Customer-centric Product Management:
Resist the lure of product-centricity for sustainable growth
While much has been written about customer centricity in marketing and even in finance with customer-based corporate valuation (CBCV), not enough has been said about what it means to apply customer centricity in the context of product management. I want to change that. Here are some customer-centric basics to help overcome bad product-centric habits.
What is customer-centric product management (CCPM)?
Customer-centric product management is the guiding philosophy that sustainable business growth requires the ongoing creation of new value for customers.
The fundamentals of customer centricity apply regardless of functional area, so we can build on the shoulders of giants.¹ These basics lay a nice foundation for customer centricity across domains:
The customer is the central economic unit (not product units);
Customers are denominated in lifetime value (LTV or CLV); and
Customers are heterogeneous. In the immortal words of Ted Lasso, “All people are different people.”
About great products, Marty Cagan says they “solve real problems for our users and customers in ways that … work for our business.”² Some business leaders focus on “ways that work for our business” and then try to “solve real problems for our users and customers” by iteration. This often manifests as a solution in search of a problem and is an example of product centricity. Product managers (PMs) often fall into this trap as well, myself included. Once in a while, it works. However, sustainable business growth is path-dependent. That is to say, to first “solve real problems for our users and customers” will greatly improve the long-term success rate of “ways that work for our business.” To do this well, the critical path starts with a relentless focus on the customers’ jobs-to-be-done (JTBD), where a JTBD is “the progress a customer is trying to make in a given circumstance.”³
Why is that important? The amount of customer value created for any addressable market is the ceiling on business opportunity. If customer value creation is flat, then business opportunity is capped. Growth becomes limited to optimizations that capture more of the area under a plateaued customer value curve rather than moving that curve. Companies that get complacent or stuck in optimization mode are at significant risk of being disrupted, sometimes without even realizing it is happening. CCPM helps keep teams focused on prioritizing the most meaningful customer value unlocks, continually raising that ceiling on business opportunity. Products and services are simply a means to that end.
“Companies don’t sell products. They buy customers.”⁴ - Jim Kalbach
When thinking of customer-centric product management, the following four key points are helpful to keep in mind:
Product management is about a value exchange. Organizations provide a product or service to customers, and customers reciprocate with their money, time, attention, personal data, ratings, consent, or whatever “currency” the organization seeks as part of the value proposition. When this cycle happens readily, a product is said to have product-market fit (PMF).
Customers’ perception of value is what matters. Customers are the ones that decide whether or not to trigger this value exchange, not companies, so evaluate initiatives based on ability to create new customer value. Customer willingness to pay will be determined by their perception of value net of perceived costs relative to that of alternate options.
The average customer does not exist. Each customer’s perception of value is influenced by different factors, and each customer weighs the relative importance of those factors uniquely. Customers also differ in the degree to which they feel alternate options already satisfy their needs and wants. Behavior is a stronger indicator for useful segmentation than any demographics.
Customer value creation precedes business opportunity. Pulling it all together, because of the point #2, it’s important to understand the nuances of the point #3 for priority segments and evaluate this information when prioritizing development. Aligned with the point #1 above, business opportunity is limited to the amount of marginal customer value created, since an organization can’t capture value it hasn’t first created to exchange.
In a world where consumers have more choices than ever, paired with less friction in switching than ever, value is in the relationship and not in any given transaction. This is why customer-centric product management is such a critical skill for modern product managers to practice. Amazon’s “working backwards” product development process is a great example of being deeply rooted in understanding the customer value proposition upfront.
It is challenging. Measuring true customer value delivered is hard. Predicting forward-looking customer value is even more difficult. PMs must get comfortable evaluating predictive metrics, interpreting leading indicators, and taking action on imperfect information. All that said, it would be more painful to lose a market by holding tight to product-centric habits and overlook key customer signals, such as those that pulled the rug out from under BlackBerry, Kodak, and Blockbuster.
And if you’d like to read more about the difference between Product-led and Product-centric, check out: Product-led beats product-centric: why the best product-led companies are also the most customer-centric
¹ These foundations are derived from teachings through the marketing lens of: Fader, Peter. Customer Centricity: Focus on the Right Customers for Strategic Advantage. University of Pennsylvania Press, 2020.
² Cagan, Marty. “Product Management — Start Here — Silicon Valley Product Group.” Silicon Valley Product Group, 20 Feb. 2023, www.svpg.com/product-management-start-here.
³ Christensen, Clayton M. “Know Your Customers’ ‘Jobs to Be Done.’” Harvard Business Review, Sept. 2016, hbr.org/2016/09/know-your-customers-jobs-to-be-done.
⁴ Kalbach, Jim. The Jobs to be Done Playbook: Align Your Products, Marketing, and Strategy Around Customer Needs. New York: Rosenfeld Media, 2020. 17.
this article was originally posted at Scul.ly on Feb 12, 2024