The Marketing Orientation
The Marketing Orientation Lay Views of Marketing Ask the average person what marketing is and a range of answers will probably be forthcoming. Typically, the answers offered tend to fall into three loose categories:- Presenting an organisation and its products to potential customers. Launching, advertising and promoting new products to support the sales force. Llaslng with advertising and sales functions to attract new customers to existing products. The problem with all of the above, however, is that they emphasise what marketers do rather than what marketing actually Is.
To arrive at a more formal definition, we herefore need to consider the underlying philosophy behind the marketing function which, as we shall see, has evolved subtly over the years. Generally speaking, the marketing concept can be seen as having evolved via three distinct developmental stages:- Production Orientation (pre 1950s) Sales Orientation (1950s-80s) Marketing Orientation (1980s+) A word of caution, though. In each of the above, the dates provided represent only a rough guide to the dominance of particular business orientations – they are not absolutes, as some text books would have us believe.
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The reality is that organisations ave always deviated from these general trends. Even today, for instance, we can find firms still rooted in the traditional production orientation phase, whilst Adam smith espoused the virtues of a market-led approach to management as early as the eighteenth century! tore In many ways, the production orientation phase can be seen as an inevitable consequence of mass industrialisation. Expressed simply, this phase in the development of marketing is characterised by a continual focus upon the product.
Manufacturers work on the assumption that products, when produced in sufficient quantities and at the correct price, generate consumer demand. When sales fall, the response is therefore simply to lower prices further through increased productivity. It is a simple philosophy and highly effective in situations where demand far outstrips supply. The classic example of the production orientation is the Ford Motor Company. Prior to the Second World War, conditions were right for mass automotive production.
Craft production techniques maintained high prices and demand was far in excess of supply – mainly because very few people could actually afford a car. Within this climate, Henry Ford developed the assembly line method of production and the Model T Ford was born, the first relatively inexpensive mass-produced car. The focus was very much on minimising production costs wherever possible, hence Ford’s now famous assertion that consumers could have “any colour, as long as it’s black! ” The Model T Ford was a resounding success, but its market dominance was actually quite short-lived.
Many of the problems the company experienced are typical of an organisation adopting a production orientation in its marketing strategy. In particular, low-cost mass production is very easy to replicate by new market entrants and Ford was almost put out of business by intense competition from General Motors. As both supply levels and consumer disposable income increased, GM began to offer a greater range of colours and refinements to a more discerning new clientele. The Ford Motor Company soon began to face severe financial problems, particularly when supply eventually began to overtake demand.
Supply-demand problems are not the only dangers associated with a production orientation, however. So-called marketing myopia can also be a danger, companies focused solely upon their own products and those of their immediate competitors failing to recognise threats emerging in other industries. Expansion in the dry leaning industry, for example, was halted almost overnight by developments in fabric technologies and the growth in domestic appliance ownership. On a more general level, even where a product does not become obsolete, over-refinement can lead to a widening gulf between consumer needs and product specification.
The home video recorder, for instance, became increasingly complex during the 1980s and 90s, to the extent that consumers began to complain quite vocally that the product was becoming too complicated to actually use! So, the production orientation centres management of the marketing function around ass production of the product itself, continuous cost reduction and product innovation forming the basis of marketing strategy. Such an approach is very replicated by competitors and the tactic is vulnerable to marketing myopia and problems of consumer-product “fit”.
The Sales Orientation To a certain extent, the adoption of a sales orientation can be seen as an intuitive (some would say “knee-jerk”! ) reaction to the problems of the production oriented phase. If demand is falling, simply go for the “hard sell” and persuade customers to buy through aggressive promotion. It is this philosophy which leads to the common ay view of marketing as merely being “selling”. The problem with this approach is that it still focuses attention firmly on the product as produced, the emphasis being upon sales rather than consumer satisfaction.
This is fine where a company’s market affords few opportunities for repeat business (e. g. fitted kitchens, double glazing). Even here, though, it can be argued that dissatisfied customers can damage a company’s reputation through word of mouth. Moreover, where competition intensifies, a sales orientation demands ever larger budgets in order to merely hold on to existing consumers. Quite simply, a company ends up pending more and more money on promotion Just to stand still. Take the example of the package holiday.
From the mid 1960s, demand increased dramatically and the initial success of a few companies (e. g. Thomson) was soon under severe threat from intense competition. The holiday market became ever more “cut-throat” and the emphasis was firmly on cutting prices to drive out competitors. Low prices were often at the expense of quality and consumer satisfaction, however, and travel agents soon became as notorious as estate agents in the consumer psyche. Established companies began to resort to ever more ingenious (or often Just bizarre! methods of promotion.
Thomson, for example, introduced the so-called “honest” holiday brochure, including negative comments about a particular hotel or resort alongside the traditional sales “blurb”. Initiatives such as these were, however, typically greeted with cynicism by consumers. Moreover, they completely missed the point – instead of making a virtue of honesty about your product’s weaknesses and spending a fortune trying to persuade customers to buy a product you know doesn’t quite satisfy their requirements, wouldn’t it be far simpler to Just find out exactly what the consumer wanted and then provide it?!?
The sales orientation, then, uses aggressive pricing and promotion to counter increasing competition and falling demand. Such a strategy can be quite effective as a short-term “fix”, but in the longer term organisations must strive to provide added value as price differentiation narrows and there are few further production savings to be made. Towards a Marketing Orientation interrelated sets of environmental factors:- Increasingly sophisticated and diverse consumers, with more disposable income (e. g. epending on the consumer, a car can be a mode of transport, a status symbol or even a hobby). Increasing competition and globalisation (e. g. ue to low labour costs overseas, falling trade barriers, the growth of the Web). Decreasing product differentiation (e. g. generic drugs, look-a-like products and “clones”, lower price differentiation, etc. ). New technologies (e. g. traditional watch-making effected by developments in electronics, printing effected by computer technologies, music CDs and cassettes by mp3s on the Web, etc. . In essence, the marketing orientation places the customer’s needs at the heart of business strategy and is based around a view of marketing as being “the ability to create and keep profitable customers” (Brown, 1987). Let’s consider that definition for moment. By creating customers, Brown means that organisations should be monitoring the environment in which the business operates and acting on opportunities presented by changes in consumer needs and/or competitor activities.
Similarly, keeping customers refers to the need to minimise threats to the organisations existing customer base arising from changing consumer needs and/or competitor activities. And profitable customers? The key here is the need to focus primarily upon those customers with the potential to generate revenues which exceed business costs, rather than on Just pursuing any customer at any price. In effect, then, the emergence of a marketing orientation marks a transition from an organisation having an efficiency goal (“Doing the right things”) to the adoption of an effectiveness goal (“Doing things right”).
So, a more appropriate definition of the term marketing might be as follows:- “Marketing is the management process responsible for identifying, anticipating and satisfying customer requirements profitably. ” Chartered Institute of Marketing (1999) Characteristics of the Marketing Orientation Sadly, no single definition of a marketing orientation exists on which all would agree. Some authors focus primarily upon the need for customer and competitor intelligence (e. g. Kohli & Jaworski, 1990), for instance, whilst others focus more on the organisation of the business unit itself (e. . Narver & Slater, 1990). In a review of the literature, however, Lafferty and Hult (1999) identify four key features of a marketing oriented firm, common to all current theoretical perspectives:- Customer Focus: All models place the importance of identifying and satisfying customer needs at the heart of the business, together with the need to strive to provide added value to the customer in the face of intense competition and the ontinual erosion in product/service differentiation.
This focus is seen as pervading all areas of the organisation as a guiding principle, of equal relevance even to those functions with no direct customer contact at all. Marketing is thus seen as a business philosophy rather for all within the organisation, rather than as Just a particular person or team’s Job. Information Dissemination: The second common feature is the emphasis on a need for comprehensive information about the organisation’s customers, competitors and operating environment.
There is a recognition that successful organisations are ntelligence driven, with a thorough understanding of customer needs and motivations, together with the potential impact of competitor activities upon them. Information is disseminated throughout the firm, not Just within the marketing function, and input is encouraged from all areas and levels. Interfunctional Coordination: Following on from the above, it is not sufficient to merely disseminate intelligence if the organisational mechanisms are not in place to ensure inclusive planning.
All models of the market-led firm therefore stress the need to act upon information received in a coordinated way, with strategic and actical decisions being taken interfunctionally. Taking Action: Finally, all models agree that organisations need to be continually amending strategy in light of current and anticipated market developments. This responsiveness should be corporate wide, utilising all of the firm’s resources to proactively ensure continuing satisfaction of customer needs. ursuit of added value at the heart of its activities, has a corporate culture which shares information and ideas across functions, and adopts a management structure which ensures maximum responsiveness to changing circumstances via inclusive tactical decision-making processes. Identifying the Business Orientation How do we know if a business is “marketing-oriented”? One test is simply to ask the company the deceptively simple question: “What business are you in? ” Exercise: Ask a senior manager in your own organisation this question. What do you make of his or her reply?
What does it tell you about the organisation’s approach to marketing? If you get the opportunity, try asking senior members of staff in the Business School the same question! If the organisation is production or sales oriented in its marketing philosophy, the answer given will focus firmly on the product or service offered for sale. So, seen from this perspective, a senior executive of a company such as IBM might describe the business in terms of “selling computers”. By contrast, a marketing oriented executive would probably define IBM as “providing solutions to customers’ business problems”.
In this latter definition, the emphasis has switched from selling a product to satisfying consumer needs. Managing Marketing In a marketing-oriented organisation, successful management of the marketing function cab be divided into four key areas: analysis, planning, control and organisation. Analysis: Successful marketing begins with a thorough understanding of company, ompetitor and market activities. Information and its dissemination becomes a crucial resource, informed by marketing research and the ongoing development and refinement of marketing information systems.
Planning: Following on from the above, market opportunities must be rigorously assessed and appropriate strategies developed. Through careful planning, customer needs become the focus of corporate decision-making and resources are more efficiently allocated toward their satisfaction. In effect, the marketing function acquires a crucial role in subsequent production, financial and human resource Control: Progress of the strategies developed must be continually monitored and, where necessary, amended appropriately.
The marketing-oriented company sees control mechanisms as an essential failsafe, enabling corrective action to be taken as soon as possible should the need arise. Organisation: Last but not least, effective marketing management requires an organisational structure which allocates specific responsibilities to specific individuals, encourages effective communication throughout the organisation and, most importantly perhaps, encourages all those employees within the organisation ho do not have direct contact with the consumer to nevertheless remain totally focused upon satisfaction of the customer’s needs.
We will return to all of the above in subsequent sessions, particularly the final session in the marketing block. CASE STUDY: CORUS The case study for this lecture is called “Developing a stronger customer focus” and concerns organisational changes made by the steel corporation Corus. The case study itself poses five basic questions to help guide your analysis:- 1 . Why is it important for business organisations today to be willing to change? 2. What external difficulties did Corus face while it was introducing the change process? 3.
Why did Corus’ Construction and Industrial Unit create a series of account managers? 4. How did the changes that took place at Corus’s Construction and Industrial Unit involve a change of culture? 5. How could you evaluate the effectiveness of the changes made at Corus? When reflecting on the case study after the session, there are a few particular issues you might want to consider in relation to these lecture notes. For instance:- Does the company now satisfy the criteria for a marketing oriented organisation in erms of its customer focus and organisational philosophy?
What were the obstacles and potential pitfalls in achieving the current business orientation? What do you think a senior Corus executive might give today as an answer to the question “What business are you in? ” Do the changes made simply involve marketing, or are there specific areas you might pick out where the interface with strategic management and operations are particularly apparent? Thinking about issues such as these after discussion of the case studies each week will help enormously when it comes to the course assignment and exam!