Market Orientation and Customer Centricity are Overrated
This morning, Helen Edwards argued in Marketing Week that “[t]o create long-term, sustainable growth, brands need to stay ahead of the game by creating products and services consumers don’t even know they need yet.”
Her piece, to many, may come across as provocative. For example, Seth Godin famously once said that marketing isn’t about finding customers for your products, but products for your customers. Indeed, it is by now an adage in modern business. Market orientation, or customer centricity, makes a lot of sense.
However, a lot of justification for it is based on halo effects and narrative fallacies. For various reasons I won’t bother going into now, it is intuitive to us to think that companies perform well therefore must be customer oriented. Ask yourself — how many successful companies are labeled customer adverse?
It should be noted that this is all not to say that customer orientation does not drive performance, merely that the evidence for it is flawed. And, as Clayton Christensen has long said, companies can fail if they stay too focused on today’s customers and ignore the needs of future customers. A point that is echoed by the work by Byron Sharp and others. Brands grow by acquiring new customers, not by retaining old ones.
Of course, it could be argued that the way to do that is by servicing the existing needs of the overall market, and yes, that is a large part of it. However, as Helen writes, “[i]f everybody’s complying with [customer orientation], nobody has a natural advantage.”
This is an important point oft-forgotten. There are always numerous companies, all supposedly customer-centric, competing for the same customer. No company will ever act in a vacuum.
One of the most common errors in business analysis is to perceive performance as absolute. It isn’t. Performance is relative. You can improve your results, but if your competitors are improving even further, it’s not good enough, and success is down to a hell of a lot more than just being “more customer-centric than the next brand”.
In trying to find new products for new customers, we find perhaps the strongest argument for trying the illogical as it is the only thing your competitors won’t try — inevitably, if what you are doing is logical, logically, they will do it too, as Rory Sutherland has pointed out.
Of course, what makes matters a tad more complex for many is that post hoc analyses often post-rationalize and infer the to the analyst seemingly logical. “They ignored conventions because it’s true to their brand”, “bravery is at the heart of their strategy” etc.
So, does this mean that we should ignore our customers? Absolutely not. It merely further emphasizes a point I continuously make — marketing, as well as business management in general, is largely risk management. Competitive advantage requires calculated risks. Ignoring current customer needs carries higher risk, but also potentially higher upside. So you balance your investments accordingly.
Or, to paraphrase Robert Rubin, you try to improve your chances of success by looking clearly and carefully at the odds, at your own capabilities, at the motives and abilities of your rivals, and make the best judgment you can. Knowing, of course, full well that even the best decisions sometimes won’t turn out well, and remembering that, importantly, if they don’t, it doesn’t mean they weren’t good decisions. Chance plays a part, whether we like it or not.
Balance your risks, and you’ll improve the chances of success. Some of that may require you to not be customer oriented. It may also require you to ignore category conventions, best practices or, perhaps more commonly, columnists’ advice. Just not this time. Helen is right: market orientation and and customer centricity are, or at least can be, overrated.
