In the last few years, the concept of becoming ‘consumer-centric’ has received a growing focus, with most of the global enterprises aiming to execute such a change.
However, by talking to executives in these companies, I realised that very few understand what consumer centricity really means. Consequently, even less people know what to do to achieve it.
In this short article I will explain the differences between ‘product-centric’ and ‘consumer-centric’ companies. It is always a good exercise to think about the structures and the processes of our day-to-day, and evaluate whether your approach is more towards the product or the customer.
Product-centric (PC) companies, obviously focus on product, but so do consumer-centric (CC) brands. The ultimate goal of PC organisations is to maximise shareholders’ value, and guess what? For CC companies the goal is exactly the same. So, where do they differ?
The main difference is in ‘how’ to get to the final result. PC firms plan to achieve their goal through high volumes and cost reduction, where their most important KPI is Market Share. Usually these brands achieve growth through product line extensions and/or by enabling new geographical markets.
Think of a car manufacturer in the old days, like Ford, when it launched the iconic Model T. It was the first ‘mass production’ car ever, it came only in one colour (black) and…that was it. The more cars sold, the lower the (fixed) production costs.
Usually PC companies have their competitive advantage stored in product expertise. Remember this. It shouldn’t be surprising – in fact, the more we become ‘experts’ of a technology, the more we irrationally feel that we don’t need to listen to customers.
Generally, CC companies try to align development and delivery around current and future needs of a set of customers. This sentence is very important, as it introduces three new concepts that are not present in a strict PC culture:
In fact, CC companies try to maximise shareholders’ value by distinguishing highly profitable clients from less profitable ones, introducing the concept of lifetime financial value. Hence, CC brands do not only care about today’s revenue, but invest to cultivate clients that may spend more in the future. As a consequence, CC firms’ competitive advantage is in the relationship expertise, and no longer in product.
Sounds good, but how do CCs execute their plan? Mostly by focusing on these three tactics:
- Customer development: make existing clients more valuable
- Customer retention: cultivate clients so they don’t leave for another brand
- Customer acquisition: focus on behaviours, not on demographics
So why is it so important that executives know and understand the product and consumer-centric concepts? Because moving from PC to CC requires a cultural change from the above. Changes may impact design, structure, processes, metrics, and even incentives. The focus needs to move from ‘sell now’ to bigger, and more long-term goals.
What if you realise that your company is a PC company? First of all there is no good or bad here. There are many successful product-centric companies out there, but it is also true that in highly competitive markets most brands are now becoming CC.
What if you aren’t an executive? Well, you can start your CC transformation without having the support of the top management (yet). Try to experiment this routine:
- Ask your clients/contacts/colleagues for feedback after an important interaction
- Write it down, segmenting by different customer persona
- Collect them during the week, and ask at least another colleague to do so
- Organise a 20-minute meeting with your team to share the feedback, discuss learning, and think about improvements
- Implement the changes into your day-to-day while you keep track of new feedback
- If results are encouraging, share them with the management
- Advertise the changes to your customers, as they would be delighted that you heard their voice.