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Marketing's reputation and influence in the firm
Journal of Business Research 65 (2012) 446–452
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Journal of Business Research
Marketing's reputation and influence in the firm Omar Merlo a,⁎, Bryan A. Lukas b, Gregory J. Whitwell b a b
Imperial College Business School, Imperial College London, United Kingdom Department of Management & Marketing, University of Melbourne, Australia
a r t i c l e
i n f o
Article history: Received 1 September 2010 Received in revised form 1 December 2010 Accepted 1 February 2011 Available online 31 March 2011 Keywords: Marketing function Reputation Marketing's influence Generic strategy Role of marketing
a b s t r a c t This study examines whether or not marketing's influence in the firm is fundamentally a reputation issue. Based on a sample of 122 senior executives of Australian firms operating in a wide range of manufacturing industries, empirical findings show that the marketing function's reputation in a firm is an important antecedent of marketing's influence in a firm. Results also show that the reputation–influence link is contingent on a firm's particular strategic stance (cost-leadership strategy and differentiation strategy). Results further show that marketing's reputation was good and marketing's influence was strong in the Australian firms surveyed. Directions for future research are discussed. © 2011 Elsevier Inc. All rights reserved.
1. Introduction A number of marketing scholars (Piercy, 1998; Kumar, 2004; Webster et al., 2005; Verhoef and Leeflang, 2009) argue that the influence of the marketing function is generally weak in many firms. Whether this is the case, or not, is an interesting question. A more fundamental question, however, is what antecedents affect marketing's influence in the first place? Only Homburg et al. (1999) and Verhoef and Leeflang (2009) address the latter question empirically and proceed to identify market and managerial factors as important drivers of marketing's influence. In this empirical study, we identify a sociological factor, namely marketing's reputation, as another important determinant of marketing's influence in the firm. The present study complements the research by Homburg et al. (1999) and Verhoef and Leeflang (2009) in several ways. First, the study introduces a contingency perspective by examining the possibility that marketing's influence is a reputation issue contingent on a firm's particular strategic stance (cost-leadership strategy and differentiation strategy) and market environment (competitive intensity and market potential). Second, the study provides a non-marketing, senior executive perspective on the issue of marketing's influence. Relying on respondents who are not marketing practitioners has the benefit of stifling potential professional biases associated with responding to questions about the standing and impact of one's own profession. Third, the study includes a number of Homburg et al.'s (1999) and Verhoef and Leeflang's (2009) focal variables for replication purposes. Finally, the
study uses data from Australia to broaden the empirical context established by Homburg et al.'s (1999) German and U.S. data sets, and Verhoef and Leeflang's (2009) Dutch data set. 2. Conceptual model Keys and Case (1990, p.38) describe “influence” as “the process by which people successfully persuade others to follow their advice, suggestion, or order”. In the marketing literature, influence is viewed as having a decidedly strategic focus. For example, Homburg et al. (1999) define marketing's influence as the impact of the marketing function, relative to other business functions, on strategic decisions of importance for the success of a business unit. The present study adopts this definition. “Reputation” is a belief that an individual has, or group of individuals have, about a person or entity. This belief derives from the views (or opinions) that other people have about the person or entity in question, and incorporates the expectations, norms, and values that underpin and shape those views. Hence, reputation is a socially derived, summative construct. The following hypotheses represent the conceptual model for this study. The hypotheses specify that marketing's reputation relates positively to marketing's influence in the firm and that internal (organization-related) and external (market-related) factors moderate this relationship. 2.1. Hypothesized direct effects
⁎ Corresponding author. E-mail addresses: [email protected] (O. Merlo), [email protected] (B.A. Lukas), [email protected] (G.J. Whitwell). 0148-2963/$ – see front matter © 2011 Elsevier Inc. All rights reserved. doi:10.1016/j.jbusres.2011.03.002
Keys and Case (1990) point out that an important step in establishing sustained influence in social contexts is the development
O. Merlo et al. / Journal of Business Research 65 (2012) 446–452
of a good reputation, for example as a knowledgeable person or function. From a trust perspective, when marketing's reputation in an organization is poor, other organizational actors may lack confidence in marketing's capabilities and contributions and, hence, not respond positively to marketing-function activities and inputs. The opposite is likely to be the case when marketing's reputation in an organization is good: decision makers are more likely to seek out and trust the marketing function's views and, therefore, may be more willing to act on marketing advice. More succinctly, the marketing function is more likely to be influential if the marketing function has a good reputation and less likely to be influential if it has a poor reputation. H1. A positive relationship exists between marketing's reputation and marketing's influence in the firm. 2.2. Hypothesized moderator effects Homburg et al. (1999) suggest that a firm's strategic stance and market characteristics are a determinant of marketing's relative influence in the firm. The present paper examines the possibility that strategic stance and market characteristics also act as contingencies (i.e. are moderators) that influence the reputation–influence link. To this end, we use Porter's (1980) cost-leadership strategy and differentiation strategy to conceptualize strategic stance, and we use competitive intensity and market potential to conceptualize market characteristics. 2.2.1. Cost-leadership strategy and differentiation strategy Porter (1980) describes a differentiation strategy as the provision of something unique along dimensions valued by customers. Successful differentiation is, in part, based on an ability to assess customer needs— something marketing is well-placed to do (Wind and Robertson, 1983; Piercy, 1985). Accordingly, the more a firm relies on a differentiation strategy, the more likely the firm will turn to marketing as a strategic resource. And the better marketing's reputation is in the firm, the more defensible and appropriate it will be for decision-makers to turn to marketing. Therefore, the more emphasis given to a differentiation strategy, the stronger the link between marketing's reputation and influence. Porter (1980) describes a cost-leadership strategy as the exploitation of cost advantages by an organization intent on becoming a lowcost producer. In firms relying on a cost-leadership strategy, decision makers may deem functions such as operations management and accounting–which are entrusted more directly than marketing with reducing inefficiency and minimizing costs–as more important contributors to achieving the strategic objective. Hence, the more a firm relies on a cost-leadership strategy, the less likely the firm will turn to marketing as a strategic resource. Therefore, marketing's reputation, whatever it may be in the firm, is less likely to be important for decisions related to cost leadership. In short, a cost-leadership strategy is likely to weaken the marketing reputation–influence link. H2. The greater the reliance on a differentiation strategy, the stronger the positive relationship between marketing's reputation and marketing's influence in the firm. H3. The greater the reliance on a cost-leadership strategy, the weaker the positive relationship between marketing's reputation and marketing's influence in the firm. 2.2.2. Competitive intensity and market potential Competitive intensity refers to the degree of inter-firm rivalry in a market (Song and Parry, 1997). In highly competitive markets, customers usually have a number of differentiated product and service options, and organizations must compete to attract and retain customers
447
(Jaworski and Kohli, 1993). Under these conditions, an organization is likely to be reliant on marketing because, being the function closest to the customer, marketing can provide important strategic information on how to attract and retain customer demand (Piercy, 1985). Therefore, reputational issues around marketing are likely to be of considerable interest to managers who need to draw on marketing input when faced with intense market competition. If marketing has a good reputation in the firm, decision makers will find it defensible and appropriate to rely on marketing input to make the firm competitive. As a result, competitive intensity is likely to strengthen the relationship between marketing's reputation and influence in the firm. Market potential refers to the attractiveness of a target market and reflects not only existing market size and growth, but also any gap between customer needs and the ability of existing products and services to satisfy those needs (Song and Parry, 1997). Marketing is well placed to help decision makers leverage a market's potential because marketing provides expertise in the identification of expressed and latent needs of existing and future customers. Following the same reasoning related to a differentiation strategy and competitive intensity, if marketing's reputation is good rather than bad, decision makers are likely to rely more readily on the marketing function to capitalize on a market's potential. Therefore, market potential is likely to strengthen the marketing reputation–influence link. H4. The higher the competitive intensity, the stronger the positive relationship between marketing's reputation and marketing's influence in the firm. H5. The higher the market potential, the stronger the positive relationship between marketing's reputation and marketing's influence in the firm. 3. Replication of effects hypothesized in previous studies H2 and H3 include differentiation strategy and cost-leadership strategy as moderators. To replicate Homburg et al.'s (1999) findings, the empirical model here also includes these strategy variables as antecedents of marketing's influence in the firm. Further, the empirical model includes CEO background, market turbulence, and organizational size to replicate both Homburg et al. (1999) and Verhoef and Leeflang (2009), and includes market orientation to replicate Verhoef and Leeflang (2009). 4. Method 4.1. Sample frame and data collection method The sample frame for this study is a commercially available mailing list of Australian manufacturing firms. Homburg et al. (1999) also used the manufacturing sector. The present study uses a random selection of 524 medium and large organizations, and the unit of analysis is the strategic business unit (SBU). The study uses a questionnaire distributed by mail for the data collection. Because it is possible that members of functional areas have a bias in relation to their area's reputation and influence (Yukl et al., 1996; Atuahene-Gima and Evangelista, 2000), the study relies on key informants drawn from the ranks of senior executives (chief executive officers, managing directors, general managers, directors, or people in equivalent positions) of an SBU. Informants at this organizational level (1) are usually substantially removed from the marketing function of an SBU (i.e. usually do not receive direct reports from a marketing function) but (2) would have a very good understanding and overview of how influential a marketing function is when important decisions are made in an SBU. Prior to the actual data collection, the authors contacted potential respondents in the sample in two ways: with a notification letter
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explaining the study and foreshadowing the arrival of a questionnaire, and then a few days later again by telephone. The purpose of the telephone calls was to (1) ascertain whether respondents had received the notification letter, (2) verify the accuracy of the mailing list, and (3) arouse interest in the study. A few days after the telephone calls, the authors mailed a survey package to those executives verified by telephone. Three weeks after the mail-out, the authors contacted all non-respondents to encourage participation in the study and address any concerns preventing a return of the questionnaire. The data collection procedure yielded a response rate of 27%, or 141 questionnaires, three of which were not usable due to missing data. The questionnaire contained a confidence-related question asking respondents to assess the extent to which they believed their knowledge and expertise allowed them to complete the survey confidently. The question used a seven-point scale anchored with ‘not at all confident’ and ‘extremely confident’. The study only employed those questionnaires with a confidence score of four or above, resulting in a final sample of 122 usable questionnaires and a confidence-measure mean of 6.05. The anonymity of respondents precludes any direct comparisons between respondents and non-respondents to test for non-response bias. However, t-test comparisons of early and late respondents in terms of demographics and actual responses to key variables suggest that nonresponse bias is unlikely in this study.
4.2. Measurement development and validation The dependent variable, influence of marketing, was measured using a scale by Homburg et al. (1999), which is a 100-point constantsum scale across five functional groups: marketing, finance, sales, R&D, and production. This scale provides an estimation of the perceived relative level of influence that each functional group exercises. The following question was asked: “In general, how much influence on the strategic direction of your business unit would you say the people responsible for each of the following activities have had over the past 3 years? Please allocate points to each activity out of 100. If your organization does not carry out any of these activities, give it no points and allocate the 100 points among the others.” Table 1 shows the point allocations provided by the respondents across the five functional groups. A new scale grounded in a content analysis of the literature concerned with marketing's reputation measured the reputation of marketing. Because the respondents are executives removed from the marketing function, the scale requires them to generalize about views held in the organization with respect to the marketing function. The first three scale items concentrate on marketing's reputation in regards to the relevance of the advice that marketing provides, marketing's ability to communicate its contribution to business performance, and marketing's understanding of the business and its environment. The fourth item assesses the overall reputation of marketing because reputation can take on a specific meaning (i.e., someone's reputation for something in particular, as captured in the first three items) and a broader meaning (i.e., someone's reputation in general). The items are anchored by “strongly disagree” and “strongly agree”. Two managers and five academics assessed the face validity of the four reputation items and confirmed the appropriateness of the items.
Table 1 The general influence of business functions (means and t-tests). Marketing
Finance
Sales
R&D
Production
25.7
20.3⁎
23.2⁎
19.2⁎
21.2⁎
⁎ p ≤ .05.
Three-item scales based on Homburg et al. (1999) measure differentiation strategy and cost-leadership strategy. Three items adopted from Song and Parry (1997) measure market potential. Five items adopted from Jaworski and Kohli (1993) measure competitive intensity. A four-item scale, also based on Jaworski and Kohli (1993), measures market turbulence. The log of the number of an SBU's employees measures SBU size. Fourteen items from Narver and Slater (1990, 2000) measure market orientation. A dichotomous variable (1 = marketing; 0 = others) assesses CEO background. The professional backgrounds of the responding executives are distributed as follows: Marketing (16.4%), Finance/Accounting (11.5%), Sales (13.9%), Operations (23%), Production/Manufacturing (25.4%), Human Resources (0.8%), and Other (9%). Confirmatory factor analysis produced the following fit indices: GFI = .79, TLI = .79, CFI = .82, and RMSEA = .08. Cronbach's alpha (α), composite reliability (CR), and average variance extracted (AVE) are reported in Table 2, as are the factor loadings and t-values. Both the fit and evidence of convergent validity (AVEs) are less than desirable, but still acceptable for this study. 4.3. Hypotheses testing The study uses moderated regression analysis to test the hypotheses. The independent variables are mean-centered following Aiken and West (1991). The variance inflation factor (VIF) for each regression coefficient is below the cutoff value of 10, suggesting no multicollinearity problems. Table 3 shows the correlation matrix for the constructs. The results in Table 4 support H1, while the results for H2 and H3 are significant but are directionally opposite to what was predicted. The results do not support H4 and H5. 5. Discussion 5.1. Hypothesized effects The results demonstrate that marketing's influence is a function of marketing's reputation in the firm. This relationship is robust despite variations in the degrees of market potential and competitive intensity experienced by the firm. While a cost-leadership strategy has a positive moderating effect on the reputation–influence link, a differentiation strategy has a negative moderating effect on the link. Overall, the observation that the importance of marketing's reputation for marketing's influence varies according to a firm's strategic choices, but does not vary according to the two broad environment characteristics examined in this study, points to the possibility that internal organizational factors outweigh external factors as important contextual contingencies for reputation effects on influence. The unexpected findings regarding the moderating role of a costleadership strategy and differentiation strategy will no doubt surprise those who take the view that marketing must be more influential in organizations that seek to attract customers using a differentiation strategy. However, the fact that the sample only comprises manufacturing firms may have influenced the study's findings. Manufacturing executives may have a strong product focus and adopt the view that the role of marketing professionals is fundamentally about promotion (such as advertising and public relations). Consider a situation in which a manufacturing firm is pursuing a differentiation strategy. The senior managers of such an organization may be convinced that the point of differentiation lies principally in the product itself. For them, differentiation may derive from attributes such as reliability, ease of use, design/workmanship, and functionality, as well as the nature of pre- and post-sales support. If in such an organization decision makers deem marketing's role to be principally concerned with promotion, then its contribution to a differentiation strategy is likely to be considered
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Table 2 Factor loadings and t-values. Measure Reputation of marketing (α = .73; CR = .75; AVE = .50)a 1. Marketing people here provide important strategic advice 2. Marketing people here can communicate effectively the impact of their activities on performance 3. Marketing people here have a good understanding of the business and its external environment 4. Compared to people in other departments, marketing people here have a good reputation Low cost (α = .73; CR = .87; AVE = .63) 1. My business emphasizes competitive advantage through operating efficiencies 2. My business emphasizes pursuing cost advantages in raw material procurement 3. My business emphasizes a low price strategy 4. My business emphasizes pursuing economies of scale Differentiation (α = .92; CR = .73; AVE = .48) 1. My business emphasizes competitive advantage through superior products 2. My business emphasizes creating superior customer value through services accompanying the products 3. My business emphasizes new product development 4. My business emphasizes building up a premium product or brand image 5. My business emphasizes obtaining high prices from the market 6. My business emphasizes advertising Competitor orientation (α = .81; CR = .83; AVE = .56) 1. We rapidly respond to competitive actions that threaten us 2. Our salespeople regularly share information in our firm concerning competitors' strategies 3. Top management regularly discusses competitors' strengths and strategies 4. We target customers where we have an opportunity for competitor advantage Customer orientation (α = .85; CR = .87; AVE = .63) 1. We constantly monitor our level of commitment and orientation to serving customers' needs 2. Our business objectives are driven primarily by customer satisfaction 3. Our strategy for competitive advantage is based on our understanding of customer needs 4. Our strategies are driven by our beliefs about how we can create greater value for customers 5. We measure customer satisfaction systematically and frequently 6. We give close attention to after-sales service Interfunctional coordination (α = .85; CR = .87; AVE = .61) 1. We constantly monitor our level of commitment and orientation to serving customers' needs 2. Our business objectives are driven primarily by customer satisfaction 3. Our strategy for competitive advantage is based on our understanding of customer needs 4. Our strategies are driven by our beliefs about how we can create greater value for customers 5. We measure customer satisfaction systematically and frequently Competitive Intensity (α = .84; CR = .87; AVE = .63) 1. Our products are very similar to those produced by other firms 2. We have a large number of competitors 3. In this industry, customers often switch from one supplier to another 4. Other companies often try to take away our customers 5. Competition in this industry is very fierce 6. In this industry, each customer buys from many different suppliers 7. It would be easy for our customers to find an alternative supplier Market turbulence (α = .70; CR = .85; AVE = .60) 1. Our customers are looking for new products all the time 2. Sometimes our customers are very price-sensitive, but other times price is relatively unimportant 3. We are witnessing demand for our products from customers who never bought them before 4. New customers tend to have product-related needs that differ from those of existing customers 5. We are not catering to many of the same customers that we used to in the past Market potential (α = .75; CR = .87; AVE = .63) 1. There are many potential customers for this product, as opposed to one or few customers 2. Potential customers have a great need for this class of product 3. The potential dollar size of the market for this product is very large 4. The market for this product is growing very quickly
Factor loading
t-Value
.462b .610 .780 .720
– 4.13 4.48 4.09
.831b .708
– 6.11
c
.582 .634
4.87 b
–
c
.730 .718
5.05 4.76
c c
.727b .894 .736 .565
– 9.09 7.25 5.54
.669b .816 .861 .650
– 7.75 7.87 6.18
c
.665
6.44
.769b .827 .522 .793 .778
– 9.66 5.31 7.93 7.75
c c
.761b .852 .861 .581 .584
– 9.09 9.08 6.37 6.32
.637b
–
c
.511 .673 .501
3.52 3.75 3.01
.760b .780 .594
– 5.37 5.52
c
α = Cronbach's alpha; CR = composite reliability; AVE = average variance extracted. t-values are significant at p b .05. a The respondents are senior executives. Because senior executives are removed from marketing functions (i.e. usually do not receive direct reports from marketing functions), the first three items require an executive to generalize about views held in the organization with respect to the focal marketing function. Hence, the first three items capture various reputational issues related to a marketing function rather than a direct assessment of a marketing function by an executive. b Item was fixed to 1 to set the scale. c Items deleted based on poor factor loadings.
marginal at best. Senior executives may see the key functions instead to be R&D, operations, and design. Consider next a manufacturing firm that pursues a cost-leadership strategy. Such an organization typically competes on the basis of offering the lowest prices in the market. With such a strategy, volume is a critical consideration; an organization competing on the basis of low prices needs to try to maximize sales to cover low margins. Porter (1980) observes that a cost-leadership strategy often requires a high relative market share, while differentiation may preclude gaining a high market share because of the need for exclusivity. An organization
seeking to maximize sales volume may see promotion as very important for building awareness and stimulating demand. Another consideration is that organizations that adopt a cost-leadership strategy are often producers of generic products. The more commoditized the product, the more important promotion may be. In such circumstances, senior managers often become more reliant on those who are good at “spin” and who can help shape customer preferences. Whether these two possible explanations for the present study's unexpected findings can be supported by empirical analysis remains to be determined.
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Table 3 Means, standard deviations, correlations and reliabilities. Variable
1
1. Cost-leadership strategy 2. Differentiation strategy 3. Competitive intensity 4. Market potential 5. Reputation of Marketing 6. Market turbulence 7. SBU size 8. CEO background 9. Market orientation 10. Marketing influence Mean Standard deviation
–
2
3
4
5
6
7
8
9
10
– .16 .21⁎ .16 .37
– −.02 5.03 .76
– 25.67 9.42
–
.07 .06 .13 .22* −.07 .26⁎⁎
–
.08 .08 .10 .32⁎⁎ .01 .12 .32⁎⁎
.11 .27⁎⁎
−.05 5.47 .92
.11 5.09 1.03
–
.17 .10 .08 −.01 −.08 .26⁎⁎
.06 .28⁎⁎ .13 .02 .10 −.15 5.15 1.16
−.09 4.97 1.20
– .07 −.10 .17 .24⁎⁎ .26⁎⁎ 5.03 .75
– −.29⁎⁎ −.04 .34⁎⁎ .14 4.12 1.13
– −.12 −.26⁎⁎ −.12 517 116
Correlations exceeding .17 are significant at *p b .05; ** p b .01 (two-tailed test).
5.2. Replicated results Table 4 presents the results associated with the variables in the empirical model that replicate parts of Homburg et al.'s (1999) and Verhoef and Leeflang's (2009) research. The findings provide (1) no support for a direct relationship between marketing influence and the variables market turbulence, market orientation, differentiation strategy, and cost-leadership strategy; and (2) support for a direct relationship between marketing influence and CEO background. Table 5 summarizes the replication findings. As can be seen, this study's findings are consistent with Homburg et al.'s (1999) research in terms of cost-leadership strategy; and consistent with Verhoef and Leeflang's (2009) research in terms of market turbulence, market orientation, and differentiation strategy. The exceptions to the present study's results are that Verhoef and Leeflang (2009) find a significant relationship between marketing influence and cost-leadership strategy, and do not find a relationship between marketing influence and CEO background; while Homburg et al. (1999) find a significant relationship between marketing influence and differentiation strategy. Interestingly, of the variables tested in all three studies (cost-leadership strategy, differentiation strategy, and CEO background), none produces consistent empirical results across the three studies. Although the present study focuses on the reputation–influence link, the data provide interesting findings on how the marketing function is perceived within organizations. Table 1 shows that marketing is influential in the firms surveyed (a finding consistent with Table 3 which shows that the marketing function, on average, enjoys a relatively
Table 4 Moderated regression analysis (dependent variable: marketing's influence). Variable
Market turbulence SBU size CEO background Market orientation Differentiation strategy Cost-leadership strategy Competitive intensity Market potential Reputation of marketing (H1) Reputation × differentiation (H2) Reputation × low-cost (H3) Reputation × competitive intensity (H4) Reputation × market potential (H5) R2 F
Model 1
Model 2
b
t-value
b
t-value
.23 −.17 .19 −.22 −.77 .17 −.01 −.20 .22
2.05⁎ −1.66 2.08⁎
.15 −.11 .20 −.20 −.09 .14 −.03 −.13 .21 −.29 .25 −.05 −.07 .34 3.66⁎⁎
1.42 −1.11 2.23⁎ −1.72 −.83 1.51 −.32 −1.33 2.29⁎ −3.17⁎⁎ 2.71⁎⁎
−1.85 −.75 1.76 −.06 −2.03⁎ 2.30⁎
.22 3.18⁎⁎
Note: Standardized regression coefficients are reported. ⁎ p b .05. ⁎⁎ p b .01.
−.50 −.74
good reputation). Table 6, which is comparable with similar analyses by Homburg et al. (1999) and Verhoef and Leeflang (2009), confirms that marketing wields considerable influence in the firms surveyed in the present study, especially when it comes to influencing the strategic direction of the firm, expansions into new geographic markets, choices of strategic business partners, and new product development. Taken together, the present study's findings and those of Verhoef and Leeflang (2009) and Homburg et al. (1999), as well as Moorman and Rust (1999) and Merlo and Auh (2009), raise the possibility that concerns expressed in the literature about marketing's limited influence as a business function are perhaps overstated. 6. Directions for future research Prior studies identify a number of factors associated with marketing's level of influence in the firm; the present study shows that reputation is another important factor. The key implication for marketing managers is that defending and bolstering marketing's reputation should be an important part of their activities to improve their influence in the firm. How can this be done? Unfortunately, the marketing literature offers little guidance on how marketing can manage its reputation in an organization. Hence, new research is needed. A first step would be to determine what the antecedents of marketing's reputation are. The corporate reputation literature may be a useful place to provide insights into antecedents. In the same way as organizations strive to develop and defend their reputation in the marketplace, the marketing function may use similar principles to manage its reputation in the firm. Another question is whether marketing's influence is an antecedent to marketing's reputation. The present study provides strong reasons for seeing marketing's reputation as a driver of marketing's influence in an organization. However a feedback loop may exist between influence and reputation. As marketing's influence grows, the more positive marketing's reputation may become. This possibility is on the proviso, however, that marketing influence is judged post hoc to be beneficial to the organization. An additional research track that may shed light on the antecedents of marketing's reputation is to explore to what extent the marketing function suffers from deep-rooted professional problems. One problem marketing professionals appear to struggle with in firms, according to Stewart (2008), is that they cannot always explain how they achieve their results. The inability to demonstrate how their marketing actions affect shareholder value is another problem that marketing professionals face (Lukas et al., 2005). A third problem-area relates to observations that other organizational members deem marketing professionals to be sources of innovation bottlenecks. For example, Kotler and Trias De Bes (2003) report that many CEOs believe that the traditional segmentation mindset of marketers limits innovation to a given market and leads, eventually, to the hyper-fragmentation of markets in which differences
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Table 5 Comparison of empirical findings: Homburg et al. (1999), Verhoef and Leeflang (2009), and present study. Antecedents of the marketing function's influence in the firm that have been shown to be important
Homburg et al. (1999)a (data from German and U.S. firms)
Verhoef and Leeflang (2009)b (data from Dutch firms)
Present studyb (data from Australian firms)
Reputation of marketing Accountability of marketing Innovativeness of marketing Market orientation Market turbulence SBU size Cost-leadership strategy Frequency of major market-related changes Unpredictability of major market-related changes Differentiation strategy Percentage of direct sales CEO background Societal context
Not tested Not tested Not tested Not tested Not tested Not supported Not supported Supported Supported Supported Supported Supported Supported
Not tested Supported Supported Not supported Not supported Not tested Supported Not tested Not tested Not supported Not tested Not supported Not tested
Supported Not tested Not tested Not supported Not supported Not supported Not supported Not tested Not tested Not supported Not tested Supported Not tested
a b
Dependent variable in Homburg et al. (1999): “Influence on all issues”. Dependent variable in Verhoef and Leeflang (2009): “Decision influence”.
Table 6 The influence of business functions on specific decision issues (means and t-tests)a,b. Decisions on… Pricing Distribution Capital expenditure Strategic business directions Advertising messages New geographic markets Customer satisfaction measurement Customer satisfaction improvement Design of customer service and support Strategic business partner choices New product development
Marketing
Finance
Sales
R&D
Production (operations)
37.3 37.5 13.5 31.7 71.5 46.7 51.4 42.9 38.3 34.0 33.5
24.8⁎⁎
37.2 38.6 8.9⁎ 22.9⁎
3.7 3.8 9.5⁎ 13.9⁎ 4.8⁎⁎ 6.3⁎⁎
14.2⁎ 19.2⁎⁎ 34.1⁎ 18.1⁎ 4.7⁎⁎ 7.9⁎ 10.9⁎⁎ 13.8⁎⁎ 14.0⁎⁎ 17.8⁎⁎ 16.0⁎
15.8 42.2⁎⁎ 25.8⁎⁎ 4.3⁎ 18.0⁎⁎
35.8 36.3⁎ 41.3 39.7 43.9 25.9⁎ 24.5⁎
7.4 7.5⁎ 9.9 24.7⁎⁎ 10.0⁎
6.2 9.2⁎ 7.6 9.6⁎ 31.5⁎
This table can be compared with Table 1 in Homburg et al. (1999) and Table 3 in Verhoef and Leeflang (2009). a Marketing compared with other business functions (finance, sales, R&D, and production). b To obtain the data reported in this table, the questionnaire included Homburg et al.'s (1999) multi-issue measure of marketing influence. ⁎⁎ p ≤ .01. ⁎ p ≤ .05
between products become increasingly trivial. A fourth problem-area is that executives are sometimes weary of giving marketing strategic responsibility. Webster (1997, p. 49) observes that firm executives have limited the role of marketing “to the short-term tactical areas of demand stimulation” and that, as a consequence, other organizational functions have captured many of marketing's strategic responsibilities. Research that helps to better understand these four problem areas will identify additional factors that explain marketing's reputation in the firm, and how the marketing function can manage its reputation. The fact that market orientation does not relate significantly to marketing's influence in the firm is an unexpected finding relevant to future research. Although non-significant, the market orientation– marketing influence relationship is negative, rather than positive as predicted. A possible explanation for this finding may be that, as marketing as a philosophy and orientation becomes increasingly important, the marketing function itself may become less instrumental as an organizational institution and, hence, it may suffer from a decline of influence. Some discussions in the literature point to this possibility. For example, Webster (1990) notes that as marketing becomes more of a set of activities carried out by different people throughout the organization, marketing units may be seen as ineffective, or perhaps even redundant. Greyser (1997) concludes, “doing marketing” belongs to the marketing subunit, while becoming and being marketing-minded is the job of everyone in the business, thus leading to the simultaneous upgrading of marketing as an orientation and the downgrading of marketing as a formal function.
The present study does not test these perspectives. More research is necessary in this area.
References Aiken LS, West SG. Multiple Regression: Testing and Interpreting Interactions. Newbury Park, CA: Sage; 1991. Atuahene-Gima Kwaku, Evangelista Felicitas. Cross-functional influence in new product development: an exploratory study of marketing and R&D perspectives. Manage Sci 2000;46(10):1269–84. Greyser Stephen A. Janus and marketing: the past, present, and prospective future of marketing. In: Lehmann Donald R, Jocz Katherine E, editors. Reflections on the futures of marketing. Cambridge, MA: Marketing Science Institute; 1997. p. 3-14. Homburg Christian, Workman Jr John P, Krohmer Harley. Marketing's influence within the firm. J Mark 1999;63:1-17 (April). Jaworski Bernard J, Kohli Ajay K. Market orientation: antecedents and consequences. J Mark 1993;57:53–70 (July). Keys Bernard, Case Thomas. How to become an influential manager. Acad Manage Exec 1990;4(4):38–51. Kotler Philip, Trias De Bes Fernando. Lateral marketing: new techniques for finding breakthrough ideas. Hoboken, NJ: John Wiley and Sons; 2003. Kumar Nirmalya. Marketing as strategy. Understanding the CEO's agenda for driving growth and innovation. Boston: Harvard Business School Press; 2004. Lukas Bryan A, Whitwell Gregory J, Doyle Peter. How can a shareholder value approach improve marketing's strategic influence? J Bus Res 2005;58(4):414–22. Merlo Omar, Auh Seigyoung. The effects of entrepreneurial orientation, market orientation, and marketing subunit influence on firm performance. Mark Lett 2009;20(3):295–311. Moorman C, Rust RT. The Role of Marketing. J Mark 1999;63(Special Issue):18–197. Narver John C, Slater Stanley F. The effect of market orientation on business profitability. J Mark 1990;54:20–35 (October).
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Piercy Nigel. Marketing organization: an analysis of information processing, power and politics. London: HarperCollins Publishers; 1985. Piercy Nigel F. Marketing implementation: the implications of marketing paradigm weakness for the strategy execution process. J Acad Mark Sci 1998;26(3):222–36. Porter Michael E. Competitive strategy: techniques for analyzing industries and competitors. New York: The Free Press; 1980. Slater Stanley F, Narver John C. The positive effect of a market orientation on business profitability: a balanced replication. J Bus Res 2000;48:69–73. Song X Michael, Parry Mark E. A cross-national comparative study of new product development processes: Japan and the United States. J Mark 1997;61(2):1-18. Stewart David W. How marketing contributes to the bottom line. J Advert Res 2008;48(1):94-105. Verhoef Peter C, Leeflang Peter SH. Understanding marketing department's influence within the firm. J Mark 2009;73:14–37 (March).
Webster Jr Frederick E. Do you know where your marketing is? Mark Sci Rep 1990;1989:89-123. Webster Jr Frederick E. The future role of marketing in the organization. In: Lehmann Donald R, Jocz Katherine, editors. Reflections on the futures of marketing. Cambridge, MA: Marketing Science Institute; 1997. p. 39–66. Webster Jr Frederick E, Malter Alan J, Ganesan Shankar. The decline and dispersion of marketing competence. MIT Sloan Manage Rev 2005;46:35–43 (Summer). Wind Yoram, Robertson Thomas S. Marketing strategy: new directions for theory and research. J Mark 1983;47:12–25 (Spring). Yukl Gary, Kim Helen, Falbe Cecilia M. Antecedents of influence outcomes. J Appl Psychol 1996;81:309–17 (June).
Contents lists available at ScienceDirect
Journal of Business Research
Marketing's reputation and influence in the firm Omar Merlo a,⁎, Bryan A. Lukas b, Gregory J. Whitwell b a b
Imperial College Business School, Imperial College London, United Kingdom Department of Management & Marketing, University of Melbourne, Australia
a r t i c l e
i n f o
Article history: Received 1 September 2010 Received in revised form 1 December 2010 Accepted 1 February 2011 Available online 31 March 2011 Keywords: Marketing function Reputation Marketing's influence Generic strategy Role of marketing
a b s t r a c t This study examines whether or not marketing's influence in the firm is fundamentally a reputation issue. Based on a sample of 122 senior executives of Australian firms operating in a wide range of manufacturing industries, empirical findings show that the marketing function's reputation in a firm is an important antecedent of marketing's influence in a firm. Results also show that the reputation–influence link is contingent on a firm's particular strategic stance (cost-leadership strategy and differentiation strategy). Results further show that marketing's reputation was good and marketing's influence was strong in the Australian firms surveyed. Directions for future research are discussed. © 2011 Elsevier Inc. All rights reserved.
1. Introduction A number of marketing scholars (Piercy, 1998; Kumar, 2004; Webster et al., 2005; Verhoef and Leeflang, 2009) argue that the influence of the marketing function is generally weak in many firms. Whether this is the case, or not, is an interesting question. A more fundamental question, however, is what antecedents affect marketing's influence in the first place? Only Homburg et al. (1999) and Verhoef and Leeflang (2009) address the latter question empirically and proceed to identify market and managerial factors as important drivers of marketing's influence. In this empirical study, we identify a sociological factor, namely marketing's reputation, as another important determinant of marketing's influence in the firm. The present study complements the research by Homburg et al. (1999) and Verhoef and Leeflang (2009) in several ways. First, the study introduces a contingency perspective by examining the possibility that marketing's influence is a reputation issue contingent on a firm's particular strategic stance (cost-leadership strategy and differentiation strategy) and market environment (competitive intensity and market potential). Second, the study provides a non-marketing, senior executive perspective on the issue of marketing's influence. Relying on respondents who are not marketing practitioners has the benefit of stifling potential professional biases associated with responding to questions about the standing and impact of one's own profession. Third, the study includes a number of Homburg et al.'s (1999) and Verhoef and Leeflang's (2009) focal variables for replication purposes. Finally, the
study uses data from Australia to broaden the empirical context established by Homburg et al.'s (1999) German and U.S. data sets, and Verhoef and Leeflang's (2009) Dutch data set. 2. Conceptual model Keys and Case (1990, p.38) describe “influence” as “the process by which people successfully persuade others to follow their advice, suggestion, or order”. In the marketing literature, influence is viewed as having a decidedly strategic focus. For example, Homburg et al. (1999) define marketing's influence as the impact of the marketing function, relative to other business functions, on strategic decisions of importance for the success of a business unit. The present study adopts this definition. “Reputation” is a belief that an individual has, or group of individuals have, about a person or entity. This belief derives from the views (or opinions) that other people have about the person or entity in question, and incorporates the expectations, norms, and values that underpin and shape those views. Hence, reputation is a socially derived, summative construct. The following hypotheses represent the conceptual model for this study. The hypotheses specify that marketing's reputation relates positively to marketing's influence in the firm and that internal (organization-related) and external (market-related) factors moderate this relationship. 2.1. Hypothesized direct effects
⁎ Corresponding author. E-mail addresses: [email protected] (O. Merlo), [email protected] (B.A. Lukas), [email protected] (G.J. Whitwell). 0148-2963/$ – see front matter © 2011 Elsevier Inc. All rights reserved. doi:10.1016/j.jbusres.2011.03.002
Keys and Case (1990) point out that an important step in establishing sustained influence in social contexts is the development
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of a good reputation, for example as a knowledgeable person or function. From a trust perspective, when marketing's reputation in an organization is poor, other organizational actors may lack confidence in marketing's capabilities and contributions and, hence, not respond positively to marketing-function activities and inputs. The opposite is likely to be the case when marketing's reputation in an organization is good: decision makers are more likely to seek out and trust the marketing function's views and, therefore, may be more willing to act on marketing advice. More succinctly, the marketing function is more likely to be influential if the marketing function has a good reputation and less likely to be influential if it has a poor reputation. H1. A positive relationship exists between marketing's reputation and marketing's influence in the firm. 2.2. Hypothesized moderator effects Homburg et al. (1999) suggest that a firm's strategic stance and market characteristics are a determinant of marketing's relative influence in the firm. The present paper examines the possibility that strategic stance and market characteristics also act as contingencies (i.e. are moderators) that influence the reputation–influence link. To this end, we use Porter's (1980) cost-leadership strategy and differentiation strategy to conceptualize strategic stance, and we use competitive intensity and market potential to conceptualize market characteristics. 2.2.1. Cost-leadership strategy and differentiation strategy Porter (1980) describes a differentiation strategy as the provision of something unique along dimensions valued by customers. Successful differentiation is, in part, based on an ability to assess customer needs— something marketing is well-placed to do (Wind and Robertson, 1983; Piercy, 1985). Accordingly, the more a firm relies on a differentiation strategy, the more likely the firm will turn to marketing as a strategic resource. And the better marketing's reputation is in the firm, the more defensible and appropriate it will be for decision-makers to turn to marketing. Therefore, the more emphasis given to a differentiation strategy, the stronger the link between marketing's reputation and influence. Porter (1980) describes a cost-leadership strategy as the exploitation of cost advantages by an organization intent on becoming a lowcost producer. In firms relying on a cost-leadership strategy, decision makers may deem functions such as operations management and accounting–which are entrusted more directly than marketing with reducing inefficiency and minimizing costs–as more important contributors to achieving the strategic objective. Hence, the more a firm relies on a cost-leadership strategy, the less likely the firm will turn to marketing as a strategic resource. Therefore, marketing's reputation, whatever it may be in the firm, is less likely to be important for decisions related to cost leadership. In short, a cost-leadership strategy is likely to weaken the marketing reputation–influence link. H2. The greater the reliance on a differentiation strategy, the stronger the positive relationship between marketing's reputation and marketing's influence in the firm. H3. The greater the reliance on a cost-leadership strategy, the weaker the positive relationship between marketing's reputation and marketing's influence in the firm. 2.2.2. Competitive intensity and market potential Competitive intensity refers to the degree of inter-firm rivalry in a market (Song and Parry, 1997). In highly competitive markets, customers usually have a number of differentiated product and service options, and organizations must compete to attract and retain customers
447
(Jaworski and Kohli, 1993). Under these conditions, an organization is likely to be reliant on marketing because, being the function closest to the customer, marketing can provide important strategic information on how to attract and retain customer demand (Piercy, 1985). Therefore, reputational issues around marketing are likely to be of considerable interest to managers who need to draw on marketing input when faced with intense market competition. If marketing has a good reputation in the firm, decision makers will find it defensible and appropriate to rely on marketing input to make the firm competitive. As a result, competitive intensity is likely to strengthen the relationship between marketing's reputation and influence in the firm. Market potential refers to the attractiveness of a target market and reflects not only existing market size and growth, but also any gap between customer needs and the ability of existing products and services to satisfy those needs (Song and Parry, 1997). Marketing is well placed to help decision makers leverage a market's potential because marketing provides expertise in the identification of expressed and latent needs of existing and future customers. Following the same reasoning related to a differentiation strategy and competitive intensity, if marketing's reputation is good rather than bad, decision makers are likely to rely more readily on the marketing function to capitalize on a market's potential. Therefore, market potential is likely to strengthen the marketing reputation–influence link. H4. The higher the competitive intensity, the stronger the positive relationship between marketing's reputation and marketing's influence in the firm. H5. The higher the market potential, the stronger the positive relationship between marketing's reputation and marketing's influence in the firm. 3. Replication of effects hypothesized in previous studies H2 and H3 include differentiation strategy and cost-leadership strategy as moderators. To replicate Homburg et al.'s (1999) findings, the empirical model here also includes these strategy variables as antecedents of marketing's influence in the firm. Further, the empirical model includes CEO background, market turbulence, and organizational size to replicate both Homburg et al. (1999) and Verhoef and Leeflang (2009), and includes market orientation to replicate Verhoef and Leeflang (2009). 4. Method 4.1. Sample frame and data collection method The sample frame for this study is a commercially available mailing list of Australian manufacturing firms. Homburg et al. (1999) also used the manufacturing sector. The present study uses a random selection of 524 medium and large organizations, and the unit of analysis is the strategic business unit (SBU). The study uses a questionnaire distributed by mail for the data collection. Because it is possible that members of functional areas have a bias in relation to their area's reputation and influence (Yukl et al., 1996; Atuahene-Gima and Evangelista, 2000), the study relies on key informants drawn from the ranks of senior executives (chief executive officers, managing directors, general managers, directors, or people in equivalent positions) of an SBU. Informants at this organizational level (1) are usually substantially removed from the marketing function of an SBU (i.e. usually do not receive direct reports from a marketing function) but (2) would have a very good understanding and overview of how influential a marketing function is when important decisions are made in an SBU. Prior to the actual data collection, the authors contacted potential respondents in the sample in two ways: with a notification letter
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explaining the study and foreshadowing the arrival of a questionnaire, and then a few days later again by telephone. The purpose of the telephone calls was to (1) ascertain whether respondents had received the notification letter, (2) verify the accuracy of the mailing list, and (3) arouse interest in the study. A few days after the telephone calls, the authors mailed a survey package to those executives verified by telephone. Three weeks after the mail-out, the authors contacted all non-respondents to encourage participation in the study and address any concerns preventing a return of the questionnaire. The data collection procedure yielded a response rate of 27%, or 141 questionnaires, three of which were not usable due to missing data. The questionnaire contained a confidence-related question asking respondents to assess the extent to which they believed their knowledge and expertise allowed them to complete the survey confidently. The question used a seven-point scale anchored with ‘not at all confident’ and ‘extremely confident’. The study only employed those questionnaires with a confidence score of four or above, resulting in a final sample of 122 usable questionnaires and a confidence-measure mean of 6.05. The anonymity of respondents precludes any direct comparisons between respondents and non-respondents to test for non-response bias. However, t-test comparisons of early and late respondents in terms of demographics and actual responses to key variables suggest that nonresponse bias is unlikely in this study.
4.2. Measurement development and validation The dependent variable, influence of marketing, was measured using a scale by Homburg et al. (1999), which is a 100-point constantsum scale across five functional groups: marketing, finance, sales, R&D, and production. This scale provides an estimation of the perceived relative level of influence that each functional group exercises. The following question was asked: “In general, how much influence on the strategic direction of your business unit would you say the people responsible for each of the following activities have had over the past 3 years? Please allocate points to each activity out of 100. If your organization does not carry out any of these activities, give it no points and allocate the 100 points among the others.” Table 1 shows the point allocations provided by the respondents across the five functional groups. A new scale grounded in a content analysis of the literature concerned with marketing's reputation measured the reputation of marketing. Because the respondents are executives removed from the marketing function, the scale requires them to generalize about views held in the organization with respect to the marketing function. The first three scale items concentrate on marketing's reputation in regards to the relevance of the advice that marketing provides, marketing's ability to communicate its contribution to business performance, and marketing's understanding of the business and its environment. The fourth item assesses the overall reputation of marketing because reputation can take on a specific meaning (i.e., someone's reputation for something in particular, as captured in the first three items) and a broader meaning (i.e., someone's reputation in general). The items are anchored by “strongly disagree” and “strongly agree”. Two managers and five academics assessed the face validity of the four reputation items and confirmed the appropriateness of the items.
Table 1 The general influence of business functions (means and t-tests). Marketing
Finance
Sales
R&D
Production
25.7
20.3⁎
23.2⁎
19.2⁎
21.2⁎
⁎ p ≤ .05.
Three-item scales based on Homburg et al. (1999) measure differentiation strategy and cost-leadership strategy. Three items adopted from Song and Parry (1997) measure market potential. Five items adopted from Jaworski and Kohli (1993) measure competitive intensity. A four-item scale, also based on Jaworski and Kohli (1993), measures market turbulence. The log of the number of an SBU's employees measures SBU size. Fourteen items from Narver and Slater (1990, 2000) measure market orientation. A dichotomous variable (1 = marketing; 0 = others) assesses CEO background. The professional backgrounds of the responding executives are distributed as follows: Marketing (16.4%), Finance/Accounting (11.5%), Sales (13.9%), Operations (23%), Production/Manufacturing (25.4%), Human Resources (0.8%), and Other (9%). Confirmatory factor analysis produced the following fit indices: GFI = .79, TLI = .79, CFI = .82, and RMSEA = .08. Cronbach's alpha (α), composite reliability (CR), and average variance extracted (AVE) are reported in Table 2, as are the factor loadings and t-values. Both the fit and evidence of convergent validity (AVEs) are less than desirable, but still acceptable for this study. 4.3. Hypotheses testing The study uses moderated regression analysis to test the hypotheses. The independent variables are mean-centered following Aiken and West (1991). The variance inflation factor (VIF) for each regression coefficient is below the cutoff value of 10, suggesting no multicollinearity problems. Table 3 shows the correlation matrix for the constructs. The results in Table 4 support H1, while the results for H2 and H3 are significant but are directionally opposite to what was predicted. The results do not support H4 and H5. 5. Discussion 5.1. Hypothesized effects The results demonstrate that marketing's influence is a function of marketing's reputation in the firm. This relationship is robust despite variations in the degrees of market potential and competitive intensity experienced by the firm. While a cost-leadership strategy has a positive moderating effect on the reputation–influence link, a differentiation strategy has a negative moderating effect on the link. Overall, the observation that the importance of marketing's reputation for marketing's influence varies according to a firm's strategic choices, but does not vary according to the two broad environment characteristics examined in this study, points to the possibility that internal organizational factors outweigh external factors as important contextual contingencies for reputation effects on influence. The unexpected findings regarding the moderating role of a costleadership strategy and differentiation strategy will no doubt surprise those who take the view that marketing must be more influential in organizations that seek to attract customers using a differentiation strategy. However, the fact that the sample only comprises manufacturing firms may have influenced the study's findings. Manufacturing executives may have a strong product focus and adopt the view that the role of marketing professionals is fundamentally about promotion (such as advertising and public relations). Consider a situation in which a manufacturing firm is pursuing a differentiation strategy. The senior managers of such an organization may be convinced that the point of differentiation lies principally in the product itself. For them, differentiation may derive from attributes such as reliability, ease of use, design/workmanship, and functionality, as well as the nature of pre- and post-sales support. If in such an organization decision makers deem marketing's role to be principally concerned with promotion, then its contribution to a differentiation strategy is likely to be considered
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Table 2 Factor loadings and t-values. Measure Reputation of marketing (α = .73; CR = .75; AVE = .50)a 1. Marketing people here provide important strategic advice 2. Marketing people here can communicate effectively the impact of their activities on performance 3. Marketing people here have a good understanding of the business and its external environment 4. Compared to people in other departments, marketing people here have a good reputation Low cost (α = .73; CR = .87; AVE = .63) 1. My business emphasizes competitive advantage through operating efficiencies 2. My business emphasizes pursuing cost advantages in raw material procurement 3. My business emphasizes a low price strategy 4. My business emphasizes pursuing economies of scale Differentiation (α = .92; CR = .73; AVE = .48) 1. My business emphasizes competitive advantage through superior products 2. My business emphasizes creating superior customer value through services accompanying the products 3. My business emphasizes new product development 4. My business emphasizes building up a premium product or brand image 5. My business emphasizes obtaining high prices from the market 6. My business emphasizes advertising Competitor orientation (α = .81; CR = .83; AVE = .56) 1. We rapidly respond to competitive actions that threaten us 2. Our salespeople regularly share information in our firm concerning competitors' strategies 3. Top management regularly discusses competitors' strengths and strategies 4. We target customers where we have an opportunity for competitor advantage Customer orientation (α = .85; CR = .87; AVE = .63) 1. We constantly monitor our level of commitment and orientation to serving customers' needs 2. Our business objectives are driven primarily by customer satisfaction 3. Our strategy for competitive advantage is based on our understanding of customer needs 4. Our strategies are driven by our beliefs about how we can create greater value for customers 5. We measure customer satisfaction systematically and frequently 6. We give close attention to after-sales service Interfunctional coordination (α = .85; CR = .87; AVE = .61) 1. We constantly monitor our level of commitment and orientation to serving customers' needs 2. Our business objectives are driven primarily by customer satisfaction 3. Our strategy for competitive advantage is based on our understanding of customer needs 4. Our strategies are driven by our beliefs about how we can create greater value for customers 5. We measure customer satisfaction systematically and frequently Competitive Intensity (α = .84; CR = .87; AVE = .63) 1. Our products are very similar to those produced by other firms 2. We have a large number of competitors 3. In this industry, customers often switch from one supplier to another 4. Other companies often try to take away our customers 5. Competition in this industry is very fierce 6. In this industry, each customer buys from many different suppliers 7. It would be easy for our customers to find an alternative supplier Market turbulence (α = .70; CR = .85; AVE = .60) 1. Our customers are looking for new products all the time 2. Sometimes our customers are very price-sensitive, but other times price is relatively unimportant 3. We are witnessing demand for our products from customers who never bought them before 4. New customers tend to have product-related needs that differ from those of existing customers 5. We are not catering to many of the same customers that we used to in the past Market potential (α = .75; CR = .87; AVE = .63) 1. There are many potential customers for this product, as opposed to one or few customers 2. Potential customers have a great need for this class of product 3. The potential dollar size of the market for this product is very large 4. The market for this product is growing very quickly
Factor loading
t-Value
.462b .610 .780 .720
– 4.13 4.48 4.09
.831b .708
– 6.11
c
.582 .634
4.87 b
–
c
.730 .718
5.05 4.76
c c
.727b .894 .736 .565
– 9.09 7.25 5.54
.669b .816 .861 .650
– 7.75 7.87 6.18
c
.665
6.44
.769b .827 .522 .793 .778
– 9.66 5.31 7.93 7.75
c c
.761b .852 .861 .581 .584
– 9.09 9.08 6.37 6.32
.637b
–
c
.511 .673 .501
3.52 3.75 3.01
.760b .780 .594
– 5.37 5.52
c
α = Cronbach's alpha; CR = composite reliability; AVE = average variance extracted. t-values are significant at p b .05. a The respondents are senior executives. Because senior executives are removed from marketing functions (i.e. usually do not receive direct reports from marketing functions), the first three items require an executive to generalize about views held in the organization with respect to the focal marketing function. Hence, the first three items capture various reputational issues related to a marketing function rather than a direct assessment of a marketing function by an executive. b Item was fixed to 1 to set the scale. c Items deleted based on poor factor loadings.
marginal at best. Senior executives may see the key functions instead to be R&D, operations, and design. Consider next a manufacturing firm that pursues a cost-leadership strategy. Such an organization typically competes on the basis of offering the lowest prices in the market. With such a strategy, volume is a critical consideration; an organization competing on the basis of low prices needs to try to maximize sales to cover low margins. Porter (1980) observes that a cost-leadership strategy often requires a high relative market share, while differentiation may preclude gaining a high market share because of the need for exclusivity. An organization
seeking to maximize sales volume may see promotion as very important for building awareness and stimulating demand. Another consideration is that organizations that adopt a cost-leadership strategy are often producers of generic products. The more commoditized the product, the more important promotion may be. In such circumstances, senior managers often become more reliant on those who are good at “spin” and who can help shape customer preferences. Whether these two possible explanations for the present study's unexpected findings can be supported by empirical analysis remains to be determined.
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Table 3 Means, standard deviations, correlations and reliabilities. Variable
1
1. Cost-leadership strategy 2. Differentiation strategy 3. Competitive intensity 4. Market potential 5. Reputation of Marketing 6. Market turbulence 7. SBU size 8. CEO background 9. Market orientation 10. Marketing influence Mean Standard deviation
–
2
3
4
5
6
7
8
9
10
– .16 .21⁎ .16 .37
– −.02 5.03 .76
– 25.67 9.42
–
.07 .06 .13 .22* −.07 .26⁎⁎
–
.08 .08 .10 .32⁎⁎ .01 .12 .32⁎⁎
.11 .27⁎⁎
−.05 5.47 .92
.11 5.09 1.03
–
.17 .10 .08 −.01 −.08 .26⁎⁎
.06 .28⁎⁎ .13 .02 .10 −.15 5.15 1.16
−.09 4.97 1.20
– .07 −.10 .17 .24⁎⁎ .26⁎⁎ 5.03 .75
– −.29⁎⁎ −.04 .34⁎⁎ .14 4.12 1.13
– −.12 −.26⁎⁎ −.12 517 116
Correlations exceeding .17 are significant at *p b .05; ** p b .01 (two-tailed test).
5.2. Replicated results Table 4 presents the results associated with the variables in the empirical model that replicate parts of Homburg et al.'s (1999) and Verhoef and Leeflang's (2009) research. The findings provide (1) no support for a direct relationship between marketing influence and the variables market turbulence, market orientation, differentiation strategy, and cost-leadership strategy; and (2) support for a direct relationship between marketing influence and CEO background. Table 5 summarizes the replication findings. As can be seen, this study's findings are consistent with Homburg et al.'s (1999) research in terms of cost-leadership strategy; and consistent with Verhoef and Leeflang's (2009) research in terms of market turbulence, market orientation, and differentiation strategy. The exceptions to the present study's results are that Verhoef and Leeflang (2009) find a significant relationship between marketing influence and cost-leadership strategy, and do not find a relationship between marketing influence and CEO background; while Homburg et al. (1999) find a significant relationship between marketing influence and differentiation strategy. Interestingly, of the variables tested in all three studies (cost-leadership strategy, differentiation strategy, and CEO background), none produces consistent empirical results across the three studies. Although the present study focuses on the reputation–influence link, the data provide interesting findings on how the marketing function is perceived within organizations. Table 1 shows that marketing is influential in the firms surveyed (a finding consistent with Table 3 which shows that the marketing function, on average, enjoys a relatively
Table 4 Moderated regression analysis (dependent variable: marketing's influence). Variable
Market turbulence SBU size CEO background Market orientation Differentiation strategy Cost-leadership strategy Competitive intensity Market potential Reputation of marketing (H1) Reputation × differentiation (H2) Reputation × low-cost (H3) Reputation × competitive intensity (H4) Reputation × market potential (H5) R2 F
Model 1
Model 2
b
t-value
b
t-value
.23 −.17 .19 −.22 −.77 .17 −.01 −.20 .22
2.05⁎ −1.66 2.08⁎
.15 −.11 .20 −.20 −.09 .14 −.03 −.13 .21 −.29 .25 −.05 −.07 .34 3.66⁎⁎
1.42 −1.11 2.23⁎ −1.72 −.83 1.51 −.32 −1.33 2.29⁎ −3.17⁎⁎ 2.71⁎⁎
−1.85 −.75 1.76 −.06 −2.03⁎ 2.30⁎
.22 3.18⁎⁎
Note: Standardized regression coefficients are reported. ⁎ p b .05. ⁎⁎ p b .01.
−.50 −.74
good reputation). Table 6, which is comparable with similar analyses by Homburg et al. (1999) and Verhoef and Leeflang (2009), confirms that marketing wields considerable influence in the firms surveyed in the present study, especially when it comes to influencing the strategic direction of the firm, expansions into new geographic markets, choices of strategic business partners, and new product development. Taken together, the present study's findings and those of Verhoef and Leeflang (2009) and Homburg et al. (1999), as well as Moorman and Rust (1999) and Merlo and Auh (2009), raise the possibility that concerns expressed in the literature about marketing's limited influence as a business function are perhaps overstated. 6. Directions for future research Prior studies identify a number of factors associated with marketing's level of influence in the firm; the present study shows that reputation is another important factor. The key implication for marketing managers is that defending and bolstering marketing's reputation should be an important part of their activities to improve their influence in the firm. How can this be done? Unfortunately, the marketing literature offers little guidance on how marketing can manage its reputation in an organization. Hence, new research is needed. A first step would be to determine what the antecedents of marketing's reputation are. The corporate reputation literature may be a useful place to provide insights into antecedents. In the same way as organizations strive to develop and defend their reputation in the marketplace, the marketing function may use similar principles to manage its reputation in the firm. Another question is whether marketing's influence is an antecedent to marketing's reputation. The present study provides strong reasons for seeing marketing's reputation as a driver of marketing's influence in an organization. However a feedback loop may exist between influence and reputation. As marketing's influence grows, the more positive marketing's reputation may become. This possibility is on the proviso, however, that marketing influence is judged post hoc to be beneficial to the organization. An additional research track that may shed light on the antecedents of marketing's reputation is to explore to what extent the marketing function suffers from deep-rooted professional problems. One problem marketing professionals appear to struggle with in firms, according to Stewart (2008), is that they cannot always explain how they achieve their results. The inability to demonstrate how their marketing actions affect shareholder value is another problem that marketing professionals face (Lukas et al., 2005). A third problem-area relates to observations that other organizational members deem marketing professionals to be sources of innovation bottlenecks. For example, Kotler and Trias De Bes (2003) report that many CEOs believe that the traditional segmentation mindset of marketers limits innovation to a given market and leads, eventually, to the hyper-fragmentation of markets in which differences
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Table 5 Comparison of empirical findings: Homburg et al. (1999), Verhoef and Leeflang (2009), and present study. Antecedents of the marketing function's influence in the firm that have been shown to be important
Homburg et al. (1999)a (data from German and U.S. firms)
Verhoef and Leeflang (2009)b (data from Dutch firms)
Present studyb (data from Australian firms)
Reputation of marketing Accountability of marketing Innovativeness of marketing Market orientation Market turbulence SBU size Cost-leadership strategy Frequency of major market-related changes Unpredictability of major market-related changes Differentiation strategy Percentage of direct sales CEO background Societal context
Not tested Not tested Not tested Not tested Not tested Not supported Not supported Supported Supported Supported Supported Supported Supported
Not tested Supported Supported Not supported Not supported Not tested Supported Not tested Not tested Not supported Not tested Not supported Not tested
Supported Not tested Not tested Not supported Not supported Not supported Not supported Not tested Not tested Not supported Not tested Supported Not tested
a b
Dependent variable in Homburg et al. (1999): “Influence on all issues”. Dependent variable in Verhoef and Leeflang (2009): “Decision influence”.
Table 6 The influence of business functions on specific decision issues (means and t-tests)a,b. Decisions on… Pricing Distribution Capital expenditure Strategic business directions Advertising messages New geographic markets Customer satisfaction measurement Customer satisfaction improvement Design of customer service and support Strategic business partner choices New product development
Marketing
Finance
Sales
R&D
Production (operations)
37.3 37.5 13.5 31.7 71.5 46.7 51.4 42.9 38.3 34.0 33.5
24.8⁎⁎
37.2 38.6 8.9⁎ 22.9⁎
3.7 3.8 9.5⁎ 13.9⁎ 4.8⁎⁎ 6.3⁎⁎
14.2⁎ 19.2⁎⁎ 34.1⁎ 18.1⁎ 4.7⁎⁎ 7.9⁎ 10.9⁎⁎ 13.8⁎⁎ 14.0⁎⁎ 17.8⁎⁎ 16.0⁎
15.8 42.2⁎⁎ 25.8⁎⁎ 4.3⁎ 18.0⁎⁎
35.8 36.3⁎ 41.3 39.7 43.9 25.9⁎ 24.5⁎
7.4 7.5⁎ 9.9 24.7⁎⁎ 10.0⁎
6.2 9.2⁎ 7.6 9.6⁎ 31.5⁎
This table can be compared with Table 1 in Homburg et al. (1999) and Table 3 in Verhoef and Leeflang (2009). a Marketing compared with other business functions (finance, sales, R&D, and production). b To obtain the data reported in this table, the questionnaire included Homburg et al.'s (1999) multi-issue measure of marketing influence. ⁎⁎ p ≤ .01. ⁎ p ≤ .05
between products become increasingly trivial. A fourth problem-area is that executives are sometimes weary of giving marketing strategic responsibility. Webster (1997, p. 49) observes that firm executives have limited the role of marketing “to the short-term tactical areas of demand stimulation” and that, as a consequence, other organizational functions have captured many of marketing's strategic responsibilities. Research that helps to better understand these four problem areas will identify additional factors that explain marketing's reputation in the firm, and how the marketing function can manage its reputation. The fact that market orientation does not relate significantly to marketing's influence in the firm is an unexpected finding relevant to future research. Although non-significant, the market orientation– marketing influence relationship is negative, rather than positive as predicted. A possible explanation for this finding may be that, as marketing as a philosophy and orientation becomes increasingly important, the marketing function itself may become less instrumental as an organizational institution and, hence, it may suffer from a decline of influence. Some discussions in the literature point to this possibility. For example, Webster (1990) notes that as marketing becomes more of a set of activities carried out by different people throughout the organization, marketing units may be seen as ineffective, or perhaps even redundant. Greyser (1997) concludes, “doing marketing” belongs to the marketing subunit, while becoming and being marketing-minded is the job of everyone in the business, thus leading to the simultaneous upgrading of marketing as an orientation and the downgrading of marketing as a formal function.
The present study does not test these perspectives. More research is necessary in this area.
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