Customer demand orientation or product profit orientation
On June 1, 2009, General Motors CEO Fritz Henderson appeared in the Southern District Court of New York and submitted an application for entering “bankruptcy reorganization protection”. After countless restructurings and government bailouts, GM is starting from scratch in its 101st year trying to be reborn. As we all know, the reason why General Motors (General Motors) is named “General” means to meet the needs of cars of all income groups. General Motors was originally established as a holding company to acquire other car manufacturers. In GM’s multi-brand joint strategy, Chevrolet is defined as a car that ordinary people can afford, Pontiac and Oldsmobile are mid-range, Buick is a premium brand, while Cadillac is a luxury sedan.
The brand portfolio of these different grades under General Motors aims to meet the car needs of various income groups. This strategy has successfully established GM as the world’s largest automobile company. However, with the start of competition from Japanese manufacturers, GM’s customer demand-oriented strategy began to suffer setbacks, and the decline in market share and shrinking profits became obstacles to development. In order to preserve market share and meet the needs of different target customer groups, more complicated product categories and product lines were born under the sub-brands, and GM has entered a contradictory dilemma between meeting customer needs and realizing product profits.
On the one hand, in order to cut costs, GM has not invested enough in the research and development of various brands of vehicles, which appear to be similar; on the other hand, GM has been hiring marketing CEOs for many years. They focus on how to make practical products fashionable or how to sell these products, but ignore In order to maintain the overall profit of the product line, and even constantly compromise on quality to gain profit margins-the non-production culture has eroded the competitiveness of GM’s technology, making these sub-brand series eventually lose the momentum of advancement together.
Satisfying customer needs vs increasing product profits
The advent of the era of customization has made many companies busy responding to the various needs of end customers. In order to fully meet customer needs, more companies blindly adjust the entire business model around customer needs, and even continue to carry out market segmentation and product segmentation. Points, reset the business process. Just imagine, the result of each market segmentation is that the company not only has a different product line, but also a different set of business processes for procurement, planning, manufacturing and distribution-at this time, the company will have to give up high-quality products. And low-cost manufacturing core capabilities, committed to providing customers with various initiatives to maximize segmental needs.
If you want to design corresponding solutions according to the changing needs of customers, you usually need to cooperate across departments, product lines and even across enterprise boundaries. In this process, not counting the unsalable and depreciation of old products affected by new products, even the investment in new products will have to pay a huge price-many companies therefore propose to all employees of the company that they should take into account customer satisfaction and the company’s own interests. profit. And we know that in such an era of fierce market competition, there is only one final choice that takes both aspects into account, that is, to reduce product quality through procurement, outsourcing, and replacement of materials to maintain profit margins, which will eventually cause companies to lose their brand value. From a broader perspective, over-satisfying customer needs will inevitably lead to over-investment in similar products in the same market segment, and the product will die prematurely without fulfilling its market value.
How should we choose between satisfying demand and maintaining profit? The process of defining, designing and manufacturing a product has determined the value of the product and its commercial life cycle. If the overall performance of the consumer market rises rapidly, customer demand orientation will Leading enterprises to produce more product lines to obtain the largest market share after comprehensive coverage; and in the case of bleak market performance, product profit orientation will lead enterprises to re-analyze and screen existing product lines to obtain higher enterprise Operational efficiency.
Taking the computer industry as an example, Intel’s CPU is an essential component of all brands of computers. It has various computer manufacturers as its stable customers. In a market environment where end consumers continue to rely on Internet applications, the customer demand strategy makes Intel the earliest Seize and maintain market opportunities. The development of Intel depends on continuously satisfying or creating demands. The clear customer demand-oriented strategy enables Intel to maintain the industry’s pioneering ability to design different CPU processors for various groups. Therefore, Intel maintains the advantages of a high degree of business globalization, comprehensive product line coverage, and the largest market share.
Let’s look at the finished product manufacturers and retailers in the computer industry. Although they are first-line brands, such as Hewlett-Packard, Dell, Lenovo, etc., if these manufacturers implement customer demand-oriented strategies, they will force themselves to have various products according to product brands and different groups of people. Line, once this is the case, the huge manufacturing system will torture their profits. Therefore, these companies have to focus on adopting a product profit-oriented strategy, screening and retaining product lines, and maintaining overall business profits. Michael Tatelman, vice president of sales and marketing of Dell’s global consumer business, thinks this way: “Whether it is in the supply chain, product development, sales channels or marketing methods, we must find ways to improve business operation efficiency in every aspect every day to ensure the realization of products. Possibility of profit.”
Customer demand orientation: gaining market by creating demand and satisfying demand. There are two very obvious characteristics of enterprises that
choose customer demand orientation. One is to have relatively core product technology or a stable customer group; The industry is showing an overall upward trend in the market. These two aspects will ensure that the company will fully cover the market with its product line through the development of core technical capabilities (or copying a stable customer base), fully absorb the market capabilities in the overall upward trend, and increase market share. At this time, the enterprise maintains a high marginal income, and the price is not the main factor to attract customers; in this case, the customer demand-oriented strategy, even accurate to the customer’s individual demand-oriented strategy, will enable the enterprise to fully penetrate the market, and who can quickly respond to customers Demand, who can give priority to market share.
Taking fashion consumer electronics products as an example, Apple’s software product application store has become a new fashion in the US mobile communication market, followed by Microsoft, Google, Nokia, Intel and other companies rushing to open application stores. They hope that in the future, customers will be like Shop the app the same way you shop at Walmart. At the Mobile World Congress in Barcelona in 2009, handset makers, operators and various software makers were all talking about app stores. Apple pioneered this business model on the iPhone, allowing users to purchase applications from the App Store, and Apple takes a 30% cut of the revenue.
Apple’s success has stimulated the IT giants. Microsoft quickly established a Microsoft retail experience center in its headquarters in Redmond, allowing customers to be in a “warehouse-style supermarket”, displaying many models of notebooks, desktops and computers using the Microsoft operating system. cell phone. Nokia has brought some new features to the application store model: “community” and “location”, and strives to be not only a place to buy applications, but also a smart store. It can recommend apps based on customers’ interests, let customers know what other people have bought, and change inventory according to the customer’s geographic location… Why are these brands building their own retail tentacles? To get closer and Customer distance – These products create and meet customer needs, so they must be experienced by customers to enhance brand and sales.
Experience stores and app retail stores are just some specific examples of customer demand-driven strategies, another example is a luxury manufacturing retailer. All kinds of luxury goods companies have kept their core classic elements for a long time, and these innovative designs that break through the needs of customers will always be seen at the press conference.
Once an enterprise invests in and chooses to implement this development strategy, it should first consider allowing customers to feel the specific experience of using the latest products of the manufacturer faster and more truly, so that the price and performance of each product can be clearly presented to the customer. Customers; in addition, customer demand orientation requires that the technological R&D and innovation of enterprises must break through the existing mode of catering to demand, and focus on creating demand.
Demand, that is, to cultivate new customer demand for products. In other words, the forward-looking technology is more reflected in winning the hearts of customers in the customer demand-oriented strategy.
It is worth noting that the customer demand-oriented development strategy will inevitably bring about a huge support system, and the operating cost will also increase accordingly; market segmentation needs, meeting these individual needs, and even innovation needs will bring complicated and repetitive operations process and the enormous costs that come with it. Therefore, the overall upward trend of the market in the industry is another necessary factor for enterprises to decide to adopt customer demand orientation. Under the upward trend of the market, product lines that meet different customer needs can ensure that enterprises can fully occupy the market and obtain higher brand value. and sales performance.
Product profit orientation: gain profits by reducing obsolete product lines. Enterprises that
choose product profit orientation have two completely different characteristics. First, the market share performance of each product line is relatively stable, whether good or bad; The overall downward trend of the market or the obvious instability of material prices on the supply side of the product. That is to say, if companies rely on increasing product lines to obtain market profits, they may face the loss of market returns obtained from existing product lines. In this case, if the product line is not quickly reduced and adjusted, the company is very likely to face a break in the capital chain, and the overall situation will be out of control.
The financial crisis has plunged the originally bustling North American auto market into a cold winter. If Toyota Motor wants to restore its former glory in advance, it needs to re-examine the strategy of each product line, investment route and integrate the supply chain layout of global production and sales. On the whole, contrary to American companies, the development model of Japanese companies is a model of non-financialization and non-stockization. The reason why General Motors was directly affected by the financial crisis is that it relied too much on the profits of the financial business, which caused GM to lose its own profit model as an automobile manufacturer. The zero-interest car purchase plan overdrafted the consumption power of Americans in advance. The next step became a fatal blow to GM.
An important heritage in Japanese culture is “production first”, that is, “creation culture” is far superior to “money-making culture”. Because of this, the representatives of Japanese companies, Toyota and Panasonic, attach great importance to product profit strategy. We have seen that what Toyota is most willing to talk about is its relentless pursuit of high quality, low cost, and low fuel consumption. When Ford Motor is advocating “economy of scale”, Toyota advocates “based on the idea of completely eliminating waste, The production method that pursues the rationality of manufacturing automobiles”.
Let’s take a look at how Toyota has changed over time (see Table 1). In response to the decrease in sales in the U.S. and Western European markets, Toyota Motor first analyzed the product lines in the European and American markets to obtain a sustained and stable large market share, and lowered the supply of other products with weak market shares in the European and American markets. A large product line is kept in supply to ensure a product profit-oriented strategy.
With fuel prices fluctuating and the market for low-energy vehicles showing an upward trend, Toyota sees the prospect of an overall rise in market demand for low-energy vehicles. Availability of vehicle types such as hybrids and minicars. At the same time, accelerate the development of plug-in electric vehicles (PHV) and electric vehicles (EV).
In response to the supply situation of soaring raw material prices, Toyota has decisively increased the supply to business growth markets, such as China, Russia and other countries, in order to obtain the maximum market share in these markets and offset and weaken the profits brought about by rising raw material prices in other regions Reduce the impact; at the same time, fully enter the Indian and Brazilian markets to gain new market shares; adhere to the product profit-oriented strategy, and expand the supply of stable profit product lines by eliminating low-profit product lines in each market to ensure sufficient and healthy cash flow.
Conclusion There are many
similar examples. The first quarter financial report of Sony Ericsson, one of the world’s top five mobile phone manufacturers, shows that it is facing a crisis of depletion of funds; Starbucks, which has always admired the exquisite coffee culture, is actually getting out of trouble by selling instant coffee… …
In this case, it is very important to analyze and adjust the strategy of each product line in time – if the overall performance of the consumer market rises rapidly, customer demand orientation will lead the company to produce more product lines to obtain the largest market share after comprehensive coverage; and in the market In the case of bleak and sluggish performance, product profit orientation will lead companies to re-analyze and screen existing product lines to obtain higher operating efficiency.
