7 - 1 - (1) How Can Customer Centricity Be Profitable- (19-02).txt

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[MUSIC] Well, it's good to see everybody once again. Let me remind you of where we've been and then talk about where we're going for the remainder of my portion of the course. So, here's where we've been. We've been talking about customers centricity. we've been motivating it by the fact that the traditional product-centric model, while it's still common, still the way that most businesses operate, there are some cracks in product centricity. Issues like commoditization, well informed customers
  [MUSIC]Well, it's good to see everybody onceagain.Let me remind you of where we've been andthen talk aboutwhere we're going for the remainder of myportion of the course.So, here's where we've been.We've been talking about customerscentricity.we've been motivating it by the factthat the traditional product-centricmodel, while it's stillcommon, still the way that most businessesoperate, there are some cracks in productcentricity.Issues like commoditization, well informedcustomers, globalization, and so on,they just take some of the edge off ofproduct centricity.And so customer centricity is emerging.It seems to be a promising alternative butit's not well understood.So people, companies are using a lot ofdifferent words forit, whether it's customer intimacy,whether it's customer centricity, customerfocus,[INAUDIBLE]people using a lot of different words andpeople are employing a lot of differentconcepts.For me, I've offered a very, a, a veryclear definition ofwhat customer centricity means, and, andwhy companies would want to consider it.and, and for me, the key to costumercentricity is a celebrationof customer heterogeneity, anacknowledgement thatcustomers are different from each otherandinstead of viewing that as a nuisance, ohwe have to treat them differently, it's anopportunity.It's a terrific opportunity to say, hey,some customers are more valuable thanothers.Let's really focus on them to create andextract some of that value.Let's find more customers like them, andlet's find ways to continue to haverelationships with the other customers butnot necessarily on the same terms asthose really focal customer.And at the heart of that argument was theconcept of Customer Lifetime Value.The idea that we're going to judge thegoodness of a customer notso much on the amount of, of, of money or  value thatwe've already extracted from thatcustomer, of the amount of money orvalue that we think we can extract andwill extract in the future.So its this future looking idea we'regoing to judge customer basedon what we think they will be worth to us.And that's just really critical and we'regoing to continue toreally focus on how that forward lookingCOV orientation isgoing to effect, and in some casesradically change thekinds of decisions we make about how werun our business.And I mentioned very briefly some of thetactics that wetend to focus on, things likecustomer acquisition, customer retention,customer development.ButI haven't given a lot of specifics yetabout how wemanage those tactics, how we gauge oursuccess at those tactics, andhow we balance them off against each otherin order toreally understand our customers, and againcreate and extract all that value.That's what we're going to be doing now.So, so this module is all about show methe money.This, this module is all about andhow to really, really understandacquisition, retentionand development in a very new way, becauseasI've said before, those tactics bythemselves aren't new.Companies have been acquiring customers,they've been retaining and, andinc-, increasing the value of customersfor a long, long time.But we want to elevate the importance ofthose ideas.We want to develop metrics and managerialguidelinesto, to really understand those tacticsbetter anddrive the business using them, not justusing them kind ofat the margin to, to squeeze a, a few moredollars.So we're really going to dive deep intoacquisition,retention and development, that's whatthis module is all about.Ideally, a company would aspires to beworld class  on all three of those dimensionsacquisition, retention and development.But that's tricky.In fact, it's, it's tough enough to masterany oneof them, much less two or even three ofthem.So what we're going to do is we'regoing to examine them one at a time.But we do want to understand theinter-play among them.We do want to understand some of thetrade-offs that companies face.And in fact, I want to begin by asking youabout one of those trade-offs.So let's imagine that your running acompany.Many of you are or you're involved with abusiness and, and your outthere, you, you have your marketing budgetand you're, you're spending itappropriately on acquisition,retention, development, but then the CEOcomes down and says, you know what?I'm going to give you an extra dollar or a$100,000, you getthe idea, I'm going to give you a littlebit of extra money.Which one of those three tactics are yougoing to spend it on?Now those all three are important, but atthe margin which one doyou think is most deserving of thatincremental dollar that you might have.And in fact I really want you to thinkaboutthis, I want to make this a little quizquestion.So in fact I, I will pause for a secondand I, and I want you to vote, okay.So I want, I'm, I'm, I'm counting.So I want you to, to raise your hand.So, so which one is the most importanttactic at the margin?So how many of you would say it's customeraquisition?[BLANK_AUDIO]Okay.How many say customer retention?Raise them high so I can see.Okay.And how many say customer development?Okay, I got it.Alright, so, if I, I tallied up your voteshere, and it looks like[INAUDIBLE]approximately 5% of you voted for customeracquisition.And of the rest of you, the remaining 95%,it looks like it's a pretty even split.  So 47.5% for customer attention, 47.5% fordevelopment.At least when I ask this question to, tostudents, to managers, tosenior executives, different companies allaround the world, that's the basic splitthat I get.Most of the attention seems to be onretention and development, and justa few oddballs who are saying, we shouldspend that extra dollar on acquisition.So I want to come up with a crisp answerto that question, okay.I, I don't like, it depends.I want to say at the margin which one ofthose would be most important for ourongoing activities.So here's what I want to do.Let's dive into each one ofthese three tactics, and understand itreallycarefully, but understand it in a new way.because again, the basic words,acquisition, retention, development aren'tnew.But how do we see these differently whenwelook at them through the lens of customercentricity?Or more specifically, how do we see themdifferently in a world where we'recelebrating heterogenity?Okay, so that's the theme that's beenrunning throughmy portion of the course so far and willcontinue, because now we're going to seethe big payoff from that celebration ofheterogenity.So here's what I'm going to do.For each one of those tactics, I'm goingto lead by askingthe same question, and then we're goingto, dive deeper from there.So here's the question.Let's start with customer acquisition.What metric do firms use to gauge andguide their acquisition activities?Okay, so there's a lot of differentmetricsout there that firms use to evaluate howwell they're doing different parts oftheir operations.But when we look at customer acquisitioninparticular, what's the metric that tellsus how wellwe're doing and gives us a forward lookingindication of how well we think we'll bedoing?Now, for some of you, you might even have
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