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Journal of Market Focused Management, 4, 43–76 (1999)

c 1999 Kluwer Academic Publishers, Boston. Manufactured in The Netherlands.

The Customer Concept: The Basis for a New

Marketing Paradigm
JANNY C. HOEKSTRA j.c.hoekstra@eco.rug.nl
Professor of Direct Marketing at the Erasmus University, Rotterdam, and Associate Professor of Marketing at the
University of Groningen, The Netherlands

Professor of Marketing at the University of Groningen

General George Rogers Clark Professor of Management and Marketing at Yale School of Management,
New Haven, USA, and Professor of Marketing at the University of Groningen


Recent developments in both marketing theory and marketing practice make it necessary
to formulate a new marketing paradigm. This paradigm consists of three elements: (1) a
concept, which is the core of the paradigm, (2) a set of activities, and (3) a domain. The
customer concept is the new marketing concept. It is a management orientation which
maintains that firms establish relationships with selected individual target customers with
whom superior customer values are designed, offered, redefined and realized in close co-
operation with other partners in the marketing system such as suppliers and intermediaries,
in order to realize long-term profits through customer satisfaction, partner- and employee
satisfaction. The new marketing activities include decisions with regard to the firm’s stated
vision, objective(s), strategy, organizational structure, culture, information system, market-
ing instruments, business processes and human resource management. The new marketing
domain encompasses the broader interpretation of marketing as the central concept in the
behavior of the firm. The customer concept implies a reorientation of marketing to one that
places the customer in a pivotal role.
Keywords: marketing paradigm, new marketing, customer-based marketing, customer focus, relationship mar-

1. Introduction

In this paper we discuss the validity of existing marketing paradigms and propose a new
paradigm. The new marketing paradigm consists of three elements: a concept (orientation),
a set of activities (decision), and a domain (field of research). The concept, which is
labeled the customer concept, is mainly based on the realization of superior customer
values where the individual customer is the starting point. The values are designed, offered,
redefined and realized in close cooperation with partners in the marketing system such as
customers, suppliers and intermediaries. The adoption of this concept directs the (new)

marketing activities. The new marketing domain encompasses the (broader) interpretation
of marketing as the central concept in the behavior of the firm.
The adoption of an explicit focus on the customer presents multiple advantages over pre-
vailing orientations. We envision that the characteristics of a customer management system,
consistent with the customer concept, will encourage managers to track customer purchases,
measure customers’ satisfaction levels and survey customers’ unmet needs continuously.
Instead of having a separate department responsible for new-product development, as tends
to exist under the brand management system, a firm using a customer management system
would integrate all marketing activities. By combining hard (e.g. purchase) and soft (e.g.
satisfaction and preference) data, a customer manager will escape the myopic perspective
brand managers tend to adopt. Importantly, the soft data will have more impact on deci-
sions as managers learn to trust those data better in a continuous collection and updating
environment. And by focusing on customers instead of brands, managers will better un-
derstand how customers may react to new marketing activities by other firms which will
reduce unnecessary competitive reactions.
We propose that under the customer concept sellers will increasingly recognize customer
heterogeneity in needs, preferences, decision-making criteria, etc., and provide values that
truly allow for individual customer utility maximization.1 We believe that firms that are
confronted with developments in the market environment must make adaptations in their
vision, objectives, strategies, structure, culture, their information systems, their marketing
decisions, their business processes and their human resource management to realize superior
customer value that leads to customer satisfaction. The customer concept is an evolutionary
concept which may not be embraced by all firms. This depends on the degree to which
the market environment is stable, the degree to which there is a relationship potential in
the market (Christy et al., 1996), customer buying patterns are changing and also on the
firm’s current and future core competencies. In an extreme form changes have to be made
consistent with the adoption of a customer-intimacy value discipline (Treacy and Wiersema,
The framework we propose is intended to help managers in the adaptation of organiza-
tional elements to the changing environment. In section 2 we briefly indicate the more
fundamental changes in the market environment. In section 3 we describe the development
of marketing in the changing environment. In section 4 we critically evaluate existing
marketing paradigms and concepts. We provide a precise definition of the new marketing
paradigm in terms of concept, activities and domain in section 5. In section 6 we describe
implications of the new paradigm for (marketing) management and we summarize critical
differences between the new and classical marketing by contrasting the elements of the two
approaches. We end with a research agenda in section 7.

2. Changes in the Market Environment

The marketing environment changes more quickly than ever in the history of modern mar-
keting. Important changes in the macro environment of many firms refer to economic,
demographic, political, legal and technological variables. Partly as a consequence of these
developments, today’s companies are confronted with fundamental changes in the behav-

ior of the ‘4 C’s’: Customers, Competitors, Channel Members and the Company. This is
reflected in changing relations between these publics.
The growth of income in many countries results in weakened relations between income
and expenditures on services and product categories such as clothing, cars, holidays and
household appliances. This development and the trend of customer individualization make
it difficult to identify market segments for product or marketing differentiation based on
household characteristics. Today’s marketers are confronted with more demanding cus-
tomers, rapidly changing customer buying patterns (Buttle 1996), customers with increasing
environmental and health concerns (Leeflang and Van Raaij, 1995; Ottman, 1995), subcul-
tures penetrating in existing subcultures and an older (greying) population. Consumers face
a global marketplace and can choose among a large variety of products and services from
producers throughout the world (Webster, 1993).2 Manufacturers of consumer goods are
confronted with an increasing bargaining power of their channel members such as whole-
salers and/or retailers. There is an increasing concentration in retail outlets in the EU
nations: a smaller number of outlets accounts for a growing proportion of revenues. We
also see increasing cooperation between chains in different countries (Leeflang and Van
Raaij, 1995).
The competition in many markets is fierce and becomes more international. There is
a tendency for European consumers to prefer pan-European brands (Leeflang, Van Raaij,
1995). Not only manufacturers but also retailers are confronted with these tendencies of
internationalization. At the macro level, changes in the nature of competition are facilitated
by economic blocks such as NAFTA, ASEAN and the EU. As a consequence of the political
integration, marketers are confronted with new laws and regulations.
Probably the most critical changes occur in the technological realm (Blattberg et al.,
1994; Molenaar et al., 1996; McKenna, 1997). These changes have consequences for the
competitive structure in many markets, the relations between parties in the market system
and the gathering of data about the needs, wants and capabilities of these parties. The costs
of processing data have decreased drastically in recent years, enabling many organizations
to build and maintain customer databases. Such data can be used to find distinctive features
of target markets, and to trace needs and preferences which can be used to modify existing
products/services or to develop entirely new products or services. Also, developments
in data compression, digital production, storage and transmission facilitate the transfer of
large quantities of data. New media such as the Internet provide managers the opportunity
to build databases consisting of individual interactions, such as information search within
Web sites and actions taken (request for information, order of goods or services) (Hoffman
and Novak, 1996). This information can be used to interpret the wishes and preferences of
customers, enabling delivery of better, tailor-made products, services and communication,
both in terms of content and medium (Schultz, 1994).

3. Marketing in a New Environment

Broadly speaking, the role of marketing in a market economy is to facilitate exchanges

(Sweeny, 1972; Bagozzi, 1975, 1978). This definition should be independent of time.
However, the manner in which marketing is carried out seems to depend strongly on the

environment. For example, until the introduction of mass production, exchange relations
were limited by the modest supply of goods. Mass production (an activity that can be
characterized by the product concept) resulted in mass marketing with initially little need
for product differentiation. As Henry Ford said “customers can have any color they want for
their automobiles as long as it is black.” But while Ford continued to look for opportunities
to improve the efficiency of production, Sloan recognized that customers did not all want
the same automobile.Thus, General Motors emphasized product differentiation thereby
allowing customers to purchase the type of car that provided a closer fit to income, family
size, and other individual characteristics.
Markets became more saturated in the U.S. in the thirties. Management attention shifted
from “production” and “the product” to the selling of products (the selling concept). Here
selling emphasizes how a salesperson can convince customers to purchase something they
might or might not have otherwise been interested in. The selling concept focuses on the
methods and techniques for selling products and services. The customer’s role is a relatively
passive one. In this era, marketing would take the customer as a party to whom something
is to be sold, and the brand management system was introduced by Procter & Gamble in
this era. This concept dominated until the early fifties. Its life cycle was extended by the
second world war. Sellers could choose from many unsaturated markets for the production
and marketing (i.e. selling) of products and services.
With the occurrence of higher degrees of market saturation, the marketing concept was
introduced. This concept is based on the premise that, at least within established product cat-
egories, producers benefit from an understanding of customer needs and preferences. Thus,
if producers first survey the market, quantify heterogeneity in preferences, and produce
goods or services based on this knowledge, exchanges will be more effective and efficient.
Market segmentation is a pivotal activity under the marketing concept. Segmentation refers
to the approach that consists of grouping customers according to similarity in preferences
(or other characteristics believed to relate to preferences). Under the marketing concept,
marketing takes the customer as a party for whom products and services are developed with
the objective to satisfy customer needs at a profit.
Perhaps consistent with the emphasis on market segmentation, firms in many consumer
goods industries, especially frequently purchased ones, adopted the brand management
organization. In this system, a manager has responsibility for a given brand. It is the
manager’s task to manage this brand as well as possible, in the sense of defining the target
market, measuring consumer preferences and perceptions, choosing advertising campaigns,
developing promotional programs (for the trade and the consumer) and instituting pricing
strategies. Each brand manager can also, to a limited extent, consider product modifications
and product-line extensions. Under the most favorable conditions, brand managers assess
heterogeneity in consumer preferences, explore trends in these preferences, and modify
product ingredients that allow them to build sustainable competitive advantages. Within
the last decade the brand management system has been changed somewhat at many firms
in recognition of the fact that the competition between brands offered by the same firm
may be counterproductive. Now a category manager can modify the decisions that would
otherwise be made by brand managers operating independently, if coordination is expected
to produce a superior result for the firm (Zenor, 1994).

Although the brand management system is very popular, it suffers from serious short-
comings. For frequently purchased consumer goods, A. C. Nielsen and IRI have developed
elaborate and detailed market feedback systems. The client specifies the relevant set of
brands, and the market research firms provide volume, market share, and other data on
these brands gathered from traditional distribution outlets. These systems assume that for
a given product category, the set of relevant brands is static3 and that only the purchases
occurring in traditional distribution outlets (or the outlets with scanner-based measurement
systems) matter. Such a feedback system forces brand managers to focus on products and
competitors more than on consumers. The system also encourages managers to maintain
competitive parity. Furthermore, brand managers’ incentive systems emphasize volume
and market share more than profit. And since the feedback system excludes information on
unmet needs, new-product development is usually a separate activity. Thus, while brand
managers focus on a limited set of possible marketing activities for existing brands, new
products have to be generated elsewhere in the organization. In general, the brand manager
is not encouraged nor rewarded for the identification of unmet needs that can be exploited
for new-product development.
These shortcomings become more serious as product markets become more dynamic,
distribution outlets become more diverse, more informative feedback systems become fea-
sible, and consumers demonstrate more heterogeneity in purchase and consumption behav-
ior (O’Driscoll and Murray, 1998). We envision that the implementation of a customer
management system will force managers to become explicitly focused on the customer in
the sense of current purchases and current satisfaction levels but also in the sense of future
oppportunities (re: unmet needs). Relative to a brand management system, it will be less
competitor oriented, less product oriented and less static.
Due to these and other developments, the relations between parties in the marketing system
change (Grover, 1996; McKenna, 1991; Weitz and Jap, 1995; Williams, 1994). Tradition-
ally relations between the Company, its Customers, Competitors and Channel members can
be represented as demonstrated in figure 1. These relations tend to be unidirectional, are
often of an ad hoc nature, and are often anonymous.
Recent developments in information and communication technology offer opportunities
to change the nature of relations between a company and its parties as is suggested in figure 2.
Relations become closer, more selective and may become so familiar that the term intimacy is
used (Treacy and Wiersema, 1993). This intimacy results from careful study, or investigation
of the opportunities of the relevant parties (Webster, 1993). The relations become multidi-
rectional, tend toward continuous interactions and may be individualized. In figure 2 we al-
low for cooperation between manufacturers (the Company) and suppliers in areas which are
known as reverse logistics (Magrath, 1993) and reverse marketing (Leenders and Blenkhorn,
1988). Efficient consumer response (ECR), level loading (Karmarkar, 1996), category man-
agement (Nielsen, 1992; Zenor, 1994) and channel member involvement in new-product
development reflect the cooperation between manufacturers and intermediaries.
We focus especially on the relations between manufacturers and customers,4 which have
become of more intimate. Some examples are:

• There is a tendency to involve potential customers in new-product development (Griffin

and Hauser, 1993; Pine II et al., 1995). Philips NV, the Netherlands-based electronics

Figure 1. Traditional relations between parties in a marketing system.

Figure 2. Intimate relations between “marketing,” its customers, channel members and constituencies (within the

giant, now develops on-line interactive products for children. Children are invited to
brainstorm for ideas and test the resulting new-product idea (McKenna, 1995).

• Two-way communication has been established between customers and suppliers using
(charge-free) telephone numbers which are connected with service desks (Philips, Gen-
eral Electric) or through direct mail and face-to-face contacts with (potential) customers
(Nestlé’s baby- and children products, Molenaar et al., 1996).5

• Through mass customization, customers are offered the opportunity to have tailor-made
products or services assembled from a large choice of parts, delivered through a made-
to-order service (Webster, 1993; McKenna, 1995; Pine II, 1993; Gilmore and Pine II,
1997). An example is the Japanese Bicycle Industry which has its customers compose
their own bicycle from more than 11 million possible combinations of parts. The bicycle
is largely assembled by robots and shipped to the dealer or directly to the customer (Hart,
1996). Dell builds personal computers to order, and Toyota is developing a system that
will allow individual customers to select features for a car which can be delivered at
the customer’s home address a few days after the order is made (Webster, 1993).

• There is interest in the development of integrated data systems on consumer choices,

customer satisfaction and unmet consumer needs (Wade, 1996). We can now track
individual consumers in a cost-effective manner and estimate current and future profit
contributions separately for each consumer. It is conceivable that firms which lead in
this new way of thinking modify the competitive nature of industries similar to how
General Motors overtook Ford when it introduced product differentiation.

• Electronic shopping and home delivery. Companies like Peapod and Streamline6 allow
their customers to organize, in a customized fashion, their shopping behavior electron-
ically. Even though the users of Peapod’s services have to pay extra charges (Peapod
does the shopping and delivery), customers say their total grocery expenditures are
often reduced. This reduction is an unintended by-product and appears to be realized
because customers have an opportunity to design the shopping experience for their own

Today’s customers have concepts of value that go beyond some combination of quality and
price: other components include aspects such as convenience of purchase, after-sales service
and supplier dependability (Treacy and Wiersema, 1993; Webster, 1994, p. 282). Delivering
customer value implies that projections should be made of future customer needs and
preferences. Projected movements in future customer behavior should influence competitive
strategies. The competitive strategies should be based on current core competencies (Hamel
and Prahalad, 1994; Webster, 1994), and profitable investments in competencies given the
projections of customer preferences. Also, organizational structures should be determined
in a manner that is consistent with these core competencies and the chosen strategy. By
making customers the central focus in choosing competitive strategies, it is also critical
that intimate relations between the marketing department and other functional areas are
established. In prevailing marketing paradigms, the marketing function and marketing
activities are largely restricted to the marketing department. Given the need for cooperation

between all parties in a marketing system, the marketing function has to be re-organized so
that the entire organization can become market-oriented (Grönroos, 1994b). In this respect,
internal marketing in the company is an important vehicle.

4. Existing Marketing Paradigms

Disciplines evolve through the progressive refinement and articulation of an accepted

paradigm (Day and Wensley, 1983, p. 81). A paradigm can be described as a loose con-
sensus regarding the fundamental nature of a discipline. The marketing concept, with the
allied notions of customer choice and customer satisfaction related to the marketing mix,
represents the traditional marketing paradigm. Paradigms have to be adapted when dis-
crepancies between the accepted wisdom and reality become too large to be ignored, or
there are too many problems that cannot be solved by the paradigm. What is then needed is
a shift to other rules and procedures: a shift to another game (Kuhn, 1962). We agree with
Grönroos (1994a), Gummesson (1998), O’Driscoll and Murray (1998) and Piercy (1998)
that there is increasing discrepancy between marketing theory and practice.
In our view a marketing paradigm consists of three elements: (1) a concept (idea, philos-
ophy, vision, orientation), which is the core of a paradigm, (2) a set of activities (decisions;
marketing management: the implications of the concept), and (3) a domain (area, field
of research where the concept and its implications are applied).7 In the literature the term
‘marketing’ is used for each of these elements, and the term ‘paradigm’ is often used for
an aggregate description, which disallows differentiation between concept, activity and
domain. Some authors (e.g. Kotler, 1997) implicitly make a distinction between several
elements, while others (Day and Wensley, 1983; Grönroos, 1994b; Webster, 1994) use the
concepts interchangeably. The description of the concepts elicits ‘the loose consensus’
about the marketing discipline.
Following the market developments we described above, as well as the changing relations
between parties, we recommend that the new marketing paradigm:

1. be directed to the realization of individual customer values and the redefinition of these

2. encompass the intimacy between partners in the marketing system and, as a conse-
quence, focus on relationships instead of on transactions;

3. match customers’ preferences and the firm’s capabilities;

4. force the fit between customer values and the firm’s capabilities to be based on a market
feedback system which measures the behavior, the satisfaction, and unmet needs of
individual customers continuously;

5. reflect the idea that marketing is a state of mind which is not restricted to one functional

6. stimulate the internal organization to be constantly monitored and adapted to changing

needs and preferences of customers, and always take the customer as the focal point.

Marketing concepts and paradigms described in the literature do not satisfy the specified
criteria. Kotler’s (1997, p. 27) ‘enlarged’ definition of the marketing concept holds that:
“the organization’s task is to determine the needs, wants, and interests of target
markets and to deliver the desired satisfactions more effectively and efficiently than
competitors in a way that preserves or enhances the consumer’s and the society’s
This societal marketing concept replaced the well-known marketing concept which in its
turn emerged from the selling concept, and the product concept. All these philosophies are
competing concepts under which present organizations conduct their marketing activities.
Marketing management is defined as:
“the process of planning and executing the conception, pricing, promotion, and
distribution of goods, services and ideas to create exchanges with target groups that
satisfy customer and organizational objectives” (Kotler, 1997, p. 15).
The definition of marketing as a social and managerial process
“by which individuals and groups obtain what they need and want through creating,
offering, and exchanging products of value with others” (Kotler,1997, p. 9)
can be interpreted as a description of the marketing domain.
If we apply the desiderata, specified earlier, it is clear that the concepts defined by Kotler
(1997) do not reflect the characteristics of the proposed new marketing paradigm.8 Extant
concepts are static, and do not represent the intimacy between partners in the system with
whom activities are designed. There is also an emphasis on the capabilities and instruments
of the marketing department and there is no explicit attention for requirements with respect
to the internal organization.
In 1983 Day and Wensley proposed an “integrative paradigm” which says that:
“The marketing function initiates, negotiates and manages acceptable exchange
relationships with key interest groups or constituencies in the pursuit of sustainable
competitive advantages, within specific markets, on the basis of long run consumer
and channel franchises” (Day and Wensley, 1983, p. 83).
The integrative paradigm focuses on: 1) exchange relationships between sellers and buyers.
Furthermore, it gives explicit attention to: 2) competitive forces and, 3) the dynamic aspects
of marketing’s role in the organization. Also it is grounded in: 4) a constituency-based
theory of the firm. In this integrative paradigm no distinction is made between ‘idea,’
‘activities’ and ‘domain.’ Furthermore it does not reflect the idea that marketing is a state
of mind (it is seen as a function). Although the concept focuses on exchange relations it is
defined from the point of view of the firm, that initiates and wants to realize only its own
goals. So, no attention is given to the realization and the redefinition of individual customer
values. Customers are seen as one of the key interest groups at the aggregate level.
Such criticisms also apply to a paradigm articulated by Grönroos (1990, 1994a, 1994b).
He states that the “marketing mix management paradigm” is losing its position, because it
constitutes a product-oriented definition of marketing: the customer is somebody to whom

something is done, not for whom something is done. It misses adaptability, flexibility and
responsiveness. The organizational consequences (a separate marketing department) are no
longer useful, even counterproductive. According to Grönroos the answer lies in building
customer relationships, in addition to using the four P’s. Grönroos develops a marketing
strategy continuum, with relationship marketing at one end, and transaction marketing at
the other. Relationship marketing is seen as one of the new “paradigms.”9 Its definition is:
“to establish, maintain, and enhance relationships with customers and other partners,
at a profit, so that the objectives of the parties involved are met. This is achieved by
a mutual exchange and fulfillment of promises” (Grönroos, 1990, p. 138; 1994b).
Webster (1994, p. 9–10) introduces a loose description of the marketing concept:
“a statement of organizational culture, an agreed-on set of shared values among the
employees of a company representing a commitment to put the customer first in all
management and operational decision making.”
His concept reflects the idea that a customer focus should be created throughout the business.
The building of customer relationships and loyalty and the intimacy between partners in
the marketing system receives much attention in Webster’s monograph. However, Webster
does not define his key ideas into a new paradigm. The same holds, for example, for the
description of the relationship marketing paradigm by Gummesson (1998).
Cravens et al. (1997) propose five characteristics of a market-driven strategy:
1. developing a shared vision about the market and how it is expected to change in the
2. selecting avenues for delivering superior customer value to customers;
3. positioning the organization and its brands in the marketplace using distinctive compe-
4. recognizing the potential value of collaborative relationships with customers, suppliers,
distribution channel members, internal functions and competitors; and
5. reinventing organizational designs to implement and manage future strategies (Cravens
et al. 1997).
Although these characteristics and our proposed marketing paradigm have some points in
common, Cravens et al. do not focus on the realization of individual customer values. Also,
they do not integrate these characteristics into a marketing paradigm.
Thus we conclude that recent developments in marketing’s theory and practice are not
reflected in well-known and articulated marketing paradigms. There is a need to define a
new paradigm.

5. A New Marketing Paradigm

We propose the customer concept as the basis for a new marketing paradigm. In this
concept, the customer is the central element. Strategy should be aimed at realizing superior

customer value, and business objectives should be stated in terms of the customer (e.g.,
customer satisfaction). Research is needed to demonstrate that, or under what conditions,
the financial consequences of the achievement of such objectives are indeed favorable. One
way to guarantee favorable financial consequences is if marketing selects customers to be
served in such a way that the marginal contribution to profits provided by the least attractive
customer during his/her customer lifecycle is positive, and there is nobody remaining who
can be profitably served. Hence, the market feedback system must show the behavior,
the satisfaction, and the unmet needs of individual customers. Data on purchase behavior
should focus on the share of customer, i.e. the part of the relevant budget allocated to seller’s
items based on expenditures at all possible outlets for a given type of product or service.
Survey data of purchases in nonconventional outlets will be an essential component of this
system, and such data need to be integrated with the individual consumer’s purchase data
currently gathered. This integration is essential because fundamental changes in exchange
relations may occur outside the distribution channels for which the market feedback is
currently obtained by A. C. Nielsen (ACN) and IRI for frequently purchased consumer-
goods products. Of course, companies such as mail-order firms, and business-to-business
firms that employ direct channels of distribution, collect their own individual customer
data. In general, however, this concerns customer interaction data with regard to purchases,
responses to direct communication and complaints. Under the new paradigm, their market
feedback system should also include data on satisfaction, unmet needs, and allow for the
calculation of share of customer (Hoekstra and Huizingh, 1996).
The new paradigm emphasizes an enhanced role for the manager of customers. The
enhancements consist of the explicit consideration of customer motivations, satisfaction
levels, and unmet needs, in addition to purchases. The manager is charged with continuous
innovation. Heterogeneity in consumer preferences must be exploited maximally given
the opportunities for mass customization (Gilmore and Pine II, 1997; Kahn, 1998). While
market researchers have focused on heterogeneity in preferences for product and service
characteristics, it will also be important to identify heterogeneity in purchase selection.
For example, grocery retailers design the shopping environment in a way that guides the
consumers through the store so as to maximize retailer sales (or profits). Thus, here the
consumer is still someone to whom things are sold in a way that is unlikely to match the
consumer’s interest in utility maximization. The problem is comparable to the disadvantage
consumers have in traditional price negotiation with a skilled and experienced automobile
sales person. The latter disadvantage is reduced with the advent of fixed prices (e.g.,
Saturn) and the relatively easy access consumers now have to dealer cost via the Internet.
In grocery retailing consumers face an almost impossible task in finding the best item for
them in a given product category. Products are positioned on shelves in a manner that
rarely reflects consumers’ interests. Since consumers have heterogeneous utility functions,
implying heterogeneous comparison processes, there is also no way for retailers to customize
the layout in the current setup. However, the distribution of many goods is increasingly
occurring outside the traditional outlets (DMA, 1998), and the grocery store will not be
an exception. Grocery stores can either offer expanded services, such as home shopping,
themselves or allow other companies to do so. The advantage of the former is that retailers
will be able to develop a more complete understanding of their customers. This should

result in the customer concept being about marketing activities that are designed together
with the customer.
Partly due to the globalization of markets, it is becoming more difficult for firms to
maintain a unique position with regard to product characteristics. Consumers can purchase
many items as easily from distant places as locally. As a result, differentiation will have to
come from associated services. With an enhanced emphasis on services in general and with
the broadening concept of customer value, marketing activities that were traditionally the
responsibility of the marketing people will become part of every employee’s responsibility.
This requires a change in the organization culture, which should be one in which the (se-
lected) customer always comes first. Business processes should be monitored and improved
constantly in order to make them as efficient and effective as possible in delivering superior
customer values. Every function should be defined in terms of how it helps in creating and
delivering these values.
The new marketing paradigm encompasses the customer concept, new marketing activi-
ties and a new marketing domain. The customer concept is the new marketing concept. It is
a management orientation which maintains that firms establish relationships with selected
individual target customers with whom superior customer values are designed, offered, re-
defined and realized in close cooperation with other partners in the marketing system such
as suppliers and intermediaries, in order to realize long-term profits through customer-,
partner- and employee satisfaction. The fit between customers’ preferences and company’s
capabilities is based on a market feedback system which measures the behavior, the satis-
faction and unmet needs of individual customers. The adoption of the customer concept
directs the (new) marketing activities.
The new marketing activities will be maximally efficient in the exploitation of hetero-
geneity in customer needs and preferences. An extreme scenario consists of the planning,
implementation and control of production on order, of products or services that match
the customers’ preferences at prices they are willing to pay, with exchanges facilitated
by two-way communication and just-in-time promotions, and distribution based on cus-
tomers’ specifications. Strategically, the choices of target customers and values will be
influenced by a firm’s core competencies and favored value discipline(s). Also, logical
relations between the firm’s stated vision, objective(s), strategy (value discipline), orga-
nizational structure, culture, information system, marketing decisions, business processes
and human resource management should be fully exploited. Generally, the focus needs to
be on managing customers, not products, with a balanced allocation of investment expen-
ditures between keeping current and attracting new customers, and differential treatment of
customers based on expected lifetime values.10
The new marketing domain encompasses the broader interpretation of marketing as the
central concept in the behavior of the firm. In both marketing practice and marketing science
a core concept consists of the exchange relationships between the firm and its customers
and other key interest groups. The relationships are intended to realize exchanges of money,
products, services, information, etc. between the parties in the system. In the new marketing
domain the relationships are characterized by integration and participation. A focus on
relationships implies that every employee in a firm has his/her own responsibility for
creating superior customer value. Individual customer-, partner- and employee satisfaction

can only be realized if requirements are met in the fields of organization culture and structure,
leadership styles, human resource management and design of business processes. These are
fields that, under the preceding marketing concepts, were not a part of the domain. Because
of their close interrelatedness with the marketing objectives, strategy and activities, and
because the customer concept can only exist if requirements in the fields mentioned are met,
these subjects form an integral part of the marketing domain under the customer concept.
The customer concept is an evolutionary concept which may not be embraced by all firms.
This may be illustrated through a consideration of the value disciplines introduced by Treacy
and Wiersema (1993): operational excellence, product leadership and customer intimacy.
Firms that choose operational excellence aim to be leaders in price and convenience. They
are continuously seeking ways to minimize process costs, to eliminate intermediate pro-
duction and transaction steps and to optimize business processes for maximum efficiency.
Although there are some examples of firms that excell in operational excellence and at
the same time maintain close relationships with their market (e.g. Staples, see Treacy and
Wiersema, 1993), the pursuit of low costs leaves little room for realizing individual cus-
tomer values. Therefore, these firms may use the more classical marketing concept as a
basic orientation.
The objective of a firm that pursues product leadership is to produce a continuous stream
of state-of-the-art products and services, by which one’s own technology may be rendered
obsolete. This discipline is strongly R&D-driven, which may make it difficult to develop
discontinuous innovations with the customer (as the customer concept would imply). In-
novative ideas are commercialized quickly, before competitors do. In the value discipline
of product leadership, the role of marketing is to facilitate acceptance of innovations. Ex-
tensive financial resources may be required for the necessary investments, a large scale of
production is useful to recover the investments, and (mass) advertising helps to establish the
organization’s reputation and to educate customers. These characteristics may be difficult
to combine with the customer concept, and firms pursuing product leadership may also use
the more classical marketing concept.
Firms that deliver superior customer value in line with a customer intimacy value discipline
however will want to adopt the customer concept to the full extent. They continually tailor
products and services to individual customers’ needs. Although this is an expensive strategy,
they do not focus on the value of single transactions but rather on the customer’s lifetime
value to the company. The customer concept is the most natural concept for the value
discipline of customer intimacy. This is illustrated by the Ritz-Carlton hotel, which records
the unique habits, preferences and dislikes of each of its guests in a corporatewide database,
and uses this information to customize the questions asked and services offered. As Hart
(1996) states: ‘Ritz-Carlton is closing in on the concept of delivering exactly what you as
an individual customer want. (This is) something planned and coordinated, the result of a
carefully designed strategy, which is embodied in a management system that combines a
focus on individual guests’ needs, information technology, flexible processes, empowered
employees and—perhaps most important—continuous learning about guests’ needs gleaned
by observing them over time.’
Although we stated that the customer concept will not be embraced by all firms, we
propose that no matter which value discipline a firm chooses, the customer concept will

play an increasing role for many firms in their trade marketing strategies. Kraft (USA),
for instance, tailors its advertising, merchandising and operations in single stores within
a supermarket chain to those stores’ particular needs (Treacy and Wiersema, 1993). This
strategy is beneficial for the store and for Kraft: inventories are reduced, and the right
product is delivered to the right place at the right time. If customization takes hold, and at
least one firm in a given industry establishes long-term relations with the ‘best’ customers,
it may be difficult for other firms to maintain traditional ways of doing business.

6. Implications for Marketing Management

We elaborate on the new marketing paradigm, and consider implications in terms of orien-
tation and activities.
Adopting the customer concept has consequences for the following nine aspects of (mar-
keting) management: 1) vision; 2) objective; 3) strategy; 4) structure; 5) culture; 6) infor-
mation; 7) decisions; 8) business processes; 9) human resource management. We discuss
each of the nine aspects in detail and we confront the characteristics of each of these under
the customer concept with the characteristics under the marketing concept.


A shared vision by all employees on all levels throughout the organization is the answer to
the question: “What do we want to create?” (Senge, 1990). A common vision raises the
aspirations of everyone in the firm and it creates an identity (Griffin, 1995). AT&T’s shared
vision was the omnipresent telephone service, while Ford had the vision of the man in the
street owning his own car. Under the customer concept, the answer to the question is centered
around creating superior customer value for a selection of (potential) customers, with whom
things are created and realizing customer-, employee- and partner satisfaction. This implies
that companies who adopt the customer concept should select customers consciously. Every
employee—not just the marketing department—influences customer value, everyone is a
‘part-time marketeer’ (Gummesson, 1987). Under the customer concept, marketing is a
state of mind or an attitude rather than a function (Gummesson 1998).
The transition to the adoption of the customer concept is a lengthy process. In order to
persevere, the organization and its employees need a lot of energy. A shared vision not
only provides the direction of change, but also provides the ‘fuel’ needed to persevere.
Therefore, the new marketing paradigm can only be realized if everyone in the organization
shares the same vision, and is putting the customer’s interest first. (See table 1).


The selection of an appropriate objective is a key element of the success of any organiza-
tion. Recent research results suggest that the objective should be stated in absolute rather
than relative terms, perhaps because relative objectives (e.g. market share) force managers

Table 1. Vision.

Marketing Concept Customer Concept

Product/Service Quality Customer Value
Target Group Focus—to whom Customer Focus—with whom
Self selection of customers Conscious selection of potential
Marketing is a function Marketing is a state of mind

Table 2. Objectives.

Marketing Concept Customer Concept

Sales orientation Profit orientation through customer-, employee- and partner satisfaction
Selling products/services Delivering superior customer value
Market share Customer share
Short-term Long-term
Attracting customers Retaining customers
Transactions Relations
Value of single transactions Customer lifetime value

to be excessively focused on a narrow and static set of competitors. Armstrong and Col-
lopy (1996) argue against the adoption of objectives stated in relative terms. Their field
research results indicate that firms with objectives stated in relative terms tend to be less
profitable and less likely to survive compared with other firms. Relative objectives may
encourage managers to maintain parity (or some constant distance) on various instruments
assumed to be relevant to maintaining market share. Price wars and other battles are likely
For the purpose of motivating employees, a customer-based objective is desirable. For
example, Xerox has adopted customer satisfaction as the ‘number one priority.’ The firm’s
belief is that both market share and profit will improve with the attainment of higher
customer satisfaction scores (Harvard Business School, case 9-591-055), consistent with
findings by Anderson et al. (1994). In companies that offer a wide range of products to final
consumers, objectives are formulated in terms of customer share, which is translated in e.g.
“share of wallet” by financial institutions or “share of stomach” by restaurants or producers
of food products (Heskett et al., 1994). We already mentioned the emphasis on retaining
existing customers rather than on attracting new customers, on relations rather than on
transactions and on delivering superior customer value rather than on selling products. In
such companies the emphasis is on long-term objectives and long-term or even life-time
value (see table 2).


The choice of a strategy should be guided by customer needs and the organization’s existing
and potential core competencies. The marketing concept argues that successful firms pursue
one or more of the three competitive strategies: cost leadership, differentiation and focus
(Porter, 1980, 1985). Under the customer concept, successful firms excel in at least customer
intimacy, as one of the three value disciplines: operational excellence, product leadership
and customer intimacy (Treacy and Wiersema, 1993).
Customer intimacy involves detailed knowledge of customer needs and wants, and an
ability to satisfy heterogeneous preferences. For large firms the adoption of this discipline
requires the development and maintenance of large-scale databases on customer choices
and unmet needs. The adoption of this strategy elicits the “ultimate” in customer-driven
marketing decisions. The customer intimacy-value discipline is a business strategy which
directs all efforts in a company to the creation of superior value for individual customers,
satisfying its customers and managing customer expectations. It is built around the core
marketing competencies of firms. Under the customer concept, segments are constructed
by bottom-up segmentation (Shepard, 1990, p. 232). This means that if ultimately seg-
ments are found, each having homogeneous values, each segment will be approached in a
differentiated way. The emphasis will be more on ‘niching’ and ‘differentiated marketing’
than on ‘undifferentiated marketing’ as marketing strategies.
The acceptance of the customer concept also implies that strategies are built around
intimate relations with channel members, suppliers and employees (see table 3).


Since structure follows strategy (Chandler, 1962), it is straightforward to argue that the type
of organization adopted by the firm must be guided by the chosen value discipline. Lead-
ership in operational excellence may be accomplished by a cross-functional organization.
Employees responsible for an individual function must be motivated to maximize the effi-
ciency of that function jointly with other functions. As a result, innovation will especially
occur in the processes of production, distribution, etc. Firms that excel in product leadership
are organized like a small, entrepreneurial company. They avoid bureaucracy because it
slows commercialization of their ideas. They possess the infrastructure and management
systems needed to manage risk well.
Whereas a traditional market approach is served by an organizational structure that fo-
cuses on improving the efficiency of production, distribution and other components, the
customer concept requires the organization to be structured in a way that invites continu-
ous interaction with customers. A brand management organization suffers from product
focus and insufficient attention to shifting customer needs and wants. A customer intimacy
strategy is facilitated by a customer-oriented organization, with customer managers.
Marketing activities are no longer limited to the marketing department. Many employees
in the firm are ‘part-time marketeers’: employees in functions that are ‘non-marketing,’ such
as R&D, deliveries and credit management, have a decisive influence on customer value,
and therefore on the success of the company. Marketing should then be a cross-functional

Table 3. Strategy.

Marketing Concept Customer Concept

Competitive strategy Value disciplines
Marketing strategies are “added Marketing strategy = the business
to corporate strategies” strategy

Marketing strategies limited to

marketing as a function Market-driven Management
Distinctive competencies Core (marketing) competencies
Mass marketing Individual marketing
Top-down segmentation Bottom-up segmentation

Price/quality ratio Customer value is the guiding star

Manage customer expectations
marketing strategy:
Undifferentiated marketing Concentrated (niching) and
differentiated marketing (segm.)
Strategic alliances, partnerships Strategic alliances, partnerships
relations at the corporate level relations with
• large customers
• wholesalers
• retailers
• suppliers
• employees

activity. The creation of customer focus is not the responsibility of one department, but is a
company-wide responsibility. Organizationally, the functional areas need to be motivated
and empowered to jointly make decisions regarding desirable changes in activities.
Intimate relations with partners in the core marketing system can be constructed by
networks (Webster, 1992), where ‘marketing’ should be responsible for the most important
spokes in the network (see table 4).


The development and sustenance of a customer-oriented culture within the organization is

an important determinant of long-term success under the customer concept. Organizational
culture is about the unwritten system of shared values and norms (Payne et al., 1995,
p. 11). These values and norms help employees understand how the company functions
and dictate behavioral norms. Under the customer concept, values and norms are under
permanent discussion in order to be able to develop, realize and redefine customer value.

Table 4. Structure.

Marketing Concept Customer Concept

Brand and product management/managers Customer management/managers
Marketing is a department Marketing is responsible for the
important spokes in the network
(Webster, 1992)
Marketing is a functional activity Marketing is a cross-functional
activity (Payne et al. 1995, p. 5)
Customer focus is marketing’s responsibility Create customer focus
throughout the business

A customer-oriented organizational culture is one in which the customer’s interest always

comes first, ahead of those of the owners, the management and the employees (Webster,
1993; 1994, p. 240). Only those customers should be serviced whose wishes and desires fit
the organization’s distinctive competences.
Under the new marketing paradigm, organizations are ‘learning organizations.’ In a
learning organization there is no separation of thinking and doing: everyone is expected to
participate in thinking about what is right for the organization. Organizations constantly
learn from customers, competitors and employees through a process that is called generative
learning. This occurs when the organization is willing to question long-held assumptions
about its mission, customers, capabilities or strategy (Slater and Narver, 1995). It requires
the development of a new way of looking at the world, based on an understanding of
the systems and relationships that link key issues and events. Through systems-thinking
the organization is disciplined to focus on interrelationships and dynamic processes of
change rather than on linear cause-effect chains (Senge, 1990). In this customer-oriented
organizational culture there is a need for stimulating leadership, and internal marketing is
a necessity (see table 5).


An element that we believe is especially critical is data collection and use. For firms
wishing to adopt the customer concept all organizational functions need to receive relevant
customer information. Managers responsible for marketing, production and other decisions
need to know the “score” (e.g. share of customer expenditures), but also need to have access
to the appropriate diagnostic information (e.g. explanations of purchase, satisfaction and
preference data). Through direct clienting routines, employees can have real-time insight
into customer profiles.
The customer concept requires a continuous, customer-oriented feedback system. Com-
panies do not wait until complaints arrive. They monitor their customers continuously and
their customer service department is an important source of information. The monitor-
ing system will concentrate on marketplace purchase behavior integrated with survey data.

Table 5. Culture.

Marketing Concept Customer Concept

Values and norms are given Values and norms are under discussion
Departments work for themselves, Everyone contributes to the goals of
more than for the entire organization the organization
Strong separation between Everybody is expected to participate in
thinking and doing thinking
Arrogant organization Learning organization (Pine II
et al, 1995; Narver and Slater, 1995)
Directional leadership Stimulating leadership
(Slater and Narver, 1995)
Boundary between Permeable boundary between
organization and environment organization and environment
External marketing Internal and external marketing, with
consequences for one another

Customer managers should know not only what customers are purchasing (and why), but
also how satisfied they are with the purchases made, with the interactions that occurred,
and what unmet needs remain. In addition, customers should be categorized according to
expected lifetime value. Ideally, customer contact occurs continuously, in both directions,
but in a manner that suits both the company and the customer.
A pitfall of current information systems about marketplace behavior in consumer goods
markets is that the data emphasize the performance of own- and selected competing brands.
Consider the reporting systems designed by ACN and IRI. Clients obtain on a regular (e.g.
weekly) basis information about unit sales, dollar sales, average price, average promotion,
average distribution, etc. for a subset of the items in a product category. Typically, client
management chooses the subset of items on which information is made available. This
subset is changed infrequently. Thus, client management observes marketplace behavior
for a narrowly defined set of items that tends to be stable over time.
Such a reporting system provides highly reliable feedback from the marketplace. But it
is product-oriented and it encourages the user to make direct comparisons against current
competitors. Unit (or dollar) market shares also tend to be reported, consistent with an
emphasis on relative measures. Such data may be acceptable if the objective of the firm is
stated in terms of market share. We now elaborate on the arguments against such a focus.
The empirical research results about the relation between market share and profitability
are controversial (e.g. Jacobson and Aaker, 1985). Conceptually, it is clear that existing
purchase reporting systems exclude activities that occur outside a narrowly defined set of
items. In a classic article, Levitt (1960) argued against marketing myopia. Yet it appears
that many firms have adopted information systems that encourage the user to engage in
myopic behavior. Consider, for example, the advent of Starbuck’s coffee. Not only did
two highly regarded marketing firms, General Foods (GF) and Procter & Gamble (P&G),
miss the new-product opportunity that Starbuck created, but the information system on

the coffee market excluded the growth of Starbuck’s and the behavior of its customers.
Thus, GF and P&G may have emphasized their marketplace successes or failures relative to
each other, due to an information system based on a priori defined market boundaries (the
set of relevant competitors and the set of distribution channels), while Starbuck’s pursued
attractive options not covered by this system.
We propose, therefore, that the highly developed information systems that play a large role
in consumer-goods industries be modified. Even if the client firm does a substantial amount
of consumer research, this consumer research is almost always ad hoc, and subject to both
reliability and validity concerns. Thus, even if the total expenditures for such consumer
research were equal to the expenditures for consumers’ purchase data, we hypothesize
that the impact of ad hoc research on marketing decisions is far less than proportional.
A continuous, customer-oriented feedback system that incorporates purchase behavior,
customer satisfaction measurement and surveys of unmet needs, will allow soft data to have
a greater influence, because of its continuity and regularity, as well as its known reliability
and validity (and use in all organizational layers).
We propose that the firm select the target customers it wants to serve, and that the in-
formation system be based directly on data from these individual customers. With newly
developed household-based technologies, it is possible for both ACN and IRI to provide
information at the household level. Of course, to the extent that the existing technology is
restricted to a subset of channels, an expansion to a complete set e.g. through survey data
is required. A system is needed that covers supermarkets, drugstores, mass merchandisers,
etc. through convenient, relatively unobtrusive, plastic cards and/or wands. This system
must also accommodate non-conventional outlets. For example in the case of coffee, pur-
chases in cafes and restaurants, and consumption in businesses, institutions, airlines, etc.,
need to be included. It will then be possible to learn at the individual household level
the share of category purchases accounted for by specific items (the ‘share of customer’).
These household data can be aggregated in flexible ways, to obtain, for example, average
household shares by a variety of classifications. Importantly, such an information sys-
tem will also facilitate the determination of net contribution per customer. In this manner
the proposed system allows management to modify the set of customers to be served and
to adapt marketing activities based on customers’ actual or potential net contribution to
It is a natural extension of this proposed system to not only provide the “score” at much
more disaggregated levels than before (focused on the consumer rather than on the product),
but also to provide “explanations” of the score and conditional forecasts of future “scores.” If
explanations are incorporated in the continuous monitoring system, the validity or reliability
issues can be addressed over time, so that the confidence one has in the inferences provided
will approach its true level.
Although the proposed monitoring system starts with marketplace purchase behavior,
we emphasize that it is straightforward to integrate survey data. These data are critical
for the generation of consumer-based new-product development ideas. Today’s feedback
system is not geared to providing this information. We summarize the main points of
comparison between the proposed “customer share” information system with the current
system (labelled “market share”) in Table 6.

Table 6. Information.

Marketing Concept Customer Concept

Market share information Customer share information
Aggregated product-based data Individual customer data
Measurement of the score Explanation of the score
Static market boundaries Fuzzy market boundaries
(and white space opportunities)
Emphasis on existing products/ Emphasis on existing customers
Ad hoc studies of customer satisfaction Integration of marketplace
and preferences choice data with customer
satisfaction and preferences
through statistical modeling
Ad hoc explanations Integration of score
measurement and explanation
Focus on contributions of products/ Focus on contributions of
services customers (“share of wallet/
Research on choice behavior given Research on choice behavior
a homogeneous store environment under heterogeneous, self-
created decision-making
Customer information for the Customer information disseminated
marketing department through the organization
Internal information systems Information systems linked with those
of other parties

We believe that a redesigned information system is beneficial for all firms, independent of
the chosen value discipline. However, firms pursuing the operational excellence discipline
may adopt primarily a mass marketing approach. Thus, their usage of household-based
data will be concentrated at relatively high levels of aggregation. And their survey data
collection approaches may consist of probability samples of the target market. However,
if customer intimacy is the chosen strategy, the maximal exploitation of household hetero-
geneity is paramount. For these firms probability sampling is no longer desirable. Instead,
exhaustive interaction with the entire set of chosen customers (census) is the natural ap-
proach. Firms pursuing product leadership may follow an intermediate approach with the
role of a household feedback system dependent upon the relative emphasis of consumer
research (versus R&D).
We note that advantages of closer cooperation between the functional areas have been
claimed before (Kohli and Jaworski, 1990; Narver and Slater, 1990; Webster, 1994). It
should be obvious that for firms wishing to be truly customer oriented all functions need
to receive customer information. All managers need to know the “score” (e.g. share of

customer expenditures in a given category), and have access to the appropriate diagnostic
information (e.g. drivers of purchase, satisfaction and preference). Organizationally, the
functional areas need to be motivated and empowered to jointly make decisions regarding
desirable changes in activities.


Perhaps one of the most important benefits to be realized from the new paradigm we propose
is that integrated information will be available about what customers are purchasing, why
they are making these purchases, how satisfied they are and what unmet needs exist. In
addition, customers will have been categorized according to expected lifetime value, and
diagnostic information about the opportunity to make desirable changes will be available.
This new system of information will facilitate improvements in marketing decisions on the
following dimensions:
1. The decisions will be customer-based;
2. The decisions will be substantiated;

3. The decisions will reflect the perspectives of all functional areas;

4. The decisions will exploit customer heterogeneity in lifetime value;
5. The decisions will incorporate the latest data on the dynamics of marketplace choices.
It should also be clear that marketing decisions will have to reflect, more than is currently
the case, the interests of customers. Consider again how the joint efforts of manufacturers
and grocery retailers have influenced how consumers are guided through the stores. Many
aspects are arranged to entice the consumer to expend sums of money to the retailers’ advan-
tage. While it is possible for consumers to develop and maintain idiosyncratic choice rules,
the manufacturer creates products, packages, package sizes and variations that can over-
whelm the consumer’s decision-making process. The retailer compounds the consumer’s
problem by, for example, giving preference in shelf-space management to items with favor-
able retailer margins. And both manufacturer and retailer offer a range of different kinds
of promotions. For most consumers, the result is a myriad of aspects that together make it
very difficult for each consumer to make optimal purchases, given consumer heterogeneity
in utility functions.
Electronic home shopping should allow consumers to specify criteria (e.g. lowest unit
price, selected ingredients) on which each consumer wants selections to be made. Such
an innovation will allow consumers to maximize their utility functions much more closely
than ever before. The new marketing paradigm recognizes that customers have idiosyncratic
utility functions and that customized marketing programs can be created to help customers
achieve utility maximization. For both manufacturers and retailers it will become critical
to incorporate this new reality into future marketing decisions. We note that new commu-
nication media (e.g. the Internet) accelerate the diffusion of insights gained by individual
consumers about the potential to realize gains in utility. Alternatively, new services will be

Table 7. Marketing instruments: Product.

Marketing Concept Customer Concept

technology-driven new-product customer-based new-product
development development (Griffin and Hauser,
incidental new-product development continuous new-product
production for inventory just-in-time production
homogeneous products high-variety product line (Kahn, 1998)
large-scale production of customized production on order
homogeneous items
quality is up to quality department individual customer defines quality
product consists of core elements customized services added to the core

created to help consumers maximize their objective functions. We now briefly discuss the
consequences of adopting the new marketing paradigm for the set of marketing instruments.
We imagine that customer-research-based new product or service development will be
facilitated by the proposed information system. Management will have simultaneous access
to consumer marketplace choice data and survey data. Diagnostic information will be
available for “what if “ questions, and the customer monitoring system includes actions by
new competitors reflected in customer purchases from the very beginning. To accomplish
this, supplemental information, for example through distribution outlets not commonly
included in data collection, will have to be gathered.
New-product or service development will be a continuous process. Customers either
volunteer new product ideas or respond to requests for information based on changes in
customers’ marketplace choices. Continuous customer-based new-product development
is a natural consequence. A high-variety product line enables the customer to select the
customized option he or she desires (Kahn, 1998). Under the customer concept decision
making is pro-active not reactive.
Production may be on a just-in-time basis, and may not take place without an order. The
customer defines quality. Customers buy benefits, not products. Therefore, services are
added to the core product. Webster (1994) states that customer expectations revolve around
the service aspects of the product offering, and that information can turn any product into
a service and, thereby, build a customer relationship. He describes the example of Procter
& Gamble’s Crest toothpaste, the package of which includes a toll-free telephone number,
allowing customers to call in with questions or comments. When callers request information
about dental care, their names and addresses become part of a database. In this way, the
product becomes a service and a two-way relationship develops between the marketer and
the customer, who is buying improved dental health, not just a physical product (see table 7).

Table 8. Marketing instruments: Price.

Marketing Concept Customer Concept

cost-based pricing pricing based on willingness-
homogeneous pricing heterogeneous pricing
(core product) (service-enhanced product)

Table 9. Marketing instruments: Promotion.

Marketing Concept Customer Concept

mass promotions tailored promotions
mass communication personalized messages
“broad casting” “narrow casting”
repetitive communication just-in-time communication
classical media for all communication classical media to point out
interaction opportunities
manufacturer-initiated customer-initiated selection
communication (MIC) of information (CISOI)
one-way communication two-way communication
same communication for customers different communication for dif-
and noncustomers (self selection) ferent customers (based on life-
time value) and non- customers
communication emphasizing attraction communication emphasizing
of new customers maintenance of relations
promotions to reduce inventory levels promotions to attract new

Full exploitation of consumer heterogeneity also allows for further distinction in prices,
based on willingness to pay and based on differences in the service-enhanced product (see
table 8).
Just-in-time advertising and promotion define the promotion mix under the new marketing
paradigm. Promotion and commercial messages will be tailored to specific needs. Messages
will be ‘narrow-casted,’ and accessed by customers ate the time of need.
Classical media may be used to invite interaction, but the focus will be on customer-
initiated selection of information. There are always possibilities for the customer to contact
the organization. Every message contains a telephone number, e-mail address, etc. to facili-
tate and stimulate two-way communication. Different messages and different media will be
used for different customers and prospects. Communication emphasizes the maintenance
of relations, while promotions are used to attract new customers (see table 9).

Table 10. Marketing instruments: Distribution.

Marketing Concept Customer Concept

multi-layered distribution channels multiple channels:
direct and indirect distribution
customer selection from limited on-line product selection
assortment (durable goods)
mass distribution closer to the customer,
personal delivery
physical presence by customers electronic buying, virtual
in retail outlets shopping

Table 11. Marketing instruments: Customer service.

Marketing Concept Customer Concept

complaint handling; reactive pro-active search for customer
no real time accessible information ‘direct clienting’: real time insight
about customer profile in customer profile
department ‘customer service’ is department ‘customer service’ is
for complaint handling a source of information

The customer-based information system will also allow management to identify new dis-
tribution opportunities more easily. For example, under some conditions it may be desirable
for consumer-goods manufacturers of frequently purchased branded items to engage in di-
rect selling to households. Other consequences of the adoption of the customer concept are
the use of direct and indirect distribution channels. Earlier, we mentioned the fit between
customer concept and on-line product selection, virtual shopping and personal delivery.
Two-way communication and distribution is possible through media such as fax and the
Internet (see table 10).
The creation of competitive advantages is now shifting to the provision of extra services,
loyalty benefits, etc. for the best customers. The adoption of the customer concept implies
that companies are active in searching for customer feedback. They do not wait until com-
plaints arrive but they monitor customers continuously. The customer service department is
an important source of information to (marketing) managers. By ‘direct clienting’ routines
these companies have real-time insight in customer profiles (see table 11).

Business Processes

A prerequisite for the shift from a transaction focus to a relationship focus, or from a
product focus to a customer focus, is business process redesign: management looks at the

Table 12. Business processes.

Marketing Concept Customer Concept

business process redesign for business process redesign for
improving efficiency improving the level of customer
new product development continuous improvement and
new product development
product quality total quality management
series production flexibility in production processes
to enable tailor-made offers
standardized communication processes flexibility in communication
to enable tailor-made messages

company and its processes of value delivery from the customer’s perspective, and redesigns
those processes and their related organizational structure “from scratch” (Webster, 1994).
Business process redesign concentrates on continuous improvement of processes, in order
to make them as efficient and effective as possible for the delivery of superior customer
value. The focus is on improving the ‘total quality’ of each of the intermediate steps that
lead to the delivery of the product or service (Howe et al., 1995).
Flexibility is a key characteristic of processes in organizations that have adopted the
customer concept. Flexibility in production processes is needed in order to react to changing
wishes and preferences, and to be able to deliver tailor-made products or services. Flexibility
in communication processes is needed for tailoring commercial messages to individual
customers (see table 12).
Business process redesign should lead to empowered self-steering teams of managers
and a ‘destruction of marketing bureaucracy’ (Webster, 1994, p. 292). Daimler-Benz,
General Electric and Kodak are examples of companies that redesigned the structure of
their organization in this direction.11

Human Resource Management

Under the customer concept, every job is defined in terms of how it helps in creating
and delivering value for the customer and thus realizing customer satisfaction. Inter-
nal processes are managed to ensure responsiveness to customer needs and maximum
efficiency in value delivery. Every employee should be willing and able to carry the
responsibility of contributing to the realization of the organization’s vision (Williams,
Hiring and training programs must be aimed at the employee’s ability and attitude with
respect to customer orientation. Can and will the (potential) employee recognize the cus-
tomer’s interest? Can and will he/she carry and further develop the organizational vision?
Can and will he/she act pro-actively and be creative in improving organizational perfor-

Table 13. Human resource management.

Marketing Concept Customer Concept

hiring and training programs aimed hiring and training programs aimed
at knowledge and abilities with at abilities and attitude with respect
respect to content to customer orientation
customer perspective not explicit delivering value and satisfying
in function profiles customers is an explicit element of
function profiles
limited insight into criteria of full insight into criteria of performance
performance measurement measurement
customer perspective not explicit incentives based on realized
in incentive system customer satisfaction figures, profits and
new-product development effectiveness
employees have limited authority empowered employees

mance? Skills such as these may be more relevant than knowledge and abilities with respect
to content aspects of a function.
In the new marketing paradigm, delivering value and satisfying customers is a core ele-
ment of function profiles and reward systems. Employees will be motivated and rewarded
accordingly. Although it is important for marketing people to have strong marketing skills,
achievements in those specialized skills alone should not be the basis for rewards (Hartline
and Ferrell, 1996). The balanced scorecard (Kaplan and Norton, 1996) provides a mea-
surement approach for evaluating strategies under the customer concept. Rewards should
be stated in absolute terms (e.g. profit, Armstrong and Collopy, 1996), stated with respect
to customers (e.g. share of customer, customer satisfaction, depth of unmet needs), stated
with regard to new-product development effectiveness (e.g. share of this year’s revenues
and profits due to new products that did not exist a few years ago) and stated at the business
level (to encourage jointly optimal decisions). Every employee should fully understand the
criteria of performance measurement.
A final element of human resource management concerns empowerment. An organization
that employs the customer concept empowers its employees. Those who are in touch
with customers (either external or internal) need the authority to make decisions whenever
necessary without having to consult a manager (see table 13).

7. Research Agenda

It is important that empirical studies of various aspects related to the proposed paradigm
are conducted. For example, we expect that adoption of the customer concept by firms
will result in superior profitability and growth. However, even if this is not contested the
question remains how strong the benefits are. In addition, it is meaningful to relate results to,

for example, product category characteristics. In this section we identify specific research
questions organized according to the following categories:

• customer concept adoption

* to what extent has the concept been adopted by firms

* how do firms differ in the adoption of the concept
* does the adoption of the concept relate to the type of products, the degree of
customer heterogeneity in needs or preferences, the number of customers and the
customer typology (e.g. consumer versus industrial markets), the turbulence in the
market environment, or the competitive intensity
* what is the relation between adoption of the new concept and the market orientation
of the firm

• impact on market structure

* does adoption of the customer concept lead to ownership of customer data by

individual sellers
* does adoption lead to an increase in customer loyalty to the firm or to individual
brands (perhaps through switching barriers created by customer data ownership)
* does adoption lead to an increase in selectivity of partners in exchange, for both
sellers and buyers
* does adoption lead to higher profits (e.g. as a result of increased loyalty, higher
customer satisfaction)
* does adoption lead to higher growth (e.g. two-way communication facilitates the
early identification by sellers of unmet needs)
* does a higher degree of consistency between the nine areas, influenced by the
adoption of the new marketing paradigm, lead to higher profitability and/or growth
of the firm

• impact on organization

* does the greater recognition of and response to customer heterogeneity (result-

ing from the adoption of the customer concept) lead to greater flexibility in the
organizational structure of the firm over time

• impact on customer

* what is the customer’s ability and willingness to be an active participant

* is willingness to participate a customer-dependent phenomenon (e.g. it differs
strongly between individuals, but weakly between products)

* is ability to participate a product-specific phenomenon (e.g. it depends strongly on

the product, but weakly on the customer)
* does the customer need to be educated about the ways in which he can be an
effective participant in production and marketing processes

• implementation of the customer concept

* how is the lifetime value of an existing customer best determined

* what should the balance in marketing activities be between maintaining current
customers and attracting new customers
* what is the effectiveness of alternative marketing programs designed to convert
unattractive customers to attractive ones.

8. Summary and Conclusions

The marketing environment changes more quickly than ever in the history of modern mar-
keting. Important developments take place in the field of economic, demographic, political,
legal and technological variables. As a consequence, the behavior of the company’s cus-
tomers, competitors and channel members change. Customers, for instance, no longer
judge the value of a product or service solely on the basis of some combination of price and
quality (Treacy and Wiersema, 1993). Nowadays customer value is also defined around
concepts such as convenience of purchase and after-sales service. In this ‘new’ environ-
ment, marketing focuses on relationships with the parties in the marketing system instead of
on transactions only. Relations become closer, more selective and may become so familiar
that the term intimacy is used. Examples of more intimate relations with customers include
involving potential customers in new-product development, mass customization, electronic
shopping and home delivery. In our view, the marketing concepts and paradigms described
in literature do no longer reflect the fundaments of the marketing discipline. We believe
that the recent developments in marketing both in theory and practice make it necessary
to formulate a new marketing paradigm. This paradigm consists of three elements: (1) a
concept, i.e. the customer concept, which is the core of paradigm, (2) a set of activities
(decisions: the implications of the concept), and (3) a domain (area, field of research where
the concept and its implications are applicable).
The customer concept is the new marketing concept. It is a management orientation
which maintains that firms establish relationships with selected individual target customers
with whom superior customer values are designed, offered, redefined and realized in close
cooperation with other partners in the marketing system such as suppliers and intermediaries,
in order to realize long-term profits through customer satisfaction, partner- and employee
satisfaction. The fit between customers’ preferences and company’s capabilities is based on
a market feedback system which measures the behavior, the satisfaction and unmet needs
of individual customers.
The new marketing activities will be maximally efficient in the exploitation of hetero-
geneity in customer needs and preferences. The choices of target customers and values will

be influenced by a firm’s core competencies and favored value discipline(s). Marketing

activities include decisions with regard to the firm’s stated vision, objective(s), strategy,
organizational structure, culture, information system, marketing instruments, business pro-
cesses and human resource management. Generally, the focus needs to be on managing
customers, not products, with a balanced allocation of investment expenditures between
keeping current and attracting new customers.
The new marketing domain encompasses the broader interpretation of marketing as the
central concept in the behavior of the firm. The relationships with other parties in the mar-
keting system are characterized by integration and participation. A focus on relationships
implies that every employee in a firm has his/her own responsibility for creating superior
customer value. Individual customer satisfaction, partner- and employee satisfaction can
only be realized if requirements are met in the fields of organization culture and structure,
leadership styles, human resource management and design of business processes. These are
fields that, under the preceding marketing concepts, were not a part of the domain. Because
of their close inter relatedness with the marketing objectives, strategy and activities, and
because the customer concept can only exist if requirements in the fields mentioned are met,
these subjects form an integral part of the marketing domain under the customer concept.
The customer concept implies a reorientation of marketing to one that places the customer
in a pivotal role. Organizations will have to be restructured, and functions have to be re-
defined to facilitate achievement of objectives stated in customer terms. Feedback systems
have to be redesigned to start at the level of individual customers (and allow users to aggre-
gate data in ways that serve their purposes). The integration of purchase, satisfaction and
unmet need data is important so as to allow each of these components to have its proper role
in marketing decision making. Survey data on purchases outside conventional outlets, on
purchase and consumption levels and on unmet needs must be collected continuously so that
the validity and reliability of those data can be established (such that, in principle, survey
data can have a comparable impact on the marketing decisions as recorded purchase data).
These data need to be employed for scoring and diagnostic purposes, so that managers will
be in a position to have their marketing decisions to be based on customer perspectives.
If the selling concept is characterized by customers to whom something is sold, and the
marketing concept is characterized by customers for whom products and services are de-
veloped, then the customer concept is characterized by customers with whom changes in
marketing activities are considered in such a way that the customer’s utility functions are
truly maximized.


1. See also Christopher et al. (1991) and Bessen (1993).

2. According to New Product News the number of new products, including line extensions, introduced in grocery
stores each year increased from less than 3,000 in 1980 to more than 10,000 in 1988 and more than 17,000
in 1993. The number of stockkeeping units in the average supermarket doubled to more than 30,000 between
1980 and 1994. See Pine II et al. (1995), and Messinger and Narasumhan (1995).
3. New brands can, of course, be added to the relevant market, but changes in the set occur infrequently.
4. See also e.g. Grönroos (1994a); Sheth and Parvatiyar (1995); Christy et al. (1996).

5. See also McKenna (1995); Raaijmaakers (1996).

6. This example is also discussed by Pine II, Peppers and Rogers (1995). See also the Boston Business Journal,
October 11–17 1996, about the Streamline, Inc.; and the Wall Street Journal, June 17 1996.
7. In theory and practice the term ‘marketing’ is also used to indicate a function in a company or as a societal
process (Sweeny, 1972).
8. See also Day and Wensley (1983).
9. Grönroos (1994a, p. 15).
10. The life-time value concept is investigated and discussed in detail in e.g. Hoekstra and Huizingh (1999).
11. See also Treacy and Wiersema (1993) who give an example of a financial brokerage firm which has been
redesigned to realize customer intimacy.


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Prof.dr. Janny C. Hoekstra is Professor of Direct Marketing at the Department of Economics, Erasmus University
Rotterdam and Associate Professor of Marketing at the Department of Economics, University of Groningen, The
Netherlands. She obtained her Ph.D. in 1987 with her thesis on the ‘Behavior of Heroin users and the Impact of
Policy Measures.’ During the years 1986–1990 she was an Assistant Professor of Marketing, and between 1990
and 1994 she was an Associate Professor of Marketing, both at the Department of Economics of the University
of Groningen. Papers of her research projects have been published in a nmber of journals in The Netherlands, as
well as in international journals such as the Journal of Direct Marketing, the European Journal of Marketing and
Medicine and Law.

Prof.dr. Peter S. H. Leeflang studied Econometrics at the Erasmus University of Rotterdam. From 1970 till
1975 he was Assistant Professor at the Interfaculty for Graduate Studies in Management at Rotterdam/Delft. He
obtained his Ph.D. in 1974. At present he is Professor of Marketing at the Department of Economics, University
of Groningen, The Netherlands. He has authored or co-authored 15 books, and published, inter alia, in the Journal
of Marketing, the Journal of Marketing Research, Management Science, Applied Economics and the International
Journal of Research in Marketing. At present he is the Dean of the Department of Economics and vice-Vice
Chancellor of the University of Groningen. As Professor of Marketing he is also affiliated to the European
Institute of Advanced Studies in Management (EIASM) in Brussels, Belgium.

Prof.dr. Dick R. Wittink is General George Rogers Clark Professor of Management and Marketing at Yale School
of Management, New Haven. He completed the Ph.D. program at the Krannert Graduate School of Management,
Purdue University. After six years as Assistant- and Associate Professor at Stanford University’s Graduate School
of Business, he joined Cornell. In 1998 he joined Yale School of Management. He has been a visiting professor
at the Ecole Superieure des Sciences Economiques et Commerciales (ESSEC), Cergy Pontoise, France, at the
Kellogg Graduate School of Management, Northwestern University, and at the Graduate School of Business,
Colombia University. He has more than seventy publications, is an associate editor of the International Journal
of Forecasting, and is editorial board member of the Journal of Marketing, the Journal of Marketing Research,
Management Science, and the International Journal of Research in Marketing.