In his new book, Wharton professor Peter Fader outlines what he views as the failure of companies to understand customer behavior, proposing a data-based framework.
The book — titled "The Customer-Base Audit: The First Step on the Journey to Customer Centricity" and co-authored by Michael Ross, the chief retail scientist at EDITED, and Bruce Hardie, a professor of marketing at London Business School — was published in early November by the Wharton School Press.
Fader, the Frances and Pei-Yuan Chia Professor of Marketing at Wharton, challenges the way firms typically analyze their customers and presents an alternative "customer-base audit" — a systematic review of customers using transaction data.
"Companies always say, 'Our customers are different.' They actively avoid comparison and accountability," Fader said. "But companies aren't as different as they think. So the whole idea of an audit is to look at things in a standardized way rather than making excuses of why [companies] are different," he said.
Fader said that transaction data — which reveals who bought what and when — is the "biggest chunk" of data that is needed.
"If you know how many customers you're acquiring, how long they're buying from you, how often they're buying from you, and how much they're spending, and you add all that up, that's all the money your company makes," he said.
Many firms fail to lean into this data and, therefore, miss the foundation for an effective customer base analysis, Fader added.
"People say that you can't just view your customers as numbers. You need to view them as human beings and get in touch with their emotions — their wants, needs, desires, and aspirations," he said. "I believe in all these things, but too many companies are down-playing the foundational parts and up-playing [the motivations of customers]," he added.
The book targets senior business leaders, aiming to "[raise] the quantitative literacy of executives," according to Fader.
In addition to encouraging executives to revamp their methods, "The Customer-Base Audit" sets out five lenses to help firms understand what their data means, he said.
"[Companies] have the data at their fingertips. They have all the information systems and analytical capabilities. There's no excuse," Fader said.
For those outside the business world, Fader said he hopes this book will address the "disdain" that he perceives to be aimed at the marketing field.
"There really is a lot of genuine science in marketing: psychological science — how people actually make decisions — and statistical science — how do we extract as much insight as possible," he said.
This book connects with the other books that Fader has written, "Customer Centricity: Focus on the Right Customers for Strategic Advantage" and "The Customer Centricity Playbook," and the companies he has founded, Zodiac and Theta. Fader said that the customer-base audit was the first step in his work on customer lifetime value, customer centricity, and customer-based corporate valuation.
Fader also recommended this book for students who wish to understand the "phenomena and domain" of his Wharton MKTG/STAT 4760 course, which focuses on forecasting and modeling. "Before we talk about the future, let's first understand the present," he said.
Fader said that he hopes Penn and Wharton students will learn to look at these issues the "right way" as future leaders in the business world. "I'm counting on the next generation of leaders to bring these ideas forward," he said.