The answers seem obvious enough. Your customers are all those people visiting your stores, browsing your website, following your company on Facebook or Instagram.
But what about people who have visited your website or joined your loyalty program without ever pulling out a credit card? And those people who bought a single item one time four years ago, but you haven’t heard from since?
Many executives will tell you how their organizations have become much more “customer-centric.” They have multiple forms of segmentation that they apply to targeted marketing and personalization. Or they’ve started using machine learning and predictive models to adjust their prices. And yet — they still don’t really have a definition of their customer.
To be fair, most companies have come a long way from treating every customer the same. True customer-centricity, though, requires running your business from the customer dimension, just as you do from the product or geography dimensions.
This isn’t to suggest you throw out your product and geo-based P&Ls or organizational structures. But companies who manage by the additional dimension of customer will realize a step-change in revenue, profit, and customer loyalty from the insights and operational changes generated.
Businesses optimize what they’re measured on and what they build operations around. This organizes your business around the most important decisions affecting your sales and profits: those made by your customers. You can’t ask a product or store why its sales were subpar — but you can ask customers why they didn’t buy.
Operating on the customer dimension means you create a customer portfolio that collectively represents 100% of your revenue. Then, you can build business measurement and management systems around that portfolio — things like revenue targets, P&Ls, operating strategies, and organizational structures.
The first part isn’t hard. The sum of your customers’ spend with you equals 100% of your revenue. We just have to group customers in a way that’s structured and meaningful to your business, by creating behavioral segments that capture their patterns of responses to your overall value proposition in the marketplace.
Things typically get more challenging from here. Businesses have long-held, refined ways of managing product portfolios, regional operations, and channel touch points. Managing a customer portfolio requires developing a whole new set of metrics, operating structures, and functional expertise.
Historical disciplines will help. You don’t abandon product, geo, and channel management; you augment them with customer management. The traditional foundational questions are the same: We sell what goods, at what price, through what channels, in what locations, with what brand experience? Now, simply add a “to whom” at the front of those questions.
Make your customer portfolio the starting point: Who is buying what, at what price, through what channel? If you want to raise revenue and profit: Who is going to spend that incremental revenue, and how will you deliver in such a way as to realize that incremental profit?
Don’t try to do everything at once. Start with your definition of customer. Make sure your definition captures 100% your revenue and is in language your people and your customers understand. Becoming truly customer-centric starts with clarity on what a customer actually is for your business.