module 2.7 not every customer is equal

Not every customer is equal

One of the biggest myths in businesses is:-Every customer should be treated the same

Customer centric companies rejected this idea

They understand:-Some customers create significantly more value than others

• The goal is not to maximise the number of customers

• The goal is to maximise the value created from customers relationship over

Important clarification

Product centric - company goal :

• Maximise product sales

• Increase market sales

• Sell more units

Customer centric-company goal:-

• Maximise customer value

• Increase retention

• Grow profitable relationship

Both won the same thing

Ultimately:- Both want higher profits and shareholder value

The difference is the path they take to get there

The most important idea :- Customer heterogeneity

What is customer heterogeneity

Customers are different

They Differin:-

• spending habits

• Loyalty

• Needs

• Profitability

• Future potential

A customer centric company celebrates this differences instead of ignoring them

Example :- Airline industry

Imagine two passengers

Passenger A

• Flies once a year

• Always buys the cheapest ticket

Passenger B

• Files twice every month

• Buy premium seats

• Uses loyalty program

• Books hotels through the airline

Both are customers

But they are not equally valuable

This is why airlines creates

• frequent flyer program

• Elite Tiers

• Lounge access

They are investing more in high value, customer

Marketing lesson:- centricity is often about allocating resources where they create the greatest

From product expertise to relationship, Expertise

Traditional companies build expertise around products

QuestionS:-

• How do we improve the product?

• How do we reduce cost?

• How do we launch new products

Customer centric companies build expertise around relationships

Questions:-

• Which customers are becoming more valuable?

• Which customers are likely to leave?

• How can we strengthen loyalty?

• What does this customers need next?

Why data matter so much?

• Customer centricity depends on prediction

• The real value of customer data is not understanding the past

• It’s understanding the future

Weak use of data:- What happened last month?

Strong use of data :- Which customers are likely to become valuable next year?

Example:- Credit card companies

Credit card companies don’t rate every customer same

Using data they estimate

• spending potential

• Risk profile

• Retention likeHood

• Product needs

That’s why different customers receive

• Different rewards

• Different offer

• Different service levelS

Marketing lesson:- The future value of a customers often matters more than their current value

Three core customer centric activities

The lecture highlights three major responsibilities

Customer acquisition

Customer retention

Customer development

1. Customer acquisition

• Finding the desirable customer

• Not just more customers

• The right customers

Example:-A luxury hotel would rather attract

• Loyal premium guest

Than

• Thousand highly price, sensitive guest

2. Customer retention

• Keeping valuable customers

• retention is often cheaper than acquisition

Example :-

• Many subscription, businesses lose money, acquiring customer

• Profit comes only when customer

This is why retention is a board issue, not just a marketing issue

3. Customer development

Growing the relationship

Questions:-

• What additional needs can we solve

• How can we create more value?

Example banking

A customer may start with :-

• Savings account

Later:

• Credit card

• Mortgage

• Investment products

The goal is relationship growrth not one time sales

Organisational change by customer, electricity is hard

Most companies are organised around products

• Product A team

• Product B team

• Product C team

Each department optimise its own product

Customer centric companies try to organise around customers

Example :-

• Young professionals

• Families

• Retirees

Now Decision begin with customer needs

This sounds simple

In reality it requires :-

• new incentives

• New reporting structures

• New metrics

• New leadership priorities

The Procter & gamble insight

The lecture mentions companies moving towards customer centric structure

The reason is simple :-

• Product become easier to copy

• Customer understanding is hard to copy

A competitor can copy :-

• Feature

• Packaging

• Pricing

It’s much harder to copy

• years of customer data

• Relationship expertise

• Trust

• Customer insights

Divergent thinking vs convergent thinking

This is one of the most useful ideas in the lecture

Product - centric thinking ( divergent )

Questions :-

• what new products can we create

• What features can we add

Focus:- expansion

Customer centric thinking ( convergent thinking )

Questions :-

• which customers matter most ?

• Which needs matter most ?

• Where should we focus resources ?

focus on :- prioritisation

Marketing lesson :- great marketing is often about deciding who not to serve

Mental model

Think of customers like managing an investment portfolio

Good investor doesn’t equal money into every opportunity

They identify

• The highest potential opportunities

• The strongest long-term returns

Customer centric companies do the same with customer

key takeaways

Strategic lesson:-An is about maximising customer value, not maximising customer account

Business lesson:-The best are not always the biggest person as today, but often the most valuable customers tomorrow

Marketing lesson::-The sustainable advantage comes from relationship expert is not just a product expertise

Customers centric companies win by identifying, retaining and growing the most valuable customer relationship rather than trying to sell everything to everyone