Market-Oriented Is More Than Being Customer-Led

Author(s): Stanley F. Slater and John C. Narver

Source: Strategic Management Journal, Vol. 20, No. 12 (Dec., 1999), pp. 1165-1168
Published by: Wiley
Stable URL: https://www.jstor.org/stable/3094084
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 Strategic Management Journal
Strat. Mgmt. J., 20: 1165-1168 (1999)

RESEARCH NOTES AND COMMUNICATIONS

MARKET-ORIENTED IS MORE THAN BEING

K CUSTOMER-LED
STANLEY F. SLATER1* and JOHN C. NARVER2
'University of Washington, Bothell, Washington, U.S.A.
2Graduate School of Business Administration, University of Washington, Sea
Washington, U.S.A.
I

Connor, in 'Customer-led and market-oriented: A matter of balance', argues, among

things, that we propose that market oriented businesses focus on future customer needs t
neglect of current customer needs, that market oriented businesses over-emphasize mark
activities in their value chains, that market oriented businesses emphasize generative lear
to the neglect of adaptive learning, and that only large companies have the resour
become market oriented. These arguments are largely unfair extrapolations of our positio
reflect a superficial understanding of the nature and benefits of being market oriented. W
this response to clarify our position on these issues. Copyright ? 1999 John Wiley & Sons,

We welcome the dialogue stimulated by Tom in this field. This task recently became
articles
Connor's Comment on our article 'Customer-Led much easier as the Marketing Science Institute
and Market-Oriented: Let's Not Confuse the Two'(Deshpande, 1999) has sponsored the publication
(Slater and Narver, 1998). The nature and benefits
of a compilation of many of these articles. Thus,
of a market orientation have been discussed in while we use the remainder of this response to
the strategic marketing literature for a decadeclarify or correct positions taken in the Comment,
(e.g., Day, 1990; Kohli and Jaworski, 1990; we strongly encourage readers who are interested
Narver and Slater, 1990). And, although the in cre-
this topic to read the original works.
ation of superior value for customers is central
to the concept of competitive advantage (e.g.,
Ohmae, 1988; Porter, 1980), the culture and WHAT DOES IT MEAN TO BE
behaviors for accomplishing this have receivedMARKET-ORIENTED?
relatively little attention in the strategy literature.
And, as we note in our earlier paper, muchMarket-oriented businesses seek to understand
that has been written about the nature and conse-
customers' expressed and latent needs, and
develop superior solutions to those needs (e.g.,
quences of being market oriented is incomplete
or incorrect. While we believe that 'Customer-
Day, 1994; Kohli and Jaworski, 1990; Slater and
Narver, 1995). Based on an extensive set of field
Led and Market-Oriented: A Matter of Balance'
makes some useful observations, we suggestinterviews,
that Kohli and Jaworski (1990: 6; see also
Narver and Slater, 1990; Deshpande, Farley, and
Connor would benefit from reviewing the seminal
Webster, 1993) conclude that, 'it is appropriate
to conceptualize the market orientation of an
Key words: market orientation; innovation; corporate organization as one of degree, on a continuum,
culture; discontinuous change rather than as being either present or absent.' In
*Correspondence to: Stanley F. Slater, University of Wash-
ington, Bothell, 22011 26th Avenue SE, Bothell, WA a recent review of the work on market orientation,
98021, U.S.A. Jaworski and Kohli (1996) point out that reacting

CCC 0143-2095/99/121165-04 $17.50 Received 30 May 1999

Copyright ? 1999 John Wiley & Sons, Ltd.

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1166 S. F. Slater and J. C. Narver

to customers' expressed needs is usually inad-

to the needs of current and potential customers.
The latter point is consistent with Miles and
equate for the creation of competitive advantage.
Snow's (1978) position that the Prospector, Ana-
In contrast to their position that industry foresight
(see also Hamel and Prahalad, 1994) is an lyzer, and Defender strategy types fall along a
important subset of being market oriented, continuum
we of adjustment styles. It is far easier
to think in terms of distinct strategies than it is
hold that industry and customer insight is an even
to think of strategies as points on a continuum.
more important component of market orientation.
Thus, the low end of this continuum is rep-
Deep insight and the opportunity to attain strong
buyer loyalty are achieved when sellers areresented
able by product-oriented businesses, the
middle by customer-led businesses, and the high
to understand and satisfy buyers' latent needs.
Latent needs are current needs. But also, endbyby market-oriented businesses.
definition, they are impossible for buyersAn
to important distinction is that while the
theory and evidence suggests that any of the
articulate. It was Levitt (1980) who first presented
a multi-level product concept. The 'generic prod-
Miles and Snow strategy types may be successful,
uct' is the core benefit to the customer. The market orientation theory and evidence strongly
indicates that a more well developed market
'expected product' is what the customer considers
orientation is associated with superior perform-
the minimum acceptable benefits. The 'augmented
product' comprises benefits that a customer ance.
mayThus, businesses that fall in the middle of
never have considered-i.e., benefits that the satisfy
continuum are generally more concerned with
latent needs. The 'potential product' includesthe expressed needs of their customers and, other
everything that might be done to attract and things
hold being equal, will not perform as well
a customer. as more fully market-oriented businesses-i.e.,
Let us focus on the difference between the
businesses that address both expressed and latent
needs
expected product and the augmented product. of customers.
The
expected product conforms to buyers' expressed
Market-oriented businesses do not ignore their
current customer base or the expressed needs
needs and is the product strategy of the customer-
led business. The problem with satisfying aof their customers. They do realize that, since
buyer
at only this level of benefits is that what acompetitive
buyer advantage is often temporary, the
can articulate to one seller, the buyer can firmand
must understand how customers' needs are
evolving and develop innovative solutions to
will articulate to competitive sellers. The result,
those
typically, is price competition as all sellers are needs (D'Aveni, 1994). Thus, the greater
providing the same set of benefits. To augment
the market orientation of the firm, the greater the
a product, it is necessary to discover a current
proportion of its activities that are oriented to
need that is not being addressed. In this situation,
understanding latent needs.
because competition is based on providing bene-
fits beyond what the buyer expected, the buyer
LEARNING
has reason to pay a price premium. Thus, a AND INNOVATION
market-oriented seller will of course understand
and satisfy the expressed needs of customers. Connor correctly points out that businesse
But, a market-oriented seller will also seek to not, and can not, choose to be either ada
discover customers' latent needs and thereby offer learners or generative learners. As we argu
an augmented product-i.e., superior benefits- 'Market Orientation and the Learning Orga
that differentiates the seller and insulates it in
tion' (Slater and Narver, 1995), generative le
ing can not be planned, occurs episodically,
part or in whole from price competition. Product
augmentation that addresses latent needs ishappens
the only during some businesses' lives.
businesses that have a generative learning
basis of competitive advantage for the market-
oriented seller. experience are adaptive learners for the most
Contrary to Connor's assertion, there is nothingpart. Adaptive learning is necessary for continu-
in our discussion that suggests that market orien- ous improvement and incremental innovation.
tation is not concerned with current needs or
However, adaptive learning is not sufficient for
should not be seen as a continuum of behaviors
break-through innovation. The ability to learn
regarding the development of and responsiveness
generatively is more likely to be the catalyst for
Copyright ? 1999 John Wiley & Sons, Ltd. Strat. Mgmt. J., 20: 1165-1168 (1999)

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 Research Notes and Communications 1167

ket needs (Leonard-Barton, 1995; von Hippel,

break-through innovations than any other factor,
including technology-push or serendipity. 1986). This is not to say that being market-
oriented is natural or easy. It simply need not be
expensive or unavailable to small firms.
MARKET-ORIENTED IS NOT
MARKETING-ORIENTED
CONCLUSION
Once again, Connor seems to have read some-
thing into our article that simply is While we welcome the opportunity to adv
not there.
When he cites Drucker's (1974: 63)the discussion of the nature of market orientation
insightful
remark that 'Marketing is the whole business
in the strategy literature, we reject many of Con-
seen from the final point of view nor's criticisms
of its finalof 'Customer-Led and Market-
Oriented:
result, that is, from the customer's point Let's Not Confuse the Two' as inaccu-
of view,'
as evidence of a functionalist perspective for a
rate characterizations or undue extrapolations of
market orientation, they seem to missour statements.
a major We make these final comments
point of our article. As we explain to(Slater
clarify and
our position:
Narver, 1998: 1003), market-oriented businesses
are committed to understanding both the * Market orientation is one end on a continuum
expressed and latent needs of their customers, to of market learning and market response
sharing this understanding broadly throughout the behaviors. A business that is exclusively cus-
organization, and to coordinating all activities of tomer-led will never achieve the full benefits
the business to create superior customer value. of being market-oriented.
Coordinated action among all business functions*Market-oriented businesses need not sacrifice
is a core element in all conceptualizations of short-term performance for long-term pros-
market orientation (e.g., Deshpande et al., 1993; perity, or vice-versa.
Kohli and Jaworski, 1990; Narver and Slater, *Businesses do not choose to be generative
1990; Shapiro, 1988). learners at the expense of an adaptive learning
capability. However, businesses that do not
develop the market learning skills that can lead
ARE MARKET-ORIENTED to generative learning experiences are unlikely
BEHAVIORS THE DOMAIN OF to achieve a position of advantage in competi-
WELL-ENDOWED FIRMS? tive markets. Continued adaptive learning will
facilitate the maintenance of a position of
A common misconception is that developing
advantage. a
market-oriented culture and engaging in market-
* Market-oriented behaviors need not be expensive.
oriented behaviors must be expensive. The
The ability
required market learning activity can be as
to engage in market-oriented activities iscontinuously
simple as not carefully observing ones
solely the province of the large or lead
richcustomers
firm or customers' customers.
(Leonard and Rayport, 1997). Jaworski and Kohli
(1993) hypothesized that market share Again, (a measure
we encourage strategy scholars who are
of relative size) and market orientation would
interested be topic to read the original works.
in this
related. They found no significant relationship.
The understanding of what it means to be market-
We (Narver and Slater, 1990) found oriented and how a market orientation benefits
no evidence
that large businesses are more market-orientedthe firm continues to evolve. Research on this
than smaller ones. Pelham and Wilson (1996) topic is in the domain of strategy scholars as
and Slater and Narver (1996) both found highlymuch as it is of marketing scholars.
market-oriented small firms that were more suc-
cessful than larger competitors.
ACKNOWLEDGEMENT
Almost all firms begin life small and poorly
endowed. Those that become very successful
develop relationships with customers who can
We gratefully acknowledge the support of
give them unique and valuable insights into mar-
Marketing Science Institute.
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 1168 S. F. Slater and J. C. Narver

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