Customer centricity: what exactly does it mean? Why does it matter? And, how can businesses embrace a more customer-centric approach?
Defined literally, one may say customer centricity means putting customers at the center of decisions. And while that definition is a good starting point to broadly explain customer centricity, there’s a bit more to it than simply listening to your customers. That’s because customer centricity is an organizational mindset that’s woven throughout the fibers of every part of an organization, not just customer-facing teams like support, success, and sales.
In this article, we will address customer centricity and some of its nuances through a lens of product development, but it’s worth noting that many parts of our definition are applicable to the broader organization’s contribution to this mindset.
Customer centricity defined
At UserVoice we define customer-centric product development as follows:
Customer-centric product development is an approach to building and improving products that places customer truths at the core of new development. Embracing this approach means every new feature and functionality released can be traced back to a real customer problem.
This approach places emphasis on gathering, tracking, and acting on customer feedback with the end goal of developing products customers truly love and get value from.
Beyond this, there’s also an element of mutual respect and relationship-building involved that is less-frequently discussed but of critical importance. Customer-centric organizations strive to co-create with customers by encouraging and empowering them to share their honest feedback. When giving customers this metaphorical seat at the table, organizations commit to not only taking their feedback into consideration but also to following up with honest answers about what actions the feedback has prompted (even if they’ve decided not to act on a piece of feedback). This creates a mutually beneficial partnership between customers and product development organizations, which is a key differentiator between simply listening to customers and being truly customer-centric.
Customer-centric vs. product-centric
People often wonder how a customer-centric approach differs from a product centric approach (also known as a product-led approach). It turns out, the two are not as different as many people believe. In fact, the two go hand in hand.
“Being product led incorporates customer wants and needs into a broader perspective of what's good for the company strategically.” he explains, it means looking at things through a wider lens, “Where is there viable business for us? What is technically feasible and defensible? What can we build that would be unique and differentiated as well as desirable for the customer? Those are kind of the three Venn diagram bubbles that people draw in product, and being customer-centric is one, but being product centric is all three.”
So, according to that definition, customer centricity and product centricity (also called being product led) are not mutually exclusive, but rather complementary to one another and mutually supporting.
Before we go on to discuss how a customer-centric approach may work, let’s take a quick look at the why.
Benefits of customer centricity
Why are so many product organizations today embracing a customer-centric approach?
Let’s start with the obvious: this approach helps product teams create products customers love. Putting genuine, articulated customer problems, at the core of product development not only ensures customers’ evolving needs are met, but also helps product organizations reduce the risk of building the wrong thing. It’s win-win.
Another big benefit: an improved customer experience. In today’s increasingly competitive landscape, consumers have the luxury of choice when it comes to the brands they choose to do business with. Giving customers a voice in product development and committing to listening to that voice and communicating back to them about outcomes is one way brands can differentiate themselves.
Organizations who leverage customer-centric product development to help them create great products and memorable customer experiences may see measurable impacts such as:
- Increased customer satisfaction and net promoter scores
- Improved customer loyalty and retention metrics (such as churn)
- Increased customer lifetime value (LTV)
But at the end of the day, one of the most significant positive impacts is a little less concrete at first glance: customer-centric product development can help turn average customers into passionate product evangelists. Start tracking the business that comes in through referrals, and then you’ll see.
Characteristics of a customer-centric approach
Product management organizations don’t magically become customer-centric overnight. That’s because the mindset and approach require several core competencies to properly put into place. Talking to customers is a good start, but product organizations need more than a regular cadence for customer research to get the full benefits of a customer-centric approach.
Let’s take a look at what these core prerequisites and competencies are:
Mechanisms for capturing and tracking customer feedback
Committing to being customer-centric means committing to getting a representative view of all target customer segments, not the perspective of a vocal minority. Product development teams without a scalable system in place for capturing and tracking feedback from various sources may struggle to get a holistic understanding of customer needs.
Not only do organizations need a mechanism for capturing and tracking the various types of feedback they receive, they also require an understanding of when and how to use the various types of feedback they receive. For example, when to use qualitative vs. quantitative data, and how to bring both together in a meaningful way.
Ability to focus on target customers
In addition to a scalable way to capture customer feedback data, product teams need to be adept at segmenting their data. A common pitfall in this approach is forgetting that not every customer segment has equal business or strategic value and looking broadly at all feedback. Instead, customer-centric product teams know which segments represent the most value, and focus first on serving the needs of those segments.
Accountability and ability to close the loop
As we mentioned earlier, mutual respect and reciprocity are important elements of customer centricity. If customers who share feedback are consistently left in the dark about what’s been done with that feedback, they may begin to feel a lack of respect. Operating under false pretenses of “thank you for your feedback, we’ll act on it soon,” can evoke similar feelings. So, in order for this approach to work, product development teams must commit to not only following up on feedback with updates, but also letting customers know (nicely) when their ideas are simply not a good fit.
Acute “problem vision”
Finally, with a seemingly endless list of requests to fulfill, product development teams must be proficient at seeing beyond requests to the underlying problems. Because as Bruce McCarthy points out, “often there's a much shorter list of problems to solve than there are requests to fulfill.” Getting to the root problem often means digging deeper into requests by asking the right questions, and that requires its own unique set of skills. After understanding the underlying customer problem, customer-centric product teams can look at their lists of articulated customer problems through the lenses of product vision and objectives and further filter them down.
Organization-wide access to customer truths
Since customer centricity is an organization-wide mindset driven largely by customer truths, it’s important that the full organization has access to said truths. Customer-centric product organizations make concerted efforts to spread customer stories and feedback to other departments, and to grant individuals across the organization access to key pieces of context that may enable them to be more customer-centric in their own approaches.
Conclusion: Why does customer-centric product development matter?
To summarize, here are a few things customer-centric product organizations do that set them apart.
- Continuously gather and track both qualitative and quantitative customer feedback from an assortment of sources.
- Strive to understand the needs of the broader customer base, not just those of the vocal minority.
- Are aware that not every customer has equal strategic or business value and therefore use segmentation to uncover the needs specific to target customers.
- Look for the underlying customer problems driving customer requests rather than take every request at face value.
- Know when to say “no” to a customer request that simply does not align with the product vision.
- Consistently follow up with customers regarding their feedback whether the request will be acted on or not.
Customer-centric product development represents an opportunity for organizations to not only better understand and serve their customers’ needs, but also to give their customers the magical experience of being co-creators of the products they use. This unique experience, and the products created by it, are key strategic reasons organizations strive to take a customer-centric approach to product development.