Customer Centric and Market Driven Approaches to Marketing

With the increasing pace of commercialization of economy, international and domestic market environment has changed dramatically-the termination of seller’s market and shortage economy, the arrival of buyer’s market and surplus economy. Consumers have become the leading role within transaction relationship. Companies must spare no efforts to please consumers, provide consumers with satisfactory products. Nowadays, concerning corporate marketing concept, there are customer centric and market driven.

Customer centric refers that the enterprise takes the fulfillment of customer demands and the increase of customer value as business starting point. It stressed that the organization should avoid separating the actual demand from customers and subjective assumptions of the market. A customer-centric approach can add value to a company by differentiating themselves from competitors who do not offer the same experience. In essence, customer centric means the modern marketing concept that build a long-term and stable business relationship through provide customers more value and improve customer satisfaction. Customer centric is a marketing philosophy which regards customer-oriented needs and desires as its direction.

The concept of market driven is defined through three dimensions: customer demand for current and future generation of market intelligence; market information dissemination in the organization; organization of the market intelligence activities and responses.  In order to maximize long-term achievements, enterprises must establish and maintain long-term mutually beneficial relationship between customers. The concept of market-driven is based on customer centric and supplemented by competitor orientation. Company applying market-driven always fully satisfies customer demand and pays close attention to changes in competitive environment. From the perspective of competitive advantage, market driven is the organizational culture which can reach this relationship most effectively.

Differences and Similarities of Customer Centric and Market Driven Approaches

From the definition of customer centric and market driven approach, we can find, customer centric and market driven approach both regard finding and meeting consumer demand and improving customer satisfaction as the center of the marketing concept. Under buyer’s market and surplus economy, the consumer has become the center of business competition. Many business concept as “customer is God” indicate that if companies achieve success in the market, they should attach importance to customers. Therefore, both customer centric and market driven approach are no longer only focus on their products, like product orientation. Enterprises attach importance to consumer demand rather than the products.

From the above description of the concept of market driven, the concept of market driven is derived from customer centric and beyond it. Market driven is different from customer centric, and market driven is the combination of customer centric and competitor oriented. Customer centric is a fundamental orientation. Each business must follow it, but following it does not mean the company can be successful. Businesses have to pay close attention to the changing competitive environment, improving operations, enhancing their competitive ability, and build up the concept of competition — notice the attempt of competitors and try to estimate correctly our own strength as well as our opponents. Therefore, the customer and the competitor is an integral part of today’s marketing. Customer orientation is the foundation, if not follow the customer centric, it will lose the competitive share and the qualifications and opportunities to success. Competitor orientation is additional. Market driven concept requires the company not only focus on the customers but also the competitive environment. Therefore, we should be take customer as the center, also take into account the competitor.

The Importance of Customer Centric and Market Driven Approaches

The origin of customer centric is the fact that product-oriented company invests too much on product development, while ignoring the needs of customers, which often results in mismatching of product value and customer’s real needs. Product-oriented company will easily get ‘marketing myopia‘, which makes a company deviate from the market, loss market share, be in the poor place in competition, then eventually being eliminated by the market. To avoid these consequences, companies adopt a customer centric approach and take customer satisfaction as the goal so that they can improve the current market share. In addition, customer centric approach can improve customer satisfaction. Customer centric enterprise can make full use of the reputation, business relationship and channels built previously to sell other products, which can reduce barriers for market entry, increase sales and profits.

Market driven is favorable towards business’s long-term competitive advantage. At the same time, market driven approach can prevent an enterprise from being passive in the market and subject to the customer’s changing needs. Market driven model requires companies take the initiative to analyze the potential customer demands so that they can take the preemptive opportunities. In addition, market driven model requires companies concern about market trends and competitors. Today, the market economy are maturing, increasingly competitive market, if companies are not concerned about changes in the market and the competitors, they will not become the industry leader.

Disadvantages of being Customer Centric

Customer centric requires the enterprises pay attention to consumer demands, however, an accurate definition of the customer should be divided into two categories: external customers and internal customers. An external customer refers to the final consumer, and an internal customer means the shareholder, manager and employee.  Customer centric business pays too much attention to external customer while neglect internal customer’s needs, which will damage employee motivation and affect long-term viability.

As long as there is a market demand, enterprises will spend great efforts to obtain such information, to take various measures to meet the market demands, regardless of the number of competitors on the market and countermeasures. They barely seem to realize that other competitors may also obtain these market sources through market research, but also adopt the same means to share the market. As a result, it happens that there are large numbers of similar products in the market and the marketing approaches adopted by enterprises are also surprisingly similar. Customer centric will easily lead to “‘homogeneity competition’ situation”.    As the product identical, while the total market demand is limited, their market share is relatively narrow. Their market share declines, which will result in all businesses and enterprises within the industry profits decline. For example, American Delta Airlines serve the customers who take their planes regularly a lottery-ticket called “triple mileage”. At the superficial level, this kind of ticket can attract the consumer’s attention, but in practice, because of its high imitability, its competitors such as American Airlines, United Airlines joined the competition and also issuing the lottery tickets. As a result, not all enterprises benefit from this tickets, but to improve the industry’s operating costs.

Also, Customer centric does not have universal application.    For an enterprise, when it is in different stages of industry life cycle or different stages of enterprise life cycle, should adopt different orientation strategies. Customer centric is primarily ineffective, because the customers do not understand new product and therefore no demand. In other words, customer centric inhibits business innovation. But in the long run, customer centric marketing account for a major energy of a company, which will make company ignore the innovation from competitors market, and lose the initiative of the future market.

Disadvantages of being Market Driven

Enterprises provide products to meet current customer needs, and develop new products to meet the future needs of customers. However, the cost of market-oriented marketing innovative is high, as a consequence, makes this type of marketing business facing risk. For example, Toyota is one of the companies who adopt market driven approach as their marketing concept. Since they have spent too many resources on product development to meet customers’ demands, their operation costs are correspondingly high. Toyota introduces cost planning to control the costs. Cost Planning is the basic concept which starts from the product development period to production; in order to reduce costs and ensure profits requires a company to implement the various management activities. So, market driven gets an enterprise jammed in “resource allocation dilemma”.

Market driven marketing undermine the current level of profitability of enterprises. Concerning about the future customers needs affect the ability to meet current customer needs, and the investment of potential market will keep the enterprise in “low cash flow difficulty”. While concerning about the current customers, in the current market there is a high cash flow, but the future demand cannot be met and no cash flow in the future market. Therefore, managers of enterprises must rationally allocate resources to achieve current and future balance.

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