Marketing - in the New Age of Information Technology - Essay Example

Marketing - In the New Age of Information Technology "The business world around marketing is changing, but marketing seems not to have noticed. Theage of technology has transcended from automating company processes to customer interaction" (Arnold, 2002). There has been considerable discussion over the past few years about the extent to which the discipline of marketing is, or is not, changing. In the hospitality industry also technology represents the one major change in the past few years. Hotel reservation systems, through the Global Distribution Systems [Amadeus, Galileo, Sabre and its Spotlight program, and Worldspan] and internet access to reservation systems and evaluation of the 'product' by the customer have changed how marketing people approach their task. The total concept of marketing - branding and promotion, customer segmentation and product positioning has become a totally different ball game in the new technology scenario. As an example of the change, in 2004, six out of the 10 hotel web-site hits came through the use of an online search engine; this makes search engine optimization and pay-per-click advertising key to the successful marketing of a hotel (FHRAI). "Increasing occupancy rates and revenue by improving customer experience is the aim of modern hospitality organizations. To achieve these results, hotel managers need to have a deep knowledge of customers' needs, behaviour, and preferences and be aware of the ways in which the services delivered create value for the customers and then stimulate their retention and loyalty" (Minghetti, 2003). Almost every organization is considering customer relationship management (CRM) as the new paradigm in marketing, where the customer, and not the process, is at the heart of the marketing initiative (Grnroos, 1994). However, a more fundamental question that needs to be answered is: to what extent are developments within Information and Communications Technology (ICT) changing how marketing is or can be done This paper attempts to answer this question. The customer needs the service or product to be provided on time, appropriately and at a fair price; the traditional 4P's (McCarthy, 1978). While information technology is of tremendous use has placed capability in the hands of the marketer it has also given marvelous tools to the customers through which they can evaluate the products available, compare features and price and make a decision that is purely individual and difficult to influence by traditional methods. The first priority, then, obviously is to be on the information grid (Internet) and look for ways to improve customer value through a competitive edge. The market segmentation has thus come down to a 'segment of one' and the emergence of one-to-one marketing strategies (Berry, 1994). But is this all Is it enough to be an effective marketing organization Understanding the customer and the best way to communicate and build profit is at the heart of all marketing efforts. Enhanced customer satisfaction and retention lead to increased customer loyalty, occupancy rates and revenue per available customer (Dub & Renaghan, 1999a, 1999b). "Managing customer value by creating quality and service that customers can see now is considered a critical component of companies' strategic marketing. Customer value is what builds loyalty" (ibid, p. 79). However, most hotels use information technology only for administrative purposes and have not realised the full possibilities for generating customer value (Minghetti, 2003). The effects of ICT on marketing are not only potentially dramatic they can be catastrophic to managers who choose to ignore the new technology. Marketing is increasingly becoming reliant on understanding and knowing about new concepts and skills that have become essential to stay ahead in the modern marketplace - or marketspace! The customer expects to be able to access a virtual audio-visual tour that give them the complete feel of the facility before deciding where to holiday. Face-to-face marketing, using ICT to provide a preview of the service being sold in addition to using modern communication media will certainly replace telemarketing as the marketing tool of choice for contacting individual customers. As the use of the internet becomes more pervasive and websites become more user friendly, interactive and offer better content they will allow the customer to make a fuller research before purchase, the internet will also allow the customers to share experiences through user groups, chat rooms and blogs. How can a modern hotel, resort or restaurant afford not to provide such a purchase experience The use of multimedia allows customers to see, sense, feel and hear about the product, and thereby absorb and retain more information. Traditional marketing management concepts focus on the most advantageous use of a set of marketing mix variables that are, more or less, predetermined and available in innumerable marketing textbooks (for example, Kotler, 2003). Contemporary ICT-enabled marketing innovations demonstrate that the present marketing paradigms are inadequate, especially when viewed in light of the virtual organization (Handy, 1995; Lockett and Holland, 1996) and Web-based marketing (Loebbecke and Jelassi, 1997; Bianco, 1997) as exemplified by Amazon. However, the role of close relationships between buyers and sellers, especially in the business-to-business context has led to an appreciation of the importance that relationship management plays in some markets (Hakansson, 1982; Ford et al., 2002). This approach has found a great amount of acceptability in the Business-to-Customer situations as well. "Relationship marketing" is now being projected as the new mantra for success in the market and a whole new paradigm (Grnroos, 1994; Gummesson, 1998). This concept then forms the basis for the new thinking on the use of ICT in developing customer relationship management (CRM) systems. The role that developments in ICT have played in defining the role of marketing, however, goes far beyond CRM systems. Understanding the customer and understanding how best to communicate and build profit was, and remains, the essential definitions of marketing. CRM provides individual customer data, a base for communication, and ICT the means for economical and appropriate contact. It provides a system, a process, but not the solution. The solution lies - as it always has - in understanding customer behavior, in anticipating it and shaping it for the profit of the company. But increasingly, marketing people put CRM as a process before the customer. CRM confuses sales with marketing and sells a system, not a solution (Holland & Naude, 2004). ICT is not a separate area of management, to be studied in its own right, to do so is to totally misunderstand its impact. Technology is not marketing and the ICT department is not the custodian of the customer - marketing is. The use of information systems is now firmly rooted in organizations and to such an extent that the proper way of viewing the inter-relationships between ICT and marketing theory is to understand marketing concept change primarily as an information handling problem. It is much easier to understand and interpret the role of ICT if we consider the responsibilities of marketing as information handling problems. The theoretical reason for considering marketing as being driven by information handling lies in understanding the generally accepted definition of marketing as the set of activities involved in the facilitation of exchange (e.g., Bagozzi 1975; Kotler and Levy 1969). As goods or services move along the value-added chain (Porter 1985) from supplier to distributor to retailer to consumer, a major component of exchange is the exchange of information. In that sense, the value added chain can be viewed as a communications channel (Glazer, 1991). ICT can play a vital role in analysis of customer data and help in development of marketing strategy and development of ICT-based marketing systems. It then becomes possible to understand the impact of the ICT-based marketing systems as improvements in the information processing systems become a tool for exploitation for improvement of the performance of marketing tasks and the overall marketing effort. The simplification in handling large amounts of data will also allow different companies and hotels to share customer data. This is an area with a large potential as customer information, their likes and preferences, are shared to generate sale leads for personal contact and marketing effort, a wholly new prospect. Yet the collection and use of customer information is frequently intermittent, delayed, and fragmented (Cline, 1999). The strategic use of technology in marketing is one of the most significant opportunities the hospitality industry has at this moment (Cline, 1999; Dev & Olsen, 2000) The traditional view of marketing is to look at the physical and human aspects of organizations (for example, Kotler, 2003). However, the information view of organizations also has been acknowledged for a long time now (for example, Beer, 1959; Morgan, 1986). The information view of marketing theory is now being re-visited to take into account the tremendous developments in the power of ICT and the associated developments in business innovation (Haeckel and Nolan, 1993; Verity, 1995; Naude and Holland, 1996). If we examine the priorities of marketing today, we get a clear understanding that nothing basic has really changed -marketing is still a function that comprises of effective business processes, it is only the way things are done that has changed. In these processes the priorities remain much the same, only the effective use of the new technology helps achieve these faster, more efficiently and more effectively; whether these address business communication, analysis, supply chain management or production planning and distribution systems. In most industries the information handling costs are outstripping costs associated with the physical processes. For example, recent research suggests that information handling costs in the automotive industry account for 80 per cent of the total costs (Holland & Naude, 2004). A host of reasons can be cited for this, but when one considers innovations in design and manufacturing such as CAD, simulation and automated production, and the associated huge investment in IT to support these innovations, the figures become plausible (Rayport and Sviokla, 1995). Transaction marketing, or the use of the traditional 4P's, focused on the base of the theoretical economics and the balance of market supply and demand. The idea was to push the demand curve to the right, by creating additional demand for the product through promotion activities, and optimizing a set of parameters - the traditional marketing mix, in a competitive market. There is a tremendous amount of literature on this concept which is dominated by such classics as Kotler (2003), Perreault and McCarthy (2002) and Porter (1980). All look at profit maximization under differing supply and demand conditions. Traditional marketing concepts then evolved into 'relationship marketing' based on the recognition that "supplier-customer relationships were complex phenomena and that independent studies of buying behaviors or marketing activities should give way to research focused directly on the patterns of interaction between the two partners to a relationship" (Turnbull et al., 1996, p. 44). The two partners were understood as the customer and the seller and the selling process dominated by a thought of 'co-operation'. This brought the thinking closer to a cooperative relationship with the customer and a closer focus on customer analysis, market segmentation and target marketing. With the coming of the developments in information technology marketing is becoming more information-driven as against relationship-driven changing the fundamentals on which managerial actions are based. Increasing use of databases, data-warehousing and communications technologies that have become available has changed the fundamentals of marketing. For example, the idea of customer analysis, segmentation and targeting has always been at the core of the transaction oriented approach, where large samples of statistically reliable customer data were used to generate groups of demographically, geographically or psychologically similar individuals (or segments of the market). This helped marketers target a specific segment by positioning a product tailored to meet the needs of the identified group of customers. This concept has changed drastically within the context of the availability of ICT; the idea has changed to the understanding that not all potential customers are similar and of similar value to the organization. As a result the need is identified to forge closer longer-term relationships with those who make investments in time and effort worthwhile (Porter & Millar, 1985). This has, in turn, led to recognition of the importance of customer portfolios rather than segments (Turnbull and Zolkiewski, 2002). Technologies such as data warehousing (Gray and Watson, 1998) and CRM (Xu et al., 2002) permit firms to focus on the individual buying unit, as is borne out by examples such as the way in which Federal Express interacts with its important corporate customers (Berry, 2000). "Orientation to customer retention, continual customer contact, and high commitment to meeting customer expectations are the new strategic rules of relationship marketing, which are based on factors other than pure economic assessment and product attributes" (Bowen & Shoemaker, 1998). Throughout the above discussion an attempt has been made to highlight that while ICT has enabled the more efficient and effective deployment of the company's resources towards improving the profitability, the fundamentals of marketing have not changed significantly. For example, segmentation remains as a concept and so does positioning, yet ICT enables the narrowing down of the segment to maybe even an individual or specific niche level where the product can be positioned against the specific individual or niche. ICT then allows for optimizing the logistics costs and enabling customer designed product delivery at the most competitive price. In basic buying and selling as well as contractual relationships with less adaptation between the buyer and seller, online sources are slightly more important, but even here have not replaced the traditional information resources. Traditional salesman can not be replaced, at least up till now. Through a detailed study Deeter-Schmelz and Kennedy (2004) conclude that ".buyers still value the traditional information sources of supplier's salespeople and buying centre members." While companies scramble to find competitive edge through finer segmentation and relation-based marketing there is the basic market still out there which will respond to mass marketing and afford operational scales, revenues and profits - for after all people still do not go to the internet to buy a coke and a burger. At this point the role of the sales force remains valuable to buyers as long as buyers find them a useful information source. Online sources are moderately important and become even more important as the buyer-seller relationship progresses into the maintenance stages for inter-organizational communication (Deeter-Schmelz & Kennedy, 2004). However, the online environment is dynamic and changing by the day and marketers would do well to keep track of changes as buyer's become more proficient in Internet capabilities and the use of the internet pervades more and more areas. In basic buying and selling as well as contractual relationships with less adaptation between the buyer and seller, online sources are slightly more important, but even here have not replaced the traditional information resources (ibid). Use of ICT and customer-related marketing is not direct marketing by another name. Its aim is not simply to personalize, but to customize the offer, even the product and payment, delivering at the most appropriate time and cost effectively. Marketers can no longer ignore or sideline technology. However, the assimilation of ICT use with marketing efforts has to be taken up by a large number of marketing companies. However, savvy marketing managers know that the customers are looking for brands and it is still brands that sell. Therefore the intellectual high ground of marketing has always been advertising, with television at the peak. Everything else is known under the denigrating label 'below the line' (Arnold, 2002). ICT use helps in creating customer oriented focus; while this is acknowledged by all, hotel managers' technology initiatives do not support this contention (Namasivayam, Enz, & Siguaw, 2000). In order to stimulate customer loyalty marketing must understand how technology can assist in the understanding of customers' value drivers and what aspects of the business enhances or detracts from the creation of such value (Dub & Renaghan, 2000). 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