What Is Customer-Centered New Product Development, and Why Does It Matter?
You arrive at your hotel after a six-hour flight, exhausted and ready for bed. But an aloof front desk associate says there’s a 15-minute wait for the only working elevator—or you can take the stairs to your seventh-floor room. When you finally lug your bags up six flights of stairs, your key doesn’t work.
Now imagine—instead, a friendly clerk takes your luggage and lets you know they only have one working elevator at the moment. The clerk sincerely apologizes for the inconvenience, but offers to deliver your bags to your room and offers you a free dinner at the hotel restaurant. When you unlock your door easily with the hotel’s app, you’re welcomed with a handwritten note, complimentary snacks, and a bottle of water on the desk. Your luggage arrives an hour later.
The same central problem exists in both scenarios. The difference lies in the details of the customer experience (CX)—and that’s true whether you’re running a hotel or a SaaS product team. And how you respond to customer feedback, whether it’s product- or service-based, is what will set your company apart from your competition.
According to Zendesk’s CX Trends 2022 report, 61% of customers say they would switch to a competitor following just one poor customer service experience with a company. However, 74% say they would forgive a company for its mistake if they otherwise receive excellent service.
Your customers want to know your business prioritizes not only their needs but also their interests and their investments in your products—and customer centricity encompasses both. If your company isn’t yet focusing on customer centricity—and further, customer-centered new product development—it’s time to rethink your strategy.
What Is Customer Centricity?
Defined literally, one may say customer centricity means putting customers at the center of decisions. And while that definition is a good starting point to broadly explain customer centricity, there’s a bit more to it than simply listening to your customers. That’s because customer centricity is an organizational mindset that’s woven throughout the fibers of every part of an organization, not just customer-facing teams like support, success, and sales.
In this article, we address customer centricity—and some of its nuances—through a lens of product development, but it’s worth noting that many parts of our definition are applicable to the broader organization’s contribution to this mindset.
What Is Customer-centered New Product Development?
At UserVoice, our product development process is customer-centric, as well.
“Customer-centric product development is an approach to building and improving products that places customer truths at the core of new development. Embracing this approach means every new feature and functionality released can be traced back to a real customer problem.”
This approach places emphasis on gathering, tracking, and acting on customer feedback with the end goal of developing products customers truly love and get value from.
Examples of Customer Centricity in Product Development
It doesn’t take long for customers and other businesses to figure out if an organization has (or lacks) customer-centric values. The same brands that make great customer centricity examples also tend to be the ones with loyal customers and the most innovative products.
Netflix Crushes Streaming Customization
The name of the customer-centricity game for modern businesses is personalization. Netflix recommends TV series and movies based on user profiles and the ratings these users have assigned to programs within their platform. Netflix gives the user the power to provide direct feedback about their preferences—which means users receive specifically tailored viewing recommendations.
Bottom line: Netflix uses customer “feedback”—first-party data—to inform its product decisions. The streaming giant is able to make these recommendations because it puts its customers first and considers user experience data to do it.
With Netflix, each user has a custom experience that is focused on them—not a buyer persona or ideal customer profile (ICP).
Nordstrom Dominates Retail With AI
Luxury retail brand Nordstrom has launched the Nordstrom Analytical Platform (NAP) to enhance service and improve product discovery. The company uses AI to suggest products for its shoppers. It’s an alternative method to market research and keyword searches for connecting with its audience—and it’s much more personalized. Customers receive AI-powered suggestions and can accept them (or not), which makes the software learn user preferences better and more quickly.
Stitch Fix Tries Big Data on for Size
Stitch Fix seems to be a brand that truly practices what it preaches with its human-centered styling technology. The company sends each new member of its customer base a personalized “style quiz” to discover the user’s brand, fit, and color preferences, budget, and willingness to wear something “out of their comfort zone.” Stitch Fix then uses AI algorithms along with its human stylists to gain a competitive advantage and create client recommendations for clothing, shoes, and accessories.
These two sources of “intelligence” help data scientists collect and analyze as much data as possible, and all client responses (especially “rejections” of shipped garments) are considered and incorporated into their styling algorithms carefully. Not only are Stitch Fix’s physical products centered on the customer experience, but its algorithm becomes “smarter” over time, as well.
Because of the success of Stitch Fix’s customer-centric product and its data-driven style matches, the company increased its client base and now serves more than four million customers.
What Is the Impact of Customer Centricity on Product Development?
Let’s start with the obvious: a customer-centric approach helps product teams create products customers love. Putting genuine, articulated customer problems at the core of product development not only ensures customers’ evolving needs are met, but also helps product organizations reduce the risk of building the wrong thing. It’s win-win.
Another big benefit: an improved customer experience. In today’s increasingly competitive landscape, consumers have the luxury of choice when it comes to the brands they choose to do business with. Giving customers a voice in product development and committing to listening to that voice and communicating back to them about outcomes is one way brands can differentiate themselves.
Organizations that leverage customer-centric development to help them create great ideas, product prototypes, and memorable customer experiences may see measurable impacts such as:
- Increased customer satisfaction and Net Promoter Scores (NPS)
- Improved customer loyalty and retention metrics (such as churn)
- Increased customer lifetime value (CLV)
However, one of the most significant positive impacts is a little less concrete at first glance: Customer-centric product development can help turn average customers into passionate product evangelists. Start tracking the business that comes in through referrals, and you’ll see.
Customer-centric vs. Product-centric
People often wonder how a customer-centric approach differs from a product-centric approach (also known as a product-led approach). Turns out—the two are not as different as many believe. They actually go hand in hand.
Bruce McCarthy, product management expert, author, and founder of Product Culture, says customer centricity is one of three key pillars of a product-centric or product-led approach.
“Being product-led incorporates customer wants and needs into a broader perspective of what’s good for the company strategically,” he explains. Being product-led requires McCarthy’s team to look at things through a wider lens and ask themselves:
- “Where is there viable business for us?”
- “What is technically feasible and defensible?”
- “What can we build that would be unique and differentiated, as well as desirable for the customer?”
“Those are kind of the three Venn diagram bubbles that people draw in product, and being customer-centric is one, but being product-centric is all three.”
So, according to that definition, customer centricity and product centricity (also called being “product-led”) are not mutually exclusive, but rather complementary to one another and mutually supporting.
Characteristics of a Customer-Centric Product
Product management organizations don’t magically become customer-centric overnight—the mindset and approach require several core competencies to be properly put into place. Talking to customers is a good start, but product organizations need more than a regular cadence for customer research to experience the full benefits of a customer-centric approach.
The entire company—but especially the product team—needs to capture and share feedback so they can focus on customers and remain accountable to them. Most importantly, the product team has to see beyond the problem at hand to understand the customer’s needs when engaging in idea generation.
Mechanisms for Capturing and Tracking Customer Feedback
Committing to being customer-centric means committing to getting a representative view of all target customer segments, not the perspective of a vocal minority. Product development teams without a scalable system in place for capturing and tracking feedback from various sources may struggle to get a holistic understanding of customer needs.
Not only do organizations need a mechanism for capturing and tracking the various types of feedback they receive, but they also require an understanding of when and how to use this feedback. For example, when to use quantitative vs. qualitative data and how to bring both together in a meaningful way.
Ability to Focus on Target Customers
In addition to a scalable way to capture customer feedback data, product teams need to be adept at segmenting their data. A common pitfall in this approach is looking broadly at all feedback and forgetting that not every customer segment has an equal business or strategic value. Instead, customer-centric product teams know which segments represent the most value and focus first on serving the needs of those segments.
Accountability and Ability to Close the Loop
If customers who share feedback are consistently left in the dark about what’s been done with that feedback, they may begin to feel a lack of respect. Operating under false pretenses of “thank you for your feedback; we’ll act on it soon” can evoke similar feelings. So, in order for this approach to work, product development teams must commit to not only following up on feedback with updates but also letting customers know (nicely) when their ideas are simply not a good fit.
Acute “Problem Vision”
Finally, with a seemingly endless list of requests to fulfill, product development teams must be proficient at seeing beyond requests to the underlying problems. As Bruce McCarthy points out, “Often there’s a much shorter list of problems to solve than there are requests to fulfill.” Getting to the root problem often means digging deeper into requests by asking the right questions, and that requires its own unique set of skills. After understanding the underlying customer problem, customer-centric product teams can look at their lists of articulated customer problems through the lenses of product vision and objectives and further filter them down.
Organization-wide Access to Customer Truths
Since customer centricity is a company-wide mindset driven largely by customer truths, it’s important that the full organization has access to said truths. Customer-centric product organizations make concerted efforts to spread customer stories and feedback to other departments and to grant individuals across the organization access to key pieces of context that may enable them to be more customer-centric in their own approaches.
Conclusion: Why Is Customer Centricity Important to Product Development?
There’s an element of mutual respect and relationship-building involved in customer centricity—it’s less frequently discussed but of the utmost importance. Customer-centric organizations strive to co-create with customers by encouraging and empowering them to share their honest feedback.
When giving customers this metaphorical seat at the table, organizations commit not only to taking user feedback into consideration but also to following up with honest answers about what actions the feedback has prompted (even if leadership decides not to act on a piece of feedback). This creates a mutually beneficial partnership between customers and product development organizations, which is a key differentiator between simply listening to customers and being truly customer-centric.
Ready to make a customer-centric overhaul of your business? Contact UserVoice for a free trial to find out how we can upgrade your CX.