Shifting the Goalposts: Reorienting a Company’s Objectives Around Customer-Centricity

This post also appears on the Zodiac blog.

Most primary school students will understand the meaning behind the proverb, "If at first you don’t succeed, try, try again." It is a noble lesson and, in the corporate world, we see many examples of companies that fail to achieve goals defined around revenue growth, units sold, net profit, and so forth. 

Failure happens, and it is inextricably linked to the daunting task of trying to start, scale, and ultimately lead a successful venture through the ups and downs of economic cycles.

However, the real problem has nothing to do with failure. Rather, it is that the boards of many struggling companies repeatedly try the same failed strategies in an effort to chart a new course toward sustainable growth. Among their favorite approaches are: 

• Firing the CEO
• Hiring a “hotshot” executive from another company
• Improving margins by cutting costs (code for laying off thousands of employees) 

If you agree that the definition of insanity is to try the same things but expect different results, then absurdities abound in the board rooms of the world’s largest and most storied corporations.

Try, Try Again (But Please, Try Something Else)

To be clear, I don’t advocate that leaders who fail to achieve a particular goal simply give up and go home. To the contrary, when it comes to achieving business growth that is both authentic and sustainable, if at first you don’t succeed, don’t bother to try the same failed solutions as so many other companies. Rather, shift the goalposts by redefining corporate success around a strategy of Customer Centricity and Customer Lifetime Value (CLV).

The Business of Customer Lifetime Value

Companies whose goals are not oriented around Customer Lifetime Value strive to achieve what we might call the “traditional” measurements of business success: 

• Revenue
• Stock Price
• Market Capitalization
• Profit
• Gross Margin

In a customer-centric organization, though, key metrics often include: 

• Customer Equity
• Percent of Revenue from Repeat Customers
• Customer Profitability by Segment
• Customer Profitability by Cohort
• Net Promoter Score (NPS)
• New Customers Referred by Repeat Customers

Nonetheless, the distinction that exists between customer-centric leaders and non-customer centric leaders is about more than just metrics. You can read more about these differences in my last article, titled Ethos and Ideology: Inside the Minds of Leaders Running Customer-Centric Organizations.

If You Want to Get from A to Z, DON’T Make It Your Goal to Get Straight to Z

Non-customer centric leaders believe that the path to revenue growth is linear. In other words, the end goal is higher revenue, and all strategies and tactics should be designed to produce that revenue.

Customer-centric leaders believe that the path to revenue growth is nonlinear. These leaders believe that the end goal is true long-run customer loyalty. As a result, strategies designed merely to produce revenue are both inappropriate and ineffective. 

Among the strategies that a customer-centric leader might espouse are:

• Designing experiences to enhance the value of good customers
• Encouraging existing customers to return
• Incentivizing valuable customers to share their stories with others
• Minimizing customer churn
• Cultivating a reputation as a company that cares about its customers

Revenue Matters (and Customer-Centric Leaders Care About It)

Customer-centric leaders still care about revenue. They have to. Revenue, profit, and positive cash flow are all among the characteristics of a great business. But customer-centric leaders believe that they can grow revenue higher and faster by obsessing about customers rather than by obsessing about revenue, per se.

Achieving customer centricity, therefore, is about shifting the goalposts of corporate success. Whereas creative accounting rules can help companies mask underlying problems with fictitious stories of growth and profitability, no company can produce fake fans. No company can fake that it cares.

As I’ve written previously, success with Customer Lifetime Value is more of a cultural challenge than a data or technological one. Stay tuned for more updates in this series about how firms can best embrace the promise and power of CLV marketing. In the next article, I’ll be taking up the all-important question: In developing a culture around Customer Centricity, how do companies make the leap from Big Insight to Big Action?

About the Author: Peter S. Fader is the Frances and Pei-Yuan Chia Professor of Marketing at the Wharton School of the University of Pennsylvania. His expertise centers around the analysis of behavioral data to understand and forecast customer shopping and purchasing activities. In addition to his various roles and responsibilities at Wharton, Professor Fader is also co-founder of Zodiac, a predictive analytics firm that aims to make top-notch customer valuation models and insights easily accessible to a broad array of data-driven organizations.