The following document reviews some of the considerations, objectives, factors and alternatives
in selecting an appropriate structure for theSales & Marketing
functions within a small-to-medium size organization moving into Phase II of its
growth and maturation cycle: the Adolescent Phase. This phase occurs some years after an
entrepreneur's embryonic idea for "what kind of business should I create?" has germinated,
blossomed, and survived at least one-to-two seasons.
An Introduction to the fictional Company
For the purpose of this discourse we'll use a fictional organization, O'Shaughnessy &
Company. Jim O'Shaughnessy founded his company with a couple of college buddies twelve
years ago over a kitchen table while they pondered what they were going to do with their lives,
having all just received master's degrees from tony Ivy League schools in such esoteric (and
highly utilitarian) disciplines as neo-classical Zulu philosophy, Minoan literature, and Modern
English essayists.
They concluded that they had a common set of skills, namely, (1) the ability to write in that
breezy academic style usually employed in scholarly journals, (2) a high level of Cobol literacy
and (3) a great love for PDP-11s. So in the wink of an eye and a chug of a Bud, they founded ,
O'Shaughnessy & Company. Their mission: to shed light on the arcana of Cobol.
A scant one and a quarter decades later, Jim O'Shaughnessy finds himself at the helm of an 80
person company based in Haymarket, Virginia, nestled in the Shenandoah Valley, not far from
the Civil War battlefield of Manassas. Always one to favor content over structure, Jim's
company has grown like a radiation-exposed Topsy. Files are bursting from cardboard packing
crates. Sales people share one-person offices with editors and warehouse clerks. And the sales
of the company's growing list of 6th generation Cobol applications and books of incantations to
be used when recompiling code originally hacked in the 60's -- well, sales double every 18
months.
During a month-long vision quest in southern New Mexico, where they encounter the
Castaneda cousins, Carlos & Murphy, the company's management team have come to a
conclusion: Cobol's days are numbered. They decide to throw their lot in with the Unix
upstarts and their constant companions, the Internet interlopers. In other words, they've
decided it's time for some product line re-engineering.
Several month's after the New Mexico adventure, Jim's 10 year old son, a budding derivatives
trader, persuades Jim that he needs to put some organization into his organization. It is at this
juncture that we join Jim as he reviews some initial recommendations from a marketing and
organizational design consultant. Here are excerpts from that report.
Pre-Planning and Assessing the Organization's Needs
The most effective organization will be the one that emerges from a process that generally
involves three steps: (1) establishing the mission for the organization, (2) identifying those
organizational issues that should be considered in the design and maintenance of a
contemporary, customer-focused organization, and (3) selecting the organization structure that
best supports the marketing function in carrying out its mission.
The Marketing Mission
The mission statement comes from an identification of the corporations purpose, objectives and
strategy.
O'Shaughnessy’s corporate mission. O'Shaughnessy develops and markets products and
services which help people simplify or solve their information and information access needs,
particularly those related to electronic/computer information access and exchange.
O'Shaughnessy’s objectives. These may be summarized as: Increase sales revenues and
profits by developing new products and services in a socially-responsible way which meet real
customer needs; coupled with improvement of internal systems, procedures and processes for
bringing these products and services to market in an efficient and cost-effective manner.
O'Shaughnessy’s strategies. The company will increase share and sales for product line in
growth categories by developing new products and services, while improving profits from
products and product lines in categories where consumption/purchase is static or declining.
O'Shaughnessy marketing mission statement. A working mission statement for
O'Shaughnessy’s marketing function might be: To ensure the identification, development,
availability, promotion, delivery, and support of products and services which meet the needs of
end-users who utilize the Unix operating system or who access information exchange through
the Internet.
Purpose of the Marketing Organization
The primary focus of marketing is external to its parent organization (that is, it set its sights on
external publics, and seeks to meet those publics needs through the cost-effective delivery of
products and services which the parent organization develops and produces). The purpose of
the marketing function should therefore reflect the parent organization’s marketing strategy.
There are 3 primary marketing strategy options: (1) growth, (2) maintenance, and (3)
“harvest/milk”. The strategies can be mixed and matched with the needs of different product
lines or markets, but typically, one strategy drives the “flavor” of an organizations marketing
function.
The Marketing Strategy Matrix
Activities to be Managed
The traditional model of marketing defines marketing as a business activity which deals with
the Four Ps: Product, Pricing, Place (i.e. sales and distribution channels), and Promotion.
Elements which fall within the purview of Marketing are activities and decision-making relating
to: product line, pricing, advertising, sales promotion, trade shows, direct marketing, and
product development. Sales is a marketing function, but it is often kept separate from
marketing. This is the result of the historical precedence of sales to marketing. Sales existed
before “marketing” was conceived as a business discipline.
Consequently, when the first “marketers” were hired, they were the “new guys on the block”, and often were junior in
experience to the “seasoned sales pros”. Additionally, early marketers often had little front-line
sales experience, so naturally, the sales guys said (in effect), “We’re not taking any direction
from those snot-nosed marketing kids”. Nevertheless, I emphasize, sales is a sub-function of
marketing. So are telemarketing, telesales, and customer service functions. They are found in
various places on the organization chart, usually under marketing, sales, or various
Operations/Customer Support categories.
Consumer Goods Model vs. Industrial Goods Model
A consumer goods marketing organization can be characterized as primarily selling small
quantities of a product to end-user individuals through a distribution system which includes
manufacturer, wholesaler, retailer, consumer. An industrial organization sells
standardized products (which are produced in quantity for inventory) or custom-
engineered products made to a customer’s specifications. The industrial distribution channel
is direct from manufacturer to commercial user or may include a wholesaler as an intermediate
step.
Consumer markets are segmented by demographics such as age, sex, income and lifestyle.
Industrial markets are segmented by broad classifications such as SIC code or class of buyer.
Clearly, O'Shaughnessy’s sales and marketing functions, as well as the markets it serves,
represent a hybrid of both traditional consumer goods and industrial (aka business-to-
business) organizations.
Delegation of Authority and Responsibility
As a general rule, authority and responsibility should be delegated to the lowest level within the
organization that has timely and adequate information from which to make decisions. Systems,
processes and procedures enable individuals with less experience to accept greater
responsibility, manage a greater range or volume of tasks, and be more productive than would
otherwise be possible.
Levels of Supervision & Span of Control.
These two areas are determined by the functional activities that are to be managed, coupled
with the maximum number one supervisor can effectively direct.
Reporting Relationships
The traditional approach has each individual reporting to only one boss. This minimizes the
organizational conflict which can arise when an employee is expected to take direction from
more than one supervisor. Multiple reporting relationships can (and should) occur when
significant changes occur in the external environment that are difficult to anticipate. Multiple
reporting relationships are appropriate where communication and coordination are required
across functional areas in order to effectively assess the situation and develop a timely response.
These relationships may be semi-permanent, or can be task or project driven.
Organizational Structure Options
The appropriate organizational structure is determined by the inter-relationship of several sets
of factors. Among them are: corporate culture, number and diversity of product lines, number
of sales channels, number and diversity of markets served, and product line or corporate sales
volume.
The Functionally-Structured Organization
The Functional (i.e. Traditional) Organization. This form of organization is
structured around functional operating units. It works well when marketing either a single or a
few product lines to the same (or limited number of) market. As market diversity and product
line complexity grow, this organizational model loses effectiveness. The benefits of grouping
specialists into one group, functional area, or department are offset by the barriers to cross-
function communication and coordination needed to effectively implement multiple product-
multiple market strategies.
The Functionally-Structured Organization Model
The Product-Management Organization
The Product-Management Organization. This structure replaces the functional
organization model as the number of product lines increases. Product managers are introduced
to manage product lines and new product activity, as well as to coordinate the employment of
corporate resources. Product managers have no direct authority over the personnel in other
functional areas whose “resources” they use to manage their product lines. Hence a matrix
organization results in which multiple reporting relationships or quasi-reporting relationships
occur.
Product Marketing Manager Responsibilities
Following are some of the more usual responsibilities which product managers have in
consumer, industrial, service and high-technology businesses.
Set product line objectives for sales volume, market share, and profit targets.
Develop annual product line marketing plan.
Evaluate the product line marketing plan to ensure compatibility with overall corporate
objectives, plans and resource allocation.
Work with functional areas (i.e. marcom, production, research, etc.) to ensure the proper
implementation of the marketing plan (e.g. financial forecasting, sales, pricing, trade
show, and advertising programs).
Forecast sales and profit performance.
Develop and implement product pricing policies.
Establish marketing communications objectives and strategies.
Lead new product development, line extension, and market development activities.
Compile and interpret marketplace changes in customer, prospect, dealer/distributor, and
competitor arenas. Assess other developments which can signal threats or opportunities.
Manage the product line for long-term viability, growth and profitability.
Product Marketing Manager System Pros
Strong, on-going management and focus of product line.
Point of accountability for products.
Can become product-market interface experts; the “scouts” for market environment changes.
Bring management focus to problems and opportunities for the product line.
Play major role in development and execution of marketing strategies and tactics.
Integrate, facilitate and coordinate internal/external expertise in order to achieve
marketing objectives.
PMMs are the product lines “marketing subject matter experts”, providing marketing
concentration on the product line to provide executive management with key decision-
making information: profit potential, growth projections, resource needs, marketing plans
and strategies.
Product Marketing Manager System Cons
Fragmentation of the corporation can occur.
Competition among product managers for disproportionate share of resources; “my
product line myopia”.
Can add additional layer(s) of staff and costs.
Increased administrative complexity; more paperwork, plans and projects; bulky plans to
justify more resources than the next product manager.
“Nose to the grindstone” focus of product manager may lead to short-term profit
orientation and reduced willingness for risk taking.
The Product Management Organization Model
The Market-Management Organization
The Market-Management Organization. This structure is appropriate when
marketing similar products to diverse markets using different distribution channels. The
market managers have direct authority over such functions as product planning, sales,
advertising, and sales promotion. In situations where the market is relatively small in size and
scope, the market manager’s authority may be limited to personal selling, while marketing
communications and product planning are set-up as centralized functions.
The Market Management Organization Model
The Geographic Organization
The Geographic Organization. When products have limited shelf life or high
transportation costs, a geographic organization is often used. Examples of such products might
be milk or mattresses. This organizational model is not appropriate for O'Shaughnessy and will
not be discussed in detail.
The Strategic Business Unit Organization
The Strategic Business Unit Organization. This structure places divisions with
similar product lines and markets into strategic business units (SBUs) headed by group
executives. SBUs are appropriate where strategic issues are common to all the products and
services within the SBU and different from those of other SBUs. The SBU is appropriate to large
and diversified corporations. The product lines intended for similar segments of the same
market are brought together within the SBU. This is in contrast to the traditional approach in
which operating units are structured around product lines with similar product
characteristics.
The Strategic Business Unit Organization Model
Moving O'Shaughnessy from a Customer-Focused Technology-Driven
Organization to a Customer-Focused Market-Driven Organization
O'Shaughnessy can be characterized by its close relationship with its historic customer base.
Supporting this customer focus has been a technology/engineering/production view of how it
meets its customers needs. To succeed as a growing enterprise in a -fast-changing environment
on the information superhighway, it needs to move to a marketing driven engine, with the
marketing viewpoint suffusing all parts of the company.
What’s the difference? The following table shows that O'Shaughnessy is moving along the
technology-to-marketing driven continuum, but isn’t home yet.
Tactics Used By Excellent Marketers
What does O'Shaughnessy need to do to become a Market-Focused
Company?
Use market share rather than volume, as the primary measure of marketing success.
Share rather than volume requires a consideration of market potential (i.e. size,) when
setting priorities. Share removes the masking factor that volume disguises in a growth
sector.
Understand and use market-segmentation principles. Different segments require
different product-value-benefit mix packages.
Employ a process for monitoring customer needs, usage, and trends, as well as a
competitive activity, that is, market research. It is critical to stay abreast of
changing customer needs and habits as well as competitive activity in order to have
early warning of problems and opportunities for product or service modification.
Create a structure or process for coordination of all non-marketing functions
toward the achievement of marketing goals. How should you make trade-offs between cost
control and the provision of product quality? What processes ensure that there is
consistency between product and service quality? How are marketing priorities reflected
in non- marketing areas like product development and finance?
Set clear and specific marketing goals and targets
Shift to a corporate style and culture where marketing plays a pivotal role.
Marketing is a company’s window on the world. All parts of the organization need to
channel customer/market feedback in useful, non-anecdotal ways (i.e. information vs.
data).
Develop a market-based business concept that provides unique value to the
customer. What does O'Shaughnessy offer its current and future customers that sets it
apart from the competition, in a way that is relevant to customers’ needs?
What should O'Shaughnessy’s Marketing Structure Look Like?
That would be giving the secret away. Besides, consider this to be a marketing murder
mystery. You've been given the facts, clues, and irrelevant information. We hope
you've found this report informative, thought-provoking, horizon-broadening, or at least
mildly entertaining.
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