Notes

[MUSIC]
So now that we've laid out the definition
of customer centricity,
we've spoken a little bit about some of
the challenges that it requires
companies to meet changing its centric
structures and so on.
What I like to do is just to step back
and review all the aspects of living in a
customer-centric world.
What does that mean?
Now we'll spend a little bit more time
talking about some of the other aspects of
it.
So, so first, if you live in a
customer-centric world, well let me ask
you this question.
What's the overarching objective for the
commercial enterprise?
You remember I, I asked that and
we discussed it before for the
product-centric enterprise.
But what is it for the customer-centric
enterprise?
So usually when I ask this question
people will give me a lot of customer
oriented answers.
Building loyalty, creating satisfaction,
getting people to buy things.
Yeah, that's all nice.
That's all terrific.
We want to do all that and we hope the
customer-centricity will
help us do those things but that's not the
single overarching objective.
The overarching objective is the same as
it was before, to maximize shareholder
value.
To maximize the profits
of the company in the short run and
the long run, recognizing the time value
of money.
And even though that point seems kind of
silly,
it's the same thing, that's why I want to
emphasize it.
That in the end, the overall objective of
any commercial
[LAUGH]
enterprise is to make as much money as
possible.
The problem is this.
There's too many people who think that the
money-making
thing is uniquely associated with product
centricity, but it's not.
There's lots of different paths that we
can
follow, and while customer-centricity is
quite different in many
ways from product centricity, it's a path
that
actually might help you get there faster
and better.
So, If I want to emphasize that point,
that we're trying to
achieve the same over-arching goal but in
a very different way.
So let's talk about how we achieve it.
Again, going back to product centricity,
for most firms, the performance superior
ones and the operationally excellent ones,
it was all about blockbuster idea.
Let's produce a lot of it, let's produce
it efficiently, and let's think about the
next thing
to produce.
And again, that formula has worked for so
many companies, still works today.
So what is it in the customer-centric
world?
What is it that we celebrate in the
customer-centric world going
back to the, the Harrah's and the Tesco
and the IBM?
Well, this, this point might be more
subtle, but it's very, very important.
What we celebrate in the customer-centric
world is customer heterogeneity.
The idea that not all customers are
created equal.
The idea that some customers are just
inherently
much more valuable, much more profitable
than other customers.
See, in, in the old days, companies didn't
know the profitability of customers.
They didn't understand how customers were
different from each other.
And again, they didn't care, because they
were
so intent on just pushing products out
there.
Once they started realizing that
customers are different from each other,
at first it was a nuisance.
Oh my gosh!
Different customers, we're going to have
to talk to them in different ways.
And develop different products for them.
It was a nuisance.
It added to our costs.
It was a hassle.
And the more we learned about our
customers, the more
we realized they are really, really
different from each other.
And it's, and it's always true, we can't
avoid that.
So unless we're going to paint ourselves
into a corner, and only
work with one kind of customer, we
need to acknowledge and celebrate that
heterogeneity.
We need to find a way to say that these
differences
across the customers not only exist, but
they're a good thing.
Let's find the kinds of customers who can
be very valuable to us.
Let's make them valuable, and let's find
others like them.
And,
[UNKNOWN]
at the same time, let's find ways of
dealing
with the other prob, customers in a
reasonably profitable manner.
So, we celebrate heterogeneity.
One point I want to emphasize along the
way, I, I, say this over
and, over and, over again, but it is
important to make this explicit.
Is that when we're focusing on
heterogeneity and we're focusing on the,
on the, the profitability of our
customers, we're talking about future
profitability.
Notice that I'm always pointing over here
to the future.
It's great to look at past profitability.
In many cases, that will be a guide
towards future
profitability but it's not a perfect one
to one match.
So we need to use our data, we need to use
models
and technology in order to project the
future value of our customers.
So the celebration of heterogeneity is not
only what the customers have been worth.
And which customers have been the most
valuable?
But is which ones we think will we be most
valuable.
Going back to my example about the MBA
students and the airlines.
Most of the value is what we're going to
create and extract in the future.
And that's the really pivotal role of this
idea of customer lifetime value.
Now here's a tough question for you.
Okay, we're going to want to measure CLV,
we're going to want to manage around
it, how do we do that?
So, when we look at a company as it starts
changing
from being product centric to customer
centric, what kinds of tactics change?
So one point that I want to emphasize
right now,
[SOUND]
what were going to go into much greater
depth in module three
are those three tactics that lie at the
heart of customer centricity.
That are the, the tactics that make it
possible for companies
to potentially make more money being
customer centric than product centric.
And you see those words right here, it's
all about customer acquisition, customer
retention, customer development.
And a lot, lot of you might be
looking those words and saying well that's
not new.
Companies have been acquiring customers
forever.
Companies have been thinking about the
retention and development, making
customers more valuable.
These ideas are not new, and you now what?
They're not!
That's true!
But in many cases, these ideas are, are,
kind of
treated at a fairly low level within the
marketing organization.
Because the marketing organization is
often there
just to support the product-centric
blockbuster mentality.
So it's all about, how can we get as much
stuff out there as quickly as possible?
It's all about coming up with the message.
Very often, branding might be associate
with product centricity.
Not always but in many cases, it is.
And so, instead, as we start to think
about
how customer's different from each other,
we're going to want to
ask questions about which kinds of
customers should we be acquiring.
How much should we be willing to spend to
acquire them.
On the retention side, should we try to
keep
everybody, should we roll out the red
carpet for everyone?
Or should we be a little bit more
selective.
And when it comes to customer development,
are there some
customers who we can make into better
customers than others.
And how do those tactics tie in with the
acquisition and the retention?
So
I'm going to spend much more time talking
about it later on, but
my point here is that these three tactics
need to be elevated.
The people who are going to be working on
them need to be higher in the
organization.
The people who are running the marketing
function
have to be at least as painfully aware as
acquisition, retention, and development,
as they are around some
of the branding ideas that, that Barbara
spoke about.
And so we're going to get back into that.
But I just wanted to plant that seed right
now.
One point that I've mentioned from time to
time, but I want to make
a little bit more explicit here would be
challenges for the organization itself.
Again instead of having an organization,
that's organised purely around the
different
kinds of products and services, we
want to have a customer-centric
organizational structure.
Ideally, the whole org chart would be
built around the different
kinds of customers we have.
And then below them, the different ways
that we're
going to create and extract the profits
from them.
I'm going to give you a nice example of a
company that's seriously exploring
different
organizational approaches towards customer
centricity.
It's a company that today focuses quite
a bit on developing and distributing
blockbuster products.
But more and more they're realizing that
they actually need to be, or could
be a direct marketer.
The company is Proctor & Gamble.
What does Proctor & Gamble know about you
or me?
Actually not much.
Today, Proctor and Gamble's customer would
be the retailer.
The Walmarts, or other grocery chains who
they sell their products to.
But Proctor and Gamble recognizes that
with this shift
towards customer centricity, with the
shift towards direct marketing,
that eventually their customer will be me
and you.
And they want to start to understand who
the really valuable customers are.
How we can sort them out from other
customers.
And what are things that we can do to
create more value for those customers?
So here's an example of a really nice
initiative,
one of many that Proctor & Gamble is
trying out.
It's called My Black Is Beautiful and it's
aimed at African American woman.
And P&G is determined that this is a
really valuable customer segment for
us, we need to be there, we want to be
seen as a trusted adviser.
So, so take a look at this slide in front
of you here there's a number
of very unusual aspects about it compared
to
traditional Proctor and Gamble or package
goods advertising.
First, look at the bottom of the slide.
You see a number of different P&G brands
being advertised together.
It's pretty unusual for
a company like P&G, or again other
packaged goods manufacturers, to use
that kind of umbrella branding, and going
back to some of Barber's content.
and if you look, look higher up on the
slide, you'll notice that they're also
talking about recipes and music and all
kinds of things that P&G isn't involved
with.
But this should be an example of Procter
and
Gamble trying to position itself as a
trusted adviser.
That they're offering all kinds of
products and services
to this valuable customer segment that
they
don't necessarily make any money on, but
they want them to see P&G as someone who
has their best interest in mind.
And if you look at the bottom
of the slide, you'll notice something
fairly unusual.
You see here this the mention of, of a
line of cosmetics called Covergirl Queen.
Covergirl is a big line of cosmetics under
Procter and Gamble.
But, Queen refers to Queen Latifah, the
popular actress, and
so they developed a whole line
of cosmetics specifically for African
American women.
This goes back to our definition of
customer centricity.
Going to the R&D people and saying, you
know what, instead of coming
up with a blockbuster product that
everybody's
going to buy, here's a valuable customer
segment.
We want to come up with something for
them, that they're going to find very
valuable.
Others might buy it too, and that would be
great.
This idea of leveraging R&D around a focal
segment
that's starting to show us what
customer-centricity is all about.
Now I have no idea if this initiative by
Procter & Gamble will be successful.
I don't even know if this is the right
segment to go after.
But I'm not going to comment on that.
But given that they are going after this
segment this
is the right way to do it, this is
customer centricity.
And you have to believe that in the
Proctor,
Proctor, Gamble organizational chart
there's some people who are responsible
for My Black is Beautiful.
And they're going to bring whatever
resources they can
what are the products with in the P&G
family or outside of it in order to
make this customer group as valuable is
possible.
That' s what I like to see for customer
centricity and I want to
see more companies developing these kinds
of organisational and marketing structures
around it.
The bottom line for customer centricity,
is this idea
of relationship expertise, if you remember
earlier,
the key to product centricity was product
expertise.
We're really good at developing and
delivering a certain kind of product.
We're always, s, steps ahead of everybody
else,
but as we discussed, the cracks in product
centricity
are shortening some of those steps, it's
much harder
to stay ahead when it comes to product
expertise.
But when it
comes to relationship expertise, I believe
that
there are meaningful, sustainable long run
advantages.
And I'm not just talking about soft,
squishy understand your customers in some
generic way.
I'm talking about data.
I'm talking about models.
I'm talking about forecasts.
I'm talking about truly understanding your
customer, your customers, celebrating the
heterogeneity.
One of the beautiful things about it, is
that when you collect the data,
and you develop these kinds of forecasts,
nobody can ever take it away from you.
It will never become commoditized.
And so I believe, if your customers are
assets,
and I think they are, that investing in
the
data, in the knowledge, in the
heterogeneity, can actually
lead to better outcomes to companies than
pure product-centricty.
There's one more point I want to raise, to
really
help us understand the contrast between
product and customer-centricity.
You might remember a chart that I showed
you earlier
that showed a lot of the characteristics
of a product-centric firm.
And I, and I really focused on the idea of
the divergent thinking.
We have this product goodness, what do we
do with it?
Well here's the complete chart now, where
it shows you
the contrast between the product-centric
firm and the customer-centric firm.
I hope that you'll see that many of
them are entirely consistent with our
discussion so far.
This focus on the valuable customers
instead of the blockbuster products.
The different kinds of metrics customer
retention, lifetime value.
We're going to be saying more about those
as we go on.
Again, I just want to call your attention
towards the bottom of the slide.
Instead of diversion thinking, what do we
do with this product?
It's conversion thinking.
How do we bring more value
to this customers?
What products and services can we develop?
What information can we provide?
What can we do in the relationship to
create and
extract more value, more value for these
really valuable customers?
So again, moving from the product centric
world to the customer centric world
is very difficult, going from divergents
to convergent thinking doesn't happen over
night.
It requires
all kinds of different incentives, it
requires different
kinds of people with a totally different
mindset.
That's one of the challenges associated
with customer
centricity and I want to talk about a few
more.
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