Learning MBA Master Degree

TEACHER: Hello, Student. We have already mentioned the ways different firms organize the marketing effort. An some companies marketing is closely knit group; at other organizations employees specialize in carrying out individual marketing functions, rather than serving on a team. Either way, marketing managers are responsible for seeing that the activities called for in marketing plans are performed in a way that achieves marketing objectives.

STUDENT: What you mean, Teacher, is that in all cases marketing managers are responsible for implementing and controlling the marketing effort.

TEACHER: Precisely. Except at the smallest companies, marketing efforts are carried out by a group of employees. An important management task is to organize this group; that is, to structure the group by defining areas of authority and working relationships. To an employee with limited responsibilities, such as analyzing prices or selling a product line, it may seem unimportant whether the marketing group has one structure or another. However. employees will work together most efficiently if the group is organized logically and in accordance with the marketing objectives established during the planning process.
Centralized Versus Decentralized Organizations

Generally speaking, the marketing group and the organization of which it is a part may be centralized or decentralized. A centralized organization is one in which relatively few people hold authority and responsibility. In practice, this means that a large share of decisions are made by top management. Student, can you think of some examples?

STUDENT: I'd say that in a centralized organization probably the marketing staff will have to get the approval of top management before hiring a new advertising agency or changing the price of a product; this type of decisions.

TEACHER: Good. Le me add that a centralized structure makes it easier for management to coordinate the work of various departments.

Typically, a centralized organization has many layers of management. Until some years ago, a typical large consumer goods corporation had as many as ten layers between entry-level employees and its chief executive. Some of these managers supervised only two or three people.

STUDENT: Sounds like a costly arrangement.

TEACHER: Yes it is. To cut costs, most corporations have eliminated some layers so that each entry-level employee is seven or fewer layers away from the CEO.

When organizations eliminate layers of management, the outcome tends to be a more decentralized structure. In decentralized organizations a relatively great number of people hold authority and responsibility. Because there tend to be fewer layers co

management, middle and lower-level managers -and even operative employees have authority to make decisions about their areas of responsibility. For example, Macy's adopted a more decentralized structure that allows individual stores to tailor the goods they carry to the customers they serve in their respective areas.

STUDENT: I understand this process was accelerated by the intensive use of Information Technology, because the job of many of those intermediate layers was simply to collect and process information to be given to their bosses. This work is now done by computers and software like the "control panel" management tool.

TEACHER: Sure. But there are other advantages in a decentralized structure; most importantly, it enables the organization to benefit from the expertise and decision-making skills of more of its employees. Also, fewer levels of managers can mean lower costs. Because decentralized organizations allow employees and lower-level managers to make more decisions without first requesting approval, they can more quickly get a product to market or respond to changes in the environment.

STUDENT: Are there also more mistakes?

TEACHER: Sure, sometimes mistakes are made that could have been avoided by a centralized organization But this problem seems to be more that compensated by the agility of response to challenges and opportunities and the better use of talent provided by flat organizations that empower employees.

STUDENT: Flat?

TEACHER: Given these benefits some companies create organizations that are almost "flat"; that is, almost lacking in hierarchy. Such organizations give their employees broad latitude in making decisions, often as part of a team.

In general, the marketing group may be organized by function, product, or geographic location. Other companies more directly attempt to organize the marketing group in a way that positions them to meet customer needs.

Organizing By Function

Just as an entire company might be divided into functions, such as marketing, production, finance, and research and development, the marketing group can be organized by function. Thus, the marketing department can be divided into specialized groups handling such marketing functions as marketing research, product planning, sales, and advertising and sales promotion.

STUDENT: And does this arrangement work?

TEACHER: A functional organization may be effective when all the company's products have similar marketing needs, such as when all products are directed to the same target market. This type of organization may also be appropriate for a small company with one product or a few similar products. Employees who handle a single marketing function become expert at it. The marketing manager must coordinate everyone's work to make sure it meets the organization's overall marketing objectives. This may work well in a small organization or one with limited offerings, but coordination may become overly complex in an organization with a variety of marketing plans to execute.

Organizing By Product

In some marketing groups, managers have responsibility for all marketing activities pertaining to a particular product.. The product managers report to the organizations vice president of marketing, who also oversees some functional groups that cannot be efficiently divided among products.

STUDENT: Would the salesforce also be divided according to products?

TEACHER: No. The company will probably have a single sales force, rather than paying two different groups of salespeople to sell two different products to the same customers.

Of course there would be separate salesforces when the products and the customers are substantially different. Let me use Unilever as example again. Unilever markets two very different types of products: Foods (Lipton, Knorr, Hellmann’s, etc.) and Home & Personal Care (Dove, Omo, Skip, Ala, etc.).

STUDENT: I heard of companies that have a "product line" or "product group" manager.

TEACHER: True. If the organization handles many products that fall into several categories, it may need an additional layer of management; a product group manager. This person coordinates the work of several product managers. As an example, Unilever may have a Knorr product manager, to whom several product managers report, each dealing with products sold under the Knorr brand; say soups, bouillon, ready made food, etc.

A product-based organization makes sense when the marketing mix and target market vary significantly from one product to the next. Employees become experts in their product and the needs of its target market.

STUDENT: Looks fine. Any problems?

TEACHER: This approach has advantages, including that the organization develops talented marketing managers. However, because each product needs marketing employees with expertise in various functions, this type of organization can be expensive.

Organizing By Geographic Location

The marketing group also may be organized by geographic location. A company serving a global marketplace might have separate marketing divisions for North America, Asia, Europe, and Africa. Often a portion of the marketing group, such as the sales or advertising department, is organized geographically.

STUDENT: And when is this approach convenient?

TEACHER: Organizing by geographic location makes sense when the company's markets are significantly different from one location to another. When the needs and values of customers vary among locations, the company can benefit from having people paying attention to each group. An employee handling distribution in Asia would probably approach the task differently than the person handling distribution in Europe.

STUDENT: But it seems that there is not total agreement between company boards on how to organize. Until 2006 Unilever had a combined organization (product group divisions/regions) this is what the company said in their website before making the change to a different organization:: "This structure allows improved focus on foods and home and personal care activities at both the regional and global levels. It allows for faster decision making and strengthens our capacity for innovation by more effectively integrating research into the divisional structure."

Now Unilever adopted a basically different organization, didn't it? And now their website states that Unilever's new organisation provides single point accountability and has fewer management layers to deliver faster decisions and faster execution.

TEACHER: You are right. There is not single, permanent truth. Conditions may change, as well as the composition of the top management team.

Organizing For Customer Satisfaction

The competitive pressure generated by new technology and increased international competition have led some companies to seek ways to organize that put customers first. Such a company is Motorola, where many of the employees have been organized into work teams dedicated to improving performance quality and customer satisfaction.

In many cases, these organizations group people according to the customers they serve so that employees can be well acquainted with their customers' needs. Hewlett-Packard assigns salespeople to serve particular industries, rather than geographic territories.

STUDENT: Not a novelty, actually. As I have already told you once before, my father worked for IBM decades ago, and he says that in "his time" salespeople were already specialized by industry.

TEACHER: Well, some companies adopt new approaches sooner that others.

Whatever way the marketing group is organized, its core activities are directed toward implementing the marketing plan or plans for which it is responsible.

When the implementation process succeeds, the marketing group achieves the objectives laid out in the marketing plan. Successful implementation depends on coordinating work, motivating employees, and communicating with people inside and outside the organization.

Coordination

No marketer can succeed in isolation. Even the most brilliant and hardworking marketing experts need help in carrying out their marketing plans. And even a small company needs employees or contractors to handle at least some marketing activities -say, designing a logo or distributing goods. In addition, the success of the marketing effort depends on cooperation from non-marketing personnel. Therefore, implementing the marketing effort requires that the marketing manager coordinate the work involved by setting priorities, scheduling activities, and building cooperation.

Setting Priorities - Because employees in different departments have different, even conflicting, concerns, priorities can be difficult to agree on. For example, production managers can minimize mistakes and maximize productivity when the company makes a moderate amount of a single product. However, sales managers can boost earnings by offering a variety of products -and the more they sell, the better. Even within the marketing group, there are disagreements over priorities. If the head of marketing research is convinced that spending more on research will enable the company to target its product so well that it can afford to cut back on promotion, the head of promotion will almost certainly object.

STUDENT: And how can the marketing manager set priorities in light of these conflicts?

TEACHER: The manager can either impose priorities or lead the group in reaching a consensus. The latter approach can be more difficult and tends to require more patience, but it is likely to result in greater commitment to the priorities agreed on. Whether the manager sets priorities alone or leads the group in doing so, the focus should be on doing what is necessary to achieve the objectives of the marketing group and the organization.

Scheduling - Implementing any marketing plan requires carrying out many activities. To make sure that they are done on time, the marketing manager must schedule them. Scheduling requires identifying what needs to get done, who will perform each task, how long each task will take, and when it must be completed. For example, a company launching a new service will want much of its advertising to take place around the time the service begins. If the company advertises too far in advance, people will become discouraged when they can't buy the service, and they may have lost interest by the time the service is available.

Scheduling activities is easier when the manager uses some of the techniques and tools developed for that purpose, like the Gantt chart, the critical path method (CPM), or specialized computer software.

STUDENT: Obviously all you said before is important, but in the end managers must deal with real people.

TEACHER: Right. We’ll discuss this reality right now.

Building Cooperation - To get their work done, managers and employees alike need the cooperation of others. In general, people tend to cooperate when they understand the need to do so and when they respect the person seeking their cooperation. Thus, a general guideline for building cooperation is to make sure others understand what it is you're trying to do and why. For example, when requesting help from the company’s accountant in developing sales and cost records for each product line the marketer can explain, "This kind of information will help us make sure we are emphasizing the most profitable products." In addition, any employee or manager who wishes to receive respect must earn it by being ethical, considerate, and fair and by striving to do excellent work.

Coordinating Teamwork - Coordination is especially important when the marketing plan is implemented by a team. In organizations that rely on teamwork within and across departmental and organizational lines, success depends on the ability to work cooperatively with ones equals, not on the ability to give or follow orders.

For team members to coordinate their work, they must all understand what they can and should be doing. Are they an advisory group, for example, or are they expected to make and carry out decisions? Team members need to know about the objectives and performance of the team itself and of the organization as a whole. Management and the team leader must work together to ensure that this information is getting to the team.

Motivating Teams -To motivate employees to work as a team, the manager needs to offer rewards for group achievements rather than just for individual accomplishments. For example, a group incentive system is a compensation method based on paying a bonus to members of a group that achieves specified objectives. Thus, after a team launches a new product on time and under budget, each team member might receive a bonus representing a share of the first years profits generated by the new product.

STUDENT: Good principle, but of course, many marketing managers have little influence on their employer's compensation plan.

TEACHER: True, but they can be careful to apply the same standards to all rewards, including praise and positive performance appraisals. For example, if marketing employees are assigned to cross-functional teams, the marketing manager must uphold team goals, rather than fostering an us-versus-them attitude toward employees in other functional areas.

Controlling the Marketing Effort

When the marketing group begins implementing the marketing plan, the manager needs to know whether the plan is obtaining the desired results. When a marketing strategy does not perform as expected, the marketer needs to find out where problems lie. Somehow, the marketing group will have to make changes to bring performance and standards into line. The process of measuring performance and making corrections as needed is known as controlling.

The Control Process

Controlling involves three steps.

* First, the manager measures the results being obtained.
* Then the manager compares those results with the standards that have been set (these should be spelled out in the marketing plan).
* Finally, when performance is close to or superior to the objectives, the manager reinforces performance. For example, in the first year Starbucks Coffee offered stock options to all employees based on the company's performance, Starbucks exceeded its profit objective by 20 percent. In response, management made the formula for awarding stock options more generous for future years. When performance is significantly below the objectives, the manager takes corrective action.


STUDENT: Your last statement about corrective action is quite general, isn’t it?

TEACHER: Let me elaborate. The type of action taken in response to unacceptable performance depends on the source of the problem. The basic causes of unacceptable performance are problems

* with the plan,
* with the way it is being implemented,
* or with both.

Problems with the plan arise when the plan was not well prepared, or when a change in the environment requires a change in the plan.

Problems with how the plan is being implemented can arise in several areas. Perhaps not enough resources are being directed toward one area. Or the problem may be with employees who don't understand what they are supposed to be doing or aren't putting forth enough effort. In general, when performance suffers from problems with implementation, the response should be to identify and solve those problems. When there are problems with both the plan and the implementation, the plan fails, and the manager must start the planning process from the beginning.

STUDENT: This must be a pretty bad situation, of course.

TEACHER: Well, the need to start over from scratch should be rare, especially in organizations with a total quality philosophy. First, such an organization would focus on continuous improvement, not just wait to spot problems to correct. For example, employees at a company that successfully practices TQM wouldn't ask, "Why aren't small companies buying our service?" Rather, they would ask a positive question such as "How can we better identify the needs of small companies?"

Furthermore, the focus on continuous improvement should apply to strategic marketing planning, so that marketing plans increasingly meet the criteria of being challenging but achievable. With input from the employees, management would continually be fine-tuning the marketing plan and the process of implementing it.

STUDENT: What you said means control is not something that happens only after implementation is complete. Instead, management seeks information to measure performance throughout the implementation process.

Especially at an organization with a quality orientation, one of the most important performance measures will be customer satisfaction. The marketing manager needs to determine whether customers are pleased with the goods and services they receive.

STUDENT: I think customer satisfaction is not the easiest outcome to measure.

TEACHER: True, but the manager and all employees of the marketing department can continuously improve methods for receiving feedback from customers. For example, all employees may be trained to observe and report feedback from customers. Nowadays, most consumer goods packaging displays a toll-free customer hotline. The organization may conduct various types of surveys as well, such as by giving customers cards to fill out with their comments or complaints about service.

Customer feedback is also an opportunity for the organization to communicate with its customers. Scott Gross, author of Positively Outrageous Service, advocates the following approach to customers complaints:

* When in doubt, apologize.
* Apologize even when the customer doesn't know you goofed. This really makes an impression.
* Make amends to the customer in excess of the slipup.
* Empower employees to solve problems.


Sales Analysis

Financial performance is a basic way to evaluate the results generated by implementing a marketing plan. One method for evaluating financial performance is to conduct sales analysis. This type of analysis consists of "gathering, classifying, comparing and studying company sales data."

The definition of sales analysis implies that it requires planning the kinds of information the marketing manager will need for the control process. This information will include records of what goods were sold or what services were delivered. The records should include any other information needed to classify the sales data, such as the price and information about the buyers.

After the organization has set up a system and begun gathering sales information, the marketer can classify, compare, and study it. Marketers classify past and present sales in a variety of ways:



* By product, package size, model, grade, or color
* By customer type or size
* By geographic region
* By price or type of discount
* By method of sale, such as direct sales or mail order
* By method of payment, such as cash or charge
* By size of order
* By commission to be paid to salesperson
* By reason for purchase.

Measurement Of Sales - There are several ways to measure sales for a sales analysis. Each provides only a partial picture of the organization's performance. The most common measures of sales are unit volume, dollar volume, and market share.

Unit Volume - To determine unit volume, the marketer finds the number of goods or units of service that the organization has sold. Unit volume is useful for identifying the organization's most popular products and for measuring the demand for its products.

STUDENT: Surely an important measure, but unit volume cannot indicate whether the organization is making a profit or growing as fast as its competitors.

TEACHER: Sure, there are many other forms of measuring sales.

Money Volume - Another way to measure total sales is to find their money volume, or their value in the currency of choice. Whereas unit volume tells only the number of products sold, the money volume takes into account the different prices of the organization's products.

Market Share - Finally, the marketer measures sales volume in terms of market share., To compute market share, divide total sales of the product by the industry’s total sales for the product type to come up with a percentage. The marketer can look at changes in market share over time or compare market shares to find the organizations rank in the marketplace. Market share shows the marketer how well the organization is performing compared with competitors.

Measurement Of Profitability

The basic measure of a business's success is its profitability -how much it earns after expenses. Thus, for controlling in a business, an important type of information is the profits generated by particular products or by sales to particular customer groups.

A basic measure of profitability is the profit margin, or profits (that is, revenues minus expenses) divided by revenues. The profit margin is expressed as a percentage.

As in the case of analyzing sales, the marketing manager will need to see profit margins broken down in various ways, such as by product or by market. The manager can disaggregate the data in the ways listed for sales analysis. The manager might use this information to decide which products or target markets should receive the most resources. Or the manager might use the information about profits to adjust the marketing mix -say, to reconsider the price of an unprofitable product or make sure the most profitable items are widely available.

Marketing Cost Analysis

To interpret profitability, it helps to understand how much the organization is spending and for what. For example, if a particular market segment is generating relatively low profits, the marketing manager may seek to identify areas where the marketing group can boost profits by cutting costs incurred to serve that market segment.

STUDENT: So, we are back to the old question of how to allocate costs!

TEACHER: Accounting systems are set up to measure various costs such as those for supplies, inventory, rent, and salaries. Marketing cost analysis calls for reallocating the costs so that they correspond to specific marketing activities, such as order entry, transportation, selling, and advertising. The resulting accounts are called functional accounts.

The marketing manager needs to ensure that the organization's accounting system is set up so that it is possible to create the functional accounts.

Each of the functional accounts is further allocated among product types or market segments

Activity-Based Costing - An increasing number of large companies are adopting a fresh approach to understanding costs. Called activity-based costing, this accounting system itemizes all costs associated with producing and marketing a particular product for a particular market. Activity-based costing can help managers see which products are profitable and can suggest areas where reducing costs can have the most impact.

STUDENT: Seem the Japanese have been leaders in this new method of analyzing costs. I know that most Japanese corporations have been using a form of it for decades.

TEACHER: True. As an important part of the activity-based costing approach, all employees are made aware of their contribution to product costs, so they can be sensitive to ways of keeping those costs down. This approach fits well with the Japanese use of teamwork. Cross-functional teams work together to develop new products so that they can be made and sold for a "target cost". In contrast, the typical Western approach has been to design a product, then see how much it will cost, proceeding with it only if the costs are acceptable. The increasing use of cross-functional teams in the Western developed economies may spur a move to this new way of looking at costs.