Product-centric and customer-centric are the two most popular and most talked about terms when it comes to several approaches to doing business.

If we talk about the time two decades back, there was no concept of customer satisfaction or customer demand. Products were just developed according to evolution needs and daily life necessities. Therefore, companies and businesses at that time were product-centric only.

However, with the advances in business strategies and techniques, companies focus on becoming customer-centric as well. In this article, we will give a detailed comparison of these two approaches for you to develop a better understanding.

Product-Centric Approach

Definition

According to the definition, a product-centric approach is one in which the company stays focused on the product only. According to this approach, the company keeps on developing the present products and keeps on introducing new products in the market whether there is demand for it in the market or not.

This type of company focuses solely on the strategy development of related products only. All business operations also revolve around the products.

These companies utilize most of the budget in the research and development of product betterment and adding new products to the portfolio.

Whenever the company witnesses a good sale of a particular product, they launch the same product in a new market and even in a new country as well. Similarly, if a product is not gaining any revenue, the company decides to discontinue the product. They locate the budget of that product to the high-performing product instead.

Advantages

• More Focused

One of the major benefits of a product-centric approach in business is that this approach is more focused. In this approach, you only have to focus on one thing which is your “product”. This is not only time saving but this approach also helps you win as well. The more focused you are on your product, the better product you will be able to develop.

• Better Reputation Building

Every business owner knows that their product is the best way for them to build and develop repute in the market. When you launch a quality product in the market, you get a positive response which proves that your company is a producer of superior products. In this way, you become able to gain more customers.

• Gaining Customer Loyalty

Customer loyalty can only be gained through quality products. When a customer is satisfied with your product, he will buy the same product again and again, until he will become a regular customer. Therefore, by having a product-centric approach, you will be able to gain customer loyalty by addicting people with your products.

Disadvantages

• Not always a Market-Fit

When the company solely focuses on the product, they do not focus on the market needs and customer demands, etc. In this way, sometimes they even launch a product that is not the best fit for a particular market. This happens because, without proper market research, the company is not able to meet customer demands and requirements.

• An Expensive Approach

The company will certainly need more budget if they want to adopt the product-centric approach. In this approach, the company launches products without any kind of market research because they put the entire budget into their products only. That is why sometimes they launch a product that does not give any benefit because it is not the customer’s demand. This results in a loss of money and thus this approach is considered to be an expensive and cash-burning approach.

• More Risk is Involved

The company’s prime focus is the product and not the customer. Therefore, launching a product in the market without knowing the customer’s perspective often proved to be very risky and detrimental. The risk of failing in this approach is very high as the company knows nothing about the customer demands and launches the product blindly by investing heavily in it.

Examples

• Apple

Apple has been launching its products in the market since the 1980s. However, you will be surprised to know that the company is using a product-centric approach. They do not try to focus on what the demands of a particular target market are. They just launch products with new features and new technology that anyone can dream of. After that, they put a heavy price tag on their products as a price for providing high-tech features.

• Dyson

Dyson is another big name that is following the product-centric approach. They focus on the research and engineering of the products to make them flawless. The main products of the company are fans, vacuums, hair dryers, etc. With their top-notch quality products, they have become able to develop a group of loyal customers that are willing to pay high prices for these high-tech products.

Customer Centric Approach

Definition

As it is obvious from the name a customer-centric approach is the one in which the company’s primary and only focus is to satisfy the customer. These companies’ main focus is to do research and analysis regarding customer demands and requirements. They continuously keep on getting feedback from customers so that they can make the products better by learning about the customer’s approach.

These companies keep on finding new ways to enhance the overall customer experience of the products. They have a keen interest in customers’ demands so that they can develop a better product. They also keep on maximizing their budget for doing market research.

The main focus of customer-centric companies is to gain customer satisfaction and customer loyalty by providing valued products. They know that the ultimate secret to business growth is customer satisfaction. That is why they not only focus on developing quality products but also provide after-sale services in order to satisfy the customer and provide them support.

Advantages

• Less Risky

One of the major benefits of a customer-centric approach is that it is very less risky as compared to the product-centric approach. The company enters a market that is already developed. You launch the product according to the customer’s needs and requirements. Therefore, the risk of the product failing is minimized.

Even if the company is going to launch a new product, it will not fail because they do proper market research beforehand in order to minimize risks and increase the chances of product success.  

• Long-Term Results

The customer-centric approach produces long-term results. The company first does proper market research before launching the product. This does not mean that they can forget about the product after launch. They have to do constant research in order to know the ever-growing and ever-changing demands of customers. They keep on developing the product according to the changing needs of customers. In this way, they keep on getting new customers and are also able to sustain the current ones.

That is why it is said that a customer-centric approach yields long-lasting results for the particular product and the parent company.

• Develop Customer Affinity and Loyalty

Customer affinity is a concept in marketing where you make the customer addicted to your product through its unique features and quality. The customer becomes so much dependent on your product that he does not accept any other alternative product.

Similarly, customer loyalty is a concept in which the company keeps on focusing on the customer’s needs in order to make the customer feel valued and he will ultimately become loyal to your brand or product.

Therefore, we can understand that these two things are really important to develop a positive brand image of your product and to earn revenue. A customer-centric approach is one that helps companies to achieve both customer affinity and customer loyalty by making them the company’s prime focus.

Disadvantages

• Market Research is Expensive Process

One of the significant disadvantages of the customer-centric approach is that it requires extensive market research which becomes very expensive as well.

It is a commonly understood fact that when you need to find out what actually the customer needs, then you have to do extensive market research. You have to do research studies and conduct surveys as well in order to find the actual requirement of the customer. For all this process, a broad spectrum of research has to be conducted that needs a heavy budget. However, the obtained results are worth all the cost.

• Compromised Product Quality

Sometimes, this happens when the company allocates all the budget or a greater part of the budget for conducting market research, the product quality may suffer.

This happens because companies allocate the greater part or most of the allotted budget for doing market research and getting customer feedback. After that, they are left with very less budget for product development. In this case, the product quality has to be compromised. In many cases, the company fails to develop quality products and the product ultimately fails to generate revenue when launched in the market. Therefore, it is considered to be a major drawback of the customer-centric approach.

• Brand Building Might Take Longer

Building a brand’s image in the eyes of the target customer is not an easy task. It is not only an effort some task but a very time-consuming task as well. First finding out the actual customer’s requirements and then developing the product according to those requirements is indeed not something simple.

That is why building your brand’s reputation and developing a positive perception of your brand in customers’ minds is a task that takes time, effort, money, etc. The company has to find the right fit between customer demands and product features to build a positive brand reputation.

Examples

• Zappos

It is an Amazon-owned company. This company works with a customer-centric approach. One of the major strategies making them famous is their free returns approach. This is an e-commerce website for shoe shopping. Many people feel hesitant to buy shoes online due to many reasons. However, Zappos has removed this issue for customers by providing the facility of free returns. This has helped Zappos to gain customer loyalty and customer affinity.

• Trader Joe’s

This is a grocery store that is different from traditional grocery stores. They not only provide more variety but huge discounts on that variety as well. The main focus of the company is on customer service and providing competitive prices as compared to other stores. In this way, they are able to gain more customers and have developed a positive image of their brand in the eyes of the customers.

Product Centric Vs Customer Centric 

Both product-centric and customer-centric approaches are used by different business organizations in order to achieve organizational goals. Both these approaches have certain advantages and disadvantages.

However, in many cases, customer-centric proved to be a better fit. Through this approach, the companies can know the choice and needs of the target market customers.

Customers develop a better brand image of the product only when it is able to satisfy and fulfill the customer’s needs. After that, customers are able to develop a connection between them and the product. If a product is developed after proper market research and keeping the customer’s demands in mind, product development becomes easier. Moreover, these products have less chance of failing in the market.

On the other hand, a product-centric approach is also not useless at all. It has its own merits as well. This strategy works very well in a sense when you provide a top-notch product to the customer because all the budget and research go into the development of the product. Thus making the product able to fulfil customers’ requirements.

Both approaches have positive and negative aspects. The company should find out which method will best suit their needs in order to achieve organizational goals and objectives.