A

Book

Customer Centricity Review

Focus on the Right Customers

for Strategic Advantage, 2nd Edition
Review by Lindsay Langenhoven Book by Peter Fader | Published by Wharton Digital Press | © 2012

As a business owner, your eye is always on the bottom line.

Customer Centricity shifts your focus to what really matters.
By focusing on your customers, who create real value in your
organization, you will see your profits rise exponentially!

Customer Centricity takes a new look at the old saying “the customer is always right” by
providing a persuasive, easy-to-follow, and refreshing take on product- versus customer-
centric business models. The book explores five key components of customer centricity to
help you connect with your customers and generate greater profits.

Behavioral data specialist Peter Fader revitalizes the customer relations field and encourages you
to re-examine how your business relates to its customers. Customer Centricity incorporates vast
knowledge and expertise in the field of customer relations and promotes a shift in your business’s
focus. This will help you gain strategic advantage over your competition, and attract customers who
create real value.

As a Professor of Marketing and Co-Director of the Wharton Customer Analytics

Initiative, Peter Fader brings a wealth of experience and know-how to Customer
Centricity as he immerses you in a new, authentic approach to customer relationship
management. Readers will learn how to:

move away from product centricity

gain competitive advantage

rethink equity in brand and customer relations

recalculate customer value

gain maximum benefit from customer relationship management

 Book Review: Customer Centricity
2

Initial Insights
Many people in customer relations have probably heard the famous story of Nordstrom accepting the return of
a set of tires when the company didn’t even sell tires in the first place! Whether legend or fact, this is certainly an
extreme application of the adage “the customer is always right.” Customer Centricity shakes things up with a very
different view on serving customers—the customer is not always right! This might set your head spinning, but
take a deep breath and allow Fader to guide you from your staid product-centric approach to a more modern
and profitable customer-centric view to business. His examination of the customer relations practices of well-
known companies and easy-to-follow stories shed light on the need to shift your view on how you relate to your
customers.

A Shift from Product-Centricity

You’ve probably tried doggedly to get your staff to try to meet your customers’ needs and do whatever it takes to
keep your customers happy. Ever thought that some of those customers are really not worth the effort? Good
news—you’re completely right! Customer Centricity targets the customers who are really worth your time and effort!

It’s commonly understood that the aim of business is to make profit. Fader doesn’t try to sway you from this basic
premise. In fact, he delves into the old way of doing business and uses relatable, real-life examples, such as Ford,
to smoothly explore the tried-and-tested product-centric model that you’re familiar with. This model, the author
posits, is aimed at making profits and many companies employing this model do make good profit; consider the
booming success of Apple, for instance. But he also cautions that, since it’s a simple approach, its simplicity can
become a major growth-limiting factor.

Customer Centricity acquaints you with the gaps in product centricity and prompts you to examine them for
yourself by logically addressing four key factors: the speed of technological advances, the loss of geographical
advantages, the deregulation in many industries, and the consumer’s need for instant gratification. The latter,
you’ve more than likely experienced with the younger generation! But though the newest group of consumers
wants everything now, the author drives home the flip side of doing business in the modern world—companies
need to take advantage of the vast amounts of customer data available to them. Fader examines contemporary
customer relations cases, such as Apple and Walmart, to help you re-examine your views on customer-friendly
versus customer-centric service.

Gain Competitive Advantage

As a business owner or manager, you want to do everything you can to get ahead of your competition. However,
sometimes your own inflexibility in considering new approaches can lead to you shying away from a new trend
or idea, such as the customer-centric model. Fader gently helps you through your initial resistance by pointing
out that both product and customer centricity share the same goals. Customer Centricity indicates that only a
notably small number of well-known companies truly follow and reap the rewards of the customer-centric
approach, such as Amazon and Netflix.
 Book Review: Customer Centricity
3

Fader takes a deeper look at the challenges of customer centricity by examining practical accounts of two main
issues: financial and organizational. The author, in his customary conversational style, further examines how cus-
tomer centricity brings about long-term profits by clearly defining three key areas: customer acquisition, customer
retention, and customer development.

Leveraging his superlative experience in customer relations, Fader continues to tune into management thinking
and raises a common concern regarding the customer-centric model: what about the customers you’re no longer
focusing on? With his straightforward approach, the author alleviates this concern by getting you to picture your
own company reconfigured to serve only a select group of customers, and thus navigates you smoothly along
the journey from product to customer centricity.

Rethink Equity in Your Brand and Customer Relations

Of course you want your company’s value to grow so you meet shareholders’ expectations. In order to do this,
you need to know what’s creating value for your company. With an anecdotal look at the Coca-Cola brand, Cus-
tomer Centricity examines brand equity, the customers’ perceived value of the brand, and its inclusion in the tra-
ditional concept of equity in a business. Fader suggests that there is definite value in a company’s brand and
brand portfolio and brings you to a clearer understanding of customer equity, the total value of your customers.
He highlights a keystone of his thinking: customer equity is an essential element in customer centricity. The author
poses simple questions such as whether your firm is likely to grow via brand equity
or customer equity to help you ascertain if your business is suited to a customer-
“…there is definite value

centric approach. In keeping with his instructional style, Fader also includes
in a company’s brand

insightful glimpses into the types of companies that might not align well with this
and brand portfolio.”

approach.

Recalculate Your Customer Value

If you want to see growth in your business, you need to know the real worth of your clients or customers. And
with this information at hand, you can run your company more effectively. Fader introduces a well-known core
customer relations concept: customer lifetime value (CLV). He offers a clear-cut definition: CLV is the present value
of future cash flows from a particular customer. He further clarifies the basics of the concept with four key points:
it’s a forward-looking concept; only relevant data is used in calculations; calculations are predictive; and different
calculation methods apply to different business types.

Customer Centricity also emphasizes that CLV must be calculated correctly. To do this, Fader stresses the need for
accurate customer data and accordingly lists the benefits of correctly calculated CLV, such as establishing actual
customer worth, better estimating overall customer equity, and enabling you to select the most valuable cus-
tomers. With a keen eye for doing things differently in the customer relations field, the author examines why tra-
ditional means of calculating CLV have been flawed in the past, such as CLV not pertaining to a customer’s past
 Book Review: Customer Centricity
4

profitability but ideally viewed as a forward-looking approach. And with

the aid of graphical representations, Customer Centricity provides valu-
“…Customer Centricity provides

able lessons on calculating the true value of your customers and how
valuable lessons on calculating

you can reach a more accurate picture of your customer base by seg-
the true value of your customers.”

menting customers.

Exploit Customer Relationship Management

It’s commonly understood that having a good connection with your customers is key to good customer relation-
ship management (CRM). This naturally leads to good profit margins. But how do you develop that connection?
Fader provides an accessible story of a small-scale beauty salon and the markedly attentive relationship the owner
has with her clients, which demonstrates the need to gather and maintain accurate data on your customers in
order to establish and maintain a genuine connection. The accepted definition of CRM is expanded in Customer
Centricity to include a firm’s efforts to gather information about and better understand the expected value and
unique characteristics of its focal customers and allocation of resources according to the gathered information.
The author continues to expound on CRM as an actualization of customer centricity and constructively picks out
where the accepted definition falls short.

With the inclusion of a simple quiz, Fader unearths the essence of customer centricity—breaking down the cus-
tomer base from an indistinct mass into unique individuals with distinct valuations. Customer Centricity gently
broadens your understanding of the customer-centric model and concludes with an archetype of an effective
model in action, leaving you ready to take the plunge into customer centricity in your own business.
 Book Review: Customer Centricity
5

Here are some strategies you can apply to

Putting it All
refocus customer relations in your own
Together workplace.

1 Recognize the Differences Between Your Customers

Break away from tradition and focus on the differences, rather than similarities, between your customers. This
enables you to form an individual connection and increase brand loyalty. As Customer Centricity affirms, “not all cus-
tomers are created equal.”

2 Focus Marketing on Your Valuable Customers

By focusing on your valuable customers, you’ll experience short- and long-term gains. Though it takes a lot more
work initially to orient your business and market in this way, it’ll be well worth the rewards for both the customers
and your company.

3 Quantify the Value of Each Customer

You can accurately portion how much to spend on your existing versus new customers by quantifying their value.
By allocating correctly, your customer-centric model and business as a whole will flourish. It may help to refer to
Fader’s valuable additions to the traditional CRM definition and calculations.

4 Use a Highly Focused CRM Strategy

When you use a highly focused CRM tool, you can gather and utilize more detailed information about your customers.
This leads to a more genuine and personalized connection with them and keeps them coming back for more!

For Additional Reading

1 Managing Customers Profitably by Lynette Ryals, John Wiley & Sons, © 2008,
ISBN 978-0470060636.

2 Statistical Methods in Customer Relationship Management by V Kumar and

Andrew Petersen, John Wiley & Sons, © 2012, ISBN 978- 1119993209.

3 Using Information to Develop a Culture of Customer Centricity: Customer

Centricity, Analytics, and Information Utilization by David Loshin and Abie Reifer,
Elsevier Science and Technology Books, Inc., © 2013, ISBN 978-0124105430.
 BookCustomer
Book Review: Centricity
Review: Contagious
6

Parting Thoughts
Customer Centricity provides a refreshing look at customer relations management. Fader incorporates his wealth
of knowledge in the industry into an unassuming, persuasive narrative, by guiding you on a logical journey from a
product-centric to customer-centric approach. Business owners will relish in the potential for better customer con-
nection and a foreseeable growth in profit margins.

“I am here to let you in on this little secret: the customer is not always right.”

About the Author

PETER FADER is a renowned specialist in the field of behavioral data and customer relations.
A Professor of Marketing at the Wharton School of the University of Pennsylvania, Fader is
also Co-Director of the Wharton Customer Analytics Initiative. He is a prolific researcher in his
field and has had his work published on numerous occasions.

Also by Peter Fader

• Wharton Executive Education Customer Centricity Essentials: What It Is, What It Isn’t, and Why
It Matters, Wharton Digital Press, © 2011, ISBN 978-1613630075.

Customer Centricity: Focus on the Right Customers for Strategic Advantage, 2nd Edition, by Peter Fader. Copyright © 2012, Wharton Digital
Press, 128 pages, ISBN 978-1613630167.