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.
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.
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.
Determining the right strategic focus is crucial for any company’s success Should you concentrate on making the best possible product or service? Or should you prioritize understanding and adapting to your customers’ needs? These reflect the core difference between product orientation and market orientation Choosing the approach that fits your business can impact everything from product development to marketing,
What is Product Orientation?
Product orientation is a business strategy that focuses on the features, quality, and technical excellence of the product or service itself. Companies that favor this approach devote significant resources to research and development. Their goal is to create products with superior design, advanced capabilities, and innovative technology compared to competitors.
Some key aspects of product orientation include:
- Primary focus is on continuous product improvement and innovation.
- Belief that a great product will sell itself based on its quality.
- Marketing emphasizes product features, specifications, and prestige.
- Limited customer research since the product is assumed to be desired.
- Common in technology companies, luxury goods, and other innovation-driven industries.
What is Market Orientation?
In contrast, market orientation prioritizes understanding and meeting customer needs through extensive market research. Companies tweak product design, branding, and business operations to align with preferences and trends.
Key aspects of a market orientation strategy are:
- Primary focus is on consumer behaviors, wants, and needs.
- Marketing is tailored to customer pain points and benefits.
- Products adapted based on market insights and customer feedback.
- Risk of overemphasizing short-term trends and demand.
- Common in consumer goods, services, and highly competitive sectors.
Key Differences in Approaches
While both strategies aim for business success. product and market orientation differ significantly
- Focus: Product strengths vs. customer needs.
- Innovation: Technology push vs. market pull.
- Feedback: Limited vs. extensive customer input.
- Marketing: Product features vs. customer benefits.
- Adaptability: Rigid vs. responsive to trends.
Product Orientation in Action
Product-oriented companies believe their expertise and innovation will make customers want to buy. Some examples:
- Luxury automakers like Mercedes emphasize advanced engineering and performance.
- Apple‘s iPhone set the standard for smartphones with features like the touchscreen.
- Japanese electronics companies are known for product quality and incremental advances.
This inside-out approach can lead to game-changing innovations that create new demand, But it also risks developing products that don’t solve real customer problems
Examples of Market Orientation
Market-oriented firms win business by shaping offerings around what customers already want. For example:
- Fast fashion retailer Zara quickly copies catwalk trends for mass market.
- Consumer goods companies like P&G research consumer frustrations.
- McDonald’s adapts its menu to cultural preferences in different countries.
This outside-in approach ensures products match demand. But an overemphasis on current trends can discourage long-term innovation.
Finding the Right Balance
So which approach is better? In reality, most successful companies use a blend:
- Maintain core product strengths.
- Incrementally improve via market feedback.
- Invest in longer-term technology development.
- Build an adaptable culture and operations.
The ideal balance depends on factors like industry lifecycles, competitive forces, and positioning. But remaining responsive to evolving customer needs is key.
Transitioning from Product to Market Focus
Many older companies were built on product orientation but later shifted to increase market orientation. For example:
- IBM moved from a hardware focus to software and services.
- Nokia was complacent about its mobile phone dominance but lost share by ignoring smartphone demand.
- Microsoft expanded beyond business software to gaming, cloud services, and hardware in response to market trends.
This required major cultural and organizational change to become more customer-centric.
When Product Orientation Works
Some situations where a product focus can thrive:
- New, emerging industries: Focus on establishing product leadership before customer expectations solidify.
- High-tech fields with rapid innovation: R&D and technological differentiation is the priority.
- Premium segments valuing prestige: Quality, craftsmanship and exclusivity drive desirability more than mass preferences.
But even here, understanding user behaviors and building loyalty through great experiences is vital to long-term success.
Product and market orientations represent two philosophies of how to drive business growth. While a market focus is often viewed as less risky in established industries, the right balance depends on a company’s specific context and objectives. But in most cases, ignoring evolving customer preferences is a recipe for decline. By blending strong product capabilities with market adaptiveness, companies can better navigate today’s fast-changing environment.
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.
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.
- 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.
- 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 value innovation, 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.
- Product orientation emphasizes producing high-quality products.
- Modern market orientation adapts to global audiences and emotional factors.
- Product orientation was historically successful but became less effective as competition increased.
- Different approaches are needed when developing new markets versus existing ones.
- Being a first-scaler adds an advantage to being a first-mover in tech markets.
Read Next: Product Orientation.
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.
