Focus on your market for long term success
Aug 6th, 2008 | By Emmett Dulaney | Category: Entrepreneur
Does your business have a market orientation? Or do you focus more on sales and production? Hundreds of books stress the importance a market orientation as the key to long term success. Even the early writings of management guru Peter Drucker reveal these words of wisdom: “True marketing starts out… with the customer, his demographics, his realities, his needs, his values.” The message is clear. Still, many entrepreneurs adopt other strategies for their firms – production or sales philosophies. Why? I think it reflects the weighting entrepreneurs often place on short-term results as opposed to the long-term.
To be market oriented, a firm must focus on the target market, customer needs, integrated marketing and profitability. It is crucial to acquire market information and use it to develop products, promote, price, and distribute. Studies associate proper market orientation with higher employee satisfaction, price premiums, higher profitability and long-term success. This table charts some of the differences between a Market Oriented firm and one embracing the Product Concept:
|
|
MARKET ORIENTED FIRM |
PRODUCT CONCEPT FIRM |
|
Focus |
On the customer and maintaining a profitable relationship. |
Producing superior products & quality. |
|
Competitive advantage |
Knowing the customer’s wants and needs |
Achieving functional excellence |
|
Product development |
Based on research and changing market demands |
Based on engineering possibilities |
|
Employee pay |
Above industry average – the firm sees the employee as an asset |
At or below industry average –The employee is not as important as the product |
|
Advertising / Promotion |
Appealing to the customer’s wants and showing how the product can satisfy them. Focusing on pull strategies. |
Focused on explaining the differences in the product, marketing to distributors and employing push strategies |
|
Customer service |
Readily available and touted as a benefit. |
Not as visible and viewed as a secondary function, beneath sales |
|
Culture |
Externally oriented – working with customers, channels, and partners |
Internally oriented |
|
Pricing |
Able to charge a price premium and earn an economic profit |
Earning an accounting profit, but not an economic profit |
|
Revenue |
Constantly evaluating long-term growth |
Focusing on short-term results |
|
|
Implementing a market orientation requires the creation of values, norms and behaviors that emanate from the top level of management throughout the organization. Because the investment is so intensive and may not show immediate financial results, many entrepreneurs may choose to forgo market orientation and focus their firms on the short-run in which the transaction is valued more than the relationship.
Shifting from a focus on sales to a focus on profit is in the best interest of most firms in the long run, but by the time the entrepreneur realizes that, it is quite possible that sales and marketing interests within the company have diverged to an extreme. The best solution is to undertake a cost-benefit analysis and measure the impact of each marketing strategy over the life expectancy of the firm.
About the Author: Emmett Dulaney teaches entrepreneurship and business at Anderson University. He can be reached at eadulaney@anderson.edu.