Marketing dept. organization is destiny

February 18, 2002

BY MICHAEL KRAUSS

Years ago I worked with a diversified food products company. Our marketing department had a dry grocery group, a poultry group, a processed meats group and a dairy group, and people really didn't talk with anyone outside their own group. Salary and promotion were based on making your product sales numbers. The only problem was that each of our groups sold to the same retailers -- Kroger, Safeway and Pathmark, to name a few -- and not all of our product lines were equally profitable.

So we reorganized the marketing department. For a while things got better, but then old habits re-emerged.

These days, marketing departments are reorganizing again, and more: We're downsizing and trimming budgets. Marketers don't usually spend a lot of time talking about the theory and practice of organizing, beyond gossiping about who's getting promoted and who's out of favor.

Organization structure just isn't interesting to most marketers, but it ought to be.

To get a better understanding of the issue, I spoke recently with Mohanbir Sawhney, McCormick Tribune professor of electronic commerce and technology at Northwestern University's J. L. Kellogg Graduate School of Management in Evanston, Ill. Sawhney agreed that technology offers marketers leverage as they reorganize and can help integrate a diverse marketing department.

Still, I wondered if there are guidelines regarding how the marketing department should be organized. Think of all the possible ways we design our businesses and departments:

• Around products -- Product marketing is possibly the most fundamental form, whether it's Ivory soap or Palm personal digital assistants.
• Around brands -- Intel's marketing is famous for branding.
• Around categories -- Arranged by detergents or computer peripherals, say.
• Around markets -- A leading telecommunications company organizes around the small business market, for example.
• Around geography -- By area and region, for example.
• Around parent or subsidiary -- Some companies have corporate marketing groups and subsidiary marketing groups.
• Around function -- Customer care, promotions and market research, for example.
• Around customers -- Sawhney reports that, "P&G has a marketing unit just for Wal-Mart."
• So here are some thoughts to consider when organizing, or reorganizing, a marketing department:
• Customer first. The primary driver. Adopt an organization structure that best serves the buyer.
• "IBM Global Services is moving in the right direction," Sawhney says. "(Its) whole organization is geared to serving customers in specific industries. Schwab does a decent job in organizing (itself) to serve customers without regard to what products they may buy or the channel through which they access the company."
• Keep the overlay units. Overlay organization structures shouldn't go away; they're beneficial. A typical company will still organize marketing as a matrix. The pitfall is to avoid anything that distracts from a customer focus.
• Misapplied technology, for example, can be a distraction. In the dot-com craze we focused more on Internet technology than on the customer's true needs and set up separate Internet marketing units. Falling in love with our products can become a problem, as can too heavy an emphasis on functional structures, such as advertising groups or pricing departments. You need these functions but they have to be organized and integrated around serving customers.
• Use technology to link decision-making. Groupware technology, knowledge management techniques and other IT systems can provide the glue to build a multifaceted marketing organization around customers.
• In my old food products company, for instance, we lacked the means to share information in real-time; that's no longer the case. While it's expensive, organizations today can install systems that can unify a diverse organization. A tool as basic as e-mail can be a step in the right direction.
• Reinforce structure through compensation. People behave the way they are measured, so make sure you reward performance that serves the overall customer relationship.
• "There may still be a product marketing organization," Sawhney says, "But people should be rewarded based on how the customer account does." I agree.
• People are the real mechanisms through which links are established. While technology can help, success still comes down to the individual, so hire people who are collaborators.

"The marketers with the most impact," Sawhney says, "are the people who understand the points-of-view of their counterparts." Hire people who are "better at managing connections than managing objects," he adds.

When I think back to those days in that old food products company, I realize a lot has changed. Technology has given us an opportunity to redefine our strategy to cross-sell products and optimize customer relationships. We need to make sure our marketing organization structure doesn't lag behind. My advice is to spend time talking about it.

Michael Krauss is a partner with Chicago-based DiamondCluster International. He can be reached at michael.krauss@diamondcluster.com or news@ama.org.