Product orientation represents a high risk to a company, because it concentrates resources on products, rather than the needs of customers. This can lead to several disadvantages compared with market or customer orientation, which ensures that a company adapts its products and services to changing needs in the market and continues to meet real customer needs.
Poor Product Development Decisions
Product development teams that work on new products or improvements to existing ones should take account of customer needs by reviewing market research or customer feedback. However, teams dominated by technologists or engineers may focus on product features that are attractive or interesting to them but not necessarily important to customers. The result is likely to be a product that may lead competitors in terms of features and performance but has little appeal to the market. The revenue from the new product is therefore unlikely to cover the costs of development, making it a poor investment.
Low Return on Marketing
Companies with a product orientation spend their marketing budgets promoting products that may not meet customer needs. That means wasted expenditure on creative services and media, because companies are not communicating information that is important to the market. Basing marketing communications on research into customers’ attitudes and needs likely will improve the return on marketing investment.
Loss of Competitive Advantage
Maintaining investment in existing products can hand an advantage to competitors. Companies with a strong product orientation may lose customers and market share to competitors who offer a more relevant product to the market. Declining product revenue and the loss of important customers can damage a company’s profitability and, ultimately, its survival.
A company that is not in tune with the marketplace is unlikely to be aware of changing trends and may lose business to competitors who are able to respond quickly to new opportunities. Companies must collect data that allows them to monitor and react to changing market conditions. A change may be as simple as introducing a new color or offering a product in smaller pack sizes, but without market awareness, a company may miss the opportunity.
Narrow Market Focus
Focusing on established products and markets may prevent a company from looking at new market opportunities. If product demand in existing markets falls, a company must look for new markets for existing products or develop new products for its traditional markets. A company with a strong product orientation may overlook this important task.