Marketing innovation behaviour of Dutch financial services Master thesis about the marketing and innovation of financial services providers

Marketing innovation behaviour of Dutch financial services

Master thesis about the marketing and innovation of financial services providers

Master thesis

University of Groningen

Faculty of Economics and Business Msc Business Administration Marketing Management Amsterdam, 30 October 2008 Derk van Wingerden Legmeerstraat 53-1

Marketing innovation behaviour of Dutch financial services

Master thesis about the marketing and innovation of financial services providers

Master thesis

University of Groningen

Faculty of Economics and Business Msc Business Administration Marketing Management Amsterdam, 30 October 2008 Derk van Wingerden Legmeerstraat 53-1

1058 NB Amsterdam, The Netherlands Student number: s1583085

e: derkvanwingerden@hotmail.com t: 06-53892891

Supervision

VODW Marketing: Drs. M. Sonnemans and Drs. F. Pétré

Management summary

The world of financial service providers is subject to fundamental change. The competition in the global retail-banking industry will become gradually more intense (Boston Consulting Group, 2007). Nevertheless, the trade-off effects of the current (October 2008) global crisis in the industry on the world economy and its global market are unpredictable and very insecure.

The world of financial services providers will be shaped by two major directions of change – the extreme focus on operational efficiency and the ongoing globalization of financial services (Gentle, 2007). These two major directions of change will decrease the orientation of organizations on its customers, and customers will decreasingly maintain brand preferences. It will be harder for the financial service providers to differentiate brands in overcrowded industries, both in economic upturns and downturns (Kim and Mauborgne, 2005). In order to compete effectively, organisations are challenged to create more customer value (Gordon et al., 1993). Kotler (2003, p.19) and Webster (1994) provide, although from a different perspective, both a strategic answer to this (prospective) environmental turbulence, by delivering enhanced value to customers. The first scholar is an evangelist of the marketing concept and the latter of the innovation concept. Webster (1988) was the first scholar who executed and brought the marketing concept to a strategic orientation, known as a market orientation. Narvar and Slater (1990) defined and formulated the market orientation construct based on culture, as the “organizational culture that most effectively and efficiently creates the necessary behaviours for the creation of superior value for buyers and thus, continues superior performance for the business”. The innovation concept is also embedded in a strategic orientation, namely innovation orientation. Innovation orientation is the perspective of an organisation and its ability to execute strategy in order to be able to create and deliver more value its customers (Dobni, 2006). Market orientation just as innovation orientation can positively affect organisations’ competitive advantage and business performance (Hult and Ketchen, 2001; Liu et al., 2002).

This report focus on both the market orientation and innovation orientation of financial services providers in the Netherlands, whereby the combination of both strategic orientations, also a multiple orientation, is handled as marketing innovation, which is, depending on the degree of orientation, comparable with a market driving orientation (Kumar et al., 2000). The research objective of this thesis is to provide insight in the relationship of market and innovation orientation and its influence on the business performance of financial services providers.

relationships which are approved and discussed in the literature, and which are proposed in the literature but not validated. The antecedents of the conceptual model are market orientation, as proposed by Narver and Slater (1990), and innovation orientation, as proposed by Dobni (2006), that result in the construct, as mediator, of the marketing innovation of financial services providers, as discussed basically by Kumar et al. (2000). The environment, as discussed by Jaworski and Kohli (1993), is expected to relate to the extent of orientation of both market and innovation orientation. Finally, it is expected that marketing innovation, as mediator, relate to (Kumar et al., 2000) the business performance of financial service providers.

As a result, there is a linear relationship found between market orientation and marketing innovation. There is also a linear relationship found between proactive market orientation and marketing innovation. Furthermore, there is a linear relationship found between innovation orientation and marketing innovation. Finally, there is a linear relationship between marketing innovation and business performance. In conclusion, market orientation and innovation orientation influence directly marketing innovation, which is the proactive marketing and innovation behaviour of the organisation, whereby marketing innovation has a mediator effect on the business performance of Dutch financial services providers.

In the future, research should examine the proposed scales of innovation orientation and marketing innovation in other industries, in order to validate the results of this research. Furthermore, it is interesting to investigate whether the founded clusters in the cluster analysis are specific for the financial services industry, and why these two clusters are found, instead of the four archetypes as mentioned by Berthon et al. (2004). Hence, it is wholeheartedly recommended to research the fascinating role and influence of customers on the strategy and activities of financial services providers in unstable environments and crisis periods.

The most intrigue managerial aspect of the research is the strategic consideration of financial services providers regarding the extent of market orientation and innovation orientation of the organisation. Importantly is that organisations are capable of identifying their own current configuration of marketing innovation and are able to evaluate whether the strategic orientation did fit the environment of operations (Berthon et al., 2004). The marketing and innovation behaviour should gain considerable attention from marketing directors and chief marketing officers of the Dutch financial services providers.

Preface

One day in the late summer days of the year

1982

, the eleventh day of August, a

unique

Dutch brand was established near one of the largest branches of the river Maas, which was, as

always, pleasantly lapping through the industrial and civilised landscape of Holland.

The brand started to live, and evolved by life experiences and the positive influences of

family

,

friends

, and the biotopes of the Western Province of Zuid-Holland and the Northern Province of

Fryslân. The brand was

challenged

to learn and educate itself in

Marketing

at the Saxion University of Professional Education in the Eastern based city of Enschede, and continued the learning experience at the academic level at the

University of Groningen

, which signified a fantastic period of

celebration

,

hard-working

and

friends

making in the cities of

Groningen

and Amsterdam. In addition, the brand became an

entrepreneur

itself by distributing its ideas via Internet. Moreover, the brand gained

international

experience and was influenced and inspired by life and education in the Northern countries of Europe, especially at the

Blekinge Institute of Technology in the country of

Sweden

, and by travelling in the Asian countries of

China

and

India

. The brand evolved as a result of these life events over a period of more than 25 years.

The marketing of a brand asks for dedication and implies answers today and plans for tomorrow. However, a human brand is not a standalone entity and needs endorsement, so does this brand. I am luckily involved in a complex and varied network of unique and above all human supporters and inspirators. Honest and sincere, I am pleased to thank these. First, I am exceptionally grateful to my parents, who gave me unlimited

support

and

freedom

to discover,

develop

and experience myself and enjoy life where and whenever possible, even abroad. Second, I would like to thank Professor J.C. Hoekstra for her always pleasant and inspiring relief, and Drs. J. Berger for the assistance during the finalisation of this master thesis. Fourth, I am very grateful to my friends Hans Troost, Joost Wijermars, Pieter Bas Blanken, Aletta Puite, Laura van Dijk, Caroline Roos, housemates of ‘Het Maagdenhuis - Groningen’, participants of the ISP

China

, and Jorrit Pijlman, who challenged and inspired me, and who gave me joy and relaxation during my

student life in Groningen and Amsterdam. At last, there is one person I am very privileged with and who enthused and energized me most, to enjoy life and to

successfully

achieve my (personal) objectives, until today. My girlfriend, Liesbeth de Vries. Thank you

!

Finally, I would like to thank the principal of this report,

VODW Marketing

and its employees, for supporting me and giving me inaccessible

opportunities

at the NIMA Expert platform Marketing of Financial Services, as well as in the think tank sessions and the marvellous

inspiration

tour with board members of Dutch financial services providers in London. In addition, I would like to thank the University libraries of Groningen and Amsterdam for providing the perfect utilisation to perform.

Let’s continue to build and live the brand. Let’s

reinvent and enjoy

that unique brand

everyday.

Let’s start by exploring today

.

Table of content

Management summary ... 3 Preface ... 5 Table of content... 6 1. Introduction... 9 1.1 Research objective... 11 1.2 Problem statement... 11 1.3 Research questions ... 11 1.4 Methodology ... 11 1.5 Research contribution... 12 1.6 Thesis outline... 12

2. Marketing and innovation of financial service providers ... 13

2.1 Conceptual model ... 13

2.2.1 Market orientation... 14

2.2.2 Responsive and proactive market orientation... 16

2.2.3 Market orientation – business performance relationship... 17

2.3.1 Innovation orientation ... 18

2.3.2 Innovation orientation – business performance relationship... 22

2.4 Marketing innovation... 23

2.5 Effects of the environment... 26

2.6 Marketing innovation - business performance relationship ... 27

3. Research design... 28

3.1.1 Research method... 28

3.1.2 Qualitative research... 28

3.1.3 Quantitative research... 28

3.1.4 Single cross-sectional research... 29

3.2.1 Data collection... 30 3.2.2 Target population... 30 3.2.3 Sampling frame... 30 3.2.4 Sample size ... 31 3.2.5 Scale evaluation... 31 3.3 Methods of analysis... 32 4. Results... 33

4.1.1 Characteristics of the sample... 33

4.1.2 Frequency distribution of descriptive variables ... 33

4.1.3 Market orientation construct... 35

4.1.4 Proactive market orientation construct... 35

4.1.5 Innovation orientation construct... 36

4.1.6 Marketing innovation construct ... 36

4.1.7 Environment construct... 36

4.1.8 Business performance construct... 36

4.1.9 Conclusion... 37

4.2.1 Correlation analysis ... 37

4.2.2 Market orientation... 37

4.2.6 Environment... 39 4.2.7 Business performance... 40 4.2.8 Descriptive variables... 40 4.2.9 Conclusion... 41 4.3.1 Regression analysis ... 41 4.3.2 Hypotheses testing... 42 4.3.3 Conclusion... 44 4.4.1 Cluster analysis... 45

4.4.2 Validation of the clusters... 45

4.4.3 Characterisation of the clusters... 46

4.4.4 Conclusion... 47

5. Summary, conclusions and recommendations ... 48

5.1 Summary ... 48

5.2 Conclusion ... 51

5.3 Recommendations ... 52

5.4 Limitations and future research directions... 54

References ... 56

Appendix I - Questionnaire qualitative research ... 62

Appendix II - Invitation to participate ... 63

Appendix III- Questionnaire quantitative research... 64

Appendix IV - Factor Analysis ... 70

Appendix V - Correlation Analysis... 76

Appendix VI - Regression Analysis... 78

Appendix VII- Cluster analysis ... 84

List of figures FIGURE 2.1 - Conceptual model... 13

FIGURE 2.2 - Antecedents of innovation orientation ... 20

FIGURE 2.3 - Archetypes of market orientation-innovation orientation... 24

FIGURE 4.1 - Results of Cluster analysis ... 46

FIGURE 5.1 - Model of demonstrated linear relationships ... 49

List of tables TABLE 3.1 - Reliability and distribution of multi-scale items of constructs... 31

TABLE 4.1 - Frequency of primary business of the organisation ... 33

TABLE 4.2 - Frequency of generic strategy of organisation... 33

TABLE 4.3 - Frequency of primary source of returns of business unit ... 34

TABLE 4.4 - Frequency of number of marketing employees in business unit... 34

TABLE 4.5 - Frequency of function level of respondents... 34

TABLE 4.6 - Characterisation of the constructs ... 35

TABLE 4.7 - Correlation among constructs ... 38

Glossary

Market orientation Market orientation is the organizational culture that most effectively and efficiently creates the necessary behaviours for the creation of superior value for buyers and, thus, continues superior performance for the business (Narver and Slater, 1990).

Innovation orientation Innovation orientation is the perspective of an

organisation and its ability to execute strategy in order to be able to create and deliver more value its customers (Dobni, 2006).

Proactive market orientation Proactive market orientation is applied when an organisation attempts to explore, understand, and try to satisfy the latent needs of its customers (Narver et al., 2004).

Marketing innovation Marketing innovation is defined as the result of the

implementation in an organisation of both strategic orientations, market orientation and innovation orientation.

Environment The environment consists of varying degrees of market

turbulence, competitive intensity, and technological turbulence (Jaworski and Kohli, 1993).

Business Performance The business performance consist of turnover growth

market share growth, profit growth, return on investment, cash flow, and productivity.

VODW Marketing

VODW Marketing is the principal of this research project in cooperation with the NIMA – expertise platform Marketing of Financial Services. The strategic marketing consultancy is with 150 professionals, the largest marketing consultancy agency in the Netherlands. The organisation is specialised in innovation, sales excellence, marketing intelligence and market strategy. VODW Marketing is a leading international consultancy in marketing.1

Background of the research project

The financial service industry will be one of the most dynamic industries of The Netherlands in the upcoming years. Marketing of financial services is an interesting and fascinating job nevertheless this is not recognized by young marketing talent. Therefore an Expert platform, NIMA Marketing of Financial Services, is founded and launched with the mission to make The Netherlands a leading country in customer-driven financial services in order to create an attractive financial service industry for top marketing talent. The NIMA expert platform Marketing of Financial Services consists of top management members of well-known and established

financial service providers in The Netherlands (e.g. ING, ABN AMRO, Fortis,

Achmea, DeltaLloyd)and marketing and strategy consulting companies as IG&H and VODW Marketing.

1. Introduction

The world of financial service providers is in the upcoming years subject to fundamental change. According to a Boston Consulting Group – study (2007), the competition in the global retail-banking industry will become gradually more intense. The intensive competition is driven by ongoing deregulation and opening of international markets, the continuing regionalization and globalization of the financial services industry, the rise and expansion of direct and online financial services, and increasing customer expectations (Boston Consulting Group, 2007). As a supplement to this introduction, today (October 2008), the financial services industry fell into a deep global crisis, due to the infarct as a result of the credit crisis, and where of the trade-off effects on the world economy and its global market are unpredictable and very insecure.

Since trade barriers between nations and regions crumble off and as information and prices of products and services become at once worldwide available, niche markets and substratum for monopolies continue to disappear (Kim and Mauborgne, 2005). The world of financial services providers will be shaped by two major directions of change – the extreme focus on operational efficiency and the ongoing globalization of financial services (Gentle, 2007). These two major directions of change will decrease the orientation of organizations on its customers and customers will decreasingly maintain brand preferences, due to the infinite possibility to compare offerings of financial services providers. It will be harder for the financial service providers to differentiate brands in overcrowded industries, both in economic upturns and downturns (Kim and Mauborgne, 2005). In order to compete effectively, organisations are challenged to create more customer value (Gordon et al., 1993).

construct based on culture, as the “organizational culture that most effectively and efficiently creates the necessary behaviours for the creation of superior value for buyers and thus, continues superior performance for the business”. Kohli and Jaworski (1990, p.6) defined the market orientation construct based on information, as “it is the organization-wide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments, and organization-wide responsiveness to it.” However, in order to provide a strategic answer to the prospected market turbulence, Webster (1994, p.10) argues that being merely market oriented is not enough in order to outperform competitors.

According to Webster (1994, p.19), innovation, which is the capacity to introduce a new process, product, or idea in the organization (Damanpour, 1991), and is also obligatory to deliver enhanced value to customers in a competitive market environment. This obligation can be accomplished by process, product and service innovations, as an example by offering higher levels of service that refines customers operating status, in order to create enhanced value to customers (Gordon et al., 1993). The innovation concept is also embedded in a strategic orientation, namely innovation orientation. As said by Siguaw et al. (2006) “an innovation orientation is a set of organisation-wide beliefs and understandings that guide and direct all organisational strategies and actions, including those embedded in the formal and informal systems, behaviours, competencies, and processes of the firm”. Accordingly, Webster (1994, p.10) state that innovation has the potential to create customers, by the engagement of customers’ minds and imaginations.

strategic orientations, also a multiple orientation, is handled as marketing innovation, which is, depending on the degree of orientation, comparable with a market driving orientation (Kumar et al., 2000). According to Kumar et al. (2000), a market driven organisation is excellent in generating incremental innovation, which is comparable to a market orientation, while a market driving organisation is engaged with radical innovation, which is comparable with an innovation orientation.

1.1 Research objective

The research objective of this thesis is to provide insight in the relationship of market and innovation orientation and its influence on the business performance of financial services providers.

1.2 Problem statement

The problem statement will form the main funding of this master thesis, and is stated as follow. What is the influence of market and innovation orientation on the business performance of Dutch financial services providers?

1.3 Research questions

In order to answer the problem statement the following research questions are stated and will be answered by a literature review and quantitative research.

! What is market orientation and how does it relate to business performance? ! What is innovation orientation and how does it relate to business performance? ! What is the influence of market orientation on marketing innovation?

! What is the influence of innovation orientation on marketing innovation?

! What is the influence of the environment on the marketing innovation and business performance relationship?

! What is the contribution of marketing innovation to business performance? ! Which groups can be distinguished based on market- and innovation orientation? 1.4 Methodology

the environment. The literature research is based on a review of books as well as academic published articles in well known journals that relate to the problem statement. The literature search process is conducted by using the five steps method provided by Cooper and Schindler (2003). The main purpose of the quantitative research is to investigate the influence of a combination of both market orientation and innovation orientation on the business performance of financial service providers, and whether groups can be identified based on the level of market orientation and innovation orientation.

1.5 Research contribution Academic contribution

This master thesis builds further on the fundament of four archetypes of market innovation, which vary in the degree of contribution to business performance, as defined by Berthon et al. (1999). The behaviour of an organisation, defined by Kumar et al. (2000), as a result of the implementation of a marketing innovation archetype, and its influence on the business performance of an organisation will be the main research focus of this thesis. This thesis will thus build further on the concepts provided by Berthon et al. (1999) and Kumar et al. (2000).

This master thesis will provide academically insight in the influence of a combination of market orientation and innovation orientation on business performance of financial service providers. This combination of both orientations will be tested in the financial services industry, and thus it provides academics an opportunity to further research in this industry or diversify the research direction in other industries and contribute in the research area of marketing and innovation. Managerial contribution

Practically, this master thesis will provide the principal of this research project, VODW Marketing, a strategic benchmark of the orientations across the industry that has the potential to become a key learning mechanism for identifying, building, and enhancing marketing and innovation capabilities to deliver sustainable competitive advantage (Vorhies and Morgan, 2005). This benchmark should contribute to the marketing innovativeness of the financial service industry in the Netherlands.

1.6 Thesis outline

2. Marketing and innovation of financial service providers

The theoretical framework focuses on the academic discussion of the strategic orientations of market orientation (2.2) and innovation orientation (2.3), marketing innovation (2.4) as a result of both strategic orientations, the effects of the environment (2.5) and the marketing innovation-business performance relationship (2.6). First, the theoretical framework will be outlined on the basis of the conceptual model (2.1).

2.1 Conceptual model

The conceptual model, which is shown below as FIGURE 2.1, will be the guideline for this thesis. The antecedents of the conceptual model are market orientation, as proposed by Narver and Slater (1990), and innovation orientation, as proposed by Dobni (2006), that result in the construct, as mediator, of the marketing innovation of financial services providers, as discussed basically by Kumar et al. (2000). The linkage between market orientation as well as innovation orientation and business performance, as discussed by Jaworski and Kohli (1993), depend on the environmental context. Finally, it is expected that marketing innovation, as mediator, relate to (Kumar et al., 2000) business performance, as the consequence, of a financial services provider. The variables and the relations among the variables will be discussed further in this chapter.

FIGURE 2.1 - Conceptual model

2.2.1 Market orientation

Market orientation as a form of execution of strategic orientation is at the centre of attention of modern marketing and a frequently studied and discussed research object in the marketing literature. The orientation was presented in the 1990s as the framework of actions that organisations undertake in order to implement a customer orientation in the organisation, whereby a set of behaviours and the organisational culture supports the framework of actions (Deshpande´ et al., 1993; Kohli and Jaworski, 1990; Narver and Slater, 1990). According to Narvar and Slater (1990, p.21), market orientation can be defined as an “organizational culture that most effectively and efficiently creates the necessary behaviours for the creation of superior value for buyers and thus, continues superior performance for the business”. These authors came also with an operational measure of market orientation and the contribution to business profitability, which will be discussed later. Several researchers proposed various perspectives in the conceptualisation of the market orientation construct. Lafferty and Hult (2001) reviewed the similarities and differences between the numerous perspectives, and synthesized a conceptualization of market orientation. Three important perspectives on the market orientation construct will be described and discussed below in order to gain more insight in the perspectives. Kohi and Jaworski (1990) define their market intelligence perspective as follow:

! “Market orientation is the organization-wide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments, and organization-wide responsiveness to it (Kohli and Jaworski, 1990, p.6).”

Kohi and Jaworski (1990) proposed three key elements for market orientation, namely: intelligence generation, intelligence dissemination, and responsiveness. According to this perspective the starting point of a market orientation should be market intelligence and the scholars state that market intelligence is a broader concept that is going beyond the verbalized needs and preferences of customers. It also includes the monitoring of competitors’ actions and their effect on customer preferences as well as analyzing the effect of environmental factors. Narver and Slater (1990) define their culturally based behavioural perspective as follow:

! “Market orientation is the organizational culture that most effectively and efficiently creates the necessary behaviours for the creation of superior value for buyers and, thus, continues superior performance for the business (Narver and Slater, 1990, p.21).”

and services of superior value (Narver and Slater, 1990). The competitor orientation of an organisation represents an understanding of the strengths and weaknesses of its current and potential competitors as well as their capabilities and strategies on the long-term. The latter component of the perspective is interfunctional coordination which is according to Narver and Slater (1990) the managed deployment of organisational resources in generating superior value. Deshpande et al. (1993) define their customer orientation perspective as follow:

! “Customer orientation is the set of beliefs that puts the customer's interest first, while not excluding those of all other stakeholders such as owners, managers, and employees, in order to develop a long-term profitable enterprise (Deshpande et al., 1993, p.27).”

Deshpande et al. (1993) inferred that market orientation is synonymous with customer orientation. The authors of the customer orientation perspective excluded the competitor component by comparison with the perspective of Narver and Slater (1990) since they argue that the competitor orientation can be merged with the customer orientation perspective. Deshpande et al. (1993) acknowledge the importance of the interfunctional coordination component proposed by Narver and Slater (1990), however the authors argue that this component should be part of the meaning of customer orientation.

Defining the market orientation construct

This report will use the market orientation perspective of Narver and Slater (1990) as a fundament for the research framework. The most important reason to use the construct of these authors is that their perspectives is a combination of the market intelligence persepective of Kohi and Jaworski (1990) and the customer orientation perspective of Deshpande et al. (1993), and thus also represent a widespread confirmation in the marketing literature.

insight. An organisation’s market-orientated strategic behaviour includes three components which should be supported by a relevant organisational culture, namely: customer orientation, competitor orientation, and interfunctional coordination (Grinstein, 2008). The three components of market orientation will be discussed below.

Customer orientation

The concept of customer orientation, or as it is labelled as putting the customer first (Deshpande et al. (1993, p.27), can be traced back to a statement by Drucker (1954, p.37), that “it is the customer who determines what a business is”. The general interpretation of this statement is that in order to be successful, organisations should determine the wishes and needs of its customers and deliver products and services that will satisfy and fulfil these wishes and needs (Berthon et al., 2004) in order to build up a long-term profitable business (Deshpande et al., 1993, p.27). Customer orientation is also seen as synonymous for the marketing concept inferred by Kotler (1988, p.17), purely figure out what customers desire, and deliver it to them.

Competitor orientation

According to Aaker (1988) and Porter (1985) the concept of competitor orientation implies that an organisation should understand the short-term strengths and weaknesses as well as the long-term capabilities and strategies of both present and potential competing organisations. Noble et al. (2002) define the orientation as a competitive culture as a dimension of the organisational culture. This dimension provides the organisation values and priorities in the interaction with the environment and specifically influences the strategies and tactics of an organisation (Noble et al., 2002).

Interfunctional coordination

In order to implement the marketing concept properly, Felton (1959) persist to integrate all other functions of the business with the functions of marketing. According to Narver and Slater (1990), is with interfunctional coordination, any point in the consumers value chain an opportunity for the organisation to create and deliver superior value for the customers. Therefore, any employee in any function of the organisation, thus interfunctional, can contribute in order to deliver and create value for the customers (Porter, 1985).

2.2.2 Responsive and proactive market orientation

2004). This first set of organisational behaviour is also named as, ‘responsive’ market orientation, and will be further stated as market orientation. The second set of organisational behaviour is ‘proactive’ market orientation. This type of orientation is applied when an organisation attempts to explore, understand, and try to satisfy the latent needs of its customers (Narver et al., 2004). Organisations that exclusively rely on customers expressed needs as an input for product development do not create new insights into value-adding opportunities for its customers (Narver et al. 2004). Furthermore, these organisations create thereby slight or even no customer dependence and a foundation for customer loyalty, because the product development is a repetitive and not a progressive product development. The success of a new-product due to the role of a proactive market orientation is obvious and is empirically supported by a study of Narver et al. (2004). So far, responsive and proactive market orientation is not related, by empirical research, to a multiple orientation. Thus, the following hypotheses are stated and will be investigated;

H1. Market orientation positively influences marketing innovation.

H2: Proactive market orientation positively influences marketing innovation. 2.2.3 Market orientation – business performance relationship

The market orientation framework of Narver and Slater (1990), examined the direct causality assumption of market orientation on business performance. Prior studies in the market orientation literature demonstrated various findings. Positive findings were presented by Hult and Ketchen (2001) and Liu et al., (2002), who exhibit that market orientation positively affect organisations’ competitive advantage and business performance. Furthermore, Narver and Slater (1990) found a substantial positive effect of a market orientation on the profitability of an organisation. Several researchers presented negative or non-significant findings with regard to the proposed hypothetical relationship (e.g., Agarwal, Erramili and Dev, 2003; Sandvik and Sandvik, 2003). Although nonconforming findings were found by several researchers, three recent meta-analyses (Cano et al., 2004; Kirca et al., 2005; Shoham et al., 2005) confirm the positive relationship between market orientation as a strategic orientation and the business performance of an organisation. The predominant finding, taken the previous discussion of positive and negative findings into account, is that market orientation positively affects business performance. This positive finding will be used as foundation in the research framework. Accordingly, the subsequent hypothesis is stated;

2.3.1 Innovation orientation

The financial services industry will, the upcoming years, be exceptionally competitive and dynamic (Boston Consulting Group, 2007), see again the supplement in the introduction with regard to the current turbulence in the financial services industry. In order to compete effectively in this dynamic environment, organisations are obliged and challenged to create more value for its customers (Gorden et al. 1993), which can also be labelled as a responsive market orientation (Narver et al., 2004). Webster (1994, p.10) argues that continues innovation is a precondition in order to create and deliver more value to customers. Being purely ‘customer oriented’ as stated by Berthon et al. (2004) is not enough in order to compete effectively. According to Berthon et al. (2004) innovation is over the longer term a pre-requisite in order to create customers, which is thus a different approach than attracting and serving customers as described by Slater and Narver (1998). The innovativeness of an organisation is, defined by Damanpour (1991), the ability to introduce some kind of new process, product, or idea.

Previous scholars demonstrated that innovation is a pre-requisite for delivering and creating value. Consequently, how do organisations become innovative? Leading authors in this field do have different visions to become innovative. Christensen and Raynor (2003) believe that organisations become innovative because of the discovery of disruptive strategies. However, Hamel (2002) state that revolutionary thinking is the manner to become innovative. Moreover, Bossidy and Charan (2002) argue that to become innovative, organisations should focus on the execution of strategy. Furthermore, Dobni (2006) state that it depends on the perspective of an organisation and its ability to execute strategy in order to be able to create and deliver more value its customers. Finally, Grewal (1999) as well as Marinova (2004) argue that innovative organisations hit the idea of the ideal composition of optimal alignment to their competitive environment and therefore dominate their industries. In conclusion, in order to compete the current status quo, financial services providers are challenged to innovate in order to gain a competitive advantage.

According to Gorden et al. (1993), the creation of more customer value, in order to compete effectively, can be realized by innovating a process, product or service. An example of creating more customer value is by enhancing the customer’s operating states by delivering higher levels of service to customers (Gorden et al., 1993).

Innovative organisations share at least three common characteristics (Dobni, 2006):

1. Employees understand that they energize innovation, through the way they think and act; 2. A culture of creativity, excitement, empowerment and the desire to succeed;

3. Innovation is their mantra – they all know why they are at the top.

Previous literature, discussed the topic of innovation in general and of organisations. Interestingly, what is the innovation situation of the financial services industry?

The innovation environment of the financial services industry can be characterised as being low in disruptive innovations, while it is high in compatible innovations (Dobni, 2006). According to Dobni (2006), major disruptions, which can be identified as innovations that fundamentally changes the way of doing business in an industry, occur rarely. The author state that major disruptions occur once every 10-20 years in this specific industry. However, Dobni (2006) state that when these disruptions occur, innovations are highly compatible, which means that the innovation is often difficult to protect from plagiarism by competitors. Finally, if major disruptive innovations are introduced to the marketplace, all competitors will adopt the disruptive innovation eventually as it becomes the new industry standard (Dobni, 2006). The author argues that for organisations in a low in disruption but high in compatibility environment, it is not important to introduce the major disruptive innovation, but the ability of an organisation to adopt and benefit from the disruption (Dobni, 2006). Organisations which are able to implement and incorporate this organisational behaviour, tend to out-compete rivals. Dobni (2006) argues, that this can be done, by the continuous introduction of new or improved products and services, through customer relationship development and offering higher levels of customer service.

widespread adopted view of the innovation literature which is mainly focused on the factors that affect the performance of innovations in the marketplace and on product and process innovations (Morrison et al., 2000; Caldwell and O'Reilly, 2003). Although the innovation is a step beyond the traditional approach towards innovation (Siguaw et al., 2006), it can be asserted that the orientation also should gain some critique. Managers in organisations that enact a technology strategy philosophy, which means that technological innovation is the key driver of economic growth (Berthon et al., 2004), devote their energy towards innovation, which in marketing texts can be referred to a ‘product orientation’ (e.g. Kotler and Armstrong, 1996). The critique here is that managers do not devote their energy to fulfilling the needs of customers, which are finally the buyers and thus the most important driver of economic growth. In conclusion, the most important critique is that an innovation orientation excludes the customer in its strategic point of departure.

Defining the innovation orientation construct

Although several scholars, as previously discussed, review the similarities and differences between the numerous perspectives on how to become innovative, this report will use the innovation orientation perspective of Dobni (2006) as a fundament for the research framework. Accordingly, innovation orientation is the perspective of an organisation and its ability to execute strategy in order to be able to create and deliver more value its customers (Dobni, 2006).

The most important reason to use the construct of this author is that it can be effectively used (Berthon et al, 2004), next to the market orientation construct of Narver and Slater (1990), in order to define the marketing innovation behavior of financial services providers.

In order to gain more insight in and explore the components of the innovation orientation construct, the researched components of the orientation, proposed by Dobni (2006), will be described and discussed. An organisation’s innovation-orientated strategic behaviour includes three components, as shown in FIGURE 2.3, namely: context, culture and execution (Dobni, 2006). The three key components of innovation-orientation will be discussed below.

Context

Every organisation is unique. Therefore the composition of elements that encompass an innovation orientation will vary for every financial services provider. The development and adoption of innovation within an organisation requires a supportive organisational context (Dobni, 2006). According to Dobni (2006), a successful innovation context of an organization requires some fundamental commitments and consists of: propensity quotient, strategic architecture and organizational learning. The first element of the context is the propensity quotient of an organisation and concerns the likelihood that an organisation embrace efforts to enlarge and to sustain an innovation orientation. As Dobni (2006) state it another way, “if organisations do not display a propensity for innovation, or if they are not prepared to pick the battles necessary to make fundamental changes or shifts, then it is not going to happen”. This quotient could even encompass that organisation may have to change their processes or even their business model in order to support the innovation orientation. The second element of the context is the strategic architecture of an organisation. As said by Dobni (2006) the strategic architecture comprehends the balance between emergent and planned strategy, which can also be stated as the flexibility of strategy. Mintzberg (1994) argues that an organisation can potentially withdraw 50 percent of the future growth of the business if an organisation’s context is not supporting emergent strategy. Therefore, respecting the innovation orientation, Dobni (2006) argues that the objective and the challenge of an organisation should be to convert continuously emergent opportunities into deliberate strategy. Finally, the third element of the context is organisational learning. A learning organisation comprises the development of new knowledge throughout the organisation (Crossan et al., 1999). The element of organisational learning affect the innovation orientation, by offering employees skills training and the further development and execution of emergent opportunities, and entrust the organisation with learning from its employees (Dobni, 2006). Culture

employees are honourable, loyal, open and reliable to other employees. Secondly, Rodan and Galunic (2004) state that the generation and dissemination of knowledge, which is knowledge management, about customers and competitors influence innovation. Finally, Dobni (2006) state that cluster enactment is directly linked to emergent strategy. An innovative organisation encourages employees to enact and challenge continuously the status quo of the business (Dobni, 2006).

Execution

Ideas within an organisation are mostly abundantly. However, the execution of ideas separates those organisations that think they can execute and those organisations that do execute (Dobni, 2006). According to Dobni (2006), the execution of an innovative organization consists of: psychological empowerment, venture experimentation and co-alignment. The first element, psychological empowerment, suggests that employees sense that their work is valuable and that employees are confident about their own capabilities to perform (Dobni, 2006). The second element, venture experimentation, is the essence of innovation. Venture experimentation comprises that employees are starting to think differently, become adventurous, and undertake manageable risks (Dobni, 2006). The third and final element is co-alignment, which is the fit between the behaviour of employees and the competitive environment. Dobni (2006) argues that “it is the effective interaction between the environment and the alignment of behaviours with the competitive context”.

If an organisation is able to achieve the operational-level of continuous innovation, the innovation nexus, the innovation orientation of an organisation becomes its mantra (Dobni, 2006). The nexus should be the objective of an innovation orientation although to path to achieve the nexus should be carefully balanced. The following hypothesis is stated in order to investigate the influence of an innovation orientation on the marketing innovation construct:

H4: innovation orientation positively influences marketing innovation. 2.3.2 Innovation orientation – business performance relationship

orientation positively affect firms’ competitive advantage and business performance (Hult and Ketchen, 2001; Liu et al., 2002). Therefore, the next hypothesis is stated and will be explored; H5: innovation orientation positively influences business performance.

2.4 Marketing innovation

According to the conviction of numerous scholars, it is said that market orientation contributes to the business performance of organisations (Cano et al., 2004; Kirca et al., 2005; Shoham et al., 2005). However, other scholars (Hult and Ketchen, 2001; and Liu et al., 2002) demonstrated that alternative strategic orientations can also affect positively the business performance of organisations. Moreover, organisations that mingle market orientation with alternative strategic orientations, a multiple orientation, as an organisational strategic perspective, are expected to perform and positively influence the business performance even better than the adoption of only the market orientation construct (Grinstein, 2008). In fact, an empirical study within five countries by Deshpande et al. (1997), advocated that the innovativeness of an organisation is an even more important contributor to the performance of an organisation than the adoption of a market orientation. Hence, empirical evidence suggests that market orientation as well as innovation orientation significantly influence the business performance of an organisation positively (Berthon et al., 2004).

According to Grinstein (2008) there has been over the past three decades a discussion in the literature about the relationship between market orientation and innovation orientation. Some scholars (e.g. MacDonald, 1995; Christensen, 1997) presented negative findings concerning this relationship, whereby organisations with a market orientation are less likely to innovate since the orientation is too close to the customer. On the contrary, other scholars (e.g. Atuahene-Gima, 1996; Hult et al., 2004; Kirca et al., 2005) suggested a positive relation between market orientation and innovation orientation. These scholars suggest that innovation is enhanced positively by a market orientation, since it incorporates execution of business in a something new or different manner, in response to changing market conditions. Consequently, which strategic orientation should a financial services provider adopt in order to meet expressed and latent needs of customers by the utilisation of innovation?

Defining the marketing innovation construct

differentiation of its products. Both behaviours, from the innovation-driven organisations as well as the market-driven organisations, are likely to change the status quo, and thus increase the innovativeness of the organisations (Deshpande´ et al., 1993; Han et al., 1998; Narver et al., 2004). Apparently, there is overlap between the two strategic orientations in order to fulfil latent needs of customers. Therefore, marketing innovation is defined as the result of the implementation of both strategic orientations in an organisation, which can vary by organisation. Berthon et al. (1999) came up with a

theoretical marketing innovation framework, which considers the organisational focus on the market and on innovation. The theoretical framework of Berhon et al. (1999) identified four alternative approaches towards the interaction between a market and innovation orientation. According to previous work of Carpenter et al. (1994), organisations and managers learn from the market, which in turn is a market orientation, and the market learns from new technologies, which is the result of an innovation orientation. According to

FIGURE 2.3 - Archetypes of market orientation-innovation orientation 1 2 3 4 5 6 7 1 2 3 4 5 6 7 Market orientation Inno va ti on o ri ent at io n

(source: Berthon et al.,1999)

Berthon et al. (1999), this two-way learning dialogue is, for every product or service, to a greater or lesser extent apparent in every market. However, as said before, the extent of focus on the customer and innovation can vary substantially by organisation (Berthon et al., 2004). The marketing innovation framework, as shown in FIGURE 2.4, identified four configurations by a mixture of a market orientation and an innovation orientation, namely; isolate, follow, shape and interact (Berthon et al., 1999). Each configuration is described below.

Isolate

The organisation is organocentric, it becomes the focus of its own attention (Woodruff, 1997, p.139) and is obsessed with internal efficiency and short-term profits. The communication between the market and innovation is nil (Berthon et al., 2004). The need of customers is barely considered by the management, and thus market research is rare. Likewise, the developed technologies are not market-driven and are probably developed for own sake (Berthon et al., 2004). The organisation is in an ‘Isolate’ mode.

Isolate Shape

Follow

The market, and thus the customer, drives the innovation of an organisation in a ‘Follow’ mode. According to Berthon et al. (2004), an organisation in a ‘Follow’ mode relies heavily on structured (formal) and unstructured (informal) market research, which drives the development, from scratch (new product development) or from an established position (product reengineering), of products and services. The organisation focuses on the satisfaction of its customers and attempts to enhance positive experiences and rectify mistakes (Berthon et al., 2004).

Shape

Innovation drives the market, in the situation of a ‘Shape’ strategy (Berthon et al., 2004). In this situation the organisation is technology-oriented, whereby customers might be not aware of the usefulness and benefits of the innovation until it came to market (Pilzer, 1990, p.18). Innovation defines in certain circumstances the human needs, by developing and providing new products or services that induce changes in basis behaviour of humans (Berthon et al., 2004).

Interact

Organisations in the ‘Interact’ mode, maintain, according to Berthon et al. (2004), a true dialogue between the market and innovation. Berthon et al. (2004) argues that “the term dialogue is appropriate here because it uses the metaphor of speech to underpin the market-innovation relationship, providing a spectrum ranging from ‘conversation’ to ‘negotiation’.” The ‘Interact’ mode can be characterised as an orientation whereby expressed and latent needs of customers, and continuous product or service engineering and development drives the organisation.

According to Berthon et al. (1999) none of the four configurations of marketing innovation is a better option than another option to implement. Each of the four modes might be an appropriate orientation, under a given set of environmental circumstances (Berthon et al., 2004). More importantly is that organisations are capable of identifying their own current configuration of marketing innovation and are able to evaluate whether the strategic orientation did fit the environment of operations (Berthon et al., 2004).

2.5 Effects of the environment

According to Jaworski and Kohli (1993), which researched the role of environmental characteristics in moderating the relationship between market orientation and business performance, it is likely that environmental characteristics influence the level of market orientation of an organisation. Research findings acknowledged their point of view, whereby the relationship appeared to be robust across varying degrees of market turbulence, competitive intensity, and technological turbulence (Jaworski and Kohli, 1993). Berthon et al. (2004) find that organisations in an ‘Isolate’ and ‘Follow’ mode significantly out-perform other orientations in stable and low turbulence environments. This finding mirrors the finding of other scholars (Greenly, 1995; and Harris, 2001), that a market orientation positively contributes to the business performance of an organisation, under the condition of low environmental turbulence. However, a ‘Shape’ and ‘Interact’ orientation as such, provided no significant direct or unmediated impact on business performance (Berthon et al., 2004). Conversely, a ‘Shape’ and ‘Interact’ mode as a strategic orientation does have significantly positive impact in turbulent environments (Berthon et al.). Finally, it make sense that organisations with a ‘Shape’ and ‘Interact’ orientation possibly contribute to the turbulence of an environment, and thus benefit from their own orientation, as such (Berthon et al., 2004). However, Slater and Narver (1994) came across with critics regarding the proposition whereby the environment moderates the market orientation-performance relationship and state that it would be risky for an organisation, due to the complexity and expensiveness, to attempt to adjust the business market orientation to match current market conditions. Nevertheless the critics of Slater and Narver (1994), the findings of Jaworski and Kohli (1993) will be used as part of the research framework.

Defining the environment construct

The environmental context can be described by market turbulence, competitive intensity and technological turbulence (Jaworski, and Kohli, 1993).

Market turbulence

Organisations in turbulent markets are likely to modify and adapt their products and services in order to continually satisfy the changing preferences of customers (Jaworski and Kohli, 1993). Hence, organisations in more turbulent markets are expected to be more market oriented than organisations in stable markets (Jaworski and Kohli, 1993).

Competitive intensity

its products or services. By contrast, customers have infinite options to satisfy their needs in a highly intensive competitive environment (Jaworski and Kohli, 1993).

Technological turbulence

Organisations that market mature technologies could be poorly in the utilization of leveraging a market with the technology to gain a competitive advantage (Jaworski and Kohli, 1993). It is likely that these organisations rely to a greater extent on market orientation. Moreover, organisations that continuously develop and adapt their technologies may be able to obtain a competitive advantage, and will rely to a lesser extent on market orientation (Jaworski and Kohli, 1993). Consequently, the following hypothesises are stated and will be investigated:

H6a: the influence of marketing innovation on business performance becomes stronger as the market is more turbulent.

H6b: the influence of marketing innovation on business performance becomes stronger as the competition is more intensive.

H6c: the influence of marketing innovation on business performance becomes stronger as the technological environment is more turbulent.

2.6 Marketing innovation - business performance relationship

The extent of marketing innovation of an organisation is in particularly important whether an organisation is faced with substantial market turbulence and other moderating factors of marketing innovation (Hult et al., 2004). According to Hult et al. (2004) it should be important to engage the marketing innovation behaviour, of an organisation in order to achieve superior performance, when an organisation faces high turbulence.

Defining the business performance construct

The business performance consist of turnover growth market share growth, profit growth, return on investment, cash flow, and productivity.

Research findings of Han et al. (1998) and Hurley and Hult (1998) suggest a strong linkage between business performance and various types of innovative activities. Furthermore, the interrelation between business performance, environmental turbulence and the type of marketing innovation is interesting to research. Consequently, the next hypothesis is stated:

3. Research design

This chapter discusses the method of research (3.1), data collection (3.2), and the plan of analysis (3.3).

3.1.1 Research method

The research methods which will be applied are a qualitative- and quantitative research and a single-cross-sectional research method, the types of research and the applications of it will be discussed below.

3.1.2 Qualitative research

According to Malhotra (2006) a qualitative research is appropriate when little is known about the problem situation. A qualitative research is to gain insight and understanding of the problem which is confronting the researcher (Malhotra, 2006). Therefore, this type of research will be applied first in order to gain more insight into the research field and to define more precisely the problem statement and hypothesis. The questionnaire of the qualitative research, which is used as a guide for the more conversational than structured (Cooper and Schindler, 2003) expert interview, is enclosed as appendix I. The experts are knowledgeable about the industry; the experts have together more than 25 years of experience in the Dutch financial services industry, both as marketing strategy consultants at banks, insurance companies and intermediary organisations. According to the justification of the researcher of this paper both experts are qualified to engage as expert in this research.

The objective of the expert interviews is to gain insight, recognition and positive feedback from the experts regarding the proposed relationships derived from literature, the method of investigating the marketing and innovation in the industry, the classification of the industry, the research level in the hierarchy of the organisation, the function level of respondents, the estimated number of the marketing employees population in the industry, and finally the method of data collection. The experts both acknowledged the proposed relationships as conveyed in the conceptual model (paragraph 2.1). The hypotheses will be empirically tested. Therefore, the quantitative research will be discussed.

3.1.3 Quantitative research

Quantitative research as a research method bring along some points of attention. First, it is very important that the proposed model is a closed environment. In other words, the proposed model relationships should mirror the real life situation, whereby non-influencing variables are excluded from the model as much as possible, and that influencing variables, are included in the model. Second, the research method requires a planned and structured design. Finally, it is possible that inaccuracies are included in the procedure or model due to actions of the researcher, which will affect the final results of this thesis, for example by beforehand classifying a question instead of asking a open question, and therefore might lose some important data.

The application of a 7-point Likert scale, has also several advantages and disadvantages. An advantage is that a 7 point scale is easy to construct and administer and the scale is readily to use and easy to understand for respondents (Malhotra, 2006). The major disadvantage of the 7 point scale is that it takes longer to complete for respondents than other rating scales since respondents are ‘forced’ to read every statement (Malhotra, 2006). The questionnaire is enclosed as appendix III.

3.1.4 Single cross-sectional research

To be able to describe the status quo, a conclusive, and more specific a descriptive research method is required. The data received out of the questionnaire is also applicable for a descriptive research because it attempts to make a description of the population. The research method that will be applied is a single cross-sectional research. A single cross-sectional design is also named as a sample survey research design (Malhotra, 2006). According to Malhotra (2006) questioning respondents is used as a survey method of obtaining information. The questionnaire consists of fixed-alternative questions, which requires the respondent to select a predetermined set of answering possibilities (Malhotra, 2006).

According to Malhotra (2006), a major disadvantage of cross-sectional research over longitudinal research is the inability to discover and detect changing patterns as a result of repeated measurement. However, an advantage of the single survey method is that it is simple to administer (Malhotra, 2006).

3.2.1 Data collection

The data collection can be described by the target population, a determination of the sampling frame, selecting a sampling technique, and the determination of the sample size and the execution of the whole sampling process (Malhotra, 2006). These steps are closely interrelated and relevant to the data collection process, and will be discussed below.

3.2.2 Target population

The outcome of the expert interviews resulted into an advice about the target population. According to the experts, marketing and innovation can be best measured at employees who are affected with and responsible for these two major strategic issues. Thus, the population for this research can be defined as the employees, from the executive management until the marketing employees, who are working at, or responsible for, the marketing department of financial services providers established in The Netherlands. The (retail) department consists of marketing employees working at banking services, investment services, insurance services, intermediation services or advisory services of financial services providers. The total estimated population comprises 5.000 marketing related employees working in the Dutch financial services industry2_. 3.2.3 Sampling frame

survey. Furthermore, the survey comprised questions about the functional level of the respondents, and the email address of the respondents of the company were the respondents are working for was asked, in order to create afterward the possibility to screen and adapt the dataset, in order to bring it to perfection.

3.2.4 Sample size

The sample size of this research is n=97 respondents. However, in the ideal situation, n=385 respondents are needed in order to be able to draw conclusions about the population, with a confidence level of 95% (Malhotra, 2006). The research findings should be interpreted with caution, as the sample size is rather small and far from the perfect magnitude.

The sample size has also influence on the reliability and accuracy of the sample, due to the variation between the population and the sampling frame as stated in paragraph 3.2.3 (Malhotra, 2006).

3.2.5 Scale evaluation

The constructs must be evaluated by testing the reliability and the validity. The validity of the constructs is investigated by a factor analysis. However, the factor analysis did not represent prior findings and earlier stated theory3_{. Therefore, the reliability of the constructs, based on} theory, will be investigated. The reliability, or the internal consistency, of the constructs can be measured by the statistic Cronbach’s alpha (Malhotra, 2006). The constructs, as stated in the conceptual model (see paragraph 2.1), are all internal consistent due to the satisfactory Cronbach’s alpha’s, see TABLE 3.1, and therefore all the constructs are reliable (Malhotra, 2006). However, the environment construct contains two items, items 53 and 58 (see also appendix III), which show relatively low means in comparison to the other items within the construct, and are therefore removed from the environment construct.

TABLE 3.1 – Reliability and distribution of multi-scale items of constructs

Construct Cronbach’s alpha Items (see appendix III) Market orientation 0,915 by 15 items 1. – 15.

Proactive market orientation 0,897 by 8 items 16. – 23. Innovation orientation 0,896 by 9 items 24. – 32. Marketing innovation 0,879 by 9 items 33. – 41. Environment 0,854 by 15 items * 42. – 58. Business performance 0,847 by 6 items 59. – 64.

Descriptive variables - 65. – 71.

* Items 53 and 58 are removed from the construct, due to low means, in order to gain internal consistency.

3 _{The factor analysis provided 12 legitimate factors, whereby some factors closely represent the constructs,}

3.3 Methods of analysis

First, the measured variables will be described and displayed by means of frequency tables and cross-tabulations, which is an uncomplicated device for arraying data (Cooper and Schindler, 2003). This description will mainly provide insight in the composition of the data. Second, a correlation analysis is conducted, in order to identify coherence and relationships between the constructs and descriptive variables. Third, a regression analysis is applied in order to test the stated hypotheses. The regression analysis will focus on the direct and moderator relationships. Two models will be tested and are shown below in FIGURE 3.1 and FIGURE 3.2. Finally, a cluster analysis will be applied in order to gain managerial insight, and will imply the methods of outlier detection based upon single linkage, hierarchical clustering based on Ward’s method and the iterative cluster method based on K-means (Punj and Stewart, 1983).

FIGURE 3.1 – Model 1 FIGURE 3.2 – Model 2

Market orientation + + Marketing Innovation Innovation orientation Market orientation + + Marketing Innovation Innovation orientation Market orientation Business performance Marketing Innovation Innovation orientation + Environment Market orientation Business performance Marketing Innovation Innovation orientation + Environment

The relationships, as shown in FIGURE 3.1 and FIGURE 3.2, will be tested according to statistical testing procedures (Cooper and Schindler, 2003, p.529). The questionnaire consists mainly of questions with a 7-point Likert scale, and will be therefore treated as interval data (Cooper and Schindler, 2003, p.254). Furthermore, a one-sample test will be conducted, because the research consists of a single sample in order to test the hypothesis that comes from the population (Cooper and Schindler, 2003). Thus, parametric tests such as the Z or t-test (Cooper and Schindler, 2003) will be conducted. Third, the desired α level of significance will be 0,5. Finally, the significance test will be conducted, the critical test value will be checked and the test will be interpreted and discussed in chapter 4.

+

4. Results

The sample, which consists of n=97 respondents, is first characterised by frequencies (paragraph 4.1) and after that, analyzed by correlation analysis (4.2), regression analysis (4.3) and cluster analysis (4.4). The analyses will be focused on the (sub) constructs.

4.1.1 Characteristics of the sample

The data obtained from the survey will be described on the basis of the frequency distributions of the descriptive variables as well as the frequencies of the constructs in order to characterise and gain insight in the composition of the data.

4.1.2 Frequency distribution of descriptive variables

Below, the frequency distribution of the following descriptive variables is shortly described, namely; primary business of the organisation, generic strategy of the organisation, primary source of return of the business unit, number of marketing employees in the business unit, function level-, and gender of respondents. The descriptive variables cover the questions 65-70 of the survey.

The primary businesses of the respondent’s organisations are bank services (38.1%), insurance services (35.1%) and intermediary and advisory services (12.4%), as shown in TABLE 4.1.

TABLE 4.1 - Frequency of primary business of the organisation

Primary business of organisation Frequency Percent

Bank services 37 38,1

Investment services 3 3,1

Insurance services 34 35,1

Intermediary and advisory services 12 12,4

Other 11 11,3

Total 97 100

The most applied generic strategy is that of a differentiation strategy (49.5%), as shown in TABLE 4.2. Strikingly, a relatively small group, 13.4 percent of the respondents’ organisations, applies a focus strategy (differentiation), and 4.1 percent applies a focus strategy (low cost).

TABLE 4.2 - Frequency of generic strategy of organisation

Generic strategy of organisation Frequency Percent

Cost leadership strategy 32 33,0

Differentiation strategy 48 49,5

Focus strategy (low cost) 4 4,1

Focus strategy (differentiation) 13 13,4

As listed in TABLE 4.3, almost half of the respondents state that the primary source of returns of the business unit is business-to-consumer (49.5%), where business-to-business covers 33.0 percent, and business-to-intermediary 17.5 percent of returns of the business unit.

TABLE 4.3 - Frequency of primary source of returns of business unit

Primary source of returns of business unit Frequency Percent

Business-to-business 32 33,0

Business-to-consumer 48 49,5

Business-to-intermediary 17 17,5

Total 97 100

The number of marketing employees in a business unit varies among the respondents, as can be seen in TABLE 4.4. The largest group is 0-50 (63.9%) marketing employees in a business unit. The groups 100-150 and 150-200 are not worth mentioning, due to the few observations.

TABLE 4.4 - Frequency of number of marketing employees in business unit

Number of marketing employees in business unit Frequency Percent

0-50 62 63,9 50-100 19 19,6 100-150 3 3,1 150-200 1 1,0 200 > 12 12,4 Total 97 100

The function level of the respondents is shown in TABLE 4.5. In order of size; senior level marketeers (38.1%), board and management level marketeers (33.0%), medior level marketeers (12.4%), junior level marketeers (8.2%), and two respondent’s identified themselves as chief marketing officer (2.1%).

TABLE 4.5 - Frequency of function level of respondents

Function level of respondents Frequency Percent

Junior level (1-3 years working experience) 8 8,2 Medior level (3-5 years working experience) 12 12,4 Senior level (5-8 years working experience) 37 38,1 Board / management level (8-> years working experience) 32 33,0

Chief marketing officer level 2 2,1

Other 6 6,2

Total 97 100