Product-centric vs user-centric: Which is better for SaaS?

Product-centric and user-centric design approaches are fundamentally different

Scrum methodology, business process optimisation, young black female character pointing at the diagram and explaining how it worksB2B and B2C SaaS companies can choose between a product-centric and user-centric approach. So which one is better?

In this article, we’ll explain the differences between a product-centric approach and a user-centric one. We’ll also explain the pros and cons of each one.

Customer centric vs user centric

Let’s first clear up the difference between the terms “customer-centric” and “user-centric.”

The two words “customer centric” and “user centric” tend to be used synonymously, but they are not the same. A “customer” is defined as the purchaser, whereas a “user” is the person who actually uses the product.

In a B2C context, the two roles may actually be the same person. But in B2B contexts, this is often not the case.

Because a B2B SaaS customer may not be the same as the B2B SaaS user, this can cause tension. The customer who buys this software may have budget authority but not use the purchased software.The customer may purchase the product because it provides the functionality needed for business. However, they may not know how difficult or confusing this product might be.

In contrast, users of the product will have first-hand experience of a product’s usability — whether good or bad. And a product with poor usability can cause frustration and issues with productivity.

It’s important to think “user-centric” for both B2C and B2B SaaS products, because improvement directly impacts the end-user experience.

Product centric vs user centric: What’s the difference?

A product-centric approach is where organizations focus on building and bringing products to the market with the product and innovation in mind. In this approach, organizations continually push the envelope to build new solutions that the market may not even realize it needs.

On the contrary, a user-centric approach is where organizations focus primarily on the users and providing them a positive experience through research and identifying their needs. This approach builds on customer loyalty by solving existing problems.

Strategy, goal and success

A product-centric approach relies on selling the product’s core features and functionality. Its end goal is to create the best product, and success is measured by how well it sells. Through this strategy of providing new, appealing or innovative products, organizations aim to reach as many customers/users as possible. The needs of the users may be considered, but don’t come first.

On the other hand, a user-centric approach focuses on keeping users satisfied. It eases the pain points users face while using the product. A user-centric approach aims to keep a long-term relationship with users and customers, which would lead them to a long-term success of the product. Success is measured by how good the user experience is and less focused on how the product’s logistical features compare in the market.

Focal points and investments

Organizations that take a product-centric approach invest far more in advanced research and development, because they are focused on creating an edge through innovation. Typically, organizations taking this approach will focus heavily on developing advanced versions of an existing product or adding new product lines.

Because a user-centric approach prioritizes user delight and value over immediate profits, organizations using this approach invest in customer/user research and analysis to correctly understand their needs. By enhancing the overall experience, they aim to create a loyal fanbase, which can lead to referrals, renewals, and higher upsell rates.

Pros and cons of the product-centric approach

Pros of a product-centric approach

Focus on creating the best

Organizations focus on building the best-in-class product and features in their niche. Because they focus on their resources, they create more innovative and quality products.

High brand reputation

When organizations create best-in-class products in their niche, they can create a powerful brand positioning and reputation.

Loyal customers/users

Customers/users will be loyal through additions in their products, and they may never leave the brand. A great example of this would be Apple, which introduces new products frequently. Their attractive, robust products create a loyal fanbase simply because they are best-in-class.

Cons of a product-centric approach

Bad product-market fit

Because an organization will not have the customer/user in mind at any stages, it may result in a bad product market fit. This can come from first of all the lack of customer/user research, underestimating or overestimating their needs, or disregarding any of their needs.

High risk

Rewards are high for taking this approach, but the risk is also just as high. In fact, the risks may actually be higher in the long run. A bad product-market fit can lead to business failure, because product-centric organizations have a higher chance of losing to competitors over time.

Additionally, competitors may catch up to you or even imitate the product, which can sabotage a company’s efforts. Product-centric organizations must constantly innovate and produce something new in order to keep current customers/users and gain new ones along the way.

Hard to reach to new customers/users

Because a product-centric approach forces organizations to continuously innovate, their products may be difficult for new prospective customers/users. It would take time and effort to educate and convince that your product is better than your competitors, as compared to early adopters of your product. Product-centric companies must spend money, time and effort on marketing in order to appeal to users.

Pros and cons of the user-centric approach

Pros of a user-centric approach

High user sentiment and satisfaction

By prioritizing user needs, organizations that take the user-centric approach have a better relationship with their customers/users. These relationships shape positive sentiments that may last a long time. Understanding, valuing, and improving user pain points make them feel valued, which increases brand trust and overall satisfaction.

More sustainable

User centricity is a long-term approach, where you don’t just launch a product and forget about it. It’s more sustainable as companies grow and evolve their product according to their users’ needs. This helps the product remain relevant.

Increased customer retention

High user satisfaction and sustainability not only lead to an increase in customer retention, but also to lower churn rates and increased customer lifetime value. Happy users return again and again.

Developmental process is fluid

Believe it or not, a user-centric approach helps organizations catch issues earlier and prevent wasting time, effort and money. (“Why you shouldn’t cut the UX budget”)

Because this approach takes steps according to the existing demand, the possibility of it failing to attract demand is lower. Development processes can be planned out and tailor-made for the organizations’ user base.

Cons of a user-centric approach

Time and cost intensive

One of the main drawbacks to a user-centric approach is that up-front research may be costly both in terms of time and money. Adequate research takes time and may delay a product or features’ launch, even if you integrate marketing automation tools for analytics.

Product quality might suffer

With the user in the center of this approach, the product may be slow to release fixes and lose its quality within the market. Organizations will have to find the right balance between user expectations and product development.

Longer time to build brand reputation

Due to the nature of this approach, users may find you less authoritative in your marketplace when you are not releasing new products or features. Reputation comes from referrals and reviews from current users, so growth can be gradual. Organizations should still focus on product development if they wish to stay more relevant in their marketplace.

Which approach is better for SaaS companies?

Deciding whether you should pick the product-centric approach or the user-centric approach highly depends on the size of the company, market, sector, and brand.

We highly recommend the user-centric approach for SaaS companies. SaaS businesses require constant changes, one-to-one user relations (subscriptions), and brand awareness.

Because most SaaS companies use a subscription model, constant improvements and adaptations will keep your users satisfied and prevent them from jumping to a competitor. Brand recognition and referrals aid in long-term success of the product and company and is more profitable in the long-run.

Results may appear fast for product-centric approaches; however, the approach falls short in places where the product requires constant changes, one-to-one user relations, and brand awareness. Organizations should manage a balance between focusing on user needs and product developments. Departments should work closely with one another and consider what features or improvements need to be prioritized.