The Customer-Base Audit: The First Step on the Journey to Customer Centricity

by Peter Fader

As a leader in your organization, you will be very familiar with your organization’s key financial statements and monthly management reports. You may have spent countless hours discussing budgets and expenditures.

But how much time have you spent reflecting on the fact that these revenues are generated by actual customers―the people who pull out their wallets and pay for your products and services? In The Customer-Base The First Step on the Journey to Customer Centricity , experts Peter Fader, Bruce Hardie, and Michael Ross start you on the path toward really getting to understand your customers’ buying behavior as well as the health of your overall customer base.

A customer-base audit is a systematic review of the buying behavior of a firm’s customers using data captured by its transaction systems. It will help you answer questions such

-- How healthy is your customer base? How realistic are your growth objectives?
-- How do your customers differ in terms of their behavior and value?
-- How has the quality of your customers changed over time?
-- What changes in customer behavior lie behind period-to-period changes in firm performance?
-- What is important to your high-value customers? Which products help you acquire and retain your best customers?

Fader, Hardie, and Ross present five “lenses” through which an executive can address questions like those above. The answers are often lurking in various parts of the organization, but it is rare to find all the relevant analyses in one place, let alone performed on a regular basis (as an audit should be). Yet without such a basic, systematic understanding of the foundations of the firm’s primary source of cash flow, how can executives make informed decisions?

Fader, a Wharton professor, is the author of Customer Centricity and coauthor of The Customer Centricity Playbook , both of which have helped businesses radically rethink how they relate to customers. In this first step of the journey, Fader, Hardie, and Ross assist leaders in gaining a fundamental understanding of their customers’ buying behavior―and thus their company as a whole.

Genres: Business

218 pages, Paperback

Published November 1, 2022

About the author

Peter S. Fader is the Frances and Pei-Yuan Chia Professor of Marketing at The Wharton School of the University of Pennsylvania. His expertise centers around the analysis of behavioral data to understand and forecast customer shopping/purchasing activities. He works with firms from a wide range of industries, such as telecommunications, financial services, gaming/entertainment, retailing, and pharmaceuticals. Managerial applications focus on topics such as customer relationship management, lifetime value of the customer, and sales forecasting for new products. Much of his research highlights the consistent (but often surprising) behavioral patterns that exist across these industries and other seemingly different domains.

In addition to his various roles and responsibilities at Wharton, Professor Fader co-founded a predictive analytics firm (Zodiac) in 2015, which was sold to Nike in 2018. He then co-founded (and continues to run) Theta Equity Partners to commercialize his more recent work on “customer-based corporate valuation.”

Fader is the author of Customer Centricity: Focus on the Right Customers for Strategic Advantage and coauthor with Sarah E. Toms of the book The Customer Centricity Playbook. He has been quoted or featured in The New York Times, The Wall Street Journal, The Economist, The Washington Post, and on NPR, among other media. In 2017, Professor Fader was named by Advertising Age as one of its inaugural “25 Marketing Technology Trailblazers,” and was the only academic on the list.

Reviews

[Lydia Wallace · Rating 5 out of 5]

What a great book. It's a must have for any business that wants to understand the health of their customer base written by some of the best experts in the field. The book not only accessible but engaging. I am retired now but wish I would have read this book before I retired. After I read it I gave it to my daughter who is getting her Bachelor's Degree in business. She was very intrigued by it. I highly recommend.

[Patrick Pilz · Rating 2 out of 5]

A pretty linear view on customers.

[Becky · Rating 1 out of 5]

This book is out of wheelhouse. I did learn something as a lay person, customer's money matters. Businesses are always looking at ways to sell more and more often, a continuous in out the door.

[Dominic Bouffard · Rating 3 out of 5]

I recommend the book "Customer-base Audit" for any business leader who wants to gain a deep understanding of their customers' buying patterns. The authors' unique perspective challenges the notion that there is such a thing as an "average customer" and emphasizes the importance of grouping customers based on their distinguishing characteristics.

The book provides valuable insights on how to analyze customer behavior data to identify bad trends and mitigate them effectively. The authors also highlight the significance of cohort analysis and provide a detailed guide on how to perform it accurately. This powerful technique enables businesses to detect customer trends following product or price changes, which is crucial for making data-driven decisions.

In conclusion, "Customer-base Audit" is an essential read for any business leader who wants to prioritize customer-centricity and leverage data-driven insights to improve their bottom line.