Prof. Kamel Jedidi Columbia University Customer Centricity

2 Agenda What is customer centricity? How to create the customer advocate The rewards from customer centricity Conclusion

3 What does Customer Centricity mean to you?

4 1-to-1 marketing Customer intimacy Customer loyalty Permission marketing CRM Customer equity Real-time marketing Customer lifecycle management Customer acquisition & retention Personalization Themes and buzzwords

5 Customer Centricity has two sides to it Create value Company Customers

6 Customer Centricity has two sides to it… Create value Company Customers Capture value Customer centric firms understand not only what the customer values, but also the value the customer represents to their bottom line. Booz Allen (

7 Progressive Auto insurance industry — Price sensitive customers — Industry is not profitable — Companies make up for losses by investing pre-paid premiums Progressive — More costly service features – Immediate response vans get there first (IRV) — But still makes money on insurance — How do they do it?

8 Progressive Immediate response vans — Reduces legal fees — Reduces fraud Comparison Quotes — Provides quotes for both Progressive and competitors — Superior data analysis — Know the true risk better than competitors — Finer segmentation of the customer base

9 Too Focused on Creating Value “In the United States, top executives lose their jobs when their companies sell too little. In Britain, it can happen when their companies sell too much.” —The New York Times, March 31, 1993

10 Daily Deals: Prediction, Social Diffusion, and Reputational Ramifications (2011, by Beyers, Mitzenmacher, and Zervas)

11 Too Focused on Capturing Value Examples —

12 Customers as Advocates or Adversaries Advocate Adversary

13 Customer Centricity—Recap Customer Centricity is about creating a win- win relationship with the customer — Both customer and firm benefit — Ability to create and capture value

14 Creating the Customer Advocate

15 Creating Value: The Kano Chart Delighters Excitement Surprise Dissatisfiers (Must-Have) Essential Taken for granted Satisfiers Required The more the better Performance Customer Satisfaction

Listening to Customers

New Product Development 17

18 Listening to the Customers: Jetblue’s story telling

19 Test & Learn: Intuit Intuit offers — A toll free number for customers to call if they have any software related question — Added a new feature to TurboTax, where 700 live tax advisers answer customers' questions by phone, for free. WSJ — How can it provide this excellent service for free for a $45 product? Ease of use is key in software design Phone team is part of new product development team Make customer service excellent, but not necessary Do it right the second time Considers customers as assets Lifetime value of customers matters the most

20 Observe: Honda Odyssey’s fold-into-the-floor rear seat

21 Create Norms: Zipcar Car sharing service — Reserved cars parked throughout the city — Online reservations — Very convenient Issue: What happens when one customer is late and another is inconvenienced? — How to solve this problem?

22 Zipcar Removed late fees Set up a normative environment Lateness reduced

23 The Rewards from Customer Centricity

24 Customer are Assets How Much Profit a Customer Generates Over Time Source: Frederick Reichheld (1996), The Loyalty Effect, HBS Press.

25 Acquisition cost Base profit Profit from increased purchases Profit from reduced cost Profit from referrals Profit from price premium Source: Reichheld and Sasser (1990), “Zero Defections: Quality Comes to Service,” HBR, Sep-Oct. Why customer are more profitable over time?

Programs Metrics Strategy Leadership Infrastructure Intelligence Continuous Learning Organizational Culture Organizational Structure Customer Centricity – Building Blocks

27 Conclusion: Customer-centricity vs. Product- centricity Product-centric Industrial era = mass production. & distribution Develop & sell products — Find customers who will want your products Maximize sales / market share of products Products are your assets Structure and manage organization around products/brands Use mass distribution & media Customer-centric Technology era = information + customization Develop & manage customer relationships — Find products that your customers will want Maximize customer lifetime value / share-of-wallet Customers are your assets Structure and manage organization around customer segments Use targeted distribution and media Product- centricity Customer- centricity