Historically, businesses drove growth by creating better products. Through a product-centric approach, huge companies were created—think of Henry Ford and the Model T. Today, the path to growth can take several different approaches. Thanks to digital technologies, it is possible to focus on individual interactions with your customers both in and out of retail. This approach is most often referred to as customer centricity.
To better understand the concept, consider that in business today there are three centricities—Product Centric, Brand Centric and Customer Centric.
• Product Centric focuses on things like product development, features, sales and the scope of portfolio or product selection.
• Brand Centric approaches focus on brand awareness, identity, positioning, value and market share.
• Customer Centric fixates on customer differentiation, customer value, life cycles, journeys and relationships.
In the book Customer Centricity by Peter Fader, which has generated much of today’s thinking on this subject, Fader defines centricity as “A strategy that aligns a company’s development and delivery of its products and services with the current and future needs of a select set of customers in order to maximize their long-term value to the firm.”
Tom O’Toole, in the book Kellogg on Marketing, defines it much more succinctly: “The practice of differentiating customers and managing customer offerings, investment and engagement in order to maximize customer value.”
Suffice it to say, developing a customer strategy for your business may be more important than your brand strategy. When we take a customer-centric approach, one of the most effective things you can do is focus on creating more loyal consumers.
Often, independent brick-and-mortar retailers are faced with competing against online competitors like Amazon.com. Amazon’s success is often attributed to its customer-focused approach.
Jeff Bezos, founder of Amazon, has often stated, “We have always wanted to be the Earth’s most customer-centric company.” Amazon is customer-centric in a number of ways, but without a doubt, they have been a leader in leveraging customer data to make predictions about their consumers, developing loyalty through programs like Prime and Subscribe & Save, while also improving the customer experience through fast shipping.
So how does this apply to natural products retailers? Most retail businesses in the natural industry today are some combination of product-centric and brand-centric. Retailers pride themselves on their selection of products, the education of their staff, and their reputation in their communities.
Consider a hypothetical health food store “The Health Hut,” which I’m adapting from a case study on another business in O’Toole’s write-up.
From a product-centric approach, The Health Hut offers a phenomenal selection of supplements, as well as organic foods. They offer training seminars and classes. Their customers are mostly seniors who care about their health and are doing everything they can to fight off the effects of aging. However, The Health Hut is being challenged by competition at every corner—a major big-box store just moved in next door with cheaper produce, many of their customers are going online for delivery, and customers are getting educated more than ever through online methods and their own research journey.
What should The Health Hut do? Should they bring in a broader selection of products? Develop an online e-commerce store? When we look at The Health Hut from a brand-centric perspective, we know that they have built a successful reputation in their community. They have done a phenomenal job building a large library of reviews on Google and other platforms, and they are active on social media. So, when considering a brand-centric approach, they may be asking themselves how they can raise their profile in their community. Should they go to more local events? Sell merchandise? Go on the morning news show?
Finally, through a customer-centric approach, The Health Hut focuses on the customers they have today and the customers they want to serve. This is an important consideration. Many businesses focus only on the customers they have today, without clearly defining a strategy for who the “ideal” customer may be for their store. If they are reaching an older demographic today, perhaps The Health Hut sees an opportunity to target younger college students, as an example.
Equally important is to consider who the customers are that The Health Hut does not seek. This is very important because, without this consideration, firms will often fail to adequately segment the needs of their consumers. They pick groups of customers that are far too wide to effectively reach. When you try to reach all customers, you reach none.
O’Toole gives five questions to consider:
1. How can we gain and retain customers?
2. What is important to our customers?
3. What drives customer engagement?
4. What produces customer loyalty?
5. How can we grow customer value?
And in each case, the business should consider “For which customers?”
It’s important to not over-generalize your customers. For example, even if The Health Hut were to decide to focus on getting more young college students in-store, not all college students are the same. Consider if 10 college students were to walk through the door—they all may have different profiles and needs, from athletes looking to build muscle strength to women seeking beauty solutions. Others may have digestive issues. In other words, customers are heterogeneous.
An important question to ask is, of all potential customers for your business, who has the greatest value to your business? In retail, this can be measured in many ways, but typical metrics include traffic and shopping frequency, basket size, customer lifetime value and other loyalty metrics—for example, opt-ins to your email or SMS lists, social media follows and shares, etc. Do you have a loyalty program in-store capable of collecting this data? If not, this should be a top priority for your business.
When you have the ability to collect and measure this type of data, you unlock predictive analytics that can help to guide your business strategy. For example, you can start to project how long a customer will stay with you, how many transactions they will complete, and what the value of those transactions is. This is invaluable in that it guides your ability to invest your limited marketing dollars where they can make the most difference.
Once you have identified the customer segments that you want to focus on most, then the strategy becomes how to develop programs and offerings that create value for those customers. In other words, what matters to them in your store?
For example, picture if The Health Hut were to be located in an older, affluent region of Florida. This area is filled predominantly with retirees. Today, they have signage down by the road that says, “Come to The Health Hut for Your Vitamins and Organic Foods.”
Technically, nothing is wrong with this sign. After all, older demographics do take vitamins and being that the region is an affluent one, organic foods are likely appreciated. But that sign is very product-centric. What if it could be customer-centric? What if, instead, the sign read, “Come to The Health Hut for supplements to improve your golf swing!” In this case, The Health Hut has identified that a core group of customers are golfers, and they are loyal users of supplements to support their pain and inflammatory processes.
In other words, focus on the benefit to the customer rather than the product.
These types of activities work best when they are designed as experiments. Using the golf example, The Health Hut could create a special display with golfer-centric products. They should measure the sales of those products prior to putting out the sign, while it is out, and after they’ve taken it down. What happened? While product sales are a valuable metric, a customer-centric approach will also measure if new customers were gained from the sign, how loyal those customers are, etc.
Value can be created in a lot of different ways. Are there functional needs that you can help your customers with? Can you create psychological value through a more personal and emotional experience? Does shopping at your store elevate their social status because they align with your store’s ideals? Do you drive monetary value for your customers through promotions or cost-savings opportunities?
However you choose to create value, it is equally important to drive awareness of that value. Incorporate these ideas in your messaging for your advertising, signage and in-store experience.
In summary, to develop a customer-centric business strategy, you must first identify the most valuable customers for your business—both current and prospective. You must identify the customers that you do not seek. From there, you will define how you will create value for those customers. You will develop a marketing communication plan to create awareness of that value, and then you will collect data on your customers to see if your strategy is working. Along the way, you’ll make mistakes and find that some things work better than others. There is no “magic pill” to marketing, but putting your customers’ needs first is never a bad strategy.VR
Ryan Sensenbrenner leads marketing at Enzymedica, Inc. With extensive expertise in various marketing fields, including retail and e-commerce, he places a special emphasis on branding and customer centricity. Sensenbrenner has collaborated with retailers nationwide, enhancing their marketing strategies to boost revenue and brand recognition in their communities. He serves on SENPA’s Board of Directors, holds a Bachelor’s degree in journalism from Grand Valley State University and is an Executive Scholar and Certified Chief Marketing Officer from Northwestern University’s Kellogg School of Business.
