Exploring proactive and reactive market orientation strategies and their implications on businesses

A company that takes too much time to respond to a change in the business environment is susceptible to a shortfall of profits. Sometimes it may result in loss of market share due to a competitor already in the process of implementing the strategy which was being planned by the company. It may also happen that the company may have to shut down or prune some of its business lines due to the inability to oversee changes in market behaviour or a breakthrough in technology leading to the current technology capabilities becoming obsolete.

Companies following stringent procedures, in terms of having a strong research capability, a strategic planning system in place, proper business intelligence tools to help make key decisions and employing specialists, for example marketing co-ordinators and analysts to predict changes in consumer patterns and the environment, have a competitive edge over their competitors.

A proactive company is the one who foresees these changes and has the action plans ready to face them. These companies are well prepared and have information from various sources, to counter any discrepancies in the business environment. A reactive company on the other hand responds after the event has taken place and has little preparation or anticipation of such changes.

However, no company can rely on being either completely proactive or reactive in its orientation. Ideally, a company must use both strategies to respond effectively with a minimum response rate. A reactive company uses market surveys and questionnaires to gauge customer insight and satisfaction levels.

Based on the recorded feedback and analysing consumer trends, the company works on improving their services and products and focuses on the key improvement areas highlighted by the consumers. For instance a Fortune 500 food company gathers continual customer and employee feedback from e-mails, submitted survey forms and other documents. This feedback is collected from thousands of disparate sources on a real time basis. This feedback is then analysed using sophisticated tools, and thereafter strategies and process improvements are designed based upon the observations.

This is an example of an effective reactive strategy used to improve customer satisfaction. It includes understanding and meeting customer’s expressed needs. In fact companies like Mindshare Technologies assist large corporations in implementing comprehensive feedback mechanisms by deploying Enterprise Feedback Management Solutions, which captures customer feedback from disparate sources on a real time basis and has powerful reporting tools for intelligent decision making and reporting.

Although this is very important and companies must use this strategy to gain insight and feedback on their products and services, sometimes companies tend to rely too much on this data and hence innovation takes a backseat. Most critics argue that reactive companies tend to lag behind when it comes to high speed innovation and satisfying the latent needs of consumers.

This is where companies following a proactive orientation have a distinct edge over their counterparts. They use extensive methodology like brainstorming, anticipating market trends, analyzing customer demand patterns, using sophisticated planning, and encouraging innovation at all levels in the organization. These firms are constantly finding new ways of providing customer delight by fulfilling the latent needs of consumers and hence creating a differentiating factor, which in turn harness the company’s brand image and improves customer equity.

Organizations like 3M, HP and Motorola have made it a practise to research and fulfil latent needs of consumers by adopting the ‘probe and learn’ philosophy and encouraging innovation at all levels within the company. Technology firms tend to be more inclined towards a proactive orientation, since there is a high scope for innovation and design of value added features and solutions. Consider industries like biotechnology, whose core focus is research and development and hence it is primarily proactive in nature. However due to the large influence of marketing in today’s business environment, a large number of biotechnology firms are using a market oriented approach and they do keep this in mind while moving forward.

A research was conducted to find out which approach was more effective in case of new product development. A sample of technologically diverse companies was taken, and the relationship of new product success with both proactive and reactive orientations was recorded. It was seen that to create and sustain new product success, only reactive market orientation was not sufficient and a proactive market orientation plays an important role in the success of a new product offering.

A company solely relying on customer responses is one step behind and carries a risk of losing both market share and brand equity from a competitor who provides value added latent features at competitive prices. The company following reactive orientation is taking a risk of solely relying on customer expectations and stated needs, which are not necessarily static and are always changing. It also provides little opportunity for consumers to experience ‘delight’ and hence loses out on customer loyalty and brand equity.

However every coin has two sides and so has both proactive and reactive orientations. There is another risk of customer acceptance of these latent features. Many times it may happen that a customer is not willing to pay the premium for these features or does not see it as a significant benefit or a differentiating factor. In this case the company may lose out on profits due to additional costs of rolling out the value additions and loss of customers. A strong research capability reduces this risk and increases the probability of market acceptance of these latent features.

It is important for companies to adopt both strategies and follow a total market orientation by strengthening both its proactive and reactive capabilities. Such companies are well prepared to face changes in the business environment, and are even pioneers and innovators, who eventually revolutionize the way people use a certain product or technology.