Developing Customer Orientation Strategy Marketing Essay

Each company in the market survives by focusing on customer needs and delivering goods and service to this customer. Many companies in Lebanon have a customer focus or market orientation. There are many ways for this. The most important one is the customer driven approach

In the customer driven approach, customer need is the drive of all strategic marketing decisions. The company will not pursue a strategy until it passes the test of consumer research. The starting point is always the consumer. The company thinks that there is no need to spend money on research and development for products that customers will not buy. Those systems are basically the four P’s (Product, Price, Place and Promotion). If any of those four P’s had a problem, the business could be in trouble and the consumer demand will decrease.

TABLE 2.1 the 4 P’s of MarketingMarketing-Mix.png

Source: This table is extracted from the Marketing mix, Management notes, 2010

Most companies spend their resources on customer orientation. It helps them to understand customer needs and focus on marketing strategies. In this way, customer satisfaction will increase and the performance of the company will eventually increase. This direction is a set of activities that companies use for supporting beliefs in sales that permit considering customer’s needs as the major priority of the firm. (Mintzberg, 1996)

Most of the seller markets are transforming themselves to become buyer markets. This will lead to the amelioration of customer-focused activities on production-focused markets. As a result, everyday’s products demand will increase in addition to the benefits on user goods and supplies.

In order to classify the scale of customer-oriented products and services it is important to label adequate parameters (Lampel and Mintzberg, 1996). Reichwald and Dietel focus on production in the customer oriented strategies. They differentiate the difficulty and the inconsistency of tasks in the production agenda. (Reichwald and Dietel, 1991).

Pine et al. (1993) use the variation rate of products to differentiate between consistent and tailored products. (Pine et al, 1993) However, the success in customer orientation will be granted in adaptation of customer’s needs to products and/or services. Therefore it is important to measure the personalization from the view of the customers. At this point we need parameters that describe the customer’s felt adaptation. A right parameter is the degree of individuality. It describes the orientation of the output to a customer’s individual need according to his personal situation. The individuality arises with the individual content or value of an output. (Pine et al, 1993)

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The relationship between the individuality of an output and customer’s need shows only one feature of a production because different ones can have different levels of individuality. More than that, a customer would like to concentrate on various features in order to find a tailored product or service. The features describe all parts (e.g. product attributes, price, and color) of the output which are a difference to a certain customer. In this view, an additional parameter has to be established: the degree of complexity. Complexity shows the output from a multi-layered source. It describes the variety of different features of an output. (How useful is the concept of the customer-oriented bureaucracy for understanding the management and experience of retail work, Lancaster, 1971)

2.1.1- Developing customer orientation strategy

A customer orientation policy is the approach that a business focuses its product or service on customers. In broad, there are three ways that can adjust a product to consumers: Aiming at price sensitive customers, aiming at quality sensitive customers and aiming at niche customers. (Wendell Clark, 1999)

2.1.2- Price sensitive orientation

This orientation involves targeting consumers who focus on the price. This orients the company towards anyone who is price sensitive or a large market segment. In order for this strategy to succeed, the company needs to be efficient with the lowest possible overhead. This will imply having low costs and therefore, company will be able to sell at lower prices or make discounts compared to competitors. This strategy will help the company gain a bigger market share and target a wider range of customers. (Wendell Clark, 1999)

2.1.3- Quality sensitive orientation

This orientation allows the company to be very well known in the market as the best company on a non – price basis. This will result in becoming the most preferred by customers. Therefore, the product or service must have an added value and the company can demand a higher price for this value. When quality is considered more important than price, this company will become the leader in the market. (Wendell Clark, 1999)

2.1.4- Niche strategy

This strategy has a very thin customer orientation. It involves finding a small audience and aiming a particular product at that audience. The product might not be the best or the cheapest but it is the one that fits the needs of this audience. This strategy can be achieved through customization. This is when the company makes a certain product and after knowing the needs of a certain customers, new features can be added to this product to best suit the needs of this consumer. (Wendell Clark, 1999)

2.1.5- Developing a successful customer oriented strategy

A successful strategy includes the below:

Customer driven quality: company uses ideas that lead to customer satisfaction.

Leadership: Managers in the company need to search between the employees or their subordinates who are customer oriented. Executives should play the role of managing and sustaining processes that contribute to increasing these values.

Continuous improvement: the company should commit to an ongoing improvement by optimizing employee performance and improve goods and services for a better quality.

Immediate response: faster replies should be given to customers by reducing product introduction cycles.

Full participation: The company should adopt and reward and recognition system to encourage the participation of employees in customer management.

Long run outlook: the company should plan policies and resource allocation that reflect long term commitment to customers, suppliers and employees. It should regularly asses the jobs and reviews them in order to optimize the work load.

Using facts only: Account managers and executives should use facts and real data to demonstrate current position of customer satisfaction.

Public responsibility: The business should tackle general public concerns and interests like for example lessening the effect of product squander on the environment.

A high quality mission statement should be reflected by the anticipations of customers. The operating philosophy of organizations is to identify customer’s needs and then offer a product or service to satisfy this need rather than developing a product and trying to identify the market. The following statements are applicable and important in developing a mission statement.

Do not offer me things

Do not offer me clothes, offer me attractive looks

Do not offer me a house, offer me security and a nice place

Do not offer me books, offer me the benefits of knowledge

Do not offer me records; offer me leisure and the sound of music. (Strategic Management book, 2009)

A major reason for developing the mission of the business is to attract customers that give a meaning to the organization. The customer himself is willing to pay for a good or service and therefore determines what a business is, what it produces and whether it will prosper. (Customer orientation checklist, quality software, 2010)

In 1950s, the demand for customer orientation rose in the field of marketing. Total quality management is also aimed at customer orientation and business reengineering is a radical reshaping of business processes to better suit the needs of the customer. As stated by Jeschke in 1992, satisfied customers remain loyal to the organization; therefore, the common aim of those efforts is customer satisfaction.

Most companies nowadays are aware of the importance of customer management. Many companies are building customer database, arrange for customer feedback programs in addition to hiring customer oriented employees. Companies like L.L Bean, USAA and MBNA have built enduring relationships with their valuable customers. So what does it mean to be customer oriented?

Companies focus on their customers rather than their products and manage their relationships with those rather than perform discrete transactions. They seek to provide their customers with products and services tailored for their own needs. Their success is measured by their share of customer loyalty but not their market share.

Customer oriented companies that accelerate their product numbers see similarities at the competition level. Therefore, they have decided to treat their customers differently and create exceptional customer value.

As an example, and just in 15 years, MBNA, the credit card issuer in Delaware, USA, became the second largest lender through bank credit cards with more than 35 billion dollars loans. The customers started to use the card more often, spent more amounts and carry higher balances. Therefore, MBNA market share increased. This company selects its customers by targeting associations and universities and tailoring its product to suit their need. It also has a detailed customer database to be used for promotions and to anticipate defectors.

Customer orientation is not easy to implement and many companies find it very hard to get it right. Customer oriented companies share two attributes. First, it is driven from the top, where the leader promotes the approach. Second, the success of the execution arises from the effective integration of the culture and strategies. The leading companies start by creating successful customer strategies to reach their business objectives and train their first line employees to satisfy customers at all levels. Leading companies target their most valuable customers and segment them depending on their needs. They focus their efforts on differentiation strategies and value proposition. (Jeschke, 1992)

The differentiation strategy focuses on how the company will leverage its strengths, customer relationship and market position in order to attract and retain customers. As for the value proposition, it’s how the company will share economic value.

In order to formulate a value proposition, the company needs to ask: What behaviors does the company seek from its customers? How much value will be resulted from this behavior? And how does this company share its values with its customers to motivate them to behave in the desired way?

As an example, General Electric White Goods developed a reward program for its appliance dealers to reward three desired behaviors: represent all the General Electric product line, guarantee 50% of sales and provide payments on time. In return, General Electric provides night deliveries right from its warehouse and provides the best price regardless of the order size or quantity. As a result, subscriber’s numbers increased.

Many companies that adopt a customer driven approach succeed on the power of their execution. Alone, the strategy does not differentiate one company from another but the execution of this strategy.

Many companies seek the point of view of their customers and make sure that those customers stay loyal and are satisfied with the company’s offerings. Leaders of those companies measure their success by the number of interactions between themselves and their customers. They always seek having information on the customer’s experience and assess their performance.

Many leading companies make sure that they place the right people on the right job in order to interact with the customers. Those employees are well trained, motivated and organized to satisfy customer’s needs at interface.

What differentiates customer driven companies from each other’s is the attitude and behavior of its employees. Companies share this culture by managing their staff’s attitude and behavior. They make sure that those employees share a sincere desire to help customers, pursue excellence and own customers problems in order to solve them as their own.

A successful implementation of customer orientation requires changes in the business and how companies manage its business. Companies should align their strategies and culture with the customer needs and emphasize consistent behavior and a passion to treating customers.

Organizations should base their values on customer feedback, involve the employees in the creation of values, like the values to their brand, encourage the staff to align their behavior to the values of the company and then reward them.

Steps to building a remarkable customer oriented company:

Commit to building a company that will be known for its customer service

Choose staff that is dedicated to customer service and believes in the company’s vision

Think of the processes from the customer’s point of view

Have continuous staff development and process improvement

Have customer focused employees and a system in place then watch the magic happening.

FIGURE 2.1 Traditional Organization vs. modern customer oriented organization

Modern customer oriented organizational chart Modern Customer oriented organizational chart

Source: This figure is extracted from web images, customer orientation.

2.2- Learning orientation system

In the recent years, many experts have emphasized the need for companies to become more competitive, try new organizational structures, new process and many marketing strategies. They should learn from their success and failures.

Many firms are seeking to improve their performance and strive to be learning organizations where managers and staff develop a profound acceptance of business activities and constantly improve their skills to better react to the fast changing competitive environment. (Weitzby, 1993)

Sales managers can improve their sales force performance by encouraging the sales team to learn about the product, the customers, the market and the selling strategies. Sale employees with a learning orientation can work intelligently by evaluating the suitability of different sales approaches and participating in a wide range of selling activities. Sales managers should encourage their team to study customers and develop new approaches for working with them. When salespeople are equipped with market data and involved in trainings, managers can show interests in learning among their sales force.

More than that, if the selling experience is enjoyable, sales people will have a desire to learn and increase job satisfaction as well as productivity. One of the most important competitive advantages is the ability of the team to learn faster than the competitor (DeGeus, 1988).

Learning orientation is the activity of creating and using knowledge to create competitive advantage. This involves obtaining information about customer needs, market changes and development of new technologies to create new products that become more superior to the competitor. Learning orientation refers to what kind of information is gathered and how it is evaluated and shared.

TABLE 2.2 Definitions of Organizational learning (Marketing bulletin, 1999)

Fiol & Lyles (1985)

“the process of improving actions through better knowledge and understanding”

Levitt & March (1988)

“organizations are seen as learning by encoding inferences from history into routines that guide behavior”

Stata (1992)

“Organizational learning occurs through shared insights, knowledge and mental models … and builds on past knowledge and experience”

Huber (1991)

“an entity learns if, through its processing of information, the range of its potential behaviors is changed”

Garvin (1993)

“An organization skilled at creating, acquiring, and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights”

Source: Table extracted from the Marketing Bulletin, 1999, 10, 38-51, Article 4

Page 2 of 14

2.2.1- Commitment to learning

Commitment to learning is defined as how much the company promotes and values learning. This company considers learning as a very important investment in order to survive. Commitment to learning is linked to a long term planned orientation. Managers in committed companies expect their employees to use their time to pursue knowledge outside the scope of their work. If this company doesn’t encourage growth of knowledge, staff will not be motivated to learn more. (Marketing Science institute, learning orientation, 1994)

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2.2.2- Shared vision

Shared vision refers to an organization’s focus on learning. Learning is less likely to be meaningful to the organization’s members if there is no shared vision. They find it difficult to know what to learn even if they are motivated. A positive learning climate requires the organization to focus on the implementation of a new knowledge.

After the researches made by Brown in 1980, he revealed that various departments differ in their way of interpreting knowledge. That’s why; people from different useful areas distinguish innovation in diverse ways. (Brown, 1980)

2.2.3- Intra-organizational knowledge sharing

Intra-organizational knowledge sharing refers to collective beliefs related to the widening of learning between different departments inside the organization. The information gathered is kept for future references. Learning in an organization is the result of the accumulation of individual learning. Sharing the knowledge inside the organization is very important to prevent the loss of information after employee turnover or transfer. The organization should have an efficient system to reexamine the information and its structure. (Industrial Marketing Management, science direct, Roger Calantone, 2001)

FIGURE 2.2 Organizational learning (extracted from Word press, 2009)

screenshot-1.gif

Source: This figure is extracted from word press, 2009

FIGURE 2.3 Learning orientation system (extracted from science direct)

1-s2_0-S0019850101002036-gr1.gif

Source: The figure is extracted from Science direct, Learning orientation

Learning orientation can be found inside employees who value learning new skills and want to increase their ability and competence (Deshon, 2005). In difficult situations, the employees who are learning oriented respond more to situations and can solve them better than others. Those employees always seek to search for new ways to solve all challenging problems, that’s why, their presence inside firm is very critical to its success. (Deshon, 2005)

In 1991, Huber talked about a cultural perspective when he gave a definition of learning orientation as the development of new knowledge that can influence the behavior through existing values and beliefs inside the culture of the company. We can see the presence of the learning orientation when action is taken after the development of a new knowledge. (Huber, 1991)

Innovating and adapting is very important and companies can adapt fast if they can learn fast. Therefore, learning has been always a concern in changing competitive environment. High level of innovation is found in companies that emphasize both learning and development.

A learning organization is a company that continually transforms itself by allowing its members to learn more. It always seeks to work in parallel with the growing market and stay competitive in the business. Employees should be committed, work hard and become more like a community.

Usually, when companies grow, employees get accustomed to work in a certain way and neglect learning. That’s when only a short term solution is found to emerging problems. As a result, many companies preferred to downsize and only keep the dedicated employees who work more efficiently in order to create a more competitive advantage by learning faster than competitors and growing such a culture. Companies need to understand what is going on around them in the outside environment, maintain their product and process knowledge and then generate solutions using what they have learned. In order to do that, people should cooperate together, communicate and mainly share a culture of trust. (Huber, 1991)

According to Peter Senge (1994), a learning organization has five main characteristics: systems thinking, personal mastery, mental models, a shared vision and team learning.

Systems thinking: This is where people study the business as bounded object. Companies use this thinking method when they want to assess the company and measure its performance. Systems’ thinking is when all the characteristics of the organization should be clear and state that it’s a learning organization. If any is missing, the organization will not reach its goal.

Personal mastery: Is the commitment of the individuals to learning. And this learning is acquired from training and development. As a result of learning, employees should transfer what they have learned to the concerned parties or colleagues in order to be aligned.

Mental models: Are assumptions held by individuals or companies. Those models must be challenged in order to become a learning organization. Employees place theories that they intend to follow or use the existing ones which are what they actually do. Same for companies that preserve norms, values and memories. In order to be more learning oriented, attitudes have to be replaced with an open culture of trust. In order to reach this, the company should have organizational assessment methods for the theories of action and therefore, discard unwanted values.

Shared vision: it motivates the employees and gives them the energy to learn more. Furthermore, it should be accompanied by long term organizational goals.

Team Learning: one of the benefits of having a team learning the same thing is that they grow more quickly and their problem solving is improved because they are equipped with the necessary knowledge. Employees should engage in dialogues and have an open communication and a mutual understanding.

Benefits of a learning organization:

Remaining competitive and having a good level of innovation

Sharing a good place when responding to external pressures

Have the suitable knowledge that satisfies customer needs

Improve quality

Become people oriented and improve the image of the company

Increase the pace of change inside the company

Resistance to learning can always be found in the company if employees did not buy the idea in the first place and are fully committed to learning. They think that the change will make them loose or they feel threatened. Their mind is usually close and they are not willing to participate in mental models. (Senge, 1994)

Learning can be seen as restricted to senior levels if it is not implemented coherently across the company. That’s when learning is not considered as a shared vision.

When the number of employees is very high (more than 150 employee), sharing the learning information can be very hard because of the size and complexity of the organization structure, weak employee relations, low trust between colleagues and low communication.

“The Dance of Change” book includes reasons why companies find problems in transforming itself to a learning company. The main problem is that management and employees do not have the sufficient time to change their own culture as they are busy with their daily operations and issues. They need to know that they must give from their time in order to achieve the desired results. And if they fail to do it, a mentor or a coach will be necessary and mandatory to help them plan their time and schedule.