A new definition of customer for product managers
I teach a case study on Pandora at Stanford. The question that trips students up the most? A seemingly simple one: “who’s Pandora’s customer?” At Pandora, it could be listeners, advertisers, or music labels. At Havenly, it could be design clients, designers, or vendors. The concept of “customer” as a single entity has become an outmoded, and restrictive, way of thinking. It’s better for product managers to think of customers as relationships — not human beings with pocketbooks in search of a specific service.
For the past few years, I’ve joined the Strategies of Effective Product Management class at Stanford’s Graduate School of Business, where I help teach a case study on Pandora. The question that trips students and product managers up the most? A seemingly simple one: “who’s Pandora’s customer?”
If you look up the definition of “customer,” you’ll read something along the lines of “one that purchases a commodity or service.” If you take this definition at face value and apply it to Pandora, the answer to the deceptively simple question above would be advertisers: the hundreds of companies who purchase the service of reaching tens of millions of pairs of ears with their messages each year. (It’s worth noting that Pandora offers paid subscriptions to listeners, but it’s a smaller fraction of its total revenue. So, for the sake of simplicity, I’m focusing on Pandora’s ad-supported business here.)
When we describe the concept of purchasing something, we tend to use a narrow definition of currency: money. There’s good reason for it; generally, companies can’t stay afloat without dollars in the bank. I’d argue, though, that we as product managers should build our products alongside a broader notion of currency, one that encompasses the web of moments where value — monetary and otherwise — is exchanged in and outside of our product.
Here’s what the “web of value” looks like for two companies I’ve worked for: Pandora and Havenly.
For Pandora, listeners provide advertisers with the value of their millions of pairs of ears — the ones that are receiving the messages those advertisers are paying Pandora to deliver. Music labels provide Pandora with the value of rights to the songs in their catalogs; those songs keep the millions of pairs of ears coming back to the platform. Pandora, in turn, pays music labels for those rights.
For Havenly, design clients pay Havenly for an interior design from an interior designer. Havenly provides these interior designers with the value of a platform that allows them to create beautiful room designs at scale. Home furnishing vendors provide Havenly with the value of access to their products at competitive prices. Havenly provides those vendors with the value of new customers that they may not have otherwise reached.
Imagine what these products would look like if product managers only invested in building great experiences for end users with money to spend. Pandora would have great ad-serving capabilities, but no one actually listening. Havenly’s checkout experience would be flawless, but each client’s design would be eerily devoid of furnishings.
So while the dictionary may emphasize dollars changing hands in its definition of a customer, product managers need something bigger. Imagine your customers not as individual people with dollars to spend on a finite service, but as a series of relationships in need of a finely tuned web. How will you build that web?