[MUSIC] So now that we've laid out the definition of customer centricity, we've spoken a little bit about some of the challenges that it requires companies to meet changing its centric structures and so on. What I like to do is just to step back and review all the aspects of living in a customer-centric world. What does that mean? Now we'll spend a little bit more time talking about some of the other aspects of it. So, so first, if you live in a customer-centric world, well let me ask you this question. What's the overarching objective for the commercial enterprise? You remember I, I asked that and we discussed it before for the product-centric enterprise. But what is it for the customer-centric enterprise? So usually when I ask this question people will give me a lot of customer oriented answers. Building loyalty, creating satisfaction, getting people to buy things. Yeah, that's all nice. That's all terrific. We want to do all that and we hope the customer-centricity will help us do those things but that's not the single overarching objective. The overarching objective is the same as it was before, to maximize shareholder value. To maximize the profits of the company in the short run and the long run, recognizing the time value of money. And even though that point seems kind of silly, it's the same thing, that's why I want to emphasize it. That in the end, the overall objective of any commercial [LAUGH] enterprise is to make as much money as possible. The problem is this. There's too many people who think that the money-making thing is uniquely associated with product centricity, but it's not. There's lots of different paths that we can follow, and while customer-centricity is quite different in many ways from product centricity, it's a path that actually might help you get there faster and better. So, If I want to emphasize that point, that we're trying to achieve the same over-arching goal but in a very different way. So let's talk about how we achieve it. Again, going back to product centricity, for most firms, the performance superior ones and the operationally excellent ones, it was all about blockbuster idea. Let's produce a lot of it, let's produce it efficiently, and let's think about the next thing to produce. And again, that formula has worked for so many companies, still works today. So what is it in the customer-centric world? What is it that we celebrate in the customer-centric world going back to the, the Harrah's and the Tesco and the IBM? Well, this, this point might be more subtle, but it's very, very important. What we celebrate in the customer-centric world is customer heterogeneity. The idea that not all customers are created equal. The idea that some customers are just inherently much more valuable, much more profitable than other customers. See, in, in the old days, companies didn't know the profitability of customers. They didn't understand how customers were different from each other. And again, they didn't care, because they were so intent on just pushing products out there. Once they started realizing that customers are different from each other, at first it was a nuisance. Oh my gosh! Different customers, we're going to have to talk to them in different ways. And develop different products for them. It was a nuisance. It added to our costs. It was a hassle. And the more we learned about our customers, the more we realized they are really, really different from each other. And it's, and it's always true, we can't avoid that. So unless we're going to paint ourselves into a corner, and only work with one kind of customer, we need to acknowledge and celebrate that heterogeneity. We need to find a way to say that these differences across the customers not only exist, but they're a good thing. Let's find the kinds of customers who can be very valuable to us. Let's make them valuable, and let's find others like them. And, [UNKNOWN] at the same time, let's find ways of dealing with the other prob, customers in a reasonably profitable manner. So, we celebrate heterogeneity. One point I want to emphasize along the way, I, I, say this over and, over and, over again, but it is important to make this explicit. Is that when we're focusing on heterogeneity and we're focusing on the, on the, the profitability of our customers, we're talking about future profitability. Notice that I'm always pointing over here to the future. It's great to look at past profitability. In many cases, that will be a guide towards future profitability but it's not a perfect one to one match. So we need to use our data, we need to use models and technology in order to project the future value of our customers. So the celebration of heterogeneity is not only what the customers have been worth. And which customers have been the most valuable? But is which ones we think will we be most valuable. Going back to my example about the MBA students and the airlines. Most of the value is what we're going to create and extract in the future. And that's the really pivotal role of this idea of customer lifetime value. Now here's a tough question for you. Okay, we're going to want to measure CLV, we're going to want to manage around it, how do we do that? So, when we look at a company as it starts changing from being product centric to customer centric, what kinds of tactics change? So one point that I want to emphasize right now, [SOUND] what were going to go into much greater depth in module three are those three tactics that lie at the heart of customer centricity. That are the, the tactics that make it possible for companies to potentially make more money being customer centric than product centric. And you see those words right here, it's all about customer acquisition, customer retention, customer development. And a lot, lot of you might be looking those words and saying well that's not new. Companies have been acquiring customers forever. Companies have been thinking about the retention and development, making customers more valuable. These ideas are not new, and you now what? They're not! That's true! But in many cases, these ideas are, are, kind of treated at a fairly low level within the marketing organization. Because the marketing organization is often there just to support the product-centric blockbuster mentality. So it's all about, how can we get as much stuff out there as quickly as possible? It's all about coming up with the message. Very often, branding might be associate with product centricity. Not always but in many cases, it is. And so, instead, as we start to think about how customer's different from each other, we're going to want to ask questions about which kinds of customers should we be acquiring. How much should we be willing to spend to acquire them. On the retention side, should we try to keep everybody, should we roll out the red carpet for everyone? Or should we be a little bit more selective. And when it comes to customer development, are there some customers who we can make into better customers than others. And how do those tactics tie in with the acquisition and the retention? So I'm going to spend much more time talking about it later on, but my point here is that these three tactics need to be elevated. The people who are going to be working on them need to be higher in the organization. The people who are running the marketing function have to be at least as painfully aware as acquisition, retention, and development, as they are around some of the branding ideas that, that Barbara spoke about. And so we're going to get back into that. But I just wanted to plant that seed right now. One point that I've mentioned from time to time, but I want to make a little bit more explicit here would be challenges for the organization itself. Again instead of having an organization, that's organised purely around the different kinds of products and services, we want to have a customer-centric organizational structure. Ideally, the whole org chart would be built around the different kinds of customers we have. And then below them, the different ways that we're going to create and extract the profits from them. I'm going to give you a nice example of a company that's seriously exploring different organizational approaches towards customer centricity. It's a company that today focuses quite a bit on developing and distributing blockbuster products. But more and more they're realizing that they actually need to be, or could be a direct marketer. The company is Proctor & Gamble. What does Proctor & Gamble know about you or me? Actually not much. Today, Proctor and Gamble's customer would be the retailer. The Walmarts, or other grocery chains who they sell their products to. But Proctor and Gamble recognizes that with this shift towards customer centricity, with the shift towards direct marketing, that eventually their customer will be me and you. And they want to start to understand who the really valuable customers are. How we can sort them out from other customers. And what are things that we can do to create more value for those customers? So here's an example of a really nice initiative, one of many that Proctor & Gamble is trying out. It's called My Black Is Beautiful and it's aimed at African American woman. And P&G is determined that this is a really valuable customer segment for us, we need to be there, we want to be seen as a trusted adviser. So, so take a look at this slide in front of you here there's a number of very unusual aspects about it compared to traditional Proctor and Gamble or package goods advertising. First, look at the bottom of the slide. You see a number of different P&G brands being advertised together. It's pretty unusual for a company like P&G, or again other packaged goods manufacturers, to use that kind of umbrella branding, and going back to some of Barber's content. and if you look, look higher up on the slide, you'll notice that they're also talking about recipes and music and all kinds of things that P&G isn't involved with. But this should be an example of Procter and Gamble trying to position itself as a trusted adviser. That they're offering all kinds of products and services to this valuable customer segment that they don't necessarily make any money on, but they want them to see P&G as someone who has their best interest in mind. And if you look at the bottom of the slide, you'll notice something fairly unusual. You see here this the mention of, of a line of cosmetics called Covergirl Queen. Covergirl is a big line of cosmetics under Procter and Gamble. But, Queen refers to Queen Latifah, the popular actress, and so they developed a whole line of cosmetics specifically for African American women. This goes back to our definition of customer centricity. Going to the R&D people and saying, you know what, instead of coming up with a blockbuster product that everybody's going to buy, here's a valuable customer segment. We want to come up with something for them, that they're going to find very valuable. Others might buy it too, and that would be great. This idea of leveraging R&D around a focal segment that's starting to show us what customer-centricity is all about. Now I have no idea if this initiative by Procter & Gamble will be successful. I don't even know if this is the right segment to go after. But I'm not going to comment on that. But given that they are going after this segment this is the right way to do it, this is customer centricity. And you have to believe that in the Proctor, Proctor, Gamble organizational chart there's some people who are responsible for My Black is Beautiful. And they're going to bring whatever resources they can what are the products with in the P&G family or outside of it in order to make this customer group as valuable is possible. That' s what I like to see for customer centricity and I want to see more companies developing these kinds of organisational and marketing structures around it. The bottom line for customer centricity, is this idea of relationship expertise, if you remember earlier, the key to product centricity was product expertise. We're really good at developing and delivering a certain kind of product. We're always, s, steps ahead of everybody else, but as we discussed, the cracks in product centricity are shortening some of those steps, it's much harder to stay ahead when it comes to product expertise. But when it comes to relationship expertise, I believe that there are meaningful, sustainable long run advantages. And I'm not just talking about soft, squishy understand your customers in some generic way. I'm talking about data. I'm talking about models. I'm talking about forecasts. I'm talking about truly understanding your customer, your customers, celebrating the heterogeneity. One of the beautiful things about it, is that when you collect the data, and you develop these kinds of forecasts, nobody can ever take it away from you. It will never become commoditized. And so I believe, if your customers are assets, and I think they are, that investing in the data, in the knowledge, in the heterogeneity, can actually lead to better outcomes to companies than pure product-centricty. There's one more point I want to raise, to really help us understand the contrast between product and customer-centricity. You might remember a chart that I showed you earlier that showed a lot of the characteristics of a product-centric firm. And I, and I really focused on the idea of the divergent thinking. We have this product goodness, what do we do with it? Well here's the complete chart now, where it shows you the contrast between the product-centric firm and the customer-centric firm. I hope that you'll see that many of them are entirely consistent with our discussion so far. This focus on the valuable customers instead of the blockbuster products. The different kinds of metrics customer retention, lifetime value. We're going to be saying more about those as we go on. Again, I just want to call your attention towards the bottom of the slide. Instead of diversion thinking, what do we do with this product? It's conversion thinking. How do we bring more value to this customers? What products and services can we develop? What information can we provide? What can we do in the relationship to create and extract more value, more value for these really valuable customers? So again, moving from the product centric world to the customer centric world is very difficult, going from divergents to convergent thinking doesn't happen over night. It requires all kinds of different incentives, it requires different kinds of people with a totally different mindset. That's one of the challenges associated with customer centricity and I want to talk about a few more. [MUSIC]
