Managing a Holistic Marketing Organization
After reading this chapter, students should:
27) Know what are the important trends in marketing practices
28) Know what are the keys to effective internal marketing
29) Know how companies can be responsible social marketers
30) Know how a company can improve its marketing implementation skills
31) Know what tools are available to help companies monitor and improve their marketing activities
DETAILED CHAPTER OUTLINE
Healthy long-term growth for a brand requires that the marketing organization be managed properly. Holistic marketers must engage in a host of carefully planned, interconnected marketing activities and satisfy an increasingly broader set of constituents. They must also consider a wider range of effects of their actions. Corporate social responsibility and sustainability have become a priority as organizations grapple with the short-term and long-term effects of their marketing. Some firms have embraced this new vision of corporate enlightenment and made it the very core of what they do. Successful holistic marketing requires effective relationship marketing, integrated marketing, internal marketing, and performance marketing.
TRENDS IN MARKETING PRACTICES
In response to the rapidly changing marketing environment, companies have restructured their business and marketing practices in some of the following ways:
W) Supplier partnering
X) Customer partnering
The role of marketing in the organization is changing.
Traditionally, marketers have played the role of middlemen
In a networked enterprise every functional area can interact directly with customers.
Marketing in an networked enterprise must integrate all the customer-facing processes so that the customer sees a single face and hears a single voice when they interact with the firm.
Internal marketing requires that everyone in the organization buy into the concepts and goals of marketing and engage in choosing, providing, and communicating customer value.
A company can have an excellent marketing department, yet fail at marketing.
Much depends upon how the other company departments view customers.
Only when all employees realize that their jobs are to create, serve, and satisfy customers does the company become an effective marketer.
Many companies are now focusing on key processes rather than departments to serve the customer.
To achieve customer-related outcomes, companies appoint process leaders who manage cross-disciplinary teams.
Organizing the Marketing Department
Modern marketing departments may be organized in a number of different, sometimes overlapping ways: functionally, geographically, by product or brand, by market, in a matrix, and by corporate or division.
The most common form of marketing organization consists of functional specialists reporting to a marketing vice president, who coordinates their activities.
v. Additional specialists might include:
w. Customer service manager
x. Marketing planning manager
y. Market logistic manager
z. Direct marketing manager
aa. Internet marketing manager
w. The main advantage of a functional marketing organization is its administrative simplicity.
x. A functional organization often leads to inadequate planning for specific products and markets.
A company selling in a national market often organizes its sales force along geographic lines.
V) Several companies are now adding area-marketing specialists (regional or local marketing managers) to support the sales efforts in high-volume markets.
W) Improved information and marketing research technologies have spurred regionalization.
X) Some companies have to develop different marketing programs in different parts of the country out of necessity because their brand developments (and retailers' request it) varies so much.
Companies producing a variety of products and brands often establish a product (or brand) management organization.
The product management organization does not replace the functional organization but serves as another layer or management.
A product-management organization makes sense if the company's products are quite different, or if the sheer number of products is beyond the ability of a functional organization to handle.
Product and brand management is sometimes characterized as a hub-and-spoke system.
Some of the tasks that product or brand managers may perform include:
)1 Developing a long-range and competitive strategy for the product
)2 Preparing an annual marketing plan and sales forecast.
)3 Working with advertising and merchandising agencies
)4 Increasing support of the product among the sales force and distributors
)5 Gathering continuous intelligence on the product's performance, customer and dealer attitudes, and new problems and opportunities
)6 Initiating product improvements to meet changing market needs.
These tasks are common to both consumer and industrial product managers.
)1 Consumer-product managers typically manage fewer products and spend more time on advertising and sales promotion.
)2 Industrial product managers spend more time with customers, laboratory, and engineering personnel.
The product-management organization has several advantages:
)1 Product managers can concentrate on developing a cost-effective marketing mix for the product.
)2 He or she can react more quickly to new products in the marketplace.
)3 The company's smaller brands have a product advocate.
The product management has some disadvantages also:
)1 Product managers and specifically brand managers are not given enough authority to carry out their responsibilities.
)2 Product and brand managers become experts in their product area but rarely achieve functional expertise.
)3 The product management system often turns out to be costly.
)4 Brand managers normally manage a brand for only a short time.
)5 The fragmentation of markets makes it harder to develop a national strategy from headquarters.
)6 Product and brand managers cause the company to focus on building marketing share rather than building the customer relationship.
When customers fall into different user groups with distinct buying preferences and practices, a market-management organization is desirable.
27. A market manager supervises several market managers (also called market-development managers, market specialists, or industry specialists).
28. Market managers are staff people and develop long-range and annual plans for their markets.
29. Market managers are judged by their market's growth and profitability.
30. Many companies are reorganizing along market lines and becoming market-centered organizations.
31. In a customer-management organization, companies can organize themselves to understand and deal with individual customers.
Companies that produce many products flowing into many markets adopt a matrix organization.
Companies can go one-step further and view the market managers as the main marketers, and their product managers as suppliers.
A matrix organization would seem desirable in a multi-product, multi-market company.
The rub is that this system is costly and often creates conflicts, here are two examples:
31) How should the sales force be organized?
32) Who should set the prices for a particular product or market?
33) Matrix management gained advocates because companies provide the context in which a matrix can thrive-flat, lean team organizations focused around business processes that cut horizontally across functions.
Relations with Other Departments
In principle, all business functions should interact harmoniously to pursue the firm's overall objectives. In practice, interdepartmental relations are often characterized by deep rivalries and distrust.
gg. In the typical organization, each business function has a potential impact on customer satisfaction.
hh. Under the marketing concept, all departments need to "think customer" and work together to satisfy customer needs and expectations.
ii. The marketing vice president, or CMO, has two tasks:
25. To coordinate the company's internal marketing activities.
26. To coordinate marketing with finance, operations, and other company functions to serve the customer.
1) Yet there is little agreement on how much influence and authority marketing should have over other departments.
2) Typically, the marketing vice president must work through permission rather than authority.
3) Companies need to develop a balanced orientation in which marketing and other functions jointly determine what is in the company's best interests.
4) Perhaps, the best solution is for marketing to periodically propose a function-to-function meeting with departments where greater understanding and collaboration is warranted.
Building a Creative Marketing Organization
Many companies are beginning to realize that they are not really market- and customer-driven, they are product-and-sales driven. To transform themselves into true market-driven companies will require:
Developing a companywide passion for customers
t. Organizing around customer segments instead of around products
u. Developing a deep understanding of customers through qualitative and quantitative research
v. The task is not easy, it will require a change in job and department definition, responsibilities, incentives, and relationships.
w. The organization must also be creative.
x. The only answer is for the firm to build a capability in strategic innovation and imagination.
y. Companies must watch trends and be ready to capitalize on them.
z. Market leaders tend to miss trends when they are:
27. Risk averse.
28. Obsessed about protecting their existing markets and physical resources.
29. More interested in efficiency than innovation.
SOCIALLY RESPONSIBLE MARKETING
Effective internal marketing must be matched by a strong sense of social responsibility Companies need to evaluate whether they are truly practicing ethical and socially responsible marketing.
Several forces are driving companies to practice a higher level of corporate social responsibility:
aa. Rising customer expectations
bb. Changing employee expectations
cc. Government legislation and pressure
dd. Investor interest in social criteria
ee. Changing business procurement practices.
(xxiii) Business success and continually satisfying the customer and other stakeholders are closely tied to adoption and implementation of high standards of business and marketing conduct.
(xxiv) Business practices are often under attack because business situations routinely pose tough ethical dilemmas.
(xxv) The most admired and increasingly successful companies in the world abide by a code of serving people's interests, and not their own.
Corporate Social Responsibility
A three-pronged attack: legal behavior, ethical behavior, and socially responsible behavior.
Society must use the law to define those practices that are illegal, antisocial, or anti-competitive.
23) Organizations must ensure that every employee knows and observes all relevant laws.
Companies must adopt and disseminate a written code of ethics, build a company tradition of ethical behavior, and hold its people fully responsible for observing ethical and legal guidelines.
Social Responsibility Behavior
Individual marketers must practice a "social conscience" in specific dealing with customers and stakeholders.
S) Increasingly, people say that they want information about a company's record on social and environmental responsibility to help decide which companies to buy from, invest in, and work for.
T) Deciding how to communicate corporate attitudes and behaviors towards social responsibility can be difficult.
Sustainability is the importance of meeting humanity's needs without harming future generations, has risen to the top of many corporate agendas.
22) Embracing sustainability helps avoid the negative consequences of environmental disasters, political protests, and human rights or workplace abuses.
23) Investors are demanding more concrete information about what firms are doing to achieve sustainability.
Many firms are blending their corporate social responsibility initiatives with their marketing activities.
S) Cause-related marketing is marketing that links the firm's contributions to a designated cause to customers' engaging directly or indirectly in revenue-producing transactions with the firm.
T) Cause marketing has also been called a part of corporate societal marketing (CSM).
Cause Marketing Benefits and Costs
A successful cause marketing program can produce a number of benefits:
23. Building brand awareness
24. Enhancing brand image
25. Establishing brand credibility
26. Evoking brand feelings
27. Creating a sense of brand community
28. Eliciting brand engagement
The danger is that the promotional efforts behind a cause-related marketing program could backfire if cynical consumers question the link between the product and the cause and see the firm as being self-serving and exploitative.
Choosing a Cause
Some experts believe that the positive impact on a brand from cause-related marketing may be lessened by sporadic involvement with numerous causes
q. Many companies choose to focus on one or a few main causes to simplify execution and maximize impact.
r. Limiting support to a single cause may limit the pool of consumers or other stakeholders who could transfer positive feelings from the cause to the firm.
s. Most firms tend to choose causes that fit their corporate or brand image and matter to their employees and shareholders.
Cause-related marketing is done by a company to support a cause.
180) Social marketing is done by a nonprofit or government organization to further a cause.
181) Social marketing is a global phenomenon that goes back for years.
182) A number of different types of organizations conduct social marketing in the United States.
183) Literally hundreds of nonprofit organizations are involved with social marketing.
184) Choosing the right goal or objective for a social marketing program is critical.
185) Social marketing campaigns may have objectives related to changing people's cognitions, values, actions, or behaviors.
dddddddd. Cognitive campaigns
eeeeeeee. Action campaigns
ffffffff. Behavioral campaigns
gggggggg. Value campaigns
190) The social marketing planning process follows many of the same steps as for traditional products and services.
191) Given the complexity and challenges of the issues involved with social marketing, it is important to take a long-run view.
192) The actual success of the social marketing program must be evaluated in terms of the program objectives.
193) Criteria might include the following:
llllllll. High incidence of adoption
mmmmmmmm. High speed of adoption
nnnnnnnn. High continuance of adoption
oooooooo. Low cost per unit of adoption.
pppppppp. No major counterproductive consequences
.a Corporate culture defined as "the shared experiences, stories, beliefs, and norms that characterize an organization."
A marketing company is great not by "what it is," but by "what it does."
T) Marketing implementation is the process that turns marketing plans into action assignments and ensures that such assignments are executed in a manner that accomplishes the plan's stated objectives.
U) A brilliant strategic marketing plan counts for little if it is not implemented properly.
V) Strategy addresses the what and why of marketing activities.
W) Implementation addresses the who, where, when, and how.
X) Companies today are striving to make their marketing operations more efficient and their return on marketing investment more measurable.
Y) Companies use information technology to improve the management of their marketing resources.
Z) Certain repetitive processes can be automated. This drive is going under such names as:
1) Marketing resource management (MRM)
2) Enterprise marketing management (EMM)
3) Marketing automation systems (MAS)
AA) Marketing resource management (MRM) software provides a set of Web-based applications that automate and integrate such activities as:
BB) These software packages are Web-based and add up to what some have called desktop marketing in that marketers can find whatever information and decision structures they need on their computers.
EVALUATION AND CONTROL
In spite of the need to monitor and control marketing activities, many companies have inadequate control procedures
T) Annual-plan control aims to ensure that the company achieves the sales, profits, and other goals established in its annual plan
xxi. The heart of annual-plan control is management by objectives
xxii. Four steps are involved
w. Management sets monthly or quarterly goals.
x. Management monitors its performance in the marketplace.
y. Management determines the causes of serious performance deviations.
z. Management takes corrective action to close the gaps between goals and performance.
AA) This control model applies to all levels of the organization.
Sales analysis measures and evaluates actual sales in relationship to goals. Two specific tools make it work:
Sales-variance analysis measures the relative contribution of different factors to a gap in sales performance.
Microsales analysis looks at specific products, territories, etc. that failed to produce expected sales.
Market Share Analysis
Company sales don't always reveal how well the company is performing relative to competitors. Management tracks its market share in three ways:
ff. Overall market share
gg. Served market share
hh. Relative market share
Conclusions from market share analysis are subject to certain qualifications
Outside forces affect all companies in the same way
A company's performance should be judged against the average performance of all companies
New firms entering the industry will cause all existing firms market shares to fall
A market share decline is sometimes deliberately engineered to improve profits.
Market share can fluctuate for many minor reasons.
A useful way to analyze market share movements is in terms of four components:
Overall market share = Customer X Customer X Customer X Price
Penetration Loyalty Selectivity Selectivity
Marketing Expense-to-Sales Analysis
Annual-plan control requires making sure the company is not overspending to achieve sales goals.
Y) Key ratio: Marketing expense-to-sales
Z) Monitor period-to-period fluctuations
Marketers should analyze the expense-to-sales rations and use financial analysis to find profitable strategies beyond sales building
Rate of Return on Net Worth
Return on Assets and its financial leverage
Companies should measure the profitability of their products, territories, customer groups, segments, trade channels, and order sizes.
This example uses a lawnmower company to illustrate the steps in the marketing-profitability analysis.
In general, marketing-profitability analysis indicates the relative profitability of different products, channels, territories, and other marketing entities. It does not prove that the best course of action is to drop unprofitable ones.
Direct Versus Full Costing
Another judgmental element affecting profitability analysis is whether or not to allocate full costs or only direct and traceable costs in evaluating a marketing entity's performance.
Traceable common costs
Non-traceable common costs
Companies are showing growing interest in using marketing-profitability analysis, or its broader version, activity-based accounting (ABC), to quantify the true profitability of different activities.
Some companies are establishing a position of marketing controller to specialize in improving marketing efficiency.
Each company should periodically reassess its strategic approach to the marketplace with marketing effectiveness reviews and marketing audits.
The Marketing Audit
The average U.S. corporation loses half of its customers in five years, half of its employees in four years, and half of its investors in less than one year. Clearly, this points to some weaknesses. Companies that discover weaknesses should undertake a thorough study known as a marketing audit.
A marketing audit is a comprehensive, systematic, independent, and periodic examination of a company's or business unit's marketing environment, objectives, strategies, and activities with a view to determining problem areas and opportunities and recommending a plan of action to improve the company's marketing performance.
jj. The marketing audit has four characteristics:
A marketing audit starts out with a meeting between the company officer(s) and the marketing auditor(s) to work out an agreement on the audits:
26. Data sources
27. Report format
28. Time frame
cc. The cardinal rule of the marketing audit is not to rely solely on company mangers for data and opinions.
dd. Customers, dealers, and other outside groups must also be interviewed.
ee. The marketing audit examines six major components of the company's marketing situation.
The Marketing Excellence Review
Management can place a checkmark to indicate its perception of where its business stands. The profile that results can expose weaknesses and strengths, and highlight where the company might become an outstanding player in the marketplace.
THE FUTURE OF MARKETING
Top management has recognized that past marketing has been highly wasteful and is demanding more accountability from marketing
w. Going forward, there are a number of imperatives to achieve marketing excellence:
24. Marketing must be "holistic" and less departmental.
25. Marketers must achieve larger influence in the company if they are to be the main architect of business strategy.
26. Marketers must continuously create new ideas if the company is to prosper in a hyper-competitive economy.
27. Marketers must strive for customer insight and treat customers differently but appropriately.
28. Marketers must build their brands through performance, more than through promotion.
29. Marketers must go electronic and win through building superior information and communication system.
dd. In the coming years we will see:
31. The demise of the marketing department and the rise of holistic marketing
32. The demise of free-spending marketing and the rise of ROI marketing
33. The demise of marketing intuition and the rise of marketing science
34. The demise of manual marketing and the rise of automated marketing
35. The demise of mass marketing and the rise of precision marketing
jj. To accomplish these changes, a new set of skills and competencies is needed. Proficiency will be demanded in areas such as:
37. Customer relationship management (CRM)
38. Partner relationship management (PRM)
39. Database marketing and data mining
40. Contact center management and telemarketing.
41. Public relations marketing (including event and sponsorship marketing)
42. Brand building and brand asset management.
43. Experiential marketing
44. Integrated marketing communications
45. Profitability analysis by segment, customer, and channel