Module

Marketing Management

Topic

Customer Needs and Market Orientation

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Table of Contents
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2.
3.
4.
5.
6.
7.

Introduction
Customer Needs
Market-Oriented Organisations and the Marketing Concept
Markets and Targets
Target Marketing
Self-Assessment
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

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Module

Marketing Management

Topic

Customer Needs and Market Orientation

"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.

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Module

Marketing Management

Topic

Customer Needs and Market Orientation

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

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Module

Marketing Management

Topic

Customer Needs and Market Orientation

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

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Module

Marketing Management

Topic

Customer Needs and Market Orientation

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): 2035.
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.

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