When trying to analyze the marketing activities of a given organization, we can understand that it is all about communication; the marketing department continuously tries to communicate the brand image, the products/services, and the mission and objectives of the organization. However, the communication approach might produce different marketing tones affected by the structure of the organization and how the different departments are allocated. For example, in centralized organizations there is only one marketing department which controls the marketing activities, responsible for producing the different marketing initiatives, and creating a unified brand image. In decentralized organizations however, there is more freedom and autonomy where there are multiple marketing departments responsible for promoting the products/services of the different BU’s (Business Units) of the organization. Every marketing approach has its own advantages and disadvantages; a shift in focus might occur if the strategy the company working with is not effective when conversing with the customers – that takes us to the important question: when companies should centralize or decentralize their marketing?
When to Centralize / Decentralize your Marketing?
Usually, the decision of centralizing or decentralizing the marketing activities comes by default based on how the company is structured. Decentralized organizations offer multiple products/services with no much similarity between what is offered, thus requiring different managing teams each having their own customers, marketing approaches and initiatives, and pricing strategies. Centralized organizations on the other hand, have a unified brand image, with great similarity between the products/services and the core brand – the main brand has the power over the different BU’s (Business Units).
Another factor which might affect the decision for centralization is the nature of what is offered. Service oriented organizations have the tendency for using a mix-strategy of centralizing and decentralizing marketing activities; providing the freedom for each Business Unit to operate independently but the ultimate decision is in the hand of the central marketing department. Product oriented organizations have the tendency to go for a centralized marketing approach, where customer communication inaugurates at the brand level and customer feedback is also received at such level.
Other contributing factor towards centralization and decentralization is the type of the product. FMCG’s (Fast Moving Consumer Goods) depend mainly on decentralization of marketing activities to communicate the (SBU’s) Strategic Business Units independently from the main brand. As for CPG’s (Consumer Packaged Goods), organizations tend to utilize the centralized marketing approach to communicate the brand rather than the product/service by itself.
Advantages and Disadvantages:
Marketing departments typically have a mix of centralized and decentralized operations, but sometimes it is better to decentralize operations to serve the organization when communicating the core benefits of each of its products/services independently to preserve the identity and individuality and to make sure customers are clearly communicated the core benefits of the products/services without the disruption of the main brand. For example, Unilever offers different Strategic Business Units varying from personal hygiene products, refreshments, to detergents. If Unilever imposed the brand image of the main brand on each Strategic Business Unit, the customers might be confused as of comparing between the products used and the producing company. Thus, in its recent ads and as they were aware of the diminishing power of the main brand “Unilever” they started displaying the “Unilever” logo at the end of each TV ad, to create a reminding association without directly connecting the SBU’s with the brand.
Another great example from a different industry would be MasterCard, which offers payment solutions through partnering banks. The organization offers credit, debit, and prepaid cards through a B2B relationship with banks where the MasterCard brand has the power over the products/services offered over the identity of the products/services themselves. The MasterCard logo is the main differentiators between its products/services and its main rivalries: Visa and American Express – with a centralized marketing and operational-regional marketing departments.
Companies that use a mix-strategy of centralized and decentralized marketing approach would be like Al Futtaim. The organization owns different organizations under which there are a variety of Business Units operating in different industries – such as the automotive industry, the fashion industry, real estate and construction, and other joint venture operations locally and oversees. Al Futtaim has a centralized / decentralized approach for marketing where such is required to highlight both the brand image of the main company and the Business Units each giving the power to one another.
Another point of view when viewing the advantages and disadvantages of centralization versus decentralization would be in the operations related to both approaches. Organizations that chooses centralization over decentralization would refer such an option as decentralizing marketing operations has many drawbacks, which includes the duplication of efforts, deviation of goals, and failing to see the bigger picture of the market situation and competition for the organization as a whole and not for a specific product/service offered.
Additionally, centralizing the marketing approach puts budgets, marketing initiatives, and marketing talents closer to the customers where marketing strategies are linked with ROI (Return on Investment) and there is more accountability towards fulfilling the sales objectives of the organization – making a profit. At the end, all depends on the customers, the market the company operates in, the nature of the product/service, and other unforeseen elements which are only vigilant to decision makers when making such decisions. Yahoo for example, has been going back and forth between centralized and decentralized marketing approaches successfully.
Evaluating your Marketing Approach:
The degree of relevance by which choosing a specific marketing approach is of no importance, as long as the organization communicate its products/services effectively to the customers – internal communication as well is coordinated towards such an objective. But, it is important to restructure the strategic marketing approach if the brand started to lose the strategic alignment that should occur around the decision making frame-work – which allows all the Business / Strategic Business Units to be represented clearly to the customers. Moreover, another determining factor would be the dilution of scope of work and the fragmentation of such – where deliverable of work can’t be achieved, and business outcomes are not fulfilled. Evaluating the focus of the organization towards implementing a different strategic marketing approach becomes inevitable, where marketing activities can put the organization at stake of either establishing itself in the market or losing customers and ultimately its business.
A classical example of diminishing the power of marketing and losing the opportunity of choosing a strategic marketing approach for centralizing or decentralizing activities is to confuse marketing with sales – where the core activities becomes associated with selling a service/product rather than communicating the brand, the core benefits of the services/products, and ultimately creating a cohesive framework with aligned objectives towards a clearly defined marketing-mix. The main deliverable of any organization should be the focus on the brand(s) that sells, and not selling what should be sold. At the end, what makes any organization different from another in the customer’s perspective is how it communicates its products/services and not merely the benefits associated with purchasing a service/product.
Where to find Dr. Islam Gouda,