225 Study Unit 9 Marketing Implementation and Control Contents Page Introduction 226 A. Strategic Orientation of Business 227 Production Orientation 227 Product Orientation 228 Sales Orientation 229 Marketing Orientation 230 B. Organisation for Marketing 231 Alternative Organisational Structures 231 Organisation Structures for Marketing 234 Organisational Structures in SMEs 238 C. Coordination of Marketing with other Management Functions 240 Marketing and Production 241 Marketing and Finance 242 Marketing and Human Resources 243 Relations with Other Departments 244 D.
Elements of an Effective Marketing Organisation 245 Importance of the Marketing Function 245 Internal Marketing – Building Customer Orientation and Marketing Ethos 246 Management Style 248 The Contribution of Total Quality Management 251 Relationship Marketing 251 Marketing Education 253 E. Control 255 The Control Process 256 Critical Success Factors 257 Control Criteria and Mechanisms 259 Answers to Review Questions 265 © ABE and RRC 226 Marketing Implementation and Control INTRODUCTION Effective marketing requires the effective implementation of marketing plans. In this unit we shall consider the conditions which should apply in order to facilitate this. We will also briefly look at the importance of marketing education.
The conditions which impact on implementation are those in the environment within which the plans are carried out. Environmental factors, as we have seen, may be divided into internal and external. The external factors will have been taken into account, as far as can be realistically assessed and forecast, in the formulation of the marketing plans, and any changes are likely to result in changes to the plans. Further, they are essentially uncontrollable.
It is, therefore, the internal factors which bring most pressure to bear upon successful implementation – and internal factors are controllable. McKinsey's Seven Ss model is a very good way of representing the internal factors which are essential in marketing and which can affect the successful implementation of plans. This model (Figure 9.1) shows the links which, when present in a balanced format, will allow a marketing plan to be developed and will aid in its implementation.1: McKinsey's Seven Ss Framework Structure Strategy Systems Shared values Skills Style Staff The key elements shown here represent the main areas for study in this unit – the management and structures of the organisation through which staff work in the planning and delivery of marketing. Note, though, that whilst we shall consider the different aspects separately here, there needs to be integration among them through support for the strategies and objectives at both the corporate and functional, marketing levels.
© ABE and RRC Marketing Implementation and Control 227 A. STRATEGIC ORIENTATION OF BUSINESS The structures and management of an organisation are largely a reflection of the strategic approach the organisation adopts towards doing business. Not every organisation adopts a marketing stance – there are various different methods of conducting business – and the success of the approach will depend upon a number of factors, including the type of product and the type of market. It is generally held that there are four strategic business concepts or types of strategic business orientation: Production orientation Product orientation Sales orientation Marketing orientation.
Production Orientation A company following this concept is operating on the idea that the more you can produce the more you can sell. Managers assume that customers are only interested in the availability of products and of low prices and that marketing is not necessary. This may or may not be true. Consider the following examples: A fashion company making exclusive dresses, selling on average at £3,000, produces and sells 12 dresses each month.
If they were to double their production rate it is unlikely that they could retain their "exclusive" appeal. This would mean prices would have to be reduced and revenue would fall – not to mention the increased costs in materials and labour needed to make more dresses. A company making electronic switching gear, on a batch production basis, produces 4,000 units each four-week period. The units are sold at £3.00 each and are recognised as being "superior" products to those of the competition, which sell at £2.
The competitor sells more units than the company does. If the company were able to increase production and reduce the price slightly they could possibly sell more units and increase their revenue. Of course, calculations need to be made taking into account all costs incurred – for example: Current Potential Level of production 4,000 6,000 Sales @ £3.75 £16,500 Fixed costs £2,000 £2,000 Variable costs (£0.25 per unit) £1,000 £1,500 Profit (per four weeks) £9,000 £13,000 Assuming that new production plant cost £4,000, and that all units produced were sold, it would take only one month's production to recover the costs. After that the company would be making even more money than they are at present.
Even allowing for a price match to that of the competitor this would seem an advantageous move for this company. However, let us take this one step further with another example: © ABE and RRC 228 Marketing Implementation and Control Imagine a company that makes a small electrical product which can be used in photography. After introducing a small pilot batch, it appears that sales potential for this product is promising. The company has the production capacity to produce 3,000 units per month.
Managers fix a target production level of 12,000, which will take four months to complete, and production begins. Once the first monthly batch has been completed selling activity takes place and everyone stands back waiting for the orders, but few orders are taken. An investigation is begun after eight weeks as to why the product is not selling – by which time the company has produced a total of 6,000 units. The investigations are completed by the end of Week 10 (7,500 units produced).
The company discovers, by asking its current customers, that a new digital camera has been launched which has made their product obsolete almost overnight. The company are left holding all the stock, and now have to accept the losses or find other markets for the product which, in turn, will involve them in even more costs for research, marketing and other activities. In this last example the "production concept" has failed miserably. To simply mass produce any product on the outcome of meagre research is foolish in the extreme.
The company might well find a market for their product but it would be a "niche" market rather than a mass market because of the changes in technology. Producing in smaller batches appropriate to the level of demand makes much more sense. Using these three examples we can see that there are times when a production orientation will work and times when it will not. This concept works when: the market is low cost and high turnover there is high demand for the product buyers are sensitive to price the organisation has the capacity to mass produce, and the marginal production costs incurred are low.
However, it does not work in the opposite circumstances. Companies following a production orientation gain from economies of scale and reduced marketing and production costs, and are likely to have a greater market share and strength over the competition. However, they will not have any degree of "exclusive" appeal or close contact with customer needs, and will not receive high levels of customer loyalty. Product Orientation This type of orientation is present when managers in the company believe that customers will recognise a good product and buy it when it is made available.
The managers have such a firm belief in the quality and appeal of their product that they cannot accept that customers may not readily see the same advantages and they fail to undertake any marketing or even carry out essential research before beginning production. Consequently the managers are dumbfounded when customers are not beating a path to their door to buy up the existing stocks. Perhaps one of the most quoted examples of this type of orientation concerns the Sinclair C5, a small motorised vehicle which was introduced into the UK by Clive Sinclair. Sinclair thought he had an excellent product which would help alleviate pollution and lower traffic levels on the roads of Britain.
He did carry out product tests – but they were in a gymnasium. When the product was finally launched it proved to be dangerous and frightening when users were faced with large trucks © ABE and RRC Marketing Implementation and Control 229 and other vehicles using the public roads. Sinclair had underestimated the fact that his target audience liked their cars and that they were not going to buy something which, in their opinion, was inferior to what they already had. Despite his belief in it, the product failed completely.
Although the C5 is used to demonstrate how product belief by managers can be dangerous it is not the only example in existence. Currently there are many organisations who have excellent products of all kinds but, because they do not market them or tell people about them, they are not selling. We must not overlook the fact that sometimes a good product does have a good future and that the belief of a manager can save the product from disappearing. Innovative products spring from creative minds and sometimes creative minds can be far ahead of the majority of the public.
It is only after a period of time, and education, that people will appreciate the benefits and begin to buy. The product may then take off and become very successful. If every new product that did not sell was dropped immediately we would never move forward, but to simply go ahead and produce a product because its creator believes in it is dangerous. Companies following a product orientation can only be successful if: There is a current demand for the product There is a potential demand for the product Products are given full marketing support Products meet customer requirements.
Thus it is obvious that product orientation must, if it is to be successful, be adopted only after research has been carried out. Sales Orientation Orientation on selling means that the company sells what it makes – it does not make what it can sell. Managers believe that buyers have to be "coaxed" into buying by aggressive techniques. This will involve heavy activity on the selling and promotional aspects with perhaps discounted prices being used and incentives to buy being offered.
The company is more interested in "moving stock" than in stocking the right goods. Companies selling goods very similar to those of the competition are often following this type of orientation as they can see no other way to get customers. Consider the following situation. In a medium-sized town there are four outlets selling carpets.
They are all selling very similar products, many actually coming from the same manufacturer. The managers think that the only way they can get customers in is to "attract them". So: One outlet offers 10% reduction (a reduction in profit) Another offers interest free credit (charges from the finance company) Another offers free fitting (labour costs incurred) The last offers extended guarantees (insurance costs for potential replacements). In each case the company is using money to attract money and each gain will only be short term.
It is likely that they will have to continue on this round of competitive activity just to stay in the market. If one of them were to break the cycle and research customer requirements they might well find that customers are prepared to pay a slightly higher price for good quality advice on © ABE and RRC 230 Marketing Implementation and Control carpet buying – something which would not cost too much money to provide but which would give the outlet a competitive edge. Sales orientation usually implies the existence of an aggressive sales-force and this can bring a company into disrepute.