Burning Ideas

Marketing strategy must reflect a coordinated effort of product performance and two-way communication. Within the communication process must be integration of marketing efforts and messages. Further, what is communicated about the product must be accurate, or the position won’t be supported. How can a company make certain that such integration occurs?
Several factors can encourage the appropriate level of integration within the marketing program. Clear strategic decisions, personnel stability, compensation systems that support the marketing strategy, and formal communication and organizational structures that encourage cross-functional interaction are among the more important.

Clear Strategic Decisions
In one study that examined mismatches between marketing and sales strategies, an issue that surfaced was a lack of decisiveness on the part of senior marketing executives. For example, two sales managers said that, although formal strategy indicated that a product would be on the market for the next few years, informal signals from marketing management indicated that the product might be withdrawn. As a result, the sales force was not putting any effort into those products. Sales and marketing strategies are neither immediate nor irreversible; if management waffles on strategic decisions, then marketing and sales investments could be wasted and relationships (both internal and external) damaged.

Personnel Stability
Relationships take time to build. As mentioned earlier, internal relationships go through the same stages as external relationships. Moving people rapidly through the organization can mean that relationships between areas of the marketing department are never built. One manager in one study reported three marketing executives in five years; one salesperson told us he had three different sales managers in one year! While each successive manager had to try to quickly build rapport with each subordinate and superior, the whole sales team suffered because new relationships had to be built between each new manager and all of the other functional areas. When rapid personnel turnover occurs, the relationship cannot get past the exploration stage.

Compensation
A key issue that creates ill will is the fact that different groups within marketing compete for the same budget. Fights over budgets can create bad feelings and damage relationships. Budgets, though, are not the only “money” issue that can damage or enhance relationships. Many companies are evaluating and testing compensation plans that encourage teamwork. For example, marketing managers may find that their pay contains incentives based on sales or contribution margins. When that is the case, they are incented to work more closely with the sales force. Morehead Supply is one company that pays quarterly bonuses to all marketing personnel if sales targets are achieved. Unlike profit sharing plans that the company also uses, these bonuses are specifically designed to encourage teamwork within the marketing–sales interface. Compensation can also help turn budgeting into teamwork. By using a joint compensation system, all of those competing for budget end up being paid based on the same performance. As a result, they are more determined than ever to see that the budget results in effective marketing. The issue, though, also affects how areas such as manufacturing, engineering, and other functional area bonuses are paid. When those areas are also compensated for customer satisfaction and teamwork, then those outcomes are more likely.

Organizational Structure
Compensation plans, though, should be supported by the appropriate organizational structure. The structure of the organization can enhance or inhibit the ability to create internal partnerships. In the next section, we discuss different types of organizational structures, as well as the different groups within marketing between whom partnerships are created.

Market-driven companies, or those with a strong market orientation, are superior in two important ways. First, market-driven companies do a better job of market sensing, or anticipating market requirements ahead of competition. Market sensing is the gathering of information from the market. Market research, is one form of market sensing, but market sensing can be achieved through listening to the sales force, observing competition at trade shows, and developing stronger ties with innovative customers and suppliers.

Similarly, the second important difference is that market-driven companies are able to develop stronger relationships with their customers and their channels of distribution. Stronger relationships include more direct lines of communication; instead of all communication going between a purchasing agent and a salesperson, interaction among engineers in all three firms (customer, manufacturer, and supplier) can occur. Stronger relationships can result in greater attention to the customer throughout the firm.
Research indicates several outcomes of a market orientation. Increased profit is one outcome, although increased market share does not necessarily follow a market orientation. That higher profit is due to the better pricing and product development that occur because of market orientation. In fact, in studies conducted in Japan, India, Australia, the United States, and Hong Kong, market orientation was found to influence performance.

A market orientation influences performance more in economies or industries that are rapidly changing. There is some evidence from transitional economies, such as Ghana or China, that firms with market orientations may last longer and respond better to dynamic economies. In stable markets, market orientation seems to be less important, but there are few markets that stay stable. As competition grows more fierce, market orientation becomes essential.
Companies that want to adopt a market orientation must have adequate spanning processes, processes that link internal processes with the customer. New product development is one such spanning process, as it links market requirements with internal processes such as manufacturing. All companies have new product development processes; the difference is how the process incorporates the voice of the customer. For internal processes to contribute to the value delivered by the value chain, there must be adequate spanning processes.

One’s objective in this process is to define good market segments. Good markets are identifiable, accessible, and substantial. These criteria work well to discipline the tasks of gauging opportunities and directing marketing effort. Identifiable members of market segments can be enumerated and evaluated. Imagine a cardiologist who developed a healthy heart program for overworked and overweight executives. Is there a practical way to identify such individuals? The cardiologist might advertise her service and/or invite prospects to a power breakfast seminar or a free risk screening. Prospects might not be so willing to identify themselves, however, if the service were for coping with chemical addictions.

Accessibility means that members of a market can be reached or impacted by some directed marketing activity. American Express knew that to get companies to adopt its corporate card, an American Express sales rep had to get some time with the prospect firm’s chief financial officer. Years of advertising, direct mail, and attempted sales calls still left 400 attractive but inaccessible accounts.
The ability to approach or address known prospective customers is necessary but not sufficient to make an opportunity. That market must be substantial, promising sufficient business to justify the efforts to serve it. Customer lifetime value is a useful criterion in an assessment of a target market. Unfortunately, a firm’s history with its current customers may provide very little basis for estimating the LTV of customers from entirely new markets.