With companies striving to stay one step ahead of their competition, the customer has become more valuable than ever before. Companies are moving towards models focused around customer-centricity, while trying to define exactly what the term means.
While the concept is nothing new, the phrase “customer-centric” is starting to see a lot more screen time. So what exactly does it mean to be customer-centric, and how can companies improve their customer-focused interactions?
Customer-Centricity: What is it, Exactly?
The term is somewhat self-defining, yet it means a lot more than just putting the customer first. A customer-centric company focuses on creating a seamless journey that starts from the customer’s first point of contact all the way through post-sale satisfaction surveys.
An easy way to determine if a company is customer-centric is by looking at their NPS, or Net Promoter Score. This is a measurement of how likely a customer is to recommend a company’s products or services to their friends and colleagues. When a customer becomes an ambassador for a brand, it is likely due to having been through a journey focused around customer-centricity.
Customer-centric companies also differ in how they place value on their customers. They realize that every customer has value. By using analytics and well-organized CRMs, data can be extracted from a wide-ranging customer pool that can help determine what customers are looking for in their journeys. This allows the company to carefully construct their approach and offers.
The Benefits of Customer-Centricity
Econsultancy conducted a survey of successful businesses in the digital space and asked them what the most important factor is in becoming “digitally native.” The leading response (58%) pointed to becoming more customer-centric.
Below are benefits of shifting to a customer-focused culture within a company:
Higher Customer Retention Rates
CMO opines that customer retention yields better profits than customer acquisition. Every company has a customer acquisition cost, and depending on how deep the competition is, that cost can add up fast. Now consider how much less it would cost for a company to foster a loyal relationship where a customer gives them steady, repeat business. In fact, improving retention by just 5%, a company will increase profits by anywhere from 25% to 95%.
An added benefit is that a truly engaged customer (thanks to customer-centric best practices) is going to aid in the acquisition of new customers. This further cuts costs while attracting customers that are more engaged based on trust that was immediately formed based on the recommendation by their peers.
While customer retention makes a measurable difference in a company’s bottom line, it’s trickier to measure. It also takes more time to see the results in higher retention rates. This circles back to the essence of being customer-centric. Rather than striving for instant results, customer-centric companies keep the big picture in mind. They realize that the benefits to be reaped by establishing a customer-centric model will take time and patience but will be worth it at the end of the day.
Improved Customer Lifetime Value
A metric that customer-centric companies live and die by is the Customer Lifetime Value, or CLV. CLV is defined as a prediction of the net profit attributed to the entire future relationship with a customer. The more customer-centric a company is, the higher their customer’s CLV will be.
Measuring CLV also allows companies to develop interactions and offer products and services that are specifically geared towards customers with higher lifetime value.
Most people are familiar with the Pareto Principle which states, from a business perspective, that 80% of a company’s profits will come from 20% of its customers. CLV allows companies to determine who those 20% are. As a result, a company can focus on the most profitable segment of their customer base. In doing so, acquisition and retention efforts are focused on high value customers, eventually increasing the overall CLV company-wide.
How to Become More Customer-Centric
Customer-centricity is not a high concept or an esoteric notion. Rather, it’s a gestalt: a collection of best practices that, together, make up a whole that is greater than the sum of its parts.
Some of those practices include:
- Focus on the wants and needs of high-value customers and develop products and services centered around them.
- Analyzing customer data and sharing the insights provided across all departments within an organization.
- Steering clear of any off-strategy ideas that may deflect the focus from the customer.
- Constantly mining the current customer base for feedback, and then implementing strategies based on the insights provided.
Customer-centricity is quickly becoming the norm, not the exception, and rightly so according to expert-driven studies and surveys.
A company that wants to foster a customer-centric structure will need to be patient and resilient as it will take time and effort to adjust to a true customer focused model.
Shifting towards being more customer-centric will be worth it in the long run though, as it leads to a higher ROI of acquisition costs, increased rates of retention, and a customer base that is made up of high value prospects.
In what ways can your company become more customer-centric?