How a market-focused approach leads to products that customers value and will pay for

Products customers love

Innovation and new product development are hot topics in today’s market, especially in technology sectors like IT, software, Web, telecoms, and related areas.

Every organization has its own approach for developing new offers to bring to market. Today’s firms invest up to 15-20% of revenues on R&D, depending on the sector, for creating, testing and trialing new technologies and new products.

At the same time, when it comes to developing new products, what matters is not just the amount of resources allocated to new product initiatives, but how they are applied.

Whether a freshly founded or a well-established company, each firm adopts a specific approach for creating new products. This choice is often driven by a mix of the product team’s capabilities and management’s chosen philosophy, and directly shapes the company’s culture and ultimately its ability to compete.

Most of today’s tech-based firms apply one of three main types of marketing approaches when creating new products for market:

Production-focused approach: Customers favour products that are highly available and affordable

Under this premise a firm’s management focuses its efforts on improving a firm’s production and distribution capabilities. This approach has been used by computer manufacturers such as Acer and Dell, and to some degree in mobile handsets by Nokia.

Such firms have tried to dominate a large market segment by readily providing affordable devices to consumers and businesses thanks to high production efficiency and broad distribution networks.

While initially successful, by continuing to focus on optimizing their production and logistics in order to easily deliver affordable, basic devices, such companies can lose touch with many of the changing tastes and demands of its customers. As markets have evolved, new and more adapted alternatives have appeared, including ultra-thin laptops and innovative smartphone, tablets and related mobile media services, and many customers have moved on to more functional and modern devices.

Product-focused approach: Customers seek products with greater quality, performance and innovative features

By following this approach a firms’ efforts are focused on making continuous product improvements to deliver the highest performing, cutting-edge products and services. This approach has been used at times by mobile phone maker HTC, network equipment manufacturer Alcatel, and software firm Microsoft.

During the mid-2000s HTC kept churning out increasingly sophisticated devices packing larger screens, higher resolution cameras, more memory, and a broader range of high-speed connectivity options, at a premium price, while apps and media had yet to flourish. Around the same time Alcatel (now Alcatel-Lucent) created the highest-capacity ATM-based, digital switch to serve a growing number of privately owned telecom operators. Microsoft released its Windows XP operating system in 2006, featuring significant technical changes over the previous suite, with a particular focus on stronger security features.

While such products offer clients cutting-edge features and increasingly higher performance, by focusing on continuous improvement to existing products, such companies assume that by building better products they will attract more clients. In fact, in general what customers seek are not specific products, but solutions to their particular problems and needs.

In these three particular cases, the majority of the market had other issues to resolve: Consumers were looking for an elegant, all-in-one solution to take the Internet and their music with them; New telecom operators wanted a cost-effective way to deliver voice calls while easily adding new services, which IP technology was beginning offering; Existing PC users wanted a more modern yet hassle-free operating system, including backwards compatibility with their software.

Market-focused approach: Products should be developed using a deep understanding of customers’ unmet needs & demands

Under this approach, a company must use a ‘sense and respond’ approach to satisfying the needs of its clients. Compared to the other approaches, a market-focused strategy takes an outside-in perspective, making satisfying clients’ evolving needs a firm’s main objective.

Recently, companies like Salesforce.com, Amazon and Apple have successfully used this approach to create client-driven products, while benefited by capturing added revenue and generating double-digit growth despite a challenging economic context.

These companies have established and/or raised the bar in their respective markets, each in its own way:

  • Delivering social, customer-driven enterprise cloud software with products like Sales Cloud and Chatter;
  • Offering a superior consumer shopping experience that marries broad choice with low prices and ease of use;
  • Reinventing the mobile phone with iPhone, and refining the mobile media and computing experience with iPad.

A customer and market-driven approach is the path towards creating products that customers value

A technology firm’s management and product development teams may be motivated for different reasons to apply an inside-out production or product-driven marketing strategy to develop their  business. While this approach can generate significant sales and profit in the short-term by delivering affordable or high-performing products, over the long-term it can lead to market myopia, making it hard for them to quickly adapt to emerging market trends and evolving customer tastes and demands.

In today’s market the most successful companies are the ones that relentlessly strive to satisfy their clients by addressing their changing needs and demands, and in some cases leading them where they want to go before they know it.

In the process, those customer-driven companies will capture value from their customers in the form of new and incremental revenue, business growth and satisfied clients.

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One Response to “How a market-focused approach leads to products that customers value and will pay for”

  1. Successful companies mix digital and traditional channels to satisfy their clients and achieve business objectives | Merkado | Technology Marketing Leadership Blog Says:

    […] be successful, any company must first have a product and service offering real value to its clients. This value may take the form of greater convenience and security (e.g. a file backup and sharing […]

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