Product-driven vs. Customer-driven Businesses
Many take for granted the significance of having a product-driven business as opposed to a customer-driven business. This is mostly down to their reasoning that the business is operating for the same purpose: growth and profitability. So it does not really matter whether it is product-driven or customer-driven, is it?
Business experts would disagree, since there is actually a distinction between the two concepts, and that difference could also spell a significant difference on how managers should run their business, directly affecting their decisions.
In this article, we will start with 1) drawing the line between product and customer driven businesses, and explore then 2) the product-driven business, 3) the customer-driven business, and 4) a summary.
DRAWING THE LINE
But why is there really a need to clearly distinguish one from the other? Why does it matter when the purpose of the business is to become profitable?
We must keep in mind that profit or the “bottomline” is only one of the many vital aspects of running a business. Aside from the question on whether the business would make money or provide a return on your investment, there are other questions that will come into play in the course of its operations. And that is when knowing how to identify a product-driven business and a customer-driven one comes in handy.
Even before starting a business, one of the first questions that an entrepreneur would have to wrestle with is the type or kind of business that he or she will set up. Once the entrepreneur decided on one, he will have a clearer picture on the direction that the business will take. But even the kind of business is not going to be permanent, since there are instances when the business may decide to make changes in its operations and structure, and there may be a need to go back and redefine the identity of the business. Thus, being a good manager entails being able to tell the difference between a product-driven and a customer-driven business.
THE PRODUCT-DRIVEN BUSINESS
A product-driven environment involves the business developing a product first, then searching for a market for it. Basically, it operates under the assumption that with great products come great customers which, in turn, bring in the profit and revenue.
In a product-driven setting, the usual picture that comes to mind is a room enclosed with four walls, with a team of talented individuals within it, and a single figurehead or figure of authority to keep everything together. They will be brainstorming, throwing brilliant ideas on the table, and develop a product, without taking into account the current state of the market or, more specifically, the needs and preferences of the customers or users.
All the functions of the company are focused on the product – its design, features, capabilities, and its subsequent design and manufacture. All the other departments act as support for the product, and that includes the finance, human resources, and even IT sections. The marketing and sales team will be responsible for taking the product and introducing it to the market.
In this setting, products are managed as though they are independent business segments or even standalone businesses. Persons will be assigned specifically to the product, and the product manager is at the helm, taking on the role of the CEO of that product. All their efforts and resources will be poured into that product.
Take, for example, Apple. In this product-driven organization, the ones who make the major decisions are the executives and designers. In Amazon, it is the product managers that decide what to put out to the market. The engineers of Facebook are the ones who call the shots on what feature to introduce. The same is true within Google: it is the engineers who make the big decisions. Saying that they are the ones who make the decisions might be overstating it a bit but, at the end of the day, they are the main drivers of the roadmap that the business is on.
Some Techniques and Strategies Employed by Product-driven Businesses
A product-focused business tends to focus on the product it is offering instead of the customer. Some of the strategies that these businesses employ include:
- Use mass marketing. Since a product-driven business assumes that there is already a large number of customers that are looking for products, although they are not fully aware what those products are, mass marketing is the most efficient strategy to apply. The purpose of this is to inform as many number of potential customers as possible that the business offers these products.
- Create unique products. You must create products that are unique and distinctive. It should turn out that you are the only business that makes or sells the product. Customers must not have other sources of the product other than your company.
- Focus on your positioning. If you cannot create a unique product, you should position it so that it comes out to be the most favorable or the best one among its competitors. The marketing team would have to be more creative when it comes to positioning your product. One good example is how Coca-Cola positioned itself as the best soft drink, even if there are other soft drink companies operating at the time.
Apple: A Product-Driven Business
The most classic and often touted example of a product-driven business is Apple. Steve Jobs and his team have successfully created products that the market did not even know initially that it needed or wanted. They operated on the “build it and they will come” strategy, creating the iPod even before the market knew that it is something that it must have. They created the product without necessarily identifying the market or customer; they just knew that there is going to be a market for the product once it is out.
First, Apple developed a team to create the iTouch. Another team was separately working on building the iPhone. The iTouch team focused solely on developing it, and the iPhone team did the same. Granted, the products have similarities. However, this did not become a constraint as they focused on the product instead of being competitive. As a result, Apple was able to build these products in a shorter time than expected, and they actually complemented each other.
Apple was able to come up with distinctive products so that, at the time of their release or launch, they are the only ones selling the devices.
Amazon: A Product-Driven Business
Amazon is also another prime example of a business that has successfully adapted the product-driven approach. This was described by Amazon CTO Werner Vogels as “working backwards”, a process where they write the Press Release and the Frequently Asked Questions document which are both needed at the product launch. These include mockups, and detailed narratives and descriptions, all of which attempt to provide a precise and detailed explanation on the customer experience. What will the customer do with the product? What features will the product be able to provide for the customers? This often entails writing a User Manual, and that is what Amazon does. This will give everyone at Amazon a clearer vision and direction on what product they are going to build for the customers.
THE CUSTOMER-DRIVEN BUSINESS
When a business goes out and gets information on its customers, and subsequently develops a product based on the information gathered, then it falls under the customer-driven category. In short, the focus is on the customer. How do you make the customer happy? What can your business do to address their needs? How can you meet and exceed their expectations?
This type of business, which is also often referred to as a market-driven business, operates under the assumption that it can only survive if the customers are satisfied. Thus, you have to make every effort of delivering high quality products and services, coupled with excellent customer service and support.
Product development in this setting is largely based on what the customers want. Market research is conducted, focusing on the needs and preferences of customers. Based on the information obtained, the product development team will then come up with a design that addresses those needs. Once the product is launched, it will be something that is created primarily to satisfy those needs.
In terms of marketing, a product-driven business is not greatly invested in marketing the product. After all, the product has been designed and created with the customer in mind, so it goes without saying that there is already a market (and customers) for it.
Some Techniques and Strategies Employed by Customer-driven Businesses
It goes without saying that the business should have a quality product, which means that it should have features and functionalities that the market is looking for. On top of product quality, the business also has to employ some techniques to ensure that the business earns. It also relies heavily on customer and business intelligence, which entails performing activities such as data mining and database marketing and maintenance.
- Put emphasis on speed. In this day and age, things seem to be moving at a faster pace than usual. Competition is fierce and, often, whoever is faster gets the customer (and the sales) first. Customers want products and services to be faster, saving them time. This is a huge part of the reason why many businesses are now taking the operations online, since transactions can take place in real time, cutting through the usual waiting times associated with the traditional way of doing business. This also applies to how fast you respond to customers when they present their inquiries and requests. Answers must be made promptly and, yes, responding is a must, even if you have to deliver a negative reply. Customers will appreciate being given an unfavorable answer than being met with cold, hard silence. Make sure the response time is reasonable and tolerable. Make it snappy, because a customer that is kept waiting is not a happy one.
- Prioritize flexibility and convenience. Just like speed, convenience is also something that customers look for in the products that they buy. Some businesses do this by offering various sizes of their products, even making them small enough as to be portable. Establishing an online presence is seen by many businesses as a way to make things more convenient for their customers (on top of speeding up the whole process). Another simple example is how fast foods and restaurants now accept payments made using credit cards and debit cards. Adding priority lanes for elder customers is also another strategy aimed at improving convenience.
- Maximize customer contact. Since the business operations are essentially driven by the customers and their needs, preferences and expectations, it is important to keep in contact with them. Having a dedicated customer service and support arm of the business is essential since it will act as the link between the business and the customers. Even seemingly trivial techniques such as floating customer survey forms and sending service emails, or obtaining customer feedback through Twitter, blogs and other social media platforms are very useful. Face-to-face interactions are appreciated by most customers more than impersonal phone calls or online conversations. In any case, courtesy should always be exercised, no matter what platform is used for communicating with customers. Keep in mind that customers will not hesitate to bring their business (and money) elsewhere if they find the customer service to be rude or lacking in any way.
- Include value-added benefits for customers. Customers look for more than freebies and tangible perks in the products that they buy. Intangible value even goes farther than their tangible counterparts, so businesses should always make it a point to pack their business with as much intangible value as possible. Your goal should always be to exceed the expectations of the customers, not just meet them.
- Practice consistency in service standards. There should be standards in place on how customers are served or handled. It will do the business no favors if a certain group of customers is given better treatment than others. Be consistent in your application of your customer service.
Samsung: A Customer-Driven Business
One of the more well-known customer-driven brands is Samsung, establishing itself as a business that puts a lot of its efforts and resources in understanding the customers and the market, and designing and marketing effectively to fit that customer or market.
The first step it takes before developing a product or making important business decisions is to find out what the customer wants. From there, they will do what they could to fulfill those needs and requirements. Samsung is always seen to heavily invest in customer care and after-sales services and efforts.
Samsung may not have revolutionized the smartphone, as Apple did when it created iPhone. However, what Samsung did was listen to the clamor of users who are looking for more affordable alternatives to the iPhone. Then it proceeded to launch a string of smartphones with features that can easily rival those of iPhone, and offered it at more affordable prices.
A Comparison: Pixar vs Dreamworks
Pixar Animation Studios, or Pixar, is one of the most recognizable names in the world when it comes to animated films. It is, at heart, a product-driven organization. It was known for setting up the Pixar Braintrust, which is essentially a think tank where all the directors, writers and storyboard artists of the studio regularly gather together to look at each other’s projects and conduct peer review or critiquing. Through these reviews, they can move forward with film projects to produce, create, and eventually release.
Dreamworks is also one of the biggest film production companies in the world, producing films, television programs and video games. In their setup, the driver’s seat is not left for the executives and directors alone. Ideas are solicited from employees and staff members, as well as simple moviegoers and film enthusiasts, and they are pitched to the powers-that-be, whose decisions will be influenced by the results of the gathering of ideas and pitches.
In a product-driven approach, development of visions start from the internal process within the company; in the customer-driven approach, visions start from outside the company, particularly in the marketplace where the customers are.
Customer-driven organizations already assume that customers do exist, and they have a fixed behavioral pattern, particularly in terms of what they want and need. These customers do not change. The only thing left to do for the business is to identify what those wants or need are, and understand them. Then you will have to find ways to meet these wants and needs.
On the other hand, a product-driven organization does not assume that there are customers for the product. However, they will employ business strategies in order to attract the customers and make them realize that they want and need the product. In this approach, the customers do not have stable patterns of behavior, and it is up to the business to change or alter their behavior or attitude in a way that will be beneficial (and profitable) to the company.