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Scale to measure the level of customer orientation

This paper reports an exploratory study on the validation of measure of market/customer orientation that has been suggested by Deshpandé and Farley (1999) resulting from their study undertaking a Meta-Analysis of three market orientation scales. On the other hand, we are also trying to validate the scale suggested and employed by Dawes (2000) to measure the industry's customers' views and perceptions about the financial sector institutions responsiveness. However, although our findings lead us to accept the scale suggested and employed by Dawes (2000) to measure customers’ level of satisfaction, a number of corporate as well as individual customers expressed their dissatisfaction with the level of service provided to them. On the other hand, our findings also indicate that we have to add two more items to the scale suggested by Deshpandé and Farley (1999). These two items were added as a result of CEO’s and marketing executives’ suggestion and views of what constitute a customer/market-oriented organization in their industry. However, it is worth noting here that reviewing the literature covering the measurement and scaling issues may reveal various issues that must be considered.

Literature review

Based on our literature review a number of issues must be pinpointed here. Some researchers criticized the way the variables have been measured including the definitions and the measures of reliability and validity of what have been used to measure the various constructs (Churchill, 1979). Others claim that despite the various empirical supports for market orientation, no one model that has been suggested, which can precisely and adequately measure market orientation in different contexts (Gray et. al.,1998). In addition, those who have employed the cultural approach they did not include or suggest measures related to the organizational culture (Webster, 1994a; Harris and Ogbonna, 1999). However, the other studies have employed subjective measure while others have employed both subjective and objective measure for the relationship between market orientation and performance (See Narver and Slater, 1990; Greenley, 1995b; Dess and Robinson, 1984; Robinson and Pearce, 1988). Furthermore, other researchers criticized the absence of customer satisfaction measure, and claim that even when such measure included, business organizations has fallen short in measuring it (Woodruff, 1997).

In fact, Raaij and Stoelhorst (2008) argue that even though Narver and Slater scale (MAKTOR) and Kohli et al. scale (MARKOR) have been employed by several researchers either in their original forms or as the basis for adopted scales, both scales have been criticized for various reasons but the most important for not being useful as a diagnostic tool (See also Gabel, 1995; Wensley, 1995; and Steinman et al., 2000; Van Bruggen and Smidts, 1995; Selnes et. al., 1996).

However, it is clear from the literature that there are a contradicting views related to the scales that have been employed to measure the level of market orientation in different contexts. Therefore, we tried to find out whether the 10-item scale suggested by Deshpande’ and Farley (1999) have been tested in different context with different level of market and economical development, but was not able to do so. According, we decided to employ this scale and obtain the content validity through the conduction of interviews and focus groups in different context, which might lead the researcher to contribute to the body of knowledge. Furthermore, the qualitative research approach might provides insights covering the views and perceptions of service providers in different context related to what in their opinion would constitute a market-oriented business organization.

Therefore, the researcher is also going to validate the scale employed by Dawes (2000) to obtain the customers’ perception of the level of market orientation in the business organizations. Accordingly, the researcher intends to obtain the content validity of the scale in this context through focus groups discussion. Therefore, this study will combine both perspectives: (Organization & Customer), and will be conducted in resource based economy which only two studies have been undertaken in such context (Bhuian, 1997 and 1998).

Methodology

We have obtained the complete list of financial institutions registered with the Kingdom of Bahrain Central Bank. Based on this list we sent an official letter addressed to the CEO of 141 financial institutions explaining the purpose of the research, and inviting them to participate in the focus groups. Letters were addressed to 24 Retail conventional Banks, 55 Wholesale conventional Banks; 6 Retail Islamic banks, 21 Wholesale Islamic Banks, 27 locally incorporated Insurance Companies, 6 Investment companies, and 2 overseas insurance companies. All of the above selected institutions were representing the entire list in their category except the investment companies and the overseas insurance, which were selected at simple random approach from their categories (the entire population list attached). This was followed by follow up process through emails and telephone calls to ensure that a reasonable response is obtained. However, seven focus groups were conducted with total participations of 35 representing retail and wholesale banks, insurance companies, and investment companies. However seven institutions’ representatives could not attended the focus groups and kindly was able to spare sometime for interviews have been interviewed. In addition, ten institutions were not able to either attend focus group discussion or spare sometime for interview were asked only to go through the final 12-item scale and confirmed their acceptance that statements are clear and can measure the level of customer/market orientation in the financial sector. Therefore, the total response to our investigation was 52 institutions representing almost 36.9% of our sample.

On the other hand, convenient sapling approach has been employed for individual and corporate customers’ sample. Based on the list of the registered industrial and commercial institutions with the Bahrain Chamber of Industry and Commerce, we invited 20 industrial companies and 20 commercial companies and 8 attended the focus group for corporate customers, and 5 have gone through the 5-item scale and all of them confirm that the scale can capture their views and perceptions of the financial institutions’ level of customer orientation. Furthermore, convenient sample of 20 individuals were invited to participate in the focus group and eight have attended it. All focus groups and interviews transcripts were typed based on the recording of both.

Findings and discussion - Financial Institutions

The data collected through the focus group sessions and interviews was rich and thorough providing a holistic picture of industry views of what constitute a market or customer-oriented financial institution. In addition, the researcher was able to obtain insights about what these institutions are doing in order to enhance their level of customer orientation. Our findings also indicated that there are different levels of customer orientation within this sector. However, our analysis of the qualitative data collected through the focus groups and interviews can be categorized in various categories that indicate the elements of customer/market orientations as viewed and perceived by the financial service providers. The findings also show that certain related issues and activities have been emphasized more than others by the financial institution executives.

Intelligence generation

Most financial institutions especially in the banking and investment companies emphasized that intelligence generation is critical in order to be updated with changes occurring in the market, their customers’ expectations, needs, and preferences, their competitors’ activities, and general macro and micro-environments. Intelligence generation covered various sources for information including market research, Newspapers and magazines, professional journals, conferences, receptions, and attending other events. One banking executive explained it, and I quote:

“We have two types of activities for gathering intelligence. Gathering related information through the newspaper, through the scientific articles about Banking, about financial organizations, new product development and they are just reporting to us. In addition, we gathered information through attending various events, workshops and seminars, in addition to market research”.

Our findings provide further evidences that support previous studies, which have been undertaken in different context even in the most developed economies such as Western countries (See Kohli and Jaworski, 1990; Narver and Slater, 1990; Jaworski and Kohli, 1993; Slater and Narver, 1999; Lafferty and Hult, 2001).

Internal/External Communication

Most financial institutions have also emphasized the importance of enhancing communications whether between front line and back office (support) employees or between the various functional areas in each organization. A CEO of an investment company said and I quote:

“We do keep our employees and managers fully aware of all the new products, market information, and up-to-date customers’ information to enable them to answer any enquiry or questions raised by any of our customers. This is because when such product or service discussed at different levels and across the various departments’ knowledge is shared and contribution is facilitated”.

The above certainly provides more support for various findings and conclusions reported previously by various studies findings and conclusions emphasizing the importance of the inter-departmental connectedness fostered by internal communications (See Kohli and Jaworski, 1990; Narver and Slater, 1990; Jaworski and Kohli, 1993; Kohli et. Al., 1993). In addition, our findings clearly support the argument that enhancing the communications with customers as well as other stakeholders play an important role in keeping customers and other stakeholders well informed and updated about the service providers activities, existing and new products, and encouraging them to actively communicate with their service provider.

Top Management Commitments

The top management support and commitments through the explicit and implicit signal sent to the managers and staff that understanding customer needs and expectations through continuous market sensing, coordinating the various functional areas efforts to design its response, and serving customers through the creation and delivery of superior value to them is of utmost importance to their business success is crucial (Kohli and Jaworski, 1990; Jaworski and Kohli, 1993; Day, 1994b; Harris, 1996; Harris and Piercy, 1999; Kirca et. al., 2005).

However, our findings lead us to conclude that top management support is recognized by the financial sector as an important antecedent that facilitates the adoption of customer/market orientation philosophy.

One Retail Bank executive said and we quote:

“The question is whether this is enough and can be achieved without top management commitment that would foster and facilitate focusing on providing superior value to customer by the entire organization”.

Organizational/Corporate Culture

Despite that the scale suggested by Deshpandé and Farley (1999) is not explicitly included statement that measure the organizational culture and its impact on the level of market orientation adopted by the business organization, some of the statements included in the scale are “describing the norms that operate in businesses” (Deshpandé and Farley, 1999, p. 233). Furthermore, if one accepts that norms that operate the business would influence the level of being customer or market oriented, then changing such norms would facilitate the implementation of changes required to become market oriented organization (Lichtenthal and Wilson, 1992). However, there was total congruence among the participants that a statement to be added to the scale explicitly measuring the impact of the organizational culture (See Narver et al., 1998; Kennedy et. al. 2003; Gebhardt et. al., 2006). Furthermore, one can argue that statements number seven and ten in the scale are implicitly measuring the organizational culture that guide the managers and employees behaviors toward being customer-focused and disseminate gathered information to foster the organizational response to such information.

In fact, a CEO of a retail bank claim and we quote:

“Organizational culture that facilitate being customer-oriented is important and particularly within the financial sector if you don’t have the right corporate culture, I don’t believe that you can win.

Organizational strategy, structure, and systems employed

Our findings indicate that the organizational structure and the various systems employed to facilitate the organizational process also play a major role to foster the adoption of customer/market orientation concept within the business organization (See Ruekert, 1992; Pelham and Wilson, 1996; Martin et al., 1998; Becker and Homburg, 1999; Harris and Ogbanna, 2001b; Homburg et. al., 2004). In fact, most participants emphasized the importance of the formulated strategy, the organizational structure, and the various systems employed within the organization. However various participants have pinpointed how important these issues for their organizational success in being customer-oriented service provider. As one marketing executive explained it, and we quote:

“In addition, having the right systems in terms of your MIS that allow you to integrate the entire generated intelligence, the suitable structure that facilitate the implementation of your strategies, and employing an appraisal and reward system that evaluate managers and employees performance based on factors such as customer satisfaction, customer retention, new customers gained, and overall quantitative and qualitative performance measures is important”.

Measuring Customer Satisfaction

Our findings also indicate that various organizations are actually measuring customer satisfaction. This has been undertaken either internally by the service provider organization or through a third party. However, while this activity considered as an integrated part of intelligence gathering process, respondents have emphasized the fact that understanding the level of customer satisfaction allow them to understand the customer expectations and the shortfalls in their services and process. As one retail bank executive claim and we quote:

“We continuously and every quarter measure our customer satisfaction. We have dedicated yearly budget for this activity. …. We want to know our position in the customer perception, where are we standing in the market for some specific products? We are trying to understand their expectations, we are trying to make services and process more effective, make it more feasible to maintain the highest satisfaction level”.

Responsiveness to inquiries and complaints

Our findings also show that the service providers in the financial sector consider the promptness in answering customers’ inquiries or handling their complaint and provide them with the required feedback. As one marketing executive claim, and we quote:

“As soon as the customer walked into our premises, employees meet him properly, decently and ask him about his enquiries, needs, and want. In fact they would ask him if he or she need something extra or additional services.

Furthermore, business organizations’ responsiveness whether to the generated intelligence or to customers’ inquiries and complaints has been emphasized by various studies as well as the respondents representing the financial sector within this context (Kohli and Jaworski, 1990; Jaworski and Kohli, 1993; Kohli et. al., 1993; Narver and Slater, 1990; Ruekert, 1992; Day, 1994b; Day, 1999; Deshpandé et. al., 1993; Slater and Narver, 1995).

Organizational Environment

Our findings also indicate that various service providers within the financial sector consider the organization’s friendly atmosphere and environment enhances the team spirit, connectedness, and cooperation and coordination not only among the various functional areas and department, but also among managers and employees in each department and with other departmental employees. This was evident in their organizations’ social events, through their cross-departmental meetings, internal workshops and seminars, and their annual organizations’ dinners. They argue that such friendly environment is reflected not only in the level of cooperation and coordination, but also on the way they deal and treat customers. As one Investment Company marketing executive explained it, and we quote:

“And all your internal communication being passionate about your work and this is part of their day to day interaction with customers and among the employees and managers. It is part of their day to day work basically. A customer friendly culture is important as well, but we should not forget that a satisfied employee would be able to satisfy customers”.

In addition, our findings lead us to understand that employee training and career development is important, but what is more important to them is that all employees understand and appreciate the marketing discipline and the activities associated with it. According to them, this can enhance the employees’ appreciation and acceptance that our customers are the focal point. A retail bank marketing executive explains it, and I quote:

“So what is really important is I think is to get people in the organization to understand how important customers are. At the end of the day we do not have business if we do not have customers”.

Findings and discussion - Financial Institutions’ customers

Our findings from the focus groups that have been conducted with corporate and individual of the financial institutions customers indicate some contradiction in their perceptions of the level of satisfaction, hence the level of customer orientation among the financial institutions. However, all of them including those who received a copy of the scale and went through it have agreed that scale is suitable to measure the customers’ satisfactions with the financial institutions services provided to them. Accordingly, we thought that as the scale suggested and employed by Dawes (2000) to measure customer responsiveness scale was accepted as it is, and because the scale was purified previously we are going to use it as it was originally suggested.

Furthermore, in order to present the contradiction of the respondents’ views and perceptions we are quoting some of their statements recorded during the discussion. A general manager in an industrial factory said and we quote:

“Simply, when we decided to use a bank services, they showed that they really responsive to our requirement. Recently, we have our requirement for small facility something of about BD. 5 million to finance our expansion. A bank offered us the best terms for the loans; so we proceed with them and signed the initial agreement. Now we need the money to start, but the number and magnitude of complications and additional conditions they required are so complicated and were not put forward clearly to us at the time of signing the initial agreement”.

On the other hand, the individual customers also provide indications that some of them are holing very negative attitudes in relation to the services provided to them by banks and insurance companies.

One banks and insurance company customers said, and we quote:

“How often do you go to the bank? All the services are available either ATM or e-banking. I mean I don’t remember the last time I visit the bank. But on the other hand, we do not hear anything from the bank unless the loan is over. Even when the loan is over they will not bother to give you the certificate, you have to visit them and ask for it.”

Our discussion with various customer obtaining financial services indicate that the financial institutions whether banks, investment companies, or insurance companies tend to be focusing more on their corporate customers and major accounts, which can be understandable due the amount, size, and magnitude of the business and revenue generated through these customers.

Conclusion

Finally, we conclude that the rich data collected allow us to thoroughly understand what constitute a customer or market-oriented financial service provider in this context as viewed or perceived by the industry various management levels. It also provide us with the opportunity to obtain at least the content validity of the 10-items scale and add two items to the original scale, which we are going to purify at a later stage of the study.

However, and as mentioned above we present the scale suggested by Deshpandé and Farley (1999) including the two additional statements related to the organizational culture and systems, which was actually suggested by respondents during the first focus group discussion to all participants and we obtain total congruence that the 12-items scale is suitable to capture the true level of customer/market orientation within the financial service providers in this context (See appendix 1).

Therefore, and based on this exploratory study, we suggested a conceptual model that consists of four variables namely, intelligence gathering, organizational/corporate culture, organizational strategy and structure, and organizational internal communication. There are three factors (3-itms, in the scale) measuring each of these variables (See appendix 2).

Furthermore, before we administrate the questionnaire and even before we pilot test it, we intend to obtain the academicians views and opinions of whether or not we need to undertake an exploratory factor analysis after adding these two items. The list covers those researchers who have conducted research in this area including Professor Deshpandé and Professor Farley who have suggested the original scale based on their work during 1999.

Limitations

In addition to the time consumed by conducting focus groups and in-depth interviews, we faced problem of securing the participation of CEO’s, executives, and managers due to their preoccupation with their day-to-day work that sometimes even when they have planned to attend a last minute issue would prevent them from being able to participate. Therefore, major limitation of this exploratory study was the limited of respondents attending the discussion. Furthermore, even though we were able to obtain the entire list of population for the financial institutions from the Kingdom Central Bank and were able to streamline it with the Chamber of Commerce list, it was impossible because of the Central Bank regulations to obtain the financial institutions customers’ list. Therefore, one can expect the introduction of bias into the sampling procedure for selecting the corporate and individual customers approach. Finally, it worth also noting hear that somebody can argue whether obtaining the academics and practitioners opinion would be enough to replace undertaking and exploratory factor analysis before administrating the institutions’ self reporting questionnaire.

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