Market Orientation: Meaning, How It Works, Pros and Cons

What’s it: Market orientation is a business philosophy in which a company focuses on meeting customer needs and wants through its products. In this case, the company assumes its success depends on customer satisfaction.

Satisfying customers is vital for generating loyalty and repeat sales in the long run. Companies not only develop a reliable marketing mix but do it better than competitors. That way, customers have a reason to continue buying the company’s products instead of competitors’ products.

How the market orientation works

To explain this, I will discuss four orientations in marketing management, covering production, product, market, and holistic marketing orientations.

Production orientation

Under the production concept, the company assumes, availability and price are the primary considerations for customers to buy. They then focus on developing distribution strategies to reach customers and increase product availability. At the same time, they also focus on production efficiency to sell products at lower prices.

This concept is an early part of the evolution of marketing management. Companies increase efficiency by streamlining the production process and achieving higher economies of scale. There are several alternatives for doing this:

• Specialization by dividing a complex process into a series of specific jobs
• Bulk purchases, to get discounted prices, and through long-term contracts
• Target the mass market, so the company can sell multiple products
• Use of mass promotion and distribution to reach as many potential customers as possible
• Automation of production processes to reduce labor costs
• Cheap funding, for example, by raising funds in the capital market instead of banking

This concept is suitable when demand is relatively high in comparison to supply. Thus, each company can record high sales without having to grab customers from competitors. Also, companies usually sell homogeneous products and target all customers in the market.

Product orientation

Under product orientation, the company assumes customers buy for reasons of high-quality products. It shares similarities with product orientation, which is inward-looking. If the company produces cheap or quality products, it will eventually attract demand by itself.

Unlike production orientation, they focus on developing product differentiation instead of product standardization. Because it is inward-looking, the company does not pay enough attention to customer needs and wants. They assume product quality to be a factor in driving demand.

Sales orientation

Under a sales orientation, companies focus on informing and persuading customers to buy products. In other words, they seek to develop sales and promotion techniques to attract demand.

This concept is also inward-looking and pays less attention to customer needs and wants. The company assumes effective promotion, and reaching more customers are the main determinants of demand. By doing so, they can persuade people to buy the product.

This concept is likely suitable for companies with high inventory in warehouses. They face high warehouse costs and have to aggressively promote products to achieve more sales. Alternatively, sales orientation is also useful when the product is in high demand by the market and is not prone to changing consumer tastes.

Market orientation

Sometimes, we also call it a marketing orientation. Under this approach, we assume customer satisfaction determines how the company develops, produces, promotes, and sells products. Companies focus their efforts on marketing mix (product, price, promotion, place) and competition.

The ultimate goal of market orientation is to satisfy customers. When they are successful, the company creates customer value equal to or higher than the price.

This approach is suitable for markets where consumer tastes and preferences change rapidly and are unstable.

Companies identify consumer’s needs through market research and market segmentation. Then, they develop the right marketing mix. That way, the product can better meet customer requirements.

Also, through market research, the company identifies the competition in the market. It is essential to determine potential profitability, competitive pressure, and competitive position.

To satisfy customers, companies must develop products profitably and better than competitors’ products. That way, they can secure profits in the long run.

Holistic marketing orientation

This is a further development of the marketing orientation by accommodating societal aspects. For this reason, we often refer to it as a social marketing orientation or social orientation. This concept has gained momentum recently with the increasing demands on corporate social responsibility.

A holistic marketing strategy combines four main aspects: internal marketing, integrated marketing, relationship management, and social responsibility. Companies also use technology and data to support marketing strategies.

Market orientation advantages

Customer satisfaction. The availability of products allows people to have more choices to satisfy their needs and wants. It should lead to a better quality of life.

Higher acceptance rate. Companies sell what consumers want instead of selling as many products as possible even though consumers may not want them. They conduct market research and develop a compelling marketing mix. As a result, product failures in the marketplace are significantly reduced as companies align their products with customer expectations and demands.

Indeed, some companies may fail to generate sales or profits. But, that’s usually because their product is no better than the competition. Thus, consumers prefer competing products. 

Customer loyalty. By satisfying customers, companies can create loyalty. It is critical to secure sales and profits in the long run. Again, to generate greater loyalty, they must do better than competitors.

More ideas. Market research allows companies to gather feedback from consumers. It is useful for improving the quality of an existing product or in developing the next new product.

Market orientation disadvantages 

More complex. Companies must consider broader aspects to generate profits, from market needs, business operations to competitive maps. They have to make sure the product satisfies the customer in a profitable way.

To make a profit, companies must ensure their production runs efficiently. To generate sales, they have to make sure the customers prefer their product over the competitors’ products.

Must be flexible. Not only is it more complicated, but market orientation also forces businesses to be more flexible. They must be able to adapt to changing customer tastes and the dynamics of competition. Failing to do so, they lose sales and cannot secure profits in the long run.