RAJ KAMALDEEPAK AGRAWAL

Re-engineering the DirectMarketing OrganizationStructureA Business Process View

9/^ KAMAL is a manager with the management consulting practice of urant Thornton LLP in Madison. Wisconsin. Hereceived his MS in Management from Purdue University and an MBA from the Indian Institute of Management. Ahmedabad,India. He assists manufacturing, distribution, and service organizations in business process re-engineering, change manage-ment, performance measurement, customer service, order management process, marketing analysis, and strategy He atsoconducts professional marketing seminars. DEEPAK AGRAWAL Is an assistant professor of management at the KrannertSchool of Management. Purdue University, West Lafayette. He received his PhD in Marketing from Stanford University. Hiscurrent research interests include promotional mw. channels of distribution, and manufacturing-marketing interface Hisresearch has appeared in Journal of Marketing Research. Marketing Science, and Journal of Retailing.Both authors have contributed equally to this article, and are listed in a random order.

ABSTRACTMost corntemporar/ direct marketing organizations are structured around business functions such assales, marketing, customer service, product procurement, and accounting. In this paper we arguethat the functional view does not fully realize the direct marketer's potential in satisfying and creatingvalue for customers. As an alternative we develop a business process view of direct marketing usingconcepts from business process re-engineering. In this framework, the organization is conceptualizedas a set of end-to-end processes cutting across several Functional areas. Based on an actual re-engineered consumer direct marketing organization, we contrast the traditional functional view withthe business process view and discuss implications for direct marketing strategy, performancemeasurement, and impact on customer satisfaction in the two frameworks. We show how afunctional view drives performance measurement towards evaluating each functional areaseparately, resulting in suboptimal performance due to potentially conflicting objectives andprocedures of different functional areas. In contrast, we show how a business process view is betterable to resolve these conflicts by making customer satisfaction the key business objective.

© 1997 John Wiley & Sons, Inc. and Direct Marketing EducalJnnLiI Rmndji ion. Inc.CCC 0892-0591/97/02059-10

JOURNAL OF DIREa MfiRKETING VOLUME I I NUMBER 2 SPRING 1997 59

1. INTRODUCTION

riic importunes and pivwik-ncc (ifcliivti ni;irketini»is increasing rapidly in the economy in ivkiiion toother torms ol ni.irkcuni' aiui ciimmunications. Ac-coi\lin;^ lo iv.suli.s 1)1 ,1 ,sur\ey puhlishcd in DirectM.irketinj; Association (DMA) Slcilistical Fact Book,52.S",i o^ all adult consumers in the U.S. reponedshopping hy mail or telephone during 1994 in re-sponse to an offer in magazines, newspapers. tele\ i-sion, radio, catalogs, or direct niail pieces (4). Thegro\\th in consumer direct marketing sales (ex-pected to reacli $594.4 billion in 1995, nearly 28%of total retail sales in the I'.S.) has exceeded theoverall consumer sales growth (6). The consumerdirect marketing saies grew at a rate of 6.1% (5.3%Eoroxerall consumer sales growth) per year between1990 and 1995 and forecast to increase at the rateof7.2'!o(5.5')o)per i'(?<r/rbet^'een 1995 and 2000 (6).Similar trend is being obsen'ed in the business-to-business direct marketing sales (expected to reachS-t98,l billion in 199S). which also grew faster thanthe total U.S. business-to-business saies, at a rate of8.1% (4.3%) per year between 1990 and 1995, andforecast to grow by 10.2% (6.5%) per year between1995 and 2000 (6). Clearly the direct marketing in-dustn,' is becoming an increasingly important forcein the economy.

One reason for the rapid growth of the directmarketing industry is its purported ability to effi-ciently deliver strategic value to the market <5). Inthis paper we study the issue of structuring a con-sumer direct marketing organization, w hich is a keystrategic \ariable in the firm. Most contemporai")'consumer direct marketers are organized accordingto traditional functional areas such as sales, market-ing, procurement, and accounting. We argue thatsuch an organizational structure is not the most effi-cient in terms of delivering value to the market. Asan alternati\e we present a business process viewof a direct marketing organization using the rela-tively new concepts drawn from the business pro-cess paradigm. We contrast the business processview with the traditional functional view and assessthe impact on the direct marketers ability to deliverstrategic value to the market in the two cases.

We first present a function-driven direct market-ing organization and illustrate how a function-drivendirect marketing organization can be converted intoa process-driven direct marketer. Then we discuss

how a tunclion-drivcn direct marketer compares toa process-driven direct marketer on the criteria ofcycle time, customer satisfaction, Lind profitability.We provide examples to illustrate these concepts.This is, to the authors' besl knowledge, the first at-tempt in academic literature to apply business pro-cess re-engineering to ciirect marketing.

2. A FUNCTION-DRIVEN DIRECTMARKETER

Consider two consumer direct marketers: one of per-sona! computers and the other of clothing. Thesetwo direct marketers typically have a fundamentallysimilar organization structure despite differences intheir nature of business. The similarities exist l")e-cause both direct marketers depend on direct con-tact and dialog with the customer, bypassing tradi-tional retail channels. The differences arise primarilyin the relative emphasis on different operations. Forexample, personal computers are a relatively higherffinancial) risk and higher involvement purchase forthe consumers. This necessitates relatively higherle\'els of before- and after-sale customer service fromthe computer's direct marketer, which has implica-tions for how the custonier sei-vice function is orga-nized at the two direct marketers. A typical function-driven consumer direct marketer can be representedas in Figure 1, which is based on an actual directmarketer of apparel products.

Several differences between a conventional mar-keter and a ciirect marketer are apparent in Figure1. First, there are no traditional distribution channelmemhers (such as wholesalers, retailers) in the di-rect marketing set up.* Second, there is no conven-tional sales force as may he found in a marketingbusiness. The direct marketer reaches consumers di-rectly through catalogs, direct mailings, telemarket-ing, and targeted mass media such as magazines,newspapers, radio, and tele\ision. Third, a ciirectmarketer obtains input directly from the ct)nsumers,unlike the conventional marketer who observes aderived demand through the retail channels. This

*Tlii.s is one key conceptu.il cliffi-Tencc in i.on.-iiirriLT product inclusir^'Ix-iwc'fn A ilirect mLirki.icr ,ind ,L inditinnal in;irki.-lcr. Siimc firms, svwh .i.sBliHjminpdiik-'.s. J.C, Punnt-y. Sciirs, SliarpL-r Imaf L-, ;md T.ilhni.s u.se -i du.ildisirihiitjon slnilL'Hy with Imih emnpany-ovvned retail .siorcs ;ind an inde-pfnilenle;ilalondi\'isii)n. ciii>rLlinaie<.l ;ini.lnver.seen hv' l ie cnrpuratf head-

6 0 J0URr4AL OF OIREa MARKETING VOLUME I I NUMBER 2 SPRING 1997

Executive Function

AccountingProduction plan

R & D

Manufacturing

Shipment plan

Marketing Sales

\

\Offers

Warehouse

Orders

Market Research Databases

Receivables and Payments

Direct Mailings

Telemarketing

T.V. Marketing

Catalogs

Magazines

Newspapers

Shipments

I

TConsumers

FIGURE 1A function-driven direct marketer

makes the demand forecasting task a bit different (ifnot easier) for the direct marketer compared with aconventional marketer.

We next present a potential business processview of the same direct marketer.

3. A PROCESS-DRIVEN DIRECTMARKETER

Busine.ss process view is a relatively new paradigmin the field of management of organizations (2,3.7).It envisions the organization as a set of processesthat cut across functions, locations, and organiza-ticjnal boundaries. In this paradigm the Ffjcus ofwork and decision-making is shifted from verticalhierarchical channels to horizontal Hows of informa-tion and/or materials across the organization. The

purpose is to produce siniultaneous and dramaticimprovements (25% to 75% or more) in cost, quality,and time through cost efficiencies, inno\'ati\'eness,tlexibility, and tlie ability to respond quickly, effi-ciently, and effectively to the market.

All organizations are considered to encompass afew (three to five) core processes that deliver themajority of an enterprise's value to its customers, Inconsumer electronics, for example, one core processmight be new product development, which linksfunctional activities of R«S:D, manufacturing, andmarketing to provide customers with a steady streamof innovative products (3).

The term business process itself refers to the flowand tninsformation o\' information and materialsthat facilitates logistics, operations, con"imuniea-tions, coordination, synthesis, and decision-making(1). The end-to-end process contains eveiything

JOURNAL OF DIREa MARKETING VOLUME I I NUMBER 2 SPRING 1997 61

iK'i.\k\l. in ix'rfoiniancc tcniis. to deliver to thenuukcl sonic critical aspect of strate,uic value. Forexanipk', a tasl-tooei business niii hi have threecore processes; 1) logistics: deli\-ennj^ food, cook-ing lood. and training people to serve it, 2) newoffer development: devising new restaurant for-mats and communicating their vaiue propositionsto potential customers thrt)ugh ad\ertising andbranding: and 3) network development: findingsites and buikling restaurants. Ever)'thing elsewould be considered a support activity (1).

Business process re-engineering, which refers totransforming a function-dri\en organization into aprocess-dri\'en organization is a well-known man-agement tool for enhancing operational efficiency.Acct)rding to a sun'ey of 497 U.S. and 124 Europeanftmis. 69 percent of U.S. firms and 75 percent ofEuropean fimis have already re-engineered, andmore than half of the rest are thinking about it C8).Tliere are se\"eral examples of re-engineered corpo-rations in hoth iiianLifacturing and service sectorsand in a di\ erse set of industries such as consumerfoods, financial ser\ ices, telecommunications, phar-maceuticals. publishing, and information technol-ogy. Some well known examples include Ameritech,ATiS:T. Citicorp. Dow Chemical, Dun and Bradstreet,Federal Express. Hallmark, Intel, Kodak, McDon-ald's, Merck, Microsoft, Proctor and Gamble, SiliconGraphics, Simon and Schuster, and Westinghouse.Among the direct marketers, Bloomingdale's, EllettBrothers, Sears, Talbots, and Time-Life are promi-nent examples of re-engineered corporations.

The design of a process-driven organization isdri\'en mainly by customer needs. Careful and de-tailed process mapping and process analyses may beused to identify and sequence all tasks and activitiesincluded in that process. The focus of process designis on deli\ ering highest customer value and satisfac-tion; doing so typically cuts across traditional func-tional areas. The process view attempts to match thecompan\' and customer objectives with the organi-zation capabilities in terms of people, processes andtechnology, as shown in Figure 2.

A process-driven organization in fact has mLiltiple

t Note [hnt thf reftrtncc lo orKiini/jitJons [li;il h;(ve iindL'nyki.-n husi-ness prcxtrss FL'-LTij^intL-ring dots nut rn--LL-,s.s;irily imply ihiii tliL-sL- rirganiz;i-tiorw have achjtr\'o'd their staled goaU. The uliimaic success of hu.sinessprocess re-enyjni.Lrjnn depends nut just on creiitinji J future vision n\'ihe husiness processes, bill al.vi nn the appropri.ite implement.ilion ;ind

eni of ihiil \ isitin.

levels of processes. At the top level are core or mega-processes, Each of the mega-processes may consistof several siibprocesses, and each of the sub-processes may consist of several specific activities,which may further consist of very specific tasks. Typ-ical organizations have three to five core processes,lor example, order management, new product de-velopment, and executive processes, (discussedlater). However, large and complex organizationsmay have many more core processes. Eor example,IBM can be represented as a set of 18 mega-pro-cesses, Ameritech as a set of 15 mega-processes,Xerox l4, and Dow Chemical 9 (2).

A typical direct marketer can be represented as aset of three mega-processes (Figure 3).

The three mega-processes in the direct marketingorganization, namely, order management, newproduct development, and executive, interact withone another. The nature of interaction differs fromprocess to process. For example, the ( o mega-pro-cesses of order management and new product de-velopment have a t ivo-way interaction where as theexecutive mega-process has an overseeing role overthese two processes. Other activities such as the in-formation systems management which provides en-abling technology are considered as support activi-ties. We next develop each of the three mega-pro-cesses in further detail.

3 .1 . Order Management ProcessThis mega-process, along the lines described by Sha-piro et al. (9), refers to all the steps needed to createand manage business opportunities for the directmarketer. It begins before the customers have beencontacted, continues until after-sale customer ser-vice, and includes activities cutting across viraiallyeveiy functional area. It consists of seven sub-processes, each of which can be further brokendown into several specific activities (Figure 4).

ORDER GENERATION. This subprocess refers tothose acti\'ities of the direct marketer which createdemand. The executive process provides input inthe form of external market analysis and marketingstrategy. Existing and potential customers are con-tacted via print or electronic media. Internal andexternal databases may be utilized with data miningtechniques to identify, qualify, and prioritize pros-pects.

In a function-driven organization, these activities

6 2 JOURNAL OF DIREa MARKETING VOLUME ) I NUMBER 2 SPRING 1997

Customer Requirements• Accurate, complete orders• On-time delivery• Quick, accurate response

Direct Marketer Objectives• Customer satisfaction• Cycle-time reduction• Customer and order

profitability

IStrategic Obiectives• Customer retention• Market share• Cash flow cycle time• ROI

People• Broad job scope, authority• Tight cross-functional skills• Self-managed teams

Process• Accurate, complete orders• On-time delivery• Quick, accurate response

Technology• At point of contact• Real-time information access• Information technology based

customer service

FIGURE 2Matching customer needs with organizational capabilities

are the sole responsibility of the sales and marketingfunction, which is not always able to coordinate itsactivities with, for example, logistics and inventoryfunction. Lack of active coordination can create gapsin fulfilling customer orders as discussed later.

ORDER PLANNING AND PROCUREMENT. This Sub-process refers to planning, scheduling, and procur-ing resources needed to satisfy all potential orders.Procurement-related forecasts for raw materials andcomponents are prepared in conjunction and recon-ciled with demand forecasts. Suppliers are identifiedand supply contracts are e.stablished. All supplierrelated activities including accounts payable arechanneled through this subprocess.

The key feature is that sales forecasts and materialrequirement plans are developed in conjunction. Ina function-driven organization, the marketing func-tion may develop demand forecasts independent of

the purchasing function's plans for required materi-als. These two functions often do not work in coor-dination. One reason for this lack of coordination isthat their performance is sometimes measured usingconflicting criteria. For example, marketing functionmay be measured by the growth in sales, whichmight require larger safety stocks, whereas the pur-chasing function may be measured on reduction inInventory costs. These two performance measuresare mutually inconsistent, and may drive functionalperformance in diverse directions. On the otherhand, a process-driven direct marketer can utilizeconsistent performance measures and eliminate thesources of such incongruence.

COSTING AND PRICING. This subprocess deals withestimating all costs and setting prices for all the of-fers, new and existing. In a function-driven directmarketer, the executive group sets the profitability-

JOURNAL OF DIREa MARKETING VOLUME I I NUMBER 2 SPRING 1997 6 3

Executive Process

Order Management Process

Order GenerationOrder PlanningCosting & pricingReceipt & entryOrder fulfillmentBillingAfter-sale service

Consumers

New Product Development Process

Concept generationAnalysis & testing

FIGURE 3A process-driven direct marketer

Generate Order

Plan OrderProcure

Costing andPricing

Receive andEnter Order

Customer Satisfaction

After Sales SupportReturns/

AdjustmentsBill Customer

Fill Order

JFIGURE 4Order management process for a direct marketer

6 4 J'XIRNAL OF DIREQ MARKETING VOLUME I ) NUMBER 2 SPRING 1997

targets, the pLiivhasing clepartnicnl pntcurcs ;it theleast priee, the accounting depurtnient computesvarious costs, and the marketing department deter-mines the selling price based on market analysis.The methods, objectives, and motivations of thesevarious departments are not always in harmony. Asa result, incongruities may occur in costing and pric-ing in a function-driven organization. A process-driven organization can eliminate such incongruitiesthrough the use of, for example. acti\'ity-based cost-ing, which is more difficult to implement at a func-tion-driven direct marketer.

ORDER RECEIPT AND ENTRY. Once an order is gener-ated it is received and entered in this subprocess.Each customer order is processed through an infor-mation system, the availability is checked, and thepricing and expected deliver^' schedule are commu-nicated. In a process-driven organization, sales, cus-tomer sen'ice, accounting, and logistics activities areperformed by cross-functional teams that vv'ork to-wards consistent goals with the required empow-erment and information. For example, a process ori-entation can help eliminate inconsistent perfor-mance measures like evaluating the marketingfunction on increase in new accounts (which mayincrease risk of bad debts), and measuring account-ing and credit function on minimizing bad debts.

Order receipt and entry in a function-driven directmarketer are the responsibility of the customer ser-vice function, which is the first point of contact forthe customers. The customer service employees mayunderstand the customers well, but they generallyhave little control over other functions, and maysometimes not have accurate information. For exam-ple, one direct marketer in the apparel industry dis-covered that its customer sen'ice representatives de-veloped imaginary deliver)' dates to customers forbacklogged items, without confirming with the pur-chasing department. This increased customer dissat-isfaction when the promised delivery scheduleswere n(jt met. Such problems also arise becausecustomer ser\'ice representatives are not account-able for not meeting delivery deadlines. In a pro-cess-driven organization, an analysis of root causesof such discrepancies can assi.st with identifying andeliminating their sources.

ORDER FULFILLMENT. This refers to actual picking.packing, and shipping of the order. Back orders are

also managed in (his sub-process. In a lunction-driven organization, these activities are pcrffjrmcdprimarily by tlie warehouse and shipping depart-ments, with minimal or no coordination with cus-tomer seivice and accounting. Tn a process-drivenorganization, the information Hows freely andquickly between the functions, so that, for example,any out-of-stock situations can be quickly communi-cated to the procurement sub-process and the cus-tomer. Such ability to keep the customer informedhas significant implications for customer satisfactionand retention.

INVOICING AND BILLING. This refers to generating aninvoice and managing accounts receivable for eachshipped order. At a function-driven direct marketer,these acti\'ities are primarily conducted by the ac-counting function. At a process-driven direct mar-keter, an integrated invoicing process is used, whichcan eliminate annoying situations. For example, theshipping department may send a paitial shipment(with backorder), and the accounting departmentmay send the invoice for the whole order, t r multi-ple invoices.

AFTER-SALES SERVICE. Consumer feedback onshipped orders is mcjnitored and logged, and re-turns, claims, and replacements are processed in thissubprocess. The feedback may pertain to the prod-ucts and the process that the customers go throughto buy the products. It is more difficult to effectivelyutilize such feedback in nonintegrated function-driven organization, because the feedback is re-ceived by ciifferent functions working in isolation.

The key to successful order management lies inmanaging the integrated customer focused processoutlined above. Through such a process, it is possi-ble to predetermine customer needs and completelyconsolidate customer contact points. To successfulh'implement such a process, all customer contact per-sonnel need t<» be sLiitalily empow ered, gi\ en accu-rate information, and more importantly, be held ac-countable.

3.2. New-Product Development ProcessThis mega-process consists ol t\\() subprocesses:

CONCEPT GENERATION AND OFFER DESIGN. Newconcepts are created based on market research, cus-tomer feedback, and market monitoring. Consumer

JOURNAL OF DIREQ MARKETING VOLUME I I NUMBER 2 SPRING 1997 6 5

lienjs are Mut.lit\l ant.1 competiliw ollerings are ex-aminet.1 in order to create new offers and rehne ex-isting (.)lters. Customer feedback is primarily ob-tained in die atter-sales service subprocess of the(.ii\it,r nianagenient mega-process.

ANALYSIS. TESTING, AND NEW OFFER DEVELOPMENT.F.xisting i>ffers and new prototype offers are testedusing past tiata and test markets. The results areanalyzed dUi.\ promising offers are developed, re-fined and finalized.

A process-clriwn organization has a better capa-bility-of understanding consumer needs and translat-ing them into marketable products in a timely andefficient manner, because the marketing, sales, R&D,engineering, and manufacturing functions exchangeinfomiation regularly, A process-driven organizationcan readily eliminate information gaps and misinter-pretations that may occur when functions work inisolation.

3.3. Executive ProcessThis mega-process encompasses the top manage-ment function. Specifically, it consists of three sub-processes;

STRATEGY DEVELOPMENT. This refers to the settingof the mission and goals of the business, its vision,philosoph). and strategy. The strategy is developedbased on market and company analysis.

STRATEGY EXECUTION AND MONITORING. The im-plement.ition ot strategy" is achie\ed through financ-ing, personnel, and enabling technology. The out-come of implementation is measured and monitoredfor control purposes.

ADMINISTRATION. This refers to development andimplementation of the organizational staicture tosupport the core operational processes, human rela-tions policies, performance review, and incentiveand reward systems in the organization. Investor re-lations is a part of this subprocess.

3.4. Enabling TechnologyTo support tlie abcjve processes, today's organiza-tions rely heavily on technology to collect, manage,and disseminate customer and product information.For example, at a leading direct marketer with astate-of-the-art order management process, w hen a

customer calls, integrated computer systems are ableto bring up ihe customer's information on the com-puter screen even before the customer starts speak-ing. The enabling technology used for achieving thisincludes automatic number identification (AND, thedigital number identification system (DNIS), the in-teractive voice response system, and automated calldistribution (ACD), This technology has providedproven results in reduction of call time and in-creased customer satisfaction.

We next compare the function-driven and theprocess-driven direct marketers on criteria of cycletime, cost, and quality which drive profitability andcustomer satisfaction.

4. COMPARISON BETWEENFUNCTION-DRIVEN ANDPROCESS-DRIVEN DIRECTMARKETERS

4.1. Communication StructureFirst we note that the process-driven organization issimpler in structure, and the information flows aremore complete and logical. Moreover, the use ofcross-functional teams facilitates better communica-tion in process-driven organizations. Thus the pro-cess-dri\'en organization is likely to be more effi-cient, flexible, and responsive to the market place.

4.2. Performance ComparisonFor a direct marketer, process perfoi'mance can bemeasured using three criteria: cycle time, cost, andquality. For example, in the order management pro-cess, measures of cycle time include the timeelapsed between initiation of an order and receiptof the product by the customer, or between orderinitiation and payment receipt. Another measure isthe time elapsed between complaint filing and prob-lem resolution tor the customer.

Like cycle time, cost can also be measured indifferent ways. Selling price net of all discounts,costs of claims and returns, net revenue per order,opportunity cost of lost sales due to stock outs orcustomer dissatisfaction, or total order managementcosts per order are a few of the cost measures. Eachprocess, subprocess, and activity has its own associ-ated cost.

Order management process quality is primarilymeasured in terms of error free rates: for example.

6 6 JOURNfii. OF DIREa MARKEflNG VOLUME I I NUMBER 2 SPRINU 1997

FIGURE 5Multiple points of contact

percent of orders taken and delivered without i:)rob-lems. percent orders shipped complete, percent or-ders deli\-ered on time, percent invoices submittedon time, percent orders on backlog, percent cus-tomer problems resolved on first attempt etc.

Shorter cycle time along with higher ser\ ice qual-ity implies efficiency and thus gains in profitability.Similarly speedier response, all else being equal, tocustomer inquiry' or complaint results in higher cus-tomer satisfaction. A process-driven direct marketerwill typically achieve better performance on cycletime, cost, and quality compared to a fimction-driven organization. This capability is specially im-portant when customer turnover rates are high, be-cause reducing customer turnover directly adds tothe profitability^ This can be best illustrated throughan example.

Let us first consider the function-driven organiza-tion. Suppose a customer calls in with an order asa result of marketing's efforts. The customer will firsttalk to sales where the order will be recorded, thenthe order w ill be processed by accounting, and itwill be shipped by the shipping department. Finally,the customer's payment will be recei\'ed and pro-cessed by the accounting department. In these inter-actions, the customer is likely to come in contactwith multiple departments of the direct marketer(Figure 51.

Now let us consider the process-driven organiza-tion. When the customer calls in with an order as aresult of efforts of order generation sub-process, thecustomer call will be received by the order entrysubprocess, and fopA'arded to order fulfillment sub-process where the product is shipped, invoicing isdone, and customer payment received. Any after-.sale service is also undertaken within the samemega-process. Thus from start to end the customeris serviced by personnel within the same process,and depending on the organization, maybe by oneperson fsingle point of contact, or SPoC; Figure 6).

This single point of contact approach with the

Order Manu^emenl Procesx

Single Pointof Contact

r Sales

Accounting

Warehou.se

FIGURE 6Single point or contact

customer results in significant time savings for boththe organization and the customer. The shorter cycletime results in cost savings for the firm thus enhanc-ing the profitability. Also quicker response to theCLtstomer results in higher cu.stomer satisfaction andin future, translates into repeat purchases and cus-tomer loyalty to the organization. At one large ap-parel direct marketer, cycle time was cut in half afteran order management process replaced a functionalorganization.

The smooth flow of information and activitieswithin a process-driven direct marketer compared tointerfunctional movement in a function-dri\ en directmarketer is one of the primary reasons for improvedperformance. A process-driven organization is ableto break the functional stovepipes as illustrated inFigure 7.

A similar comparison of the t\"\'o views can bemade with a customer complaint example. When acustomer calls in with a complaint, the customerfirst talks to the customer ser\'ice department in the

Order management process

Mar

keti

ng

Sale

s

Acc

ount

ing

Pro

cure

men

t

War

ehou

se

Shi

ppin

g

FIGURE 7Breaking functional stovepipes

OF DIRECT MARKETING VOLUME I I NUMBER 2 SPRING 1997 67

tunction-i.lri\en organization. II ihe ct miplaint is wiilirespect tti in\oice. the call is [rLmslerretl (alter somedialog anti <,lela\ ) to ihc aciouniing department,which is ros|xiiisible tor ln\t.>icing, and if the com-plaint is regarding shipping, the call is transferredto warehouse. At c\ery point, the customer mayha\e to repeat the w hole stoiy. The matter will typi-cally take a few i kiys, if not weeks, before it is re-soKed, h contrast, if the cu.stomer calls in with acomplaint in the process-driven organizatit)n, thecomplaint is solely handled by the single point ofcontact in the order management process, and thecusttimer does not have to repeat the complaint mul-tiple times. All matters are resolved by the samegroup thus expediting the complaint managementprocess. Moreo\er. it is much easier to determinethe causes of mistakes and to eliminate them in theprocess-driven firm because order taking, shipping,and invoicing are coordinated. In contrast it maybe difficult to assign accountability' in the function-dri\en finn. Once again, single-point contact andgreater accountability increase customer satisfactionin a process-driven firm.

In summary', the two most notable advantages ofa process-driven direct marketing organization are1) reduction in cycle time, which results in increasein efficiency, which in turn reduces costs and leadsto higher profitability, and 2) a simplified communi-cation structure with increa.sed accountability andresponsibility, which in turn results in greater re-sponsi\eness to customers leading to higher cus-tomer satisfaction.

5. CONCLUDING REMARKS

A topical direct marketer is organized along tradi-tional functional lines such as marketing, account-ing, procurement, shipping, etc. An alternative is toorganize the direct marketer as a set of core or mega-proces.ses that are customer-centered. In this paperwe show how a traditional direct marketer can bere-engineered into a process-driven organization.We also di.scuss how this can resLilt in higher levels

t Wcr jllustnitc one p< HL-nii.il w.iy to rc-c-nHincL-r ,i dirccl niiirkc-ler here-There arc, of course, other ways lo nrguni/x-a direci nurkcter a.sa process-driven organizjtion.

of customer satisfaction, retention and profitabilitythrough reduction in cycle time, costs, and improvedc|U;ility.

One of the critical steps in process re-engineeringis process mapping. If the tasks, activities, sub-processes, and processes are not calibrated accu-ralely. the improvements may not occur. A criticalsLiccess factor is that the people working in the orga-nization ha\ e to learn and be trained to do their jobsdifferently. Re-engineering efforts require consider-able change management support, which includeshelping employees cope with the changes and mini-mize the "pain" of transition from a functional ap-proach to a process orientation. The issues of jobsatisfaction, mobility', and empowerment become asimportant as employee productivity and efficiency.The success of the process-driven organization isalso critically dependent on the enabling techncjl-ogy. If the mix of processes, people, and enablingtechnology is right, then a direct marketer canachieve significant improvements in profitability andcustomer satisfaction by being process driven ratherthan function driven. •

.sij n," Tlue

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6 8 JOURNAL OF DIREa MARKETING VOLUME I I NUMBER 2 SPRING 1997