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Brands: Are you customer centric?
In the wild west of online marketing, many brands are focused on acquiring new customers. Sometimes to the detriment of older customers; customer who may have 'made' the brand. The question now becomes how do brands focus on new customers without ignoring the old?
Kristina: How does customer centricity go against traditional marketing wisdom?
Blair Lyon, Vice Presidnet, Marketing, Monetate: Traditional marketing wisdom says it is much easier to hold on to existing customers than to find new ones - as a result, most companies are more focused on retaining and developing existing customers than on acquiring new ones. In reality, flighty customers will typically remain unprofitable no matter what you do, and trying to convert low quality customers into valuable customers is often more expensive than it's worth. It is more important to focus on acquiring new high-value customers that have a low attrition risk and a long expected lifetime. Shifting spending towards acquiring high-value customers is ultimately more profitable.
Additionally, many companies aim acquisition efforts towards the traditional goal of spending the least amount of money to acquire the most customers, rather than focusing on how and where they can acquire the most valuable customers. However, now that it is possible to use data to determine which customers will be the most valuable, focusing on cost per acquisition is a mistake. It is much more advantageous to focus on value per acquisition, or customer lifetime value. In order to acquire the best customers who will ultimately be the most profitable, use customer lifetime value to drive acquisition strategy. This can be done by looking at how lifetime value of previously acquired customers varies based on segments of acquisition sources and targeting segments that have resulted in the most valuable customer acquisitions.
Kristina: What are the key drivers behind a customer-centric marketing strategy?
Blair: The key drivers behind a customer-centric marketing strategy are knowing your customer and taking action. Forty percent of marketers don't create personalized web experiences targeted to specific customer or visitor segments, and 28% of marketers don't know which high-value customers to focus on. In order to adopt a customer-centric approach, companies must celebrate the heterogeneity of their customers and distinguish the profitable customers from the less profitable ones. The nature and magnitude of differences across customers are an opportunity for companies to decipher who the valuable customers are and allocate resources accordingly. Differences between customers when it comes to profitability are particularly critical, and emerging metrics such as customer lifetime value make this type of distinction possible.
Kristina: How should companies approach adopting a customer-centric strategy to help grow business?
Blair: Customer centricity is about shifting away from the product-centric mindset of coming up with the next big thing, and focusing on finding the next big customers. It is imperative to stop treating all customers as though they are the same - customers do not all hold the same value to a company. One key element to a successful customer-centric strategy is focusing efforts on testing and figuring out who the valuable customers are rather than trying to transform unprofitable customers into profitable relationships. Companies must get more comfortable with the data and tools that make it possible to mine through all the information customers are sharing, and take action accordingly. By leveraging data to figure out what makes valuable customers unique, companies can now tell which customers have been valuable previously and which will be profitable in the future. Basing future acquisition efforts on this knowledge can have a significant impact on business.
Image via Shutterstock
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