Product- or Brand-Management Organization
Companies that produce a variety of products and brands often establish a product-
(or brand-) management organization as another layer of management within the
marketing function. A product manager supervises product category managers, who
in turn supervise specific product and brand managers. A product-management organization
makes sense if the firm’s products are quite different, or if the sheer number
of products is beyond the ability of a functional marketing organization to handle.
In both consumer and industrial markets, product and brand managers are
responsible for product planning and strategy; preparing annual marketing plans and
sales forecasts; working with advertising and merchandising agencies to create programs
and campaigns; stimulating support among sales reps and distributors; ongoing
research into product performance, customer and dealer attitudes, opportunities and
threats; and initiating product improvements to meet changing market needs.
The product-management organization allows the product manager to concentrate
on developing a cost-effective marketing mix for each product, to react more
quickly to marketplace changes, and to watch over smaller brands. On the other hand,
it can lead to conflict and frustration when product managers are not given enough
authority to carry out their responsibilities effectively. In addition, product managers
become experts in their product but rarely achieve functional expertise. And appointing
product managers and associate product managers for even minor products can
bloat payroll costs. Finally, brand managers normally move up in a few years to another
brand or transfer to another company, leading to short-term thinking that plays havoc
with long-term brand building.
To counter these disadvantages, some companies have switched from product
managers to product teams. For example, Hallmark uses a triangular marketing team
consisting of a market manager (the leader), a marketing manager, and a distribution
manager; 3M uses a horizontal product team consisting of a team leader and representatives
from sales, marketing, laboratory, engineering, accounting, and marketing
research.
Another alternative is to introduce category management, in which a company focuses
on product categories to manage its brands. Kraft has changed from a classic brand-management
structure, in which each brand competed for resources and market share, to a
category-based structure in which category business directors (or “product integrators”)
lead cross-functional teams of representatives from marketing, R&D, consumer promotion,
and finance. These category teams work with process teams dedicated to each product
category and with customer teams dedicated to each major customer.20 Still, category
54 CHAPTER3 WINNING MARKETS THROUGH STRATEGIC PLANNING, IMPLEMENTATION, AND CONTROL
management is essentially product-driven, which is why Colgate recently moved from
brand management (Colgate toothpaste) to category management (toothpaste category)
to a new stage called “customer-need management” (mouth care). This last step finally
focuses the organization on a basic customer need.21
Market-Management Organization
Many companies sell their products to a diverse set of markets; Canon, for instance,
sells fax machines to consumer, business, and government markets. When customers
fall into different user groups with distinct buying preferences and practices, a market
management organization is desirable. A markets manager supervises several market
managers (also called market-development managers, market specialists, or industry
specialists). The market managers draw upon functional services as needed or may
even have functional specialists reporting to them.
Market managers are staff (not line) people, with duties similar to those of product
managers. This system has many of the same advantages and disadvantages of product
management systems. Its strongest advantage is that the marketing activity is organized
to meet the needs of distinct customer groups. This is why Xerox converted from
geographic selling to selling by industry, as did IBM, which recently reorganized its
employees into 14 customer-focused divisions. In fact, several studies have confirmed
the value of market-centered organization: Slater and Narver found a substantial positive
effect of market orientation on both commodity and noncommodity businesses.22
Product-Management/Market-Management Organization
Companies that produce many products that flow into many markets tend to adopt a
matrix organization. Consider DuPont, a pioneer in developing the matrix structure. Its
textile fibers department consists of separate product managers for rayon and other
fibers plus separate market managers for menswear and other markets. The product
managers plan the sales and profits for their respective fibers, each seeking to expand
the use of his or her fiber; the market managers seek to meet their market’s needs
rather than push a particular fiber. Ultimately, the sales forecasts from the market
managers and the product managers should add to the same grand total.
A matrix organization would seem desirable in a multiproduct, multimarket
company. However, this system is costly and often creates conflicts as well as questions
about authority and responsibility. By the early 1980s, a number of companies had
abandoned matrix management. But matrix management has resurfaced and is again
flourishing in the form of “business teams” staffed with full-time specialists reporting
to one team boss. The major difference is that companies today provide the right context
in which a matrix can thrive—an emphasis on flat, lean team organizations
focused around business processes that cut horizontally across functions.23
Corporate-Divisional Organization
As multiproduct-multimarket companies grow, they often convert their larger product
or market groups into separate divisions with their own departments and services. This
raises the question of what marketing services and activities should be retained at corporate
headquarters. Some corporations leave marketing to each division; some have
a small corporate marketing staff; and some prefer to maintain a strong corporate
marketing staff.
The potential contribution of a corporate marketing staff varies in different
stages of the company’s evolution. Most companies begin with weak marketing in their
divisions and often establish a corporate staff to bring stronger marketing into the divisions
through training and other services. Some members of corporate marketing
Managing The Marketing Process 55
might be transferred to head divisional marketing departments. As divisions become
strong in their marketing, corporate marketing has less to offer them. Some companies
then decide corporate marketing has done its job and proceed to eliminate the
department.24
Global Organization
Companies that market internationally can organize in three ways. Those just going
global may start by establishing an export department with a sales manager and a few assistants
(and limited marketing services). As they go after global business more aggressively,
they can create an international division with functional specialists (including marketing)
and operating units structured geographically, according to product, or as
international subsidiaries. Finally, companies that become truly global organizations have
top corporate management and staff plan worldwide operations, marketing policies,
financial flows, and logistical systems. In these organizations, the global operating units
report directly to top management, not to the head of an international division.
Building a Companywide Marketing Orientation
Many companies are beginning to realize that their organizations are not really marketand
customer-driven—they are product or sales driven. Companies such as Baxter,
General Motors, and Shell are working hard to reorganize themselves into true marketdriven
companies. The task is not easy: it requires changes in job and department defi-
nitions, responsibilities, incentives, and relationships.
To create a market- and customer-focused company, the CEO must: convince
senior managers of the need to be more customer-focused; appoint a senior marketing
officer and marketing task force; get outside help and guidance; change reward
measurement and system to encourage actions that build long-term customer satisfaction;
hire strong marketing talent; develop strong in-house marketing training programs;
install a modern marketing planning system; establish an annual marketing
excellence recognition program; consider restructuring as a market-centered organization;
and shift from a department focus to a process-outcome focus.
DuPont successfully made the transition from an inward-looking to an outwardlooking
orientation when it began building a “marketing community” by reorganizing
divisions along market lines and holding marketing management training seminars
for thousands of managers and employees. The company also established a marketing
excellence recognition program and honored employees from around the world who
had developed innovative marketing strategies and service improvements.25 It takes a
great deal of planning and patience to get managers to accept customers as the foundation
and future of the business—but it can be done, as the DuPont example shows.
Marketing Implementation
Organization is one factor contributing to effective marketing implementation, the
process that turns marketing plans into action assignments and ensures that such
assignments are executed in a manner that accomplishes the plan’s stated objectives.26
This part of the marketing process is critical, because a brilliant strategic marketing
plan counts for little if it is not implemented properly. Whereas strategy addresses the
what and why of marketing activities, implementation addresses the who, where, when,
and how. Strategy and implementation are closely related in that one layer of strategy
implies certain tactical implementation assignments at a lower level. For example, top
management’s strategic decision to “harvest” a product must be translated into specific
actions and assignments.
56 CHAPTER3 WINNING MARKETS THROUGH STRATEGIC PLANNING, IMPLEMENTATION, AND CONTROL
Bonoma identified four sets of skills for implementing marketing programs:
(1) diagnostic skills (the ability to determine what went wrong); (2) identification of
company level (the ability to discern whether problems occurred in the marketing
function, the marketing program, or the marketing policy); (3) implementation skills
(the ability to budget resources, organize effectively, motivate others); and (4) evaluation
skills (the ability to evaluate results).27 These skills are as vital for nonprofits as
they are for businesses, as the Alvin Ailey Dance Theater has discovered.
Like many nonprofit cultural organizations, the company founded by Alvin
Ailey in 1958 always seemed to be operating in the red—despite its ability to attract
full houses—because of the high costs of mounting a production. But Judith
Jameson, the principal dancer who succeeded Ailey as director after his death, has
been able to keep the company in the black, thanks largely to her skill at motivating
others to carry out marketing efforts. The nonprofit implements its marketing plan
through a high-powered board of directors and a group of businesses that want to
associate with the Ailey company for their own marketing purposes. For example,
Healthsouth Corporation provides free physical therapy to the dancers and benefits
from the association when marketing its sports medicine clinics. With an audience
that is almost half African American and 43 percent of which is between the ages of
19 and 39, Ailey provides access to an important market for its corporate partners,
earning their enthusiastic support.28
Evaluating and Controlling the Marketing Process
To deal with the many surprises that occur during the implementation of marketing
plans, the marketing department has to monitor and control marketing activities continuously.
Table 1.1 lists four types of marketing control needed by companies: annualplan
control, profitability control, efficiency control, and strategic control.
Annual-Plan Control
The purpose of annual-plan control is to ensure that the company achieves the sales,
profits, and other goals established in its annual plan. The heart of annual-plan control
is the four-step management by objectives process in which management (1) sets
monthly or quarterly goals; (2) monitors the company’s marketplace performance;
(3) determines the causes of serious performance deviations; and (4) takes corrective
action to close the gaps between goals and performance.
This control model applies to all levels of the organization. Top management
sets sales and profit goals for the year that are elaborated into specific goals for each
lower level. In turn, each product manager commits to attaining specified levels of
sales and costs; each regional district and sales manager and each sales representative
also commits to specific goals. Each period, top management reviews and interprets
performance results at all levels, using these five tools:
➤ Sales analysis. Sales analysis consists of measuring and evaluating actual sales in
relation to goals, using two specific tools. Sales-variance analysis measures the relative
contribution of different factors to a gap in sales performance. Microsales analysis
looks at specific products, territories, and other elements that failed to produce
expected sales. The point of these analyses is to determine what factors (pricing,
lower volume, specific territories, etc.) contributed to a failure to meet sales goals.
➤ Market-share analysis. Company sales do not reveal how well the company is
performing relative to competitors. To do this, management needs to track its
market share. Overall market share is the company’s sales expressed as a percentage
Managing The Marketing Process 57
of total market sales. Served market share is its sales expressed as a percentage of
the total sales to its served market—all of the buyers who are able and willing to buy
the product. Relative market share can be expressed as market share in relation to
the largest competitor; a rise in relative market share means a company is gaining
on its leading competitor. A useful way to analyze market-share movements is in
terms of customer penetration, customer loyalty, customer selectivity, and price
selectivity.
➤ Marketing expense-to-sales analysis. This is a key ratio because it allows management to
be sure that the company is not overspending to achieve sales goals. Minor
fluctuations in the expense-to-sales ratio can be ignored, but major fluctuations are
cause for concern.
Type of Prime Purpose of
Control Responsibility Control Approaches
I. Annual-plan control
II. Profitability control
III. Efficiency control
IV. Strategic control
Top management
Middle management
Marketing
controller
Line and staff
management
Marketing
controller
Top management
Marketing auditor
To examine whether
the planned results
are being achieved
To examine where the
company is making
and losing money
To evaluate and
improve the spending
efficiency and impact
of marketing
expenditures
To examine whether
the company is
pursuing its best
opportunities in
markets, products, and
channels
■ Sales analysis
■ Market-share
analysis
■ Marketing expenseto-
sales analysis
■ Financial analysis
■ Market-based
scorecard analysis
Profitability by:
■ product
■ territory
■ customer
■ segment
■ trade channel
■ order size
Efficiency of:
■ sales force
■ advertising
■ sales promotion
■ distribution
■ Marketiingeffectiveness
review
■ Marketing audit
■ Marketing
excellence review
■ Company ethical
and social
responsibility review
Table 1.1 Types of Marketing Control
58 CHAPTER3 WINNING MARKETS THROUGH STRATEGIC PLANNING, IMPLEMENTATION, AND CONTROL
➤ Financial analysis. Management uses financial analysis to identify the factors that
affect the company’s rate of return on net worth.29 The main factors are shown in
Figure 1-10, along with illustrative numbers for a large chain-store retailer. To
improve its return on net worth, the company must increase its ratio of net profits
to its assets or increase the ratio of its assets to its net worth. The company should
analyze the composition of its assets (i.e., cash, accounts receivable, inventory, and
plant and equipment) and see if it can improve its asset management.30
➤ Market-based scorecard analysis. Companies should also prepare two market-based
scorecards that reflect performance and provide possible early warning signals of
problems. A customer-performance scorecard records how well the company is doing on
such customer-based measures as new customers, dissatisfied customers, lost customers,
target market awareness, target market preference, relative product quality, and
relative service quality. A stakeholder-performance scorecard tracks the satisfaction of
constituencies who have a critical interest in and impact on the company’s
performance: employees, suppliers, banks, distributors, retailers, and stockholders.31
Profitability Control
Successful companies also measure the profitability of their products, territories, customer
groups, segments, trade channels, and order sizes. This information helps management
determine whether any products or marketing activities should be expanded,
reduced, or eliminated. The first step in marketing-profitability analysis is to identify
the functional expenses (such as advertising and delivery) incurred for each activity.
Next, the firm measures how much functional expense was associated with selling
through each type of channel. Third, the company prepares a profit-and-loss statement
for each type of channel.
In general, marketing-profitability analysis indicates the relative profitability of
different channels, products, territories, or other marketing entities. However, it does
not prove that the best course of action is to drop the unprofitable marketing entities,
1.5%
3.2
Asset turnover
Profit margin
Net profits
–––––––
Net sales
4.8% =
Return on assets
Net profits
–––––––
Total assets
2.6 x
Financial
leverage
Total assets
–––––––
Net worth
12.5% =
Rate of return
on net worth
Net profits
–––––––
Net worth
Net sales
–––––––
Total assets
Figure 1-10 Financial Model of Return on Net Worth
Managing The Marketing Process 59
nor does it capture the likely profit improvement if these marginal marketing entities
are dropped. Therefore, the company must examine its alternatives closely before taking
corrective action.
Efficiency Control
Suppose a profitability analysis reveals poor profits for certain products, territories, or
markets. This is when management must ask whether there are more efficient ways to
manage the sales force, advertising, sales promotion, and distribution in connection
with these marketing entities. Some companies have established a marketing controller
position to work on such issues and improve marketing efficiency.
Marketing controllers work out of the controller’s office but specialize in the
marketing side of the business. At companies such as General Foods, DuPont, and
Johnson & Johnson, they perform a sophisticated financial analysis of marketing
expenditures and results, analyzing adherence to profit plans, helping prepare brand
managers’ budgets, measuring the efficiency of promotions, analyzing media production
costs, evaluating customer and geographic profitability, and educating marketing
personnel on the financial implications of marketing decisions.32
Strategic Control
From time to time, companies need to undertake a critical review of overall marketing
goals and effectiveness. Each company should periodically reassess its strategic approach
to the marketplace with marketing-effectiveness reviews and marketing audits.
➤ The marketing-effectiveness review. Marketing effectiveness is reflected in the degree to
which a company or division exhibits the five major attributes of a marketing
orientation: customer philosophy (serving customers’ needs and wants), integrated
marketing organization (integrating marketing with other key departments), adequate
marketing information (conducting timely, appropriate marketing research), strategic
orientation (developing formal marketing plans and strategies), and operational efficiency
(using marketing resources effectively and flexibly). Unfortunately, most companies
and divisions score in the fair-to-good range on measures of marketing effectiveness.33
➤ The marketing audit. Companies that discover marketing weaknesses should
undertake a marketing audit, a comprehensive, systematic, independent, and
periodic examination of a company’s (or SBU’s) marketing environment, objectives,
strategies, and activities to identify problem areas and opportunities and
recommend a plan of action for improving the company’s marketing
performance.34 The marketing audit examines six major marketing components:
(1) the macroenvironment and task environment, (2) marketing strategy,
(3) marketing organization, (4) marketing systems, (5) marketing productivity, and
(6) marketing function (the 4 Ps).
Highly successful companies also perform marketing excellence reviews and ethicalsocial
responsibility reviews to gain an outside-in perspective on their marketing activities.
➤ The marketing excellence review. This best-practices excellence review rates a firm’s
performance in relation to the best marketing and business practices of highperforming
businesses. The resulting profile exposes weaknesses and strengths and
highlights where the company might change to become a truly outstanding player
in the marketplace.
➤ The ethical and social responsibility review. In addition, companies need to evaluate
whether they are truly practicing ethical and socially responsible marketing.
Business success and continually satisfying customers and other stakeholders are
60 CHAPTER3 WINNING MARKETS THROUGH STRATEGIC PLANNING, IMPLEMENTATION, AND CONTROL
intimately tied to adoption and implementation of high standards of business and
marketing conduct. The most admired companies abide by a code of serving
people’s interests, not only their own. Thus, the ethical and social responsibility
review allows management to determine how the firm is grappling with ethical
issues and exhibiting a “social conscience” in its business dealings.
Effective control of the marketing process ultimately depends on accurate,
timely, and complete information about markets, demand, and the marketing environment—