Peter Fader is a Professor of Marketing at The Wharton School of the University of Pennsylvania and Director & Co-Founder at Theta, a company specializing in Customer-Based Corporate Valuation®.
Fader has worldwide recognition for his contributions in research areas such as Customer Lifetime Value, Customer Centricity and Customer-Based Corporate Valuation. As a recognition for his interdisciplinary approach, in 2003, Dr. Fader became a Frances and Pei-Yuan Chia Professor of Marketing.
Companies from various industries such as retailing, telecommunication, or financial services, benefit from his expertise in behavioral data analysis and become more agile in predicting future customer behaviors.
Peter Fader’s contribution to the Customer Value Optimization world
To give you a glimpse of his contributions to the Customer Value Optimization (CVO) category, here’s Peter Fader’s TED Talk at TEDxPenn:
Customer Centricity: Focus on the Right Customers for Strategic Advantage
by Peter Fader
Based on Fader’s book, an effective customer-centric approach starts with one essential principle: not all customers are created equal. Therefore, if you want to generate better profits in the long term, everything your eCommerce company does should be in line with the needs and wants of your most valuable customers.
Fader offers numerous examples from companies like Nordstrom, Costco, Apple, Starbucks, or Tesco to help you understand the characteristics of a customer-centric company and act like one. In his book, you’ll learn how to use customer lifetime value and customer-centric data to make better decisions for multiple areas of your business.
Essential CVO takeaways from the Customer Centricity book
- “The customer is not always right. Rather, the right customers are always right. And, yes, there’s a difference.”
- “In the world of customer centricity, there are good customers… and there is everybody else.”
- “Customer centricity is a strategy to fundamentally align a company’s products and services with the wants and needs of its most valuable customers. That strategy has a specific aim: more profits for the long term.”
The Customer Centricity Playbook: Implement a Winning Strategy Driven by Customer Lifetime Value
by Peter Fader and Sarah E. Toms
Peter Fader co-write this playbook with Sarah Toms, Executive Director & Co-Founder at Wharton Interactive. It is a valuable resource for any company that wants to integrate customer-centricity into its DNA.
The book will help you shift from creating acquisition and retention strategies for the average customer to investing your resources in attracting and keeping the most valuable customers. Fader and Toms show you all the elements you should focus on to create and implement a winning customer-centric strategy and make sure this approach is part of your organizational culture.
It goes without saying that once you read this book, you’ll better understand customer lifetime value, market valuation, who are the customers that generate the greatest value, and how to put your CRM system to work.
Professor Peter Fader has numerous contributions to the academic field, from which we want to present three essential papers in the Customer Value Optimization category.
‘RFM’ and ‘CLV’: Using Iso-value Curves for Customer Base Analysis
By Peter Fader, Bruce Hardie, Ka Lok Lee
Publication: 2005, Journal of Marketing Research
The primary purpose of this paper is to generate a formal model for CLV forecasts based on the link between RFM (recency, frequency, and monetary values) and Customer Lifetime Value. The tests conducted by the researchers show that the RFM model can be trusted as the basis for CLV estimates and can be used in developing forecasting tools.
In Pursuit of Enhanced Customer Retention Management: Review, Key Issues, and Future Directions
By Eva Ascarza, Scott Neslin, Oded Netzer, Zachery Anderson, Peter Fader, Sunil Gupta, Bruce Hardie, Aurelie Lemmens, Barak Libai, David Neal, Foster Provost, Rom Y. Schrift
Publication: 2018, Customer Needs and Solutions, 17
The authors of this paper used previous research and existing practice to identify new opportunities that can improve customer retention management, one of the biggest challenges many companies have to overcome.
Based on the difference between at-risk customers and the ones that should be targeted, the paper suggests multiple solutions, including reactive and proactive retention programs, as well as short and long-term actions.
Customer-Base Valuation in a Contractual Setting: The Perils of Ignoring Heterogeneity
By Peter Fader and Bruce Hardie
Publication: 2010, Marketing Science, 29 (1), 85-93.
Noticing an increasing interest in Customer Lifetime Value, the authors show that using aggregate retention rate to calculate the residual value of a customer base leads to incorrect results:
“Any attempt to compute the residual value of a customer (and therefore a customer base) using an aggregate retention rate will lead to a biased estimate of the true value that takes cohort-level retention-rate dynamics into consideration.”
In fact, the findings of their paper show that “valuations performed using an aggregate retention rate underestimate the true value of the customer base by the order of 25%–50% in standard settings.”