Making Market Orientation Real: Transforming One of Business s Most Powerful Concepts Into An Action Plan and Business Results

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1 Making Market Orientation Real: Transforming One of Business s Most Powerful Concepts Into An Action Plan and Business Results BeMarketOriented 2014

2 We d Appreciate Your Feedback Thank you for your interest in the information about market orientation (MO) we provide. We re constantly trying to focus our attention and resources on the specific MO topics of most interest to people. To that end, your feedback and comments would be helpful and appreciated. Please send us an or leave a comment on our website. roger@bemarketoriented.com miki@bemarketoriented.com Your contact information will not be distributed to anyone else and we won t contact you unless you request it. To get the discussion started, here are a few topics you might consider What specific question(s) about MO are you trying to answer? Was the information we provided helpful or were you looking for something different? What dimension of MO would you like us to spend more time on? 2

3 We Already Do That Most companies we talk to about market orientation declare We already do that. The reality is they may do a few of the related activities but their true market orientation is not broad enough, not aligned and not deep enough to produce the desired results. Talking to a few of your favorite customers occasionally or hearing from salesmen about what features their prospects would like in the current product is not sufficient to claim a high degree of market orientation for your company. Among other things, highly market-oriented companies: Can rank the highest value, unmet outcomes their ideal customers want to achieve and can show the data to back up that ranking Spend a significant amount of time and resources understanding future market trends and developments Can distinguish between good revenue and bad revenue. The goal of this document is to explain a process by which a company can improve its market orientation. First it will provide evidence that market-oriented companies are more successful. Then it will introduce the four step process: 1. Create your market-orientation (MO) profile 2. Assess your MO strengths and weaknesses 3. Prioritize the most pressing MO areas to address 4. Implement specific MO improvement projects Most business concepts start and end with a promising idea. We believe that to produce the desired benefits, you have to systematically transform that concept into Monday-morning actions. If you do, an investment in becoming more market oriented will return more profit and growth over time than any other investment you could make. Our answer is that in an era of increasing market turbulence and intensifying competition, a robust market orientation has become a strategic necessity. George Day 3

4 Types of Orientation Every company has a business perspective or function that is at the center of its thinking. This focus may be on the products they make, the skills of the sales force, the efficiency of their operations or the opportunities in the market they ve decided to serve. It s true that companies have to consider all these topics to some extent but typically one of these orientations will dominate the development of strategy, the setting of goals, the allocation of resources and the monitoring of activities. The most common orientations are: Product Orientation primarily focuses on continually improving and refining its products. This type of organization believes consumers will prefer products based on quality, performance and innovative features. Since the organization has the great knowledge and skill in making the product, it also assumes it knows what is best for the consumer. Sales Orientation the organization believes it can sell any product it produces with the use of marketing techniques, such as advertising and personal selling. This type of organization focuses primarily on customer conquest getting short-term sales with little concern about who buys or why. Production Orientation focuses on efficiently manufacturing and distributing the product. It is premised on the assumption that consumers will favor products that are readily available and highly affordable. Market orientation primarily focuses on the opportunities in its chosen markets and operates to deliver superior value. It starts with a well-defined market, focuses on customer needs and yields profits by creating a lasting relationship with the targeted customers based on customer value satisfaction. 4

5 Increasing Your Market Orientation In most cases, the dominant orientation is not the result of a formal decision process but instead emerges from the personalities of the leadership, the history of the company and the corporate culture. Even though one orientation tends to dominate a company s thinking, the other orientations are present to some extent, as shown in the graph below. In this company, the product orientation is most dominant with the sales, production and market orientations being present in declining order of impact. A major disadvantage with all three inward facing orientations (product, production, and sales) is the company often fails to see what is going on in the market around them; for example evolving business models, a new competitor, technology shifts or changing customer values. Recognizing these changes late can result in uncompetitive products, squeezed margins, and loss of customers. We ll show that companies with a dominant market orientation are more successful. However, a company can gain great benefits by increasing the level of its market orientation no matter what is its dominant orientation. Market Product Production For example, most high-tech companies are product oriented because of the technical backgrounds of upper management. It s believed that breakthrough technology and a superior feature set are keys to product and business success. These companies are typically full by technology and product experts and lacking in knowledge of the targeted customers latent needs. To simplify, they spend most of their time on the solution and little time on understanding the problem. Even a modest increase in market orientation can make a huge difference. With greater insight into the market, priorities become clearer, decisions easier, products more focused and sales more efficient. Sales Current Level of Performance 5

6 Performance Improvement Greater Business Success Market-oriented companies are more successful. Numerous studies show that companies with a strong market orientation have greater product success, grow faster, are more profitable, and earn higher levels of customer satisfaction than companies with some other form of dominant orientation. The chart below summarizes one study of 87 companies where 43 market-oriented companies outperformed 44 less market-oriented companies in four key business metrics. The new normal of fast-paced and information-rich business operation places a higher demand on understanding and anticipating the changes that are happening in your markets. Rapidly changing technologies, evolving business models and quick market cycles make the way you did things several years ago outdated. If you want to grow, innovate, and stay ahead of the competition, you need to increase your market orientation or get left behind. 20% 18% 16% 16% 18% 14% 12% 10% 10% 12% 8% 6% 4% 2% 0% Growth Profitability Customer Satisfaction Adaptability 6

7 Market-Oriented Sources of Increased Profit Profit = Revenue A market orientation enhances the process of choosing and implementing the competitive strategy, which translates into greater value that is rewarded with a price premium Market-driven companies are twice as fast in getting new products to market A market orientation is related positively to the proficiency in launch budgeting, launch strategy and launch tactics Market-driven companies own 10-20% higher customer satisfaction levels - Costs Reduce product development costs by limiting the scope through tight requirements definitions that are targeted to specific market segments New customers can cost five times more than satisfying and retaining current customers Companies can improve the outbound marketing ROI by up to 50%, eliminating entire campaigns and significantly increasing sales productivity Market-driven collateral and tools that focus on solving market problems for prospective customers generate leads in no more than 2 to 3 touches, improving the ROI by over 100% Future revenue Market-driven companies can anticipate changing market requirements and have a superior ability to anticipate competitors moves 7

8 The MO Business Improvement Process 1. Measure your market orientation (MO) profile 4. Define and implement your MO projects 2. Identify your MO weaknesses 3. Prioritize your MO activities 8

9 Measure Your Profile In order to improve, you have to know from where you are starting and have a way to measure the before and the after. For a concept as potentially imprecise as market orientation, this can pose a problem. Most discussions about market orientation stay at a high and abstract level based on platitudes such as you have to get closer to your customer. In order to be more pragmatic, we ve defined a market orientation framework consisting of 8 domains (listed in the graph in the lower right corner of the page) and 24 supporting activities. To generate the profile, a questionnaire is completed to obtain an executive s rating on a number of statements about the organization s operation. These scores are then analyzed and reported in several ways. Performance ratings of the eight domains are shown below. Increasing the level of market orientation can be a strategic goal, the focus for planning, and a way to monitor progress over time. This framework serves two important purposes. First, it acts as a reference point to illustrate the dimensions of being market oriented. For example, some people don t think of customer retention as an element of market orientation. Second, by quantifying the company s performance in the individual activities and domains, it highlights the company s strengths and weaknesses, leading to a prioritized action plan. The domains are divided into internal and external capabilities and a balance is important. For example, you will have difficulty in gaining deep customer insight (external) if you don t have people trained in research techniques (internal). 9

10 Identify Weaknesses and Prioritize Activities Analysis of the statements in the questionnaire also highlights the differences between self-assessment statements (e.g. how well we perform a certain function) and weaknesses derived from symptoms (e.g. if you are losing good customers, what weaknesses does this imply?). This graph indicates the priority with which domains should be improved. Those domains with the highest priority are those in the upper right corner of the graph. In this example, the company should focus on the activities that help the company empower capable people and earn customer loyalty. 10

11 Define and Implement Projects Increased knowledge without corrective action is an opportunity missed. Once the high priority activities are identified, good project management practices can be applied to ensure effective execution. Improved focus activities will strengthen the domain performance resulting in an overall advance in market orientation. Priority A A B Domain Focus activities Objective Weakness to correct Action needed Gain deeper insights Customer research Understand high priority, unmet needs in adjacent market Lack of deep customer insight Training in outcome-based research Enable capable people Role definition Better balance of inbound and outbound work Sporadic research Create separate PM and PMM positions Share market knowledge Dissemination of market information Broader understanding of customer needs Lack of shared information Create market info section in SharePoint Timeframe By end of Q1 By end of Oct By end of Q3 Leader Director of Product Mgt. VP of Marketing IT manager Next step Set up training class for PMs Draft job descriptions with HR Document types of info to share 11

12 First Step The first step toward improvement is understanding your current market orientation. We do this by administering a simple questionnaire which you can complete in 15 minutes. There is no charge for the questionnaire and preliminary analysis. We believe if you have an objective view of your own market orientation you will want to go further down the market orientation path and we d like to help. To read more and to find the questionnaire, visit To contact us directly, Roger Hicks roger@bemarketoriented.com (503) Miki Tokola miki@bemarketoriented.com (503) BeMarketOriented, All Rights Reserved 12