Market Orientation is the philosophy of a business whereby the company is customer-oriented (Customer = Market). Unlike traditional Product-oriented companies, market-oriented companies are much better at customer satisfaction. In Market Orientation, the profitability remains a baseline but is in sync with customer satisfaction.
In 1990 the term “Market Orientation” was used by Kohli and Jaworski. They saw it as more of an application of a marketing concept. According to them, market orientation is a full-fledged generation of market intelligence relating to customers’ needs – it may be past or present, spreading of the talent or intelligence across various departments and organizational-wide acceptance to it. Thus according to them, vital elements of Market Orientation are:
- Market Intelligence reaping or generation (Customers’ current as well as future needs)
- Market intelligence spreading (Generating or taking actions per Market/customer requirement), and
- Responsiveness (Responding to the action taken from intelligence generated and disseminated). This concept is called the Kohli and Jaworski Model, which is seen as a very general model of Market Orientation from an operational point of view.
In the same year, 1990, Narver and Slater gave a slightly more specific and conceptually more practical model. The model meant Market Orientation as the organizational culture that most efficiently creates the behaviours for creating high value for buyers or customers and, thus, maintenance of superior execution for the business. The major pros of this theory are the focus on “customers” and “competitors”, more clarity and relation to the concept and applicability.
Most companies are Market-Oriented, and history has shown that many product-centric companies had their downfall. Changing as per the needs and wants of customers and upgrading the products accordingly should be the primary focus of any company.
The ever upgrading mobile phones are the best example of Market-Oriented products. With the latest launches of new phones by companies like Google (Pixel 7) and Apple (iPhone 14), the products have drastically changed – all of them dictated by customer requirements.
Extended Model of Market Orientation
Based on previous definitions and trying to eliminate the earlier shortcomings, the new definition of Market Orientation can be stated as follows:
Market orientation is a corporate culture spread throughout the organization via inter-departmental or functional coordination, having the objective of designing and promoting, making a profit for the firm, top quality solutions to the firm’s stakeholders – they may be direct or indirect.
The definition can be broken down into several components as design may refer to the market research performed by the company while the promotion is to be done by the advertising department. Superior value solutions may refer to the changed or revamped services and products for the customers.
This definition marks a clear distinction between Strategic Marketing – which refers to identifying and positioning the product according to the market’s needs – and Operational Marketing, which is steps taken by the organization to implement the changes. The nature of strategic marketing steps taken will determine the effectiveness of operational marketing.
Market Orientation vs Product Orientation
As discussed above, a product-oriented company would try to sell what it produces, while a Market-Oriented company would try to produce what the customer requires. A product-oriented company would always do well in the product it produces, and it tries to sell that to the customer, irrespective of the customer’s need. It can be a risky approach for business because even though the product may be excellent, what use will it be if there is no demand from the customer?
Becoming a market-oriented company is no easy task. This does not require one-time change but constant change, innovation, and improvement. While some changes may be subtle, at other times, those changes may be complete transformations that may incur huge expenses.
Stages of Market Orientation
Although there are no official stages of Market Orientation, the following could be classified arbitrarily as stages of Market Orientation.
- Beginning: The initiation of any change is usually seen because of a threat. Missed targets year on year, customer complaints and a steady decrease in several new customers are the common cause for initiation. Identification of the critical strategies or changes that need to be implemented is made in this stage. Market research or Market intelligence data is to be relied upon. Also, internal sources like the Sales team are valuable in determining current trends and customer needs.
- Reconstruction: There is a reconstruction or reconstitution of current processes and strategies to adopt necessary change. The changes are presented to relevant stakeholders for approval. This can be a significant step as a certain group of employees may disagree with the new philosophy and may leave the company. The alignment of employees with the company’s mission and vision is of paramount importance since even an unbaked brick can bring down an entire wall.
- Institutionalization: The once new change is now starting to reward the organization in terms of increased revenue and improved performance and efficiency. Workers and employees become more involved in the change process and its implementation. The newly developed values are reinforced in the company, and problems, if any, are presented to everyone, from top management to the executive level. Everyone has their say in decision-making as well as the problem-solving process.
- Maintenance: Once new, the implemented concept or processes now become regular and part of daily tasks for the employees. New recruits are carefully trained and ingrained with the company’s new core values. The restructured image is to be maintained by the internal as well as external stakeholders of the organization. Maintenance requires a strong adoption of new policies and their implementation consistently.
Measurement of Market orientation
MKTOR and MARKOR are the two scales for measurement.
MKTOR Scale: The MKTOR scale is a 15-item, 7-point Likert-type scale, with all points specified. This measure conceptualizes market orientation with three components: customer and competitor orientation and inter-functional coordination. The average of these three is taken to determine the Market Orientation score.
MARKOR Scale: MARKOR scale is a 20-item, 5-point Likert scale, with only the ends of the scale specified. Here market orientation is again composed of three components: intelligence generation, intelligence dissemination, and responsiveness, which were major points in Kohli and Jaworski’s theory.
Challenges of Market Orientation
1. Constant Change: Managing the ever-changing and adopting new policies constantly can be challenging for any organization. This majorly affects employee turnover, not to mention time and resources to stabilize things, only to change again.
2. Wider Scope: Market Orientation requires a comprehensive view of the vision and mission and its practical applications to employees. This would also require strong coordination of various departments towards one goal, and more often than not, this is challenging.
3. Research: It may be of market intelligence, market research or research of any kind; this is one expense that the company cannot avoid if it decides to become Market-oriented. Small and Medium organizations may be unable to keep up with this since research requires a considerable budget.
Conclusion: Market Orientation prioritizes customer above products and focuses on developing a customer-centric marketing strategy. Being product centric may yield profits in short term but only Market Orientation can yield long term sustainability.