A customer-centric approach goes beyond selling products and services. It aims to understand the customer and establish long lasting relationships.
Do you ever wonder about the difference between customer-focused and customer-centric? For most people, these two terms are almost interchangeable. But if you dig into the true meaning and implications of each, you’ll find some subtle, yet important differences. This blog looks at these differences and identifies where customer centricity takes center stage.
Markets have moved from product centricity to customer centricity. Companies used to focus on design, manufacturing, and logistics. Back when products and services could muster a clear difference that was sustainable and beneficial, a product-centric approach made sense. Today, in light of the information available and the level of competition, the focus has shifted to customers.
So, what is the difference between customer centricity and being customer focused, and why would you favor customer centricity? Here are five key points to keep in mind.
1. Think like a customer
Customer-focused approaches tend to be based on figuring out what to sell to customers. This is an outside-in approach. In turn, customer-centric approaches try to see the world from the customer’s point of view, which is an inside-out point of view. Approaches like programmatic advertising, A/B testing, and NPS metrics are customer focused. Approaches based on co-creation, ethnography, and motivations tend to be customer centric.
2. Deal with needs, not wants
Customer-focused companies listen to customers and try to give them what they want. Customer-centric companies work hard to understand what customers need, even if they themselves don’t know it yet.
3. Provide solutions, not just products or services
Customer-focused marketing tries to identify which products and services match the wants from each customer. In contrast, a customer-centric approach would create a complete solution. By putting the customer at the heart of the business and understanding their needs and wants, a customer-centric company can ensure that their long-term experience is optimized.
4. Focus on customer lifetime value
Customer-focused companies often focus on offering great service and empowering frontline staff to go the extra mile. Customer-centric companies know who the key customers are, given that they use a segmentation approach (based on customer lifetime value) and focus their efforts on cultivating the relationship with this key segment. The remaining customers are still customers, but they are not central to the strategic planning of the business, nor to the creation of key tactical tools.
5. Proactive instead of reactive
Customer-focused companies tend to chase the customer. They seek to please everybody who walks through the door. Customer-centric companies focus on core customer groups, identify their conscious and subconscious needs (not just wants), and offer solutions to their problems. This strategic approach encourages collaboration with customers in order to co-create the future.
Customer centricity at work: Three examples
Best Buy talked to a group of customers to find out why they were leaving the store empty-handed. The group in question—busy moms, a high value group—was involved in 55% of purchases from the store.
Best Buy discovered there was a mismatch between the customer focus the sales team was offering and the actual customer’s needs. What these "busy moms" were really interested in was a device with complete solutions, such as a digital camera that would allow them to share photos with family members, yet the sales team kept peppering them with technical questions such as the number of pixels they wanted. By properly identifying important customer groups and their needs, Best Buy was able to sell more products. The right ones.
The customer-centric layout that resulted from the initiative led to a 9% increase in sales.
Apple versus Nokia
In 2007, Nokia was the dominant mobile phone provider, with a global share of about 50%. Nokia had a great research program that listened to what their customers were looking for.
That year, Apple launched the iPhone, which addressed the needs of core future customers. The iPhone never reached a market share of 50%, but was massively profitable and fundamentally disrupted the mobile phone market—leading to the decline of Nokia. Ever since, Apple has been successful in anticipating the customers’ needs and focusing on customer lifetime value among its core segments.
Ryanair is a very successful low-cost airline in Europe.Alas it has been rated very poorly by industry satisfaction studies: in 2017, the Which survey rated it worst amongst 20 European airlines—while acknowledging that it was also Europe’s most popular airline with the highest number of customers.
Ryanair is not a customer-friendly brand, but it’s customer-centric. It flies lots of planes, reliably, to numerous destinations, at a very low cost. Their target customers are people who prioritize affordability, frequency, and destination. These customers might "want'' good food, pleasant customer service, and premium benefits, yet their main factor for purchase is affordable pricing. They don’t mind settling as long as they can afford the tickets. Ryanair has succeeded by identifying and focusing on the needs of this niche customer segment, rather than by trying to please all segments in the market.
Apply customer centricity to your business
The first step is to start thinking strategically and being proactive rather than reactive. Determine how you are going to focus on lifetime customer value and who your core customers are. Identify your customers’ needs and organize around providing solutions, rather than separate collections of products or services.
Pro-tip: put yourself in your customers’ shoes and start visualizing the world from their eyes.