Marketing Innovation free essay sample

A brief literature Review Innovation is widely regarded as a vital source of competitive advantage in an increasingly changing environment. In today’s vibrant and ever changing competitive environment which is characterized by high degree of technological progress innovation capability is the most important determinant of firm performance. Although, technological innovations are important for developing new products and to maintain survival strength, yet they are not sufficient for turning any firm into dominant economic player in the market. According to a paper prepared from the Danish Centre for Studies in Research and Research Policy (2005), innovation has become more market driven and less Ramp;D driven following the market orientation of the firms nowadays. Innovation policy has taken on a broader scope, increasing emphasis on â€Å"non-technical† forms of innovation, market driven innovation, knowledge transfer and firm’s capacity to capture and utilize knowledge. The broad premise of this literature suggests that the ability to innovate is a â€Å"key mechanism for organizational growth and renewal†. We will write a custom essay sample on Marketing Innovation or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page In times of environmental turbulences such as during an economic crisis, the need for innovation has been recognized as imperative to survive, be it a technological or marketing. The ability to innovate in marketing has recently gained in prominence as one such dynamic competence that distinguishes firms which outperform their competitors. Most studies examining market orientation have investigated a direct relationship with performance. However, a few others have inferred innovation as a moderating variable between market orientation and performance. This paper extends this debate by suggesting that the link between marketing innovation and firm’s performance is mediated by the ability of the firm to develop and sustain a competitive advantage. Competitive advantage, for the purpose of this study, is defined as â€Å"a value creating strategy not simultaneously being implemented by any current or potential competitors† This literature review studies the basic aspects of marketing innovation within the framework of marketing orientation. 1. Market Orientation and Marketing Innovation: Motivation Levitt (1960) in his pioneering paper â€Å"Growth and Profits through Planned Marketing Innovation† studied the exploration and development of new arketing procedures by companies. He criticized the absence of any dedicated marketing inventions and development departments in the big companies which leads to the missed and exhausted opportunities. Further, most of the marketing innovations were unintentional, spontaneous or fortuitous. The problem stemmed from the fact that product innovation had completely overshadowed the marketing innovation leading to the situation where â€Å"distribution† becomes the bigges t problem for such companies. The main obstacles in giving increased importance to dedicated marketing innovation is the threat of its eventual overshadowing product innovation, lack of any backgrounds for carefully planned experimental and speculative activity in marketing innovation, difficulty in controlling the way product is sold in supermarkets or departmental stores. Additionally, the visible effect of marketing innovation has to be proved under highly unstable conditions of open market experiment, which is quite expensive, especially if the trial is honest and full-scale, even though limited to a few test areas. To overcome this sorry state of marketing innovation, he proposed various solutions such as, recognition by top-management that marketing innovation is an uncompromising aspect of sales and profits, setting up a marketing development task force, giving it a reasonably permissive environment and most importantly the dedicated personals who are energetic, bold, rational and nonconformist who have no corporate or strong personal ties to continue the present marketing schemes. . Significant Features Chen (2004) in â€Å"Marketing Innovation† provides the economic analyses of marketing innovation in a dynamic oligopoly model. This paper provides an economic analysis of marketing innovation. Variants of a dynamic oligopoly model are developed to study two forms of marketing innovation: which allows a firm to acquire consumer information effectively; and ; which reduces consumer transaction costs. The study concluded that within a duopoly market structure, an increase in competition intensity reduces the value of the marketing innovation to acquire consumer information but may increase the value of the marketing innovation to reduce consumer transaction cost . The innovation incentive is higher for a large firm than for a small firm if imitation is sufficiently difficult, and otherwise the opposite is true. Increased competition reduces the value of but may increase the value of. Relative to the social optimum, the private incentive is too high for but too low for . Human amp; Naude (2009) in â€Å"Relationship or Innovation orientation in B2B markets: Empirical results from an emerging market† considers the association of innovation orientation and relationship orientation with the firm performance in business-to-business (B2B) markets simultaneously and in particular examines the mediating effect of innovation on the relationship orientation-firm performance relationship. By employing published scales for innovation and relationship orientation, cross-sectional data were collected from 181 business-to-business managers in South African firms. Confirmatory factor analysis was used to test for scale reliability and validity, while the hypothesized relationships between constructs were considered through structural equation modeling and partial least squares analysis. The results suggest that practitioners and researchers should pay attention to both orientations simultaneously, because jointly they are associated with better firm performance. This study demonstrates a significant positive relation between innovation orientation and performance, as well as between relationship orientation and performance. In addition, research showed the mediating effect of innovation orientation on the relationship between relationship orientation and firm performance. The results also suggest that higher levels of performance are possible for firms that achieve an increased integration of innovation and relationship orientation. Likewise, firms that score low on both these Abstract preview orientations perform worse. Therefore, the study suggests that business-to-business firms need both an innovation orientation, as well as a relationship orientation. By integrating these strategic orientations, firms may enhance their performance beyond what may be possible by adoption only one of the orientations. Peter et. al. in â€Å"Lessons learned about marketing in micro firms† develop an understanding of how micro firms handle their marketing. The guiding research questions are: Which are the marketing challenges micro firms encounter and how are they handled? Which principles guide the owner-managers of micro firms in their marketing efforts? The empirical study is based on ten case studies of micro firms which include repeated interviews with each of the owner-managers of the micro firms. The method of sampling is purposive with a clear intention to attain diversified and rich data from firms operating in various businesses. Data collection occurred in two phases: an explorative and a verification phase. The study concluded that the micro firms wrestle with the same types of challenges as do any other firm or organization. Moreover, common goals and purposes of marketing seem to be attained also by micro firms. However, one can notice some discrepancies in how marketing is handled in practice, as compared to existing marketing literature. The first lesson to be learned about marketing in micro firms is that activities that by tradition have not been related to marketing can in a micro firm setting have a considerable marketing impact. The results revealed that marketing in micro firms is about long-term, gradual development of a position on the market. This implies that the micro firm is characterized by organic growth, where the development of the firm occurs little by little in accordance to what the cash flow permits. This organic growth process is characterized by two distinct dimensions which we have chosen to label as â€Å"earning your position† and â€Å"being your brand†. Efi (2010) in â€Å"Marketing Innovation Measurement† studies the marketing innovation measurement; using established scorecards from Europe, US and Australia and also alternative approaches. Although, there are many differences between the analyzed approaches; some common points are proposed so as to indentify the new trends in innovation measurement in marketing field. The study concluded that the evolution of marketing could be described as a product lifecycle. After World War II marketing concept started replacing the prevalent selling concept (â€Å"hard sell†) with an outside-in perspective based on profits through customer satisfaction (â€Å"customer is king†). Consumers could afford to be more selective and enterprises, used to sell what they produced, should start selling what customer needs. Marketing concept dominated around 1950 and continued growing throughout the enterprises till its value started being questioned. Despite of its redefinitions, marketing innovation may not be able to keep its dominant position following the classical product lifecycle to the decline stage. During the last decades technological innovations have been recognized as an important driver of performance. Although, existing marketing concepts have been incorporated in the launch of these innovations, a considerable part of new product failures is contributed to the lack of a new marketing concept. In other words, technological innovations demand a corresponding change in marketing. Apart from the need to act as complimentary to traditional forms of innovation, marketing innovations have proved to be strong enough to enable especially SMEs to compete effectively larger enterprises. 3. Implementing Marketing Innovation Pang (2010) undertook study titled â€Å"Marketing Innovation Implementation† a case study of Chinese Pharmaceutical Company. The thesis focuses on the implementation process of marketing innovation. The thesis is built on a literature study on marketing innovation and a case study of a marketing innovation project in the Chinese pharmaceutical company Guizhou YiBai Pharmaceutical Co. Ltd The data were being collected by interviews and questionnaires Due to the long distance, make on-site interviews could not be conducted so the interviews were being conducted through internet using SKYPE, MSN and e-mail. The studies summarize some useful elements for successful marketing innovation implementation. Some positive elements which are useful for the implementation of marketing innovation are paying attention to the neglected market, Segmenting markets, Information, Public relationship, Provide value to customer’s Combination of market factors, Marketing channels and technology. The study also reveals some negative elements and their effect in marketing innovation like cost, Uncertainty of market, information leakage, imitation and overdependence on experience. The found when implementing a marketing innovation project, companies should pay more attention to the external environment and that technology is an important element in marketing innovation 4. Chief Advantages of Marketing Innovation Lee et. al. , [2010] in â€Å"The influence of knowledge management and marketing innovation strategies on marketing performance† discussed the positive influence of knowledge management and marketing innovation strategies on marketing performance, taking the example of the biggest and the most representative Taiwan’s funeral service company – Lung Yen. The rise of customer self-consciousness has brought forth consciousness of autonomy which consists in people’s demand for quality and variety. In order to increase the enterprise’s competitiveness, it has become crucial to have knowledge management and market sensitivity to make business strategies that can help an enterprise cope with the ever-changing market environment, enhance its competitiveness, and provide help in examining internal organization coordination. In Management guru Peter Drucker view, only the customers truly understand the market; therefore, enterprises must carry out exhaustive market investigation and analysis to understand customer behavior by constantly asking them questions, and anticipate their possible future needs, going from a passive marketing approach to an active one. The importance of this aspect has gradually gained recognition in the corporate world. Acknowledge construction model composed of 7 procedures: create, identify, collect, adopt, organize, apply, and share. This knowledge management helps in adopting effecting marketing innovation. Authors contend that innovation is not equal to creativity but is the practical application of creativity, helping the organization to achieve its aims in a more efficient way. Drucker viewed that the term of innovation is basically non-technological in nature, and ought to belong to economic or social sciences; innovation should mean â€Å"change in the value and satisfaction obtained from resources by the customer†. It may also be said that only what is valuable for economy or society can be called innovation. In the framework of the study, two types of creation in marketing innovation strategy, namely, production innovation and marketing method innovation are proposed to explain the structure of marketing. The fact that knowledge management and marketing innovation strategy are both latent variables that cannot be measured by value means that research in this regard is subject to limitations, and author’s way of bypassing this problem consists of dividing these two variables into five explicit variables or sub-dimensions. Knowledge management† is divided into knowledge absorption, knowledge sharing, knowledge storage, and â€Å"marketing innovation strategy† into product innovation and marketing method innovation: the five sub-dimensions being used as the dimensions for measurement. The empirical results of the study show that knowledge management and marketing innovation strategy both have positive influence on marketing performance. Furthermore, the study uses sales growth rate as a measurement index, illustrating the possibility to change the way performance is measured, for example, by adding financial performance indexes (ROE or ROA). Naidoo [2010] in Journal for Industrial Marketing Management investigates the importance of marketing innovations for small and medium manufacturing enterprises (SMEs) in withstanding the challenges of operating under the current economic conditions where the global manufacturing sector is collapsing due to economic downturn. The case-study is done for Chinese SMEs. The need for innovation has been recognized to withstand the gales of creative destruction, more so, in times of environmental turbulences such as during an economic crisis. For cash-strapped manufacturers operating in the grips of the current economic crisis (often, but not always, SMEs), marketing innovation can present an attractive strategy (given its relative affordability) to attempt reversing the flow of declining sales. The logic of marketing innovation emphasis sales growth by shifting consumer demand from elastic to more inelastic market segments through the delivery of better value (actual or perceived) to the consumer. Further, Innovation is the mechanism for firms to ensure that strategic assets are hard to imitate by competitors and hence the marketing innovation capability of a small-to-medium manufacturer is positively related to its competitive advantage. This competitive advantage of a small-to-medium manufacturer is positively related to its survival. Three key findings are derived in the study. First, the examined Chinese manufacturing SMEs had a greater perceived likelihood of survival had they developed and sustained a competitive advantage. Second, marketing innovation assisted in developing and sustaining competitive advantages based on differentiation and cost leadership strategies. Third, marketing innovation capabilities improved when the examined manufacturing SMEs were competitor oriented and had good inter-functional capabilities. 5. Further Advantages and Future Studies Erdil et. al. , (2004), in their paper entitled â€Å"The relationships between market orientation, Firm innovativeness and innovation performance† addresses the issue of interrelationships between market orientation, firm innovativeness and innovation performance. Three dimensions of market orientation, namely a) collection and use of market information (), b) development of market –oriented strategy and c) implementation of market oriented strategy are measured. Factor analysis is used to validate the measures of market orientation, firm innovativeness and innovation performance. A correlation analysis is performed to determine whether market orientation is associated with firm innovativeness and innovation performance A survey was conducted in order to evaluate the propositions listed above. The data has been gathered by using structured questionnaire forms distributed to and collected from executive managers of a sample of industrial firms in the Marmara Region. The study utilized collection and use of market information, development of market-oriented strategy and implementation of market oriented-strategy scales of Gima (1995) with six, four and three questions respectively. Firm innovativeness was measured with four questions adopted from Hurt and Teigen (1977), Hollen-stein (1996). The data were analyzed by using SPSS 10. statistical program and factor analysis, reliability and correlation analyses were utilized in order to evaluate the relationships between the variables. The study finds that the Collection and use of market information () is positively correlated with the development of market-oriented strategy and the implementation of market-oriented strategy. Furthermore, development of market-oriented strategy is positively correlated with the implementation o f market-oriented strategy. Collection and use of market information () and the development of market-oriented strategy are correlated positively with the innovation performance. Implementation of market-oriented strategy is not correlated with the innovation performance. The analysis also indicates that firm innovativeness and innovation performance are correlated positively. Given the consistent interactions between the dimensions of market orientation and firm innovativeness and innovation performance, we would argue that efforts of firms to enhance the collection and use of market information and implementation of market oriented strategy is especially important to companies that want to gain competitive advantage. The findings suggest that market orientation can lead to firm innovativeness and increase innovation performance. Market orientation as a driver of organizational market information processing activity should be incorporated into conceptualizations of innovation process. Furthermore, findings indicate that firm innovativeness is related to innovation performance for the sample data. These findings support the predicted relationships between market orientation and innovation performance. The results suggest that a firm with a market – orientation is likely to improve its innovation capacity and performance. The three dimensions of market orientation, market intelligence generation, development of market oriented strategy and implementation of market oriented strategy are important for innovation performance. Garcia 2011 in his studies â€Å"The relevance of marketing in the success of innovations† focuses on marketing expenditures and their relation with Ramp;D investments and innovative sales. The analysis is based on the micro data from the third wave of the Community Innovation Survey (CIS 3) covering 18 European countries: Belgium, Bulgaria, Czech Republic, Germany, Estonia, Spain, Finland, Greece, Hungary, Iceland, Italy, Latvia, Lithuania, Norway, Portugal, Romania, Slovenia and Slovakia. The period covered by this survey is 1998-2000. The research was carried out in the SAFE center at Eurostat in Luxembourg. The paper uses Community Innovation Survey data, the third wave (CIS 3) and set up a system of simultaneous equations like in Crepon et al. 1998). This paper finds empirical evidence that marketing expenditures explain a lot of the success of the innovation 0. 5 to 0. 7% (measured in terms of the elasticity of this effort to innovative sales), even more than the flow of investment in Ramp;D (which counts for 0. 3 %). The study reveals that the size of the coefficient for marketing doubles than those found for Ramp;D, a quite surprising result taking into consider ation the little importance that marketing has in innovation studies.