Do you care more about your products than your customers?
INSIGHT - Helen Blake
I’m ‘Yes’ is the conclusion I came to after a sales meeting yesterday. Their company’s culture was definitely all about the product.
How do you overcome this product myopia if the people in the business aren’t prepared to listen to customers and explore their changing needs and expectations?
Product centric companies endeavour to create the best products, rarely involving their customers in the product design, trusting that their internal team knows best.
However, the biggest drawback for product centric companies is the pricing strategy this mindset forces a company to take. For all of us as customers, when we know what we want and we’re out buying a product, we will compare the benefits, features and prices of competing products across the market. This means companies can only charge what the market will bear; what we as customers feel is a fair but relatively narrow price range, 5% either way.
In contrast, a customer centric organisation provides tailored offerings, a choice of product and service packages or bespoke services to solve a challenging customer problem. This makes it difficult for we as customers to compare between providers, so that we evaluate what is of real value and importance to us, the amount of pain we’re in, and the level of risk we are prepared to take, in terms of buying into the ethos of the customer centric company. This careful consideration around problem-solving means we’re far more likely to pay to have our pain taken away and our problems resolved. Customer centric companies selling solutions to problems can earn higher margins and move away from the race to the bottom on price.
Another characteristic of product centricity, particularly when operating in mature markets, is being overwhelmed by competitors who can be leaner and/or digitally savvy with a lower cost base. This lower cost base affords the leaner competitors significant protection when customers make their buying decisions on price. This race to the bottom for pricing intensifies then cripples the established product centric company in their internally focused loop.
Success demands a more sophisticated understanding of customers and a different way of relating to them. But not just the old-school sense of market segmentation, i.e. classifying customers by size, spend, geography, purchase patterns etc. then customising your approach accordingly. Today it means knowing how your customers feel and how they behave. Because if you know this, you can understand what it is they value most, and then tailor your approach accordingly.
In the financial services industry, one of our clients had always taken for granted that its rational business customers made rational purchasing decisions, with price figuring highly. However, when we spoke to customers, it turned out that their concerns were more emotional, based on fundamental issues like getting promoted and having a high enough salary to pay for their children’s schooling. Some were so unhappy with aspects of our client’s service that they became actively hostile, refusing to let the client’s staff onto their premises. In this particular relationship, the customers felt both unappreciated and powerless.
What do your customers think about you?
Hopefully, your business doesn’t provoke quite such an extreme reaction in your customers. But have they changed the way they want to work with you? Do they now, to steal an old Apple tagline, “think different”? Could the shift from a product centric to customer centric approach benefit you?
Answering the following questions will help you decide whether your business needs to consider a more customer centric approach:
Have your customers changed in the way they want to interact with you?
Are you increasingly competing on price?
How is this affecting your business?
Is your company culture set up to be customer or product centric?
How does this affect the customer experience?
Will your leadership team champion the change?
To learn how we helped a business unit within Siemens begin the internal shift from product centricity to customer centricity, see our case study.