August 25, 2014 | Written by: THINK Leaders
Categorized: Marketing | New Thinking
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Customer centricity is a term often bandied about, yet its exact meaning can be hard to pin down. “You pick up three different books on customer centricity, and you get four different definitions about it,” writes customer-centricity expert Peter Fader.1
But one thing is certain: to be centered on customers, we need to know the value of a customer. Customer lifetime value – a critical measure in determining the value of all of an individual customer’s transactions – guides decisions about which segments of customers to focus on, when to invest in acquiring new customers, and when to focus on retaining the ones we have.
Even for customer-centric organizations that calculate and make decisions based on customer lifetime value, there can be disagreement. Do they include the value a customer brings by sharing positive sentiment about their brands in social media? How do they segment their customers so that they can isolate metrics like acquisition cost and revenue per customer for the segments they choose?2
There’s no single right answer, but a cross-organizational conversation about how to value a customer is an indispensable step in the marketing transformation journey.
“The person who clicks on a Google ad and contacts a local agent is far more valuable than someone who may come to the site to check what how much their old boyfriend’s home is worth. If we’re going to pay for advertising, we’re going to focus on segments of traffic that we monetize.”
“The majority of spending in our resorts can be tied back to specific people and three-quarters of gaming can be tied back to specific players. That enables us to be smarter about what a customer might value and what personalized inducements we can provide.”
China Eastern Airlines
“We discovered that marketing and service talk different languages and they disagree on some very fundamental things, like who is our highest value customer? So, really, we needed to start by coming up with a common definition for most valuable. This has been difficult.”
1Knowledge@Wharton: Peter Fader on Customer Centricity and Why It Matters
2Forrester: Navigating the Customer Lifetime Value Conundrum
IBM Software: Business Analytics, “From Insight to Foresight: Using Business Analytics to Improve Customer Lifetime