Market orientation: The construct, research propositions, and managerial implications

Table of Contents

1. Introduction: What does Market Orientation mean?

2. Marketing Concept
2.1 Four main pillars
2.2 Hurdles a company has to face

3. Market Intelligence and the Business Marketing System

4. Market Orientation: the construct
4.1 Antecedents to a Market Orientation
4.2 Consequences of a Market Orientation

5. Implementing the New Marketing Concept

6. Conclusion

List of Literature

1. Introduction: What does Market Orientation mean?

Very little attention has been given to organizational processes, such as market orientation. That is one reason why hardly anybody can explain the term. Market orientation means the implementation of the marketing concept and represents a long-term advantage. Because a market orientation is not easily engendered, it may be considered an additional and distinct form of sustainable competitive advantage. In this paper the domain of the market orientation construct will be clarified and a working definition provided.

2. Marketing Concept

The marketing concept is a business philosophy and its central tenets crystallized in the mid-1950s.

“The marketing concepts holds that the key to achieving organizational goals consists in determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors.”^[1]

The marketing concept has been expressed in many colourful ways:

- “Meeting needs profitably.”
- “Find wants and fill them.”
- “Love the customer, not the product.”
- “Have it your way.” (Burger King)
- “You’re the boss.” (United Airlines)
- “To do all in our power to pack the customer’s dollar full of value, quality and satisfaction.” (J.C. Penny)

The commitment to innovation and customer-oriented business decision making is only the first step in implementing the marketing concept. The next step is to shift the focus away from sales volume and toward profitability. When managing for profitability, not sales volume, the firm is focusing on the value its products create for customers in the competitive marketplace. Theodore Levitt drew a perceptive contrast between the selling and marketing concepts.

“Selling focuses on the needs of the seller; marketing on the needs of the buyer. Selling is preoccupied with the seller’s need to convert his product into cash; marketing with the idea of satisfying the needs of the customer by means of the product and the whole cluster of things associated with creating, delivering and finally consuming it.”^[2]

2.1 Four main pillars

The marketing concept rests on four main pillars, namely target market, customer needs, coordinated marketing, and profitability.

Target market

No company can operate in every market and satisfy every need. Therefore companies do best when they define their target market(s) carefully and prepare a marketing program.

Customer needs

A company can define its target market but fail to fully understand the customer’s needs, which is not always a simple task. Customers speak in a code that requires some interpretation. What does it mean when the customer asks for an “inexpensive” car or an “attractive” bathing suit? Unfortunately, it is hard to know how the customer will judge whether a car is really inexpensive. The fact is that the customer has not stated all of his or her needs. There are five types of needs:

a) Stated needs: (the customer wants an inexpensive car)
b) Real needs: (the customer wants a car whose operating cost, not its initial price, is low)
c) Unstated needs: (the customer expects good service from the dealer)
d) Delight needs: (the customer buys the car and receives a complimentary U.S. road atlas)
e) Secret needs: (the customer wants to be seen by friends as a value-oriented savvy consumer)^[3]

Customer-oriented thinking requires the company to define customer needs from the customer point of view. Every buying decision involves tradeoffs, and management cannot know what these are without researching customers. The key to professional marketing is to meet the customers’ real needs better than any competitor can. In his classic statement of the marketing concept, “Marketing Myopia”, Levitt built a convincing argument that the business should define itself not by its products but by the basic customer needs it was committed to satisfying.^[4] This fact is really important because it always costs more to win and attract new customers as to retain current customers. Therefore, customer retention is more critical than customer attraction.

The key to customer retention is customer satisfaction. A satisfied customer:^[5]

- Buys more and stays “loyal” longer
- Buys additional products as the company introduces and upgrades its products
- Talks favourably about the company and its products
- Pays less attention to competing brands and advertising and is less price sensitive
- Costs less to serve than a new customer because transactions are routinized

How can customer satisfaction be measured? Some companies think that they are getting a measure of customer satisfaction by counting all customer complaints. But in fact, 95% of dissatisfied customers don’t complain; many may just stop buying. Listening to complaints is not enough. The company must respond constructively to the complaints, because customer satisfaction is the best indicator of the company’s future profits. The best example for this is the clothing company L.L. Bean.^[6]

To its customers, it offers the following:

100% Guarantee

All of our products are guaranteed to give 100% satisfaction in everyway. Return anything purchased from us at any time if it proves otherwise. We will replace it, refund your purchase price or credit your credit card, as you wish. We do not want you to have anything from L.L. Bean that is not completely satisfactory.

To motivate its employees to serve the customers well, it displays the following poster prominently around its offices:

What is a customer?

- A customer is the most important person ever in this office … in person or by mail.
- A customer is not dependent on us … we are dependent on him.
- A customer is not an interruption of our work … he is the purpose of it. We are not doing a favour by serving him … he is doing us a favour by giving us the opportunity to do so.

[...]

^[1] John B. McKitterick (1957): American Marketing Association, Chicago, pp. 71-82

^[2] Theodore Levitt: Marketing Myopia, p. 50

^[3] see: Philip Kotler (1994): Marketing Management, p. 20

^[4] see: Theodore Levitt (1960): Marketing Myopia, pp. 45-56

^[5] see: Philip Kotler (1994): Marketing Management, p. 20

^[6] Brochure and poster material from L.L. Bean, Inc., Freeport, Maine