Value Realization

November 17, 2015

One of the distinctive differences between companies with a “production” mentality vs. a “market orientation” is the degree of responsibility that they accept for their customer’s successful use of their products and services.  The “production” mindset defines success in terms of whether the product or service was delivered to the customer on time and on budget and consistent with specifications.  The “market orientation” mindset looks beyond the product or service to the underlying problem that motivated the customer’s purchase.  If the customer’s problem is not resolved, then success has not been achieved.

The challenge lies in the fact that the product or service may be technically capable of solving the customer’s problem, but the customer may lack the knowledge of how to use the product or service.  In other words, there is a consumption problem.

Is this a cost or an opportunity?  Most “production” companies would say the former.  Training the customer on how to use the product looks like an additional cost of doing business.  Better to focus on “competent” customers who do not require this level of support.

There is merit in this viewpoint, especially in the short term.  Selling sophisticated products to sophisticated users is a sound business model.  But it has limited growth potential because it relies on the customer to be an expert user. If the customer is sophisticated and knows what problem it wants solved, but does not see any competitive advantage in using his/her own resources to configure and implement the solution, then the “sophisticated products for sophisticated users” strategy is flawed.  It is not that the customer is unsophisticated, it is that the customer places a high opportunity cost against having to use his/her own resources in order to get the full value out of the purchase.

A “market orientation” mentality begins from an assumption that there is a significant opportunity cost associated with the customer’s time and resources.  If realizing the value of the product or service requires a lot of effort on their part, then the customer will not regard the prodcut or service as valuable (no matter how inherently sophisticated and powerful the product or service may be).

Market orientation means assuming responsibility for the customer’s outcome and not just providing them with tools to achieve that outcome.

 

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