Industrial Marketing: Managing New Requirements

An industrial products firm recently held a meeting for senior managers to discuss marketing strategy and implementation. An outside facilitator, who led a discussion about improving marketing effectiveness, encouraged participants to list the key issues facing the firm. The blackboard in the meeting room was soon filled with two lists:

Salespeople say:

  • “Marketing people do not spend enough time in the field. They don’t take specific customer complaints seriously enough. Marketing needs to establish a system for better field communications.”
  • “Marketing should be more demanding with R&D and manufacturing to alter product designs and production schedules.”
  • “Biggest frustration to our sales reps is lack of timely information.”
  • “Sales reps’ compensation should not be penalized for price erosion. . . . That’s a product issue out of our control.”

Marketing people say:

  • “Salespeople are always asking for information that they have already received. We spend much effort gathering and writing up product and competitive information, send out that information, and reps call a week later for the same information. . . . This takes time away from other important tasks we have.”
  • “We are underresourced: too many chiefs and not enough implementation people.”
  • “Our success depends on fulfilling customer expectations for tomorrow, not just today.”
  • “Sales is happy to criticize, rather than accept responsibility and suggest constructive improvements.”

These comments reflect the changing tasks these managers face. Salespeople in this firm need more information, more often, from more marketing managers, as sales tasks involve more customized product-service packages at accounts. Conversely, marketing’s complaints about “too many chiefs and not enough implementation people” reflect a situation in which product managers must work with more functional areas (and especially with field sales and service), even as cost-reduction pressures shrink staff support resources. Also, while sales generates more customized orders and complains about marketing’s seeming inability to alter product designs and production schedules, marketing managers respond that “our company now has highly automated manufacturing operations, making design and other product changes a complex process.” Hence, marketing rightly evaluates these requests with more than sales’ often account-specific specifications in mind.

Especially for industrial firms, these interactions can be costly. Studies indicate that as many as one-half of new industrial products fail to meet business goals and consistently point to the management of the product launch — and, in particular, the hand-off from product management to sales and service groups — as key to new product success or failure.

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References

1. For pertinent studies of industrial product introductions, see:

J. Choffray and G. Lilien, “Strategies behind the Successful Industrial Product Launch,” Business Marketing 17 (1984): 82–94;

R. Cooper and E. Kleinschmidt, “New Product Processes at Leading Industrial Firms,” Industrial Marketing Management 20 (1991): 137–147;

J. Konrath, “Why New Products Fail,” Sales & Marketing Management 144 (1992): 48–56; and

V. Mahajan and J. Wind, “New Product Models: Practice, Shortcomings, and Desired Improvements” (Cambridge, Massachusetts: Marketing Science Institute, Report 91–125, 1991).

2. Developments tending toward a merging of manufacturing and service businesses have been discussed from various perspectives. For example, see:

J. Gershuny and I. Miles, The New Service Economy (London: Pinter, 1983);

M. Piore and C. Sabel, The Second Industrial Divide (New York: Basic Books, 1984);

J.B. Quinn et al., “Technology in Services: Rethinking Strategic Focus,” Sloan Management Review, Winter 1990, pp. 79–87; and

R. Norman and R. Ramirez, “From Value Chain to Value Constellation,” Harvard Business Review, July–August 1993, pp. 65–77.

3. For data concerning product variety, see:

S. Wheelwright and K. Clark, Revolutionizing Product Development(New York: Free Press, 1992), chapter 1.

4. E.R. Corey, Procurement Management: Strategy, Organization, and Decision Making (Boston: CBI Publishing Company, 1978).

5. J. Emshwiller, “Suppliers Struggle to Improve Quality as Big Firms Slash Their Vendor Rolls,” Wall Street Journal, 16 August 1991, p. B1.

6. For more on this topic, see:

F. Cespedes, “Once More: How Do You Improve Customer Service?,” Business Horizons, March–April 1992, pp. 58–67. For an excellent discussion of wider cross-functional issues implicated in supply-chain initiatives, see:

H. Lee and C. Billington, “Managing Supply Chain Inventory: Pitfalls and Opportunities,” Sloan Management Review, Spring 1992, pp. 65–73.

7. For data concerning product life cycles in various industrial product categories, see:

C.J. Easingwood, “Product Life Cycle Patterns for New Industrial Products,” R&D Management 18 (1988): 22–32; and

C.F. von Braun, “The Acceleration Trap,” Sloan Management Review, Fall 1990, pp. 49–58.

8. For data on responsibilities of industrial product and sales personnel, see:

R. Eccles and T. Novotny, “Industrial Product Managers: Authority and Responsibility,” Industrial Marketing Management 13 (1984): 71–76; and

W. Moncrief, “Selling Activity and Sales Position Taxonomies for Industrial Sales Forces,” Journal of Marketing Research 23 (1986): 261–270.

9. What I here call “hierarchies of attention” is analogous to what some have labeled organizational “routines” or “thought worlds”: the patterns of activity that characterize different subgroups in a firm, that shape the assumptions and marketplace interpretations of each group, and that in turn become the “genes” of a firm’s repertoire of capabilities.

For a discussion of organizational routines, see:

R. Nelson and S. Winter, An Evolutionary Theory of Economic Change (Cambridge, Massachusetts: Harvard University Press, 1982), chapter 5. For a discussion of the various “thought worlds” that characterize groups typically involved in industrial product development activities, see:

D. Dougherty, “Interpretive Barriers to Successful Product Innovation in Large Firms,” Organization Science 3 (1992): 179–202.

10. See M. Cunningham and C. Clark, “The Product Management Function in Marketing,” European Journal of Marketing 9 (1975): 129–149; and

N. Piercy, “The Marketing Budgeting Process,” Journal of Marketing, October 1987, pp. 45–59.

11. For a discussion of the gaps between accounting data and the types of information sought by managers in various functional areas, see:

S.M. McKinnon and W.J. Bruns, Jr., The Information Mosaic (Boston: Harvard Business School Press, 1992).

12. B. Levitt and J.G. March, “Organizational Learning,” Annual Review of Sociology 14 (1988): 319–340.

13. J.P. Kotter, A Force for Change (New York: Free Press,1990), p. 92.

14. A. Edstrom and J.R. Galbraith, “Transfer of Managers as a Coordination and Control Strategy in Multinational Organizations,” Administrative Science Quarterly 22 (1977): 251.

15. See M. Aoki, “Ranking Hierarchy as an Incentive Scheme,” in Information, Incentives, and Bargaining in the Japanese Economy(Cambridge, England: Cambridge University Press, 1988), chapter 3; and

K. Koike, “Skill Formation Systems: Japan and U.S.,” in The Economic Analysis of the Japanese Firm, ed. M. Aoki (New York: North-Holland Press, 1984), pp. 63–73.