Is Your Company Product- or Customer-Centric?

There are two ways to build a company. One way is to build your company from your products. The other way is to create and sustain customers.

Product-centric and customer-centric companies have vastly different strategies to sustain a viable business. Your profitability may differ under each type of approach.

Which one of these is your company?

Product-Centric

A product-centric company focuses on products it brings to market rather than the customers who buy those products.

Product-centric companies seek to develop new products. You can do this with new technology or special skills that exist within your organization without looking outside your company or at your customer’s unmet needs. You invest to have the best product with the most advanced features in the industry. And you measure success by the portfolio of products you sell, the sales you make from them and the market share you hold.

Determining how many applications a product has is often a key part of your sales and marketing pitch. You highly reward product engineers for innovation.

The cons of a product-centric company are that you may have a myopic vision of the company through the product lens. This can blindside you from changing your product focus. You may also focus on short term product sales, but at the expense of long-term customer loyalty. Plus, as a product-centric company, you may lack a coordinated approach to serve customers.

Customer-Centric

A customer-centric company is one that focuses on fulfilling the unmet needs of customers. This type of company finds a demographic or psychographic trend and builds its business around serving this group of people.

You are a customer-centric company if you create the best solution for customers rather than just the best products. This may involve packaging, education, training and consultative services with your products. This enriches the customer experience and builds loyalty.

To grow your business, you search for new customer needs to fill. You look for ways to increase customer share-the amount of money they will spend with your company. And you segment your marketing and profits by customers rather than by products to measure success. You also measure success by lifetime value of customers.

As a customer-centric company, you give the biggest rewards to managers who develop and sustain customers. More loyal customers lead to higher profits in both the short and long run.

Going From Product-Centric to Customer-Centric

Product-centric companies live and die with their products. They are more vulnerable to fluctuations in the market than customer-centric organizations. The number and types of products a product-centric company has, and the capacity to create and promote new products limit growth. If your product costs go up and your customers are not willing to pay more, then your profits can suffer.

Customer-centric companies on the other hand can respond better to fluctuations in the economy. This is one reason why Oracle helped companies in the insurance industry develop customized customer-centric solutions and move away from being product-centric. They did this by creating a customer relationship management system that enabled its clients to gather information about their clients so they could create the right types of products and services. As a result, the insurance industry today is much more customer-centric compared to twenty years ago.

IBM also moved away from a product-centric business model to a customer-centric business model. After Louis Gerstner took the helm at IBM he changed the way IBM continued its business. In the past they developed innovative products and marketed those products to customers who would buy them. Today, IBM consults businesses before determining a solution they can create to satisfy the customer’s needs.

When Steve Jobs came back to lead Apple, he changed the company strategy from product-centric to customer-centric. Sure, Apple still made innovative products. In fact, you could say during his second stint at Apple, the company made even more innovative products than before. This time, Apple developed these products around customer-expressed problems and needs.

Perhaps the most visible innovation Apple made was through its retail store division. Apple put the customer at the center of its products and services and created incredible brand loyalty. Today it has the highest market capitalization of any company in the world, taking over the spot held by Exxon Mobile, according to this 2013 Forbes report.

By understanding your customers, you can fulfill their needs by changing your product/service offering.

From a marketing perspective it’s worth your time and investment to go from a product-centric to a customer-centric company.

When you consider your marketing strategy, going from a product-centric to a customer-centric company can give your business a competitive advantage. Doing so will enable your company to retain customers and sustain higher-margin performance. Think about what happened when IBM, Apple and General Motors changed from product- to customer- centric. They all became more profitable, and so can your company.