Here's an overview of Peter Fader's thinking:
Your customers differ greatly in the value they bring to your company, An effective/sustainable growth strategy should focus on (and leverage) these differences far more than typical product-centric marketing approaches.
It’s harder than ever to outperform competitors by focusing on product quality/differentiation or scaling efficiency. Your biggest growth opportunity will come from switching the usual obsession over products/services to an enterprise-wide customer-centric strategy. Companies must align their innovation, customer service, advertising strategies, etc., with the differences across their customers with a disproportionate focus on the most valuable ones - those with highest lifetime value.
While historical data is useful, it’s not a perfect “mirror to the future.” As the graph to the left shows, observed purchase frequency shows increasing returns-to-scale for heavy buyers, so it’s vital to nurture the strongest relationships and focus acquisition efforts more on the quality of new customers rather than quantity. Using information about these key customers for product design, messaging, and tie-ins with other products/services is the key to growth.
You still need to satisfy the core needs of the remaining (majority) of lower value customers but you should aim to do this using relatively low levels of investment so you can spend more on high value customers and prospects who can deliver growth. It’s hard to turn “ugly ducklings” into “beautiful swans,” and efforts to do so rarely have high ROI.
This strategy is most relevant to businesses (B2C or B2B) that have the ability to track the purchasing behaviour of every customer. Likewise, it may be limited by regulatory barriers that make it difficult to treat customers differently (e.g., in health care settings). Company-wide buy-in is essential for it to be successful, and a new organisational design may be required.