Brand Orientation and Market Orientation

This paper explores the interaction between brand orientation and market orientation. Brand orientation is an inside-out, identity-driven approach that sees brands as a hub for an organization and its strategy. Similarly, market orientation is an outside-in, image-driven approach. Initially, brand orientation and market orientation appear to be two different strategic options. Though synergistic combinations are also possible, they are not explored in previous theories, nor labeled as part of branding practice and philosophy. A new type of orientation, a hybrid between brand and marketing orientation, is among the key ?

 The paper articulates typical trajectories for evolving the orientation and aspires to move the discussion from the tug-of-war between the two paradigms by developing a more dynamic view. The study paves the way for better understanding, operationalization and evaluation of alternative approaches to marketing. © 2011 Elsevier Inc. All rights reserved. Article history: Received 1 October 2010 Received in revised form 1 March 2011 Accepted 1 April 2011 Available online xxxx Keywords: Brand orientation Market orientation Strategic orientations Synergy

1. Introduction The discussion about market orientation and brand orientation is in essence concerned with a company’s or organization’s approach to brands and the market. Is it the brand identity or the brand image that serves as a guiding light? Should a company’s management primarily take the outside-in perspective or the inside-out perspective when guiding their brands? Or should they select a brand approach that is a combination of these two perspectives? How can management square the general principle that the customer is king with the speci?

Belief that our brands are our greatest assets? 1. 1. The brand and the business In 1989, Nestle acquired the British confectionery company Rowntree for 4. 5 billion USD, which was six times its book value and twenty-six times its annual pro? t. The ? xed assets were 600 million USD, and Nestle paid 3. 9 billion USD for what were described as ‘other values’. Their head of marketing commented in an earlier research study: “How much are brands such as Kit Kat, After Eight, Lion, Polo, and Smarties worth? Brands, brand management, sectors, segments ?

The authors thank the participants in the Sixth Thought Leaders in Brand Management Conference for many interesting suggestions and gratefully acknowledge the helpful comments of the three anonymous Journal of Business Research reviewers. ? Corresponding author at: Department of Business Administration, Box 7080, SE 220 07 Lund, Sweden. E-mail addresses: mats. [email protected] lu. se (M. Urde), [email protected] net (C. Baumgarth), bill. [email protected]? th. edu. au (B. Merrilees). 0148-2963/$ – see front matter © 2011 Elsevier Inc. All rights reserved. doi:10. 1016/j. jbusres. 2011.

07. 018 are equities valued differently from one ? rm to another… The value becomes a strategic value” (Urde, 1997, p. 12). The Rowntree case is a prominent example, acting as a milestone in the way marketers view, consider and work with brands as strategic resources, a fundamental characteristic of the brand orientation approach. A senior vice president at Nestle remarked in the same study upon the difference between market orientation and the proposed de? nition of brand orientation: “Market orientation is on a more uncomplicated, short-term, and fundamental level.

If an organization is only market oriented, then it’s still in the discussion about products and markets. Brand orientation is an additional degree of sophistication. To be brand oriented is market orientation ‘plus’. ” (Urde, 1999, p. 118). Has the understanding of brands, the role of brands, and the management of brands fundamentally changed, or are these examples just anomalies: that is, rare exceptions to the rule that can be disregarded? Kuhn (1962, 1977), discussing paradigm shifts, describes a change of practice, the theoretical applications and the set of fundamental rules that de?

ne an area or discipline. In a narrow sense, identifying a shift in a paradigm is about ideas expressed in textbooks, while in a broader sense, it can be viewed as what is seen as the theoretical foundation of a given area. It is now vital to backtrack for further re? ection on developments within the area of strategic brand management. For example, if an older edition of a marketing textbook by Kotler were to be compared with a more recent edition of a reader on strategic brand management by Kapferer, what conclusions could be drawn?

If attention is paid to ‘new‘ concepts such as identity, brand equity, core values, corporate branding, internal branding, employer Please cite this article as: Urde M, et al, Brand orientation and market orientation — From alternatives to synergy, J Bus Res (2011), doi:10. 1016/j. jbusres. 2011. 07. 018 2 M. Urde et al. / Journal of Business Research xxx (2011) xxx–xxx branding, brand leadership, and reputation, how has theory evolved? And, how do ? rms manage brands in a practical sense? How are the manager’s approach and mindset evolving, with respect to brands, markets and customers?

2. A tug-of-war between brand orientation and market orientation? Satisfaction of customer needs and wants: this is what the principle of market orientation very successfully maintains. However, when that becomes a mantra, the brand may morph into an unconditional response to customer needs and wants, thereby creating dif? culties for the consistency and management of brands. In contrast to market orientation, it is possible to see the brand as a resource and a strategic hub of the company. Essentially, this means that the brand is made super-ordinate to the needs and wants of customers.

According to the dominant paradigm in marketing theory, this idea may seem almost heretical. There could thus be a questioning of such familiar maxims as that the customer is always right, that the company must do everything for the customer, and that it must deliver ‘customer delight’. The wants and needs of the customer are relevant, but they should not unilaterally steer the development of the brand and determine its identity. Strategically companies may have motives beyond the satisfaction of customers’ wants and needs.

Prioritizing the brand in the organization gives it integrity in relation to customers’ desires and the actions of competitors, but also in internal strategic processes. Satisfaction of customer needs and wants occurs within the framework of the brand. In practice, the essence of the brand-orientation approach evaluates proposals depending upon what the brand stands for. The decisive difference is whether or not the core brand identity represents a strategic hub for the company. If a company starts from its brands and regards them as strategic resources, it is an expression of an approach and a mindset (Urde, 1999).

Fig. 1 visualizes the basic ideas of market and brand orientation. The purpose of this conceptual paper is to explore the interaction between brand orientation and market orientation. The concept of brand orientation is positioned in relation to the ruling paradigm of market orientation. The aim is to broaden the debate and introduce a more dynamic view of both brand orientation and market orientation. The broader objective is to pave the way for better understanding, operationalizing and evaluating of alternative approaches to branding and marketing.

3. Concepts of strategic orientations The concept of strategic orientation is de? ned as “… the guiding principles that in? uence a ? rm’s marketing and strategy-making activities” (Noble, Sinha, & Kumar, 2002, p. 25). Discussion is limited here to an overview of brand and market orientation. The strategic orientation of a company is not always the explicit choice of the management. It can include the pattern of decisions or the results of organizational learning (Mintzberg, 1989) and other factors. This issue is relevant to note.

Previous research addresses the conjunction of market orientation with other strategic orientations: (1) innovation or technology orientation (Berthon, Hulbert, & Pitt, 1999; Gatignon & Xuereb, 1997; Olson, Slater, & Hult, 2005; Zhou, Yim, & Tse, 2005), (2) learning orientation (Baker & Sinkula, 1999), (3) entrepreneurial orientation (Miles & Arnold, 1991; Zhou et al. , 2005) and (4) production and cost orientation (Noble et al. , 2002; Olson et al. , 2005). In addition, one paper has differentiated between distinctive types of market orientation (Noble et al. , 2002).

Much of the debate in theory and practice has been how to lift a production or product orientated ? rm to a state of market orientation. There is minimal research relevant to the broad relationship between brand orientation and market orientation. From a performance perspective, Keiningham et al. (2005) analyze in two empirical studies, of a truck manufacturer and a ? nancial institution, the in? uence of the brand-centric construct brand preference and the customer-centric construct customer satisfaction on the performance outcome, measured as share of spending. In an exploratory study for one non-pro?

t organization, Weisenbach Keller and Conway Dato-on (2010) compare the in? uence of brand and marketing orientation on performance. The literature discusses the more speci? c topic of the relationship between brand equity and customer equity (Keller, 2008; Leone et al. , 2006). Keller (2008), and Burmann et al. (2009) underpins the Fig. 1. The market and brand-oriented approaches (based upon ‘The Egg Model’, Urde, 1997). Please cite this article as: Urde M, et al, Brand orientation and market orientation — From alternatives to synergy, J Bus Res (2011), doi:10. 1016/j. jbusres. 2011.

07. 018 M. Urde et al. / Journal of Business Research xxx (2011) xxx–xxx 3 differences between the two concepts, but also the need to integrate both views. This approach is both inspiring and complementary to how brand orientation and market orientation are viewed in this paper. Though there are differences, it is also necessary to explore possible integrations and combinations of the two orientations. Three perspectives on market orientation can be distinguished: cultural, behavioral, and performance-related (Baumgarth, Merrilees, & Urde, 2011; Bridson & Evans, 2004; Homburg & P?

esser, 2000; Meehan, 1996). 3. 1. Market orientation The concept of market orientation (sometimes synonymous with customer orientation: see Deshpande, Farley, & Webster, 1993; Shapiro, 1988) is a classical concept in marketing. Drucker (1954), Kohli and Jaworski (1990), Narver and Slater (1990), and Shapiro (1988) are seminal writers on the topic. Research studies address the de? nition of the construct and its theoretical foundation, the development of a measurement instrument, and the empirical analysis of determinants and performance effects of market orientation. The cultural perspective de?

nes market orientation as a unique type of corporate culture or as a particular mindset of a company (Deshpande et al. , 1993; Homburg & P? esser, 2000; Narver & Slater, 1990). The literature offers a wide range of conceptualizations of corporate culture (Cameron & Quinn, 2006; Deshpande & Webster, 1989). The seminal model formulated by Schein (2004) distinguishes between three different but interrelated layers of corporate culture: underlying assumptions, espoused beliefs and values, and artifacts. Homburg and P? esser (2000) adapt this general framework to the market orientation context.

In contrast, the behavioral perspective describes market orientation in terms of concrete instruments, tools or behaviors (Kohli & Jaworski, 1990; Shapiro, 1988), focusing on the satisfaction of individual and changing customer needs and wants. Behaviors with a strong link to market orientation are market segmentation (Beane & Ennis, 1987; Wedel & Kamakura, 2002), customization (Franke, Keinz, & Steger, 2009), adaptive selling (Spiro & Weitz, 1990), customer relationship management (Reinartz, Krafft, & Hoyer, 2004), customer satisfaction surveys and calculation of customer lifetime value or customer equity (Keiningham et al.

, 2005; Rust, Lemon, & Zeithaml, 2004; Venkatesan & Kumar, 2004). The analysis of the in? uence of different strategic orientations on corporate performance is one of the central ideas of the strategic orientation concept. The literature on marketing accountability and marketing control discusses the in? uence of strategic orientation on the selection of marketing metrics (Ambler, Kokkinaki, & Puntoni, 2004). Typical performance metrics of a market-oriented company are such key performance indicators as customer satisfaction, customer loyalty or customer lifetime value.

In addition, many research studies analyze the impact of market orientation on corporate performance (Homburg & P? esser, 2000; Jaworski & Kohli, 1993; Narver & Slater, 1990). To conclude, market orientation can refer to the mindset of a company or to concrete instruments that pertain to the actual and latent needs and wants of individual customers. The core of this orientation identi? es with the satisfaction of each customer. 3. 2. Brand orientation Researchers describe the concept of brand orientation as a new approach to brands that focuses on brands as resources and strategic hubs (Melin, 1997; Urde, 1994, 1997).

Speci? cally, “Brand orientation is an approach in which the process of the organization revolve around the creation, development, and protection of brand identity in an ongoing interaction with target customers with the aim of achieving lasting competitive advantages in the form of brands” (Urde, 1999, p. 119). This orientation is relevant for describing companies that strive not only to satisfy needs and wants, but also to lend a strategic signi? cance to brands. The brand is a strategic platform.

Inspiration for the new orientation came from case studies of practice at DuPont, Nestle, Tetra Pak, Nicorette and Volvo (Melin, 1997; Urde, 1997), and from the simultaneously emerging ? eld of strategic brand management pioneered by Aaker (1991), de Chernatony et al. (2011), Kapferer (2008), King (1991), and Olins (1978). The perspective on brands as strategic assets (Itami & Roehl, 1987; Melin & Urde, 1990) and on brand management (Diamond, 1981; Low & Fullerton, 1994) as a core competence (Prahalad & Hamel, 1990) ? nds support from the ?

eld of resource-based strategy (Barney, 1991, 1997; Dierickx & Cool, 1989; Grant, 1995; Itami & Roehl, 1987). The roots of brand orientation as a concept can be traced to strategic intent (Hamel & Prahalad, 1989), visionary companies (Collins & Porras, 1998) and the brand as part of the culture of the organization (Alvesson & Berg, 1992). The continuous interaction between values and identity at three levels is a key proposition of brand orientation: the organization, the brand, and customer and non-customer stakeholders, as depicted in Fig. 1.

First, organizational values are translated into core values and promises (what the brand stands for), which guide the organization’s efforts (how it works and behaves). Second, those core values are converted into extended customer values (what the brand offers and how it is perceived). In this sense, brand orientation can be seen as an inside-out perspective, with the brand’s core values and promise as a strategic focal point. The statement that “the brand is not an unconditional response to the wants and needs of customers” (Urde, 1999, p.

119) challenges the market-oriented paradigm by assigning greater emphasis to the organization’s mission, vision and values. Brand orientation represents an integrated view of the brand, bringing both the internal and external perspectives into the process (Hankinson, 2001; Reid, Luxton, & Mavondo, 2006). A central argument is that the brand’s core values and promise continuously affect an organization at every level (Simoes & Dibb, 2001).

When an organization grows from a position in which its mission, vision, and organizational values are combined (Collins & Porras, 1998), a critical rung on the ladder toward a high level of brand orientation is achieved (Urde, 2003). For brandoriented organizations, this leads to strategic competitive advantages (Melin, 1997), with brands as resources and the basis of increased performance (Persson, 2007, 2009). Brand orientation, being a striving and relatively young paradigm (Louro & Cunha, 2001) relies more on contributions to the concept than on explicit references.

The management literature also discusses a number of closely related concepts, such as brand-driven business (Davis & Dunn, 2002; LePla, Davis, & Parker, 2003), brand mindset (Knapp, 2000), brand manners (Hamish & Gordon, 2001), authentic branding (Beverland, 2009), and even corporate religion (Kunde, 2000). There have been many important contributions to the ? eld of brand management and the management of brands during the past decade, re? ecting the attention and interest from practitioners and scholars.

With this note of respect, the literature overview is structured in terms of culture, behavior, and performance as the key aspects of the concept of brand orientation. From a cultural perspective, brand orientation may also be de? ned as a certain type of corporate culture or as a particular mindset of a company. It is suggested that the way of relating to brands and the organization’s brand competence are “prerequisites of brand development” (Urde, 1999, p. 123). Hatch and Schultz (2001, 2008) offer insights into the alignment of vision, culture and image.

Their approach uses culture as a foundation, vision as a point of gravity and image as the external aspect of the brand, relating their work closely to the ideas of the brand-oriented corporation. It is also possible to view the exploration of the multiple identities of the corporation and the evolution of corporate branding by Balmer and Greyser (2003) as another important contribution to the Please cite this article as: Urde M, et al, Brand orientation and market orientation — From alternatives to synergy, J Bus Res (2011), doi:10. 1016/j. jbusres. 2011. 07. 018 4 M. Urde et al.

/ Journal of Business Research xxx (2011) xxx–xxx understanding of brand orientation. Baumgarth (2009, 2010) uses Schein’s corporate culture framework for explaining the internal structure of brand orientation. From a behavioral perspective, brand orientation characteristics include the importance accorded to the internal anchorage of the brand identity (mission, vision, and values). The idea of ‘living the brand’ has a strong link to the brand orientation concept (de Chernatony, 2010; de Chernatony, Drury, & Segal-Horn, 2003; Ind, 2003, 2007; Ind & Bjerke, 2007; Mitchell, 2002; Punjaisri & Wilson, 2007).

Other examples of important brand-oriented behaviors are corporate identity and corporate design (Birkigt & Stadler, 2002; Olins, 1978; van Riel & Balmer, 1997), integrated marketing communication (Cornelissen, 2000; Ewing & Napoli, 2005; Schultz, Tannenbaum, & Lauterborn, 1995), measurement of brand equity (Christodoulides & de Chernatony, 2010; Keller, 1993, 2008; Yoo & Donthu, 2001), the impact of brand orientation on managerial practice (Hankinson, 2002) and employer branding (Barrow & Mosley, 2005).

From a performance perspective, the critical consideration is whether or not brand orientation is associated with better corporate performance. Empirical studies in different contexts by Baumgarth (2009, 2010), Bridson and Evans (2004), Gromark and Melin (2011), Napoli (2006) and Wong and Merrilees (2007, 2008) demonstrate a positive relationship between brand orientation and corporate performance. To conclude, brand orientation is, like market orientation, a mindset. The core of this orientation is customer satisfaction within the limits of the core brand identity. 4. 1.

Market orientation “Customer obsession: We start from the customer and work backwards. ” (Amazon, 2010). Market orientation accords importance to the customer and the brand image. The perspective is from the outside in, and the needs and wants of the consumers in the market are viewed as essential. Amazon. com is used here to illustrate market orientation. The quotation above clearly identi? es the company’s outside-in approach. The customers’ needs and wants are the point of departure for the Amazon way of creating value. The needs and wants of the consumers are paramount, to the extent of being an ‘obsession’ with the customer. 4.

2. Brand orientation “We believe human rights abuses anywhere are the concern of people everywhere. So, outraged by human rights abuses but inspired by hope for a better world, we work to improve people’s lives through campaigning and international solidarity. Our mission is to conduct research and generate action to prevent and end grave abuses of human rights and to demand justice for those whose rights have been violated. ”(Amnesty International, 2010). Brand orientation emphasizes the signi? cance of the brand identity (mission, vision, and values) as a guiding light and hub for organizational culture, behavior, and strategy.

The internal aspect of the brand — the organization — is seen as vital in the brand-building process. The perspective is from the inside out, while the needs and wants of consumers are recognized, the integrity of the brand is paramount. Amnesty International illustrates the brand-oriented approach. Deeply held values and convictions, derived from the Universal Declaration of Human Rights propel this independent, non-pro? t, selfgoverning organization. 4. 3. Market and brand orientation “All our products and services share the common Electrolux philosophy — to make that extra effort to ?

nd out what people really need and want… That is our way of demonstrating how all the time “Electrolux is thinking about you” in order to make your life a little easier and more enjoyable. ”(Electrolux, 2010). The CEO of Electrolux explains that “Becoming the Thoughtful Design Innovator requires a lot of thought. But now it is time to shift from thinking what we should do, to thinking about how we can do it better, faster and more ef? ciently in every part of our value chain — thereby accelerating the implementation of the entire brand-driven business development strategy that has evolved over the past years” (Electrolux, 2009, p.

1). This approach is hybrid, initially relating to market orientation, but recognizing the importance of brand identity and the internal side of the brand. The view of the market and customer comes ? rst, but brand identity also in? uences the culture, behavior and strategy of the organization. Electrolux illustrates the market and brand orientation. The company’s design processes begin with consumer insight studies, which investigate the possible needs and wants of their target markets. Outcomes are translated into new product ideas or new features.

Depending upon the character of the new product or feature, it is channelled to the key brands of the Electrolux corporation: Electrolux, AEG or Zanussi. The choice of brand depends on positioning and other strategic considerations. Electrolux follows a brand-oriented approach in this stage of the process. As a corporation, 4. Four basic approaches to brand and market orientation In principle, market orientation and brand orientation are two different strategic orientations. Market orientation primarily takes an outside-in approach, with brand image as a fundamental concept.

Conversely, brand orientation takes a primarily inside-out approach, with brand identity as a key concept. Using this logic with two dimensions, it is possible to identify four basic approaches to brand and market orientation, as illustrated in Fig. 2. The mapping of brand and market orientation invites discussion of the two paradigms. It can no longer be an either-or proposition; there are now two additional major-minor approaches to consider. Brand and market orientation, and market and brand orientation are hybrid versions, one being related more closely to brand orientation and the other more closely to market orientation.

Discussion of the four basic approaches draws on four case examples: Amazon. com, Amnesty International, Volvo Cars, and Electrolux. All are strong international organizations by any standards. Fig. 2. The brand and market orientation matrix. Please cite this article as: Urde M, et al, Brand orientation and market orientation — From alternatives to synergy, J Bus Res (2011), doi:10. 1016/j. jbusres. 2011. 07. 018 M. Urde et al. / Journal of Business Research xxx (2011) xxx–xxx 5 Electrolux relies on brands as competitive advantages.

The company’s ‘Thinking of you’ promise, which is an expression of their marketoriented approach, governs the brand-building process. 4. 4. Brand and market orientation “The Volvo core values express what the organization believes in and, ultimately, help the corporation to endure. The core values drive the development of new product offerings and the way Volvo serves its customers and the community. By following this path, a bond between Volvo and its customers and partners is established. ”(Volvo, 2007, p. 8).

This approach is hybrid, relating to brand orientation, but also recognizing the weight of brand image and the external aspect of the brand. Volvo’s view of brand identity comes ? rst, but both the brand image and the needs and wants of consumers play an important role in the strategy and culture of the organization. Volvo Cars illustrates the brand and market orientation (Urde, 2003, 2009). The statement in the quotation above, that the company’s core values “drive the development of new product offerings and the way Volvo serves its customers and the community”, encapsulates Volvo’s use of a brand and market-oriented approach.

The core brand values are fundamental and act as bellwethers in the process of satisfying customer demands. The case examples illustrate all four orientations. The next step is to explore how corporate orientation may evolve. Relevant cases again illustrate the arguments. 5. A dynamic view of brand and market orientation 5. 1. Case examples and fundamental evolution routes There is in fact no inevitable tug-of-war between the market orientation and brand orientation paradigms. On the contrary, this paper suggests a new and dynamic view, which is more realistic and fruitful, both for advancing theory and for business practice.

The evolution of different companies’ orientations over time is examined. The brand and market orientation matrix in Fig. 3 illustrates the trajectories of the Body Shop, Nicorette, Dell, and Avis brands. 5. 1. 1. Nicorette Nicorette made the dramatic transition from a strong value-driven, brand-oriented culture to a market-oriented approach (Urde, 1994, 1997). From being part of a traditional pharmaceutical company, as a prescription-only smoking cessation product, it became an international over-the-counter consumer brand.

The switch from a medical to a consumer market focus was in itself a commercial success, but the reaction of the organization was both unexpected and very strong, as demonstrated by the following verbatim comments: “We don’t recognize ourselves anymore; Why invest in silly advertising when research projects lack funding? ; Our products are better, why invent arguments out of the blue? ; Branding is for Coca-Cola type of businesses, our business is different; and, I’m embarrassed when colleagues at conferences ask me how life is in the Cola-business” (Urde, 1997).

The head of research delivers the harshest criticism saying that branding is an unworthy manipulation. What had gone wrong? A top manager re? ects: “We are in an ethical battle against smoking; we are on a crusade against smoking. This is what we are all about and what, deep down, drives us” (Urde, 1997, p. 288). It became evident that the marketing and branding team had forgot the internal element of the brand, and failed to carefully evaluate the mission and deep values of the organization and the brand. They had, in effect, abducted the brand and left the bewildered organization behind.

The dramatic change to an outside-in approach had followed the marketing textbooks step by step. The marketing team had surveyed consumers and given them exactly what they wanted, but the brand had become an unconditional response to customer needs and wants. Top management initiated a dialogue within the organization, emphasizing that the core identity and mission were unchanged, and that only the market approach had been adapted, to ? t the transition from medicine to consumer products and from patients to consumers.

With time, this approach was accepted and Nicorette ? ts the description of following a market and brand-oriented approach. 5. 1. 2. The Body Shop Illustrating the brand and market orientation approach is the Body Shop, which rejects animal testing, chemicals and exploitation of third world farmers. In its own words, “We have never, and will never, test our cosmetic products on animals. We also don’t commission others to do it for us. In fact, we campaigned for years to bring about a ban on testing cosmetics on animals.

We are among the few companies to comply with the stringent requirements of the internationally recognized Humane Cosmetics Standard” (Body Shop, 2010). The Body Shop brand subsequently became an admired global brand with a worldwide retail presence. When L’Oreal acquired the brand, they pursued a more commercial approach until a scathing press article suggested that everything was not exactly as the company had been promising, and implied that some ingredients of Body Shop products might have been tested on animals. Today, the brand has largely returned to its origins and thereby restored its reputation.

The company’s current approach can be described as brand and market oriented. Fig. 3. The brand and market orientation matrix with examples of evolutions of different brands. 5. 1. 3. Dell Dell had considerable initial success with its direct-selling business model (Dell & Fredman, 2000), which had both lower distribution costs and a product customization capability. The customer is central to such a focus, with the brand performing a secondary role to package the customer focus. The initial organizational direction can be described as a market and brand orientation.

The Dell strategy became broader over time, with e-commerce replacing the traditional telephone method and other channels, such as retail distri