Product-Centric vs Customer-Centric: Which Approach Should Businesses Follow?
Let’s examine product-centric vs customer-centric approaches in detail and find out how they contribute individually to the business growth.
There was a time when large organizations were built solely depending upon the product-centric approaches. But as the customers have evolved, companies are slowly shifting towards a customer-centric approach. Product centric vs customer centric approach is the biggest dilemma that modern companies find themselves dealing with.
These two approaches are the two sides of the same coin. One cannot grow without the other. Yet companies are evaluating the efficacies of both the approaches to find the pros and cons of both. Theoretically, the best solution is to leverage the power of both approaches.
With the evolving nature of competition and customer behavior, customer-centricity is becoming a more effective approach in driving business growth. Yet, product centricity cannot be fully ignored for it has its own plus points that add into the business. So, let’s examine product centric vs customer centric approaches in detail and find out how they contribute individually to the business growth.
A product-centric company places all of its focus on product and develops newer and advanced products irrespective of its demand in the market. All the strategies and business processes are built around the product and work accordingly. These companies invest heavily on R&D to develop advanced products and the company expands by adding new product lines to their portfolio.
Any product that is doing exceptionally well in a market, the company decides to launch it to the newer customer segments or even to a new country. For the better performing products, the company decides to invest further to upgrade the quality of the product. They continuously release the advanced versions of the product to the market.
And, for the product that is underperforming, the company decides to kill the product line and instead deploy its time and resources to the high-performance products.
Product-centric companies don’t work on the principle of meeting the customer’s needs and challenges. They work on the principle of presenting the product which customers have not yet realized that it’s needed. Steve Jobs had put it very wisely when he said:
The main advantages of being product-centric are:
Being product-centric entails you focus solely on one thing – what you do best, which is to build your product. Product-led growth advocates the strategy of putting all your efforts in building the best-in-class product in your niche. This is a big time and effort-saver.
With a product-centric, you build your reputation in the market through the quality of your product. You would be known in your industry for providing the best product if you make it to the best of its level. This reputation is more long-lasting than any other form.
A proven form of building customer loyalty is through addiction in your product. Customers who get addicted to your product would never consider leaving your brand, provided your product consists of high-quality engagement strategies that provides continuous value to your customer.
There are few disadvantages too associated with this approach:
When you solely concentrate on product and launch it, you might miss out on finding the right product-market fit. This means you might fail in meeting the demands of your customer. Your product might be the best in its niche but it would be of no use if customer doesn’t want it at all in the first place.
Product-centric approach needs a behavioral change in the customer because it was not built from a user’s perspective primarily. This means you have to groom your customers to start liking it the way you built it. This process takes time and money. You have to invest more on being in the market while burning cash until you gain momentum.
Even though the rewards are much higher in this approach, on the flipside, the risk of failure is also quite high. You don’t follow the herd but rather expect the herd to follow you, “right from the beginning”. This could pose a greater challenge in customer acquisition phase.
A customer-centric company places the customer at the center of all their strategies. They identify the needs, challenges and pain-points of their customers and then build the solution to sell them. They have a keen understanding of their customer segments to which they would be marketing their products.
Apart from giving focus to the solution they offer, customer-centric companies articulate the whole customer journey for a greater customer experience. They keep a keen eye on building customer loyalty and thereby growing their business.
Their focus is on maximizing the customer lifetime value for turning every customer into a profitable asset of their business. Customer lifetime value also plays a crucial role in the valuation of the company and influences the investor’s decisions on further investing in the business.
Customer-centric companies rely on generating business through their repeat customers and aim at maximizing their recurring revenues. They provide more than just good support and service. To help their customers achieve their business outcome, they invest in customer success which is becoming a whole new industry and science in the SaaS world.
The advantages are quite lucrative:
Since you build your product after a thorough study of customer needs, there’s already a market available for you to enter. All you need is to market your offerings aptly to help customers understand what they need is being offered by you. Once you hit the right spot, your company can flourish within no time.
Customer-centricity is a lifelong approach. You don’t just launch the product for customers and forget about it. You need to constantly keep an eye on customer’s growing needs and evolve your product accordingly to always stay relevant. Keeping this approach ensures longer sustainability of your brand.
When you build solutions keeping the customer in mind, it reflects in all aspects of your business like marketing, sales, support, product and customer success. This helps in shaping positive sentiments in customers as they feel privileged to be your partner. This sentiment is essential for building brand affinity that lasts for generations to come.
It is not an easy ride to become a brand that your customers love. Few glitches and barriers towards this approach are:
When you have to find what your customers need, you need to invest heavily in market research. These include marketing automation tools that give you all the analytics of the footfall, or conducting surveys to get customer feedback and promoting them for wider participation.
Due to extensive attention towards your customers, your product focus might deteriorate resulting in its inferior quality. You need to work towards finding the right balance between customer expectations and product development. That demands a balanced and strategic investment towards both ends.
Once you start working on customer’s terms, it will take much longer for you to build your own standard in the marketplace. Customers would consider you less authoritative if you always meet their demands rather than putting your own terms. A fine balance has to be furnished to prevent falling in such situations.
As per the definition of both the approaches in the previous section, the main difference lies in the area of the focus. But if we can fragment the two approaches on various business strategies, we get a much clearer comparison. Below are few of the areas in which they differ fundamentally.
Product-based companies have their end goal to create the best product. They would invest most of their resources towards this end. Their success relies mainly on the quality of the product.
Customer-centric companies have their end goal to create the best solution for their customers. It could be either in the form of a product or a service. These companies start with identifying customer needs and challenges and then go on to build their product. They know their customers as much as their product.
Product-centric companies build their growth strategy around the upgradation of their product. They are on a continuous path of evolving their product with evermore better ideas and product innovation.
Customer-centric companies have their growth strategy built around identifying customer needs. Their customer success team is solely dedicated towards collecting valuable customer insights. These insights are used by various other teams like product management or sales and marketing for building their own customer-centric strategies.
Product-centric companies depend mostly on their product itself to self-promote their brand. They build their customer base on the basis of how good their product is and how great a value it offers. Hence, these companies build their success through product-led growth.
Customer-centric companies have a lot of strategies in place to market their product. They aim at turning their loyal customers into brand advocates who help bring new prospects to the sales funnel. These companies also focus on building long-term relationships with their customers so that a continuous flow of incomes can be generated. This helps them in shaping the sustainability of the business in a competitive environment.
Few more differences worth mentioning can be found in the below comparison chart.
Being a customer-centric advocate, we suggest going with a customer-centric approach in the beginning could be a more viable solution. However, there are certain challenges you need to face and overcome:
It is most important to turn your whole organization, rather than just an individual function, to customer-centric for giving a consistent experience to your customer all over their journey. And that demands extensive cross-functional collaboration. Companies which are not aligned already in this fashion have to undergo structural and procedural changes at an organizational level. And that’s a huge task and also time-taking.
Data aggregation across different departments is another hassle you have to take care of. Customer data is all over the place in different forms like support calls and tickets, CRM, recorded touchpoints from your customer success manager and so on. All the data have to be aggregated to gain a 360-degree view of customer, which is almost impossible if you don’t invest in a customer success tool.
Most of the companies still operate with a traditional mindset, which is to equate growth with customer acquisition. Being customer-centric entails you shift your weightage more on retention than on acquisition. This is a radical change that has to be ingrained in every department at all levels. And this takes time and perseverance.
Few insightful statistics of more such challenges faced by organizations can be seen in the below chart:
To decide which is a better approach between the product centric vs customer centric, you must understand your business offering well. There are great examples of both kinds. Google, Apple are few of the product-centric brands while Amazon is a good example of customer-centric brand.
If you are building an innovative product that is one of its kind and whose need has not yet been realized in the marketplace, then going product-centric is the way. Whereas for the case where you already have a customer need in the market and many other competitors too, then going customer-centric is more viable.
Being customer-centric doesn’t mean you can ignore product success. Product success still lies at the core of your organization with the only difference of the company’s vast expanse towards customer-centric strategies as well.
Becoming customer-centric would allow you to build your business sustainably with a steady growth. Customers have to develop trust in your brand and that doesn’t happen overnight. It takes years of perseverance to forge customer loyalty and become a leader in your niche.
Originally Published November 10th, 2020, Updated February 26th, 2021
Shoeb lives and breathes Customer Success and SaaS. He has a passion to research on the latest innovations happening in SaaS and Customer Success. Shoeb hails from a Software Architecture background where he worked for many years with Indian Tech Giants like Wipro and ITC building software solutions for their MNC clients in the UK and Denmark. You can connect with him on LinkedIn here.