Frederick E Webster Jr. Handbook of Marketing. Editor: Barton A Weitz & Robin Wensley. Sage Publication. 2002.
The role of marketing and the firm has been evolving for almost a century, ever since marketing was first recognized as a distinct activity. Putting marketing within the context of the firm is a fairly recent development from an historical perspective. Prior to that, it was regarded as a socioeconomic process taking place within markets, not firms. It was identified as a distinct management function in the 1920s, and since then has experienced continued elaboration as both management practice and academic discipline. Most recently, the idea of marketing as a separate management function is being challenged and modified dramatically by a new conceptualization of marketing as a set of organizational processes that pervades the whole firm, and is not the sole responsibility of marketing managers. Our field is very much a field in intellectual and practical transition, as evidenced by the changing role of marketing in the firm (Day & Montgomery, 1999).
Marketing was recognized as a set of human activities long before it was identified with the firm. Obviously, people had been doing many of the things we call ‘marketing’ long before it was given a name. Even before the earliest commercial traders, who might be considered to be the first marketing firms (most of the great voyages of discovery were launched in search for goods to be traded), people were undoubtedly exchanging things such as one type of food, tool, or clothing for another. For most of history, marketing was thought of as a societal, economic process through which goods and services were exchanged between buyers and sellers, activities that even preceded the existence of money and a market economy.
Competing Views of the Role of Marketing
There have been many conceptualizations of marketing. These different viewpoints prove to be useful in understanding the evolution of marketing as a management and business activity within the firm and as a relationship between buying and selling firms.
There has been a kind of ‘border war’ among competing interests in both the academic and business worlds about the proper boundaries for the field. In both practice and theory there has been an on-going struggle to define marketing as an academic intellectual domain on the one hand, and as a management function with prescribed scope of organizational responsibility and authority on the other. On the academic side, marketing as a discipline, which arguably has its roots in economics, overlaps with many other fields including psychology, sociology, anthropology, political science, organization theory, strategic management, and quality management (as part of operations).
For a time in the 1960s and 1970s, there was a trend in academia to define marketing in terms of its analytical tools and techniques, especially mathematical and statistical modeling and behavioral theory. Today, it appears that the debate has been resolved in favor of those who argue, following the logic of philosopher of science Karl Popper (1963), that marketing is defined by the problems it studies and attempts to resolve rather than its techniques or its subject matter (Bagozzi, 1975; Day & Montgomery, 1999). The subject matter of marketing is markets, but that doesn’t define it as a field of study. Marketing is not alone among the behavioral disciplines in using markets as its subject matter. The problems that are studied in marketing must be unique for it to be a distinct scientific discipline. Defining what those problems are is central to the challenge of defining marketing as both discipline and practice, and to understanding its role in the firm.
Conflict with Sales and Other Functions
Within the firm, marketing managers have found themselves in turf battles with other management functions including sales, research and development, engineering, strategic (long-range) planning, purchasing, logistics, and operations. The problem of demarcating marketing from sales has perhaps been the most persistent and remains largely unresolved. On the one hand, marketing in the firm developed essentially within the sales function, to provide market analysis and communications support for the sales force. On the other hand, the development of the marketing concept (Drucker, 1954) was based on the fundamental premise that marketing is much more than selling. According to the integrated view of marketing, selling (and more generally promotion) is just one of several marketing functions.
If marketing is more than selling, it is also less than all of the management functions taken together. Several authors have asserted that ‘marketing is the whole firm seen from the customer’s point of view’ (Drucker, 1954). McKenna (1991) asserted that ‘marketing is everything.’ Webster (1992) agreed with several business executives who had argued that ‘marketing is too important to be left to the marketing people.’ Haeckel (1999) says that marketing isn’t a function of business; it is the function of business.
While all of these authors are striving to assert, correctly, the fundamental importance of customer orientation to the success of the firm, they do not help to clarify the issue of marketing’s intellectual domain and practical scope. In fact, if it can be agreed that the fundamental purpose of the firm is to create satisfied customers, as proposed by the marketing concept as a management philosophy (Borch, 1959; Drucker, 1954; Levitt, 1960; McKitterick, 1957), then it follows logically that marketing as a management function cannot be uniquely and solely responsible to and for the customer. Customer orientation does not, by itself, define the role of marketing within the firm.
Marketing exists both within the firm and outside it. It is both a set of organizational management activities and a set of institutional actors and functions within the marketplace, external to the firm, in which the firm participates. Marketing channels, or vertical market structures, consist of multiple organizational entities, each firm engaged in marketing management activities, interacting with one another in a set of market-based processes. Complex inter-organizational networks, such as strategic alliances, are increasingly responsible for marketing activities. The role of marketing and the firm is very complex, a fact reflected in the many rather distinct definitions of marketing. We will now review some of these definitions as they relate to the role of marketing and the firm.
Marketing as Exchange
Exchange as a human activity is as basic as any social process and it is certainly not surprising that marketing scholars are attracted to a definition of their field as exchange. It is fundamental to assert that ‘exchange forms the core phenomenon for study in marketing’ and that marketing is ‘a general function of universal applicability. It is the discipline of exchange behavior, and it deals with problems related to this behavior’ (Bagozzi, 1975: 32, 39). This definition is more than tautological, as exchange involves many specific problems related to processes for negotiation, determining value, managing transactions, etc. This definitional point of view was implicit in the attempts of several scholars in the 1970s to broaden the concept of marketing beyond the firm to include all exchanges of value between social actors of all kinds (Kotler & Levy, 1969; Kotler, 1972).
The so-called ‘resource-based’ or ‘constituency-based’ theory of the firm looks at the firm as a set of negotiated exchanges with multiple constituencies including employees, suppliers, financiers, customers, the community in which it operates, and the public-at-large (Anderson, 1982; Grant, 1991; Pfeffer & Salancik, 1978). The theory recognizes that the firm depends upon resources such as cash, labor, materials, supplies, and community support, each controlled by a different set of people and institutions. The relative influence of each upon the firm is a function of the power that constituency has as a result of its control of these resources. (The marketing concept argues that customers should have the most power. It is normative, not descriptive.) Since each member of each of these constituencies is involved in some exchange of value with the firm, it can be argued that each of these exchanges is within the intellectual domain of the field of marketing.
Most scholars would agree that this goes too far (Arndt, 1978; Luck, 1969, 1974). A traditional point of view would argue that only exchanges with customers fall within the domain of marketing. Some would use the broadened concept of marketing as exchange to argue that each management function and organizational sub-unit has its own ‘internal’ customers within firm who use its services. Once again, traditionalists would counter that the only true customer is one who pays the firm for the goods and services that it produces for exchange in the open marketplace. (A dictionary definition of a customer is ‘a patron, shopper, or buyer.’) Simply put, a reasonable conclusion is that marketing exchanges must take place within markets. Not all exchanges are marketing exchanges because not all exchange partners are customers. Customers are the essence of marketing.
Marketing as Demand Stimulation
A competing and widely held alternative definition of marketing is that it is the stimulation of demand for the firm’s output or, more generally, its ‘productive resources’ (Davis, 1961). This viewpoint gained broad support as the practice of modern marketing developed in the late nineteenth and early twentieth centuries in Britain, the US, and Germany. The important context for this development was the rapid increase in mass production and the concomitant appearance of intense competition and excess manufacturing capacity (Fullerton, 1988; Tedlow, 1990). Aggressive personal selling and advertising were in full bloom by the early 1900s as firms faced the need to create new customers for their products, especially innovations such as the mechanical harvester, the typewriter, the automobile, and a plethora of health and beauty aids, packaged foods, and household cleansers (Rowsome, 1959).
Firms began to differentiate their products, hoping to do a better job than their competitors of responding to and satisfying customers’ needs (Shaw, 1916). The practice of, if not the term, market segmentation was well known at the turn of the twentieth century (Shaw, 1916: 106; Fullerton, 1988: 113). While Henry Ford is celebrated for his vision for mass production and design of a standard product for the working class (the Model T), he also purchased the Lincoln Motor Company in order to offer a luxury car. He used advertising and publicity of all kinds, including racing, to stimulate demand for Ford products (Ford, 1922; Fullerton, 1988: 118).
Clearly, firm managers a century ago understood the importance of marketing as demand stimulation, although they did not often call it marketing. Selling, advertising, and other forms of promotion (the terms that were used) were essentially synonymous with ‘marketing’ in the common understanding. Business people were focused on the problem of stimulating demand and creating preference for their products, and on pricing and distribution as part of the demand stimulation process. Marketing presented the company and its products to the customer. Communications were one-way, from producer to consumer. Within the firm, marketing was synonymous with selling.
Marketing as Creating and Managing Markets
While business people were focused on the problems they faced, academic theorists were trying to define marketing as a field of study and a distinct academic discipline. The first marketing management case book to be used as a text was published in 1920 (Copeland, 1920), but it did not offer an analytical framework for decision making.
Early academic definitions of marketing grew out of an attempt to understand how markets actually worked in moving the products of farm, forest, sea, mine, and factory from the producer to the consumer. Thus, many early scholars attempted to understand the differences among commodities in terms of their unique market structures and processes (Breyer, 1931). There was a heavy emphasis on the functions (McGarry, 1950; Weld, 1917) and institutions (Breyer, 1934; Duddy & Revzan, 1947) involved in the marketing process as marketing scholars attempted to discern the fundamental principles of marketing (Ivey, 1921; Maynard et al., 1927). On the other hand, there was relatively little attention paid to the management of those institutions (Shaw, 1916; Copeland, 1920).
Nonetheless, the functional approach to marketing in particular contained the intellectual root stock for the development of marketing management as a distinct approach to the discipline, and for defining the role of marketing within the firm. Obviously, marketing functions had to be managed. In 1948, after due study and consideration, the Definitions Committee of the American Marketing Association (AMA) offered the first ‘official’ definition of marketing: ‘The performance of business activities directed toward, and incident to, the flow of goods and services from producer to consumer or user’ (American Marketing Association, 1948: 210). A stronger interest in marketing theory also developed at this time (Alderson & Cox, 1948).
While the AMA statement is not a clear definition of the role of marketing within the firm, it blends the functional and institutional approaches. It defines marketing as a business activity rather than an economic function performed by markets and anonymous institutions. The recognition that these activities (functions and institutions) must be managed within the firm opened the door to consideration of the specific problems that marketing managers must deal with and that require analysis, planning, implementation, and control as basic management processes.
Marketing as Tactics: ‘The Four P’s’
It did not take long for an explicitly managerial approach to the study of marketing and its role within the firm to develop. Several textbooks incorporating a managerial approach appeared in the 1950s and 1960s (Alderson, 1957; Davis, 1961; Howard, 1957; Kotler, 1967; McCarthy, 1960). The subtitles of these texts demonstrate clearly where the field was going: ‘Marketing Behavior and Executive Action’ (Alderson); ‘Analysis and Planning’ (Howard); ‘Analysis, Planning, and Control’ (Kotler), and ‘A Managerial Approach’ (McCarthy).
Analysis of these texts shows quite clearly that the authors were still in the demand stimulation business, with a focus on the problem-solving required in each of four specific areas in order to develop an optimum offering of products, prices, promotion, and place (distribution), immortalized as ‘the four P’s’ by Professor McCarthy’s treatment.
The early approaches to marketing management as a distinct discipline were based on the fundamental microeconomic theory of the firm (also called ‘price theory’) and the assumed focus on profit maximization as the ultimate objective of all firm decision making (Anderson, 1982). When two famous studies of management education were published in 1959 (Gordon & Howell; Pierson) calling for a more rigorous analytical approach on the part of business schools, marketing scholars eagerly turned their attention to the application of quantitative techniques and behavioral science theory to the study of marketing problems (Webster, 1992). The new emphasis on rigorous, quantitative analysis was totally consistent with the fundamental optimization approach of microeconomic theory. Interestingly, from a constituency-based theory point of view, it implicitly gives primacy to the interests of the owner-shareholders because it emphasizes profitability as the sole decision criterion.
The marketing management approach is still the dominant paradigm underlying academic research in the field. Marketing management is treated as an optimization problem in which the dependent variables (sales revenue, market share, gross margin, return on investment, etc.) are a function of product quality, price, promotion (advertising, selling effort, price discounts, etc.), and distribution. The assumed functional form of the relationship, with few exceptions, is the classic S-shaped curve where initially increasing returns give way to decreasing returns to scale as expenditures (more generally, efforts) increase. The relationship is usually characterized by time lags, interactions among the ‘independent’ variables, and other complicating factors, making it difficult to estimate the impact of changes in any particular variable. However, the classic optimizing condition of ‘marginal cost equals marginal revenue’ persists as the objective of all analysis and managerial action.
This is the fundamental microeconomic, price theory model. The primary focus of this approach is short-term and tactical, not long-term and strategic. The time horizon in most analyses is a week, month, or quarter, seldom beyond a year (Hayes & Abernathy, 1980). In contrast to the customer orientation called for by the marketing concept, this tactical view remains product- and marketer-oriented.
Organizing the Marketing Function
Within this view of marketing function as the ‘four P’s’ of marketing tactics, there were a number of different, often competing, views as to how the marketing function should be organized within the firm. Before we return to a consideration of marketing as customer orientation and organizational culture, we will first look at marketing from the point of view of marketing organization structure. Different organizational forms imply basically different views of the role of marketing in the firm.
There has been surprisingly little solid research on the organization of the marketing function, probably reflecting the complexity of the issue, the general lack of training in the organizational theory area by academic marketing specialists, and the absence of meaningful databases across a reasonable sample of firms. Furthermore, gathering data about marketing organization is a time-consuming process, not readily amenable to traditional survey methodologies. A set of common questions in a questionnaire or interview guide are difficult to create because of the inherent complexity and ambiguity of organizational issues. Defining simple terms like ‘product manager’ or ‘applications engineer’ in words with similar meanings across a sample of respondents is very, very difficult.
The small amount of research that has been reported on the organization of the marketing function has often relied upon clinical analysis and observational data of the case study variety. For example, Workman (1993) spent many months observing and interviewing managers in a well-known computer manufacturing organization and concluded that marketing was able to play only a limited role in the new product development process. Workman has worked with others and used the insights from his field research experience to offer an integrative framework for issues of marketing organization (Workman et al., 1998). Dougherty (1992) studied interactions between marketing and research and development managers in the new product development process with special attention to their differing perceptions. She concluded that effective coordination requires developing specific organizational arrangements and routines.
Corey and Star (1971) analyzed program management in 13 companies in 11 industries to develop generalizable answers to three sets of questions:
- How do corporate managements delineate the overall enterprise by businesses?
- How are individual businesses organized? What design principles are at work?
- What coordinating mechanisms are most effective in managing resource allocations across programs?
Their analysis identified four ways in which companies segment markets, leading to four different forms of marketing organization: by product, by end-use technology, by buyer behavior, and by geography for both industrial and consumer markets (Corey & Star, 1971: 23). They found that decentralized marketing organizations were more common, not surprisingly, when markets varied greatly by geography, buyer behavior, and local or regional government regulations. They also found that the program management structures could be either ‘unilateral,’ with single managers responsible for both products and markets, or ‘bilateral’ with both a product manager and a market manager for each program, where diverse markets are served by technically related product lines, and where marketing strategy as well as applications technology varies considerably across markets (Corey & Star, 1971: 25).
It is common for authors to define alternative marketing organization forms along these lines. Product, market, and geographic forms, and combinations of them, represent broadly the options available (Weitz & Anderson, 1981). In the background lurks the never-resolved issue of the appropriate relationship between sales and marketing. Should marketing and sales be separate organizational functions? Is marketing part of sales? Is sales part of marketing?
It is not uncommon to find in one corporate structure almost all combinations of marketing organization forms. For example, a chemical firm might have a product-centered organization with managers for each distinct group of products; a market-centered organization with separate managers for several distinct end-use markets; and a geographically organized sales force. Within the product organization, there might be market specialists and within the market organization there might be product specialists. Within the sales organization, there might very well be both market and product specialists located at regional offices reflecting the industry concentration in that area. These specialists might have a dual reporting relationship to the regional sales manager and to the relevant product or market manager. When organizations become this complex, there are almost certainly major issues of efficiency, coordination, and control and noticeable difficulties in responding to changes in the competitive marketplace and in customer needs and wants. Issues of coordination and control and the resolution of organizational conflict are likely to take a significant portion of management time.
Brand management (sometimes called product management) structures, pioneered by the Procter and Gamble Company, are common in consumer packaged-goods firms and similar companies (Low & Fullerton, 1994). In recent years, however, brand management systems have undergone significant re-evaluation (Shocker et al., 1994). One of the major problems that must be addressed is the lack of coordination between brand marketing strategy and its implementation through the field sales organization. Whereas the brand manager may be focused on the nuances of product positioning and brand equity, the field sales manager may be more concerned with attaining volume objectives and using short-term price incentives for the trade to achieve those short-term results (Webster, 2000).
The wide variety of marketing organization forms found in practice reflects the basic fact that structure generally derives from strategy (Chandler, 1962) and that strategy reflects the unique circumstances of each firm in terms of market and product characteristics. Clearly, there can be no single answer to the questions ‘What is the optimal form of marketing organization?’ and ‘How should the marketing function be organized?’
Marketing as Organizational Culture
The articulation of the so-called ‘marketing concept’ in the 1950s was a seminal event in the development of the marketing field and brought the field of marketing into the center of discussions about management in general (Borch, 1959; Drucker, 1954; Levitt, 1960; McKitterick, 1957). We referred to the marketing concept earlier in order to make the point that marketing can be defined as ‘the whole business seen…from the customer’s point of view’ (Drucker, 1954: 39). The essence of Drucker’s argument can be summarized with five assertions paraphrasing his words:
- The only valid definition of business purpose is to create a customer.
- What the business thinks it is producing is not as important as what the customers think they are buying; what they consider to be ‘value’ is decisive.
- Any business has only two basic functions: marketing and innovation.
- It is not enough to entrust marketing to the sales department.
- Marketing is the whole business seen from the point of view of its final result, that is, from the customer’s point of view.
It is especially relevant to note that Drucker was talking about customer-defined value almost 50 years ago—a concept which has only reappeared in the marketing and strategy literature in the last 10 years or so. This early articulation of customer orientation as a guiding principle has once again become a central focus of the marketing field (Lehmann & Jocz, 1997). By the late 1960s some authors were using this concept to redefine the totality of marketing as a management function. Customer orientation was enlarged as a concept to become marketing orientation, and the terms were used interchangeably. For example, John Keith, the CEO of Pillsbury, wrote a famous article in which he argued that the marketing focus was the ultimate stage in corporate development from manufacturing- to sales- to marketing-orientation (Keith, 1960). He also argued that marketing, in the sense of customer focus, was the best way to insure management responsibility in a corporation grown too large to be controlled by its owners. Likewise, McKitterick (1957) stressed the ethical content of the marketing concept when he noted that it represented a basic change in management philosophy from seeing the customer as a means to the end of profit, toward the view that the customer’s welfare must be an end in itself. McKitterick’s view is founded on Kant’s ‘categorical imperative’ that no person should be viewed as a means to an end and, more generally, that one’s actions should always be capable of serving as the basis for universal law that one would be willing to have applied to oneself.
The fundamental mandate of the marketing concept was simple: To put the customer’s interests first, always. It is interesting to note that the moral philosopher Adam Smith, in his famous The Wealth of Nations (1776) wrote that: ‘Consumption is the sole end and purpose of production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer.’ (Vol. II, Book IV, Ch. 8.) Today, Smith’s ‘invisible hand’ of the marketplace is usually invoked as the mechanism by which producers’ pursuit of self-interest (profits) is justified because it maximizes social welfare. However, Smith clearly gave primacy to the consumer’s self-interest as he approached the question of how to create the greatest good for the greatest number. Consumer orientation for the firm is a very old idea. However, the articulation of the marketing concept in the 1950s brought it into the management literature.
There followed a period when researchers (e.g., Felton, 1995, Hise, 1965; Houston, 1986; McNamara, 1972; Webster, 1981) examined whether firms had actually adopted the marketing concept. Results were mixed. McNamara found that the marketing concept had been more readily adopted by consumer (vs. industrial) products companies, and by larger (vs. small and medium-sized) companies. He also concluded that Keith’s total ‘marketing control’ had yet to be found. In general, the conclusion was that the marketing concept was easy to articulate but hard to implement in practice. Among the barriers to implementation were the traditional turf battles among management’s functional silos (Anderson, 1982); the dominance of a product, engineering, and manufacturing orientation; powerful retailers and distributors; a focus on short-term profitability (or return-on-investment—Hayes & Abernathy, 1980); under-investment in marketing activities; and imperfect and incomplete information about customers’ needs and wants (Webster, 1981, 1994: 14-28).
For the first 15 or 20 years of its existence, the marketing concept remained essentially a question of corporate culture, a basic set of values and beliefs about putting the customers’ interests in a position of primacy relative to all other claimants. It competed directly with other value systems including those which emphasized technology (R&D), manufacturing excellence, product performance, and financial control, any of which could easily dominate the customer-oriented culture. There was a seemingly endless stream of articles in the management literature (not, it should be noted, in the more academic, scientific marketing literature), emphasizing both the importance of customer orientation and the lack of it in most organizations (Bell and Emory, 1971; Kotler, 1977; Lavidge, 1965; Shapiro, 1988; Webster, 1981, 1988). There was also considerable semantic confusion over the meaning of the terms ‘customer orientation,’ ‘market orientation,’ and ‘marketing orientation.’
As we will investigate in the next section, the emphasis on marketing as customer orientation and organizational culture left a large gap between concept and implementation, a gap that was filled by authors and scholars in a new field that came to be known as strategic management (Ansoff, 1965). By the mid-1970s, a strategic emphasis in marketing had pushed aside the focus on customer orientation in favor of a competitor-focused approach to planning (Anderson, 1982; Buzzell et al., 1975; Day & Wensley, 1988; Schoeffler et al., 1974). The pendulum began to swing back to customer orientation and organization culture in the late 1980s.
Deshpandé and Webster (1989) surveyed the literature and adopted the scheme of Smircich (1983) that identified five different paradigms of organizational culture: comparative management, contingency management, organizational cognition, organizational symbolism, and the structural/psycho-dynamic perspective. The first two were said to regard culture as a variable (grounded in a sociological framework), whereas the latter three saw it as a metaphor (grounded in anthropology) for the organization itself. In this latter view, culture is not something the organization ‘has’ but what it ‘is.’ Deshpandé and Webster defined organizational culture as ‘the pattern of shared values and beliefs that help individuals understand organizational functioning and thus provide them norms for behavior in the organization’ (1989: 4). They proposed that the organizational cognition perspective offered the richest research opportunities in marketing, especially for understanding the customer focus called for by the marketing concept, because it views organizational culture as a metaphor for organizational knowledge systems with shared cognitions (1989: 11).
Kohli and Jaworski were among the first researchers to revisit the concept of market orientation in a more analytical framework (Kohli & Jaworski, 1990; Jaworski & Kohli, 1993). They were concerned about both the lack of a clear definition of the construct and the gap between concept and implementation. Their approach was not grounded in the culture paradigm but instead relied upon a ‘discovery-based’ approach to theory construction using empirical data. Their interviews with managers from multiple functions and levels within a cross-section of companies included questions about what marketing meant to these managers and its consequences for action and results.
Analyzing the responses, they found widespread agreement that customer focus was the central element of market orientation. However, they noted that marketing was seen as much more than simple customer research or a vague sense of customer commitment. Kohli and Jaworski proposed a definition of market orientation as ‘the organizationwide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments, and organizationwide responsiveness to it’ (Kohli & Jaworski, 1990: 6, italics in original). They developed a series of testable propositions relating market orientation to antecedent organizational factors (senior management, interdepartmental, and systems) and consequences (customer and employee responses and business performance measures), mediated by such external factors as market and technological turbulence, competitive intensity, and general economic conditions. They agreed with Shapiro (1988) that the phrase marketing orientation was too restrictive, limiting the concept to the marketing department rather than seeing it as a firm-wide construct.
At the same time, Narver and Slater (1990) were conducting an intensive study of one company’s 140 business units (incorporating both commodity and differentiated products), relating unit profitability to a carefully developed and validated measure of market orientation. Their definition of market orientation was broader than that of Kohli and Jaworski and incorporated customer orientation, competitor orientation, and interfunctional coordination, giving each set of factors equal importance. Market orientation proved to have a positive and linear impact on the profitability of non-commodity businesses, whereas the impact for commodity businesses was positive but non-linear. The most profitable commodity businesses had either high or low market orientation, whereas those with medium market orientation scores were least profitable. This was an important first step in establishing the relationship between market orientation and profitability, an unproved assumption of the marketing concept.
Deshpandé and Webster, following their work on organizational culture and marketing, teamed up with Farley (Deshpandé et al., 1993) to examine the relationships among corporate culture, customer orientation, innovation, and company performance. They used a model of organizational culture types adapted from Cameron and Freeman (1991) and Quinn (1988) that characterized firms as having either an internal or external focus, and either flexible and spontaneous or mechanistic and controlled management processes. The four culture types that result from this two-by-two scheme were labeled Clan (internal/flexible); Adhocracy (external/flexible); Market (external/controlled); and Hierarchy (internal/controlled). Each organization demonstrates some of the characteristics of each type of culture; the measurement scales are used to characterize firms in terms of their dominant cultural orientation. Previously developed measures of organizational climate, innovativeness, and business performance were also used, along with a new scale for customer orientation. Performance was measured as a combination of profitability, size of firm, market share, and sales growth relative to the firm’s largest competitor—measures adopted from the PIMS (Profit Impact of Market Strategy) studies (Buzzell & Gale, 1987).
Their first published results (Deshpandé et al., 1993) concerned only Japanese firms, based upon interviews with two managers in each of 50 marketing firms and two managers in a randomly chosen customer organization for each marketer, resulting in four observations for each firm, called a ‘quadrad’ design. Thus, the Japanese sample was a total of 200 interviews. Subsequently, smaller samples of managers in both marketer and customer firms were interviewed in France, Germany, the UK, and the US. The total sample in all five countries represented 640 managers from 320 organizations, including 160 marketers. The results shed light on the basic question of the relationship of customer orientation and organizational culture to business performance.
Customer orientation, whether measured from the perspective of the marketer or the customer, had no significant impact upon business performance. Simply stated, customer orientation by itself, as part of the organization’s values and beliefs, just doesn’t count for very much. It has to be transformed into action. This finding lends strong support to the Narver and Slater definition of market orientation as a combination of customer-, competitor-, and profit-orientation, not just customer focus.
Combining data from all five countries in the sample, organizational culture did have an effect on performance (Deshpandé et al., 1997). Market-type culture had a positive and significant effect on performance. Adhocracy-type culture had a positive but not statistically significant impact. Hierarchy had no significant impact and Clan had a significant negative impact. (The Market-type firm is distinguished by its focus on competitors more than customers and should not be confused with ‘customer orientation.’) In other words, firms that are externally oriented outperform those with an internal focus. The Market-type firms are both externally focused and flexible in their responsiveness to changes in the marketplace. In contrast, the Clan-type firms, both internally focused and flexible in their organizational response, are least effective. Hierarchical organizations, internally focused and tightly controlled, do not show any significant influence of culture, positive or negative, on business performance.
As would be expected, there were differences in dominant cultural types across countries. However, consistent with the analysis of the pooled data, there were only minor effects of cultural type on performance in the individual country results. Similarly, at the individual country level customer orientation had no effect on performance.
Innovativeness had the strongest impact on performance. This result was found in individual countries and in the pooled data and was strongly significant in every instance. Likewise, an organizational climate characterized as ‘friendly’ had a significant incremental effect on performance when the effects of innovativeness and culture were present. Innovativeness was by far the most important variable in impact on performance, followed by culture (either Market—positive or Clan—negative) and climate. Customer orientation, as measured in this study, had no impact on firm performance. Thus, by separating customer orientation from the more general corporate culture, this study shows that it does not have a direct effect. Furthermore, customer orientation does not have any relationship with type of culture; no particular type of culture is more or less conducive to customer orientation.
Continuing their research programs, the several authors just reviewed have developed additional data and analyses that tend to strengthen their conclusions about the importance of customer and market orientation to successful business performance (Slater and Narver, 1994, 1995). They have also developed better scales for measuring market orientation with improved validity and reliability (Deshpandé and Farley, 1998).
To conclude this discussion of marketing as culture and the marketing concept with its emphasis on customer orientation and innovation, we can see that recent research linking these concepts to business performance has considerably extended our understanding. Customer orientation by itself cannot translate into profitability as asserted by the original marketing concept. However, when customer orientation is folded into a broader definition of market orientation, incorporating competitor focus and an emphasis on profitability, and combined with innovation, there is a positive impact on the firm’s performance.
Limitations of the Marketing Concept
Frustration with the speed of implementation of the marketing concept reflected a number of limitations of the concept itself. These can be summarized as follows:
- It is an incomplete idea. It says nothing about how a company should go about satisfying customer needs. It ignores the question of company capabilities and limitations.
- It does not specify which customers a firm should focus its attention on.
- It assumes a causative relationship between customer orientation and profitability without an underlying argument or proof.
- It assumes that customers can articulate their needs and wants and does not consider how to anticipate consumer needs, especially in the case of rapidly developing technology.
- It has weak strategic content. It does not define a good strategy or how to develop one.
In other words, as stated earlier, the marketing concept is only a statement of corporate culture, values, and beliefs with an emphasis on customer orientation. It has little strategic content in its simple form. As we have just seen, more recent research confirms both these limitations and the positive impact of a market-oriented culture when combined with a stronger strategic focus.
The limitations of the marketing concept were, understandably, a cause of the slowness in its implementation. Marketing as culture and marketing as tactics were both incomplete views of the role of marketing in the firm. Recognizing that there was a need to integrate a strategic focus with the concept of customer orientation, companies such as General Electric developed strategic planning as a separate corporate level activity, motivated, in part, by a desire to make customer orientation operational.
Marketing and Business Strategy
An important stimulus to the adoption of formal strategic planning systems in many large corporations was the work of Professor H. Igor Ansoff (1965). He noted that customer orientation and market opportunities needed to be matched with the firm’s capabilities and resources; no firm could be all things to all potential customers. He was specifically critical of the marketing concept, arguing that it was unreasonable to define a business around customer needs. Strategy formulation required finding market niches where the firm could gain competitive advantage by using and developing its unique competitive strengths.
Ansoff defined three types of decisions. Operating decisions set levels of input variables. Administrative decisions determine the shape and structure of the firm. Strategic decisions define markets to be served and products to be offered in those markets. It was somewhat confusing that Ansoff defined ‘marketing strategy’ (his words) as operating decisions, not strategic. Using our earlier terminology, this is equivalent to saying that marketing is tactics, not strategy.
Strategic planning concentrated on matching the firm’s strengths and weaknesses with market opportunities where the firm could achieve a competitive advantage. This came to be called SWOT analysis: Strengths, Weaknesses, Opportunities, and Threats. The focus in the planning process shifted subtly from customers to competitors, defining markets as collections of competitors vying for advantage. Strategic planning thus undermined customer orientation, instead of supplementing and implementing the concept.
The path to sustained growth, in Ansoff’s view, depended upon the firm’s unique capabilities and the definition of market segments which valued them. The most attractive markets were those that were growing the fastest and where the firm could achieve a dominant market share. The PIMS studies, mentioned earlier (see page 72), supported this viewpoint by reporting that regression analysis using 37 variables describing a firm’s marketing strategy, showed that market share (relative to that of the largest competitor) had the strongest influence on its profitability, measured as return-on-investment (Buzzell et al., 1975; Schoeffler et al., 1974). Later work (Aaker & Jacobson, 1985;
Prescott et al., 1986) called into question these results, suggesting that the correlation could be spurious or that the causal relationship could actually go the other way. Profitability may lead to market share by permitting higher levels of spending for product development and other marketing activities (Webster, 1994: 54-8). Even the original authors of the PIMS studies now conclude that product quality relative to competition, not market share, has the strongest influence on long-term return on investment (Buzzell and Gale, 1987: 7).
Ansoff’s pioneering work in strategic planning, along with others who followed (e.g., Glueck, 1970; Hofer & Schendel, 1978) gave rise to an entire new field that today is identified as strategic management (Ansoff, 1972; Schendel & Hofer, 1979). Strategic planning had its heyday in the 1970s and early 1980s. Product portfolio models were a common tool for strategic planners (Abell & Hammond, 1979; Day, 1977; Haspeslagh, 1982). These models incorporated a cashflow paradigm that viewed the objective of planning as the allocation of financial resources to alternative growth opportunities. Financial management criteria came to dominate business strategy, and they can compete directly with customer focus (Hayes & Abernathy, 1980; Webster, 1988).
Critics of strategic planning were concerned with its narrow focus on return-on-investment and other short-term measures of business performance, as well as its lack of customer focus. The emphasis on market share led many business managers to increasingly narrow definitions of their ‘served markets’ so as to assure that they could tell their corporate bosses that they were ‘Number One or Number Two’ in their markets (Kiechel, 1981).
By the late 1970s, the infatuation with strategic planning had begun to fizzle out (Kiechel, 1982). American firms in industries as diverse as automobiles, chemicals, tires, construction equipment, consumer electronics, and photography had lost substantial market share to global competitors that were doing a better job of responding to customer needs. Formal strategic planning approaches were identified as part of the problem of slow response to a changing marketplace (Hayes & Abernathy, 1980). The large, bureaucratic strategic planning staffs that were created in many corporations became a major burden in terms of costs and, more importantly, response time to changing market conditions. ‘Paralysis by analysis’ was a serious problem for the large, hierarchical organization that had developed large strategic planning operations.
The focus shifted from formal strategic planning to strategy implementation and strategic management (Gluck et al., 1980; Porter, 1980; Schendel & Hofer, 1979). The shift from strategy formulation, and its emphasis on competitor actions, to strategy implementation and the need to understand customers and how they will respond to the firm’s product offering, brought marketing competence back into the strategic management process. Now, customer value is at the center of most strategic management frameworks (Day, 1990, 1999; Webster, 1994). However, the line between marketing management and strategic management has blurred.
There is cause for concern about where this leaves the marketing field as an academic discipline. Many of the issues once considered to be the intellectual domain of marketing such as customer orientation, market segmentation, competitor analysis, product management, and pricing, are now central to the field of strategic management.
Meanwhile, the preponderance of marketing scholarship appears to be concentrated still in the traditional areas of marketing tactics, not strategy, centered around the micro-economic paradigm. This is perhaps seen most clearly in the substantial number of journal articles, doctoral dissertations, and research conferences devoted to the area of sales promotion and other short-term price incentives, a primary concern of firms selling consumer products and services, especially frequently purchased packaged goods. Using impressive analytical models and statistical tools, these scholars are attracted to the sales promotion area by the availability of large-scale databases, most easily available on retail transactions of frequently purchased products, even though the quality of the data is often less than desired. In contrast, the scholarly work in the area of the role of marketing and the firm, which, by definition, is concentrated on issues of strategy and organization, can often be criticized for its reliance on anecdotal and observational data and the use of much less rigorous forms of analysis.
Summary: Marketing as Culture, Strategy, and Tactics
The debate about the role of marketing in the firm and the definition of its intellectual domain is far from over. Marketing’s role in the firm simultaneously encompasses culture, strategy, and tactics. A huge research challenge remains to understand each of these subsystems and to integrate them into a comprehensive model of the role of marketing in the firm. The challenge is further complicated by the fact that many firms, perhaps even a majority of them, are evolving from traditional hierarchical, bureaucratic organizations into new organizational forms characterized by extensive relationships with other firms in strategic relationships, partnerships, and alliances in which each firm concentrates on that small part of the total value chain where it has distinctive, world-class competence.
The distinction between the firm and its market environment is breaking down (Achrol & Kotler, 1999; Badaracco, 1991). The network ‘captain’ or ‘hub’ of the networked organization is the firm that has the ultimate relationship with the end-user customer. Firms are increasingly defined by their customer relationships as their major strategic asset, not their offices and factories, and not even their products and technology. The customer is the only part of the value chain that cannot be ‘outsourced’.
One attempt to conceptualize the role of marketing in this new and still evolving environment is organized around a more flexible view of the traditional corporate hierarchy paradigm, looking at the role of marketing at the corporate (culture), business unit (strategy), and functional (tactics) levels (Webster, 1992).
At the corporate level, the role of marketing is to determine what business the company is in, as defined by the customer needs it wishes to serve, and to determine the mission, scope, shape, and structure of the firm. This requires considering customer needs, the firm’s distinctive competence vs. competitors (Prahalad & Hamel, 1990) and its position in the value or supply chain. At the corporate level, decisions are required about where to form strategic alliances and with what types of partners, to form new strategic business units such as joint ventures. These decisions in every instance should be determined primarily by customer needs and the definition of the combinations of distinctive competencies (e.g., converging technologies, some possessed by the firm and some outsourced) that will be required to satisfy them.
At the corporate level, top management has the important marketing responsibility of creating a culture of customer orientation and advocating for the customer’s welfare in all decisions. The focus on the customer’s definition of value must pervade the organization in every management function from accounting to manufacturing to research-and-development to human resources. In some firms, for example, customers participate in the hiring of key managers. In others, customer visit programs are a regular part of the new product development process. Many firms require that their top executives, including the C.E.O., spend at least one day each month visiting customers.
The role of marketing at the corporate level is therefore three-fold:
- To promote a culture of customer orientation and to be an advocate for the customer in the deliberations of top management strategy formulators;
- To assess market attractiveness by analyzing customer needs and wants and competitive offerings; and
- To develop the firm’s overall value proposition, the vision and articulation of how it proposes to deliver superior value to customers.
At the corporate level, the definition of the firm’s distinctive competence must be robust enough to have strategic value across multiple markets and business opportunities as the marketplace evolves and customers’ definition of value changes.
At the level of the individual strategic business unit (SBU), the role of marketing is somewhat more traditional and the focus is upon how the firm will compete in the businesses it has chosen to be in. Here the focus shifts to individual customers and competitors as the firm develops its competitive strategies for specific market segments. The definition of those segments, selection of market targets, and the development of positioning strategies for each of them is a major marketing management responsibility at the SBU level. At the SBU level, marketing and strategic planning are virtually synonymous.
At the SBU level, marketing management should be actively involved in strategic decisions about the procurement of materials, components, sub-assemblies, systems, and services that will become part of the firm’s product offering, as the firm forms its strategic partnerships with vendors. Beyond that, marketing management must consider strategic partnerships with other marketing partners at multiple points in the value chain including market research providers, marketing strategy consultants, independent sales representation, communications media, distributors and other types of resellers, packaging designers and suppliers, transportation companies, customer credit facilitators, etc. Each of these decisions requires make vs. buy analysis—the definition of the service specification in terms of the firm’s value proposition, and the identification and selection of suppliers.
At the third level, tactical and operating decisions, there is the ground most familiar to marketing managers of defining the marketing mix and managing customer relationships. Marketing specialists are responsible for market research and market segment analysis; product management, including new product development, pricing and sales promotion; communications; distribution; and related functions. Although sales force management may be a separate function (either within or across strategic business units), the strategic guidance of sales force activities is a marketing management responsibility built around market segmentation, targeting, and positioning (Rackham & DeVincentis, 1999). In practice, however, marketing strategy implementation often breaks down at the sales force management level, usually due to defects in the sales compensation system and in sales force training and supervision.
The analytical tools of segmentation and optimum allocation of marketing expenditures and other financial, human, and technological resources, apply primarily at the tactical level. In addition to the individual decision variables, however, the marketing management team must manage the interrelationships and synergies of the marketing mix and create an integrated, short-term marketing strategy to achieve business unit performance goals most efficiently.
However, this integrated view of marketing as culture, strategy, and tactics does not go far enough. It leaves unanswered some important questions about the role of marketing in the firm. If, as has been argued at different points in this chapter, marketing is not a separate management function: if it is the whole firm seen from the customer’s point of view; if it is not merely creating demand for the firm’s productive resources; if everybody in the firm has responsibility for customer value delivery, and marketing is ‘too important to be left to the marketing people,’ then we have yet to define what it is in terms of organizational tasks, structure, skills, roles, and technology. Current thinking about these questions has moved strongly in the direction of re-conceptualizing marketing as a set of organizational processes as distinct from a separate management function.
Marketing as Organizational Processes
Marketing as Value Delivery
Understanding of the role of marketing and the firm has evolved to a point where the focus on customer orientation that was the hallmark of the marketing concept has broadened from a statement of organizational culture to its implementation in strategy and tactics. Customer value is the intellectual linking mechanism bringing together views of marketing as culture, strategy, and tactics (Webster, 1997, 52-4). Marketing is undergoing re-conceptualization as the link between commitment to, and understanding of, customers’ needs and wants and various processes for defining, developing, and delivering solutions to customer problems. Marketing inputs become the guiding force in matching customer needs, company capabilities, and financial results. The only way to increase the value of the firm for its owners is to deliver superior value to customers, and to have a business model that allows the firm to retain a fair share of the value created for the customer (Slywotsky, 1996; Slywotsky & Morrison, 1997).
Customers define the business in the sense that they make demands on the firm, which the firm responds to by collecting, organizing, and deploying resources to respond to customer demands. Understanding those demands and responding to them with a keen sense of the firm’s strengths and limitations defines the essential role of marketing within the firm. Marketing is fundamentally an informational process. Marketing is not something the firm does to the customer, which can be said to be the old persuasion or selling view of marketing. Marketing is how the customer is able to influence the firm. This is the essence of Haeckel’s (1999) paradigm of ‘sense and respond’ as opposed to ‘make and sell.’ Or, to go all the way back to Drucker (1954), marketing is the whole firm seen from the customer’s point of view.
Earlier we reviewed research that connected innovativeness, organizational culture, and organizational climate with firm performance. Further evidence of the positive impact of marketing competence on firm performance has been provided by Moorman and Rust (1999). In their model, marketing links customers to product development, service delivery, and financial accountability. They surveyed a sample of managers from multiple functional areas. Their research found that the marketing function contributes to firm performance beyond the shared values of market orientation, by linking customers to new product development, service delivery, and financial accountability. Strong customer relationships and information about customer needs and wants can simultaneously contribute to successful new product development and, ultimately, higher levels of financial performance in both product and service firms. They suggest that marketing’s role can be strengthened by placing more emphasis on the link between customers and financial performance.
This broad view of marketing as defining, developing, and delivering value calls forth a view of marketing not as a separate management function distinct from other management specialties within the firm, but rather as a set of processes for guiding firm activities toward the creation of satisfied customers who are willing to pay the firm for the productive resources it has committed to solving their problems. Some important definitional issues must again be resolved.
What is a Marketing Process?
Defining what we mean by a marketing process once again raises the question of the borders on the intellectual domain of marketing. What is it and what is it not? There is no need to review the arguments developed earlier in this chapter, but we must recognize that marketing involves markets which are aggregations of customers and competitors, and that the role of marketing in the firm is to guide the firm in managing its linkages with the market. Our understanding of marketing as value delivery, combined with the recognition that the firm itself can only occupy a limited space in the value chain, means that it must also involve linkages with suppliers who must be guided by the firm’s value proposition and its commitment to a given customer set. In this aspect, marketing includes processes for managing linkages with suppliers (marketers) as well as customers (buyers).
Recognizing that this definition pushes the limits of marketing as an intellectual domain, we can define a marketing process as any activity which generates or uses information about customers to organize and deploy resources for providing solutions to customer problems. Marketing is any business process that gathers and disseminates information about customers, guides value creation and delivery with information about customers, or produces information evaluated and used by customers. A culture that values customer orientation provides the necessary organizational predisposition to use market-back information in all value-creation and value-delivery processes. Marketing is the design and management of all of the business processes necessary to define, develop, and deliver value to customers. Marketing cannot operate alone in these processes but must provide the customer focus that guides and directs all activities. As we will argue, marketing can therefore be most effective not as a separate function, but as part of a team of managers where marketing provides the guidance and leadership for the customer-oriented enterprise.
Types of Marketing Processes
Marketing processes are defined by customer information, but many of these processes are not solely the responsibility of marketing managers. Product development, for example, is a marketing process but it is not exclusively owned by marketing. Certain other processes, such as financial accounting, are probably minimally affected by marketing inputs. Many processes which we would consider to be marketing processes have traditionally been the province of other management functions, especially operations management, purchasing, engineering, and research-and-development. This new view of marketing asserts that these processes that used to be managed primarily from a cost-control perspective need to be repositioned, and be managed from a customer-value perspective. This is a fundamental shift in point of view.
Marketing processes have been defined in several different (but not conflicting) ways. One framework is organized around a definition of marketing as defining, developing, and delivering value (Webster, 1997: 53-4). Examples include:
- Market research—studies of customer needs, preferences, expectations, buying behavior, product use, etc.
- Analysis of the firm’s core competencies
- Strategic positioning of the firm in the value chain
- Economic analysis of customer use systems
- New product development
- Design of distribution channels
- Development of sourcing strategy
- Vendor selection
- Strategic partnering with service providers (e.g., customer credit, database management, product service and disposal)
- Developing pricing strategy
- Developing the value proposition
- Sales force and dealer training
- Managing distribution and logistics
- Deployment of the sales force
- Order-entry, credit, and post-sales service
- Advertising and sales promotion
- Applications engineering
- Product upgrades and recalls
- Customer training
Other classifications of marketing processes identify the linkages between the firm and its continuencies. For example, Srivastava et al. (1999) define an ‘organizationally embedded’ view of marketing in terms of three core business processes that generate value for customers: product development, supply chain management, and customer relationship management. A.T. Kearney, management consultants, have identified four key marketing processes of a very macro nature (Bluestein, 1994), with an emphasis on strategy—except for the fourth, which is tactical:
- Establishing competitive position
- Defining target markets and designing products/services to serve those markets
- Delivering products/services to those target markets
- Creating and managing demand
This classification is easily mapped onto the Webster categories. Establishing competitive position and defining target markets are part of the value-definition process. Designing products and services are value-development processes. Delivering products/services and creating and managing demand are primarily value-delivery activities.
Beddow (1995) has described how 3M Company defines marketing ‘competencies,’ which encompass both processes and marketing capabilities:
Core Marketing Competencies:
- Planning—defining the business and its customers
- Product development—strategy for business unit growth
- Value-pricing—understanding the utility the customer places on the company’s products and services
- Channel management—developing and managing the institutions through which the company goes to market
- Customer analysis—analyzing individuals, organizations, and institutions in terms of needs, desires, and ability to buy
- Research—gathering and interpreting market information for marketing decision making
- Brand management—developing and managing strong global brands and corporate assets
Advanced Marketing Competencies:
- International—marketing products and services across national borders
- Financial analysis—identifying profitable strategies that increase the lifetime value of the customer
- Strategic planning—developing strategic fit between organizational goals and capabilities and changing market opportunities
- Quality function deployment—translating customer inputs into design requirements
- Process management—interrelating critical organizational functions in product development, manufacturing, selling, and distribution
- Value-added—continually improving customer value
- Customer—focused selling—demonstrating a consistent ability to meet and exceed customer expectations
Complementary Marketing Competencies:
- Teamwork—ability to function as a member of a cross-functional team
- Interpersonal skills—ability to listen and understand the needs of others, to manage conflict, and to convey information
- Marketing communications—exchange of product information between buyers and sellers
- Computer literacy—ability to use data retrieval systems, develop databases, apply computer-based models, etc.
Perhaps the leading marketing theorist involved in redefining marketing as organizational process rather than separate function, is Professor George S. Day. Central to his definition of the market-driven organization (Day, 1999) are capabilities for market sensing (creating a shared base of market knowledge throughout the organization) and market relating (strategic thinking). He sees these marketing capabilities combining with an externally oriented culture to create a flexible, adaptable organizational configuration, with integrated organization structure, and systems focused on superior customer value. The result is a superior ability to understand markets and sense emerging opportunities and competitors’ moves, and superior ability to attract and retain customers by leveraging market investments and delivering superior customer value. The firm is more closely aligned with its changing market environment. The bottom-line benefits are increased revenues, cost efficiency, enhanced employee satisfaction, and price premiums that result in stronger profit margins and the preemption of rivals.
Future Research on the Role of Marketing and the Firm
Paradoxically, as the traditional marketing function becomes less important, the role of marketing in the firm becomes ever-more critical. As traditional hierarchical organization forms give way to hybrid forms for aligning the firm with its rapidly changing marketing environment, our understanding of the role of marketing and the firm is challenged and must be renewed. The movement from an economy consisting primarily of firms engaged in manufacturing, to one emphasizing services, and now toward one in which the predominant value-delivery activities involve information technology in one form or another, unquestionably calls for paradigm shifts in our thinking about organization strategy and structure (Achrol & Kotler, 1999; Haeckel, 1999). Marketing is an essential part of that transformation. As noted by Srivastava et al., ‘traditional marketing perspectives almost certainly contain within them the seeds of marketplace failure’ (1999: 178).
Under the very broad rubric of the role of marketing and the firm, it is hard to draw lines around directions for important future research. At the broadest level, we need to know more about the way marketing activities are conducted within the firm, and how these are changing. We need to compare and contrast alternative organization forms, to identify the benefits and drawbacks of each, and evaluate them in terms of efficiency and performance. Increasingly, marketing activities will take place across firm boundaries, in various forms of network organizations. Inter-organizational issues will become much more important in marketing research.
Research on the role of marketing and the firm must be by definition interdisciplinary, incorporating the theories and methodologies of diverse intellectual fields from anthropology to organization science, political science, psychology, sociology, and strategic management. Given the very traditional structures of most universities, the scholar who wishes to breach the boundaries of his or her chosen discipline will face a challenge that must, nonetheless, be met in order to move the marketing field forward.
A research workshop of the Marketing Science Institute, in December 1996, addressed the question of the future scope of the marketing discipline and the shape of the marketing organization (Lehmann & Jocz, 1997). In their review of these proceedings, Montgomery and Webster (1997) identified several important research directions. Among these were the need to understand ‘value migration’ (Slywotsky, 1996), the process by which delivering superior value to customers results in a shift in the market valuation of firms that compete for the customers’ patronage. The fundamental notion of market orientation needs further study and elaboration, as does the process of creating and sustaining customer orientation as part of organizational culture. The assumptions of the traditional paradigms guiding research in marketing and management practice need to be made explicit and evaluated. Interfunctional conflict within marketing itself and between marketing and other business functions can be usefully examined for both positive and negative consequences on firm performance.
Montgomery and Webster proposed a three-dimensional grid with a total of 120 cells for thinking about research opportunities for examining marketing’s interfunctional interfaces: Three dimensions of marketing (culture, strategy, and tactics) across five other management functions (operations, human resources, research-and-development, finance, and purchasing) with eight sets of marketing activities (customer orientation, market segmentation, targeting and positioning, product development, pricing, promotion, relationship management, and channel strategy). Each cell in the matrix identifies specific issues relating to the role of marketing and its inherently interfunctional dimensions.
In summary the future role of marketing and the firm requires understanding, if not total resolution, of conflicts on several dimensions. First, there is a need to continue to work on the integration of three traditionally competing viewpoints of marketing as culture, strategy, and tactics. Second, we need to develop an up-to-date understanding of when transactional marketing activities should dominate the marketing mix, versus when relationship management processes are more strategically valuable and financially rewarding. Third, the trade-offs between bureaucratic control of asset and resource allocation and organizational flexibility with team-based structure and hybrid organization forms need to be studied. Fourth, the inherent conflict between marketing’s broad, strategic, long-term orientation and the sales function’s more immediate, tactical requirements must be understood and managed carefully. Fifth, better measures of marketing performance incorporating a process and customer-value oriented view must be integrated with traditional, short-term, financially oriented performance measures such as sales volume, profit margins, and return-on-investment. However, the traditional concerns of cost and economic efficiency must not become victims to the new concern for superior customer value.
In summary, our understanding of the role of marketing and the firm has changed from an emphasis on revenue to profit, from price to customer value, from products to customer needs and preferences, from traditional bureaucratic, functional structures to networked organizations, from function to process, and from ‘make and sell’ to ‘sense and respond.’