Product Manager Dilemma: Customer Impact VS Business Impact
We can’t serve customers without a sustainable business and we cant sustain business without customers.
As per one of Amazon’s leadership principles, Customer Obsession:
“Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers.”
However, I’ve realized that these principles don’t always apply universally.
For organizations that are not mature — particularly startups and growing companies — the balance between prioritizing customer impact and business impact is far more complex.
Focusing solely on customers without a strong and sustainable business model can lead to serious challenges and even failure for companies
1. Friendster (2002–2011)
Focus: Enhancing user experience for social networking.
Why It Failed:
Friendster invested heavily in creating a delightful user experience and driving engagement. However, it failed to monetize its user base effectively and neglected its technical infrastructure. These issues led to poor performance, customer migration to competitors like Facebook, and an unsustainable business model.
Source: https://www.failory.com/cemetery/friendster
2. Quibi (2020–2021)
Focus: Premium short-form video content for mobile users.
Why It Failed:
Quibi aimed to deliver high-quality, mobile-first video content, heavily investing in customer experience. However, it underestimated critical business factors like its target audience’s willingness to pay and the competition from free platforms like YouTube and TikTok. Despite $1.75 billion in funding, Quibi couldn’t generate enough revenue and shut down in just a year.
Source: https://www.theguardian.com/tv-and-radio/2020/jun/28/quibi-netflix-jeffrey-katzenberg-crash
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As a product manager, I’ve worked across various company types, including B2B and B2C, at different stages of growth — ranging from startups to mature organizations — and with varying levels of business model maturity.
In B2C environments, customer impact often takes priority, serving as the north star .
In B2B environments, companies often prioritize initiatives that directly impact revenue. As it helps to achieve short-term gain of revenue increment .
Consider these two real-life scenarios, which, like many of you, I’ve had to navigate: we have two requests in the backlog and need to prioritize one.
1. Revenue-Driven Feature: A single client requests a feature and is willing to pay for it or request from sales team to close a deal
2. Customer-Centric Feature: A feature could benefit 50–60% of your customer base but doesn’t directly contribute to revenue.
Don’t get me wrong — sometimes a revenue-driven feature can also be a customer-centric feature. When that happens then its a no brainer and life is simple, as THIS IS THE WAY!
But that's not always the case. Most of the times balancing customer and business impact isn’t black-and-white. To navigate this dilemma, I evaluate multiple factors:
- Revenue Addition vs. customer Retention
- Does the feature create new revenue streams or help retain existing customer?
If one feature is for just one client and another impacts many customers, retention may outweigh revenue addition.
But only if PM life is that simple
2. Revenue Contribution Analysis
- What percentage of revenue does the requesting client contribute?
- How does this compare to the potential value for other customers?
If a request comes from a client who is willing to pay and is also one of the top 3 revenue contributors, it may take priority, especially if the customer relationship is not healthy
3. Customer’s Retention Rate VS EBITDA
But then what about company's overall metric retention and churn rate?
— Are retention rates low?
High-impact features that drive satisfaction and loyalty should be prioritized.
Or when company is far behind in reaching the revenue target and it has a huge impact on the company’s stability then
Features that drive revenue should be prioritised
💡The decision-making process is rarely clear-cut. Here are a few strategies I’ve found helpful:
1. Monitor Customer Health: Continuously assess customer satisfaction and churn risk to prioritize high-impact features proactively.
2. Stakeholder Alignment: Communicate trade-offs clearly with stakeholders to ensure alignment and avoid surprises.
3. Iterative Delivery: Launch scaled-down versions of features to address immediate revenue needs while working toward broader customer benefits.
It’s important to ensure you’re not spending disproportionate time on prioritization. If you’re mired in analysis, step back and ask:
- Does this reflect a broader strategic misalignment?
- Are you balancing customer priorities with market opportunities effectively?
- Do we need to revisit the business model and align the decision-making process with organizational goals?
The process may never be perfect, but clear communication and risk mitigation can help navigate these complex decisions.
How do you approach this dilemma? What strategies or frameworks guide your decision-making?
If you have any thoughts or would like to chat over a coffee, I’d be glad to connect!
Email : nidasaleem333@gmail.com
