Market Orientation

A business approach wherein the processes of product development and creation are focused customer satisfaction

Written by

CFI Team

Updated December 5, 2022

What is Market Orientation?

Market orientation is a business approach wherein the processes of product development and creation are focused on satisfying the needs of consumers. It is a type of marketing orientation technique that designs products with qualities that consumers want, which is completely different from the conventional marketing approach.

In the conventional approach, the business prioritizes the promotion of existing products by establishing features that can be key selling points. Companies like Amazon and Coca-Cola use market orientation principles while companies in the luxury goods market, such as Louis Vuitton or Chanel, follow the conventional approach.

Summary

• Market orientation is a marketing approach wherein the processes of product development and creation are focused on satisfying the needs of consumers.
• Marketing orientation is the business approach that dictates all the processes within that organization. It comes in several types: sales orientation, market orientation, production orientation, and societal orientation.
• Market orientation offers several advantages, including product differentiation and increased consumer satisfaction.

Understanding Marketing Orientation

Marketing orientation is the business approach that dictates all the processes within that organization. It outlines how the company’s core offering is presented to its users and how the marketing teams are empowered.

Although marketing teams have a say in the marketing strategies adopted, the marketing orientation is determined by the priorities of upper-level management. The different types of marketing orientation are as follows:

1. Sales orientation

2. Market orientation

3. Production orientation

4. Societal orientation

How Does Market Orientation Work?

Market orientation is more of an approach to product design rather than promotion. It means that the priority is to analyze the target audience and determine their needs instead of undertaking any promotional or sales activity. The needs are kept in mind while developing and upgrading the product offering.

A market-oriented organization uses a customer-centered approach, which means that the most pressing concerns, immediate needs, and personal preferences of the consumer base must be researched.

The strategy must be focused on values, culture, and other behavioral traits of the consumer base. Thus, the development efforts of the organization are focused on characteristics that are most widely demanded. This enables companies to adapt to different markets and enhance competitiveness.

Advantages of a Market-Oriented Strategy

• Most consumers are in touch with market trends, too, and clearly understand their needs and aspirations. Performing data analysis can reveal trends and desires that are not explicit.

  It can be instrumental in anticipating consumer needs and adapting the market-oriented organization as one that shapes consumer behavior rather than one that reacts to it.

• Consumer demands can often seem impractical, but their knowledge can be vital in the long-range decision-making process. Ideas that are not cost-effective in the status quo can be employable amid changed market conditions in the future. They can be used for long-term development strategies.
• Data collected for product development can also be used post-launch to improve customer service. Efficient product support that addresses concerns raised by consumers is essential in maintaining a high degree of consumer satisfaction. It enhances brand loyalty and word-of-mouth advertising by existing consumers.

Disadvantages of a Market-Oriented Strategy

• An excessive focus on addressing the needs and desires of consumers reduces the scope for innovation in an organization. Thus, market orientation is based on reacting to market trends rather than creating them.
• Consumer desires are not fixed and can change very rapidly. A standalone market-oriented strategy cannot guarantee a huge market share, given that rival companies serving the same consumer needs can quickly come up in the market.

Examples of Market-Oriented Companies

Amazon consistently changes the virtual marketplace and adds features to address the concerns expressed by consumers. One such feature is the rating and review system introduced by the online retailer to boost credibility.

The company launched Amazon Prime to address issues with delivery charges. In addition, it created the Amazon Locker, which is a self-pickup service for consumers who may not be present in the shipping address indicated at the time of delivery.

Coca-Cola performs extensive research to come up with new flavors for its consumers. For users who are worried about sugar content, the company launched the zero-calorie Diet Coke and undertook several acquisitions of “healthy” brands, such as Dasani, etc.

Learn More

Thank you for reading CFI’s guide to Market Orientation. To keep learning and developing your knowledge of financial analysis, we highly recommend the additional CFI resources below: