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Working Paper No. 2004-07
April 10, 2004
The Role of Marketing in the Corporation: A Perpetual Work in Progress
Shankar Ganesan Eller College of Business, University of Arizona Alan J. Malter Eller College of Business, University of Arizona Frederick E. Webster, Jr. Tuck School of Business at Dartmouth
This paper can be downloaded from the Social Science Research Network Electronic Paper Collection:
IN THE IN
A P ERPETUAL WORK
Frederick E. Webster, Jr. Alan J. Malter Shankar Ganesan1
April 10, 2004
Frederick E. Webster, Jr. is the C.H. Jones Third Century Professor of Management, Emeritus, Tuck School of Business, Dartmouth College and Visiting Scholar, Eller College of Business and Public Administration, University of Arizona; Alan J. Malter is Assistant Professor of Marketing; and Shankar Ganesan is Associate Professor and Payne Fellow of Marketing, Eller College of Business and Public Administration, University of Arizona, 320 McClelland Hall, Tucson, Arizona 85721. Please address correspondence regarding this paper to Alan Malter, tel. 520-626-7353, fax 520-621-7483, email@example.com. This study was partially funded by the Marketing Science Institute. The authors also thank the MSI Board of Trustees, the American Marketing Association Winter Educators' Conference, and Don Lehmann, Rohit Deshpande, Bob Lusch, and Koen Pauwels for valuable comments on earlier drafts of this paper.
S. which increases the difficulty of assessing marketing performance and justifying the support and resources for marketing activities from top managers focused on shortterm financial objectives. 2 .THE ROLE OF MARKETING IN THE IN CORPORATION : A P ERPETUAL WORK PROGRESS ABSTRACT This study critically examines the widely-held view that the role of marketing in corporations is in decline. One result of these developments. is that marketing in many firms has "lost a seat at the table" as marketing expenditures have been reduced and marketing activities decentralized. and global corporations. At the same time. marketing as a distinct function with its own bureaucratic structure has become a more dispersed set of activities and responsibilities. contrary to trends that appeared to be emerging in the early 1990's. We find that there is still a wide range of opinion about the meaning of marketing. we describe major changes that are occurring in the organization and management of marketing activities in large manufacturing firms and compare these findings with earlier predictions. Based on interviews and discussions with top marketing executives and chief executive officers from a broad sample of leading U.
3 .At the same time. marketing in some firms continues to play an influential role in corporate strategy. suggesting a range of possible influence of marketing in the corporation. Marketing’s ambiguous position raises significant questions for the future of marketing as management practice and academic discipline.
it influences business operations and financial performance in many ways.g. Similarly. and its tactical dimensions of demand stimulation. 4 . Lehmann and Jocz 1997) of the influence of marketing. including promotion and pricing (Webster 2002b). so must marketing. Textbook descriptions of marketing management (e. namely as an organizational culture focused on satisfying customers.. Homburg.g.Marketing has always been changeable. Workman. and Krohmer 1999) or overly negative assessment (e. Kotler 2000) are quickly outdated. targeting. It is so closely intertwined with all aspects of the business that changes anywhere in the firm and its market environment inevitably have an impact on marketing and on the influence of marketing within the firm.. its business strategy dictates of segmentation. Snapshot assessments of the role of marketing at any particular point in time will miss the essential dynamic nature of the discipline and its relationship to the changing organizational environment. a narrow focus on just one dimension of marketing may result in an overly positive assessment (e.g.. and positioning. both in its conceptual and academic aspects and in its management and organization within firms. In its multiple dimensions. As the internal and external environment change.
a focus on short-term measures of financial performance.The last decade of the twentieth century was certainly a period of rapid change in the business environment. As noted by Webster (2002b). and destroying bureaucracy in the search for greater efficiency and responsiveness to the changing market environment. Home Depot. including the rise of distributed computing. • the rapid growth of discount mass merchants such as Wal-Mart. especially quarterly earnings per share. and Target. and the use of stock options as a major form of management incentive compensation. downsizing. • • globalization and increased competitive pressures. important forces that impacted the evolution of marketing in the past decade include: • rapid improvements in telecommunications and other forms of information technology. • the Internet revolution including the boom and bust of e-commerce and the dot.coms. movements in stock prices. • outsourcing and strategic partnering with vendors and other resource providers leading to new organization forms. • the drive toward cost cutting. 5 .
networked organizations (e.. The 6 .During the last decade. Day and Montgomery 1999. Day 1992. 1992). Their analysis of the environmental trends at that time led these authors to conclude that marketing might be expected to expand its influence under the emerging conditions. Srivastava.g.. Kerin 1992. Freeling. and Fahey 1999. The dominant conclusion is that these changes have produced a negative dynamic that has diminished and marginalized the role of marketing in the firm. and Court 1994.g. Moorman and Rust 1999. Achrol and Kotler 1999. a number of authors and forums considered the effects of these changes from both an academic and business perspective (e. Shervani. 2002c). Srivastava. Indeed. Webster 2002b. Haeckel 1999. Lehmann and Jocz 1997. Deighton 1996. Montgomery and Webster 1997. Shervani and Fahey 1999). EXPECTED CHANGES IN THE 1990'S This state of affairs stands in marked contrast to the cautious optimism expressed by some authors at the beginning of this period regarding the long-term future of marketing (e. Varadarajan 1992. Webster 1981. George. marketing is viewed in the academic literature as uniquely positioned to manage customer information processes and new product development processes in decentralized..g. Achrol and Kotler 1999.
Glazer 1991). • An expanded role for marketing. Frazier et al. placing more importance on the firm's relationship management skills (e..g.g. Webster 1992. More specifically. marketing scholars observed the following trends emerging in the early 1990’s. 1999). 1988. integrating customer focus and responsibility for delivering customer value throughout the organization. rather than seeing marketing as the sole responsibility of a few specialists (e.. Webster 1992).Information Age and the Internet further promised to create ideal conditions for marketing to reshape itself and finally achieve a dominant role in the firm (Deighton 1996. 1987. 7 . Srivastava et al. internal focus on company needs to a customer-centric. see also Moorman and Rust 1999. • A shift away from transactions as the unit of analysis toward longerterm buyer-seller relationships.. Day 1992. which they expected to continue and further predicted would increase the status and influence of marketing: • A move from product-centric.g. Dwyer et al. Webster 1992). external focus as called for by the original "marketing concept" (e. as envisioned long ago by Keith (1960) and repeated in marketing textbooks ever since.
hierarchical organization to more flexible forms including networks of strategic partnerships with customers and vendors. and joint ventures (e. Marketing was seen to be moving away from a focus on transactions as the fundamental unit of analysis and toward relationships with customers and suppliers (Bagozzi 1975. promotion. and Oh 1987.• The evolution from bureaucratic. Thorelli 1986). Jackson 1985. strategic alliances with resellers and technology providers. and distribution (Zoltners 1981) and toward a conceptualization of marketing as a set of activities focused on intra-firm and inter-organizational influence processes. bureaucratic forms toward more flexible networks of relationships. and strategic alliances (Badaracco 1991. Womack.g. Organizations were believed to be evolving from traditional hierarchical. Webster (1992) asserted that the field of marketing was undergoing a paradigm shift away from the view of marketing as an optimization problem (based on the microeconomic model) with an emphasis on product. and Roos 1991). Webster 1992). Achrol and Kotler 1999. Johnston and Lawrence 1988. partnerships. and O’Neal 1988. Powell 1990. Spekman.. Schurr. Dwyer. 8 . Frazier. price. Jones. Achrol 1991.
(2) to identify the forces driving changes in the organization of the marketing function. 9 . that corporate changes expected to occur in the 1990’s have already been widely implemented and now characterize most organizations and marketing operations. Specifically. From the perspective of one decade later it is now possible to reexamine changes in the role of marketing in the corporation and the extent to which the forces identified previously and new forces that have since emerged have been at work in changing the practice of marketing management and its influence in the firm. and supply-chain management. based on a normative belief that marketing should play a dominant role in guiding corporate strategy. and (3) to examine how marketing competence finds its way into value-creating processes of innovation. we propose a theoretical framework to consider such changes and present initial evidence regarding the current and likely future status of marketing. However. the objectives of this study are: (1) to gather evidence on the nature of changes that are occurring in the organization and influence of marketing within corporations. the current sense that marketing is losing its influence in corporations runs counter to these earlier expectations. In this paper. customer relationship management.Many marketing academics assume.
followed by a comparison with what had been expected at the beginning of the past decade. we summarize the potential range of influence of marketing in the corporation and discuss the implications of these developments for the future of marketing as management practice and academic discipline. we discuss four major sets of issues facing marketing management in the future. respondents must have a broad enough perspective and deep enough familiarity with the role of marketing in their organizations to have a sense of how it has changed over time. Thus. Finally. The next section describes the methodology used in the empirical study. followed by a presentation of key findings from interviews with top executives and discussions with Chief Marketing Officers.More specifically. First. Next. These findings are organized under eight categories describing the current status of marketing management. respondents must be very senior-level corporate executives with decades 10 . RESEARCH METHOD A number of factors influence the methods that can be used to investigate these research questions. we identify changes in the role of marketing management that are occurring in a sample of large corporations and examine their causes and consequences.
In particular. 11 .. we adopted a qualitative approach and conducted depth-interviews and discussions with a select sample of top executives (e. this research seeks to understand the complexity and subtlety of these issues.. Instead. the fluidity and ambiguity of many of the key concepts and terms requires interactive. or the opportunity to clarify ambiguous concepts with respondents. 1999. which requires a method to navigate the diverse and inconsistent terminology used to describe forms of marketing organization and activities across different firms. Finally.of experience in their respective firms and industries. Thus. since this research seeks insights about highly sensitive strategic issues. Moorman and Rust 1999) would not provide the required top-level perspective to view changes across the corporation over time. which mandates a more personal approach to data collection. a large-scale survey of marketing managers or functional area subunits in SBU’s (e. there is a need to build trust and rapport with each individual respondent. such as shifting marketing responsibilities to different organizational units.g. flexible questioning so that ambiguities can be addressed and meanings clarified. Second.g. Webster 1981) to enable us to examine the interplay of changes in marketing organization across both corporate and SBU levels. Homburg et al.
including automobiles. The executives (men and women) interviewed ranged in age from 40 to 70.Data Collection In order to gain a broader understanding of the phenomena of interest. and one was less than $1 billion. we collected data from two sources. Interviews were conducted either in person or by telephone and typically lasted one hour. eight were in the $2-$100 billion range. chemicals. with 20 to 40 years of experience in their respective firms and industries. using a common interview guide that was modified slightly as the interviewers gained experience with it. In addition. and a mix of products and services. food. household products. All had advanced professional degrees (some had PhD's). Three firms had annual revenues in the $100$200 billion range. Industries represented spanned both consumer and industrial markets. 12 . information technology. Some had taught marketing courses in leading business schools and authored influential management books and articles. First. and toys. including some of the largest in the world. electronics. depth interviews were conducted with top-level executives (CEOs and senior marketing executives) in a diversified sample of twelve corporations. we also interviewed a senior manager in a leading marketing consulting firm.
representing a broad range of businesses and some of the world's most important corporations. Together. as they are viewed as representing important trends and developments among global corporations. the total sample includes over 50 top managers. The identities of individual respondents and their firms have been disguised to preserve their anonymity and safeguard confidential information.The second source of data was a two-day interactive forum with 40 senior marketing executives. These sessions covered the same topics as the individual executive interviews and took place during the same time period. Twenty- 13 . including verbatim quotes from the respondents. Data from the interviews and interactive forum were analyzed using a comparative approach and triangulating across the interpretations of the three authors (Strauss and Corbin 1990). Many of the companies that provide the basis for this study are the subject of regular reporting in the business press as well as academic studies. Data Analysis Detailed notes were taken of each individual executive interview and of the discussions in the interactive forum. The discussions focused on the experience of these CMO's with the changing role of marketing in their corporations.
Definition and Scope of Marketing In almost every interview and in the interactive forum.four frequently occurring themes were identified. THE CURRENT STATUS OF MARKETING MANAGEMENT 1. Notable outliers mark the range of influence of marketing in these corporations. which are used as subheadings to organize the findings reported in the next section. leading to the emergence of eight central themes. The findings that emerge from this analysis are then compared to predictions from the marketing literature and developments reported in the business press. All of the findings reported below are based on central tendencies among the companies studied. "How has marketing been changing in your company in the past three to five years?" with a comment along the lines of "That depends upon what you mean by 'marketing'. Selected quotations are used to illustrate these themes and highlight concerns articulated by the respondents. the discussion began with a consideration of the meaning of the word "marketing. related concepts were aggregated. the respondent would answer the first interview question." Usually." Several respondents focused on the distinction 14 . In further analysis. though there is variance among firms on specific themes.
The definition of marketing. and to some extent in non-packaged-goods consumer marketers as well. It is part of the Business [SBU] Manager's responsibility. In a consumer durables firm.between marketing as a general focus on the customer and as a set of activities related to new product development. A respondent in the same industry also reported that marketing in his company was combined with sales and service and said specifically that "Marketing is really Sales. customer account management. brand promotion. we don't often differentiate between sales and marketing. the CEO of a consumer packagedgoods company said. in fact. there was a tendency to equate marketing with sales. "I have always defined marketing as brand management plus sales." Another respondent explained that in his company marketing had changed from "advertising and merchandizing" to being part of the Sales and Service Division." In the industrial marketers. One chemical company respondent said simply: Truthfully. For example." Another respondent said: There are really two meanings to this question: How it is positioned in the company organizationally and how the company attempts to be marketdriven and customer-oriented. it was noted that: 15 . often guided by the CEO. and so on. tends to be specific to the company.
it is surprising that there is still such a lack of consensus and 16 . It is fair to conclude that the definition of marketing depends very much on the particular situation of a given firm and a specific industry. when a distinction was made between sales and marketing. For a management discipline with historical roots as old as those of marketing. was the blurred distinction between marketing and sales. According to one respondent: Marketing is at the front end of new product development. In some of the business marketers. In one of the chemical companies.Marketing is much more integrated today. marketing's major responsibility was often seen as that of guiding new product development. the observation was made that: Marketing has become new business development [defined as new applications development]. The thrust of these comments was that it is hard to identify people with specific "marketing" responsibility. We have a world of deeply-embedded marketing. and marketing is much closer to sales. The management consultant we interviewed thought there was a very strong trend toward the integration of sales and marketing. and the supply chain. One recurring theme. to be discussed below under a separate heading concerning resource allocation. primarily at the SBU level.
This is such a critical issue because it is hard to win budgetary support for an ambiguous concept with unclear responsibilities that makes an uncertain contribution to the financial performance of the firm. especially in the battle for top-level management support and resources. To the CMO’s in the interactive forum. and tactics (see Day 1992. but he doesn't "get it." 17 . A very senior marketing executive in one of the world's largest corporations (who had commented that marketing was really sales in his company) made a very interesting comment: I tell the [CEO] that he is really the one person responsible for Marketing. and market share.wide range of opinion about its meaning. It is hard for an organization to conceptualize marketing simultaneously as a point of view about customer orientation that pervades the organization. Part of the confusion over the definition of marketing reflects its multiple dimensions as culture. a strategic emphasis on market targeting and product positioning. The cultural notion that "Marketing is everyone's responsibility" makes it very difficult to define marketing as a distinct management activity. brand awareness. and the day-to-day battles for sales volume. strategy. this was a major issue to be addressed going forward. He responds "Did I miss something on my way up?" He understands. Webster 2002b).
and may therefore be significantly diminished as a result of this realignment. Most other traditional marketing activities including day-to-day brand management. Figure 1 shows these shifts. especially in new product development. marketing skills and competence.An over-riding theme in these remarks is a bifurcation of marketing management at the present time. which is centralized in a few of the companies we talked with but generally has been delegated to the operating units to be coordinated with their specific needs. Clearly. key account management. The greatest diversity appears to be in the market research and market intelligence function. e. Market research becomes an expense 18 . product development.. Of major concern are the specific elements that no longer fit neatly into either category.g. At the top of the corporate organization (and on the left-hand side of Figure 1). marketing responsibility has been redefined as brand development and stewardship and overall marketing communication strategy. in which responsibility has been divided between the corporate and SBU levels. and distribution have been reassigned in various ways to strategic business units. pricing. the trend of dispersing marketing activities to operating units has been motivated by the desire to reduce corporate level overhead expenditures.
combined with the fact that a significant portion of the population now owns financial investments. focused attention on stock prices and quarterly earnings per share as a major driver of those price movements. Gale. Buzzell."The Tyranny of the P&L" It is well known that corporate management developed a much sharper focus on financial measures of performance beginning in the 1960s and 1970s. aided and abetted by the increased importance of corporate level strategic planning. While these recent developments have underscored the 19 .associated with strategic business units and new product development activities. Financial Emphasis of Management . More recently. and a concomitant interest in cash flows and the allocation of financial resources across the portfolio (Ansoff 1965. Day and Montgomery 1983). the boom in the stock market of the 1990s followed by the bear market of the early 2000’s. -------------------------------Insert Figure 1 about here --------------------------------2. the development of product portfolios as a management tool. and Sultan 1975.
In contrast. which are viewed as a key role of marketing in the firm (e. One of our respondents referred to this succinctly as "The tyranny of the P&L.short-term focus. There are many marketing-finance battles. customer focus. it is a problem of much longer standing. margin focus. Marketing is always seen as a variable cost [compared to a "committed cost"] so its budget is seen as soft money that is always in danger of being cut.g. They were also virtually unanimous in their opinion that this had a negative impact on long-term business performance and on the effectiveness of the marketing function. and [brand] equity building. Illustrative comments included: There is no question that quarterly earnings per share are still the major driver. Making the financial numbers isn't the only thing. There was also a common opinion that this short-term focus on quarterly earnings and stock prices had produced negative results in the form of lack of true product innovation and reduced investment in brand and business development. and brand equity. and consequently to the erosion of strategy. some respondents expressed the 20 . specifically in terms of funds available for marketing activities.. short-run. Kerin 1992). it's everything. This has led to a more tactical." Respondents were generally in agreement that short-term financial measures of business performance dominated management decisions in their companies. consumer focus. Most observed that the short-term focus had led to an erosion of strategic thinking.
it did not reduce the corporation's focus on financial performance.opinion that recently a longer-term focus was gradually gaining ground and that the use of mergers and acquisitions to grow sales and earnings had largely run its course. Real innovation is needed to increase sales. this respondent noted that his firm was able to develop a whole new product category that became a key growth engine and allowed the firm to escape the productivity trap. 3. at least for the foreseeable future. Though this success generated renewed respect for marketing in this firm and secured the continued support of top management for marketing activities. When probed to elaborate further. As one respondent from a packaged consumer goods firm noted: Firms can't grow forever through pricing and costing. Measuring Marketing Productivity 21 . Marketing was heavily involved in the conception and launch of this new category and received much of the credit for its success. The gains from increased 'productivity' are running out. Pressures to reduce costs were seen as producing smaller incremental gains as the opportunities for cost reduction were fewer and fewer.
Marketing managers in our sample criticized themselves for not doing a better job of linking marketing actions to measures of profitability. 22 . multi-period results that are by definition difficult to measure. One respondent in a technology company said that their organization had taken the initiative in developing measures of marketing performance specifically because: It is hard to hold onto even flat spending on marketing if you don't know which activities are effective. not long-term investments.Closely related to the issue of short-term financial emphasis is the widespread realization that marketing has a difficult time justifying its expenditures in terms of direct return on investment. in turn. to more effective marketing and the development of stronger brands? Probably both directions of causation play a role in a mutually reinforcing cycle. It is difficult to separate cause and effect here: Do strong brands drive the investment in marketing performance measures or does the availability of good data enable better measurement and lead. especially as many of the desired outcomes are long-term. Respondents noted that marketing expenditures tend to be regarded by top management and financial management as short-term expenses.
One consumer marketer respondent noted that his company can measure the effectiveness of its advertising expenditures daily. So they have instant access to data about product movement and the ability to relate that to specific marketing activities and expenditures. The ability to track marketing performance depends on the circumstances of particular industries. much longer purchase decision cycles.There is also equally strong concern that the ability to measure shortterm results of marketing efforts at the retail level has led to much heavier use of retail trade and point-of-purchase promotions along with consumer price promotions that in turn have caused significant loss of brand equity (Mela. In industrial markets. 13 of its 30 top retailer customers are using vendormanaged inventory systems allowing the company to manage inventories at the store and distribution center level. using point-of-sale tracking data from each major retailer customer. Each of this company's three product divisions has its own sales research group to track marketing performance. and Lehmann 1997). with fewer customers. Gupta. and less direct causal relationships between marketing actions and sales results. the effects of marketing 23 . many fewer transactions. In another consumer packagedgoods company.
4. the effects of short-term price inducements are much more easily traced. In both types of firms. Loews. the shift in channel power from manufacturers to resellers and end-users. Office Depot. This trend is probably most obvious with the large retailers such as Wal-Mart. Automobile companies. important E-commerce companies have emerged such as Amazon. that have come to dominate the consumer marketing landscape. Shift in Channel Power Before turning to the issues of customer relationship management and the re-allocation of resources from marketing to sales. and so on. Home Depot. Staples. Target. Defending marketing expenditures poses a much more difficult challenge for business-tobusiness marketers. and the Internet-based 24 . which may be a major cause of the increased frequency of such tactics in recent years. cannot trace the effectiveness of advertising and brand development investments with anywhere near the precision of a consumer packaged goods company. for example.expenditures can be much harder to track. we must note another major causal factor.com. although other consumer marketers face equally difficult measurement issues. Also on the consumer marketing side.
all of those small distributors (in our industry) have disappeared! Several other trends found in both consumer and industrial markets have contributed to reduced channel power for manufacturers including: 1. 25 . L. L. that Wal-Mart alone accounts for 17 percent of the revenue of Procter and Gamble. and Brookstone. Our data confirm these welldocumented trends. hardware. compared to about 1. clothing. These developments have caused major shifts in channel power in such industries as books. up from 10 percent five years ago (Hopkins 2003). household products. The numbers of small. as well as wholesalers and distributors have been rapidly declining. A CEO from a consumer packaged-goods firm commented: (We) currently serve 5-10 big customers. as a number of respondents described the impact of these changes on their companies. or catalog. Consolidation in many industries leading to much greater concentration of buying power in fewer companies.000 distributors a few years ago -.operations of the traditional direct. food. and office supplies. Bean. One respondent in the food industry noted that there has been a steady change toward fewer but larger customers (retailers). music. large traditional retail formats such as department stores. marketers such as Lands' End. independent retailers. It has been reported. for example.
rather than simply between manufacturer and consumer (Webster 2000). Merger trends in distribution in such industries as chemicals and electrical and electronic components. Manufacturers' brands are increasingly viewed as a key element in the three-way strategic relationship among manufacturer. It also casts the role of brands in a different strategic context. hospitals. Increased outsourcing and reliance on fewer vendors for a given product or service (often on a sole-source basis) resulting in much more buying power for a given customer.2. Creation of buying groups in many industries including independent hardware stores. Evolution of Internet-based auction sites for many industrial goods and services. and the field sales force. and 5. 3. and drug and grocery retailers. 5. trade promotions. 4. and end-user. Simply put. The impact on product manufacturers has been to place increased importance on customer relationship management. Increased Importance of Customer Relationship Management 26 . all of these forces lead to concentrated buying power and more powerful customers. reseller.
Our data also confirm the significant shift toward customer relationship management as a central concern of marketing management. Each week is different. where the customer is now defined as the retailer. Target. as few as three large customers can account for the majority of revenue. and K-Mart) account for the majority of his firm's revenue. He spends three hours every weekend in the Wal-Mart store near his home and commented about how much he learns that helps him run the business: "These guys are good. Things change continuously there. not the end-user consumer. This is true for both consumer goods companies. where it is not uncommon for a small number of customers to account for more than half of the company's revenue." One result of the increasing dominance of mass merchants such as Wal-Mart is that 27 . Each of these accounts is now the responsibility of a senior executive with broad authority to manage the relationship including pricing and the commitment of IBM resources to solving these customers' problems. and for industrial companies. For some companies. IBM has reported that 35 large customers account for more than 50 percent of its revenues. The CEO of a major packaged goods firm reported that his six largest customers (including Wal-Mart.
but of a reduction in the influence of marketing and related erosion of marketing competence and skills.traditional grocery stores have become. Mass media has declined in importance and. 6. For consumer goods companies. the role of the brand manager has become focused almost exclusively on trade deals and other programs related to in-store activities designed to create immediate sales revenue in an intensely competitive environment. the impact has been dramatic. 28 . "oversized convenience stores where consumers go to fill-in" until their next shopping trip to the mass merchant. The executive just quoted above also noted that: Marketing now has more to do with working with retailers and in-store stuff. nobody can define what "mass media" means anymore. This is not merely an issue of blurred identity between marketing and sales. in this executive's words. Moving Resources from Marketing to Sales The shift toward customer relationship management has a direct result in the allocation of resources away from mass media advertising and consumer promotions and toward field sales activity and trade promotions. in fact. In many companies with traditional brand management structures.
Marketing is being forced out of the equation. On the consumer marketing side. these companies have decided that they have to move unit volume (Welch 2003). combining marketing and sales. including rebates and zero-percent financing. marketing is definitely equated with sales…. Marketing competence building through management training and development had been a priority for these firms through the mid-1990s. there is heightened emphasis on top-line revenue and market share and on sales as traditionally defined. This renewed emphasis on sales was also seen in the automobile companies we interviewed. Driven by the fact that their labor costs are more fixed than variable as a result of long-term labor contracts negotiated in the 1990s. It is back to the basic blocking and tackling of sales. with huge commitments to fund pension plans and other benefits programs. Sales is not guided by marketing strategy. On the business marketing side. 29 . Now the ratio is 95 to five. and dealer support dominate marketing.The experience of the consulting firm executive we interviewed led him to conclude that the shift of resources from marketing to sales was the single most important trend shaping marketing management: There is a definite movement toward integrating. Sales. The aggressive use of sales incentives. service. 25 percent marketing. is well-known. but resources have now shifted to relationships with the dealer organizations. It used to be about 75 percent sales. driven by the need to hit the metrics for volume and margin.
each of six or so individual brands has become a Strategic Business Unit. In one consumer goods company we studied. 7. which has all but disappeared. As a result. in order to refocus its marketing energy on the importance of brand equity. This discipline is enforced by the company's evaluation and reward system right down to the individual sales representative. Among the most severely cut appear to have been strategic planning. headed by a General Manager.Some companies recognize the costs of this short-term focus in taking attention away from more traditional methods of brand development. and marketing. which two decades ago became increasingly 30 . who is responsible for the brand as a business with its own P&L. Global Brand Management and Customer Advocacy The size of corporate staffs has been reduced greatly in the past decade in the search for greater efficiency and productivity. these managers are measured in terms of long-run performance and can lose their jobs if short-term volume gains are achieved at the expense of profit margins because of aggressive pricing and trade promotions. new organizational positions have been created in those companies to once again focus on building brand equity and the relationship with end-user consumers. Importantly.
One consumer marketer noted that in his company. Today. it is entirely gone. in a large majority of the companies interviewed. often in conjunction with corporate communications. In contrast to this general downsizing." The influence of marketing at the corporate level has been significantly reduced in the past decade. the marketing function had essentially "run the corporate bureaucracy" in the past and represented the majority of the middle management layer in the organization. The responsibilities of the top corporate marketing executive (who typically managed a very small staff) were focused on policies to maintain consistency in how the brand is used on a global basis. a common phrase heard in the interactive executive forum was that "Marketing has lost a seat at the table.identified with strategic planning (Webster 1981). In summary. there was still a strong corporate level responsibility for global brand management and marketing communications. coordinating the development of subbrands for distinct product lines. continuing to build brand equity. however. and achieving the necessary efficiency and consistency in media purchasing and advertising agency 31 .
a corporate level marketing executive. As put succinctly by one respondent. "We want to have one message to the world about [our brand]. there was also another corporate marketing officer whose job was essentially to be an advocate for customer orientation throughout the organization. In one technology-oriented company." This trend toward centralization is not universal. how we wished to be positioned around the world. But we were talking to ourselves. had successfully implemented a new strategic marketing initiative in one of the company's largest business units as a demonstration of the contribution of marketing. who had been recruited to lead a refocus on customer-driven strategy within the company. not the customer. in addition to the global brand and marketing communications position. although it might also be combined with the responsibility for global brand management. In another global company. As a result of this initial success.relationships. In a few cases. however. marketing had become a stand-alone function. This sapped energy from the divisions. We spent a lot of time on the details of high-level marketing issues such as the global image of the [company] brand. the argument against corporate level brand responsibility was presented: Previously. he was then assigned to head that SBU and charged with responsibility as well for developing similar programs in the company's 32 .
a senior marketing executive was brought in to improve the marketing competency of the firm and to drive marketing 33 . focused on efficiency and cost reduction. and the subsequent allocation of resources to marketing activities.other SBUs. The lack of a corporate advocate for marketing affects the type of marketing activities performed. It remains to be seen whether this person will be able to wear the two hats of an SBU manager with P&L responsibility and a corporate advocate for marketing best practice and the development of marketing competence. P&L responsibility was given to more than 100 separate businesses organized into about 20 strategic business units. In the 1980s. Another company with a strong corporate brand in this same industry had gone back and forth on the issue of corporate marketing. Part of this initiative will be to create new branding programs for the company's technology-based products. how marketing skills and competence are developed. About two years ago. The latter role is critical for the future influence of marketing and is often missing when marketing activities are shifted from the corporate level to the SBU’s. described to us as very product-centric. how marketing performance is evaluated. this company had moved to a strongly decentralized SBU form of organization.
Customer orientation gave way to efficiency and cost concerns when we looked at marketing strictly from an SBU perspective. This executive believes that the brand has been neglected for the past several years and he is also focusing on corporate branding and strategy. He commented: Once corporate marketing no longer had responsibility for marketing education and developing marketing capabilities under the SBU approach. Each developed its own approach and there was little or no consistency. knowledge sharing. It shows a clear understanding of the tension between an appropriate role for marketing management at the corporate level vis a vis the individual business units and the challenge of achieving a healthy balance between the two. the SBUs themselves did a poor job of building marketing competency and developing marketing strategy. and customer advocacy. and strategic consistency across the organization. customer orientation. it has underlying strength that is valuable to many SBUs and source of leverage from the corporate perspective. The [company] brand is a strong unifying factor. the focus is on branding and developing a general understanding of 34 . We often had many different people selling to the same customer and competing for business with different approaches.capabilities across the SBU structure through education. This comment is especially interesting because it relates the importance of the brand to the more general problem of developing marketing capability. Even where there is renewed interest in corporate level marketing.a system of products…. Now we are trying to sell [company/brand] solutions -.
some of them contradictory. was that marketing strategy responsibility had been pushed down in the organization and out into the Strategic Business Units. Shift of Marketing to SBU’s and Effect on Marketing Competence A common theme. there does appear to be a stronger customer focus in individual strategic business units than may have existed a decade ago. the corporate marketing function has been downsized. On the one hand. there also appears to be a dearth of marketing skills to implement a customer-driven approach to the business.and market-strategy issues are the responsibility of strategic business units organized around products/technologies. All of our respondents 35 . 8. Marketing strategy as a distinct function has remained at the corporate level only in those companies in our sample where the CEO has a strong marketing orientation and background. On the other hand. Product. end-use markets. an observation that we are most comfortable making for the industrial companies we examined. or geographies. Here we found an interesting conjunction of forces. Yet. in about two-thirds of our respondent firms.marketing in the SBUs and throughout the organization.
" As the marketing point of view pervades the organization. 327) noted that the acceptance of marketing as a general management orientation “may lead to eventual subordination of the marketing function to a supporting role within the flexible organization of the future where everyone is involved in marketing. "Product is everything. Indeed. p. Marketing as a function seems destined to dwindle. In the words of one.” While this may be viewed as an acceptable trade-off for marketing.indicated that there was a stronger focus on customer relationships and account management in their companies than in the past. "We are the customer interface. Day (1992. In fact. some observed that their companies still tended to be product-centric and technology-driven. a few of the respondents argued that product and technology focus was essential to the success of businesses in their industry. found at the levels of P&L responsibility." So the basic finding is that responsibility for marketing strategy with respect to products and markets is now much more dispersed throughout the organization. However. not customer-centric and market-driven. To quote two respondents: Every part of the company now says. the possibility that marketing would also become subordinate and 36 .
a shrinking marketing function leaves a vacuum of responsibility for the continued development of marketing competence and skills. as marketing competence is considered the “key competitive weapon” among firms where marketing is wellestablished and influential and an important source of sustainable competitive advantage (Varadarajan 1992. For example. the loss of marketing competence resulting from the dispersion of marketing responsibilities to SBU’s has major implications for the future influence of marketing and effectiveness of marketing activities. (1999) concluded that the marketing sub-unit remains strong at the SBU level. Even at the SBU level. many traditional marketing mix decisions are no longer the primary domain of the marketing department. This is a critical issue. a closer examination of their data shows that the only marketing decision areas still dominated by the marketing department were advertising messages and marketing research (customer 37 . Thus. As noted earlier. though Homburg et al.marginalized in organizations that would revert back to a strong productorientation seems to have been overlooked. Webster 1981. Webster 2002a). Yet this is precisely the predicament of marketing in many of the firms in our sample.
and 38 . focusing management attention on those variables believed to be the key to successful business performance. Some. and choice of strategic business partners. These trends raise concerns about the ability of SBU level managers to develop and implement effective marketing strategies. are developing new programs of marketing management education. the CEO himself or herself is taking direct responsibility for developing the firm's marketing competence through such programs as customer visits. Our respondent firms reported that they are addressing the issue of marketing competence in several different ways. In contrast. design of customer service. as part of an increased emphasis on short-term financial performance. the sales and R&D subunits had the largest influence on new product development decisions. Others have strengthened the metrics they use to evaluate and reward marketing performance. is consistent with these results. the sales sub-unit had the largest influence of any functional sub-unit (including marketing) on decisions regarding distribution strategy. Our finding of a shift in resources from marketing to sales. as noted in the example above. In some companies.satisfaction measurement). regularly scheduled product development reviews. Together. pricing.
Summary of Findings To summarize and highlight our key findings: Marketing as a distinct function has evolved into a broader and more dispersed set of organizational assignments and responsibilities. as previously understood. appears to have diminished in many firms as short-term revenue goals become more predominant and the role of the sales force is strengthened. The strategic influence of marketing.enhanced management recognition and rewards for superior marketing achievement. 39 . Marketing's inability to document the value of its strategic contribution has been a major reason for its fall from grace at the corporate level. capabilities. Financial resources have been shifted away from marketing and toward the sales function as key customer relationships receive more attention. There is not likely to be a significant increase in the size of the corporate marketing function as a way to achieve marketing competence. However. and skills remains an issue. committing the necessary resources to developing marketing understanding. as management responds to pressures from the financial community and from major customers and resellers with increased buying power and the ability to capture a larger share of the value created by the firm's marketing activities.
Figure 2 also shows that a decrease in marketing spending leads to downsizing of the marketing function. less attention is invested in brand development. The result is that only a few major marketing decisions are still made at the corporate level. a lack of innovation. firms reduce spending on marketing activities due to general pressures for corporate cost reduction. partly in response to the shift in channel power. The negative effects on marketing spending can be mitigated by a CEO with a strong orientation toward marketing. Over time. resources are shifted from marketing to the sales force. Overall. 40 . combined with an inability to effectively document the contribution of marketing to corporate performance. resulting in weakened brands.A composite diagram of the forces leading to the decline in the influence of marketing is shown in Figure 2. Pressure to cut costs derives from both investors and increasingly powerful customers. ------------------------------Insert Figure 2 about here ------------------------------In this view. these developments erode marketing performance. Instead. which leads to a growing focus on key account management. namely global branding and marketing communications.
This dynamic ultimately leads to slow growth. reduced market share. (3) firms would shift from discrete transactions toward longer-term buyerseller relationships. inadequate attention is being devoted to developing marketing competence and skills. ACTUAL CHANGES SINCE EARLY 1990'S THE Our data further allow us to evaluate the assertions made by leading marketing scholars in the early 1990’s in the perspective of the past decade.declining market power. and price erosion. and a decline in stock price. We find that brand strategy and marketing communications remain a key responsibility at the corporate level in many firms. it was predicted that: (1) firms would shift from a product-centric internal focus to a customer-centric external focus. As noted earlier. resulting in an inability to implement strong marketing strategy at the strategic business unit level. (2) the role of marketing and responsibility for delivering customer value would expand beyond the traditional domain of a few specialists. with a new emphasis on brands as a strategic resource for control in reseller relationships. and (4) firms would evolve from bureaucratic and 41 . While the importance of customer orientation tends to be better understood throughout the organization.
Though many marketing academics widely assume that these changes have already occurred in most corporations. At the same time. it is still widely believed in the automobile industry that "the product is everything" and there is open skepticism about the value of customer-focused research to guide new product development. in contrast to the optimistic observation ten years ago. Some of the predicted changes were only partially or very superficially implemented and some firms actually moved in the opposite direction from what was expected. For example. we find a mixed record. but achieving it is still a struggle.to Customer/Market-Focus Customer orientation as a strategic focus appears to be more widely accepted than it was a decade ago. Many of the respondents reported that their companies were still productfocused in practice. especially but not exclusively in the more technologydriven companies. it is now a much more common practice to have market research activity located in new product development groups rather than as a separate corporate function. Actual developments in each of these areas are summarized below. as part of the effort to achieve stronger 42 . From Product.hierarchical organizations to more flexible forms such as networks of strategic partnerships.
However. corporate brand management.customer focus. Every respondent noted the pressure on marketing budgets and the decline of integrated marketing as a clear functional responsibility at the corporate level. It is less clear from our sample of companies that the responsibility for integrated marketing has been successfully delegated to strategic business 43 . Marketing as a Defined Function In the early 1990's. the general notion of customer orientation is now widely accepted even as considerable difficulties of implementation remain. Our data suggest that the strength of organizational commitment to customer focus is highly dependent upon the mindset and advocacy of the CEO. it now seems clear from our respondents that the "Marketing Department" has declined in size and scope as a separate business function. it appeared that the role of marketing was destined to expand and increase in importance throughout the organization. So. Marketing at the corporate level has typically been narrowed to a primary concern with marketing communications and overall. An Expanded Role for Marketing vs.
Our interviews show that this tends to be specific to a given organization. influenced by its industry setting. the vision of its CEO. p. The cause as well as the result has been substantially increased buyer power in the relationship and a greater concentration of revenues for marketers and buying dollars for customers.unit leadership or that marketing competence has been easily transferred once corporate stewardship for marketing decreased or was eliminated altogether. Webster (1992. and the historical development of marketing within the firm. buyer-seller relationship management has developed as a major sub-discipline.15) stated that "…traditional selling functions for the organization are evolving toward a broader definition of responsibilities for relationship management. assisted by interactive information 44 . A related issue is the definition of marketing itself. From Transactions to Relationships There is little doubt that long-term supplier-customer relationships have become more important in the past decade. In the academic literature. For example. in both consumer products and industrial products markets. It is very difficult to clearly define the role of marketing within the organization without a consensus about its definition and scope.
Day and Van den Bulte 2002. Rackham and DeVincentis 1999." Our respondents provide strong support for this trend as seen in the increased allocation of resources to field sales. The increased concentration of buying power and revenues in fewer. Customers continue to solicit competitive or negotiated bids from multiple vendors. Various studies have reported that such long-term relationships can result in lower profit margin on the business for the supplier but an increase in total dollar profits and cash flow from these customers (Anderson. Has a greater focus on relationship management really transformed marketing? Our respondents note that many long-term relationships in industrial markets can still be characterized as more like a string of transactions than a true strategic partnership. key account management. it results in lower prices but also can lead to a higher risk of product supply interruption and other difficulties. and trade promotion activities and increased decision-making authority delegated to field sales management.management capability. using the 45 . Fornell and Lehmann 1994. Reicheld 1996). larger customers has had both positive and negative consequences on both sides of the relationship. especially in sole-source procurement situations. On the buyer side.
46 . bureaucratic organization with multiple levels of functional staff specialists has been in decline for at least the past two decades. Gerstner 2002. Some of the best known CEOs have reported on their struggles to evolve their organizations away from slow-moving bureaucratic monoliths into more flexible.g.. Welch 2001). While these corporate leaders have succeeded in changing the structure of their organizations.g. It can be argued that this is an important source of the cost pressures that have led to reduced expenditures on marketing. the beginning of which was noted a decade ago (e. it is also true that many of these relationships are based more on traditional adversarial buyer-seller attitudes than the more cooperative behaviors that were initially thought to be characteristic of long-term buyer-seller relationships.Internet and other information services to obtain up-to-the-minute price and availability information on a global basis. From Hierarchy to Alliances and Networks The hierarchical. more emphasis on sales and key account management.. responsive units (e. and increased financial pressures on firms to cut costs even further. While transactions in their pure market form are probably less prevalent and on-going relationships are more important than they once were.
Day 1992; Webster 1992), they have found it much harder to change the traditional bureaucratic culture of their organizations. Their experience shows that flattening an organization's structure does not necessarily change its culture. In every case, beliefs about customer orientation vs. product orientation are at the heart of the organization culture and among the hardest elements to change.
Our respondent firms provide confirming evidence of this evolution. Outsourcing has clearly become a common practice as firms sharpen their focus on particular functions in the value-creation and value-delivery process. The welfare of most of our respondent organizations, in both consumer and industrial markets, is highly dependent upon the welfare of strategic reseller and vendor partnerships. Yet as noted above, many firms in our sample still have not embraced cultural change in conjunction with structural change.
THE FUTURE STATUS
Our data highlight a number of sobering and serious challenges for marketing management going forward and for the future of marketing as a distinct management discipline. While some of these challenges have
persisted for many years (e.g., Day and Wensley 1983; Webster 1981), they are still unresolved in many firms, leading to a long-term decline in the role of marketing in these organizations. The following are major continuing challenges affecting the influence and effectiveness of marketing in all corporations.
Long-term vs. Short-term Emphasis Marketing managers by themselves cannot shift the emphasis from quarterly earnings per share to long-term business development. The shift in time horizon must come from the top management of the firm and its investors. Anecdotal evidence suggests that such a shift may be occurring, at least in small degree. Recent, well-publicized examples of egregious corporate misbehavior in managing earnings through deceitful and illegal accounting practices have produced a strong reaction from management in all firms. Short-term results mean little if they are not part of a solid pattern of long-term profitable growth of the business. Among the most significant changes already seen are companies that will no longer publish pro-forma earnings and much more careful attention to accounting rules concerning timing of revenue recognition.
The issue of balancing short-term and long-term commitments and results is the central challenge facing any senior general manager. Respondents often expressed the view that top management is calling for more true product innovation and sustained business growth as opposed to shortterm sales gains and modest product improvements. Whether management will be able to focus on profit rather than sales volume is a very difficult question, especially in industries such as automobiles, air travel, consumer electronics, and paper where companies seem to be trapped in a classic "prisoner's dilemma" situation of unprofitable pricing tactics.
The marketing managers we talked with usually framed the problem as whether marketing is viewed as an investment or an expense, which has dramatically different implications for the role of marketing in the firm (e.g., Sheth and Sisodia 2002). Marketing managers believe that their most important expenditures represent long-term investments in the growth and future profitability of the business from brand equity, enhanced product quality, better customer relationships, and stronger pricing. However, these marketing managers also believe that most other managers, including the top management of the firm, tend to regard
marketing as an expense. which brings us back to the distinction between marketing and sales. Sales success would be measured by daily. "expenses" get "cut. A blurring of the lines between these two functions has occurred as marketing becomes more like sales with its emphasis on short-term revenue gains and sales promotion activities while sales becomes more like marketing with its increased emphasis on strategic customer relationships. these measures must distinguish between long-term and short-term goals as well as long-term and short-term effects of marketing expenditures (Sheth and Sisodia 2002. As one succinctly put it. Furthermore. Measuring Marketing Productivity This debate can probably not be resolved until marketing managers have available better measures of marketing productivity. 1999). Then the measurement issue could be more easily addressed." especially under the pressures of short-term financial performance measures. 50 . weekly. and quarterly changes in sales volume. It would be beneficial to have clear agreement that marketing is long-term and strategic whereas sales is short-term and tactical. Srivastava et al.
profit margin. Lemon. where possible. Important academic research studies that address the relationship between marketing investment and financial measures of performance are beginning to appear (Gupta. Rust. Moorman and Dickson 2002). including the correlations among these various measures. cash flow. Lehmann. reseller stocking levels. total profit.market share. Marketing success would be measured by long-term trends in customer awareness and attitudes. Improved measures of marketing productivity. Our analysis suggests that addressing the issue of measuring marketing productivity is the number one problem facing 51 . and stock prices. marketing planning must be more rigorous in tying its analysis to financial outcomes based on careful assumptions about the influence of marketing activities and a better understanding of how they impact the profit-and-loss statement and the balance sheet. At the minimum. and so on. Rust. profit as a percentage of revenue. and Zeithaml 2004. Our data show that marketing continues to lose credibility partly due to its inability to document the value of its contribution. return on investment. and Stuart 2001. annual and longer-term changes in sales revenue. will help marketing regain its influence. brand and customer loyalty. Mizik and Jacobson 2003.
Innovation in Products and Strategy Some of our respondents believe that top management is disappointed in the level of innovation in their firms. innovation by definition requires investment with a long-term payoff. In the interactive executive forum. recognizing that it is an important issue.marketing management as it seeks to regain its "seat at the table" and to secure the financial resources and management support necessary to achieve its potential to contribute to the success of the organization. Clearly. for which they hold marketing at least partially accountable. survey results were presented showing that CEO’s want marketing to play a more active role in new business development whereas CMO’s are more narrowly focused on new product development. It should also be obvious that the chances of successful innovation are increased if the efforts are guided by valid and 52 . It is wrong to try to place blame for this problem. So it should be obvious that short-term financial pressures are a major force standing in the way of significant and by definition risky innovation.
Marketing managers under intense pressure to produce the numbers on a weekly.reliable studies of evolving customer needs. buying behavior. and so on. New types of marketing organizational capabilities are going to have to be created to facilitate the required shift in emphasis. wants. whether the firm is market.or technology-driven. the commitment of resources to marketing. Building Brand Equity Brand equity and the strategic importance of branding are perhaps the strongest survivors of the financial and organizational pressures that have been placed upon marketing management.vs. marketing as investment vs. preferences. and top management support for marketing and the customer point of view. expense. The correlation of brand strength and firm value is being studied more closely and documented 53 . and quarterly basis are going to find it difficult to make the commitments of time and money necessary to develop truly innovative new business opportunities. long-term perspective but also the distinction between marketing and sales. The issue of innovation is related to most of the issues discussed earlier. attitudes. not just short. monthly.
more carefully than before (Business Week 2003: Lebar and Bergesen 2002). There is also a growing realization that the brand is more than a relationship with the end-user. But the big retailers don't need small brands at all. marketing programs. Marketing scholars are building models of brand equity that relate brand development. But Wal-Mart also needs us because they cannot run their [blank] department without [our brand]. and customer response to the long-term value of the firm (Keller 2001). they'll squeeze the small brands so much on price that they won't be profitable. A strong brand is an essential tool for maintaining influence in the relationship with key customers. One of the CEOs we interviewed reported that his firm's position with the leading mass merchants was safe because his company had one of the best known brands in the world that could be used as leverage to offset the power of his largest customer: Yes. it is a business asset for the retailer or for the industrial customer who incorporates the branded product as an ingredient in their product offering. There is mounting evidence that large corporations are using these models in the development of their marketing and branding strategy in the new business environment that is focused on increasingly strong channel partners and financial pressures. 54 . we need Wal-Mart.
in companies where management has been focused on stock price. to a large degree. In these firms. our data suggest that the firms we have studied can be subjectively classified into two categories: firms where marketing is successful and remains influential and those where it is not. and a dependable flow of innovative products.Brand marketers will face increasing pressure to have really strong. dominant brands. they will not be able to afford the costs of branding and differentiating products in a marketplace that trends inevitably toward commoditization. Marketing is considered to have failed. strong brand equity. customer loyalty. we mean that marketing has a clear role in the organization. and there is consensus about its scope and its contribution to the performance of the business. By success. growth in earnings 55 . otherwise. marketing has retained a seat at the table and exerts a strong influence on corporate strategy and operations. There are clear indicators of that success such as sales and revenue growth. CONCLUSIONS Broadly speaking.
customer) focus. Marketing is either held in general low regard or there is ambiguity and disagreement about its definition and role in the firm. combined with an inability to document the contribution of marketing to corporate performance. Growth and market share in these companies have often been achieved primarily through mergers and acquisitions instead of internal growth and innovation. In these firms. These companies maintain a strong product (vs. market share.per share. 56 . and these shifts are associated with a wide range of negative outcomes. depicted earlier in Figure 2. The CEO's of these companies tend to have little or no marketing experience. even though the acquisition strategy may have been targeted at acquiring strong brands. the data from these firms illustrate the decline of marketing. marketing has lost its seat at the table and exercises very little influence over strategic corporate decisions. Thus. They are still struggling to find new ways to reduce costs and increase productivity per unit of labor and dollars invested. cost reduction. Attention has shifted away from longer-term brand development and more toward the field sales force and key account management. Pressures for cost reduction. and sales volume. have often led to a reduction in marketing spending and a downsizing of the marketing function.
where Marketing has been successful and remains influential. market need. we find that there is usually a CEO with a strong marketing background. or a deep understanding of marketing. 57 . to assess marketing performance. and applications focus is hard-wired into the new product development process. Strong marketing is no longer associated with a big marketing department. and a compelling vision of how to deliver superior value to customers. The role and influence of marketing in firms with these characteristics has generally remained strong and influential despite the shift in channel power and other external forces that have been shaping the role of marketing for all firms over the past decade. The contrasting characteristics of firms in which marketing is strong and influential and firms in which marketing is relatively weak and ineffective are shown in Figure 3. A customer-back.In contrast. brand attitudes. Marketing bureaucracy is minimal in these companies. The company is more committed to long-term growth than to short-term earnings performance. such as tracking data on market share. In these companies. and margin by account. sales volume from major customers. whether they are consumer or industrial products companies. there is adequate marketing information.
a firm’s position within this range will be determined by the micro-level factors. top management in forward-looking firms will resist the pressure of prevailing trends and create conditions for 58 . Firms exhibiting the divergent sets of micro-level characteristics shown in Figure 3 essentially mark the endpoints of a potential range of influence of marketing in the corporation. but is also shaped by endogenous micro-level factors within the control of top management. Hence. Clearly.------------------------------Insert Figure 3 about here ------------------------------- The contradictory finding that marketing has been successful and retained its influence in some firms despite unfavorable pressures from the general business environment while marketing in many other firms has been diminished by these same forces questions both the widely-held perception of a general decline in marketing and the view that marketing is destined to play a dominant role in the firm. While macro-environmental conditions may influence the general parameters of the range. the role and influence of marketing in a particular corporation is not only the result of exogenous macro-level conditions in the business environment.
Other firms will succumb to these pressures and sacrifice marketing in favor of shortterm objectives. a key function of the CEO is to develop a strong customer-orientation throughout the firm and to build consensus about the importance and value of marketing. especially if there is a consensus view that marketing is not crucial to firm performance. These firms tend to exhibit relatively high and stable spending on marketing. In customer-oriented firms that lack consensus about the role of marketing. to the long-term detriment of these firms. Firms with a CEO who is a strong advocate of marketing will have a customer-oriented culture and broader agreement about the role and value of marketing. Thus. marketing spending may be adequate for a while but will always be tenuous and in danger of significant cutbacks. 59 . which plays an influential role in corporate decisions.marketing to flourish. two micro-level variables that determine the range and level of influence of marketing in any given firm are the importance of customer orientation in the corporate culture and the degree of consensus within the firm about the definition and role of marketing. More specifically. Firms that lack a strong customer orientation will allocate few resources to marketing. to the long-term benefit of these firms.
But there will be a new equilibrium. made comments that effectively capture the range of opinion on the future influence of marketing. one respondent believed that although "Marketing needs to make a comeback." They [corporate] will strip it down and go back to the emphasis on cost reduction. we go back to "Make and Sell. there was this hopeful observer. each of whom has long-standing professional commitments to marketing as a discipline. If not.Four of our respondents. measurable results: If Marketing can deliver on new business growth. we have a huge future. one industrial marketer saw the future of marketing as very much dependent on its ability to deliver observable." he remained concerned about whether the situation would turn around because it is getting harder to achieve real innovation in an environment dominated by a short-term focus and improving the bottom line through cost-cutting. One respondent on the pessimistic end of the continuum concluded that. in the food industry. Finally. On the other hand. 60 . there was lots of room for improvement but he saw no sign of a greater commitment to marketing. who noted: We are in the middle of a discontinuity in marketing. in his product-focused company in the electronics industry. Trends are not yet clear. In another firm. in a technologyoriented firm.
would completely disappear. but as a direct result of the ideas. While recent environmental trends have led to a decline in the 61 . no one right way to define the role of marketing in the firm. Defining the role of marketing. Varadarajan (1992) states that it is “inconceivable” that the marketing function broadly defined. as it has in the past. is clearly still a work-in-progress in most companies. It will continue to evolve not only in response to environmental forces. beginning with the definition of the term itself. These processes result in a wide disparity between firms in the role and influence of marketing in corporate decision making. other than to delineate the range of possible influence of marketing within the corporation. and resource commitments of those who have responsibility for it. our study finds that marketing remains an evolving field of management practice and academic discipline. but it has also survived at a minimal level in many firms despite increasing and relentless pressure toward product-orientation and short-term financial performance. It has certainly not achieved the grand and maximal vision articulated by Keith (1960). activities. decisions.Overall. and the marketing department specifically for managing marketing operations. There is almost certainly no right answer.
Change in the role of marketing over time appears to be driven by dissatisfaction with the status quo rather than motivated by a clear vision of the optimal organization. Thus. building strong brands and exploiting the immediate opportunities presented by lower costs and prices. long-term and short-term emphasis.influence of marketing in many large manufacturing corporations. marketing organization may be facing a future of continuous experimentation and change. we also highlight some notable exceptions. cycling in perpetuity between centralization and decentralization. Yet the success of marketing in some firms suggests that marketing can retain (or regain) its seat at the table if its role is clearly defined and it can empirically demonstrate its contribution to business performance. Only then will marketing be able to approach the degree of influence in corporate strategy and operations that is commonly assumed by marketing academics and many marketing managers. as described in our study. 62 .
•Market Research •Product Development •Channel Management •Marketing Strategy General: •Corporate Strategy •Financial Scorecard No Man’s Land •Marketing Competence & Professionalism •New Business Development General: •Profit Responsibility 63 .FIGURE 1 SHIFT FROM INTEGRATED MARKETING TO DIVISION OF MARKETING RESPONSIBILITIES Integrated Marketing Corporate Level Marketing: •Marketing Communications •Global Brand Management •Market Research? SBU Level Industry/Geography/Product Marketing: •Key Account Mgmt.
Global Branding & Communications Less Attention to Brand Development Focus on Key Account Management Weakened Brands. Declining Stock Price 64 . Stock Price Orientation of CEO toward Marketing Shift in Channel Power Pressures for Cost Reduction Downsizing of Marketing Function Inability to Document Marketing Contribution Reduction in Marketing Spending More Attention to Sales Force Residual Corporate Level Marketing . Market Share. Declining Market Power. Price Erosion Slow Growth. Market Share Erosion. Lack of True Innovation.FIGURE 2 RECENT FORCES SHAPING THE ROLE OF MARKETING AND FIRM PERFORMANCE Emphasis on Short-term Revenues. Earnings.
resellers. and key accounts Growth achieved through serious commitment to R&D. market share. pricing used to achieve volume goals Role of brands Focus of new product development Portfolio strategy 65 . growth strategy NPD is product-focused and technology-focused Product portfolio managed for cash flow. strong customer orientation in the corporate culture Management focuses on longterm growth in revenue. cost reduction. profitability. profitability Top management objectives Top management priorities Growth strategy Growth achieved through merger and acquisition Strong brands used as cash cows to fund acquisitions. sales volume Cost reduction and labor productivity are top priorities Characteristics when Marketing is Influential in Corporate Decisions Orientation and functional background of CEO Definition of “Marketing” CEO has deep understanding of marketing. product innovation Substantial investment to build and maintain brand equity Customer analysis is hard-wired into product development Customer portfolio analyzed and managed for loyalty. compelling vision of customer value. focused on customers. EPS. shared understanding of the role of marketing.FIGURE 3 CHARACTERISTICS OF FIRMS ON THE ENDPOINTS OF THE RANGE OF INFLUENCE OF MARKETING Key Dimensions Characteristics when Marketing is NOT Influential in Corporate Decisions CEO has little or no marketing experience and focuses on financial community Wide disagreement and ambiguity about the role and importance of marketing and customer orientation Management focuses on current stock price. EPS. and advocates for customer Clear. and cash flow Market information and tracking data are key management tool.
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