FUNCTIONAL ORGANISATION
Functional
Organisation
In
the functional organisation, various functions performed as part of the overall
marketing function are the basis for organising the marketing set-up. Each
function is assigned to a specialist who reports to the marketing manager. The
most common functions in marketing are:
-
Sales
-
Distribution
-
Advertising and Sales
Promotion
-
Marketing Research
Marketing Information System
-
Dealer Development
Customer Service
-
New Product
Development
-
Marketing Planning
It
is possible that in your firm you may be using terms different from these to
describe various functions. You will be able to identify the functions according
to the terms used here once you have gone through the description of each
function. Moreover depending on the nature of product, service or industry to
which you belong you may have some functions not described here. For instance,
in a bank, public relations would be an important marketing function.
In a small firm, all these functions may
not be individually identified and differentiated, even though they are
actually performed. All the functions may be handled by just one or two
individuals, who are `jack-of all trades' rather than specialists in any
particular function. But as the firm grows in size, it becomes imperative to
differentiate and delegate the functions to separate individuals. One man can
no longer perform all the functions, and even if he can, he would not have the
necessary skill or knowledge for it.
Figure-I : Functional Marketing Organisation
All
the functional specialists report to the marketing manager who has overall
responsibility for marketing. Depending on the relative importance of each
marketing function to the overall effectiveness of the marketing organisation,
a function may either be organised separately or clubbed with another function.
Further, the organisation of each marketing function within the overall
marketing organisations may vary from firm to firm. Figure I depicts a
typical functional marketing organisation. We shall now discuss the various
options available for organising each of the marketing functions within the
functional marketing organisation.
Sales: The Sales function is
performed by a team of sales people who are responsible for actually selling
the product or service. The product may be sold directly to the actual
customers and this is known as direct sales. Or else the. product may be sold
to distributors, wholesalers, retailers or other middlemen, who in turn sell to
the actual customers. This is known as indirect selling. A firm may sell either
directly or indirectly or use a combination. We shall discuss indirect selling
in the following section while here we shall confine ourselves to direct selling
through company sales force. There are three basic methods in which the sales
force may be organised: geographic division, product division and customer or
marketing channel division.
It is wise to have the sales force
organised on a geographical basis when the area of sales coverage is very large
and there are marked differences in the market and buyer characteristics in
each area. The entire market is divided into regions or zones and each region
has its own sales force. Such an organisation implies geographic division of
authority and decision-making. This type of sales force organisation is very
widely used and is effective when there is a single product or a range of
similar products to be marketed to many geographically scattered markets.
When
a firm has a wide range of products, each significantly different from the
other in terms of its physical and/or technical characteristics, the sales
force is usually organised around each distinct product or product group. The
basis for differentiating the products may be the technical process involved or
the customer characteristics so that the salesman's specialised knowledge
of technology or the customers can be efficiently used. Thus there is a
separate sales force for each product. (See Figure II). Johnson and Johnson Ltd.
in India markets a range of baby care products (soap, cream, oil, lotion) and a
range of surgical sutures and meshes, the latter marketed by the Ethic
division. The two product ranges are marketed by two separate divisions each
having its own sales force.
Figure-II : Organisation of Sales Force on Product
basis
Another
basis for organising the sales force is the different customer groups served or
the marketing channel used to reach the customers. A company marketing
television sets has two distinct sales teams. One team serves the distributors
and wholesalers (who in turn sell to the individual customers) while the other
team is engaged in selling to institutions such as hotels, schools, and
universities which buy in large numbers. The company finds it useful to have
this distinction because the methods and channels used for selling to these two
customer groups are totally different. Many companies also find it useful to
have separate sales teams to sell to the private sector and to the public
sector and government bodies.
A
company manufacturing computer peripherals, printers, pen drives, memory chips,
and consumable items such as magnetic tape has one sales team selling to
original equipment manufacturers (OEM) who use these items in assembling their
own branded computer, and another sales team selling to computer retail outlets
such as Computer Point, Computer City, which retail these individual items on
per piece basis.
Many
companies use a combination of above basis for organising the sales force. At
the head office level, the sales team may be divided on a product basis, but if
the market is very large, the team may be further sub-divided on a geographic
basis. Thus, there is sales specialisation at the product level as well as the
market level.
Distribution: Distribution refers to the physical movement of goods from the
factory to the customers. In organising the distribution function, the
objective must be to find the least-cost physical distribution method which
allows you to service your customers in the most efficient manner.
There
are three most common types of physical distribution organisations. The first
is where the company has one plant and delivers to a single market. In this
case the plant is usually located close to the market, the godown/warehouse is
next to the plant and the cost of distribution is relatively low. Examples of
this kind can be found in case of perishable foods and confectionaries, such as
bread.. The company may use its own sales force or distributors who in turn use
wholesalers and retailers to reach the actual customers or a combination of
both distributors and own sales forces.
In
the second type, there are many geographically far flung markets which
are served from one plant. The manufacturer can choose to ship directly to
customers in each market, appoint regional or town level distributors, set up
own godowns and branches in each important centre or use a combination of any
of these.
The
third case is where there are multiple plants catering to multiple
markets. The two problems in this situation are (i) those of minimising the
transportation and the stock carrying costs at the current level of facilities
and (ii) the long-term problem of deciding whether the combination of existing
godowns and distribution centres is the most cost-effective one.
At your end, you have to take decisions
regarding the number and location of godowns, type of transportation to be
used, strength and role of sales force. The decision regarding sales force has
to be taken in relation to the type of intermediaries available. There are
wholesalers, stockists, distributors, commission and freight (C & F)
agents, who can act as middlemen for moving your product from your godown to
the final customer. The combination of intermediaries varies from company to
company, and may also vary within the same company, for each product and each
market.
Advertising
and Promotion: There are many
objectives for which advertising may be used. Some objectives are long-term and
their scope is wide enough to include the entire operations of the firm. Other
objectives are short-term and have a limited scope and coverage. Most firms
divide their advertising budget into two parts; one part (and often the larger
part) is reserved to be used by the head office for achieving long-term or
corporate objectives. This part of the budget is used for advertising in
national media such as television and magazines such as India Today. Some of the corporate
objectives may be building corporate image, creating brand image at the
national level, capturing a specified share of the national market. Thus, a
large part of the advertising is planned, controlled and executed by the
corporate office. The branch offices may be given a certain budget and
authority which they can use for advertising in local newspapers, local radio,
local hoar-dings etc. The branch offices may also have freedom to undertake
some local level sales promotion such as providing signboards to selected
retail outlets, and holding display contests. This is the most commonly
observed pattern of organising the advertising .Function, but there can be many
variations.
Marketing
Research: In many companies,
marketing research is organised along the same lines as advertising. The major
chunk of research activity is centralised at the corporate office and the
branch offices have the freedom to undertake only some local level research. In
a country like ours, where most market research organisations are located in
the major metropolitan cities, allowing the branch offices located in small
towns to initiate local research is rather irrelevant simply because there
exist no reputed research organisations in these towns. Thus for all practical
purposes, the entire marketing research function is usually organised at the
corporate office.
Marketing
Information System (MIS): MIS refers to the
system of collecting, processing and using information which helps improve the
quality of decision-making in the area of marketing. The basic processes are
collecting, processing, maintaining and using information. There are three
ways in which MIS can be organised.
In the first method, the role of the branch office is
restricted to collecting and passing on the required information, which is then
processed and maintained at the corporate office. The relevant information,
reports and analyses are passed on to the individual branch offices and the
rest are maintained in a master file for future use.
In the second method, the branch office not only collects
but also processes the information which it has collected. After processing,
all the relevant and critical reports are passed on to the corporate office.
However, all information files and records, collectively known as the data base
are maintained at the head office.
In the third method, all the three tasks of collecting,
processing and maintaining information, are decentralised at the branch level.
The head office receives regular reports and can requisition any additional
information that it requires.
The use of computers and introduction of real time information
systems and networking has greatly increased the efficiency of MIS,
irrespective of the manner in which it (MIS) is organised.
Customer and
Dealer Relations: This is rather a
broad-term and may include activities such as after sales service, and
development of new customers, markets, and dealers. The specific activities
included under this head would vary according to the nature of product and type
of distribution channel which the firm has. In terms of organising this
function, it is usually decentralised since efficient servicing of the
relationship requires proximity to the customer and dealer. But the manner of
servicing the customer/dealer may be strictly defined by company policies,
guidelines and procedures.
New Product
Development: This is probably the
most critical function for a company which wants to be in business five, ten
and fifteen years from today, and yet it is often the most neglected function.
The reason for this is that most companies are organised for today and not for
the future. New product development requires vision and foresight and the
ability to take risks. It requires an organisation in which new product
development is recognised and organised as a separate activity and allocated
resources but the expectation of results is not specified.
It is not enough to merely create a .research
and development cell. At the most it may produce some technical improvements or
modifications in the product. But unless there is a marketing person involved
with the R & D, you cannot expect a new product which would satisfy
customer wants. Ideally the organisation for new product development must include
marketing people who have thorough knowledge of market and buyer
characteristics.
One
way of organising for new product development is to totally segregate the
organisation for existing and new products as shown in Figure III.
Richardson Hindustan Limited (engaged in manufacturing and marketing the Vicks
range of products and Clearasil cream and soap) is organised on the basis of
product teams. Of the total of 20 product teams, only 8 work on the existing
products, while the remaining 12 work on new products.
Figure-III : Organising for New Product Development
Marketing Planning: This includes activities such as forecasting, target setting,
budgeting, establishing control and review procedures, and strategy
formulation.
Sales
targets are usually set on the basis of market knowledge of the sales staff combined
with the top management's vision for the future. Each area salesman provides
feedback on the potential in his area and the competitor's strength. All this
data are compiled into a area-wise target plan which is discussed across the
table between the marketing people and the top management.
Budgeting
and establishing control and review systems have traditionally been the
exclusive preserves of top management. The budget for the coming year is based
upon last year's budget with a certain percentage increase to account for
inflation and genuine increase in expenditures. The middle and lower levels of
management have not much to contribute in this kind of budgeting exercise, But
the introduction of zero-based budgeting has changed this. In zero-based
budget there is no historical precedent to base the budget upon. Each
expenditure head has to be justified afresh for inclusion in the budget, since
the last year's expenditure on this head is assumed to be zero. The entire onus
is on the operating managers for preparing and justifying expenditure heads.
In
strategy formulation, top management requires the active participation of the
marketing people in term of their feedback on success of present strategy,
competitors activities, and consumer tastes.
Thus, the functional marketing organisation
is based on the different sub-functions performed as part of the overall
marketing function. The manner in which each sub-function is organised varies
from one company to another, depending on the unique combination of internal
company attributes and external environmental factors.
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