In his book, Customer Centricity: What It Is, What It Isn’t, and Why It Matters, Peter Fader, Professor of Marketing at the Wharton School of the University of Pennsylvania, defines customer centricity as “a strategy to fundamentally align a company’s products and services with the wants and needs of its most valuable customers.”
One of the areas of customer centricity that Fader explores is customer development. By matching products and services with the wants and needs of their most valuable (focal) customers, customer-centric companies can increase repurchase rates, up-sell or cross-sell a variety of different products/services to existing customers, and realize price premiums—as loyal customers tend to be less price-sensitive.
In his article, The Skinny on “Fattening Up” Customers, Fader identifies Wells Fargo as an example of a company “whose relatively robust success through the recession seems due…to its customer development efforts. The average Wells Fargo household has over five different bank products, roughly twice the industry average, while about 20% have an impressive eight or more products from the bank. And Wells Fargo credits cross-selling with lowering its selling and advertising costs, given that it’s cheaper to target existing customers than new customers.”
Wells Fargo’s success with cross-selling to existing customers reminded me of an experience I had several years ago with the Denver-area furniture store where my wife and I had spent thousands of dollars furnishing our new home in 2000.
The arrival of our first three children between 2001 and 2004 prompted the need for additional chairs for our kitchen table. So, in early 2005 (five years after originally purchasing a kitchen table and four chairs with custom-upholstery depicting the French countryside), I phoned the store to order two more matching chairs.
After placing the order, I asked to be transferred to the store manager. When he came on the line, I introduced myself and mentioned the order I’d just placed and what prompted it. I then inquired as to whether or not his sales staff ever followed up with young couples who bought tables (with expansion leafs) with only four chairs after some period of time to determine whether or not their needs had changed and, if so, how the store might be able to serve those customers now.
I don’t recall the specifics of our conversation but I do remember that the store manager seemed preoccupied and dismissive during our call. It’s likely that he and his sales staff were busy servicing the prospective customers on the sales floor, reviewing sales forecasts, and planning the next direct marketing or advertising campaign that would ensure a steady stream of foot traffic in the showroom.
While customer acquisition is vital for growth, all too often companies squander opportunities to increase their market share amongst existing customers—what Fader refers to as “share of wallet.”
What if the furniture store had developed a simple customer relationship management (CRM) database that captured the formal demographics of its customers together with casual insights gleaned by the salespeople who had spent hours with customers coordinating furniture, selecting fabric, securing financing, etc.? And what if salespeople accessed this information afterward to reconnect with existing customers and make informed product recommendations to them?
No doubt this would have required an investment of time and money. Based on the robust economy in 2005, creating a CRM database (in order to gather information and better understand the unique characteristics and expected value of its focal customers) may not have seemed like the best use of the store’s resources. Although, as the Wells Fargo example illustrates, using customer data to capitalize on cross-selling opportunities has proven to be particularly effective in recent recessionary years.
Now consider your situation. What can you do today to develop your own customer base?
(Don’t wait. The furniture store waited and eventually closed in 2010 after being in business for 45 years.)