Peter Fader on Customer Buying Behavior

A customer-base audit is a systematic review of customer buying behavior using data captured by its transaction systems. It will help you answer questions such as:

-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?

Pete Fader is the Frances and Pei-Yuan Chia Professor of Marketing at The Wharton School of the University of Pennsylvania. His expertise centers on 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, retail, and pharmaceuticals.

In addition to his various roles and responsibilities at Wharton, 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 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 (2020, 2012) and coauthor of The Customer Centricity Playbook (2018) with Sarah Toms. He has won many awards for his research and teaching accomplishments.

Topics in this episode include:

01:11 - About Peter

09:50 - Methodology to predicting customer behavior

20:25 - Not all customers are created equal

24:34 - Factors to keep in mind when evaluating long-term customers

30:54 - Peter's thoughts on survey data

38:10 - Valuing a business by auditing your customer base

Get the book here: https://www.amazon.com/Customer-Base-Audit-Journey-Customer-Centricity/dp/1613631618

About Gene: Gene Marks is a former columnist for The New York Times and The Washington Post and now writes weekly on political, economic, management and technology issues affecting small and mid-sized businesses for The Guardian, The Hill, The Philadelphia Inquirer, The Washington Times, Forbes and Entrepreneur. He runs a 10-person company financial and technology consulting firm near Philadelphia.