Product-Centric vs Customer-Centric: Which One Is The Best For Your SaaS?

There are different approaches when it comes to growth & sales strategies. Product-centric and customer-centric approaches are the two most well-known of them for SaaS companies.

In this article, I will explain what the Product-Centric and Customer-Centric approaches are, their aims, differences, and shortcomings. If you are a SaaS company trying to find the right approach for your sales strategy, this article is for you.

What Is Product-Centric?

The Product-Centric approach aims to improve the product and make the product speak for itself. One of the main points of this approach is constant updates. However, that is not to say that the Product-Centric approach completely disregards the customers’ opinion.

It is not possible to roll out updates and improve your product without the help and feedback of your users. However, it is a fact that the customer-centric approach emphasizes the customer while it is more of an after-thought for the product-centric approach.

The main difference between the product-centric and the customer-centric models would be while one is product first, feedback later, the other is feedback first, product later.

The Product-Centric approach aims to design a product that draws potential users, not to get their product to the customers themselves. This situation is achieved by innovative services, new features, and a solid product you serve.

R&D departments play a vital role in product-centered companies since these departments play a fundamental role in their production strategy.

Important Aspects of the Product-Centric Companies:

  • They are innovative.
  • They are product based.
  • They aim to draw the customer to their product by its quality.

What is Customer-Centric?

The Customer-Centric approach aims to have the best relationship with the customer base to increase sales and retain customers. This style is achieved through multiple methods, mainly reducing churn rate, increasing the user retention rate, and having good customer service.

Companies that adhere to the values of the Customer-Centric method tend to focus more on their relationship with their customers. These companies try to get their products to the users rather than simply waiting to draw them with features.

However, this does not mean that the Customer-Centric companies do not update their product. In most cases, appealing to customers goes hand-in-hand with the base product’s improvements.

Important Aspects of the Customer-Centric Companies:

  • They aim to design their product according to the needs of their users.
  • They rely heavily on their customer services.
  • Their developmental process is more fluid compared to the Product-Centric approach.
From Mindler

What Are The Advantages of Product-Centric?

Opportunity to Gain Status in Your Category

There are multiple benefits of being a Product-Centric company. Companies that use this method can set the benchmark for their sector, making them the forerunners in the industry they operate. This approach will result in them becoming synonymous with their industry.

Everyone knows companies like Netflix, AmazonPrime, and Adobe are the leading figures in their respective sectors. Even companies that do not sell software try to imitate their methods to a certain extent.

Innovative Approach

Another vital advantage of the Product-Centric approach is that it allows the company to be an innovative one. Trying new methods and applying them to your product is essential for SaaS growth. This innovative approach also helps you solidify your status as the leader of the industry too, supporting the first point even more.

From World Bank Group

Opportunity to Exert Control in Your Sector

The features you provide also dictate the pricing in your given sector. If your software is the only one that fulfills specific needs, this gives you a monopolistic role in your industry. You can dictate the prices and the rate of services you provide according to your liking.

For example, Microsoft Word is one of the widely known products. Most companies use Word, which is incompatible with other software, giving Microsoft an edge in the sector.

Here is a shortlist of the advantages of the Product-Centric approach:

  1. This method allows you to become the most innovative company in your sector, thus giving you positive recognition.
  2. This method helps you to create various products on short notice. Although some of these products might fail, your increased productivity more than makes up for these products.
  3. Your possible monopoly in the sector might allow you to set standards in your industry. This ability is instrumental when it comes to pricing and reaching new customers.

What Are The Advantages of Customer-Centric?

Planned Steps

One of the real benefits of being a customer-centric company is taking your steps according to existing demand in a given sector. This factor makes the possibility of failing to attract customers much lower. This factor applies to new companies that develop a new product and to the existing companies that roll out new updates.
By utilizing this method, you will plan your developments and introduce tailor-made products for your customer base.

Good Reviews Mean More Customers

Another significant benefit of the Customer-Centric approach is that it will directly affect your reviews. By utilizing a dynamic support team and updating your product according to the needs of your users, you assure their positive feedback. This method is essential for social services like streaming.

These platforms depend on the quantity of the users rather than their quality, meaning that your user retention rate is much more essential to increase your brand reach.

The Customer-Centric Approach Allows Specialized Business Strategies

Having a stable user base also allows you to keep track of your customers and better design your media strategy. This benefit will enable you to create a more specialized approach for your business strategy.

Gaining the Maximum Efficiency from Your Customers

Another essential benefit of this method is that it allows you to gain the maximum benefits from a customer. This benefit is significant for companies that operate on a subscription basis since retaining customers by achieving user activation has multiple advantages over overreaching new users.
This situation is also essential for creating brand awareness, brand loyalty, and an overall image for your product.

Good for SaaS Companies

An essential advantage of the Customer-Centric approach is that SaaS companies utilize it best. Since this method allows you to constantly get in touch with your customer base and update your product, you will be able to gain an edge over your competitors.
Here is a shortlist of the advantages of the customer-centric method has:

  1. This approach lets you test out which sections you want to expand your product and business to are safer.
  2. Customer feedback allows you to gain brand recognition in the sector, thus increasing your image.
  3. Companies that adhere to this method need to spend less on marketing since their pro-customer plans draw users.

What Are The Disadvantages of Product-Centric?

Unfortunately, neither of these methods is perfect. Both of them come with potential disadvantages that you need to consider. Here is a list of these disadvantages:

There is a Potential to Overlook Customer Demands and Needs

One of the most significant disadvantages of the Product-Centric approach is that it disregards the users’ views. You can minimize the effects of this problem by conducting surveys through email. Although your main topic of interest is your product, you will need to keep track of your users’ views to improve your existing product and plan the coming ones.

It Might be Hard to Reach New Customers

Without an existing customer/supporter base, it is harder for product-centric companies to reach potential users. Although marketing campaigns might help you ease this problem, this method costs both time and money.

The Danger of Underestimating or Overestimating The Need for a Product

Another problem with the Product-Centric method is that its supporters can underestimate or overestimate the need for a product within the sector they operate in. This attitude can result in potential failures and lost opportunities.

This Approach Can be Lacking for SaaS Companies

Since this article mainly deals with SaaS companies, please note that the Product-Centric method might not always be best for your services. Since SaaS businesses require constant changes, one-to-one customer relations, and brand awareness, you might be better off utilizing the methods used by the customer-centric approach.

Here is a shortlist of the disadvantages the product-centric method has:

  1. The product-centric method is prone to disregarding the customers’ interests.
  2. The lack of a strong support team and a community of users mean that you will have to spend more on marketing.
  3. The lack of research regarding the sector can mean underestimating or overestimating the need for a specific product.
  4. It is easier to copy than to come up with something new. Your competitors in the market can imitate the developments you make and sabotage your efforts.

What Are The Disadvantages of Customer-Centric?

It Can Be Time and Cost Intensive

However, shortcomings do not only limit themselves to the Product-Centric method. There are several disadvantages the Customer-Centric approach has as well. These need to be considered while planning your company strategy. A critical drawback of the customer-centric method is that it can be costly and time-consuming to conduct adequate market surveys.

Important Point:

Even if one manages to conduct a proper survey, it cannot help the company or the product. It is hard to follow user patterns.

There Can Be Operational Problems Between Departments

With constant updates comes the need for operational cooperation between departments. A lack of coordination can result in unnecessary complications and delays. To avoid this, you need to consider alternative methods to increase the collaboration between your departments. Structuring your SaaS marketing team is essential in achieving cooperation between your branches. 

It Can Be a Long and Arduous Progress

Creating and nurturing your customer base is arduous progress. You might not see the results in the short term. In addition to this, your product might be less inclined to be customer-based due to its nature. As much as your approach affects your development, your product affects the success of your approach.

You can smoothen this experience by checking out forerunners in the sector and using their methods as a customer marketing guide.

You Will Have More Competitors that Utilize This Approach

The customer-centric approach is a method most companies use, often regardless of the sector. The number of companies might result in you having more competition than a company that follows the product-centric model.

Your PR Can Outshine Your Product

There is also a potential problem where your image as a company overtakes the quality of your product. It would be best if you struck a balance between the features of your product and your public relations. Here is a shortlist of possible disadvantages of the customer-centric method:

  1. Since most companies use the customer-centric method, you might have difficulty getting a solid place among your peers.
  2. The customer-centric method requires extensive preparation, and its results might not be apparent in the short term. The preparation period in a customer-centric approach is both cost and time-intensive.
  3. This approach requires extensive cooperation between your departments. Although this cooperation creates more flexibility within your company, it also means that your business structure is more prone to problems.
  4. If you are not careful, your messaging can get in front of the content you provide.

What Are The Main Differences Between Customer-Centric and Product-Centric?

The main difference between the customer-centric and the product-centric model is how they reach a customer. While the customer-centric approach aims to reach out to customers by listening to their demands, understanding their needs, and updating the product according to them, the product-centric approach aims to draw customers by the quality of its product.

However, the differences between these two methods do not limit themselves only to how they approach the customers. The method you pick is directly related to your company’s structure.

For example, while the customer-centric approach relies on the inter-branch operations between your departments, the product-centric approach utilizes a more independent approach when it comes to your departments.

Another difference between these two approaches is their duration. Since following the customers’ patterns is a long-term game, the customer-centric approach takes its time to succeed. On the other hand, the product-centric approach presents results much sooner, whether these results are good or bad.

Do not forget that deciding whether you should pick the customer-centric approach or the product-centric approach depends highly on the size of your company, sector, and brand.

Suppose your company cannot afford the innovational steps taken by the product-centric approach. In that case, you might be better off by picking the customer-centric approach to creating a hybrid of the two.

You can better analyze which approach would be best for you by setting up your sales strategy, considering your metrics, and deciding your goals.

Here is a little diagram explaining the differences between the Customer-Centric and the Product-Centric ones:

The Customer-Centric:The Product-Centric:
You will draw customers to your productYour product will draw customers
Depends mainly on PRDepends mainly on R&D
Departments that work togetherRelatively independent departments

Should SaaS Companies Be Customer-Centric or Product-Centric?

SaaS companies, most of the time, should be customer-centric. The most significant reason for this is how they operate. Since most SaaS companies depend on subscriptions to operate, this requires constant change and adaptation; otherwise, your subscribers could start using other products within the market.

Seasonal trends in most SaaS companies further support this conclusion. Analyzing the pattern changes and planning your product is an important step to achieve a high user retention rate and a low churn rate.

However, that is not to say that the product-centric approach is entirely useless for SaaS businesses. Even if you adhere to the rules of one approach, that does not mean you should completely disregard the benefits of the other approach.

For example, a supporter of the product-centric approach can easily use their status as the forerunner of innovation to increase their brand awareness and loyalty. On the other hand, a proponent of the customer-centric approach could easily use customer feedback to improve their product.

One company can not stand alone by marketing or hope to gain ground and become influential through a product. You need to combine the best aspects of these approaches while eliminating their disadvantages.

Conclusion

In conclusion, I have analyzed customer-centric and product-centric approaches in this article, their advantages, and disadvantages. Although the differences might seem apparent, you will have to gain experience to excel in this topic.

You can learn more about SaaS-related topics by checking out articles written by HockeyStack. If you need more help, you can always reach out to our support team for additional information.

FAQ

What is the main difference between a customer-centric and a product-centric company?

While a customer-centric company aims to analyze the patterns of its users through surveys and reviews, a product-centric company mainly focuses on developing the product it currently has. You can learn more about which approach is best for your SaaS marketing plan by checking out other articles written at HockeyStack.

What are some examples of Customer-Centric companies?

Amazon Prime
Slack
Netflix

Are SaaS companies customer-centric or product-centric?

Saas companies are usually customer-centric and change their products according to their customers’ needs. However, it is not an unseen thing to see a product-centered SaaS company or a combination of both of these methods.