Different businesses, even in the same industry, orient toward different things. For example, one business may see its focus as meeting customer needs while another concentrates on producing an awesome product. Product orientation has its advantages, but it's not always the best path to take.
Different Strokes for Different Folks
Businesses have many different orientations but the main ones are product and market. Some businesses favor an engineering or selling orientation.
- Product: You create a great product, confident customers will buy it.
- Market: You make products only when you know there's a market for them.
- Selling: You push the products the sales force wants to sell, for example, products they're used to selling or that have a high commission.
- Engineering: The company creates products that incorporate what engineers and designers think are cool, cutting-edge features, regardless of the market for them.
Product Orientation Advantages
Many entrepreneurs are driven by their passion for their product. Microsoft and Apple were started by people who loved computers. Many restaurateurs open their business to showcase their great food. Product orientation has a number of advantages when people exploit this passion. If you're already experienced in the industry, for example, you may have an excellent idea of what products will sell. Product-oriented businesses typically focus on their strengths and making products they're skilled in manufacturing. Plus, if you have an established customer base that trusts your work, you may be able to sell the product with relatively little marketing, thus reducing marketing costs. Relying heavily on consumer trends and market surveys can lead to making products that aren't a good fit for your company – you avoid this when the customer base is already there.
Product Orientation Disadvantages
A great product doesn't automatically translate into profits. Some of the drawbacks include:
- The customers may not be interested in what you're selling.
- If you don't have an established reputation, customers may not trust you to deliver the goods.
- Product-oriented companies stand and fall on the strength of the product. It has to be first-rate.
- The R&D costs for an ace product may be steep.
- Making a profit on a first-rate product may require setting a higher price than the market will accept.
Can You Combine Orientations?
There's no law that says you have to choose a product over the market or vice versa. Many companies have found success by combining both approaches. First, they engage in heavy market research to learn what consumers want. Then they focus on creating an A-list product that meets the market niche they've targeted. The marketing focus helps companies identify the right product to make; product orientation ensures the product comes out right.
Fraser Sherman has written about every aspect of business: how to start one, how to keep one in the black, the best business structure, the details of financial statements. He's also run a couple of small businesses of his own. He lives in Durham NC with his awesome wife and two wonderful dogs. His website is frasersherman.com