Who Are Customers, and Why Do They Matter?

Marketing exists to help organizations understand, reach, and deliver value to their customers. For this reason, the customer is considered the cornerstone of marketing.

With this in mind, what is likely to happen when an organization doesn’t understand or pay attention to what its customers want? What if an organization doesn’t even really understand who its customers are?

One of the world’s best-known brands, Coca-Cola, provides a high-profile example of misunderstanding customer “wants.”  In the following video, Roberto Goizueta—in his only on-camera interview on this topic—recounts the disastrous launch of New Coke in 1985 and describes the lessons the company learned. Goizueta was chairman, director, and chief executive officer of the Coca-Cola Company from August 1980 until his death in October 1997.

Focus on Customers: The “Marketing Orientation”

The purpose of marketing is to gain a balance between creating more value for customers against making profits for the organization. To achieve this, many firms have adopted a marketing philosophy or what is generally termed a “marketing orientation.”

A marketing orientation can be defined as focusing the organization on identifying and understanding the customers’ preferences in terms of needs and wants and delivering them more effectively and efficiently than their competitors.

Prior to the adoption of a marketing orientation, many organizations followed what was referred to as the “production philosophy.” This approach focused on improving the efficiency of production and distribution in order to reduce costs and deliver more affordable products—both were considered the source of competitive advantage.

Another philosophy that has been followed historically is the “selling concept.” This approach required organizations to aggressively focus on selling and promotion efforts as a way to stimulate demand and drive sales.

A marketing-driven approach, or marketing orientation, has consistently delivered superior results over these other philosophies. Adopting a marketing orientation is now widely accepted as delivering greater levels of customer satisfaction, profitability, and sustainability.

As an example, Toyota, with its strategy of manufacturing cars for different segments of populations around the world, maintains a balance between customer value and profitability. With the marketing philosophy in mind, it has replaced its original goal of 10% of the world’s market share with being “Number one in customer satisfaction,” as it believes its market share will follow the satisfaction it delivers to its customers.^[1]

The Problem of Misplaced Focus

Both historically and currently, many businesses do not follow the marketing orientation. In the past, companies such as Texas Instruments and Otis Elevator followed a production orientation, maintaining a primary focus on technology, innovation, and low production and distribution costs. Such companies assume that a technically superior or less expensive product sells itself. While this may be true in some cases, over time this approach leaves businesses particularly vulnerable to competitors who outpace them technologically or undercut their pricing. Without a sufficient focus on the customer’s needs and preferences, businesses can lose sight of what matters most in the exchange process.

Other companies, such as Amway, treat sales and marketing as essentially the same thing. This sales orientation assumes that a good salesperson has the capability to generate demand and sell anything regardless of the customer’s needs and the value provided in the exchange process. Often, this focus on selling and the promotion process effectively ignores the customer or views the customer as someone to be manipulated. Organizations with this orientation become vulnerable to competitors that do a better job of understanding and catering to what customers actually want.

Staying Close to the Customer

Insightful businesses acknowledge the importance of production and sales but realize that the following three-step process is most effective:

1. Continuously collect information about customers’ needs and competitors’ capabilities
2. Share the information across departments, including production and sales
3. Use the information to create a competitive advantage by increasing value for customers

Thanks to the Internet and other technological advances, today’s consumers have access to far more and far better information than ever before. They also have many more choices. To succeed in this environment, businesses must provide comparable levels of information to competitors, and they must deal with new competitors that are quicker, smarter, and open 24-7-365.

Organizations that employ marketing correctly know that keeping customers informed is easier if they maintain constant contact with the customer. This does not necessarily mean that they write or call regularly, although it could. Rather, it means a marketing organization knows a great deal about the characteristics, values, interests, and behaviors of its customers. It monitors how these factors change over time. It provides channels of information and communication to meet customers where they are and be accessible at any moment. Although the customer-oriented marketing process is not an exact science, there is sufficient evidence that marketers who do this well tend to succeed.

A prime guideline for marketing success is to establish customer satisfaction as a company’s number-one priority. This forces an organization to measure and pay attention to customers’ experiences purchasing and using its products. The drive to improve customer satisfaction typically results in improvements to products, processes, and relationship building. This approach helps organizations develop a marketing mentality that facilitates information gathering and maintains effective communication with the customers who are critical to growth, profitability, and success.

TERMS

• Customer: a person or organization who pays to consume a product or service; the customer has needs/wants that the business seeks to address
• Exchange process: the act of obtaining a desired object from someone by offering something of value in return
• Marketing orientation: an approach focused on identifying and understanding the customer’s needs and wants and addressing them more effectively/efficiently than one’s competitors
• Production orientation: an approach focused primarily on technology, innovation, and low production and distribution costs
• Sales orientation: an approach focused on selling a product and using promotion techniques to attain the highest sales possible, regardless of what a customer wants

Check Your Understanding

Answer the question(s) below to see how well you understand the topics covered in this outcome. This short quiz does not count toward your grade in the class, and you can retake it an unlimited number of times.

Use this quiz to check your understanding and decide whether to (1) study the previous section further or (2) move on to the next section.