Companies with a customer-centric business model are 60% more profitable than those who didn’t implement this business model according to research from Deloitte.
There are a lot of articles about customer-centricity, but fewer guides that the companies can follow. So, firstly, we’re going to talk about the biggest misconception.
Customer-Centered vs. Customer-Centric
Being a customer-centered company (or customer-focused) means paying great attention to the needs and opinions of customers.
On the other side, according to Wharton Professor Peter Fader, customer-centric means that:
“You’re going to be friendly, provide good service and develop new products and services for the special focal customers — the ones who provide a lot of value for you — but not necessarily for the other ones. You need to pick and choose. Some customers deserve special treatment, and if others want to buy from you, that’s great, but they are not going to be treated the same.” — Peter Fader, author of The Customer-Centricity Playbook
Many steps need to be taken to become customer-centric, so we are going to start with the first and most important step in building towards the structure of a customer-centric company.
1. Build a CRM
Peter Fader suggests building a CRM and keeping it simple, then adding to it later on. Also, a good idea is to have customer segment managers, not just product managers. Here are some metrics to keep track of:
- Churn rate: It costs five times more to get new customers than to retain the current ones. Increasing customer retention rates by 5% increases profits by 25% to 95%, according to research done by Frederick Reichheld of Bain & Company.
- Net promoter score: How happy are your customers with your product or service? Keep track of every answer, and you’ll spot the ones who are loyal to you while acknowledging that more improvement is needed.
- Customer lifetime value: The most important one to keep track of when becoming customer-centric. You want to see which customers make the most sense to invest in, and which ones enjoy your products or services the most.
- Survey results, complaints, questions, or feedback they provided: You want to see what each customer has to say, and what you can improve.
- Customer segments: You have to give similar groups of customers a name so you can recognize them, and tailor marketing to convert visitors into customers. This way, you’ll have an easier time recognizing in which customer groups you need to invest the most. (e.g. UI designers, UX designers).
2. Find the Highest-Value Customers
In this video of Peter Fader, who talks about customer-centricity and why it matters, he says for you to become a customer-centric company you need to have the ability to understand customers (CRM helps a lot at this one), and to differentiate customers who are valuable from the ones who aren’t.
So here are some aspects you need to take into consideration when defining the highest-value customers:
- Alignment: Which customers you can help out the most? Which have the least options to choose from when it comes to solving their problems?
- Loyalty: Which customers will be buying from you for a longer period of time?
- Customer lifetime value: You need to calculate the value the customers will have over time and take into account the costs of acquisition. Which ones will benefit from you the most and will result in a high profit for you?
3. Create Products for Customers, Not the Other Way Around
With a CRM built, and with the highest-value customers into the spotlight, you can focus on providing the best value to them so they can solve their needs, not creating many products or services for a generic entity.
- Maximize CLV: When focusing on products, you don’t really focus on the customers’ needs, therefore you don’t really solve their problems, and you end up losing important resources. But focusing on the customers and their needs, and providing what they need and want, will increase CLV.
- Know when a product or service update is needed: By listening to your highest-value customers, you’ll know what features or updates you need to add, without “guessing” what to do next.
4. Ask for Feedback Often
I talked before about keeping track of the feedback customers give you, but it’s time to explain why feedback is so necessary when being a customer-centric company.
Being customer-centric means putting customers at the heart of your strategy, and your focus won’t be on sales or usage figures anymore, but on the feedback you receive.
An example of how this works is Uber, which relies a lot on the customers’ reviews. With simple taps on the mobile app, you can rate the driver from zero to five stars. This way, Uber manages its internal business structure by keeping the employees who treat their customers better than the others.
- Build a feedback loop: Customers rate their drivers, and drivers can rate the customers.
- Separate feedback per segment: Their surveys are made for a specific customer segment they want feedback from.
- Personalization for each customer segment: When they send a survey they always start with a personalized email.
5. Do Constant Test and Iteration
Imagine this: You have a high-value customer and you want to implement a big product update, but you’re not sure if it could really help them and you don’t want to spend too many resources on it if it doesn’t work out. Use Agile and Design Thinking methodology — ideate, prototype, test with customers, and implement.
Take Netflix as an example: They have an excellent streaming platform because they always conduct A/B tests to deliver the best experience for their customers.
- They incorporate feedback to maintain continued growth.
- They are testing and monitoring High Impact Titles through complicated A/B tests, where every option has a different member experience.
“Testing starts several weeks before launch and ramps up till launch day. After launch, we monitor these titles on different device platforms across all countries.” — source: netflixtechblog.com
- They customized thumbnails according to the user’s demographics.
TransferWise says they put their customers first, so each team’s success is measured by the positive impact they made each time for the customers.
- They invite customers to test their product.
- They launched the “wish” functionality to be able to talk to prospective customers and learn more about what they need.
6. Focus on Customer Experience
As a customer-centric company, this is what you’re building besides your product. Focus on this and you’ll increase your CLV by a lot, as eight in ten customers are willing to pay more money for a better experience.
Ikea created a loyalty program called “Ikea Family” for people who are passionate about homes.
- Customers will receive discounts.
- They will receive hot drinks every time they visit the location.
- They participate in events and workshops.
7. Add Personalization
Slack is a great example of a customer-centric company, at first, they used word-of-mouth for marketing and 8,000 people signed up on the first day.
“Slack believes that every customer interaction is a marketing opportunity.” — Wes Brummette
- They add a human feel to customer support. They’re always using a warm and funny tone when they notify their customers
- Great copywriting: They actively use Twitter for engaging with their customers and for growing views organically on their website
8. Feature Your High-Value Customers
Like every human being, customers want to feel important and they want to feel like they played a role in shaping your brand and your story, so include them on your website, or in any marketing campaign.
- Attract the same valuable customers: Other customers will see themselves in your brand when watching a video of a person who used your product or service, and they will want to be a part of it.
- Fuel word of mouth: Create a podcast and invite them as your guests; they’ll for sure talk about the experience with their friends.
- Do customer case studies: What better way to showcase how your product works than by telling the story of a customer who used your product? You’ll inspire more to come and use your product the same way too.
- Show testimonials: Always use testimonials from your customers, and not just on the website, but on your other brand touchpoints, such as video. This builds trust for potential customers.
9. Engage With Them
And lastly, you want to encourage them to speak to you and to get to know you. You want to show that you care and the best way to do this is to engage with your customers and potential customers on social media. Many things get shared with their friends, after all, you get free marketing.
- Talk to them on social media: Discord is a great example of a company that constantly interacts with its customers, makes jokes, and acts as a pioneer when it comes to social issues.
- Watch their review videos: You get free feedback from them and you also see how they use your product. You can also leave a thank-you message.
- Respond to their reviews: Show them that you are interested in their reviews and in the feedback that they have, and reply to them on the review platforms.
Becoming a customer-centric company takes effort and time, but the reward is bigger to a company, and to a customer altogether, when focusing on the right customers, building the product or service around them, improving the customer experience, and engaging with them whenever possible to maximize word of mouth and increase profits.