the difference between product orientation and customer (market) orientation

3.1.4 Product orientation vs. market orientation

Learning objective (Syllabus 3.1.4)

Students should be able to:

• Distinguish product‑orientation from market (customer) orientation.
• Explain why many firms shift towards market orientation.
• Assess the implications for marketing objectives, the marketing mix (the 4 Ps), segmentation, mass vs. niche strategies, performance measurement and ethical considerations.

1. Key definitions

• Product orientation: The firm’s strategy is centred on the product itself – its technical superiority, quality or innovation. Management assumes that a good product will sell itself, so decisions are driven mainly by internal capabilities.
• Market (customer) orientation: The firm places the target market’s needs, wants and preferences at the heart of every decision. The business gathers external market information and designs its offering to satisfy those identified needs.

2. Influence on marketing objectives

Objectives must be SMART (Specific, Measurable, Achievable, Realistic, Time‑limited). The orientation determines the type of objectives a firm is likely to set.

• Product‑oriented objectives – often internal and output‑focused, e.g.:
  • “Increase R&D expenditure by 15 % in the next 12 months.”
  • “Launch three new models with a minimum of 20 % higher processor speed by Q4 2025.”
• Market‑oriented objectives – outward‑looking and outcome‑focused, e.g.:
  • “Raise market share among 18‑24‑year‑olds to 12 % by Q3 2025.”
  • “Achieve a customer‑satisfaction index of 85 % by the end of 2024.”
  • “Increase repeat‑purchase rate by 10 % within 18 months.”

3. Impact on the marketing mix (the 4 Ps)

4. Why many firms shift towards market orientation? (Syllabus 3.1.4 drivers)

1. Intense competition makes product‑only differentiation insufficient.
2. Customers have greater access to information and higher expectations for value.
3. Advances in technology enable rapid collection and analysis of customer data (big data, social listening).
4. Long‑term profitability is increasingly linked to customer loyalty, repeat purchase and brand advocacy.
5. Strategic frameworks such as blue‑ocean strategy encourage firms to create new market space by focusing on unmet customer needs rather than competing in a crowded “red‑ocean”.

5. Market‑oriented decision‑making process (required flow‑chart)

If the diagram cannot be displayed, the steps are listed below for exam reference:

1. Market research – gather data on customer needs, competitors and macro‑environment.
2. Target‑market selection – segment the market and choose the most attractive segment(s).
3. Product development – design or modify the offering to meet the identified needs.
4. Marketing‑mix decisions – set product features, price, promotion and place based on the target segment.
5. Implementation & control – launch the offering, monitor performance (e.g., NPS, market share) and feed results back into research.

6. Strategic implications – blue‑ocean vs. red‑ocean

• Red‑ocean (competitive) strategy – often product‑oriented; firms compete on existing dimensions (price, features) and fight for market share.
• Blue‑ocean (value‑innovation) strategy – aligns with market orientation; firms look for untapped customer needs, create new demand and make the competition irrelevant.

Example: Cirque du Soleil combined theatrical performance (a new value proposition) with circus skills, creating a blue‑ocean that appealed to adult audiences willing to pay premium prices.

7. Real‑world illustration

Apple Inc.

• Early 2000s (product‑oriented) – focus on hardware specs (processor speed, storage).
• Late 2000s onward (market‑oriented) – extensive user research showed customers valued seamless integration, ease of use and services (iTunes, App Store).
• Objectives shifted to ecosystem growth (e.g., “increase iOS market share to 80 % by 2025”).
• Marketing‑mix changes:
  • Product – design centred on user experience.
  • Price – premium but justified by perceived value.
  • Promotion – lifestyle‑focused, pull‑type advertising.
  • Place – Apple Stores, online store, authorised resellers.
• Performance measured with NPS, CLV and ecosystem revenue.

8. Segmentation and choice of mass vs. niche marketing (Syllabus 3.1.5 & 3.1.6)

• Segmentation – market‑oriented firms use research to divide the market into geographic, demographic, psychographic and behavioural groups. The selected segment determines product features, price level and promotional tone.
• Mass marketing – suitable when a product satisfies a common need across a large, relatively homogeneous audience; more typical of product‑oriented firms (e.g., basic commodity goods).
• Niche marketing – favoured by market‑oriented firms that identify a specific segment with distinct needs and tailor the mix accordingly (e.g., high‑end mountain bikes for serious cyclists).

9. Customer‑oriented performance measures

• Net Promoter Score (NPS) – measures willingness to recommend the brand.
• Customer Lifetime Value (CLV) – estimates total profit from a typical customer over the relationship.
• Other useful metrics: customer‑satisfaction index, repeat‑purchase rate, market‑share growth, churn rate.

10. Customer relationship marketing (CRM) – a natural extension of market orientation (Syllabus 3.1.7)

CRM uses data‑driven tools to build long‑term relationships, personalise offers and improve retention. It is most effective when a firm already adopts a market‑oriented philosophy, because the required customer data are gathered as part of the market‑oriented decision‑making cycle.

11. Ethical considerations

• Product orientation – risk of over‑engineering or ignoring consumer welfare (e.g., selling a technically superior product that is unsafe or environmentally harmful).
• Market orientation – risk of privacy invasion or manipulation when extensive customer data are collected; firms must ensure transparent data handling and avoid exploitative practices.
• Both orientations should adhere to the UK Code of Non‑Commercial Advertising and Marketing Communications (CAP Code) and broader corporate social responsibility principles.

12. Summary

Product orientation centres the business around the product itself, leading to internally‑driven objectives, cost‑plus pricing and a push‑type promotion. Market (customer) orientation places the customer at the heart of all decisions, resulting in SMART, outward‑looking objectives, value‑based pricing, pull‑type promotion and distribution that mirrors customer preferences. The orientation influences segmentation, the choice between mass and niche strategies, performance measurement (NPS, CLV) and ethical responsibilities. Modern firms increasingly adopt market orientation—and often a blue‑ocean approach—to achieve sustainable competitive advantage, higher customer loyalty and long‑term profitability.