THE INSIDE-OUT VERSUS THE OUTSIDE-IN DILEMMA

The second recurring strategic marketing dilemma is of the same nature but is nevertheless significantly different. It concerns the well-recognized tension between technology push and market pull. Do we make something we want and try to find a market to sell it in, or do we let the demands and wants of customers feedback into our product planning?

Both extreme approaches lack enough integrity once you go international. For many years , a pure push from technology worked successfully in internally controlled societies such as the UK, the Netherlands, and the US. Conversely, a focus solely on the customer worked well in externally oriented cultures such as Japan and other Asian societies . However, technology push was doomed to failure when the internationalization process accelerated in the 1960s. American-produced and conceived consumer electronics were wiped out by foreign competition and Japanese products took their place.

A push strategy can work, especially in situations of low competition. In cases where competition is strong, this push approach leads to selling your fantastic products into the ultimate niche market. As it happens, this market has no customers.

The Dutch company Philips is a splendid example of an organization that still struggles with the marketing of products such as the CD and the DVD. Philips invents and Sony sells, say the cynics. It is typically Japanese to be fully empathetic with customers. But this extreme "market pull" approach also has its restrictions as customers often have no idea what they want.

This dilemma often starts from the different ideologies of marketing and R&D. Mutual communication is very essential in making this relationship fruitful, and is a precondition for reconciling this dilemma. Bang & Olufsen are an excellent example here.

Through THT's WebCue, B&O framed this dilemmas in their own words as:

The disconnection of Sales and Marketing from Research, Development, and Production and the elevation of the latter functions to a dominant position, so that marketing commercial considerations were largely ignored.

In terms of our conceptual framework, this was a dilemma between inner-directed push and outer-directed pull.

B&O had all the classic symptoms of technology-push by innerdirected, individualistic genius entrepreneurs, who had built a company that celebrated their own notable strengths and (after the death of Olufsen, one of the founders) played down what they lacked. The market, sales, customers, service, and effective distribution were neglected: everything that lay outside the select criteria of " brilliant professionals" was in the wider community. From these B&O took little or no direction. The dilemma is shown in Figure 9.2.

Figure 9.2: Inner-directed push versus outer-directed pull

B&O

Bang & Olufsen faced the challenge to develop an understanding of the evolving market and patterns of demand, before aligning its own. products with this knowledge. "We had to teach people how to think in business terms, without sacrificing their pride in their creativity and their products," its CEO Anders Knutsen recalled. "Beauty, style, and technical superiority were everything. No one had been paying attention to development costs or commercial success." The product had actually taken the place of the people who were supposed to lead.

Knutsen regarded this imbalance as so serious that he made himself the head of Marketing and Sales until an internationally experienced VP could be found. In this way he was able to discover facts that the company had long ignored for too long. "B&O thought communication was a one-way process and that its customers were dealers, not consumers. Of course, the dealers were passing on our arrogant treatment to the final customers." Anders Knutsen discovered that dealers used the B&O aura to upgrade the image of their dealerships, while putting most of their energies into selling rival products that were better suited to the market, including Philips, Daewoo, Sony, and Grundig. These appeared reasonably priced when compared to B&O's expensive, upmarket products. "There was a radical disconnection between the product and the market," Knutsen recalled. "It was as if we communicated to the product and not with the people." ^[1]

 

B&O's museum-type exhibits and System 6000, which was built without anything to play on it, are symptomatic of an excessive emphasis upon the vertical axis at the expense of the horizontal. The Break-point plan, point "X," is the culmination of this chronic imbalance, as B&O faced a cash-flow crisis.

Knutsen realized that he must move towards the marketing "horn" of the dilemma, that is the horizontal axis. As we've seen, he appointed himself marketing director pro tem , at which point he discovered that distributors were using B&O's reputation for quality as a backdrop window dressing for selling rival products. His solution was the butterfly model, with products and marketing to the final consumer as two coordinated "wings" of the same operation. Fewer, but more dedicated, distributors facilitated dialogue with consumers and the company. Consumers could order direct from retail outlets and build up a modular system over time, allowing them to spread the cost.

A form in which this dilemma can manifest itself comes from the tension between a focus on a limited number of products or an extension of the range or portfolio. The advantage of focus is depth. The disadvantage is that many opportunities can be missed with existing customers. The advantage of extending a range is that the producer can exploit existing brand reputation and distribution channels. For the customer, however, it becomes messy ... look at the confusion between Classic Coke, Coke Light, Caffeine-free Coke, Cherry Coke, and Vanilla Coke - especially if they stand side-by-side on a single shelf.

There is also a related strategic marketing dilemma between product and concept. We think that Ries and Trout are going a bit too far in concluding that advertising is going into a dead end street if it focuses on the specific characteristics of a product. Marketing must be a "war of concepts," in which the whole system of values needs to be addressed. We believe that, if an organization wants to be internationally successful, it needs to choose a modular approach, in the same way that Bang & Olufsen and Lego have done. They have united the outstanding quality of their specific products with becoming growing systems or ways of life.

^[1] Source: Trompenaars and Hampden-Turner (2001).