MARKETING INSTITUTIONS

MARKETING INSTITUTIONS

Marketing institution may be defined as an agency which has reduced marketing costs through eliminating, simplifying, or consolidating various activities usually undertaken in the course of carrying goods from producers to consumers.

The chain store is an outstanding example of such an institution. Others are mail order houses, supermarkets, some department stores, leased departments chains, and co-operative groups of various sorts.

The term marketing institutions can be considered to embrace a wide range of organizations, including associations of farmers, traders, and others in the value chain, as well as cooperatives and government marketing agencies. FAO works to develop the capacity of both farmer-run marketing organizations and of private sector associations.

CHAIN STORES

The chain-store organization combines the retail and wholesale functions, and in many cases the manufacturer’s marketing functions as well. This has permitted a real reduction in marketing costs. The chains central warehouse, for example, supplies its store units more economically that the old-style wholesaler could service a variety of retail stores. Instead of wholesalers’ salesmen calling upon a retail unit at regular or irregular intervals and “selling” it kinds and quantities of merchandise which may or may not be suitable, the chain-store manager places an order on a definite schedule, to replenish a carefully selected stock.

The elimination of wholesale salesmen and their expenses is an obvious and direct method of reducing marketing costs. The simplification of the retail unit’s merchandise stock, with reduction of investment in inventory, is not so obvious, but it represents perhaps an equally great saving in relation to certain-store system endeavors to reduce the costs of retail operation to a minimum by correct selection of merchandise stocks, by elimination of unnecessary variations in styles, bands, prices, and sixes and by avoiding losses on obsolete and unsalable merchandise through frequent ordering.

The first and perhaps the major contribution of the chain store to direct distribution of the chain store to direct distribution is this integration of the wholesaling and retailing functions. But in addition to this, the chain-store organization often reduces the manufacturer’s marketing costs. This is especially true where the manufacturer’s total output is taken by a chain, thus eliminating the manufacturer’s salesman and their expenses. Still further reductions in what are sometimes considered “production costs” are accomplished when he manufactures only for known retail demand. Wasteful, speculative production (the cost of which must be reflected in net losses or increased prices to the consumer or both) is eliminated; production peaks and valley can be smoothed out, merchandise turnover increased, and total costs reduced.

MARKETING INFLUENCE WITHIN THE FIRM

Although marketing’s changing role within the firm has been the subject of much discussion, there is little empirical research to measure the influence of marketing or to describe the situational or environmental factors that may lead to variations in marketing’s role. Prior research has primarily been conceptual and has tended to examine marketing’s role in specific contexts such as new product development, strategic planning, or advertising budgeting.

In this report, authors Homburg, Workman, and Krohmer investigate marketing’s level of influence and address the question: Under what circumstances does the marketing sub-unit have higher levels of influence?

In a survey of marketing managers in strategic business units in U.S. and German companies in three industry sectors, the influence of marketing was rated in relation to sales, R&D, manufacturing, and finance/accounting. Results indicate that:

• The marketing sub-unit has substantial influence within the firm, with the most influence over decisions on advertising messages, procedures for measuring customer satisfaction, and programs for improving customer satisfaction. Marketing is also rated the most influential unit with respect to decisions on the strategic direction of the business unit.
• The level of marketing’s influence is systematically affected by determinants (such as percentage of direct sales) not related to individual managers’ characteristics.
• Institutional factors account for variance not explained by determinants more commonly used in contingency theories in marketing. This suggests that the dispersion of influence within an organization is not only the result of adaptation to environmental conditions but also a result of unique historical aspects that become institutionalized within the firm.

MANAGERIAL IMPLICATIONS

Knowledge of intra-organizational influence is important. Effective change management requires the support of influential actors within the organization; as marketing and sales sub-units are shown to be highly influential, successful change management requires the support of those groups.

In addition, managers must be sensitive to intra-organizational influence as a potential barrier to organizational change. These results show that the present organizational form may not be the result of rational adaptation to market forces, but may be due to cultural and institutional factors, resulting in less optimal outcomes.

Finally, the constant sum instrument developed in this study can be used by managers to diagnose the patterns of influence within their business unit. Such measurement may be important in planning and implementing strategy change.