Marketing is cross functional and not a stand-alone function
Author: Krishnendu Dasgupta
Institute: S. P. Jain Institute of Management and Research Area: Marketing Marketing is cross functional and not a stand-alone function Synopsis Marketing has been seen as the function that drives an organization due to its sheer proximity with the consumer. Like other functions, marketing works as a separate department with its own objectives and goals, which are in line with those of the organization. This paper does treat marketing as a department it views it as a philosophy. The issue being explored here is that can the philosophy of marketing be made cross-functional? The idea of marketing becoming inter-functional is related to the idea of customer orientation of an organization. Peter Drucker in 1954 had suggested that to be truly customer-centric an organization must adopt the marketing concept, which entails that the key to achieving its organizational goals consists of the company being more effective than its competitors in creating, delivering and communicating customer value to its chosen target markets. One of the steps that help adopt the marketing concept is integration of functions. If customer satisfaction is the goal of the organization then marketing alone cannot be expected to meet it. Customer satisfaction is heavily dependant on the performance of other departments, which necessitates the need for marketing to involve itself with other functions. The marketing concept however is very difficult to implement however brilliant it may conceptually. Very few companies have been successful in doing the same. This paper details the case of Wolverine Controller Company, an Indianapolis based producer of flow controllers, which is an excellent example of marketing becoming a cross functional organization. This should serve as a model for organisation that intend to adopt the marketing concept and become cross functional in its approach. Marketing is cross functional and not a stand-alone function 1. Have marketing departments delivered? Henri Fayol, who is regarded as one of the founding fathers of the management science, had said that no management principle is absolute by itself and cannot be applied with the same effect in a similar situation. Modifications to the approach must be made depending on the problem at hand and the situational variables that affect it. This belief is based on a simple premise that recognizes that each problem is unique and merits an unique solution. However, modern practioneers merely acknowledge his contribution and but do not seemed to heed his advice. They choose to apply solutions that have worked in the past. The ever-mystifying phenomenon called the consumer, who continues to be under the scrutiny of all organisations. They spend years understand how they behave in the hope that the marketing efforts can be more focused and profitable. Traditionally, the understanding of a consumer has been typically a function of the marketing department, which acts as the contact point between the company and the consumer. How effective have marketing departments been in this regard? To be fair, marketing departments of companies across categories have displayed a sound knowledge of the consumer using sources like studies commissioned to marketing research firms, inputs from their sales forces, primary research etc. But at the same time marketing professionals have realized that with consumer behaviour is becoming increasingly difficult to ascertain and predict using conventional investigational tools. Sometimes such tools have proved to be grossly inadequate in understanding consumer behaviour. For instance conventional information gathering techniques used in market research like the five point Likerts scale have proved to be unsuitable for rural research. So there is a silent agreement that true knowledge of the consumer is not best obtained methods being practiced by existing marketing departments of organisations. But the more relevant issue here is have marketing departments been able to deliver on its basic tasks the planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational goals? Companies in the past and today have recruited the brightest minds for the marketing department. But the marketing department in the past lacked clarity in functioning, which is also the case with many companies today. For all practical purposes the difference between sales and marketing took the entire 90s decade to be established. The best perspective about marketing efficacy came from the President of the one of the Big three automobile companies who said in 1980 said .. the auto companies are in the Dark Ages. They confuse sales and marketing. The sales and marketing guys are all sales guys. They dont sell cars to the public, they sell them to the dealers. Marketing professionals are also to blame equally. For most marketing is just the 4 Ps. These just provide an operational framework but most companies rarely look beyond them for marketing mix variables Companies like Harley-Davidson and Virgin have steered cleared of the trodden path and set new standards in marketing. They have used a mixture of techniques like buyer clubs, unconventional advertising and public relations to create customer-focused solutions. Like traditional marketing companies like Procter and Gamble they too have been successful companies. So is there some aspect that traditional firms have not looked at? To some extent yes. Marketing has been accorded the exalted status of reaching out a companys produce to a suitable customer. To succeed in its task it has looked at well established functions like sales, advertising, market research and external resources like distribution. However, it has rarely looked beyond the marketing department and marketing-related functions to accomplish its mission. Unfortunately marketing departments themselves became an organization entity within companies, which spent more time reconciling the disparate views of sales and marketing rather concentrating on their assigned functions. Marketing departments are not known to consider other departments as their partners in the task of reaching out to consumers, which may not be the correct assumption to make. They choose to direct the functions of departments like R&D and manufacturing to suit consumer needs and yet do not involve them in the process of delivering customer value. Hence it would be fair to conclude that the manner in which marketing has been practiced has not integrated the other functions of an organisation. This is a sheer waste of available resources. But then the question is should marketing strive to become cross-functional? 2. The failure of the marketing concept The prominence given to the marketing function stemmed from the adoption of customer orientation as an approach in the early 1950s. This was primarily due to the writings of Peter Drucker who propounded the concept of customer orientation in his book The Practice of Management where he addressed a fundamental question what is a business? In his view the objective of a business was not to make to profits, its purpose was to create customers and profits were a result of gaining customers. He stressed on the importance of marketing and not sales was the key to growing business along with innovation. He cited the example of Cyrus McCormick, the inventor of the mechanical harvester, who also invented market research and analysis, the concept of market share or standing, modern pricing policies, sales/service specialists, after sales service and customer credit way back before the middle of the 19 th century. He stated that the European businesses were sales oriented and had hence stagnated. Drucker went on say, Marketing is not only much broader than selling, it is not a specialized activity at all. It encompasses the entire business. It is the whole business seen from the point of view of the final view of its final result, that is the customers point of view. This signaled the shift from what is today known as the selling concept to the marketing concept 1 . Druckers views were based on GEs development of a new marketing approach, which integrated all marketing functions and an analytical perspective based on market research that had been adopted in 1950. In fact in their annual report of 1952 they proclaimed the customer had been put first in the process of production planning, attempting to build consumer appeal into the product design stage. The report stated the marketing man would be introduced at the beginning of the production cycle instead of the end and would integrate marketing into each phase of the business. GE became the vanguard in implementing the marketing concept by understanding the customers drive markets and not products. In addition companies like IBM, Procter & Gamble, General Foods, Xerox and HP have championed the marketing concept. A pertinent question at this point would be how does the marketing concept ensure cross- functionality in marketing? After all, it is a philosophy is easier understood than implemented. As Fredrick Webster noted in his book Market-Driven Management that by 1970s most companies did not readily or easily accept the rather simple strictures of the market concept. The focus shifted from long-term profitability through customer satisfaction to short-term term manufacturing and selling orientations. The original concept of putting the customer at the center of all operational and strategic decision making so as to blur the boundaries between traditional management functions did not take place. The boundaries actually grew taller with the marketing function in some companies and became the dominant function providing a large portion of the top management in companies. In other places there was still engineering dominance and a sales orientation. As a result marketing did not live up to its promise of revolutionizing American businesses. Non- American firms were gaining into the market share in most industries. 3. Where did market concept fail a starting point for the future? Phillip Kotler states that for the marketing concept to be implemented in organisations, some key steps need to be followed: Target a market Identify customer needs Evolve an integrated marketing approach Generate profits through customer satisfaction While companies have successfully followed the first two steps, the last two have not been implemented partially. An integrated marketing approach involves the working together of all the departments of a company to serve the interests of a consumer. This involves two steps coordinated functioning between all marketing functions (sales, product management, market research, advertising etc) and the adoption of the customer orientation concept by all other departments. *1. Marketing concept holds that the key to achieving its organizational goals consists of the company being more effective than its competitors in creating, delivering and communicating customer value to its chosen target markets. Again, in several organizations the marketing department is quite well organized but other departments do not embrace this concept. There is usually a conflict between marketing and other functions because the constituencies that other departments serve are different. For the marketing department, the constituency is the customer but for the finance department they are the firms shareholders and investors and for the purchase department suppliers form the key constituency. They find it difficult to put customer interests before others because they feel their internal customers would be affected. The other issue is generation of profits. The marketing concept stresses on the fact that profits will come if customers are satisfied but it become difficult to account to accept such a long term perspective when share holder and investor pressures exist. Also one must keep in mind that what Drucker propounded was a philosophy a way of thinking. It was not a tool kit and a typical Seven steps to corporate success approach. The drawback to this was that in the absence of an implementation framework, Druckers philosophy could be put to practice in many organisations. But the failure in implementation does not undermine the utility of this philosophy. In fact most organizations practice customer orientation in some way or the other. Every one today recognizes the need to serve a customer well from large government departments to family run businesses and they have been taking steps to become more customer focuses. This is an opportunity for the marketing function to reinvent itself by aligning with other departments in the organizations . The failure of marketing should be the path to realizing any process that takes one close to a consumer couldnt be conducted in isolation. Marketing needs to be a part of a larger process involving the entire organisation. It must be understood that the survival of an organization depends on the consumer and every employee has a stake in each sales that is made. A well-designed product will not sell unless the consumer wants it. Profits are not generated only through cost reduction measures a loyal and satisfied customer will ensure a lifetime of profits for the organization. An organization also exists for its customer because they have invested both their wealth and trust in purchasing a product manufactured by it. Consequently the investors and shareholders are not only stakeholders important for a finance manager. The key is to realise that customer orientation is not just the prerogative of the marketing department all departments have to work together towards become more customer focused. It would be incorrect to say that the marketing concept was flawed or did not develop pointers that would have helped operationalise the philosophy of Drucker. Drucker just showed the way. In fact had Drucker or any other management guru developed a model way of making a customer-oriented organization it may not have worked for everyone. Some organizations were able to understand the concept and become powerful customer focused organizations while others failed. The idea is not reject the concept but to develop in a more relevant frame. 4. Aligining marketing with other functions The question now is can a framework be thought of which is able to integrate marketing with other functions so that they do not work at cross-purposes. Benson Shapiro has done some extraordinary work in this field. This paper would focus on two of his famous articles published in Harvard Business Review and understand how marketing can become cross-functional. The first article Can marketing and manufacturing coexist? looked at how to decrease conflict and increase cooperation between marketing and manufacturing. Eight factors were identified which led to conflict between the two functions capacity planning and long range sales forecasting, production scheduling and short-range sales forecasting, quality assurance, delivery and physical distribution, breadth of product line, cost control, new product introduction and adjunct services. The primary reasons why conflicts arise in these areas were: Differing reward systems: Manufacturing people are evaluated on running a smooth operation on a minimal cost while marketing people are judged on the basis of profitable growth of the company. Their tasks often are at cross-purposes, which lead to increase in conflicts. Orientation and work experience: A marketing and sales person has spent his life interacting with customers while a manufacturing person has worked his way from the shop floor. The difference in experiences builds in perspectives that are hard to change over the years. Cultural differences: Traditionally marketing people are known to be flashy, outgoing, flamboyant with large egos while manufacturing people are more sedate and sober. Hence it is easy to understand why they dont see eye-to-eye. Technological changes: Changes in technology put too burden on both functions. Products become obsolete faster than expected increasing pressure to find new products and mistakes become less tolerable. Consumer unpredictability: A product, which looks perfect at development and testing stage, flounders at the selling stage. Manufacturing people blame marketing people for not being able to sell. Shapiro suggests the following to overcome conflicts: Explicit management policies: The top management should lay down clear-cut policies that take in account the constraints faced by both sides. This will ensure that when problems arise the organization and not an individual provide a solution. Unless necessary compromises and mediations must be avoided, as they are short- term policies, which do more harm than good. A common evaluation system: The performance of people should be evaluated in such a manner that inter-functionality is stressed. There should be common variables of evaluation between both functions People orientation: An organization must provide platforms for informal interaction between departments. This would help increase knowledge about the other functions. Also career paths that encourage cross-functional experience should be considered. Shapiros other work What the Hell is Market Oriented?, (Harvard Business Review, November, 1988) talks about Wolverine Controller Company, an Indianapolis based producer of flow controllers for process industries like chemicals, paper and food which was facing a problem of declining profitability. The CEO called a meeting of the VPs of all functions marketing, manufacturing, sales, finance and research & development. At the conclave they came to the conclusion that the problem they were facing was due to lack of knowledge of the consumer and competitors. They decided to go for a complete revamp of their strategy with responsibility for getting know consumers being shared across departments and not being restricted to the marketing team. For instance they listed down their 20 major customers and decided that pairs of two would visit them. These pairs would be formed out of the CEO, six functional heads and three divisional general managers and the sales force would coordinate it. Also all 10 heads would visit the next trade show together and also visit 10 prospective consumers. Finally a group of 7 was drawn for whom the marketing VP gathered market information, finance VP analysed their financial performance and the R&D VP made technical reviews. The rest analysed the strengths and weaknesses of one competitor each. To tackle the problem of inter functional coordination the HR VP scrutinized cross functional communication and identified ways to improve it. The MIS was identified a key tool to leverage inter-departmental communication. Also the existing bonus plan based on divisional goals was done away with and instead corporate goals were introduced in the revised plan that was devised by the VP of HR. Responsibilities were changed. Each team now had members from other divisions. Informal socialization was encouraged. An idea to improve customer responsiveness was developed by the technical field service and customer-service manager during a bowling league party. Changes began to show with sales and profits increasing. Internally decisions became more integrative. The organisation became truly marketing-oriented. The key reason for this was that it stressed on inter-functional coordination as means of achieving a common goal. It had vision and commitment from the top level, which is a necessity from any company to marketing oriented. Thus these two cases have ably demonstrated that marketing, as a philosophy, is truly cross-functional. The issue here is that one should not look at marketing as function, rather it should look at it as a philosophy. As a concept, for marketing to exist, it has to be cross- functional. 5. The road ahead Implementing marketing as a cross-functional discipline is easier said than done. A key concept that needs to be understood is that employees of an organization must be convinced of the goals of customer orientation. In other words the organization must be sold to the employees. Unless that take place an organization cannot be truly customer focused. A step that can aid this process of internal customer orientation is the idea of internal marketing. As Berry and Parsuraman define it, internal marketing is the philosophy of treating employees as customers.wooing themand it is the strategy of shaping job products to fit human needs. It is very different from managing human resources and should not be viewed as an HR function. For any external marketing function to be successful, internal marketing is a must. Unless employees are motivated enough the very idea of a cross functional marketing system cannot exist Hence for marketing to succeed it must understand a fundamental premise customer satisfaction is affected by the performance of other divisions. In the interest of sustaining the concept of marketing, it must influence and involve itself with other departments. That is the path of the future and possibly that of success.