11 Evolution of Marketing Organization & Marketing Audit

8/13/2019 11 Evolution of Marketing Organization & Marketing Audit

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Trends in Marketing Practices (Evolution of Modern Marketing):- With time some important changes in the marketingmacro-environment like Globalization, Deregulation,Technological Advances, Customer Empowerment, and Market

Fragmentation have taken place. In response to this rapidlychanging environment, companies have restructured theirbusiness and marketing practices in many ways :-

Reengineering:- Appointing teams to manage customer-value-building processes and break down walls between departments.Outsourcing:- Buying more goods and services from outsidedomestic or foreign vendors.Benchmarking:- Studying best practice companies to improveperformance.Supplier Partnering:- Partnering with fewer but better value-adding suppliers.Customer Partnering:- Working more closely with customers toadd value to their operations. Merging:- Acquiring or merging with firms in the same orcomplementary industries to gain economies of scale and scope.


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Globalizing:- Increasing efforts to think global and act local.Flattening:- Reducing the number of organizational levels to getcloser to the customer.Focusing:- Determining the most profitable businesses andcustomers and focusing on them. Accelerating:- Designing the organization and setting up processesto respond more quickly to changes in the environment.Empowering:- Encouraging and empowering personnel to producemore ideas and take more initiative.

The role of marketing in the organization is also changing.Traditionally, marketers have played the roles of middlemen ,charged with understanding customer needs and transmitting the

voice of the customer to various functional areas in the organization. Marketing no longer has sole ownership of customer

interactions ; rather, marketing needs to integrate all thecustomer-facing processes so customers see a single face andhear a single voice when they interact with the firm .


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Internal Marketing:- Internal marketing requires that everyone inthe organization buy into the concepts & goals of marketingand engage in choosing, providing, and communicatingcustomer value .

Over the years, marketing has evolved from work done by thesales department into a complex group of activities spreadthrough the organization .

Only when all employees realize their job is to create, serve, andsatisfy customers then only the company become an effectivemarketer .

Now a days Characteristics of Company Departments That AreTruly Customer Driven presents a tool that evaluates whichcompany departments are truly customer driven.

Organizing the Marketing Department:- Modern marketingdepartments can be organized in a number of different,sometimes overlapping ways :- Functionally, geographically, By

Product or Brand, By Market, or In a Matrix .


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i. Functional Organization:- The most common form ofmarketing organization consists of functional specialistsreporting to a marketing vice president , who co-ordinates theiractivities as depicted in the below figure.

Additional specialists might include a Customer Service Manager, a Marketing Planning Manager, a Market Logistics

Manager, a Direct Marketing Manager, and a Digital Marketing Manager .

Marketing Vice President

Marketing Administration

Manager

SalesManager

MarketingResearchManager

Advertising &Sales Promotion

Manager

New ProductsManager

Fig:- Functional Organization


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The main advantage of a functional marketing organization is itsadministrative simplicity; however to develop a smooth working relationship within the marketing department is quitea challenge .

This form can lose its effectiveness as the number of productsand markets increases, as a functional organization often leads toinadequate planning for specific products and markets .

In such a case each functional group starts to compete withothers for budget and status .The marketing vice president constantly weighs the claims of

competing functional specialists and faces difficulties in co-ordination.


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In the Indian context, many MNCs are reorganizing and creatingan Asia Pacific group, normally with headquarters atSingapore .

iii. Product Or Brand Management Organization:- Companies producing a variety of products and brands often establish a product (or brand -) management organization .

They does not replace the functional organization, but serves asanother layer of management . A product manager supervises product category managers ,

who in turn supervise specific product and brand managers .

It makes sense if the companys products are quite different, orif the sheer number of products is beyond the ability of a functional organization to handle .


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Product and brand management is sometimes characterized as aHub and Spoke System. The brand or product manager isfiguratively at the center, with spokes emanating out to variousdepartments as depicted in the below figure.

Brand orProductManager

Advertising Agency

PromotionServices

Manufacturing& Distribution

R & D

Fiscal

Media

Publicity

Legal

MarketResearch

Purchasing

Packaging

SalesForce

Fig:- The Product Managers Interactions


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Some tasks that product or brand managers may perform are:-

i. Developing a long range and competitive strategy for the product.

ii. Preparing an annual marketing plan and sales forecast.iii. Working with advertising and merchandising agencies to develop

copy, programs, and campaigns.

iv. Increasing support of the product among the sales force anddistributors.

v. Gathering continuous intelligence on the products performance,customer and dealer attitudes, and new problems an opportunities.

vi. Initiating product improvements to meet changing market needs.

The product management organization lets the productmanager concentrate on developing a cost effectivemarketing mix and react more quickly to new products in themarketplace .

It also gives the companys smaller brands, a product advocate.


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However, this organization has also got the followingdisadvantages:-

i. Product and brand managers may lack enough authority to carry out their

responsibilities.ii. Product and brand managers become experts in their product area but

rarely achieve functional expertise.

iii. The product management system often turns out to be costly. One person

is appointed to manage each major product or brand, and soon more areappointed to manage even minor products and brands.

iv. Brand managers normally manage a brand for only a short time. Short term involvement leads to short term planning and fails to build long term strengths.

v. The fragmentation of markets makes it harder to develop a nationalstrategy. Brand managers must please regional and local sales groups,transferring power from marketing to sales.

vi. Product and brand managers focus the company on building market sharerather than the customer relationship.


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A second alternative in a product management organization is product teams.

There are three types of structures: Vertical product team,Triangular product team, and the Horizontal product team.

The Triangular and Horizontal Product-Team approaches, leteach major brand be run by a Brand Asset Management Team(BAMT) consisting of key representatives from functions thataffect the brands performance . The company is made ofseveral BAMTs that periodically report to a BAMT directorscommittee, which itself reports to a Chief Branding officer .This system is quite different from the way brands have traditionallybeen handled.

Productmanager

AssociateProductManager

Product

Assistant F i g : -

V e r t

i c a l

P r o

d u c t

T e a m

ProductManager

MarketResearcher

CommunicationSpecialist

Fig:- Triangular Product Team

Product Manager

M a r

k e t

R e s e a r c

h e r

C o m m u n

i c a t

i o n

S p e c

i a l i s t

S a l e s

M a n a g e r

D i s t r i b u t

i o n

S p e c

i a l i s t

F i n a n c e

/

A c c o u n

t i n g

S p e c

i a l i s t

E n g i n e e r

Fig:- Horizontal Product Team


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A third alternative for product management organization is toeliminate Product Manager positions for minor products andassign two or more products to each remaining manager .

This is feasible where two or more products appeal to asimilar set of needs .

Ex:- A cosmetic company does not need product managers foreach product because cosmetics serve one major need beauty.

But at the same time a toiletries company needs differentmanagers for toothpaste, soap, and shampoo, because theseproducts differ in use and appeal.

A fourth alternative is to introduce Category Management, in

which a company focuses on product categories to manage itsbrands .Ex:- P&G, pioneers of the brand management system, and

several other top firms made a significant shift to categorymanagement.


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Another rationale for category management is the increasing power of the trade, as the Retail Trade has tended to think of profitability in terms of product categories , P&G felt it onlymade sense to deal along similar lines.

Category management is not a panacea . It is still a product driven system .

Ex:- Colgate has moved from Brand Management (Colgatetoothpaste) to Category Management (toothpaste category) to a newstage called Customer need management (mouth care).

This step finally focuses the organization on a basiccustomer need .

iv. Market Management Organization:- Many companies sell theirproducts and services to different markets.

Ex:- Cannon sells fax machines to consumer, business, andgovernment markets.

Tata Steel sells to the railways, construction, and public utilityindustries. Etc.


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When customers fall into different user groups with distinctbuying preferences and practices, a Market Managementorganization is desirable.

Market Managers supervise several Market Development Managers, Market Specialists, or Industry Specialists and drawon functional services as needed .

Market managers of important markets might even have functional specialists reporting to them .

Market managers are staff people, with duties similar to thoseof product managers . They develop Long Range and Annual

Plans for their markets.Their performance is judged by their markets growth and profitability .


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This system shares many advantages and disadvantages of product management system .

The strongest advantage is organizing marketing activity tomeet the needs of distinct customer groups rather than focusingon marketing functions, regions, or products.

Many companies are recognizing along market lines and becomingmarket centered organizations .

Ex:- Xerox has converted from geographic selling to selling byindustry, as have IBM and H.P.

In a Customer Management Organization, companies can

organize themselves to understand and deal with individualcustomers rather than with the mass market or even marketsegments.


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When a close relationship is advantageous , such as whencustomers have diverse and complex requirements and buy anintegrated bundle of products and services, Customer Management organizations should prevail .

Ex:- IBMs Global Services and General Electrics Power Systemsare organized in this fashion because of their need to interact closely with customers.

Studies have proved, that companies organized by customer groups reported much higher accountability for the overallquality or relationships and employees freedom to takeactions to satisfy individual customers .

v. Matrix Management Organization:- Companies that producemany products for many markets may adopt a matrixorganization. Some provide the context in which a matrix can thrive flat, lean team organizations focused around business processesthat cut horizontally across functions.


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DuPont was a pioneer in developing the matrix structure. (Before it wasspun off, DuPonts textile fibers department consisted of separate productmanagers for rayon, acetate, nylon, orlon, and dacron; and separate marketmanagers for menswear, womens wear, home furnishings, and industrial

markets. The product managers planned sales and profits for theirrespective fibers. They asked market managers to estimate how much oftheir fiber they could sell in each market at a proposed price. Marketmanagers, however, were generally more interested in meeting theirmarkets needs than pushing a particular fiber. In preparing their market

plans, they asked each product manager about the fibers planned pricesand availabilities. The final sales forecast of the market managers and theproduct managers should have added up to the same grand total.)

Companies like DuPont can go one step further and view the marketmanagers as the main marketers, and their product managers assuppliers . The menswear market manager, for instance, would beempowered to buy textile fibers from DuPonts product managers or, ifDuPonts price is too high, from outside suppliers, forcing DuPont productmanagers to become more efficient. If a DuPont product manager couldnt match the arms length pricing: levels of competitive suppliers, thenperhaps DuPont should not produce that fiber.


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Menswear Womens Wear Home

FurnishingsIndustrialMarkets

Rayon

Acetate

Nylon

Orlon

Dacron

Market Managers

P r o d u c t M

a n a g e r s

Fig:- Product / Market Management Matrix System


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A matrix organization seems desirable in a multiproduct,multimarket company .

The drawback is that its costly and often creates conflicts .Theres the cost of supporting all the managers, and questionsabout where authority and responsibility for marketingactivities should reside at headquarters or in the division?

Some corporate marketing groups assist top management withoverall opportunity evaluation , provide divisions with consultingassistance on request, help divisions that have little or no marketing,and promote the marketing concept throughout the company.

Relations with Other Departments:- Under the marketingconcept, all departments need to think customer and worktogether to satisfy customer needs and expectations .

The marketing department must drive this concept.


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The marketing vice president, or CMO, has two tasks:-

1. To co-ordinate the companys internal marketing activities.

2. To co-ordinate marketing with finance, operations, and othercompany functions to serve the customer.

There is little agreement on how much influence and authoritymarketing should have over other departments . Departmentsdefine company problems and goals from their viewpoint, soconflicts of interest and communication problems are unavoidable.Hence, the marketing vice president must typically work through persuasion rather than authority .

To develop a balanced orientation in which marketing and otherfunctions jointly determine what is in the companys best interests,companies can provide joint seminars to understand each others viewpoints, joint committees and liaison personnel, personnelexchange programs, and analytical methods to determine the costprofitable course of action.


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Many companies now focuses on key processes rather thandepartments, because departmental organization can be abarrier to the smooth performance of fundamental business processes .

They appoint process leaders, who manage cross disciplinaryteams that include marketing and sales people . As a result,marketing personnel may have a solid line responsibility to theirteams and a dotted line responsibility to the marketingdepartment.

Building a Creative Marketing Organization:- In the currentscenario many companies realize that they are not yet reallymarket and customer driven they are product and salesdriven .


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To transform oneself into a true market driven company requires:-

a. Developing a company wide passion for customers.

b. Organizing around customer segments instead of products.c. Understanding customers through qualitative and quantitative

research.

The task is definitely not easy, but if followed, the payoffs can beconsiderable. At the same time although its necessary to becustomer oriented, its not enough . The organization must alsobe creative, as companies today copy each others advantagesand strategies with increasing speed . Differentiation gets harderto achieve, and margins fall when firms become more alike.

The only answer is to build a capability in strategic innovationand imagination . This capability comes from assembling tools,processes, skills, and measures that let the firm generate more andbetter new ideas than its competitors.


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Companies must watch trends and be ready to capitalize onthem , otherwise it is even difficult to survive or protect its share inthe market for the leader.

Ex:- Motorola was 18 months late in moving from analog todigital cellular phones, giving Nokia and Ericsson a big lead.

Market leaders tend to miss trends when they are risk averse,obsessed about protecting their existing markets and physical

resources, and more interested in efficiency than innovation .


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Marketing Audit:- Every organization has got some weaknessand due to this weakness they loose their customers,employees and investors .

To prevent this the companies should know their weaknesses.Companies that discover weaknesses should undertake athorough study known as Marketing Audit .

A Marketing Audit is a comprehensive, systematic, independent and periodic examination of a companys or business units marketing environment, objectives, strategies, and activities, with a view to determining problem areas and opportunitiesand recommending a plan of action to improve the companys

marketing performance .


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i. Comprehensive:- The marketing audit covers all the majormarketing activities of a business and not just a few troublespots .

It is called a functional audit if it covered only the sales force, pricing, or some other marketing activity .

Although functional audits are useful , they sometimes misleadmanagement .

Ex:- Excessive salesforce turnover could be a symptom not ofpoor sales force training or compensation, but of weak companyproducts and promotion.

A Comprehensive marketing audit usually is more effective inlocating the real source of problems .

ii. Systematic:- The marketing audit is an orderly examination ofthe organizations macro and micro marketing environments,marketing objectives and strategies, marketing systems, and specific activities .


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The audit indicates the most needed improvements,incorporating them into a corrective action plan with short and long run steps to improve overall effectiveness .

iii. Independent:- Marketers can conduct a marketing audit in six ways:- Self Audit, Audit from Across, Audit from Above,Company Auditing Office, Company Task Force Audit &Outsider Audit.

However, the best audits come from outside consultants whohave the necessary objectivity, broad experience in a number ofindustries, some familiarity with the industry being audited andundivided time and attention.

iv. Periodic:- Typically, firms initiate marketing audits only aftersales have turned down, sales force morale has fallen, andother problems have occurred .

Companies are thrown into a crisis partly because they failedto review their marketing operations during good times . A

periodic marketing audit can benefit both, companies in goodhealth as well as those in trouble .


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Marketing Audit Process:- A marketing audit starts with ameeting between the company officer(s) and the marketingauditor(s) to work out an agreement on the audits objectives,coverage, depth, data sources, report format and time frame .

It includes a detailed plan of who is to be interviewed, thequestions to be asked, and where & when to minimize time &cost .

The Cardinal rule in marketing auditing is: Dont rely solely onCompany Managers for data and opinions.

Ask Customers, Dealers, and other Outside Groups.

The truth is many companies dont really know how theircustomers and dealers see them, nor do they fully understandcustomer needs .


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The marketing audit examines six major components of thecompanys marketing situation :-

Part I Marketing Environment Audit:-

1. Macro Environment:-a. Demographic:- What major demographic developments and

trends pose opportunities or threats to this company ? Whatactions has the company taken in response to thesedevelopments and trends?

b. Economic:- What major developments in Income, Prices,Savings, and Credit will affect the company ? What actions hasthe company been taking in response to these developments andtrends?

c. Environmental:- What is the outlook for the cost andavailability of natural resources and energy needed by thecompany ? What concerns have been expressed about the companys role in pollution and conservation, and what steps has the companytaken?


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d. Technological:- What major changes are occurring in productand process technology ? What is the companys position in thesetechnologies? What major generic substitutes might replace thisproduct?

e. Political:- What changes in laws and regulations might affectmarketing strategy and tactics ? What is happening in the areasof pollution control, equal employment opportunity, productsafety, advertising, price control, and so forth, that affectsmarketing strategy ?

f. Cultural:- what is the publics attitude toward business andtoward the companys products ? What changes in customerlifestyles and values might affect the company ?


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2. Task Environment:- a. Markets:- What is happening to market size, growth,

geographical distribution, and profits ? What are the majormarket segments?

b. Customers:- What are the customers needs and buying processes ? How do customers and prospects rate the companyand its competitors on reputation, product quality, service,sales force and price ? How do different customer segmentsmake their buying decisions ?

c. Competitors:- Who are the major competitors ? What are theirobjectives, strategies, strengths, weaknesses, sizes, and market

shares ? What trends will affect future competition andsubstitutes for the companys products ?

d. Distribution and Dealers:- What are the main trade channels for bringing products to customers ? What are the efficiency

levels and growth potentials of the different trade channels ?


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e. Suppliers:- What is the outlook for the availability of keyresources used in production ? What trends are occurringamong suppliers ?

f. Facilitators and Marketing Firms:- What is the cost andavailability outlook for transportation services, warehousing facilities, and financial resources ? How effective are thecompanys advertising agencies and marketing research firms ?

g. Publics:- Which publics represent particular opportunities or problems for the company ? What steps has the company takento deal effectively with each public ?

Part II Marketing Strategy Audit:-


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Part II Marketing Strategy Audit:a. Business Mission:- Is the business mission clearly stated in

market oriented terms ? Is it feasible ?

a. Marketing Objectives and Goals:- Are the company and

marketing objectives and goals stated clearly enough to guidemarketing planning and performance measurement ? Are themarketing objectives appropriate , given the companys competitive position, resources, and opportunities?

c. Strategy:- Has the management articulated a clear marketingstrategy for achieving its marketing objectives ? Is the strategyconvincing ? Is the strategy appropriate to the stage of the product life cycle, competitors strategies, and the state ofeconomy ? Is the company using the best basis for marketsegmentation ? Does it have clear criteria for rating the

segments and choosing the best ones ? Has it developed accurate profiles of each target segment ? Has the company developed aneffective positioning and marketing mix for each targetsegment ? Are marketing resources allocated optimally to themajor elements of the marketing mix ? Are enough resources ortoo many resources budgeted to accomplish the marketingobjectives ?


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Part III Marketing Organization Audit:-a. Formal Structure:- Does the marketing vice president have

adequate authority and responsibility for company activities thataffect customers satisfaction? Are the marketing activities optimallystructured along functional, product, segment, end user, andgeographical lines?

b. Functional Efficiency:- Are there good communication and working relations between marketing and sales? Is the product management system working effectively? Are product managers ableto plan profits or only sales volume? Are there any groups inmarketing that need more training, motivation, supervision, orevaluation?

c. Interface Efficiency:- Are there any problems between marketingand manufacturing, R&D, purchasing, finance, accounting, and/orlegal that need attention?

P IV M k i S A di


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Part IV Marketing System Audit:-a. Marketing Information System:- Is the marketing intelligence system

producing accurate, sufficient, and timely information about marketplacedevelopments with respect to customers, prospects, distributors anddealers, competitors, suppliers, and various publics? Are company decisionmakers asking for enough marketing research, and are they using theresults? Is the company employing the best methods for marketmeasurement and sales forecasting?

b. Marketing Planning System:- Is the marketing planning system wellconceived and effectively used? Do marketers have decision support

systems available? Does the planning system result in acceptable salestargets and quotas?c. Marketing Control System:- Are the control procedures adequate to

ensure that the annual plan objectives are being achieved? Doesmanagement periodically analyze the profitability of products, markets,territories, and channels of distribution? Are marketing costs andproductivity periodically examined?

d. New Product Development System:- Is the company well organized togather, generate, and screen new product ideas? Does the company doadequate concept research and business analysis before investing in newideas? Does the company carry out adequate product and market testingbefore launching new products?

P t V M k ti g P d ti it A dit


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Part V Marketing Productivity Audit:-a. Profitability Analysis:- What is the profitability of the companys

different products, markets, territories, and channels of distribution?Should the company enter, expand, contract, or withdraw from anybusiness segments?

b. Cost Effectiveness Analysis:- Do any marketing activities seem to haveexcessive costs? Can cost reducing steps be taken?

Part VI Marketing Function Audits:-a. Products:- What are the companys product line objectives? Are they

sound? Is the current product line meeting the objectives? Should theproduct line be stretched or contracted upward, downward, or both ways? Which products should be phased out? Which products should be added? What are the buyers knowledge and attitudes toward the companys andcompetitors product quality, features, styling, brand names, and so on? What areas of product and brand strategy need improvement?

b. Price:- What are the companys objectives, policies, strategies, and

procedures? To what extent are prices set on cost, demand and competitivecriteria? Do the customers see the companys prices as being in line withthe value of its offer? What does management know about the priceelasticity of demand, experience curve effects, and competitors pricesand pricing policies? To what extent are price policies compatible with theneeds of distributors and dealers, suppliers, and government policies?

Di t ib ti Wh t th di t ib ti bj ti d


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c. Distribution:- What are the companys distribution objectives andstrategies? Is there adequate market coverage and service? How effectiveare distributors, dealers, manufacturers representatives, brokers, agents,and others? Should the company consider changing its distributionchannels?

d. Marketing Communications:- What are the organizations advertisingobjectives? Are they sound? Is the right amount being spent on advertising? Are the ad themes and copy effective? What do customers and the publicthink about the advertising? Are the advertising media well chosen? Is theinternal advertising staff adequate? Is the sales promotion budgetadequate? Is there effective and sufficient use of sales promotion tools suchas samples, coupons, displays, and sales contests? Is the public relationsstaff competent and creative? Is the company making enough use of direct,online, and database marketing?

e. Sales Force:- What are the sales forces objectives? Is the sales force largeenough to accomplish the companys objectives? Is the sales force

organized along the proper principles of specialization (territory, market,product)? Are there enough (or too many) sales managers to guide the fieldsales representatives? Do the sales compensation level and structureprovide adequate incentive and reward? Does the sales force show highmorale, ability, and effort? Are the procedures adequate for setting quotasand evaluating performance? How does the companys sales force compareto competitors sales forces?

h k ll


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The Marketing Excellence Review:- The three columns in the below tabledistinguish among poor, good, and excellent business and marketing practices.

Poor Good Excellent

Product driven Market driven Market drivingMass market oriented Segment oriented Niche and customer orientedProduct offer Augmented product offer Customer solutions offer Average product quality Better than average Legendary Average service quality Better than average LegendaryEnd product oriented Core product oriented Core competency orientedFunction oriented Process oriented Outcome orientedReacting to competitors Benchmarking competitors Leapfrogging competitorsSupplier exploitation Supplier preference Supplier partnership

Dealer exploitation Dealer support Dealer partnershipPrice driven Quality driven Value driven Average speed Better than average LegendaryHierarchy Network Teamwork Vertically integrated Flattened organization Strategic alliancesStockholder driven Stakeholder driven Societally driven

M l h k k i di i i f


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Management can place a checkmark to indicate its perception of where the business stands. The profile that results from thismarketing excellence review exposes weaknesses and strengths,highlighting where the company might make changes to become atruly outstanding player in the marketplace.

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11 Evolution of Marketing Organization & Marketing Audit