Interaction orientation: The new measure of marketing capabilities

Date of Completion

January 2006


Business Administration, Marketing




Advances in technology have resulted in increasing opportunities for interactions between firms and customers, between customers, and between firms. The effective management of interactions and the interfaces where these interactions occur is increasingly being recognized as a source of lasting competitive advantage for firms. Firms that develop the capabilities needed for the successful management of interactions would be termed 'interaction oriented'. ^ First, we identify and discuss the four components of interaction orientation: (1) customer concept, (2) interaction response capacity, (3) customer empowerment, and (4) customer value management. ^ Second, we relate interaction orientation to performance measures. We posit the following: (1) An interaction orientation leads to superior customer-level relational performance; (2) An interaction orientation leads to superior customer-level profit performance; (3) Superior customer-level relational performance is associated with superior customer-level profit performance. ^ Third, we identify the antecedents of interaction orientation as: (1) A firm's dependence on trademarks and patents; (2) The institutional pressures that a firm faces to adopt interactive technologies; (3) The outsourcing expertise of a firm; (4) The extent to which a firm's employee rewards system is based on customer-centric measures of performance; (5) Whether a firm operates in the business-to-business industry or not. ^ Fourth, we examine the moderating effects of customer initiated contacts and competitive intensity on the interaction orientation-performance linkage. ^ The results based on a survey of top marketing managers in a hundred and seven firms, obtained using a structural equation modeling approach, provide evidence that the proposed relationships between interaction orientation, its consequences, and its antecedents are by and large supported. The commonly held view that customer-level relational performance is related to customer-level profit performance is not supported. However, both customer-level relational performance and customer-level profit performance affect aggregate level business performance positively. Also, contrary to expectations, the results indicate that interaction orientation is a phenomenon observed equally among business-to-business firms and business-to-consumer firms. The extent of customer initiated contacts moderates the interaction orientation performance relationship whereas competitive intensity does not. ^