The ultimate goal for any business, regardless of what product or service they offer, is to:

It’s the age old debate, which one is better for a business? A product-driven approach? Or a customer-driven approach? Some may argue, it really doesn’t matter as almost all businesses operate for the same reasons; growth and profitability.

Business experts however, will disagree and argue that there are large distinctions between each approach, resulting in noticeable contrasts in how fundamental areas of the businesses are run; from management styles, marketing, IT functions and more.

In this article, we aim to explore the differences between each business approach using case studies from businesses we know and love today.

Exploration

First things first, why are we doing this? When profitability is the ultimate goal of any business, is there a real need to distinguish one approach from the other?

We have to remember, whilst profitability is an important goal, it’s not the only goal a business should keep in mind. In addition to the dateless questions of whether a business will generate money or achieve a return on investment, there are major questions to be considered around a business’ operations. This is where it’s fundamental to identify whether a business is a product-driven or customer-driven.

Before a business plan is even drawn up, an entrepreneur must decide what type of business they want to create - is it going to be product-led or customer-led? The answer to this fundamental question, will provide a clear picture of the direction of the business.

Regardless of the direction the entrepreneur decides to take the business in, it’s important to note, it’s not a permanent decision. Often, businesses will make significant decisions to strategically redefine their business, which may result in changes to their operational focus and overall business structure. Which may mean, the business decides to change their direction from being product-led to customer-led, or vice-versa. Therefore, it’s important to have people within a business that are able to identify the core differences between each approach, and are able to help facilitate change within the business.

The product-driven business

A product-driven environment refers to a business developing a product first and then searching for a niche market for the product to exist within afterwards. It operates on the proviso that by creating a great product, will create an appetite in the market thus attracting a pool of top-class customers which will ultimately generate a return on investment and profitability for the business.

Within a product-driven business, you’d expect to see a group of talented innovators and knowledgeable individuals, of which would be headed up by a senior leader. The group would collaborate and mind-map to create and nurture best-in-class ideas centered around the development of the product. Employees within a product-driven business will be tasked with focusing on the landscape of the market, with key view on current market trends. It’s important to note, the consideration of customer and end-user expectations, needs and preferences are not primarily acknowledged.

The design, features, capabilities and manufacturing of the product are the key focus by all functions of the business. With business departments such as; Finance, Human Resources and IT acting as support for the product. Marketing and Sales departments are responsible for bringing the product to market, creating awareness and generating revenue.                                                                  

In a product-driven business, individual products are managed like separate standalone businesses that exist within the overall business. Each product will have specific people and departments assigned to it, with the product managers at the forefront of the operation, acting like the champions and CEO’s of their specific product.

Apple is a great example of this principle in practice. The innovative tech-giant is a truly product-driven business, where vital decisions are made by designers and executives. The product managers within Amazon, are responsible for making those all-important decisions about which products to bring to market. Similarly with LinkedIn, it’s the engineers who are responsible for the latest products and developments within the social network. The same can be said of Google, the engineers are responsible for new developments and ultimately influencing important decisions. Whilst this is somewhat of a generalisation, there are strong truths in the fact that the engineers and product managers are the leaders of the product development and ultimately deciding the roadmap and future planning of the product lifecycle.   

Sales and marketing techniques are of utmost importance to a product-driven business, as they are reliant on generating awareness of the product to acquire business. A few of the strategies a product-driven business may use to create interest are;

• The use of mass marketing:  In most cases, a product-driven business tends to assume there are already a large pool of customers potentially interested in the product or products similar to the product they are about to bring to market. Therefore, the use of mass marketing tends to be the most efficient and cost-effective way of generating awareness to large audiences.
• Be unique: A product-driven business needs to create products that are truly distinctive and unique. In an ideal world, they would be the only business that creates and sells that product. 
• Positioning is key: If your product is not unique, it must be positioned as the most attractive on the market. In this instance, product-driven businesses tend to invest heavily in creative marketing methods to create a perceived point of difference.

A customer-driven business

So in contrast, a customer-driven business actively gathers insights about their customers to forms the basis of developing a product in-line with their requirements. The clue’s in the name, a customer-driven business is all about the customer; the business cannot do enough for their customers. They want to know what their customers like, dislike, what they can do to make their customers happier, how they can solve any potential related problems their customers may have, and so on.

A customer-driven business often operates on the assumption that they will not be able to continue in business if their customers are not satisfied with their product. Therefore making it imperative for all parties within the business to ensure the product being offered is of the highest quality, combined with exceptional customer service.

As expected, product development is largely centered around what customers want. The typical product development process begins with market research, focused on customer requirements and preferences. These insights are then combined with business insights to create product prototypes addressing customer needs. In certain instances, the prototype is then released to a small group of customers to test, and further modifications may be made. Once the business feels the product is in line with customer expectations, it’s then released to market.

Whilst marketing is an important requirement for almost every business, the need for marketing in a customer-driven is lesser than a product-driven business. A customer-driven business has engineered the product with their customers in mind, therefore, knowing that there is a pre-established appetite for the product.

Whilst having a top-quality product that meets the needs of the market is important, it’s also key for a customer-driven business to ensure they invest in the following to remain competitive in the marketplace;

• Time is of the essence: In most recent business cases, whoever gets to the customer first wins. This statement rings true for customer-driven businesses. It’s important to be first to market, as it creates brand authority and in the minds of most customers, the originators of products are ‘the best’, which often results in market dominance. Whilst it’s important to be first, it’s also important to be fast. Due to heavily saturated marketplaces, businesses cannot always compete on product, they need to offer the ‘full package’ this includes; fast-turnarounds, next-day deliveries, quick responses to customer queries (positive or negative) and so on. Therefore, businesses need to ensure they have the correct internal infrastructure to meet the requirements of such a demanding marketplace.
• It’s all about flexible convenience: Does your product come in different sizes? Does it have features to make it convenient to use on-the-go? Have you put processes in place to make delivery easier? How many delivery options do you have? Do you offer next-day delivery? What about Apple Pay? Contactless? The list could go on. The point here is, whilst the product and the service may be good, the product also needs to be flexible and convenient. Because if it’s not easy to use or get, it’s not going to be used or purchased.
• Where’s my value-added?: Yep, a quality product, excellent customer service, flexibility and convenience aren’t the only things a customer-driven business needs to strive towards in order to attract and acquire customers. They also need to be able to add intangible-value. In some cases, intangible value can far outweigh the need and importance of tangible value. Customer-driven businesses need to be sure to include as many intangible benefits as possible, to help them achieve standout and a perceived point of difference between them and the competition.
• Process: Every business, no matter whether they are a product-driven business, or a customer-driven business, should always have a comprehensive process in place on how to deal with their customers. This is especially important for a customer-driven business, as the customer truly is King. As touched upon previously, customer-driven businesses believe they wouldn’t be able to survive in business if their customers were not satisfied with their products or services. Therefore, it’s especially imperative that there is a process in place to ensure their customers receive the best customer service possible. Customer service should always be consistent; whether it’s a positive or a negative experience; a frequent purchaser, or a one-off buyer; a business should never appear to be biased, they should always treat all of their customers with the same levels of respect and service.

To summarise:

So what is the key difference between a product-driven business and a customer-driven? Within a product-driven business, the development of the product originates from the internal visions of the company. Whereas, with a customer-driven business the development of the product and product direction originates from outside of the business.

Product-driven businesses do not assume there are any customers for their product. They identify people they think would be interested in the product and will invest in marketing and strategies to attract said people, with a view to turn them into customers through advertising the product and its benefits. It’s important to note, these customers do not have predictable behavioural patterns, it’s up to the business and its marketing strategies to influence behaviours to generate interest and most importantly sales for the business.

Conversely, customer-driven businesses assume that customers for their product already exist, and that their product will fix a behavioural pattern. The needs of the customer do not change, the business needs to identify what the needs and requirements are and then create a product to cater to or better serve those needs, than what’s already out there in the marketplace.

Neither approach is better than the other, it’s all dependent on the business and the product that the business wants to bring to the market.

We work with businesses in the technology sector that are both product-driven and customer-driven, making us expertly placed to place experts in either set-up. For more information on how we can help you staff your business, do get in touch on 01789 269677.

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