What is customer-centricity?
The concept of “customer-centricity” first became a topic of discussion in the business world in the 1950s. In his book “The Practice of Management”, Peter Drucker said, “It is the customer who determines what a business is, what it produces, and whether it will prosper”. However, it wasn’t until the 1990s that the idea really became popular.
A customer-centric company, as the term suggests, is focused on providing a great experience for their customers. Organizations with this orientation are very tuned in to their customers ’ needs, opinions, and desires, and are ready and willing to make changes based on what they hear.
What is product-centricity?
This stands in contrast to a more traditional model, product-centricity, in which the organization is focused on creating and shipping the “best product” possible above all else.
One clarification: the terms product-centric and product-led do not mean the same thing. According to Michael Scully of The Product Brief, “Product versus customer-centricity is about the way a firm recognizes and measures value, whereas being product-led versus sales-led (or service-led or engineering-led) is about the way a firm makes decisions with that information. The best product-led organizations are customer-centric.”
Customer- and product-centricity in the hospitality industry
Although the term “product” is typically associated with companies that sell a physical good or software, these concepts of customer- and product-centricity can easily be applied to hotels. In this industry, the hotels themselves, along with the facilities and curated experiences they offer, are the products being offered to guests.
While product-centricity usually comes from a place of good intention, it often results in a hotel or group that’s out of touch with its customers. With this in mind, it’s important for hoteliers and their teams to understand the approach their organization is taking. We’ve included three examples below to illustrate some common characteristics of product-centric hotels to help you spot this mindset in your current context.
What are some common characteristics of product-centric hotels?
Characteristic 1: Too focused on the competition
A mid-sized hotel in a popular beach town has a reputation for being a quiet retreat amongst other more lively accommodations. The town has a reputation for its active nightlife scene and rowdy beach parties, making it popular with college students and young adults. However, it’s also located near a wildlife reserve, making it a great destination for nature enthusiasts and bird watchers. While many of the other properties in the area cater to young travelers, offering cheap cocktails and enhanced beach cabanas, the hotel in our example has long focused on the second demographic. This group, made up mostly of older couples, often takes advantage of the hotel’s convenient shuttle to and from the reserve. Many of them also eat at the hotel’s restaurant each night, which serves fresh, healthy meals with ingredients sourced from local farms.
When a new general manager takes over the hotel, he notices that they’re one of the only hotels in town without a poolside bar. During his first all-staff meeting, he announces that they’ll be expanding their main pool to include a massive bar and restaurant in order to “remain competitive”, and that certain changes will be made to maintain profit margins. In practice, this means cutting things like the complimentary reserve shuttles and purchasing food from cheaper sources.
These changes are not well-received, especially by guests who have visited this location multiple times. Though some enjoy the new pool additions, their experience generally proves to be less convenient and enjoyable overall.
While the general manager may have believed that he was increasing the value of his hotel by adding this new amenity, he failed to consider that his guests might perceive value differently. His focus on the competition prevented him from considering their perspective. This is one of the pitfalls of a product-centric approach.
Characteristic 2: Valuing internal opinion over guest feedback
A rustic hotel in a remote location is known for giving guests a chance to “unplug,” spend time in nature and connect with loved ones in real life. The hotel has been in operation for 50 years, and its operations haven’t changed much during that time. In fact, the hotel doesn’t even have a website. Guests typically hear about the place from family or friends, or they read about it in online forums.
Recently, their bookings have started to fall. On the paper feedback form that they leave in each guest's room on the day of check-out, several guests have shared that they’d like to be able to book stays online. Others mentioned that not having any Wi-Fi or cell service at all felt a little disconcerting. All-in-all, 70% of guests have left feedback that they’d like to see technological upgrades to the hotel before their next stay.
Despite these requests, the owners decided not to make any changes. They’re proud of the “unplugged” environment they’ve created at their hotel and decide to focus their attention on improving their signature family excursions, like horseback riding and rock climbing.
In this situation, the hoteliers decided that maintaining the consistency of their brand’s identity was more important than providing their guests with what they wanted. They chose to create what appeared to be the best possible product from their perspective. This is a common characteristic of product-centered hotels.
Characteristic 3: Underutilizing customer data
A global hotel group with properties in six countries typically focuses on the business travel demographic. Their workspaces and conference rooms are highly utilized, and first-time bookings are on the rise.
Unfortunately, the same can’t be said for returning guests. In fact, this hotel group is seeing a decline in the number of guests that return for a second stay at one of their properties. Their sales, marketing, and operations teams all track guest data, but in separate databases (along with a handful of Excel spreadsheets). This has given each team the ability to choose software that works best for their use case, empowering them to work efficiently. However, it also means that data are not being shared amongst the three groups, and critical insights are being lost.
For example: In one particular location, several guests traveling for work have mentioned to front desk staff that they’d like to return with a partner, or with their whole family. They often say that there are many attractions they didn’t have the chance to experience because of their business commitments. The front desk staff usually make a note of this in the guest’s file. However, this information is never shared with marketing, so they miss a critical opportunity to send relevant promotional materials to those guests.
This hotel group, whether intentionally or not, decided to prioritize the preferences of each team within their organization over drawing insights from customer data. This internal focus, rather than an external-facing perspective, is typical of a product-centric orientation.
Each of the hotels in the above scenarios has one thing in common; they’re product-centric, rather than customer-centric. They don’t value the customer’s perspective above all else. Instead, they use competitor data, leadership opinions, or internal preferences as the primary information that guides their decision-making. Though not always, this often results in a team, hotel, or group that is out of touch with what their customers actually want.
If you suspect that your organization has some product-centric tendencies, don't worry! It’s always possible to introduce more customer-centric practices and processes. Stay tuned for parts two and three of this series to learn how to center around your customers, and how customer-centricity can benefit your organization.