Companies operate in two ways
- Launch a new product and finds the best fit customers for this product. Here you are changing the target customer segment time to time to suit the product. You mostly have one product and want to sell that product to as many customers as possible [ product centric]
- Launch a new product and find the best fit customers for this product. Here you identify the most profitable customers and tailor the product to suit the customer needs. You mostly focus on one customer segment and want to sell that customer as many products as possible. [customer -centric]
When you are focused product centric, you are open to risks and are vulnerable to fluctuations in the market needs and your customer need to connect with the product. when product cost increases and the product is positioned at higher price, the customer may not be ready to pay the price, and the company cuts their profit margins. Another difference is products do not have and customers have memories. A customer can provide reference to other customers, based largely on perception of how well they were treated today. Referral or word of mouth is the most effective way of marketing.
Both approaches are mutually exclusive and can be implemented along with each other in a company. Every company tries to find the right balance between generating money/customer satisfaction and value creation/ market share growth. Companies that achieve both becomes the market leaders in the industry. A customer centric approach ensures increase in wallet by referrals, generates good faith and leads to growing loyalty base.