Product Market Fit: From Product Centric to Customer Centric
Too many companies start building products before they know who their customers are. They build around a problem they’ve experienced first-hand, or a gut feeling that they’ve got a big idea that will change the world.
None of these reasons helps a company build a product as efficiently as possible. Whether one is self-funded or venture funded, they have limited cash on their hands—especially in the beginning. The moment they start building something, a clock starts ticking.
When they don’t know who their audience is from the start, they end up wasting their most precious resource: time.
There’s one simple rule to building products that people will care about: Entrepreneurs have to be customer-focused, even when they don’t have any customers.
The paradox is that if they don’t have any customers, it’s hard to figure out what they want and where to start. If they start building the product too early, entrepreneurs risk building for the wrong customers.
That’s why they need to learn more by researching their customers. Doing research is cheaper than writing code. It provides businesses with learnings that they can iterate on, so they are never starting from scratch. Research is a habit entrepreneurs build that guide all of their decisions at every stage of the company. They might as well start from day zero; that way, businessmen can get as close to their target customers as possible before investing resources into development, marketing, and sales.
How To Create a Customer-Centric Strategy For Your Business
A customer-centric way of doing business is focused on providing a positive customer experience before and after the sale. However, according to CMO Council, only 14% of marketers believe that customer-centricity is a hallmark of their companies.
Here’s the thing: Executing a successful customer-centric strategy doesn’t happen overnight. However, a customer-centric company requires more than offering good customer service. Both Amazon and Zappos are prime examples of brands that are customer-centric and have spent years creating a culture around the customer and their needs. Their commitment to delivering customer value is genuine. In fact, Zappos is happy to fire employees if they do not fit within their customer-centric culture.
Let’s explore ways to create a customer-centric strategy that connects the business to the unique needs of the customers.
What is customer-centricity?
Customer-centricity is a business strategy that’s based on putting the customer first and at the core of the business in order to provide a positive experience and build long-term relationships.
Research by Deloitte and Touche found that customer-centric companies were 60% more profitable compared to companies that were not focused on the customer, and 64% of companies with a customer-focused CEO are more profitable than their competitors.
Furthermore, 90% of companies compete solely based on customer experience. Companies that focus on their customers can provide a positive customer experience throughout their entire journey. To accomplish this, companies must undergo a massive shift in their organization’s structure and culture.
5 Best practices for becoming a customer-centric company
Becoming a customer-centric business allows entrepreneurs to anticipate customers’ needs and delight them with products and services.
Consider the CEO of Apple, Tim Cook, who said, “Our whole role in life is to give you something you didn’t know you wanted. And then once you get it, you can’t imagine your life without it.”
Apple’s entire strategy revolves around customer-centricity. Their product makes customers fall in love and their Apple Centres provide world-class customer support to help them get set up and out the doors with a smile on their face. Thus, a customer-centric brand creates products, processes, policies and a culture that is designed to support customers with a great experience from initial discovery to point of purchase and beyond.
To achieve better customer-centricity, here are five best practices to help the business stand out:
Hire for customer success. Employees are the front-facing workforce that will shape many of the experiences with customers. Regardless of role, focus on hiring talent that can be aligned with customer-centric thinking and the importance of customer experience at business.
Put relationships first. Customers are not numbers to be measured and analyzed in a revenue performance report. They are people and benefit greatly when entrepreneurs establish a mutually beneficial relationship together.
Democratize customer data. Adopting a new customer-centric strategy requires centralized access to customer data and insights. Having a CRM database can help facilitate a better understanding of customers to provide a unified front that delivers better customer experiences.
Connect company culture to customer outcomes. Employees will be motivated by a customer-centricity strategy when actions can be linked to results. For example, strategies to reduce customer wait times or make transitions easier for a customer can be captured in real-time to highlight successful strategy implementation.
Define your CX strategy. The customer experience (CX) strategy encompasses all of the plans that a company makes to ensure positive, high-quality customer experiences. Customer experience spans all of the interactions between a business and its customers. More specifically, CX is defined by how customers feel about those interactions over time.
3 ways to measure the success of a customer-centric company
Not every organization will have the same customer success metrics to measure customer-centricity. However, the three most important customer-centric metrics that should be carefully monitored are churn rate, net promoter score and customer lifetime value (CLV).
1. Churn rate
Acquiring new customers is becoming more difficult. Therefore, more companies are investing in keeping existing customers instead of trying to find new ones. Here’s why:
Acquiring new customers can cost up to 5x more than keeping existing customers
A 2% increase in customer retention has the same effect on profits as cutting costs by 10%
On average, companies lose approx. 10% of its customer base each year (also known as customer churn). The key to improving retention rates is to understand why people leave, and why people remain customers.
2. Net Promoter Score
Are the customers happy? How do entrepreneurs measure customer happiness?
The answer is through NPS. NPS, or Net Promoter Score, focuses on uncovering customer loyalty by asking only one, simple question: Based on your experience with us, how likely is it that you will recommend us to a friend or family?
Each time a customer responds to this question, the answer is then segmented based on predefined criteria:
- Promoters (9-10): These people are in love with the product or service and are likely to refer the brand to potential buyers. The customers who rate 9 or 10 are repeat customers and will have a high customer lifetime value.
- Passives (7-8): These people who rate 7 or 8 are content with being a customer of the business but are the most likely to switch to a competitor should they find a new or better product.
- Detractors (0-6): These people are not happy with the product or service and are likely to damage the brand reputation by sharing their negative experience with their friends, family and connections.
The more Promoters one has, the healthier the business. It’s simple.
For a customer-centric business, the most valuable “asset” is its customer base.
If entrepreneurs are investing in long-term relationships, they can calculate the “health” of the relationship with customer lifetime value or CLV.
CLV measures the amount of revenue a customer contributes to the business for as long as they are a paying customer. It starts with their first purchase and ends when they stop doing business.
To calculate CLV, add up the total revenue one has earned and multiply that by the length of the business relationship. Then, deduct the initial cost of acquiring them.
For example, if a customer spends Rs 100000 annually, and the average “lifetime” of a customer is 10 years, then one can multiply 100,000 by 10 years (1,000,000). Now, subtract the cost of acquisition (in this case, we’ll estimate 100,000), and the CLV is 900,000.