Marketing and business performance

The adoption of the marketing concept will improve business performance - that is the basic premise. Marketing is not an abstract concept; its acid test is the effect that its use has on key corporate indices such as profitability and market share. Fortunately, in recent years, studies in both Europe and North America have sought to examine the relationship between marketing and performance. The results suggest that the relationship is positive.

Narver and Slater, for instance, looked closely at the relationship between business performance and marketing orientation. They collected data from 113 strategic business units (SBUs) of a major US corporation. In the main, their study found that the relationship between market orientation and profitability was strongly linear, with the businesses displaying the highest level of market orientation achieving the highest levels of profitability, and those with the lowest scores on market orientation having the lowest profitability figures. As the authors state: 'The findings give marketing scholars and practitioners a basis beyond mere intuition for recommending the superiority of a market orientation.'

Similarly, a study published in the UK by Hooley, Lynch and Shepherd sought to develop a typology of approaches to marketing, and to relate those approaches to business performance. They identified four groups of companies, namely: 'marketing philosophers', 'sales supporters', 'departmental marketers' and 'unsures'. The marketing philosophers saw marketing as a function with the prime responsibility for ident­ifying and meeting customers' needs and as a guiding philosophy for the whole organization: they did not see marketing as confined to the marketing department, nor did they regard it merely as sales support. The sales supporters saw marketing's primary functions as being sales and promotion support. Marketing was confined to what the marketing department did, and had little to do with identifying and meeting customer needs. The departmental marketers not only shared the view of the marketing philosophers that marketing was about identifying and meeting customer needs, but also believed that marketing was restricted to what the marketing department did. The final group of companies - the unsures - tended to be indecisive regarding their marketing approach.

The attitudes, organization and practices of the four groups were compared, with the marketing philosophers exhibiting many distinct character­istics, as summarized below.

1. Marketing philosophers adopted a more pro­active, aggressive approach towards the future.

2. They had a more proactive approach to new product development.

3. They placed a higher importance on marketing training.

4. They adopted longer time horizons for marketing planning.

5. Marketing had a higher status within the company.

6. Marketing had a higher chance of being represented at board level.

7. Marketing had more chance of working closely with other functional areas.

8. Marketing made a greater input into strategic plans.

Significantly, the marketing philosophers achieve a significantly higher ROI (return on investment) than the remainder of the sample. The departmental marketers performed at the sample average, while the unsures and sales supporters performed significantly worse. Hooley et al.’s conclusion was that marketing should be viewed not just as a departmental function but as a guiding philosophy for the whole organization.

It is surprising, then, that marketing has not had the influence in corporate boardrooms its importance would seem to justify. A recent study in the UK found that only 12 per cent of the chief executives in Britain's top 100 companies had experience of a marketing job, while research in the USA shows that the majority of chief executives in recent decades have had a finance background. Doyle argues that the reason for marketing's relatively low status is that the links between marketing investments and the long-term profitability of the organization have not been made clear. Too often, marketers justify their investments in terms of increasing customer awareness, sales volume or market share. He proposes the concept of value-based marketing, where the objective of marketing is seen as contributing to the maximization of shareholder value, which has become the overarching goal of chief executives in more and more companies. This approach helps clarify the importance of investment in marketing assets such as brands and marketing knowledge, and helps to dissuade management from making arbitrary cuts in marketing expenditure, such as advertising, in times of economic difficulty.