Theories of Marketing () fall semester- Summary of all articles
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Theories of Marketing
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Universiteit Van Amsterdam (UvA)
This document includes a summary of all reading materials (e.g. academic journals, research paper, conference press) mandatory for the exam and structured as follows: introduction, findings, conclusion and practical implications. This summary is thorough and detailed enough to successfully pass the...
master in business and administration consumer marketing track
entrepreneurship and management in the cre
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Universiteit van Amsterdam (UvA)
MSc Business Administration - Consumer Marketing
Theories of Marketing
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ToM
Week 1 - Development in Marketing Thinking and
Strategies
Article 1: Narver & Stangly - The effects of Market Orientation on Business Profitability
Introduction
- Exploratory study which looks at the effects of market orientation on business profitability
- For organisation to outperform others and create a SCA the expected value of their offerings
needs to exceed the expected value of alternative solutions
- The value of a seller offering to a buyer is the difference bw what the buyer perceives as the
offering expected benefits and what the buyer perceives as it’s expected total acquisition and
use costs.
- Market orientation is the organization culture that most effectively, efficiently create
necessary behaviours for the creation of superior value for buyers, and thus,
continuous superior performance for sellers/businesses
- Marketed oriented businesses, continuously examine these alternative sources of SCA to see
how it can be most effective in creating sustainable superior value for its present and future
target buyers because it aims at keeping long-term beneficial relationship with its buyers.
- Market orientation consists of 3 behavioural components:
1- Customer orientation: acquiring information about the buyers to best target it’s
needs and understand it’s perception. Requires a seller to understand a buyer’s
entire value chain as time goes by and how/why it can change.
- Value can be created by: (1) increasing the benefits to the buyer in relation to
the buyer costs, (2) decreasing the buyer’s costs in relation to the buyer’s
benefits
2- Competitor orientation: acquiring information about the competitors in order to
understand the ST strength and weaknesses and LT capabilities and strategies
of both the key current and the key potential competitors. It involves analysing and
spotting the current and potential competitors over time across the entire set of
technologies used and capable of satisfying the current and expected needs of the
seller’s target audience (e.g. jeans dyes, jeans manufacturers, jeans designers etc)
3- Interfunctional coordination (IC) internal organisation: refers to business
coordinated efforts that is, involving more than just the marketing behaviour to
create above average performance. It refers to the coordinated utilization of
company resources in creating superior value for target customers. Therefore any
individual in any function of a business can potentially contribute in enhancing the
value created for buyers.
- Closely tied to customer and competition orientation because the results of it
affect the actions taken by a business.
- Achieving effective interactionional coordination requires an alignment of the
functional areas incentives and the creation of interfunctional
dependency so that each area perceives its own advantage in operating
closely with the others.
, - In developing effective IC, all departments must be extremely sensitive and
responsive to the perception and needs of all other departments in the
business. They must feel a sense of interdependence and responsibility.
Hypothesis
- Market orientation is a one-dimensional construct consisting of three behavioural
components and two decisions criteria; Customer orientation, competitor orientation,
interfunctional dependency a LT focus and profitability objective and each measure can be
measure reliably = CONFIRMED
- Greater business market orientation leads to greated profitability= YES BUT it depends on the
time frame you’re looking at when comparing commodity and non-commodity businesses
Results/Conclusion:
- Both for commodity and non-commodity businesses, market orientation is an important
determinant of profitability.
- Noncom businesses there is a monotonic positive relationship bw market orientation
and profitability
- Commodity businesses a positive relationship bw market orientation and profitability
is only found for above the media market oriented businesses
- Market growth is an important determinant of profitability for both types but the
relationship differs:
- Noncom businesses: ST market growth is positively associated with
profitability
- Commodity businesses: ST market growth reduces profitability. Basic
industries as well as long-established technology driven industries have a
U-shaped market orientation/profitability relationship. Commodity businesses
that are substantially market orientated are able to initiate value-increasing
programs with powerful buyers to effect a mutually profitable outcome.
- Market orientation is important for every market environment
- The highest degree of market orientation are associated with the highest profitability
- The study validates the relationship between market orientation and profitability
Limits: more longitudinal and controlled studies are needed because they are many factors at play
and market orientation is also correlated with factors such as customer retention, new product
success and sales growth, which remains unexplore. PS. the article is from 1990
,Article 2 (Stanley, 1998) Customer-led and Market oriented: Let’s not confuse the two
Introduction
This article criticises the customer orientation that has been supported by marketing literature
because it has led to confused business processes and supposedly a decline of America’s
industrial competitiveness causing firms to loose their leadership positions
- The marketing concept says that an org goal is to discover the needs and wants of your
target audience and satisfy those more effectively and efficiently than competitors in
order to have a SCA
- Goals of this article: address the debate that exist between businesses claiming that a market
orientation is better than a customer led orientation or vice versa
Findings
- The debate still exists because they talk about two different management philosophies.
The first one being customer led as a ST philosophy in which org respond to customer-s
expressed wants. The second being market oriented which refers to a LT commitment for
org to understand customer needs--both expressed and latent--and to developing
innovative solutions that produce superior customer value.
- Customer-led businesses:
- Leverage customer surveys to enhance their understanding of customer wants and
perception of current products and services and technique such as concept testing
and conjoint analysis to guide the developments of new products and services
- Reactive and incremental
- Suitable for stable environments
- Short term effect on business performance
- E.g. retail banking has been successfully using this philosophy to improve their
customer experience by routinely collecting information about their customers and
how to best target their segments
- Limits:
- Existing customers can constrain a firm's ability to innovate because the
innovation may threaten their user experience = rigidity
- Relies on the customers ability to express and articulate their needs
which not everyone is able to do
- Demands the customer to help devise solution to those needs while these
are often uninformed about the latest technologies
- Customer satisfaction surveys are also unreliable surveys and indicators
to purchase or the likelihood of repeat business
- Effort to measure customer satisfaction can overwhelm other strategic
performance indicators such as those concerned with product success or
organisational learning
- Only ST effects
- Market oriented businesses
- Resemble customer led businesses because they are also interest in the
customer’s existing needs. Therefore they may also exhibit behaviours similar to
customer led org.
- However Market oriented businesses are committed to understanding both
the expressed and latent needs of their customers and the capabilities and
plans of their competitors through the processes of acquiring and
evaluating market information in a systematic and anticipatory way
- Radical, anticipatory and long term, in depth focussed
- Suitable for turbulent environments
, - Interested in both existing and latent needs
- Combine traditional survey techniques with other techniques to discover customer’s
latent needs and to drive generative learning by closely observing the behaviours and
customer’s use of products or services in normal routines.
- E.g. quantitative and laddering interviews using MEC
- Market oriented businesses work closely with lead users and strive to push
innovation to target new latent needs or even form new ones. Lead users are
windows into the future and not anchors to the past
Conclusion
- Market orientation is not the same as marketing orientation; marketing is only one
function of the business. A business is market oriented only when the entire org embraces
the value implicit therein and when all business processes are directed at creating superior
customer value.
- Both innovations and marketing are critical aspects of business success and leveraging
a SCA. Without the other, neither will be sufficient for LT success.
- Implications
- In a stable/predictable environment understanding the customer wants and
needs facilitates the durable and valuable relationships between sellers and
buyers
- Targeting pragmatist (existing customers)
- In a turbulent environment, the ability to anticipate evolving customer needs
and to generate new value-creating capabilities based on that knowledge leads
to favourable LT success.
- Targeting visionaries (lead users)
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