The Digital Transformation Playbook: Rethink Your Business for the Digital Age

Customer networks
TV, radio, out-of-door
Broadcast
Direct mail, brochure
Product test,
comparison
In-store purchase
Reward points
Figure 2.3 
Rethinking the Marketing Funnel.

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Today’s customer networks, however, make their biggest impact on the 
marketing funnel through an additional level, which I call advocacy. At 
this psychological stage, customers are not just loyal; they advocate for the 
brand and connect the brand to people in their network. These custom-
ers post photos of products on Instagram, write reviews on TripAdvisor, 
and answer friends’ product questions on Twitter. Thanks to search engine 
algorithms, this type of customer expression is heavily weighted to influ-
ence search results. Each customer’s advocacy thus feeds back up to the top 
of the funnel and has the potential to increase the magnitude of awareness, 
consideration, and so on through the funnel. (This extended, or looped, 
marketing funnel is sometimes renamed the customer journey, with new 
names invented for the same stages of the funnel, ending in advocacy. But 
the model is the same.)
Now every business needs to go beyond driving potential customers 
to the stages of purchase (action) and repeat purchase (loyalty). Businesses 
need also to engage, nurture, and inspire repeat customers to enter the 
stage of advocacy, where they will contribute to the growth of the business 
in the rest of its customer network.
At the same time that the funnel is influenced by customers’ net-
worked behaviors, their range of possible touchpoints with a company 
is increasing dramatically. In addition to advertisements, store shelves, 
and possibly a call center, today’s customers may be consulting a search 
engine, the company’s website, a mobile app, a local map search, a physi-
cal retailer, online retailers, peers on social media, the company’s own 
social media accounts, instant chat, and customer review sites. Custom-
ers are increasingly proactive in taking advantage of all these resources. 
Customers who are standing in a store looking at a product display are 
likely to use a mobile device to check prices, additional product details, 
and customer reviews. They may also check shipping options if they don’t 
want to carry the product home. And they may be instant messaging a 
quick snapshot to their friend or spouse before making a final decision on 
color or model. In a study at Columbia Business School on “Showroom-
ing and the Rise of the Mobile-Assisted Shopper,” we observed all these 
behaviors and more.
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These touchpoints open multiple paths to a purchase. To effectively 
market to customers, businesses must think about the specific needs that 
will lead customers to take one path to purchase versus another: How 
quickly do they need the product? How price sensitive are they? Do they 

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already have a preferred brand? How close are they to physical retailers? 
And so on. Businesses can increase their influence by mapping and opti-
mizing the customer experience on each path. They begin this process by 
developing an “omni-channel” view of the customer—based on an under-
standing that the same customer may be using a tablet app and a desktop 
computer and walking into a store. Designing each touchpoint experience 
What Is a Customer Worth?
One of the most important questions any business must face today is, How much 
are my customers worth?
As customer interactions expand across more digital touchpoints, measuring the 
return of marketing investments requires new financial tools. Chief among them is 
a model of customer lifetime value—the profitability of each customer for your bot-
tom line over the long term. For any business, some customers are more profitable 
than others, and some may even be costing you money. Customer lifetime value 
can be shaped by various factors: frequency of purchase, volume of purchase, price 
point, reliance on discounting, and loyalty or attrition rate. To build a model, you 
will need historical data and the involvement of your finance team. (To get started, 
you can read Managing Customers as Investments by Sunil Gupta and Don Lehm-
ann.
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) Once you have a customer lifetime value model, it is extremely helpful in 
segmenting your customers, defining objectives for new customer strategies, and 
measuring the impact of things like customer engagement and advocacy.
In a networked world, though, customers add value in more ways than just 
their transactions over time. Increasingly, new business models are being built 
where the customers’ participation, data, and collective knowledge are a business 
asset and a key competitive advantage.
This more intangible value of customer networks can even be a factor in the 
financial valuation of firms. Customer participation is a key driver of stock price 
for social networks such as Facebook or LinkedIn. When Yahoo paid $1 billion for 
the popular blogging platform Tumblr, it was not for Tumblr’s paltry revenue but 
for its large network of young, active, creative users. Of course, the challenge in 
acquiring a firm for its customer network is that continued customer loyalty is not 
assured. When Google purchased Waze for $1.1 billion, it was critical to maintain 
the participation of Waze’s customer network to justify the full price of the acquisi-
tion. Google immediately announced that Waze would not be rolled into Google 
Maps but would be kept as a separate product run by the original Israeli team that 
started it. Customer networks are extremely valuable, but they are intangible assets 
that can’t be swapped and leveraged as easily as real estate or factory equipment.

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in isolation, as if it were for a different customer, dilutes and disrupts the 
brand experience. An omni-channel experience uses design to integrate the 
path to purchase as it moves from one touchpoint to the next.
Whereas the funnel is a macro tool for thinking very broadly about 
customers’ psychological states, the path to purchase is a lens for looking at 
customer behaviors much more specifically. Both perspectives illustrate the 
necessity of understanding customer motivations and needs more deeply 
than ever. They also point to two striking new imperatives for every busi-
ness: create compelling experiences at each step of the path to purchase, 
and drive customer advocacy at the end of the funnel so as to engage and 
co-create value with the most involved customers. These imperatives raise 
important questions: How do you engage customers in their networked 
world? What motivates them? What are they looking for?
Five Customer Network Behaviors
In the research for my book The Network Is Your Customer, I sought to answer 
this question: What kinds of digital offerings most deeply engage customers 
in their digital lives? I started by looking at hundreds of cases—across con-
sumer and B2B industries—of the products, services, communications, and 
experiences that had been embraced and adopted by customers during the 
first two decades of the World Wide Web and the mobile Internet. What I 
found was a recurring pattern of five behaviors that drive the adoption of 
new digital experiences. I call these the five core behaviors of networked 
customers:
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 Access: They seek to access digital data, content, and interactions as 
quickly, easily, and flexibly as possible. Any offering that enhances 
this access is incredibly compelling. Think of text messaging on early 
mobile phones, which revolutionized communications with the ability 
to receive and send messages from anywhere at any time. From the 
convenience of e-commerce to today’s latest instant messaging apps, 
customers are drawn to anything that provides the immediacy of sim-
ple, instant access.
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 Engage: They seek to engage with digital content that is sensory, 
interactive, and relevant to their needs. From the early popularity of 
Web portals, to the spread of online video, to next-generation virtual 
realities—their digital desires are marked by a thirst for content. The 
old media adage that “content is king” is at least half right. Although 

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content makers may struggle to earn profits in the digital era, there is 
no question that the desire to engage with content is a key driver of 
customer behavior.
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 Customize: They seek to customize their experiences by choosing and 
modifying a wide assortment of information, products, and services. 
In a generation, customers have gone from having a handful of televi-
sion channel options to a digital world with more than a trillion web-
pages. They have been trained by their digital networks to expect ever 
more options for personal choice, and they like this. From Pandora’s 
personalized radio streams to Google’s search bar that anticipates their 
search terms when they type just a few characters, they are drawn to 
increasingly customized experiences.
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 Connect: They seek to connect with one another by sharing their expe-
riences, ideas, and opinions through text, images, and social links. 
This behavior has driven the entire explosion of social media—from 
blogging, to social networks like Facebook or LinkedIn, to online 
niche communities that gather around a shared passion, vocation, or 
viewpoint. All of these incredibly popular platforms are driven by the 
behavior of individuals using small bits of text and images to signal to 
others that “here is where I am, what I’m thinking, what I see.”
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 Collaborate: As social animals, they are naturally drawn to work 
together. Accordingly, they seek to collaborate on projects and goals 
through open platforms. This is the most complex and difficult of these 
five behaviors, but it doesn’t stop them from trying. Whether building 
open-source software together, raising money for causes they believe 
in, or organizing write-ins and protests around the world, they seek 
collaboration.
As illustrated in figure 2.4, these customer behaviors can be leveraged 
strategically through a set of corresponding customer network strategies. 
These can be used for strategic planning for any industry, business model, 
or customer objective. I have used them in executive strategy workshops 
with hundreds of companies facing widely varying customer challenges. By 
starting with a strategy rooted in customer behavior, businesses can avoid 
the trap of technology-first thinking (What’s our Twitter video strategy?) 
and focus instead on value to the customer and the business.
Let’s take a look at each of the five strategies in depth, with examples. 
Then I will present a tool that you can use to choose which customer net-
work strategy is best for a given business scenario.

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