Articles
Theories of
Marketing
FULL BOOK
, Topic 1A. Core of Marketing Thinking
Narver and Slater (1990) - The Effect of a Market Orientation on
Business Profitability
Reading questions:
What is the core of this definition and how is it related to marketing and the marketing
concept?
Set of beliefs that put the customers’ interest first. Market Orientation (MO) is the
implementation of the marketing concept. The ability to generate, disseminate and use
superior information about the customers.
Marketing concept: Being Market-Oriented is essential to success.
The organization culture that creates the necessary behaviors (1. Additional benefits or 2.
Reduction in acquisition and usage cost) for the creation of superior value for buyers (SCA)
which lead to superior performance for the business.
Why is it important to measure this concept?
Market Orientation leads to better market performance because it creates superior value for
customers SCA
Measurement of MO (new measure development, reliability, construct validity). Success
measure is profitability.
Can you explain why some companies benefit more from (investments in) Market
Orientation than others?
Depends on how internally oriented they are, commodity businesses are often price-driven
instead of value-driven (because of its telemarketing approach). Commodity business
profitability is U-shaped (don’t invest at all so the costs will be diminished or invest much in
market orientation to ensure profitability. Median is not suggested). For non-commodity, the
more MO, the more profitability.
Research Gap = Yet to date there has been no valid measure of a market orientation and no
systematic analysis of its effect on the business performance.
Goal of this research = The development of a valid measure of market orientation and analyse
its effect on a business profitability.
They define and try to measure the concept of market orientation in their research
What is a valid measure of market orientation in order to increase the business performance
/ profitability?
SCA (sustainable competitive advantage) = expected value of product A exceeds the expected
value of product B.
Value of a product (for the buyer) = Difference between the expected benefits and the
acquisition and usage costs. A seller creates value in two ways: Increase benefits in relation to
the costs and decrease costs in relation to the benefits.
,The conceptual model
Market orientation = The organization culture that creates the necessary behaviors (1.
Additional benefits or 2. Reduction in acquisition and usage cost) for the creation of superior
value for buyers (SCA) which leads to superior performance for the business.
Three behavioral components of market orientation:
1. Customer orientation: all activities to acquire information about the buyers. i.e.
Understand the buyers value chain over time (subject to internal and market
dynamics) to be able to create superior value continuously. “Who are my potential
buyers now and in the future?”
2. Competitor orientation: All activities to acquire information about the competitors.
i.e. understand the short-term strengths and weaknesses and long-term capabilities
and strategies of the key current / potential competitors.
3. Interfunctional coordination: The business’s efforts derived from the information
about the buyers and competitors (involving more than just the marketing department
– the entire business) to create superior value for the buyer. Sharing of information
and resources derived from the first two in order to integrate and collaborate different
departments within the business.
In short These 3 behavioral components of market orientation comprehend the activities
of market information acquisition (verkrijgen van) and information dissemination
(verspreiden van) and respond on this (voldoen aan de behoeften van de klanten) in order to
create customer value.
Two decision criteria of market orientation:
1. Long term focus in relation to profits and in implementing each of the three
behavioral components. A business must constantly discover and implement
additional value for its customers to prevent that its competitors have created a
superior buyer-value. This needs a range of long-term tactics and investments.
2. Profitability (economic wealth) The ultimate goal for businesses in a market
orientation. Profit is a component of market orientation (without profit, a business is
not able to perform the thee behavioral components of market orientation) and
profitability is a consequence of market orientation.
For non-profit organizations, the objective of profitability is survival (to cover long-run
expenses).
The effect of Market Orientation on Business Performance
Hypotheses: There is a positive relationship between market orientation and business
profitability.
It is easier for distribution and specialty business to implement the three components of
market orientation than it is for commodity businesses. The value for commodity goods is
often price-driven. Two reasons why implementing a market orientation may be not
successful for commodity businesses:
3
,
Theories of
Marketing
FULL BOOK
, Topic 1A. Core of Marketing Thinking
Narver and Slater (1990) - The Effect of a Market Orientation on
Business Profitability
Reading questions:
What is the core of this definition and how is it related to marketing and the marketing
concept?
Set of beliefs that put the customers’ interest first. Market Orientation (MO) is the
implementation of the marketing concept. The ability to generate, disseminate and use
superior information about the customers.
Marketing concept: Being Market-Oriented is essential to success.
The organization culture that creates the necessary behaviors (1. Additional benefits or 2.
Reduction in acquisition and usage cost) for the creation of superior value for buyers (SCA)
which lead to superior performance for the business.
Why is it important to measure this concept?
Market Orientation leads to better market performance because it creates superior value for
customers SCA
Measurement of MO (new measure development, reliability, construct validity). Success
measure is profitability.
Can you explain why some companies benefit more from (investments in) Market
Orientation than others?
Depends on how internally oriented they are, commodity businesses are often price-driven
instead of value-driven (because of its telemarketing approach). Commodity business
profitability is U-shaped (don’t invest at all so the costs will be diminished or invest much in
market orientation to ensure profitability. Median is not suggested). For non-commodity, the
more MO, the more profitability.
Research Gap = Yet to date there has been no valid measure of a market orientation and no
systematic analysis of its effect on the business performance.
Goal of this research = The development of a valid measure of market orientation and analyse
its effect on a business profitability.
They define and try to measure the concept of market orientation in their research
What is a valid measure of market orientation in order to increase the business performance
/ profitability?
SCA (sustainable competitive advantage) = expected value of product A exceeds the expected
value of product B.
Value of a product (for the buyer) = Difference between the expected benefits and the
acquisition and usage costs. A seller creates value in two ways: Increase benefits in relation to
the costs and decrease costs in relation to the benefits.
,The conceptual model
Market orientation = The organization culture that creates the necessary behaviors (1.
Additional benefits or 2. Reduction in acquisition and usage cost) for the creation of superior
value for buyers (SCA) which leads to superior performance for the business.
Three behavioral components of market orientation:
1. Customer orientation: all activities to acquire information about the buyers. i.e.
Understand the buyers value chain over time (subject to internal and market
dynamics) to be able to create superior value continuously. “Who are my potential
buyers now and in the future?”
2. Competitor orientation: All activities to acquire information about the competitors.
i.e. understand the short-term strengths and weaknesses and long-term capabilities
and strategies of the key current / potential competitors.
3. Interfunctional coordination: The business’s efforts derived from the information
about the buyers and competitors (involving more than just the marketing department
– the entire business) to create superior value for the buyer. Sharing of information
and resources derived from the first two in order to integrate and collaborate different
departments within the business.
In short These 3 behavioral components of market orientation comprehend the activities
of market information acquisition (verkrijgen van) and information dissemination
(verspreiden van) and respond on this (voldoen aan de behoeften van de klanten) in order to
create customer value.
Two decision criteria of market orientation:
1. Long term focus in relation to profits and in implementing each of the three
behavioral components. A business must constantly discover and implement
additional value for its customers to prevent that its competitors have created a
superior buyer-value. This needs a range of long-term tactics and investments.
2. Profitability (economic wealth) The ultimate goal for businesses in a market
orientation. Profit is a component of market orientation (without profit, a business is
not able to perform the thee behavioral components of market orientation) and
profitability is a consequence of market orientation.
For non-profit organizations, the objective of profitability is survival (to cover long-run
expenses).
The effect of Market Orientation on Business Performance
Hypotheses: There is a positive relationship between market orientation and business
profitability.
It is easier for distribution and specialty business to implement the three components of
market orientation than it is for commodity businesses. The value for commodity goods is
often price-driven. Two reasons why implementing a market orientation may be not
successful for commodity businesses:
3
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