What Is Customer Centricity and Why Is It Important

Last Published: Sep 19, 2023 |
Jennifer McGinn
Jennifer McGinn

Sr. Director of Product Marketing

This blog is co-authored by Monica Mullen.

What is Customer Centricity?

Customer-centricity means putting the customer first and at the center of everything that you do. You might think to yourself, that’s easy. I can do that. But is it really that simple?

Being customer-centric entails more than just saying the customer is top of mind. It is about truly understanding the customer, so you can anticipate their wants, needs and communication preferences, create meaningful experiences, and build lasting relationships with them. And that is easier said than done.

Customer-centric organizations take steps to understand the customer and act on that understanding by creating a culture that empowers employees to make the best decisions for both the customer and the company in parallel. They take into account how each business decision, process change, and customer touchpoint affect the experience.

All in all, customer-centricity is as much a strategy as a culture. It has to be ingrained in an organization in order to be recognized by the final decision maker: the customer. Successful organizations realize higher retention rates, more referrals, price premiums, and ultimately greater revenue.

Why is customer-centricity important to your business and brand?

If customers aren’t happy, they won’t stay with your brand. If you don’t have customers, you don’t have a business.

Consider your own experiences interacting with your favorite brands. They make it easy to do business with them, they communicate with you via your preferred method, and they may even present offers at the exact time you plan to purchase. Now consider the ones that get it wrong. In the Marie Kondo era of cleaning out, tidying up, and simplifying, how often do you stick with brands that fail to spark joy? Consumers today have an easy path to walk away from brands they love, and they are not afraid to do so. In fact, according PWC, one in three customers will leave a brand they love, after one bad experience.

Across the customer journey, from awareness to purchase to advocacy, each interaction and stage benefits from a customer-centric approach. In today’s digital environment which focuses on personalization, organizations are being built on their commitment to do what’s right for their customers. It is the definitive competitive differentiator.

For example, Nordstrom has always been synonymous with exceptional customer service. In order to pivot with buyers’ demands, they have taken the in-store experience they are known for and replicated it in the digital shopping experience with an innovative mobile app as well as new services such as buy online/pickup in store.

The ultimate reward of creating customer-centric processes is loyalty and retention. As the old saying goes, it is easier and more cost-effective to keep a customer than acquire a new one. In 2014, Harvard Business Review  underscored the fact that acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one. This concept is not new. So why aren’t more companies prioritizing retention over acquisition?

Customer-centricity done right results in your customers trusting they will not only get what they want and need from your company, but will also experience enjoyable and frictionless service, including: boxless returns, order online/pickup in store, immediate refunds, fast delivery of online orders (sometimes same-day or even 2-hour). These experiences delight and build trust that helps to retain customers for the long haul.

3 common challenges businesses face getting to customer-centricity

It’s important enough to repeat: Being a customer-centric organization is easier said than done.

What sounds like a simple concept in theory presents challenges in reality. Everything from culture to organizational structure to data and technology within an organization need to be reoriented around the customer – from the back office to the front line – to fully recognize the benefits.

Customer-centricity challenge 1: Getting buy-in and building a culture

The most difficult challenges to overcome are the least tangible. Creating a customer-centric culture is a good example of that. Culture is not something that is forced or easily changed. It doesn’t necessarily translate directly from plan to action. It requires everyone from executives on down to embrace the change that customer-centricity brings. Everyone has to want to believe, execute and succeed. At times, it may require taking a leap of faith (albeit a guided leap) centered on a longer-term vision and focusing on more than just the bottom line.

What’s the one thing customer-centric organizations have in common? Customer-centricity is a core value. Every employee is focused on the customer and puts the customer first in their thinking and decision-making. For example, at Informatica, we are guided by our “We DATA” values of which one of them is “Think Customer First.” It is called out at every all-company meeting, woven into annual performance reviews, and celebrated through recognition of employees who embody the value. Empowering employees to think about what’s right and do the right things puts the customer front and center.

One way to create a culture that values customer-centricity is to encourage teams to answer questions to determine if a decision is customer-centric or not:

  • How will this new product introduction benefit the customer?
  • How will this new back-office system create an easier, more intelligent way to interact with the customer?
  • How will this new process remove unnecessary friction experienced by our customers?

If the answer to any of these questions is no or inadequately defined, you may want to rethink your decision. When employees are empowered to think in this way and challenge any decision that is not customer-centric, good things will happen. When employees feel supported and empowered, they go above and beyond for the customers they serve, resulting in high satisfaction and stronger relationships.

Customer-centricity challenge 2: Shifting from product-centric to customer-centric

In his book, Customer Centricity, Wharton School of Business professor Peter Fader gives examples of how brands like Starbucks and Nordstrom successfully pivoted from product- to customer-centric models over the past decade. This shift is due to a change in customer behavior, better access to information, and the ability to scale understanding of and delivery on customer wants and needs. The precision gained with better insights replaces the need to cast a wide net in hopes of getting a bite.

A shift from product-centricity to customer-centricity applies to both consumer and non-consumer-based industries. Think of your bank or insurance agency. In the past, you would have an account number for each account owned, interacting with different representatives for each one. This product-centric approach didn’t stop there. Systems recognized a customer by account or policy number, not by name. Processes and experiences were siloed and choppy as a result. You’d often need to share your information multiple times or receive offers for products you already own. 

The inefficiencies and poor customer experiences were a result of traditional organizational structures based on the products they sold. Many businesses focused on selling as many products to as many people or organizations as they possibly could. This strategy is 100% product-centric and doesn’t take into account customer preferences. In marketing, it results in “spray and pray” campaign strategies where product-focused messages are blasted out to anyone and everyone.

This approach wastes valuable time, money and mindshare because the message most likely misses the target the majority of the time. In addition, a product-centric business model creates silos of teams and silos of data – often resulting in misaligned or competing goals as well as duplicate, inconsistent, and fragmented information across an organization.

Creating strategies and processes focused on customer over product is a critical step in overcoming challenges around customer-centricity.

Customer-centricity challenge 3: Overcoming data silos and technology

Digital transformation means a successful data management strategy to support customer-centricity is even more important. As customers flock to the growing number of digital channels, interactions with your brand have potentially increased in frequency.  Consumers and business buyers alike are making purchase decisions prior to engaging with a salesperson due to the availability of information.

Web chats, online product reviews, and social media create additional channels for customers to learn about and experience brands. And for brands to learn about and understand their customers if they manage the data correctly. With more channels at play and more applications in the mix, technology must be an enabler, not a detraction.

Data is often the biggest challenge when it comes to knowing who your customers are and understanding what they want. In many companies, data is unorganized, siloed, duplicated and, frankly, a mess. This may be due to how a company has grown over time, for example through merger or acquisition, where multiple sets of customer data exist, but have not been unified. It may also be because systems are set up by business unit, product, or department, creating silos and duplicates.

No matter how messy it is, data holds the key to understanding your customers, anticipating their wants and needs, and interacting with them in an authentic, relevant manner. It can help marketers, sellers and customer service reps personalize communications and empathize with the customer.

Breaking down silos and getting control of data – centralizing it, cleaning it, enriching it, governing it – and making it actionable go a long way in delivering customer-centricity. And it doesn’t stop with customer data. Customer experience involves product, finance, supplier, employee, and other data, including attributes inferred from social media, chats, and other unstructured data sources. Making the data challenge both more difficult and more rewarding when done right.

How to overcome the barriers to customer-centricity

The first step to becoming customer-centric is getting everyone on board – leadership, marketing, sales, service, support, finance – encompassing both customer-facing as well as back-office roles.

All teams need to recognize the impact of first impressions during the awareness and consideration phases. When customers are at the beginning of their journey, it’s critical to ensure marketing hits the mark and doesn’t alienate customers. You may not have all the data you need right from the start. But, over time, as data is added and connected with the customer’s profile, it guides future decisions and helps build hyper-targeted and more personalized campaigns.

As their journey continues and prospects become customers, customer-centric processes must be in place for a smooth and frictionless onboarding process. Conversations and outreach to customers must add ongoing value to ensure repeat business and loyalty – not to mention brand advocacy.

Here are some customer-centric best practices to help you achieve your vision:

  • Build a customer-centric culture. Ensureevery employee, from the CEO to the frontline worker, lives and breathes the customer. Build it into your mission, values, and vision.
  • Improve your data. Improve data quality, consistency and availability to help everyone in the organization identify and understand the customer at every stage of the journey. Too often, data is an underutilized asset because of the erosion of quality and the difficulty using it. With AI, data can be automatically connected to resolve identities and reveal insights that improve personalization and next best offer initiatives.
  • Capture customer feedback. Gain a better understanding of your customers by really listening to what they want and need. Look for patterns in the feedback. Not every customer is always right, but it pays to listen to many customers who provide the same feedback – whether explicitly stated or expressed by their behavior.
  • Reward employees. Tie employee compensation, recognition and reward structures directly to meeting the needs of the customer. Build trust within your employee base and empower them to think customer first.
  • Think long-term. A long-lasting customer is more valuable over time than a single transaction. By creating frictional experiences, having empathy and making a customer feel known, those long-term relationships with your customers will result in loyalty and retention – and ultimately greater revenue. This is truly where CX has an impact on the bottom line.

Measuring the benefits of customer-centricity

Another key step to building a customer-centric strategy and culture is agreeing on the key performance indicators (KPIs) and metrics that you will measure to determine what is working and what needs to be tweaked to ensure success.

What gets measured gets managed. Using customer metrics such as retention rate, propensity to churn, customer satisfaction (CSAT), customer effort score (CES), and wallet share will keep your efforts on track. Customer-centric marketing, sales and service efforts must align with measurable KPIs. In addition to tracking metrics such as revenue by product or channel, you must also capture and measure customer behavior, sentiment, value and other important customer-centric metrics.

For example, most chief marketing officers are laser-focused on increasing customer lifetime value (CLV), which measures the value of a customer over the entire relationship. It is a critical indicator of how well marketing and other tactics are working to establish long-term, highly profitable customer relationships. By tracking CLV, you can spot early signs that a customer might churn, for example if spending subsides below what is typical for that customer. You can also use CLV data to perform customer segmentation for targeted promotions and other offers.

Another key metric is Net Promoter Score (NPS). NPS is widely used, especially by consumer-facing brands and simply asks: “How likely is it that you would recommend [brand] to a friend or colleague?” It is a common predictor of growth and measures overall perception of the brand. Complement NPS with additional metrics and insights to derive actionable insights that will improve customer experience.

Go forth and be customer-centric

People buy from people they trust. And people do business with a company, not departments within a company. This is why customer-centricity must be promoted at the executive level across an organization. The payoff for customer-centric organizations is that loyal customers spend more over time. They are also more forgiving of minor trespasses (a poorly timed offer, an out-of-stock item, a wrong item delivered) because there is a sense of trust that the organization will take care of the customer in the long run. But betray that trust on the bigger items without quick resolution, and you risk losing that customer forever.

Retaining customers and growing wallet share requires having the right culture, data and technology that drive customer-centric sales, marketing, and customer service. The foundation for a successful customer-centric business practice requires technologies that streamline processes and reduce the cost of data management and makes trustworthy data accessible across your enterprise.

By creating a customer-centric strategy, your organization will have the right information at the right time to stay ahead of your competition, manage healthy customer relationships and maximize value for your stakeholders.

If you’re ready to deliver customer-centric experiences that boost revenue, loyalty, and retention, then join us at our Informatica World Tour. You’ll hear about innovations in master data management technology from industry leaders—and walk away with the tools you need to get the most out of your customer data.

First Published: Mar 28, 2021