Introduction
When examining what company has lost touch with its consumer base, the best example that can be seen at the present is the fall of Blockbuster and the subsequent rise of Netflix within the past 10 years. What is notable in this particular case is that Blockbuster originally had a dominant position in the U.S. market. It has 3,000 stores and controlled 95% of the video rental market, but it is interesting to note that its business model did little to change over time (Knee, 2011).
Blockbuster stores were notable for their large selection of movies and games. However, they tended to be overly spacious and placed in an equally large parking lot with few surrounding stores. Such a scheme resulted in high sales over a period of 15 years. However, it must be questioned whether the sales were a result of its business model or just the sheer proliferation of its stores and the dominant position it enjoyed in the market (Gandel, 2010).
When examining how Blockbuster dealt with local competition, it was obvious that they did so by offering a wider selection, cheaper prices and more attractive looking stores in order to gain more consumers. Not only that Blockbuster also enjoyed a rather healthy relationship with several studios which enabled it to release movie rentals faster than its competitors could have which resulted in more consumers coming to Blockbuster as a result.
The fall of Blockbuster
By the late 1990s, it was obvious that Blockbuster was competitor centered in maintaining its dominant position that it neglected to examine changes within its consumer base (Gandel, 2010). By this time, faster internet speeds were becoming available to the general public which, along with the proliferation of home computer systems, resulted in more people turning towards the internet for their needs.
In fact, it was at this point that online e-commerce systems which enabled consumers to make purchases online started to proliferate which enabled new companies to enter into previously hard to enter markets due to the flexibility and low cost nature of online sales and consumer marketing.
When Netflix began its online video rental service in the latter half of the 1990s, this gave consumers a faster and more convenient method of video rental which subsequently eroded away at Blockbuster’s market position till by 2005 to 2009 when Netflix released its online video streaming service this could be considered the “final nail in the coffin” so to speak resulting in the dominance of Netflix and the complete erosion of Blockbuster’s previously dominant position (Knee, 2011).
Strategy to maintain balance between competitor and customer orientations
While the book in class maintains the view that “the customer is king”, the fact is such that a marketing strategy cannot be practiced at its fullest. The reason behind this is the fact that businesses do not operate within a vacuum and have to deal with intense competitive environment forces on an almost daily basis.
What must be understood is that there are three components to market orientation that dictate how a company acts within a competitive environment, these are: customer orientation, competitor orientation, and inter-functional coordination. In the case of customer orientation, a company spends what resources it has in gathering data on the needs and behaviors of various consumers, the same can be said for competitor orientation.
However, it focuses on competitors instead (Ward & Lewandowska, 2008). What must be understood is that either method has a distinct weakness. Focusing too much on consumer orientation can actually blind a company to changes in the market or may actually stifle innovation since the company focuses too much on consumer satisfaction rather than changing based on trends (Xueming & Seyedian, 2003).
Focusing too much on competitor orientation, on the other hand, results in too much time and capital being placed on competitive activities which results in companies at times neglecting their consumer bases and focusing too much on getting ahead of the competition.
On the other hand, both methods also have their own respective strengths such as the customer orientation strategy being more effective in uncertain markets whereas competitor oriented strategies become effective in fast growing markets (Xueming & Seyedian, 2003).
The best way to maintain a balance between the orientations is to first create a market intelligence mechanism that gathers consumer information and disseminates it within the company and secondly is to encourage the free flow of information within the organization. What must be understood is that market orientations tend to become ineffective when organizations are mired in bureaucratic nuances which prevent information from being passed on quickly (Kumar, Jones, Venkatesan & Leone, 2011).
By allowing information to freely flow within an organization this increases its ability to respond to changes in the market and enables it to respond to these changes in an effective manner. One company where such strategies are evident can be seen in the case of Whole foods Inc. which combines both competitor and customer orientation strategies in its business model.
This is evident by its focus on providing consumers with cheap and healthy selections which change depending on consumer preferences within a particular location while at the same time it utilizes a competitor oriented strategy by having prices which are marginally lower than other competitors in the health food market. It must be noted though that a company’s strategies do change over time depending on changes within the market.
For example, as mentioned earlier customer orientation strategy are more effective in uncertain markets whereas competitor oriented strategies become effective in fast growing markets, the inherent problem with this is that markets tend to change over time as seen in the case of Netflix. As such, when markets change, this necessitates changes in orientations as well with companies at times shifting towards either customer oriented or competitor oriented strategies (Kumar, Jones, Venkatesan & Leone, 2011).
Reference List
Gandel, S. (2010). How Blockbuster Failed at Failing. Time, 176(15), 38-40.
Knee, J. A. (2011). Why Content Isn’t King: How Netflix became America’s biggest video service—much to the astonishment of media executives and investors. Atlantic Monthly (10727825), 308(1), 34.
Kumar, V., Jones, E., Venkatesan, R., & Leone, R. (2011). Is Market Orientation a Source of Sustainable Competitive Advantage or Simply the Cost of Competing?. Journal Of Marketing, 75(1), 16-30.
Ward, S., & Lewandowska, A. (2008). Is the marketing concept always necessary? The effectiveness of customer, competitor and societal strategies in business environment types. European Journal Of Marketing, 42(1/2), 222-237.
Xueming, L., & Seyedian, M. (2003). Contextual Marketing and Customer-Orientation Strategy for E-Commerce: An Empirical Analysis. International Journal Of Electronic Commerce, 8(2), 95-118.