engleski

The impact of market driving strategy on firm performance

Numerous examples of companies that have achieved exceptional success by changing consumer preferences rather than just responding to them indicate an important area for deeper theoretical understanding. For example, Durex has engaged in consumer education getting them motivated to address their health issues rather than just promoting the brand. MTV, Consumer Digest and Cosmopolitan have developed their business precisely based on consumer education on how to make choices, i.e. what is important to consider, and consumers voluntarily turn to them for advice when needing to make choices. In our contribution we focus on understanding aspects which firms can influence in order to alter consumers’ decision making processes. We ground on market driving ideas of Jaworski et al (2000) and see market driving as an important strategy for achieving competitive advantage, complementing the existing predominant view that firms should be responsive to existing market preferences (Jaworski, Kohli, & Sahay, 2000 ; Carpenter & Nakamoto, 1994). It is defined as the extent to which a firm invests resources (time, money, effort) in changing the consumer mindset in a way that enhances the benefit consumer perceives from the focal product. Besides providing an aggregate perspective on market driving, by following generic decision-making model (Kotler & Armstrong, 2009) complemented with research on categorization (Viswanathan & Childers, 1999 ; Alba & Hutchinson, 1987), we also provide an analytical approach by differentiating between three levels at which market driving can affect consumers: need, category and attribute. Need driving is defined as the extent to which a firm invests resources in enhancing consumers’ motivation to satisfy needs that can be addressed by the firm’s products. Category driving is defined as the extent to which a firm invests resources in enhancing consumer’s perceived opportunity to satisfy a particular need by using the focal category as compared to any alternative category. Attribute driving which is defined as the extent to which a firm invests resources in enhancing the relative weights that consumers give to attributes on which the firm’s product outperforms its competitors (i.e. other products in the category). Results from the data on marketing managers participating in executive education programs in two European countries indicate that market driving should be actively pursued as a strategy. However, it is not a simple strategy but rather a highly complex endeavor. Although when using aggregate market driving construct, there is a significant impact on sales growth, taking the analytical perspective shows that less abstract market driving approaches (i.e. needs and category driving) have yielded stronger results. Needs driving, as a more abstract market driving approach, requires high expertise and longer time horizons for expected returns. Our results are robust when controlling for firm’s growth strategy, market focus, competitive intensity, firms market driven orientation, and radicality of product innovations. Market driving holds a promise of growth for companies but requires well planned and executed educational campaigns altering consumer preferences. Firms have a possibility (and even responsibility) to educate consumer on how to make the best choices, regardless of how one defines “the best”. Our research contributes existing literature in several ways. First, we have provided clear definition of market driving and discussed market driving in an analytical manner. Market driving is not just a response to latent customer needs but a daring strategy of altering consumer decision making by modifying their needs and preferences. We test the theoretical relationship between market driving and performance and provide evidence that market driving and driven strategies should be used simultaneously since they enable firms to compete on consumer preferences in short term while competing over consumer preferences in the long run. Well planned and executed market driving activities hold a promise of creating a “perceptual monopoly” where consumers put the greatest weight on focal aspects thus making competitors relatively less important. Such approach enables the firm to be active leader on the market rather than just a follower who responds to market conditions. It is important to recognize the risks that market driving bears, especially since its effects are expected to surface after the effects of being market driven. In that sense, firms should be willing to accept these postponed rewards for their efforts.

market driving; strategies; market driven

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