Why Customer Service Doesn’t Equal Customer Centric

Sounds blasphemous, doesn’t it? What could possibly be more customer centric than offering great customer service? I’m not the only one who sees the difference. In his book, “Customer Centricity,” Wharton Professor of Marketing Peter Fader makes the customer-centric distinction, disavowing any notion of marketing political correctness. He says, “Not all customers are created equal. Not all customers deserve your company’s best efforts. And despite what that the tired old adage says, the customer is most definitely not always right. Because in the world of customer centricity, there are good customers, and then there is everybody else.”

Imagine for a moment that you’re the CMO of a Fortune 500-sized company. Everyone — the board, the shareholders and the company employees — depends on you to develop a long-range plan for creating profitable revenue growth, based on a unique and defensible brand. With that goal, would you treat all your customers “great”? Or would you give extra special attention and investment to those customers with the most potential value? This is “customer centricity,” and it is, as Fader states, “the strategy with a specific aim, more profits for the long term.” That aim is achieved by investing proportionately to customer value potential.

I understand this is sensitive territory. I do not propose turning your back on certain customers. Instead, I urge you to know which customers buy more, have the potential to buy more and/or have greater influence on the market. In short, know which customers hold the most potential and invest accordingly. As for the others, consider a stratified approach to engagement and focus on moving those customers into strata that are more valuable.

How can today’s marketing leaders identify the value of a customer during an interaction? How can they stratify what to do according to customer value? How can investment and engagement be dialed up and down? The essential ingredient for all these questions is data — sourced from internal, external, online, offline, custom research, across the enterprise.

Unfortunately, no firm can count on any one signal to consistently describe or predict consumer value or behavior — not actual purchases, not search, and sometimes not even what customers say they want to buy. Instead, multidimensional insight or the “refinement of data across all relevant signals” is paramount. This, in turn, takes an enterprise data-management strategy to activate, evaluate and apply these signals at scale. It is not simple, but it is achievable.

There is great potential in investing in customer value. Our research indicates that in general, “top value” consumers still represent a 17 percent upside, and that “low value” spenders represent a 34 percent upside if brought into higher-value tiers. The impact on margins is even more profound; on average, an improvement of 10-15 points of margin is achievable.

While great customer service remains a foundational component for a brand’s success, to optimize the value of the company, brands must continually strive to increase the value of their customer portfolio. In other words, optimizing the value of individual customer relationships optimizes the long-term value of your brand and a payoff for everyone: customers, shareholders and employees alike. Maybe this pre-holiday season is a good time to assess both your customer service and your customer centricity. They are both vital, but different.

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