Integrating customer orientation, employee compensation and performance management: A conceptual framework

Compensation systems are an essential tool to link corporate goals such as customer orientation with individual and organisational performance. While some authors demonstrate the positive effects of incorporating nonfinancial measures into the compensation system empirically, companies have encountered problems after linking pay to customer satisfaction. We argue that reasons for this can be attributed to the measurement of customer satisfaction as well as to the missing link between customer satisfaction and customer retention and profitability in theses cases. Hence, there is a strong need for the development of an holistic reward and performance measurement model enabling an organisation to identify cause-and-effect relationships when linking rewards to nonfinancial performance measures. We present a conceptual framework of a success chain driven reward system that enables organisations to systematically derive a customer-oriented reward strategy. In the context of performance evaluation, we propose to rely on integrated and multidimensional measurement methods.

Enhancing performance through the introduction of customer orientation into the building components industry

Purpose: This paper aims to describe an investigation into how company performance can be improved by integrating internal and external customers and technology. The approach was developed, implemented and evaluated in the operations of the building components industry. The research was carried out in the precast concrete division of a Singapore company. Design/methodology/ approach: For the purpose of undertaking the investigation an exploratory case study approach was used. This was divided into conceptual and action research stages. The action research was also used to implement the changes in the company. Questionnaire surveys were carried out among company employees and external customers to assess the effect of these changes. Results of the investigation were derived using content and statistical analysis. Triangulation between three sources was used for validating the data. Findings: The exploratory case study strategy resulted in rich research data, which provided evidence of the changes taking place and integration happening, leading to improved performance. The action research approach proved a powerful tool where the uncertainty of outcomes makes it near impossible to make accurate forecasts. Another output of the research was the development of an "integrated customer orientation" (ICO) model. Research limitations/implications: The research in this paper used a single site action research investigation so should be interpreted within the specific company and industry context. There are implications for theory and practice in a number of areas of production and marketing as well as contributions to understanding about productivity improvement and organisational development. The investigation also fulfils the dual objectives of action research by contributing to both knowledge and practice. Originality/value: The paper describes a unique approach towards improving productivity, quality and service through the use of action research to implement changes, as well as providing the research evidence to evaluate both the process of implementation and results achieved. © Emerald Group Publishing Limited.

Customer orientation and innovativeness:differing roles in new and old Europe

Burgess and Steenkamp [Burgess, S. M., & Steenkamp, J. (2006). Marketing renaissance: How research in emerging markets advances marketing science and practice. International Journal of Research in Marketing, 23(4), 337-356.] have pointed out that marketing knowledge derives almost exclusively from research conducted in high income, industrialized countries. However, the generalizability of marketing knowledge should also be tested in emerging markets. We demonstrate that returns on customer orientation and organizational innovativeness play out differently in New versus Old Europe. Contrary to previous research, we find that customer focus is at least as important in New Europe as in our Old European country, while organizational innovativeness appears more important in New Europe to drive both customer service and financial performance.

The impact of employees' customer orientation and service orientation behaviours on customers' service evaluation

In this paper the authors conceptualize and test the effects of service employees’ customer orientation and service orientation behaviors within an extended service evaluation model encompassing service quality, service encounter quality, perceived value and customer satisfaction. The context is 271 Indian retail customers. Data analysis incorporates confirmatory factor analysis and structural equation modeling. We find that Findings indicate that: 1) customer orientation is positively related to service orientation, customers’ perceptions of service encounter quality and service quality; 2) service orientation influences customers’ perceptions of service encounter quality and service quality; 3) customers’ perceptions of service encounter quality influence customers’ perceptions of service quality and customer satisfaction; 4) customers’ perceptions of service quality influence value perceptions; 5) service quality influences customer satisfaction; and 6) customer satisfaction influences customers’ behavioral intentions. The importance of these findings for practitioners and academics, research limitations and future research avenues are subsequently discussed.

The Impact of Internal Market Orientation on Staff Service Behaviours

The impact of service direction, service training and staff behaviours on perceptions of service delivery are examined. The impact of managerial behaviour in the form of internal market orientation (IMO) on the attitudes of frontline staff towards the firm and its consequent influence on their customer oriented behaviours is also examined. Frontline service staff working in the consumer transport industry were surveyed to provide subjective data about the constructs of interest in this study, and the data were analysed using structural equations modelling employing partial least squares estimation. The data indicate significant relationships between internal market orientation (IMO), the attitudes of the employees to the firm and their consequent behaviour towards customers. Customer orientation, service direction and service training are all identified as antecedents to high levels of service delivery. The study contributes to marketing theory by providing quantitative evidence to support assumptions that internal marketing has an impact on services success. For marketing practitioners, the research findings offer additional information about the management, training and motivation of service staff towards service excellence.

Customer-oriented deviance (COD) : a conceptualisation, development and validation of a behavioural measure

Frontline employee behaviours are recognised as vital for achieving a competitive advantage for service organisations. The services marketing literature has comprehensively examined ways to improve frontline employee behaviours in service delivery and recovery. However, limited attention has been paid to frontline employee behaviours that favour customers in ways that go against organisational norms or rules. This study examines these behaviours by introducing a behavioural concept of Customer-Oriented Deviance (COD). COD is defined as, “frontline employees exhibiting extra-role behaviours that they perceive to defy existing expectations or prescribed rules of higher authority through service adaptation, communication and use of resources to benefit customers during interpersonal service encounters.” This thesis develops a COD measure and examines the key determinants of these behaviours from a frontline employee perspective. Existing research on similar behaviours that has originated in the positive deviance and pro-social behaviour domains has limitations and is considered inadequate to examine COD in the services context. The absence of a well-developed body of knowledge on non-conforming service behaviours has implications for both theory and practice. The provision of ‘special favours’ increases customer satisfaction but the over-servicing of customers is also counterproductive for the service delivery and costly for the organisation. Despite these implications of non-conforming service behaviours, there is little understanding about the nature of these behaviours and its key drivers. This research builds on inadequacies in prior research on positive deviance, pro-social and pro-customer literature to develop the theoretical foundation of COD. The concept of positive deviance which has predominantly been used to study organisational behaviours is applied within a services marketing setting. Further, it addresses previous limitations in pro-social and pro-customer behavioural literature that has examined limited forms of behaviours with no clear understanding on the nature of these behaviours. Building upon these literature streams, this research adopts a holistic approach towards the conceptualisation of COD. It addresses previous shortcomings in the literature by providing a well bounded definition, developing a psychometrically sound measure of COD and a conceptually well-founded model of COD. The concept of COD was examined across three separate studies and based on the theoretical foundations of role theory and social identity theory. Study 1 was exploratory and based on in-depth interviews using the Critical Incident Technique (CIT). The aim of Study 1 was to understand the nature of COD and qualitatively identify its key drivers. Thematic analysis was conducted to analyse the data and the two potential dimensions of COD behaviours of Deviant Service Adaptation (DSA) and Deviant Service Communication (DSC) were revealed in the analysis. In addition, themes representing the potential influences of COD were broadly classified as individual factors, situational factors, and organisational factors. Study 2 was a scale development procedure that involved the generation and purification of items for the measure based on two student samples working in customer service roles (Pilot sample, N=278; Initial validation sample, N=231). The results for the reliability and Exploratory Factor Analyses (EFA) on the pilot sample suggested the scale had poor psychometric properties. As a result, major revisions were made in terms of item wordings and new items were developed based on the literature to reflect a new dimension, Deviant Use of Resources (DUR). The revised items were tested on the initial validation sample with the EFA analysis suggesting a four-factor structure of COD. The aim of Study 3 was to further purify the COD measure and test for nomological validity based on its theoretical relationships with key antecedents and similar constructs (key correlates). The theoretical model of COD consisting of nine hypotheses was tested on a retail and hospitality sample of frontline employees (Retail N=311; Hospitality N=305) of a market research panel using an online survey. The data was analysed using Structural Equation Modelling (SEM). The results provided support for a re-specified second-order three-factor model of COD which consists of 11 items. Overall, the COD measure was found to be reliable and valid, demonstrating convergent validity, discriminant validity and marginal partial invariance for the factor loadings. The results showed support for nomological validity, although the antecedents had differing impact on COD across samples. Specifically, empathy and perspective-taking, role conflict, and job autonomy significantly influenced COD in the retail sample, whereas empathy and perspective-taking, risk-taking propensity and role conflict were significant predictors in the hospitality sample. In addition, customer orientation-selling orientation, the altruistic dimension of organisational citizenship behaviours, workplace deviance, and social desirability responding were found to correlate with COD. This research makes several contributions to theory. First, the findings of this thesis extend the literature on positive deviance, pro-social and pro-customer behaviours. Second, the research provides an empirically tested model which describes the antecedents of COD. Third, this research contributes by providing a reliable and valid measure of COD. Finally, the research investigates the differential effects of the key antecedents in different service sectors on COD. The research findings also contribute to services marketing practice. Based on the research findings, service practitioners can better understand the phenomenon of COD and utilise the measurement tool to calibrate COD levels within their organisations. Knowledge on the key determinants of COD will help improve recruitment and training programs and drive internal initiatives within the firm.

Does relationship marketing improve customer relationship satisfaction and loyalty?

Purpose - This study investigates the relationship marketing (RM) strategy of a retail bank and examines whether - after its implementation - customer relationships were strengthened through perceived improvements in the banking relationship and consequent loyalty towards the bank. Design/methodology/approach - A survey was conducted on two profitability segments, of which the more profitable segment had been directly exposed to a customer oriented RM strategy, whereas the less profitable segment had been subjected to more sales oriented marketing communications. Findings - No significant differences were found between the segments on customers’ evaluations of the service relationship or their loyalty toward the bank. Furthermore regression analysis revealed that relationship satisfaction was less important as a determinant of loyalty in the more profitable segment. Research limitations/implications - This study was conducted as a case study of one specific branch of a bank group in Finland, which limits the external validity of its results. It was not possible to ascertain if, or to what extent, customers of the more profitable segment had received the intended RM treatment. Other limitations are also discussed. Practical implications - Customer orientation is desirable within retail banking and more studies are needed on the differential drivers of loyalty across customer profitability segments. By identifying the aspects of a banking relationship that are more highly valued among more profitable customers than among less profitable customers, bank managers would be able to more effectively devise appropriate strategies for different segments. Originality/value - The study contributes to the RM literature and marketing of financial services by providing empirical evidence of the effects of RM activities on customer relationship perceptions in different profitability segments.

Customer involvement in lean startup principles: case of game development studio

The objective of this thesis is to better understand customer’s role in lean startup methodology. The aim is to find out how customers are involved in lean startup methodology implantation and increase the likelihood of new venture survival. This study emphasizes the usage of customers in shaping of new product development processes within companies, through iteration and constant communication. This communication facilitates the development of features that are requested by the customers and enhances the prospects of the new venture. The empirical part of the study is a single qualitative case study that uses action research to implement the lean startup methodology into a pre-revenue venture and examines its customer involvement processes. The studied case company is Karaoke d.o.o., developing a game called kParty. The study used the theory discussed in the literature review: customer involvement (in the survey and interviews conducted for the lean startup methodology), lean principles (through the implementation of lean startup methodology) and lean startup methodology, which are the central building parts of this thesis as a whole. The thesis contributes to the understanding of customer involvement in lean startup methodology, while giving practical implications of customer orientation and product market fitting.

Marketing orientation of small Firms- a study with reference to Trivandrum district

The small business has attracted very little attention of the historians in the ancient times, or public mind inspite of the fact that its impact on the various civilisations has been phenominal. Even in recent times economists considered the small firms as inappropriate, obselate and anacronistic as it cannot assimilate the full potential of technological change in the production system. But today everybody agrees that the small business has a definite role in shaping the human destiny and enhancing the quality of life in any society. In a developing country like India small firms are necessary to generate employment for millions, high standared of personal choice to consumers, provide competition and act as a check to monopoly power; further the small firms provide an important source of innovation and in turn it paves the way for entrepreneur development in the society. In many countries the small enterprises played a significant role in the growth and development of their economic system. Italy and Japan are quoted as classic examples . In India, too, with the abundance of labour and scarce capital resources small firms have been promoted and protected by the government. But one must say that the small firm owners/managers in India have been shy in developing a market orientation in themeselves. Due to this many firms failed and closed. The alarming rate of sickness among the small firms in India may be attributed to the lack of market driven/customer orientation approach among the owner/managers of small business. So the study on the market oreintation of the small firms has never been in the mind of marketing experts and academicians. Thus, an attempt is made to enquire into them systematically and scientifically. For the study, Trivandrum district in Kerala has been selected. The data for the study has been collected by the help of a schedule which has been prepared after consulting the relevant literature and after consultation with experts in the field, academicians and practising managers.

Inter-relationships between innovation and market orientation in SMEs

Purpose – This study aims to explore the nature of the interactions between two strategies, innovation and market orientation. By examining the components of these constructs the paper seeks to identify key components of market orientation that are antecedent factors of the innovation performance of the firm.

Design/methodology/approach – Correlation analysis was undertaken on data from a survey of 73 manufacturing firms in the Greater Western Sydney economic development zone in Australia. The data were supplemented by information obtained from the firm's annual reports.

Findings – Innovation was found to be positively correlated to market orientation (customer orientation, competitor orientation and inter-functional co-ordination) and both of these constructs were found to be positively correlated to firm performance and the degree of change in the firm's competitive environment.

Research limitations/implications – Possible limitations are: the low survey response rate; the nature of the sampled population; and the spread of industries involved, which could limit the generalisability of the results. The next steps will be to conduct deeper analysis into the factors that make up the subscales of the two constructs and to determine how market orientation or its associated activities interact with the innovation process.

Practical implications – In order to maximize a firm's financial performance, organizations should increase both their market orientation and their innovation activities as these factors operate synergistically.

Originality/value – This study is arguably the first to establish the finding that the degree of change in the competitive environment and the level of market orientation are linked, and the identification of the components of market orientation that are linked to firm innovation. These findings suggest that firm innovation and firm market orientation are strategic reactions to changes in the firm's competitive environment.

Developing customer-focused public sector rewards schemes : evidence from the Botswana government's performance based reward system (PBRS)

Purpose – Governmental agencies are interested in improving the quality of their service delivery. One tool that has been used to manage their performance is performance based reward schemes (PBRS). The aim of this paper is to examine the degree to which a sample of these plans, used within the Botswana public sector, is customer-focused. Being more customer-focused should deliver improved public sector service quality.

Design/methodology/approach – This study carried out an evaluation of a sample of Botswana PBRS plans, using multidimensional content analysis undertaken by four expert “evaluators”, to identify the degree to which the PBRS were customer-focused.

Findings – Classifying PBRS plans as being customer-focused was difficult, as the plans had few objectives related to customer experiences or outcomes. Those that did had poorly defined performance objectives, their targets were not specific, or there was limited explicit role responsibility. Thus, PBRS plans seemed not to focus on improving customer outcomes.

Research limitations/implications – The PBRS evaluated do not appear to be customer-focused and, thus, would have limited ability to improve customer experiences (i.e. public sector quality). Further research is needed in other countries to see whether these results are generalisable, and whether service levels vary with more customer-focused PBRS plans.

Practical implications – The results suggest improvements that could be adopted by organisations seeking to make their PBRS schemes customer-focused.

Originality/value – Extensive research suggests that PBRS plans can be used to improve service quality. Most of the studies have focused on the employees' perspectives and have not looked at the degree of customer orientation within the plans.

The influence of market orientation on innovation strategies

Purpose – The purpose of this paper is to examine the effects of market orientation on exploratory and exploitative innovation, and the moderating effects of family ownership on these relationships. Design/methodology/approach – This study utilizes multi-group path analysis and confirmatory factor analysis in LISREL on data from 228 firms in the Australian service sector. Findings – This study establishes that both customer and competitor innovation are positively related to exploitative and exploratory innovation. However, customer orientation does not lead to significantly stronger effects on exploitative innovation than on exploratory innovation, and competitor orientation does not lead to significantly stronger effects on exploratory innovation than on exploitative innovation. In addition, the study found that the relationship between customer orientation and exploratory innovation was stronger for family firms, while the relationships between competitor orientation and both exploratory and exploitative innovation were stronger for non-family firms. Research limitations/implications – The cross-sectional design is one weakness of this study. In addition, as firms in the present study came from the service sector the generalizability of the findings to other sectors of the economy need to be determined. Practical implications – These findings of this study highlight the need for managers to build a strong market orientation in order to promote innovation, and consider the effects of ownership structure on innovation strategies. Originality/value – This study is the first to measure the relative influence of customer and competitor orientation on a firm’s use of exploitative and exploratory innovation strategies.

Market orientation, innovation capability and business performance:insights from the global financial crisis

Purpose - The paper aims to examine the role of market orientation (MO) and innovation capability in determining business performance during an economic upturn and downturn. Design/methodology/approach - The data comprise two national-level surveys conducted in Finland in 2008, representing an economic boom, and in 2010 when the global economic crisis had hit the Finnish market. Partial least square path analysis is used to test the potential mediating effect of innovation capability on the relationship between MO and business performance during economic boom and bust. Findings - The results show that innovation capability fully mediates the performance effects of a MO during an economic upturn, whereas the mediation is only partial during a downturn. Innovation capability also mediates the relationship between a customer orientation and business performance during an upturn, whereas the mediating effect culminates in a competitor orientation during a downturn. Thus, the role of innovation capability as a mediator between the individual market-orientation components varies along the business cycle. Originality/value - This paper is one of the first studies that empirically examine the impact of the economic cycle on the relationship between strategic marketing concepts, such as MO or innovation capability, and the firm's business performance.

Effective forms of market orientation across the business cycle:a longitudinal analysis of business-to-business firms

Macroeconomic developments, such as the business cycle, have a remarkable influence on firms and their performance. In business-to-business (B-to-B) markets characterized by a strong emphasis on long-term customer relationships, market orientation (MO) provides a particularly important safeguard for firms against fluctuating market forces. Using panel data from an economic upturn and downturn, we examine the effectiveness of different forms of MO (i.e., customer orientation, competitor orientation, interfunctional coordination, and their combinations) on firm performance in B-to-B firms. Our findings suggest that the impact of MO increases especially during a downturn, with interfunctional coordination clearly boosting firm performance and, conversely, competitor orientation becoming even detrimental. The findings further indicate that both the role of MO and its most effective forms vary across industry sectors, MO having a particularly strong impact on performance among B-to-B service firms. The findings of our study provide guidelines for executives to better manage performance across the business cycle and tailor their investments in MO more effectively, according to the firm's specific industry sector.