Directory UMM :Data Elmu:jurnal:J-a:Journal Of Business Research:Vol48.Issue2.2000:
An Exploration of The Meaning and Outcomes
of a Customer-Defined Market Orientation
Dave Webb
UNIVERSITY OF WESTERN AUSTRALIA
Cynthia Webster
MISSISSIPPI STATE UNIVERSITY
Areti Krepapa
CARDIFF BUSINESS SCHOOL
To date the marketing literature has failed to substantiate the linkage
between market orientation and customer satisfaction. This is surprising
particularly when considering the attention that has been given to the
implementation of the marketing concept in recent years. Furthermore,
market orientation is not yet commonly positioned as a customer-defined
organization state, despite the literature strongly promoting the importance
of customer perceptions when determining extent of organization success.
The exploratory research reported here supports the customer-defined
position and seeks to redress this gap in the context of the services industry.
An analysis of customer perceptions of market orientation suggests that
a reduced and amended version of a well-known market orientation
measurement instrument can meaningfully be applied to customers, and
that a strong relationship exists between customer-defined market orientation and both service quality and customer satisfaction. The discussion of
findings is facilitated through the adoption of an amended satisfaction/
dissatisfaction motivation theory model. In addition, areas for further
research are proposed. J BUSN RES 2000. 48.101–112. 2000 Elsevier Science Inc. All rights reserved.
T
he key to a firm’s economic success is developing a sustainable competitive advantage (SCA) (Porter, 1985),
and the key to developing a competitive advantage is
consistently creating superior value for customers (Slater and
Narver, 1992; Narver, Slater, and Tietje, 1998). The marketing
literature suggests that a necessary prerequisite to achieving
a competitive advantage and providing superior value for customers is the development of a market orientation (e.g., Kohli
and Jaworski, 1990; Narver and Slater, 1990; Pitt, Caruana,
and Berthon, 1996). However, past research has almost exclu-
Address correspondence to C. Webster, Mississippi State University, Department of Marketing, Box 9582, Mississippi State, MS 39762. Fax: 601-3257012; E-mail: cwebster@cobilan.msstate.edu
Journal of Business Research 48, 101–112 (2000)
2000 Elsevier Science Inc. All rights reserved.
655 Avenue of the Americas, New York, NY 10010
sively considered a market orientation as an “employee-perceived phenomenon,” and as a result, subsequent studies pertaining to a firm’s market orientation generally have been
based on employee self-reports.
Although Drucker’s (Drucker, 1954) comment that marketing is not a specialized activity, but rather “the whole business
seen from the customer’s point of view,” was made over four
decades ago, only recently has a customer-defined market
orientation position been proposed. Adopting a customercentered view of market orientation, Deshpande´, Farley, and
Webster (1993) used the term “customer orientation” synonymously with “market orientation” to argue that the evaluation
of a firm’s level of customer-orientation should come from
customers rather than the company itself. They emphasize that
it is the customers’—as opposed to the sellers’—perceptions of
the level to which a firm is customer oriented that will be
the critical measure of business performance. Indeed, their
empirical rejection of the hypothesis stating that marketer selfreported customer orientation is related positively to business
performance, and their acceptance of the hypothesis stating
that customer self-reported customer orientation is related
positively to business performance adds further testimony
to the importance of a customer-defined market orientation.
Furthermore, in a contrasting model assessment incorporating
three market orientation measurement instruments (i.e., those
advanced by Kohli and Jaworski, 1990; Narver and Slater,
1990 and Deshpande´, Farley, and Webster, 1993), a factor
analysis resulted in a synthesized 10-item marketing orientation scale (Deshpande´, Farley, and Webster, 1993). The authors note that the 10 items seem to have intuitive integrity
because they all regard a customer-focused notion of market
orientation.
Thus, drawing on Drucker’s (Drucker, 1954) comment and
Deshpande´ and colleagues’ (Deshpande´, Farley, and Webster,
ISSN 0148-2963/00/$–see front matter
PII S0148-2963(98)00114-3
102
J Busn Res
2000:48:101–112
1993; Deshpande´ and Farley, 1998) research, it seems not only
intuitively logical but also necessary to view market orientation
from a customer vantage. This view appears even more compelling in cases where organization “perceptions of reality”
are out of sync with those of its customers (Deshpande´, Farley,
and Webster, 1993). In such cases, defining and evaluating
market orientation from an employee vantage appears even
more tenuous.
The research reported here advances the customer-defined
position and argues that the adoption of the employee-defined
view of market orientation is one-sided and myopic in that
it ignores the vital role of customers in terms of value recognition. We suggest that an organization can be described as
market-oriented only when the firm’s total product offer is
both recognized and described by customers in value terms.
In other words, a firm can be accurately labeled as “marketoriented” only when customers perceive it as such and when
they perceive that the firm offers considerable value to them.
We advance therefore that market orientation, as an organization state, is not wholly definable by employees, and that
beneficial strategic insights can be gained by firms when they
view market orientation from a customer vantage.
In addition, acceptance of the proposed relationship between market orientation and customer satisfaction is more
appealing where both constructs are measured from a customer vantage. In other words, if consumers view a firm as
being highly market oriented, they are more likely to have a
high level of satisfaction with that particular firm. While the
explication of the market orientation and customer satisfaction
relationship may first appear somewhat tautological, it is important to note that the relationship has not been empirically
investigated. If market orientation is a form of organization
culture (as proposed by Narver and Slater, 1990; Deshpande´,
Farley, and Webster, 1993; Day, 1994; and Narver, Slater, and
Tietje, 1998), then we forward that the empirical validation of
its proposed linkage to customer satisfaction deserves explicit
consideration. Should a positive relationship result, rationalizing the necessity for the development of a market-oriented
culture would become all the more palatable for organizations.
Given the considerable extent to which customer satisfaction
is discussed as a key strategic issue in the business literature,
it is surprising to find that no empirical study has yet explicitly
examined the relationship between customer-defined market
orientation (CDMO) and customer satisfaction. The current
study adds to the existing literature in several ways. First, the
market orientation and organization outcome framework is
extended by offering a conceptual model in which CDMO is
positioned both as an antecedent of service quality (SQ) and
customer satisfaction (CS). Second, a market orientation scale
is modified to accommodate a customer-defined position.
Third, the validity and reliabilty of a number of competing
customer-defined market orientation models are examined.
And fourth, the relationships between a CDMO and both CS
and SQ are investigated.
We begin by reviewing the literature on the conceptualiza-
D. Webb et al.
tion and implementation of the marketing concept and the
linkages among market orientation, service quality, and outcomes (performance and customer satisfaction).
Literature Review
Implementation of the Marketing Concept
For decades, the marketing concept has been heralded by
marketing academicians and practitioners to the extent that
its acceptance as the optimal marketing management philosophy has been almost universal (Houston, 1986). However,
many have expressed concern about the implementation of
the marketing concept, declaring it is not a practical basis for
managing a business (e.g., Kotler, 1991; Day, 1994).
Perhaps the difficulty associated with the practice of the
marketing concept stems from a lack of consensus regarding
its meaning, what it means to implement the concept, and
the term to describe the latter. In general, the meaning and
implementation of the marketing concept has been referred
to as being “customer oriented,” “market driven,” “market
oriented,” and “marketing oriented.”
The terms “market driven” and “customer oriented” are
considered as interchangeable concepts by Shapiro (1988).
Moreover, he emphasizes that for a company to be considered
market driven or customer oriented, three characteristics must
be evident. First, information on salient buying influences
must permeate each corporate function. Second, strategic and
tactical decisions must be made interfunctionally and interdivisionally. And third, divisions and functional units must make
coordinated decisions and execute them with a sense of commitment.
The terms “market driven” and “market oriented” are viewed
synonymously by Slater and Narver (1992, 1994). They propose that these two terms refer to the development and maintenance of an organization culture that most effectively and
efficiently creates superior value for consumers and continuous, superior performance for the firm. They propose further
that a market orientation consists of three key dimensions: a
customer orientation, a competitor orientation, and interfunctional coordination (coordinated utilization of company resources in creating superior value for target customers).
On the other hand, market driven and market oriented are
viewed as different constructs by other authors. For example,
Day (1994) applies the term “market driven” to firms that
maintain close contact with their customers, more specifically
arguing that such firms are superior in their market-sensing
and customer-linking capabilities. Shapiro (1988) views being
“market oriented” in a more comprehensive manner and posits
that it represents a set of processes touching on all aspects of
the company. He emphasizes that a market orientation is
much more than “getting close to the customer.” Similarly,
Kohli and Jaworski (1990) argue that a market orientation is an
overall organizational value system, one that provides strong
norms for the generation, dissemination, and responsiveness
to intelligence.
Customer-Defined Market Orientation
The terms “market orientation” and “customer orientation”
are perceived to be synonymous by Deshpande´, Farley, and
Webster (1993). Dissimilar to the view mentioned earlier,
these authors distinguish a market orientation from a competitor orientation, arguing that it can be antithetical to a customer
orientation when the focus is on the strengths of the competitor rather than on the unmet needs of the customer. Furthermore, they position customer orientation as part of an overall
fundamental corporate culture.
Although the terms “market orientation” and “marketing
orientation” have been used interchangeably in the literature,
the former term is considered to be the better descriptor for
three reasons (Kohli and Jaworski, 1990). First, the term
implies that the construct is not exclusively a concern of
the marketing function; whereas, “marketing orientation” is
restrictive and misleading in this respect (Shapiro, 1988).
Second, the term “market orientation” is less politically
charged because it does not overemphasize the importance
of the marketing function in the organization. And third, the
label focuses on markets, which include customers and the
forces affecting them. This is consistent with the broader
“management of markets” orientation proposed by Park and
Zaltman (1987) and the “competitor orientation” dimension
proposed by Narver and Slater (1990).
In summary, the conceptualized dimensions of customer
orientation, competitor orientation, and interfunctional coordination (Narver and Slater, 1990), share a similar nomological network with the dimensions of intelligence generation,
intelligence dissemination, and responsiveness (Kohli and
Jaworski, 1995). However, though similarities in definition,
content, and operationalization are evident, consensus with
respect to the importance and positioning of “information,”
“value,” and “competitors” has yet to be reached.
Market Orientation and
Performance Assessment
A modest but growing body of empirical evidence from both
the United States (e.g., Narver and Slater, 1990; Deshpande´,
Farley, and Webster, 1993; Slater and Narver, 1994; Deshpande´ and Farley, 1998) and Europe (e.g., Pitt, Caruana,
and Berthon, 1996) supports the proposition that market
orientation is positively associated with superior performance.
More specifically, Narver and Slater (1990) position market
orientation as an important determinant of profitability. These
authors suggest that superior business performance is the
result of superior skills in understanding and satisfying customers, thereby emphasizing further the importance of measuring market orientation from a customer vantage.
Market Orientation, Customer
Satisfaction, and Service Quality
Although an empirical linkage among these constructs has yet
to be substantiated, the literature suggests a linkage through
the concept of value. In the market orientation literature, value
J Busn Res
2000:48:101–112
103
provision is positioned as a central organizational objective
(e.g., Kohli and Jaworski, 1990; Narver and Slater, 1990;
Narver, Slater, and Tietje, 1998). There are three equally
important prerequisites for the creation of superior customer
value. The first two, information acquisition and information
dissemination, focus on understanding what consumers value.
These intelligence-related prerequisites overlap with both customer and competitor orientations. The third prerequisite,
organization-wide responsiveness, involves coordinating across
the firm’s departmental boundaries those activities necessary
to deliver superior value (Siguaw, Brown, and Widing, 1994).
This dimension overlaps with Narver and Slater’s “interfunctional coordination (Narver and Slater, 1990).”
Within the CS literature, the importance of value creation
in satisfying customers also has been recognized. Woodruff,
Schumann, and Gardial (1993) explicate the sentiments of
other researchers (e.g. Morganosky, 1988; Spreng, Dixon, and
Olshavsky, 1993; Heskett, Jones, Loveman, and Schlessinger,
1994) in stating that “by being responsive to customer’s needs,
customer value delivery strategies are instrumental in building
strong customer satisfaction.” Thus, a linkage is hypothesized
between market orientation, which focuses on the production
and provision of value-satisfying activities and the customers’
level of satisfaction. Hence,
H1: The greater the level of customer-defined market orientation, the greater the level of CS.
It is important to distinguish between market orientation
as a type of organization culture and its consequences (the
customer’s evaluation set). For example, in customers’ interactions with a service firm, they are positioned in the relationship
such that they are able to form opinions about the service
quality received and consequently construct cognitive evaluations about the organization’s level of delivered service. Thus,
we suggest that the level of service provided is guided by the
fundamental culture of the providing firm. In this sense, service received reflects a consequence of market orientation.
Hence we propose that:
H2: The greater the level of customer-defined market orientation, the greater the level of perceived service
quality.
Following Taylor and Baker (1994), we propose that CS
and SQ are not only outcomes of a firm’s market orientation
but also mediator constructs in a broader organization performance framework (see Figure 1).
Market orientation has mostly been treated as a summary
measure representing the extent to which employees perceive
their firm to be market oriented (Kohli and Jaworski, 1990;
Narver and Slater, 1990). In the current study, the treatment
of market orientation is more in line with Deshpande´ and
colleagues’ (Deshpande´, Farley, and Webster, 1993) suggestion that market orientation be customer defined. Thus for this
study, we adopt the following working definition of market
orientation:
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2000:48:101–112
Figure 1. Market orientation performance relationship. Study focus
(area with dotted line). Abbreviations: MO 5 market orientation;
CS 5 customer satisfaction; SQ 5 service quality.
Market orientation reflects customer attitudes regarding the
extent to which a firm’s customer orientation, competitor
orientation, and interfunctional coordination represents its
total value offering.
To maximize the ability of customers to respond to the
market orientation items included in this study, the adoption
of an amended version of the Narver and Slater (1990) measurement instrument was deemed appropriate. Hence, this
study tests the proposition that:
P1: An amended version of the market orientation instrument developed by Narver and Slater (1990) maintains
its psychometric properties of validity and reliability
when considered from a customer vantage.
Methodology
To explore the aforementioned hypotheses and proposition,
a study to examine market orientation in a business to business
banking context was conducted. A cross-sectional, self-administered survey (Appendix A) was mailed to the main contact
person in each of all the client firms of a single corporate
bank (n 5 119). Each client represented a separate organization with which the bank had a direct business relationship.
Following the dispatch of a reminder notice, 78 questionnaires
were returned (65% response rate) of which 77 were considered usable.
Subjects were asked to respond to a series of 28 item
statements. The first 11, representing market orientation, were
measured with a scale ranging from 1, “strongly disagree” to
7, “strongly agree.” The original market orientation instrument
(Narver and Slater, 1990) consists of 15 items; in this study,
however, only 11 of the original items were considered to be
relevant to the corporate banking context. To ensure that the
administered questionnaire was meaningful and consistent
with the content of the original instrument, minor phraseology
changes were made. In spite of the amendments, each of the
three market orientation dimensions proposed by Narver and
Slater (1990) was deemed adequately covered in both content
D. Webb et al.
and structure. Hence, the modified instrument was considered
a structurally sound, content-valid replication of the original.
Given recent thinking concerning confused aggregated satisfaction data distribution functions (Estelami and De Maeyer,
1997), and the exclusion of any cognitive comparative component in this study, customer satisfaction was measured using
a seven-point visual representation scale thereby emphasizing
the affective nature of the construct (Anderson and Narvus,
1990). The measurement of customer satisfaction at the overall
level is also consistent with Nunnally’s (Nunnally, 1978) suggestion that unidimensional measures are appropriate when
the issue to be measured is measurable at the single attribute
level.
Completing the main body of the questionnaire, service
quality was assessed by aggregating a number of items from
the original 22-item SERVQUAL instrument (Parasuraman,
Zeithaml, and Berry, 1988). Consistent with Parasuraman and
colleagues’ suggestion that items be determined in-line with
the objectives of each study, a total of 16 items measured on
a 1 (“strongly disagree”) to 7 (“strongly agree”) scale were
included. The appropriateness of the wording of each item
in the instrument was confirmed with the bank’s management
team prior to the dispatch of the survey instrument.
Results
Validity Assessment
Analysis commenced with an assessment of the market orientation scale for unidimensionality and internal consistency.
Confirmatory factor analysis was used to test three competing
positions advocated in the literature.
The first position, replicating a first-order single factor
representation of the data, assesses the unidimensional validity
and reliability of an adapted version of the original Narver
and Slater (1990) market orientation measurement instrument. Thus, the first position examines the proposition stated
earlier.
The second position, replicating a first-order two-factor
structure of the data, recognizes the similarity drawn between
a combined customer-competitor representation and the
“management of markets” position advanced by Park and
Zaltman (1987). Thus:
P2: Customer orientation and competitor orientation are
indicative of one dimension representing information
and acquisition activities, and interfunctional coordination is representative of a separate dimension corresponding to managerial action in the creation of value.
And finally, the third position (Figure 2) tests the validity
of a three-dimensional representation of market orientation
(Narver and Slater, 1990) and proposes that:
P3: The market orientation components (customer orientation, competitor orientation, and interfunctional coordination) are discrete constructs.
Customer-Defined Market Orientation
J Busn Res
2000:48:101–112
105
Figure 2. Three factor structure for model 3. EQS summary statistics: method 5 ML; x2 5 74.06; df 5 41; p value 5 0.0012; BBNFI 5
0.874; BBNNFI 5 0.916; CFI 5 0.938. Abbreviations: asterisks indicate significant result at ,0.05 level. CompOrn 5 competitive orientation;
CusOrn 5 customer orientation; FCoord 5 interfunctional coordination. For coding schema see Appendix A.
Chi-square was used to test the null hypothesis that each
of the positions (hereinafter referenced as models, that is,
position 1 5 model 1 [M1], etc.) reproduce the population
covariance matrix of the included observed variables. By convention, an acceptable model is one where the p-value is
greater than or equal to 0.05 (Bagozzi and Foxall, 1996). In
addition to the chi-square test and its associated p-values, the
comparative fit index (CFI) is reported as a test of model fit.
Bentler (1990) suggests that CFI values of above 0.95 indicate
a good overall fit, while values of between 0.90 and 0.95
suggest adequate fit. The analysis reveals that each of the
models demonstrate to some extent unsatisfactory results with
chi-square and p-values below the desired level in all cases
(M1 2 M2) and unacceptable to low goodness-of-fit (CFI)
values for models 1 (M1) and 2 (M2), respectively. Consequently, M1 and M2 are not presented within the text; however,
associated results are documented in Table 1.
In summary, the goodness-of-fit indexes for the 2 and 3
factor representations reveal an improved model fit for these
models over the single factor representation with CFI values
falling in the Bentler (1990) proposed “adequate fit” band
(Table 1, M2 and M3 CFI values . 0.90). As stated previously,
however, chi-square values and their associated p-values reveal
a degree of model misspecification.
A technique of partial disaggregation is used to minimize
the effect that low sample size to parameter estimate ratios
has on the calculation of the chi-square statistic. Partial disaggregation involves the formation of indices by summing ranTable 1. Goodness-of-Fit Indicators
Model
M1
M2
M3
M4
M5
x2
df
CDMO
x2-Ratio
p-Value
CFI
119.69
94.46
74.06
20.66
16.19
44
43
41
13
17
2.70
2.20
1.81
1.59
0.95
0.000
0.000
0.000
0.080
0.510
0.84
0.90
0.94
0.98
1.00
CFI, comparative fit index (Bentler, 1990.)
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D. Webb et al.
Figure 3. Two factor partial disaggregation structure (model 4). EQS summary statistics: method 5 ML; x2 5 20.66; df 5 13; p value 5
0.0799; BBNFI 5 0.951; BBNNFI 5 0.969; CFI 5 0.981. Abbreviations: asterisks indicate significant result at ,0.05 level. CCorn 5
customer and competitor orientation combined; FCoord 5 interfunctional coordination. CC1 2 4 5 Random combination of customer and
competitive orientation items.
dom items within each construct to form pairs or clusters of
composite indicators (Bagozzi and Foxall, 1996). Items were
selected on the basis of the magnitude of the factor loadings
in each model.
In total, two models incorporating the partially disaggregated sets of items were assessed. Model 4 (Figure 3) depicts
a first-order two-factor structure with items 1 to 8 paired
(CC1 2 CC4) as indicators of one latent factor (labeled
“CCorn”, customer and competitor orientation), and items 9
to 11 as indicators of a second latent factor (labeled “FCoord”,
interfunctional coordination). Model 5 (Figure 4), depicting
a first-order three-factor structure, includes customer orientation (CusOrn), competitor orientation (CompOrn), and interfunctional coordination (FCoord) as independent latent factors. Indicators are identical to those explored in Model 3
(Figure 2), with the exception of “CusOrn” where items 1 to
6 are paired to create a set of three indicators (CusOrn 1 to
3). Models 4 (Figure 3) and 5 (Figure 4) thus replicate models
2 and 3 in composition.
Chi-square test statistics reveal an excellent model fit in
each case with x2, p-value, and CFI indexes of the desired
magnitude (model 4: 2 x2 5 20.66, df 5 13, p 5 0.07,
CFI 5 0.98; model 5: 2 x2 5 16.19, df 5 17, p 5 0.51,
CFI 5 1.00).
Comparing the results, the three-factor solution for model 5
(Figure 4) appears to represent the model of best fit. Lagrange
multiplier (LM) and multivariate Wald (W) tests revealed that
no further changes to the parameterization of the model’s
structure would yield a significant improvement in x2 values.
Thus, model 5 was accepted as representative of the structure
of market orientation.
Convergent and Discriminant Validity
Convergent and discriminant validity were evaluated by calculating the average variance extracted (AVE) for each factor.
Convergent validity is established if the shared variance accounts for 0.50 or more of the total variance. Discriminant
validity is evident when the AVE for each construct is greater
than the squared correlation between that construct and any
other construct in the model (Fornell and Larcker, 1981).
The results presented in Table 2 confirm both the convergent and discriminant validity of model 5.
Internal Consistency
Internal consistency was assessed by means of the Cronbach’s
alpha coefficient. Values were calculated for each of the three
factors included in model 5. The results presented in Table
Customer-Defined Market Orientation
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2000:48:101–112
107
Figure 4. Three factor partial disaggregation structure (model 5). EQS summary statistics: method 5 ML; x2 5 16.19; df 5 17; p value 5
0.5107; BBNFI 5 0.964; BBNNFI 5 1.003; CFI 5 1.000. Asterisks signify significant result at ,0.05 level. CompOrn 5 competitive
orientation; CusOrn 1–3 5 diassagregated customer orientation items; FCoord 5 interfunctional coordination. For coding schema See
Appendix A.
2 attest to the high internal consistency of the instrument in
that all values are above the suggested 0.70 level for scale
robustness (Nunnally, 1978).
The results presented in the above sections offer support
for the psychometric soundness of the CDMO measurement
instrument at a three-factor level. Propositions 1 and 2, which
explore the structure of market orientation at the single and
two factor levels are rejected. However, proposition 3, which
stated that “the market orientation components of customer
orientation, competitor orientation, and interfunctional coor-
dination are discrete constructs,” is accepted. On the evidence
of the above results we concur with Narver and Slater (1990)
that the structure of market orientation is best represented
by three unique dimensions, that is, customer orientation,
competitor orientation, and interfunctional coordination.
Hypotheses Testing
Hypotheses 1 and 2 state that there will be a significant positive
relationship between market orientation and both CS and SQ.
Recognizing the three-factor structure of market orientation,
Table 2. Reliability and Validity Assessment (Model 5)
CusOrn
M5
Rel
Ave
CompOrn
Rel
Ave
Rel
Ave
(Corr)2
Conv
Disc
0.90
0.80
0.71
0.84
0.70
0.53, 0.40, 0.70
Yes
Yes
0.70
FCoord
Abbreviations: CusOrn 5 customer orientation; CompOrn 5 competitor orientation; FCoord 5 interfunctional coordination; Rel 5 Cronbach alpha coefficient; AVE 5 average
variance extracted 5 S of standard loading2 / S of standard loading2 1 S of ej; Conv. 5 convergent validity (AVE . 0.50); Disc. 5 discriminant validity 5 AVE/(Corr)2 . 1;
(Corr)2 5 highest (Corr)2 between factors of interest and remaining factors.
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D. Webb et al.
Discussion and Implications
Figure 5. Hypothesized relationships between market orientation,
customer satisfaction (CS), and service quality (SQ). Abbreviations:
CompOrn 5 competitive orientation; CusOrn 5 customer orientation; FCoord 5 interfunctional coordination.
H1 and H2 are henceforth expanded to reveal a number of subhypotheses (Figure 5). H1a and H2a explore the relationships
between customer orientation (CusOrn) and both CS and SQ;
H1b and H2b explore the relationships between competitor
orientation (CompOrn) and CS and SQ; and H1c and H2c the
relationships between interfunctional coordination (FCoord)
and CS and SQ. The magnitude of the significant positive
correlation coefficients shown in Table 3 offers strong support
for all of these hypotheses.
To provide a more comprehensive representation of the
relationships exhibited among the constructs in Figure 5, a
simple path model was analyzed using the EQS structural
equation software package (Bentler, 1990).
The nature of the relationship between the market orientation dimensions and both CS and SQ is depicted in structural
form by the full-standardized solution (Figure 6). The model
fit results (x2 5 17.73, p-value 5 0.12, CFI 5 0.99), together
with the standardized path coefficients provide further testimony of the strong positive and direct relationship between
market orientation and both CS and SQ.
Since market orientation, as an overall organizational value
provision system, influences the behavioral norms that shape
the organization’s attributes and delivery behavior, the considerable impact of market orientation on both service quality
(SQ) and customer satisfaction (CS) is logical. The results
presented in Figure 6 attest to the significance of each of
the dimensions of market orientation (customer orientation,
competitor orientation, and interfunctional coordination) as
CS and SQ antecedents. The results revealed here show a
similar ordering of standardized coefficients between the three
market orientation dimensions and CS and SQ. The strongest
coefficients are evident between competitive orientation
(CompOrn) and CS (0.39) and SQ (0.37), respectively.
At a cursory glance, the relatively strong relationships evidenced between a competitive orientation and both CS and
SQ may lead a service firm’s management to think that it is
more beneficial to focus on the competition than it is on the
customer orientation (CusOrn) or interfunctional coordination (FCoord) delivery components. An extension to Herzberg
and colleagues’ (Herzberg, Mausner, and Snyderman, 1959)
dual factor needs-satisfaction theory can be applied here to
help understand the findings of this study and to compose a
management response agenda incorporating the three market
orientation dimensions.
On the basis of past research findings using the critical
incident technique, Herzberg and colleagues’ (Herzberg,
Mausner, and Snyderman, 1959) proposed the dual factor
theory to understand better the causes of both satisfaction
and dissatisfaction in the workplace. Two sets of factors were
revealed, one explaining instances of dissatisfaction, and the
other, instances of satisfaction. The former set, referred to as
“hygiene” factors, relates to attributes which are expected in
the normal course of service delivery (e.g., reliable, prompt,
courteous, etc.). From this perspective, hygiene factors are
not considered strong predictors of satisfaction, though their
absence can result in dissatisfaction. The latter set, referred
to as “satisfiers” or “motivators,” pertains to attributes that
contribute positively to the fulfillment of customer higher
order needs. Positive performance, which causes pleasant surprise and/or delight, is applicable here. Thus “satisfiers” please
by their presence, but do not dissatisfy by their absence. In
essence therefore, Herzberg and colleagues (Herzberg, Mausner,
Table 3. Correlation Matrix — Variables in Figure 2
SATN
OVQUAL
FCoord
CompOrn
CusOrn
SATN
OVQUAL
FCoord
CompOrn
CusOrn
1.000
0.558
0.617
0.721
0.727
1.000
0.618
0.651
0.699
1.000
0.509
0.726
1.000
0.636
1.000
n 5 77; all correlations significant at p 5 , 0.001.
Customer-Defined Market Orientation
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2000:48:101–112
109
Figure 6. Path analysis. EQS summary statistics: method 5 ML; x2 5 17.73; df 5 12; p value 5 0.1242; BBNFI 5 0.962; BBNNFI 5
0.969; CFI 5 0.987. Abbreviations: Asterisks indicate significant result at ,0.05 level. CompOrn 5 competitive orientation; CusOrn 5
customer orientation; FCoord 5 interfunctional coordination.
and Snyderman, 1959) have argued that satisfaction results
from the attainment of a “motivator” need and dissatisfaction,
the frustration of a “hygiene” need (Oliver, 1997). While providing an important framework to understand the needs-satisfaction relationship, fault has been found with the above dual
factor theory. For example, one criticism focusing on the
potential limitations of a two-factor model to explain the
needs-satisfaction relationship has been considered by Oliver
(1997). Here, Oliver extends the two-factor framework to
include a third factor, which is comprised of attributes that
have the ability to both satisfy when present and dissatisfy
when absent. This group is labeled “bivalent satisfiers.” Adopting the language of “valency,” the other two factors in the
framework are likewise relabeled. Thus, “hygiene” factors become “monovalent dissatisfiers,” and “satisfiers” or “motivators” become “monovalent satisfiers.”
We now apply this mono and bivalent satisfier/dissatisfier
conceptualization to help interpret the findings of the current
study. We expected to find the highest path coefficient between customer orientation and customer satisfaction (0.31,
Figure 6). However this was not the case as demonstrated by
the magnitude of the path coefficient between competitive
orientation and CS (0.39). How can this, as well as the other
relationships depicted in the market orientation-CS framework, be explained?
A close examination of the interfunctional coordination
attributes indicates that they contain properties similar to
those of the monovalent dissatisfiers; that is, they are essential
service organization elements and do not contribute to satisfaction by their presence but contribute to dissatisfaction by
their absence. Thus, they can be considered “hygiene” factors.
The relatively low path coefficient witnessed between this
dimension and both SQ (0.27), and CS (0.25) attests to this
logic.
A stronger relationship (0.31) exists between the dimension
of customer orientation and CS. Here, an examination of the
customer orientation attributes suggests that they are comprised of bivalent satisfiers; that is, they are the likely cause
of both client satisfaction and dissatisfaction. For example,
either satisfaction or dissatisfaction can be interpreted when
selecting the item with the highest factor loading for this
dimension (the item that pertains to the firm engaging in
information acquisition [market research] activities to determine customer needs—factor loading 0.84). When market
research is conducted to ascertain customer needs, the service
firm’s customers may feel empowered, given that the product/
service supplied has been directed to meet their specific requirements. Thus they may feel more satisfied. Where the
converse is true, that is, no market research is executed, the
customers may feel that the relationship between themselves
and the firm is unidirectional in the firm’s favor and thus feel
dissatisfied.
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2000:48:101–112
The strongest path coefficient evidenced in the model is
between competitive orientation and CS (0.39). The competitive orientation attributes provide an example of Oliver’s (Oliver, 1997) monovalent satisfiers; that is, they can motivate
and satisfy by their presence but not necessarily dissatisfy
by their absence. In the case of the service firm/customer
relationship described here, this appears particularly relevant
for two reasons. First, the service firm’s customers are somewhat committed in their relationship with the firm. Therefore,
to switch to an alternative service provider could result in
switching costs (financial, time, operational, etc.). Hence, an
action by the firm that is considered by the customers as
competitive in their favor is likely to intensify the customers’
level of relationship comfort thus their satisfaction with the
firm. Second, the competitiveness of the service firm is likely
to be displayed with the positive fulfillment of one or more
of the bivalent satisfier components of customer orientation.
Hence, the more the bank is perceived to be competitive, the
more likely it is that it will be perceived to be customeroriented. The strong significant positive correlation (0.64)
evident between these dimensions attests to this assertion.
An indication as to how management can gain direction
from this study becomes evident when the findings are considered in conjunction with the competitive advantage concept.
For an organization to achieve a competitive advantage, it is
necessary to ascertain not only the key critical success factors
(CSFs) driving the industry but furthermore the performance
ability of competitors with respect to these factors. Having
assessed all of these factors, superior performance against the
appropriate “deliverables” corresponding to these CSFs can
be designed into the organization’s portfolio. In this way, both
the competitor- and customer-orientation components are
considered. Finally, to ensure the effective delivery of the
firm’s offerings, the necessary implementation infrastructure,
that is, one which complies with the need for a coordinated
organizational effort towards the creation and provision of
value, needs to be in place. Such arrangements include the
formation of alliances between functional units in an organization, and likewise, the formation of alliances between organization units in a corporation (Anderson and Narvus, 1990).
On the basis of the evidenced relationships, some support
for the notion that management may be able to influence CS
and SQ by adopting and implementing a market-oriented
culture is offered. Furthermore, since we argue in this article
that market orientation is a customer-defined state, customer
evaluations of the level of market orientation exhibited by
an organization may similarly serve as good indicators of
management’s ability to implement such an orientation within
the firm.
This study has provided preliminary insight into the market
orientation, SQ, and CS relationship. Methodologically, further empirical research is needed to confirm the dimensionality and structure of the CDMO construct and to explore the
D. Webb et al.
applicability of the proposed CDMO measurement instrument
across a broader range of service and goods-producing firms.
Support has been offered for the linkage between market
orientation, which focuses on the production and provision
of value satisfying activities, and the customer’s level of satisfaction, which includes an appraisal of value received. Future
research is needed to develop and explicitly include a measure
of value in the market orientation framework. Thus far, very
little attention has been given to ascertaining and understanding the importance, nature, dimensionality, and structure of
the value construct.
In developing a more extensive framework, a model that
incorporates the consequences of both CS and SQ, that is,
loyalty and objective measures of organization performance, will
also provide timely and important contributions to marketing
knowledge. Studies that examine the depicted relationships
in other countries also will extend our knowledge concerning
the cultural and contextual antecedents and consequences of
the market-orientation framework.
Working with larger sample sizes could perhaps alleviate
problems with respect to model parameter estimation. Finally,
it is suggested that the valency needs-satisfaction framework
applied in this study may prove a useful interpretive tool to
help management understand the output of more traditional
CS and SQ measurement studies.
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Appendix A. Questionnaire
Coding Schema
(as per figures)
Statement Wording
Customer
Orientation
CDCC1
XYZ Bank effectively utilizes its human and product/service systems to gain long-term customer
commitment
CDCV2
XYZ Bank consistently offers products and services
that create customer value
CDMRDCN3 XYZ Bank engages in market research activities to
determine customer needs
CDDLVPS4 XYZ Bank uses customer information to deliver
products and services that are in line with customer requirements
CDMEASQ5 XYZ Bank systematically measures customer satisfaction
CDDELSQ6 XYZ Bank’s practices and procedures consistently
focus on delivering customer satisfaction
Competitor
Orientation
CDRESCA7 XYZ Bank is quick to respond to competitor activity
CDUNDCN8 XYZ Bank’s managers demonstrate a knowledge and
understanding of their competition
Interfunctional
Coordination
CDINFSH9 At XYZ Bank customer information is shared between relevant staff members
CDCORD10 There appears to be effective coordination between
XYZ Bank’s functional areas
CDFCV11
All XYZ Bank’s functional areas work together in
creating superior customer value
Customer
Satisfactiona
12.
D. Webb et al.
Service Quality
13. xyz uses the most up-to-date technology available
14. xyz facilities are in line with those provided by banking services
15. When an employee of xyz promises to do something by a
certain time, he/she does so
16. xyz employees are sympathetic and reassuring to customer
problems
17. xyz employees deal effectively with customer problems
18. xyz employees give prompt service
19. xyz employees are trustworthy
20. xyz employees are polite and considerate
21. xyz employees verbally communicate in a clear manner
22. xyz employees written communication is comprehensible
23. My dealings with the bank are treated confidentially
24. xyz employees demonstrate an understanding of my personal needs and requirements
25. The amount of information provided by xyz is in line with
my requirements
26. The information provided by xyz is accurate
27. xyz employees are easy to access
28. xyz employees have my best interests at heart
All items assessed using 7-point “1 5 strongly disagree” and “7 5 strongly agree” scale.
a
Smiles vary in width in original.
of a Customer-Defined Market Orientation
Dave Webb
UNIVERSITY OF WESTERN AUSTRALIA
Cynthia Webster
MISSISSIPPI STATE UNIVERSITY
Areti Krepapa
CARDIFF BUSINESS SCHOOL
To date the marketing literature has failed to substantiate the linkage
between market orientation and customer satisfaction. This is surprising
particularly when considering the attention that has been given to the
implementation of the marketing concept in recent years. Furthermore,
market orientation is not yet commonly positioned as a customer-defined
organization state, despite the literature strongly promoting the importance
of customer perceptions when determining extent of organization success.
The exploratory research reported here supports the customer-defined
position and seeks to redress this gap in the context of the services industry.
An analysis of customer perceptions of market orientation suggests that
a reduced and amended version of a well-known market orientation
measurement instrument can meaningfully be applied to customers, and
that a strong relationship exists between customer-defined market orientation and both service quality and customer satisfaction. The discussion of
findings is facilitated through the adoption of an amended satisfaction/
dissatisfaction motivation theory model. In addition, areas for further
research are proposed. J BUSN RES 2000. 48.101–112. 2000 Elsevier Science Inc. All rights reserved.
T
he key to a firm’s economic success is developing a sustainable competitive advantage (SCA) (Porter, 1985),
and the key to developing a competitive advantage is
consistently creating superior value for customers (Slater and
Narver, 1992; Narver, Slater, and Tietje, 1998). The marketing
literature suggests that a necessary prerequisite to achieving
a competitive advantage and providing superior value for customers is the development of a market orientation (e.g., Kohli
and Jaworski, 1990; Narver and Slater, 1990; Pitt, Caruana,
and Berthon, 1996). However, past research has almost exclu-
Address correspondence to C. Webster, Mississippi State University, Department of Marketing, Box 9582, Mississippi State, MS 39762. Fax: 601-3257012; E-mail: cwebster@cobilan.msstate.edu
Journal of Business Research 48, 101–112 (2000)
2000 Elsevier Science Inc. All rights reserved.
655 Avenue of the Americas, New York, NY 10010
sively considered a market orientation as an “employee-perceived phenomenon,” and as a result, subsequent studies pertaining to a firm’s market orientation generally have been
based on employee self-reports.
Although Drucker’s (Drucker, 1954) comment that marketing is not a specialized activity, but rather “the whole business
seen from the customer’s point of view,” was made over four
decades ago, only recently has a customer-defined market
orientation position been proposed. Adopting a customercentered view of market orientation, Deshpande´, Farley, and
Webster (1993) used the term “customer orientation” synonymously with “market orientation” to argue that the evaluation
of a firm’s level of customer-orientation should come from
customers rather than the company itself. They emphasize that
it is the customers’—as opposed to the sellers’—perceptions of
the level to which a firm is customer oriented that will be
the critical measure of business performance. Indeed, their
empirical rejection of the hypothesis stating that marketer selfreported customer orientation is related positively to business
performance, and their acceptance of the hypothesis stating
that customer self-reported customer orientation is related
positively to business performance adds further testimony
to the importance of a customer-defined market orientation.
Furthermore, in a contrasting model assessment incorporating
three market orientation measurement instruments (i.e., those
advanced by Kohli and Jaworski, 1990; Narver and Slater,
1990 and Deshpande´, Farley, and Webster, 1993), a factor
analysis resulted in a synthesized 10-item marketing orientation scale (Deshpande´, Farley, and Webster, 1993). The authors note that the 10 items seem to have intuitive integrity
because they all regard a customer-focused notion of market
orientation.
Thus, drawing on Drucker’s (Drucker, 1954) comment and
Deshpande´ and colleagues’ (Deshpande´, Farley, and Webster,
ISSN 0148-2963/00/$–see front matter
PII S0148-2963(98)00114-3
102
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2000:48:101–112
1993; Deshpande´ and Farley, 1998) research, it seems not only
intuitively logical but also necessary to view market orientation
from a customer vantage. This view appears even more compelling in cases where organization “perceptions of reality”
are out of sync with those of its customers (Deshpande´, Farley,
and Webster, 1993). In such cases, defining and evaluating
market orientation from an employee vantage appears even
more tenuous.
The research reported here advances the customer-defined
position and argues that the adoption of the employee-defined
view of market orientation is one-sided and myopic in that
it ignores the vital role of customers in terms of value recognition. We suggest that an organization can be described as
market-oriented only when the firm’s total product offer is
both recognized and described by customers in value terms.
In other words, a firm can be accurately labeled as “marketoriented” only when customers perceive it as such and when
they perceive that the firm offers considerable value to them.
We advance therefore that market orientation, as an organization state, is not wholly definable by employees, and that
beneficial strategic insights can be gained by firms when they
view market orientation from a customer vantage.
In addition, acceptance of the proposed relationship between market orientation and customer satisfaction is more
appealing where both constructs are measured from a customer vantage. In other words, if consumers view a firm as
being highly market oriented, they are more likely to have a
high level of satisfaction with that particular firm. While the
explication of the market orientation and customer satisfaction
relationship may first appear somewhat tautological, it is important to note that the relationship has not been empirically
investigated. If market orientation is a form of organization
culture (as proposed by Narver and Slater, 1990; Deshpande´,
Farley, and Webster, 1993; Day, 1994; and Narver, Slater, and
Tietje, 1998), then we forward that the empirical validation of
its proposed linkage to customer satisfaction deserves explicit
consideration. Should a positive relationship result, rationalizing the necessity for the development of a market-oriented
culture would become all the more palatable for organizations.
Given the considerable extent to which customer satisfaction
is discussed as a key strategic issue in the business literature,
it is surprising to find that no empirical study has yet explicitly
examined the relationship between customer-defined market
orientation (CDMO) and customer satisfaction. The current
study adds to the existing literature in several ways. First, the
market orientation and organization outcome framework is
extended by offering a conceptual model in which CDMO is
positioned both as an antecedent of service quality (SQ) and
customer satisfaction (CS). Second, a market orientation scale
is modified to accommodate a customer-defined position.
Third, the validity and reliabilty of a number of competing
customer-defined market orientation models are examined.
And fourth, the relationships between a CDMO and both CS
and SQ are investigated.
We begin by reviewing the literature on the conceptualiza-
D. Webb et al.
tion and implementation of the marketing concept and the
linkages among market orientation, service quality, and outcomes (performance and customer satisfaction).
Literature Review
Implementation of the Marketing Concept
For decades, the marketing concept has been heralded by
marketing academicians and practitioners to the extent that
its acceptance as the optimal marketing management philosophy has been almost universal (Houston, 1986). However,
many have expressed concern about the implementation of
the marketing concept, declaring it is not a practical basis for
managing a business (e.g., Kotler, 1991; Day, 1994).
Perhaps the difficulty associated with the practice of the
marketing concept stems from a lack of consensus regarding
its meaning, what it means to implement the concept, and
the term to describe the latter. In general, the meaning and
implementation of the marketing concept has been referred
to as being “customer oriented,” “market driven,” “market
oriented,” and “marketing oriented.”
The terms “market driven” and “customer oriented” are
considered as interchangeable concepts by Shapiro (1988).
Moreover, he emphasizes that for a company to be considered
market driven or customer oriented, three characteristics must
be evident. First, information on salient buying influences
must permeate each corporate function. Second, strategic and
tactical decisions must be made interfunctionally and interdivisionally. And third, divisions and functional units must make
coordinated decisions and execute them with a sense of commitment.
The terms “market driven” and “market oriented” are viewed
synonymously by Slater and Narver (1992, 1994). They propose that these two terms refer to the development and maintenance of an organization culture that most effectively and
efficiently creates superior value for consumers and continuous, superior performance for the firm. They propose further
that a market orientation consists of three key dimensions: a
customer orientation, a competitor orientation, and interfunctional coordination (coordinated utilization of company resources in creating superior value for target customers).
On the other hand, market driven and market oriented are
viewed as different constructs by other authors. For example,
Day (1994) applies the term “market driven” to firms that
maintain close contact with their customers, more specifically
arguing that such firms are superior in their market-sensing
and customer-linking capabilities. Shapiro (1988) views being
“market oriented” in a more comprehensive manner and posits
that it represents a set of processes touching on all aspects of
the company. He emphasizes that a market orientation is
much more than “getting close to the customer.” Similarly,
Kohli and Jaworski (1990) argue that a market orientation is an
overall organizational value system, one that provides strong
norms for the generation, dissemination, and responsiveness
to intelligence.
Customer-Defined Market Orientation
The terms “market orientation” and “customer orientation”
are perceived to be synonymous by Deshpande´, Farley, and
Webster (1993). Dissimilar to the view mentioned earlier,
these authors distinguish a market orientation from a competitor orientation, arguing that it can be antithetical to a customer
orientation when the focus is on the strengths of the competitor rather than on the unmet needs of the customer. Furthermore, they position customer orientation as part of an overall
fundamental corporate culture.
Although the terms “market orientation” and “marketing
orientation” have been used interchangeably in the literature,
the former term is considered to be the better descriptor for
three reasons (Kohli and Jaworski, 1990). First, the term
implies that the construct is not exclusively a concern of
the marketing function; whereas, “marketing orientation” is
restrictive and misleading in this respect (Shapiro, 1988).
Second, the term “market orientation” is less politically
charged because it does not overemphasize the importance
of the marketing function in the organization. And third, the
label focuses on markets, which include customers and the
forces affecting them. This is consistent with the broader
“management of markets” orientation proposed by Park and
Zaltman (1987) and the “competitor orientation” dimension
proposed by Narver and Slater (1990).
In summary, the conceptualized dimensions of customer
orientation, competitor orientation, and interfunctional coordination (Narver and Slater, 1990), share a similar nomological network with the dimensions of intelligence generation,
intelligence dissemination, and responsiveness (Kohli and
Jaworski, 1995). However, though similarities in definition,
content, and operationalization are evident, consensus with
respect to the importance and positioning of “information,”
“value,” and “competitors” has yet to be reached.
Market Orientation and
Performance Assessment
A modest but growing body of empirical evidence from both
the United States (e.g., Narver and Slater, 1990; Deshpande´,
Farley, and Webster, 1993; Slater and Narver, 1994; Deshpande´ and Farley, 1998) and Europe (e.g., Pitt, Caruana,
and Berthon, 1996) supports the proposition that market
orientation is positively associated with superior performance.
More specifically, Narver and Slater (1990) position market
orientation as an important determinant of profitability. These
authors suggest that superior business performance is the
result of superior skills in understanding and satisfying customers, thereby emphasizing further the importance of measuring market orientation from a customer vantage.
Market Orientation, Customer
Satisfaction, and Service Quality
Although an empirical linkage among these constructs has yet
to be substantiated, the literature suggests a linkage through
the concept of value. In the market orientation literature, value
J Busn Res
2000:48:101–112
103
provision is positioned as a central organizational objective
(e.g., Kohli and Jaworski, 1990; Narver and Slater, 1990;
Narver, Slater, and Tietje, 1998). There are three equally
important prerequisites for the creation of superior customer
value. The first two, information acquisition and information
dissemination, focus on understanding what consumers value.
These intelligence-related prerequisites overlap with both customer and competitor orientations. The third prerequisite,
organization-wide responsiveness, involves coordinating across
the firm’s departmental boundaries those activities necessary
to deliver superior value (Siguaw, Brown, and Widing, 1994).
This dimension overlaps with Narver and Slater’s “interfunctional coordination (Narver and Slater, 1990).”
Within the CS literature, the importance of value creation
in satisfying customers also has been recognized. Woodruff,
Schumann, and Gardial (1993) explicate the sentiments of
other researchers (e.g. Morganosky, 1988; Spreng, Dixon, and
Olshavsky, 1993; Heskett, Jones, Loveman, and Schlessinger,
1994) in stating that “by being responsive to customer’s needs,
customer value delivery strategies are instrumental in building
strong customer satisfaction.” Thus, a linkage is hypothesized
between market orientation, which focuses on the production
and provision of value-satisfying activities and the customers’
level of satisfaction. Hence,
H1: The greater the level of customer-defined market orientation, the greater the level of CS.
It is important to distinguish between market orientation
as a type of organization culture and its consequences (the
customer’s evaluation set). For example, in customers’ interactions with a service firm, they are positioned in the relationship
such that they are able to form opinions about the service
quality received and consequently construct cognitive evaluations about the organization’s level of delivered service. Thus,
we suggest that the level of service provided is guided by the
fundamental culture of the providing firm. In this sense, service received reflects a consequence of market orientation.
Hence we propose that:
H2: The greater the level of customer-defined market orientation, the greater the level of perceived service
quality.
Following Taylor and Baker (1994), we propose that CS
and SQ are not only outcomes of a firm’s market orientation
but also mediator constructs in a broader organization performance framework (see Figure 1).
Market orientation has mostly been treated as a summary
measure representing the extent to which employees perceive
their firm to be market oriented (Kohli and Jaworski, 1990;
Narver and Slater, 1990). In the current study, the treatment
of market orientation is more in line with Deshpande´ and
colleagues’ (Deshpande´, Farley, and Webster, 1993) suggestion that market orientation be customer defined. Thus for this
study, we adopt the following working definition of market
orientation:
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2000:48:101–112
Figure 1. Market orientation performance relationship. Study focus
(area with dotted line). Abbreviations: MO 5 market orientation;
CS 5 customer satisfaction; SQ 5 service quality.
Market orientation reflects customer attitudes regarding the
extent to which a firm’s customer orientation, competitor
orientation, and interfunctional coordination represents its
total value offering.
To maximize the ability of customers to respond to the
market orientation items included in this study, the adoption
of an amended version of the Narver and Slater (1990) measurement instrument was deemed appropriate. Hence, this
study tests the proposition that:
P1: An amended version of the market orientation instrument developed by Narver and Slater (1990) maintains
its psychometric properties of validity and reliability
when considered from a customer vantage.
Methodology
To explore the aforementioned hypotheses and proposition,
a study to examine market orientation in a business to business
banking context was conducted. A cross-sectional, self-administered survey (Appendix A) was mailed to the main contact
person in each of all the client firms of a single corporate
bank (n 5 119). Each client represented a separate organization with which the bank had a direct business relationship.
Following the dispatch of a reminder notice, 78 questionnaires
were returned (65% response rate) of which 77 were considered usable.
Subjects were asked to respond to a series of 28 item
statements. The first 11, representing market orientation, were
measured with a scale ranging from 1, “strongly disagree” to
7, “strongly agree.” The original market orientation instrument
(Narver and Slater, 1990) consists of 15 items; in this study,
however, only 11 of the original items were considered to be
relevant to the corporate banking context. To ensure that the
administered questionnaire was meaningful and consistent
with the content of the original instrument, minor phraseology
changes were made. In spite of the amendments, each of the
three market orientation dimensions proposed by Narver and
Slater (1990) was deemed adequately covered in both content
D. Webb et al.
and structure. Hence, the modified instrument was considered
a structurally sound, content-valid replication of the original.
Given recent thinking concerning confused aggregated satisfaction data distribution functions (Estelami and De Maeyer,
1997), and the exclusion of any cognitive comparative component in this study, customer satisfaction was measured using
a seven-point visual representation scale thereby emphasizing
the affective nature of the construct (Anderson and Narvus,
1990). The measurement of customer satisfaction at the overall
level is also consistent with Nunnally’s (Nunnally, 1978) suggestion that unidimensional measures are appropriate when
the issue to be measured is measurable at the single attribute
level.
Completing the main body of the questionnaire, service
quality was assessed by aggregating a number of items from
the original 22-item SERVQUAL instrument (Parasuraman,
Zeithaml, and Berry, 1988). Consistent with Parasuraman and
colleagues’ suggestion that items be determined in-line with
the objectives of each study, a total of 16 items measured on
a 1 (“strongly disagree”) to 7 (“strongly agree”) scale were
included. The appropriateness of the wording of each item
in the instrument was confirmed with the bank’s management
team prior to the dispatch of the survey instrument.
Results
Validity Assessment
Analysis commenced with an assessment of the market orientation scale for unidimensionality and internal consistency.
Confirmatory factor analysis was used to test three competing
positions advocated in the literature.
The first position, replicating a first-order single factor
representation of the data, assesses the unidimensional validity
and reliability of an adapted version of the original Narver
and Slater (1990) market orientation measurement instrument. Thus, the first position examines the proposition stated
earlier.
The second position, replicating a first-order two-factor
structure of the data, recognizes the similarity drawn between
a combined customer-competitor representation and the
“management of markets” position advanced by Park and
Zaltman (1987). Thus:
P2: Customer orientation and competitor orientation are
indicative of one dimension representing information
and acquisition activities, and interfunctional coordination is representative of a separate dimension corresponding to managerial action in the creation of value.
And finally, the third position (Figure 2) tests the validity
of a three-dimensional representation of market orientation
(Narver and Slater, 1990) and proposes that:
P3: The market orientation components (customer orientation, competitor orientation, and interfunctional coordination) are discrete constructs.
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105
Figure 2. Three factor structure for model 3. EQS summary statistics: method 5 ML; x2 5 74.06; df 5 41; p value 5 0.0012; BBNFI 5
0.874; BBNNFI 5 0.916; CFI 5 0.938. Abbreviations: asterisks indicate significant result at ,0.05 level. CompOrn 5 competitive orientation;
CusOrn 5 customer orientation; FCoord 5 interfunctional coordination. For coding schema see Appendix A.
Chi-square was used to test the null hypothesis that each
of the positions (hereinafter referenced as models, that is,
position 1 5 model 1 [M1], etc.) reproduce the population
covariance matrix of the included observed variables. By convention, an acceptable model is one where the p-value is
greater than or equal to 0.05 (Bagozzi and Foxall, 1996). In
addition to the chi-square test and its associated p-values, the
comparative fit index (CFI) is reported as a test of model fit.
Bentler (1990) suggests that CFI values of above 0.95 indicate
a good overall fit, while values of between 0.90 and 0.95
suggest adequate fit. The analysis reveals that each of the
models demonstrate to some extent unsatisfactory results with
chi-square and p-values below the desired level in all cases
(M1 2 M2) and unacceptable to low goodness-of-fit (CFI)
values for models 1 (M1) and 2 (M2), respectively. Consequently, M1 and M2 are not presented within the text; however,
associated results are documented in Table 1.
In summary, the goodness-of-fit indexes for the 2 and 3
factor representations reveal an improved model fit for these
models over the single factor representation with CFI values
falling in the Bentler (1990) proposed “adequate fit” band
(Table 1, M2 and M3 CFI values . 0.90). As stated previously,
however, chi-square values and their associated p-values reveal
a degree of model misspecification.
A technique of partial disaggregation is used to minimize
the effect that low sample size to parameter estimate ratios
has on the calculation of the chi-square statistic. Partial disaggregation involves the formation of indices by summing ranTable 1. Goodness-of-Fit Indicators
Model
M1
M2
M3
M4
M5
x2
df
CDMO
x2-Ratio
p-Value
CFI
119.69
94.46
74.06
20.66
16.19
44
43
41
13
17
2.70
2.20
1.81
1.59
0.95
0.000
0.000
0.000
0.080
0.510
0.84
0.90
0.94
0.98
1.00
CFI, comparative fit index (Bentler, 1990.)
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D. Webb et al.
Figure 3. Two factor partial disaggregation structure (model 4). EQS summary statistics: method 5 ML; x2 5 20.66; df 5 13; p value 5
0.0799; BBNFI 5 0.951; BBNNFI 5 0.969; CFI 5 0.981. Abbreviations: asterisks indicate significant result at ,0.05 level. CCorn 5
customer and competitor orientation combined; FCoord 5 interfunctional coordination. CC1 2 4 5 Random combination of customer and
competitive orientation items.
dom items within each construct to form pairs or clusters of
composite indicators (Bagozzi and Foxall, 1996). Items were
selected on the basis of the magnitude of the factor loadings
in each model.
In total, two models incorporating the partially disaggregated sets of items were assessed. Model 4 (Figure 3) depicts
a first-order two-factor structure with items 1 to 8 paired
(CC1 2 CC4) as indicators of one latent factor (labeled
“CCorn”, customer and competitor orientation), and items 9
to 11 as indicators of a second latent factor (labeled “FCoord”,
interfunctional coordination). Model 5 (Figure 4), depicting
a first-order three-factor structure, includes customer orientation (CusOrn), competitor orientation (CompOrn), and interfunctional coordination (FCoord) as independent latent factors. Indicators are identical to those explored in Model 3
(Figure 2), with the exception of “CusOrn” where items 1 to
6 are paired to create a set of three indicators (CusOrn 1 to
3). Models 4 (Figure 3) and 5 (Figure 4) thus replicate models
2 and 3 in composition.
Chi-square test statistics reveal an excellent model fit in
each case with x2, p-value, and CFI indexes of the desired
magnitude (model 4: 2 x2 5 20.66, df 5 13, p 5 0.07,
CFI 5 0.98; model 5: 2 x2 5 16.19, df 5 17, p 5 0.51,
CFI 5 1.00).
Comparing the results, the three-factor solution for model 5
(Figure 4) appears to represent the model of best fit. Lagrange
multiplier (LM) and multivariate Wald (W) tests revealed that
no further changes to the parameterization of the model’s
structure would yield a significant improvement in x2 values.
Thus, model 5 was accepted as representative of the structure
of market orientation.
Convergent and Discriminant Validity
Convergent and discriminant validity were evaluated by calculating the average variance extracted (AVE) for each factor.
Convergent validity is established if the shared variance accounts for 0.50 or more of the total variance. Discriminant
validity is evident when the AVE for each construct is greater
than the squared correlation between that construct and any
other construct in the model (Fornell and Larcker, 1981).
The results presented in Table 2 confirm both the convergent and discriminant validity of model 5.
Internal Consistency
Internal consistency was assessed by means of the Cronbach’s
alpha coefficient. Values were calculated for each of the three
factors included in model 5. The results presented in Table
Customer-Defined Market Orientation
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107
Figure 4. Three factor partial disaggregation structure (model 5). EQS summary statistics: method 5 ML; x2 5 16.19; df 5 17; p value 5
0.5107; BBNFI 5 0.964; BBNNFI 5 1.003; CFI 5 1.000. Asterisks signify significant result at ,0.05 level. CompOrn 5 competitive
orientation; CusOrn 1–3 5 diassagregated customer orientation items; FCoord 5 interfunctional coordination. For coding schema See
Appendix A.
2 attest to the high internal consistency of the instrument in
that all values are above the suggested 0.70 level for scale
robustness (Nunnally, 1978).
The results presented in the above sections offer support
for the psychometric soundness of the CDMO measurement
instrument at a three-factor level. Propositions 1 and 2, which
explore the structure of market orientation at the single and
two factor levels are rejected. However, proposition 3, which
stated that “the market orientation components of customer
orientation, competitor orientation, and interfunctional coor-
dination are discrete constructs,” is accepted. On the evidence
of the above results we concur with Narver and Slater (1990)
that the structure of market orientation is best represented
by three unique dimensions, that is, customer orientation,
competitor orientation, and interfunctional coordination.
Hypotheses Testing
Hypotheses 1 and 2 state that there will be a significant positive
relationship between market orientation and both CS and SQ.
Recognizing the three-factor structure of market orientation,
Table 2. Reliability and Validity Assessment (Model 5)
CusOrn
M5
Rel
Ave
CompOrn
Rel
Ave
Rel
Ave
(Corr)2
Conv
Disc
0.90
0.80
0.71
0.84
0.70
0.53, 0.40, 0.70
Yes
Yes
0.70
FCoord
Abbreviations: CusOrn 5 customer orientation; CompOrn 5 competitor orientation; FCoord 5 interfunctional coordination; Rel 5 Cronbach alpha coefficient; AVE 5 average
variance extracted 5 S of standard loading2 / S of standard loading2 1 S of ej; Conv. 5 convergent validity (AVE . 0.50); Disc. 5 discriminant validity 5 AVE/(Corr)2 . 1;
(Corr)2 5 highest (Corr)2 between factors of interest and remaining factors.
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D. Webb et al.
Discussion and Implications
Figure 5. Hypothesized relationships between market orientation,
customer satisfaction (CS), and service quality (SQ). Abbreviations:
CompOrn 5 competitive orientation; CusOrn 5 customer orientation; FCoord 5 interfunctional coordination.
H1 and H2 are henceforth expanded to reveal a number of subhypotheses (Figure 5). H1a and H2a explore the relationships
between customer orientation (CusOrn) and both CS and SQ;
H1b and H2b explore the relationships between competitor
orientation (CompOrn) and CS and SQ; and H1c and H2c the
relationships between interfunctional coordination (FCoord)
and CS and SQ. The magnitude of the significant positive
correlation coefficients shown in Table 3 offers strong support
for all of these hypotheses.
To provide a more comprehensive representation of the
relationships exhibited among the constructs in Figure 5, a
simple path model was analyzed using the EQS structural
equation software package (Bentler, 1990).
The nature of the relationship between the market orientation dimensions and both CS and SQ is depicted in structural
form by the full-standardized solution (Figure 6). The model
fit results (x2 5 17.73, p-value 5 0.12, CFI 5 0.99), together
with the standardized path coefficients provide further testimony of the strong positive and direct relationship between
market orientation and both CS and SQ.
Since market orientation, as an overall organizational value
provision system, influences the behavioral norms that shape
the organization’s attributes and delivery behavior, the considerable impact of market orientation on both service quality
(SQ) and customer satisfaction (CS) is logical. The results
presented in Figure 6 attest to the significance of each of
the dimensions of market orientation (customer orientation,
competitor orientation, and interfunctional coordination) as
CS and SQ antecedents. The results revealed here show a
similar ordering of standardized coefficients between the three
market orientation dimensions and CS and SQ. The strongest
coefficients are evident between competitive orientation
(CompOrn) and CS (0.39) and SQ (0.37), respectively.
At a cursory glance, the relatively strong relationships evidenced between a competitive orientation and both CS and
SQ may lead a service firm’s management to think that it is
more beneficial to focus on the competition than it is on the
customer orientation (CusOrn) or interfunctional coordination (FCoord) delivery components. An extension to Herzberg
and colleagues’ (Herzberg, Mausner, and Snyderman, 1959)
dual factor needs-satisfaction theory can be applied here to
help understand the findings of this study and to compose a
management response agenda incorporating the three market
orientation dimensions.
On the basis of past research findings using the critical
incident technique, Herzberg and colleagues’ (Herzberg,
Mausner, and Snyderman, 1959) proposed the dual factor
theory to understand better the causes of both satisfaction
and dissatisfaction in the workplace. Two sets of factors were
revealed, one explaining instances of dissatisfaction, and the
other, instances of satisfaction. The former set, referred to as
“hygiene” factors, relates to attributes which are expected in
the normal course of service delivery (e.g., reliable, prompt,
courteous, etc.). From this perspective, hygiene factors are
not considered strong predictors of satisfaction, though their
absence can result in dissatisfaction. The latter set, referred
to as “satisfiers” or “motivators,” pertains to attributes that
contribute positively to the fulfillment of customer higher
order needs. Positive performance, which causes pleasant surprise and/or delight, is applicable here. Thus “satisfiers” please
by their presence, but do not dissatisfy by their absence. In
essence therefore, Herzberg and colleagues (Herzberg, Mausner,
Table 3. Correlation Matrix — Variables in Figure 2
SATN
OVQUAL
FCoord
CompOrn
CusOrn
SATN
OVQUAL
FCoord
CompOrn
CusOrn
1.000
0.558
0.617
0.721
0.727
1.000
0.618
0.651
0.699
1.000
0.509
0.726
1.000
0.636
1.000
n 5 77; all correlations significant at p 5 , 0.001.
Customer-Defined Market Orientation
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109
Figure 6. Path analysis. EQS summary statistics: method 5 ML; x2 5 17.73; df 5 12; p value 5 0.1242; BBNFI 5 0.962; BBNNFI 5
0.969; CFI 5 0.987. Abbreviations: Asterisks indicate significant result at ,0.05 level. CompOrn 5 competitive orientation; CusOrn 5
customer orientation; FCoord 5 interfunctional coordination.
and Snyderman, 1959) have argued that satisfaction results
from the attainment of a “motivator” need and dissatisfaction,
the frustration of a “hygiene” need (Oliver, 1997). While providing an important framework to understand the needs-satisfaction relationship, fault has been found with the above dual
factor theory. For example, one criticism focusing on the
potential limitations of a two-factor model to explain the
needs-satisfaction relationship has been considered by Oliver
(1997). Here, Oliver extends the two-factor framework to
include a third factor, which is comprised of attributes that
have the ability to both satisfy when present and dissatisfy
when absent. This group is labeled “bivalent satisfiers.” Adopting the language of “valency,” the other two factors in the
framework are likewise relabeled. Thus, “hygiene” factors become “monovalent dissatisfiers,” and “satisfiers” or “motivators” become “monovalent satisfiers.”
We now apply this mono and bivalent satisfier/dissatisfier
conceptualization to help interpret the findings of the current
study. We expected to find the highest path coefficient between customer orientation and customer satisfaction (0.31,
Figure 6). However this was not the case as demonstrated by
the magnitude of the path coefficient between competitive
orientation and CS (0.39). How can this, as well as the other
relationships depicted in the market orientation-CS framework, be explained?
A close examination of the interfunctional coordination
attributes indicates that they contain properties similar to
those of the monovalent dissatisfiers; that is, they are essential
service organization elements and do not contribute to satisfaction by their presence but contribute to dissatisfaction by
their absence. Thus, they can be considered “hygiene” factors.
The relatively low path coefficient witnessed between this
dimension and both SQ (0.27), and CS (0.25) attests to this
logic.
A stronger relationship (0.31) exists between the dimension
of customer orientation and CS. Here, an examination of the
customer orientation attributes suggests that they are comprised of bivalent satisfiers; that is, they are the likely cause
of both client satisfaction and dissatisfaction. For example,
either satisfaction or dissatisfaction can be interpreted when
selecting the item with the highest factor loading for this
dimension (the item that pertains to the firm engaging in
information acquisition [market research] activities to determine customer needs—factor loading 0.84). When market
research is conducted to ascertain customer needs, the service
firm’s customers may feel empowered, given that the product/
service supplied has been directed to meet their specific requirements. Thus they may feel more satisfied. Where the
converse is true, that is, no market research is executed, the
customers may feel that the relationship between themselves
and the firm is unidirectional in the firm’s favor and thus feel
dissatisfied.
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The strongest path coefficient evidenced in the model is
between competitive orientation and CS (0.39). The competitive orientation attributes provide an example of Oliver’s (Oliver, 1997) monovalent satisfiers; that is, they can motivate
and satisfy by their presence but not necessarily dissatisfy
by their absence. In the case of the service firm/customer
relationship described here, this appears particularly relevant
for two reasons. First, the service firm’s customers are somewhat committed in their relationship with the firm. Therefore,
to switch to an alternative service provider could result in
switching costs (financial, time, operational, etc.). Hence, an
action by the firm that is considered by the customers as
competitive in their favor is likely to intensify the customers’
level of relationship comfort thus their satisfaction with the
firm. Second, the competitiveness of the service firm is likely
to be displayed with the positive fulfillment of one or more
of the bivalent satisfier components of customer orientation.
Hence, the more the bank is perceived to be competitive, the
more likely it is that it will be perceived to be customeroriented. The strong significant positive correlation (0.64)
evident between these dimensions attests to this assertion.
An indication as to how management can gain direction
from this study becomes evident when the findings are considered in conjunction with the competitive advantage concept.
For an organization to achieve a competitive advantage, it is
necessary to ascertain not only the key critical success factors
(CSFs) driving the industry but furthermore the performance
ability of competitors with respect to these factors. Having
assessed all of these factors, superior performance against the
appropriate “deliverables” corresponding to these CSFs can
be designed into the organization’s portfolio. In this way, both
the competitor- and customer-orientation components are
considered. Finally, to ensure the effective delivery of the
firm’s offerings, the necessary implementation infrastructure,
that is, one which complies with the need for a coordinated
organizational effort towards the creation and provision of
value, needs to be in place. Such arrangements include the
formation of alliances between functional units in an organization, and likewise, the formation of alliances between organization units in a corporation (Anderson and Narvus, 1990).
On the basis of the evidenced relationships, some support
for the notion that management may be able to influence CS
and SQ by adopting and implementing a market-oriented
culture is offered. Furthermore, since we argue in this article
that market orientation is a customer-defined state, customer
evaluations of the level of market orientation exhibited by
an organization may similarly serve as good indicators of
management’s ability to implement such an orientation within
the firm.
This study has provided preliminary insight into the market
orientation, SQ, and CS relationship. Methodologically, further empirical research is needed to confirm the dimensionality and structure of the CDMO construct and to explore the
D. Webb et al.
applicability of the proposed CDMO measurement instrument
across a broader range of service and goods-producing firms.
Support has been offered for the linkage between market
orientation, which focuses on the production and provision
of value satisfying activities, and the customer’s level of satisfaction, which includes an appraisal of value received. Future
research is needed to develop and explicitly include a measure
of value in the market orientation framework. Thus far, very
little attention has been given to ascertaining and understanding the importance, nature, dimensionality, and structure of
the value construct.
In developing a more extensive framework, a model that
incorporates the consequences of both CS and SQ, that is,
loyalty and objective measures of organization performance, will
also provide timely and important contributions to marketing
knowledge. Studies that examine the depicted relationships
in other countries also will extend our knowledge concerning
the cultural and contextual antecedents and consequences of
the market-orientation framework.
Working with larger sample sizes could perhaps alleviate
problems with respect to model parameter estimation. Finally,
it is suggested that the valency needs-satisfaction framework
applied in this study may prove a useful interpretive tool to
help management understand the output of more traditional
CS and SQ measurement studies.
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Appendix A. Questionnaire
Coding Schema
(as per figures)
Statement Wording
Customer
Orientation
CDCC1
XYZ Bank effectively utilizes its human and product/service systems to gain long-term customer
commitment
CDCV2
XYZ Bank consistently offers products and services
that create customer value
CDMRDCN3 XYZ Bank engages in market research activities to
determine customer needs
CDDLVPS4 XYZ Bank uses customer information to deliver
products and services that are in line with customer requirements
CDMEASQ5 XYZ Bank systematically measures customer satisfaction
CDDELSQ6 XYZ Bank’s practices and procedures consistently
focus on delivering customer satisfaction
Competitor
Orientation
CDRESCA7 XYZ Bank is quick to respond to competitor activity
CDUNDCN8 XYZ Bank’s managers demonstrate a knowledge and
understanding of their competition
Interfunctional
Coordination
CDINFSH9 At XYZ Bank customer information is shared between relevant staff members
CDCORD10 There appears to be effective coordination between
XYZ Bank’s functional areas
CDFCV11
All XYZ Bank’s functional areas work together in
creating superior customer value
Customer
Satisfactiona
12.
D. Webb et al.
Service Quality
13. xyz uses the most up-to-date technology available
14. xyz facilities are in line with those provided by banking services
15. When an employee of xyz promises to do something by a
certain time, he/she does so
16. xyz employees are sympathetic and reassuring to customer
problems
17. xyz employees deal effectively with customer problems
18. xyz employees give prompt service
19. xyz employees are trustworthy
20. xyz employees are polite and considerate
21. xyz employees verbally communicate in a clear manner
22. xyz employees written communication is comprehensible
23. My dealings with the bank are treated confidentially
24. xyz employees demonstrate an understanding of my personal needs and requirements
25. The amount of information provided by xyz is in line with
my requirements
26. The information provided by xyz is accurate
27. xyz employees are easy to access
28. xyz employees have my best interests at heart
All items assessed using 7-point “1 5 strongly disagree” and “7 5 strongly agree” scale.
a
Smiles vary in width in original.