Sunday, 6 April 2014

Does Product-Centricity conflict with Customer-Centricity?

I have noted that the (right) emphasis on customer-centricity is drawing attention away from the other fundamental constituent of most businesses: the product! This should not be the case.
I had an engaging conversation with an industrial designer yesterday. It is amazing how much of their work is focused on customer expectations and product design to match those expectations. Retailers should learn a lesson here in a multi-disciplinary approach to break down silos, extend their market share and their share of customer. In her words:

Product Centricity is your strategy to design, manufacture, distribute to people who needs your product. Customer Centricity is your strategy to satisfy individual customers by meeting as many of his/her needs as possible.

End quote. This point has been greatly exemplified by Don Peppers, founder of Peppers&Rogers Group. Here is his take:

[It] should be clear that customer centricity doesn’t actually conflict with product centricity, because they aren't opposite in direction but orthogonal, so they have little or no effect on each other. That is, the strategies and tactics you follow to be more product centric will have little effect on your share of customer, while customer-centric strategies will have little effect on your market share.

End quote. This is the diagram he is referring to:

I strongly believe in this distinction which has, in my opinion, important repercussions on how companies design their digital strategy…but this is a subject for a different post.

Long Tail
How company extend their customer base? Obviously by selling more products which implies two things: 1) increasing the supplier base, and consequently 2) increasing the number of product assortments across all customer’s interaction points (this relation can be read backwards as well). I am here interested in the efforts to create deep assortments of products without the limitation of traditional retailers which are very much focused on their merchandising mix on high volume product with mass appeal. This is the idea behind the long tail concept, which was developed and popularised by Chris Anderson in 2006. Amazon and Netflix exemplify the long tail business model, profiting from the use or purchase of a deep catalogue of products instead of focusing on best sellers.

However, the challenge faced by many retailers to actually manage these catalogues, is the reason of the slow adoption of this model. More accurately, larger product catalogues may make it difficult for customers to search, and product information has to be maintained by the company, so there is additional overhead as the product catalogue grows. 

If you know me or have been following my blog, I am sure you know the answer J. Yes, our PIM hero is here to help! But I will expand on that in an upcoming post.

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Kate Koltunova said...
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Kate Koltunova said...

I think that a catalogue problem is not №1 in long tail strategy implementation. Logistic, supplier relations, planning, internal management, etc. - big assortment means a lot of work and set requirments to your infrastructure. Retailer should scale to manage it.

Michele Arpaia said...

Thank you Kate...that's absolutely correct in fact what I meant is that the catalog management is just one element to implement a successful long-tail strategy. Please stay if the upcoming post will address this topic in more details.

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