Market-driven strategy: Beware of its toxic curse

ILLUSTRATION BY RACHEL REVILLA

Market-driven strategy—which seeks to understand and satisfy the needs and wants of the existing market, focusing on customer loyalty and repeat purchases—has been the most common approach to business decision-making and choice of marketing activities. In recent years, this way of thinking has been challenged due to its limitations, thus now requiring marketers to keep thinking and see things differently to gain meaningful insights that will create innovation for their brands and companies.

To go beyond traditional marketing concepts and challenge existing paradigms, marketers must explore alternative perspectives.Let’s delve into some key limitations:

Neglecting nonuser market segments: The popular segmentation, targeting and positioning approach often overlooks untapped emerging market segments that hold significant growth opportunities. This oversight is evident in the low market penetration. By solely focusing on recognized markets, companies miss out on the potential growth within untapped segments. Embracing a more inclusive approach to market segmentation can unlock new avenues for expansion and allow businesses to tap into unexplored sources of growth.

Differentiation in the same way: When firms target the same set of customers, they often heavily rely on price and promotions, thus eroding profitability. This triggers a race among competitors to offer better products, distribution channels, advertising campaigns and promotional activities. As a consequence, the differentiation achieved within the market mix remains superficial rather than transformative market-driving changes. It is at this higher level of differentiation that companies can achieve a more profound and impactful transformation, setting themselves apart from competitors and creating more sustainable competitive advantages.

Lack of win-win outcome: While companies often claim to pursue win-win relationships, in reality, they often employ tactics such as “from you to me” brand switching, which adversely affects retailers by leading to stagnant volumes. As a result, larger retailers resort to charging different fees for market recovery, perpetuating a cycle that benefits them but hinders the effectiveness of market-driven strategies.

Limited customer insight: While market-driven strategies heavily rely on market research, they often fail to consider the perspectives of non-users, resulting in limited customer insight. Furthermore, customer feedback predominantly focuses on areas of dissatisfaction, fueling a pervasive pattern across industries where customers demand more for less. This narrow focus on existing customers and dissatisfaction-driven feedback can hinder the ability to truly understand and address the needs and aspirations of potential customers, potentially missing out on untapped market opportunities and preventing the development of breakthrough innovations.

Questionable marketing plans: When firms predominantly concentrate on serving existing customers despite low market penetration in a product category, it signifies a misalignment of the marketing strategy and the untapped market potential. In such cases, the underserved market often presents a greater opportunity than the already-served market. By overlooking this untapped potential, companies may miss out on significant growth prospects and fail to capitalize on the larger market that remains ripe for exploration and expansion.

Reactive decision-making: Rather than proactively shaping their own destiny, companies frequently find themselves caught in a cycle of reacting to external market changes when relying on market-driven strategies. This reactive approach leaves them susceptible to constantly playing catch-up and being influenced by the actions of competitors, customers and other market forces. By prioritizing a proactive stance, businesses can take charge of their direction, anticipate market shifts and strategically position themselves for long-term success.

Limited scope for experimentation: Market-driven decision-making often restricts the scope for experimentation and stifles creativity by solely focusing on current market demands. This narrow focus hinders the exploration of new ideas without immediate market validation, thereby impeding the ability to innovate and take risks.

Lack of customer foresight: Concentrating on existing customers within market-driven strategies can impede the ability to envision and articulate the future needs of a new set of customers. To stay ahead of evolving customer demands, companies must strike a balance between customer feedback and forward-looking strategic foresight. This balance ensures that companies are not only responsive to current customer needs but also proactive in identifying and addressing the emerging needs of potential new customers.

Limited focus on internal capabilities: Prioritizing market alignment in market-driven strategies often results in neglecting internal strengths and capabilities necessary to build a future-ready organization and create sustainable competitive advantages. By excessively emphasizing external market factors, companies may overlook the importance of developing and leveraging their internal resources, expertise and distinctive competencies. Balancing market responsiveness with internal capability development is vital for long-term success and the ability to adapt to evolving market dynamics.

Myopic market view: Overreliance on market-driven strategies can result in a myopic focus, primarily benchmarking against direct competitive offers and neglecting broader opportunities related to the business. Expanding the market vision beyond competitive benchmarking is essential for identifying new avenues of growth and staying ahead of industry disruptions.

We have seen the successful entry of new players in various industries such as aviation, internet fiber, intimate wash, energy drinks, mobile wallets, entertainment, automotive, mobile phones and day care, among others. Traditional players in these industries are often preoccupied with satisfying their existing customer base using the same value proposition and playing to their existing strengths. However, they may unknowingly be losing relevance and market share in the process. This disruption poses a significant challenge to the long-term viability of their businesses, as they become vulnerable to changing market conditions and the evolving preferences of consumers.

No longer it is enough to just pursue current customers who constantly demand more for less, or to grab market share from competitors in a cutthroat scenario. To be strategic and to stay ahead, and to maintain a strong competitive advantage, is to remain relevant and responsive, blending market insights with a long-term vision and a mindset focused on innovation. This requires a forward-thinking market-driving approach, beginning with organizations proactively identifying emerging market segments to gain a deeper understanding of the reasons behind, for example, their lack of purchases. This deeper understanding allows businesses to uncover the barriers or obstacles that prevent potential customers from engaging with their offerings. Companies are thus able to challenge industry norms and explore innovative solutions to address these specific challenges. Instead of waiting for market demand to emerge, they take the initiative to shape and create demand, going beyond market share into market penetration, seizing growth opportunities that might otherwise go unnoticed, and thereby owning a unique position in the market.

—CONTRIBUTED

Josiah Go, chair and chief innovation strategist of Mansmith and Fielders Inc., will conduct his 39th Market-Driving Strategy seminar starting Aug. 21. An extensive array of case studies from different regions will be presented and discussed.

Visit www.mansmith.net for details.