 The author - Professor Philip Kotler, Kellogg School
of Management, Northwestern University shared his experience at a
seminar in Warsaw's Marriott Hotel on 17 May 2006 organised by Bigram
SA Personnel Consulting and Golden Mark. (This article to be published in Strategy & Leadership in Autumn 2006; published here courtesy BIGRAM)
Running a successful company – or turning an unsuccessful
company into a successful one – is a constant challenge for a CEO.
Often, the engine of many companies, successful or otherwise, is the
marketing department, which is supposed to drive business strategy.
Yet many business leaders today find the primary efforts and functions
of their marketing departments split up among marketers, strategists,
financial experts and operations managers. In many cases, the company
winds up with a marketing department that is unprepared to fulfill its
role both within the company as well as among customers or prospects.
This requires senior management to address three key problems with
marketing that are often overlooked: the marketing department lacks the
organization needed to get its primary job done; the marketing staff
does not have the skills or equipment to make maximum use of
technology; and there is bad blood between marketing and other
departments in the company.
Separately, any of these aspects can slow down a company’s overall
growth or prevent it from recognizing and taking advantage of
opportunities in the marketplace. Any combination of the three could
spell doom for even the smartest companies offering the best products
or services. A company facing all three problems is in deep trouble.
Let’s take a look at how these situations can be recognized and
addressed. Often, the approach one takes to address these situations –
not necessarily the money spent trying to tackle the problem – is the
key to turning the marketing operation into the business-driving force
it should naturally be to ensure success.
Organising the marketing department
One way to reorganise the marketing department, or to assess the effectiveness of the current staff, it to start at the top.
An effective Chief Marketing Officer, for example, is able to juggle a
number of jobs at once. The CMO must run the marketing department
effectively, hire competent staff, set high standards for marketing
planning and implementation and improve the staff’s skills at research,
forecasting and communication. Then he or she must win the confidence
of the heads of other departments – finance, operations, purchasing,
information technology, etc. This prepares the entire organization to
be ready to serve and satisfy the customers. Finally, the CMO needs to
work well with the CEO and deliver on the CEO’s expectations in terms
of company growth and profitability.
A few CMOs are competent in all of these areas, while others are
competent in only one or two. Unfortunately, too many may fail at all
three, at which point it’s time for the CEO to find a new CMO.
Overall, marketing departments have traditionally practiced such skills
as marketing research, advertising, sales promotion and sales
management. Scores of books have been written about each of these, and
yet many departments are deficient and don’t possess all these skills.
Additionally, many marketing department staffers are unable to acquire
new skills that they need in order to deal with the marketing
challenges of the 21st century.
Fixing or reorganizing a “broken” or ineffective marketing operation is
composed of several steps. The first is to appoint a strong leader who
can meet the challenge of gaining the respect of the CEO, the various
department heads and of employees throughout the company. This can
happen if marketing’s financial forecasts are fairly accurate and there
is accountability for the marketing expenditures in terms of the
contribution to ROI or other financial measures.
But more often than not, the marketing department’s primary focus
should be on the company’s customers. Herb Kelleher, the brilliant
co-founder of Southwest Airlines, went so far as to rename the
carrier’s marketing department: “We don’t have a Marketing Department;
we have a Customer Department.” A similarly enlightened executive at
Ford Motor Co. once noted, “If we’re not customer driven, our cars
won’t be either.”
Building new marketing skills
Having a strong leader is just the beginning as far as reorganizing the
marketing department, whose members may also need to brush up on new
initiatives and new skills that make it easier to compete in today’s
challenging marketing environment.
Here are some specific skills that members of the marketing department
need to make sure are part of the organizational structure:
· Positioning – Al Ries and Jack Trout introduced the
central marketing concept of brand positioning in 1982. They asserted
that a brand should own a single word or idea. For Volvo, that word is
“safety,” while BMW owns “driving performance” and Tide owns “cleans
cleanest.” They also argue that no brand should come into the market as
second in the category, but should offer an important new benefit to
eventually create a new category.
· Brand asset management – This concept is closely related
to positioning since certain brands are central to a company’s current
and future performance. They need to be managed, enhanced and protected
as assets. This allows brand names like Coca-Cola, Sony, Intel and
Disney to extend into new product categories, product variants and
services. But someone also has to police the use to which such “star
power” names are put. Any deviations from the positioning center of
these brands must be avoided.
· Customer Relationship Management and database marketing
– Companies can improve targeting precision by collecting data about
individual customers and building a database of past transactions,
demographics, psychographics and other useful information.
Statisticians can then mine the data to uncover new customer segments
and trends that point to new opportunities. CRM skills are rapidly
being added in marketing departments to create an advantage over
competitors working at grosser levels of targeting.
· Partner Relationship Management – As more companies team
up with partners to perform more activities, the skill of managing
partner relationships becomes critical. Partner productivity depends on
both participants feeling satisfied with the terms of the relationship
and the opportunities that result in working closely with the firm. A
company should appoint someone to manage supplier relations and another
to manage distributor relations, very much like a human resources
department manages employee relations.
· Company contact center – Companies need to consolidate
activities for reaching, hearing and learning about customers through
what has been described as a contact or customer interaction center.
All the information coming from customer touch points, such as the
telephone, regular mail, e-mail, faxes and store visits needs to be
integrated, and companies need to capture information that will provide
a 360-degree view of the individual customer.
· Internet marketing – Virtually all companies have
created a website where viewers can learn about the company’s product
line, history, philosophies, job opportunities and recent company news.
Dell Computer, Amazon, W.W. Grainger and scores of others go further
and use their websites as a sales channel. But there are many other
marketing applications for such websites that most companies have not
yet tried: market research, competitive intelligence, concept and
product testing, coupon distribution and employee and dealer training,
for example.
· Public relations marketing – Long a stepchild in the
promotion mix, public relations is coming into more prominence. Hi-tech
firms discovered early on that PR skills are critical to spreading
information about new products. These firms would submit new hi-tech
products to well-known reviewers, hoping to receive from them a
positive recommendation. Companies need to add PR skills to the
marketing department and not rely on begging and borrowing them on an
as-needed basis from the company’s PR department or an outside agency.
· Service and experiential marketing – Outstanding service
can be a powerful differentiator for a company in the absence of other
differentiators. Companies that win high marks for service, such as The
Container Store and the Ritz-Carleton Hotel Chain, practice
values-driven leadership, strategic focus and brand cultivation.
Service marketing has been lifted to a new level by the recent work of
experience marketing. Great restaurants, for example, are known for the
customer experience as much as they are for the food they serve.
Similarly, Starbucks is “allowed” to charge coffee drinkers $2 or more
to experience coffee in a special setting.
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· Integrated Marketing Communications – Among the most
important skills in marketing are communication and promotion.
Communication is the broader term and it happens whether planned or
not, like a salesperson’s choice of clothing to wear or the company’s
office decor. All of these things create impressions on the receiving
party. This explains the growing interest in Integrated Marketing
Communications. Companies need to orchestrate a consistent set of
impressions from personnel, facilities and actions that deliver the
company’s brand meaning and promise to its various audiences.
· Profitability analysis – Most companies don’t have the
capabilities to assess their real profitability by geographies,
products, segments, customers and channels. More often than not, they
assume their profits are proportional to sales volume. But this ignores
the different margins and cost structures for different-sized
customers. Marketers must add profit measurement and financial skills
to increase the department’s accountability for budget allocations over
geographies, products, segments, customers and channels.
· Market-driving skills – Effective marketing has
traditionally been defined as the ability to “find needs and fill them
profitably.” But with so many needs now being filled by countless
products, today’s challenge is to invent new needs. Market-driving
firms revolutionize industries by creating a new value proposition or a
new business system that offers greater benefits. Many competitors may
imitate the new value proposition but they tend to be less successful
in copying the business system. Market-driving firms – like Federal
Express and Sony– guide by vision rather than by traditional market
research.
Maintaining technological skills
Another key component that a 21st Century-capable marketing department
needs in order to improve its effectiveness is to make sure the
participants are making the most efficient use of technology. With the
continuing development of Internet-based marketing initiatives and
processes, it becomes imperative that marketers have not only the
equipment to handle such challenges, but also the training to best
utilize the technology.
In terms of the Internet, many companies believe they are using the
World Wide Web properly because they have set up websites and might
even sell products or services online. But this only represents about
10% of the opportunities available on the Internet. The most important
marketing use of the Internet is the establishment of an effective and
attractive website describing the company, its products, its
distributors, its job opportunities and its officers.
But not all websites are user-friendly or effective. The download time,
for example, often is higher than it should be because of overly fancy
graphics. It also might be confusing to navigate to new pages or
tougher to pay for a purchase on the Internet than it needs to be. The
website also might lack the kind of information that would draw
visitors back again.
It’s pretty easy to assess the effectiveness of a company’s website.
You need to survey the main group of users – customers – on their
experience with the website. You should also solicit their suggestions
for improvement. You could invite website experts to give their
assessment and suggestions as well. Companies need to figure out how to
add value to their websites — value that will draw visitors back time
and time again.
More companies also are using the Internet as a platform to link
themselves electronically to their main suppliers, distributors and
dealers. Ford, for example, sends orders for parts to suppliers without
a need for paper documents. It can also send payment to the supplier’s
banks once the parts are delivered. Ford saves a considerable amount of
money and time by investing in these electronic links.
Similarly, an Intranet can be used as an efficient communications tool
within the company. Employees would be able to reach each other through
e-mail, access documents from the company’s server when on the road, or
upload sales data and other reports back to company headquarters
quickly once a sale is made.
Companies can also keep employees up-to-date with the latest knowledge
and skills for running their business through online e-training
programs. IBM Corp., for example, saves the money it would spend on
hotels and transportation by doing 25% of its training online.
Similarly, the Internet has made it easier and more cost-effective to
search for talent via the Web through e-recruitment programs, as well
as to collect vital market research information from people visiting
business’ websites.
In terms of the sales force, technology is helping sales people more
easily answer any question a prospect might throw at them through
automating the sales process. A sales automation system enables sales
people to immediately possess the knowledge needed to make profitable
decisions on behalf of the company. Additionally, routine marketing
decisions can often be better handled by software rather than by
company personnel, such as in the case of airlines trying to balance
the number of empty seats on a particular flight with the fare that
needs to be changed to fill those seats. Yield-based pricing by
airlines and hotels is an outstanding example of marketing automation..
Since the 1960s, academic marketers have been developing decision
models to support sales call planning, sales territory design, sales
promotion planning, and many other applications. Marketers today are
using decision models to determine the marketing mix that will optimize
profitability.
Better development of technological skills, along with making the
latest technology available to marketing and sales departments, go a
long way to turning a stagnant marketing operation into a cutting-edge
innovator that will help a company better compete in this fast-paced,
techno-centric business climate.
Can’t we all just get along?
The final challenge needed to establish the marketing department as the
driving engine for company growth involves the relationship marketing
has with other departments in the company. Initiatives that improve
marketing’s relationship with sales, engineering, manufacturing and
finance are key to building a stronger overall marketing program.
There is no doubt that for most companies, marketing must improve its
relationship with sales. Marketing typically takes care of product
planning, pricing, lead generation and communications, while sales
handles reaching and developing customers and generating orders.
Various frictions can arise, but the central question remains: can the
heads of the two divisions respect each other enough to try and
objectively share the marketing budget for the common good rather than
for the glory of either of the two departments?
Additionally, the marketing planning process should include more sales
people so that they have a say in the program and can buy into the
plan. It also helps if marketing people regularly get out and travel
with sales people to better understand customers needs and the
operations of the sales staff.
Marketers usually only have an issue with engineering departments when
they are not invited in early enough in the planning of new product
features and prices. Scientists and engineers may not take into account
the subtle judgments that buyers make when confronting a new product.
The engineers may overemphasize features and technical jargon instead
of benefits and values of the product. Marketers can work with
engineers to create better guidance to consumers as to the product’s
merits.
Marketing also often interferes with the smooth operation of the
production department by planning special promotions that require
manufacturing to increase the production load. This could increase
production’s costs because of resulting overtime issues. Or marketing
may request smaller batches of product for special markets, requiring
manufacturing to reset their tools and dies. If marketing’s requests
lead to higher profits, then their view should prevail. When this is
less certain, it may be better for marketing not to make demands on
manufacturing until they really can promise a big win.
A major issue between marketing and finance (as well as accounting)
involves marketing’s accountability for the financial impact of the
department’s expenditures. Without a strong case by marketing that
requested funds will produce measurable profit, finance will be less
willing to release the funds. This, of course, produces a continuous
tension between marketing and finance because of the lack of hard
financial data from marketing.
Clearly, marketing has to take the lead in making sure that relations
with other departments remain on solid ground and all of the teams are
pulling in the same direction at the same time. Taking steps to improve
the relationships between marketing and the other company departments
initially may appear tough to manage but such efforts could go a long
way toward restoring marketing’s place as a key driver of business
strategy.
Philip Kotler is the S.C. Johnson & Son
Distinguished Professor of International Marketing at Northwestern
University’s Kellogg School of Management in Chicago. He is the author
of 35 books in the field of marketing management, including Marketing
Management: Analysis, Planning, Implementation and Control (Prentice
Hall, now in its eleventh edition), the most widely used marketing book
in graduate business schools worldwide. His latest book is “Ten Deadly
Marketing Sins: Signs and Solutions” (Wiley, April, 2004).
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