The traditional product-centric business model is showing some cracks
- Commoditization, well-informed customers, globalization, etc.
Customer centricity is a promising alternative but is not clearly understood
- Many firms that are touted to be customer centric really aren’t…
!! Celebrate customer heterogeneity: distinguish the profitable customers from the less profitable ones
- Emerging metrics such as customer lifetime value (CLV) make this possible
Show me the money!
Customer centricity can lead to improved profitability through greater effectiveness/efficiency in:
- Customer acquisition
- Customer retention
- Customer development
You can’t expect to be world-class on all three dimensions, but doing very well at even one of these could be highly lucrative for the company as a whole.
Mo money
Balancing acquisition, retention, and development requires considerable skill (and analytical insight)
If you had an extra dollar to spend, which of these activities would you allocate it to?
Let’s examine each tactic separately in order to learn the answer…
Customer acquisition
What metric is used by most firms to gauge and guide their acquisition activities?
CPA (cost per acquisition)
Big mistake!
Would you use it for other kinds of acquisition activities
(e.g., employees, technology, lawyers)?
Firms should focus instead on:
"! VPA
“Value per acquisition” # which is CLV!
Customer acquisition: summary
You must actively avoid having a “CPA mentality”
"! Focus on ceilings instead of floors…
!! Celebrate heterogeneity by using CLV to drive acquisition strategies and tactics
"! Be more patient/forward-looking when judging acquisition efforts !! In general, firms tend to underspend on acquisition, and underachieve as well
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