Customer vs. competitor orientations

Most sales and marketing organizations are torn between pursuing customer orientation vs. competitor orientations as their strategic focus. Zhou, Brown, Dev and Agarwal (2007) offer concise definitions for each orientation:

Customer: In a customer orientation, the company develops a detailed analysis of customer needs and then attempts to devise a strategy, i.e. product offerings, service offerings, technology changes, etc., that meet those needs. Ideally, the strategy outcome will result in a differentiation advantage.

Competitor: In a competitor orientation, the company watches its competitors closely, matching product enhancements or pricing movements. Often this approach leads to understanding as to how a company can reconfigure its value chain to achieve a cost advantage.

However, Zhou et al. also researched the relationship between the market environment and the most effective orientation and discovered the following relationships:

Stage of economy development: In more developed economies, the customer has more choices and, therefore, has become more sophisticated about having their needs met. In these countries, a stronger customer orientation is required. Conversely, in less developed economies, price considerations (usually pegged to competitor prices) will have more impact.

Stage of business conditions: In less developed economies, where business conditions may be considerably less structured than in the company’s home country, monitoring competitors is an effective way to understand what government ties are necessary, how contracts are negotiated, how marketing activities are perceived, etc.

Effects of resource availability: When the resources to develop a product are constrained, competitor monitoring will help in understanding how to configure the supply chain more effectively and secure rare resources.

Effects of customer demandingness: In a similar vein as the stage of economic development, the level of customer demands determines if a customer or a competitor orientation is appropriate. Even in emerging economies, customers may have very specific benefit requirements for certain products. For example, in most Asian countries, low-lather shampoos and soaps are preferred, due to washing methods. Price competitiveness will be considered in the customer evaluation, but the ultimate purchase decision will be based on these specific, critical needs.

To sum up, neither orientation is the perfect strategy for all companies. Instead, it depends considerably on the market conditions and the level of consumer needs as to which should be used.

Resources:

Zhou, K., Brown, J., Dev, C., Agarwal, S. (2007) “The effects of customer and competitor orientations on performance in global markets: a contingency analysis.” Journal of International Business Studies. 38 pp. 303-319.

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