In this article we will discuss about:- 1. Defining Market Orientation 2. Importance of Market Orientation in Relationship Marketing 3. Conceptualization 4. Current Trends.
Defining Market Orientation:
Although the term ‘market orientation’ has been in common usage for some time, it does not possess a universally accepted definition. That market orientation is not confined to an ‘official’ meaning and is used in variety of capacities by academics and practitioners alike is evidence of the concept’s utility and versatility. To appreciate its crucial significance to the marketing agenda in general, and RM in particular requires a sound understanding of the ways in which the term is applied.
To begin with, there is the consideration of whether a ‘market’ orientation is something distinct from a ‘marketing’ orientation, and whether or not being ‘customer focused’ or ‘competitively aware’ is also the same or something different again. Some would argue that using the term market or customer, instead of marketing, draws attention away from internal organizational issues and overemphasizes external activities.
The danger is that, although firms need to be in tune with their markets, customers and competitors, an excessive focus on external matters can distract from the achievement of the returns required for long-term business survival. For many organizations, these returns are measured as profits of one form or another, while for others they may be the achievement of social, charitable or artistic objectives.
Internal factors that affect profitability or the achievement of other types of objective, so the argument goes, should consequently have an equal influence on the practice of marketing. Thus marketing managers must have an appreciation of such areas as resource availability, cost generation and organizational capability, as well as an in-depth knowledge of customer wants and needs. Without the former, it becomes difficult to gauge the attractiveness of different marketing opportunities; without the latter, the business is unfocused.
An alternative approach to understanding the term market orientation recognizes that the rationale for raising the topic of market, marketing or customer orientation is one and the same- namely, being more effective in the market place.
Trying to distinguish between these and similar terms is, accordingly, a waste of valuable management time. The debate adds little to the way in which marketing is practised or relationships are developed, and detract from the need to ‘get on’ with the business of business.
The terms that are used and the ways in which they are depicted do, however, reveal telling characteristics of the market-oriented business.
These can be listed as:
(i) A concern for customers
(ii) An interest in the business environment
(iii) A focus on competitors
(iv) Curiosity about the future
(v) An entrepreneurial spirit
(vi) A desire for action
From a practitioner’s point of view, the important point is not whether a market orientation is something distinct from a marketing orientation (and so on), but that a management team is able to draw on the marketing principles involved and to agree a direction for the business.
In this sense, it is important that marketing theory is able not only to support actively the determination of strategic business decisions, but also their implementation. For many commentators, therefore, the various terms are used synonymously.
The number of closely related terms which can be collected under the umbrella of ‘market orientation’ indicates the multidimensional nature of the concept, rather than any serious disagreement about the fundamentals of its meaning.
This multidimensional quality of market orientation can be illustrated by reference to the ways in which different writers have gone about explaining and exploring the concept. For some, market orientation is essentially a philosophy, representing a body of thought that can be applied to an organization or used to underpin the way in which a business is conceptualized or run.
Others view market orientation as an aspect of organizational culture, where attention is focused on the values, attitudes and beliefs collectively held by an organization’s members. Still others conceive the concept as a process- a series of actions or activities that constitutes the heart of what it means to be market-oriented.
Given this diversity of perception, one way of moving towards a better understanding of market orientation is to identify common themes within the various usages of the term. What becomes strikingly apparent from such an exercise is the emphasis each approach places on the interaction between an organization and its external environment, and the myriad of relationships that this interaction generates.
Thus, while the substance of a market orientation may vary from one observer to another, the object of a market orientation remains the same. Market orientation, therefore, embodies-
The ability and willingness of an organization to take account of external factors which will affect the possibility of it developing profitable exchanges (however profit is defined by the organization), both now and in the future, and the ability and willingness of the organization to take action as a result of these factors to strengthen important relationships.
This definition of market orientation acknowledges the constraints placed on organizations by internal factors (their ‘ability and willingness’ and their need for certain outcomes or ‘profit’) and emphasizes the key activity of effective marketing organizations- understanding and acting upon the dynamics of the markets in which they operate and concentrating on critical relationships.
Describing market orientation in this way implies that market-oriented organizations will be particularly interested in understanding how a number of different factors will affect future sales (or exchanges), and what profits or outcomes might be gained from them.
According to the existing array of texts dedicated to marketing and competitive strategy, these factors include:
1. Customer perceptions and preferences, both existing and potential.
2. Political, legal, economic, social, technological and institutional trends.
3. Competitors, both existing and potential.
4. Opportunities (neglected and/or new needs and wants), both existing and potential.
5. Relationships, and how they impact on marketing effectiveness.
Market-oriented organizations will therefore be interested in the acquisition of intelligence about these areas. More importantly, they will also be interested in the response this intelligence suggests and the actions that it prompts.
A market orientation can thus be seen to incorporate a number of sub- orientations, which together form its substantive elements. Collectively, these sub-orientations emphasize the need for an external focus and make the concept more explicit, ‘fleshing out’ what is otherwise a difficult concept to define. Importantly, they stress the prevalence and prominence of relationships in marketing.
The Importance of Market Orientation in Relationship Marketing:
As the ultimate goal of marketing is profitable exchanges, market orientation is about laying the foundations for the establishment and growth of relationships that will deliver these exchanges. Market orientation, RM and marketing implementation, therefore, go hand in glove.
Indeed, for many writers, the term market orientation is taken to mean the implementation of RM. The more market-oriented a business, the better it is at implementing the development of marketing relationships. It is hard to conceive of an organization that has a high level of market orientation, but which fails to implement strategies developed in a truly market-oriented fashion and carried out by people working from a market-oriented perspective.
Problems with relationships are more likely to stem from organizational inadequacies, such as shoddily conducted market research or poor relationship management, rather than from deficiencies associated with being market- oriented.
Consider, for example, the many instances where managers want their organizations to become more market-oriented and to enjoy better customer relationships, but who adopt insufficient or inappropriate measures to ensure their realization. Popular initiatives such as the ‘smile campaigns’ used by service businesses represent superficial attempts at substantive change and improved relationships.
While the intentions behind them may be worthy, they are unproductive in the long term. Creating better customer relationships requires real organizational commitment, achieved through courses of action that do more than simply create the visible manifestations of a market orientation.
Conceptualization of Market Orientation:
In addition to highlighting the importance of having a market orientation, the need to find better ways of implementing marketing has also led to a number of propositions about how to conceptualize market-oriented organizations. There is no one orthodoxy on the subject and three distinct schools of thought prevail.
Each theory has been developed from a particular conventional wisdom about what is important for organizational effectiveness in terms of marketing capabilities. In turn, each has influenced the way a market orientation has been conceived and adds its own depth to the discussion.
Market Orientation as a Philosophy:
In its philosophical sense, market orientation is used to describe a particular approach to the way in which an enterprise is conceived or conceptualized. Theodore Levitt was one of the first proponents of this idea. In his seminal work, he draws attention to the importance of viewing a business in a way that is appropriate to the markets in which it operates.
His classic example was the railroads, which defined themselves as being in the railway business, rather than in the transportation business- ‘The railroads did not stop growing because the need for passenger and freight transportation declined. That grew. The railroads are in trouble today not because the need was filled by others (cars, trucks, aeroplanes, even telephones), but because it was not filled by the railroads themselves.
Levitt contrasted the railroads with companies such as DuPont, which saw their activities in a very different light. Instead of defining themselves in terms of their products, the companies concentrated on finding ‘customer-satisfying’ applications for them.
They did not abandon the search for technical excellence, but combined it with an awareness of its relevance to market needs. As a result, these companies continued to thrive while direct competitors steadily lost custom and declined.
The significance of these examples is the way in which the different self- perceptions focus attention on contrary aspects of the business. Seeing oneself as being in the railroad business implies that knowing, understanding and being proficient in running railways is the key to successful business management.
If, however, the business is seen as finding the best means of transporting people and freight from one location to another, business management takes on another dimension. The priority then becomes not running a railway, but providing transport and communication services.
As better, cheaper, faster, more effective ways of providing customer benefits appear, the transport business takes advantage of them to compete for custom. The organization that regards itself as being in the business of running railroads, on the other hand, tries to compete by running the railroad better. In those areas where alternative technologies can cost-effectively outperform the railroad, the business will never compete profitably and its future will become uncertain.
A similar example is provided by a luxury ocean cruise company whose business performance was greatly enhanced by the realization that it was closer to being in the hotel business than in the business of running cruise ships. Applying the principles of customer focus and understanding customer perceptions, the company devoted more effort to achieving service excellence than it did to merely improving the efficiency of getting from one destination to another. As a result, it delivered much higher levels of customer value.
At a philosophical level, market orientation is about giving meaning to an enterprise’s activities. It provides a set of principles for the management of a business. These principles require operations to be performed in the context of market needs. As has long been acknowledged, the purpose of the organization becomes the acquisition and retention of customers, and the value that is created for customers becomes the measure of business performance.
While strategically supportive in principle, market orientation as a philosophy offers little in the way of practical guidance. It is easier to extol the virtues of being a market-oriented organization than it is to apply them in a meaningful manner.
Market Orientation as an Organizational Culture:
One approach to linking market orientation as a philosophy to more practical issues is to look at it as an aspect of organizational culture. Organizational culture refers to the collection of values, attitudes and beliefs that dominate an enterprise. Its value lies in its ability to provide a guide for behaviour and to legitimize certain types of action over others.
The power of organizational culture is illustrated by the phrase ‘the way things are done around here’, which implies accepted standards of approach and action. As one prominent writer notes, a marketing culture is one in which the philosophical principles of market orientation rule, in policy and in practice.
Implementation of effective relationships is achieved in a market-oriented culture because the value systems of the organization are translated into an operational environment that supports and encourages behaviour that contributes value for the customer and profit for the company. However, as the following example shows, the culture of an organization can be a formidable force and may counteract philosophical tenets. Having an appropriate philosophy about the business may not be enough to ensure a market oriented culture.
The example concerns a UK national retail banking organization. Following the introduction of automated teller machines (ATMs), the bank received complaints from infuriated customers who were reliant on the machines to obtain cash outside bank opening hours.
The problem was that the machines sometimes ran out of cash. Understanding that their business was all about customer service, the bank’s central marketing function issued an instruction that ATMs should be monitored more closely and imposed a system of penalties on branches which experienced ‘cash outs’.
In a number of branches, the prevailing culture tended towards isolationist values based on a feeling of alienation from central policy-making. The predominant belief was that senior managers were intent on getting as much work out of branch employees as they could without paying for it. Therefore, the main concern of branch staff was to prevent ‘cash outs’ being reported, rather than to find ways of keeping sufficient cash reserves in the tills.
As a solution, many branches came up with the idea of folding the last note in the machine, which had the effect of jamming the ATM before it could run out of cash. In this way, no ‘cash outs’ were ever reported, but the policies developed from good marketing principles were not satisfactorily implemented.
Thinking of market orientation in terms of culture focuses attention on inherent social forces, which can discourage as well as encourage the implementation of marketing principles. While creating the right cultural environment is keys to the successful implementation of marketing and the nurturing of good relationships, the complex and intangible nature of organizational culture can make this a difficult task, especially on an organization-wide basis.
A further difficulty is that creating a particular culture relies on the absence of other values, attitudes and beliefs in order to be effective. Thus, organizations and their representatives may espouse market-oriented values, but these may be countered by attitudes and assumptions that are at odds with the essence of a marketing culture.
A business may support the notion that customers and customer relationships are important, but may tolerate employees, at whatever level, who abuse behavioural guidelines, such as staff who prefer to finish a personal conversation instead of attending to a waiting customer. Without proper organizational reinforcement, a market-oriented culture is inadequate as a means of ensuring the implementation of marketing.
Market Orientation as a Process:
The difficulties associated with achieving a market orientation have led recent writers to take a systems approach to the topic. By focusing on the tangible manifestations of a market orientation, they have endeavored to identify a set of activities that indicate the extent of its existence within an organization.
Rather than try to understand the way the business defines itself or maps organizational culture, they have concentrated on input/output relationships as a way of assessing the degree of market orientation. This approach features the processes required for a business to be market-oriented.
The starting point for examining market orientation as a process is, naturally enough, the market place itself. From a process point of view, the main element of the exercise is the systematic collection and collation of market intelligence. Since marketing is about the attainment of profitable exchanges, market factors that influence the ability and willingness of customers to engage in such exchanges form an important input to organizational processes. The regular collection, analysis and dissemination of market information provide an effective basis for measuring and improving activities that promote market orientation.
The communication of this information throughout the organization is crucially important, for an organization’s relationship with its market depends on more than just the activities of its marketing department.
Employees from almost every function can have an impact on the experience of an organization’s markets and customers. It is, therefore, imperative that every member of the organization operates from similar understandings of the market place and customers’ needs, and responds accordingly.
From a process perspective, market orientation becomes the generation and dissemination of, and organization-wide response to, market information. The degree of market orientation will depend on the extent to which these processes occur.
Research in this area has identified three key influences, sometimes termed antecedents, on the degree of market orientation within an organization.
1. Senior Management Factors:
This encompasses the extent to which senior managers are themselves convinced of the value of a market orientation and how actively they communicate their commitment to more junior employees. As senior managers help generate the organizational climate, it is important that they encourage the ‘right’ processes.
2. Inter-Functional Relations:
This refers to the degree of conflict or cooperation between different functions within an organization. Barriers derived from, say, feelings of self-importance by one group are likely to impede the flow of information around a business and inhibit coordinated responses to it.
3. Organizational Systems:
This concerns the ability of decision-making and reward systems to foster the generation and dissemination of market information and market responsiveness. Many organizations have found themselves hampered by, for instance, bonus systems that reward volume, rather than relationships, or an emphasis on acquiring new business, rather than retaining existing customers. The administrative aspects of an organization need to be in line with marketing principles if they are not to obstruct market orientation processes.
Regarding market orientation as a process is beneficial in that it provides a structured view of what issues need to be addressed to achieve a market- oriented organization. However, it is lacking in not linking these actions to a cultural context or to the behavioural requirements needed to ensure the quality and effectiveness of processes.
A process approach thus enriches our understanding of what it means to be market-oriented, but leaves us wanting in respect to its role in achieving better marketing relationships.
Current Trends in Improving Market Orientation:
Current trends in improving market orientation reflect the strengths and weaknesses of market orientation as a philosophy, a culture and a process. They are also a consequence of general developments in marketing thought which seek to address changes in business demand, capability and expectation.
One of these trends is the advent of quality initiatives under the banner of Total Quality Management (TQM). Another is the growing interest in internal marketing as a missing link in developing market-oriented businesses. Yet another is the appearance of marketing competencies as a means of identifying the skills required to achieve a market orientation.
Total Quality Management:
Although quality management and marketing may, at first sight, appear to be different animals, they have a number of important similarities. In particular, they have both been described in philosophical, cultural and process terms. Like market orientation, TQM can be regarded as a philosophy in that it entails a set of principles that give meaning to (in this case) quality issues within a business.
As with market orientation, TQM can also be seen in a cultural light since it implies that a set of values, attitudes and beliefs must be present in an organization for people to implement policies that promote quality standards. In addition, both market orientation and TQM can be approached from a systems perspective, as demonstrated by the existence of standards such as BS 5750 and ISO 9000.
A more important connection between the two concepts is their shared interest in customer perceptions. Under modern approaches to TQM, the definition of quality moves away from ‘conformance to specification’ to something which ‘meets customer requirements’. Such similarities have led to speculation that the success experienced in achieving better levels of quality may have some parallels for the improvement of marketing practice.
Where the development of marketing capabilities has been studied in the light of experiences of introducing TQM, recommendations have usually been couched in terms of ‘success factors’ of one form or another.
These criteria include:
(i) Having senior managers who lead rather than control.
(ii) Removing barriers between the different parts of the organization and taking a holistic view of the business.
(iii) Pushing responsibility for achieving quality/marketing improvements down the organization to obtain bottom-up redesign.
(iv) Providing training in both the discipline being developed and the skills associated with the new way of working, such as team working or benchmarking.
(v) Measuring, rewarding and publicizing achievements.
(vi) Making information relevant to decisions freely available.
(vii) Employing methods for analyzing and understanding situations, such as customer needs or competitor positions.
While these factors do not ignore issues of culture or organizational structure, they tend to focus on systems and processes, emphasizing the need to incorporate such thinking into the development of a more market-oriented business. On closer examination, however, many of the factors identified here are similar to those advocated within the different schools of thought about market orientation.
An alternative approach to TQM in developing a more market-oriented organization is the emerging concept of internal marketing. This is based on the idea that the skills and abilities that marketing professionals use to gain advantage in the market place can also be used to good effect within the organization itself.
Internal marketing involves regarding members of staff as customers. In applying a customer focus internally, the needs, wants and desires of employees are identified and programmes are constructed to encourage and enable them to engage in exchange activities with colleagues. The resulting collaboration not only enhances internal morale and operational efficiency, but also improves service levels to the external customer, therefore progressing the marketing campaign.
One of the vehicles for putting such an idea into practice is marketing planning. The implication is that planning for any marketing activity encompasses two strands- an external focus and a parallel internal focus. Traditional approaches to marketing planning have concentrated on the development of an external position and how internal resources should to be used to achieve it.
The logic of internal marketing is inescapable. If marketing principles make sense for external customers, then they should make equal sense for anybody else who can be regarded as a customer. Adopting the perspective that members of the organization are also customers of the organization can provide useful insights into the management of inter-functional relations and the coordination of marketing effort.
In practical terms, however, internal marketing is limited in what it contributes to the wider issues of organizational culture, since it too often defaults to a communications exercise. Selling the need to value relationships with customers is a far more complex issue than just letting people know what is going on.
Competencies for the Marketing Professional:
A further trend has seen the development of a market orientation based on the cumulative capabilities of individuals to carry out marketing tasks effectively. It implies a direct relationship between the possession of marketing competencies and the achievement of a market orientation. The implication is that an organization’s marketing activities can be improved if greater levels of competence in marketing-related skills can be acquired.
Considerable investments have been made to identify and codify the skills and abilities required of competent staff and marketing managers. Of particular interest has been the idea that measurable competencies will enable the identification of skills gaps, inherent in both individuals and organizations. This has generated long lists of essential attributes that purport to encapsulate the essence of high performance in marketing.
Naturally enough, many of the skills identified reflect areas of expertise associated with the elements of the marketing mix- product, price, promotion and so on. At a higher level, they also encompass advanced skills such as analysis, planning and decision-making.
In general, competencies of this form tend to be activity-based and related to specific actions, such as the production of a marketing plan or the influencing of others in reaching strategic decisions. This is especially true where competencies are used as a basis for appraisal and advancement. Skills and abilities that can be objectively described and observed are felt to provide a fairer basis for judging a person’s job performance.
One of the drawbacks to breaking competencies down into their component parts for this purpose is the tendency to oversimplify matters. As a result, lists of marketing competencies often ignore many important ‘higher order’, or ‘meta’, competencies that are increasingly being recognized as essential for effective management, and marketing management is no exception.
An example in marketing might be the ability to engender trust in other people (an attribute of great importance for the management of relationships with customers or when presenting market research data to, say, field sales personnel).
The development of comprehensive sets of competencies is certainly useful for identifying training needs and technical deficiencies. They are also helpful in efforts to ‘professionalize’ marketing in the same way that accountancy, law and engineering are considered to be professions. Where the identification and promotion of marketing competencies fall short is in addressing the higher order behaviours that encourage organizational philosophy, culture or processes to be more in line with marketing principles.