How epic companies like Nike and Amazon grab advantage with market orientation
Creating market orientation in your business
Market orientation is an important strategic direction for a company to take.
In Creating a Market Orientation (Narver, Slater, Tietje), market orientation is defined as:
[A] business culture in which all employees are committed to the continuous creation of superior value for customers.
There's substantial evidence that market orientation has a positive impact on business performance. The more market oriented your business, the more likely it is to succeed and win big.
Mark Ritson argues that the more market oriented a manager and her company are, the faster the company will grow.
A few examples of market oriented businesses:
- Amazon -- Jeff Bezos built Amazon into the giant it is by maintaining a singular focus on delivering value for customers
- Nike -- Phil Knight shifted Nike from focusing on their products to focusing on their customers
- Ramsey Solutions -- Dave Ramsey's mission to help people get out of debt and live amazing lives is front and center to everything his company does
Competing orientations
Market orientation is one approach, or orientation, for growth and sustainability. Here are four other orientations and what they mean:
- Product orientation -- We sell what we make and we make it better than anyone
- Sales orientation -- Everything we do is in support of sales, so everyone works in support of sales
- Advertising orientation -- Marketing is communications and the more we communicate, the more we grow
- Competitor orientation -- We focus on what our competition is doing, what their strategies are, and how we can mimic them or stay slightly ahead
There are companies who have done well with each orientation listed above. These notes highlight the strength of market orientation compared to alternative orientations and how to create it in an organization.
Mixing orientations
I'm not sure how well companies can do with a mixed orientation. Each orientation listed above can be used in service of the customer.
Product innovation can lead to growth as it did for Dyson vacuums. Sales orientation works for companies like Wyndham selling vacation time shares. Advertising works wonders for Coca-Cola (and I would argue that they cannot be market oriented because Coke kinda ain't good for you, no matter what the ads say). Pepsi, Burger King, Avis, and 7-Up have done well with a competitor focus.
Something I need to think on
How can a company maintain market orientation, or a customer-centric approach, while enabling teams to be product, sales, advertising and competitor focused? These are all constituent parts of a company no matter how big or small.
Key takeaways on market orientation
To adopt a market orientation, I need the humility to recognize that I am not the customer and I do not know what they want.
The moment I become a team member within an organization, I am no longer a customer and I can no longer pretend to think like one. I cannot understand my customer's motivations in first person anymore. I must focus on the market and let the customer tell me what she or he wants or needs.
A company can have only one orientation.
Sales, advertising, product and competition are all part of market orientation, but they cannot all be the primary orientation.
My company cannot be market oriented and sales oriented. A market orientation requires all employees to commit to continuous creation of superior value for customers. There is no room left for product or sales or advertising orientation.
Changing to a market orientation is hard.
Change does not come easy, even in small organizations. To fully embrace market orientation, a company needs to change its culture to support the new orientation and that requires every team member to be on board with the new ideas and new orientation.
How to create a market orientation
The authors of Creating a Market Orientation argue that two things must be true before a market orientation can be realized:
- An educational focus on teaching everyone what market orientation means, why it's important, and how it can work. This is a formal educational system, or programmatic as the authors call it. Think internal Learning Management System with predetermined courses.
- A system for delivering experiential learnings based on testing different ways to provide superior customer value. To me this is a classic test and learn loop. Test a series of hypotheses through campaigns and use the resulting data to tell us if customers got more value. For example, "if we shorten product onboarding from 15 to 5 steps we expect a 25% increase in trial-to-paid users."
Any big change to company culture must be based on learnings that A) establish the need for the change and B) reinforce the belief in that change. Companies have to establish a training program to help people understand what the change is and why it's important. Then companies cement the change and reinforce those learnings through a test and learn approach, in essence creating lessons learned through doing and giving teammates experiences to remember.
Market orientation rests on cultural values
According to studies outlined in another paper titled Creating a Market Orientation -- this one by Gebhardt, Carpenter and Sherry -- there's a four-stage model for building cultural change and market orientation within a company.
- Initiation -- company leaders must see the need for change and prepare the organization for it
- Reconstitution -- new values and norms are established with a focus on the market and having the right teammates "on the train"
- Institutionalization -- aside from being a mouthful to say (and type), companies need to formalize new values and norms by building a company structure that supports them, and aligns rewards with the new desired outcomes (i.e.: give teammates a reason to want to change too)
- Maintenance -- companies have to stay consistent with their new market orientation by screening new team members for cultural fit, maintaining market connections, and finding "flame keepers" who keep the whole team focused (and the fire of market orientation lit)
Where I've gone wrong with marketing orientation
Two stories come mind when I look back at my work. One from client work when I owned an agency and one from a business of my own.
It's worth noting that before learning about orientation neither of the following approaches felt wrong. I believe a business can be successful with any orientation, but market orientation looks like the one that unlocks larger growth.
The first story is of an airport parking lot operator for whom we managed ads and SEO. Parking is heavily commoditized, so local price wars were a daily headache and customers were conditioned to look for the lowest daily price.
Our client wasn't the cheapest (it was close), but they offered benefits the other lots couldn't and we worked hard to communicate that to customers. We constantly preached the product (location, undercover parking, battery protection, etc.) and compared competitors and pushed hard on advertising. Communications was marketing. We were advertising oriented and our approach was to advertise more to grow more.
I reckon we could have won a lot more business by telling more customer stories and playing up the excitement of travel that inevitably goes with parking. NPS surveys with thousands of respondents averaged over 9! We had the sentiment on our side, but we focused on advertising.
We could have helped them shift their focus from being advertising and competitor oriented to being market or customer oriented.
Side note: the most successful people I know own and run unsexy businesses. Parking is a bigger, more profitable business than you might think. It's wicked "boring" but when run well it spins off the cash, baby!
Another story is from my business, Dear Video. I loved working in and on this business - the customers were fun, edgy, hard gas, creative people who were all amazing to work with. But like the parking lot business, I oriented the business to be more about the product than about the customer. My orientation was product and sales. I spent my time building the product and selling it to people. Internally, I wouldn't change that product focus. The systems and delivery processes were our secret sauce to providing value. Externally, I could have done a lot more to understand the market and reflect that understanding back to customers.
Adopting a market orientation
To adopt a market orientation where there wasn't one before, a company has to recognize the need to change. I'm not sure how to recognize the need, but I suspect it has to do with plateauing in a current orientation. For example, if sales stay flat no matter how many sales staff you hire, it's probably time to look at your orientation.
Once company leaders see the need for change, it's time to figure out what has to change, to make those changes, and to make them permanent. For sure, it's not easy but if it leads to big time growth, it'll be worth it.
This is the first post in a series on marketing. Here's a full list of the other posts. I'll update each one with links as soon as they're published.
- How to do market research for a startup (from a Saas product marketer)
- Market segmentation? Unwrap the best way to nail your marketing strategy
- Your next market targeting strategy must highlight these two things
- What is market positioning and where does it fit into your marketing strategy?
- Objectives (coming)
- Product (coming)
- Pricing (coming)
- Integrated Marketing Communications (coming)
- Distribution (coming)
