Let’s kick off the article with a closer look at Michael Phelps 🔎. The American freak of nature is the most successful Olympian ever. Thanks in large part to a mix of physical characteristics that make him unique and a natural-born swimmer.

Scientists have examined his body and determined that the wingspan of his arms is 8 cm longer than his body length (in the average person this ratio is one-to-one). They noticed that the distance between his ribs and hips is 10 cm longer than average. And the list goes on.. Basically, the only thing he is missing is a set of gills. 

The point we are trying to make here? (It is a marketing blog after all..)

Every single person is different. But so are your customers! Instead of physical criteria, we can differentiate customers based on 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 believes that there is no such thing as ‘the customer’ or ‘the target group.’ 

A buyer persona becomes redundant when you there is a lot of customer data available.

So far you have probably not read anything you did not already know. (But I promise you will !)

Yet there are still a lot of companies that think of their customer base 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 the time, Jeff Bezos predicted that online shopping would be the next big thing. He started selling books online. Why books? Because this way the product he sold would reveal a lot of information about his customers (e.g. people buying cooking books might enjoy cooking utilities). He knew that if he understood his customers, he could sell them anything . 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 ‘customer support’ is crucial, it is not the same as customer centricity. 

Customer centricity is not really about being friendly 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 (as defined by Peter Fader). 

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 exponential growth of your company.

Three things we excel in at BossData. Get in touch! 

What happens if you don’t work customer-centric?

Big players like Amazon, Zappos, Coolblue, Bol have already fully integrated the customer centricity philosophy into their daily routine.  If you do not start treating your best clients the best way possible (= customer centricity), your direct competitors will soon begin. Perhaps, they have already started?

Zappos Example

Shoe giant Zappos has adopted customer centricity and knows how to satisfy its most valuable customers with a striking condition: free returns within 365 days. They do so because they noticed that their most loyal customers also have the highest return rates. This strategy is proving to be profitable for Zappos, despite the high cost of returns. 

Why now?

Customer loyalty is at an all-time low as customers leave your business without a blink due to increased price transparency and ever-growing competition. It becomes increasingly more expensive to acquire new customers at an acceptable ROI. A customer-centric approach counters these recent developments by raising revenue generated from your current customer base. 

Research by Deloitte and Touche found that customer-centric companies were 60% more profitable compared to companies that were not.

Customer centricity is central to the success of your business. Increasing revenue generated from current customers will make the difference between growth and exponential growth.

“Charging everyone the same thing and treating everyone the same way, as retailers do today, is ‘Six Sigma’ thinking which is great for producing widgets on a production line, but it makes no sense in a world where customers are inherently different.

Peter Fader, author of ‘Customer Centricity’

What should your next step be? 

As you have entered this part of the blog, you now know that it’s a shame to give all your customers the same amount of love. 

Are you developing a new business strategy? Make sure that your best customers will benefit the most. It all starts with an RFM segmentation, analysis of the findings/data and ends with using/choosing the right technology to reach your newly-created RFM segments through various channels. 

We are not claiming it is easy. Here are some of the biggest known issues when implementing a customer centric mindset.

This data is gathered from marketingsprofs.com

Final Notes

We are aware that not every company benefits from customer-centricity in the same way. It is partly due to the frequency of purchases, which is different for a car dealer than for a jewelry shop. The chosen strategy is a differentiator as well. Coca-Cola, for example, puts brand equity more central than customer equity.

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