Market orientation is an approach to business where the company focuses more on the behaviors, wants, and needs of customers in its market. A company will first target a niche market to prove a commercial use case. And from there, it will create options to scale.
Aspect
Product Orientation
Market Orientation
Definition
– Product Orientation is a business approach where a company focuses primarily on the quality and features of its products or services. The company believes that producing superior products will lead to customer demand and market success.
– Market Orientation is a business approach that prioritizes understanding and meeting customer needs and preferences. It places customers at the center of decision-making and product development processes.
Primary Focus
– The primary focus of Product Orientation is on the product itself. Companies emphasize product design, innovation, and quality as their main competitive advantage.
– The primary focus of Market Orientation is on customers and their evolving needs. Companies aim to align their products, services, and strategies with customer demands and market trends.
Product Development
– Product Orientation often leads to a “build it, and they will come” mindset. Companies develop products based on their perception of what customers need, with less emphasis on customer input.
– Market Orientation involves extensive customer research and feedback in the product development process. Products are designed and improved based on customer preferences and market insights.
Customer Understanding
– Product Orientation may lack a deep understanding of customer needs since it assumes that superior products will naturally attract customers. Limited customer research is conducted.
– Market Orientation places a strong emphasis on understanding customers through surveys, focus groups, market analysis, and customer feedback. Insights drive product and service decisions.
Competitive Advantage
– Product Orientation believes that product excellence and innovation provide a sustainable competitive advantage. The focus is on outperforming competitors in terms of product features.
– Market Orientation sees a sustainable competitive advantage in aligning with customer preferences. Companies aim to differentiate themselves by offering solutions that precisely meet customer needs.
Marketing Approach
– In Product Orientation, marketing efforts often revolve around highlighting product features, technical specifications, and quality. Product-centric advertising and promotion are common.
– Market Orientation focuses on customer-centric marketing. Messages and campaigns are tailored to address customer pain points, benefits, and solutions, emphasizing how products or services meet those needs.
Sales Approach
– Product Orientation may rely on a “hard sell” approach, where sales efforts emphasize product features and push for sales. It assumes that a compelling product will convince customers.
– Market Orientation adopts a consultative sales approach, seeking to understand customer needs, provide tailored solutions, and build long-term relationships. It emphasizes customer satisfaction and loyalty.
Customer Relationships
– Product Orientation may prioritize transactions over relationships. Customer interactions may be limited to product purchase and use.
– Market Orientation values long-term customer relationships. Companies aim to engage, retain, and delight customers through ongoing communication and support.
Innovation Approach
– Product Orientation tends to focus on internal innovation and R&D efforts to create novel products.
– Market Orientation encourages innovation driven by customer insights and feedback. Companies adapt and evolve based on market trends and changing customer demands.
Risk of Mismatch
– Product Orientation carries a risk of developing products that do not align with actual customer needs or preferences. It may result in market rejection or limited demand.
– Market Orientation aims to minimize the risk of product-market mismatch by continuously seeking customer input and adapting products to evolving market conditions.
Examples
– Examples of Product Orientation include companies that prioritize creating technologically advanced products, such as luxury car manufacturers emphasizing engineering excellence.
– Examples of Market Orientation include companies that conduct extensive market research and tailor their products to meet specific customer segments, such as consumer electronics companies that focus on user experience.
Customer-Centricity
– Product Orientation is often less customer-centric, with product features taking precedence over customer needs.
– Market Orientation places a strong emphasis on customer-centricity, viewing customer satisfaction as a key driver of success.
Market Responsiveness
– Product Orientation may struggle to adapt quickly to changing market conditions or customer preferences since it is less attuned to external factors.
– Market Orientation is highly responsive to market dynamics, aiming to proactively adjust strategies and products based on shifts in customer behavior and competition.
Long-Term Viability
– The long-term viability of Product Orientation can be challenging, especially if products become outdated or if competitors focus on better addressing customer needs.
– Market Orientation is often seen as more sustainable, as it prioritizes customer satisfaction and can adapt to changing market dynamics.
Profit Generation
– Product Orientation can generate profits if products are superior and in demand. However, it relies heavily on product innovation and marketing effectiveness.
– Market Orientation can also generate profits by aligning closely with customer needs and preferences, potentially building a loyal customer base. It emphasizes customer lifetime value.
Customer Feedback
– Product Orientation may undervalue or underutilize customer feedback, leading to missed opportunities for improvement.
– Market Orientation actively seeks and values customer feedback, using it to refine products and services. Feedback loops are integral to continuous improvement.
Market Research
– Product Orientation conducts less extensive market research compared to Market Orientation.
– Market Orientation invests heavily in market research to stay attuned to customer trends, competitive landscapes, and emerging opportunities.
Businesses that favor the product orientation philosophy assume that product quality is a determinant of demand in the market. In other words, they believe customers will purchase a product based on superior quality, performance, or features – regardless of whether the product suits their individual preferences. Therefore, Product orientation is a marketing management philosophy where the promotion of high-quality products is used to generate sales.
Product orientation is an approach to business where the company is focused on developing products and services of the best or highest quality.
This focus is supported by other activities such as research and development or the determination of optimal price points.
Ford’s Model T is an early example of product orientation.
Founder Henry Ford wanted to create a car that was easier to manufacture, inexpensive to repair, and simple to drive for customers who were unaccustomed to cars as a form of transportation.
The Model T also only came in black since it was the quickest drying color.
What is market orientation?
This approach requires the company to constantly evaluate what customers want with the intention to develop long-term relationships with them.
Companies like McDonald’s, Nike, Coca-Cola, and other multinational brands use market orientation to adjust their marketing mix in response to different audiences around the world.
While the product itself is important, these brands also understand that customer purchases are also driven by intangibles such as emotion.
Key differences between product and market orientation
Some of the more obvious differences between product and market orientation are explained in the following sections.
Timeline
Note that most companies before the 1960s used the product orientation approach. During this time, products were relatively scarce and companies found success by manufacturing as many units as possible.
The Ford Motor Company we mentioned above is a classic example of this. With production the more successful strategy, investment in advertising and marketing was considered unnecessary.
Once products started to flood the market, however, customers had more choices and companies were forced to spend money on finding ways to differentiate their products via marketing, advertising, and innovation.
Modern examples of the product orientation approach are rare. Only companies who manufacture premium products with high brand equity or a culture of consistent innovation can pull it off.
Strategy vs. culture
Product orientation tends to be a strategy that companies use to increase the quality of their products and services. This quality is then reiterated to customers and used as a point of market differentiation.
In general, market orientation is a component of a company’s culture. In other words, the company’s customer-centrism extends beyond product development and is embodied by all employees, leaders, and operations.
Focus
Companies that utilize product orientation develop products based on the particular skills or abilities in which they excel.
While product orientation does not ignore the needs of customers per se, those that employ this approach believe that if they make the best product they can, customers will come to them.
Again, market orientation companies develop products based on customer wants and needs.
They actively try to understand the customer and ensure there is demand for the product or service before committing to taking the idea forward.
Developing a market from scratch
Developing a whole new market is one of the most sought-after endeavors for tech business leaders with the ambition to set trends.
A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is valueinnovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.
However, opening up a whole new market requires considerable effort, as there is not yet a well-defined set of customers.
Thus, building distribution, fast execution, and iteration are the key.
Being a first-mover
Being a first-mover in a market can be a good advantage.
In the business world, it is usually believed that the first to market will retain a long-term advantage due to branding recognition, economies of scale, and switching costs. However, business history shows examples of tech companies that took over markets even though they were not first-mover, but the latecomers (see Google and Facebook as reference).
However, being first is not the key in a tech-driven business world.
Indeed, as the market develops and technology starts to get commoditized, it’s critical to be able to dominate a market in order to really take advantage of being a first-mover.
This requires scale.
Being a first-scaler
One thing is to be a first-mover; another is to be a first-scaler.
A first-scaler is a tech player who has not only opened up and developed a market from scratch but also has dominated that market.
This is a core difference to understand.
In fact, later entrants will have valuable lessons learned at the expense of the first mover, which they can take advantage of to build scale quickly.
Thus, to take advantage of the first-mover, a company must also be able to gain a first-scaler advantage.
When to develop a new market vs. taking advantage of an existing market?
Sometimes it makes sense to launch a business in an existing market; other times, when windows of opportunities develop, it’s possible to develop a new market.
Those are two completely different endeavors.
Going after an existing market can be much easier, as a set of defined customers understands what you’re selling.
On the contrary, going after a new market means you’ll have to educate customers first about the product before you can make the first sale.
Of course, there are also advantages of developing a new market; that is, there is no competition.
Whereas in an existing market, you will find yourself competing against many other players.
For that matter, it’s critical to understand the landscape around to build a viable business from the nose.
The type of market will completely change the company’s structure.
Below are some examples of the type of startup you can build depending on the market type.
Case Studies
Examples of Market Orientation:
Startup’s Niche Focus: A health-tech startup initially targets elderly patients to validate the need for telemedicine. After validating the concept, they then expand to a broader age demographic.
McDonald’s: Adjusts its menu in India by offering more vegetarian options, recognizing the country’s dietary preferences and religious beliefs.
Nike: Launches a hijab sportswear line for Muslim women athletes, understanding the cultural needs and expanding its market reach.
Coca-Cola: Introduces green tea-flavored beverages in East Asian markets to cater to local tastes.
Examples of Product Orientation:
Ford’s Model T: Henry Ford’s decision to manufacture the Model T only in black to reduce production time and costs.
Apple’s iPhone: Prioritizing high-quality design and unique features, assuming that customers will want the product because of its superior quality.
Luxury Watch Brands: Companies like Rolex or Patek Philippe focus on the superior craftsmanship and quality of their products, believing customers will purchase based on these factors.
Examples of Timeline Shifts:
Before 1960s: A vacuum cleaner company focuses on producing the most powerful and durable vacuums, assuming households will buy them due to their quality.
After 1960s: The same company starts offering vacuums in various sizes and functionalities, recognizing diverse household needs and preferences.
Examples of Strategy vs. Culture:
Strategy: A tech company emphasizing the superior battery life of its gadgets as a selling point.
Culture: A retail brand like Zara constantly updating its collection based on real-time customer feedback and trends, ensuring all its operations align with customer preferences.
Key takeaways:
Product orientation is an approach to business where the company is focused on developing products and services of the best or highest quality. Market-oriented companies are more focused on the wants and needs of customers in their market.
Companies like McDonald’s, Nike and Coca-Cola employ market orientation to adjust their marketing mix in response to different customers around the world. They understand that purchase decisions are influenced by more than the product itself.
Modern examples of the product orientation approach are rare. They tend to be concentrated in companies that manufacture premium products with high brand equity.
Key Highlights
Market Orientation:
Focuses on understanding and fulfilling customer behaviors, wants, and needs.
Aims to develop long-term relationships with customers.
Involves adjusting marketing strategies based on diverse audience preferences.
Brands like McDonald’s, Nike, and Coca-Cola use market orientation to cater to global audiences and emotional aspects of buying.
Recognizes that intangibles like emotions play a role in customer purchases.
Evolved as the market became more competitive and customers had more choices.
Product Orientation:
Centers around producing high-quality products and services.
Assumes that superior product quality, performance, or features drive demand.
Historical examples include Ford’s Model T, which focused on simplicity and affordability.
Often accompanied by research and development efforts.
Initially successful when products were scarce, but became less effective as markets became saturated.
Premium brands or innovators can still employ product orientation.
Differences between Market and Product Orientation:
Timeline: Product orientation was prominent before the 1960s; market orientation emerged as markets became more competitive.
Strategy vs. Culture: Product orientation is often a strategic approach, while market orientation is a cultural aspect embraced throughout a company.
Focus: Product orientation prioritizes a company’s strengths in creating the best products; market orientation focuses on customer preferences.
Developing a Market: Companies pursuing market orientation may need to educate customers about their product, while product orientation assumes customers will come for quality.
First-Mover vs. First-Scaler: Being the first mover can provide advantages, but being a first-scaler, dominating the market, is even more advantageous.
Developing New Markets vs. Existing Markets:
Existing Market: Easier due to defined customer understanding; competition may be high.
New Market: Requires educating customers about the product; offers opportunities without competition.
Business Landscape: The type of market determines business structure and strategy.
Blue Ocean Strategy:
Involves creating uncontested markets by redefining market boundaries.
Emphasizes valueinnovation, offering greater value at lower costs.
Requires effort in distribution, execution, and iteration for success.
Advantages of First-Mover and First-Scaler:
Being a first-mover provides branding recognition, economies of scale, and switching costs.
Being a first-scaler involves dominating a market and leveraging lessons from first-movers.
Key Takeaways:
Market orientation focuses on understanding and catering to customer preferences.
A total addressable market or TAM is the available market for a product or service. That is a metric usually leveraged by startups to understand the business potential of an industry. Typically, a large addressable market is appealing to venture capitalists willing to back startups with extensive growth potential.
A microniche is a subset of potential customers within a niche. In the era of dominating digital super-platforms, identifying a microniche can kick off the strategy of digital businesses to prevent competition against large platforms. As the microniche becomes a niche, then a market, scale becomes an option.
In simple terms, market validation is the process of showing a concept to a prospective buyer and collecting feedback to determine whether it is worth persisting with. To that end, market validation requires the business to conduct multiple customer interviews before it has made a significant investment of time or money. A transitional business model is an example of market validation that helps the company secure the needed capital while having a market reality check. It helps shape the long-term vision and a scalable business model.
Market orientation is an approach to business where the company focuses more on the behaviors, wants, and needs of customers in its market. A company will first target a niche market to prove a commercial use case. And from there, it will create options to scale.
In a tech-driven business world, companies can move toward market expansion by creating options to scale via niches. Thus leveraging transitional business models to scale further and take advantage of non-linear competition, where today’s niches become tomorrow’s legacy players.
Digital and tech business models can be classified according to four levels of transformation into digitally-enabled, digitally-enhanced, tech or platform business models, and business platforms/ecosystems.
A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.
Business scaling is the process of transformation of a business as the product is validated by wider and wider market segments. Business scaling is about creating traction for a product that fits a small market segment. As the product is validated it becomes critical to build a viable business model. And as the product is offered at wider and wider market segments, it’s important to align product, business model, and organizational design, to enable wider and wider scale.
Developing a successful business strategy is about finding the proper niche, where to launch an initial version of your product to create a feedback loop and improve fast while making sure not to run out of money. And from there create options to scale to adjacent niches.
Product development, known as the new product development process comprises a set of steps that go from idea generation to post-launch review, which help companies analyze the various aspects of launching new products and bringing them to market. It comprises idea generation, screening, testing; business case analysis, product development, test marketing, commercialization, and post-launch review.
In the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful business product portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.
You can use the Ansoff Matrix as a strategic framework to understand what growthstrategy is more suited based on the market context. Developed by mathematician and business manager Igor Ansoff, it assumes a growthstrategy can be derived by whether the market is new or existing, and the product is new or existing.
The term “user experience” was coined by researcher Dr. Donald Norman who said that “no product is an island. A product is more than the product. It is a cohesive, integrated set of experiences. Think through all of the stages of a product or service – from initial intentions through final reflections, from first usage to help, service, and maintenance. Make them all work together seamlessly.” User experience design is a process that design teams use to create products that are useful and relevant to consumers.
A cost-benefit analysis is a process a business can use to analyze decisions according to the costs associated with making that decision. For a cost analysis to be effective it’s important to articulate the project in the simplest terms possible, identify the costs, determine the benefits of project implementation, assess the alternatives.
Empathy mapping is a visual representation of knowledge regarding user behavior and attitudes. An empathy map can be built by defining the scope, purpose to gain user insights, and for each action, add a sticky note, summarize the findings. Expand the plan and revise.
Perceptual mapping is the visual representation of consumer perceptions of brands, products, services, and organizations as a whole. Indeed, perceptual mapping asks consumers to place competing products relative to one another on a graph to assess how they perform with respect to each other in terms of perception.
Value stream mapping uses flowcharts to analyze and then improve on the delivery of products and services. Value stream mapping (VSM) is based on the concept of value streams – which are a series of sequential steps that explain how a product or service is delivered to consumers.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
