Market Orientation, Customer Selectivity and Firm Performance
Market orientation is a well-known construct in the marketing literature. One reason for theextensive research on market orientation is that it is seen as the operationalization of themarketing concept itself.Extant literature provides evidence supporting the link between market orientation and firmperformance. However, most of the evidence which links market orientation with firmperformance comes from studies carried out in the goods context. The few studies that havebeen done in the services context show either a weak link with firm performance or no linkat all. Further, the studies that have been carried out in the services context have generallybeen limited to a single industry.In this thesis, I explore the reasons as to why market orientation might be more stronglyassociated with firm performance in the goods context than in the services context. Isuggest that one reason could be that services are by their very nature non-standardized,and that market orientation is aimed at satisfying all the customers. Therefore, marketorientation may not be the dominant driver of firm performance in the services context,where it becomes very difficult to satisfy every single customer. In the goods context,however, market orientation will be a dominant driver of firm performance.I also suggest another construct, namely customer selectivity, as a driver of firmperformance in the services context. Customer selectivity, it is argued, is anchored in thecustomer relationship management (CRM) literature. Since services are by their natureheterogeneous, i.e. non-standardized, firms which are customer selective will do well in theservices context.However, one cannot exclude the possibility that, while market orientation might not be agood driver of firm performance in the services context, it might be an antecedent of customer selectivity. Therefore I develop an alternative model in which market orientationis conceptualized as a cultural orientation, and thus acts as antecedent to customerselectivity, which then leads to firm performance.To test the hypotheses which are developed in the study, I use a pre-existing scale formarket orientation, and operationalize customer selectivity using existing items. All thehypotheses are tested on a multi-industry dataset. The first set of hypotheses, relating to thefirst model, is tested using regression analysis. The second set, relating to the alternativemodel, is tested using structural equation modelling.The results are, broadly speaking, consistent with the hypotheses. It is seen that marketorientation is a direct driver of firm performance in the goods context, while customerselectivity is a direct driver of firm performance in the services context. Similarly, it is alsoseen that market orientation is an antecedent to customer selectivity. This is consistent withthe results obtained in the first model. However, it is also seen that in both models, whilethe first dimension of market orientation (customer orientation) is associated with firmperformance according to the hypotheses derived in the thesis, the second dimension ofmarket orientation (interfunctional coordination) is not associated with firm performance.The study clarifies and delimits the role of market orientation as a direct driver of firmperformance in all contexts, and suggests it leads to firm performance primarily in thegoods context. Similarly, customer selectivity leads to firm performance primarily in theservices context. However, the study also suggests that market orientation is an antecedentto customer selectivity in both contexts. In other worlds, market orientation plays a role inboth the goods and services context, but differentially. Managerially, market orientationand customer selectivity are proposed as a pair of strategies that marketers can help theirCEOs choose between or possibly combine depending on the goods-service mix that thefirm offers.
Year of publication: |
2008
|
---|---|
Authors: | Khan, Aamir |
Other Persons: | Wilson, Hugh (contributor) |
Publisher: |
Cranfield University |
Saved in:
freely available
Saved in favorites
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