Successful Customer-Centric Businesses Revolve Around Their Superfans

Co-written with Anthony Tjan, CEO and Managing Partner at Cue Ball Capital

For over 20 years, we have had the privilege of founding, leading, or investing in dozens of companies of all sizes and stages of maturity — from small, early seed stage start-ups to large-scale growth to Fortune businesses. Along the way, we have observed a common struggle: companies want and need to be customer-centric in their strategies but are often uncertain or inconsistent in their execution. It turns out much of this confusion can be resolved by focusing on one simple question: Do you really know your superfans? Answering this question has often yielded rewards such as stronger recurring revenue streams, better customer retention, and streamlined and reduced operational costs from companywide strategic alignment. For example, we have seen a portfolio company more than triple DTC channel revenue versus a comparable period while seeing record customer retention metrics.

Why is it so deceptively hard to be successfully customer-centric? On the surface it feels like the concept of superfans is a “Captain Obvious” point: who wouldn’t focus on their most valuable customers? In practice, it’s hard to sustain a customer-centric strategy because of the allure of near-term gains. We often end up acting on the impulse to capture value in the near term, favoring quantity of growth over quality of growth. For those who can be patient, our premise is that the best path to sustained profitable growth is to obsessively know your customers — most of all, the ones who love and support you the most. These are your superfans, and customer-centric strategy begins with understanding everything there is to know about them.

The idea of superfans is not new. We’ve seen a focus on superfans repeatedly translate into value creation. Airbnb scaled through its Four Key Lessons. For them, the foundation of scalability was built on the seemingly unscalable: the power of one-on-one interactions and personal relationships. They met their first guests in person, got to know them on a first-name basis, investigated what it really took for them to rate their Airbnb experience a 10/10, then unpacked how they could scale those attributes. Marshmello became one of the highest paid DJs in the world in part due to his manager Moe Shalizi’s deep understanding of who Marshmello’s superfans were and what they valued most in their lives. This highlighted unconventional but highly effective ways of connecting with them, including through targeted cultural collaborations such as a cooking channel and a Fortnite concert. Before starting our venture firm, some of our colleagues architected and led the transformation of what is now Thomson Reuters from a diversified newspaper company into one of the world’s largest information conglomerates. We achieved this by initially focusing obsessively and meticulously on what core customers did before, during, and after using Thomson’s products. We have since applied similar principles of front-end customer strategy to companies in our portfolio.

If this were as simple as it sounds, we would expect more companies to be half as good as an Airbnb, Marshmello, or Thomson Reuters. Even with a sufficiently long-term outlook, successful superfan strategies have many common pitfalls and challenges that make focusing on them harder than it sounds:

1. There is no established definition for a super-fan.
   If you are a B2B company, should you focus on the buyer or end-user? Airbnb’s initial definition of a superfan was its guests who would rate the experience a 10/10. In another start-up , Tea Drops (a portfolio company of ours that sells unique organic ground-leaf teas), superfans were initially identified as customers who purchased at least three times a year.
2. Without context and humility, the right data can produce misleading results.
   Even if you get the right data in a “clean” and scalable way, it is important to remember that data is representative of when it was collected and, as a result, can be misleading without context (e.g. data collected in the wake of a large promotional campaign may not be reflective of truly loyal behavior).
   It is also important to ensure biases do not cloud your judgment of the data. A common mistake is to lean on the belief that small accounts eventually grow into larger ones. This is often the result of survivorship bias: while some small accounts turn into large accounts and make for great success stories, they in general have higher relative churn and costs.
3. It is harder to commit to a long-term strategy than it is to score shorter-term wins.
   A successful superfan deep-dive is often the result of a long-term commitment to a customer-driven strategy. Getting the right customer, right product, and right go-to-market — in that order — is the holy grail of business, but most people do not follow that sequence of priorities. Since it is often easier and cheaper to spend more on PR or go-to-market efforts, many leaders flip the order to focusing on right product or right go-to-market first, assuming that the right customers will come once those are all figured out.

What are the best ways to respond to some of these common pitfalls? Drawing on our experience, we have developed a three-part action plan that can help move you toward discovering who your superfan base is and what to do with that information:

1. Draw a clear line around your superfan base.
   Your ideal superfan should be one who you can expect to retain longer than the rest of the customer base and whose impact on your revenue volume is above a certain threshold. As such, define your superfan around a balance of total revenue impact (quantity) and recurrence (quality). Our approach to refining these heuristics is to get to know just the top 100 end users of a product or service and compare their spending behavior to the top 10–20% end users.
2. Learn as much as possible about them.
   The output of the “Define” phase is just a list identifying your superfans. The next step is to figure out who they are across multiple dimensions: demographically, psycho-graphically, and behaviorally. You need to unpack the “why” behind their purchasing and product-use patterns through surveys and data deep-dives. Questions to answer include: Who are they? What do they value in their lives — their “behavioral preferences”? What hero product do they love the most?
3. Use your superfan’s characteristics as a map to successfully reach them.
   Once you know who your superfans are, what they like, and why they buy, those learnings should inform how to reach them. We have seen superfans serve as R&D focus groups and be tapped to pilot loyalty programs. This creates opportunities for more positive interactions with your superfans; even sending a personalized note of thanks goes a long way.

To be truly successful, super-fandom at your organization needs to be as much a culture as it is a business strategy. Superfans purchase your product not only because it provides some utility but also because it is a source of culture or identity. By aligning yourself with your top advocates, you unlock access to the most valuable and compelling feedback while setting up the foundation to create a lasting brand. This will require your entire team to become superfan-obsessed and understand how their efforts champion and affect your superfans. Your superfan is your company’s best friend.