Creating customer satisfaction through market orientation

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Implementing market orientation in the Dutch automotive industry 0

Creating customer satisfaction

through market orientation

- Implementing market orientation in the Dutch

automotive industry -

Master Thesis

MSc BA Marketing Management September 2010

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Creating customer satisfaction

through market orientation

- Implementing market orientation in the Dutch

automotive industry -

Groningen, September 2010

University of Groningen

Faculty: Economics and Business

Study: MSc BA Marketing Management

1st Thesis supervisor: dr. J.A. Voerman 2nd Thesis supervisor: prof. dr. J.C. Hoekstra

Student: A. van Hijum Student number: S1495372

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Management summary

Companies are increasingly looking for ways to best meet the needs of the customer and thereby make profit. An example of a business sector where there has been an increasing demand for the insight in customers’ needs and to what extent marketing activities should be aligned, is the automotive industry. In consequence, market orientation is subject of many studies in marketing literature. Market orientation is an organizational culture in which the collection and dissemination of information from customers and competition (market information) is important, a customer centered focus of employees is encouraged, and in which a management form is implemented where the information obtained is used for (marketing) activities in order to create the highest possible added value for the customer.

The purpose of this study was to find out in which factors employees play a role in realizing a successful implementation of market orientation and to investigate the influence of market orientation on customer satisfaction. The specific subject of this study, is the automotive industry. This subject is chosen, since in this industry, a large focus exists on the interaction between the two groups; frontline sales staff and customers. Employees interact most with customers and therefore influence the customer’s perception of the automotive company and the customers themselves to a large extent.

The main question in this research is as follows:

How does the interaction between salespeople and customers in the automotive industry improve the degree of market orientation and what factors influence this interaction?

To answer this question a descriptive study is performed in several stages. First, a literature study gives an overview of the definitions, factors, elements, measurement and consequences of marketing orientation. Using this information, a conceptual model is developed. In this model a distinction is made between the expected level of market orientation (employees) and the perceived level of market orientation (customers).

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Implementing market orientation in the Dutch automotive industry 3 expected competitor orientation, competitor orientation, interfunctional coordination, sales person selling orientation and internal market orientation with expected market orientation.

Another conclusion is that a higher level of perceived market orientation leads to a higher level of perceived customer satisfaction. The same seems to be applicable for the sample of employees, but this relation seemed not to be significant. Regarding customer satisfaction, it is found that customers with a low education level are more satisfied than customers with a middle or high education level. There are no significant differences in customer satisfaction measured and different income levels. Finally, a positive relation is found between internal market orientation and expected customer orientation.

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Preface

For almost six years I have been searching for the ideal mix between the knowledge acquired at the University of Groningen and the applicability of it in my company Store Support BV. The wish of optimizing this mix has come true with writing my thesis. Largely free to choose the topic and research area, I took the opportunity to make the automotive industry subject of study. This is an industry that is intriguing me. After a house, a car is the biggest investment of your life, a symbol of power or sheer necessity, something to brag about, and for almost every citizen of 18 years and older in the Netherlands, a product for daily use.

But much has been changed in the recent years, both on the demand and the supply side. A showroom is not the only site of interaction between a customer and sales person. Information has never been so accessible and competition is more fierce than ever. Combined with economically challenging times, this offers a great marketing case.

On this basis my goal was created: being able to answer automotive companies which factors influence a market oriented way of doing business. In consequence, I confront them with answering: Do customers and employees think the same about the level of market orientation? I am convinced that there will always be automotive showrooms; the degree of market orientation is vital for a company to survive and to create customer satisfaction. Whether I have reached this goal should be answered by the reader. You decide if my research is applicable. In any case the content inspires to start becoming (even more) market orientated tomorrow and, become more customer focused.

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Implementing market orientation in the Dutch automotive industry 5 But the one I am most grateful is my wife Saskia. Her qualities as a motivator and stable factor in periods of stress and setbacks prove to be the critical success factors to complete my Master.

Arjen van Hijum

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Content

MANAGEMENT SUMMARY ... 1 PREFACE ... 4 CHAPTER 1 INTRODUCTION ... 8 § 1.1 Introduction ... 8 § 1.2 Market orientation ... 9 § 1.3 Problem statement ... 14 § 1.4 Design report ... 15 CHAPTER 2 LITERATURE ... 16 § 2.1 Introduction ... 16

§ 2.2 The market orientation concept: A definition ... 16

§ 2.3 Measurement of market orientation ... 23

§ 2.4 The role of staff ... 24

§ 2.5 Consequences of market orientation ... 27

§ 2.6 Conceptual model ... 29

CHAPTER 3 METHODOLOGY ... 31

§ 3.1 Operationalisation of the conceptual model ... 31

§ 3.1.1 Customer orientation ... 32

§ 3.1.2 Competitor orientation ... 34

§ 3.1.3 Interfunctional coordination ... 35

§ 3.1.4 Salesperson selling orientation ... 35

§ 3.1.5 Internal market orientation ... 36

§ 3.1.6 Customer satisfaction ... 38

§ 3.1.7 Demographic characteristics ... 38

§ 3.2 Method of data collection ... 38

§ 3.2.1 Questionnaire ... 38

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§ 3.3 Plan of analysis ... 40

§ 3.3.1 Representativeness ... 40

§ 3.3.2 Descriptive results ... 41

§ 3.3.3 Testing the conceptual model ... 42

§ 3.3.4 Factor analysis ... 44

CHAPTER 4 RESULTS ... 47

§ 4.1 Response and representativeness ... 47

§ 4.1.1 _{Response en demographic characteristics ... 47}

§ 4.1.2 _{Representativeness ... 48}

§ 4.2 Descriptive results ... 49

§ 4.2.1 _{Results regarding customer orientation ... 49}

§ 4.2.2 _{Results regarding competitor orientation ... 51}

§ 4.2.3 _{Results regarding interfunctional coordination ... 52}

§ 4.2.4 _{Results regarding sales person selling orientation ... 53}

§ 4.2.5 _{Results regarding internal market orientation ... 54}

§ 4.2.6 _{Results regarding customer satisfaction ... 55}

§ 4.3 Difference between customers and employees ... 57

§ 4.4 Regression (customers) ... 57

§ 4.5 Regression (employees) ... 59

§ 4.6 Comparison of expected and perceived market orientation ... 61

CHAPTER 5 CONCLUSIONS AND RECOMMENDATIONS ... 62

§ 5.1 Conclusions ... 62

§ 5.2 Management recommendations ... 66

§ 5.3 Research recommendations ... 67

REFERENCES ... 69

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Chapter 1 Introduction

§ 1.1 Introduction

Companies are increasingly looking for ways to best meet the needs of the customer and thereby profit. The marketing concept, a cornerstone of modern marketing thought, stipulates that to achieve sustained success, firms should identify and satisfy customer needs more effectively than their competitors (Day 1994, Kotler 2002). The desired level of organization-wide concern and responsiveness to customer needs and competitive actions, sets the degree to which the firm should implement a market orientation (Kohli and Jaworski 1990, Narver and Slater 1990). Kohli and Jaworski (1990) define market orientation as the combination of three broad business activities: the generation of market intelligence, the dissemination of this intelligence and organization-wide responsiveness to it. The Narver and Slater (1990) definition of market orientation complements the definition of Kohli and Jaworski (1990) with three components – customer orientation, competitor orientation, inter-functional coordination – and two decision criteria; long-term focus and profit objectives.

Over the last decades, marketing literature has acknowledged the role of market orientation as a major source of achieving a sustainable competitive advantage. Perhaps this advantage is achieved because a number of studies found that market orientation has a positive influence on performance (Jaworski and Kohli 1993, Narver and Slater, 1990 Reukert, 1992). The market orientation has been tested in different parts of the world such as Africa, the Far East and different parts of Europe (Elg 2007). Also, its relevance for different types of industries has been investigated in general, as well as for specific types of firms such as small businesses (Greenley 1995).

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Implementing market orientation in the Dutch automotive industry 9 immediate sales without reward for customer interest. Finally, firms can send mixed signals and/or attempt to reside between the extremes, which Narver and Slater (1990) suggest could be the least effective position to adopt from a sales performance standpoint.

An example of a business sector where there has been an increasing demand for the insight in customer needs and to what extent marketing activities should be aligned, is the automotive industry. With the automotive industry the dealers are meant, where physical contact occurs between consumer and salesperson. Especially, in the automotive retailing industry, the role of staff is a specific factor where much research is focusing on (e.g. Sigauw et al 1994, Goff et al 1997, Chang et al 1999). Consequently, in the automotive industry, customer satisfaction is increasingly seen as a key performance indicator (KPI). One of the essential aspects of these indicators is the distinctive role of sales personnel. In the automotive industry, many companies combine the level of customer satisfaction with the quality of the employees their customer orientation. As a result, more and more companies are rewarding their employees based on quality, rather than quantity such as turnover. In economic challenging times, with high pressures on sales and negative impact on the price both the importers, as well as the dealers are still looking for answers. For example, on how existing customers can be maintained, the share of wallet can be increased and new customers can be attracted.

This development makes it interesting to examine the factors that determine the market orientation of a company in the automotive industry, with special interest for the interaction between customers and sales staff. Therefore, this study will focus on market orientation within the automotive industry.

§ 1.2 Market orientation

Historical perspective

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Implementing market orientation in the Dutch automotive industry 10 From the start of the twentieth century to the period following the second World War (although the development was interrupted by the wars) competition grew and the focus of marketing turned to selling. This sales orientation made communications, advertising and branding more important as companies needed to sell the increasing outputs of production in an increasingly crowded market. From the 1960s onwards, most markets have become saturated resulting in an intense competition for customers. Marketers are involved at a strategic level within the organization.

About a decade later, it was stated that the marketing concept defines marketing as a philosophy: “A company has to base its activities on the needs and wishes of customers in selected target markets, while simultaneously taking into account constraints from the environment” (Grönroos 1989). Gradually, the opportunities for information about individual customers in a cost efficient way to register and use increased. The extent to which an organization operated in this way, is also known as ‘external orientation' or 'market orientation'. (Wikipedia, 18 augustus 2010)

Market orientation in the 21st century

Much of the prolific market orientation literature examines the extent to which firms behave, or are inclined to behave, in accordance with the marketing concept (Kohli and Jaworski 1990). Market orientation has been conceptualized from both behavioral and cultural perspectives (Homburg and Pflesser 2000). The behavioral perspective concentrates on organizational activities that are related to the generation and dissemination of and responsiveness to market intelligence (e.g. Kohli and Jaworski, 1990). The cultural perspective focuses on organizational norms and values that encourage behaviors that are consistent with market orientation (e.g. Deshpandé, Farley and Webster 1993, Narver and Slater 1990).

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Implementing market orientation in the Dutch automotive industry 11 the market orientation philosophy (e.g. Barroso Castro et al 2004). Their research proves that the attitude of the people who make up the organization, i.e. management and employees, represent an essential factor in the development of a market orientation, insofar as the company leaders have the power to shift organizational systems and structures in favor of the employees. The latter creates the climate aimed at offering higher value to the customer. The unique aspect concerning the study of Barroso Catro et al (2004) is the fact that it not only measures the relationship between market orientation and performance, but also stresses the essential role of three sources, namely: companies’ management, companies’ employees and customers.

The cultural perspective of market orientation focuses on organizational norms and values. Examples of literature that discusses the concept of having a supportive “culture” to have successful market orientation, are from authors such as Kohli and Jaworski (1990), Narver and Slater (1990), Kohli, Jaworski and Kumar (1993), Deshpandé and Farley (1999), Pulendran, Lafferty and Hult (2001), Osarenkhoe (2008) and Homburg et al (2009). They all include actions of employees and corporate culture among the explanation of market orientation. For instance, Homburg et al (2009) mention the concept of Customer Need Knowledge (CNK), which describes the extent to which a frontline employee can accurately identify a given customer’s hierarchy of needs. Osarenkhoe (2008) concludes that continuously fine-tuning the strategy’s compatibility with corresponding values in the firm’s business culture, and maintain an informed workforce that is aligned with the philosophy, is required to create a market orientation.

Gebhardt et al (2006) developed a theoretical model showing that creating a market orientation requires dramatic changes to an organization’s culture and the creation of organizationally shared market understandings. In relation with this cultural perspective, an increasing research effort is made concerning internal and external market orientation. It’s based on the fact that research in services has long recognized the need for managers to focus internally on employees as well as externally on customers (Lings 2002). The author propose that internal market orientation has a direct positive impact on the internal aspects of organizational performance, and these aspects are proposed to impact directly on the external aspects of performance of market orientation.

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Implementing market orientation in the Dutch automotive industry 12 Other research findings emphasize the important role of the interaction between frontline employees and their customers (e.g. Chen and Quester 2005). The authors research an integrated view of the implemented customer value-based market orientation (CVBMO, the firm side) and perceived CVBMO (the customers’ perspective). Based on the survey a list of items is presented that form the basis of market orientation. They also state that research in other branches than the hairdressing industry is necessary to determine whether their findings could be generalized. Given the significant positive role of staff performance on customer satisfaction and the relation between customer satisfaction and customer store loyalty, it is interesting to test these findings within the automotive industry.

Less literature is aimed at the factors that influence the relationship between sales staff and customers. One of the scarce researches concerning this specific area, is from Jones et al (2003). Their results suggest that a firm’s market orientation positively influences salesperson work attitudes. Sales managers influence salesperson’s customer orientation through their organizational commitment, and salesperson’s customer orientation influences industrial customers’ switching intentions.

Also, several authors have described how market orientation can be implemented. The leading author in this area is George Day, who has done many research concerning the path to market orientation. Day (1994) suggests that a top-down direction, meaning a visible commitment by senior management to put the customer first, exercised through a strategy development process, is necessary for enhancing market orientation.

Automotive sales in the Netherlands

Consumers are confronted daily with advertising on cars. Many interesting accessories and price tags must lure them to the showroom for a test drive. And from that point on, the consumer who enters the showroom, is the sales opportunity of the employee. But it is not as simple as it seems. Anno 2010, the consumer has more knowledge than ever before (Black et al 2002). Virtual marketplaces and comparison sites offer the consumer purchase arguments and counter arguments in the sales conversation.

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Implementing market orientation in the Dutch automotive industry 13 is interesting to look further than that. When sales orientation is a strategy that is suffering hard under the crises and the customer is more critical, value focused and informed, the implementation of marketing activities should be one of the critical priorities of management (TNS NIPO 2007). One of the reasons that the automotive industry in the Netherlands is suffering a hard time is because the modern car needs much less maintenance, just because they are better built.

As a result of this development, the number of independent dealers is decreased from approximately 3,000 to 1,750 in the last ten years. Another issue is that price-sensitive consumers prefer to buy their cars on the ‘car super market’ (Elsevier 2010). According to a study by consulting firm Ernst&Young, nearly half of the independent dealers and fourth of the brand dealers in the Netherlands fears for his business in the long run. Maintenance and repair for cars remain the main source of income.

Also, the car market as a whole shrunk the last few years. According to the Central Bureau of Statistics in 1999 611,000 cars were sold. In 2004 this number was only 384,000. In 2009, the number was still well below the desired level (388,000). Whether the economic recovery can turn the tide, is the question (Bovag 2010). However, the consultants of ING expect that the number of new cars sold will end at around 410,000 in 2010. That matches the level of 1998 (ING 2010).

Market orientation in the automotive industry

This research is specifically focused on the automotive sector. The reason for this has to do with the fact that the role of individual marketing in this industry increases rapidly (www.mercer.com). According to research by Mercer, the automotive sector is lagging behind in terms of customer loyalty. In other sectors, organizations often have frequent customer contacts with low transaction values, while in the automotive industry, there is little customer contact with a high transaction value. An average customer buys a new car every five years, with a number of client contacts at 1.3 per year, including visits for maintenance. This is not enough for solid long term relationships to build.

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Implementing market orientation in the Dutch automotive industry 14 of a car. When the customer decides to switch to another brand or car dealer, this results not only in the loss of sales of the new car, but also the after sales for the following years.

A fundamental requirement for continued customer loyalty is a regular customer between the sale times. Important is the communication between manufacturer, dealer and customer. Dealers are independent businesses that tailor communications with customers, including prices for accessories and service. On the other hand, producers want to communicate uniformly, so dealers should take into account their guidelines. In this way, producers can centrally manage services and ensure their brand image.

§ 1.3 Problem statement

Developing a market orientation business involves the whole company’s culture and identity. The relationship between sales staff and customers to a large extent derives from this culture and identity. On the other hand, this same relationship contributes for a large part to the level of market orientation of the company as a whole.

The purpose of this research is to find out on which factors staff has a role to realize the successful implementation of market orientation and the influence of market orientation on customer satisfaction. Special interest within this area is aimed at the automotive industry. Therefore, much focus is on the interaction between the two groups; frontline sales staff and customers. Based on this research, in this report recommendations are presented that would help the businesses to transfer to or optimize a market-oriented strategy.

The main question in this research is therefore as follows:

How does the interaction between salespeople and customers in the automotive industry improve the degree of market orientation and what factors influence this interaction?

The question will be answered on the basis of the following parts: 1. What does the concept market orientation mean?

2. What factors influence market orientation?

3. How does the interaction between customers and employees influence market orientation? 4. What factors play an important role in the interaction between staff and customers in order

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Implementing market orientation in the Dutch automotive industry 15 This research seeks clarity on the experience of customers in the automotive and the extent to which the performance of staff has an important role in this, based on a market oriented strategy. Therefore, the antecedent included in the present study pertains to sales staff in the automotive retailing industry. Managers can use the findings of this study to enable the concept of market orientation, making the company ultimately more profitable (Narver and Slater 1990).

§ 1.4 Design report

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Chapter 2 Literature

§ 2.1 Introduction

A literature study is performed to investigate what is exactly meant with market orientation, the various elements that are part of it and how market orientation is measured. This study is an obvious starting point for answering the research questions. Next to a definition, the role of staff in the concept of market orientation, the measurement of market orientation and the consequences are explained. Finally, the conceptual model is presented.

§ 2.2 The market orientation concept: A definition

Since the beginning of the 1990’s the concept of market orientation attracted immense attention from market acedemics. This is not surprising because it is closely related to fundamentals of marketing theory (marketing concept), with implementation of marketing as an organizational-wide philosophy and with the notion that it positively impacts business performance. Kohli and Jaworski (1990) and Narver and Slater (1990) are often cited as founders of conceptualization and measurement instruments for assessing market orientation construct. Kohli and Jaworski (1990) define market orientation as the organization-wide generation of market intelligence pertaining to current and future needs of customers, dissemination of intelligence within an organization and responsiveness to it. These authors therefore define (and measure) this concept through three basic components activities/ processes dealing with marketing information: their generation, dissemination and responsiveness.

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Implementing market orientation in the Dutch automotive industry 17 A competitive approach means that a supplier strengths and weaknesses of the current potential competitors know their capabilities and strategies in the long term. These first two components were also part of research from Day and Nedungadi (1989). These authors state that a customer-focused organization, through the eyes of the customer, make comparisons of their own position versus the competition. Such organizations appear to focus on differentiation rather than to seek new and improved products to introduce earlier than competitors. Through direct comparison of organizations trying to identify one's own strengths and weaknesses to identify, the market-oriented organizations seek a balance between the customer and competitive orientation, i.e. between the emphasis on cost and/or differentiation between costs and customer satisfaction.

The third component, the interfunctional coordination, means the concerted use of the resources of the company based on the acquired knowledge actually achieving a superior value for the customer. To the three basic components Narver and Slater (1990) add two decision criteria: long-term focus and profitability.

Deshpandé, Farley and Webster (1993) challenge both the definition of Kohli and Jaworski (1990) and Narver and Slater (1990). Their construct and definition of market orientation is based on a customer orientation, which they see as being: “a combination of market intelligence, a focus on customer service and operational measured of service levels, responsiveness to the customer, and acceptance of the proposition that the customer comes first”. Kohli and Jaworski (1990) and Ruekert (1992), however, consider market orientation as organizational behavior, a behavioral definition. Overall, Deshpandé, Farley and Webster (1993) see market orientation as being synonymous with customer orientation, being distinguishable from competitor orientation. Putting customer interests first is the central part of their definition of customer (market) orientation and they argue that competitor orientation can be almost opposite to customer orientation when the focus is more on the strengths of the competitor than on the unmet needs of the customer. This view is consistent with other authors from the marketing and strategic management field. They emphasize a need for a strategic focus which should be on the customer (Ruekert 1992, Day 1994, Doyle and Wong 1998).

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Implementing market orientation in the Dutch automotive industry 18 made to define common points or integrate suggested improvements. On the other hand, some important suggestions of original authors were largely neglected. Narver and Slater (1990) and Kohli, Jaworski and Kumar (1993) specifically proposed an application of the questionnaire in different contexts. Among them, despite intense application of market orientation measurement across different sectors and markets (Jaworski and Kohli, 1993, Deng and Dart 1994, Greenley 1995, Hooley et al 2000), no known attempts were made to test and adopt market orientation measurement for the services context.

Therefore, when the two most common definitions of market orientation by Kohli and Jaworski and Narver and Slater are combined, in relation to the marketing concept, than the definition of market orientation is as follows:

“Market orientation is the organizational culture which means the collection and dissemination of customers- and competition (of market) information and encourages the customer centered focus of employees, and a management form in which the information obtained is used for (marketing) activities to reach the highest possible added value for the customer.”

Elements of market orientation

According to Greenley (1995), who focus on the components of Narver and Slater (customer orientation, competitor orientation and inter-functional coordination), the elements of market orientation are:

1. Customer focus orientation; 2. Competitive focus orientation; 3. Comprehensive market orientation; 4. Fragmented orientation;

5. Undeveloped market orientation.

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Implementing market orientation in the Dutch automotive industry 19 of the market orientation process: analysis and strategic actions (each consisting of four components), plus an additional component, intra-functional coordination.

More recently, Lafferty and Hult (2001) made an overview of marketing orientation perspectives and they found five different approaches to the conception of market orientation: 1. Organizational decision making perspective;

2. Market intelligence perspective;

3. Culturally based behavioural perspective; 4. The strategic focus perspective;

5. The customer orientation perspective.

Each perspective proves to be an interesting venue for study and further development of the market orientation concept. Contrary to the information and decision making perspectives, a culturally based perspective puts more emphasis on informal, deeply rooted elements of organizational culture: values, norms, artefacts and behaviours (Deshpandé et al 1993, Homburg and Pflessner 2000). Lafferty and Hult (2001) also propose a synthesis of those perspectives which result in four meta-dimensions: customer orientation, importance of information, inter-functional coordination, and taking action.

Expected market orientation and perceived market orientation

In this study two populations are considered; employees and customers in the automotive industry. As for the first population, the employees, the expected level of market orientation is object of the study, which is the level of market orientation what they, themselves, expect to have. As for the second population, the customers, the perceived marked orientation is object of the study.

Combining the earlier mentioned definition, in which customer centered focus, competitor orientation and dissemination of information are the key-elements, with the two populations who will be subject of the study, the following hypothesises are being formulated:

H1a. The higher the level of expected customer orientation, the higher the level of expected market orientation.

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Implementing market orientation in the Dutch automotive industry 20 In the automotive industry competition is fierce, so this factor might be strongly related to financial performance of companies. As Kohli and Jaworski state (1990) firms in a competitive market do everything to deliver the greatest value for the lowest possible price. Therefore, for an automotive retailer it is crucial to analyze its position in the market. According to Greenley (2005) competitor orientation is important for managers to gave an understanding of their firms’ overall market orientation, as they need to balance the interests of competitors and customers with those of other stakeholders. Combined with the definition of market orientation of Narver and Slater (1990), where one of the three basis components of market orientation is customer orientation, this give rise to:

H2. The higher the level of competitor orientation, the higher the level of expected market orientation.

As mentioned, interfunctional coordination is also an important component of market orientation (Narver and Slater 1990). According to the authors, creating value for buyers is much more than a "marketing function." A seller must draw upon and integrate effectively its entire human and other capital resources in its continuous effort to create superior for buyers. Given the multidimensional nature of creating superior value for customers, marketing's interdependencies with other business functions must be systematically incorporated in a business's marketing strategy (Wind and Robertson 1983). This gives rise to:

H3. The higher the level of interfunctional coordination, the higher the level of expected market orientation.

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Implementing market orientation in the Dutch automotive industry 21 Barriers and conditions to become market oriented

To become market oriented Ames and Hlavacek (1989) state that market-driven management has to be focused on the operationalisation of 5 C’s:

1. A complete understanding of the applications and requirements of specific customer groups;

2. Study and document competitor performance to determine relative strengths and weaknesses in each market niche;

3. Objectively compare existing capabilities with changing market requirements and willing to make the changes necessary to serve attractive market segments;

4. Constantly strive to improve costs and/or product performance to provide target customers with greater value;

5. Work together as a cross-functional team to ensure that all key activities, priorities, and decisions are synchronized to serve target market needs.

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Implementing market orientation in the Dutch automotive industry 22 important questions of marketing concept implementation and the importance of sufficient political power is often emphasized (Harris 2000, Piercy 1990).

Organizational characteristics represent the second layer of barriers to and factors in the development of market orientation. Kohli and Jaworski (1993) state that structural connectedness and centralization both act as obstacles for market orientation. Harris (2000) found that integration devices (internal communication systems, organizational integration and coordination systems) are important for market orientation. Homburg et al (2009) also stress the importance of organizational structure for customer orientation. According to them, one of the major trends in organizing marketing in firms is the development of customer-focused structures meaning that segments are the basis of organizational structures.

Narver et al (1998) suggest that market orientation could be developed through organizational learning. They suggest two approaches for improvement of market orientation. The first approach is focused on establishing market orientation principles that are later communicated and trained for development of necessary skills and knowledge. A second approach focuses on direct interaction with the market and stresses personal involvement and experimentation as a learning method.

The best-intentioned senior managers find it difficult to translate market oriented aspirations into actions. Day (1999) wrote much about the process of creating a market driven organization. He proposes six conditions that ensure change process success.

1. Demonstrating leadership commitment; 2. Understanding the need for change; 3. Shaping the vision;

4. Mobilizing commitment at all levels; 5. Aligning structures, systems and incentives; 6. Reinforcing the change.

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§ 2.3 Measurement of market orientation

In the literature, several methods of measurement can be found on market orientation. One of the methods that is applied is the method of Narver and Slater (1990). They analyzed the impact of market orientation on business profitability, the so called MKTOR-scale. They concluded that market orientation is a one-dimensional construct consisting of three behavioral components (customer orientation, competitor orientation and inter functional orientation) that is strongly related to profitability. Though, according to Kohli et al (1993), the MKTOR-scale adopts a focused view of markets by emphasizing customers and competition as compared with a view that focuses on these two stakeholders and additional factors that drive customer needs and expectation, and does not tap the speed with which market intelligence is generated and disseminated within an organization, and includes a number of items that do not tap specific activities and behaviors that represent a market orientation. Therefore, Kohli et al (1993) developed the MARKOR-method. As mentioned, they define market orientation as the organization wide generation of market intelligence pertaining to current and future needs of customers, dissemination of intelligence horizontally and vertically within the organization, and organization wide action or responsiveness to market intelligence. The 20-item market orientation scale (MARKOR) involves a factor structure that consists of:

- One general market orientation factor; - One factor for intelligence generation;

- One factor for dissemination and responsiveness; - One marketing informant factor; and

- One nonmarketing informant factor.

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Implementing market orientation in the Dutch automotive industry 24 Ames en Hlavacek (1989) created, based on the 5C’s they mention to operationalize market driven management, a questionnaire with consists of 14 statements about operational factors. Based on this questionnaire a company can determine if they are market driven.

Carr and Lopez (2007) proposed a market orientation as culture and conduct model (MOCCM) in which the three components of Narver and Slater (1990) established a market oriented culture that provides the foundation for market-oriented behaviours of Kohli and Jaworski (1990). They demonstrated that the link between firm market-oriented culture-conduct-behavior is appropriate and is consistent with prior research. The only relationship that was not supported in their study is between the customer culture and intelligence dissemination behaviours. They suggest that the firm should focus on developing a culture that embraces awareness and learning about customers and competitors and also embrace the importance of cross-functional efforts and communication.

§ 2.4 The role of staff

The literature shows that the behavior of staff not only influences market orientation (Lings 2004). Sales force behavior and attitudes can also positively be influences and stimulated by market orientation (Siguaw et al 1994). Sigauw et al (1994) researched the influence of the market orientation of the firm on sales force behavior and attitudes. They state that the degree to which the firm implements a market orientation is based on its desired level of organization wide concern and responsiveness to customer needs and competitive actions. On deciding the strategy of choice, an important aspect of implementation is to influence salespeople to adopt the chosen orientation in their selling efforts. A firm, for example, can instill a customer oriented philosophy and provide the training, resources, and reward system necessary to support and motivate a highly customer oriented sales force (Schlesinger and Heskett 1991).

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Implementing market orientation in the Dutch automotive industry 25 environment to positively affect job satisfaction and organizational commitment and reduce role stress (Jaworski and Kohli 1993, Kohli and Jaworski 1990).

All company departments should be informed accurately concerning how to best meet the customer’s needs. The sharing of information though seems to play a crucial on informing all employees. To measure the degree to which salespeople engage in customer-oriented selling, the SOCO (Selling Orientation-Customer Orientation) scale is widely used. Saxe and Weitz (1982) developed this 24-item scale that helps salespeople to evaluate their desire to help customers, assess their needs, offer satisfactory products, adequately describe products and use deceptive or manipulative selling tactics. 12 Items were positively stated (customer orientation) and 12 items were negatively stated (sales orientation). Saxe and Weitz measured six basic characteristics of sales person attitudes and behaviors that reflect a customer orientation in the sales process.

In this study, aspects regarding Sales Person Customer Orientation and Sales Person Selling Orientation are analyzed among two populations; the employees and customers of the participating automotive companies. To demonstrate differences between both orientations as well as the differences between both populations, both orientations are separately included in the conceptual model, as shown in paragraph 2.7. Considering that the higher level of customer orientation leads to a higher level op expected and perceive market orientation (Hypothesis 1a and Hypothesis 1b), it is expected that Sales Person Selling Orientation, being applied in the SOCO-scale, will negatively influence the level of market orientation. Therefore, the following is stated:

H4a. The higher the level of expected Sales Person Selling Orientation, the lower the level of expected market orientation.

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Implementing market orientation in the Dutch automotive industry 26 Internal market orientation

Other researchers also state that market orientation is not a concept that only has an external scope; market orientation has an internal scope and objective as well (e.g. Lings, 1999). Lings (1999) argues that the most important interface between the firm is the contact between customer contact employees and the customers. According to Lings it is useful to use a process of internal market orientation that focuses on the communication and education programs, to align the employee or the firm with a corporate strategy.

In another study Lings (2004) conceptualizes internal market orientation (IMO). Internal market orientation (IMO) arises from the view that customer contact personnel are of primary importance to service industries, and the satisfied, committed and motivated front-line employees are essential if customers are to perceive that they have received good service. This focus on customer contact personnel and the philosophy of treating these employees as customers of the firm’s jobs is the foundation on which IMO is based. The first stand of this concept is based on total quality management perspective and focuses on the service delivery process. This approach to the internal market views all employees and departments as simultaneously being internal customers of, and internal suppliers to, other employees and departments in the firm. IMO can be measured using the scale reported by Lings and Greenley (2005). This scale consists of 16 items measuring the five behavioral components of IMO:

- Informal information generation;

- Formal face-to-face information generation; - Formal written information generation; - Information dissemination and;

- Responsiveness.

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Implementing market orientation in the Dutch automotive industry 27 Given these findings, it is rather interesting to examine the relation between IMO and Customer Orientation. Therefore, the following hypothesis is stated:

H5. The higher the level of Internal Market Orientation, the higher the level of customer orientation.

Lings and Greenly (2005) consider Internal Market Orientation as a separate concept. In this study it is presumed that market orientation has an internal as well as an external appearance. Based on the definitions of market orientation, given in paragraph 2.1, it is presumed though that market orientation, as a concept, exists of internal as well as external elements. An example of the cohesion of these elements is given by Grönroos (1982). He states that one of the consequences of Internal Market Orientation is that employees are motivated to be more market oriented. Therefore, in this study, it is presumed that a higher level of Internal Market Orientation, will lead to a higher level of market orientation, as evaluated by the employee as well as the consumer. The following hypothesis follows:

H6. The higher the level of Internal Market Orientation, the higher the level of expected market orientation.

Next, Lings and Greenley (2005) identify a positive and substantial impact of IMO on customer satisfaction and they suggest to test this relation in different service settings and service situations. This gives rise to:

H7. The higher the level of Internal Market Orientation, the higher the level of expected customer satisfaction.

§ 2.5 Consequences of market orientation

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Implementing market orientation in the Dutch automotive industry 28 three mail groups of performance: consumers’ response (e.g. satisfaction and loyalty); employees’ response (e.g. employment satisfaction and organization commitment); and, economic performance. Furthermore, Chen and Quester (2005) state that the consequences of market orientation are organized into four categories: organizational performance, customer consequences, consequences innovation, and employee consequences.

Kirca et al (2005) conducted a meta-analysis that aggregated empirical findings from the market orientation literature. They find that marketing orientation-performance relationship is stronger in samples of manufacturing firms and also found that the market orientation-performance correlation is stronger for both cost-based and revenue-based performance measures in manufacturing firms than in service firms. Although Rust, Moorman, and Dickson (2002) note that market orientation may not be entirely consistent with a focus on cost reduction, Kirca et al (2005) showed that it does enhance profits. In other words, even though the implementation of market orientation may demand resources, it generates profits over and above the costs involved in its implementation while growing revenues.

Quester (2005) their findings give an insight into the impact of perceived customer value in marketing orientation practice as well as its impact on customer retention. As customer satisfaction is one aspect of market orientation, the interaction between service employees and customers is also examined in their study. Therefore, they developed and measured a customer value-based market orientation (CVBMO) construct. Quester’s research outcomes also indicate that service employees' implementation of market orientation by means of customer value has a significant and positive influence on customer satisfaction. This gives rise to the following hypothesis:

H8a. The higher the level of expected market orientation, the higher the level of expected customer satisfaction.

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Implementing market orientation in the Dutch automotive industry 29 Chang et al (1999) found that market orientation is positively associated with measures of effectiveness such as service quality and overall service level. Also, market orientation has a positive influence on measures of cost efficiency, such as productivity and sales per person. Operational effectiveness is how well a firm serves its customers. To measure the service SERVQUAL scale has been used. In line with this is much research into the impact of market orientation on the actions of staff and the differences between market orientation in different cultures and sectors (Castro et al 2002, Elg 2007).

Walker and Ruekert (1987) offer a different perspective based on three dimensions that can be measured in relation to a company’s main competitor. The three dimensions are: 1. Effectiveness: success of procedures (e.g. changes of sales growth rate and market). 2. Efficiency: ratio of input to output (e.g. investment return).

3. Adaptability: responsiveness to opportunities afforded by changes in the business environment (e.g. number of new products that succeed during a particular time).

Although economic performance measures appear to be the most widely used measure of performance in previous market orientation studies, it can be argues that economic performance is not necessarily a consequence if market orientation but is a consequence of a consequence. For instance, Agarwal et al (2003) state that: “the main goal of market oriented companies should be the creation and retention of satisfied customers” (Agarwal et al 2003; p69). This has also been emphasized in a number of other studies (e.g. Hooley et al 1990, Day 1994, Day and Wensley 1998). The creation and retention of satisfied customers can the result in an improvement in the economic performance if a company.

§ 2.6 Conceptual model

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Implementing market orientation in the Dutch automotive industry 30 General conceptual model

Figure 2.1 General conceptual model

When the model is split to show the difference between the hypotheses that are relevant for the sample of customers and employees, the following two models arise.

Conceptual model customers

Figure 2.2 Conceptual model customers (perceived market orientation)

Conceptual model employees

Figure 2.3 Conceptual employees (expected market orientation)

H7 (+)

Competitor orientation

Salesperson selling orientation Customer orientation

Internal Market Orientation (IMO) Interfunctional coordination Market orientation Expected market orientation Perceived market orientation Customer satisfaction H1a (+) H1b (+) H2 (+) H3 (+) H2a, (-) H2b (-) H6 (+) H5 (+) H8a (+) H8b (+)

Perceived salesperson selling orientation

Perceived customer orientation Perceived market

orientation Perceived customer satisfaction H1b (+) H2b (-) H8b (+) H8a (+) H7 (+) Competitor orientation

Expected salesperson selling orientation Expected customer orientation

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Chapter 3 Methodology

In this chapter, the empiric part of the study will be discussed, with reference to the theoretical framework. The study has a conclusive character. The purpose is to demonstrate to what extent different factors effect market orientation and to what extent market orientation affects customer satisfaction (Malhotra 2004). Conclusive research consists of testing hypothesis and demonstrating relations between variables. It can be divided in two types, descriptive and causal research (Malhotra 2004). This study has a descriptive character, since the purpose is to demonstrate which factors of interaction between employees and customers define the level of market orientation. The study is a multiple cross-section study is well, since the study will be executed once en consists of data collection among two samples (Malhotra 2004); employees of three automotive companies and customers of those companies.

This chapter consists of three parts, which will be discussed in the next paragraphs: operationalisation of the conceptual model, method of data collection and plan of analysis.

§ 3.1 Operationalisation of the conceptual model

In this paragraph, the measurability of market orientation and customer satisfaction is described. For both elements it will be explained in what way they will be measured, using a survey. Almost all statements in the survey are measured using a 5-point Likert scale with values ranging from 1 (‘completely disagree’) to 5 (‘completely agree’). The Likert scale is used, since it is a scale that is easy to understand and to work with by respondents (Malhotra 2004: 258). Also this scale is chosen, to give respondents the possibility to choose answer option ‘neither agree, nor disagree’. A disadvantage using this scale is that it takes more time to go through this type of survey than surveys using other scales, since every thesis has to be read completely and respondents need to give their opinion about each thesis.

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Implementing market orientation in the Dutch automotive industry 32 are only relevant for employees of the automotive companies, and therefore only measured in that sample.

In the following subparagraphs it will be stressed out which variables have been measured per factor.

§ 3.1.1 Customer orientation

As explained in chapter 2, customer orientation is one of the key elements of market orientation (e.g. Kohli and Jaworski 1990, Greenley 1994). The SOCO scale (Saxe and Weitz, 1982) is partially used to examine to what extent employees of the automotive companies judge themselves as being customer oriented and to what extent customers perceive this. Also the measurement of market orientation of Deng and Dart (1994) is used.

Next, the survey contains some items of Greenley (1994). Customer orientation, Greenley demonstrated, is one of the statements that makes up market orientation. In table 3.1 items used in the surveys used for both samples regarding customer orientation are displayed.

The MARKOR scale of Kohli, Jaworski, and Kumar (1993) might best be represented by a factor structure that consists of one general market orientation factor, one factor for intelligence generation, one factor for dissemination and responsiveness, one marketing informant factor and one nonmarketing informant factor. The items that were related to customer orientation activities were used in this study. In the actual survey items are adapted to a small extent to fit the study best.

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Questionnaire (C=customer, S=Salesperson)

Item customer orientation Source

C/S Management regularly visit customers Greenley, 2002

C/S We look for ways to create customer value in our products. Deng and Dart, 1994

C/S For our customers, price is the most important selling feature. Deng and Dart, 1994

C/S We encourage customer comments-even complaint-because they help us to do a better job.

Deng and Dart, 1994

C/S We measure customer satisfaction on a regular basis. Deng and Dart, 1994

C/S After sales service is an important part of our business strategy.

Deng and Dart, 1994

C/S We have a strong commitment to our customers. Deng and Dart, 1994

S We periodically review the likely effect of changes in our business environment on customers.

Kohli, Jaworski, and Kumar, 1993

S Our company would be much better off if our salesforce just worked a bit harder.

Deng and Dart, 1994

S In our company, marketing’s most important job is to promote our products and services to our customer.

Deng and Dart, 1994

S Competitive strategies are based on understanding customer needs.

G.E. Greenley, 1994

S Business strategies are driven by increasing greater value for customers.

G.E. Greenley, 1994

S Information about customers is freely communicated throughout the company.

G.E. Greenley, 1994

S Our managers understand how employees can contribute to value for customers.

G.E. Greenley, 1994

S In this organization, we do a lot of in-house marketing research.

S In this organization, we meet with customers at least once a year to find out what products or services they will need in the future.

S We define product quality in terms of customer satisfaction. Deng and Dart, 1994

C/S I try to figure out what a customer’s needs are. Saxe and Weitz, 1982

C/S I try to get the customer to discuss their needs with me. Saxe and Weitz, 1982

C/S I answer a customer’s question about product/services as correctly as I can.

Saxe and Weitz, 1982

C/S I offer the product/service that is best suited to the customer’s problem.

C/S I try to bring a customer with a problem together with a product/service that helps solve that problem.

C/S A good employee has to have the customer’s best interest in mind.

C/S I try to give customers an accurate expectation of what our product/service will do for them.

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Item customer orientation (Continued) Source

C/S I am willing to disagree with a customer in order to help him or her make a better decision.

C/S I try to influence a customer by information rather than pressure.

C/S I try to find out what kind of products/services will be most helpful to a customer.

C/S I try to achieve my goals by satisfying customers. Saxe and Weitz, 1982

Table 3.1 Items regarding customer orientation

§ 3.1.2 Competitor orientation

According to Deng and Dart (1994) competitor orientation involves an understanding of the capacity of customers to serve the same markets. In the analysis of Deng and Dart (1994), where two samples were used to measure competitor orientation, they found an alpha of 0.7388 and 0.6980 for respectively sample 1 and 2. Based on these values, the measures were judged to be sufficiently reliable. Three of the items were used in this study, together with two items of Greenley (2002).

Item competitor orientation Source

S We regularly analyze our competitors’ marketing programs. Deng and Dart, 1994

S Sales people share information about competitors. Greenley, 2002

S We respond rapidly to competitors’ actions. Deng and Dart, 1994

S Customers are targeted when we have an opportunity for competitive advantage.

Greenley, 2002

S We target opportunities based on competitive advantage. Deng and Dart, 1994

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§ 3.1.3 Interfunctional coordination

From the philosophy that all departments and employees within the organization must accept responsibility for servicing the market, interfunctional coordination is crucial (Deng and Dart, 1994). In every process of service and sales there are directly or indirectly more employees involved than salesmen only. From R&D, finance, to sales, every department has its role and unique function. Sharing information and a coordination of efforts in the direction of the most value for customers makes up the factor interfunctional coordination.

Item interfunctional coordination Source

S Market information is shared with all departments. Deng and Dart, 1994

S Marketing personnel in our organization spend time discussing customers’ future needs with other functional departments.

S We communicate information about our successful and unsuccessful customer experiences across all business functions.

S All departments are involved in preparing company plans. Deng and Dart, 1994

S Several departments get together periodically to plan a response to changes taking place in our business environment.

S The activities of the different departments in this business are well coordinated.

S In our company, marketing is seen as a guiding philosophy for the entire organization.

Deng and Dart, 1994

S All of our business functions are integrated in serving the needs of our target markets.

S All of our managers understand how everyone in our company can contribute to creating customer value.

Table 3.3 Items regarding interfunctional coordination.

§ 3.1.4 Salesperson selling orientation

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Implementing market orientation in the Dutch automotive industry 36 another norm, dependent of the wide range of sales situations. In the following table, the items of selling orientation are shown. Both employees and customers could indicate on a 5-point Likert scale to what extent they agreed on the propositions regarding customer selling orientation.

Item sales person selling orientation

C/S If I am not sure our product/service is right for a customer, I will still apply pressure to get him or her to buy.

C/S I imply to a customer that something is beyond my control when it is not.

C/S I try to sell as much as I can rather than to satisfy a customer.

C/S I spend more time trying to persuade a customer to buy than I do trying to discover his or her needs.

C/S I pretend to agree with a customer to please them.

C/S I treat a customer as a rival.

C/S I begin talking about the product/service before exploring a customer's need with him or her.

C/S I try to sell a customer all I can convince them to buy, even If I think it is more than a wise customer would buy.

C/S I paint too rosy a picture of my product/service to make them sound as good as possible.

C/S I decide what product/service to offer on the basis of what I can convince customers to accept, not on the basis of what will satisfy them in the long run.

Table 3.4 Items regarding customer selling orientation.

§ 3.1.5 Internal market orientation

The research of Lings and Greenley (2008) contributes to the era of internal market orientation in different ways. For instance, managerial behaviors associated with managing the employee-employer exchange are conceptualized. Second, it is a valid and reliable instrument that examines the relationship between internal market orientation and organizational consequences and has, for instance, proven a positive relation between internal market orientation and customer satisfaction.

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Questionnaire (S=Salesperson)

Item internal market orientation

S In this company, management tries to find out what employees want from the company.

S In this company, managers regularly talk to the staff to find out about their work

S In this company, managers and employees have regular staff appraisals in which they discuss what employees want.

S In this store, management meets with our employees at least once a year to find out what expectations they have of their jobs for the future.

S In this store, management interacts directly with our employees to find out how to make them more satisfied.

S In this store, we survey our employees at least once a year to assess the quality of employment.

S In this store, I regularly meet with all my staff to report about issues relating to the whole organization.

S In this store, we have regular staff meetings with employees at all levels attending.

S In this store, when we find out that employees are unhappy with our supervision or management, we take corrective action.

S In this store, when we find that employees would like us to modify their conditions of employment, the departments make concerted efforts to do so.

S In this store, we make changes to what we do when employee feedback indicates that they are dissatisfied with the status quo.

S It is important to understand all of the factors that affect employees’ satisfaction with their employment.

S Keeping my employees satisfied is as important as keeping my customers satisfied.

S A good employer makes sure that all employees are happy in their jobs.

S Employees are the most important resource that the firm has.

S The organization for which I work is genuinely concerned with the welfare of all its employees.

S The firm for which I work tries to accommodate the different personal needs of all its employees.

S The firm for which I work does not recognize the importance of its employees.

S My firm treats all employees in a way that demonstrates that they are valued.

S Staff members are generally happy working here.

S Staff members are happy to put in extra effort when I need them to.

S Staff members are well motivated.

S Staff members are happy to take on more responsibility.

S In this store, the atmosphere is positive.

S In this store, staff members act in a way that is consistent with the image that the company wishes to develop.

S In this store, staff members are aware of the image that the company wishes to develop.

S Staff members are always smart and well presented.

S Staff members in this store generally do not need to be chased up to make sure that jobs are done on time.

S This store has higher sales than our local competitors.

S This store has a significant impact on the local economy.

S This store consistently outperforms our local competitors.

S This store has a significant impact on the fortunes of the whole organization.

S This store has higher profits than other stores in our firm.

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§ 3.1.6 Customer satisfaction

To measure the customer satisfaction from a customer and employee perspective, the items that Lings and Greenley (2005) applied to develop a scale for internal market orientation are used in this study. Both employees and customers could indicate on a 5-point Likert scale to what extent they agreed on the statements regarding internal market orientation. The item “We pride ourselves on the friendliness of our staff” is only asked to employees.

Items customer satisfaction

C/S 1. Customers of this store are satisfied with the service that they receive.

C/S 2. Customers of this store receive a very friendly service from staff.

C/S 3. I would be happy to be one of our customers.

S 4. We pride ourselves on the friendliness of our staff.

C/S 5. Customer service is the key factor that differentiates us from our competitors.

Table 3.5 Items regarding customer satisfaction.

§ 3.1.7 Demographic characteristics

The demographic stats being measured under customers are age, gender, education level and gross income (measured by family).

§ 3.2 Method of data collection

§ 3.2.1 Questionnaire