What business are you in? Don’t overthink the question. Go with your initial thought, not the way you think you should answer. Many will define their business by the products they build. For example, “We’re in the accounting software business.” Others will define their business by the customer problem they solve. “We help our customers effectively manage their assets.” The way you answer is a good indicator of whether your business perspective is product centric or customer centric.
Peter Drucker, one of my business heroes, said the purpose of a business is to attract, retain, and profitably grow customers. I’m going to focus on the grow part of the definition. The term that’s often applied is earning customer loyalty. Going academic for a minute, Kotler and Keller in their book Marketing Management define it as a deeply held commitment to re-buy or
re-patronize a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior.
At the risk of being overly simplistic, here are the basic differences. A product centric view means you build a product, you sell the  product, and then you sell more products to others. A customer centric view means you understand a need in your target market, then you deliver a superior set of user experiences to the target customers in that market.
There are significant differences in these two views. A customer centric view is broader in scope. It’s not just the code that’s installed on the server; it encompasses a wide range of interactions between the customer and the company over a longer period of time. Product centric companies view the competition as directly comparable products, while customer centric
companies consider alternative experiences. For example, Borders could have focused on Barnes and Noble with a product centric view or on Amazon and its Kindle as an alternative experience their customers may select.
For a product centric company the critical time frame is from the qualified lead to closing the order. The relationship is two-sided. We sell. You buy. We give you product. You give us money. The measurements focus on revenues and margins. The customer centric company considers from the initial contact with the prospect throughout the usage of the initial product and its predecessors. The relationship is a partnership in jointly solving a problem. The measures focus on customer retention, customer satisfaction and lifetime value.
What signs should you look for to see how your company behaves in the continuum of these two views? Here are a few questions to ask yourself.
  • What is the quantity and quality of communication with your installed base?
  • How much do you personalize and customize the information to provide the type of content they want, when they want it and in the form that they want it?
  • How good are you at meeting post-sales commitments?
  • Do you carefully manage detailed information about individual customers and all customer touch points?
There are least three advantages to having a higher degree of customer loyalty and value orientation. The first is financial. Studies show that it costs 5X or more as much money to obtain a new customer than to retain an existing customer. Keeping customer acquisition costs down certainly helps the bottom line. Second, loyal customers serve as references which can increase sales success rates and shorten sales cycles. In the exploding world of social media, positive and  negative reviews are shared faster and carry more weight than ever before. Last but not least, are the market insights that can be gained by working closely with loyal customers. You will be able to recognize incipient needs and market trends earlier than your competition providing a an important business advantage.

What about your company? What examples of activities demonstrate an interest growing loyal customers and what benefits have you seen as a result?