![CASE STUDY: BEST BUY
“We started this [customer-centricity] journey by learning
how to see the differences in the desires of our
customers, and then learning how to meet them,” says
former CEO Brad Anderson.
Source: Principles of Marketing](https://image.slidesharecdn.com/customercentric-dungvnt-150730074853-lva1-app6892/75/Customer-Centric-Marketing-19-2048.jpg)
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Customer-Centric Marketing
The document discusses product-centric vs customer-centric marketing strategies. A product-centric strategy focuses on developing new products and increasing market share, while a customer-centric strategy focuses on understanding customer needs and increasing profitability from the most valuable customers. Research findings show referred customers are more profitable and loyal than other acquired customers, and the difference in customer lifetime value depends on the individual customer. To be customer-centric, companies should identify their most valuable customers, find more like them, understand what they want, and increase profits through cross-selling and premium prices.
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Customer-Centric Marketing
- 1. Source: marketing.wharton.upenn.edu TYPES OFMARKETING STRATEGIES Product Centricity Customer Centricity Seller’s market Buyer’s market
- 2. 60% of marketers allocate< 20% their budget to nurturing customer relationships Source: adage.com
- 3. 60% of marketers allocate< 20% their budget to nurturing customer relationships 70% of marketers allocate < 20% of their people to this goal Source: adage.com
- 4. “A PRODUCT CENTRICORGANIZATION IS ONE THAT IS FOCUSED ON THE PRODUCTS IT BRINGS TO MARKET RATHER THAN THE CUSTOMERS THAT BUY THOSE PRODUCTS”.
- 5. Source: marketing.wharton.upenn.edu Product Centricity TYPES OFMARKETING STRATEGIES Focus on Company (inside-out)
- 6. Source: marketing.wharton.upenn.edu Product Centricity TYPES OFMARKETING STRATEGIES Offer what the firm has Focus on Company (inside-out)
- 7. Source: marketing.wharton.upenn.edu Product Centricity TYPES OFMARKETING STRATEGIES Generic product Offer what the firm has Focus on Company (inside-out)
- 8. Source: marketing.wharton.upenn.edu Product Centricity TYPES OFMARKETING STRATEGIES Generic product Offer what the firm has Lowest cost Focus on Company (inside-out)
- 9. Source: marketing.wharton.upenn.edu Product Centricity TYPES OFMARKETING STRATEGIES Generic product Offer what the firm has Lowest cost Market ShareFocus on Company (inside-out)
- 10. THE GOAL OFPRODUCT-FOCUSED MARKET IS: SELL AS MUCH AS WE CAN
- 11. “CUSTOMER CENTRICITY ISABOUT IDENTIFYING YOUR MOST VALUABLE CUSTOMERS, INCREASE PROFITS FROM THEM AND FIND MORE LIKE THEM,”. Peter Fader
- 12. “CUSTOMER CENTRICITY HASA SPECIFIC AIM: MORE PROFIT FOR THE LONG TERM” Peter Fader
- 13. Source: marketing.wharton.upenn.edu Customer Centricity TYPES OFMARKETING STRATEGIES Focus on Customer and Competitor (outside-in)
- 14. Source: marketing.wharton.upenn.edu Customer Centricity TYPES OFMARKETING STRATEGIES Offer what the customer wants Focus on Customer and Competitor (outside-in)
- 15. Source: marketing.wharton.upenn.edu Customer Centricity TYPES OFMARKETING STRATEGIES Differentiated product Offer what the customer wants Focus on Customer and Competitor (outside-in)
- 16. Source: marketing.wharton.upenn.edu Customer Centricity TYPES OFMARKETING STRATEGIES Differentiated product Offer what the customer wants Customer knowledge Focus on Customer and Competitor (outside-in)
- 17. Source: marketing.wharton.upenn.edu Customer Centricity TYPES OFMARKETING STRATEGIES Differentiated product Offer what the customer wants Customer knowledge Customer shareFocus on Customer and Competitor (outside-in)
- 18. CASE STUDY: BESTBUY Best Buy wants to focus on customers’ individual wants and needs— to become “that trusted advisor capable of helping customers use technology the way they dreamed,” says Anderson. Source: Principles of Marketing
- 19. CASE STUDY: BESTBUY “We started this [customer-centricity] journey by learning how to see the differences in the desires of our customers, and then learning how to meet them,” says former CEO Brad Anderson. Source: Principles of Marketing
- 20. CASE STUDY: BESTBUY Best Buy’s “customer-centricity” strategy serves its best customer segments better while sending less attractive customers packing. The result: Sales are jumping despite the recently gloomy economy. Source: Principles of Marketing
- 21. So, which arethe best customer?
- 22. “A VALUABLE PROSPECTWHO HAS A HIGH REVENUE AND RETENTION POTENTIAL AT LOW COSTS” Steffen Zorn
- 23. CUSTOMER VALUE Cost per acquisition customer Valueper customer CONTRACT 1 Customer lifetime value
- 24. CUSTOMER VALUE Cost per acquisition customer Valueper customer CONTRACT 1 CONTRACT 2 Customer lifetime value
- 25. CUSTOMER VALUE Cost per acquisition customer Valueper customer CONTRACT 1 CONTRACT 2 CONTRACT 3 Customer lifetime value
- 26. CUSTOMER VALUE Cost per acquisition customer Valueper customer CONTRACT 1 CONTRACT 2 CONTRACT 3 Customer lifetime value Low cost
- 27. CUSTOMER VALUE Cost per acquisition customer Valueper customer CONTRACT 1 CONTRACT 2 CONTRACT 3 Customer lifetime value Low cost Premium price
- 28. CUSTOMER VALUE Cost per acquisition customer Valueper customer CONTRACT 1 CONTRACT 2 CONTRACT 3 Customer lifetime value Low cost Cross selling Premium price
- 29. CUSTOMER VALUE Cost per acquisition customer Valueper customer CONTRACT 1 CONTRACT 2 CONTRACT 3 Customer lifetime value Low cost Referral Cross selling Premium price
- 30. RESEARCH FIDINGS: COMPANYGROWTH = 3 TYPES OF CUSTOMER LOYALTY BEHAVIORS Source: HBR
- 31. RESEARCH FIDINGS: REDUCINGDEFECTION Source: HBR
- 32. RESEARCH FIDINGS: ACQUISTIONTHOUGH REFERRAL Source: Philipp Schmitt, Bernd Skiera and Christophe Van den Bulte Researchers compared two groups of customers acquired,10.000 customer, by a leading German bank over a three year period. All of the first group were customers acquired through the bank´s referral program The second group comprised a random sample of customers acquired through other means such as direct mail or advertising over the same period of time.
- 33. RESEARCH FIDINGS: ACQUISTIONTHOUGH REFERRAL Source: Philipp Schmitt, Bernd Skiera and Christophe Van den Bulte 25% Referred customers are more profitable Researchers compared two groups of customers acquired,10.000 customer, by a leading German bank over a three year period. All of the first group were customers acquired through the bank´s referral program The second group comprised a random sample of customers acquired through other means such as direct mail or advertising over the same period of time.
- 34. RESEARCH FIDINGS: ACQUISTIONTHOUGH REFERRAL Source: Philipp Schmitt, Bernd Skiera and Christophe Van den Bulte 25% Referred customers are more profitable 18% Referred customers are more loyal Researchers compared two groups of customers acquired,10.000 customer, by a leading German bank over a three year period. All of the first group were customers acquired through the bank´s referral program The second group comprised a random sample of customers acquired through other means such as direct mail or advertising over the same period of time.
- 35. RESEARCH FIDINGS: ACQUISTIONTHOUGH REFERRAL Source: Philipp Schmitt, Bernd Skiera and Christophe Van den Bulte 25% Referred customers are more profitable 18% Referred customers are more loyal 16% The difference in customer lifetime value varies according to customer Researchers compared two groups of customers acquired,10.000 customer, by a leading German bank over a three year period. All of the first group were customers acquired through the bank´s referral program The second group comprised a random sample of customers acquired through other means such as direct mail or advertising over the same period of time.
- 36. RESEARCH FIDINGS: ACQUISTIONTHOUGH REFERRAL Source: Philipp Schmitt, Bernd Skiera and Christophe Van den Bulte 25% Referred customers are more profitable 18% Referred customers are more loyal 16% The difference in customer lifetime value varies according to customer 60% The referral program pays off Researchers compared two groups of customers acquired,10.000 customer, by a leading German bank over a three year period. All of the first group were customers acquired through the bank´s referral program The second group comprised a random sample of customers acquired through other means such as direct mail or advertising over the same period of time.
- 37. What does thecustomer want?
- 38. Apple’s research uncovereda key insight about how people want to consume digital music—they want to take all their music with them, but they want personal music players to be unobtrusive.
- 39. Why you mustunderstand customer want?
- 40. VALUE MAPPING COST BENEFITS higher lower inferior superior WHYWE MUST UNDERSTAND CUSTOMER WANT?
- 41. VALUE MAPPING COST BENEFITS higher lower inferior superior INFERIOR VALUE SUPERIOR VALUE WHYWE MUST UNDERSTAND CUSTOMER WANT?
- 42. VALUE MAPPING COST BENEFITS higher lower inferior superior INFERIOR VALUE SUPERIOR VALUE fair-value line WHYWE MUST UNDERSTAND CUSTOMER WANT?
- 43. VALUE MAPPING COST BENEFITS higher lower inferior superior INFERIOR VALUE SUPERIOR VALUE fair-value line Lowvalue customer High value customer THE LACK OF INFORMATION WHY WE MUST UNDERSTAND CUSTOMER WANT?
- 44. VALUE MAPPING COST BENEFITS higher lower inferior superior INFERIOR VALUE SUPERIOR VALUE fair-value line Lowvalue customer High value customer Fair value (1) THE LACK OF INFORMATION WHY WE MUST UNDERSTAND CUSTOMER WANT?
- 45. VALUE MAPPING COST BENEFITS higher lower inferior superior INFERIOR VALUE SUPERIOR VALUE fair-value line Lowvalue customer High value customer Fai value (1)Fair value (2) THE LACK OF INFORMATION WHY WE MUST UNDERSTAND CUSTOMER WANT?
- 46. VALUE MAPPING COST BENEFITS higher lower inferior superior INFERIOR VALUE SUPERIOR VALUE fair-value line Lowvalue customer High value customer Fai value (1)Fair value (2) Fair value (3) THE LACK OF INFORMATION WHY WE MUST UNDERSTAND CUSTOMER WANT?
- 47. Source: marketing.wharton.upenn.edu Nordstorm isa retailer, it is famous for HOW it sells – with truly outstanding customer service. In 1975, an unhappy owner of a set of worn-down tires walked into the Nordstorm outpost and asked to return them. Nordstorm DID NOT SELL TIRES at all. But the store granted the request anyway. Because they want to know as the store that not only SAYS the customer always right, but actually BELIEVES the customer is always right.
- 48. Is the customeralways right?
- 49.
- 50. Conclusion Fair-value solutions Reduce Defection Valuable customers #1 - Whichis the most valuable customer? RFM, Cluster Analytics, Social Listening
- 51. Conclusion Fair-value solutions Reduce Defection Valuable customers #1 - Whichis the most valuable customer? RFM, Cluster Analytics, Social Listening #2 - How to fine them and more like them? STP process, Cluster Analytics
- 52. Conclusion Fair-value solutions Reduce Defection Valuable customers #1 - Whichis the most valuable customer? RFM, Cluster Analytics, Social Listening #2 - How to fine them and more like them? STP process, Cluster Analytics #3 - What dose the customer want? Research, 5W1H, Value Map, Social Listening
- 53. Conclusion Fair-value solutions Reduce Defection Valuable customers #1 - Whichis the most valuable customer? RFM, Cluster Analytics, Social Listening #2 - How to fine them and more like them? STP process, Cluster Analytics #3 - What dose the customer want? Research, 5W1H, Value Map, Social Listening #4 – How to increase profit from them? Cross selling, Low Cost, Premium Prices, Referral
- 54. PRODUCT-CENTRIC & CUSTOMER-CETRIC Product-centricCustomer-centric Strategy Goal Best product Best solution Main offers New products Personalized package Most important Most advanced customer Most profitable, loyal customer Structure Organizational concept Product team Customer team Processes Most important New product development Customer relationship management Rewards Measures Number of new product Market share Customer lifetime value & Referral lifetime value Customer Share/Retention People Approach of personnel Power to people who develop products Power to people with in-depth knowledge of customer’ business Mental process How many possible use of this product? What combination of product is the best for this customer? Sales bias On the side of the seller On the side of the buyer Source: marketing.wharton.upenn.edu
- 55. REFERENCES Research: - Acquisition Methodsand Customer Lifetime Value – Steffen Zorn (2009) - How Valuable Is Word of Mouth? – V. Kumar (2007) - Why Customer Referrals Can Drive Stunning Profits – Philipp Schmitt (2011) - Branding in the Digital Age: You’re Spending Your Money in All the Wrong Places – David C. Edelman (2010) - Zero Defections: Quality Comes to Services – Frederick F. Reichheld (1996) Article: - Why Aren't More Companies Shifting to Treat Their Best Customers Best? – Adge.com - A Customer Loyalty Measurement Framework – Business Broadway - The change in Marketing – Barbara Kahn (2015) - Moving from Product-Focused to Customer Focused Brands – Barbara Kahn (2015) - Not All Customers Are Created Equal – Peter Fader (2015) eBook: - Understanding Digital Marketing – Damian Ryan - Principles of Marketing – Philip Kotler Further reading: https://twitter.com/hashtag/CustomerCentricity?src=hash