Inside-Out Strategy vs. Outside-In Strategy: Which Marketing Approach Is Best?
- How Inside-Out Strategy and Outside-In Strategy Differ
- What Are the Benefits of an Inside-Out Strategy?
- What Are the Disadvantages of an Inside-Out Strategy?
- What Are the Benefits of an Outside-In Strategy?
- What Are the Disadvantages of an Outside-In Strategy?
- Our Conclusion: Which Approach Is Better?
To achieve success in your marketing and your business, you have a lot to consider. For starters, there’s the way you think about things—whether you opt for an inside-out strategy or an outside-in strategy. That’s why we’re going to take a deep dive into each approach and show you how shifting your thinking can help your company thrive…
As a business owner, you know you need to bring value to your customers by giving them the latest and greatest. More importantly, you need to give them the best possible solution to the problem they’re experiencing right now. At the same time, you strive to keep things running efficiently internally while leveraging your strengths.
The truth is that your company probably falls somewhere between the following 2 marketing approaches:
- Inside-out strategy
- Outside-in strategy
You may be wondering which approach is best and whether it’s okay to function somewhere in the middle. That’s what we’re going to discuss.
How Inside-Out Strategy and Outside-In Strategy Differ
Even today, there’s still some debate surrounding inside-out vs. outside-in strategy. They share the same goal: creating long-term value and ultimately achieving business success. However, they use different methods. Before you can determine which approach to take and whether you should shift your thinking, you need to understand what each involves.
What Is an Inside-Out Strategy?
The inside-out strategy focuses on—you guessed it—the internal. It looks at how businesses can use their existing resources to drive value. The premise of this strategy is that by building up internal strengths and abilities, the company will be able to sustain itself by making smart choices.
In taking this approach, businesses leverage their internal competencies, such as…
- A talented team of skilled professionals
- Long-term customer relationships
- Efficient systems and processes
When this strategy is applied, a business develops a product or service first. Then they try to find ways to create a desire for it. They highlight the quality and value of the offering, showing customers how it can benefit them.
What Is an Outside-In Strategy?
The outside-in strategy, on the other hand, focuses on the external. It encourages a company to direct its attention to customers and their experiences. This strategy is guided by the belief that providing customer value is the only way to succeed.
The approach involves starting with an external market orientation and thoroughly studying customer insights before moving forward.
Unlike the inside-out approach, outside-in starts at the end and works backward. Businesses put a lot of effort into figuring out what the customer wants or is struggling with. That way, they can come up with solutions from that viewpoint.
In short, it’s a more customer-centric approach.
What Are the Benefits of an Inside-Out Strategy?
At this point, you may assume outside-in is the way to go. After all, it just makes sense to focus on identifying what your customer wants rather than what you can sell. That said, you shouldn’t disregard the inside-out strategy altogether. If done right, there are advantages to using this approach to marketing.
Let’s look at a couple of them…
1) It Creates Short-Term Gains
The inside-out approach can lead to short-term gains since it helps companies increase back-end efficiency and cut costs. It does this by focusing more on the internal workings of a company. More specifically, it involves looking at existing resources and how a company can streamline internal operations to reduce spending.
2) It Leverages Strengths
An inside-out approach focuses on what the company is good at and/or what they love to do, what they’re capable of achieving, and so on. It’s about eliminating weaknesses and leveraging strengths. However, it does require steadiness and stick-to-it-ness.
If a company can identify these things clearly, it can be successful using the inside-out strategy.
A prime example is Apple. This technology giant has so clearly defined who they are and what they are good at that they can get mobs of people to camp out in line waiting for the latest iPhone time and time again.
3) It Encourages Authenticity
As mentioned previously, this approach involves looking inward, which encourages authenticity. When companies adopt the inside-out approach, they take a close look at…
- Who they are
- What they stand for
- Why they exist
- What they’re good at
- What they enjoy doing
Because of this, they develop a firm grasp of their identity. They understand exactly why they’re in business and what goals they want to achieve. And as a result, they’re viewed as being more real, honest, and reliable.
4) It Supports Differentiation
By taking an inside-out approach, businesses can also increase their chances of standing out in the marketplace. Applying this strategy helps companies see what they do well. But more importantly, it allows them see what they do better than others. They can build on this to differentiate themselves from the competition and gain customers' attention.
What Are the Disadvantages of an Inside-Out Strategy?
Of course, there are also some disadvantages to the inside-out strategy. As you’ve probably figured out already, taking this approach can present some challenges in the long run. And it only makes sense to cover the drawbacks as well.
So, let’s dive in…
1) It’s Antiquated
Inside-out marketing is what we know. It’s traditional. It’s how we’ve been taught to plan and strategize in business, but it’s now considered the “old way.” As technology has evolved, so has marketing. Customer expectations are much higher now; they expect to be wowed and dazzled with great solutions to their problems, which can be difficult to deliver from an inside-out perspective.
Just like the four Ps of marketing, which have been mostly retired in favor of the four Cs, this approach is thought of as outdated and unsuitable for marketing in the modern age.
2) It Distracts Companies from What Is Really Important
There are 2 things that are essential for a business to succeed:
- The ability to adapt to changes in the marketplace
- The commitment to providing customer value
Advocates of the outside-in approach, such as Rob Tarkoff, agree that inside-out almost always distracts the company from both of those things.
Sure, an inside-out approach streamlines processes and gets things working internally like a well-oiled machine, but at what cost? While companies are busy getting everything on the back end right, it can be easy to lose sight of what’s really important—providing customers with the value that will keep them coming back.
3) It Only Provides Short-Term Advantages
In most cases, an inside-out approach only offers short-term fixes for a company. This can be tempting for those who want a quick win. However, if continued, this approach can be detrimental to the company’s future.
Take Toyota, for example. The company shifted their focus away from an outside-in strategy of giving customers what they wanted to an inside-out strategy of trying to maximize growth and beat GM. As a result, their quality went down, and they lost sight of what kept their customers buying.
4) It Can Limit Adaptability
The inside-out strategy’s impact on adaptability was touched on above, but it’s a drawback that deserves extra attention. After all, being able to adapt to changing technology, customer expectations, and circumstances is necessary for survival. If we learned anything from the COVID-19 pandemic, it’s the importance of pivoting when necessary.
When a company holds tight to an inside-out approach, they often struggle to (or simply neglect to) make adjustments that allow them to stay competitive and even relevant. Focusing too much on the internal can prevent businesses from having a clear view of what’s going on outside. As a result, they fail to address vulnerabilities and gaps in their offerings.
What Are the Benefits of an Outside-In Strategy?
There are several advantages to using an outside-in strategy. And business owners seem to be catching on, too, as it’s being applied more often. Nowadays, most companies are having more success with the outside-in approach compared to the inside-out approach.
1) It’s Innovative
Move over, inside-out strategy. Your way is antiquated and ineffective in today’s marketing landscape. An outside-in strategy is unique because it uses customer trends to guide what products and services are offered. Those who apply this approach strive to keep their finger on the pulse of the market.
Outside-in companies are always trying to determine how they can expand the demand for their products or services by tuning into their customers’ needs and behaviors. Their thinking is often either ahead of or right in line with their customers. Therefore, they always provide high value.
Companies who use this strategy look at…
- How they can solve today’s problems in a new way
- What opportunities are presenting themselves
- What needs aren’t being met in the market
2) It’s Gotten Easier with Today’s Opportunities
Thankfully, we are living in a time when outside-in marketing couldn’t be easier. Why? Because of all the data we now have at our fingertips.
New types of marketing have opened up as a result, allowing us to get more in touch with our customers so we can provide more value. For example, we have omnichannel marketing, personalization, and social CRMs, to name a few. And all of these resources put us in a better position to learn about and connect with our customers so we can market accordingly.
It’s worth noting that you can’t just survey your customers and expect to get all the answers. As Henry Ford said, “If I had asked my customers what they wanted, they would have said a faster horse.” People don’t always know what they want, so you need to check your insights and data.
3) It Looks at Marketing from the Viewpoint of the Customer
From an outside-in perspective, the customers are at the center, and the company works to integrate as much as it can and deliver the best omnichannel customer experience possible. This way of thinking is what customers of today have come to expect. And it’s crucial that you meet their expectations.
If you don’t understand your customers, it’s almost impossible to succeed. And it’s not just who they are either. You also have to know…
- What they do in their spare time
- How much money they make
- What problems they have
- What goals they have
- Where they shop
- What devices they use
- What they want to become
- Which way they like to hang their toilet paper roll
(Okay, maybe not the last one, but you get our point.)
4) It Fosters Customer Loyalty
By adopting an outside-in approach, businesses can also look forward to better customer retention and advocacy. Having a customer-focused mind-set in everything you do shows customers that you understand and care about them. As a result, they’re more likely to be loyal to your brand, share positive reviews, and even encourage others to purchase your offerings.
What Are the Disadvantages of an Outside-In Strategy?
Of course, no strategy is completely without a downside. Despite all its advantages, the outside-in marketing approach still has some drawbacks. And if you plan on applying this approach in your business, it’s important to be mindful of them.
So, let’s talk about what we don’t like…
1) It Can Be Difficult to Think This Way
The fact of the matter is most people in the world just don’t think the way you need to think to create a successful outside-in strategy. In an article by Mika Yrjölä in the Journal of Business Strategy, the author states, “Moving from an inside-out, product-centric mind-set toward an outside-in, customer-focused one is no easy task.” And even experts who consult their clients on outside-in strategy, such as Chris Lema, fall into inside-out ways of thinking.
Ultimately, it takes a lot of effort and a complete shift in mindset to adopt this approach. And still, companies may find themselves focusing too much on themselves rather than their customers.
2) It Can Be Tough to Sustain
Companies that use the outside-in strategy tend to be unaware of their limitations. They don’t have as strong of an understanding of what their strengths and weaknesses are. And as a result, they can end up blindsided by this issue.
Many companies succeed initially by starting out with an outside-in approach, but then they aren’t able to maintain it moving forward.
For example, Dell used an outside-in strategy to earn higher profit margins from their larger customers, even though it usually works the other way around. But they didn’t adapt well to changing technologies and customer behavior. So, they weren’t able to sustain their success.
3) It Can Shift the Focus Too Much
To piggyback on the point above, taking this approach means a company thinks more externally than internally, so they’re less aware of their own limitations. A problem arises when that focus shifts too much in the other direction. It doesn’t just become tough to sustain the outside-in approach; it also means a company can lose sight of its internal strengths and capabilities. Worse, it can allow internal weaknesses to go unaddressed.
4) It Requires Intense Research
As you’ve probably guessed (or experienced firsthand), applying an outside-in approach requires a lot of research. The business needs to have a firm grasp of their customer and the market. That means spending hours and hours conducting quantitative and qualitative market research.
And make no mistake—this isn’t a task that can just be done once. The business needs to look at customer wants, problems, expectations, and trends regularly to stay up to date. For many companies, this can be time-consuming and expensive.
Our Conclusion: Which Approach Is Better?
Although the opinions can vary, we agree with Elena Ozeritskaya that the best strategy is probably a blend of both approaches. Most companies fall somewhere in between the 2 strategies anyway. Additionally, research on outside-in, inside-out, and blended marketing strategy states that taking a blended approach can allow for the collective function of the two approaches. Moreover, strategies tend to evolve over time as businesses change and grow.
When it comes down to it, you need to know where your strengths and weaknesses lie while also staying aware of market trends that could create opportunities or threats.
Having said that, if you aren’t providing value, you aren’t of much use to your customers. And today, that value really needs to be unique. It takes innovative thinking and keen insight that can look at the current market trends and foresee where it is going. Staying inside your own internal box is not the formula for success. Ultimately, it’s the difference between thriving and struggling to survive.