Notes

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So, I'm going to wrap-up by talking on
making Customer Centricity Profitable.
So we, we first spent a lot of time
defining what customer centricity is.
And motivating reasons why managers might
think about moving in that direction.
And then we, we dove into some of
the tactics, acquisition, retention,
development, to better understand them.
To better understand how we use a customer
centered lens, a celebration
of heterogeneity to, to run each of those
tactics and the interplay among them more
effectively.
But now let's put it all together and in
fact bring it
back to some of the concepts and methods
that Barbara laid out
as well to, to give them the full picture
of how customer-centric enterprise would
operate and potentially be more profitable
than a product-centric enterprise.
So, it all begins
with customer lifetime value.
If you can't calculate customer lifetime
value.
If you don't have the data.
If you don't have the analytical
capabilities.
If you don't have the, the, the, the
information technology to do so.
Your lost.
You really need to be able to look at your
historical data and come up
with a projection, just an estimate of
what, what each customer is going to be
worth.
And you need to be able to do that on a
regular basis.
And let's be real clear here.
When I'm talking about customers I'm not
necessarily talking about consumers.
So you might be a B2B firm and you're
looking
at the lifetime value of each one of your
distributors.
Some agnostic about how we define
customers.
But however your customers are, you need
to come up with
a projection about what they're going to
be worth in the future.
And you need to have the capability to be
updating that projection on a regular
basis, not just,
hey let's go out and, and figure out what
these lifetime values are.
Some companies are going to do it on a
daily basis.
Some time, companies will do it on a
quarterly or yearly basis.
It all depends on, on the rhythm of the
company,
the flow of the data and their
capabilities for doing so.
But it's important to be able to do so at
a reasonably regular basis.
After we have these CLV estimates, what do
we do with them?
It's very tempting,
if you think about one to one marketing.
To figure out the, the wants and needs of
each and every customer,
and, and send them exactly the right
message at exactly the right time.
In order to get them to do the kind of
thing that we want them to do.
That's difficult.
That's expensive.
That's risky.
So what we really want to do is to go back
to the ideas that Barbara first put forth.
The idea of segmentation.
We're going to want to break customers up
into relevant groups.
She discussed it, I discussed it.
But in my case, I want to break customers
up into
groups that, that we can actually really
see and measure actual differences.
So, as as I said before you want to break
people up based on
when we acquired them, based on what
product they first acquired from us.
based on what campaign they first
responded to.
Let's think about different kinds of
acquisition characteristics.
As I've said numerous times, let's tag
customers when we acquire them.
And again, cleanly associate different
aspects
of their acquisition with them, so when
we watch them over time and we tend to
say, hey you know what.
We tend to see really valuable customers
who are
associated with a particular product or a
particular marketing campaign.
So let's segment customers on relevant
characteristics
which might be, in fact I recommend, to be
associated
with acquisition, but it could be on other
basis as well.
But that segment, when we look at these
segments, let's, let's look at them, not
just based on the number of customers in
the segment, but let's look at the CLVs.
Let's understand which segments tend to be
associated on average with fairly high
CLV.
And we're going to obviously want to
allocate more of our marketing spend
towards those segments.
The really hard part is something that I
haven't
really discussed, is how do we do that
initial allocation.
How do we take a budget and,
and, and spend it on acquisition,
retention, development?
I've told you, at the margin, we might
want to spend a little bit
more money on acquisition, but that
doesn't
mean all of the money on acquisition.
So that's a real challenge, just figuring
out how
to do that kind of budgeting, and you know
what?
Companies tend to do that reasonably well.
Companies through trial and error, through
experience, usually come
up with a, a, a reasonable allocation of
those activities.
Even if I want to a company to, to just
add an extra dollar or two to acquisition.
They tend to be getting it right.
But a really important way to understand
if
you have the right kind of allocation, in
fact,
beyond allocation, a very important
activity for a
company to be doing all the time is
experimentation.
You, you always want to run little
experiments where, where maybe you're
varying the
amount of spend on acquisition or tension
development, but even on a more micro
level.
We want to manipulate the kinds of
marketing messages.
Let's send different messages to different
people at different times.
And then be patient and track them and try
to understand
how different kinds of experimental
manipulations will be associated with CLV.
So what kinds of tactics
are going to lead to appropriate changes
in CLV, and
how is it going to vary for different
kinds of customers?
How, how will the impact of a particular
experiment change
for the different kinds of segments that
we've come up with.
It's just these companies need to have CLV
built in to their DNA.
They also need to have experimentation
built in.
And again, that's going to be true whether
we're talking B to B,
B to C, online company, offline company.
Experimentation is a central.
It's easier to do in some situations than
others.
Well you need to be always thinking about
experimentation.
Which experiments we're going to be
running now?
What experiment we going to run next?
How will the results of the current
experiment inform us
that what the right one would be to run
next?
And thinking long term about the results
of those experiments.
One of the big themes of everything that
I've mentioned is this idea of bottoms up
thinking.
We're going to look at our customers,
we're going to look at the segments of
those customers, we're going to understand
who
are the really valuable segments of
customers.
And what can we do to make them
more valuable and find more customers like
them.
So as I, as I discussed earlier we're
going to have
these bottom up perspectives to help us
drive, are indeed decisions.
They help us drive marketing spend
decisions.
To help us understand what kinds of
products and services we should be
offering.
What kinds of marketing tactics we should
be using to get those offerings out there.
So this, this bottoms up mentality always
has to happen.
But at the same time, there's this
paradox.
There's this juxtaposition, between the
bottoms up thinking and
the product centric thinking, that still
has to take place
for a, for a, for a large but, relatively
less valuable, chunk of our customers.
So it's, it's coming up with that, that
just right balance.
But all the time, we want to be looking at
our different segments.
We want to be thinking about the CLV.
And asking ourselves, which of those
segments are the
right kinds of role models for future
acquisition activities?
Too often, a company can get itself in
trouble by saying, here is the valuable
segment of customers.
We're going after these kinds of
customers.
That we're going to align all of our
activities to make
these customers more valuable and to find
more like them.
In fact, a very good example of this would
be Harrah's Casinos.
So, you'll remember earlier, I was touting
all the
great things they did to help identify who
the good
customers were, and to create and extract
value from them,
and that's what helped them rise to the
top of
their industry.
In fact many of you might be familiar with
the
terminology that they use to describe
those really valuable customers.
In fact terminology that many companies
use today and that's the idea of Whales.
They describe their really valuable
customers as
Whales and they understood the
characteristics the
behavioral and o, other kinds of
characteristics
of those customers who were and would be
the most valuable and let's find more like
them.
What's interesting about this is that it
proved to be very successful for
Harrah's for a long period of time, but
eventually their competitors caught on.
Eventually their competitors who really
hadn't done their homework, looked
at Harrah's, looked at the success that
Harrah's was enjoying.
And say, what is it that Harris is doing
differently?
Oh, they're acquiring particular kinds of
customers.
Well thank you Harris for doing our
homework for
us, we're going to go after those
customers as well.
So you have to be thinking about
competition.
You have to be realizing that as you're
identifying the early
value of customers, your competitors might
be doing the same thing.
Either doing it on their own, or just
looking at
you and trying to figure out who those
valuable customers are.
So all the time, you need to be thinking
one step ahead.
If we were to lose this
valuable segment of customers, which one
would we go after next?
So, you don't want to be putting all your
eggs in one basket.
You want to have multiples different kinds
of segments who
could be role models for your future
market activities.
We want to recognize that times will
change, whether
its due to competition, whether its due to
changes
in the market place and,and, and in many
cases your going to have to ask yourself
are these
the right role models that we want to use?
And be prepared to come up with a new role
model segment to
guide your future acquisition R and D and
other kinds of marketing activities.
And the big part of all this, the bottom
line of customer-centric thinking, is the
idea that this process that I've just
described isn't a one-time-only deal.
You need to calculating COV on a regular
basis.
You need to be running experiments on a
regular basis.
You need to be reallocating your marketing
spend on a regular basis.
You need to evaluting the segments or
sometimes coming
up with a new segmentation scheme on a
regular basis.
The real success the customer-centric
thinking, being as it is future looking,
long term oriented is to repeat these
tactics over and over and over again.
Too often
a company says, I'm going to go out there
and do the CLV thing and
I'm going to figure out who those valuable
customers are, and then I'm going to be
rich.
Well, it's not really that easy.
It takes a while for
[INAUDIBLE]
to figure out how to do the CLV thing, how
to
estimate those models and drive decisions
on the basis of them.
And that's why you need to be not only
calculation CLV on a regular basis,
but changing all your management tactics
associated
with it on a regular basis as well.
It's the second, third, fourth time that
you go through
all these steps, that you'll really start
to see the efficiencies
of being able to do these steps in, in a
reasonable manner, but also the payoff.
The effectiveness, the, the reallocation
of dollars.
The re-identification of the right kinds
of customers.
So it doesn't happen right away.
You have to be patient.
Again, that's a major them of customer
centricity.
A lot of companies aren't willing to be
patient.
They want to see that pay off right now.
If that's the case, maybe it's not for
them.
But for companies that
are willing to learn, that are willing to
experiment, that are willing to wait, that
are willing
to invest in the right kinds of customers
and the perspectives and managerial
practices associated with it.
They can win in the long run.
I encourage you to run some of the kinds
of experiments.
Think about some of the companies that was
discussed.
Even if you are not going to completely
change the
company, you're going to do little things,
here or there.
Run a little experiment
on the side to see if you can be
customer centric, what it takes, whether
it's worth while.
Its its, you, you can't just say tomorrow.
We need to be customer-centric, you need
to be learning, experimenting, thinking
very carefully.
And I want to encourage you and your
company, to have a
very thoughtful conversation about the
ideas that we have discussed so far.
The ideas of what customer centricity is.
How you bring it to life, whether it's
worthwhile.
That's where I want to leave you and I
hope that you have a successful,
customer-centric journey.
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