Marketing Oriented Approach - Essay Example

?The dynamic business environment caused by phenomenon such as mergers and acquisitions, globalization, free trade, shorter product lifecycles, rapideconomic growth as well as technological advancements have all exerted significant pressure on the top management’s ability to proactively deal with the changes and respond to them as quickly as possible (Kumar et al., 2011). The failure to respond aptly to market changes has led many renowned firms, including Circuit City, out of business (Kumar et al., 2011). Hence, it has become increasingly important for business managers to make themselves abreast of the various orientations that a company can adopt in line with its business strategy in order to compete successfully in today’s corporate rat race. To this end it is useful to compare and contrast between firms that lie at two ends of the spectrum: the marketing oriented firms versus the production oriented. A marketing oriented approach is a ‘reactive’ approach in that companies produce new products/services based on customer needs and wants (Kotler, 2007). However, it goes further than that in that it aims to establish long term profitable relationships with the customer (Jeff, 2009). The aim of such firms is not just delivering a product has profitable customer demand but also establishing long term association with them by exceptional customer service. Such service may be in the form of superior after sales service and/or consultation services provided by salespeople (Jeff, 2009). Kotler elaborates on the concept of marketing orientation by claiming that holistic marketing orientation is essentially a process that enables companies to capture customer lifetime value. The concept of building long lasting relationships with customers enhances the company’s ability to understand the customer and retain him for a lifetime. Thus, the Pareto rule that 20% customers bring in 80% of the revenue is very well recognized by this approach which aims at capturing a customer and retaining him for life. Companies that therefore drifted away from the idea of offering low prices towards offering a brand experience. Today’s customer is no longer price conscious; infact, contemporary trends have made the customer of today pressed for time with multiple claims on an individual’s scarce time. Hence, convenience and satisfaction is the need of the hour. Thus, rather than competing on cost, companies today are competing on attempts to provide a pleasurable brand experience to its customers. On the other hand, the production oriented approach is a ‘proactive’ approach in that the company first produces the product/service that is most feasible for the company in terms of its competitive priorities (cost, quality, delivery, flexibility) and then makes an effort to sell it to the customers. Thus, production oriented firms are inclined towards mass production of goods that they are able to produce at the lowest cost due of economies of scale (Jeff, 2009). Perhaps, an obvious difference then is that companies adopting marketing oriented approach are able to offer differentiated, innovative and unique products as opposed to production oriented firms that offer standardized, low cost items at several locations (Jeff, 2009). Hence, the fundamental difference between the two is that in the former the ‘customer’ is the driving force behind a new product whereas in the latter, the ‘company’ is the driving force. Furthermore, in production oriented companies the role of the sales force also changes; from that of prior consultation to ‘pushing’ the product to the customer once it’s produced (Jeff, 2009). Hence, the marketing oriented companies adopt what is known as a ‘pull’ strategy (that is having the customer buy the product he/she wants) as opposed to the ‘push’ strategy of production oriented firms (that push the product it develops based on low costs to the customer) (Kotler, 2007). Although both have successfully co-existed since a long time, it has been realized that most successful companies adopt the marketing oriented approach. Companies that adopt the marketing oriented approach are focused on delivering high customer value (Kumar et al., 2011). However, the marketing oriented approach involves more than just customer orientation- it also requires a competitive orientation; that is, positioning your products relative to those of competitor’s within the market place (Kumar et al., 2011). On the contrary, companies that engage in production orientation often fail to take up a comprehensive competitive analysis; thus, their chances of success are minimized. Furthermore, the concept of production orientation was born much before that of marketing orientation. During industrialization and the onset of capitalism, the former approach flourished as businesses primarily aimed at cutting costs, improving productivity and efficiency and maximizing their output (Proctor, 2000). Companies to date that adopt this ‘inward looking approach’ as it was called; ignore the more fundamental dynamic environment in which they operate (including all stakeholders) (Kumar et al., 2011). On the other hand, marketing oriented companies tend to take an ‘outward looking approach’ by aligning their internal processes in line with external forces (Kumar et al., 2011). Such companies often start with an assessment of target market, focusing on the customer’s needs, inter departmental co ordination known as ‘integrated marketing’ ( as opposed to the dominant role of finance and manufacturing in production oriented firms) , the final production and after sales service (Klopper, 2006). Hence, companies with a production orientation may claim that they are travel agents, whereas, the same under marketing orientation would claim that they offer a travel ‘experience’ by enabling people to make their dreams come true (Proctor, 2000). It can perhaps not be generalized as to which firms are better; those with marketing orientation or those with production orientation, since much depends on the nature of product itself. For instance, in the case of necessities such as bread, rice, sugar, wheat etc. it makes little sense for companies to adopt a marketing oriented approach since it is assumed that there will always be a demand for these necessities ( that is; there’s a certainty of demand). Hence, production oriented firms are successful in cases where the demand for their products outstrips supply (Klopper, 2006). In this case clearly, much is gained by reducing costs and adopting efficiency in production methods so that these basic commodities are accessible by all. Similarly, in high growth environments companies may gain more by adopting both marketing and production orientation as it’d enable them to come up with innovations at low costs. Furthermore, some companies may not even adopt a clear cut bi-polar strategy. Such companies lie somewhere in the middle of the spectrum and adopt a hybrid of marketing oriented and production oriented approach, for instance, General Motors (Klopper, 2006). Although it is difficult to define what the best approach is, it has been observed that companies engaging in marketing orientation tend to be generally more successful than those companies adopting production orientation. This is primarily because marketing approach is seen as need of the hour in the midst of more ‘informed’ customers who are more aware than their predecessors and also place higher demand for greater variety of products (Klopper, 2006). Hence companies constantly need to come up with something new as product lifecycles have become shorter, and companies can no longer afford to stick to one variety of the product all the time (Kotler, 2007). Constant innovation, thus, drives companies towards marketing oriented approach. In the cut throat competition that characterizes the marketplace today, companies constantly need to position and differentiate their offerings compare to those of their competitor’s in order to avoid losing their competitive advantage and market share to their rivals. Furthermore, research has proven that a marketing oriented approach encourages companies to invest heavily in developing its internal capabilities (such as efficient information systems management, customer relationship management and vendor management) and also integrate customer’s needs and wants at every point in the product development (Kumar et al., 2011). Although returns from these ‘soft’ investments take time to realize, they reap rewards for the company in the long run (Kumar et al., 2011), thus providing it with ‘sustainable’ competitive advantage as opposed to one which is short lived. Furthermore, marketing orientation enables successful long term performance, simply because it enables companies to move into the direction of acquiring tacit knowledge that is inimitable and hence a source of sustainable competitive advantage (Day, 1994). Research has also proven that marketing orientation enables companies to shift their focus from retention to acquisition, which implies greater increase in profits as compared to sales (Kumar et al., 2011). Furthermore, it has been argued that marketing orientation and learning orientation go hand in hand; that is, companies that adopt a marketing orientation also encourage a learning organization. Such an orientation manifests itself in encouraging new ways of doing things, trial and error and is more open to failures. Consider the case of 3M. It wasn’t until the lady spontaneously started sticking notes that the concept of ‘sticky notes’ was born. Had the management discouraged new ideas, the miraculous invention wouldn’t have materialized. Much the same can be said about Apple and Steve Job’s inclination towards marketing orientation. The company went at length to develop effective, sustainable customer relationships by continually offering innovative products, ranging from iPod, itunes, iPhone, iPad, etc. The fact that change is the new constant these days simply means that the conventional production oriented philosophy is rusting and giving way to its more contemporary counterpart, marketing orientation. No longer can corporations be so sure of high customer demand for its products in future simple because of the multiplicity of substitutes and changing customer preferences. Thus, companies today have to step out of their comfort zone in an attempt to survive and sustain themselves in the marketplace. To conclude, the significance of marketing oriented approach in today’s corporate world cannot be negated. It can be undoubtedly claimed that marketing orientation helps companies reap the rewards of enhanced customer information which is the gateway to customer’s hearts. Thus, while some industries may still thrive on production orientation, it seems that virtually every offering today is being perceived as a ‘brand’ as opposed to a mere product . Hence, if production orientation is claimed as the birth of strategic orientation for firms, marketing orientation can be claimed as the future. References: Day, G.S., 1994. The Capabilities of Market-Driven Organizations. Journal of Marketing, 58, pp.37-52. Jeff, T., 2009. Sales Management. New Delhi: Dorling Kindersley Pvt. Ltd. Klopper, H.B., 2006. Marketing: fresh perspectives. Cape Town: Pearson Education South Africa. Kotler, P., 2007. Framework For Marketing Management. 3rd ed. New Delhi: Dorling Kindersley Pvt. Ltd. Kumar, V., Jones, E., Venkatesan, R. & Leone, R.P., 2011. Is Market Orientation a Source of Sustainable Competitive Advantage or Simply the Cost of Competing? Journal of Marketing, 75(1), pp.16-30. Proctor, T., 2000. Strategic marketing: an introduction. New York: Routledge. Read More