Apple’s Vision Pro $1.4bn failure shows importance of market orientation

That is how much revenue the company will roughly lose after it recently cut sales projections for the $3,500 Vision Pro VR headset in half from around 800,000 to 400,000.

And it is not only Apple. Nearly every tech giant has developed some type of VR headset or smart glasses product in recent years – only to see sales never going anywhere.

Why? It is a problem of business orientation. A recent Forbes headline summarized the problem perfectly: ‘Apple’s Vision Pro is amazing, but nobody wants one.’

But what exactly is a business orientation, why is it important, and what can marketers learn from it? Let’s dive into the actual reality – not the virtual one.

What are business orientations?

Every business or organization has a goal. For-profit companies generally want to maximize their values for their shareholders. One way by which a business chooses to achieve that goal is to have an overall orientation from the beginning.

Think of “orientation” as a guiding principle or approach. It is what is most important to the business and what it values the most – and it determines what the marketing department does. Here are some of the major ones.

Sales-orientation: These companies live or die based primarily on the success of their sales teams. Today, it is also called “sales-led growth” (SLG). Typically, these armies of telemarketers, MLM housewives, outbound email senders, and conference booth dwellers are used when the products are expensive, specialized, or technical.

In sales-oriented companies, marketing is often seen as a junior partner and the “coloring-in department” that just makes the pretty websites, ads, and brochures while the salespeople do the “real work.” Marketing will often get leads for the sales team as well. It’s basically the new buzzword of “sales enablement.”

The positive side of this approach is that a quality sales team can be the best tactical asset to have in all of marcom. But the negative counterpoint is that they are also the tactical assets that cost the most money as well as time to train.

Comms-orientation: These companies live or die based primarily on the success of their communications – usually advertising and publicity campaigns – at building brands among a mass audience. It is also called advertising-orientation.

Typically, these companies have products that are basically identical to the competition, so their brands are literally all that they have that are different. As a result, they focus not on their products but on the people who use their products. (Remember the classic ‘Choosy Moms Choose Jif’ campaign?) Think of categories such as fast food restaurants and FMCG brands.

Take these two items that I recently saw here in Tel Aviv. They are literally the exact same thing – 500ml of bottled water. But it’s because of the comms-created Liquid Death brand that people will pay 65% more for that one.

Scott Galloway likes to say that we are at the “end of brand era.” (Just see his recent interview on Jon Evans’s Uncensored CMO podcast.) But Galloway mainly discusses the tech world – and product-oriented companies are very different from comms-oriented ones.

The positive side of comms-orientation is that the work of building brands can be extremely powerful and profitable in both B2C and B2B companies. But the negative one is that – as we’ve seen in the case of Burger King – success depends on more factors than just brand advertising, and many of those will be out of your control.

Competitor-orientation: These companies live or die based primarily on the information that they can gain about the competition.

Such companies are obsessed with the competition. Sometimes, they are new entrants who quickly do what everyone else is doing just to secure an initial place somewhere in the category. Other times, everyone is racing to release a new product or open a new location first.

In terms of marketing, I cannot count the number of times I have heard someone ask, “Should we do [marcom tactic X]?” only to get the response, “Does [Category Leader Company] do X?” Basically, it is stalking other companies. (Just don’t hold a boombox over your head and play Peter Gabriel songs while doing so.)

In such businesses, marketing will tend to focus a lot on market research. The good side of this approach is that it can help you to make decisions quickly. But the bad side is the survivorship-bias fallacy.

You will never really know why successful companies are successful unless you’re on the inside. Perhaps they were successful despite doing something specific and not because of it. And you never hear about all the companies that did the same thing but were not successful.

In addition, if you just copy everything the category leader does, then second place is the highest you will ever be. At worst, you will have a product that is equal or inferior to everyone else and then compete only by undercutting them – potentially to the point of doing predatory pricing.

Product-orientation: These companies live or die based primarily on their product inventions and innovations. Today, it is also called “product-led growth” (PLG).

In such companies, marketing is reduced to communications – and often just a specific set of comms that includes SEO and direct-response ads. Even “product marketing” is usually within a separate product department rather than the marketing one (despite the adjective modifying the noun so that the term is literally a subset of marketing).

The positive side of product-orientation is that these companies can be the most innovative, famous, and successful – the ones that get all the big headlines. And it looks impressive in Silicon Valley because they can claim – falsely – that they were successful without any “marketing” (as they wrongly define the term).

However, the negative reality is that many businesses will create products that they like but that no one else wants to buy, such as Apple’s Vision Pro. Part of the reason is that smaller startups that are trying to grow will ignore proper research and market segmentation while using a flawed “ideal customer profile” (ICP) model that only hinders long-term success.

Market-orientation: These companies live or die based primarily on how well they know their target (well, market). This is the classic marketing approach that I hope all of The Drum’s readers know by now.

First, do qualitative and quantitative research, create a segmentation map, choose which segments to target, decide how to position yourself to each segment, and develop financial-based funnel objectives. Then – and only then – do you orient the four tactical Ps of product, price, distribution and marcom around your earlier strategy.

The positive side of market-orientation is that much research suggests that this is the best approach for long-term, profitable success. (From just one journal article: “Managers of high-tech companies should develop and maintain the highest possible level of market orientation.”) The negative one is that it takes time and money to accomplish – and newer, small companies might not be able to afford that.

Business orientations are complex

So, there are many orientations in business. The key is to find the right balance for you because companies rarely fit entirely into only one. (This graphic is meant just to illustrate the general complexity and not show anything precise between all of the described orientations.)

Take the VC-funded B2B high-tech software world with which I have been most familiar. Every company has a mix of product-orientation and sales-orientation. “Marketing” exists solely to tell the world that the product is wonderful, create websites and sales collateral, and do marcom to get immediate leads for sales. That is all.

Senior executives are so desperate to close deals for the revenue that they do deep discounting and ignore marketing’s warnings about future pricing power and lost future revenue. They do not care about quantitative market research and segmentation or brand or building long-term mental availability among the 95% of people who are not currently in-market. Believe me, I’ve tried – many times.

As a perfect example, just see what this chief executive officer recently posted on LinkedIn:

Not only does the product-oriented tech world understand neither marketing nor having a market-orientation, they also barely even think about it at all.

What business orientation does Apple have?

But in contrast to tech startups, Apple has had a combination of product-orientation and market-orientation – and there has actually been a debate for years over which one gets the greatest emphasis.

Of course, Apple is famous for product innovation. The company released one of the first personal computers (the Apple II) in 1970, the iPod portable MP3 music player in 2001, and the first smartphone (the iPhone) in 2007.

But behind those new products, there had often been market orientation as well – especially since Tim Cook became chief executive after Steve Jobs’s death.

In 2013, Apple announced the new iPhone 5s and 5c. Rather than release a new, innovative product at a high price that it would then actively push on to customers, Apple reacted to the realities of the newer, poor markets on which it wanted to focus. The company oriented itself to the market by offering a cheaper iPhone that contradicted its longstanding approach.

“Apple has proven that they are a company that will react to market forces in an attempt to grow share rather than just focus on breathtaking innovation to do so,” analyst Scott Lowe wrote that year.

As Duke University professor Christine Moorman, founder of The CMO Survey, also noted in Forbes in 2019, Apple has created an “experience ecosystem” of customer touchpoints, built a community of evangelists, and organized their marketing activity by customer segment and not product.

But Apple seems to have dropped the marketing ball with its Vision Pro headset. First, few people in general want to wear clunky, weird things on their faces – it’s why such things will likely never gain mass appeal.

Second, as Jonathan Reichental wrote in the Forbes article mentioned at the beginning, “the market size for VR headsets, while not trivial, is narrow and niche.” Gaming will likely remain first and foremost while other industries such as health care and education might also be interested.

The politics of ‘marketing’ at companies

Now, why is this important? Knowing the business orientation of your company – or the company where you want to work – is critical to marketing’s success.

Why? Everything from finance to sales to customer support to R&D to HR is generally the same everywhere. But marketing is the only business function whose core purpose is different at almost every type of company – and it depends on the overall orientation.

That explains much of the debate and controversy in the marketing industry. We argue over terminology, frameworks and whether we even need CMOs in part because everyone’s knowledge and experiences depend on the orientations of their individual workplaces.

Marketers at product-oriented companies think about leads. Those who are comms-oriented think about brands. Competitor-oriented marketers stalk their prey like the protagonists in 1980s and 1990s romcoms stalk their love interests.

Sales-oriented ones look at brochures and white papers. Meanwhile, we who are market-oriented will wish that everyone had proper training. Put one of each in a room, and you’ll have a bigger mess than Hootie and the Blowfish.

Still, the issues go beyond our internal industry squabbles. If you start at a company with a sales orientation and expect that marketing should oversee sales because direct selling is (to us) just one of many types of tactical marcom execution, you’re going to have a bad time.

If you go to a product-oriented company and think that marketing should be above product because product is (to us) just one of the four tactical Ps, you will not last long.

If you join a business that is obsessed with the competition and explain that everyone has a severe case of survivorship bias and that they should be market-oriented instead, you had better update your resume immediately.

If you obtain a position at a comms-oriented company and remind them that brand advertising is a weak force and not as powerful as they think, you will probably be gone by lunchtime.

If you find a job at a place that truly has a market-orientation, then make sure that you find a way to stay there for life. I am convinced that they are increasingly rare.

To learn a company’s orientation, here are four example questions to ask your current or potential boss:

• “Is it most important that the company have a great product, a great sales team, great knowledge of the market and customers, great advertising, or great competitive research?” Sometimes, the direct approach is best.

• “What is the role of the marketing department in the overall organization?” This can provide some insight into how the company works – and the politics involved.

• “On what is the marketing team judged?” Revenue growth? The number of qualified leads? Competitor insights? Market insights and strategy? Brand perception changes?

• “To whom does marketing report?” If marketing – together with sales – reports to a “chief revenue officer” or “chief growth officer,” then the company is sales-oriented. If marketing reports to product, then the business is product-oriented.

Luckily, many companies that are not market-oriented are still adopting more and more of the practices. In the product-oriented tech world, new startups are now finding “product-market fit” by showing initial versions of the product to people in the target market, getting their thoughts, and adjusting accordingly. If only they would keep going in that direction.

But if you are extremely unlucky, you will end up at a place like UK retailer B&M. Specifically, chief executive Alex Russo recently told Marketing Week this in the context of prioritizing where to focus: “I would put it into pricing … We are very aggressive on social media, which is free, but we don’t spend money on marketing. We create content.”

Wherever you are, you probably heard the sound of my forehead hitting my desk multiple times when I read that. Proper training and market-orientation, people.

The Promotion Fix is an exclusive, long-running column for The Drum, contributed by global keynote marketing speaker Samuel Scott. His opinions are only his own.