The document discusses customer centricity as an alternative business model to the traditional product-centric model. It defines customer centricity as aligning a company's products and services around the current and future needs of profitable customers to maximize their lifetime financial value. The document notes that many companies claim to be customer centric but are not. It also discusses how customer centricity requires an organization-wide transformation, including changes to marketing, finance, R&D, production, sales, and front-line staff. The document concludes by reflecting on questions organizations should consider when assessing customer centricity.

1. THE ESSENTIALS OF
CUSTOMER CENTRICITY
Professor Peter Fader
Co-director, Wharton Customer Analytics Initiative
The Wharton School, University of Pennsylvania
faderp@wharton.upenn.edu
www.petefader.com
Twitter: @faderp

2. “Customer Centricity: Focus on the Right Customers
for Strategic Advantage”
• The traditional product-centric business model is showing some cracks
• Commoditization, well-informed customers, globalization, etc.
• Customer centricity is a promising alternative but is not clearly understood
• Many firms that are touted to be customer centric really aren’t…

3. Adapted from Treacy and Wiersma, “The Discipline of Market Leaders,” 1995

4. What is customer centricity?
Customer centricity is a strategy that aligns a company’s
development/delivery of its products/services around the
current and future needs of a select set of customers in
order to maximize their long-term financial value to the
firm.

5. “Customer Centricity: Focus on the Right Customers
for Strategic Advantage”
• The traditional product-centric business model is showing some cracks
• Commoditization, well-informed customers, globalization, etc.
• Customer centricity is a promising alternative but is not clearly understood
• Many firms that are touted to be customer centric really aren’t…
• Celebrate customer heterogeneity: distinguish the profitable customers
from the less profitable ones
• It’s all about customer lifetime value (CLV)
• It’s a complex transformation

6. Galbraith (2005), Designing the Customer-Centric Organization

7. “Customer Centricity: Focus on the Right Customers
for Strategic Advantage”
• The traditional product-centric business model is showing some cracks
• Commoditization, well-informed customers, globalization, etc.
• Customer centricity is a promising alternative but is not clearly understood
• Many firms that are touted to be customer centric really aren’t…
• Celebrate customer heterogeneity: distinguish the profitable customers
from the less profitable ones
• It’s all about customer lifetime value (CLV)
• It’s a complex transformation
• And can fundamentally change the way we look at many functions in the
organization – not just marketing

8. Customer centricity as an organization-wide strategy
• Marketing
• Acquisition/retention/development > branding
• Finance
• Customer equity as a legitimate component of corporate valuation

10. Customer centricity as an organization-wide strategy
• Marketing
• Acquisition/retention/development > branding
• Finance
• Customer equity as a legitimate component of corporate valuation
• R&D and production
• Measure/incentivize by incremental CLV, not volume
• Salesforce and front-line staff
• Measure/incentivize by incremental CLV, not satisfaction

11. Reflections on customer centricity
• Who is the customer? Can your organization come up with a single,
consensus answer to this question, or can you at least reconcile the
roles/relationships of the different potential customers?
• What are the major barriers to account for?
• What resources can you utilize to overcome these barriers?
• Thoughts about what competitors are doing in this area?
• Does it make sense for your organization to become customer centric?

12. Professor Peter Fader
faderp@wharton.upenn.edu
www.petefader.com
Twitter: @faderp
Customer Centricity: Focus on the
Right Customers for Strategic Advantage”
http://bit.ly/FaderCC