What are the three organizational structures for marketing?

Several factors determine the type of organizational structure that a company uses: revenues, number of employees, diversity of products, types of customers and geographical spread. Smaller companies have more informal cultures while larger corporations are more formal and bureaucratic.

Three forms of organizations describe the organizational structures that are used by most companies today: functional, departmental and matrix. Each of these forms has advantages and disadvantages that owners must consider before deciding which one to implement for their business.

The most common organizational structure is the functional or departmental form. In this structure, all of the employees of a specific function are brought together to form a department. Examples of these individual departments are sales, accounting, marketing, finance, research and production.

A functional structure has a firm hierarchy; each department has a separate management staff and upward reporting lines of authority. A department manager may report up one level to a vice-president who might be in charge of several departments, such as finance, marketing and IT. This vice-president could then report to the CEO of the company.

Functional organizations are effective for large corporations with homogeneous product lines. Smaller companies need structures that are more creative and can adapt more quickly to changes in the marketplace. Employees in small organizations may be responsible for several functions at the same time.

Advantages: A significant advantage of a functional structure is the focus and concentration of a group of specialists on their particular skills. Putting all of the company's marketing personnel together in one department allows them to more easily share ideas to improve their expertise and become more efficient. Training is more focused on the functional area.

The chain of command is clear in a functional structure. Each person knows the limits of his decision authority and when to pass the issue to a supervisor.

The opportunity for promotion is usually clearer in the departments. Junior positions can aspire to higher levels with more training and experience.

Disadvantages: A disadvantage of the departmental structure is the limitation to communication between employees in different departments. While the managers of each department may talk with each other, employees are more isolated from each other and don't have naturally open avenues of communication.

Another problem with a functional structure is the possibility that employees will only see the company's operations through the lens of their own occupations. They develop "tunnel vision," which prohibits them from seeing the strategic direction of the business and the viewpoints of people in other departments. Employees with this narrow focus have difficulty grasping the views and perspectives of other departments. This is also known as the "silo" effect.

Recent attempts have been made to solve this communication problem by creating teams with members from different departments.

A divisional structure organizes a company's activities into geographical, products, markets or service groups. As example, a company might have one division to handle sales in the United States and another for European sales. Or a division to manage blue widgets and another to handle green gizmos.

Each division would have a complete set of functional departments. Thus, the green gizmos division would have its own departments for sales, purchasing, accounting, finance, engineering and so forth. Companies with numerous products, markets or regions prefer to organize their businesses into divisions.

Advantages: Accountability is clear with divisional structures. Each one operates separately and is responsible for managing its activities. The results, good or bad, are easily identified.

A divisional structure works best when quick decisions are needed to react to rapidly changing market conditions. Local managers are in a better position to respond sooner to competitive threats rather than having to pass information up a chain of command and wait for a decision to come back down.

Employees in divisions develop their own unique cultures. For example, personnel in a division set up for retail customers become more closely attuned to the needs of their market demographics and can tailor their activities to those wants.

Disadvantages: Divisions cost more to set up and operate. When a corporation has numerous divisions, the total number of employees will likely be higher compared to an organization aligned into functional departments. The same functions when spread across several divisions will not be as productive and efficient as when they are concentrated in a single department.

Companies with separate divisions may lose the benefits of economies of scale. Take purchasing, for example. A corporation might get better discounts for office supplies when purchasing large quantities for all divisions together rather than placing smaller orders at the division level.

Inter-divisional rivalries can become a problem when division managers don't have incentives to work together. Managers may even work against other divisions to gain an advantage since they have clear accountability for the results of their own division and don't care about the performance of the corporation as a whole.

Companies that are creating and launching new products or initiating different marketing campaigns will form matrix structures to manage the projects.

A matrix organizational structure attempts to gain the benefits of functional organizations by combining specialized skills into a project grid. Matrix organizations are designed to foster cooperation between functional silos so that similar activities can be managed more efficiently to achieve a common goal.

Matrices have two chains of command: one for the project and another for the functional skills which are brought into the project. Project managers have authority horizontally across the departments. At the same time, employees still report to the department heads for their function.

Advantages: When a matrix organization is created, it has a clear objective. It may be to introduce a new product or design a new marketing campaign for another demographic. A matrix can be dissolved once its mission is complete.

A matrix project organization structure pulls together the employees with the particular skills and knowledge required for the project. This gives the employees the ability to work with co-workers from other disciplines as teams. Together, they communicate better and share more innovative concepts that are isolated by the silos of departmental and functional organizations.

Disadvantages: Matrix structures are more complex. Lines of authority run vertically and horizontally with employees working for two bosses. Employees can often receive conflicting directives from project and functional managers, creating stress and confusion when setting priorities.

Managers for matrix projects need special talents. Since they don't have singular authority, they must be able to compromise and negotiate. They need to have tolerance for conflict and be able to handle difficult situations.

Deciding on the best organizational structure for your company is critical to success. It requires thought and analysis about which structure will work at the moment and if it can be adapted to remain effective with growth. Making changes in organizational structure can be painful for management and employees, so it is important to get it right at the beginning. Describe how the firm is organized now and look to see which form would make the most sense.

Using a systematic, disciplined approach is very important: it allows people to be good leaders and effective managers. One of the areas where it is especially valuable is in business and marketing. There are many people and resources that must be managed quickly and efficiently, so having a proper marketing company organizational structure is a must. So, if you don’t know how to structure a marketing system, this article will provide you with all the basics you need to know.

Content:

Why Do You Need A Marketing Organization Structure?

To be fair, every organization has some kind of structure. According to the marketing structure definition, it simply refers to how the parts of a system are arranged and interact with each other. However, you should always ask yourself the following question: “Is the marketing structure of my organization as efficient as possible?”. If the answer is yes, you will have a lot of benefits, including:

• Clear and fair division of work, with everything done by specialists;
• Simple and clear communication between employees;
• Coherent and more accessible goals, which leads to better efficiency.

The Most Common Types Of Marketing Structure

There are many different ways of assessing a marketing organization structures. Furthermore, most of the marketing structure charts you might read about are model cases, but in the real world, everything is much more complex. However, it’s a great way to learn about the general principles of creating a marketing organization and to figure out which model is most applicable to your business. So, here are some of the most prominent marketing organization structure examples.

1. Linear structure

A linear structure is one of the simplest organization structures, yet one of the most flawed as well. This model is based on a straightforward military chain of command where the top member is responsible for the whole operation and each chain responds only to its immediate predecessor.

It works fairly well for small businesses, and it is quite easy to implement, but it has proven to be unreliable and uncompromising for even moderately large businesses. Unless you want to be a tyrant in charge of an army, you’d better come up with something better than this.

2. Functional structure

The next simplest (and probably most common) modern marketing organizational structure is the function-based structure. As you might notice from its name, in this model the employees are organized into divisions based on the functions they perform.

What’s great about this type of structure is that it is easy to manage on a bigger scale. Furthermore, it is much easier to adapt to new conditions as your business continues to grow. Another advantage is that every division can be highly specialized and fairly autonomous. However, here lies a problem with this system – there can be difficulties and limitations in communication between divisions.

3. Product-based structure

This model draws its inspiration from the previous one, but it is specifically developed for businesses that sell more than one product. It divides the staff based on the product they are working with. This way, every division has members of every functional specialty.

In this model, every division becomes almost completely independent. There is no need for communication between departments in this case. On the other hand, it is a bit more difficult to manage, and distributing resources can become a much harder task.

4. Matrix structure

If you take a look at this marketing organization chart, you can see that this structure basically combines the previous two. The departments are defined according to both employee function and product. Usually one of the dividing criteria is less important, in this case, the product division.

This type of double reporting is much easier to manage as you deal with much more information at a much greater rate. However, it might become quite difficult for your employees to follow. Such a disorientation can lead to problems in communication and too much bureaucracy.

5. Geographical structure

This structure was created for big international companies, so it basically works only for them. However, it’s important to take a look at such a structure as it is the first model mentioned here that takes into account factors outside of the company as well as internal factors. It is easy to forget that an organization should not only adapt to the strengths and weaknesses of each team member but also pay attention to the world around it.

The problem with this model is basically the same as for the product-based structure: every division becomes almost completely independent and it becomes harder to manage and monitor the decisions they make. Resource distribution remains a problem too. However, now you can rely on the statistics you can gather from your customers. The more clients there are in a certain region, the more resources the corresponding division needs.

6. Channel-based structure

The main external factor influencing the marketing structure is its customers. Although you can’t definitively predict each and every move your customers make, you can make some simplified predictions.

An easier solution is to divide your clients into groups and distribute your goods through different channels based on the preferences of each group. For example, you can contact your loyal returning customers directly, if they have given you their mail address, but you can’t catch the attention of new customers this way. For them, you need another channel, such as your own website.

The difference between these channels has become increasingly bigger over the years. That’s why the smart decision would be to divide your staff into departments based on different channels. The only problem with this decision is that it would be much harder to offer the same fair treatment to your customers no matter what channel they use. It is manageable, but it definitely requires some extra effort.

7. Segment-based structure

This model is similar to the previous one, but it is based on a more deep and thoughtful analysis of your customers. If you know your target group well, you can implement more effective and efficient division into different segments.

For example, if your product has multiple uses, you can divide your user base into groups based on the way they will mostly use it. Other criteria you may use include the industry they work in, the position they hold, or even their age.

If you create the departments to look after each segment of your customers, you will be able to tailor the customer experience just for them – everyone loves the personal approac

Conclusion

All in all, don’t forget that everything mentioned above often does not correlate with real life. Firstly, sometimes it is more efficient to combine a couple of different models and structure an organization, for example, both geographically and based on a product. Secondly, there might be a situation where it’s better not to create an elaborate structure. Finally, there are certain types of marketing structure organizations that are much more detailed and take into account a lot of relatively minor factors. Implementing such innovative designs can be risky, but sometimes it pays off very well.

However, now you know the basics of marketing structure. With this knowledge, you can start your own journey. Tailor your own organization chart according to your business specifics and needs. If you need some help, talk to marketing specialists and try out your organizational structure in practice. So, if you want to boost your sales and make a marketing organizational chart that suits your business the best, start right now and don’t be afraid to make mistakes.