Business models set the foundational layout for how a business should operate. For budding business owners, picking the right business model is crucial for sustained growth and success. A market-driven model invests in the mass market, product development and industry insights. A customer-driven model prioritizes customer needs, loyalty, engagement and satisfaction. Find out whether your business should opt for a market or customer-driven business model.
Every business needs a business model. It’s the foundational architecture that helps you structure your business along specific lines. If you don’t set operational guidelines right at the beginning, then you can’t control the direction your business grows in.
For business owners, choosing a market-driven approach is second nature. After all, you’ll be competing against other businesses in the same industry. This implies that your customers will also be the same. By providing quality products, you should in return, get quality customers, right?
How the market operates has changed over the years. Now, customers take priority. Marketing to them en masse won’t necessarily net you higher sales figures. Businesses that focus on customer needs and satisfaction levels are more likely to secure loyal and returning customer. And in a hyper-competitive market landscape, brand loyalty can make the difference between a successful and a failed business.
But ignoring the market is a mistake as well. If you aren’t keeping up with industry developments, aren’t monitoring world economics etc., your business can be blindsided. So what do you do?
What is a Market-Driven Business Model?
A market-driven business model operates by gathering intel on the market, mass consumers, the industry, and economic trends. By gathering data and analyzing segments of the market as a whole, these businesses make informed decisions that help them grow in a sustained manner.
Some of the common techniques employed by market-driven businesses are:
- Market Analysis: To be market oriented, you should understand the market. This includes your competition, the industry, the economy etc. This involves gathering data from various sources, and analyzing them to glean insights that can aid in business growth.
- Business Positioning: After analyzing the market, you should consider positioning your business in a way where it surpasses the competition. This can come from better marketing strategies, product development etc.
- Mass Marketing: A market-driven business model doesn’t see a customer as a single person, but rather one individual along a sea of customers. To reach out to them, market-driven models emphasize product quality, usefulness and design.
With a market-driven model, product development is key. In such a model, the product or service being offered by the business is first isolated.
Then the market surrounding that product or service is studied. Finally, the product or service is positioned in a way where it reflects a higher quality when compared to the main competitors in the market. Such models aim to garner high sales numbers by marketing to as many people within the broader market as possible.
What is a Customer-Driven Business Model?
In a customer-driven business model, the customer’s needs, happiness and satisfaction is considered a priority.
In the product development stage, unlike in a market-driven business, a business owner will first analyze the market o understand customer pain points. They will look for products or services that either aren’t available to customers but is in demand, or add value to customers’ lives.
The products or services a business provides, are directly targeting specific customer needs. Such businesses also prioritize customer engagement. Here are some common techniques used by customer-driven businesses:
- Buyer Personas: Creating buyer personas or avatars that let the business identify the target market, their purchasing decisions and how to best market to them.
- Target Marketing: Instead of marketing to a large crowd of potential customers, a customer-driven model will focus on reaching out to a section of the market. This section contains customers who are most likely to make purchases from them.
- Customer Engagement: Communicating efficiently with customers helps develop connections and build brand loyalty. These businesses recognize the purchasing power of every customer, and ensure that customer satisfaction is met.
- Feedback and Opinion: Such businesses ask for, and listen to feedback from customers. This helps them cater to their customers better, while growing as a business.
A customer-driven business model focuses on brand identity as well. They associate a successful brand with a successful business. While products and services are important, they position the brand over the product in the marketplace.
This helps them build customer recognition through an effective use of brand collaterals like logos, brand colors, and more.
Which is Better? Being Market-Driven or Customer-Driven?
Adopting either business model over the other can be a risky move. This is as both models contain necessary steps a business needs to scale and grow.
By focusing on a market-driven approach, you risk neglecting the customers. Given the say customers have in enabling business success in today’s world, not understanding or target marketing your customers won’t help you grow.
Focusing exclusively on your customers is just as risky. This implies that you aren’t monitoring emerging technology, industry trends, market shifts and the economy. If the industry is shifting towards a new king of technology, and your business is still focusing on what the customer wants, you stand to lose out.
The ideal business model will be a mixture of both the market-driven and customer-driven business models. It requires more work, more data gathering, more analysis, but at the end of the day, it brings more success.
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