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Identifying the impact of IT on marketing

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Image: Identifying the impact of IT on marketingThe information age opens up great potential for solving our problems, both economic and political. But its dynamism and creativity can be destructive, and potentially very exclusionary – more exclusionary than the industrial societies of the 20th century.

Post-industrial society is built on knowledge (by knowledge workers), on information, on the technology of management and management of technology. If our work is based on the computer, if much of our play is computer based, can it be long before much of our consumer behaviour is computer-based? […]. Will this empower the consumer at the expense of the producer and the orthodox distribution channel?

These were the opening words of the keynote presentation on “The Information Age” by Michael Thomas in the marketing track of the 1st Critical Management Studies conference in Manchester in 1999.

Looking back, what could have been a more percipient and salient aperçu than to equate the information age with the twenty-first century and to contrast this with the industrial epoch of the preceding century? Also note, the choice of the term “exclusionary”, repeated in the same sentence, to describe the information age. This is long before the term “social exclusion” topped the political agenda and nearly a decade before the notion of long waves of creative destruction was resurrected to explain the boom then bust of the credit crunch.

On the other hand, the potential impact of the computer and the Internet on work and society was topical in 1999, but Thomas immediately identified the key questions for marketing at the outset of his talk. His thesis was that the coming information revolution of “e-commerce” and computer-mediated markets is built on a technology that essentially removes distance as a barrier between buyer and seller. The implications for marketing follow from this. In his view, the important effects would be on consumer behaviour, traditional channels, marketing relationships and negotiation – all of which could empower, or exclude, consumers.

The impact of IT on markets and marketing

Today, the effects of IT are felt throughout marketing practice in all organizations, impacting on all the core operations areas, including market analysis and decision making, monitoring and control, communications, distribution channels, product development, service management and delivery, etc. Although modern marketing practice requires that marketers have a clear understanding and ability to use IT, the technical capabilities of IT has far outstripped most marketers' knowledge and capability to utilize it.

IT effects are felt throughout marketing practice, impacting on such diverse areas as analysis and decision making, monitoring and control, communications, distribution channels, product development, service provision and promotion. Even a basic list of operations, which are enabled and improved through IT, illustrates the range and iniquitousness of their effect on marketing. For example:

  • electronic data processing;
  • marketing information systems;
  • interactive decision support systems;
  • executive information systems;
  • expert systems;
  • strategic information systems;
  • intra-firm and global internetworking;
  • customer relationship management (CRM) resource planning; and
  • website analytics.

Despite all the “gadgetry” coverage of IT-based applications in the popular press, marketing in many companies is still at the embryonic stage of IT assimilation. By no means, all marketing practitioners have an up-to-date understanding of the IT applications and an ability to exploit these applications. Many marketing personnel do not have this ability. For example, the extent to which the use of information and communication technologies in contemporary marketing practice has progressed from simply automating existing marketing systems to using IT to transform their marketing capabilities varies enormously between companies, countries and industries.

One topical example which illustrates the potentially transformative effects of IT on marketing is the value-added opportunities that can be created and delivered in the developing mobile economy. The current mobile market is developing rapidly as the availability and choice of mobile application services are offered to customers independently of the network supporting these services. This IT-based business model has a huge potential for realizing richer communication, information and entertainment services, anywhere and anytime.

The shape and characteristics of the mobile IT future will depend on the behaviour and interaction of four key actors:

  1. service providers
  2. customers
  3. competitors
  4. regulatory bodies

The potential for customer empowerment offered by the mobile economy is based on the customer's role in the value chain process. Traditionally, much of the control of the process has remained with the seller, which has been a top-down approach based upon some long-term service subscription. However, the customer is now able to control the configuration for network access so the degree of customer empowerment is greater. The specification of the device's function is set by the user or by software acting on the user's behalf. Users, through their customized intelligent mobile terminals will interact with numerous networks in search of various services at prices acceptable to them.

Broadly speaking, the more vertically integrated the mobile service, the easier it is to use but the less flexibility it provides to users. Multiple business models can co-exist to serve groups of consumers differentiated by the relative weighting of these two attributes (ease of use vs flexibility). However, the more disaggregated the business model, the stronger the innovation engine of the mobile economy. In other words, there is a fundamental tension between truly fixed functionality and the user-customized approach for diversity and constant change.

So the implications for marketing in this single example are potentially transformational for the marketing function in many types of organizations beyond the mobile service industry. Furthermore, it is as yet unclear what will be the impact on the customer. How will consumers respond when faced with much more choice? What are the key dimensions influencing customer behaviour – technology, knowledge, use, functionality, etc.? Many basic questions such as these remain unanswered today.

The effect of IT on consumer information and choice

The assumption in modern society is that more choice is always better, and that the consumer will see this as such. A customer can choose from a range of product features, augmented product offers, warranties, channels of delivery and so forth. It is presumed that more choice will enable customer needs to be matched more accurately through the operation of complex “free” markets with goods and service offerings by producers, leading to enhanced customer satisfaction. Free economies are thus structured to encourage competitive behaviour through consumer choice and the model of a rational decision-making consumer freely pursuing their choices in the marketplace has been central the marketing concept.

But reality is somewhat different. One of the cultural contradictions of capitalism is that rational production processes exist alongside irrational, hedonistic consumption. It has long been recognized by consumer researchers that people put their creative energies into consumption, and that they frequently buy for feelings, fantasies and fun. Rather than ensuring that they get the best quality at the best prices, as a rational decision-making model presumes, a purchase may be dictated by an individual's mood, which may precede cognition and even the information gathering stag of the buying process. Where this is the case, it raises yet more questions regarding the supposed empowering role of IT in enabling consumer information search activities to be conducted much more quickly, cheaply and widely.

The phrase often employed to represent the customer as the chooser, the one in control, is the term “the customer is king”. This royal metaphor goes back a long way and it is deeply rooted in ideas of exchange, customer service and free market choice.

On the other hand, consider the language used in many marketing texts to describe and prescribe how market segments are “targeted” for “penetration” and market share must be “fought for” and “won”. Customers must be “locked-in” lest they “defect” to the opposition. Thus, consumers are worked upon until they are “captive”, although unaware of this captivity and marketing now has such a powerful control apparatus (“technologies of governance”) of the “free” market that results in consumers becoming more and more dependent on the knowledge of experts, technologies and systems.

Nowhere is this control more apparent than in the enormous amount of recent attention to customer retention, loyalty programmes, CRM and consumer “lifetime value”, i.e. not value for the customer themselves, but for the firm.

A moving target

Professor Thomas was certainly correct in anticipating that more and more of our marketing interaction would become computer-based. Its precise effects however are less clear. Yes, there are both elements of empowerment as well as exclusionary effects that have followed, but neither the direction of the trend, nor the precise nature of the effects, are clear yet.

The dynamic and intertwined effects of any technology are notoriously difficult to determine; therefore, to say the least, identifying the impact of IT on marketing is always going to be a moving target. The question that has yet to be answered is whether and how IT-mediation will change the character of the discourse of marketing and consumers and its empowering and exclusionary consequences.

October 2011.

This is a shortened version of “Marketing empowerment and exclusion in the information age”, which originally appeared in Marketing Intelligence & Planning, Volume 29 Number 1, 2011.

The author is Michael Saren.