Work For Humans Podcast Summary

Episode: Customer Centricity: Designing Your Business Around Your Best Customers

Guest: Peter Fader | Host: Dart Lindsley

Date: July 22, 2025

Overview

This episode dives deep into the true meaning and business impact of customer centricity with Peter Fader, Wharton professor and renowned authority on the subject. Fader challenges widespread misconceptions, arguing that being customer centric does not mean treating every customer equally. Instead, it’s about identifying, valuing, and orienting an organization’s strategies and offerings around the most valuable customers—the ones who drive growth, sustainability, and profitability.

Beyond customers, the conversation draws compelling parallels to employees as “internal customers,” exploring whether organizations could and should apply customer-centric thinking to talent. The dialogue is candid, data-driven, and at several turns, provocatively challenges conventional wisdom.

Key Discussion Points & Insights

1. Defining Customer Centricity

• Customer centricity is widely misunderstood
  • “Customer centricity can mean lots of different things to lots of different people... too many companies will say we are centered on every single customer. We can't sleep at night until the least happy is satisfied. No—focus on the right customers for strategic advantage.” (Peter Fader, 00:04)
• Not all customers are created equal
  • The core idea is to focus on the right customers—not all customers are equal in value, and attempting to serve all equally leads to missed opportunities for sustainable growth.

2. Product Centricity vs. Customer Centricity

• Product centricity: Obsessing about building the “best” product (Apple, BMW) or delivering maximum efficiency (McDonald’s, Walmart).
• Customer centricity: “Let’s figure who the best customers are, let’s do more with and for them, and let’s find more like them.” (Fader, 08:14)
  • Example: Harrah’s casino couldn’t scale like Vegas giants, so they doubled down on their ‘whales’ (most valuable repeat gamblers), built loyalty programs around them, and pivoted the entire business accordingly.

3. Identifying the Most Valuable Customers

• Customer Lifetime Value (CLV) as the key
  • Fader’s work centers on rigorous measurement of projected (not just historic) profitability: “We really can very accurately and in a granular manner project the future profitability of each and every customer... Not the ones who have been the most profitable, the ones who we project to be the most profitable.” (Fader, 04:47)
• Data required: Behavioral data (transactions, timing, amounts), not just demographics or psychographics.

4. The Role of Data and RFM

• Behavioral data is king
  • "First and foremost, we're going to look at behavioral data... who bought what when, and for how much." (Fader, 16:54)
  • The old “RF(M)”—Recency, Frequency, Monetary value—remains a powerful model for predicting future value. Recency matters most.
• Real-world anecdote: Direct marketers like The Franklin Mint pioneered modern CLV concepts by tracking and projecting customer value decades before e-commerce.

5. Who IS the Customer?

• In complex businesses, identifying “the customer” can be a challenge (university: student, faculty, alumni? Pharma: physician, hospital, patient? Media: reader, advertiser?).
  • “If you can't get alignment [on who the customer is], then it's really hard to be customer centric.” (Fader, 13:34)

6. Subscription/Contractual Businesses & Customer Centricity

• Easiest & most obvious context for customer centricity: Gaming companies, telecoms, SaaS, media subscriptions.
  • “You know if the customer's alive or not and you know the differences among those who are alive. It’s just so obvious… just in your face, there’s no denying them.” (Fader, 24:05)

7. Organizational Impacts of Customer Centricity

• EA Games Case Study: Shifted from boxed games to data-driven customer relationships, leveraging individual player profitability to inform every R&D, distribution, and talent decision.
  • “Not all customers are created equal. We need to be developing games for those kinds of people over there because they're really valuable.” (Fader, 26:07)
• IMPORTANT: Product-centric culture is alluring and can blind companies (“we know best”), but the best-selling or most “sexy” products often serve low-value, one-and-done customers.

8. Common Mistakes & Challenges

• Static view: Relying on an old model of who your best customers are.
• Ignoring competition: Rivals can mimic your customer-centric programs, eroding competitive advantage.
  • “…as companies reach the pinnacle of customer centricity, they either get lazy, they get arrogant, or they just don't have their eyes open for what's coming around the corner.” (Fader, 35:21)
• Misapplying loyalty/mass customization: Not everyone wants a relationship or white glove service—know which high-value customers do, and serve accordingly.

9. Metrics: Balancing Short & Long Term

• Tension exists between delivering near-term profits and building long-term customer value.
  • “If we can come up with short-term metrics that are indicative of long-term value... trying to get companies and Wall Street analysts to focus on metrics that are more long-run oriented.” (Fader, 33:23)

10. Are Employees Really Your “Internal Customers”?

• Fader’s take is evolving: Employee differentiation (Employee Lifetime Value, ELTV) is conceptually appealing but much harder in practice than with customers because:
  • Employees are interconnected (performance is team-based and emergent).
  • Value delivery is less measurable and less linear than customer transactions.
  • Neglect of “lower value” employees can actively harm the organization (unlike just ignoring unprofitable customers).

Notable Model: Wharton’s Peer Grading Algorithm (WUPI)

• Fader describes a system for ordinal peer assessment, weighted by peer performance—now being piloted for employee evaluations to better differentiate talent (46:20).

11. Parallels & Limits: Customer vs Employee Centricity

• Differentiation is necessary but riskier with employees (mutual dependency, risk of harm from neglect).
  • “You know that not all employees are created equal. And if we could only come up with a way to properly measure them… then we could start to do our job more effectively.” (Fader, 51:00)

Notable Quotes & Memorable Moments

• On the purpose of customer centricity:
  • "It's our opportunity to rely on those differences, to find paths to growth that are sustainable, defendable, and more profitable..." (Fader, 00:30)
• On Apple & Product Centricity:
  • “Apple, Apple, Apple. You want the best, that’s who you’re going to.” (Fader, 06:50)
• On the value of data:
  • “We are building the electron microscope of the customer... you're going to have this entirely new domain to do it in.” (Fader, 15:45)
• On neglecting the wrong customers:
  • “That is customer centricity, is foregoing some revenue with the hopes that there'll be even a better customer down the road.” (Fader, 11:22)
• On measurement fallibility:
  • “You just can't paint all the customers with one brush... for those high end customers you do not want them subject to mass customization. You want white glove service for them.” (Fader, 39:41)
• On translating CLV to people:
  • “We're not even aware of the full set of factors that we must take into account... There's a lot more science that needs to be done before we can put the employee lifetime value at the same level as customer lifetime value.” (Fader, 57:10)
• On Zappos' “pride” in an 11-hour customer service call:
  • “First of all, 11-hour customer service call for an online shoe company... really? And second of all, you’re proud of this? This is actually irresponsible... You actually do have a fiduciary responsibility to your stakeholders not to have 11-hour customer service calls.” (Fader, 60:37)
• On being valued at work:
  • “It's wonderful to be in a place where the default answer tends to be yes... It makes me not only want to do those things more, but to make sure that it's being done in a way where the institution is seeing the value from it.” (Fader, 68:09)

Timestamps for Key Segments

• 00:04 – Fader outlines the real definition of customer centricity.
• 06:20 – Product centricity vs. real-world customer centricity (Apple and Harrah’s examples).
• 14:46 – Why data is core: Predicting future value (customer lifetime value).
• 19:25 – What behavioral data matters (RFM) and the evolution via direct marketing.
• 24:05 – Why customer centricity is most visible in subscription/contractual businesses.
• 25:19 – Case Study: Electronic Arts and power of customer-centric data across org decisions.
• 32:43 – Short-term vs long-term profitability, balancing metrics.
• 35:21 – How customer centricity can go wrong (complacency, static models, competitors).
• 46:20 – Fader’s grading algorithm as a potential model for employee differentiation.
• 51:17 – Employee centricity: Where differentiation proves hazardous, and how connectedness matters.
• 60:37 – On Zappos and the dangers of “friendly at all costs.”
• 68:09 – On what Fader hires Wharton to do for him (personalizing the employee-customer analogy).

Flow and Tone

• The tone is lively, direct, and occasionally contrarian—Fader is unapologetic in challenging mainstream business dogmas.
• Host Dart Lindsley is curious, reflective, and analytical, using his own experiences and candid company anecdotes to probe deeper.
• The episode is a back-and-forth: theory, practical examples, potential pitfalls, and cautionary tales—all grounded in Fader’s research and real-world stories.

Conclusion

This episode is an essential explainer and reality check for leaders seeking true customer-centricity. It demolishes the notion that more service is always better, or that all customers (or employees) should be treated equally. The path to sustainable growth lies in knowing—through data—who your most valuable relationships are and designing your systems, products, and even company culture around their unique needs.

Fader’s insights extend provocatively to the employee experience, but with important caveats: employees’ value is more interconnected and emergent. While customer centricity is well-quantified, employee centricity is a work in progress, but the measurement revolution is coming.

Further Reading/Action

• Peter Fader’s books: “Customer Centricity” & “The Customer Base Audit”
• For advanced listeners: Explore CLV metrics in your business and challenge your own assumptions about “who matters most.”
• For people leaders: Consider how segmentation and differentiated value plays can work—responsibly—for your employees.

“You have to realize the customers are people and they have needs... but you actually do have a fiduciary responsibility to your stakeholders not to have 11-hour customer service calls.”
—Peter Fader (60:37)