Andrew M. Heller Professor at the Wharton School, Senior Fellow Leonard Davis Institute for Health Economics Co-Director, Mack Institute of Innovation Management The Wharton School
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Now we're going to talk about customer development.
And before I ask you the same question,
I first want to be real clear with what we mean by customer development.
The general idea is, we want to make our customers as valuable as possible, right?
Our existing customers, as valuable as possible.
And so what are the tactics associated with customer development?
What are the kinds of things that companies do, in order to create and
extract more value from their existing customers?
And then we usually think about four different tactics.
You can think about for yourself as a manager or
as a customer, how you increase value.
And let's just review them real quickly and then we'll go on and
talk about managing customer development.
So, number one, there is cross-selling, the idea of getting customers to buy
more than just the particular product that they're interested in.
So here in the US,
millions of times a day, we hear people asking, do you want fries with that?
That's an example of cross selling, getting people to buy other products.
They could either be from the same product category like at an amazon.com
recommending other books to you or other product categories, cross selling.
Next to cross-selling would be up-selling.
And of course the classic fast food example there would be,
do you want to supersize it?
So try to get people to buy a higher margin version of the same item.
Up-selling.
Again very common not just in fast food, but in the financial services and
many, many industries.
You want to get people.
Once they're going to buy something, let's get them to buy the good something.
Those are the big two.
The third one would be frequency.
Let's just try to get people to buy our stuff more often.
Though we often, that's why companies use loyalty programs.
So let's give people just a little bit of motivation,
not just to buy this product but to buy it on a more frequent basis.
So again, a very common source of customer development there.
And the fourth one, which companies don't like to talk about.
But they like to do or at least they wish they could do would be through margins.
Maybe not just up-selling people but maybe we can get people to pay more money for
the same product of service.
A lot of companies are very hesitant to do that.
They don't want to mess around.
Charging different prices for the same product of service to different people.
As we discussed way back earlier when we're laying out the case for
customer centricity, sometimes it makes a lot of sense to do so.
So, whether it's cross-selling, up-selling, frequency or margin.
And I'm not going to get in to the nitty gritty details of exactly how we do those
things.
But I just want to understand customer development as a whole.
How we measure it, and how it fits in with acquisition retention.
Christian TerwieschAndrew M. Heller Professor at the Wharton School, Senior Fellow Leonard Davis Institute for Health Economics Co-Director, Mack Institute of Innovation Management
