I regularly find myself telling clients a simple but very important truth: that they care much, much more about their products than they care about their customers.
And it’s always interesting how clients respond when I spell this out, because it so often comes as a big surprise to them. They haven’t realised that all the care and attention they lavish on products isn’t actually for the good of their customers. It’s just what they enjoy and do best. In other words, they’re product-centric, not customer-centric.
How to Tell if You’re Product-Centric
By ‘product’, of course, I also mean a service or offering. For instance, we’ve recently been working with a large service company who are technical experts in their field. Their business grew out of the very specialist tasks they perform for their customers. These tasks are often a matter of life and death, so the company’s expertise is very highly regarded. We’ve been helping them work out how they’ll grow and develop.
One of the big things we identified is that they go to market by how they’re organised – which is by their product groupings. Because of this, their natural tendency is to sell their customers siloed offerings, based on each product grouping.
The diagram below shows a typical example of how such a company is organised. Each function – sales, marketing, customer service – addresses the customer in isolation. The organisation is grouped around product profit centres and product teams, and gives power to people who develop new products.
This approach genuinely hinders their ability to see beyond product offerings, towards a more customer-centric view. The following diagram shows the type of organisation that can do this, allowing the company to assess the customer’s problem and identify the appropriate solution, by mixing and matching connected products and services and presenting what the customer actually wants in an appealing way. The company is organised around customer segments, teams and P&Ls. Power rests with the people who have the greatest knowledge of the customers’ businesses.
Our client, even though they weren’t aware of it, are deeply product-centric. They focus a great deal of effort on developing product features, performance and quality to make continual improvements.
They are not alone. Typically, product-centric companies see new product development as their most important business process. They measure their success based on the number of new products they produce and the proportion of revenue from products that are less than two years old. Consequently, they prioritise investment in innovation and research and development. If they’re mainly services companies, like our client, they invest in people development, training, coaching and so on. Everything is dedicated to ensuring that people are working at peak performance and at the cutting edge of where they think they need to be.
While customer-centric businesses look to create the best solution for the customer, the goal for product-centric businesses is to create the best product. The problem is that product-centric companies rarely involve their customers in product design. Instead, they trust that their designers and engineers know best how to design or improve their products. They are also not inclined to look at what their competitors are doing.
Another drawback of being product-centric is the pricing approach it forces you to take. A customer who is buying a product will compare benefits, features and prices of competing products across the market. Companies can only charge what the market will bear. A customer-centric organisation, in contrast, is solving a customer’s problem. Buying a tailored offering makes it difficult for customers to compare between vendors, allowing these companies to price based on the value they add and the risk they are taking.
The crippling disadvantage of being product-centric is that it makes companies inwardly focused. They suffer a type of product myopia. Customer needs are seldom explored or taken into account. Philip Kotler in his book Marketing Management, Prentice Hall 1994, puts it well: “These organisations too often are looking into a mirror when they should be looking out of the window.”
The Importance of Customer Engagement
Product-centricity is not only a disease in big organisations. Last week, I spent a few hours with a very successful small business in the education sector. This company are grappling with how to position themselves in their markets, and the difficulty stems from the fact that they are another product-centric company. One reason they struggle to present themselves externally is that they’re so inwardly focused, they have very little practice engaging with the outside world.
And so it typically goes with product-centric companies. They don’t know how to talk to their customers, nor have they developed the ability to empathise with them, to understand what motivates and constrains them. They can’t see things from the customers’ point of view, because they’re focused only on what they have to sell.
Product-centric companies tend to think that they’re focusing on the customer, but actually, all they’re concerned about is themselves.
Focus on Relationships, Not Transactions
A final symptom of product-centricity that I’ll mention is that these companies also tend to sell in a very transactional way. This is an old-fashioned ‘one-at-a-time’ approach, which doesn’t build a relationship with the customer. Transactional selling only works when customers know what they want to buy, products and services are standardised and decisions are based on price. There’s no scope to deepen understanding of the other person, or to gain a perspective on how they see things. Product-centric companies don’t understand that they need such perspective because they think that their products are the be-all and end-all.
In time, these companies lose market share because their competitors – who they’re often oblivious to – are bringing customers into the equation. These competitors can then deliver authentic value to customers, and in due course will start to conspicuously outperform their peers. They can do this because they understand that when customers don’t know what they want to buy and need help to define the solution, the way to sell to them is through a consultative or relational approach. This allows companies to build relationships with customers who have complex needs, so they can co-create value by customising products or services to their requirements.
Companies that move from transactional to relational selling need to be clear about what is involved. Some believe that relational selling means that structured account management is no longer needed. Others see account management as all that’s required. The truth is that the best companies have both, managing their customer relationships in a structured way.
As I outlined earlier, a customer-centric company that uses relational selling will be organised around market segments. But how should companies decide what these segments are? The best way is to create customer personas. These must be based on real customer research. This research will allow companies to understand the value, needs and characteristics of different groups of customers, so they can manage them accordingly. Companies can then develop customised sales, marketing and service plans that are relevant and valuable to these groups.
A Long-Term Investment
The difficulties that accumulate from being product-centric can’t be addressed with a quick fix. As companies get bigger, they must tackle the underlying issues and internal structures. This involves some strategic thinking, which, in my experience, few want to do.
Rather than more focus and training on the technicalities of the product or service, companies need to switch focus, to invest in effective skills training in things like empathy and developing relationships, which are essential in customer-centric organisations. For many businesses, acquiring these soft skills is very hard. I understand the desire for a quick fix, but fundamentally difficult and sometimes painful work does pay dividends!
The three things you must focus on to become more customer-centric are:
1. Generating real customer insights through research. Learn as much as possible about your customers before deciding how to best serve them.
2. Understanding the different needs and characteristics of customers, and managing them accordingly. Create customer segments based on value, needs and behaviour, then develop customised marketing, sales, and service plans that are relevant and valuable to these groups.
3. Managing your customer relationship in the most appropriate channels. Find the best channels that customers prefer and create customer experiences that are consistent across those channels, whether it is online, face to face or via a retail outlet or call centre.
Are You Product-Centric?
Do any of these issues ring true in your experience? If so, you may want take a quick test. Ask yourself:
– Do we focus more on product or service features than customer needs?
– Do we involve our customers in product or service design and how we run our business?
– Do we spend time and resources researching our customers and their needs?
– Are we paying close attention to what others in our market are doing?
– Do we often struggle to create marketing messages and clearly position ourselves?
Your answers might suggest that your organisation is too product-centric.