MANAGEMENT MEMO

Diagnosing the Marketing Takeover By Philip Kotler Today it is almost axiomatic that a marketing orientation should pervade the way a company tliinks about itself and the aecomplishment of its goals. The "marketing concept" is a philosophy for business ell'ectiveness in an economy eharaeterized by an abundance ol' goods. The major problem of most lirms in the last decade has been finding enough customers lor the output they are capable of producing. An increasing number of firms think the key lies in more careful observation ol', and attention and catering to, customer needs. The "marketing concept" supersedes an older eoneept that marketing is the task of selling whatever the company makes. The new "marketing concept" reverses this logie and ealls on the eompany to make what it can sell. The marketing concept calls for the identilieation of areas of unsatisfied customer needs, ft calls for seeking profits through the ereation of want-satisfaction. It ealls for coordinating all the company functions that impinge on the customer. It is this last point which bears eareful scrutiny. The marketing eoneept has led to organizational proposals, often followed by organizational ehanges, which have spawned much interdepartmental conflict and concern. The time is ripe to ask ivhether the coiiipanv's interests are best advanced hv requiring all departments to treat ctistoiiiers' interests as -parauunint. My objeetive here is not to provide a definitive answer to this question. Rather, it is to present the ease for eoordinating company actions that A U T H O R ' S N O T E : This niticlc is :id:.plc'd from my forth-

coming book, Mdihc'ting MaiiagciiieuL: Analysis, Vlauiiing,

70

afl'ect the customer, but at the same time point the disturbing organizational eonfliets hetwee other departments and marketing that can resu from trying to achieve this eoordination.

Coordinated Marketing

An orientation outward toward customers the part of top management must be mateh* by adequate organizational backup within t] eompany. In the typieal organization, made of specialized departments charged with earr ing out difterent company tasks, eaeh depai ment direetly or indireetly has an impaet on ei. tomer satisfaction through its own activities ai deeisions. Typically these impaets are uneoon nated. Under the marketing eoneept, it is c sirable to eoordinate them beeause the satisfe tion gained by the eustomer is a funetion of t totality of stimuli, not simply of the stimuli ma aged by the marketing department alone. The marketing department is glad to aeee this responsibility. But there is little unanimi on how nnieh authority marketing should ha over other departments to bring about eoorc nated marketing. At least three difFerent po tions are taken:

(1) Tlic most popular position is that the m. kcting vice president should have formal author over only the sales force, advertising, and mark ing research — i.e., the traditional marketing fui tions. Yet he should have close relationships w the other departments and shotikl be backed by t president in conflicts between customer logic a other logics. and Control to be published by Prentice-Hall, Ine., 1966.

Marketing Takeover (2) An intermediate position holds that the marketing vice president should have authority over certain additional departments whose efforts affect customers very closely. The areas usually mentioned in this connection are physical distribution (inventory and traffic), credit, purchasing, and corporate publicity. (3) The most radical position is that the marketing vice president should oversee the entire company operation. Marketing would he the only line function, and all the others would be staff functions. Dominance by marketing would ensure that all the other departments use a customer logic in their operations. The last two positions have become a reality in some of the larger consumer goods companies. Yet these extreme positions would not be appropriate in many companies; they go beyond the essential spirit of the marketing concept. They involve a conception of marketing's authority which has engendered much antagonism to the marketing concept, and to marketing people.

Departmental Conflict Other departments naturally resent having to bend their efforts to the will of the marketing department. Just as marketing stresses the customer's point of view, other departments wish to stress the importance of their tasks. Inevitably, departments and individuals define company problems and goals in terms slanted by their self-interests. This is the result of each dealing continuously with problems in a local portion of the overall system. The major departmental differences in point of view — organizational conflicts — between other departments and marketing are summarized in EXHIBIT I. In trying to press the customer point of view in these other departments, the wise marketing executive appreciates the contrasting perspectives they have. Using EXHIBIT I to summarize the consequences in terms of interdepartmental conflict, we can briefly examine the typical concerns of each of the other departments: Product Engineering. The product engineer is interested in designing a product which meets engineering standards of simplicity and economy. His concentration on these attributes is often at the expense of those which would increase the product's marketability. Purchasing. The purchasing agent's main concern is to keep down the costs of acquiring the com-

71

pany's required inputs. This leads him to make material and design recommendations whieh often conflict with qualities that marketing would like to build into the product. Production. The production of&cer is interested in keeping down manufacturing costs. But manufacturing economies are achieved in ways often incompatible with the goal of high customer satisfaction. Inventory Management. The executive responsible for inventory management wants to keep down inventory costs. He is typically more concerned with holding down carrying costs than with the less tangible costs of stockout. Finance. The financial officer likes to keep a tight rein on company expenditures and wants to see profit on each transaction. This often conflicts with the need to take initial losses in order to develop loyal customers. Accounting. The accountant's natural interest in keeping down the costs of the company's reporting operation usually leads him to resent nonstandard marketing transaetions and to resist requests by the marketing department for a multitude of sales and cost analyses. Credit. The credit officer looks on the bad debt as a blot on his record. To minimize credit losses, he tends to set higher standards for customer credit than seem reasonable to the salesman who is working so hard to find customers. In view of this list, it is no wonder that many company officers resent the marketing concept. Marketing, in trying to mobilize the company's resources to develop customer satisfaction, often causes other departments to do a poorer job in their terms. Requests and pressures by the marketing department can increase product design and material purchasing costs, disrupt production schedules, increase accounting paper costs, and create budget headaches. In some cases the hostility against the marketing concept erupts in costly power struggles and inconsistent departmental policies and actions. Unfortunately, it takes more than good intentions and communication among executives to resolve the basic conflicts. Good executive relations are essential, but the issues nevertheless remain real.^ As long as each department is judged not by overall company contributions but by standards * See, for example, John Deardcn, "The Case of the Disputing Divisions" (i'roblems in Review), HBR MayJune 1964, p. 158.

72

HBR Nov.-Dec. 1965 EXHIBIT I. A SUMMARY OF ORGANIZATIONAL CONFLICTS BETWEEN OTHER DEPART-

MENTS AND MARKETING (Jll'iiT

•,.,,,,,

,,.„„

1 oni; d(>.inn le:id l i m e i u i u t i o n . i l ti.iturc"11'lv iiiodi'ls u ilh sliiiid.ird CDinpiinents

Short desifin le.ul time ."^.iles IV.iHires Miin> in(id(.
Sl.iiid.ird p.'iils 1 (.ijMomie lot .si/is I'lirehcisiiii; tit inlji'(|ii('iit iiiter\.il.>i

Noiist.ijidiird p.irts Ou.'ilitv cjf m.iteri.il 1 :ir)ie lot si/i'S to iivoid stticktmts himiedi.iti' [lurth-isini; for eu^toiniT nfcds

i'loiliictioii

1(111)4 urdi r li .id liinrs .iiid Jiilli'.\ih]e produLti'in st lii-iluK's 1 iin}; riiii<. u i t l i t i w mmlels \ o model i htinHes St.ind.ud orders l.iise ol' (,ilirii.' Lontriil

Short ordei li';id tiiiii's .ind iU'.\ibli: sclu'ilulin}: to iiuvt emerKencv orders Short runs »ith m.niv mtidels Jrequcnt iiiiulel L'h.iii.m'S Custom ortlers Aesthetic ;i]ipe:ircUH'e 1 i^ht quiiiity miilvol

liivenrury

1 .'i.si iiio\iii>; ill ins, n:irr>j» pi'oduct litiu 1 I'oiiDiniL ll \ i N 111 stoeli

liio.'id praduiT line 1 ;ir^i: le\els o{ .stock

Strict riituiiiiile'' liii s p e n d i n g ll.iril .111(1 l.ist huduets

Intuitive .iri^iinieiits ltir ipendin); i'lexibli' hudt-'cts to meet cliiiimini; needs J'HLini; iii further m.irket de\i.'lt'pini'nt

I.nKMRvri,.;^

mi; i.i.snig

M.iii.m< iiicnt I in,ini.i

1*1 i f i i i u III t o \ I r LOsts

,\<.(.(iuiitiiiK

SI:I)KI:IIII I v j i i s i u t i d n s

Spi'cicil terms :iiul di.scDunts Al.-iii; li'ports

( ridil

I ull lin.iiKl.d disc lostins hy cnstoriu-rs I 'iU e u d i t ri>>l.s

Minimum cn-dit lA.-imin.itiijji of ciisloriicrs .Medium cn-dit ri-.Ks

/(jiiL^h (ii'dir tc rms un prm e d i i i v j

^•'.1S^ Clfdil tiMlllh l';i.s> fiilli'ilioii p i o f f d u r t s

related to the efficient performance of its own tasks, it has a real interest in adhering to those standards.

Implications This suggests that toi) management should reduce its emphasis on departmental efficiency (narrowly conceived) and increase its emphasis on the development of interdepartmental policies and practices designed to advance overall company interests. Each recurrent source of interdepartmental conflict should be examined objectively in terms of company interests, not the respective departmental interests. The ultimate standard is neither eost control nor customer satisfaction at any price. Just as production, engineering, finance, and the other departments should show more concern for keeping and cultivating the customer, marketing has to show more restraint in interrupting production schedules and multiplying product design and material costs. (Perhaps it might help if mar-

keting's profit contribution were charged with some of the extra costs its actions create for other departments.) It is possible to spend too much in the competitive battle for customers. The marketing concept is not a philosophy of sales maximization, but a philosophy of long-run profit maximization based on an appreciation that the central problem of contemporary business is the winning of customers. Its principal tenet is that the battle is won by meeting customer needs — at a profit. What ts essential in the marketing concept is that customer logic should permeate the various parts of the company; and the corollary is that some mechanism is needed to coordinate the various customer-impinging company operations. But just what form this mechanism should take is another question — a question raised by the marketing concept but not answered by it. Giving the power to the marketing department is not necessarily the best or only way to achieve the needed coordination.