How many companies call themselves “customer-centric” while failing to see issues through customers' eyes?
Larry Selden, professor emeritus of finance and economics at Columbia University, and Geoffrey Colvin, senior editor at large at Fortune magazine, argue in their book, Angel Customers & Demon Customers, that any company that claims it's customer-centric is “an outright fraud” unless it can pass a three-part test:
• Is there a specific person who “owns” the customer and can develop specific value propositions?
• Who is accountable for the profitability of a customer or segment?
• And how significantly does the company differentiate interactions with customers?
The subtitle of the book is Discover Which is Which and Turbo-Charge Your Stock, which summarizes the book's premise well. The only way to achieve a P/E superior to the market—not your industry—is to understand that a company is no more than a portfolio of customers.
Companies that want a superior stock price must understand the relative profitability of customers, develop different value propositions for customers of varying profitability and organize around customers.
Here's what the authors say: