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Improving customer-focused marketing capabilities and firm financial performance via marketing exploration and exploitation

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An Erratum to this article was published on 27 November 2014

Abstract

Evidence within the marketing literature has shown that marketing capabilities are important drivers of firm performance. However, very little is known about how firms improve their marketing capabilities via the embedding of new market knowledge. Organizational learning theory provides us with a theoretical lens through which we can examine how existing customer-focused marketing capabilities may be improved and new customer-focused marketing capabilities may be created via marketing exploitation and exploration capabilities. In addition, this study investigates whether ambidexterity in marketing exploration and exploitation exists and finds that firms cannot do both at high levels without risking a negative impact on customer-focused marketing capabilities. This study also presents findings demonstrating how improving the two customer-focused marketing capabilities in our study, brand management and customer relationship management, impacts objective financial performance.

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Notes

  1. We thank the anonymous reviewer for this suggestion.

  2. Rust, Zeithaml and Lemon (2000) also note value equity as a driver of customer lifetime value. However, we believe value is a brand association (e.g., Ambler 2004; Keller 1993) that contributes to brand equity.

  3. Related to sense-making are the conceptual and instrumental uses of information (e.g., Menon and Varadarajan 1992; Moorman 1995; Morgan et al. 2005). Please see these sources for a complete discussion.

  4. We use the term “marketing organization” as do Vorhies and Morgan (2003) and Webster (1997) to recognize that marketing tasks are performed by both marketing and non-marketing personnel throughout the broader organization.

  5. This should not cause a significant issue due to the lack of significance from these variables in the SUR modeling.

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Authors and Affiliations

  1. School of Business Administration, University of Mississippi, PO Box 1848, Oxford, MS, 38677, USA

    Douglas W. Vorhies & Victoria D. Bush

  2. College of Business Administration, The University of Akron, Akron, OH, 44325-4804, USA

    Linda M. Orr

Authors
  1. Douglas W. Vorhies
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  2. Linda M. Orr
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  3. Victoria D. Bush
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Corresponding author

Correspondence to Douglas W. Vorhies.

Additional information

The authors wish to thank John Hulland, Neil Morgan, Robert E. Morgan, Charles Noble and Minu Kumar for commenting on earlier versions of this manuscript.

An erratum to this article is available at http://dx.doi.org/10.1007/s11747-014-0419-0.

Appendix

Appendix

Purified survey measures used in the research

Marketing Exploitation Capabilities

Please indicate how your business uses market knowledge to make modifications to existing marketing processes, relative to your main competitors. (Seven point scale: −3=much worse; +3=much better).

Consistently reexamining information from previous projects and/or studies to modify existing marketing processes

Routinely adapting existing ideas when developing new marketing processes.

Incrementally and routinely improving our existing marketing procedures.

Focusing changes in marketing procedures on improving efficiency.

Marketing Exploration Capabilities

Please indicate how your business uses market knowledge to change the way it thinks and to create new, or replace, existing marketing processes, relative to your main competitors. (Seven point scale: −3=much worse; +3=much better).

Continually developing new marketing procedures that are very different from others developed in the past.

Routinely introducing new marketing procedures which are daring, risky, or bold.

Consistently using market knowledge to develop new marketing processes which deliver different outputs from existing processes.

Using marketing knowledge to “break the mold” and create new marketing processes not used before.

Market Information Acquisition

Please consider how your marketing organization gathers and uses information about its marketplace. (7-point scale: 1=Strongly Disagree; 7=Strongly Agree)

We meet with customers at least twice a year to find out what products or services they will need in the future.

We poll end users at least twice a year to assess the quality of our products and services.

We encourage our sales representatives and other frontline marketing employees to gather information about customer needs.

We closely monitor our competitors to determine potential or missed opportunities.

Market Information Dissemination

Please consider how your marketing organization gathers and uses information about its marketplace. (7-point scale: 1=Strongly Disagree; 7=Strongly Agree)

We have interdepartmental meetings at least once a quarter to discuss market trends and developments

When something important happens with a major customer or market, the whole organization is informed within a short period

We share information effectively between marketing and other departments

We have informal networks that insure marketing decision makers have the information they need.

Market Information Analysis

Please consider how your marketing organization gathers and uses information about its marketplace. (7-point scale: 1=Strongly Disagree; 7=Strongly Agree)

New marketing ideas are regularly analyzed to assess their potential merit.

Various marketing strategy alternatives are always carefully evaluated.

Market information is routinely organized in meaningful ways.

Shared Understanding

Please consider how your marketing organization gathers and uses information about its marketplace. (7-point scale: 1=Strongly Disagree; 7=Strongly Agree)

Frequently, we clearly articulate our intended marketing actions to all marketing employees.

We regularly develop a shared understanding of the available marketing information

We frequently develop a shared understanding of the implications of marketing activities.

Customer Relationship Management Capabilities

Please indicate how your marketing organization performs the following activities with your customers. In comparison with our main competitors, we: (Seven point scale: −3=much worse; +3=much better).

Routinely establishing a “dialogue” with target customers.

Get target customers to try our products/services on a consistent basis.

Focus on meeting customers’ long term needs to ensure repeat business.

Systematically maintain loyalty among attractive customers.

Routinely enhance the quality of relationships with attractive customers.

Brand Management Capabilities

Please indicate how your marketing organization performs the following activities with your brands. In comparison with our main competitors, we: (Seven point scale: −3=much worse; +3=much better).

Routinely use customer insight to identify valuable brand positioning.

Consistently establish desired brand associations in consumers’ minds.

Maintain a positive brand image relative to competitors.

Achieve high levels of brand awareness in the market on a regular basis.

Systematically leverage customer-based brand equity into preferential channel positions.

Financial Performance

Relative Return on Assets was calculated using objective data from Compustat, A.M. Best Insurance Reports and Dun and Bradstreet.

Relative Return on Assets (ROA) is calculated as: Firm ROA—Industry segment ROA at 4 digit SIC level.

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Vorhies, D.W., Orr, L.M. & Bush, V.D. Improving customer-focused marketing capabilities and firm financial performance via marketing exploration and exploitation. J. of the Acad. Mark. Sci. 39, 736–756 (2011). https://doi.org/10.1007/s11747-010-0228-z

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