Week 2: Customer Centricity
What are some trends showing cracks in customer-centricity?
- Commoditization - Technology enabled product development (commoditization, or how unique goods with economic value end up becoming commodities) makes things easier now, making product life cycles much shorter. - Smarter customers - technology-enabled info due to the internet. So much more aware of options than ever before. - Delivery enabled instantly from companies all around the world due to distribution technologies. - Deregulation or re-regulation making markets more competitive. - Customers want end-to-end solutions which may require products/services from other companies or on products you don't make money on. Companies must be trusted advisors, as there are higher margins, so be a solution advisor. Here are the set of products and services you should be buying, which doesn't commoditize as quickly as products or services might. - Customer-level tracking of data makes this much easier.
What is the overall objective of most commercial enterprises?
Maximizing shareholder values
Describe a typical balance of customer and product-centricity between your best customers and typical customers.
The balance is often being customer-centric with the customers who matter most and product-centric with the customers who don't.
What is the customer-centric competitive advantage?
The competitive advantage is relationship expertise, as opposed to product expertise with product centric marketing. With relationship expertise, there are meaningful, sustainable, long-run advantages. How do we bring more value to the most valuable customers?
Describe direct marketing.
The individual customer is the unit of analysis, understand who the valuable customers are and what they buy based on past purchases. Constantly leverage individual customer value.
Describe the qualities of a product-centric approach. Which of the three bundles does this approach describe?How are profits traditionally maximized? What is the central metric? Where do new sources of growth come from? Describe the organizational structure. What is the competitive advantage?
- Maximum profits traditionally through high volume and low cost (will it scale?) - Market share is a central metric. - Shareholders want growth, sources of growth come from extending the product, through: - finding new customers - creating new products. - Product-oriented organizational structure - like product managers, different product silos, etc. - The competitive advantage is product expertise
Describe a good customer-centric organizational structure.
built around - the different kinds of customers you have, and - the different ways to extract profits from them.
With customer centricity, where does success arise from?
enhanced customer acquisition, retention, and development.
Define 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.
What must the company be willing and able to change to become customer-centric?
Customer centricity requires the company to be willing and able to change its - organizational design - performance metrics - employee/distributor incentive structures To focus on the long-run value creation/delivery process.