A Perspective on the Evolution of Marketing Management

Frederick E. Webster Jr.

s a field of study, marketing has not always been viewed from a management perspective. At different phases in its evolution, marketing thought leaders have variously emphasized commodities, institutions, functions, markets, consumers, management of firms, and society at large. Wilkie and Moore (2003) identify four eras of marketing thought development:

Era I: Founding the Field, 19001920. Era II: Formalizing the Field, 19201950. Era III: A Paradigm ShiftMarketing, Management, and the Sciences, 19501980. Era IV: The Shift IntensifiesA Fragmentation of the Mainstream, 1980Present.

In the academic arena as reflected in its literature over the past three decades or so (late Era III into Era IV), marketing has trended from a managerial focus to an analytical one, two perspectives that need not be but often are, in fact, in competition. There is evidence that marketing has lost its importance and relevance as a management function in many companies (Day and Montgomery 1999; Lehmann 2003; Webster, Malter, and Ganesan 2003). Perhaps marketing thought development has lagged behind shifts in the market environment and has become less relevant for managers, particularly those who are responsible for strategy and general management. Most recently, however, marketing thought leaders have pointed the way toward a customer-oriented, service-dominated concept of marketing as the definition, development, and delivery of customer value that focuses on marketing as a set of business processes rather than as a separate management function (Haeckel 1999; Srivastava, Shervani, and Fahey 2001; Vargo and Lusch 2004; Webster 1992, 2002).

nificant environmental trends drove this transition, one in the marketplace and one in education. In the economic and social environment, the post-World War II marketplace offered huge business opportunities that were created by pent-up demand, rapidly increasing consumer affluence (with commensurate economic and political power), and the dramatic development of television as a low-cost mass medium (Cohen 2003). Although the concept of market segmentation had appeared many years before as a means to improve marketing efficiency and effectiveness, the practice gained widespread acceptance in this hyperactive market environment, stimulated by the publication of Smiths (1956) article. Marketing strategy came to rely increasingly on statistical analysis of market research data. Market segmentation strategy was entirely consistent with the philosophy of customer orientation. Among the most notable developments at the beginning of Era III were the publication of several important statements of the marketing concept (Borch 1959; Drucker 1954; Keith 1960; Levitt 1960; McKitterick 1957), the growth of marketing staffs (for market research, product planning, advertising, and so on) to support sales operations in many companies, the continued development of the product- or brand-management form of organization, and the appearance of several pathbreaking texts with a managerial focus (Alderson 1957; Davis 1961; Howard 1957; Kotler 1967; McCarthy 1960). These managerial texts (especially McCarthys) produced a consensus definition of marketing strategy decisions as the four Ps: product, price, promotion, and physical distribution. As Day (1992, p. 324) observed, In retrospect, the 1960s were the era of marketings widest influence and greatest promise.

Marketing as Management
A distinct view of marketing as a management discipline (rather than an economic activity) emerged in the 1950s (Drucker 1954; McKitterick 1957), though marketing management had certainly been evolving as a practice for some time, with origins as a form of support for the sales function. This transition was marked by two major developments: first was the perspective of the marketing concept as a management philosophy emphasizing customer orientation, and the second was the integration of quantitative methods and behavioral science into the marketing discipline. Two sig-

Marketing Management as an Optimization Problem

Of equal importance as environmental forces, two pathsetting studies of business education (Gordon and Howell 1959; Pierson 1959) advocated a shift from a narrow vocational and skills emphasis to a deeper and more rigorous analytical approach based on quantitative analysis and the behavioral sciences. Among the early results for marketing of this initiative were the publication of such bellwether texts as Mathematical Models and Methods in Marketing (Bass et al. 1961), Quantitative Techniques in Marketing Analysis (Frank, Kuehn, and Massy 1962), Marketing: Contributions from the Behavioral Sciences (Zaltman 1965), and Management Sciences in Marketing (Montgomery and Urban 1969). Although these two lines of developmentthe marketing (management) concept and quantitative analysiscan be identified as equally important and influential at the outset
Journal of Public Policy & Marketing

Frederick E. Webster Jr. is Charles Henry Jones Professor of Management, Emeritus, Tuck School of Business, Dartmouth College (email: [email protected]).

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of Era III, they have developed in a very different fashion. Rigorous analytical methods proved to have greater appeal to many marketing educators than the softer and more conceptual approaches of customer orientation and the marketing concept and their managerial and organizational implications. With the active support of their colleagues in economics and finance, the dominant culture in most leading business school faculties, marketing academics eagerly adopted a pricetheory-based view of marketing management as essentially an optimization problem (Anderson 1982). Allocating resources until marginal returns were equal across spending opportunities, if only the analyst could accurately estimate the demand curve, could optimize each of the four Ps. Aided by the availability of large-scale computers and increasingly large and reliable databases, marketing scholars were strongly encouraged by the academic culture to emphasize empirical data, quantitative methods of data analysis, and mathematical modeling in their research. This bias was reflected naturally in the evolution of the editorial direction of established journals such as Journal of Marketing and the development of new vehicles such as Journal of Marketing Research and, later, Marketing Science, a spinoff from Management Science, in which much marketing work was published in the 1960s and 1970s.

The Rise and Fall of the Strategic Planning Empire

On the general management and business policy side of the academic field, the area of formal strategic management was emerging (Ansoff 1965). An important element of this approach was the famous DuPont model of management, which was based on return on investment, by which large companies could be effectively controlled through the careful allocation of financial resources across strategic business units (SBUs) competing for these limited funds. A central feature of most of these formal strategic planning approaches was the product portfolio, a matrix that depicted firms SBUs on two dimensions: their position relative to those of competitors (market share) in their respective markets and the rate of growth in those markets. Return on investment became the dominant criterion for evaluating business performance and for budgeting expenditures including marketing. Attributing revenue and profit results to marketing expenditures is known to be especially difficult because of multiple causation, lagged effects, and similar measurement and estimation problems. By the mid-1970s, the discipline of strategic planning was in full bloom, evidenced by the proliferation of corporate strategic planning departments. It was not uncommon for the corporate marketing function to merge formally into strategic planning, seeking two benefits: to make the marketing concept and customer orientation strategically operational and to make strategic planning more customer focused and market driven. Several excellent marketing strategy texts appeared at this time (e.g., Abell and Hammond 1979) along with several articles that explored the relationship between marketing and corporate strategy (e.g., Anderson 1982). Many key concepts from marketing, such as customer orientation, market segmentation, and position-

ing, were adopted and promoted aggressively by the strategic management field (Day 1992). The Strategic Management Journal appeared in 1980, edited by Dan Schendel at Purdue, who had earned his doctorate in Marketing at Stanford. These trends prompted Biggadike (1981) to contend that with their bias toward marketing tactics and optimization, marketers were unlikely to use their tools and concepts to address strategic management issues because of their orientation to methodological rigor. Biggadike questioned whether marketers were interested in raising their level of aggregation to the business unit or industry level and to their time horizon over the long run, and he concluded that it would be up to strategic management students to make the transfer of marketing concepts and methods to strategic issues. That appears to be what happened. By the early 1980s, however, formal strategic planning as an activity at the corporate level was in decline, and most strategic planning departments were being dismantled (Kiechel 1982). The bureaucratic strategic planning process had proved to be an expensive undertaking in management time and organizational and administrative costs, often causing serious lags in responding to a changing market environment (paralysis by analysis). Measurement problems in making operational such central constructs as market share and the definition of served market also proved to be difficult and a continuing source of disagreement and debate between corporate analysts and SBU-level management (Day 1977; Day and Montgomery 1983; Kiechel 1981). In many companies, responsibility for marketing strategy was delegated to SBU managers. Corporate marketing departments were also widely downsized or eliminated, which left little or no customer advocacy or marketing management competence at the top level of the organization, unless the chief executive officer happened to come from that background (Webster, Malter, and Ganesan 2003). Part of the rationale for eliminating marketing as a corporate function was embedded in the fundamental assertion of the marketing concept that customer orientation should pervade the organization and, according to Drucker (1954), thus was not a separate function at all but rather the entire business as seen from the customers point of view. As Day (1992, p. 323) notes, Paradoxically, the deeper marketing is embedded within an organization and becomes the defining theme for shaping competitive strategies, the more likely is the role of marketing as a distinct function to be diminished. Although strategic planning departments at the corporate level have disappeared, the discipline of strategic management and the related field of strategic management consulting have continued to have the ear of practicing managers. Today, it is a literature more widely read and valued by managers than the marketing literature, evidenced by the large number of management subscribers compared with those of the marketing journals. Throughout the 1970s and 1980s, the marketing discipline continued to emphasize the development of enhanced methodological sophistication and analytical rigor, whereas the strategic management journals were more likely to report interesting, new conceptual developments and (perceived) best business practices.

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An American Marketing Association Task Force on the Development of Marketing Thought (Churchill et al. 1988) highlighted the importance of the academic journals in the field and how they had evolved toward more rigor and an emphasis on methods. These positive achievements were said to be counterbalanced by a lack of articles written in a form accessible to marketing students and executives, by fewer integrative and conceptual articles, and by a paucity of articles advancing new ideas and approaches to marketing problems. Marketing journals appeared to have assumed an attitude that managerial relevance was inconsistent with academic rigor and, equally problematic, that conceptual knowledge was less valuable than methodological and empirical knowledge. It was noted that Journal of Marketing in particular had been explicitly repositioned in the 1970s to deemphasize managerial relevance in favor of articles that (quoting the editor then) were truly scholarly and provided a new theoretical, methodological, or substantive contribution to the field. This was a marked departure from the traditional mission of Journal of Marketing to publish important articles that would serve both business and academic readers. Today, there appears to be a general awareness that marketing scholarship had moved too far in the direction of methodological sophistication and analytical rigor applied to narrowly defined problems with limited managerial relevance. Recent Journal of Marketing editors have emphasized the need for both managerial relevance and analytical rigor and an editorial goal of appealing to both the business and the academic communities.

to support increased field sales effort and larger discounts to increasingly powerful resellers (Webster, Malter, and Ganesan 2003). For example, the product-level brand management function in many consumer packaged-goods companies has been redefined and relocated to the field sales organization, with primary responsibility for working with major resellers on in-store promotional activities, rather than to the traditional roles of brand development in which consumer advertising is heavily used. At the corporate level, remaining marketing management positions tend to focus on global brand strategy (across SBUs and geographies) and marketing communications. Product and pricing strategy, sales management, and channel strategy and management are SBU-level responsibilities, often with a relatively shortterm, tactical focus. Innovation for long-range product development tends to lose priority.

The Relationship Between Marketing and Selling

The proper relationship between selling and marketing has always been a problem both for companies and for the marketing discipline. Are they distinct functions, or is selling part of marketing? We know that marketing originated as a form of support for sales force management, including the development of promotional materials and sales tools, the use of market research to plan and control field sales activity, and the development of strong brands to support the trade channels and related selling effort. However, it was a central part of Druckers (1954) thesis that marketing is more than selling and is distinct from it. Over time, sales management emerged as a separate field of study within the marketing discipline and was a major focus of academic research from the 1950s to the 1980s (see, e.g., Churchill, Ford, and Walker 1981; Davis 1957; Davis and Webster 1968; Webster 1983). A significant amount of the mathematical modeling of marketing activities that was published in the 1960s and 1970s addressed field sales management issues, such as call frequency, the design of sales territories, sales force size, sales compensation plans, and assignment of individual sales representatives to specific territories (Bagozzi 1979; Bass et al. 1961; Frank, Kuehn, and Massy 1962; Webster 1983). Some observers estimate that as much as 80% of the total marketing communications budget is now spent on selling (including trade discounts in some cases), leaving only 20% for advertising and other communication and consumer sales promotion activities. Surprisingly, even as marketing dollars have shifted from other activities to the field sales force operation, academic interest in sales management has all but disappeared. Just as sales and marketing are distinct management activities in many companies, so it appears that many academics do not think of sales management when they think of marketing. Sales promotions, narrowly defined as short-term price reductions and other incentives such as additional merchandise, special packaging, or rewards for frequent patronage, have become a principal marketing tool, often accounting for the lions share of the consumer-marketing budget. There is a wide range of practice pertaining to the accounting for sales promotion expenditures: Are expenditures sim-

The Changing Role of Marketing

There is no question that marketing management has experienced significant changes during Era IV: A Fragmentation of the Mainstream. Among the many environmental forces that have reshaped the marketing function within the firm during the past two decades are as follows:
Evolution from bureaucratic to more flexible organizational forms; Rapid diffusion of computer and telecommunications technology, including the Internet; Dominance of large, low-cost retailers in most product categories; The stock-market boom of the 1990s, followed by a dramatic decrease in stock prices; Continued emphasis on quarterly earnings per share as a measure of business performance and company value; Globalization and increased competitive pressures; and Outsourcing of many parts of value-creation and value-delivery processes.

As corporate structures have moved away from centralized bureaucratic control to a stronger emphasis on SBUs and strategic partnering, marketing at the corporate level has become much less important. Either marketing management responsibilities have been shifted outward to the field sales organization or into SBUs, or they have simply been eliminated as a distinct activity. Marketing communications dollars have been reallocated to short-term price incentives and other sales promotional activities and to the selling function,

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ply reductions in price that should be deducted from top-line sales revenue, or should they be a separate expense item within marketing or sales? There are two major attractions of sales promotions for marketers: First, they can produce more or less immediate results, thus enhancing short-term revenues and related measures of business performance. Second, these results can be tracked and measured relatively easily using point-of-purchase sales tabulations and other databases that are now widely available from retailers and service organizations. Given the academic fields interest in empirical data, combined with the development of sophisticated statistical methodologies and database owners eager to maximize the value of their investments in these data, it is no surprise that sales promotion has become perhaps the most widely and rigorously studied area of marketing in recent times (Blattberg and Neslin 1990; Neslin 2002). There is undoubtedly a reinforcing feedback effect on the widespread use of sales promotion as a marketing tool, as managers under pressure to measure the effectiveness of their expenditures to support their budget requests allocate additional resources to the areas in which they can track and report results with a reasonable degree of validity and reliability. The large, lowcost retailers have the ability to control access to the necessary data and thereby gain additional power in their relationships with their suppliers, thus diminishing the relative power of the manufacturer and the manufacturers brand while delivering lower prices to the consumer.

Strengthening the Managerial View of Marketing

Marketing needs new conceptual models that articulate clearly and with more relevance for the current management environment the basic argument of the marketing concept: Customer orientation and value delivery must be at the core of the firm if the firm is to maximize long-term value for its owners and its other constituencies, partners in the valuedelivery process. Research with chief executives and marketing officers provides some guidance for strengthening marketings contribution within the firm and for defining academic research priorities (Webster 2002; Webster, Malter, and Ganesan 2003). With or without a change in corporate charters, marketing managers must develop better measures of marketing productivity that are tied to the financial systems and goals of the company. The measurement issue is one of several that must be aggressively addressed by solid conceptual development and rigorous empirical work if marketing is to regain its seat at the table, in the words of one chief marketing officer. A recent issue of Journal of Marketing (October 2004), cosponsored by the Marketing Science Institute, has a special section of articles that both conceptually and empirically address this fundamental challenge. There are some encouraging developments in relating marketing expenditures to marketplace outcomes and, in turn, relating outcomes to financial measures on the profit-and-loss statement and on the balance sheet. Also needed is more attention to product management and fundamental innovation in truly new products and services rather than to incremental product improvements to achieve short-term bumps in revenue. The risks, the required investments, and the potential rewards of true innovation are both greater and more difficult to assess than are the mere modifications in the product offering. These major strategic decisions need more careful study and thought from academic researchers. The answers to these important strategic questions are not likely to be found by analyzing a statistical database or running a controlled experiment or computer simulation with student subjects in the university laboratory. The development and measurement of brand equity has received a good share of the strategic marketing management attention in the past several years (Keller 2003). It is a good example of an area in which marketing scholars and managers have found a productive intersection of interest. However, many issues of strategic brand management remain to be solved, and it must remain a top research and management priority. To illustrate what is possible, at the November 2004 meeting of the trustees of the Marketing Science Institute, Hewlett-Packard executives described a sophisticated approach to measuring the impact of brand development expenditures on their financial statements.

The Conflict of the Marketing Concept and Corporate Charter

At the core of current trends in the role of marketing management in the firm is the overwhelming emphasis on shortterm measures of business performance, most especially return on investment, equity, or assets employed; quarterly earnings per share; and the resultant trend in the stock price (Hayes and Abernathy 1980). Most managers have a significant portion of their total compensation tied directly to such measures in the form of stock options and bonuses. Corporate charters in the United States, as mandated by state legislation, have stated since the earliest days of such charters that the purpose of the corporation, and the principal duty of its directors and managers, is to protect and maximize the value of the firm for its owners, the shareholders. From the dawn of the marketing concept, it was clear that there were countervailing forces to customer orientation and that this new management philosophy was often supported by words but not deeds. Early studies (e.g., Bell and Emory 1971; McNamara 1972) identified several barriers, including an emphasis on financial performance measures and resistance from managers in other functions who were accountable to stakeholders other than the customer. It is certainly no surprise that the chief executive officer is likely to place shareholders interests first, ahead of those of the customer, unless he or she has given considerable thought to the proposition that the long-term value of the business is ultimately a function of customer satisfaction and repeat patronage.

Conclusion
For the marketing educators eager for a rejuvenation of a managerial point of view within the field, there is cause for cautious optimism. The issue of the decline of relevance and the relative lack of attention to important areas of marketing

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strategy, such as new product development, channel strategy, and sales force management, is increasingly recognized, discussed, and written about by marketing thought leaders. Fundamentally new paradigms of marketing management are being offered that shift the core focus of the field from firms to customers, from products to services and benefits, from transactions to relationships, from manufacturing to the cocreation of value with business partners and customers, and from physical resources and labor to knowledge resources and the firms position in the value chain. Properly developed and communicated, this new conceptualization has the potential to bridge the gap between managers and scholars, to integrate rigor and relevance, and to reinvigorate a managerial view of marketing. The biggest challenge in the future, as in the past, will be meaningful communication among marketing scholars, marketing managers, and general managers so that rigorous work becomes more relevant while the practical becomes more analytical and marketing decisions become better informed by better marketing science (Lehmann 2003).

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