The first assignment my MBA students receive challenges them to come up with a list of companies that they believe are customer-centric
Apple is cited frequently — noting their sheen of trendiness and user-friendly gadgets — when in fact the tech giant is ultimately product-focused. Others point to service-oriented companies like Nordstrom. But the misleading story often used to support this assessment (providing a refund for products Nordstrom didn’t sell) does not get this much-loved department store a customer-centric seal of approval.
A truly customer-centric firm knows that world-class service should be reserved for only the best customers. Its principles warn that rolling out the red carpet for every customer is a crippling waste of resources. In my book, Wharton Executive Education Customer Centricity Essentials: What It Is, What It Isn’t, and Why It Matters, I explain why these and other well-respected companies — Starbucks, Costco, and Walmart — all fall short of a legitimate customer centric organization.
Since the term “direct marketing” was coined by marketing visionary Lester Wunderman in the 1960’s, this practice has been negatively associated with late-night infomercials, pyramid schemes, and products that can’t be sold in the traditional marketplace. Still, one student listed Mary Kay and Avon as customer-centric companies. Impressive. The fundamentals that make those companies work are the same shared by irrefutable successes such as Amazon and American Express.
Customer centricity is not merely about customized products and services. It’s also a celebration of customer diversity. A Mary Kay consultant lives and dies by her ability to leverage individual customer-level data. There is no “the customer.” Her success is about her ability to know her customers as individuals — their purchase patterns, preferences, and financial means. She is only successful if she can devote her valuable time and resources to the most profitable customers. These are customers that are going to build long-term value for the consultant through increased sales frequency, cross-selling, and retention tactics that will keep those relationships healthy for a long time.
In sharp contrast, try walking into a Starbucks shop you’ve never visited, hand them your loyalty card, and ask for your “usual.” Until they can produce your customized order with little or no work on your part, they’re not a bona fide customer-centric firm. Starbucks and other large organizations may feel the “direct marketer” label off-putting, but until they initiate practices that focus on individuals; customer centricity will be a far-off goal for them.
Customer centricity is a sound, proven, winning strategy — and no, it’s not about just being “nice” to your customers. It’s not about customer service at all, really, at least not in the traditional sense. Leaving old thinking and old practices behind, customer centricity is about targeting the right customers in the right way to generate the right results. It’s about creating smarter, more strategically focused organizations. Organizations that celebrate customer heterogeneity and are willing to admit that they can learn an awful lot from direct marketing.
Peter Fader, author of Wharton Executive Education Customer Centricity Essentials: What It Is, What It Isn’t, and Why It Matters, is the Frances and Pei-Yuan Chia Professor of Marketing at the Wharton School of the University of Pennsylvania. He is also the co-director of the Wharton Customer Analytics Initiative, an academic research center focused on fostering productive collaborations between data-driven firms and top academic researchers around the world. Fader has been quoted or featured in The New York Times, Wall Street Journal, The Economist, The Washington Post, and on NPR, among other media. For more information please visit http://wdp.wharton.