Conditions of marketing leadership

« There is probably no marketing plan in industry

today that is not out of date. If sales are to keep

pace with technological progress, management must

meet the three essential . . .

Conditions ofMarketing Leadership

By Arthur P. Felton

A tremendous number of companies are ex-periencing marketing difficulties these days.Businessmen know this. Consultants are madekeenly aware of it because so many of the prob-lems management gives them are marketingprohlems. Many consumers do not need to betold that companies have troubles in this area,for they have been on the "reeeiving end" ofthem — service difficulties, for instance.

But as we look ahead, the prospect is that busi-ness will have even more marketing difficultiesnext year, more still five or ten years from now.For technological progress is still outstrippingmarketing progress, and the peculiar nature oftechnological progress today is making the mar-keting job harder.

Take automation, for example. As James R.Bright recently pointed out in discussing its im-pact on management in this magazine: "Themarketing man is going to have to be very rightor else he may have nothing to eat but a streamof unsalable products." ' Indeed, in the yearsahead we will probably see marketing becomea more challenging problem than it has ever beenin our industrial history, even though over-allsales volume eontinues to inerease. It will beeasier to make things but not to sell them.

It is quite true, of course, that marketing isnot standing still. \^e have come out of the dol-drums of the 1940's. Companies are experi-menting with new methods and techniques —

' James R. Bright, "Thinking Ahead (Some Effects ofAutomation)," HBR November-December 1955, p. 27.

motivation research, better sales training, vari-ous kinds of market audits, and so forth. How-ever, none of them offers anything in the way ofa basic solution to the marketing problem. Noneof them would relieve the real difficulties whichso many companies are getting themselves intotoday, although they might prove very usefulonce other steps are taken.

Three Essentials

Judging by the experience of a wide range ofcompanies with all sorts of marketing problems,there are three essential conditions of marketingleadership — and they are becoming increas-ingly important:

(1) Top management must recognize that thenature of the marketing problem is fundamentallydifferent from the nature of the production prob-lem. This fact has vital implications for (a) ex-ecutive selection, (b) marketing strategy, and (c)sales organization. Failure to take the differencesinto account has got countless companies into seri-ous trouble.

(2) Management must recognize the dynamicquality of the marketing problem — all the con-stant change that is continually occurring not onlyin the market but also in channels to the market.The change is so continuous and so widespreadthat it makes every sales plan in the country out ofdate to some extent. Failure to grasp this point,perhaps more than anything else, has kept com-panies from getting out of sales trouble when theymight otherwise have succeeded.

(3) The crying need in marketing managementtoday is for greater conceptual skill — the ability

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118 Harvard Business Review

to see the enterprise as a whole and to understandhow the various functions of the company and itssales organization depend on one another.^ Thespecialists who devise techniques and conductstudies have been "going to town," but the generalmanagers have not.

The tendency has been to think in terms offormulas such as "working back from the market"or in terms of a particular group such as the distrib-utors, rather than to consider all parts of themarketing problem in relation to each other and tothe rest of the company — for example, executiveresources, productive capacity, and procurement.

The aim of this article is to describe the natureof these conditions in more detail and show howthey can be met.

Marketing vs. Production

How do companies get into marketing diffi-culties? In all the cases with which my asso-ciates and I are familiar, ranging from smallcompanies in the paper industry to large com-panies in the steel industry, certain causes keeprecurring with almost demoniacal frequency.

One such cause is the failure to recognize thatmarketing calls for a different executive temper-ament than does production. A factory-trainedexecutive usually follows a logical line of reason-ing that works best in factual situations. By con-trast, sales executives must often think with onlyintangibles as a guide. In general, they are notaccustomed to a clinieal or analytical approach.Although successful sales executives are prac-tical men, with push and drive to get thingsdone, they typically count more on an intuitivefeel for situations than do executives in otherdepartments.

The rules that work in selling are just not thesame, in letter or in spirit, as the rules thatwork in other business areas. It is in companieswhere this fact is not appreciated that we oftenfind production and financial influence to begreater than marketing influence. Sooner orlater that situation usually leads to poor or un-profitable sales, large pile-ups of obsolete inven-tories, and high administrative overhead.

In addition, the physical aspects of a market-ing problem are different in many respects fromthe physical aspects of a production problem.The four walls of the plant may bound a prob-lem in manufacturing but scarcely ever do theyconfine a problem in marketing. Machines, ma-terials, and skilled men are the usual elements of

a production problem; but the uncertain atti-tudes of distant consumers or industrial buyersmay dominate the marketing problem. There arenot as many facts and figures in marketing as inproduction.

Moreover, the data that do exist are not soeasily controllable, nor can they be checkedso easily. Perhaps more important, it has notbeen customary for marketing men to make thebest use of their data; the sales executive worksin the midst of quite different eurrents of think-ing than does the factory superintendent or in-dustrial engineer who works in a tradition of sci-entific management and careful methodology.

Red Flags

When management fails to recognize the im-portant differences between marketing and pro-duction, and particularly when the productioninfluence becomes stronger than the market-ing influence, telltale symptoms of "production-mindedness" soon become evident. Here are afew of them:

1. Designing in isolation — There may be atendency to believe that a couple of smart peoplecan design products and packages in a shelteredlaboratory, run as a wing of the production facili-ties — without regard to the often-learned lessonthat the artists and designers can and should besupplied with market facts. For all their ability,the creative geniuses cannot insure acceptance byconsumers or industrial buyers unless they takeinto account people's habits, motives, and feelings.

2. Avoidance of consumer research — Atti-tudes about consumer research are an especiallysensitive indicator in industries which are severalsteps away from the consumer, and in which itmight seem plausible for manufacturers to leaveit up to retailers, wholesalers, and jobbers to learnwhat their customers want and to pass this informa-tion back. In fact, this attitude was once prev-alent in virtually all industries producing primarygoods, but some of them — notably steel, asphalt,and chemicals — have now come to the conclusionthat distributors either will not or cannot do thejob for them, and so they have gone into basicmarket research themselves. They reason that iftheir customers down the line do not sell end prod-ucts, they will not buy raw materials.

However, not all such industries have comearound to this point of view. The textile industry isa well-known example. There is some well-in-formed opinion to the effect that textiles would not

' See Robert L. Katz, "Skills of an Effective Administra-tor," HBR January-February 1955, p. 33.

have run into so much trouble in the postwar yearsif they had not taken a "let-George-do-it" policyabout consumer research.^

3. Misdirected advertising—Too much pro-duction influence in the company's marketingeffort usually shows up in advertising copy. Is itaimed at the industrial buyer or consumer, which-ever the case may be, or does it glorify the com-pany's research and engineering effort? Compareautomobile advertising, generally a good example,with textile advertising, all too often a bad one.The automobile ads aim to make last year's modelobsolete in the consumer's eye; by contrast, duringthe recent "battle of the fibers" the manufacturersof wool, cotton, and man-made fibers, instead oftrying to make wardrobes seem obsolete, vied withclaims of longevity and durability.

4. Inadequate market investment — Anothersymptom is insignificant expenditures for develop-ing consumer markets in comparison with tremen-dous sums spent on research, cost reduction, andnew plant and equipment. Thus, when the canmakers first attempted to get the public to use beerin cans rather than bottles, they spent huge sumsdeveloping the can but left it up to the brewers todo the selling job — and no progress was made.It was only when a leading beer-can manufacturerstepped heavily into consumer promotion based onpreference studies that buying habits were revolu-tionized.

Perhaps what all this adds up to is a plea fortaking a fresh look at the complexities of mar-keting. One who goes from company to com-pany and from industry to industry working onmarketing problems is continually impressed —or, more accurately, appalled — by the tendencyamong executives everywhere to simplify, to re-duce to rules, or (using one of their favoriteterms) to try to "engineer" a sales program. Thisis nearly always fatal. Systematic thinking —yes. Efforts to analyze a problem — yes. Butthe attempt to apply to marketing what hasworked in production (or, for that matter, infinance) — no.

Why should management underrate and he-little its job? Marketing is an area for awe andwonder. It is full of questions, unsolved prob-lems, and baffling inconsistencies. It is domi-nated by the whims of consumers and the fanciesof buyers. When management recOgnizes mar-

' See the editorial in America's Textile Reporter, Junea4, 1954-

' The Editors of Fortune, The Changing American Mar-ket (Garden City, N. Y., Hanover House, 1955); see alsoPierre Martineau, "It's Time to Research the Consumer,"HBR July-August 1955, p. 45.

Marketing Leadership 119

keting for what it is and then proceeds to try tomaster it, the credit for a job well done is thegreater because the job is more difficult.

Change & Counterchange

There is probably no marketing plan in indus-try today that is not out-of-date. This may seemlike a startling statement, but we actually havenot been able to find any exception to it. Thereason is that there are so many constantlychanging factors in any company's marketingsituation that it is practically impossible to keeprevising a plan so rapidly and so accurately thatthere is no lag in it. The factors that keep a plandated are not only those of the "changing Amer-ican market" which Fortune and other publica-tions have discussed — suburbia, the new mid-dle class, the Negro market, etc.* The datingfactors have also to do with changing sellingproblems growing out of the major upheavals —shifts in consumer psychology that necessitatedifferent kinds of advertising and packaging,trends in distribution that affect the company'srelations with wholesalers and jobbers, changesin the "customer mix" that affect the efficiencyof the sales organization, and so on.

The practical significance of the foregoing isthat if management does not have a carefullythought-out marketing plan, or has a programbased on insufficient facts, or — worse yet —has no real plan at all, the company's sellingeffort may fall dangerously out of phase with thetimes and may precipitate a company crisis. Whatare the most important steps management eantake so that this will not happen?

Long-Range Objectives

The keystone of a strong marketing plan —the part of the program on which all the othersdepend — is a long-range objective. It is diffi-cult to overemphasize the importance of thiscardinal principle. Many companies find them-selves in the position of not knowing where theyare going and of having only vague ideas as tohow to get any\vhere. These companies rockalong from month to month taking expedientaction for each prohlem. The sales departmentconsequently rides from one crisis to another —and nothing is done to determine the underlyingreasons for the crises.

Why does all this happen in the absence ofobjectives? The reason is largely human nature,and especially "executive nature." Managers are


opportunistic, and unless counteracted their op-portunism tends to dominate decision making.Sales managers and salesmen seek to capitalizeon short-run deals and on tempting but (as it sooften turns out) only transient markets. Beforelong the sales organization is confused and un-wieldy; the company is committed to too manyprojects, many of them fast becoming abortive;and production costs are rising because produc-tion is spread too thin or becomes out of balance.In effect, there is wasted effort in sales, whichcauses wasted effort in other departments of thecompany. The sales managers call louder, "Let'sget out and make calls, men," and the men spintheir wheels doing it. To illustrate:

€ A manufacturing company that had specializedfor 45 years in the production of certain kinds ofengine parts began losing business when its jobbersbegan turning to competitors ofFering wider lines.(Also, a competitor had found a way to make oneof the parts automatically.)

Without formulating a long-range sales plan,management began a vigorous search for businessin other lines. Orders were approved for manyitems whicb the company had not made before; ifthe new business looked profitable, and if produc-tion could find some way to get it out, the customer'sorder was solicited. In effect, the company triedto be all things to all people. However, it turnedout that the plant was not equipped to make manyof the new hnes well or cheaply enough. Bothproduction and sales costs rose to dangerous levels.

In reorganizing the strategy of this company, theemphasis was put on concentration. What sectionsof the market was the company best equipped tosell to? What specific objectives in certain areascould the sales force best be set up to reach? Onlywhen a marketing plan with long-range objectiveswas developed in such a manner could the companymove back into a strong profit position.

Here it is important to stress that objectivescan be stated in more ways than in terms of salesvolume. For example, management's No. i ob-jective may be to become the quality leader in itsfield — and advertising copy, public relations,and the selection of new business may be gov-erned by that criterion. (A management pursu-ing this kind of an objective knows full well, ofcourse, that sales will eventually follow a reputa-tion for quality; at the same time, the market-ing history of such a company will develop quitedifferently from that of the company which setsas its objective becoming the leader in sales vol-ume.) Objectives can also be translated intospecific tactics. To illustrate:

C Last year it was announced that Indian HeadMills would spend $300,000 to advertise a table-cloth-making project, urging people to go to theirneighborhood stores and request two yards of IndianHead's fabric. While management expected to sellenough fabric to justify the cost of the campaign,and accordingly set quotas high enough to do so,the objective was not just to sell tablecloth fabric.Management's main purpose was to solidify IndianHead's leadership in textile merchandising, in thiscase by initiating the largest single promotionalcampaign in piece-goods history.

In addition, management knew that the cam-paign would sharpen up the "pitch" of companysalesmen; they could refer to tlie numbers of peoplegoing into stores to request Indian Head and capital-ize on the story to sell industrial buyers. In short,part of the objective was to gain dealer cooperationby a tie-in promotional campaign rather than topromote the company name through an institu-tional approach. This is the kind ot' shrewd tacticthat only a management with its longer-range ob-jectives clearly in mind is likely to seize upon.

Whatever its objectives, a management willprobably want to set dollar-volume goais — forpurposes of control, if nothing else. Progressivecompanies today are setting goals at least fiveyears in advance and then programing sales ob-jectives for each year. These objectives not onlyshould be stated in total dollar sales and totalunit sales but also should be subdivided by spe-cific products and product groups — and evenby number and type of distributors needed toachieve the objectives.

Why all this detail? One of the most impor-tant reasons has to do with changing markettrends. Specific ohjectives make it possible tocheck the sales performance of each product(and distributor). A product's failure to live upto expectations may be a danger signal — thefirst sign that there are new consumer trendsaffecting design or general suitability, or the firstsign that there are new selling problems withimplications, say, for the sales or service organ-ization. Maybe product B increased only 10%instead of 20%, but product C increased 30%against an expected 20%. In both cases, it isimportant to know why; "management by excep-tion" should work both ways.

"Central Intelligence"

All of us are familiar with the hackneyedphrase, "Know your market." But we sometimestend to think of the market only in the staticterms of the dictionary sense of the word. "Mar-

ket" should mean to us not only today's custom-ers but tomorrow's and those we Avill have ini960; not only today's price but also the likelyprice (and quality) four years from now; notonly present methods of reaching customers butalso the methods we will be using wben currentliving and working tremh become establishedhabits.

It is because there are so many constantlychanging factors in sales that market informa-tion is the problem that it is. Often managementgets into trouble — or cannot get out of trouble— simply because of its data. The data are notaccurate enough, timely enough, or well enoughorganized to allow executives to realize the fullsignificance of changes which have occurred orare in the making. To illustrate:

V The managers of a company making an auto-motive product received many reports each monthon total sales of their own products and of auto-mobiles. No direct action was ever taken on thebasis of the reports, however, although they wereread "with interest." Then management got theidea of making the reports specific and, more im-portant, of showing the figures "in motion." Newreports began going out revealing tbat within totalcar sales of all makes, sales of model X were hold-ing their own, sales of model Y were decreasing,but sales of model Z were rising.

When the managers saw these consumer prefer-ence trends, they really sat up; Z was what theircompany was best equipped to manufacture partsfor! Moreover, when price trends were portrayed,it appeared that the company eould realisticallyshoot for a larger share of the market if tbe sellingprice could be reduced about 10%. Managementcut its price on the basis of increased volume ex-pectations and a determined cost-reduction pro-gram — and this turned out to be a very success-ful move.

Judging from industrial records and actualcompany case histories, it is hard to escape theconclusion that most firms do not know theirmarket very well. Granted the data may not behanging out in bunches ready to be plucked, butgood market data can always be obtained. Oftena rich source is government and trade associationreports, and it is unfortunate that more manage-ments do not take advantage of them.

For instance, a manufacturer of woolen goodswho wants to size up the market for his fabriclines can use information compiled by the De-partment of Commerce, National Association ofWool Manufacturers, National Outerwear Asso-


ciation. Dun & Bradstreet, National Credit Of-fice's Market Planning Service, Fairchild Pub-lications, and several confidential trade sources.All of this material, except for the last of course,is published.

Forecasts are another good example of mar-ket data relatively easy to get — in almost anyindustry. According to a recent Federal ReserveBoard study, 437 trade associations provide somesort of economic or statistical information fortheir members; over 250 of these associationsregularly assemble and disseminate informationon the future prospects of the economy, the in-dustry, or both.

More often the trouble is not so mueh lack ofsources as lack of imagination and skill in theuse of sources, including tests of the representa-tiveness of samples and chcckhacks of resultsagainst predictions. For example:

« In the case of a firm making a product for in-terior decoration, an important factor in the marketnaturally was the number of interior decorators.In a market study, management turned to theCensus, which indicated that there were some1,300 interior decorators. According to this figurethere was not a great deal of room for increasingsales of the present line, so the management, beingaggressive, decided tentatively to branch into newproduct lines.

As subsequent events showed, this would havebeen a sad mistake. But, fortunately, the manage-ment did what few managements do: it had a moreprofessional survey made. By just taking the fur-ther steps of checking the circulation data of aninterior decorators' magazine, talking with an in-formed credit service, interviewing company sales-men, and making a spot mail survey, it was learnedthat there were actually 9,700 interior decoratorsand that they spent some $75 million a year forthis product alone. The company's biggest andbest market for expansion was the one it was al-ready selling!

Distribution Trends

Nowhere is constant change a more impor-tant factor to watch than in a company's chan-nels of distribution. These will be periodicallyreviewed by alert managements, and moderntechniques of distribution cost analysis will beused to aid in making policy decisions. Some-times new trends will operate in the company'sfavor, sometimes not; but always there are in themaking trends which do affect sales and profits,and because it is impossible to keep any plancompletely in pace with them, it is never correct


to say that "our marketing effort is more than90% efficient." To mention just a few of thepossibilities for ehange:

(1) The company's market may be changingfrom a few relatively large customers in a concen-trated area to several thousand smaller customersall over the country, with the result that the exist-ing distributor setup is becoming less efficient. Inthe case of one company where this recentlyhappened, the trend was so pronounced that itled to hundreds of thousands of dollars' worth ofobsolete inventory, heavy markdowns, and a sharpincrease in administrative overhead.

(2) Distributors' lack of merchandising abilitymay emerge as a decisive factor in the market.Television is a case in point. Last year over 7million television sets were sold (•jVz to 8 millionaccording to one source); yet many manufacturers,notably medium-size firms, were forced out ofbusiness. Tbe larger companies were able to spenda good deal on advertising and promotion, and someten heavily advertised makes became well known tothe public.

The key is the faet that the distributors wereable to sell the well-known sets, hut lacked themerchandising ability to push the lesser-known sets.With the "squeeze" on to sell, distributors concen-trated on the big ten and left many other makersstranded. Significantly, some of the medium-sizemanufacturers did do well in certain localitieswhere there happened to be a larger number ofgood distributors.

(3) Many progressive distributors, wholesalers,and retailers are tending to concentrate purchaseswith a few suppliers. For manufacturers dealingwith these outlets, the trend means that manage-ment must either offer a complete and well-pro-moted line or else risk having to turn to other —and probably less progressive — distributors.

Some sales executives have become so deeplyinvolved with one method of distribution thatthey overlook the possibilities of other methodswhich, though once inappropriate, are now moreclosely attuned to the company's needs. Oftenthe answer is not a single method but a combina-tion of methods. Thus, one large manufactur-ing company that recently found it could nolonger afford to service a large percentage of itsretail accounts has turned away from traditionand carefully seleeted several distributors tohandle a large volume of small repetitive ordersat an attractive discount — and at lower cost tothe manufacturer.

In fact many companies today are in a posi-tion to undertake what they might consider "rad-

ical" approaches to distribution. For some firms,such approaches might be house-to-house sellingor direct selling by mail; for others, merchandis-ing nonfood products through supermarkets,rack jobbing, or allowing supplementary salesorganizations to sell the company's regularproducts under different brand names (a policywhich, new studies show, may be more prac-tical than many businessmen are inclined tothink "0.

Retailers, too, are looking for better sellingtechniques. One large cha-n of building-supplyoutlets has found that a self-service retail lum-beryard offering a complete line of home-huild-ing and repair products direct to home ownerscan he quite successful under certain marketconditions — another reflection of the do-it-yourself trend. It is too soon to pass judgment onmany of the specific new approaches in market-ing, but let us look at some of the possibiUtieswhich an imaginative executive group mightconsider:

(1) In most states of the South, school buyingpractices have forced publishers to centralize theirwarehousing operations in "book depositories." Allpublic schools and other educational institutionsorder and receive from this one control point. Thebook depository performs all the functions of awholesaler or a branch operation except owningand actually selling the merchandise; it receives andstores merchandise, controls the inventory, receivesand processes orders, packs, ships, invoices, andcollects.

Some alert manufacturers are considering anadaptation of the book-depository idea to their ownneeds, particularly where individual volume is notsufficient to warrant a branch warehousing opera-tion. The obvious economies in paper work aresupplemented greatly by economies in warehousingand handling. Much special-purpose equipment(lift trucks with special clamps, for instance) canbe justified because of the greater volume. Themanufacturer can reserve for himself any functionsthat he wishes (invoicing, for example, to keepprices confidential).

Small or medium-size manufacturers of appli-ances, automotive parts, and home furnishingsmight well look into this idea of specialized ware-housing. Its main limitation is that it is not alwayseasy to get together manufacturers of similarenough merchandise.

(2) There is, in many industries, an increasingtrend toward the use of specialty jobbers. Thesejobbers, who are sometimes set up with the backing

" See Ross M. Cunningham, "Brand Loyalty — What,Where, How Much?" HBR Jan.-Feb. 1956, p. 116.

of a single manufacturer in the early stages, handlea narrow range of products — in some cases, theproducts of only one manufacturer. In one case, amidwestern manufacturer got, as a captive specialtyjobber distributing its products exclusively, a manwho had formerly distributed 4,500 items of n omanufacturers.

More and more companies are becoming dissatis-fied with the mediocre sales effort of distributorswho are spread too thin. These companies areselecting the outstanding men with the importantcontacts and setting them up as specialists in theirown territories. Granted, the specialty jobber willmake a good living on perhaps just one account;but the manufacturer will benefit from the in-creased profits that will come from the intensifiedsales effort of a topnotch representative.

In some cases, management might find theanswer it is looking for in specialized warehousingand specialized jobbing.

(3) Another interesting approach tried recentlyis the automobile supermarket. A large dealer inthe Midwest is offering — for drive-away delivery— any model of any make of car, at bargain pricesand with a full guarantee. With the increasingpractice of preselling merchandise through nationaladvertising and sales promotion, at least one schoolof thought believes that there is very little need forspecialized sales training of retail personnel. It isfelt that a large percentage of prospective customershave been sufficiently presold so that much "shop-ping" comes down principally to a comparison ofquality and prices.

The automobile supermarket offers the buyera chance to compare, at one location, all his alter-native choices without visiting a myriad of show-rooms. This is, in essence, an open-air discounthouse. The supermarket owner claims that hishigh turnover and low overhead justify his lowprices, and his volume is so great that no manu-facturer can afford not to sell to him.

Merchants experienced in selling reasonablyhigh-price merchandise with a high gross marginmight well consider applying the automobile super-market principle to those of their own productswhich are presold at the national level.

Sales Organization

To a certain extent, every sales organizationis created on the basis of the past experiencesand prejudices of top officials. It has to be. Butwhen these influences completely displace ana-lytical judgments based on present-day marketfaets and anticipated future trends, the firm'smarketing effort is almost certain to suffer. Asselling conditions become more fluid in theseyears of a growing population, greater consumer


spending power, and other "accelerators" ofchange, and as production tends to become moreinflexible (at least on a short-term basis) becauseof automation, the importance of analyticaljudgments in organizing the sales effort willincrease.

The unsound sales organization is commonlyfound in companies where it is headed by a salesmanager who was hired from another industryin which he was successful. He tends to imposea similar plan of organization in his new sur-roundings, overlooking the fact that the formerplan was for a different industry, different prod-ucts, or different marketing conditions. Trans-planting set ideas is not tbe answer to the prob-lem of building a good sales organization.

Where the nature of the marketing problemis such that, say, quick decisions and specializedknowledge are needed, it would not be good tohave a functional type of organization, howeversatisfactory for the company in times past orfor other companies at present. On the otherhand, it might be profitable, as a stimulus to con-structive thinking, to look around at differentways of decentralizing sales responsibility. Hereis an example of what can happen if sales man-agement is not on its toes, and of what can bedone when the danger is recognized before it istoo late:

C A New England manufacturer of a householdproduct marketed through a variety of outlets —department, furniture, chain, and general stores,mail-order houses, club plans, and house-to-houseagents. The product, slightly modified, was alsosold to institutions, hotels, and motels. Over theyears, the sales organization had grown here andthere, this way and that, as expediency directed.There was one salesman who specialized in whole-salers, another who concentrated on all outlets inNew York City, others who sold any and all ac-counts in stipulated territories. All salesmen re-ported directly to the sales manager, who alsohandled all "important" accounts personally.

One day, after 21 years on the job, the salesmanager died. The department found itself in acrisis as it tried to carry on. However, its troubleswere only symptomatic of a much deeper crisiswhich had been building up under the era ofsloppy control of the deceased manager. For manyyears, unrecognized by the company, distributionmethods and market conditions had been changing.Inevitably, creeping inefficiency had advanced tothe point where there seemed to be nothing that thenew sales manager could do within the existingframework to save the corporate neck. Sales wereslipping, selling costs were mounting, and the sales


manager himself had no time for policy thinkingand forward planning.

When this situation became clear, tbe sales de-partment was reorganized completely. The newsetup provided for an office manager, a field salesmanager, several staff directors, and a manager foradvertising and merchandising, all with clear-cutresponsibilities and authority; this relieved con-gestion at the top. As for the salesmen, their jobswere set on the basis of (a) territory and (b) typeof outlet. For instance, where in the same territoryone salesman had been selling to retailers and an-other to wholesalers (with the result that in effectthey had been fighting each other), now the sales-man for a given territory sold to both types ofcustomers. But where the outlet was a unique onerequiring specialized merchandising methods, asin the case of institutional sales, the businesswherever located was put in the charge of onesalesman.

The results showed up almost immediately, witha rise in sales and a reversal of the selling cost trend.

Conceptual Approach

Whenever top management begins to get wor-ried about the marketing outlook, it is only nat-ural that slogans like "Think retail" and "Nosale, no profit" gain appeal — especially if thecompany suddenly realizes that production, fi-nance, and research have been playing too dom-inant a role. This is all very well. But supposemanagement carries its sales consciousness agood deal further; suppose it buys the viewwhich holds, as one expert stated in a nationalmagazine, that "today you start with the market

— not the factory — as the base for your organi-zation and then work back." " Is this bolder,more extreme position desirable in a competitiveindustry with a dynamic market?

At first glance, the answer might seem yes.And probably it is yes in certain cases — for ex-ample, a detergent soap or a ball-point pen maybe purely a merchandising proposition. But inthe great majority of cases the extreme point ofview just described is a troublemaker. Market-ing cannot be effective if considered from a mar-keting point of view alone.

For the marketing officer, this means contin-ual compromise and negotiation with other de-partments of the company. These compromises— or, better, adjustments — will be less hard totake as he develops a company viewpoint andunderstands why they must he made. For the

' Business Week, December 11, 1954, p. 67.

president or executive vice president, the propo-sition just described means that "coaching" alldepartment heads in conceptual skill — the abil-ity, as Robert L. Katz described it, to see theenterprise as a working whole — is one of themost effective ways of helping any departmentto be effective. The less the managers of anydepartment, marketing included, have to battlenarrow, specialist viewpoints, and can count in-stead on a meeting of the minds in top-level con-ferences (not necessarily agreement), the betteroff they will be.

Here are two examples of the conceptual ap-proach applied at the interdepartmental level:

1. Marketing and production — From a marketsurvey the sales manager of a large midwesterncompany in the electrical industry learned thatthere was a substantial market for a new line ofconsumer products. The survey showed that theline should be offered in eight sizes, with a widerange hetween the two extremes. The sales depart-ment drew up tight and definite specifications forthe manufacturing department. The engineerswent over these specifications and determined thatthe products could he made as detailed — but atan extremely high cost.

At this critical point a serious impasse mighteasily have developed, as often happens. An im-passe of sorts was in fact beginning to develop inthis situation. It was broken in the only possibleway — by informal talks between the persons atodds. The sales manager hinted that more auto-matic machinery might be the solution; tbe plantmanager at first reacted negatively because he fearedloss of flexibility, then thought it over and cameback with the proposition that maybe it would befeasible if specifications were relaxed a little; thesales manager indicated he was willing to contem-plate this possibility; and together they went to theengineers and found that by changing the design ofsome of the internal components and applyingsome automatic controls, costs could be cut 20%.

As a result, the company launched an entirelynew line of products on the market. The price wascompetitive, and a good profit was earned.

2. Marketing and top management — Towardthe end of World War II, an old, established NewEngland manufacturer of fabricated metal partslooked ahead to postwar conditions and decided tomarket a line of consumer products to retail out-lets. As plans for the new venture were developed,it became apparent that a large amount of imagina-tive promotion would be necessary through a whollynew type of sales organization.

One fact loomed ominously when a realistic ap-praisal of executive resources was made: the presi-dent was vigorous and healthy, but any abilities

which the other managers (either relatives or stock-holders) had in relation to their jobs were purelya matter of coincidence. Tests and interviews con-ducted by psychological experts showed that themanagers had neither the experience nor the apti-tude for manufacturing and selling high-volume,low-cost consumer products.

The upshot of all this was that the president re-versed his earlier decision. The postwar marketingplans had to be tailored more to the managementresources that were available.

Marketing Activities

Having looked at marketing's relationship toother parts of the company, let us now look atthe relationships of different activities within themarketing effort itself. Here the contribution ofconceptual thinking is as important as it is any-where else.

Take motivation research, for example. It isone of the most interesting new ideas in the field.It has great possibilities. But its values must allbe realized through the ageneies that design, dis-tribute, sell, and influence opinion. The buy-ing decisions whicb a motivation study seeks toanalyze are affected by the number and type ofoutlets; by the merchandising abilities of thedealers; by the freshness of the advertising copy,salesmanship, and public relations of the eom-pany (what consumers may read about it in thenewspapers and see on television, etc.); and byother factors.

If marketing executives really want to cap-italize on new findings about purchasing be-havior, they will not merely revise product de-sign or advertising or packaging in the light ofwhat the researchers tell them — they will re-vise all of these activities to reinforce each otherand have a total impact on sales greater than thesum of the individual contributions. Here is anillustration of the way conceptual thinking worksat the intradepartmental level:

€ An appliance manufacturing company witha tough sales problem to lick made a survey of itsdealers. The dealers were part of the problem be-cause they were more interested in competitors' linesthan in this manufacturer's. The survey showedthat three product features would appeal to dealers:(a) superior quality, which would reduce servicecosts, typically borne by the dealer in this particu-lar industry, (b) highly salable design, and (c) highprice and high gross margin consistent with thequality features, giving dealers more flexibility ontrade-ins.

In revamping its line of appliances, manage-

Marketing Leadership 125ment naturally worked hard to please the consumer,but it also tried to please the dealer. Why designfor consumers if dealers lacked an incentive tohandle the line? This way of looking at the prob-lem made quite a difference. For instance, thecompany had been manufacturing appliances inthe low-price range; now it withdrew these modelsbut extended its line in the medium-price andhigh-price ranges. In addition, one luxury modelwas added as a prestige item.

As a result of the new strategy, dealers begangiving much more support to the company's prod-ucts, and sales rose. Significantly, the most pop-ular model in the line now sells for nearly twiceas much as the lowest-price competitive model.

Summary Case

Now let us look at a case which ties togethermany of the ideas discussed in the precedingpages. It points up the "chain reaction" of ques-tions that occur when conceptual thinking isused, the kinds of conflicts between points ofview that arise, and, in short, what happens thatis difl^erent when executives go at a marketingproblem this way rather than some other way.

The Facts

The case involves an eastern manufacturerof a well-known staple produet. (As far as thebasic problems are concerned, the companymight just as well have been a midwestern fur-niture manufacturer, a west coast lumber pro-ducer, or a southern plastics firm.) For our pur-poses, the story began several years ago whenthe management realized that its market waschanging. Several important trends were seento be in the making:

(1) The industrial market was becoming moreimportant than the consumer market. Whereastwo-thirds of the company's output had been goingthrough wholesalers to retailers, and one-third toindustrial users, it now looked as if the situationwould completely reverse itself within another tenyears.

(2) On the retail scene, independents wereplaying a less important role in the distribution ofthe product, and chains a more important role.

(3) Geographically the market was changingtoo. The consumer market, which bade to becomeless important, was growing faster in the plant'shome territory. But the more important industrialmarket was expanding faster in an area i, 500 mileswest (with an average annual growth trend pro-jected at 3%).


(4) Transportation costs — in particular, freightrates — had been increasing, and it looked as ifthey would continue to increase.

Within Marketing

These trends posed a series of important ques-tions for marketing executives:

First of all, what about the company salesmen}They had been selected and trained to sell towholesalers; it appeared now that, if they weregoing to go after a bigger share of the growing in-dustrial market, they would need to be well in-structed in materials and materials handling, theproblems of commercial users. Obviously, selec-tion and training procedures would need revision.

But would not the sales organization need to hechatiged too} The existing system emphasized clear-cut sales territories and strict "territorial protection"for the individual salesmen who called on jobbersand commercial dealers. Perhaps it would be betterto organize a task force of industrial salesmen whowould freewheel across the country showing pros-pects how to use and handle the company's product;or to reorganize sales into commercial and domesticdivisions, with managers of eacb reporting to asenior manager who would not be bothered by in-dividual salesmen's problems.

Then the question of supporting the direct saleseffort with other efforts was raised. For example,what about packaging} As for retail sales, the im-portant fact was that in chain supermarkets therewas less personal selling in the stores and more im-pulse buying. Therefore, the traditional black andwhite package should take on a little color and eyeappeal; and maybe the routine labels could be sup-plemented with some attractively printed informa-tion for consumers about uses of the product. Asfor commercial sales, it seemed desirable to explorenew, improved means of bulk shipping.

But just what package designs and colors wouldbe best? And what kinds of advertising appealswould add to the impression? These questionspointed to another, more basic one: Was moremarket research needed} Little had been done inthe way of pretesting, motivation research, or "bird-dogging" market statistics.

And if greater efforts were made along this line,as well as in the areas of packaging, sales training,and organization, could they be managed efficient-ly? Were existing controls adequate} In particular,there seemed to be a need for getting the controldata in such form that it would lend itself to betterdistribution cost analysis.

Beyond Marketing

So much for the "chain reaction" within themarketing department. Now let us look at some

of the questions which were raised and disputedoutside or beyond marketing.

Was plant expansion needed} The general man-ager, who had come up through engineering andmanufacturing, presented a plan to the board ofdirectors calling for a 50% increase in capacityat tbe eastern site — the maximum possible with-in the land and technological limitations. His planwas based on the fact that the company was cur-rently operating at 105% of capacity, and that a4 5 % increase in the market was projected for thenext ten years.

But another plan presented to the board tooka more "marketing minded" viewpoint. Should anew factory of equal capacity be built in the areaj ,5oo miles west, where the booming industrialmarkets were centered} The supporters of thisplan pointed to the usual advantages of proximityto the market, and also to the savings in transporta-tion of the finished product. Tbey estimated thata $1,800,000 freight bill would have to be ab-sorbed in five years if the proposed plant was notbuilt (tbis figure would bave heen offset somewhatby the fact that new material freight costs wouldhave been less at the eastern site).

^Vhen this plan was presented, some of the pro-duction men immediately pointed to problems. Inthe area of the proposed site, there was compara-tively little skilled labor available, and it Iwked asif there would be "one hell of a training job." Inaddition, the area was heavily unionized. Thesewere difficulties that had not been serious at theeastern plant. Would new management skills inindustrial engineering and industrial relations beneeded — and just who was going to manage allthis u'ork?

Still another viewpoint had to be considered. Agood percentage of owners and board members werefinancial men. Was the proposed second planta sound enough investment} Projected earningsshowed that it would take nine or ten years for thenew plant to equal the return on investment thatcould be achieved immediately if the eastern plantwere expanded. Moreover, there was always therisk of a depression or of revolutionary new methodsbeing developed in the industry.

So, would it be hetter to expand on a morelimited basis in the more mature, slow-growingeastern sector and capture larger short-range profits}The younger executives in the firm took issue withthis conservative view. They were more inclinedto "grow with the economy." Their views were bcldin great importance hy the board because both thefirst-line and second-line managers were older mennearing retirement age.

Further, the balance in capabilities of the presentmanagement was an issue if any kind of expansionwas undertaken. The present managers were gen-

erally men who had been "pushers" in production(the firm was operating on a seven-day week, withthree shifts a day) hut with something of a laissez-faire attitude toward other areas of management —research and development, for example, and publicrelations. They had matured in an era when com-petition, while very much present, had never beendangerous. If the company bid for a greater shareof the market, it seemed bound to run into muchmore vigorous competition than it had ever ex-perienced before. Did executives need to be broughtin from outside who could completnent the talentsof the present management — and what about theneed for exectitive training}

These and many other questions were consid-ered. What might have seemed to some at firstas a fairly straightforward problem of market-ing strategy became, with further thought, aproblem with company-wide repercussions.

The Outcome

When all the different viewpoints were care-fully considered, the board decided on the gen-eral manager's plan to expand the present plant.However, when it appeared that many of theyounger executives might leave the eompany asa result, the board hit upon another solution:merger with a larger corporation in a related butnoncompeting field. That firm was willing tosupply the risk capital needed for the new sec-ond plant venture; it could also supply some ofthe management reinforcements needed in in-dustrial relations and marketing. The price for

Marketifig Leadership 127

these advantages, of eourse, was that manage-ment control would now have to be shared withanother group, but that did not seem as seriousas the risk of going ahead with either of the twoplans proposed.

Concluding Note

The moral of this case is not that merger is agood solution, but that conceptual thinking isa good approach. Applied within the marketingdepartment, it produced a broad, well-balancedattack that, whatever tactical errors might bemade, was strategically sound. Applied to thecompany as a whole, it produced a solutionwhich combined the marketing virtues of the orig-inal two-plant plan with the features demand-ed by the financial and production interests inthe company.

Of course the conceptual approach is difficult.In the long run, it tends to build understandingand agreement among managers, but in the shortrun it may tend to create friction simply becauseof the multitude of questions raised. More con-ferences are needed; and so are more legworkand more painstaking planning. Discouragementmay be encountered as once simple problemsmagnify in scope and difficulty. But if market-ing is to be recognized as the very complex man-agement problem that it really is — so differentfrom production, so beset with change — thenconceptual thinking is a necessity. And there isalways this to be said in its favor: it pays.

k T lower levels of administrative responsibility, the principal need is for-̂ *- technical and human skills. At higher levels, technical skill becomesrelatively less important while the need for conceptual skill increases rap-idly. At the top level of an organization, conceptual skill becomes themost important skill of all for successful administration. A chief executivemay lack technical or human skills and still be effective if he has subordi-nates who have strong abilities in these directions. But if his conceptualskill is weak, the success of the whole organization may he jeopardized.

Robert L. Katz, "Skills of an Effective Administrator"Harvard Business Review, January-February 1955, p. 38.

Conditions of marketing leadership

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