Customer centricity is a business methodology of providing positive customer experiences both before and after the sale with the goal of driving repeat business through customer loyalty and maximizing profits. Software and technology companies spend millions in client acquisition, yet client retention is what separates leaders of the industry from competitors.
What are the best practices to becoming a Customer Centric organization?
A customer centric company creates products, policies, processes, and a culture that is designed to give customers a great and stress-free experience as they work towards their goals. The 3 best practices that will drive customer centricity are:
1. Be passionate and truly believe the customer comes first.
Organizations like these believe they cannot succeed without the customer, and want to see the world through the eyes and perspective of the consumer. Marketing executives in customer-centric companies understand what consumers desire, and use reliable customer data to document consumer insights to share across the organization.
2. Be committed to building relationships with the customer.
Organizations who focus on maximizing the consumer’s product and service experience will facilitate consumer retention. If the customer had a great experience with the brand they will more than likely return again for the product or service.
3. Be a brand that analyzes and plan.
Organizations should develop a carefully designed customer strategy that focuses on creating, keeping, and satisfying profitable and loyal customers.
How can we measure Customer Centricity and its success?
While not every organization will have the same metrics to measure customer centricity, the 2 most important metrics that should be carefully measured and monitored are churn rate and customer lifetime value.
1. Churn Rate.
Acquiring new customers can cost up to 5 times more than keeping existing ones. Therefore, more companies are investing in keeping existing clients rather than trying to find new ones. A 2% increase in customer retention can have the same effect on revenue stream as cutting costs by 10%. Additionally, it’s noteworthy to know that focusing on gross-revenue churn can lower net-revenue churn, which can lead to higher growth for the organization. It’s focus on this metric that separates top performers from mean performers. To calculate the churn rate:
• Churn Rate = (Number of customers who left in the last 12 months) / (Avg. number of total customers in the last 12 months)
2. Customer Lifetime Value (CLV).
CLV is also known as the profits generated during the retention phase. CLV measures the profit the organization generates from any given customer. Calculating the customer lifetime value will help shed light on the importance of investing to keep existing customers. To calculate the CLV:
• CLV = (Annual profit contribution per customer) x (Avg. number of years they remain a customer) – (Initial cost of customer acquisition)
What are the essentials in lowering gross-revenue churn?
Since gross-revenue churn is what separates top-growth performers from mean performers, it’s important to know how to effectively lower gross-revenue churn. However, organizations must first be customer centric and leverage consumer analytics and data. The 3 areas that organizations should focus on are:
1. Invest in building a high-performing digital customer centric organization.
This translates into investing in best practice digital support systems and products that can measure, monitor, and scale according to the market. Smaller customers will more than likely be served through a digital model, while larger customers will need a more hands on approach.
2. Perceive the customer experience and tailor the approach.
The inception of churn is seeded throughout the customer experience, so it’s essential to have a clear engagement strategy for each part of the customer journey. During the retention/renewal phase, companies should identify accounts which are at high risk for churn and resolve any issues to ensure a seamless customer renewal process.
3. Leverage analytics to drive decisions.
Analytics and predictive modeling can help prioritize resources and strategy for consumers that are at the highest risk of churn and of greatest value. Leverage data to determine the metrics that matter most to consumers, identify the causes of customer frustration, and analyze customer happiness with full engagement, a quick response time, and issue resolution across all customer communication channels.
The customer centric organization cannot live in a vacuum. One characteristic of pioneers of customer centricity is that customer insights are readily shared across the organization. This method then becomes a driver for learning—relaying customer findings from out on the field to the sales and marketing teams. This feedback loop is essential for an organization’s product and delivery model to improve.