Every single human being on earth is different. Michael Phelps is an extreme example. The American swimmer is the most successful Olympian ever, thanks in large part to the mix of physical characteristics that make him unique. The wingspan of his arms is 8 cm longer than his body length, in the average person this ratio is one-to-one. The distance between his ribs and hips is 10 cm longer than average. He can also overstretch his joints so that his legs can make a bigger swing.
Just as every single person is different, so are our customers. Customers are differentiated on criteria such as demographics, age, interests, buying intentions, and buying behavior (instead of physical characteristics, e.g. arm length).
‘Customer heterogeneity’ is a modern concept that acknowledges this and embraces that -just like human beings- every single customer differs from another. It states that there is no such thing as ‘the customer’ or ‘the target group.’
Yet many companies still consider their customers as one monolithic entity. A missed opportunity for sure, because a determined focus on the right customers increases efficiency massively. Not only can you increase earnings, but you can also make your customers happier and improve loyalty. Massive companies like Zappos, Amazon, and Coolblue incorporated ‘customer heterogeneity’ into their DNA and reaped the benefits.
How Jeff Bezos became successful by understanding customers
We’re going back to the ’90s. At that time, Jeff Bezos predicted that online shopping would be the next big thing. He started selling books online. Why books? Because they would reveal the most information about his customers. And if he understood his customers, he could sell them anything (e.g. people buying cooking books might enjoy cooking utilities). By focusing on his customers at all times and by understanding that every customer is different, he managed to grow the bookstore into the Amazon of today. And that philosophy is still the driving force behind his many acquisitions and investments in companies like Uber and Airbnb.
Read along as we explain why ‘Customer Heterogeneity’ is the main reason companies should adopt ‘Customer Centricity.’
Customer centricity: divide attention
In traditional marketing books, ‘customer centricity’ is defined as treating your customer as king/queen and providing exceptional customer service. Although outstanding customer support is crucial, it is not the same as customer centricity.
Customer centricity is not really about being kind to your customers. It is not a philosophy. It is not something that can be fostered through a company handbook or mission statement.
Then what is it?
Customer centricity is a strategy to fundamentally align a company’s products and services with the wants and needs of its most valuable customers (Fader et al. ).
Customer centricity encompasses three things.
Firstly, companies should focus significantly on retaining their best customers (retention). Secondly, they should focus on acquiring new customers that are very similar to their current top 5 to 10% customer base (acquisition). Thirdly, companies should also align the development of their products and services with the expectations & needs of their most valuable customers.
Does this mean that you should ‘fire’ your worst customers? No. It means that you need to focus less on your worst customers and more on your best customers. This way, you can maximize the long-term financial value of these customers for your business (customer lifetime value).
How do you structurally focus on customer centricity?
It requires three things: 1) centralization of customer data, 2) qualitative analysis, and 3) innovative marketing technology/brains. Combining these three allows you to focus more on your most valuable customers (and vice versa) and opens doors to an exponential growth of your company.
🖱️ Click the banner above to read part II. We’ll discuss :
✏️ RFM Segmentation
✏️ RFM Segments & tactics per segment
✏️ What happens when you don’t work customer centric?
✏️ How to get started with customer centricity?