"The Customer" doesn't exist, says Prof. Peter Fader of Wharton


The product-centric approach from the 1920’s focusing on creating products for “the customer” is outdated and we’ve entered a new era. Now, the pace of technological advances, globalization, deregulation, and the rising power of the consumers no longer afford us the simplicity of living in the vacuum of our products and has companies scrambling for "the answer".

In Customer Centricity: Focus on the Right Customers for Strategic Advantage, Prof. Peter Fader is quick to make some distinctions many organizations and leaders overlook.

"Nordstrom - isn't truly customer centric..."

When it comes to Nordstrom, he is right. It’s always a great experience where they avoid saying “no”. But, it’s not about the customer or even the product, it is about the brand equity and experience where every single person, regardless of their history and spend with the company, is uniformly treated as a “customer”. Undoubtedly, Nordstrom has missed upsell opportunities with their best customers and needs to take a page from Tory Burch as I shared in this previous post.

A generation of “free agents” will test our ability to deliver

We often scoff at how easy kids have it nowadays. The fact is they do and we have to adapt. So, move aside (not away) product development and welcome a new concentration on understanding what the key segments of our customers “want, when and how they want it, and what they’re willing to give you in exchange”. If we don’t, our competitors are happy to pick up the slack. Who will be at the front lines of this? Our customer facing teams including the front lines with support and the success managers, who need to evolve to trusted advisors. Unfortunately, many organizations have these teams behind this curve which leads to the next point.  

Undervalued customer equity and erroneous CLV (Customer Lifetime Value) plagues businesses

Prof. Fader is touted as one of the world’s best when determining CLV and points out common errors of:

  • CLV is forward-looking, but often confused with a customer’s past profitability

  • CLV is meant to be predictive, not precise

  • CLV calculation methods vary. The example shared in the book increased the CLV by 2x after making these adjustments.

Have the confidence in business cases towards customer-centricity.  Get the accurate data to defend the investments you need in technologies and human capital. Leaders need to consider segmenting by CLV to establish an upper bound of what makes sense to keep an existing customer or acquire new customers. Leverage these insights to help marketing and sales, highlight the most valuable customers, and set your teams up for success. I also found this podcast with Prof. Fader to be an interesting follow up on the topic.

Customer centricity is not about putting your customer at the center of your universe, nor does it mean the customer is always right. It’s about committing to the tough decisions, aligning your company’s resources and future towards the right customers as determined by the data, and long-term profitability. Not all customers are created equal and not all companies should take this approach.  But, has your organization taken a step back from sell, sell, sell to determine the appetite for customer centricity and if you are even going after the right customers? 

If you liked this post, you might also like to read How Barbie can influence your future Customer Success strategies.