Unit 5: MARKETING ORGANIZATION Organization is defined as a group of people working together to achieve common goals and objectives of the business. Marketing organization provides a vehicle for making decisions on products, marketing channels , physical distributions, promotions and prices . Need for the organization: to be competitive in the market where consumer is the king we need to satisfy the consumer. So a good marketing organization is required to satisfy the customers. Marketing organization is the pillar for success for many organizations and provides a framework for the following: a. Divide and fix authority among the sub ordinates b. TO locate responsibility c. To establish sales routines d. To enforce proper supervision of sales force e. To avoid repetitive duties f. To enable the top executives to devote more time for planning policy matters Factors affecting marketing organization. Factors influencing marketing org can be categorized into internal and external factors . Internal: 1. Top Management Philosophy: Organizational planning and its working is greatly influenced by philosophy which can be good or bad eg: Centralization Vs Decentralization 2. Product policy: the width of product line of an org determines its size as the product offerings becomes increasingly diverse. Eg: There could be a need to move away from straight functional approach to product group approach. 3. People: The size of the organization is not an important factor in terms of number of people but it is important with respect to human values which are critical and correct decisions regarding people cannot be made unless taking into consideration Number Qualifications Capabilities Personality Attitude Fear Suspicion Ambition Are some of the above intangible factors which affect the marketing organization? External Factors: 1. Business Environment: With regards to business environment three points are important. a. The type of environment in which the firm is operating in terms of operations and size. b. The Nature of particular requirement for success in a given business which again determines the size. c. The rate of change in industries being served which again decides on its size and working. 2. Markets: This is the factor which again affects the marketing organization i.e. one should note about its a. Size b. Scope c. Nature d. Location Based on the above aspects we need to design the size of the organization. 3. Consumer requirements and expectations: Consumers have their own set of requirements and expectations from the organization. The more varied and vivid services they expect that the usual requirements. as a marketer we need to increase the workload depending upon the consumer requirements and expectations 4. Channels of distribution: It is the type of channel of distribution which a marketing firm selects based on its size. Egg : Incase the company opts for indirect channel or channels it depends on outside sales force and hence the organization gets thinner .When the organization selects direct channel its size is increased as it has its own sales force. Types of marketing organization structures: The marketing organization of a business can be structured on any of the following basis: a. Line and staff organization b. Functional Organization c. Product oriented marketing organization d. Customer oriented marketing organization e. Geography oriented marketing organization f. Matrix form / Combined base Line and staff organization : In most business forms especially medium size the marketing job is structured around few line functions and few staff functions i.e. Major staff functions is organized into separate department and the line function is responsible for sales department. The required coordination between the line and staff function is managed by the executive at higher level. Merits: 1. Provides expert advice from specialists 2. Relives line executes of routine, specialize functions 3. Enables young sales executive to acquire expertise 4. Helps in achieving effective coordination 5. Easy to operate 6. Less Expensive Demerits: 1. Produce confusions arriving from indeterminate authority relationships 2. Curbs the authority of experts 3. Too much is expected from executives 4. Decision making is taken by top management Functional: Under the organization the departments are created on the basis of specified functions to be performed i.e. The Activities related to marketing, distribution etc Merits: 1. Division of work base on specialization 2. Relives line executives of routine and specialized functions 3. Promotes application of expert knowledge 4. Helps to increase overall efficiency Demerits: 1. Leads to complex relationships 2. Makes coordination ineffective 3. Promotes centralization 4. Lack of proper coordination 5. Delay in taking decisions 3. Product oriented marketing organization: Organizations that produce wide variety of products often organize marketing, training and promotion with respect to a product. Merits: 1. The salesmen can render better customer service as they possess good knowledge of product and may have close contacts with customers. 2. It makes individual departments responsible for the promotion of specific products. 3. It facilitates effective coordination Demerits: 1. It increases the employment of a number of managerial personal 2. Many salesmen of same enterprise attend same customer each representing a separate product which creates confusion in the minds of the customer. 3. There may be duplication of activities 4. Customer oriented marketing organization: When the departmentation of sales organization is done on customer basis it is called customer oriented marketing organization. Deparmtnetation by customer may be done in enterprise engaged in providing specialized services to different classes of customers. Merits: 1. It takes into account needs of each class of customers. 2. It provides specialization among the enterprise staff Demerits: 1. It makes coordination difficult 2. It may lead to under utilization of resources in same department 3. There may be duplication of activities 4. These types of sales organizations are not suitable for small enterprises. 5.Geography/Territory: In a territory oriented marketing organization , the responsibilities for marketing of various products rests almost entirely with line executives .The territory managers are given varying nomenclatures like depot manager, district manager, area manager, zonal manager , divisional manager etc. Merits: 1. It leads to economy in terms of times and money 2. It helps in taking knowledge of local customers 3. It helps in effective control Demerits: 1. It requires employment of number of managerial personnel. 2. It dilutes control from head quarters Matrix: There are some business firms that incorporate in marketing organization combining all the above. Usually such firms are multi Product, multi market firms. At the head office level they have number of staff departments to take care of each specialized functions of marketing. MARKETING CONTROL: Marketing control means monitoring, realigning the marketing efforts. It implies adaption of plans, laying down the standards, grids, review and analysis of performance. Management control is a natural sequential process to marketing planning, organizing and executing. Any management which is sensitive to market will be benefited by a system of marketing control. Benefits of control: Puts a unit on the progress path Locates responsibilities for deeds ( sub ordinates) Keeps space with environmental changes It observes organizational complexities It brings about realistic reformulation of plans. Role and scope of marketing control: 1. Marketing control is a part of management control 2. Helps to achieve performance 3. Helps in controlling wasteful expenditure 4. Helps in maximizing sales force productivity 5. Helps in directing the company to pursue best business opportunities 6. Helps in motivating sales force 7. Detection of deviations in performance 8. Assisting plan reformations Types of marketing control: There are four types of controls in most successful marketing firms. These controls have different objectives and tools. Each of these controls exists in different levels in management. a. Annual Plan control b. Profitability control c. Efficiency control d. Strategic control Annual plan control: the purpose of annual plan control is to ensure that the company achieves sales, profit and other goals established in its annual plan. The four steps involved in annual in APC are: a. Setting monthly and quarterly goals b. Monitoring its performance in market place c. Identify the causes of serious performance deviations d. Corrective actions to close the gaps between goals and performance that can be understood through a control process What do we want What is Why is it What should we to achieve happening? happening? do about it? Goal Setting Performance Performance Diagnosis Corrective Act Measurement Manager uses four tools to check plan performance. a. Sales analysis b. Market share analysis c. Market expense to sales analysis – which can be measured through 1. Advertising to sales ratio 2. Sales promotion to sales ratio 3. Sales force cost to sales ratio 4. Distribution expense to sales ratio 5. Sales administration to sales ratio d. Financial analysis – with regards to return on assets forms financial leverage e. Customer attitude tracking i. Customer surveys ii. Customer panels ( company uses customer panel who agree to communicate their attitudes periodically through questionnaire or over telephone ) iii. Feedback and suggestion system Profitability control: It allows the company to monitor its sales, profits and expenditure. It demonstrates the relative profit earning capacity of the companies’ different products and consumer goods. Companies are frequently surprised to find that small percentage of the product and customers contribute to large percentage of the profits. With increasing competition firms are finding their profit margins reducing and the companies looking for profit making strategy and increasing the markets, territories which involve three steps: 1. Identify functional expenses e.g.: salaries, rent , travelling , advertising Calculate the gross profit and net profit contribution to the firms profit by deducting the above expenses and subtracting the total sales. 2. Assign the functional expenses to marketing entities. The next step is to assign these functional expenses to marketing entities. This becomes important when the expenses are incurred on non marketing entities. e.g. Assume if the western region office of the firm there is an accountant, secretary, peon who does not perform any marketing activity, their salaries account should not be considered as a part of expense to marketing entity. Also if the rent is shared by two different corporations it has to be subtracted and these steps clearly identifies the marketing expenses Vs Non Marketing expenses. 3. Prepare Profit and loss statement for each marketing entity. Based on the above data the marketer can prepare profit and loss statement for each marketing activity just for selling activity e.g. a. Total cost of selling: i. No. of sales calls made in the period. ii. No. of units sold. iii. Expenses per sold. iv. Expenses per call. b. Total sales revenue c. Cost of goods sold d. Gross profit contribution(fixed cost vs variable cost,contribution=sales-vcost) Efficiency Control: This mechanism helps the marketer determine if there are better ways of performing a task. They exist in determine a. Sales force efficiency Average number of sales calls/ person/ day. Average number of sales calls/ sales person/ customer group. Average time spent per customer. Average time spent on travel. Return in time invested on different customer groups. Number of new customers added Number of customers lost Volume of potential business lost due to competition Average cost per sales call. b. Advertising efficiency indicator. Advertising cost per 1000- target customers reached by the media Advertising recall as a percent of total target market reached by the campaign Awareness of brand Number of enquiries generated by the advertisement Cost per enquiry The last two are relevant to direct marketing and industrial product advertising c. Distribution efficiency Market reach of channel member as measured by members in terms of number of customers Sales extraction from the channel members Cost per channel member Strategic Control: This system helps management to determine the fit between the firms marketing and external environment. They specially help in resolving the issues of obsolescence in strategies, structure, policies, programs and systems. There are two tools that help management a. Customer relationship barometer which aims to access how well the customer is integrated to the org. It provides inputs for the following parameters i. Core value of the organization ii. Organizational policies iii. Technology iv. Strategy of Customer retention b. Marketing Audit: Audit is a continuous comprehensive and systematic periodic examination of company’s business unit. It critically evaluates marketing activities of the firm and the direction of its growth. Marketing audit is concerned with long term business interest and challenges rather than short term achievements. The marketing audit is a fundamental part of marketing planning process. It is conducted not only at the beginning of the process but also at a series of points during the implementation of plan. Features of marketing auditing: 1. Comprehensive: The term marketing audit should be reserved for comprehensive audit covering companies marketing environment, objectives, strategies etc. It should cover horizontal and vertical audit. Horizontal audits study overall marketing performance with emphasis on inter relationship variables. Vertical audit is an in-depth analysis of one aspect of firms marketing strategy like product planning which involves a thorough audit of data protection within a particular function or department 2. Systematic: marketing audit will normally increase to the extent that it follows a sequence of diagnostic steps covering internal and external marketing system. 3. Independent : A marketing audit can be conducted in 6 ways : Self Audit Audit from across Audit from above Company auditing office Company task force audit Out sider audit 4. Periodic: Marketing audits are initiated only after sales have come down sharply, sales force morale has fallen and other problems have occurred in the company. Whereas , the irony is that the companies have been thrown into crisis because they failed to review their marketing operations during good times. So, a periodic marketing audit promises the benefits for the companies that are in good health as well as the companies that are in trouble. This has to be done at periodic intervals.