Responsive and Proactive Market Orientation and New‐Product Success*

What is the relationship between market orientation and new‐product success? This important question has not been examined adequately to date because the concept of market orientation has been measured too narrowly. The concept of market orientation implies both responsive market orientation, which addresses the expressed needs of customers, and proactive market orientation, which addresses the latent needs of customers—that is, opportunities for customer value of which the customer is unaware. In the numerous market orientation–performance studies to date, the measure of market orientation has consisted virtually entirely of behaviors related to satisfying customers' expressed needs rather than satisfying their latent needs as well. The present study extends the measurement of market orientation to match the full scope of the concept—to measure both responsive market orientation and proactive market orientation. Using data from a sample of technologically diverse businesses, the present study develops a measure of proactive market orientation, refines the extant measure of responsive market orientation, and analyzes the relationship of a business's responsive and proactive market orientation to its new‐product success. The study findings imply that for any business to create and to sustain new‐product success, a responsive market orientation is not sufficient and, thus, that a proactive market orientation plays a very important positive role in a business's new‐product success. These findings make intuitive sense. For if in developing its new products a business relies solely on what customers state as their new product needs, the business is very vulnerable economically. Such a business is vulnerable not only for relying on customers' best guesses for new products, many or most of which may have little long‐term economic value for either party, but also to competitors' parallel new product responses and the inevitable resulting price competition. A business that relies solely on customers' expressed needs to develop its new products creates no new insights into value‐adding opportunities for the customer and thereby creates little or no customer dependence and foundation for customer loyalty. The important role for proactive market orientation in new‐product success is intuitively obvious—and is supported empirically in this study.     

Market Orientation and Innovativeness in Supply Chains: Supplier's Impact on Customer Satisfaction

As today's firms increasingly outsource their noncore activities, they not only have to manage their own resources and capabilities, but they are ever more dependent on the resources and capabilities of supplying firms to respond to customer needs. This paper explicitly examines whether and how firms and suppliers, who are both oriented to the same customer market, enable innovativeness in their supply chains and deliver value to their joint customer. We will call this customer of the focal firm the “end user.” The authors take a resource‐dependence perspective to hypothesize how suppliers' end‐user orientation and innovativeness influence downstream activities at the focal firm and end‐user satisfaction. The resource dependence theory looks typically beyond the boundaries of an individual firm for explaining firm success: firms need to satisfy customer demands to survive and depend on other parties such as their suppliers to achieve customer satisfaction. Accordingly, the research design focuses on three parties along a supply chain: the focal firm, a supplier, and a customer of the focal firm (end user). The results drawn from a survey of 88 matched chains suggest the following. First, customer satisfaction is driven by focal firms' innovativeness. A focal firm's innovativeness depends, on the one hand, on a focal firm's market orientation and, on the other hand, on its suppliers’ innovativeness. Second, no relationship could be established between a focal firm's market orientation and a supplier's end‐user orientation. Market orientation typically has within‐firm effects, while innovativeness has impact beyond the boundaries of the firm. These results suggest that firms create value for their customer through internal market orientation efforts and external suppliers' innovativeness.     

The Effects of Mainstream and Emerging Customer Orientations on Radical and Disruptive Innovations

The merits of being customer‐oriented for firm innovation have long been debated. Firms focused on their existing customers have been argued to be less innovative. This paper distinguishes between mainstream and emerging customer orientations and examines their effects on the introduction of disruptive and radical product innovations. Radical product innovations draw on a substantially new technology and could initially be targeted at a mainstream or an emerging market. In contrast, disruptive innovations are initially targeted at an emerging market, and may not involve the newest technology. This paper hypothesizes that mainstream customer orientation is negatively related to disruptive innovation and positively related to radical innovation, and that emerging customer orientation is positively related to disruptive innovation. To test these hypotheses, longitudinal and multiple informant data from senior executives in 128 SBUs of 19 Fortune 200 corporations are analyzed, with technology scanning and willingness to cannibalize as key control variables. The results support the hypotheses, providing evidence for contrasting effects of being oriented to mainstream customers and/or emerging customers on radical and disruptive innovations. Mainstream customer orientation has a positive impact on the introduction of radical innovations but a negative impact on disruptive innovation, while emerging customer orientation has a positive effect on disruptive innovation and is unrelated to radical innovations. Technology scanning is positively related to radical innovation but not to disruptive innovation, supporting the idea that disruptive innovation may not require new technology. In contrast, willingness to cannibalize is positively related to disruptive innovation but not to radical innovation, supporting the idea that radical innovation does not require cannibalization of existing investments. Additionally, mainstream customer orientation is found to have a near‐zero correlation with emerging customer orientation, indicating that the two can coexist and can be pursued simultaneously.     

Supplier market orientation and accommodation of the customer in different relationship phases

As customers' needs have changed rapidly, market orientation has become a more primary focus of marketing literature. This study explores the strategies market-oriented suppliers use to accommodate customer needs. In addition, because buyer-seller relationships proceed through phases characterized by distinct behaviors, this study explores the relationship between market orientation and accommodation strategies over the course of the buyer-seller relationship lifecycle. The results show that market-oriented firms use flexibility and relationship-specific adaptation as accommodation strategies. Also, three market orientation components (customer orientation, competitor orientation, and interfunctional coordination) relate differently to flexibility and relationship-specific adaptation during the relationship lifecycle. Finally, accommodation strategies significantly mediate the effects of the three market orientation components on customer satisfaction. Thus, market-oriented firms can satisfy their customers and avoid an overreliance on current relationships by emphasizing either flexibility or relationship-specific adaptations that correspond to the lifecycle of the relationship.     

Assessing customer orientation in the context of buyer/supplier relationships using judgmental modelling

Retail buying is a particular form of industrial buying, one characterised by buying for the purposes of reselling to the ultimate customer, rather than for use. Retail buyers have a complex role. They are responsible for meeting the requirements of their target customers and they also have to manage relationships with suppliers in order to obtain the best terms and conditions.Modern retailing is also characterised by a high degree of concentration and centralisation of the buying function. Buyers can operate autonomously or within a buying group. Those selling or marketing to commercial buyers need to understand the needs of the buyer in order to be effective. They need to understand the buyers' businesses and how to develop relationships with them.A mediator in the development of a customer relationship is customer orientation. A customer orientation is a central factor in being market orientated, but despite the importance of customer and market orientation there has been little research into how well suppliers understand their customers in a commercial context.In the research reported here retail buyers of textile products were personally interviewed with the aid of decision analysis software to identify the significance of criteria they use in a defined buying situation. The same methodology was repeated with suppliers to identify how well suppliers understood the decision making of buyers in their market. The decision-making process was modelled using a compensatory approach, assuming six decision criteria in a choice of sourcing options. These criteria were partly selected from a pilot conducted with eight retailers in the UK and partly from the literature review and in particular the works of Nilsson and Høst [Nilsson J, Høst V. Reseller assortment decision criteria. Aarhus: Aarhus University Press, 1987] and Weber et al. [Weber CA, Current JR, Benton WC. Vendor selection criteria and methods. Eur J Oper Res 1991;50(1):2-18].The study found that while buyers were able to understand the relative importance of decision-making criteria adequately, they underestimated the importance of certain criteria. The results demonstrate the potential for judgmental modelling in the appraisal of customer orientation.     

Joint learning in R&D collaborations and the facilitating relational practices

The present study considers joint learning as a relational dynamic capability and examines the role of relational practices as enablers of joint learning in R&D collaboration between suppliers and their customers. The study applies a qualitative comparative case method to analyze seven dyadic cases, selected based on a quantitative dataset and cluster analysis. Our results indicate that in dyadic relationships, firms would benefit from developing practices related to relational investments, relational structures, and relational capital that facilitate joint learning and yield collaborative advantages from R&D interactions. This paper contributes to the existing literature on joint learning in R&D collaborations by defining joint learning as a relational dynamic capability and by focusing on the practices that facilitate it in R&D collaboration.     

Achieving Fit between Learning and Market Orientation: Implications for New Product Performance

Drawing on the learning and market orientation literature, this study examines how responsive and proactive market orientations interact with exploitative and exploratory learning to affect new product performance. Despite advancements in understanding the distinctions between the different types of learning and market orientations, little evidence exists regarding which types of market orientation work best with exploitative or exploratory learning to improve new product performance. Using a sample of 216 high‐tech Canadian firms, the authors find that new product performance is elevated only when exploratory learning is bundled with proactive market orientation. New product performance suffered when exploratory learning was complemented with responsive market orientation and when exploitative learning was complemented with proactive market orientation. Implications for marketing theory and practice are discussed.     

Identifying the right solution customers: A managerial methodology

The purpose of this paper is to develop and apply a methodology for identifying, assessing and segmenting customers for business solutions. Firstly, criteria for evaluating solution customers are identified from the literature. These criteria are then refined and differentiated through interviews with 23 solution project managers. Secondly, a longitudinal case study with three solution suppliers and five of their customers is conducted to transfer the selection criteria into a managerial methodology which is validated by both solution suppliers and customers. The developed methodology comprises 21 criteria which are structured into two dimensions: the quality of the relationship to date and the customer's potential for future solution partnership. By combining these two dimensions into a portfolio analysis, four customer segments are identified to help suppliers determine customer attractiveness. The study's contribution lies in bridging academic knowledge and managerial practice to develop a new methodology for helping solution providers to make better informed decisions and reduce the risk of solution failure.     

Development and implementation of customer solutions: A study of process dynamics and market shaping

A broad, dynamic network perspective on solution processes remains scarce. This article presents the process of developing and implementing customer solutions and its effects on the wider business environment by investigating customers and suppliers in the global mining industry (Australia, Chile, and Sweden), analyzing the deployment of a new customer solution, and assessing the changes to the competitive environment and focal firms' relationships with other customers and suppliers. It shows that the forces that drive customer and supplier interests and motivation to co-develop customer solutions may change over time, thus redefining the aim and scope of solutions and creating failure risks. Customers present problems; suppliers respond, on the basis of not only the feasibility of the customer-specific solution but also of their evaluation of future solutions in a broader market; then suppliers aim to standardize successful solutions across markets. Customers want close supplier relationships and unique solutions but also like standardized and repeatable solutions, so they can share development costs with competitors and expose the supplier to competition to avoid lock-in effects. From a network perspective, a novel solution can have a market-shaping effect and evoke reactions from other actors who want to enhance their market position. However, these changes are not necessarily deliberate, and the dynamics that market introductions of solutions trigger may be difficult to predict.     

纵向一体化与联合所有权——通用一费希尔公司收购案例研究

纵向一体化可以很好地解决物质资本的专用性问题,然而对人力资本专用性造成的“套牢”无能为力。通过降低交易双方对一般性投资的激励,从而提高专用性投资的激励,联合所有权使得“套牢”的收益最小而成本最高。因此,联合所有权不仅可以解决物质资本专用性问题,也是解决人力资本套牢问题的有效途经。     

Effects of Supplier and Customer Integration on Product Innovation and Performance: Empirical Evidence in Hong Kong Manufacturers

While the beneficial impacts of supplier and customer integration are generally acknowledged, very few empirical research studies have examined how an organization can achieve better product performance through product innovation enhanced by such integration. This paper thus examines the impact of key supplier and customer integration processes (i.e., information sharing and product codevelopment with supplier and customer, respectively) on product innovation as well as their impact on product performance. It contributes to existing literature by asking how such integration activities affect product innovation and performance in both direct and indirect ways. After surveying 251 manufacturers in Hong Kong, this study tested the relationships among information sharing, product codevelopment, product innovativeness, and performance with three control variables (i.e., company size, type of industry, and market certainty). Structural equation modeling with correlation and t‐tests was used to test the hypothesized research model. The findings indicate a direct, positive relationship between supplier and customer integration and product performance. In particular, this study verifies that sharing information with suppliers and product codevelopment with customers directly improves product performance. In addition, this study empirically examines the indirect effects of supplier and customer integration processes on product performance, mediated by innovation. This has seldom been attempted in previous research. The empirical findings show that product codevelopment with suppliers improves performance, mediated by innovation. However, the sampled firms cannot improve their product innovation by sharing information with their current customers and suppliers as well as codeveloping new products with the customers. If the adoption of supplier and customer integration is not cost free, the findings of this study may suggest firms work on particular supplier and customer integration processes (i.e., product codevelopment with suppliers) to improve their product innovation. The study also suggests that companies codevelop new products only with new customers and lead users instead of current ones for product innovation. For managers, this study has demonstrated that both information sharing and product codevelopment affect performance directly and indirectly. Managers should put more emphasis on these key processes, especially when linked with product innovation. Managers should consider involving their suppliers and customers in the early stages of design. Information sharing with suppliers is also important in product development. As suggested by this study, extensive effort on supplier and customer integration should be made to directly augment current product performance and product innovation at the same time.     

Exploring the concept of asymmetry: A typology for analysing customer-supplier relationships

In seeking to understand relationships between smaller suppliers and larger customers, there is a growing interest in examining the characteristics of asymmetry in relationships. However, there is a paucity of research that looks at the consequences of size asymmetry for smaller suppliers. Building on IMP (Industrial Marketing and Purchasing Group) research, this paper presents a typology for analysing the consequences of size asymmetry in customer-supplier relationships from the smaller supplier's perspective. The paper reports on the findings from a study involving a total of 48 interviews and eight in-depth case studies of suppliers in the UK textile industry involved in relationships with larger customers. The findings from the study show that the consequences of size asymmetry may vary widely across different relationship characteristics, with both positive and negative outcomes for suppliers. The implications of these findings are that suppliers may take advantage of the positive and constructive consequences of size asymmetry to capitalise on developing their current relationships with customers. In addition, by focusing on the positive consequences of size asymmetry, suppliers may develop the confidence and assurance to develop constructive and more balanced new customer relationships. The paper concludes by identifying the managerial implications for the development of opportunities and customer relationship options for suppliers in asymmetric relationships and proposes that it is important for suppliers to have an assessment instrument to identify the extent of asymmetry or symmetry across their customer relationships.     

The Interplay of Customer and Product Innovation Dynamics: An Exploratory Study

The challenges of successfully developing radical or really new products have received considerable attention from a variety of marketing, strategic, and organizational perspectives. Previous research has stressed the importance of a market‐driven customer orientation, the resolution of market and technological uncertainty, and organizational processes such as cross‐functional teams and organizational learning. However, several fundamental issues have not been addressed. From a customer's perspective, a more innovative product tends to have uncertain benefits and requires customers to learn new behaviors. Customer preferences can, therefore, change as product experience and learning increase. From a firm's perspective, it is unclear how to be customer‐oriented under such dynamic preferences, and product strategies using evolving technologies will tend to interact with how customers learn about an innovation. This research focuses on identifying unresolved issues about these customer and product innovation dynamics. A conceptual framework and series of propositions are presented that relate both changing technology and customer learning to a firm's strategic decisions in developing and launching really new products. The framework is based on in‐depth interviews with high‐tech product managers across several sectors, focusing on the business‐to‐business context. The propositions resulting from the framework highlight the need to consider relevant customer dynamics as integral to a firm's product innovation process. Successful innovation strategies and future research challenges are discussed, and applications to better understanding customer needs and theories of disruptive innovation are examined. Several key insights for innovation success hinge on a broad, downstream orientation to customer needs and product innovation dynamics. To be effective innovators, firms must know their customers' customers and competitors as well as or better than their immediate customers do. Market research must extend downstream for a comprehensive understanding of customer needs dynamics. In the context of disruptive innovation, new dimensions of customer needs may become more valuable based on perceived downstream customer trends. Firms may also innovate on secondary needs because mainstream customers do not always give firms the design freedom to radically innovate on primary features. Understanding customer commitments and how they develop under evolving needs can help firms focus resources on innovative efforts more likely to be accepted by customers.     

The Significance of the New Venture's First Sale: The Impact of Founders' Capabilities and Proactive Sales Orientation

Initial sale success in the market with a new product is a critical milestone for a new venture. Failure at the introduction stage of a new product could have lethal consequences for the venture. In the present study, the authors investigate the role of a new venture company's first successful sale in the venture's future commercial success. The authors develop and test a model of the impact of the founders' entrepreneurial and commercial capabilities and proactive sales orientation on the significance of the first sale and sales growth of a new venture. Using survey data and partial least squares estimation, the results reveal that the founders' commercial capabilities have a positive effect on proactive sales orientation, while their entrepreneurial capabilities positively moderate the effect of commercial capabilities. Further, the results reveal that a proactive sales orientation positively affects the significance of the first sale and that value‐based selling approach positively moderates the effect of proactive sales orientation. Finally, the results reveal that the significance of the first sale is positively related to sales growth. Thus, the authors conclude that combining the founders' commercial and entrepreneurial capabilities strengthens proactive sales orientation and that, in turn, a proactive sales orientation particularly increases the significance of the first sale when new venture companies practice value‐based selling. Research has convincingly demonstrated proactive selling behavior to be one of the most powerful predictors of sales performance. Value‐based selling is a sales approach to identify, quantify, communicate, and verify value of a new product to the customer. Our findings suggest that founders who possess both strong commercial and entrepreneurial capabilities engage considerably more in proactive sales practice as compared with founders that only possess strong commercial capabilities. Hence, rather than hiring specific sales expertise, founders should develop their proactive, value‐selling capabilities.     

Exploring proactive market strategies

Proactivity is an important driver of firm performance and for the creation of customer value on business-to-business markets. It is however not entirely clear what it is proactive firms actually do to achieve success. By investigating proactive firms' market strategies, i.e. the sets of activities they perform in order to create superior customer value, a holistic overview of the activities involved in proactive market strategies is provided. Through a case study of five proactive firms, proactive activities are identified. Using three strategic orientations—customer, competition, and innovation orientation—unique proactivity profiles are created, reflecting the patterns in the identified proactive activities. Through these profiles, three overarching proactive market strategies are forwarded: market shaping, customer engagement, and innovation leadership. These are proposed to act as generic proactive market strategies, representing coordinated proactive activities driven by multiple strategic orientations and aimed at creating customer value. These generic strategies help us understand of the role of proactivity in crafting high-performing market strategies by representing different routes to success.     

How institutional pressures and systems characteristics shape customer acceptance of smart product-service systems

This research examines how institutional pressures (mimetic, normative, and coercive), which provide shared expectations of and norms for legitimate behavior, and system characteristics influence business-to-business (B2B) customer acceptance of smart product-service systems (PSSs). This is important because many B2B customers are still reluctant to adopt smart PSSs. Drawing from a cross-industry survey with 160 managers of B2B firms and controlling for other major adoption drivers (e.g., privacy risk, organizational innovativeness), we find a non-linear effect of normative pressure on customers' intention to adopt smart PSSs. Furthermore, normative pressure particularly increases adoption intentions when customers perceive a high relative advantage from smart PSSs. Mimetic pressure positively affects adoption of customer input-oriented PSSs, whereas this effect is highly non-linear (U-shaped) for customer output-oriented PSSs. We extend adoption literature by analyzing non-linear effects of institutional pressures as well as its context dependence. From a managerial perspective, these findings show how suppliers can adapt their sales and communication efforts to effectively market smart PSSs.     

B2B relationships on the fast track: An empirical investigation into the outcomes of solution provision

In academic and business literature, suppliers providing solutions to their business-to-business (B2B) customers are often described as achieving increased customer retention, higher sales volumes, and enhanced cross-selling. Yet there is limited empirical evidence to support the positive impact of solutions on these customer-related outcomes. Moreover, it is unclear whether suppliers obtain similar outcomes from buyers at different relationship life-cycle stages. This paper aims to address these two gaps and tests the contingency role of the relationship life-cycle in driving future customer outcomes. It proposes that there is a positive effect for solutions provided to recent customers (labeled as “accelerator” role) rather than to established ones (labeled as “leverage” role). Results from a longitudinal analysis of the sales database of a North American company providing solutions to its customers empirically support the “accelerator” role of solutions.     

Knowing me,knowing you: Self- and collective interests in goal development in asymmetric relationships

This paper investigates how self-interests and collective interests in goal development are manifested in the context of asymmetric customer–supplier relationships. Taking an interaction approach (IMP Group, 1982), a conceptual structure highlighting possible patterns of characteristics of the asymmetric customer–supplier relationship and approaches to self- and/or collective interests in goal development has been created.Based on a multiple case study approach, the findings suggest that smaller suppliers who deliberately pursue self-interest in their business activities with larger customers experience better outcomes. Larger customers recognise that the creation of collective business goals enhances the outcome of joint efforts in terms of market impact and profitability. The findings also highlight that trust is perceived as a necessity for the development of collective interests in asymmetric relationships and that the power of the larger customer is not perceived as a constraint. A key conceptual contribution is the identification of two distinct types of asymmetric relationships: ‘product/technology-oriented’ in which self-interest dominates by focusing on one party's resources for developing new products or technology and ‘complementary competencies-oriented’ in which collective interests link the competencies of the larger and smaller party for new joint business ambitions.     

Strengthening B2B brands by signalling environmental sustainability and managing customer relationships

Resource depletion and environmental pollution concerns are forcing manufacturers to pay greater attention to environmental sustainability. This is especially so for business-to-business (B2B) manufacturing firms who intensively use natural resources in their operations and are blamed for observable impacts on the environment. Despite investments in environmental sustainability practices by B2B manufacturers, studies provide little explanation about the extent B2B manufacturers obtain a positive brand image and superior market performance through environmental sustainability. Furthermore, research has not identified organisational practices that strengthen the path from environmental sustainability to market performance. Drawing on signalling theory, the customer relationship management (CRM) literature, attitude theory, and data collected from B2B manufacturers and their customers, we show that environmental sustainability practices provide positive benefits to B2B manufacturers' brand image, which, in turn, impacts market performance. Further, effective CRM and working with business customers with positive environmental attitudes are essential boundary conditions that strengthen the path from environmental sustainability practices to market performance.     

The Role of Value‐Informed Pricing in Market‐Oriented Product Innovation Management*

Although the positive effect of a market orientation on new product success is widely accepted and the market orientation literature has increased its understanding of how a market orientation leads to performance, the extant literature has overlooked the role of value‐informed pricing in the relationship. Value‐informed pricing is a pricing practice in which the decision makers base the price of the new product on the customers' perceptions of the benefits that the product offers and how these benefits are traded by customers against the price (that has yet to be determined). Considering that pricing mistakes may hit hard on the profitability of product innovations, it is important to firms to have a good understanding of its role. This study develops a framework in which value‐informed pricing is integrated in the relationship between market orientation and new product performance. A distinction is made between customer and competitor orientations, and relative product advantage is also included in the conceptual model. The model is tested on data obtained from managers based on a cross sectional sample of 144 firms. The respondents were involved in a decision‐making process of the pricing of a new product. The model is tested using structural equations modeling. The results show that value‐informed pricing has a strong effect on new product performance. It also reveals that each component of a market orientation fulfills a specific role in a market‐oriented organization. Value‐informed pricing is found to have important mediating effects in the market orientation–new product performance relationship. Results show that firms with a strong customer orientation engage in value‐informed pricing and develop superior benefits to customers in an advantageous product. In turn, both value‐informed pricing and relative product advantage positively affect new product market performance. However, no significant effect of competitor orientation on value‐informed pricing is found. Combined with the finding that competitor orientation negatively affects relative product advantage, this suggests that competitor orientation may hurt new product performance when this orientation is not balanced with a strong customer orientation. The results also portray that value‐informed pricing leads to higher product advantage. Interestingly, this relation is contingent on the degree of interfunctional coordination within the firm. This suggests that the relationship between market orientation and new product performance is strongest if firms integrate value‐informed pricing in the new product development process. In this sense, a market‐oriented firm mirrors the customer value perception that makes a trade‐off between benefits and price.