What does being customer-centric actually mean? It means doing business with your customers in a way which would create a positive experience both before and after sales, so that a customer becomes your regular, and always returns to you for new shopping.
A survey conducted by Econsultancy among US SME (small and middle enterprises) established the company features that enable to adopt “Digital Native” corporate culture. As can be seen from the graph, customer centricity is named an absolute leader among all other corporate features, making up 58%.
Customer centricity means not only providing a greater customer service but, above all, greater experience in building awareness about customer’s purchase and processes after the purchase is made. This is a strategy based on placing your customer and their wishes and needs in the first place.
Far from all companies have all the necessary components to be called customer-centric.
Thus, we can see that it makes much more sense to start with your customer, and not with a product. If you are shaping your company from the customer’s perspective, it will certainly focus on the customer’s needs and desires.
There is not a single metrics for all the companies which would measure the level of a company’s customer centricity. Yet, there are two metrics that surely deserve your non-stop close attention. These are churn-rate and customer lifetime value.
Gaining new customers is becoming increasingly difficult. Therefore, instead of spending more on the customer acquisition companies try to invest more in the existing customers. The reason is as follows: gaining new customers can cost a company fivefold what it costs to retain the existing customers. A 2% growth in customer loyalty has an equal effect on profit as a 10% cost reduction. On average, a company loses about 10% of their clientele every year (also known as customer churn).
Companies with a high retention rate grow faster. The key to success is figuring out the reasons why customers leave and why customers stay.
In order to calculate the churn-rate, you first calculate the number of clients who have left your company over the last 12 months and then divide this number by the average number of your customers (over the same period of time).
This is the most valuable asset of a client for any customer-centric company. Revenues generated in the retention phase are often referred to as customer lifetime value or CLV. Customer Lifetime Value measures the profit that is brought to the company by a single customer account. It is a very important metric and is used while making important decisions about marketing, sales, product development, and customer support.
In order to calculate CLV, you take the turnover that you produce with your customer, and subtract all the customer acquisition/care costs, subsequently customizing all payments to the time value. Another way to calculate CLV is to take your average purchase value or invoice value and repeat the order placements. For example, when your average order value is €100 and the average purchase frequency rate is 20% per client, your estimated CLV totals to €120.
The Customer Lifetime Value calculation helps you to understand why it is more reasonable to invest in your customers’ retention. It offers your business a fantastic opportunity to have a better vision of your customer portfolio and a better understanding of the customer segmentation.
As a growth marketing expert and customer developer, I experience every day how important a customer-centric corporate culture is.
In combination with agile testing and optimization processes, you will bring your growth fully on course.