IZVIRNI ZNANSTVENI ČLANKI - ORIGINAL SCIENTIFIC PAPERS MARKETING DECISION-MAKERS IN SLOVENIA: EMPIRICAL EVIDENCE OF THE IMPORTANCE OF MARKETING FUNCTION Marketinški odločevalci v Sloveniji: empirična preverba pomena marketinške funkcije Introduction It is now almost half of a century since Keith (1960) wrote a groundbreaking article on the marketing revolution. Through those years marketing as a discipline has slowly entered its mid-life with all the crises pertaining to this stage of the life cycle, a fundamental crisis of representation (Brown 1995). The current position shows some signs of discipline disorganization, which should evoke serious concern in marketing theory as well as in practice. One of the reasons for the marketing crisis lies in the obsolescence of the managerial marketing paradigm, which is in fact predominantly sales and promotion oriented. We start the article with an overall analysis of the role that marketing plays in the contemporary company and proceed with an analysis of domestic findings in this area. We present the results of a national study that confirms our assumption and explains to whom the power of marketing management has been transferred. What happened is the discontinuous change in the business environment that marketing has failed to properly adapt to. Webster (2006) mentions the following forces of an increasingly competitive environment: the global economy, organizational cost-cutting and down-sizing, short-term orientation, outsourcing, the information and internet revolution, and growth of discount mass merchants. There are, of course, many other forces in the macro environment (political, economic, ecologic, technological, and socio-cultural) that are shaping the business landscape. Most important in our view are changes on the part of customers. Customers are nowadays knowledgeable, connected, ethically sensitive, and powerful as never before in the past. This provides a threat to the manipulative marketer who still bets on the old sales wisdom of an unquestionable information imbalance between sellers and buyers. Burning issues are many. The first among them is the fact of marketing mar-ginalization. Stringfellow and Jap (2006) report on the heightened discrepancy in the average compensation between marketing, financial and manufacturing executives in the USA. The poor perception of marketing executives as of minor strategic importance is widespread, connected with the slimming of chances for upward-mobility. The origins of CMOs (chief marketing executives) correspond with the "marketing revolution" of the late 1950s. Recently, we hear discussions about the decreasing role of marketing on the company's boards of directors (Stringfellow and Jap 2006; Sheth and Sisodia 2006; McDonald 2006; Bolton 2005; Kerin 2005). Welch (2004) presents the results of the study by Spencer dr. Vesna Žabkar, assoc. prof., University of Ljubljana, Faculty of Economics, Kardeljeva ploščad 17, 1101 Ljubljana, Slovenia. E-mail: vesna.zabkar@ef.uni-lj.si. dr. Zlatko Jančič, assoc. prof., University of Ljubljana, Faculty of Social Sciences, Kardeljeva ploščad 5, 1000 Ljubljana, Slovenia. E-mail: zlatkojancic@fdv.uni-lj.si. dr. Vesna Žabkar* dr. Zlatko Jančič** Abstract UDC: 339.138(497.4) The criticism of the underperforming nature of Slovenian marketing rests mostly on internal reasons. Researchers emphasize that certain historical, cultural and financial factors prevent our companies from being more marketing oriented, even though they have thrived in the market economy for almost two decades. Less is said, however, about the global environment and the similarity of problems in other developed economies, where marketing is losing its "seat at the table," being evicted from the company boards. This phenomenon is therefore a central theme of our research. We believe that our conclusions bear relevance and give food for thought for a majority of companies in developing countries. Keywords: CMO, marketing in crisis, market orientation, marketing communications, Slovenia Izvleček UDK: 339.138(497.4) Kritika zaradi nedelujoče narave marketinga v Sloveniji je zasnovana večinoma na notranjih razlogih. Raziskovalci poudarjajo, da nekateri zgodovinski, kulturni in finančni dejavniki ovirajo podjetja, da bi bila bolj tržno naravnana, čeprav uspevajo v tržnem gospodarstvu že skoraj dve desetletji. Manj pa je napisanega o globalnem gospodarstvu in podobnih problemih v razvitih gospodarstvih, kjer marketing izgublja „mesto pri mizi", s tem ko je izločen iz uprav podjetij. Temu pojavu je namenjena tudi naša raziskava. Verjamemo, da so naši zaključki relevantni in da dajejo izhodišča za razmišljanje o vlogi marketinga za podjetja v manj razvitih državah. Ključne besede: vodja marketinga, marketing v krizi, tržna naravnanost, tržno komuniciranje, Slovenija JEL: M30, M31, M32 Stuart, an executive search firm, about the development of the CMO position. While almost half of the Fortune 1000 companies have a CMO, the fact remains that such a "seat at the table" is of short duration, with an average tenure of only 22.9 months. Only 14% of CMOs of the world's top brands remain on their job for more than three years, and nearly half are new to this position over the last 12 months. The interest in CMO positions among young executives is diminishing and, besides, the one-dimensional career track in traditional marketing is no longer satisfactory. Davis (2006) therefore claims that we are about to see the rise of the new CMO, with experiences not only in marketing but also in operations, sales, strategy and customer service. Such a profile will also have a much easier path towards the CEO position. The second issue is the fact that other disciplines are usurping not only the many fields of the broadened discipline of marketing (strategic marketing to strategic management, new product development to R&D, internal marketing to HRM and PR, social marketing to advertising and PR, relationship marketing to sales), but also its core, namely pricing, distribution, product development, branding and corporate communications. The dispersion of marketing responsibilities throughout the organization was seen by some as a positive trend towards customer-oriented organization, but the result was a decline in marketing competence and a weakening of the marketing department (Webster 2006). It seems that what is left to the marketing department now is just promotion or marketing communications, and even they are more and more short term oriented. At a time when we thought that marketing had (finally) become everything (McKenna 1991), it became almost irrelevant in the eyes of many top managers, something tactical and expensive. This is a severe blow to the discipline that in the past 50 years has enriched so many companies and nations. The third issue is connected with the evidence of marketing effectiveness and efficiency. Marketing is a soft applied discipline with questionable accountability, so it obviously needs tight control from top management. There are, therefore, growing demands that marketing should become more accountable and needs to develop financial literacy and better measurements of its activities. The argument of marketing as an investment that will pay off in some rather undefined future is losing its credibility, so the cutting of such "expenses" is often the first thing management would do (Webster 2006). But even if these outcomes are not visibly present, the fact is that marketing function is being watched more closely, and many times its activities receive direct interventions from top management. Marketing function is thus losing its autonomy in the organization. Webster (2006) claims that this is a result of the implicit assumption that marketing is something easy to learn that "anybody can do." Such assumptions are not present when discussing other critical functions in the organization. The question remains whether the management perception of marketing is in tune with new professional standards, or is rather myopic, devoid of the basic marketing literacy, concentrated around care for the customer. Webster (2005) claims that the major challenges for marketing are not methodological but conceptual. The understanding of marketing and its role on the strategic and cultural level tells us that measures should be less precise than demanded. Changes in the conceptualization of marketing are more and more present and even the American Marketing Association (AMA) was forced to change its definition of marketing. The recent AMA definition (2004) is the following: "Marketing in an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders (Wind 2006)." Although it embraces new topics such as stakeholders and marketing relationships, the definition is still action oriented or one-sided with no mention of the interdependent nature of the marketing process. The fourth issue is the ever increasing perception that old marketing is not working. Brown (1995) claims that two decades ago marketing was commonly misunderstood as a new name for the old-fashioned selling by most senior managers. Some unfairly attribute this fact to the transaction oriented or Kotlerian marketing approach (Smithee 1997; O'Driscoll and Murray 1998). Kotler, on the other hand, seems to have no quarrel with these critics and evolves his thought further. He himself emphasizes that many managers may misunderstand what marketing does or is capable of doing, and have unreasonable expectations. Thus he speaks about "Neanderthal marketing," consisting of practices such as equating marketing with sales, underestimating relationships and the lifetime value of consumers, concentrating on single transactions and customer acquisition, etc. (Kotler 1999). Surprisingly or not, until recently not much attention was given to these issues from the side of "traditionalist" marketing academics who understand marketing as a mass market product related discipline in spite of many critics from the 1960s on. But the crisis in the marketing discipline is nowadays so deep that it has become a current topic of many conferences and is now well elaborated in various books and special journal editions (Brown 1995; Godin 1999; Sheth and Sisodia 2006; Wind, Mahayan and Gunther 2001; Schmitt 1999; Bolton 2005). The critiques are no longer merely academic, connected with, for instance, the lack of ethics in the marketing discipline or its reluctance to broaden its field. They are more basic, concrete and concern academia as well as a plethora of practitioners. The fact is that the old marketing tool-box (Grönroos 1996) does not offer the necessary means to cope with the changes in the environment. Grönroos (1996) also criticizes the very term marketing. Due to the new developments in the marketing discipline, and especially in services, he prefers the use of the term "management of consumer relationships." Such a change would necessarily bring if not marketing at least a marketing concept back to the board. ŽABKAR, JANČIČ: MARKETING DECiSiON-MAKERS iN SLOVENIA: EMPiRiCAL EVIDENCE OF THE IMPORTANCE OF MARKETING FUNCTION Marketing orientation in Slovenia Several authors have tried to explain the background of marketing development in Slovenia and the reasons for the current standings of marketing function development. The first attempts to uncover the importance of customer orientation were conceptual in what was at that time still a socialist economy. Prof. Bogomir Deželak, the pioneer of academic marketing in Slovenia, pleaded for the acknowledgement of marketing management even in the circumstances of modified influences of market forces. The additional argument for introducing marketing philosophy was the need for better export results of our companies. The author also emphasized the importance of transcending the production and short-term sales orientation of companies and proposed a full acceptance of (integrated) marketing management technology. The need for integration and coordination included also a proposition of the dominant role of the CMO ("marketing manager" in the author's words) over all marketing domains including sales (Deželak 1984). Others (Gabrijan and Snoj 1983) proposed the move from "closed" to "open" approaches to marketing management and emphasized the importance of the societal role of marketing. Later they also addressed the question of serious supply shortages in the Slovenian market in the early 1980s and presented data of a neglected purchasing side of marketing (Snoj and Gabrijan 1984). Further research findings showed that the majority of managers at that time still refused to believe that a market economy would ever be present in Slovenia. But if eventually it would happen, they were ready to adopt and prepared to develop a market orientation of their company, which was at that time rare and not put into practice (Jančič 1988). Later studies were mostly made in the field of market orientation (Kohli and Jaworsky 1990). The results showed that more than half of Slovenian managers are not satisfied with their company's marketing development owing to financial and historical reasons (Snoj and Gabrijan 1998). Marketing management is underperforming with slim chances of ever becoming a leading business function. In spite of expectations, foreign investors did not bring superior marketing knowledge into the small market of Slovenia (Gabrijan et al 1998). Marketing management as a whole was sales oriented and mostly reduced to marketing communications (Zupančič 1998), with a poor strategic management role. The "seat at the table" was rare and, where present, mostly occupied by sales oriented executives. The historical gap prevented Slovenian companies from ever developing a strong role of CMO, with very few exceptions. Pressed by the loss of the ex-Yugoslav market and forced to find new markets, managers adopted a tactical selling orientation, while at the same time cutting marketing expenses and in many companies reducing their existing marketing departments. Some research shows (Žabkar, 2006) that the measurement of marketing performance is also regularly omitted due to the needed costs. Managers are demanding stricter measures on one hand, but on the other hand are reluctant to spend any extra money on complex measurement techniques. Another force preventing the development of marketing orientation is a period of ownership transition that is still going on. Short-term orientation was a logical outcome in this situation. Things are now rapidly changing since a lot of new owners have realized that the value of the company rests in its committed customers. Marketing as a discipline is slowly gaining some of its reputation back, but with cautious supervision by top managers. A quick overview of the board members in the top 150 companies in 2007 showed that in about one tenth of these companies, marketing has "a seat at the table." Research Methodology The contribution of the paper lies in the more recent investigation of the importance of marketing function in companies in Slovenia. The principal hypothesis of the paper is that the majority of companies in the country suffer from a lack of power on the part of marketing managers in marketing-related decision-making. The empirical work is a result of the current structural changes and challenges in the country and is in line with Steenkamp's call for research "moving out of the U.S. silo" (Bolton 2005, p.6). A mail survey was conducted by the Institute of Marketing, Faculty of Economics, in January-February 2006, with the purpose of analyzing the specifics of marketing and marketing communications in companies in Slovenia. The survey included 2000 firms from different industries with more than 10 employees. A stratified random sample was based on company size (240 large, 760 medium and 1000 small companies). The marketing vice president, marketing director or sales director was approached. For small companies (fewer than 50 employees), the president or owner was included. An early version of the questionnaire was administered to three academics in the fields of marketing and marketing communications. The research instrument was refined on the basis of the feedback received. The revised questionnaire was further tested with a group of marketing directors. Measures of the constructs were developed based on a literature review, conceptual domains and field interviews. Responses from 235 companies were received (11.8% total response rate, 24.6% for large companies, 13.3% for medium and only 7.1% for small companies). With regard to the length, complexity and mail administration of the survey, we consider the response from large and medium companies to be encouraging. Research results The importance of marketing function was measured through questions about the position of principal decision makers deciding about marketing strategies development in general as well as in marketing communication related areas (such as selecting communication agencies, determining marketing communication budgets, reallocating Table 1 : Position of the decision-maker with regard to the SIZE of companies (% inside groups of specific size) President of the board/ CEO Marketing manager Decision-making areas: Large company Medium company Small company Sig. Large company Medium company Small company Sig. 1. About marketing strategy development 47.9% 56.3% 72.7% 0.019 48.9% 35.7% 32.4% 0.42 2. About MC agency selection 36.4% 32.7% 48.6% 0.105 52.7% 34.7% 21.7% 0.02 3. About marketing communication budget size 66.7% 72% 77.9% 0.378 35.2% 22% 16.4% 0.048 3. About marketing communication budget distribution 22.2% 33% 50% 0.005 50% 40% 29.4% 0.067 5. About media selection 18.2% 22.4% 52.9% 0.00 43.6% 35.7% 32.4% 0.42 6. About MC strategy development 23.6% 37% 55.9% 0.00 45.5% 37% 32.4% 0.323 7. About control of efficiency of MC investments 28.6% 35.7% 61.2% 0.00 47.3% 35.7% 25.4% 0.042 *Legend: MC = marketing communication; n=235. Table 2: Position of the decision-maker with regard to the INDUSTRY (% inside groups of specific industry) President of the board/ CEO Marketing manager Decision-making areas: Manufact. company Services company Sig. Manufact. company Services company Sig. 1. About marketing strategy development 62.5% 59.1% 0.61 29.1% 42.3% 0.044 2. About MC agency selection 36.1% 40.2% 0.53 34.3% 37.6% 0.66 3. About marketing communication budget size 68.2% 76.3% 0.17 23.4% 24.6% 0.83 3. About marketing communication budget distribution 34.6% 36.4% 0.77 34.3% 45.3% 0.09 5. About media selection 31.5% 30.5% 0.87 33.3% 42.4% 0.16 6. About MC strategy development 37.0% 42.0% 0.44 33.3% 42.9% 0.14 7. About control of efficiency of MC investments 37.4% 47.5% 0.12 34.0% 36.4% 0.69 *Legend: MC = marketing communication; n=235. Table 3: Position of the decision-maker with regard to the ORGANIZATIONAL STRUCTURE (% inside groups of specific organizational structure) President of the board/ CEO Marketing manager Decision-making areas: Function form Product form Matrix Form Sig. Function form Product form Matrix form Sig. 1. About marketing strategy development 56.7% 78.6% 69.2% 0.118 36.5% 7.1% 48.1% 0.018 2. About MC agency selection 38.3% 25.0% 38.6% 0.569 38.8% 20.0% 42.1% 0.288 3. About marketing communication budget size 76.4% 71.4% 73.7% 0.873 21.9% 13.3% 34.5% 0.103 3. About marketing communication budget distribution 31.8% 31.3% 40.4% 0.508 42.2% 20.0% 49.1% 0.126 5. About media selection 27.5% 35.7% 33.3% 0.634 40.8% 28.6% 43.9% 0.580 6. About MC strategy development 39.5% 31.3% 36.8% 0.791 41.4% 26.7% 45.6% 0.415 7. About control of efficiency of MC investments 41.5% 50.0% 43.6% 0.803 36.9% 18.8% 41.8% 0.242 *Legend: MC = marketing communication; n=235. Table 4: Position of the decision-maker with regard to the ORIGIN OF THE CAPITAL (% inside groups of specific origin) President of the board/ CEO Marketing manager Decision-making areas: Domestic company Foreign company Sig. Domestic company Foreign company Sig. 1. About marketing strategy development 59.4% 63.9% 0.618 32.4% 50.0% 0.044 2. About MC agency selection 38.6% 37.5% 0.894 33.0% 45.0% 0.150 3. About marketing communication budget size 70.6% 77.5% 0.382 23.5% 27.2% 0.562 3. About marketing communication budget distribution 36.2% 35.0% 0.890 35.0% 57.5% 0.009 5. About media selection 31.6% 27.5% 0.609 35.0% 57.5% 0.067 6. About MC strategy development 38.2% 40.0% 0.833 35.8% 47.5% 0.166 7. About control of efficiency of MC investments 43.2% 40.0% 0.713 32.4% 47.5% 0.071 *Legend: MC = marketing communication; n=235. budgets among different marketing communication tools, selecting media, developing communication strategies and controlling the efficiency of marketing communication investments). Results showed that the most important decision makers in the marketing strategy field are presidents of the board and marketing managers, with significant differences between companies of different sizes. In the majority of small and medium companies, top managers decide about marketing strategies, determine marketing communication budgets, and control the efficiency of marketing communication investments. Marketing managers in the majority of large companies decide about the selection of communication agencies and the reallocation of budgets among different marketing communication tools (see Table 1). There are no significant differences between manufacturing and service companies in the level of involvement of top management in decision-making about marketing. However, marketing managers in service companies decide significantly more about marketing strategies and communication budget distribution than their counterparts in manufacturing companies (see Table 2). With regard to organizational structure, there are significant differences with respect to the role of marketing managers in decision-making. It seems that companies with a matrix form of organization convey more power to marketing managers than the other organizational forms (functional, product-oriented) in the area of marketing strategy development (see Table 3). In the majority of product-oriented companies, the role of president of the board/ CEO in marketing decision-making is evident. Regarding the origin of capital, there are no significant differences in top management decision-making between companies with domestic or foreign capital ownership. There are, however, more decision-makers among marketing managers in foreign-owned companies compared to marketing managers in domestic-owned companies in the area of marketing strategy development, budget distribution, media selection and even control of communication investment efficiency (see Table 4). Conclusions and implications The major findings about the specifics of management involvement in Slovenian marketing management are the following: Results showed that the most important decision makers in the marketing strategy field are presidents of the board and marketing managers, with significant differences between companies of different sizes. The role of marketing management increases with company size. Unfortunately, Slovenian companies are predominantly small and medium sized. Key marketing decisions in Slovenian companies are made more often by top managers then by marketing managers. Top managers even decide about professional marketing decisions (marketing communication related areas) more than marketing managers. Interestingly, marketing managers in companies with a matrix form of organization seem to have more power in the area of marketing strategy development than marketing managers in the other organizational forms (functional, product-oriented). This could be due to a higher level of involvement of marketing managers in the matrix form, where information sharing is mandatory and synergism through shared responsibility between project and functional management is obtained. There are more decision-makers among marketing managers in foreign-owned companies compared to marketing managers in domestic-owned companies in the area of marketing strategy development, budget distribution, media selection and control of communication investment efficiency. Foreign investors seem to have more trust in local marketing managers with knowledge about the local macro-environment, competitors and customers, compared to domestic owners in Slovenia. These results show a slight improvement from the situation identified by Gabrijan et al. (1998). The "boss" in Slovenian marketing is therefore a CEO and not a CMO. This could probably be adequate, provided the top management would have a better understanding of the field. On the other hand, if CMOs want to regain their "seat at the table" they need to reposition their basic domain and become more strategically oriented. 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