Market oriented

What Is Market Oriented?

Being market oriented means a business prioritizes understanding and satisfying the needs and wants of its customers and monitoring its competitors. This philosophy falls under the broader umbrella of Business Strategy, guiding how a company designs its products, services, and overall operations. A market oriented organization continuously gathers and disseminates market intelligence across all its departments, ensuring that decisions are made with a clear focus on delivering superior customer satisfaction and value. This involves not only understanding current market demands but also anticipating future trends to achieve a sustainable competitive advantage.

History and Origin

The concept of market orientation evolved significantly from earlier business philosophies that dominated the industrial era. In the late 19th and early 20th centuries, many companies operated under a "production concept," where the primary focus was on efficiency in manufacturing and distribution, assuming that consumers would purchase readily available and affordable products. This was followed by a "sales concept" from the 1920s to the 1950s, emphasizing aggressive selling and promotion to move products, often without deep consideration of consumer needs¹⁰,⁹.

A pivotal shift occurred in the mid-20th century with the emergence of the "marketing concept," which laid the groundwork for modern market orientation. This new approach asserted that organizational goals are best achieved by understanding and fulfilling the needs and wants of target markets better than competitors. This marked a fundamental change from producing what a company could make to making what the market wanted, fostering long-term customer relationships⁸. The academic discourse surrounding market orientation gained significant traction in the late 1980s and early 1990s with influential works by scholars such as Kohli, Jaworski, Narver, and Slater, who further defined its components and explored its impact on organizational performance. Their work solidified market orientation as a core principle for organizational success, emphasizing customer focus, competitor intelligence, and inter-functional coordination within an organizational culture⁷.

Key Takeaways

• A market oriented company focuses intensely on understanding and satisfying customer needs and preferences.
• It involves gathering, disseminating, and acting upon market intelligence across all internal functions.
• The approach emphasizes long-term customer satisfaction and building strong relationships.
• Market orientation is linked to enhanced financial performance and greater competitive advantage.
• This philosophy contrasts with earlier business concepts like production or sales orientation.

Interpreting the Market Oriented Approach

Interpreting a market oriented approach involves assessing how deeply a company embeds customer and competitor insights into its core operations. It's not merely about having a marketing department, but rather a pervasive organizational culture where every business unit contributes to understanding and serving the market. This means actively engaging in market research to identify evolving customer desires and competitor strategies.

A truly market oriented firm will use this intelligence to guide every aspect of its business, from product development and pricing to distribution and customer service. The effectiveness of this approach can be seen in a company's ability to adapt quickly to changes in supply and demand, introduce relevant innovations, and consistently deliver value that differentiates it from rivals.

Hypothetical Example

Consider "EcoGlow," a hypothetical startup aiming to produce sustainable home cleaning products. Instead of developing a product and then trying to sell it, EcoGlow adopts a market oriented strategy from the outset.

1. Market Research: EcoGlow conducts extensive market research, including surveys, focus groups, and analysis of online discussions, to understand what consumers truly desire in eco-friendly cleaning solutions. They discover a strong preference for plant-based ingredients, refillable packaging, and a fresh, natural scent that is not overpowering. They also identify a gap in the market for effective, yet gentle, surface cleaners for homes with pets.
2. Competitor Analysis: They analyze existing eco-friendly brands, noting their pricing, ingredient lists, packaging, and marketing messages. They identify strengths and weaknesses of competitors, such as some brands having strong natural ingredients but lacking effective refill programs.
3. Product Development: Based on this intelligence, EcoGlow's chemists develop a line of concentrated cleaning solutions using specific plant extracts for scent and cleaning power, ensuring they are pet-safe. They design stylish, durable bottles with easily accessible refill pouches made from recycled materials. This product development is directly informed by consumer desires and competitive gaps.
4. Inter-functional Coordination: The marketing team works closely with production to ensure the packaging is viable, and with logistics to establish a smooth refill delivery system. Customer service representatives are trained to handle inquiries about ingredients and sustainability, reinforcing the brand's core values.
5. Launch and Feedback: Upon launch, EcoGlow actively solicits customer feedback through online channels and loyalty programs. They quickly learn that while customers love the product's effectiveness, some find the refill pouches slightly messy. In response, they develop a new, easier-to-use dispenser mechanism for the refill pouches.

By being market oriented, EcoGlow not only launched a product that resonated with its target market but also continuously adapted to improve customer satisfaction, fostering early brand loyalty.

Practical Applications

The market oriented approach is broadly applicable across various industries and organizational sizes, influencing strategic decisions and day-to-day operations.

• Product Innovation: Companies use market orientation to drive innovation by understanding unmet customer needs. For example, a tech company might develop new software features based on user feedback and observed pain points, rather than just what engineers can build.
• Service Delivery: Service-based businesses, such as financial advisory firms or healthcare providers, apply market orientation by tailoring their offerings and client interactions to individual preferences and evolving demands for personalized service.
• Competitive Strategy: By closely monitoring rivals, market oriented companies can anticipate competitive moves and develop strategies to maintain or gain competitive advantage. This includes pricing strategies, product differentiation, and targeted promotions within the marketing mix.
• Organizational Alignment: It promotes inter-departmental collaboration, ensuring that functions like research and development, production, sales, and customer service work in concert towards common market-centric goals, ultimately enhancing overall firm performance⁶. Studies have consistently shown a positive relationship between market orientation and business performance, including aspects like sales growth, market share, and profitability⁵.

Limitations and Criticisms

While generally highly beneficial, market orientation is not without its limitations and criticisms. An excessive focus on current customer desires can sometimes stifle radical innovation, as businesses might become overly reactive to existing trends rather than proactive in creating new ones. If a company solely focuses on what customers explicitly state they want, it might miss opportunities to introduce groundbreaking products or services that customers haven't even conceived of yet⁴.

Another challenge is the potential for misinterpretation or inaccurate measurement of market orientation levels within an organization³. Managers may believe their company is market oriented, but underlying behaviors may not fully align with the philosophy. For instance, internal departmental silos can hinder the essential inter-functional coordination required for a truly market oriented approach, leading to disjointed efforts or a failure to disseminate critical market intelligence effectively². Furthermore, continuously satisfying all customer needs can be resource-intensive and, in some cases, negatively impact profitability if not balanced with strategic segmentation and cost considerations¹. Over-segmentation to satisfy niche demands might dilute the overall brand message or operational efficiency.

Market Oriented vs. Product Oriented

Market oriented and product oriented are two distinct business philosophies that dictate a company's strategic focus. The core difference lies in their starting point for business operations and product development.

A market oriented company begins with the customer. It invests heavily in understanding customer needs, preferences, and challenges through market research and continuous feedback. Products and services are then developed or adapted to meet these identified needs, with the ultimate goal of achieving customer satisfaction and building long-term relationships. The emphasis is on "making what customers want."

In contrast, a product oriented company starts with its own capabilities and expertise. The focus is on producing high-quality, innovative products that the company believes are superior, often driven by engineering or production efficiency. There's an underlying assumption that if the product is excellent, customers will naturally be drawn to it. The emphasis is on "selling what the company makes." While a product-oriented approach can lead to groundbreaking innovations, it carries the risk of developing offerings that, despite their quality, fail to resonate with market demand if customer needs are not adequately considered.

FAQs

Why is being market oriented important for a business?

Being market oriented is crucial because it helps a business create products and services that genuinely meet customer needs, leading to higher customer satisfaction, stronger brand loyalty, and ultimately, improved financial performance. It enables companies to adapt to changing market conditions and gain a competitive advantage.

How does a company become more market oriented?

A company can become more market oriented by fostering an organizational culture that values continuous market research and intelligence gathering. This involves actively listening to customer feedback, monitoring competitors, and ensuring that insights are shared and acted upon across all departments, from product development to sales.

Is market orientation only for large companies?

No, market orientation is beneficial for businesses of all sizes. Even small businesses can adopt a market oriented approach by keenly observing their local customers, interacting with them regularly, and understanding the offerings of local competitors. The principles apply universally, though the methods of gathering market intelligence may vary based on resources.