It's Time to Retire the Customer Intimacy Value Discipline

Decoding the algorithms of company success has been a central focus of business research. If market success were exact and replicable, startups and tech giants could transform it from an anomaly into a consistent outcome. In the absence of a deterministic path, researchers have sought heuristics to enhance the likelihood of success.

One such heuristic can be found in the different types of strategies a business should follow to achieve success.

Michael Porter, the key reference in strategy, classifies strategies into Cost Leadership, Differentiation, and Focus. However, there is also a very popular theory developed by Michael Treacy and Fred Wiersema, that identifies Customer Intimacy, Product Leadership, and Operational Excellence as the main paths to be followed.

Except for a few details, a considerable level of correspondence can be found between these schools of thought. It is pretty reasonable to say that Cost Leadership corresponds to Operational Excellence, and Differentiation corresponds to Product Leadership.

In Porter's framework, there is also the angle of Focus, but this alone is not a source of competitive advantage. In reality, Focus is a dimension that should be added to the Differentiation and Cost strategies to clarify that a broader or more focused market was chosen.

Customer Intimacy

Moreover, we have the kind of strategy that Treacy and Wiersema call Customer Intimacy. For them, Customer Intimacy holds a special place among all strategies.

Customer Intimacy is all about understanding customers, tailoring offerings, and fostering strong relationships, with the end goal of maximizing customer lifetime value (LTV) in a practical, measurable way.

Given these insights, it's no wonder the theory was adopted worldwide and is still widely used in companies and taught in business schools to this day. It is important to recognize that Treacy and Wiersema introduced valuable customer concepts ten years before the inaugural book on Net Promoter Score, at a time when customer lifetime value was an obscure concept lacking mature definitions in both the market and academia.

We will examine each main pillar of the Customer Intimacy discipline to understand its overall framework and determine if it still makes sense to follow its rationale given the significant advancements in customer analysis.

1. Having a Deep Knowledge of the Customers

Despite decades of theories and frameworks, such as Customer Intimacy and Net Promoter Score, most companies remain product-centric, often unable to identify specific customers behind each transaction. This limits their view to anonymous data points, making true customer-centricity a challenge.

Gathering essential customer information across interactions provides valuable insights without needing exhaustive detail. Key practices, like integrating financial, product, and support data, can yield significant benefits. For those seeking deeper insights, social network data and advanced analytics are options, but this depth often depends more on resources and scalability than strictly on strategy.

2. Tailoring Products to Individual Needs

Tech companies are increasingly focused on last-mile customization, using machine learning and algorithms to deliver tailored experiences at scale. For SaaS and consumer apps, investing in technologies that respond to user behavior is essential. Platforms like Netflix and e-commerce apps leverage predictive analytics and recommendation engines to keep experiences highly personalized.

Balancing individual personalization with scalable product development requires prioritizing high-value customer needs without compromising the product’s direction. Some decisions must still be made at the product level to ensure customization aligns with the overall roadmap. This approach maximizes user value while keeping the platform's broader goals intact.

3. Building Strong and Lasting Relationships

In today’s SaaS landscape, maintaining strong customer relationships extends well beyond the initial sale. Retention strategies use advanced analytics and machine learning to anticipate churn and identify at-risk users for proactive interventions. Personalization also includes engagement-driven communication, ensuring interactions stay relevant. CRM systems and data warehousing allow companies to keep a complete view of each customer’s journey, making each touchpoint more impactful.

Maximizing LTV (Lifetime Value) is essential for tech companies focused on recurring revenue. By combining Customer Intimacy principles with real-time data, companies adapt to customer needs dynamically. This approach enables SaaS providers to deliver personalized experiences that retain high-value users, driving long-term growth in competitive markets.

Enter Customer Centricity

In many aspects, the retirement of Customer Intimacy implies the triumph of this idea. Analyzing its main pillars, we saw ideas that should be applied everywhere, not just to companies that have chosen this type of strategy. Using the same nomenclature proposed by the authors of the theory, we argue that the companies who opted for Operational Excellence and Product Leadership should have some activities that were proposed for the Customer Intimacy value discipline.

Customer Intimacy did touch upon the idea of customer lifetime value (LTV), though it wasn’t central to the theory. At that time, this concept was still emerging. Today, we’ve moved beyond Customer Intimacy to the model of Customer Centricity, where strategies and actions are focused on identifying valuable clients and maximizing their long-term value. This shift allows us to approach customer relationships more analytically and profitably, leveraging data to drive growth.

Not Just Semantics

Without further thought, the idea that is being proposed here can look like just some semantic discussion without much importance, but this is not the case. In 1992, when this theory was proposed, we were in the early stages of personal computing. CRM systems were still in their infancy. Organizing and using client data was such a significant challenge that it was fair to say those companies had 'Customer Intimacy'.

A few more sophisticated companies would know how much each client spent in a given year and create some internal procedures based on this information. Now, we have accessible computer systems and popular statistical models that allow small companies to go much farther than the most sophisticated companies of that time.

Finally, there is another important reason for this change. Strategy authors all agree that companies shouldn't be stuck in the middle, they should choose one type of strategy.

With Customer Intimacy as a distinct value discipline, companies may believe they don’t need to organize their strategy and operations around the value of their clients. But in reality, companies with any kind of strategy need to understand and try to maximize their client's value.

Conclusion

One option is to maintain the current framework — recognizing the higher standard for customer understanding across all companies — and reserve the category of Customer Intimacy for those that truly excel in this area. However, we believe this approach would cause more harm than good.

While some companies might fit this classification, they would be so few that it wouldn't justify having a distinct category for them. Also, they would necessarily have a strategy that could be classified somewhere on the differentiation and cost spectrum.

Adding a further dimension to the traditional cost and quality value spectrum increases complexity without substantial benefit. There are microeconomic reasons why companies should stick with just these two dimensions to identify their optimal strategy.

As with everything a company does, the decision of which specific customer-centric activities to develop depends on its overall strategy and available resources.

Careful analyses need to be conducted to determine which activities should be performed in a way that maximizes return for the business. Now, clients must be at the center of your strategy, with all customer-centered activities geared toward maximizing business return, regardless of your broader strategy or specific characteristics.