Peter Fader is a professor of marketing at the Wharton School of the University of Pennsylvania and a co-founder of Zodiac, a predictive software platform

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Fader

Millions of “growth-hacking” experiments are conducted every day, and we’re all just cogs in the wheel.

Airbnb offers us $35 in travel credit if we refer our friends. Zillow emails us new listings that fit our last search criteria. LinkedIn’s “Who’s Viewed Your Profile” emails get us coming back to the site every week.

Customer retention, acquisition and churn data keeps rolling in, and companies either tweak, optimize, and redeploy the experiment, or scrap it all together and try something new.

Silicon Valley companies like Facebook pioneered the growth-hacking mentality, and the term is just now starting to make its way into corporate marketing departments. Big brand CMOs, now under increasing pressure to drive revenue growth, are asking themselves the same questions startups ask themselves every day:

What marketing channels or product features can we “hack” in order to grow our customer-base quickly (and cheaply)?

When done well and conducted across many channels and business functions, growth-hacking experiments are sensible, incremental ways to squeeze a little bit more revenue out of any business. In fact, every company ought to be doing them.

But are these experiments as out-of-the-box as the term “growth hacking” might imply? I don’t think so.

The broad-brush techniques that typically fall under the growth-hack umbrella — from referral programs to super-charged content marketing — certainly don’t merit the label. “Hacking” something isn’t just about doing a conventional thing just a little bit smarter and more effectively. Quite the contrary. It’s cracking systems with finesse and cleverness. It’s doing head-turning stuff no one had ever thought of before.

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Taken literally, the term “growth hacking” should conjure up radically different ways of growing a business. It’s not, as Wealthfront’s VP of Growth Andy Johns once said: “throwing spaghetti at the wall and seeing what sticks.”

So here’s a radical idea: Instead of running a series of one-size-fits-all experiments meant for any kind of customer, why not focus on finding and exploiting the differences across your existing customer base? Let’s call it “customer hacking.”

A true “customer hack” strategy begins by recognizing that customers are different from each other. Some customers are more valuable to your business than others: for example, someone who regularly buys throughout the year vs. someone who only buys from you on Black Friday. Some are worth holding onto and others aren’t: for example, a loyal, no-complaints customer vs. a serial shop-and-returner.

While most companies know this to be true, their actions speak otherwise. It’s why we see so many “surprise and delight” campaigns to reward random customers, and why companies spend way too much on customer service systems designed to keep every single customer (including low-value ones) happy.

It sounds like such a simple question, but in my 30+ years of advising brands, I’m always surprised to learn that they often have no idea who their best customers really are. Sure, they’re collecting and analyzing customer data, but most are using these insights to justify chasing after a specific kind of customer persona (i.e., “30-something sports fans who follow our competitors on Facebook.”) Campaigns based on a flimsy hunch are certainly not the foundation for propelling true growth.

A true, customer-centric growth strategy is about shifting your entire focus to identify the kinds of customers who have spent and will most likely continue to spend money with you for the foreseeable future, finding more like them, and not worrying so much about everything else.

Sure, using well-validated predictive analytics to derive more value and growth from your existing customer base may not be as cool as testing out a sexy, new growth hack you read about on a startup blog. But in the data-driven marketing world, sexy doesn’t always sell.

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