Module Marketing Management

Topic Customer Needs and Market Orientation

Copyright 2006-2011, GlobalNxt University. All rights reserved.

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Table of Contents

1. Introduction

2. Customer Needs

3. Market-Oriented Organisations and the Marketing Concept 4. Markets and Targets

5. Target Marketing 6. Self-Assessment

7. Summary

1. Introduction

How would you define a railroad firms business?

Consider what happened to the railroad industry in the US and in many other

countries. At its prime, many in the railroad industry thought the industry would enjoy unstoppable growth and profits. However, the automobile and airplane

industries crashed that illusion. How did that happen?

The railroad companies believed that they were solely in the railroad business. They

did not realise that their real business was in transportation - not merely in trains

and tracks. By concentrating only on the products they made rather than on the reasons for making them, railroads conceded much of the transportation business to

manufacturers of cars, trucks and airplanes.

Objectives:

Upon completion of this topic, you should be able to identify customer needs

describe the features and advantages of having a market-oriented mindset describe market segments and target marketing

2. Customer Needs

The example of the railroad industry is from "Marketing Myopia", a classic article

written by marketing scholar, Theodore Levitt, more than 40 years ago. According to Levitt, any business that wants to succeed must define itself as being in the business

of satisfying customer needs. It must never see itself simply as a maker of products

or a provider of services.

As the needs of people change, they require different solutions. The product that is

indispensable today may disappear tomorrow and be replaced by a better alternative that satisfies customer needs.

Customer Needs = Growth Opportunities

Module Marketing Management

Topic Customer Needs and Market Orientation

Copyright 2006-2011, GlobalNxt University. All rights reserved.

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"An industry begins with the customer and his needs," Levitt wrote, "not with a

patent, a raw material or a selling skill." According to Levitt, there is no such thing as a growth industry. Rather, there are only "growth opportunities" and the companies

poised to take advantage of them.

Currently, despite market corrections and the end of the "dot-com" boom, the

Internet is viewed as a rich source of growth opportunities. One company that spotted these opportunities early on was Cisco.

Customer Focus

Just having the marketing staff adopt a customer focus is not enough. Ideally, everybody in the company should have a customer-oriented mindset. In Levitts

words, "the entire business process [consists] of a tightly integrated effort to discover, create, arouse and satisfy customer needs."

3. Market-Oriented Organisations and the Marketing Concept

Market-oriented organisations are in a position to act upon the marketing concept.

Kotler and Keller (2006) describe the marketing concept as an orientation requiring

firms to "sense and respond", versus the product-centred orientation of "make and sell". That is, we first strive to fully understand our customers problems, including

expressed and latent needs, and then attempt to solve those problems by developing solutions that are better than those provided by competitors.

Stanley Slater and John Narver, pioneers in measuring and studying the outcomes of market orientation, state: "A business is market-oriented when its culture is

systematically and entirely committed to the continuous creation of customer value." (Slater and Narver 1994, p. 20). That is, an organisations competitive advantage,

and consequently financial performance, rests on providing superior value and higher

satisfaction to customers.

Research generally supports the hypothesis that organisations with a higher market

orientation enjoy superior financial performance than other organisations. For example, Sue Pulendran, Richard Speed and Robert Widing (2000) reviewed

research from North America and Europe that tested and generally supported the proposition that market orientation drives superior performance. Further support for

the proposition was provided from a study the authors carried out in Australia.

What makes up a market-oriented organisation?

Market-oriented organisations are

customer-oriented competitor-oriented

focused on co-ordinating activities across functional areas to provide customers with superior value

Market research provides the means to acquire information on customers and competitors, which is disseminated to the functional areas, such as manufacturing,

marketing, service operations, human resource management and research and development. These functional areas work together as a team for the purpose of

creating products and services that deliver superior value.

Module Marketing Management

Topic Customer Needs and Market Orientation

Copyright 2006-2011, GlobalNxt University. All rights reserved.

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Too often, relevant information is not gathered and disseminated in a timely manner to those who need it. In addition, functional areas do not always work closely with a

common purpose of providing customers with superior value. Sometimes, customers and other areas within the organisation are viewed as enemies who oppose the end

and means of the organisation in its attempt to achieve a competitive advantage.

A key advantage to being a highly market-oriented organisation is that it helps to

adapt to market and technological turmoil. Kotler and Keller (2006) show that

markets and technology are in a state of rapid change. In reviewing these changes, consider how market-oriented firms would respond to the threats and exploit the

opportunities provided by the new economy.

The following topic examines the tools marketers use to contribute to this process.

4. Markets and Targets

Even within the same market, not all buyers have the same needs. For instance,

take the consumers of a brand of cola. Some only want to purchase two-litre plastic bottles, whereas others prefer 350ml cans that can be easily bought from vending

machines. To group consumers according to these different needs, marketers rely on a process called market segmentation.

Market segmentation is appropriate when the needs of a group of buyers differ from those of other groups in the same market. A market segment shares similar needs

that relate to certain other shared traits, such as income level, lifestyle choices and

gender.

In the cola example, consumers of two-litre plastic bottles could constitute a distinct

market segment, eg, married families with two or more children. Another segment could be consumers of individual 350ml cans, eg, single college students living in

Module Marketing Management

Topic Customer Needs and Market Orientation

Copyright 2006-2011, GlobalNxt University. All rights reserved.

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campus dormitories. The needs of each of these two segments differ from each other

and from those of other segments within the cola market.

Identifying a Segment

What information do marketers use to identify and describe market segments? Many use the following three-step process.

1. Survey consumers: Collect data on consumer attitudes, motivations and

behaviour. Examples of data-collection methods include focus groups and surveys.

2. Analyse survey data: Use statistical techniques to construct segments. 3. Profile consumers: Create a "profile" for each segment, including relevant

information on demographics, attitudes and behaviour.

From this data, market segments are identified and named. In addition, information

gathered in focus groups and other interview settings can help marketers develop one of the most powerful tools in marketing: the means-end chain.

Means-End Chain

A means-end chain is a graphic representation that tries to answer the question:

What do consumers value that draws them to a particular product or service? Values

are abstract things, such as love, happiness and self-esteem. They are the real reasons why consumers buy the products they do. Values motivate purchases.

How Does It Work?

A means-end chain breaks down the product experience into at least three levels.

Attributes: What qualities make the product function in the desired way? Consequences: What will the product do for the consumer? What benefit(s)

does it provide? Values: Why are these consequences important to the consumer?

Note that these levels reflect the way a consumer thinks about the product

experience. To emphasise this point, means-end chains often use the consumers own words to describe attributes, consequences and values.

Marketers apply insights from means-end chains to key areas of the marketing process. These insights guide decisions on everything from segmentation and

targeting to product development and positioning.

5. Target Marketing

After marketers have identified distinct market segments, they must decide whether or not to target them. One framework for making this decision is called the "three

Cs": customer, company and competition. You can use the "three Cs" to help you decide if you should target a particular market segment.

Once a firm decides to target a certain segment(s), a marketing program may be created or tailored to suit the needs and preferences of the target market.

One form of segmentation includes grouping customers according to their volume of

purchases from the organisation in a given timeframe. High volume segments should generally receive greater benefits than low volume segments, a notion that provides

the logic underlying customer relationship management (CRM). CRM, satisfaction and

Module Marketing Management

Topic Customer Needs and Market Orientation

Copyright 2006-2011, GlobalNxt University. All rights reserved.

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value are addressed in greater depth in the last topic of this module, Customer

Relationship Management.

6. Self-Assessment

Now, try the self-assessment questions to test your understanding of the topic. Click the following link to open the Self-Assessment in a new window.

Self-Assessment

Q1. What are the three features of a market-oriented organisation?

1. Acquire information on consumer. 2. Concentrate on co-ordinating activities across functional areas to offer

excellent value to consumer. 3. Focus on internal work processes to expedite the waiting time experienced by

the consumer.

4. Gather data on competitors.

Q2. Which one of the following statements about customer needs and market

segmentation is true? 1. Market segmentation is appropriate when the needs of a group of buyers are

identical to those of other groups in different markets. 2. Not all buyers have the same needs within the same market.

3. Buyers are always drawn to a particular product or service because of its cheaper pricing.

Q3. Which two of the following statements reflect the way a consumer thinks about a

product experience in the means-end chain? 1. It is convenient to carry the small plastic holder along the trip.

2. Its attribute is its outer coating which is a lacklustre grey. 3. It is valued for the vibrant image associated with it.

7. Summary

This topic covered the following main points:

A market-oriented company not only needs to be customer-oriented and competitor-oriented, but it aims to offer superior value to customers.

Market segmentation via surveying and profiling customers allows the company to separate consumers with different needs.

The marketer can use a means-end chain, which breaks down the product experience into attributes, consequences and values to find out the values

that motivate purchases.

After distinctive segments are identified, marketers have to decide whether to target those segments based on their analysis of the 3Cs: customer, company

and competitor. References Levitt, T. "Marketing Myopia." Originally published in 1960. Harvard Business Review, September-October 1975, 1-12. Myers, J.H. Segmentation and Positioning for Strategic Marketing Decisions. Chicago: American Marketing Association, 1996. Slater, S.F. and J.C. Narver. "Market Orientation, Value and Superior Performance." Business Horizons 54.4 (1994): 20-35. Pulendran, S., R. Speed and R. Widing. "The Antecedents and Consequences of Market Orientation in Australia."Australian Journal of Management 25.2 (2000): 119-145.