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Forget about market-driven! The future belongs to companies that

are customer value-driven.
Frederick E. Webster, Jr.
Frederick E. Webster Jr. is the Charles Henry
Management at the Amos tuck School of
Business Administration at Darthmouth
College, where he has been on the faculty
since 1965.

articulated in the 1950s is a relic of
an earlier period in economic history. Most
of its assumptions are no longer appropriate
in the competitive global markets of the
1990s. As the marketplace evolves under the
converging pressures of changing. And as
organizations change, so must the role of
marketing within them.
In the traditional business environmental,
transactions are conducted in a competitive
divisionalized, bureaucratic organizations
and their customers.
Today, however, the world is moving rapidly
toward of economic activity based on longterm relationships and partnerships among
economic actors in the loose coalitional
drame-works of network organizations.
To survive in the future, every business will
have to be customer-focused, market-driven,
global in scope, and flexible in its ability to
deliver superior value to customers whose
preferences and expectations change
continuously as they are exposed to new
product offerings and communications about
Global competition is now a fact of economic
life for the industrialized nations as well as
for most of the developing economies. The
global marketplace is a real for the small

manufacturer and local retailer or bank as it

is for the multinational corporation.
All customers have purchasing options that
span the globe, not just the community or
the nation.
The old marketing concept grew out of the
need to serve customers created by the
conditions of post-World War II affluence
and population growth. These consumers
became the beneficiaries of aggressive
competition among domestic producers,
with new entrants in many industries as
firms adjusted from military to peacetime
production and entrepreneurs jumped at the
prospect of unprecedented growth in
consumer spending.

This article, the first in a two-part series,
outlines a new marketing concept. The
original marketing concept was horn in
the post-war economy of scarcity, pent-up
consumer confidence; the new one
thrives in a world of affluence,
sophisticated and informed consumers,
competitors committed to delivering
superior value based on their distinctive
competencies. The marketer's key
strategic weapon is knowledge of
customers and their dynamic definition of
value. From the local savings bank to the
largest multinational corporation, the
focus of every company must he on
managing loyalty among employees and
carefully chosen customers.


Marketers in the 1950s faced the necessity
of becoming truly knowledgeable about and
responsive to a consumer with increased
discretionary spending power who was
informed, demanding and confident about
the future. Mass production and mass
consumption of products with high symbolic
value characterized the era of the consumer,
dubbed The Affluent Society by John
Kenneth Galbraith in his 1958 book of the
same name. It was an age of conspicuous
consumption, in which products new
purchased as much on the basis of what they
conveyed about the self-concept and lifestyle
of the consumer as for the specific
performance benefits they delivered.

he new marketing concept addresses

todays global customer who can
choose among a much larger variety of
products and services in terms of their
fundamental value, defined simply as the
ratio of benefits to cost/price, including
costs-in-use. The concept of customer value
is at the heart of the new marketing concept
and must be the central element of all
business strategy.
The global customer quickly learns about the
wide range of choices available through
many kinds of modern telecommunications
technologies that give virtually instant access
to cultural events, political news, fashions,
and economic developments throughout the
world. For example, a single performance by
the three great tenors Jose Carreras, Placido
Domingo, and Luciano Pavarotti in 1990 at
the baths of Caracalla in Rome was aired live
to more than 500 million television viewers
throughout the world as they are happening
in places such as Kuwait, Tianamen Square,
Somalia, and Bosnia-Herzegovina. The
traveler can view CNN 24 Hours a day in
hotels almost everywhere in the world.

International travel is becoming increasing

common, giving first-hand exposure to global
products and services of all kinds and
creating informed, sophisticated, and
demanding customers. Travelers likewise
inform their host countries consumers about
choices available to them in the global
marketplace, helping to spread and
preferences as well as create the demand for
global products and services. Coca Cola,
Levis jeans, Fritos corn chips, Honda
automobiles, MCDonalds burgers, InterContinental Hotels, Caterpillar tractors, IBM
PCs, Avis rental cars, Hermes scarves, Colgate
toothpaste, Swissair, Kodak film, Omega
watches, Sony Walkman, Heineken beer, and
Madonna are everywhere! Consumer in
developed countries have more than enough
options in virtually every category of product
and service.
The global customer faces a fundamentally
different economic scenario from the
consumer of the 1950s. Instead of scarcity,
optimism, and growth, the market
environment of the 1990s is one of material
abundance, excess productive capacity,
pessimism, and stagnation.
Although manufacturer brands remain
important and global brands that promise
the customer greater value increasingly will
replace manufacturers brands on the
shelves. In many product categories, I expect
to see only two or three national
manufacturer brand survive the 1990s as
merchants and their brands become
increasingly powerful in the marketing
Although retailing is likely to remain
primarily national in scope, appearing with
increasing frequency will be global retailer
such as Southland Corps 7-eleven
convenience stores, which originated in the
United States, expanded to Japan, and
wound up being acquired in the United

States by their Japanese partner. Other large

retailers with a growing international scope
include price club/Costco, Wal-Mart, Toys
R Us, and fashion merchandisers such as
Louis Vuitton, Jaeger, and Chanel.

to call in with questions or comments. When

callers request information about dental


necessary response to an increasingly

informed, sophisticated, cautious, and
value-conscious global customer is
the value-delivery concept of strategy. Tis
concept has helped bring customerorientation, as called for by the old
marketing concept, back into the fore-front.
But it also added the fundamental notion
that the firms value-delivery strategy must
be based on some distinctive competence, a
source of unique and sustainable
competitive advantage.
More often than not, this distinctive
competence spring from intellect and
knowledge, which is to say, people, not
physical materials, plant, and equipment. In
Intelligent Enterprise, James Brian Quinn
says that At their core, most successful
enterprises today can be considered
intelligent enterprises converting intellectual
resources into a chain of service outputs and
integrating these into a form most useful for
certain customers [M]ost of the processes
that add value to material derive from
knowledge-based service activities.
All businesses, including manufacturing
companies, should define themselves as
service businesses because customer busy
benefits, not products. Usually, the physical
product itself is only one part of the total
value-delivery system for the customer;
customer expectations revolve around the
service aspects of the product into as service
aspects of the product offering.
Information can turn any product into a
service and, thereby, build a customer
For example, a package of Procter &
Gambles Crest toothpaste includes a toollfree telephone number allowing customers

Their names and addresses become part of a

database. In this way, the product becomes a
service and a two-way relationship between
the marketer and the customer, who is
buying improved dental health, not just a
physical product.
A companys ability to command natural
resources, technology, and capital as sources
of competitive advantage is taking bacj seat
strategically as the ability to control
knowledge and information moves to the
forefront. The value delivery concept of
strategy is based on the fundamental
assumption that value is defined in the
marketplace-not in the factory. It is defined
by customers who continuously asses
competitive product offerings as well as their
own needs and preferences, which change as
the customer learns.


base of knowledge about customers,

their characteristics, needs, and
preferences will be at the core of the
successful business of the future. This
knowledge will be supported by technology
that makes the information instantly
available to decision-makers throughout the
organizational network. Because customers
define value, information about them
becomes the critical strategic resource.
Through their definition of value, customers
also define the business by the demands
they place on it. In a business world
increasingly characterized by network
organizations coalitions of films bringing
together their distinctive competencies to
create customer value customer
knowledge is the link that holds the network

together and defines its shared objective and

common purpose.
It is only one of several distinctive
competencies necessary for survival,
however, and by itself wont differentiate
the firm from its competitors. The firm must
have other knowledge based competencies,
especially those related to technology and
other dimensions of the product offering,
than allow it to design, develop, and deliver
superior customer value.
Every firm (and every network rganization9 is
limited in its competencies; the firm
committed to a strategy of value delivery
must, therefore, limit the customer with
which it proposes to do business. Customers
define the business by placing a set of
demands on it for delivering superior value.

segmentation and targeting decision thus
establishes the criteria by which the firm will
be judged in the marketplace.
Selecting the right customers becomes the
critical strategic choice, the polestar form
everything that happens in the business,
most especially, development of the product
offering. The product is a variable; the
customer is the given.
Under both the old market targeting and
positioning are essential requirements for
effective strategic planning. In the new
marketing concept, however, the focus is
sharpened by adding the idea of the value
The value proposition is the verbal statement
that matches up the firms distinctive
competencies with the needs and
preferences of a carefully defined set of
potential customers. Its a communication
device that links the people in an
customer expectations on things that the
company does best in a system for delivering
superior value. The value proposition creates

a shared understanding needed to form a

long term relationship that meets the goals
of both the company and its customers.
To maintain its strategic focus, fulfill its
commitment to customers, and develop its
distinctive competence, the firm must be
selective. Not all customers are valuable
customers, opportunism and the siren song
of sales volume must be avoided. Losing a
customer can be the best thing to happen to
a business if that customer cannot be
satisfied at a reasonable cost.
However, customer who value the things
the firm does well must be attracted and
retained. In the slow-growth markets of the
1900s, the key to survival for most firms will
be retaining their best customers, rather
than attracting hordes of new customer.

nder the old marketing concept, the

objective was to make a sale. Under
the new marketing concept, the
objective is develop a customer relationship,
in which the sale is only the beginning. The
customer is a long-term strategic business
asset. As customer relationships and
strategic buyer-seller partnerships replace
transactions and simple repeat purchases as
the focus of marketing activity, a new
definition of customer loyalty emerges.
Brand Loyalty used to be defined as the
portion of a customers purchases
concentrated on the stand. It was a
definition based on statistical characteristics
of a string of purchases by an anonymous
customer. Customers were defined as
statistical averages and central tendencies
within a population, not as individuals.
The concept of customer loyalty replaces
brand loyalty in the new marketing concept.
In this sense, loyalty becomes a two way
steer: Customers remain loyal to the
company that serves their needs and
preferences with a total set of related
products and services, while companies
demonstrate their loyalty ti customers by

becoming knowledgeable about them and

responding with enhaced product offerings.
The commitment to deliver superior value to
customers contains an explicit commitment
to manage customer loyalty.
Customer loyalty has meaning only within
the context of relationship marketing.
Relationship marketing is only possible when
the company

one another, not as an indiscriminate tool for

attracting as many customers as possible,
good and bad. The company must commit
the resources necessary to retain the good
customers by offering them a broad range of
related products and services that will keep
them loyal as their needs change and evolve
over time.


Knows that the customer as an individual,
not as a statistical phenomenon, and can
address communications and specific
product offering to him or her. In this way,
the customer also develops a relationship
with the company, not just with a product or
A repeat customer is much more valuable
than a new customer, the likelihood that the
loyal customer will pay a somewhat higher
price, the opportunity to sell other product
and services, the benefits of favorable word
of mouth, and the avoided costs of
finding and attracting new customers. Price
oriented promotions often attract the
wrong customers, those who are
interested only in price, reducing both loyalty
and profitability in the long run.
In relationship marketing, the objective is to
retain loyal customers by offering them
superior value, defined as the ratio of
benefits to cost/price. There is a positive
trade-off between spending money to retain
customers vs. spending promotional dollars
to attract new ones. However, when
desgning their customer retention programs,
most managers assume that the customers
in danger of being lost are, in fact, worth
retaining. This is only true if the business has
carefully and strategically selected the
correct customers in the first place, namely,
those who value the things the firm tries to
do well.
Pricing should be used as part of the process
by which customers and companies select

etaining customers means keeping

them satisfied, and keeping them
satisfied requires innovation. Even
though most people remember that
customer orientation was the central theme
of the old marketing concept, few may recall
that innovation held nearly equal
Back in the 1950s and 1960s the word
"innovation" was synonymous with new
product development.
That was entirely consistent with the growth
Markets of the time and the opportunity to
exploit technology, much of it developed as
part of military and space exploration
programs and made available for the
consumer society. The objective was to
invent products that could be produced in
large quantities at low cost and sold at the
low prices required to create mass markets.
The concept of innovation for mass
production created an interesting paradox:
Innovation implies dynamic change, whereas
mass production calls for an unchanging
product and a stable production process. As
firms saw the huge growth in consumer
markets, managers assumed that the key to
profitability would be efficient production of
large quantities of standardized products
that would permit economies of scale. Once
product designs were set, it was marketing s
job to generate the necessary volume.
Because mass marketing was the
handmaiden of mass production, marketing
could quickly revert to a sales orientation
and it often did.

The quality movement of the I970s and

1980s redefined innovation to emphasize the
notion of continuous improvement. This
shifting emphasis and the quest for new and
better solutions to customer problems are
major hallmarks of the new marketing
concept. The dynamic mechanism of
customer expectations guarantees that the
definition of quality keeps changing. As
companies meet customers' expectations,
they revise them upward. Competitors
respond in kind with improvements and
innovation, adding another stimulus to the
firm's own innovation.
Continuous improvement represents a
dramatic shift from the ideology of mass
production, where the emphasis was on
getting an optimum design process and then
maximizing the volume being run through
the process. Continuous improvement
applies more to process than products,
although product improvement often is a byproduct.
The new concern for process improvement
was closely related to the realization that the
supporting service bundle is often at least as
important as the physical product in defining
customer value. This has led many
companies to redefine their business as a
service business.
Corporate Reengineering
improvement has led to the development of
the relatively new discipline called
"reengineering," defined by Michael
Reengineering the Corporation as a
fundamental, radical rethinking of the
business from the ground up.
To improve the level of customer service and
to find and eliminate unnecessary costs,
many companies are engaged in in-depth
study of the processes involved in developing
and delivering customer value. In
reengineering, management looks at the
company and its processes of value delivery

from the customer's perspective and

redesigns those processes and their related
organizational structure "from scratch."
Reengineering concentrates on process
improvement in the pursuit of customer
satisfaction and loyalty is an important part
of the new marketing concept, product
innovation in the more traditional sense of
breakthroughs, and totally new products
should not be dismissed. I have been
involved in research with companies in
Japan, Europe, and the United States that
shows a business' ability to innovate in this
traditional sense is among the strongest
determinants of its growth and profitability.
This finding has been consistent across
countries and different types of corporate
The lower costs of doing business with
existing customers is undoubtedly one of the
major reasons for the strong, positive
relationship the research found between
innovativeness and business performance.
Innovation results in products that are in
tune with the customer's changing needs and
preferences, in new products that have the
potential to attract valued new customers
and build customer loyalty. Continuous
improvement and new product development
are essential ingredients in relationship
Mass Customization
The old marketing concept evolved in a
world of standardized products, mass
production, and mass marketing. Traditional
methods of marketing research were built
around survey methodologies that sought
the common denominators of customer
needs and preferences, the characteristics of
the "average" consumer. Once that profile
was established, perhaps for multiple market
segments in the case of the more
sophisticated marketers, a standard product
was designed for maximum appeal. Then the

company used mass communications and

other forms of mass marketing to attract and
persuade the largest possible number of
potential buyers.
Mass marketing, using the mass media and
especially the new medium of television,
provided the sales volume necessary to
support the large factories delivering the
economies of scale in production necessary
for low cost and profitability.
Mass production and mass marketing
depended on highly standardized products
and messages that had the greatest appeal
for the maximum number of potential
Customers of the 1990s demand more
precise and more complete response to their
needs and preferences. With domestic and
foreign producers
aggressively competing for their business,
people can afford to be demanding and ask
for a larger variety of products and even
custom-tailored products. And they can get
We have moved from the age of mass
production to an era of mass customization
made possible by the impact of information
technology on the processes of order entry,
product design, production scheduling,
manufacturing, inventory management,
product delivery and distribution, and
customer feedback.
Cable television and the advent of literally
thousands of new special interest magazines
aimed at smaller target audiences created
media fragmentation that has decimated the
large audiences once delivered by the Big
Three TV networks and general interest
magazines. By the late 1980s, it was
abundantly clear that the mass production
and mass consumption view of business was
obsolete. Mass markets continue to
disintegrate, and the costs associated with

themboth production
marketing costsare too high.
The objective of the old massproduction/mass marketing paradigm was
producing products in sufficient quality at a
cost most people could afford. Low cost still
is a necessary condition for profitability, but
the new mass-customization paradigm is
based on the goal of developing, producing,
and delivering affordable goods and services
with enough variety and customization that
nearly everyone finds exactly what he or she
With the commitment to continuous
improvement that came out of the total
quality movement and rising customer
expectations, firms learned to live with
dynamic process change instead of stable
processes. The next and final step is to make
the form of the product as dynamic as the
process that produces it.
The concept of mass customization is easier
to understand in the case of services because
there is no factory that must be tuned for
flexibility. Even in the production of services,
however, Quinn points out that some
"'factory-like" technology, such as a
computer and a database, usually can be
accessed in modular form in the background,
allowing the service provider to assemble
components into a service package that
appears to be completely tailored to an
individual customer.
When a traveler contacts a travel agent or
airline sales representative, for example, she
selects destination, time of day, class of
travel, routing, seat location. A special meal,
payment terms, and other variables that
represent a unique product. Her product is
reservations system where it is "held in
inventory" until it is delivered at the time of
travel. But it is truly a unique product; it
literally has her name on it, and

she is identified in the customer information

file by a large amount of data describing a
unique individual to whom communications
can be addressed and whose needs and
preferences have been duly noted. If she
is a frequent traveler, her traveling history
a series of transactionsis noted clearly, and
the value of the relationship can be
determined rather precisely.
Even though the concept of mass
customization may appear to be more
applicable to services, it is increasingly
relevant for the production of products as
well. In the case of automobiles, for example,
the number of options available in styles,
accessories, colors, and so forth, makes it
possible to produce a unique car for each of
the millions of people who purchase one
each year.
The automotive press reports that Toyota is
working on an information and production
system that will make it possible for an
individual consumer to specify a car that will
be delivered to his or her home within a few
days of ordering. A Japanese bicycle
company already offers a similar service,
tailoring each bike to the physical
characteristics of the rider, although delivery
takes a few weeks. Personal computers can
be assembled with hardware features, such
as modems and software chosen from
hundreds of options and installed to meet
the unique needs of the customer.
With mass customization, the product truly
becomes a variable, as called for by the new
marketing concept. Mass customization
means working with existing product
technology, often in modular form, to create
specific product bundles for a particular
customer. From time to time, the whole
process is invigorated with the introduction
of new technology, created through the
ongoing process of invention. In either case,
the company should start with a customer
whose needs and preferences match its
capabilities and then tailor the product as
precisely as possible to deliver superior

value. That is the ultimate fulfillment of the

new marketing concept!
In the world of mass customization, the task
of the marketing function is to understand
customers as individuals, not as part of a
"mass" market.
Increasingly, it makes sense for the firm to
think of itself not as a producer of goods or
services for the customer, hut as engaging in
a process of co-development and coproduction with the customer.
The co-production idea can be understood
more easily in the context of business-lobusiness marketing, in which case a producer
of raw materials coordinates efforts with ihe
customer in designing and managing the
Increasingly, however, the concept also
makes sense for marketers in the consumer
arena, from home-office personal computers
to banking services and insurance to kitchen
appliances and frozen foods. In every
instance, the marketer must understand the
individual customer and his or her
application of the product or service.
In the new marketing concept, this
knowledge, understanding, and commitment
is not the special province of the marketing
department. Rather, it is shared throughout
the organization, as marketing becomes part
of the organization's culture as well as the
knowledge systems that guide decision
making at all levels.
Managing Culture
Before companies can implement the new
marketing concept, they must actively
manage the organizational culture, strategy,
and organization structure. Organizational
culture is the basic set of values and beliefs
that are shared throughout the organization.
These values and beliefs help employees
understand how the company functions and
dictate behavioral norms.
A customer-oriented organizational culture is
one in which the customer's interests come
first, always. The firm stays focused on the

customer in everything it does, and

management constantly asks how it can do
things better on behalf of the customer. The
customer-oriented firm puts the customer's
interests ahead of those of the owners, the
Everyone's job is defined in terms of how it
helps to create and deliver value for the
customer, and internal processes are
designed and managed to ensure responsiveness to customer needs and maximum
efficiency in value delivery. The customeroriented firm is committed to relationship
marketing, and employees work together to
solve customer problems.
Employee morale is a critical success factor
especially for employees who deliver some
aspect of a product's service bundle.
Management issues a clear statement of the
value proposition, which becomes the focal
point for the organization and a rallying cry
for employees. It becomes part of the
symbols and rituals of the organizational
Hierarchy and authority are relatively
unimportant in a customer-oriented
company culture.
Over time, it's likely that a value-delivery
definition of strategy will result in a
flattening of the organization and elimination
of layers of middle management as the firm
attempts to improve its responsiveness to
Loyal Customers and Employees
In relationship marketing, employees know
customers by name and may even develop
enduring personal relationships. Loyal
customers are treated as a key strategic
asset and resource, one that must be
preserved and defended. Loyal employees
also are essentialto maintain a strong
culture, to improve efficiency in the valuedelivery process, and to build long-term
customer relationships.
Customer and employee loyalty are related;

each reinforces the other. Experienced

employees can serve customers best
because they understand each customer's
needs. This knowledge is an essential part of
continuous improvement. This customer's
sense of confidence and trust in the
organization is enhanced by dealing with the
employees as individuals, helping to form a
bond with the organization. Likewise, this
ongoing relationship helps bond the
employee to the customer and builds the
commitment to customer satisfaction.
Wal-Mart often is used as an example of a
Customer oriented company with a strong
organizational culture. Until his death in
1992, company founder Sam Walton was
clearly the fountainhead of Wal-Mart's
culture, its chief spokesman and cheerleader.
Today, top management carries on this
tradition vigorously.
Among the most important and more
tangible aspects of the culture are:
A commitment to the customer and value
based on low prices.
A strong dedication to the welfare of
employees and their families.
"Greeters" who welcome customers at the
store door.

management staff meetings.
Several company cheers regularly repeated
in employee meetings. For example, every
employee pledges to greet any customer
who is within 10 feet of him. "So help me.
"Be an agent for the customer" is one of
the specific values articulated as part of the
Wal-Mart culture.
To perpetuate the Wal-Mart culture, each
new store is headed up by a manager with at
least seven years of Wal-Mart experience.
Assistant managers, in contrast, are moved
about every two years to give them
additional experience and exposure to the
Wal-Mart culture. Most employees/
associates own stock in the company.
Everyone is focused on serving the customer
and beating the competition. It is the

essence of a market- driven company,

focused on delivering customer value
through motivated employees who have a
sense of ownership. Customer orientation is
a core value in the corporate culture.
Market Intelligence
Customer orientation is more than a set of
beliefs, however. It must be supported by
up-to-date and accurate information about
the needs, wants, preferences, and buying
habits of customers obtained through direct
contact with them. The central question that
should guide all information gathering is.
"How does the customer define value and
how well are we providing it?"
Although traditional survey research
methods still play an important role in
specific instances such as routine
measurement of customer satisfaction with a
large, valid sample of recent customers
other techniques are likely to be more
valuable for management problem solving.
Small focus groups with actual or potential
customers may be particularly helpful in
developing new product offerings and
service features, for example. For business
marketers, carefully planned visits to
customer sites can be invaluable in providing
information to guide R&D, manufacturing
planning, and sales force development.
In any company, top management's
understanding of market conditions must be
obtained firsthand via frequent field visits
The new marketing concept calls for defining
the business "from the outside in," being an
informed "expert" about the customer, and
letting the customer define value by
matching up the customer's needs and
preferences with the firm's capabilities. As
Ross Perot would say, "It's just that simple!"
Of course, it's a simple idea, but its
implementation is not simple at all.
Top-level professionals should manage the
marketing information function. Most

companies also will need up-to-date

knowledge about information technology,
management science methods for building
models and analyzing data, and the
communication aspects of management
information systems.
The principal responsibility of the marketing
function in a customer-oriented, marketdriven company is to provide decision
makers throughout the organization with upto-date information about customers and
competitors, helping everyone understand
the customer's constantly shifting definition
of value.
The Learning Organization
A relevant new idea is that of "the learning
organization," one that is dedicated to
continuous improvement and reinventing
itself as market conditions demand. To
change productively, an organization must
first see the changes occurring "on its
periphery," John Seely Brown of Xerox Corp.
is quoted as saying in Seeing Differently:
Improving the Ability of Organizations to
Anticipate and Respond to Changing Needs
of Customers and Markets.
Management must carefully watch its
markets, capture new ideas, and learn from
these events.
Market intelligence is a key input to the
learning organization. It must be committed
to understanding customer needs, defining
specific areas that need improvement, and
identifying "best practice" wherever it is
occurring throughout the organization and in
other companies.
The learning creates and manages strategic
alliances with customers and other partners.
It is inherent in the definition of an
"adhocracy" type of culture, one that
remains externally focused and capable of

quick and flexible response to a changing

The concept of the learning organization will
become increasingly important in the
network organizations of the 1990s, with
more opportunities for parts of the
organization to learn from one another. In
fact, the motivation for many strategic
alliances is simply to create a learning
organization, introducing change into the
existing structure to develop and improve its
distinctive competence and learn critical new
skills from the new partner.
Network Organizations
In the firm committed to a value-delivery
concept of strategy, management will have
defined the distinctive competencies it must
own and develop and those that it needs to
acquire through partnership with others in
the value chain. The role of marketing in the
network organization is to keep all of the
partners focused on the customer's
definition of value. This is a new
responsibility for marketing, and it requires
close cooperation with other management
functions including purchasing, R&D,
engineering, manufacturing, and distribution.
Many kinds of marketing partners make up
the network organization. These include
purchasing managers must work together to
ensure that suppliers of raw materials,
components, subassemblies, or complete
products with the company's name on them
understand the nuances of the company's
value proposition and customer needs and
preferences. Some companies transfer
managers between the marketing and
purchasing functions because they have
negotiation skills valuable in both areas.
These companies recognize that each
function can benefit from a better
understanding of the other.
necessary where distinct and rapidly
developing technologies converge on a

particular product category, require close

cooperation under the guidance of both
qualitative and quantitative market research.
In really new areas, where customers may
not be able to express their preferences for
products that do not yet exist, experienced
marketing managers must work with their
technical colleagues to make subtle
understanding of customer needs and wants.
Their relationship with the customer must be
strong enough to lead the customer into the
new product future.
Managers with experience in both marketing
and R&D/engineering may be best able to
make such judgments.
Partnerships with resellers are perhaps the
best known marketing alliances. In fact, the
academics have focused their study of
strategic marketing alliances on marketing
channels and distribution, areas where there
is a useful body of knowledge dealing with
power, trust, cooperation and conflict, and
other aspects of inter-organizational
In network organizations, however, the
between manufacturers and resellers is
replaced by a new emphasis on cooperation
in serving the customer.
Instead of asking "'Who's customer is it?"
and fighting for control of the customer
relationship, participants focus their energies
on the shared tasks of understanding and
delivering customer value. It may be helpful
to define the customer for any company as
the party who pays the bill. Different
companies will answer the question of
customer definition within the network in
different ways.