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Qualitative Market Research: An International Journal Volume 5, Number 4, 2002
ISSN 1352-2752
This issue is part of a comprehensive multiple access information service comprising: Paper format Qualitative Market Research: An International Journal includes four issues in traditional paper format. The contents of this issue are detailed below.
Internet Online Publishing with Archive, Active Reference Linking, Key Readings, Research Register, Non-article Content, Institution-wide Licence, E-mail Alerting Service and Usage Statistics. Access via the Emerald Web site: http://www.emeraldinsight.com/ft See overleaf for full details of subscriber entitlements.
Business Intelligence and e-Marketing Workshop, IBM Warwick, 2001 Guest Editors: Merlin Stone and Julie Abbott
Contents 230 Access to Qualitative Market Research: An International Journal online 231 Abstracts & keywords 233 Guest editorial
Viewpoint 235 UK data warehousing and business intelligence implementation Tony Dobbs, Merlin Stone and Julie Abbott 239 Customer relationship management systems: implementation risks and relationship dynamics Ian Corner and Matthew Hinton 252 Marketing principles in the application of e-commerce Tim John Hughes 261 There’s no business like e-business Roger Palmer
268 Reflections on customer knowledge management in e-business Jennifer E. Rowley 281 From bricks to clicks: understanding the e-consumer Charles Dennis, Lisa Harris and Balraj Sandhu 291 Perceived risks as barriers to Internet and e-commerce usage Yehoshua Liebermann and Shmuel Stashevsky 301 Assessments of the ‘‘new economy’’ scenario Lucio Fuentelsaz, Juan Pablo Maicas-Lo´pez and Yolanda Polo 311 Awards for Excellence 313 Conference announcement 314 Author and title index to volume 5, 2002 316 Note from the publisher
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external developers than with an internally developed system. Explores these assumptions using qualitative linear case studies, where success or failure has not been established at the start. Derives a model which represents a typical relationship dynamic for a CRM implementation. By establishing the nature of the risks involved within the context of a monitored relationship dynamic offers a framework for guidance in the implementation process.
Abstracts & keywords
Marketing principles in the application of e-commerce Tim John Hughes Keywords Internet, Business development, Financial services, Market orientation, Customers, United Kingdom
UK data warehousing and business intelligence implementation Tony Dobbs, Merlin Stone and Julie Abbott Keywords Data, Warehousing, Business development, United Kingdom This paper summarises the situation regarding the penetration of data warehouses and business intelligence systems in companies across a range of industries in the UK. Data warehouses are being implemented due to the business need for tools within companies today to analyse the increasing amounts of data being collected. The paper then presents a short case study describing an example of a successful implementation of a business intelligence solution that supports CRM in a major retailer. Points are emphasised via the use of results from a recent IBM-sponsored qualitative study done in the UK.
E-commerce has been much hyped as a potentially transformational force in many industries, and financial services is an industry where its impact is expected to be particularly strong. In this qualitative research four case studies have been developed, from a series of in-depth interviews, to investigate the way some UK financial services organisations have responded to this innovation. By taking a broad perspective, from a range of managers across a number of disciplines, this study particularly focuses on the application of marketing principles, on an organisation wide basis, to the new challenges presented by e-commerce. E-commerce can be seen to present considerable structural and cultural challenges for large established organisations. It is also potentially changing a number of aspects of customer management. Significant areas for further research are identified. There’s no business like e-business Roger Palmer
Customer relationship management systems: implementation risks and relationship dynamics
Keywords Information technology, Innovation, Internet, Business development
Ian Corner and Matthew Hinton Keywords Customer care, Relationship management, Information technology, Implementation, Risk Addresses variables in the implementation of software applications for aspects of customer relationship management (CRM) systems in medium-sized organisations. The objective is to identify those variables that present the greatest risks to effective and successful implementation in the light of the operating relationships between the main ‘‘actors’’ in multi-channel CRM implementation projects. Bases theoretical development on two central themes. The first theme is that any implementation has risks that need to be managed and the second is that the dynamics of the relationships of the main actors are more complex where a system is acquired from Qualitative Market Research: An International Journal Volume 5 . Number 4 . 2002 . Abstracts & keywords # MCB UP Limited . ISSN 1352-2752
Seeks to address directly two assumptions that are inherent in current discussions concerning business and the role of technology. First, that business intelligence is, in fact, a feature of the business rather than the staff within that business. Businesses are simply entities with assets and capabilities but no cognitive processes, intelligence is a unique property of humans. Therefore there is a greater need to understand the social processes concerned in order to recognise this resource effectively. Second, that ‘‘e-business’’ is distinct from ‘‘business’’. Uses original research in the area of technological innovation as the basis for developing a wider argument with respect to e-business. Argues that what is currently referred to as e-business is a relatively poorly developed bundle of technologies that have yet to achieve full application in order to deliver optimum benefit. Also discusses the e-business phenomenon, the role of technology and the importance of a social perspective of business to give more insightful understanding of the interactions between these areas.
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Reflections on customer knowledge management in e-business
Perceived risks as barriers to Internet and e-commerce usage
Jennifer E. Rowley
Yehoshua Liebermann and Shmuel Stashevsky
Keywords Customers, Knowledge management, Information technology, Business development, Strategy, Quality
Keywords Risk, Perception, Consumer behaviour, Internet, Business development, Marketing
Customer knowledge is an important asset for all businesses. The rhetoric of e-business emphasises the opportunities for knowing customers in the digital economy. This article sets the context with a brief summary of the key characteristics of the knowledge management paradigm. This is used as a platform for the themes that form the core of this article: defining the knowledge that the organisation requires; knowledge tools and the relationships between data, information and knowledge; the role of customer communities in CKM; bounding and structuring organisational knowledge communities; ownership of knowledge assets; integrating customer knowledge across channels; and comparing customer knowledge management with customer relationship management. The overarching message of the article is that customer knowledge management is not just about data. Organisations need to develop strategies that enable them to capitalise on the dynamic integration of systems and people.
Previous research suggests that perceived risk is an important ingredient in the consumer decisionmaking process. The purpose of the present study is to investigate what are the perceived barriers to Internet usage and e-marketing by both users and non-users. By understanding these potential obstacles, more efficient marketing strategies will become available that will drive Internet use and e-commerce. A detailed perceived risks map has been developed using a qualitative research paradigm. We suggest a model with the factors affecting the Internet’s perceived risk elements. The factors are demographic traits and usage behavior characteristics. The model is tested against a sample of 465 employed adults.
From bricks to clicks: understanding the e-consumer Charles Dennis, Lisa Harris and Balraj Sandhu Keywords Internet, Consumer behaviour, Retailing It is well known that online shopping is growing, but recent reports have indicated that e-retailers are failing to deliver. In this paper, the authors consider aspects of shopping and shopping styles, comparing e-shopping with bricks and mortar. First, a small exploratory pilot study comparing Internet vs an exemplar shopping centre, and comparing the centre with an ‘‘ideal’’ centre is reported. In this initial stage, the respondents were selected as the ‘‘shoppers of tomorrow’’ – sixthform students – more Web-literate than older age groups. Second, the results of a further small exploratory pilot study are reported with slightly more mature shoppers – university students. The qualitative findings from this stage of the research form the basis for our conclusions. Finally, we speculate on the possible future of shopping.
Assessments of the ’’new economy‘‘ scenario Lucio Fuentelsaz, Juan Pablo Maicas-Lo´pez and Yolanda Polo Keywords Internet, Economy, Value, Strategic management This paper is devoted to a consideration of the present-day situation faced by the digital economy. The appearance of this phenomenon as one of the basic pillars of modern economies has provoked increasing interest in academic circles which, for the moment, is not fully reflected in the economic literature. Against this background, the central aim of this study is to synthesise the current state of the question, accepting the limitations imposed on such an exercise that is supposed by the scarcity of sources alluded to earlier. Qualitative research in this area has concentrated on the strategies that generate competitive advantages in a digital economy scenario. We follow this line by focusing on this question, trying to determine whether these studies converge in terms of proposals that can be used as a reference point for firms operating in virtual markets. Establishing the foundations of this new scenario is essential in order to consolidate the digital economy as an independent discipline.
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E-business research
Guest editorial
About the Guest Editors Merlin Stone is the IBM Professor of Relationship Marketing at Bristol Business School, Business Research Leader with IBM’s Business Innovation Services, and a Director of QCL Ltd, Swallow Information Systems Ltd and ViewsCast Ltd. His consulting experience covers many sectors. He is the author of many articles and 20 books on marketing and customer service, including Up Close and Personal – CRM @ Work, Customer Relationship Marketing, Successful Customer Relationship Marketing, and CRM in Financial Services. He is a Founder Member of the Institute of Direct Marketing, a Fellow of the Chartered Institute of Marketing and on the editorial advisory boards of many journals. He has a first class honours degree and doctorate in economics. Julie Abbott has worked in marketing for IBM for over eight years and her current role includes IBM’s Business Intelligence solutions across EMEA. She previously worked as an IT consultant both for IBM and previous employers. Julie holds an MA in marketing from Manchester Business School, the CIM Postgraduate Diploma, is a Chartered Marketer, a full member of CIM, and Honorary Visiting Research Fellow for Bristol Business School and is about to embark on a doctorate in CRM. She regularly guest lectures at various business schools on CRM and Data Warehousing and has had various papers published.
Qualitative Market Research: An International Journal Volume 5 . Number 4 . 2002 . pp. 233–234 # MCB UP Limited . ISSN 1352-2752
This is a special issue of QMRIJ which reflects important aspects of research and business. This special issue has been guest edited from IBM by Professor Merlin Stone and Julie Abbott. Far reaching advances in communications and information technology mean that interaction between companies and their customers – whether face-to-face, over the counter, on the telephone or via the Internet, are becoming more frequent, intense and data-rich. Many companies want to achieve more using these technologies, and customers expect to be served better. These twin pressures are forcing companies to look hard at how they manage these interactions and the knowledge resulting from them. This special edition of QMRIJ encompasses both practitioner and academic views of research in the world of the Internet. The result is an interesting mix that was certainly enjoyable and informative to the audience at the Business Intelligence and e-Marketing Workshop held at IBM Warwick in December 2001. The workshop, which was chaired by Professor Merlin Stone, was again run by Professor Len Tiu Wright and co-hosted by IBM, who are pleased to be associated with this prestigious annual academic and practitioner exchange of views in the area of ebusiness. IBM was delighted to present the prize for best paper to Corner and Hinton, for their research on managing risks when implementing a multi-channel customer relationship management (CRM) system within medium sized organisations. This excellent paper also discussed the dynamics of relationships between the players involved in the implementation, both internal and external to the company. Finally, using a model developed during the research, a framework for guidance in the implementation process can be given. All this is very relevant to today’s businesses, most of which are using the Internet in some form or other to improve their customer management. This is bringing about great changes, as outlined by Hughes, who researched the impact of adopting e-business in financial services, in the areas of information provision, transactions and servicing, cost reduction and productivity. Key issues included that of leadership and whether to have an integrated or stand alone
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approach to e-business. Leadership is critical to the success of all large changes to a business. Those that are driven from the top with a clearly defined strategy have a much greater chance of success. We are often told about the great paradigm changes that are being brought about by the pervasiveness of the Internet – but has business really changed so much? Palmer argues that it has not, rather that ebusiness is a major change in technology but not in the underlying business values and that it has still not delivered all its benefits, one of which is that of customer knowledge. Huge amounts of data can be collected via ebusiness and through the use of business intelligence can be turned into valuable knowledge about the customer. This knowledge is an important business asset that needs managing if it is to be fully utilised. Rowley discusses the characteristics of knowledge management and sets out to formulate a set of questions businesses must ask if they are to get the best from their databases, turning the data into knowledge that facilitates better business decisions. Abbott, Dobbs and Stone examine briefly what it takes in practice to translate high volumes of customer data into useful customer knowledge and then into profit. But what of the consumer? The Internet has changed consumer behaviour tremendously,
with more people buying over the Web as well as from more traditional ‘‘bricks and mortar’’ outlets. Dennis, Harris and Sandhu studied shopping styles amongst teenagers and university students, and speculate on the possible future of shopping. This is contrasted by Liebermann and Stashevsky who researched the barriers to entry for consumers using the Internet for purchasing and the perceived risks to usage by adults. The growth of e-business has had far reaching consequences to global markets and we now have a new term – the digital economy. Fuentelsaz, Maicas-Lo´pez and Polo examine this new scenario, adapting traditional frameworks and identifying the keys to value creation in this new and important environment. These papers are a selection of those presented at the Business Intelligence and e-Marketing Workshop. Another set will be published in a future edition of QMRIJ. The editors wish to wholeheartedly thank the authors, the reviewers, the editor of QMRIJ Professor Len Tiu Wright and of course the participants of the workshop for their input and support of this special issue. Abstracts of earlier versions of the papers were published in Business Intelligence and e-Marketing Proceedings of the IBM Workshop, 6 December 2001. Merlin Stone and Julie Abbott
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Viewpoint UK data warehousing and business intelligence implementation
In this Viewpoint article we summarise briefly the state of play regarding the penetration of data warehouses and business intelligence systems in companies across a range of industries in the UK. Following this, we present a short case study that describes an example of a successful implementation of a business intelligence solution that supports CRM in a major retailer. We draw upon the results of a recent IBM-sponsored ‘‘qualitative study’’ in order to emphasise the points made (Networks IT Marketing, 2002).
Tony Dobbs Merlin Stone and Julie Abbott
The current status
The authors Tony Dobbs is EMEA Marketing Manager, Merlin Stone is Executive Consultant and Julie Abbott is with EMEA Marketing, all at IBM UK Ltd. Keywords Data, Warehousing, Business development, United Kingdom Abstract This paper summarises the situation regarding the penetration of data warehouses and business intelligence systems in companies across a range of industries in the UK. Data warehouses are being implemented due to the business need for tools within companies today to analyse the increasing amounts of data being collected. The paper then presents a short case study describing an example of a successful implementation of a business intelligence solution that supports CRM in a major retailer. Points are emphasised via the use of results from a recent IBM-sponsored qualitative study done in the UK. Electronic access The research register for this journal is available at http://www.emeraldinsight.com/researchregisters The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/1352-2752.htm
Qualitative Market Research: An International Journal Volume 5 . Number 4 . 2002 . pp. 235–238 # MCB UP Limited . ISSN 1352-2752 DOI 10.1108/13522750210443182
The amount of data collected by most UK firms is increasing rapidly. This is creating a need for businesses to use tools to view the data, dissect it and of course, understand it. Users of the resulting information include managers at various levels as well as analysts and, increasingly more junior staff whose job requires them to understand precisely what is happening in one part of the business. At all levels, staff need accurate information in a form which can be easily understood and quickly acted upon. In the past, many of these kinds of decisions would have been made either without analysis or using out-of-date information. Companies today are increasingly relying on applications from leading analytical tool vendors and enterprise software suppliers such as IBM. As the UK’s leading companies embrace the Internet as a core part of their business, suppliers are introducing applications and toolkits which can extract data from Web-enabled business processes and make them accessible for decision making. In some cases they can even make the business decisions without human intervention. In the area of customer or Web analytics, aggregation and interpretation routines are used to create a much clearer view of each customer and/or group of customers as well as track, profile, and illustrate the habits of individual visitors to a Web site. Data play a crucial role in most companies, but there are some industries that need quickly and accurately to analyse very large amounts of data from different sources. Modern manufacturing plants generate and store huge amounts of data from ERP (enterprise resource
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planning) systems and other transaction-based systems. Often many different systems store and analyse data relating to the production of various items or substances, for example: . stock levels; . delivery schedules; . customer orders; . prices paid; . product return rates; and . product development schedules and the like. If these systems do not communicate with each other, or if there is no single point from which to approach all of these data, it is impossible to find accurate answers to questions such as: How will a 5 per cent drop in production of a particular product in a specific month affect company profits?
And: Which are our most profitable customers?
The majority of the data in most manufacturing companies covers manufacturing, logistics and financial areas, rather than market information and customer data (although both the latter are important). Financial services companies, however, see service operations and customer information as mission-critical. Retail banks and insurers usually have millions of customers. It is not easy to predict how changes in areas such as consumer behaviour, the performance of financial markets and government policy will affect business. To benefit from all the data they have collated and stored, these companies need to: (1) extract the data they have from its different and varied sources; (2) transform it into a consistent format; (3) load it into a repository e.g. a data warehouse; and (4) find a way to analyse the data so as to give decision makers at all levels and in different units the support they need to make better business decisions more quickly than their competitors. (Typically this entails using business intelligence software, ranging from advanced reporting suites to statistical packages.)
services and manufacturing companies, the following conditions held: . Senior management were committed to the idea of data warehousing. . The board was involved in decisions. . Just under half of all companies have a true data warehouse – the larger the company, the more likely this was. . Most companies relied on external consultants, and valued their role, although this was not necessarily correlated with the perceived success of the implementation. . Two-thirds of companies were generally satisfied with their data warehousing implementation, but financial services companies were more dissatisfied than manufacturing companies. . Satisfaction was most strongly correlated with the perceived quality of information in the warehouse. . Most respondents considered their investment to be justified. . Under half of respondents were using business intelligence tools. Most of these were used to analyse data from ERP and CRM systems, and nearly half were using these tools to analyse data from CRM systems. . Almost two-thirds of the companies have not been able to measure the ROI from their projects. Several companies that have been able to measure return on investment were only able to do so because the reporting and analysis tools just implemented gave them a clearer view of the benefit of many business initiatives. . Most companies that have implemented business intelligence solutions were happy with the investments they have made in this area. . The most common problems to overcome contacts were related to business culture, e.g. moving to a datasupported view of how to make decisions and, indeed, to manage the enterprise.
The case study The research results The Spotlight (Networks IT Marketing, 2002) research indicated that in most financial
This case study, which is anonymous for confidentiality reasons, shows how a very large retailer uses data warehousing and business intelligence tools to improve results
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from its approach to customer relationship management. Company X is the largest retailer in its category in the UK. It needed a campaign management system that would enable it to target customers with relevant, timely marketing programmes. It uses traditional market research to understand why its customers shop in its stores, and why they make particular visits to branches. Today, it knows a great deal more about the individual preferences of a high proportion of its customers, thanks to its loyalty card. Its customer relationship management (CRM) approach for its loyalty card is based on a DB2-based data warehouse that uses integrated analysis for querying, reporting and data mining. It is also integrated with a campaign management system, developed by IBM. The campaign management system allows targeting of customers for specific programmes based on how they have accumulated their loyalty points. With several years of individual card holder transaction records and a selection of non-card holder sales records to provide a comparison with card holder behaviour, the size of the database created a performance challenge. Flexibility was also essential. This was achieved by storing data at the lowest level of granularity so that users can build it up to any level they require during analysis. Another important aspect is that the firm’s commercial analysts have quick, real-time access to all of the data without having to make special IT support requests. The database is structured to support the analytical process. Currently a large team of full-time analysts, as well as a separate team of direct marketing experts, use the system. From the point of sale data, the company already knew what was being sold, where and when. Now it can determine what different groups of customers are buying and monitor their behaviour over time. Using the IBM solution, direct marketing analysts are now able to develop target customer profiles without having to first create a separate extract of data and are also able to base these profiles on the full richness of information held within the DB2 database. Analysing purchasing trends by shoppers over time also provides the company with a new view of its traditional product categories and departmental divides.
This retailer can now also see how much shoppers buy in specific product categories. Monitoring purchases over time also helps identify buying patterns that can fuel further marketing efforts. For example, customers may buy a particular product from the company, but it can now see if they also buy related products. It can then determine whether it is more profitable to encourage existing customers to buy more products in a certain category than it is to attract new customers. The company combines its basic customer demographic data (age, gender, number of children and postal code) with externally available data. However, the real power of the business intelligence solution comes from being able to combine this information with detailed purchase behaviour data. This new knowledge base is used to support business decisions outside the marketing arena. An analysis of how its customers shop in a group of stores in a particular geographical area has led to a greatly improved understanding of the role different outlets play within that area and the range of goods that should be offered across them. For example, its stores have typically been grouped and merchandised according to their physical size. This leads to competition between large and small outlets in the same area. The company learnt that its most valuable customers shop across many stores in their area. So, rather than having them compete against each other, the company now manages them as local areas. The incremental sales generated by the data warehousing and business intelligence system has paid for the initial investment, but longterm value is coming from the application of customer insights across the business. The company has already proved that it can add significant value from doing this. This is in line with wider research in the implementation of CRM (Stone and Woodcock, 2001), which shows that a steady approach, with strong measurement, pursued consistently over a long period, is much more likely to lead to profitable outcomes.
Conclusions We can see that across many industries in the UK today, there is a growing need to understand the business more in order to
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compete in a fast changing marketplace. Knowledge is key; something that companies are becoming more aware of and therefore implementing business intelligence solutions in order to gain that knowledge rather than make assumptions. It is widely believed that 80 per cent of all assumptions about the customer are wrong, but as we can see, in the past many decisions were based purely on assumption as accurate information was not available or the information was out of date. This often resulted in customer dissatisfaction and low employee morale as staff felt under pressure to deliver excellent customer service but had no tools to help them do this. Qualitative research carried out in the UK (Abbott, 2000) showed that marketers in particular felt that more information helped them to do a better job – but it had to be accurate and timely as bad data hindered campaigns and the marketers felt their efforts were then largely wasted leading to a loss of morale. Businesses are now in a position to take full advantage of the technological breakthroughs, not only at the client end via the Internet but at the heart of the company’s information systems through their data warehouses and large array of business intelligence tools. The more these systems are used, and the
information fed back in a closed loop process, the more value can be gained from them. Companies that were drowning in data but had no information, suddenly find that they have the knowledge base that they need to move their business forward in an ever more competitive environment. Not only can they now give their customers the excellent products and services required to meet their demands but their employees are likely to have much higher job satisfaction, leading to higher quality service to the customers, (an area discussed at length in Daffy, 1996) and this is a virtuous circle that should lead to higher profits for the company.
References Abbott, J. (2000), ‘‘Data data everywhere and not a byte of use’’, Qualitative Market Research: An International Journal, Vol. 4 No. 3, p. 182. Daffy (1996), Once a Customer, Always a Customer, Oak Tree Press, Dublin. Networks IT Marketing (2002), ‘‘Data warehousing and business intelligence in the UK’’, Spotlight, sponsored by IBM. Stone, M. and Woodcock, N. (2001), ‘‘Defining CRM and assessing its quality’’, in Foss, B. and Stone, M. (Eds), Successful Customer Relationship Marketing, Kogan Page, London.
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Customer relationship management systems: implementation risks and relationship dynamics Ian Corner and Matthew Hinton The authors Ian Corner is a Director of Brown and Company, Great Offley, UK. Matthew Hinton is a Lecturer in Information and Knowledge Management at the Open University Business School, Milton Keynes, UK. Keywords Customer care, Relationship management, Information technology, Implementation, Risk Abstract Addresses variables in the implementation of software applications for aspects of customer relationship management (CRM) systems in medium-sized organisations. The objective is to identify those variables that present the greatest risks to effective and successful implementation in the light of the operating relationships between the main ‘‘actors’’ in multi-channel CRM implementation projects. Bases theoretical development on two central themes. The first theme is that any implementation has risks that need to be managed and the second is that the dynamics of the relationships of the main actors are more complex where a system is acquired from external developers than with an internally developed system. Explores these assumptions using qualitative linear case studies, where success or failure has not been established at the start. Derives a model which represents a typical relationship dynamic for a CRM implementation. By establishing the nature of the risks involved within the context of a monitored relationship dynamic offers a framework for guidance in the implementation process. Electronic access The research register for this journal is available at http://www.emeraldinsight.com/researchregisters The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/1352-2752.htm Qualitative Market Research: An International Journal Volume 5 . Number 4 . 2002 . pp. 239–251 # MCB UP Limited . ISSN 1352-2752 DOI 10.1108/13522750210443191
Customer relationship management (CRM) systems are a relatively new genre of computer-based applications where the concern is to improve the selling and revenue generation processes of organisations. Payroll and accounting systems are well-established applications, as are manufacturing control systems. Enterprise resource planning (ERP) systems that have been generating significant revenues for a number of system providers since the late 1980s and early 1990s are concerned with accounting, sales order processing, manufacturing and other application areas generally regarded as ‘‘back-office’’ systems. By contrast, CRM systems are regarded as ‘‘front-office’’ systems since they are concerned with the relationship of the organisation with its sources of revenue – its customers. CRM systems are seen to provide support for the provision of a service to a customer as opposed to providing support for the optimisation of a function within an organisation (Gro¨nroos and Powell, 2000). The value of the global market for CRM systems was in the order of $2 billion for software licences for 1998 (Aberdeen Group, 1998). Licence revenues are expected to be in the order $6 billion for 2001. Associated service revenues generally exceed licence revenues so that total CRM associated revenues are expected to exceed $20 billion in 2001. Hewson and Hewson (1998), whilst recognising the potential value of the benefits the systems offer also highlight their relatively poor rate of perceived success. Approximately only one-third of implemented systems are seen to have met expectations (Dickie, 1998; Hewson and McAlpine, 1999).
Why conduct this research? The general view of some observers of sales and marketing information systems (Seybold, 1996; Aberdeen Group, 1998; Hewson and Hewson, 1998) appears to be that a number of major trends are apparent. The first is the move towards the development of business strategies within which the use of IS/IT is simply the enabling mechanism. The increasing significance of information technology within business strategy places increasing demands upon CEOs to
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understand the changing potential of the technology and its changing limitations. Since overall business strategies are the responsibility of the CEO then it is argued that the CEO can no longer delegate IS/IT issues to others but must be personally at terms with them (Martin, 1995; Rockart, 1995). The second major trend is in the rapid increase in the exploitation of technology for the purposes of sales and marketing (Aberdeen Group, 1998; Bishop and Fletcher, 1998; Stevens, 1998). A third discernible trend is a reflection of the first two trends. It is the move towards systems that deal with all aspects of customer contact (Seybold, 1996). Within this context of fast moving developments in business strategy combined with equally fast moving developments in information technology and systems there remains the singularly important issue of performance. In this context performance means the achievement of objectives, improving sales performance, implementing projects on time and to cost and providing a platform for further development (Hewson and Hewson, 1994; Dickie, 1998; Hewson and McAlpine, 1999). There are a number of observations that suggest performance is poor with only about 25-30 per cent of implementations being successful (Dickie, 1998; Hewson and Hewson, 1998; Hewson and McAlpine, 1999). There is a body of work concerned with issues surrounding the implementation and effectiveness of information systems in general (for example Goodman, 1997; Mathieson and Keil, 1998; Taylor-Cummings, 1998). Work concerned with performance in sales and marketing systems, however, is in short supply. The need is for research to be done to identify the reasons why some implementations are successful whilst others are not. It is anticipated that the benefits from such work will be the ability to adopt more effective implementation procedures, reduce implementation costs and improve performance.
IS/IT strategy issues Martin (1995) suggests that information technology risks have become increasingly entangled with business risks and it is the
responsibility of the CEO to distinguish between them. Importantly he suggests that the CEO can no longer delegate such decisions. Rockart (1995) argues that the CEO must incorporate the capabilities of IT into his ‘‘theory of the business’’. He suggests that what the CEO knows about IT is less important than how he and other key members of the organisation think about IT. Batchelder (1995) is equally certain that IS/ IT is so embedded within the operation of an organisation and so fundamentally essential as an enabler of change that it should be a significant consideration for all CEOs. PriceWaterhouse (1995) provide an assessment of the major issues concerning senior IT executives. The five major concerns were (in descending order of significance): (1) integrating IT with corporate objectives; (2) transforming through IT; (3) infrastructure; (4) uncertainty; and (5) cost control. Peppard (1998) looks at IS/IT issues in the context of a global enterprise and argues that they are of fundamental concern to the management of global organisations and are not just technological issues concerned with communication networks and infrastructure. Collectively these comments indicate a growth in the significance if IS/IT from that of a support function to an essential enabler of business development and an increasing need for CEOs to be highly literate IS/IT thinkers.
IS/business relationships The relationship between IS/IT and the rest of a business is often called into question. Ward and Peppard (1995) describe the relationship as a troubled one that few organisations have been able to resolve. Taylor-Cummings (1998) quotes the views of IT directors with 47 per cent describing their major problem as the culture gap between IT and the rest of the business and 56 per cent stating that they believed the culture gap was losing or seriously delaying IT opportunities. In neither case, however, was any attempt made to categorise the organisations and IT directors in terms of size of organisation, level of IS/IT maturity (Cerpa and Verner, 1998) or level of integration of IS/IT strategy with corporate strategy.
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Hinton (1994) sees much of the conflict in the light of mismatched perceptions with users assessing the functionality of a system whereas the IT function assesses its technical quality. Corner (1987) was concerned that the relationship might be a major factor in the high failure rate for expensive manufacturing control systems. The result of that research, however, indicated that whilst the relationship may have been a concern prior to the start of any project there was no relationship between perceived conflict prior to implementation and final success. In some cases the directors of successful companies stated that the importance of the project and the level of investment involved provided a stimulus for a level of integration between manufacturing and IS/IT that had not existed before.
Return on investment (ROI) Ballentine and Stray (1998) and Fitzgerald (1998) state that there is a requirement for consensus over the effectiveness of IS/IT and that the current trend for high levels of investment is likely to continue. They also suggest that there is a significant lack of performance related data and also suggest that the measurement techniques that work well for measuring ROI on capital investment are ineffective when applied to IS/IT. For example, improved customer service is a common objective for an IS/IT system where the payback is difficult to assess. Hewson and Hewson (1998) explore ROI in the context of sales and marketing systems in some detail and reach the following conclusions: . Most sales and marketing systems are implemented as a matter of faith since their research shows that in 1994, 46 per cent of new systems had no formal costbenefit justification and of the remaining 54 per cent many were massaged to ‘‘come out right’’. . Many planned benefits are not realised. . Most management decisions regarding these systems are politically charged. . The capital costs of many systems are understated by as much as 50 per cent. Organisational culture Borgatti (1997) defines organisation culture as the shared beliefs, values and norms of a group. Included in the description are:
.
.
.
. . .
basic values (what is important; what is evil); behavioural codes (how to dress; how to behave); perceptions (how the world is; how things work; implicit theories of the market, of management, of politics); myths and legends; heroes and heroines; and emblems and rituals.
Bento (1997) extends this description to include a set of primary dimensions, which include: . innovation and risk-taking; . attention to detail; . outcome orientation; . people orientation; . team orientation; . aggressiveness; and . stability. Hewson and Hewson (1998) suggest that organisational politics plays a larger part in the dynamics surrounding sales, marketing and customer service systems than in any other part of an organisation. These descriptions and observations indicate that there are probably subjective issues, influenced by the organisation culture, which will have an impact on the perceived success of a CRM system. Previous work on IS/IT implementation A recent paper on IS system implementation by Marble (2000) argues for the formalisation of an intuitionistic theory of IS implementation. It is suggested that a unified view of IS implementation already exists within IS literature and such a view only needs recognition and extraction. There appears to be an implied dynamic between two main parties, the user function and the IS function. It is intended to argue that (in CRM system implementations, at least) there is a more complex dynamic between the user function, extra-company contributors, the IS function and the project manager, and that the manifestation and management of the inherent risks described operate within this dynamic. It is possible that this dynamic is, at least partially, in effect in most or all acquired software systems with vendor/specialist assisted implementations and requires description. The next section describes the theoretical risks, which may inhibit successful systems implementation.
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Theoretical risks to successful implementation .
The Oxford Dictionary defines a risk as: 1.Hazard, danger; exposure to mischance or peril, 2.The chance or hazard of commercial loss.
In the context of this paper, a risk is assumed to be a potential hazard. The definition for the purposes of data interpretation has been further refined. Hence, a risk that is recorded as being present or evident is a hazard or obstacle that has been encountered by the project. Usually, but not always, the encounter with the hazard would be expected to have some form of negative influence on the project. Theoretical development of CRM risks starts with the assertions made by Hewson and McAlpine (1999) that CRM implementations have eight sets of risks that differ from other system implementations. These risks are described in this section, but it should be noted that although the evidence and nature of the risks are supported by Delong and Rockart (1992), Cannon (1994), Davenport (1994), Barrow (1990), and Cavaye (1995) the support is only in the context of general IT systems implementations. Risk 1 – the system users The assertion is that CRM system users are essentially different from those who operate financial and ERP systems. The grounds for the assertion are based on the observation that sales people demonstrate tendencies for higher levels of domination and influence in psychometric test results whereas accounts people tend to demonstrate steadiness and compliance. Although the obvious conclusion would be that sales people are more difficult to manage as system users, the only risk described that might relate to psychometric profiles out of the following list appears to be the first, and that risk might apply to any user in any organisation. Passive resistance by system users is described by Marakas and Hornik (1996). The risks are: . Reluctance of users to support the project or use the system. . The need to design user interfaces that fit well with the working style of the users. . The large number of users involved with CRM systems can cause
disproportionately long implementation times. The variety of users combined with change processes may mean that there are no viable data present in the system at its outset. This would result in limited benefit for the users at the outset, no opportunities for quick wins and a resultant drop in support for the system.
Risk 2 – the processes used The assertion is, that relative to financial and manufacturing systems, the processes used in sales, marketing, customer service and other parts of the customer lifecycle are less well defined. There is less of a recognised discipline and commonality across business sectors and between companies in the same business sector. It is also suggested that management believe that their CRM processes are, or should be, different in order to gain a competitive edge and although true, to some extent, it is a significant factor in complicating an implementation. The risks that are identified as being specific to CRM processes are: . A tendency to focus on the technology rather than process improvement. . Difficulty in defining or envisioning a total solution with the risk of muddled system specification or too much time being spent on the definition stage. . A risk of ‘‘computerising’’ only current processes so that opportunities are missed. . A risk of acquiring a number of standalone tactical systems rather than an optimal encompassing system. . Re-engineered processes that are out of step with the organisation culture and people. Risk 3 – speed of change Although all aspects of an organisation’s processes undergo change, Hewson and Hewson (1998) cite the globalisation of markets, internal pressure to outperform the competition, and rapidly changing market places as causing an exponential rate of change for users of CRM systems. The assertion is that the rate of change that impacts on CRM systems implementers is greater than for other systems. The specific risks for CRM systems are:
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.
Constantly changing project scopes, overspend or inadequately implemented systems. Project speed out of step with the speed of market developments. Mature markets can afford longer implementation periods but fast moving or volatile markets need project times of six months or less.
Risk 4 – politics and vested interests The assertion is that politics play a larger part in the organisational dynamics surrounding CRM systems than in any other area of a business. This is attributed to the scope of the change that is needed and the rate of change. The specific risks described are: . Senior heads may roll and a vulnerable sponsor of the system inevitably means that the project is vulnerable. . Political issues not tackled at the start of the project may result in the project being stalled at some interim stage. . Political infighting may result in the failure to obtain committed support. . Political conflict may result in compromises that produce sub-optimal tactical systems. Risk 5 – the need for mobility Sales-focused CRM systems usually involve multiple sales channels such as the Internet, telesales, business partners and a mobile field sales force. The requirement for mobility provides the most significant differentiation of CRM systems from other systems, in terms of both technology and management. Key risks are: . System failure or integration failure for mobile communications. . Inadequate support for mobile users during roll out. Risk 6 – over-reliance on unproven methodologies Because CRM systems are new, it is argued that there is a risk of using inappropriate methodologies that were developed for financial and ERP systems. The specific risks are listed as: . The project team and management assume that the project may be run mechanistically. . The methodology’s reporting structure obscures obstacles and problems and a false sense of security is engendered.
Risk 7 – the need for rework The rework issues described by Hewson and McAlpine (1999) refer generally to all software systems development with the possible exception that failing systems will have a more significant impact in the CRM environment. Those risks described are: . Additional costs or unanticipated time delays, emanating from poorly defined processes. . Systems that do not work, leading to user disillusionment and a fall off in senior management support. Risk 8 – inadequate funding A number of suggestions are offered as to why underfunding is a particular issue with CRM systems. These include poor estimates of the costs of process re-engineering, unanticipated problems and even deliberate cost underestimates just to get a CRM project started. As with some other risk categories, they do not appear to be exclusive to CRM systems. . Corner-cutting in the ‘‘soft’’ areas of requirement definition, change management process re-engineering and training. . Inadequate systems administration. . No buffer to correct mistakes. . Failure to enhance or upgrade the system. The notion that project implementations have risks is not new and a number of the risks described have been described before. Barrow (1990) stresses the need for IT implementations to reflect business objectives and to not just automate existing processes. Cannon (1994) describes the problems caused by poor implementation planning. Cavaye (1995) and Davenport (1994) stress the need for the implementation process to be conscious of the needs of the people who will use the system. In addition, Delong and Rockart (1992) go to some length to describe the need for systems to be properly funded. The risks here are, however, seen to apply to any IT-based project.
Implementation risks case study Background The case study involves the implementation of a comprehensive CRM system into a software company, based in the east of England (which we shall call East of England
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Software, EES). EES supply a range of systems to larger commercial organisations. They have 400 employees in total, with two sales teams, structured into north and south regional sales areas, with 35 sales executives. They have a seasonal sales cycle, with on average 80 per cent of their software products sold between January and June each year. The case study began in 1999 to study the contemporary phenomenon of CRM implementation in a real life context. The case also made it viable to test the theoretical risks identified by Hewson and McAlpine (1999). The following sections outline the case with respect to the categories described above. The users Lack of user support There was no evidence of any reluctance on the behalf of any users to support the system. This may have been a reflection of the decision to demonstrate the system to all users prior to making a decision to use it and to allow for extended question and answer sessions with the vendors. During the demonstration phase the users asked many questions regarding the functionality of the system and how it might be designed to assist them. It is possible that the lack of reluctance was due to the management of the risk. It should also be noted that a number of the users had experience of other, more tactical systems. Some of these were already in use within the company. Others had used CRM systems with previous employers. One of the researchers had trained a small number in another company and was recognised by the users at the demonstration events. The reluctance described by Hewson and McAlpine (1999) may have been due to a complete lack of experience with these systems for those whom they have researched. This would suggest that, even though there was no evidence of reluctance in this case, the risk is present but transient. Transience of risks has not been addressed in this study. User interfaces The need to design user interfaces that fit well with the working style of the users was not regarded as a risk, however, or as a problem, since the system had been designed for customisation and the amount of time taken to undertake the changes was relatively short.
The most significant changes were to the standard options on the pick-lists and for the inclusion of a forecasting element in the main system view to calculate the potential value of a prospective sale. This risk is not seen to be specific to CRM systems since all systems should fit well with working practices. The effects of poor design, however, may be more acute within CRM systems. Implementation times Hewson and McAlpine (1999) suggest that a large number of users involved with CRM systems can cause disproportionately long implementation times. There were 32 users so the risk was not present. Lack of viable data at the start In this case there were some users that had already gathered data on simple systems that could be imported into the new system. These data were of value only to those who had gathered them. They were not data that could be shared with other users, apart from the company as a whole. A significant objective for the implementation of the system was to enable data gathering for all users. Thus, this perceived risk presented no actual risk. The nature of the users (sales staff operating away from the office for most of the time) did, however, present one significant problem that probably justifies the notion that the nature of the users is a significant project risk. The remoteness from each other meant that they had difficulty in sharing their relative successes and problems with each other and the support staff whose job it was to help. They were not able to deal with problems immediately and not able to pass on useful techniques other than at infrequent intervals. Processes Technology rather than process In the case study both technology and process were regarded with a fairly appropriate balance. If process issues had not been managed well then the effect would have been acute. This may well be a valid risk but it is unlikely to be specific to CRM systems. Difficulty in defining a total solution leading to muddled system specification There was no evidence of any difficulty in envisioning a total solution in the early stages of the project. It may be valid to suggest, however, that the project was envisaged as a single shot solution to an operational need
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rather than a strategic approach to the comprehensive management of relationships with customers. The risk has some validity although perhaps in its interpretation rather than its statement. This risk is not considered specific to CRM systems. A risk of ‘‘computerising’’ only current processes so that other opportunities are missed The sales directors were keen to capture the potential sales data from the field sales staff in order to do better sales forecasting. The overall objective of the system was to develop a consistent prospect and customer database that could be used for analysis and better marketing, as well as improve the lead handling processes. These intentions indicate that there was no evidence of this risk. The risk is not seen to be confined to CRM systems. A risk of acquiring a number of stand-alone tactical systems rather than an optimal encompassing system Given the relatively small scale of the project (35 or so users) it could not, in itself, have been implemented as a set of separate standalone systems. The extent to which the system is all encompassing as it stands is debatable. It is not an optimal encompassing system because there are many additional features that may be added. The system does have the potential to become encompassing. Poorly defined processes One perspective may be that if any rework is needed then the process was poorly defined at the outset. Another may be that a welldesigned process should allow for flexibility such that enhancements may be made as new potential benefits emerge. In this case, a fair amount of time was invested in defining processes but at the review sessions with users there were a number of valuable suggestions that required some rework. The case suggests that there are two types of rework: (1) error correction; and (2) enhancement. Rework in the context of threat was not an issue here. The risk is not seen to be confined to CRM systems although the effects of poorly designed processes are likely to be more acute. The users were instrumental in defining their own processes so that re-engineered processes were kept in line with the
organisational culture. If this had not been the case then the risk of non-acceptance of the reengineered processes would have been acute. Speed of change The company involved in the case study is in a mature market with an annual selling cycle and little likelihood of volatile change. The speed of the change needed to fit in with the annual cycle and was planned to do that. The project scope remained constant for the period of the initial implementation. Consequently, this risk was not present, although it would be an acute risk in some circumstances and most likely confined to CRM implementation, due to the focus on the sales interface. Politics and vested interests Vulnerable system sponsor The system sponsor was not vulnerable in this case, therefore the risk was not evident. This risk does not appear to be confined to CRM systems (Lucas, 1981) nor is likely to be more acute in CRM systems. Political issues not tackled at the start of the project may result in the project being stalled at some interim stage This situation arose during the case study. Ownership of the project was discussed at an initial meeting. The southern area sales director declined to take ownership of the project because of the inherent conflict with the northern area sales director. Political infighting may result in the failure to obtain committed support The initiative for the project came from one region and was backed by both sales directors after presentations by the vendor. Therefore, this issue was evident before implementation but was resolved after implementation started. The refusal to take ownership at the sales director level resulted in compromise. Investment for the development of an integrated quotation system was shelved because of slight differences in development preferences from each of the regions. The departure of one of the sales directors to take on responsibilities in North America resulted in a most positive response from the other sales director. The project received more attention and there was an immediate move to implement enhancements.
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Failing systems, leading to user disillusionment and reduced senior management support This issue may be regarded as a relative issue rather than an absolute concern. There was some degree of disillusionment by some people at some stage but this was overcome and not detrimental to the overall project. Some of the disillusionment was due to having forgotten training or having failed to see the potential of a particular function. Management support has remained relatively constant. The risk was evident but did not materialise. The threat is not seen to be more acute for CRM systems nor confined to them.
The need for mobility This issue of mobile communications was evident for a number of reasons. Although the synchronisation process did work it suffered a number of setbacks. Some of the data that were imported from earlier standalone systems failed to synchronise well, although new material functioned adequately. The database corrupted due to inadequate information supplied by the software developers and this contributed to dissatisfaction. The risk was evident and acutely felt. This situation was further complicated by inadequate support for mobile users during roll out. Although the support provided by the internal systems personnel was very good, the nature of the remote users’ job is such that there is minimal face-to-face contact with support staff. This risk appears to be confined to CRM systems. Reliance on unproven CRM methodologies Project team and management assume that the project may be run mechanistically The implementation methodology was derived from that of the vendor. It was not untried or unproven since the company had a relatively long history of implementing these systems. There was no evidence of project methodology being a risk or threat through being run mechanistically. The risk may be more acute for CRM systems currently since they are relatively new but the risk is seen to apply to any system. It is a risk that may be transient. The methodology’s reporting structure obscures problems engendering a false sense of security This risk is based on the assumption that the methodology used is not appropriate. Again this may be a valid risk but likely to apply to any system and likely to be transient. This was not observed during the case study. The need for rework Additional costs or unanticipated time delays There was a need for rework in the broadest sense but this had been anticipated as part of the project implementation. Most of the costs were contained within the original project estimate. Since the rework had been anticipated, the risk was not seen to be evident.
Inadequate funding Under-commitment Initial funding was fully supported after a number of presentations and was signed off by the CEO. The CEO did not take any personal ownership of the system, which was seen to be run for the sales department by the internal systems staff. The funding commitment was sufficient for the project hence the view that the risk was not evident. Furthermore, the project was not seen as a tactical exercise and a considerable amount of dedicated time was devoted it. Supplemental resources There was a very limited budget for enhancements. The risk was, therefore, evident and had an effect on the project. There was no evidence of corner cutting in the ‘‘soft’’ areas of requirement definition, change management process re-engineering and training. Time and resources were quoted for and matched by the company. Inadequate systems administration Systems administration was good, so this risk was not evident. Possibly, this reflects the quality of the systems administrator. Funds to enhance or upgrade the system were not easily available and this limitation was definitely evident during the period of joint sales directors. The risk was evident and had an effect on the later stages of the project. It is not a risk that is seen to be confined to CRM systems nor more acute for them. Consolidation of the data In order to provide an overall assessment of the data a grid (Table I) has been constructed with three options: (1) Was there evidence of the risk being present?
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Table I The presence of the risks within the case study The risk
Present
1. Users Reluctance to support or use the system Need to define interfaces that fit well Large numbers of users may extend timescales No viable data at start causes drop in support
Not present
Partially present
Negative effect
X
No No No No
X X X
2. Processes Tendency to focus on technology not process Problems envisioning a total solution Automating current processes only Having stand-alone systems not comprehensive Systems out of step with the organisation Changing specs that hinder progress
X X X X X X
No No No No No No
3. Speed of change Changing needs that hinder implementation Changing market that demands fast response
X X
No No
X
No Yes No Yes
4. Politics and vested interests Vulnerable senior project sponsor Early unresolved issues cause later problems Infighting prevents proper initial support Conflict produces compromises 5. The need for mobility Mobile communications work inadequately Roll out support insufficient Lack of contact with peers slows uptake
X X X
X
Yes No Yes
6. Reliance on unproven methodologies Mechanistic approach Problems obscured by old methodology
X X
No No
7. The need for rework Additional costs, unanticipated delays Disillusionment because of interim failures
X
8. Inadequate funding Lack of support causing initial underfunding Tactical approach giving part-time attitude No buffer to correct mistakes Corner cutting in early stages Inadequate systems administration Lack of budget for enhancements
X X
X
X X X X X X
(2) Was there no evidence of the risk being present? (3) Was there partial evidence of the risk being present? A further column has been added to indicate whether the risk had any negative effects on the project implementation. Table II details how specific these risks appear to be with respect to CRM. Other risks not identified by Hewson Two types of risk were evident. The first is associated with the need for mobility and is
the risk of a slower learning rate of the system because of the physical distance between remote users and the rest of the organisation. Consequently, users are not able to ask anybody in the immediate vicinity for help or confirmation of learning because they operate on their own. The second is the risk of paying too much attention to transient risks that were once significant but no longer are. Possible examples include the risk of users rejecting the CRM approach simply because they are sales orientated personnel. CRM systems will be well known and widely accepted within a
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No No No No Yes No No Yes
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Table II Indications of how specific the risks are to the case study The risk
Specific to CRM
1. Users Reluctance to support or use the system Need to define interfaces that fit well Large numbers of users may extend timescales No viable data at start causes drop in support
More acute in CRM
Not specific to CRM
X X X
X X X
X X
X X X X X
X
X
X
2. Processes Tendency to focus on technology not process Problems envisioning a total solution Automating current processes only Having stand-alone systems not comprehensive Systems out of step with the organisation Changing specs that hinder progress
X
3. Speed of change Changing needs that hinder implementation Changing market that demands fast response
X
4. Politics and vested interests Vulnerable senior project sponsor Early unresolved issues cause later problems Infighting prevents proper initial support Conflict produces compromises
X X X X
5. The need for mobility Mobile communications work inadequately Roll out support insufficient Lack of contact with peers slows uptake
X X X
6. Reliance on unproven methodologies Mechanistic approach Problems obscured by old methodology
X
X X
7. The need for rework Additional costs, unanticipated delays Disillusionment because of interim failures
X X
8. Inadequate funding Lack of support causing initial underfunding Tactical approach giving part-time attitude No buffer to correct mistakes Corner cutting in early stages Inadequate systems administration Lack of budget for enhancements
X X X X X X
very short period and employees are unlikely to reject systems that they know are extensively used by others. Furthermore, a sufficient skill in such systems is set to be part of the selection criteria during recruitment.
Conclusions and further developments This paper has begun to develop an understanding of the risks associated with the implementation of CRM systems. The case
study has presented useful insights into the set of risks, originally identified by Hewson and McAlpine (1999) and suggested possible adaptations. Table II demonstrates that there is evidence from the case of the presence of four of the eight risk categories. The three categories where risk was perceived to be significant were politics and vested interests, the need for mobility, and inadequate funding. This research suggests that Hewson and McAlpine’s categories are a useful starting position for the study of
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implementation risks. However, as the case study has revealed, there needs to be scope for the identification of other areas where risk may undermine implementation success. So far, the research has identified the risks in isolation. If greater insight is to be gained then it will be necessary to study how the different risk categories impact on each other during the implementation process. The second element of this paper involves the development of one or more models that describe the implementation relationship and the players within that relationship. In the section above that refers to previous research in IS/IT implementations it was noted that the great majority of work assumed that the IS/IT systems that were being implemented were also developed by the implementing organisation. Exceptions to this are Guimaraes and Igbaria (1997) who note the trend towards the implementation of acquired software and see a need to re-test the previous work in the light of the trend. Fan et al. (2000) also inevitably assume the use of acquired software because of their focus on component-based enterprise systems. Inherent in the assumption of internally developed systems is the assumption of an implementation dynamic that employs internal players, viz. the IS/IT function, users and project managers. With acquired software systems another significant element is introduced, that of the external contributors, be they the vendor of the system or agents of the vendors who contribute to the implementation process. Developing a model of relationship dynamics Figure 1 was developed for testing purposes. The model illustrates the internal project manager having a central role for the implementation process but all players in the implementation having access to all other players. The initial model was tested using two recorded interviews. The recording medium was digital video. Both interviews were with players in the implementation process. The first was with a user manager and the second with an external project manager. Both interviews were on projects that had completed the planned first phase of implementation and both projects would develop beyond the first phase. Since both were retrospective interviews, it was possible to identify which risks had been encountered
Figure 1 The initial model of CRM implementation dynamics
and to test the validity of the model. From the data gathered in the interviews, it became apparent that the model was valid but incomplete. In the first interview the risks associated with politics and vested interests were highly visible in the early stages. The company was a subsidiary of a US-based holding company with subsidiaries in a number of European countries producing automotive components. The European countries had investigated a number of CRM systems and recommended a system for general European use. The US parent did not accept the choice and another system was imposed. The US parent was the system sponsor and insisted on its own choice of system. In the second interview the role of the ‘‘system sponsor’’ again became apparent. In this case the implementation was held up for a long period by the nominated internal project manager because of other commitments. Once the project was started the project manager blocked contact between the external project manager and the users. A relationship was developed with the sales director who was the project sponsor but a number of problems arose because of a lack of user input to the design, see Barki and Hartwick (1994) and issues raised by Swanson (1988) on mutual understanding. The model was a useful tool in analysing the blockage and the effect on the implementation dynamic but was again incomplete because of the absence of the project sponsor from the illustration. The model was revised as shown in Figure 2 to accommodate the role of the system sponsor.
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Figure 2 Revised implementation model
Further research This paper has begun to develop an understanding of variables that influence the risks associated with the implementation of acquired CRM systems. The initial case study has presented some insights into the nature of the risks, originally identified by Hewson and McAlpine (1999) and suggested some adaptations. The preliminary testing of the implementation dynamic model has again provided some insights and adaptations to the model have been made. In order to gather further data on both the risks and the relationship dynamic in which these risks emerge further research is being conducted in the form of linear studies of implementations. The value of video recording is being exploited as a major element of the studies in order to capture data on interactions. Kanellis et al. (1999) observe that many research findings about implementation success have been based on the study of implementation failures and have tended to generate more cautions than true guidelines. The current studies are linear and success or failure cannot be determined at the beginning, thus the element of self-selection will be avoided.
References Aberdeen Group (1998), Engaging Customers – The Power of Electronic Sales, Aberdeen Group, Boston, MA. Ballentine, J. and Stray, S. (1998), ‘‘Financial appraisal and the IS/IT investment decision making process’’, Journal of Information Technology, Vol. 13, pp. 3-14.
Barki, H. and Hartwick, J. (1994), ‘‘Measuring user participation, user involvement and user attitude’’, MIS Quarterly, Vol. 18 No. 1, pp. 59-79. Barrow, C. (1990), ‘‘Implementing an EIS’’, Journal of IS Management, Vol. 7 No. 2, pp. 41-6. Batchelder, G. (1995), in, ‘‘The end of delegation: information technology and the CEO’’, Harvard Business Review, Vol. 73 No. 5, pp. 162-5. Bento, R. (1997), Organization Culture, Merrick Business School, University of Baltimore, Baltimore, MD. Bishop, H. and Fletcher, C. (1998), Managing Customers with Next-Generation Software Applications, Aberdeen Group, Boston, MA. Borgatti, S.P. (1997), Organization Culture, Marshall School of Business, University of Southern California. Cannon, J. (1994), ‘‘Why IT applications succeed or fail’’, Industrial & Commercial Training, Vol. 26 No. 1, pp. 10-15. Cavaye, A. (1995), ‘‘The sponsor-adopter gap: differences between promoters and potential users of IS systems that link organizations’’, International Journal of Information Management, Vol. 15 No. 2, pp. 85-96. Cerpa, N. and Verner, J. (1998), ‘‘Case study: the effect of IS maturity on information systems strategic planning’’, Information and Management, Vol. 34 No. 4, pp. 199-208. Corner, I.C. (1987), ‘‘Organizational factors relevant to the implementation of on-line MRP systems: the relationship between management behaviour and success’’, Cranfield School of Management, Cranfield. Davenport, T. (1994), ‘‘Saving IT’s soul: human centered information management’’, Harvard Business Review, March/April, pp. 119-31. Delong, D. and Rockart, J. (1992), Executive Information Systems: Emergence, Development, Impact, John Wiley, New York, NY. Dickie, R.J. (1998), ‘‘Customer relationship management’’, 1998 State of the Marketplace Review, Insight Technology Group, Boulder, CO. Fan, M., Stallaert, J. and Whinston, A. (2000), ‘‘The adoption and design methodologies of componentbased enterprise systems’’, European Journal of Information Systems, Vol. 9 No. 1, pp. 25-35. Fitzgerald, G. (1998), ‘‘Evaluating information systems projects’’, Journal of Information Technology, Vol. 13, pp. 15-27. Goodman, E. (1997), ‘‘A methodology for the usersensitive implementation of information systems in the pharmaceutical industry’’, International Journal of Information Management, Vol. 17 No. 1, pp. 55-71. Gro¨nroos, C. and Powell, S. (2000), ‘‘Spotlight on Dr Christian Gro¨nroos’’, Emerald Now. Guimaraes, T. and Igbaria, M. (1997), ‘‘Client/server system success: exploring the human side’’, Decision Sciences, Vol. 28 No. 4, pp. 851-76. Hewson, N. and Hewson, W. (1994), ‘‘The impact of computerised sales and marketing systems in the UK’’, Hewson Consulting Group, Cambridge. Hewson, N. and Hewson, W. (1998), ROI in Sales and Marketing Systems, Hewson Consulting Group, Cambridge. Hewson, W. and McAlpine, G. (1999), The CRM Systems Handbook, Hewson Consulting Group, Cambridge.
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Hinton, C.M. (1994), Technology Assimilation: Understanding The User-IT Professional Relationship, PhD thesis, Cranfield University, Cranfield. Kanellis, P., Lycett, M. and Paul, R. (1999), ‘‘Evaluating business information systems fit: from concept to practical application’’, European Journal of Information Systems, Vol. 8 No. 1, pp. 65-76. Lucas, H. (1981), Implementation: Key to Successful Information Systems, Columbia University Press, New York, NY. Marakas, G. and Hornik, S. (1996), ‘‘Passive resistance mis-use: overt support and covert recalcitrance in IS implementation’’, European Journal of Information Systems, Vol. 5 No. 3, pp. 208-19. Marble, R. (2000), ‘‘Operationalising the implementation puzzle: an argument for eclecticism in research and practice’’, European Journal of Information Systems, Vol. 9, pp. 132-47. Martin, B. (1995), ‘‘The end of delegation: information technology and the CEO’’, Harvard Business Review, Vol. 73 No. 5, p. 162. Mathieson, K. and Keil, M. (1998), ‘‘Beyond the interface: ease of use and task/technology fit’’, Information and Management, Vol. 34 No. 4, pp. 221-30.
Peppard, J. (1998), ‘‘IS/IT management in the global enterprise: a framework for strategic alignment’’, working paper, Cranfield School of Management, Cranfield. PriceWaterhouse (1995), Information Technology Review 1995/96, PriceWaterhouse, London. Rockart, J.F. (1995), in, ‘‘The end of delegation: information technology and the CEO’’, Harvard Business Review, Vol. 73 No. 5, pp. 166-8. Seybold, P.B. (1996), The Next Wave: Integrated Customer Interaction Solutions, Seybold Group, Boston, MA. Stevens, C. (1998), Internet Sales: Virtual Corporations, Real Profit, Aberdeen Group, Boston, MA. Swanson, E. (1988), Information System Implementation: Bridging the Gap between Design and Utilization, Irwin, Homewood, IL. Taylor-Cummings, A. (1998), ‘‘Bridging the user-IS gap: a study of major information systems projects’’, Journal of Information Technology, Vol. 12, pp. 29-34. Ward, J. and Peppard, J. (1995), Reconciling the IT/ Business Relationship: A Marriage in Need of Guidance, Cranfield School of Management, Cranfield.
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Background to the research
Marketing principles in the application of e-commerce Tim John Hughes
The author Tim John Hughes is a Senior Lecturer at Bristol Business School at the University of the West of England, Bristol, UK. Keywords Internet, Business development, Financial services, Market orientation, Customers, United Kingdom Abstract E-commerce has been much hyped as a potentially transformational force in many industries, and financial services is an industry where its impact is expected to be particularly strong. In this qualitative research four case studies have been developed, from a series of in-depth interviews, to investigate the way some UK financial services organisations have responded to this innovation. By taking a broad perspective, from a range of managers across a number of disciplines, this study particularly focuses on the application of marketing principles, on an organisation wide basis, to the new challenges presented by e-commerce. E-commerce can be seen to present considerable structural and cultural challenges for large established organisations. It is also potentially changing a number of aspects of customer management. Significant areas for further research are identified. Electronic access The research register for this journal is available at http://www.emeraldinsight.com/researchregisters The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/1352-2752.htm
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E-commerce has been much hyped as a potentially transformational force in many industries. It is said to be the single biggest opportunity and threat facing almost every industry (Achrol and Kotler, 1999) and it is claimed that companies have no choice but to deploy Internet technologies to remain competitive (Porter, 2001). Financial services is an industry where its impact is expected to be particularly strong (Birch and Young, 1997) because it changes the basic cost dimensions of business and the distribution structure (Durkin and Bennett, 1999). In addition it is argued that by providing easier access to information power moves more into the hands of the customer (Mitchell, 2000; Tapp, 2000). Given these predictions of the transforming nature of e-commerce to financial services there would seem to be a requirement for more research in order to understand this phenomenon more fully. The piece of research described in this paper has taken a case study approach, involving interviews across a range of different functions in four financial services organisations; to obtain a broad based managerial view of the way in which they have been responding to these changes. In undertaking this, the focus of the research has been on how far marketing principles and practice have been applied. In this the idea of market orientation is considered to be central as it represents a major model for responding to change. Jaworski and Kohli (1993, p. 56) suggest: A market orientation essentially involves doing something new or different in response to market conditions, it may be viewed as a form of innovative behaviour.
Hurley and Hult (1998) argue strongly that market orientation is about the adoption of new behaviours and that innovation should be a component of the market orientation model. Market orientation has been extensively researched in quantitative studies across many countries and industry sectors (see Lafferty and Hult, 2001 for a review). However there has been very little in-depth, multi-respondent research into the way it may operate in practice, in particular, from the point of view of the many different functions within an organisation. There has also been little recent, in-depth, empirical research into the operation of the marketing concept in
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either the banking industry or other financial services sectors although it is claimed that the banking profession has largely failed to adopt the marketing concept (Baker, 1993). Given the fact that the whole financial services industry is changing rapidly, research into this would seem to be overdue.
Methodology This paper describes a piece of qualitative research involving four case studies which have been developed from a series of in-depth interviews. An initial pilot case study was run in December 1999 and January 2000 and the rest of the interviews took place between July and December 2000. Conducting multiple case studies can be seen to be like doing multiple experiments and provides a means of enhancing the validity and reliability of the research through triangulation. Conducting a number of case studies also provides a means of testing the information by comparing between cases (Robson, 1993) and helps to add credence to interpretations of the data by allowing investigation of whether the phenomenon remains the same in different circumstances (Stake, 1995). In this study the cases were chosen to represent the two major categories of the financial services industry: banking and insurance. The UK financial services market covers a wide range of institutions and it is difficult to conduct research that comprehensively covers every sector. However the main distinction made in textbooks is between the two main market sectors of banking (including building societies) and insurance. Companies eligible for the research had to have their primary business in one or both of these core sectors of financial services. It was also important that they should have an existing involvement in e-commerce and that there should be a willing sponsor prepared to help in getting access to managers within the business. This last point was an important one from a practical point of view. The method chosen for conducting the case studies involved interviewing a number of busy executives and managers from different departments across each organisation. One of the major considerations was the difficulty in getting access to sufficient people for in-depth interviews. The sponsor was a senior contact who accepted responsibility for getting the commitment and
involvement of the interviewees. This sponsorship was very important and necessary in getting sufficient access. Individual in-depth interviews were chosen as the main method for the collection of data as they allowed the respondent to remain anonymous and provided the opportunity to probe and clarify points arising. It was also the most practical way of getting participation from busy executives and managers. The interviews were semi-structured with a topic guide to provide some structure and consistency to the interviews. The topic guide was used to give a direction to the interview, but it was not used as a straitjacket and respondents were encouraged to talk at length within and around the topic areas. In addition follow-up questions were used in the course of the interviews, where necessary, to get respondents to clarify or develop their responses. Typically the functions represented in the interviews covered: . marketing; . sales; . operations; . administration; . human resources; . IT; . change management; and . finance. All interviews undertaken were recorded and transcribed. The transcripts were then coded with concepts and transformed and simplified in order to facilitate display, analysis and comparison along the lines recommended by Miles and Huberman (1989). The coding was revised and developed as the research progressed. Displays were developed for the different concepts, summarising the response of each respondent and allowing cross-case analysis.
Overview of the case studies There was a strong consensus from across the case study respondents that e-commerce would be of immense strategic significance for both their organisation and financial services in general. There was less agreement on the pace of change, although many respondents felt that it would take many years to be taken up by the majority of the population. The impact was seen to be in three major areas:
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(1) the availability of far more information to customers; (2) the automation of transactions and servicing; and (3) the potential to reduce costs. While there was a high level of agreement on the eventual importance of e-commerce, the ways that the four organisations were responding to this new phenomenon varied greatly, as described below. Each organisation has been given a false name to preserve anonymity. Insco is a life company selling mainly through independent financial advisors (IFAs). The company had an active Web site and was very much in an investigative phase of looking at how e-commerce could be used to more effectively service both its intermediary and end customers. However it had not really taken steps to seriously address the issue of how e-commerce could integrate with the rest of the operation and did not have a clear strategic direction for how it would develop e-commerce in the future. The other insurance company in the case study is Internatco, an international life and general insurance company that has grown rapidly through acquisition. Here the major challenge seemed to be that there were many separate initiatives owned by different distribution channels within the company and therefore there was a fragmentation in the effort put into e-commerce. In addition there was also a major new e-commerce project underway that had been initiated from the head office. While respondents at Internatco recognised the need for some fundamental change to reflect a more consistent and direct approach to their end customers there seemed to be some enormous cultural and practical barriers to overcome in achieving this. The two banking organisations in the case studies had progressed further than the insurance companies in developing e-commerce initiatives in their core businesses. However they demonstrate two different approaches, one being about integrating the Internet as a channel with the other methods of distribution, the other being a standalone operation. Buildsoc has traditionally sold primarily through a branch network. It has had a presence on the Internet for a number of years, but at the beginning of 2000 the decision had been taken, by the chief executive, to really get into e-commerce in a
big way. The strategy for e-commerce at Buildsoc was to use e-commerce to provide customers with an alternative method to transact on their accounts with a view to reducing the proportion of transactions made through conventional means in the branches. The benefit of this will be to shift the burden of administration work to the customer and reorienting staff to other more profitable customer-oriented activities, however it was recognised that to achieve this type of a business transformation would require a sustained effort over a long time. In contrast Interbank had been set up as a separate operation from its parent retail bank. With a distinct brand and a new operating style it was targeting a younger group of customers. Interbank had been set up with a flat management structure and a cultural and processes designed to respond to customer feedback and provide a highly responsive customer service. As a relatively small and distinct operation Interbank has been able to operate in a very different way than its parent bank. This was made possible because it was a new operation with new people and processes. Its limitation of course is that customers do not have the option for any face-to-face service and are wholly dependent on their willingness to operate their relationship with the organisation remotely.
The marketing concept and strategy development for e-commerce The marketing concept with its central idea of market orientation stresses customer focus, but what emphasis can be placed on this when dealing with a new phenomenon? There was plenty of evidence in the case studies of the widespread use of customer and competitor feedback and research in general. This was made up of both feedback through sales contacts and also the use of a whole range of more formal market research methods. Indeed in the area of competitor research there was often far too much information and the problem for managers was in dealing with it all. However there was little evidence that market intelligence from customers had a significant influence in making the big strategic decisions that needed to be made to mobilise the e-commerce projects in these organisations. While undoubtedly the managers in the case study organisations
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would like to have a clearer vision of the future provided by customers, the reality is that they have to rely on what they already know and gut feeling. The Buildsoc technology manager sums up the situation in making strategic decisions: Nobody knows or even has a well-founded view that will turn out to be the truth . . . the organisational impact is unknown, the ground rules are different . . . It’s almost like how did gas companies react, when electricity was competitive? What is it we know about what we’ve been doing previously which will help us. That to me I see as the biggest challenge.
In taking this approach thinking has to be flexible, as plans may need to alter. The Interbank marketing manager warns against being too prescriptive: Within Interbank I think we have a very clear strategy, but not a very time detailed one, because you don’t know what’s going to happen three months down the line. Often there’s the danger of being too strategic and saying right in three years time we will be doing this, this, this and this.
This challenge of the need to anticipate the future in dealing with innovation is not really encompassed in the market orientation models. Kohli and Jaworski (1990) acknowledge that intelligence generation involves anticipating customers’ future needs, but do not develop this thought. Indeed in a later paper Jaworski and Kohli (1996) argue that innovation is an outcome of market orientation. The relationship between market orientation and innovation is not clear. On the one hand there is an argument (Hayes and Abernathy, 1980) that a market-oriented focus could be detrimental to innovation, based on the idea that market orientation seduces the business to being narrowly interested in short-term customer needs. On the other hand it is proposed that models of market orientation should focus more on innovation (Hurley and Hult, 1998). They suggest that, if market orientation requires the adoption of new behaviours (innovation), the construct of innovation should be included in the existing models of market orientation. Other studies of market orientation (Narver and Slater, 1990; Slater and Narver, 1994) took the position that the existence of a customer and competitor orientation in creating customer value will be sufficient to give a business a competitive advantage in all circumstances. Latterly Slater and Narver (1998) seem to have modified this view by
adding that a market-oriented organisation develops long-term thinking and tries to satisfy latent customer needs. However the mechanics of market sensing in this way still seems to be very vague and it is not clear how it fits into the original market orientation models. Slater and Narver (1999) admit that the understanding of market orientation continues to evolve and much is still unknown. The experience of the managers in the case studies appears to be that although an enormous amount of research and intelligence was gathered and used within the companies it was of only limited applicability in developing strategy. This is because of uncertainty about the future and the difficulty in researching theoretical propositions with customers.
The marketing concept and organisational responsiveness to e-commerce For a market-oriented organisation it is not enough to be focused on customers and competitors; it is necessary to be responsive to changes in the market (Kohli and Jaworski, 1990). In a large organisation this involves a high degree of interfunctional coordination (Narver and Slater, 1990). Small focused teams have been instrumental in forcing through change in both Buildsoc and Interbank. The Buildsoc marketing manager recognises the benefit of smaller group decision-making to short cut bureaucratic processes: I think a lot of people are warming to the idea that the business should be making the decisions in smaller groups and those smaller groups reporting their decisions to other groups, not necessarily inviting other groups to comment. There’s got to be a corporate ownership and a greater level of trust in people’s decision making . . . so I think the e-development has been a great stimuli to say do we really have to make decisions this slow and have committee meetings all over the place?
This is also recognised by the Buildsoc retail operations manager who suggests:
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The answer might be to make yourself small in the way you operate, but within a big context. That sounds a bit odd, but if you look at the companies that seem to be able to produce things very quickly [they] are very small companies. Then they get big and that slows
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them down. It’s a question of acting small but being big, if that makes sense.
The need to see across the organisational strands and also focus on the shortest timeline for implementation is challenging and is not something that traditional management training has prepared people for (Smith, 1998). It requires seeing the detail for each area and type of person involved, while also keeping the big picture in mind. This cannot be hierarchical (Miles et al., 2000) and traditional rules do not always apply. In Buildsoc and Interbank small teams with the heavyweight support of their respective chief executive were seen to be the best way of overcoming some of the challenges in getting change projects underway. However this was not the end of the story. Getting a change initiative underway is only the start, it then needs to be fully integrated within the organisation. In order to take advantage of the benefits of e-commerce Porter (2001) stresses the imperative for companies to develop tailored value chains to build up defensible competitive advantage. This involves a high degree of cross-activity integration, for instance sales activities linked with order processing. There is an appreciation from the Insco marketing manager that the response to e-commerce should be integrated: It’s not just marketing, it’s not just IT, it’s product development, it’s the whole business and I think people aren’t aware of that enough across the business to be thinking in those terms.
Despite the initial success of getting the e-commerce projects off the ground, in some of the case studies, there were very real challenges identified in developing and sustaining an integrated and coordinated cross-functional approach to long-term implementation, where it was taking place within the existing organisation. In the Interbank case study the creation of the separate operation seems to have overcome some of these by sidestepping the issue. The point is that, for an existing company doing business on the Internet, a range of organisational issues arise requiring major adjustments to the organisational infrastructure: culture, people and structures (Boddy and Boonstra, 2000). But changes to mental models and norms (Kondra and Hinings 1998) can be psychologically threatening (Ashkenas, 2000). Therefore it needs to be recognised that the strategic
decision to develop an innovation will have massive organisational implications (Prahalad and Hamel, 1990). The size of the challenge is neatly summed up by the Insco e-commerce manager: The company started in [date] – 150 years odd of doing things by paper, it is hard to move the whole organisation and there are few visionaries around that realise that.
The issue of implementation of strategy is recognised in the major market orientation models, however it can be argued that this element is explained less than comprehensively. Kohli and Jaworski (1990) have less to say on responsiveness than intelligence generation or dissemination, but it is at the core of their model. Responsiveness is the action taken in response to market trends, involving virtually all departments in the organisation. However Jaworski and Kohli (1993) acknowledge that their analysis does not shed much light on the change process. In the alternative model of Narver and Slater (1990) the mechanics of responding to change in an integrated manner is described as interfunctional coordination. To accomplish this effectively companies need to develop horizontal structures and manage projects through small multi-functional teams (Slater and Narver, 1994), but they also need to become learning organisations (Slater and Narver, 1995). They agree with Day (1994) that superior ability to learn is critical because of the acceleration of technological change and the need to development distinct competencies to achieve competitive advantage. However they accept that there is no widely accepted theory of what comprises the culture and climate of a learning organisation.
The marketing concept and customer management through e-commerce The previous two sections have focused on the operation of the marketing concept at the levels of the development of strategy and organisational change in relation to the introduction of e-commerce. This section focuses on the operational level in considering how e-commerce on its own and in conjunction with other channels is being used in relation to customers. Respondents from all four organisations mentioned three common elements of customer management
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that they expected to be delivered through e-commerce. These were: (1) the provision of information on individual accounts; (2) two-way communication with customers; and (3) self-servicing of transactions. These contacts can be considered to be significant to the marketing process because of the importance of customer service as part of a consideration of the total relationship that the organisation has with the customer. Relationship marketing has been put forward as the new paradigm in marketing, in particular with regard to its significance in services companies. It is defined as being about establishing, maintaining, and enhancing relationships with customers and other partners (Gro¨nroos, 1994, 1996) and provides an alternative view to the traditional US functional model of marketing. The services marketing literature (Reicheld and Sasser, 1990; Berry and Parasuraman, 1991) stresses the link between service quality and customer satisfaction and retention. It is argued that by improving the quality of service customer satisfaction will be improved and in turn a satisfied customer will be favourably disposed to a strong relationship with the provider. There may be a new type of opportunity to nurture customer relationships by using e-commerce. It may have advantages in optimising the quality of two-way contact (Sharpe, 1999) and by combining the ability to respond directly to customer requests and to provide the customer with a highly interactive, customised experience, companies may have a greater ability to establish, nurture, and sustain long-term relationships (Winer, 2001). At Insco the degree to which end customer relationships are managed is strictly limited because the primary relationship with the customer is through the IFA and therefore direct interaction with end customers through either e-commerce or conventional means was negligible. Similarly at Internatco the focus in the past has not gone much past the IFA. Therefore, according to the Internatco project manager: If you define our customers as IFAs, at least initially, I think we are very well aware of what IFAs are doing and what they want from e-commerce.
The Internatco sales manager notes that there is a certain amount of commonality in the approach of half a dozen large insurance companies who have done their groundwork to find out what IFAs want from e-commerce. The Internatco organisation development manager sees electronic automation to be a source of competitive advantage to try and develop a distinctive proposition for intermediaries. At the same time a number of the Internatco respondents recognise that dealing primarily at arm’s length to the customer, through intermediaries, will be challenged by e-commerce with the idea of providing a direct route for the customer to contact the company. With the development of e-commerce it is anticipated that there will be far more contact with end customers – with a big communications centre: Now we will have more contact with them at pre-sale and even more contact after the sale, because they will be able to see their portfolio, etc. (Internatco marketing manager).
This new operation selling direct to the end customer is seen as a model for the future by the Internatco organisation development manager. The problem is that this is in conflict with the existing way of operating in business channel silos with each laying claim to ‘‘own’’ their customers. A similar challenge in managing customers in a consistent manner across the many different ways that customers may now interact with the organisation is also recognised by many of the Buildsoc respondents. The Buildsoc business improvement manager points out: One challenge is to actually make that customer experience and infrastructure as consistent as we can across all channels . . . exactly how we structure it . . . we need to think about it, but perhaps we need to be looking at the needs of customers, how they are defined across the channel. There will be somebody looking at the specific infrastructure associated with one particular channel, but I think we should be looking at the customer relationship and the management of that across the piece.
There are major implications for branch roles in customer management if increasingly transactions become more self-service. In theory advisors in branches could be more focused on customer needs at different stages of life and providing advice. In this information collected online may help in understanding customer needs, according to
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the Buildsoc online services development manager: We want to build up a profile of the members’ habits online. If we’re providing them with non-financial content, we also get a better picture of their interests and of their likes and dislikes and that helps us build up a profile and it helps us to further member relationship management across all distribution channels.
At the same time the creation of a central customer service unit to deal with telephone and e-commerce customer contact means that feedback is gathered in a central administrative area and head office staff are receiving direct communication from customers on service issues. In taking an integrated approach to e-commerce Buildsoc has added a further new channel and created some major challenges for itself in effectively and consistently managing the customer relationship across both the traditional and new channels. Things are much simpler at Interbank, where customer management is totally confined to this one business unit. It is claimed that Interbank was developed from the start from the point of view that it needed to be customer focused, with new staff, a new culture and processes that were designed around the customer and channel. Emphasis is put on the way everyone responds to customer comments. As the Interbank business strategy manager says: I think the trick is not only getting the feedback, but being able to react to the feedback.
In talking about his role the Interbank operations manager claims to worry about what the customer worries about. He gives a specific example of an exercise that demonstrates this approach: We’re struggling at the moment to understand the way in which customers are contacting us and why they’re sending us e-mails. Why they’re contacting us that way and how often do they send us e-mails, how quickly do they want a response to those e-mails? How do we schedule our workloads internally within the service centre to be able to handle those e-mails and handle those secure messages and get them back to customers within what they think is reasonable, which is generally within 24 hours.
There is also a lot of emphasis at Interbank on involving all staff in understanding customer requirements and in improving the service. Feedback is collected and then all staff are involved in coming up with suggestions for improvements. The aim is to
create an environment where staff act on what they hear from customers, often taking on responsibilities outside their nominal role in order to resolve customer issues. Interbank demonstrates the way that CRM can be implemented effectively from a standing start with new customers. The advantage of short chains of command in Interbank is that you can get things done quickly as communications are simple and decisions can be made rapidly. However it is also recognised that this commitment to reacting quickly to feedback needs to be maintained despite the growth of the operation. What Interbank does demonstrate is how the marketing concept can work effectively at the operational level. A strong parallel can be drawn with Kohli and Jaworski’s (1990) information processing model of market orientation in the way that intelligence from the customer is collected, shared within the organisation and acted upon. Alternatively, taking Narver and Slater’s (1990) culture based model of market orientation, Interbank can be seen to have a very customer focused culture and it is effective in achieving interfunctional coordination in responding to customer requirements.
Conclusions This study has taken an in-depth approach to investigating the way in which a number of financial services organisations have been responding to e-commerce. In particular the question raised in this paper has related to how far the marketing concept, operationalised in the major market orientation models, provides a sufficient conceptual framework to guide practitioners in responding to a new phenomenon such as e-commerce. In taking an in-depth approach with multiple respondents it has been possible to get different perspectives from managers who have a wide range of functional roles and professional backgrounds. This provides the necessary width of perspective that needs to be brought to bear in considering an idea as all encompassing as the marketing concept. The rich data gathered raise some questions about the adequacy of existing models to explain certain aspects of market-oriented innovation on a number of different levels. At the level of strategy formulation it would seem
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to be insufficient to focus on customers and competitors and there are gaps in the market orientation models in explaining the market sensing and decision-making processes. With the current fast pace of change, particularly in the area of the application of technology to established areas of business, such as financial services, further research is needed to understand the strategic decision-making process and how it is related to an anticipation of potential customer needs. Implementing strategy in existing organisations is recognised as a highly complex and contentious area. At the organisational level the interaction of structure and culture in the change process suggests that far more cross-discipline research is required in extending our understanding. Finally, at the operational level, e-commerce and other new channels of communication may be bringing new areas of the organisation into direct contact with customers, for the first time. In this the application of the marketing concept would seem to be an essential element. Further development of a common framework for understanding customer management, that encompasses the whole range of contacts with the customer, would seem to be a necessary basis for achieving a more consistent approach. These areas for research and theoretical development are not only matters of academic interest. For large organisations making multi-million investments in technology and struggling to deal with the problem of how to deliver a coordinated and integrated service in a multi-channel environment they have very practical applications. .
References Achrol, R.S. and Kotler, P. (1999), ‘‘Marketing in the network economy’’, Journal of Marketing, Vol. 63 (Special issue), pp. 146-63. Ashkenas, R. (2000), ‘‘How to loosen organizational boundaries’’, Journal of Business Strategy, Vol. 21 No. 2, pp. 11-14. Baker, M.J. (1993), ‘‘Bank marketing – myth or reality?’’, International Journal of Bank Marketing, Vol. 11 No. 6, pp. 5-11. Berry, L.L. and Parasuraman, A. (1991), Marketing Services, The Free Press, New York, NY. Birch, D. and Young, M.A. (1997), ‘‘Financial services and the Internet – what does cyberspace mean for the financial services industry?’’, Internet Research:
Electronic Networking Applications and Policy, Vol. 7 No. 2, pp. 120-8. Boddy, D. and Boonstra, A. (2000), ‘‘Doing business on the Internet: managing the organisational issues’’, Journal of General Management, Vol. 26 No. 1, pp. 18-35. Day, G.S. (1994), ‘‘The capabilities of market-driven organizations’’, Journal of Marketing, Vol. 58 No. 4, pp. 37-52. Durkin, M. and Bennett, H. (1999), ‘‘Employee commitment in retail banking: identifying and exploring hidden dangers’’, The International Journal of Bank Marketing, Vol. 17 No. 3, pp. 124-37. Gro¨nroos, C. (1994), ‘‘From marketing mix to relationship marketing towards a paradigm shift in marketing’’, Management Decision, Vol. 32 No. 2, pp. 4-20. Gro¨nroos, C. (1996), ‘‘Relationship marketing: strategic and tactical implications’’, Management Decision, Vol. 34 No. 3, pp. 5-14. Hayes, R.H. and Abernathy, W.J. (1980), ‘‘Managing our way to economic decline’’, Harvard Business Review, Vol. 58, July-August, pp. 67-77. Hurley. R.F. and Hult, G.T.M. (1998), ‘‘Innovation, market orientation, and organizational learning: an integration and empirical examination’’, Journal of Marketing, Vol. 62 No. 3, pp. 42-54. Jaworski, B.J. and Kohli, A.K. (1993), ‘‘Market orientation: antecedents and consequences’’, Journal of Marketing, Vol. 57 No. 3, pp. 53-70. Jaworski, B.J. and Kohli, A.K. (1996), ‘‘Market orientation: review, refinement and roadmap’’, Journal of Market Focussed Management, Vol. I No. 2, pp. 119-35. Kohli, A.K. and Jaworski, B.J. (1990), ‘‘Market orientation: the construct, research propositions, and managerial implications’’, Journal of Marketing, Vol. 54 No. 2, pp. 1-18. Kondra, A.Z. and Hinings, C.R. (1998), ‘‘Organizational diversity and change in institutional theory’’, Organization Studies, Vol. 19 No. 5, pp. 743-67. Lafferty, B.A. and Hult, G.T.M. (2001), ‘‘A synthesis of contemporary market orientation perspectives’’, European Journal of Marketing, Vol. 35 No. 1, pp. 92-109. Miles, M.B. and Huberman, A.M. (1989), Qualitative Data Analysis, Sage Publications, Thousand Oaks, CA. Miles, R.E., Snow, C.C. and Miles, G. (2000), ‘‘The Future.org’’, Long Range Planning, Vol. 33, pp. 300-21. Mitchell, A. (2000), ‘‘In one to one marketing, which one comes first?’’, Interactive Marketing, pp. 354-68. Narver, J.C. and Slater, S.F. (1990), ‘‘The effect of a market orientation on business profitability’’, Journal of Marketing, Vol. 54 No. 4, pp. 20-35. Porter, M.E. (2001), ‘‘Strategy and the Internet’’, Harvard Business Review, March, pp. 63-78. Prahalad, C.K. and Hamel, G. (1990), ‘‘The core competence of the corporation’’, Harvard Business Review, May-June, pp. 79-91. Reicheld, F.F. and Sasser, W.E. (1990), ‘‘Zero defections: quality comes to services’’, Harvard Business Review, September-October, pp. 105-11. Robson, C. (1993), Real World Research, Blackwell, Oxford.
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Sharpe, G. (1999), ‘‘Realising the e-commerce opportunity in financial markets’’, Journal of Financial Services Marketing, Vol. 3 No. 4, pp. 373-9. Slater, S.F. and Narver, J.C. (1994), ‘‘Market orientation, customer value, and superior performance’’, Business Horizons, Vol. 37 No. 2, pp. 22-8. Slater, S.F. and Narver, J.C. (1995), ‘‘Market orientation and the learning organization’’, Journal of Marketing, Vol. 59 No. 3, pp. 63-74. Slater, S.F. and Narver, J.C. (1998), ‘‘Customer led and market oriented: let’s not confuse the two’’, Strategic Management Journal, Vol. 19 No. 10, pp. 1001-6.
Slater, S.F. and Narver, J.C. (1999), ‘‘Market-oriented is more than being customer led’’, Strategic Management Journal, Vol. 20 No. 12, pp. 1165-8. Smith, C. (1998), ‘‘The alchemy of change’’, The Banker, Vol. 148 No. 870, pp. 68-70. Stake, R.E. (1995), The Art of Case Study Research, Sage Publications, Thousand Oaks, CA. Tapp, A. (2000), Principles of Direct and Database Marketing, 2nd ed., Pearson Education, London. Winer, R.S. (2001), ‘‘A framework for customer relationship management’’, California Management Review, Summer, Vol. 43 No. 4, pp. 89-106.
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There’s no business like e-business Roger Palmer
The author Roger Palmer is a Lecturer, Marketing and Logistics Group, Cranfield School of Management, Cranfield, UK. Keywords Information technology, Innovation, Internet, Business development Abstract Seeks to address directly two assumptions that are inherent in current discussions concerning business and the role of technology. First, that business intelligence is, in fact, a feature of the business rather than the staff within that business. Businesses are simply entities with assets and capabilities but no cognitive processes, intelligence is a unique property of humans. Therefore there is a greater need to understand the social processes concerned in order to recognise this resource effectively. Second, that ‘‘e-business’’ is distinct from ‘‘business’’. Uses original research in the area of technological innovation as the basis for developing a wider argument with respect to e-business. Argues that what is currently referred to as e-business is a relatively poorly developed bundle of technologies that have yet to achieve full application in order to deliver optimum benefit. Also discusses the e-business phenomenon, the role of technology and the importance of a social perspective of business to give more insightful understanding of the interactions between these areas. Electronic access The research register for this journal is available at http://www.emeraldinsight.com/researchregisters The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/1352-2752.htm
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A paradigmatic perspective The use of the term e-business implies that it is distinct from business per se. There have been arguments proposed that would suggest that the underpinnings of e-business are of such significance that it can be regarded as discontinuously different. If this is so, then it could be argued that a new business paradigm has emerged. Kuhn (1970) first defined the term paradigm within the context of the natural sciences. Kuhn notes that the contrast between the current and new paradigm is so great that it can be regarded as revolutionary. He clearly uses the term within the context of scientific practice and notes two characteristics of a paradigm. First, that the new circumstances are unprecedented, sufficient to engender interest distinct from previous bodies of knowledge. Second, that it poses an agenda of problems and research to be addressed. This is underpinned by a common commitment to research practice resulting in a research tradition. The term paradigm has now become a regular part of jargon-laden, everyday business language. However further study of his work shows that he also proposes that a historiographic perspective is adopted and that the relationships between paradigms are viewed not from the remote position of hindsight, but by considering the relationship between paradigms within their historical context. It is this deeper understanding that assists in looking beyond observation and experience and to enter the scientist’s world of values and beliefs. The nature of science is such that, certainly in the major sciences, the universal laws and truths that result from scientific study are both rigorous and rigid and become entrenched by education and, eventually, the unquestioned acceptance by the community. Therefore a paradigm shift, in the sense that Kuhn originally defined the term, implied a fundamental change not just in the practice of science but in the underlying values and beliefs. We summarise this by referring, for example, to a ‘‘Copernican’’ or ‘‘Newtonian’’ shift. Perhaps we should stop and ask ourselves if the ill-defined distinctions between ‘‘e-business’’ and ‘‘business’’ conform to this higher order definition of a paradigm that Kuhn discusses? It is unlikely that we can identify e-business heroes of the
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stature of Copernicus or Newton, whose work impacted not just the domain of science, but religion as well for example. The recent reversal of fortunes of the dot.com businesses has graphically emphasised the fact that they, and e-business, operate within the same business environment and context as conventional bricks and mortar businesses (Porter, 2001). However, fundamental to this is the technology that has enabled the e-business phenomenon to take place. This paper goes on to discuss some of the issues associated with technology understood from the basis of qualitative research methodology, and applies this learning to the e-business phenomenon. The paper concludes by a social perspective of the phenomenon and develops guidelines for managerial practice.
The role of technology In modern-day society technology is ubiquitous, so much so that the benefits it delivers are commonplace and taken for granted. Everyday we experience running water, the telephone, the motor car and many other technology enabled facilities that were at one time unimaginable. However, it is not the technology as such that delivers these benefits, it is the application of that technology resulting in a product (Phillips, 2001). Hence a technology requires an application to turn it from an invention and into a product. Building on previous and current streams of research (Millier, 1993; Palmer, 2001), a series of depth interviews, focus groups and case studies were conducted. The respondents were middle/senior level managers working in technologically based business to business organisations. In particular the study was interested to consider the interaction of different disciplines within the organisation and how this contributed to the new product development process and the implications for the marketing of technologically based products (Millier and Palmer, 2000, 2001). The findings of this research are applied to an analysis of the e-business phenomenon. These studies found that the failure to understand these processes can result in the ‘‘myth of the big market’’, where a new
technology is seen as being revolutionary in its potential. However, as Millier and Palmer (2000) discuss, this apparent potential is often largely illusory. A new technology may have interesting features but perhaps no benefits, it is a device rather than a product. The innovation process develops applications for the technology and in this way the market size and hence potential becomes much more tightly defined (Cooper, 1993; Millier and Palmer, 2001). Confusion between what a technology is and what it does can result in a perception of unrealistically high potential. This can be further exaggerated by a lack of market based realism. The ubiquity of the potential applications for the technology serves to heighten further the expectations of the eventual delivery of benefits. Perhaps the magnitude of the potential applications is seen to be so great that they may be regarded as revolutionary. This is sometimes the claim made for e-business, and whilst the potential for technology enabled relationships within and between businesses is apparent, there is no change in underlying beliefs and values that would justify e-business being classed as a paradigm shift. Phillips (2001) explains that the application of technology can be considered in four ways (see Figure 1), which represent a gradation of change from evolutionary to revolutionary. He estimates the percentage of operational improvements in each category: . The application of technology to improve the efficiency of current operations (72 per cent). . The application of current technology to undertake new operations (18 per cent). Figure 1 Operational improvements by the application of technology
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The application of new technology to improve the efficiency of current operations (8 per cent). The use of new technology to undertake new operations (2 per cent).
His analysis suggests that most of the applications will be made in box 1 of the matrix, representing incremental improvement of current business activities. In the context of e-business the business to consumer sector (B2C) can be considered as secondary to the potential within the business to business (B2B) sector. For example one of the largest supermarket businesses in Europe, Tesco, also has the largest B2C e-business in Europe and one of the few profitable ones. However, despite this the revenue from this business is only approximately £300 million, from a total turnover of £23 billion. The opportunity to link B2B network members and co-ordinate their activities by the quicker and more effective transmission of information relating to stock, order administration etc. has considerable potential for cost saving and service improvement (Brewton and Kingspeed, 2001). The often quoted example of Wal-Mart and Procter & Gamble suggests that early and more immediate benefit can be gained by working through and interconnecting the supply chain (Christopher, 1998). Again Tesco offer a further example with their leadership in this context using TIES (Tesco information exchange system) to link with their suppliers (Financial Times, 1999). The company also leads a forum of retailers with the aim of standardising systems used by retailers and their suppliers. Whilst the introduction of standards can aid the adoption of new technologies and is of obvious importance with IT based products, paradoxically it can also slow the rate of future innovation (Phillips, 2001). Once a new standard has emerged then mental, financial and organisational commitment exists providing reasons not to innovate further. In addition both the apparent and real risk of technological innovation becomes more tangible. This is not unfounded as risk reduction, rather than the size of the opportunity for application, is a preferred aim with respect to technological innovation (Millier and Palmer, 2001). Hence new technology, rather than ongoing upgrades and
improvements, could be perceived as even less desirable. This suggests that new technology rather than offering optimistic potential can be seen as a downside risk. Millier and Palmer (2001) suggest that this is the area in which the organisation has least knowledge, and therefore runs the risk of exposure to unknown and unknowable problems. Christensen (1997) has identified the disruptive nature of some types of innovation and the consequent risk that attaches to them. The management of such technological innovation may require such a range of skills and capabilities on behalf of the organisation that it may be enabled in the context of its current technology, but disabled with respect to the disruptive technology. Whilst the new technology may therefore allow the organisation involved to consider entering box 4 in Figure 1, the company lacks competence and risk is high. For these reasons it is proposed that the role of technology is largely to ‘‘e-nable’’ the current activities of the firm, and in particular to seek efficiency improvements (Dutta and Biren, 2001). This represents the easiest and lowest risk approach to technological innovation, together with a good fit to organisational assets and capabilities and is consistent with current beliefs and values. It is only in exceptional circumstances that e-business can be considered as distinctly different from conventional business and to genuinely represent a new paradigm. The success of ‘‘clicks and mortar’’ firms and the convergence of e-businesses with conventional bricks and mortar enterprises (e.g. Amazon.com with Waterstones and Virgin Wine) demonstrates a shared business paradigm (Palmer, 2002).
Society and change Francis Bacon, a philosopher of science, proposed that the three most important inventions were gunpowder, the magnetic compass and printing (The Economist, 1999). Other technological innovations such as the steam engine, sanitation, electric light and power, oral contraception etc. also in their turn created significant changes in society. It is perhaps too early to place information technology within a historical context, but this degree of perspective should at least raise in our minds the question as to whether or not
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the information revolution, from a social perspective, is as dramatic as we might imagine. It is commonplace for us to comment on the rapid pace of change, the rate of technological innovation and the extraordinary pressures that this places on managers as they work in a 24/7 environment. Yet if we adopt the historical perspective advocated by Kuhn we may reflect that the pace of change may be of no greater magnitude than that experienced by previous generations. For example, the UK was the first economy to become industrialised. This was facilitated by government sanctioned structural changes to agriculture that enabled a switch from subsistence to cash farming. In the process this disenfranchised a large number of country dwellers who lost both their means of support and assets. Alongside this was the rapid industrial development of the manufacturing towns of central and northern England that attracted the newly available labour. Cities grew disproportionately, with the population fed by an efficient and technologically innovative agricultural industry (Strong, 1998). Despite the provision of employment the law of supply and demand operated brutally in the labour market, eventually resulting in social reform with the introduction of social support, the ‘‘poor laws’’, in the first half of the nineteenth century. The application of technology to both agriculture and industry in the period from the early eighteenth to the mid-nineteenth century created social change arguably of much greater magnitude than that experienced before or since. By contrast with other waves of new technology, IT has a number of distinctive features that make its potential to influence social change very significant. These features include: . Ubiquitous application. Information technology can be applied in many different ways by users irrespective of the type of business or role they perform. An e-mail system, access to the Internet and data processing capability is just as relevant for a hospital as for a component manufacturer. In fact it is highly likely that they use similar hardware and software and could communicate and exchange data quickly and easily should they need to.
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Dramatic rate of cost decline. The price of processing power, data storage and transmission has fallen from thousands of dollars per unit to a few cents. A ‘‘Furby’’ child’s toy contains more processing power than was used on the Apollo space programme. Universal ownership. The increasing utility and ever lower cost of hardware and software means that they are now almost universally adopted. However the availability of bandwidth to enable rapid communication and transmission of data remains problematic in many countries and is therefore a block to further development. Exponential growth. Continuous, rapid development and innovation means that the trends to cost reduction and capacity increase continue. The first semaphore style telegraph, using movable arms, had a capacity of 0.2bits per second. Fibre optic cable has a capacity of more than 10 billion bits per second. With surplus capacity in recently installed fibre optic networks apparent, due to recent further technology gains, this in turn is likely to stimulate more developments.
All of these factors suggest that the pace of change is going to at least be maintained and almost certainly increase due to endogenous growth. The world of leisure envisaged by the former British prime minister Harold Wilson, when discussing the implications of technology in 1963, seems a distant aspiration. The promise of the paperless office an oxymoronic joke. If gaining an historical understanding of the context of change in society in the Kuhnian sense is difficult or perhaps impossible to conceive, then envisioning the future is likely to be even more imprecise. Why is it important to understand the social and personal context of change? As has been suggested earlier, the major opportunity for the application of information technology – e-business – is in improving the efficiency of current business activities and to extend the management of information from within the organisation through the supply chain. This requires the development and management of relationships (Palmer, 2001). Such relationships need to be managed and maintained at a number of different levels:
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Industry. It is important that a company along with its competitors is engaged with the legal, social and political framework within which it operates. Business. Within a business to business context the company can be seen as the brand, and maintenance of reputation is an important contributor to credibility, trust and commitment. Product. The product represents the focus of the exchange, consistent and reliable supplies of appropriate quality are fundamental. Personal. It is not businesses that buy from each other, it is people. Appropriately motivated, committed people capable of developing empathetic and supportive relationships with customers play a vital part in the overall relationship.
The tendency of the IT specialist to, on occasions, refer to the people interacting with the hardware and software as ‘‘wetware’’ suggests that the social implications are not fully acknowledged, although the relevance of such social issues with respect to relationships is well understood (Iacobucci, 1996). If the speed with which change can be achieved is a source of competitive advantage (Quinn, 1993) then the rate of technological adoption will be influenced by the way in which it is understood and accepted by the staff concerned and their willingness and capacity to accept change.
Understanding technologically driven change
Figure 2 Diffusion of innovation
reasons for others in the market to purchase similar products. Moore asserts that the key to the mass market is to develop an appropriate application for the technology, enabling it to ‘‘cross the chasm’’ and develop market dominance as the accepted standard. Moore also noted that whilst applications are more appropriate to narrow, vertical markets, platforms provide greater opportunities for horizontal application across many markets spanning many niches. The more widely the standard is adopted the more compelling is the reason for new users to adopt it, and for established users to remain loyal. Products such as the ‘‘Word’’ program being used to prepare this document or the ubiquitous ‘‘Palm pilot’’ represent horizontal platforms, for example. For e-business to become ubiquitous, and in particular to facilitate B2B relationships through the supply chain, then common platforms readily accepted by purchasers are necessary. The TIES/Tesco example earlier represents an effort to achieve this but it is proposed that many more organisations are still at the earliest stages of the diffusion process, as represented by the comments of a senior executive of a FTSE 100 company (and who will therefore remain anonymous): We’ve wasted a ton of money on e-business. Where has it taken us? – Nowhere (Senior executive, world class manufacturing organisation, 7 November 2001).
The concept of diffusion of innovation has been applied to the high technology sector. Generically this framework consists of a bell shaped curve divided into five distinct parts: (1) innovators; (2) early adopters; (3) early majority; (4) late majority; and (5) laggards (see Figure 2). Moore (1991) emphasises the importance of moving from the early adopter to early majority stage as the product moves from being technically interesting to an application of choice and eventually establishing itself as the standard in the market place. Once a standard emerges then there are strong
He then went on to say that he envisaged the major opportunities as being cost reduction rather than value enhancement, suggesting that the main focus would lie in box 1 of Figure 1, incremental efficiency improvements to current business operations. This would suggest that the technology needs to develop considerably in order to achieve application and/or platform status, and in a B2B context to enable operational efficiency to be improved by the greater sharing of information and consequent improvement in efficiency.
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The social context of technologically driven change The significance of values and beliefs has already been mentioned with respect to the discussions concerning the concept of the paradigm. Rogers (1983) first proposed the concept of diffusion of innovation. He noted a number of important attributes with respect to innovation: the innovation itself, whereby a technology is applied to provide purpose and use; the importance of communication and the fact that this takes place over time within a social system. And then using examples drawn from the field of sociology he comments particularly on the importance of being clientoriented rather than innovation-oriented. In order for the diffusion process to occur the innovation has to be communicated, the focus is therefore to the social context rather than to the innovation itself. Within a social system there are established norms, the patterns of behaviour that are acceptable within that society. Rogers proposes that communication is much more effective between homophilous individuals who share these similarities. For an innovation to gain widespread acceptance and become a standard then it requires communication amongst members of a social system, who by definition have an established standard in place, or have yet to recognise or accept the need for one. By attempting to communicate in innovationoriented or technical terms represents a failure to understand the underlying social norms. Due to varying levels of acceptance by members of a social system the time for an innovation to diffuse depends on the extent to which it is accepted. This is an important factor underlying the bell shaped ‘‘diffusion of innovation’’ curve. Continued failure to understand and empathise with the social norms may in fact mean that the innovation never crosses the chasm to become accepted within the society. Genetically modified foods in Western Europe may represent such an innovation.
Discussion and conclusions The term e-business is unnecessary, inappropriate and unhelpful. To regard this emerging bundle of technology as an alternative business paradigm is to compound
the error. The use of such terms exaggerates the contrast between current business norms as well as amplifying the potential for innovation. Far from providing convincing evidence of the benefits of the new technology, this helps to promote the risk and uncertainty of the potential new standard compared to the security provided by the current commitment to existing standards that form the status quo. Earlier qualitative work developed within the context of bringing new technologies to market has provided a useful framework for generalisation with a larger unit of analysis. The conversation between heterophilous groups is largely ineffective (Rogers, 1983). Whilst messages may be exchanged effective communication and understanding is much less likely to occur. This phenomenon has been recognised in a comparable field – the gap between practitioners and academics (Rynes et al., 2001). They comment that: Attempts to transfer explicit knowledge across boundaries are likely to fall on deaf ears . . . in the absence of effective intergroup socialisation.
Rather than exaggerating the differences between groups and their social norms, attempts should be made to understand the social context in which innovation occurs. Drawing from the work of Rogers, Rynes et al. and others, appropriate practices would include: . Develop an understanding of the social norms making them explicit, giving this equal if not greater importance in the innovation process. . Regard tensions in relationships as a positive basis for interaction demonstrating the opportunity to share views, rather than seeing communication as a one-way process of technology/skills transfer. . Social relationships are an important foundation for the development of shared meanings and language. . Person to person interaction and facilitation of the process. . Avoid technical terms and language that exaggerate differences, develop a mutually acceptable dictionary of terms through dialogue. . Accept assumptions, complexity, prevarication, misunderstanding, discontinuity and indeterminacy as normal rather than exceptional. Seek to resolve during rather than before the discussion.
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These guidelines form a useful basis for managerial practice and provide guidance for further research to substantiate the generalisation of the original research work.
References Brewton, T. and Kingspeed, K. (2001), ‘‘Getting the most from your B2B enabled supply chain’’, Journal of Business Strategy, Vol. 22, January, pp. 28-31. Christensen, C.M. (1997), The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, Harvard Business School Press, Boston, MA. Christopher, M.G. (1998), Logistics and Supply Chain Management, Financial Times Pearson, London. Cooper, R. C. (1993), Winning at New Products, Addison-Wesley, Reading, MA. Dutta, S. and Biren, B. (2001), ‘‘Business transformation in the Internet: results from the 2000 study’’, European Management Journal, Vol. 19 No. 5, pp. 449-62. (The) Economist (1999), ‘‘Bang bang, you’re dead’’, The Economist, 31 December, p. 122. Financial Times (1999), ‘‘Collaboration in the supply chain, Supplement, Financial Times, Summer. Iacobucci, D. (Ed.) (1996), Markets as Networks, Sage, Thousand Oaks, CA. Kuhn, T.S. (1970), The Structure of Scientific Revolutions, Chicago University Press, Chicago, IL.
Millier, P. (1993), ‘‘L’union chaotique du marketing et de la technologie dans les projets de recherche et developpement’’, these de doctorate NR Universite, Jean Moulin Lyon III, February. Millier, P. and Palmer, R. (2000), Nuts, Bolts and Magnetrons – A Practical Guide to Industrial Marketing, John Wiley & Sons, Chichester. Millier, P. and Palmer, R. (2001), ‘‘Turning innovation into profit’’, Journal of Strategic Change, Vol. 10, pp. 87-93. Moore, G. (1991), Crossing the Chasm, HarperCollins, New York, NY. Palmer, R.A. (2001), ‘‘A model of relationship marketing in maturity’’, PhD thesis, Cranfield School of Management, Cranfield, September. Palmer, R.A. (2002), ‘‘Bricks, clicks, mortar and Porter’’, Marketing Intelligence & Planning, Vol. 20 No. 1. Phillips, F.Y. (2001), Market-Oriented Technology Management, Springer, Berlin. Porter, M. (2001), ‘‘Strategy and the Internet’’, Harvard Business Review, March, pp. 63-78. Quinn, J. (1993), The Intelligent Enterprise, Free Press, New York, NY. Rogers, E.M. (1983), Diffusion of Innovations, Free Press, London. Rynes, S.L., Bartunek, J.M. and Daft, R.L. (2001), ‘‘Across the great divide: knowledge creation between practitioners and academics’’, Academy of Management Journal, Vol. 44 No. 2, pp. 340-55. Strong, R. (1998), The Story of Britain, Pimlico, London.
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Introduction
Reflections on customer knowledge management in e-business Jennifer E. Rowley
The author Jennifer E. Rowley is Head, School of Management and Social Sciences, Edge Hill College of Higher Education, Ormskirk, UK. Keywords Customers, Knowledge management, Information technology, Business development, Strategy, Quality Abstract Customer knowledge is an important asset for all businesses. The rhetoric of e-business emphasises the opportunities for knowing customers in the digital economy. This article sets the context with a brief summary of the key characteristics of the knowledge management paradigm. This is used as a platform for the themes that form the core of this article: defining the knowledge that the organisation requires; knowledge tools and the relationships between data, information and knowledge; the role of customer communities in CKM; bounding and structuring organisational knowledge communities; ownership of knowledge assets; integrating customer knowledge across channels; and comparing customer knowledge management with customer relationship management. The overarching message of the article is that customer knowledge management is not just about data. Organisations need to develop strategies that enable them to capitalise on the dynamic integration of systems and people. Electronic access The research register for this journal is available at http://www.emeraldinsight.com/researchregisters The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/1352-2752.htm Qualitative Market Research: An International Journal Volume 5 . Number 4 . 2002 . pp. 268–280 # MCB UP Limited . ISSN 1352-2752 DOI 10.1108/13522750210443227
Customer knowledge is an important asset for all businesses. It is at the origin of most improvements in customer value (Novo, 2001). Vendors of customer relationship management and business intelligence solutions claim that the data collected at the customer interface can be translated into business intelligence and customer knowledge. Yet others remind us that 80 per cent of CRM implementations fail, and academics express scepticism about the viability of interpreting traffic data in such a way that it generates useful insights into customer and user behaviour. The rhetoric of e-business emphasises the opportunities for knowing customers in the digital economy. Traditionally market research, marketing information systems, database marketing, business intelligence and direct marketing have been concerned with the collection, analysis and management of customer data. Services marketing and marketing communication have been concerned with the relationship with the customer and its opportunities for gathering and promoting customer knowledge. E-business is a channel in which the service experience and data gathering about the customer are closely coupled. In e-business computer mediation of the interface or relationship between the customer and the organisation or its service agents means that every transaction, and every bit of online behaviour and dialogue can be recorded. Appropriately analysed these data hold promise as a rich source of business intelligence. But does the sacrifice implicit in IT mediation of person-to-person interaction impoverish or relocate the customer knowledge base, and thereby reduce the opportunities for using that knowledge base to strengthen relationships with customers? This article sets the context with a brief summary of the key characteristics of the knowledge management paradigm. This is used as a platform for the themes that form the core of this article: . defining the knowledge that the organisation requires; . knowledge tools and the relationships between data, information and knowledge; . the role of customer communities in CKM;
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bounding and structuring organisational knowledge communities; ownership of knowledge assets; integrating customer knowledge across channels; and comparing customer knowledge management with customer relationship management.
What is customer knowledge management? Knowledge management is concerned with the management and exploitation of corporate knowledge. It is a holistic philosophy that drives organisations to optimise the utilisation of their knowledge resources. These knowledge resources include both explicit knowledge that might be recorded in databases and other archives, and implicit knowledge that is held in workers’ minds, and which is embedded in the fulfilment of their job role. The focus of this article is customer knowledge management. Customer knowledge is viewed as an important asset for e-business. Customer knowledge management is concerned with the management and exploitation of customer knowledge. There are two types of customer knowledge: (1) Knowledge about customers, which may include knowledge about potential customers and customer segments as well as knowledge about individual customers. (2) Knowledge possessed by customers, about product ranges, such as compatibility between computer hardware components, or the efficacy of specific drugs in treating complaints, and about the wider context and marketplace into which products and services are delivered. The focus of this article is on the first of these, although the second can not be ignored in contexts such as online communities and value creation. Knowledge management is a paradigm that has largely been explored in the context of knowledge sharing within organisations. The much heralded opporunities for interactivity, the collection of customer data, and customer relationship management coupled with the emergence of customer relationship management (CRM), knowledge
management (KM) and enterprise resource planning (ERP) software solutions urge the exploration of the applicability of the knowledge management paradigm. Since one of the core concepts of knowledge management is that of the organisation as a social institution (Birkinshaw, 2001), this requires a careful analysis of the boundaries of the organisation, both in the context of the identification of members of any knowledge communities, and also in terms of the knowledge base that the organisation needs to promote its core purposes. Marketing disciplines such as business intelligence, direct marketing, database marketing and marketing research all need conceptual frameworks that support the development of an appreciation of the relationship between data and knowledge, and the interaction between the processes of managing customer knowledge and managing customer relationships. The nature of knowledge management, and the related discipline of organisational learning has been discussed by many authors (e.g. Pedler et al., 1991; Choo, 1996; Davenport and Prusak, 1998; Nonaka, 1994, 1995, 1996). For the purposes of this article Davenport et al.’s (1998) model of the key dimensions of knowledge management (and by analogy customer knowledge management) is used. This model features four interdependent strands: knowledge repositories, knowledge tools, knowledge cultures and the valuing of knowledge as an asset: (1) Knowledge repositories – store both knowledge and information, often in documentary form. A common feature is ‘‘added value’’ through categorisation and pruning. Repositories can fall into three categories: . those which include external knowledge, such as competitive intelligence; . those that include structured internal knowledge, such as research reports, and product oriented marketing material as techniques and methods; and . those that embrace informal, internal or tacit knowledge, such as discussion databases that store ‘‘know how’’. (2) Knowledge access and knowledge tools – which provide access to knowledge or facilitate its transfer amongst individuals;
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here the emphasis is on those tools and technologies that provide connectivity, access and transfer, such as video conferencing systems, document scanning and sharing tools and telecommunications networks are central (Ruggles, 1997). There may be an attempt to create a repository of such knowledge, or the emphasis may rather be on access to the individuals that hold or can provide the knowledge. Identified expert networks are often part of such projects. Success with improved knowledge access is not achieved without addressing organisational norms and values and confrontation of the relationship between knowledge and power. (3) Knowledge cultures – so that the culture and other aspects of the organisational environment are conducive to more effective knowledge creation, transfer and use (Blackler, 1995; Mullin, 1996). This involves tackling organisational norms and values as they relate to knowledge (Choo, 1996). A range of different initiatives might fall into this category. These include: . increasing awareness of the knowledge embedded in client relationships and engagements, which, if shared, could enhance organisational performance; . focussing on knowledge-related employee behaviour with, for example, contributions to the organisation’s structured knowledge base attracting significant rewards and bonuses; and . implementing decision audit programs in order to assess whether and how employees were applying knowledge in key decisions. In general this aspect of knowledge management is closely linked with specific types of virtual organisations and virtual teams, and the way in which such teams can be encouraged to build trust and share knowledge, sometimes across national boundaries. (4) Knowledge assets – and the recognition of the value of knowledge to an organisation. Assets, such as technologies that are sold under licence or have potential value, customer databases and detailed parts catalogues are typical of
companies’ intangible assets to which value can be assigned. Assessments of other knowledge can be made on the basis of knowledge that increases revenue and reduces costs. This brief review of the key strands of knowledge management serves to emphasise that knowledge management is multifaceted and extends beyond the collection of data, and their translation into knowledge repositories. In particular, knowledge management is concerned with both people and systems, and it is important to understand the link between knowledge management and organisational learning (Rowley, 2001). On the other hand, knowledge management remains both conceptually contested (Beamish and Armistead, 2001) and difficult to implement or embed. Birkinshaw (2001) argues that this is because changing an organisation’s knowledge management system involves fundamental changes to people’s behaviour, which typically takes many years to bring about. Defining the knowledge that the organisation requires Before being blinded by the dazzling array of data that can be generated from e-business, it is useful to identify the different contexts in which customer knowledge might be used. Rowley and Slack (2001) propose a taxonomy for categorising consumer behaviour research in e-business. This taxonomy offers a perspective on the different types of knowledge that can be gathered about customers, and the contexts in which this knowledge can be used. Rowley and Slack (2001) identify four different categories of consumer behaviour research as shown in Table I: (1) cognition; (2) customisation; (3) cumulation; and (4) context, All of these levels engage with customer knowledge, but the customer knowledge that is required and the questions that are answered differ. At the cognition level, knowledge of customer behaviour is typically used to inform the design of Web sites, and interfaces. At the customisation level, customer knowledge is collected about individual customers to develop customer
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Table I Applications of customer knowledge Category of research
Focus of application of customer knowledge
Cognition
Customer behaviour in relation to Web sites and marketing communication, as the basis for the evaluation of the effectiveness of Web sites and marketing communication Development of customer profiles as a basis for customisation and the development of one-to-one relationships with customers Trends in customer behaviour and other aspects of market analysis that inform the strategy directions of the e-business The relationship between consumer behaviour in the traditional and e-marketplaces The effect of online consumer behaviour on other channels, and vice versa
Customisation Cumulation Context
profiles, and to tailor Web sites and product offerings to suit specific customers, or groups of customers. At the cumulation level the concern is less with the individual customer and more with profiles of customer behaviour in general, which offer insights into strategic business directions. At this level customer knowledge is used to evaluate performance against objectives, and to inform the review of those objectives. The category content lifts the focus to the relationship between e-business and other business channels. This requires comparative customer knowledge from across different business channels. There are a number of questions about their customers to which businesses seek answers. Some of these questions can be posed at the individual customer level, the market segment level, and at the level of the business’s overall customer profile. They determine the kinds of customer knowledge that organisations seek. Questions include: . Who are our customers? . Who and where are potential customers? . What benefits do customers expect? . What are customers’ attitudes and behaviours? . How can the strengths of customer relationships be measured? . How can customer value and profitability be projected and enhanced? . How can customers be grouped into segments to support market analysis and communication? . Who will be our customers five years on? . How will customer behaviour change over the next five years? Another level of complexity arises from the dynamic nature of, not only customer communities and relationships, but also of business objectives and the marketing context and environment. These questions must be asked repeatedly, and at appropriate intervals. In general customer knowledge is an important element of the feedback loop that
influences innovation and design and evolution of the market offering of e-businesses. Such knowledge is the bedrock of diverse disciplines such as Web site (or more generally human computer interaction) design, service quality, market research, evaluation of the effectiveness of marketing communication, direct marketing, and market segmentation, and marketing and business strategy and performance. The challenge is for the different business departments responsible for these various functions to develop a coherent knowledge management strategy and resource that can support a myriad of different business processes. Knowledge tools and the relationships between data, information and knowledge Beamish and Armistead (2001) argue that technological developments have provoked a reinstitution of the debate around the interpretation of knowledge. Their definitions of data, information and knowledge are used here: . data = points of reality; . information = organised data; and . knowledge = information, context and experience. There is a general agreement that these three are linked in a pyramid, which has data at its base, information in the middle, and knowledge at its pinnacle. Some would also add wisdom above knowledge in this pyramid. Customer data can be collected from registration, during transactions, as customer feedback, and through cookies and Web server logs. There is no shortage of data in e-business, but there is disagreement as to the potential of such data (Allen et al., 1998; Peppers and Rogers, 1997; Nicholas et al., 2000). In addition, it is important to differentiate between the data that come from these different sources. Server log data give a picture of visits, whereas registration data, for instance,
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provide personal details. Equally important, but perhaps less obvious is the fact that these different sources of data relate to different groups of people. Whilst it is tempting to assume that in such a data-rich environment the necessary data to underpin information and knowledge creation must be available, winging to the giddy height of knowledge management without first securing effective data management is never appropriate. The next challenge is to convert customer data into knowledge. Intelligent agents (human or computer-based) may use this knowledge to personalise the product offering to individual customers. Managers may use the information to inform the future development of products and product portfolios, and marketing strategies. Senior managers may use the information to assess the overall performance of the business, and to identify new market segments and market directions. These different uses suggest that there are different ways in which data need to be converted into information, before they can be integrated with information from other sources, including other parts of the business, and competitive intelligence. These are not new problems, but do demand further consideration of the way in which data are fed into knowledge repositories, and how they are structured and analysed. Knowledge management tools are a facilitating factor in the human processes associated with knowledge management. Internets, intranets and other groupware are seen as facilitating information storage and sharing. Data warehousing and data mining techniques can be helpful in structuring data, and may be used as the basis for database marketing techniques. Such databases are at the core of a marketing information system, and marketing decision support systems that can provide information to support decision making. CRM systems use rich databanks of customer information to manage the relationship with customers (Newell, 2000). Some gurus argue that CRM is a philosophy, a strategy or a process that puts the customer at the design point (Sims, 2000). This may involve the customisation of marketing communications or the customisation of the product on offer. CRM systems support all stages of the interaction with the customer from order, through delivery to after-sales service. CRM systems cover online ordering, e-mail, knowledge bases that can be used to
generate customer profiles, and to personalise service, the generation of automatic response to e-mail, and automatic help. A list of functions that might feature in an eCRM application are: . e-commerce; . channel automation software; . collaborative commerce software; . online storefront; . multichannel customer management; . e-service; . e-mail response management; . guided selling and buying; . product configuration; . order management; . electronic agents; . catalogue management; . content management; . e-customer; . fulfilment software; and . self-service. It might be argued that such systems have an embedded process that translates data into knowledge and thus generates customer value, without human intervention. In general, data are not information and they are certainly not knowledge. Data need to be processed to convert them into information or knowledge such that they can fuel organisational learning and change organisational behaviour. Data can play a part in the construction of knowledge within an organisation, but there must also be other social contributions to the knowledge construction process. According to Demerest (1997) knowledge management also involves knowledge dissemination, knowledge use and knowledge embodiment. This final stage is concerned with the knowledge being seen as having economic use in regard to organisational outputs. A number of other authors have emphasised the social construction of knowledge (Choo, 1996). This might lead us to explore the context for such social processes within e-businesses and in such a way that customers act as co-producers. One arena for such social processes in the context of customer knowledge management is an online customer community.
The role of customer communities in CKM Online communities are viewed as one approach to building successful business
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models. Communities ensure an audience and a marketplace for e-businesses (Hagel, 1999; Kozinets, 1999; Hagel and Armstrong, 1997). Those businesses that control popular online communities are in a position to dominate business transactions over the Internet. Hagel and Armstrong define virtual communities as computer mediated space where there is an integration of content and communication with an emphasis on member generated content. Other defining characteristics of online communities are a distinctive focus as to membership, the integration of content and communication, and a choice of competing vendor offers. In order to be attractive to all stakeholders, online communities need to create value for each of their stakeholders. At the heart of each of these different approaches to creating value is knowledge exchange. Value can be created through: . Community existence. From a business perspective a community brings together consumers with specific demographics and interests. This presents opportunities for transacting business and communicating messages about products and services that are of interest to consumers, and which marketers and advertisers value and are consequently willing to pay. Value creation may also arise from the marketing information that is generated by the existence of a community. Typically, such information may include the demographics and psychographics of members, their attitudes and beliefs about products, service and issues, their behaviour in relation to business transactions within communities, and information on the way in which they interact. . Content contribution and co-production. Members’ input to the community consists of information content in the form of comments, feedback, elaborating their attitudes and beliefs and information needs. Members contribute knowledge that the business does not have about the efficacy of specific products. This knowledge may go beyond their endorsement to information about the context in which services or product are used, such as product compatibility, repair and maintenance options, and other knowledge about the context in which products and services can be used.
Community organisers may also contribute their own content. The literature on knowledge management emphasises the role of teams, and virtual teams in sharing knowledge across global enterprises. Trust, commitment, and culture are key issues in understanding and developing such teams. Online consumer communities differ from virtual teams within organisations because members are not under any contractual obligation to participate or contribute. The effectiveness of online communities is then crucially dependent upon the way in which the online community is managed, and the nature of relationships in online communities. In the context of knowledge management, online communities pose two challenges for businesses: (1) How best to capitalise on the data, information and knowledge that is shared within the community. (2) How to manage the community and define a community culture that maximises membership, engagement and knowledge sharing. Rising to this second challenge requires an understanding of relationships in online communities. These include B2C and C2B relationships as well as C2C relationships. Issues of loyalty and commitment and relationships lifecycles need to be considered. Not all organisations will have a community, or even a stable customer base. Customer profiles, relationships and communities in these contexts do not provide a stable basis for customer knowledge management. The vision of a dedicated online community is not realistic for every organisation. Successful online communities are likely to cluster around hobbies, professions and other topics that excite interest (politics, health, cars, investments and houses). Some organisations may have to piggyback onto communities managed by other organisations (Barnatt, 1998). This may involve collaboration with other organisations in the same sector to create a site with a wide range of industry provision (possibly through an industry portal), and offer the customer a wide range of products, and assistance in choosing between them. Alternatively organisations may piggyback on existing virtual communities, where member interest is really sustained by another organisation. Such communities may be information
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dissemination communities, communities associated with portals, search engines and other cybermediaries, communities of interest, shop-talk communities, or professional collaboration communities. Both of these models involve relationships with other businesses, and customer commitment to a virtual community that is not the community that is directly associated with the business that is seeking to function in the e-marketplace. The preceding paragraphs emphasise the role of knowledge in community dynamics and also the value of customer communities. They suggest that an enhanced understanding of CKM in such communities would be beneficial. But the issue of the membership of these communities has not been addressed. What is the basis of membership of such a community? The narrowest definition of the membership of online communities derives from the contexts of communities of interest, in which visitors who are registered to participate online, in bulletin boards, online forums, and other community spaces are deemed to constitute the membership of the community. It is important to remember that even under this definition there are leaders, followers, and non-contributors (lurkers). Most online businesses would seek to define their online community somewhat more broadly and might see its boundaries as being defined by one or more of those customers who: . had undertaken a transaction, or maybe a specified number of transactions; . had visited the Web site, or made visits to the Web site on a regular basis; and . are registered as members of an online (or offline?) loyalty scheme. Most businesses are also interested in establishing relationships with potential and previous customers. Further, registered customers may represent a family, club or social group; other members of the customer community remain invisible to the organisation. All of these points serve to illustrate that defining the boundaries of a customer community is far from straightforward.
Building and structuring organisational knowledge communities This theme reflects on the range of knowledge communities that an organisation needs to manage, and discusses the need for interaction between those communities. In addition to customer communities, organisations need to consider the knowledge management activities of their employees, other organisations with which they have alliances, and virtual organisations. E-business, in particular, spawns a wide range of partnerships and alliances, many of which are virtual and volatile. Under the knowledge management paradigm, optimal management of knowledge assets implies consideration of the knowledge cultures, knowledge tools and knowledge repositories of these many diverse groups. This is likely to lead to a networked marketplace in which organisations vie with each other for network power in terms not only of market share and alliances, but also in terms of dominant knowledge cultures, and the opportunity to capitalise on knowledge assets. The previous theme illustrated some aspects of knowledge dynamics within online customer communities. Organisations also benefit from other knowledge communities. Knowledge management has, for example, traditionally focussed on the implicit and tacit knowledge that is embedded in both the employees in the organisation, and the policies, practices, culture and values of the organisation. It has also acknowledged that within an organisation there is typically a collection of sub-communities, or communities of interest. These communities of interest may be defined by functional organisational boundaries, or by professional allegiances. In international organisations, they may span many countries and national cultures, and much of their communication may be facilitated through IT-based knowledge management tools. The challenge has always been to facilitate, manage and achieve knowledge sharing both within these communities of interest and between communities. The addition of customers to the wider organisational community (and this is the implication of the concept of the customer as co-producer) poses the question of how organisations should arrange for the customer community, and its subcommunities to interact with those
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communities of interest that have traditionally been regarded as the employees of the organisation. Should knowledge officers be charged with acting as intermediaries? Is their role two-way, in the sense that they both manage employees’ access to customer knowledge, and customers’ access to employee knowledge? The answers to these questions might depend upon the nature of the relationship between the organisation and its customers. B2B relationships are likely to require a different approach to B2C relationships. Alliances are the order of the day in e-business. A typical range of e-business alliances are: . Marketing partnerships – Web sites designed to drive traffics to the business’s Web site. . Content partnerships – with news and data providers. . Service partnerships – to allow the e-business to offer services to clients. . Technology partnerships – to provide the technological platform for the e-business enterprise. . Business partners – to support business activity and delivery of goods and services. . Research and development partnerships – to support continuing innovation. Such networks of alliances are rarely stable, and need to be reconfigured to meet the demands of a fast moving marketplace. Arguably the most interesting question associated with knowledge access in the e-business environment is the extent to which suppliers and customers are allowed access to the knowledge assets within the organisation’s extranet. Indeed, using data extracted from this extranet, it is possible that ‘‘partners’’ may be able to construct their own market intelligence, particularly if they have access to the knowledge assets, or even just data on the business processes of more than one partner. In this way, each organisation would be in a position to compile a unique profile of their industry, and the strengths and weaknesses of its partners, and make deductions about their likely future performance. Organisations need to covet their knowledge assets, and heighten their awareness of their commercial value. Even access to such simple devices as price databases, or delivery schedules might give organisational customers or suppliers an
insight into trends in company performance that could have dangerous consequences for the future of an organisation. Virtual organisations are viewed as one model for alliances in fast moving and turbulent business environments (Ashkenas et al., 1998). Virtual organisations need to feature speed, flexibility and fluidity (Byrne, 1993; Davidow and Malone, 1992; Introna, 2001), sometimes described as agility (Metes et al., 1998). Internet technologies make it easier to form and re-form alliances, and to create blurred boundaries for the organisation. Typically a virtual organisation is a temporary network of independent companies, including suppliers, customers and sometimes erstwhile competitors, linked by information technology to share skills, costs and access to one another’s markets. Each partner contributes complementary resources that reflect its strengths, and determine its role in the virtual organisation (Turban et al., 1999; Byrne, 1993). Such organisations must have a shared vision, trust, shared risk and mutual benefits (Wiesenfeld et al., 1998; Freidman, 1998). Any of these factors can change and the opportunism that led to the formation of the virtual organisation may lead to its demise. Volatile organisational structures, such as are encountered in virtual organisations and in other dynamic contexts, pose a number of challenges for knowledge management, particularly when in a knowledge-based economy, knowledge assets, and customer relationships may be one of the key assets that contributing members bring to the virtual organisation. These include: . Ensuring that the technology infrastructure can provide access to knowledge repositories, and, in particular dealing with both: legacy from the pre-alliance era; and, the aftermath of the alliance. Knowledge management can only be implemented fully with intercommunicating systems and integration between e-business interfaces as shown to customers, and the information systems used for business processes. For some organisations this will require a major re-configuration of systems, and associated information systems strategy. Member organisations may be cautious about significant investment in IT infrastructure if the future of the virtual organisation is
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uncertain. The interoperability of Internet technologies may make things easier, but there are still likely to be a range of interpretability issues. The formulation of policies on knowledge sharing between member organisations, and the reservation of access to sole use. Defining the boundaries, responsibilities and ownership in respect of knowledge repositories. Creating a knowledge-based culture, that both encourages the development of the swift trust between members that is essential to successful knowledge sharing, whilst encouraging a perspective on the valuing of knowledge assets. Managing knowledge assets on the demise of the virtual organisation.
Ownership of knowledge assets The topic of knowledge assets raises two key issues: (1) What are knowledge assets? (2) Who owns knowledge assets? In many ways discussion of knowledge assets leads on from discussion of the boundaries and membership of online communities. If knowledge is to be viewed as a key driver for business success the value placed on an organisation in an alliance, merger or de-merger situation should reflect the value of its knowledge assets, and indeed they need to be expressed in tangible if not monetary terms. Furthermore, those assets, arguably in a different way from other business assets form the basis for the future of the business. They are the platform for innovation, market responsiveness and strategic development. Traditionally, in pursuit of knowledge assets, businesses have sought to capture individuals or teams who are seen to be rich in embedded knowledge. On other occasions, knowledge assets such as brand equity or intellectual property such as licences and patents have been viewed as knowledge assets. In e-business, if customers are a valuable asset, then it is not only customer databases that can be exchanged, shared, transferred and interrogated, but the more valuable and dynamic quality is the opportunity to establish a relationship with customers, which can form the basis for the sharing of customer knowledge. Defining knowledge assets is no
easy task, but in understanding the value of a loyal customer base it is important to look beyond a model of customer lifetime value that is entirely transaction based. Controlling and exploiting knowledge in online communities begs a big question, relating to the ownership of the knowledge. This question can also be posed in relation to most types of customer knowledge. In Europe, data protection legislation sets the context for the control of the use of personal information. Beyond the legislative framework, there is evidence to suggest that customers are sensitive to intrusion on their privacy. In particular, customisation that demonstrates that the business knows ‘‘too much’’ about a customer can provoke a negative reaction and may lead to customer withdrawal from the relationship. To create a successful ongoing commercial relationship with customers it is necessary to exercise sensitivity in the collection, and utilisation of customer knowledge. Customer charters and privacy policies are common approaches to reassuring customers. Privacy and security are common customer concerns. The bond of trust, especially in the depersonalised setting of the Internet, is very fragile. Trust is the commodity that makes people and organisations comfortable and prepared to do business with one another. Trust builds with transactions, and interactions (Reichheld and Schefter, 2000; Oliver, 1999), but a key element of trust relates to how the business uses customer information and knowledge (Jarvenpaa et al., 1998; Stough et al., 2000). Respect for the customer knowledge that businesses gather can be cultivated by adhering to the points below: (1) Tell people how you are using their information. (2) Allow people to view the information that you are keeping on them. (3) Allow people to change this information. (4) Tell people how you will use the information and with whom you will share it. (5) Embed all of the above points in a privacy policy, which is available on the Web site. (6) Use ‘‘branded trust’’ by registering with a trust agency, such as Truste, and display their trustmark on the Web site. Some authors argue that in the online environment the customer has power, since they can exercise some control over the data
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and information that they provide about themselves, and indeed decide whether to engage in the relationship in the first place. This position however needs to be balanced against the power that derives from the customer knowledge and business intelligence that can be compiled for millions of Web site visits and transactions. Does a customer ever have any more than benign trust in an organisation that has so much more knowledge than they can ever expect to access, digest or analyse? Trust and loyalty are interwoven. There is no loyalty without trust, yet some commitment is necessary from the consumer in order that they engage with the business and exercise the business offering. In conclusion, there is a dynamic relationship between knowledge ownership and power, that needs to be mediated by effective management of issues that affect customer trust and willingness to provide accurate personal data, information and knowledge. The dynamic nature of both customer data and customer knowledge may actually suggest that the optimal solution is not for organisations to seek to build and glory in their customer knowledge assets, but rather to allow customers to take responsibility for their own knowledge. Admittedly this approach has more merits at the level of knowledge of the individual customer than where profiling and aggregated data or knowledge has been created, but it is always important to remember that data and knowledge are dynamic. Customers change their characteristics, including addresses, behaviour and preferences, but as they learn they also develop a richer implicit knowledge resource. The dynamic nature of both knowledge about customers, and the knowledge that customers possess suggests that the management of customer knowledge requires innovative approaches. Such approaches might acknowledge that where the customer owns the knowledge, and the knowledge is embedded in the ‘‘way in which the customer works’’ the way forward is to work with and through customers in ways that capitalise on customer knowledge. These knowledge management models avoid the need to garner or possess customer knowledge. Prahalad and Ramaswamy (2000) describe this process as co-opting customer competence. Concepts such as customer involvement with the organisation, and
self-service also assume that customers are required to learn, or to develop specific competences. The development of these competences may also have value for customers in other avenues of their life (Moon and Frei, 2000; Nel et al., 1999). One of the most fascinating exploitations of real world communities through the Internet is viral marketing, as practised for example by Hotmail. Hotmail has become the world’s largest Web-based e-mail service since its launch with a spectacular fast growth rate for its subscriber base. When a subscriber sends an e-mail to friends or associates, a short marketing promotion is inserted at the bottom of every e-mail. Viral marketing allows Hotmail to acquire customers at no cost or effort, and capitalises on existing networks of subscribers. Through this mechanism, customer profiles become less necessary, and the business capitalises upon customers’ own knowledge. What other approaches capitalise on and exploit customers’ knowledge, and thereby avoid the need to collect mammoth knowledge repositories that can be difficult to interpret and analyse? Integrating customer knowledge across channels Integration of customer knowledge across all channels through which the customer interacts with the business is important in order to ensure that the customer has the same response and the relationship can be continued, regardless of the channel of interaction. In addition to annoying the customer, absence of an appropriate level of integration exposes the business to unnecessary overheads, and missed opportunities. Consistency when addressing the customer is important in the contexts of: customer data, business rules and company and product information. The extent and nature of integration of customer knowledge management processes across e-business and other business channels depends significantly upon the way in which knowledge-based activities are embedded in business operations and transactions. Here we take the example of a retailer with a loyalty card system. Traditional retail point-of-sale systems allowed retailers to maintain a record of the sales levels of specific products, which informed purchasing further back in the supply chain, and helped to ensure effective
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control of stock levels. Loyalty cards allow the retailer to match the purchases to individuals. When an individual registers for a loyalty card they tender some basic personal details such as their name and address, but generally the retailer is not in a position to collect a detailed personal profile. If the same retailer also has an e-commerce channel, customers will register separately through this channel. Unless the retailer has ensured that registration across the two channels can be linked, through, say, a registration ID, the retailer is not able to make a link between in-store and e-commerce activity for that individual customer. This severely limits the customer knowledge that the retailer has about specific customers, although by collecting and integrating information from both channels, the retailer can learn a lot about the popularity of product lines, and create customer profiles for categories of customers. The retailer needs to consider the purpose for which customer knowledge is required, and consider the appropriate level of integration of systems to deliver the kind of customer data and knowledge that is necessary. Comparing CKM with CRM Whilst business strategists, and organisational theorists have embraced the value of knowledge in creating competitive advantage, marketers have developed the sub-discipline of relationship marketing which instead of viewing the transaction as the core of a marketing exchange, places the relationship at the heart of that exchange. Is knowledge or are relationships the key assets for an e-business? Is the valuing of relationships in some sense the same thing as the valuing of knowledge, or at least does it have the same consequences? The relationship perspective appears to emphasise the social imperative, but when working in consumer communities, and particularly in e-business, relationships cannot be built and maintained without the aid of technology. Knowledge management, some might argue, appears to start from the systems and data perspective, but acknowledges the importance of the social dimension in processes such as knowledge creation, sharing, and dissemination. The link between knowledge and its management and relationship marketing has been recently explored by Tzokas and Saren (2002), in their article entitled ‘‘Competitive advantage,
knowledge and relationship marketing – where, what and how?’’, in which they seek to analyse the types of knowledge and knowledge processes that support the different stages in relationship management. As discussed earlier, software vendors have added their offerings in the form of KM and CRM systems. Like all systems these solutions take data as their point of departure, and offer various intelligent data mining and analysis or communication processes to support the development of relationships and/ or knowledge. These systems often have a common point of departure, customer data, although the outcomes may be different and the theoretical paradigms of KM and RM certainly have different foundations. In the e-business world in which organisational boundaries are dynamic, sometimes transparent, and always contested by different stakeholders it is essential to create a synergy between knowledge management and relationship management. This synergy needs to exist at both theoretical and practical levels. Table II seeks to compare KM and RM in terms of: . disciplinary roots; . perspective; . key actors; . their key conceptual foci; . key processes; and . key communication contexts. Apart from their origins in distinct professional communities which should not be lightly dismissed, their distinct conceptual foci lead to the development of models with different parameters of analysis. On the other hand it is possible to argue that since RM focusses on customers and KM on employees, any concept of organisation that sees the boundary between employees and customers as semi-transparent requires both practical and theoretical frameworks that articulate the integration of KM and RM.
Conclusion This article responds to the rhetoric about the knowledge richness of e-business by using a straightforward model of the nature of knowledge management as a lens through which to explore a number of themes about customer knowledge management in e-business. These themes commence with a
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Table II Comparative perspectives on knowledge management and relationship management Dimension
Knowledge management
Relationship management
Disciplinary roots
Organisational behaviour
Marketing
Perspective
Inside the organisation
Marketplace
Key actors
Employees
Customers
Communication context
Business/organisational communication
Marketing communication
Key conceptual foci
What is knowledge? – Taxonomies for types of knowledge (e.g. explicit, implicit, embrained), matching knowledge types to functional levels with an organisation. Knowledge reposititories, communities of interest, knowledge assets, knowledge tools, knowledge processes
What is a relationship? – Taxonomies for the different types of relationships (B2C, C2C). Reviewing different types of customers, and customer segments (using benefit, value segmentation, relationship lifecycles, and customer lifetime value
Key processes
Knowledge creation, sharing, dissemination and exploitation
Communication, creation of loyalty and stable customer bases, customer service, trust cultivation, relationship maintenance
review of the knowledge needs of e-businesses. This is followed by an exploration of knowledge tools, and the implications of such tools for distinguishing between data, information and knowledge. Whilst some of these tools analyse customer data in such a way as to create a platform for knowledge creation, the social imperative of knowledge management means that it is necessary to consider the role and functioning of knowledge communities. Online customer communities are first discussed as one space in which customer knowledge can be generated and shared, both between the organisation and the customer, and vice versa, and between customers. Other important knowledge creating communities are those within the organisation, and those of partner organisations. Discussion of virtual organisations emphasises the dynamic nature of e-business and the challenges that this poses for knowledge management. Knowledge is dynamic. The identification and ownership of knowledge assets is discussed. Customers have rights that need to be respected, and indeed may be reluctant to engage in exchanges if their right to control the customer data and knowledge that they lend to the organisation is not respected. Integration of customer knowledge gathered through different channels and different communities is a theme that pops up throughout the article. Finally a preliminary comparative analysis of RM and KM is offered. The overarching message of the article is that customer knowledge management is not just about data, however it might be analysed.
Neither is CKM just about relationships, whether those relationships are social or transactional. Furthermore the focus needs to embrace both knowledge about customers, and the knowledge that customers have and can, if they so choose, deploy to the organisations’ advantage. Effective CKM in e-business, as in other environments, is concerned with the dynamic integration of systems and people, in pursuit of the enrichment of the knowledge wealth of the organisation. This perspective suggests a radical shift in conceptualisations of market research. Qualitative market research methodologies enter centre stage for both commercial market research and academic enquiry.
References Allen, C., Kania, D. and Yaeckel, B. (1998), Internet World Guide to One-to-one Web Marketing, Wiley, New York, NY. Ashkenas, R., Ulrich, D., Todd, J. and Kerr, S. (1998), The Boundaryless Organisation: Breaking the Chains of Organisational Structure, Jossey-Bass, San Francisco, CA. Barnatt, C. (1998), ‘‘Virtual communities and financial services – on-line business potentials and strategic choice’’, International Journal of Bank Marketing, Vol. 16 No. 4, pp. 161-9. Beamish, N.G. and Armistead, C.G. (2001), ‘‘Selected debate from the arena of knowledge management: new endorsements for established organisational practices’’, International Journal of Management Reviews, Vol. 3 No. 2, pp. 101-11. Birkinshaw, J. (2001), ‘‘Why is knowledge management so difficult?’’, Business Strategy Review, Vol. 12 No. 1, pp. 11-18.
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Reflections on customer knowledge management in e-business
Jennifer E. Rowley
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Blackler, F. (1995), ‘‘Knowledge, knowledge work and organisations: an overview and interpretation’’, Organisation Studies, Vol. 16 No. 6, pp. 1021-46. Byrne, J.A. (1993), ‘‘The virtual corporation’’, Business Week, 8 February, pp. 98-102. Choo, C.W. (1996), ‘‘The knowing organisation: how organisations use information to construct meaning, create knowledge and make decisions’’, International Journal of Information Management, Vol. 16 No. 5, pp. 329-40. Davenport, T.H. and Prusak, L. (1998), Working Knowledge: Managing What Your Organisation Knows, Harvard Business School Press, Boston, MA. Davenport, T.H., DeLong, D.W. and Beers, M.C. (1998), ‘‘Successful knowledge management projects’’, Sloan Management Review, Winter, Vol. 39 No. 2, pp. 43-57. Davidow, W.H. and Malone, W.S. (1992), The Virtual Corporation, HarperBusiness, New York, NY. Demerest, M. (1997), ‘‘Understanding knowledge management’’, Journal of Long Range Planning, Vol. 30 No. 3, pp. 374-84. Freidman, L.G. (1998), ‘‘The elusive strategic alliance’’, in Lloyd, P. and Boyle, P. (Eds), Web-Weaving: Intranets, Extranets and Strategic Alliance, Butterworth-Heinemann, Oxford. Hagel, J. (1999), ‘‘Net gain: expanding markets through virtual communities’’, Journal of Interactive Marketing, Vol. 13 No. 1, pp. 55-65. Hagel, J. and Armstrong, A.G. (1997), Net Gain: Expanding Markets Through Virtual Communities, Harvard Business School Press, Boston, MA. Introna, L. (2001), ‘‘Defining the virtual organisation’’, in Barnes, S. and Hunt, B. (Eds), E-commerce and V-Business, Butterworth-Heinemann, Oxford, pp. 143-52. Jarvenpaa, S.L., Knoll, K. and Lediner, D.E. (1998), ‘‘Is anybody out there? Antecedents of trust in global virtual teams’’, Journal of Management Information Systems, Vol. 14 No. 4, pp. 29-64. Kozinets, R.V. (1999), ‘‘E-tribalised marketing?: the strategic implications of virtual communities of consumption’’, European Management Journal, Vol. 17 No. 3, pp. 252-64. Metes, G., Gundry, J. and Bradish, P. (1998), Agile Networking: Competing through the Internet and Intranets, Prentice Hall, Englewood Cliffs, NJ. Moon, Y. and Frei, F.X. (2000), ‘‘Exploding the self-service myth’’, Harvard Business Review, Vol. 78 No. 3, pp. 26-7. Mullin, R. (1996), ‘‘Knowledge management: a cultural revolution’’, Journal of Business Strategy, September-October, Vol. 17 No. 5, pp. 56-60. Nel, D., Van Niekerk, R., Berthon, J.-P. and Davies, T. (1999), ‘‘Going with the flow: Web sites and customer involvement’’, Internet Research, Vol. 9 No. 2, pp. 109-16.
Newell, F. (2000), Loyalty.com: CRM in the Age of Internet Marketing, McGraw-Hill, New York, NY. Nicholas, D., Huntingdon, P., Lievesley, N. and Wasti, A. (2000), ‘‘Evaluating Web site logs: a case study of The Times/The Sunday Times Web site’’, Journal of Information Science, Vol. 26 No. 6, pp. 399-412. Nonaka, I. (1994), ‘‘A dynamic theory of organisational knowledge creation’’, Organisation Science, Vol. 5, February, pp. 14-37. Nonaka, I. (1995), The Knowledge Creating Company, Oxford University Press, New York, NY. Nonaka, I. (1996), ‘‘The knowledge creating company’’, in Starkey, K. (Ed.), How Organisations Learn, International Thomson, London, pp. 18-31. Novo, J. (2001), The Source of Customer Value – Customer Knowledge, available at: www.crmforum. Oliver, R.L. (1999), ‘‘Whence consumer loyalty?’’, Journal of Marketing, December, pp. 33-55. Pedler, M., Burgoyne, J. and Boydell, T. (1991), The Learning Company, McGraw-Hill, London. Peppers, D. and Rogers, M. (1997), The One to One Future, Doubleday, Garden City, NY. Prahalad, C.K. and Ramaswamy, V. (2000), ‘‘Co-opting customer competence’’, Harvard Business Review, Vol. 78 No. 1, pp. 79-85. Reichheld, F.F. and Schefter, P. (2000), ‘‘E-loyalty; your secret weapon on the Web’’, Harvard Business Review. Rowley, J.E. (2001), ‘‘Knowledge management in pursuit of learning’’, Journal of Information Science, Vol. 27 No. 4, pp. 227-37. Rowley, J. and Slack, F. (2001), ‘‘Leveraging customer knowledge: profiling and personalisation in e-business’’, International Journal of Retail & Distribution Management, Vol. 29 No. 8/9, pp. 407-15. Ruggles, R. (1997), Knowledge Management Tools, Butterworth-Heinemann, Boston, Oxford. Sims, D. (2000), What is CRM, available at: www.crmguru.com Stough, S., Eom, S. and Buckenmyer, J. (2000), ‘‘Virtual teaming: a strategy for moving your organisation into the new millennium’’, Industrial Management & Data Systems, Vol. 100 No. 8, pp. 370-8. Turban, E., McLean, E. and Wetherbe, J. (1999), Information Technology for Management, Wiley. Tzokas, N. and Saren (2002), ‘‘Competitive advantage, knowledge and relationship marketing – where, what and how?’’, unpublished. Wiesenfeld, B.M., Raghuram, S. and Garud, R. (1998), ‘‘Communication patterns as determinants of organisational identification in a virtual organisation’’, Journal of Computer Mediated Communication, Vol. 3, pp. 1-21.
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Introduction
From bricks to clicks: understanding the e-consumer Charles Dennis Lisa Harris and Balraj Sandhu
The authors Charles Dennis and Lisa Harris are Lecturers and Balraj Sandhu is a Post-graduate Student, all at Brunel University, Isleworth, UK. Keywords Internet, Consumer behaviour, Retailing Abstract It is well known that online shopping is growing, but recent reports have indicated that e-retailers are failing to deliver. In this paper, the authors consider aspects of shopping and shopping styles, comparing e-shopping with bricks and mortar. First, a small exploratory pilot study comparing Internet vs an exemplar shopping centre, and comparing the centre with an ‘‘ideal’’ centre is reported. In this initial stage, the respondents were selected as the ‘‘shoppers of tomorrow’’ – sixth-form students – more Web-literate than older age groups. Second, the results of a further small exploratory pilot study are reported with slightly more mature shoppers – university students. The qualitative findings from this stage of the research form the basis for our conclusions. Finally, we speculate on the possible future of shopping. Electronic access The research register for this journal is available at http://www.emeraldinsight.com/researchregisters The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/1352-2752.htm
Despite the dot.com crash, online shopping is growing in the UK (see Figure 1) with sales having reached £3.3billion in 2001 (Verdict, 2002). This represents only 2 per cent of all retail sales but the proportion is predicted to rise to between 2.5 per cent and 5 per cent by 2005 (BCSC, 2001) and up to 10 per cent by 2009 ((Gibson, 1999; Verdict, 2002) see Figure 2). ‘‘Most people’’ are prepared to buy groceries, books, CDs and even clothes by e-shopping (RICS Foundation, 2000). Books, videos and software are high on ‘‘factual search’’ (Shim et al., 2001) and thus natural for e-retailing, but other categories such as groceries and clothing are also increasing (Figure 3). It has been forecast that 94 per cent of e-retailing will be at the expense of existing channels (perhaps half of this diverted from catalogue shopping, half from high street retailers – BCSC, 2001), with only 6 per cent arising from incremental growth (PreFontaine, 1999). Evidence indicates, though, that e-retailers are failing to deliver the standards of service expected by customers. A survey of 9,500 online shoppers by BizRate.com indicated that 55 per cent abandoned their carts prior to checkout (Shop.org, 2001). Worldwide, $6 billion per year are being lost through failed purchase attempts (Blank, 2000). A Verdict (2000) research survey of 2,000 people found that: Consumers are being put off shopping online by poor after sales service and unreliable delivery.
Problems cited included lack of weekend/ evening delivery and complicated systems for returning unsuitable or unsatisfactory merchandise. More than a quarter ‘‘preferred the reassurance of [the] high street’’. The problems are especially acute for the clothing and footwear; and food and drink sectors, where 10 per cent and 16 per cent of shoppers respectively say that they will not buy on the Internet again, causing an annual loss of sales of around £240 million (Verdict, 2002). Typical comments from customers have included: They left it in the garden and didn’t even tell me: It’s a 24 hour shopping service but six hour delivery service. Returning unwanted products is when it goes low tech (consumer surveys from Vincent et al., 2000).
Qualitative Market Research: An International Journal Volume 5 . Number 4 . 2002 . pp. 281–290 # MCB UP Limited . ISSN 1352-2752 DOI 10.1108/13522750210443236
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Figure 1 The growth of online shopping: surveys, 1997 to 2001, forecasts, 2002 to 2004
Lunt (2000) carried out 16 focus groups and 42 user trials. The main reasons for eschewing Net shopping included: . Mismatch between buying online and handling the products. . ‘‘It’s not like shopping – more like typing’’. . Lacks the experiential aspects of shopping. A consistent picture has emerged of the importance of the interpersonal aspects of shopping, particularly for female shoppers (for examples see Dholakia, 1999; Elliot, 1994). A Colliers Conrad Ritblat Erdman survey revealed the top reason for not e-shopping to be: Prefer personal shopping and seeing the goods.
Figure 2 E-retailing as per cent of UK shopping
This was mentioned by half of Internetconnected households (Figure 4). The USA picture is similar. Shim et al.’s (2000) postal survey of 684 respondents concluded that social influences were more important for Internet and ‘‘cross’’ shoppers than for traditional ones. Childers et al.’s (2001) experiment with 274 participants found that while instrumental aspects are important: The more immersive, hedonic aspects of the new media play at least an equal role.
Mathwick et al. (2001) questioned whether the Internet channel in its current form lacks: The ability to deliver aesthetic value (i.e. is it dull and lifeless?).
According to McCarthy (2000): Sixty-three per cent of Web site visitors will not buy online until there is more human interaction. Figure 3 What e-shoppers buy
Figure 4 Why Internet-connected consumers do not e-shop
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Women want ease of navigation and sense of personalised relationship – helped by ‘‘community’’ or ‘‘chat’’ rooms (Harris, 1998).
An example of this more ‘‘community’’ orientated approach is the e-mall iVillage, which it is reported that Tesco has now joined (Sunday Times Business, 2000a). Evans et al. (2001) investigated the relatively new consumer to consumer ‘‘community’’ model. Their focus group findings illustrated the importance of the way consumers interact with each other and potentially with marketers. As they pointed out (drawing support from Anderson, 1999), ‘‘social interaction now has a ‘virtual’ version’’: People come together for sexual flirtation, business, idle gossip, spiritual exploration, psychological support, political action, intellectual discourse on all kinds of subjects – the whole range of human interests and needs (Anderson, 1999).
Claims that virtual communities are a ‘‘social phenomenon’’ (Rheingold, 1993) set to become ‘‘big commercial business’’ (Hagel and Armstrong, 1997) are now being borne out in the marketplace. For example, eBay (auction site), with its emphasis on community interests such as chat rooms and bulletin boards, is: One of the few Internet start-up companies to be avoiding financial pain (Reynolds, 2000).
As with conventional shopping, there are differences between the sexes concerning e-shoppping behaviour. For example, 77 per cent of US women browse online, then buy in store, but only 54 per cent of men do this. Men are more purposeful shoppers than women are (Lindquist and KaufmanScarborough, 2000). In the early days of the Internet, male users heavily outnumbered females, but this is now changing with 50 per cent of US e-shoppers now female (Cyr, 2000; Mathwick et al., 2001). The UK is catching up fast with 42 per cent in 2001 (Verdict (2002) – up from 30 per cent reported by Pavitt (1997)). Men’s and women’s shopping behaviour has, though, been reported in Media Matrix (US) and NetValue (UK) surveys to be more similar online than it is in store. In addition, Internet shoppers are becoming more mainstream with more e-shoppers coming from the less affluent socio-economic groups and many new sales arising from consumers more representative of the UK population. The profile is moving away from a ‘‘geek’’ majority
(McIntosh, 1999; Nutall, 1999; Orton, 1999; Verdict, 2000). The indications are, then, that e-shopping is growing at the expense of traditional shopping, but that e-shoppers are missing benefits associated with personal interaction. Here, we report on exploratory pilot research in West London. The remainder of the paper proceeds as follows. First, a small study comparing Internet vs an exemplar shopping centre, and comparing the centre with an ‘‘ideal’’ centre is reported. In this initial stage, the respondents were sixth-form students. Second, the results of a further small study are reported with slightly more mature shoppers – university students. The findings from the structured questionnaires are included in order to contextualise the qualitative findings from the open-ended part of our survey that form the basis for our conclusions. Finally, we speculate on the possible future of shopping.
Research questions This study has aimed to explore two questions: (1) To compare the factors which consumers will consider in deciding where to shop and to determine whether they associate them more positively with the Internet or ‘‘bricks’’ shopping centres. (2) To identify the various attributes consumers associate with their ideal image of a shopping centre, and to explore the congruence between this ideal image and the centre studied.
Procedure In line with an intention to investigate likely future trends in shopping, the initial sample (results reported previously, Dennis et al., 2001a) comprised 30 young people aged 16-18 – the shoppers of tomorrow – expected to be more Web-literate than older age groups. As a pilot investigation, this was a small convenience sample of students at a sixth-form college. In this preliminary phase, structured questionnaire instruments were used to compare shopping perceptions of Internet shopping with a nearby shopping centre. It is interesting to report that out of 52 of the sixth-form students initially screened, only 22 did not shop at both, i.e. 60 per cent
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shopped at both the West London shopping centre and on the Internet. For Internet shopping, these young people had access to their parents’ credit cards. The use of credit by minors raises ethical issues which we have explored further elsewhere (Dennis et al., 2001b). Many of the attributes that shoppers use in deciding choices of shopping centres (Dennis et al., 1999, 2001c) are not relevant to the Internet – e.g. ‘‘availability of toilets’’. Therefore, for research question (1), comparison of Internet vs the shopping centre was restricted to the six attributes identified by Quelch (1999) on which the Internet and shopping centres could compete head-tohead. A seven-point Likert-type scale was used, ranging from ‘‘strongly agree’’ (1) to ‘‘strongly disagree’’ (7) with the statement. For research question (2), the image dimensions of the respondents’ ‘‘ideal’’ shopping centre were studied and compared with the ideal centre, using a two-stage approach. In step 1, respondents were asked how relevant were each of 50 image dimensions (e.g. exciting – calm). The 50 dimensions chosen initially were compiled from image dimensions used in previous studies (Foxall and Goldsmith, 1994; Graeff, 1996; Malhotra, 1989). Again, a seven-point scale was used, this time from ‘‘not at all’’ (1) to ‘‘very much’’ (7). The 12 image dimensions having a mean score of 4.5 or higher were selected as the relevant dimensions for step 2. Here, the 30 respondents were asked to indicate where they perceived the ideal image of a shopping centre to be within a dimension. For example, for the image dimension ‘‘exciting – calm’’, respondents were asked the extent to which their ideal shopping centre had more of an exciting or calm image. They were then asked to indicate where the West London centre studied would lie on the same scale. Responses were recorded on a seven-point semantic differential scale. In a second stage of the research the survey was extended to young adult respondents. The questionnaire as for the sixth-form respondents was used, this time with a sample of university students, to compare Internet with shopping centre shopping. Unfortunately, terrorist action precluded the duplication of the study comparing the specific West London centre. Therefore, in this second stage, respondents compared Internet shopping with their usual shopping centre. Out of the 55 university students
initially screened, only 22 did not shop on the Internet, i.e. again 60 per cent shopped at shopping centres and on the Internet. In order to provide a deeper insight, respondents were invited to add comments on Internet shopping or shopping centres.
Results Comparing satisfaction ratings of the Internet vs the West London shopping centre Tables I and II are the comparison of ratings, illustrated in Figures 5 and 6. Table I and Figure 5 are for the sixth-form students, Table II and Figure 6 refer to the university students. Ratings have been re-scaled for convenience on a 0-100 scale, where 100 represents the ‘‘better’’ end of the scales. The results indicated that the sixth-form respondents marginally preferred the Internet for the quality of the stores and more emphatically for the breadth and depth of products, although the university students rated the Internet equally with shopping centres on these attributes. Both groups rated Internet shopping higher for favourable prices and convenience. On the other hand, the shopping centre was preferred for its positive image and more emphatically for customer service. This customer service finding is consistent with other work drawing attention to service from e-retailers, outlined earlier. Bearing in mind the size of the Internet, it would seem inevitable that e-shopping provides a bigger range of products. Similarly, it is natural for many shoppers to take advantage of the Internet’s convenience (buy where you like, someone else delivers) and lower prices arising from the ease of comparing prices. Given the lead that e-shopping has on these major shopping dimensions, it is perhaps surprising that the shopping centre was ahead on positive image. As discussed above, consumers value the social and experience aspects of shopping which, we contend, contribute to the positive image of the ‘‘bricks’’ centre. The sixth-form students were more favourably disposed towards the Internet than were the university students, perhaps reflecting the higher Web literacy of the younger respondents.
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Table I Comparison of ratings (converted to 0-100 scales, where 100 = most agreement), Internet vs the West London shopping centre – sixth-form students Internet A good breadth and depth of products (i.e. range) is offered The price of goods and services is favourable It is a convenient way to shop There are good quality stores There is a high quality of customer service There is a positive image associated with the shopping experience
Mean score Shopping centre
93 98 96 84 61 57
58 63 68 71 90 92
Table II Comparison of ratings (converted to 0-100 scales where 100 = most agreement), Internet vs shopping centres – university students Internet A good breadth and depth of products (i.e. range) is offered The price of goods and services is favourable It is a convenient way to shop There are good quality stores There is a high quality of customer service There is a positive image associated with the shopping experience
Mean score Shopping centre
75 74 78 70 46 61
75 67 71 70 62 65
Figure 5 Comparing ratings – Internet (left-hand bar) vs West London shopping centre (right-hand bar) – sixth-form students
(3) modern/old fashioned; (4) adventurous/timid; (5) relaxed/tense; (6) sophisticated/unsophisticated; (7) clean/dirty; (8) changeable/stable; (9) friendly/unfriendly; (10) fun/boring; (11) comfortable/uncomfortable; and (12) exciting/calm.
Figure 6 Comparing ratings – Internet (left-hand bar) vs shopping centres (right-hand bar) – university students
Comparing image ratings
The ideal shopping centre The top 12 image dimensions (out of 50) for the ideal shopping centre (sixth-form respondents) were: (1) pleasant/unpleasant; (2) interesting/dull;
In Tables III and IV the image ratings of the West London centre have been compared with the sixth-form respondents’ ideal ratings. As with the satisfaction ratings, these have been re-scaled for convenience on a 0-100 scale, so that for example, the ‘‘exciting’’ end of the scale = 100, whereas the ‘‘calm’’ end = 0. Those image ratings on which the centre studied was rated close to the ideal image are in Table III; those further away in Table IV, illustrated in Figures 7 and 8 respectively. The image ratings on which the West London centre performed close to the ideal were: . relaxed; . comfortable; . pleasant;
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Table III Comparing image ratings, West London centre vs ideal – dimensions on which the centre rated close to ideal – sixth-form students Mean image, 0-100 scale Ideal shopping centre West London centre Relaxed – tense Comfortable – uncomfortable Pleasant – unpleasant Sophisticated – unsophisticated Modern – old fashioned Clean – dirty
95 99 94 91 87 98
91 91 93 88 82 93
Table IV Comparing image ratings, West London centre vs ideal – dimensions on which the centre rated further from ideal – sixth-form students Mean image, 0-100 scale Ideal shopping centre West London centre Exciting – calm Interesting – dull Adventurous – timid Changeable – stable Friendly – unfriendly Fun – boring
95 93 87 85 98 96 .
Figure 7 Comparing image ratings – ideal shopping centre (left-hand bar) vs West London shopping centre (right-hand bar) – dimensions on which the centre was rated close to ideal
. .
55 48 52 47 51 50
sophisticated; modern; and clean.
Whereas those on which it fell short of the ideal were: . exciting; . interesting; . adventurous; . changeable; . friendly; and . fun.
Figure 8 Comparing image ratings – ideal shopping centre (left-hand bar) vs West London shopping centre (right-hand bar) – dimensions on which the centre was rated futher from ideal
The image dimensions on which the West London centre was close to the ideal largely concerned ‘‘hygiene’’ or the shopping environment. Poor performance on these might result in a substantial loss of business for a centre, but the good performance is not in itself likely to be a substantial generator of sales. It is postulated that the busiest shopping centres owe much of their success to generating extra patronage through a proactive approach to ‘‘entertainment’’. The biggest centres in the world are not situated in areas of great population, but are well known as tourist destinations (West Edmonton Mall and Mall of America (Dennis et al., 2002)). It is this vital entertainment area which seems to challenge smaller centres and for which the centre did not come close to the ideal.
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Qualitative findings
.
The comments of shoppers who shop by Internet and in shopping centres (from the unstructured part of the questionnaire) were coded manually. The main constructs are listed below. . Prefer to shop in shopping centres – more enjoyable/sociable. Ten respondents. Comments included:
I only buy CDs on line because they are cheaper. I buy everything else in shops.
Internet shopping is not a personal experience. You cannot try and see what you’re buying. Internet shopping is convenient but will never replace actual shops. Shopping is not purely to purchase goods/products, but is also a leisure activity and can be very sociable – unlike Internet shopping. I would rather use the Internet as a research tool in comparing potential purchases and to search for exclusive products. However, when making purchases, I would rather the physical nature of going into the shop. It is more reliable and the experience is pleasurable. If you want to shop for clothes, you are not able to feel and see the quality of the fabrics. Never ends up being as seen on the screen. .
Internet needs more trust – concern for safety of financial transactions and credit cards. Seven respondents. A typical comment was: Not totally confident about giving credit card details over the Internet yet.
Three respondents mentioned, though, that Internet security is improving: There’s more trust than two years ago as the bad dot.coms have gone. .
Internet convenient, good for [product] research. Five respondents made comments along these lines, but all added some reservation, for example: Internet shopping is a very convenient channel for shopping, but it’s not as time saving as people think, because time spent on searching and comparison takes a couple of hours. Some Internet sites very good, but it is hard to find and to know which sites are reliable.
.
Three respondents commented that the Internet was too slow or unreliable. Refund/exchange problems with Internet. Two respondents expressed concern, for example: Most of them do not have shop-floor support for after sales service, refund/change always takes more time and more troublesome and gives less feeling of secure. Hassle with exchange or refunding. Too much hassle.
Internet cheaper. Mentioned by five respondents, but only two stated that shopping centres were more expensive in general than the Internet. One considered the Internet cheaper for books and two for CDs (one of these also mentioned videos), for example:
The comments from this qualitative work support previous findings that the most important issue affecting Internet shopping is shoppers’ preferences for the experience of ‘‘real’’ shopping. Next in degree of concern is security, although this is becoming less prominent. The Internet is often described as ‘‘convenient’’ for shopping, but the degree of convenience is subject to considerable reservations such as slowness, unreliability (of both the Internet and the shopping process) and aftercare. Internet shopping has perceived price advantages, but these are not universal.
Tentative conclusions In drawing inferences from these results, the limitations arising from the small and non-representative nature of the samples must be borne in mind. Nevertheless, if the views of the respondents were in any way typical of young people and the shoppers of the future, the conclusions below could be indicated. . Shopping centres may have difficulty competing on: breadth and depth of products; prices; researching products; and convenience – although shoppers have many reservations about the convenience of e-shopping. Shopping centres could do more to make the shopping experience: exciting; interesting; adventurous; friendly; fun; and changeable. These are aspects that e-marketers could be well advised to emphasise when promoting Internet shopping. . Shoppers are still concerned about the security and payment aspects of buying online. Shopping centres may still have the edge over Internet shopping on customer service, positive image and experiential shopping. A central qualitative finding was that even the
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young, e-literate Web shoppers had a strong preference for shopping in shopping centres rather than online as more enjoyable and sociable. E-retailers need to address these limitations of Internet shopping.
The future of shopping If, as forecast, conventional ‘‘bricks’’ shopping is set to lose substantial business to Internet shopping, how might retailers protect market share? We suggest three possible approaches, the first two of which entail recognition of the wants of the e-consumer of the future: (1) multi-channel retailing; (2) the Internet shopping centre; and (3) emphasis on leisure, eating and drinking, i.e. services that the e-shopper cannot consume from the Web.
Multi-channel retailing A Forrester survey reported in Sunday Times Business (2000b) carried the headline: ‘‘Amazon loses to offline rivals’’. According to this report, the world’s biggest e-retailer was losing its lead to ‘‘clicks and mortar’’. The top-three ranking in world book sales (Internet plus high street) was reported to be: (1) Borders; (2) Amazon; and (3) Barnes & Noble. Some commentators speculate that the future of shopping lies in multi-channel retailing. Shim et al. (2000), drawing support from an Ernst & Young LLP (2000) report, suggested that, rather than compete with the Internet, conventional shops should incorporate it as part of their retail strategy – although most UK ‘‘bricks’’ retailers were yet so to do at the time of Doherty et al.’s survey (1999). According to a Deloitte & Touche study (reported in Sunday Times Business (2000)), those e-retailers that are part of traditional, old economy companies will fare best, with 75 per cent expected to gain market share. Verdict (2001) forecast that a handful of companies in each online sector will account for over 75 per cent of online sales – and these players will all be multi-channel. A British Council of Shopping Centres (BCSC, 2001) survey forecast that stores that integrate
e-retailing and a strong high street brand will continue to be successful over the next five years. Illustrating US leadership of this trend, it was reported that at the time of writing, Amazon was rumoured to be planning a tie-up with Wal-Mart that would give a physical presence to Amazon in Wal-Mart stores. There are at least 12 UK-based online malls – but the authors are aware of only one ‘‘bricks’’ shopping centre that also offers ‘‘clicks’’ shopping. This so-called ‘‘wired lease’’ (BCSC, 2001) approach could represent a growth opportunity for UK shopping centres?
The Internet shopping centre (the Dubai Internet city approach) Dubai Internet city is a ‘‘bricks’’ shopping centre devoted solely to the Internet, with tenants including, for example: hardware companies, software suppliers, service providers and Internet cafes – in fact, everything to do with the Internet in a one-stop shopping centre (Scudder, 2000). Whilst not a suitable model for every UK shopping centre, there may be UK potential for some centres of this type.
Emphasis on leisure, eating and drinking (the Easton town centre approach) Coverage in the popular press (e.g. Daily Mail, 1996), and anecdotal evidence from both sides of the Atlantic, indicates that many consumers love small traditional town centres with character. Researchers such as Hallsworth (2000) have reported the attraction of such (UK) towns and their fight-back from decline. Despite the appeal of the traditional small towns, though, many of us tend to shop for preference at (planned) shopping centres and retail sheds. Easton town centre, Columbus, Ohio, is the first of two to date of a new-style centre combining the ‘‘traditional’’ town centre with shopping centre and ‘‘edge-of-town’’. The sales area is approximately one-third shopping, one-third leisure and one-third eating and drinking. Figure 9 shows a conventional-looking town with streets and a town square – but this is entirely a planned and managed shopping centre. There is even the ‘‘edge of town’’ Wal-Mart and Home Depot (hardware shed)
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Figure 9 Views of Easton town centre, Columbus, Ohio
on the perimeter. The authors consider that this new approach illustrates the potential for shopping centres to make the experience more exciting, interesting, adventurous, friendly, fun and changeable. Conversely, e-retailers need to improve their offerings to compete with new style ‘‘bricks’’ shopping experiences by offering more interaction, entertainment and community activities.
What next? The authors’ work to date has been exploratory in nature, but draws attention to aspects of the need to keep alive the interpersonal and experience aspects of shopping in the Internet age. It is planned to progress to a larger scale survey, and to develop a methodology to assess ‘‘personality’’ aspects of Internet shopping, shopping centres and shoppers.
References Anderson, W.T. (1999), ‘‘Communities in a world of open systems’’, Futures, Vol. 31, pp. 457-63. British Council of Shopping Centres (BCSC) (2001), ‘‘Future shock or e-hype: the impact of online shopping on UK retail property’’, The College of Estate Management, London. Childers, T.L., Carr, C.L., Peck, J. and Carson, S. (2001), ‘‘Hedonic and utilitarian motivations for online retail shopping behaviour’’, Journal of Retailing, Vol. 77 No. 4, pp. 511-35. Cyr, D. (2000), ‘‘Your new consumer’’, Catalogue Age, July, pp. 125-32.
Daily Mail (1996), ‘‘Shops turn corner in war on malls’’, Daily Mail, 15 July. Dennis, C., Marsland, D. and Cockett, W. (1999) ‘‘Why do people shop where they do?’’, Recent Advances in Retailing and Services Science, 6th International Conference, Eindhoven, The European Institute of Retailing and Services Studies. Dennis, C., Harris, L., Sandhu, B. and King, T. (2001a), ‘‘e-Shopping vs shopping centres – work in progress’’, 11th International Conference on Research in the Distributive Trades, Tilburg University, Tilburg. Dennis, C., Kent, A., Harris, L. and Sandhu, B. (2001b) ‘‘Ethical considerations in e-tailing – work in progress’’, CIRM 2001, New Technologies and Retail SMEs, Manchester Metropolitan University, Manchester. Dennis, C., Marsland, D. and Cockett, W. (2001c) ‘‘The mystery of consumer behaviour: market segmentation and shoppers’ choices of shopping centres’’, International Journal of New Product Development and Innovation Management, Vol. 3 No. 3, pp. 223-39. Dennis, C., Marsland, D. and Cockett, W. (2002), ‘‘Central place practice: shopping centre attractiveness measures, hinterland boundaries and the UK retail hierarchy’’, Journal of Retailing and Consumer Services, Vol. 9 No. 4, pp. 185-99. Dholakia, R.R. (1999), ‘‘Going shopping: key determinants of shopping behaviour and motivations’’, International Journal of Retail & Distribution Management, Vol. 27 No. 4-5, p. 154. Doherty, N.F., Ellis-Chadwick, F. and Hart, C.A. (1999), ‘‘Cyber retailing in the UK: the potential of the Internet as a retail channel’’, International Journal of Retail & Distribution Management, Vol. 27 No. 1, pp. 22-36. Elliot, R. (1994), ‘‘Addictive consumption: function and fragmentation in postmodernity’’, Journal of Consumer Policy, Vol. 17, pp. 159-79. Ernst & Young LLP (2000), Internet Shopping: an Ernst & Young Special Report, National Retail Federation, Washington, DC. Evans, M., Wedande, G., Ralston, L. and van‘t Hul, S. (2001), ‘‘Consumer interaction in the virtual era: some qualitative insights’’, Qualitative Market Research: An International Journal, Vol. 4 No. 3, pp. 150-9. Foxall, G.R. and Goldsmith, R.E. (1994), Consumer Psychology for Marketing, Routledge, London. Gibson, B. (1999), ‘‘Beyond shopping centres – e-commerce’’, British Council of Shopping Centres Conference. Graeff, T.R. (1996), ‘‘Using promotional messages to manage the effects of brand and self image in brand evaluations’’, Journal of Consumer Marketing, Vol. 13 No. 3. Hagel, J. and Armstrong, A.G. (1997), Net Gain: Expanding Markets through Virtual Communities, Harvard Business School, Boston, MA. Hallsworth, A. (2000), ‘‘Britain’s local loyalty cards – an unmanageable revolution’’, International Journal of New Product Development & Innovation Management, Vol. 2 No. 2, pp. 133-44.
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Harris, K. (1998), ‘‘Women on the Net II: the female-friendly site’’, Sporting Goods Business, Vol. 31 No. 13, p. 16. Lindquist, J.D. and Kaufman-Scarborough, C. (2000), ‘‘Browsing and purchasing activity in selected nonstore settings: a contrast between female and male shoppers’’, Retailing 2000: Launching the New Millennium, Proceedings of the 6th Triennial National Retailing Conference, The Academy of Marketing Science and the American Collegiate Retailing Association, Hofstra University, Columbus, OH. Lunt, P. (2000), ‘‘The virtual consumer’’, Virtual Society? Delivering the Virtual Promise? From Access To Use In The Virtual Society, ESRC presentation led by Brunel University, 19 June, London. McCarthy, S. (2000), ‘‘Your Web site is calling, please hold for your customer’’, Call Center Solutions, Vol. 18 No. 8, pp. 70-3. McIntosh, N. (1999), ‘‘Net users lose fear of buying’’, The Guardian, 16 September. Malhotra, N. (1989), ‘‘A scale to measure self concepts from concepts, and product concepts’’, Journal of Marketing Research, p. 18. Mathwick, C., Malhotra, N. and Rigdon, E. (2001), ‘‘Experiential value: conceptualization, measurement and application in the catalog and Internet shopping environment’’, Journal of Retailing, Vol. 77 No. 1, pp. 39-56. Nutall, C. (1999), ‘‘UK online shopping doubles’’, BBC News Online, available at: www.newsbbc.co.uk (accessed 15 September 1999). Orton, D.C. (1999), ‘‘Internet news’’, Science, Technology and Innovation, October, Vol. 5, p. 12. Pavitt, D. (1997), ‘‘Retailing and the high street: the future of the electronic home shopping industry’’, International Journal of Retail and Distribution Management, Vol. 25 No. 1, pp. 38-43. PreFontaine, M. (1999), ‘‘Beyond shopping centres – e-commerce’’, British Council of Shopping Centres Conference. Quelch, J. (1999), ‘‘Retailing – confronting the challenges that face bricks and mortar’’, Harvard Business Review, Vol. 77 No. 4, July/August, p. 159. Rheingold, H. (1993), Virtual Community: Homesteading on the Electronic Frontier, Addison Wesley, Reading, MA.
Reynolds, J. (2000), ‘‘Pricing dynamics and European retailing: direct and indirect impacts of eCommerce’’, Proceedings of the International EARCD Conference on Retail Innovation (CD-ROM), ESADE, European Association for Education and Research in Commercial Distribution, Barcelona. Scudder, B. (2000), ‘‘Dubai comes of e-age’’, Gulf Marketing Review, November, pp. 86-7. Shim, S., Eastlick, M.A. and Lotz, S. (2000), ‘‘Assessing the impact of Internet shopping on store shopping among mall shoppers and Internet users’’, Journal of Shopping Center Research. Shim, S., Eastlick, M.A., Lotz, S.L. and Warrington, P. (2001), ‘‘An online prepurchase intentions model: the role of intention to search’’, Journal of Retailing, Vol. 77 No. 3, pp. 397-416. Shop.org (2001), Shop.org Press Room, National Retail Federation, Washington DC, available at: www.shop.org Sunday Times Business (2000a), 3 December. Sunday Times Business (2000b), ‘‘Amazon loses to offline rivals’’, 10 December. Verdict (2000), Verdict on Electronic Shopping 2000, Verdict Research, London. Verdict (2001), Verdict on Electronic Shopping 2001, Verdict Research, London. Verdict (2002), Verdict on Electronic Shopping 2002, Verdict Research, London. Vincent, A., Clark, H. and English, A. (2000), ‘‘Retail distribution: a multi-channel traffic jam’’, International Journal of New Product Development & Innovation Management, Vol. 2 No. 2, pp. 179-96.
Further reading Blank, C. (2000), ‘‘Study: e-tailers must close more sales’’, Marketing News, 18 December, p. 86. Craft, M. (2000), ‘‘Shopping in the new millennium’’, NAMNEWS, 4 August. Doidge, R. and Higgins, C. (2000), The Big Dot.com Con, Colliers Conrad Ritblat Erdman. Royal Institute of Chartered Surveyors (RICS) Foundation (2000), 20:20 Visions of the Future, RICS, London.
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Perceived risks as barriers to Internet and e-commerce usage Yehoshua Liebermann and Shmuel Stashevsky
The authors Yehoshua Liebermann is Executive MBA Director and Shmuel Stashevsky is International MBA Director, both at the Graduate School of Business Administration, Bar-Ilan University, Ramat Gan, Israel. Keywords Risk, Perception, Consumer behaviour, Internet, Business development, Marketing Abstract Previous research suggests that perceived risk is an important ingredient in the consumer decision-making process. The purpose of the present study is to investigate what are the perceived barriers to Internet usage and e-marketing by both users and non-users. By understanding these potential obstacles, more efficient marketing strategies will become available that will drive Internet use and e-commerce. A detailed perceived risks map has been developed using a qualitative research paradigm. We suggest a model with the factors affecting the Internet’s perceived risk elements. The factors are demographic traits and usage behavior characteristics. The model is tested against a sample of 465 employed adults. Electronic access The research register for this journal is available at http://www.emeraldinsight.com/researchregisters The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/1352-2752.htm
Qualitative Market Research: An International Journal Volume 5 . Number 4 . 2002 . pp. 291–300 # MCB UP Limited . ISSN 1352-2752 DOI 10.1108/13522750210443245
Introduction Internet usage is growing rapidly all over the globe. As reported by Nua, Internet users over the world amounted to 513 million in August 2001, 8.5 per cent of the world’s population (nua.com). Global usage growth rate for the previous 12 months is estimated at 40 per cent. In the USA and Canada 166 million were online in August 2001, 60 per cent of the population (NielsenNetRatings, 2001a). In Israel, 39 per cent of the population above 16 has home Internet access, 18 per cent have work access, and 15 per cent have access at other places (NielsenNetRatings, 2001b). The recent slowdown in Internet business does not necessarily have an immediate effect on usage trends and rates. Although these figures seem quite impressive, especially in view of the short and bumpy history of the Internet, they by no means indicate usage peaks or saturation. On the contrary, sellers of Internet time have much left to do. Marketing efforts intended to enhance Internet use are expected to follow a twofold strategy: turn non-users into new users and expand usage of current users. Theoretically, both strategic avenues seem plausible. Nonetheless, the job is not an easy one to perform. As is the case with more traditional products, no success prescription can be guaranteed. Consumers make their own decisions as to how much to consume and/or use of an abundant array of products and services. Decisions of this type are made for each good by weighing various utilities derivable from using an item against what it takes from the consumer in terms of different resources. In a more theoretical phrasing a traditional economic model would claim that consumers make their consumption/usage decisions by equating marginal utility (or benefit) to marginal cost associated with each given item considered (Katona, 1953). There is no a-priori reason to distinguish between Internet as a consumption good to any other economic service or product. Internet can be characterized in terms of both utility and cost to users (Morris and Turner, 2001; Thibodeaux, 2000). Conceptually, consumers’ attitudes towards Internet usage can be described along the lines of marginal utility and cost considerations that determine an equilibrium amount of usage. Such a model can be developed even to explain and/
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or predict a diffusion path of a new service like Internet along time. As Liebermann and Paroush (1982) show adoption rates of newly offered goods depend crucially on the marketer’s ability to mitigate perceived risk involved with new goods offered. Clearly, the effect of perceived risk is not limited to the deliberation of non-users who explore the option of becoming users. It is equally relevant to users who consider expanding use. To illustrate, a cell-phone user may be deterred from increasing usage due to perceived risk of extra radiation. The purpose of the present study is to investigate the role of perceived risks as potential barriers to Internet and e-commerce usage. In order to fulfill this goal a research design of three stages has been applied. First, using a qualitative research approach a detailed map of perceived risks has been produced. Second, a model describing factors affecting perceived risks has been constructed, using a qualitative scheme of analyzing inter-relationships between given variables. Finally, the model has been tested empirically against field data.
Conceptual framework In consumer behavior literature perceived risk is a long rooted central concept (Cox and Rich, 1964). Its centrality is due to its multidimensional nature. Traditionally, it is common to decompose overall perceived risk to different species as financial, physical, psychological (or mental), and social (Bettman, 1973). Following Dekimpe et al. (2000), it seems that for Internet and other hi-tech items product group specific technological risk (fear of technologically complicated innovations) can be added to the list. This set of perceived risk components implies that in order to expand Internet usage, suppliers must first learn what are the potential obstacles faced by potential users and non-users and only then attempt to design creative marketing solutions. Those solutions will enable potential customers to handle perceived risk more effectively and ultimately reduce it to acceptable levels. Such an approach amounts to creating an efficient user-friendly decision support system, as conceptualized by Silverman et al. (2001). Consumers supported by a system of this type will be more likely to either turn from
non-shoppers into active shoppers, or increase their previous shopping volume. It is the purpose of the present study to investigate what are the perceived barriers to Internet usage and e-marketing by both users and non-users. By understanding these potential obstacles more efficient marketing strategies will become available that will drive Internet use and e-commerce. Previous research suggests that perceived risk is an important ingredient in consumer Internet decision-making process. For example, Donthu and Garcia (1999) found that Internet shoppers are less risk averse than Internet non-shoppers are. This distinction indicates that non-users are likely to perceive higher levels of subjective risk associated with Internet usage as compared with users. Nevertheless, Donthu and Garcia (1999) do not spell out specific risk components as perceived by consumers. Practically, an accurate identification of different perceived risk types is essential for Internet service providers. Understanding the barriers that inhibit use of potential buyers enables providers to employ suitable means that are intended to help consumers reduce risk levels (Jarvenpaa et al., 2000). In turn, lowered perceived risk levels are expected to enhance consumers’ responses in terms of purchase intention and actual sales (Mitchell et al., 1999). A preliminary recent literature review reveals a series of main perceived risk components, notably privacy and security. Privacy attracts considerable attention as increasing amounts of information flow through various electronic communication channels (Introna and Pouloudi, 1999). Indeed, business organizations implement various measures to protect present and future Internet shoppers (Salkin, 1999), but electronic shopping channels provoke considerable perceived risk to many consumers. A more detailed study (Jones and Carlson, 2001) focused on privacy concerns of e-mail users regarding different items of personal information. To illustrate, their findings indicate that 73 per cent felt ‘‘not comfortable at all’’ giving up their social security number. In general, they found that the majority of e-mail users express concern about Internet privacy, although only 28 per cent are ‘‘very concerned’’. Another recent survey by Pew Internet and American Life Project (2000)
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estimated Internet user fears. The two main concerns were: (1) Business people you do not know getting personal information about you and your family (84 per cent of the users were concerned). (2) Computer hackers getting your credit card number online (68 per cent were concerned). Privacy is not the only source of subjective Internet risk as perceived by consumers. Miyazaki and Fernandez (2001) maintain that privacy and security risk perceptions are the major obstacles in the development of consumer related e-commerce activities. Some of the sources cited above document security concerns as well. The Gallup poll analysis by Jones and Carlson (2001) reports that 46 per cent of e-mail users are very concerned by misuse of credit card information given out on the Internet, while 36 per cent are ‘‘somewhat’’ concerned. Altogether, 82 per cent are concerned to some degree about security issues. Apart from privacy and security, both users and non-users generate perceived risks regarding other risk components. Miyazaki and Fernandez (2001) mention that perceived risks derive from the relative novelty of the Internet. However, we view novelty itself as an independent risk component. Public surveys as Nielsen and Gallup address some other risk types. In their analysis of the Gallup poll scores regarding e-mail users, Jones and Carlson (2001) direct attention to such risks as being tracked by Internet ‘‘cookies’’, monitoring of use by Internet provider or employer, and receiving undesired e-mails. The risk of unwanted junk mail is also identified by Pew Research Center (1998). Two additional perceived risk components are dealt with on a much more limited scale in the literature. Armstrong et al. (2000) refer to Internet addiction as potential perceived risk. High fees are a source of perceived financial risk to Israeli users (Pew Research Center, 1998). Concern about slow connection and responses can be interpreted as some sort of technological risk. As shown by Pew Research Center (1998), consumers worry about slow operation as well. This finding has been identified by other researchers such as Hoag (1998) and Sevcik and Bartlett (2001). Interestingly enough, in terms of physical perceived risk, a recent study conducted by
Vividence Corporation (2001) before and after September 11, 2001 shows that 29 per cent of the respondents claim that they would shop more online since they are concerned about safety in stores. In the present study a detailed perceived risks map is researched. Qualitative research, based on reviewing scientific literature, interviews with Internet experts, and interviews with consumers, identified the following nine different risk components: (1) Internet credit card stealing; (2) supplying personal information; (3) pornography and violence; (4) vast Internet advertising; (5) information reliability; (6) lack of physical contact; (7) not supplying Internet products purchased; (8) missing the human side in Internet purchases; and (9) Internet usage addiction. As done in some sources cited above, a distinction is made between users and nonusers. Demographic effects as documented in the literature pertain to differences in Internet usage. The main effects considered are those of gender and age. In the present research the differences based on gender, age, marital status and education are applied to potential risk perception. Following Miyazaki and Fernandez (2001) the effect of usage activity volume on the perceived risk elements is analyzed as well. The model we suggest to analyze the variables that affect perceived risk elements is presented in Figure 1. Hypotheses H1. The two main perceived risk elements are Internet credit card stealing and supplying personal information. Figure 1 The factors affecting the Internet perceived risk elements: demographic traits
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H2. Internet users are likely to perceive higher risks in the Internet than non-users concerning technical elements. H3. Females are likely to perceive higher risks in the Internet than males. H4. Older people are likely to perceive higher risks in the Internet than younger ones. H5. Married people are likely to perceive higher risks in the Internet than unmarried people. H6. People with low education level are likely to perceive higher risks in the Internet than high-educated people. H7. Internet users that never bought online are likely to perceive higher risks in the Internet than Internet users that actually bought online. H8. Light Internet users are likely to perceive higher risks in the Internet than heavy Internet users.
Methodology Subjects The respondents were 465 employed adult Israelis from a variety of organizations. Response rate was about 85 per cent. A total of 372 Internet users (80 per cent) were distinguished from 93 non-users (20 per cent). Sample characteristics The sample characteristics are: . Of the sample, 58 per cent were male and 42 per cent female. . The majority of the sample (68 per cent) was married, 25 per cent single, 6 per cent divorced and 1 per cent widowed. . Mean age is 37. . Education: elementary school 1 per cent, high school 22 per cent, partial higher education 17 per cent, BA degree 36 per cent, MA or PhD degree 24 per cent. . The majority of the sample (87 per cent) has a computer at home. . The majority of the sample (80 per cent) consists of Internet users. . Out of the Internet users 80 per cent use the Internet at home, 79 per cent use the Internet at work, and 13 per cent use the Internet at an educational institute. Measures Respondents were interviewed by means of a written questionnaire researching their Internet and e-marketing usage habits and perceptions.
The questionnaire was composed of 76 questions covering different aspects of Internet usage. Users were asked first to document their usage behavior (e.g. hours per week, number of e-mail messages sent per week) then their level of satisfaction of various service attributes (e.g. access time, e-mail accessibility) and finally their various usage channels (e.g. news, search engines). Non-users were asked as to the reasons for their refraining from use (e.g. access to computers, cost of service). Both users and non-users were asked jointly two sets of questions regarding their general attitudes to Internet (e.g. privacy protection, addiction) and their socio-demographic traits. Except for the usage behavior and demographic parts all answers were closed form measured on a six-point Likert scale. The main variables that were analyzed in this study are the following nine perceived risk elements: (1) Internet credit card stealing; (2) supplying personal information; (3) pornography and violence; (4) vast Internet advertising; (5) information reliability; (6) lack of physical contact; (7) not supplying Internet products purchased; (8) missing the human side in Internet purchases; and (9) Internet usage addiction. The answer scale for the perceived risk elements was: 1 = strongly disagree, 2 = disagree, 3 = slightly disagree, 4 = slightly agree, 5 = agree, 6 = strongly agree. The four demographic traits that were analyzed in this study and their scales are: (1) Gender: 1 = male, 2 = female. (2) Younger/older age: 1 = age up to 35, 2 = age above 35. (3) Married/unmarried: 1 = married, 2 = unmarried. (4) High/low education: 1 = high education (at least BA degree), 2 = low education. The three usage behavior variables that were analyzed in this study and their scales are: (1) Internet user/non-user: 1 = Internet user, 2 = Internet non-user. (2) Bought online: 1 = Internet user who bought online at least once, 2 = Internet user who never bought online. (3) Heavy/light Internet user: 1 = heavy user (above mean Internet usage hours), 2 = light user.
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Data analysis T-test for analyzing mean differences of independent samples was applied to analyze independently the mean of the perceived risk elements of each one of the sub-populations included in this study. Socio-demographic traits and usage behavior characteristics are tested independently since consumer information in typical Internet Web sites is rarely complete. Consequently, Internet service providers may need to make operational decisions based on partial information only. Descriptive statistics and correlation coefficients were also presented in order to enable additional insights. The statistical package used in this study was SPSS.
Results 1. Descriptive statistics and relationship among variables Table I presents the mean, standard deviation of the perceived risk variables and Figure 2
shows their ranking in a bar chart. Table II presents the correlation coefficients among them. The two main perceived risk elements are Internet credit card stealing and supplying personal information. Therefore, H1 was supported. 2. Differences between Internet users and non-users Table III and Figure 3 show the average rankings of the perceived risk elements for the two segments: Internet users and non-users. From Table III it can be seen that the two most significant risks are: Internet credit card stealing and supplying personal information. Significant user/non-user differences are measured for two risks: Internet credit card stealing and vast Internet advertising. Users’ perceived risk of these two elements is significantly higher as compared to non-users. Therefore, H2 that Internet users will perceive higher risks in the Internet than nonusers concerning the technical elements was partly supported.
Table I Mean and standard deviation of the perceived risk elements Perceived risk element 1. 2. 3. 4. 5. 6. 7. 8. 9.
Mean (all samples) n = 465
Standard deviation
4.52 4.39 3.79 3.62 3.52 3.35 3.35 3.13 2.92
1.43 1.33 1.67 1.52 1.35 1.55 1.41 1.48 1.47
Internet credit card stealing Supplying personal information Pornography and violence Vast Internet advertising Information reliability Lack of physical contact Not supplying Internet products purchased Missing the human side in Internet purchases Internet usage addiction
Figure 2 Perceived risk elements – all samples
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Table II Correlation coefficients among the perceived risk variables (Pearson coefficients) Study variables 1. 2. 3. 4. 5. 6. 7. 8. 9.
Credit card stealing Supplying personal information Pornography and violence Vast Internet advertising Information reliability Lack of physical contact Not supplying products Missing the human side Internet usage addiction
1
2
3
4
5
6
7
8
9
1 0.56* 0.38* 0.17* 0.29* 0.32* 0.40* 0.29* 0.17*
1 0.41* 0.26* 0.37* 0.32* 0.38* 0.27* 0.22*
1 0.23* 0.46* 0.25* 0.34* 0.27* 0.40*
1 0.35* 0.15* 0.26* 0.20* 0.29*
1 0.24* 0.35* 0.26* 0.34*
1 0.53* 0.76* 0.26*
1 0.46* 0.31*
1 0.30*
1
Notes: * Correlation is significant at the 0.05 level (two-tailed), n = 465 Table III Perceived risk elements, mean rankings Mean Perceived risk element 1. 2. 3. 4. 5. 6. 7. 8. 9.
Internet credit card stealing Supplying personal information Pornography and violence Vast Internet advertising Information reliability Lack of physical contact Not supplying Internet products purchased Missing the human side in Internet purchases Internet usage addiction
Users (80 per cent)
Non-users (20 per cent)
4.61* 4.42 3.81 3.76* 3.56 3.34 3.32 3.09 2.91
4.17* 4.26 3.72 3.04* 3.36 3.43 3.45 3.30 2.99
Notes: * Statistically significant difference (at p < 0.05 two-tailed), n = 465 Figure 3 Perceived risk elements: users and non-users
3. Effects of demographic traits Naturally, it is intriguing to understand why given risk elements are ranked differently by respondents. One potential source affecting consumer decisions and attitudes is their individual demographic traits. Tables IV-VII list the mean of the perceived risk elements associated with each
sub-population according to the following demographic traits: . gender; . age; . marital status; and . education. T-test analysis of independent samples was applied to test if the mean difference was statistically significant. 296
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Table IV Effect of gender, mean rankings Mean Perceived risk element 1. 2. 3. 4. 5. 6. 7. 8. 9.
Internet credit card stealing Supplying personal information Pornography and violence Vast Internet advertising Information reliability Lack of physical contact Not supplying Internet products purchased Missing the human side in Internet purchases Internet usage addiction
Male (58 per cent)
Female (42 per cent)
4.40* 4.32 3.57* 3.76* 3.51 3.24 3.29 2.98* 2.98
4.68* 4.47 4.08* 3.44* 3.54 3.51 3.44 3.34* 2.83
Notes: * Statistically significant difference (at p < 0.05 two-tailed), n = 465 Table V Effect of age, mean rankings Age Perceived risk element 1. 2. 3. 4. 5. 6. 7. 8. 9.
Internet credit card stealing Supplying personal information Pornography and violence Vast Internet advertising Information reliability Lack of physical contact Not supplying Internet products purchased Missing the human side in Internet purchases Internet usage addiction
Up to 35 (54 per cent)
Above 35 (46 per cent)
4.45 4.26* 3.58* 3.56 3.42 3.27 3.35 2.99* 2.75*
4.58 4.51* 4.03* 3.71 3.65 3.43 3.32 3.28* 3.15*
Notes: * Statistically significant difference (at p < 0.05 two-tailed), n = 465 Table VI Effect of marital status, mean rankings Mean Perceived risk element 1. 2. 3. 4. 5. 6. 7. 8. 9.
Internet credit card stealing Supplying personal information Pornography and violence Vast Internet advertising Information reliability Lack of physical contact Not supplying Internet products purchased Missing the human side in Internet purchases Internet usage addiction
Married (68 per cent)
Unmarried (32 per cent)
4.60 4.53* 4.05* 3.65 3.72* 3.42 3.41 3.23* 3.05*
4.36 4.08* 3.24* 3.58 3.12* 3.24 3.25 2.92* 2.66*
Notes: * Statistically significant difference (at p < 0.05 two-tailed), n = 465
Females perceive significantly higher risks compared to males in three elements. Only the vast Internet advertising element worries men more than females. Therefore, H3 that females will perceive higher risks in the Internet than males was partially supported. The surprising finding is the lower perceived
risk of females concerning the vast Internet advertising. Older people perceive significantly higher risks compared to younger people in four elements. Therefore, H4 that older people will perceive higher risks in the Internet than younger ones was partly supported.
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Table VII Effect of education, mean rankings Mean Academic education Non-academic education (60 per cent) (40 per cent)
Perceived risk element 1. 2. 3. 4. 5. 6. 7. 8. 9.
Internet credit card stealing Supplying personal information Pornography and violence Vast Internet advertising Information reliability Lack of physical contact Not supplying Internet products purchased Missing the human side in Internet purchases Internet usage addiction
4.48 4.35 3.68 3.68 3.59 3.24* 3.26 3.00* 2.79*
4.61 4.43 3.96 3.51 3.37 3.54* 3.49 3.32* 3.09*
Notes: * Statistically significant difference (at p < 0.05 two-tailed), n = 465
Married people perceive significantly higher risks in the Internet in the elements listed above compared to unmarried people. Therefore, H5 that married people will perceive higher risks in the Internet than unmarried people was partly supported. Those with non-academic education perceive significantly higher risks in the Internet in the asterisked elements than academically educated people. So H6 that people with low education level will perceive higher risks in the Internet than more educated people was partly supported. 4. Effects of usage behavior A complementary set of effects can be attributed to usage behavior. Tables VIII and IX exhibit a set of significant effects of this type. Internet users that never buy on the Internet perceive significantly higher risks in the Internet in the six elements listed compared to those who bought on the Internet. Therefore, H7 that Internet users that never bought online will perceive higher
risks in the Internet than Internet users that actually bought online was partly supported. Internet light users perceive significantly higher risks in the Internet in the three elements listed above compared to those who are heavy Internet users. Therefore, H8 that light Internet users will perceive higher risks in the Internet than heavy Internet users was partly supported.
Discussion and implications Perceived risks are key elements in the consumer behavior literature. Some studies focus on the perceived risks of the Internet and e-commerce (Donthu and Garcia, 1999; Introna and Pouloudi, 1999; Mitchell et al., 1999; Jarvenpaa et al., 2000; Miyazaki and Fernandez, 2001; Silverman et al., 2001). However, these studies consider a limited scope of perceived risk elements, especially security and privacy. In addition, they do not suggest a model to understand the influencing
Table VIII Effect of actual Internet buying, mean rankings
Perceived risk element 1. 2. 3. 4. 5. 6. 7. 8. 9.
Mean Internet user and buyer Internet user non-buyer (47 per cent) (53 per cent)
Internet credit card stealing Supplying personal information Pornography and violence Vast Internet advertising Information reliability Lack of physical contact Not supplying Internet products purchased Missing the human side in Internet purchases Internet usage addiction
4.38* 4.18* 3.61* 3.87 3.50 2.97* 3.05* 2.79* 2.83
Notes: * Statistically significant difference (at p < 0.05 two-tailed), n = 372 Internet users
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4.79* 4.60* 3.95* 3.69 3.62 3.66* 3.63* 3.36* 2.98
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Table IX Effect of usage volume, mean rankings Mean Heavy user – over mean (41 per cent)
Perceived risk element 1. 2. 3. 4. 5. 6. 7. 8. 9.
Internet credit card stealing Supplying personal information Pornography and violence Vast Internet advertising Information reliability Lack of physical contact Not supplying Internet products purchased Missing the human side in Internet purchases Internet usage addiction
Light user (59 per cent)
4.46 4.18* 3.72 3.86 3.64 2.99* 3.25 2.87* 3.01
4.68 4.58* 3.82 3.75 3.50 3.58* 3.35 3.35* 2.80
Notes: * Statistically significant difference (at p < 0.05 two-tailed), n = 372 Internet users
factors. In this study a detailed nine elements perceived risks map is researched. Furthermore, a model is suggested with the factors affecting the perceived risk elements. The model includes demographic traits and user behavior characteristics. ‘ ... Another . . . finding identifies two central perceived risks that have a crucial effect on both Internet current and future users, and amount of usage: Internet credit card stealing and supplying personal information... ’
The model and the eight proposed hypotheses were tested empirically with a sample of 465 employed adults. The hypotheses were supported regarding some of the perceived risk elements. Table X summarizes the study findings in terms of demographic and usage behavior effects. Another important finding identifies two central perceived risks that have a crucial effect on both Internet current and future users, and amount of usage: Internet credit
card stealing and supplying personal information. These two perceived risk elements were obtained also as the major concerns of US Internet users in the Pew Internet and American Life Project (2001), but in reverse ranking. These findings can serve as preliminary guidelines to Internet marketers as well as Internet solution providers who would like to mitigate these effects in order to enhance Internet usage motivation and e-commerce activity of private consumers. In addition, it has been shown that both demographic and usage behavior traits have their own effects in terms of perceived risk formation. These multi-attribute findings can be used by marketers along the personalization process. Thereby each individual can be approached more efficiently according to his or her expected specific perceived risk structure. This way, personalized advertising messages and promotional offers can be adopted to reduce perceived risk by Internet users. Caution in interpreting the results is required. Generalizing from the responses of a
Table X Significant differences in perceived risk elements by demographic traits and usage behavior characteristics Perceived risk element 1. 2. 3. 4. 5. 6. 7. 8. 9.
Internet credit card stealing Supplying personal information Pornography and violence Vast Internet advertising Information reliability Lack of physical contact Not supplying products purchased Missing the human side in purchases Internet usage addiction
Gender
Age
Married
* *
* *
Education
* * *
Internet user
Buyer
Usage volume
*
* * *
*
* * *
*
* *
* *
Notes: * Statistically significant difference (at p < 0.05 two-tailed)
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* *
* * *
* *
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sample in a specific society to the behavior of consumers in other countries is not so simple. It could be argued, for example, that the sympathetic view of the respondents to the Internet is a result of their specific cultural, organizational, and/or personal attributes. Thus, studies of a similar nature with different types of cultural settings are recommended before trying to generalize these findings. The model of factors influencing perceived risk elements as advocated here may have implications for both future research and practice. More research is needed to identify additional influencing factors, such as personality traits. Another aspect that is recommended for future research is investigating, in a longitudinal study, the effects of perceived risk elements on actual buying behavior of the online consumers in the time to come.
References Armstrong, L., Phillips, J.G. and Saling, L.L. (2000), ‘‘Potential determinants of heavier Internet usage’’, International Journal of Human Computer Studies, Vol. 53, pp. 537-50. Bettman, J. (1973), ‘‘Perceived risk and its components – a model and empirical test’’, Journal of Marketing Research, Vol. 10, pp. 184-90. Cox, D.F. and Rich, S.U. (1964), ‘‘Perceived risk and consumer decision making – the case of telephone shopping’’, Journal of Marketing Research, Vol. 1, pp. 2-39. Dekimpe, M.G., Parker, P.M. and Sarvary, M. (2000), ‘‘Global diffusion of technological innovations – a coupled-hazard approach’’, Journal of Marketing Research, Vol. 37, pp. 47-59. Donthu, N. and Garcia, A. (1999), ‘‘The Internet shopper’’, Journal of Advertising Research, Vol. 39 No. 3, pp. 52-8. Hoag, A. (1998), ‘‘Measuring usage and satisfaction’’, D-Lib Magazine, March, available at: www.dlib.org Introna, L.D. and Pouloudi, A. (1999), ‘‘Privacy in the information age: stakeholders, interests and values’’, Journal of Business Ethics, Vol. 22 No. 1, pp. 27-38. Jarvenpaa, S.L., Tractinsky, N. and Vitale, (2000), ‘‘Consumer trust in Internet store’’, Information Technology and Management, Vol. 1, pp. 45-71.
Jones, J.M. and Carlson, D.K. (2001), ‘‘Majority of e-mail users express concern about Internet privacy’’, Gallup Poll, available at: www.gallup.com/poll/ releases/pr010628.asp (accessed 28 June 2001). Katona, G. (1953), ‘‘Rational behavior and economic behavior’’, Psychological Review, pp. 307-18. Liebermann, Y. and Paroush, J. (1982), ‘‘Economic aspects of diffusion processes’’, Journal of Economics and Business, Vol. 34, pp. 95-100. Mitchell, V.W., Davies, F., Moutinho, L. and Vassos, V. (1999), ‘‘Using neural networks to understand service risk in the holiday product’’, Journal of Business Research, Vol. 46, pp. 167-80. Miyazaki, A.D. and Fernandez, A. (2001), ‘‘Consumer perceptions of privacy and security risks for online shopping’’, The Journal of Consumer Affairs, Vol. 35 No. 1, pp. 27-44. Morris, M.G. and Turner, J.M. (2001), ‘‘Assessing users’ subjective quality of experience with the World Wide Web: an exploratory examination of temporal changes in technology acceptance’’, International Journal of Human Computer Studies, Vol. 54 No. 6, pp. 877-901. NielsenNetRatings (2001a), ‘‘Average Web usage’’, available at: http://pm.netratings.com/nnpm/owa/ NRpublicreports.usagemonthly (accessed 22 October 2001). NielsenNetRatings (2001b), ‘‘Internet usage statistics’’, available at: http://epm.netratings.com/il/web/ NRpublicreports.usagemonthly (accessed 22 October 2001). Pew Internet and American Life Project (2000), ‘‘Trust and privacy online: why Americans want to rewrite the rules’’, available at: www.pewinternet.org/reports/ toc.asp?Report=19 (accessed 17 July 2002). Pew Research Center (1998), ‘‘The Internet news audience goes ordinary’’, available at: http://208.240.91.18/ tech98sum.htm (accessed 17 July 2002). Salkin, S. (1999), ‘‘Fear of buying’’, Logistics Management and Distribution Report, Vol. 38 No. 5, p. 101. Sevcik, P. and Bartlett, J. (2001), ‘‘Understanding Web performance’’, Business Communications Review, Vol. 31 No. 10, pp. 28-36. Silverman, B.G., Bachann, M. and Al-Akharas (2001), ‘‘Implications of buyer decision theory for design of e-commerce Web sites’’, International Journal of Human Computer Studies, Vol. 55, pp. 815-44. Thibodeaux, T. (2000), ‘‘Online shoppers defined’’, Dealerscope, December, p. 8. Vividence Corporation (2001), ‘‘Holiday readiness 2001: helping retailers prepare for the holiday season’’, Vividence Research Report, available at: www.vividence.com
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1. Introduction
Assessments of the ‘‘new economy’’ scenario Lucio Fuentelsaz Juan Pablo Maicas-Lo´pez and Yolanda Polo
The authors Lucio Fuentelsaz is Associate Professor of Strategy and Management, Juan Pablo Maicas-Lo´pez is a Research Assistant and Yolanda Polo is Professor of Marketing, all at the University of Zaragoza, Zaragoza, Spain. Keywords Internet, Economy, Value, Strategic management Abstract This paper is devoted to a consideration of the presentday situation faced by the digital economy. The appearance of this phenomenon as one of the basic pillars of modern economies has provoked increasing interest in academic circles which, for the moment, is not fully reflected in the economic literature. Against this background, the central aim of this study is to synthesise the current state of the question, accepting the limitations imposed on such an exercise that is supposed by the scarcity of sources alluded to earlier. Qualitative research in this area has concentrated on the strategies that generate competitive advantages in a digital economy scenario. We follow this line by focusing on this question, trying to determine whether these studies converge in terms of proposals that can be used as a reference point for firms operating in virtual markets. Establishing the foundations of this new scenario is essential in order to consolidate the digital economy as an independent discipline. Electronic access The research register for this journal is available at http://www.emeraldinsight.com/researchregisters The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/1352-2752.htm Qualitative Market Research: An International Journal Volume 5 . Number 4 . 2002 . pp. 301–310 # MCB UP Limited . ISSN 1352-2752 DOI 10.1108/13522750210443254
In the last decade we have witnessed an economic revolution that has its foundations in the sustained development of a series of activities, and where it is possible to find a common essence or underlying element, namely the connection between these activities with the digital or the virtual. The growth of these activities has been such that they have ended up occupying a predominant role in the economies of the leading Western countries, with this being clearly reflected in their respective GDPs. This phenomenon has acquired such relevance that some authors (Hitt et al., 2001) argue that we are passing through an era of true revolution which can be properly compared with the industrial-type revolutions of earlier centuries. In this regard, it is a complicated task to find a common denominator for this amalgam of activities. The speed of its appearance and the clearly novel element that is associated with this environment initially led to this emerging scenario being given the name of the new economy. However, with the passage of time this description has met with almost unanimous rejection. This is the case, first, because its now ‘‘lengthy’’ existence completely nullifies its qualification as new. However, the main reason for its rejection lies in the fact that this very passage of time has allowed us to appreciate that whilst we are perhaps faced with a whole range of new opportunities and threats, even with a new way of doing business, we are not dealing with a distinct substrata of the central concept of the economy or of business in general. Although there is no doubting the technological change, this does not necessarily imply a change in the laws that govern the behaviour of the economy (Shapiro and Varian, 1999), in that the keys to business success or failure will continue to be supported on the same pillars. Thus, we now find ourselves contemplating a different context from that in which the activities of the so-called traditional economy have been carried out. This new context has certain peculiarities that require a differentiated treatment, not because of the peculiarities in themselves (to which other sectors have possibly been subjected over the course of history), but rather because of the speed of growth and the importance that
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these have acquired in the international ambit. It is this omnipresent characteristic that has aroused the interest of the whole of society, from governments to researchers, and including all interest groups of any importance. Returning to the question of what name should be given to this phenomenon, and having rejected that of the new economy, various alternatives have subsequently been employed. From amongst these, the most accepted and widely used have been the digital economy, the network economy and the information economy. The first two make allusion, or are to be found, in the technological ambit, whilst the third is more closely linked to the good that underlies this whole process. Although it is certainly possible to establish some differences between these three definitions, in what follows we will refer to the phenomenon in question through the indistinct use of any of them. This paper rests on two central objectives. The first is to try to insert the information economy into the different theoretical frameworks used in the analysis of organisations, essentially from two points of view, namely the economy of organisations (agency theory, transaction costs theory, . . .) and strategic management (competitive forces, resource-based view). The second objective, which we will approach in greater detail, is to study the strategic peculiarities of the information economy, as well as the forms of value creation that have been assigned to it in recent lines of research. In summary, an attempt will be made to synthesise the state of the art in an area that is still little known. Given this comparative lack of knowledge, the limits to the generalising character of any attempted synthesis must be recognised, bearing in mind that this area is still in an absolutely embryonic state. Against this background, some authors understand the digital economy as a source of value creation. However, there is no generalised belief in the potential of the digital economy per se. Without taking the matter any further, Porter (2001) considers all the generating apparatus surrounding the Internet as a simple tool and not as an end in itself. By way of illustration, he uses the recent collapse of many of the dot.com firms, which he considers to have been lacking in any viability plan. In this present work we will try to offer both points of view, ie. that which
considers it possible for income to be generated in the scenario we have described, and that which considers the Internet and all the generating apparatus that surrounds it, as simply one more tool with which to face the competition. The information concept therefore acquires a particularly relevant role in this scenario. Furthermore, this concept is not a new one, but has in fact been the subject of specific attention on the part of various economic disciplines. Having said that, the concept of information goods, in the sense of these being susceptible to digitalisation (Shapiro and Varian, 1999), adopts a new dimension in the context of the digital economy. In the present work we will make allusion to both definitions[1], that is to say, to the traditional concept of information and to that of the information good which, in summary, is the output derived from the said process. Both definitions allow for the affirmation that we are passing through an era in which knowledge and the network economies will be the motor of support, as compared to efficiencies gained by way of economies of scale that have presided over earlier decades (Shapiro and Varian, 1999). The rest of the work will be organised in a way that meets these objectives. In the first part we will try to adjust or adapt the traditional theoretical frameworks used in business organisations to the new reference scenario. In the second, and as we have already indicated, we will focus on the keys to value creation in the digital economy. The paper closes with a review of the main conclusions, where emphasis will be placed on the main points that have emerged.
2. A reference to theoretical-conceptual frameworks 2.1. Strategic management The analysis of traditional strategic management has referred to markets and/or firms that are mature, or at least about which there is a certain degree of knowledge. However, the markets and/or firms referred to in this present work differ substantially from those considered under this traditional approach. This new scenario is characterised by digitalisation and virtuality, with the transactions that take place in it being conducted via open networks that have their
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support in the large-scale infrastructure represented by the Internet (Amit and Zott, 2001). These distinctive particularities oblige us to revise some of the basic paradigms in strategic management, with the aim of adapting them to the new scenario being opened by the digital economy. In this paper we will carry out an analysis that runs in parallel with the bifocal one that has traditionally being made in this area. The two perspectives used to view the majority of the phenomena being considered here have been organised in two levels, namely that of the firm and that of the market-industry. As a result, two leading lines of thought have emerged. On the one hand, the Porter school, which has focused to a greater extent on the analysis of questions from the industry point of view; on the other, the so-called resources approach (Wernerfelt, 1984; Barney, 1991; Peteraf, 1993; Teece et al., 1997), which has always considered the firm as the unit of analysis. 2.1.1. Competitive forces and the value chain This approach allows us to carry out the dual analysis referred to earlier, on the one hand taking the market as the point of reference and, on the other, going down to firm level, and using either the competitive nucleus (Porter, 1980), or the value chain (Porter, 1985) as the analytical tool. Beginning with the latter, the value chain is translated from a real to a virtual plane (Rayport and Sviokla, 1995), at least with respect to those activities that generate competitive advantages, and with which the value chain is particularly concerned. In this sense, the digital economy is of interest in the sense that it is characterised by some distinctive features that allow for value to be generated in a way that is an alternative to business of a ‘‘conventional’’ type. The exploitation of virtual businesses should in no circumstances be an impediment for the continuation of the activities that have provided value to the organisation throughout the length of its history. Thus, in the virtual plane, the effort must be made in the direction of studying those activities that are conductors or generators of value, seeking to support and promote them with a view to sustaining this value creation. The second part of this study will be dedicated to considering these activities, and
thus we will not take our examination further at this point. Changing level, in our view the analysis of competitive forces takes on a new dimension when compared to its traditional concept. In its most classical interpretation, Porter speaks of achieving competitive advantage through the conquest of a solid market position, always taking into consideration the effect that competitive forces have on the market. According to this view, the forces are clearly defined and differentiated and, therefore, it is possible to carry out an exhaustive and detailed analysis of each and every one of them. Ultimately, size and the lifting of barriers to entry (also in the traditional sense – economies of scale, of scope, . . .) are the keys for the success of the business. In our new reference scenario, these forces are not so clearly delimited as in the initial conception of the competitive nucleus (see Figure 1). The linkages and networks that are established between all the participants in a sector, and including between different sectors, mean that the more traditional principles or recommendations lose their force. In the new figure, the nexus that is established between the participants diffuses their position within the fabric of the sector, and it is no longer a simple task to dissect the various forces. It is for this reason that, at least in our view, earlier recommendations lose a certain degree of force or validity. This affirmation connects with the limits of the firm, which will also be significantly altered by the earlier-mentioned disappearance of the relationships between the participants in the sector. This aspect will perhaps take on greater force in the following section, where we consider the internal organisation of the firm. Thus, we return to our view that the recommendations of Porter on the achievement of solid positions within the sector have become somewhat obsolete, at least insofar as they refer to their application in virtual businesses. The concepts of economies of scale and experience are substituted for new strategies such as the imposition of standards and the management of lock-in (Shapiro and Varian, 1999; Amit and Zott, 2001). Whilst these concepts are not new, they do take on a greater degree of interest in the network industries.
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Figure 1 Evolution of competitive forces
What we have just said does not imply that conventional barriers to entry (economies of scale, experience, etc.) are without value; rather, what we are suggesting is that they will not be sufficient so as to guarantee the achievement of long-lasting competitive advantages. At this point it is perhaps appropriate to recall that, despite the appearance of new concepts in the achievement of competitive advantages, we do not find ourselves faced with a new economic order. Thus, we can say that whilst there have quite possibly been changes in the form, this is not the case with the substance. 2.1.2. Resource-based view This strategic view descends to the level of the firm (as a unit of analysis), with this being understood as a set of resources and capabilities. In this line, it is the combination of this set of resources and capacities (especially those that are complementary and that present a specific character) that gives rise to the value creation within the firm (Wernerfelt, 1984; Barney, 1991; Peteraf, 1993). One of the most forceful criticisms of this strategic approach refers to the static character of its direction. The turbulent and evolutionary condition of virtual markets implies that this paradigm has difficulties in explaining the generation of sustainable rents. However, this weakness has been corrected by revised versions of the resource-based view.
Many of these are based on elements such as dynamic capabilities (Teece et al., 1997), knowledge (Foss, 1996) or learning (Lei et al., 1996). These theories would appear to be designed ad hoc for the study and understanding of virtual markets, given that they concentrate on questions that define the idiosyncrasies of such markets: dynamism, capacity to adapt, turbulence, . . . . We have already made reference to the importance of elements such as knowledge, learning, etc. and it is at this point where we must find justification for all these questions from a theoretical point of view. These paradigms, which have evolved from the resources approach, are also sustained by Schumpeterian principles, in this way combining two mechanisms to obtain competitive advantages. Thus, we have the initial way, postulated by the theory of resources, via the complementarity and specificity of resources (that will take the final form of Ricardian-type rents), with these, furthermore, being difficult to imitate, commercialise or substitute (Barney, 1986, 1991; Peteraf, 1993). This is combined with the second mechanism, based on permanent innovation processes. We can note, therefore, how the development of these paradigms can be studied in parallel with the strategic vision proposed by Schumpeter (1934). Returning briefly to the point made in the above paragraph, we can also appreciate that Schumpeter’s postulates all point in the same direction: the only way to generate sustainable
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advantage is by way of continuous and improved innovation processes. Present-day technological development, together with the excessive shortening of the life cycle of products (here, we are essentially referring to scenarios of the digital economy), converts permanent innovation (creative destruction) into a modus vivendi, rather than into an alternative that can be chosen in the creation of value. That is to say, in this new scenario innovatory capacity (or, at least, the speed of adaptation to continuous technological changes) is presupposed. Thus, we believe that the ability to be the first mover will retain its importance in specific situations; furthermore, it is clear that in this new scenario it will be necessary to ‘‘move’’, whether first or not and, if such a step is not taken, then any option to be competitive in this context will be lost. Therefore, and by way of summary, it is possible for us to affirm that the situation we are faced with in virtual markets and businesses is very similar to that described by Schumpeter when justifying the rents generation process by innovation. Similarly, it would appear to be appropriate to carry out an analysis which employs ex aequo the strategic view of resources and the theories of the Schumpeterian character. 2.2. The economy of organisations The digital economy is going to play a crucial role in the study of the internal organisation of firms. Many of the disciplines that consider these questions regard information as one of the fundamental elements. This is the case because it has a determining influence on the development of transactions and, indeed, is the basic pillar on which one of the vital theories in the study of the internal organisation of firms, namely transaction costs theory (Williamson, 1975), has been built. The break with the basic axioms postulated by neo-classical theories has given rise to the appearance of a body of knowledge that argues in favour of the firm, as against the market, as the alternative mechanism in the allocation of resources. Thus, elements such as uncertainty, information asymmetries, bounded rationality, opportunism and the specificity of assets, either in combination or standing alone, have been ingredients of new sub-disciplines or areas within economics (Rumelt et al., 1994). In this line, Williamson
(1985) defines transactions as transfers between technologically separable units and, in the development of this process, information has played, still plays and will continue to play a leading role. Thus, moral hazard, adverse selection[2], decentralisation, property rights and, by extension, the frontiers or limits of the organisation can be viewed as topics in the field of the internal organisation of firms. Furthermore, all these topics are going to be substantially altered by the new scenario to which we will be subjected. Having said that, the content of the above paragraph falls outside the central objective of this paper, with our only purpose in this sense being to emphasise the importance of information in such a relevant discipline of economics as the study of the internal organisation of firms. Future lines of research should be in consonance with these questions, seeking to reflect the effect of the digital economy on each of the topics cited above.
3. Value creation in the digital economy The success or failure of firms has been a topic that has dominated many of the disciplines devoted to studying the behaviour of organisations. In an attempt to be more rigorous, the success of firms has been associated with the attainment of sustainable competitive advantages, whilst failure has been placed at the other extreme. Value creation or the attainment of sustainable competitive advantages on the part of firms has become the subject matter of many controversies, ranging from the measurement of this value creation to the form in which it is to be achieved. The first of these two aspects has an ‘‘easy’’ solution in the firms operating in the so-called traditional economy. In this line, measurements of numerous types have been proposed, in function of the final objective of the measurement process. Thus, measurements of a financial-accounting or stock market character, together with other parallel measurements such as models of business excellence (EFQM, balance scorecard), have been employed with this objective in mind. However, the new scenario we are considering annuls many of these measurements that have been used with greater or lesser success in earlier periods.
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Because we are dealing with firms of recent creation that generally require large initial investments (although we should not always think in this way, bearing in mind the example of Panda and the development of its antivirus), the generation of accounting profits is deferred over time and it is not easy to find positive profit figures in the first five years of the businesses’ life. Therefore, measurements of a financial-accounting character are not particularly useful for the purpose we are considering here. As regards stock market measurements, we share the scepticism of many academics with respect to their capacity to value in the short-run, with this being even more so when the environment of these firms generates such uncertainty in the markets[3]. Nor can we use this capacity in the circumstances where we believe in the power of these markets to value in the long-run, given that the firms we are considering have not existed for long enough to reach this period. The collapse of the dot.com firms on the US stock markets places in question their potential to value this type of firm, thereby providing support for our doubts in this regard. Therefore, in our view there is a gap in this area, and it would appear that attempts are being made to correct it with valuation techniques of the real options, or similar, type. However, our work leaves the measurability of value creation to one side and focuses all its efforts on the mechanisms that lead to such value creation. In other words, our intention is for our reflections to have a certain doctrinal character, summarising some of the formulas that have been tested and characterised as successful in the recent literature. We place emphasis on the idea that value creation can be understood as the attainment of sustainable competitive advantages, and in what follows we will refer to both concepts indistinctly. Drawing on the exposition of section 2, the generation of competitive advantages has traditionally been studied from two perspectives, namely that which takes the interior of the firm as the point of reference and that which has evolved in parallel, but with the market or the industry now being considered as the unit of analysis. As we have already mentioned, both perspectives have given rise to a very complete literature which, over the passage of time, has created two
schools or lines of research which are considered by many as antagonistic[4]. Thus, by way of summary, we should recall that the resource-based view holds that the generation of sustainable competitive advantages must have its roots inside the firm, in such a way that the resources and capacities possessed by the organisation must be valuable, scarce, not capable of imitation and organisational (Barney, 1991). For its part, the Porter school relies on power and positioning in the sector as more incisive strengths when generating solid positions within the industry. However, our new reference scenario cannot be explained by one single theory and, to a certain extent, uses elements from a number of them (Amit and Zott, 2001). It is the convergence of ideas and principles that give sense to many of the questions that we will consider hereafter. The next stage in our work will be to describe some of the routes by way of which it is possible to create value in the information economy[5]. However, before doing so we should consider a number of questions, such as whether it is really possible to add value in a context of the new information technologies. In our view, the potentials of the digital economy in themselves justify the creation of value and its demonstration is almost tautological. Having said that, during the course of recent years a number of events have taken place that have raised doubts concerning the strengths of this new scenario. As a first example, we can cite the fact that for a number of years the contribution made to productivity by the introduction of information systems into firms has been questioned. Bearing in mind that at a certain moment we could consider productivity as a measurement of value creation, it could be inferred that this phenomenon (undoubtedly linked to the digital economy) would lack any interest from the perspective of the achievement of competitive advantages. Thus, something that has been presented as an excellent contribution to business productivity, even to multi-factor productivity, might not in fact be so, at least at first sight. It was the studies of Brynjolfsson (Brynjolfsson, 1993; Brynjolfsson and Hitt, 1996, 2000), amongst others, in the 1990s that highlighted the weaknesses of earlier studies that questioned the potential of information technology, in what was
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described as the ‘‘productivity paradox’’ (Brynjolfsson, 1993). This author argued that certain questions should be taken into account that have not been included in earlier studies. First, that the effects of information technologies are confirmed in the long-run and, therefore, that the analysis of short periods of time are incapable of reflecting the positive effects of these new technologies. Second, and just as important, are the aspects related to the measurability of the effects. Information technologies are reflected in attributes that are complex to measure (quality, improvements in the process, etc.), which the literature has come to describe as intangible (Brynjolfsson and Hitt, 2000). In summary, what these papers point to is that more conventional ratios used with the aim of measuring or reflecting increases in productivity are not useful when dealing with new information technologies. Thus, and by following this route, we can obtain empirical evidence on the value creation in our reference scenario. Second, and within the contradictory examples cited earlier, we can return to the phenomenon of the collapse of the dot.com firms. From a basic analysis, we can infer that the formula is not valid and, therefore, that the firms which have their justification in the digital economy are incapable of creating value. However, a deeper analysis finds justification for the penalties imposed on these companies by the US stock markets. The speculative bubble that hovered over these firms provoked a kind of spiral that ended in the spectacular plunges that we have all witnessed. The quid of the question lies in other aspects, such as in the defective valuation given to firms with doubtful business plans and with a viability that was more than open to question. The cash flows that were discounted in order to find the real value of these firms were subjected to extreme uncertainty, as well as to limited economic rationality. It was as if everything formed part of a set of common expectations that had no plausible basis. The passage of time put an end to all these ‘‘caricatures’’ of firms, making clear the validity and force of the traditional rules and principles that have governed the economy over the decades. Once again, we can see that no cause-effect relationship was established between the collapse of these firms and the absence of value creation in the environment of the
network economy. In reality, we were simply faced with a group of firms that trusted in the addition of dot.com firms as some miraculous recipe for the generation of sustainable competitive advantages. Having banished some of the myths and paradoxes constructed around the information economy, we are now in a position to carry out a more exhaustive analysis of what we consider to be some of the value creation mechanisms or competitive advantages in this new environment. To that end, let us briefly review some of the sources of value creation considered in the current literature. Efficiency Recent studies (Amit and Zott, 2001) have pointed to efficiency as one of the most consistent sources of value creation in the digital economy. This idea is consistent with the earlier-mentioned theory of transaction costs (Williamson, 1975, 1989), which holds that efficiency per transaction decreases as the transaction cost decreases. There is sufficient evidence to infer that transactions will have a lower cost in digital businesses. A simple line of reasoning will be as follows. It is well known that information plays an extremely important role in transactions. On many occasions, the business-market dichotomy as a mechanism for the allocation of resources or management of transactions is related with aspects such as uncertainty, complexity or information asymmetries. In our new reference scenario, the management of these aspects will be a mechanism for achieving competitive advantages. The doubt we have in this regard is whether this type of advantage will have a long-lasting character or, by contrast, whether these advantages will have a limited life. In this same line, the fact that the new information and communications technologies are within the scope of all the agents makes it foreseeable that these agents will use them in their totality. Therefore, we believe, albeit tentatively, that efficiency is going to be a requirement and not a source of competitive advantage in the new scenario supposed by the information economy. Nevertheless, the evolution of this situation and its subsequent empirical testing should throw light on this and on the remaining questions that we will consider in what follows.
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However, if we take the resource-based approach as a point of reference, it is possible to give another meaning to efficiency as a mechanism that generates competitive advantages. If we turn to the most classical concept of this strategic approach (whose theoretical development has been described earlier), to the extent that information is a resource that satisfies a series of conditions or requirements considered throughout this paper, then it will be susceptible to value creation. In this sense, our intention is to make clear that the role of information as input within the organisation is going to be altered in general. That is to say, it will not suppose a source of advantages generation per se. This information is going to be more abundant and fluid within all organisations and will simply have a value creation character when it is a strategic asset for the organisation. Innovation It is innovation that has perhaps been the source of wealth creation par excellence in environments where dynamism and turbulence have been present. In 1934 Schumpeter had already anticipated innovation as a mechanism through which it was possible to obtain sustainable competitive advantages. In more recent years, other authors (see for example Teece et al., 1997) have taken this idea further, speaking of dynamic capabilities. By doing so they have made a clear attempt to give a broader meaning to the concept of innovation, which appeared to be somewhat restricted when considering questions related to technological development. This concept of dynamic capabilities alludes to the potential for innovation on the part of the organisation in all of its ambits. In this sense, innovation is particularly relevant in the area of management. The new characteristics to which the reference environment will be subjected open new opportunities in this direction. However, in our opinion, the critical point of innovation will rest on two basic pillars – that are the traditional arguments – represented by the productive process and the product, respectively. As we stated at the beginning of this section, innovation has been viewed as the source of competitive advantages in environments where dynamism and uncertainty have been the
main actors. The scenario that we are considering here has these two characteristics. First, we are faced with sectors in which the life cycle of the product is being increasingly shortened. Second, we do not know what will be the reaction of the consumer to new products or to changes in earlier products. A paradigmatic illustration of this aspect might be that of the mobile telephone. This product comes from a sector with such a degree of dynamism and a shortening of the life cycle of its products that before one new technology is developed there is already a bid for what will be the next. At the same time, this brilliant development raises certain doubts with respect to consumer acceptance in the face of these continuous modifications. Up to now, it would appear that the rhythm of evolution experienced by technologies has moved in parallel with the rhythm of insertion in society, but we have no clear idea of the limit point of this spiral. In any event, it would seem to be clear that lagging behind in this continuous innovation process is penalised by failure. Therefore, and as we have maintained throughout, permanent innovation will be a modus vivendi in the new framework that it is supposed by the digital economy. Lock-in and standards management If there are two sources of competitive advantages that can be intrinsically associated with the information economy, then these must be the management of lock-in and the construction of standards, both of which derive or emanate from the very nature of the concept of network economies. Thus, economists speak without distinction of network economies, network externalities or demand-side economies of scale. In this section, and clearly linked with this concept, we will also consider first mover advantages (Lieberman and Montgomery, 1988), given their linkage with lock-in and standards. Two concepts must be introduced in this section, namely networks externalities as such and the character of information as an experimental good. Thus, we understand that there are demand-side economies of scale when the value of a product or service for a user depends not only on the product itself, but also on the number of users that use or consume that product. Furthermore, we say that information has the character of an
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experimental good because it is not possible to know its utility without proceeding to its consumption. In our view, these two definitions are highly relevant for the subsequent development and illustration of lock-in and standards management. The experimental good character of information has immediate derivations for lock-in. The need to ‘‘use’’ the information in order to determine its potential has the immediate consequence of the appearance of exchange costs which, in turn, are the first cause of this lock-in. Therefore, we can see how a circle is created between all these concepts that requires a joint and co-ordinated management of all of them. In our view, the above paragraph provides a sufficient argument to justify the importance of standards in a digital economy environment. This is especially the case when the empirical evidence demonstrates that in this new scenario the battles of standards are games with only one winner (Shapiro and Varian, 1999). The reasoning will be as follows: the achievement of a standard carries with it the construction of a users’ database. This idea must be considered together with the already mentioned character of experimental good that is possessed by information, a circumstance to apply to the database in its totality. This will, in turn, generate exchange costs in the set of consumers that will finally result in the phenomenon that we have described as lock-in (see Figure 2). This process is a complex one, as has been confirmed by a significant number of empirical demonstrations[6]. However, in our view what we have described earlier has collateral effects that merit attention. The role played by complementarities represents one of these effects. For some authors (Amit and Zott, 2001), these complementarities will be a source of competitive advantages per se. In such a case, we can speak of species of demand-side economies of scale and, in any event, we are faced with a problem of crossed derivative. The very fact of the existence of network externalities perhaps makes the role Figure 2 The phenomenon of lock-in
played by complementarities even more important. Nevertheless, our opinion is that such complementarities, rather than being a source of value creation, will be a strategy that needs to be strengthened on the road towards the maintenance of standards, given that sending complementary services to our database tightens the linkage of our network, making it more solid and longlasting. On this point, we should also highlight the close linkage between the process we have just described and the advantages whose origin lies in first movers. In digital markets, where lock-in is a constant, being a first mover in the construction of a database will be crucial in winning the battle in the achievement of standards (Shapiro and Varian, 1999). It is clear that whilst we have come a long way, there is still a long way to go as regards the management of standards and the phenomenon of lock-in. However, given that this topic is not the central aim of our work, we have limited ourselves to simply mentioning the importance of these two concepts.
4. Conclusions In this paper we have tried to synthesise the current situation of the network economy, reviewing the most recent lines of research devoted to this subject. However, in this process we have often encountered more shade than light, given that we are charting a course through territory that is characterised by complete speculation. Therefore, we should place emphasis on the fact that our central aim has been to indicate some of the key points raised in the literature for a better understanding of digital business. Our exercise has resulted in the appearance of many questions that have yet to be provided with answers. The uncertainty that characterises the situation in which virtual markets operate is the reason why we must wait for some time before determining the place of these markets within the economy as a whole. What we feel we can say with certainty is that this role will be equally as important, or perhaps even more important, than that which these markets currently play. What we are not so sure about is how this evolution will come about.
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Notes 1 What we are trying to indicate here is that information not only takes on a fundamental role as output (information goods), but also to the extent that its concept as input is modified, making it more plausible throughout the length of the productive process. 2 For an illustration of these themes, see Shapiro and Varian (1999). 3 By way of example, we can cite the creation of stock markets that run in parallel to the conventional markets, and where the volatility, uncertainty and range of fluctuation are much greater than in the former. 4 For a better understanding of this debate, see Hoskisson et al. (1999). 5 At this point we should make an initial qualification. In our view, the concept of the new economy or digital economy extends beyond the field of activity of the dot.com firms and includes sectors such as that of software, hardware and all that which has a certain linkage with the digital environment. We say this because of our belief that the study becomes much more attractive if we do not reduce the analysis to those firms whose business focuses to a very large extent on the Internet, given that many of these would have no sense at the margin of other sectors such as those cited above. 6 See Chapter 9 of Shapiro and Varian (1999).
References Amit, R. and Zott, C. (2001), ‘‘Value creation in e-business’’, Strategic Management Journal, Vol. 22, pp. 493-520. Barney, J.B. (1986), ‘‘Strategic factor markets: expectations, luck, and business strategy’’, Management Science, Vol. 32 No. 10, October, pp. 1231-41. Barney, J.B. (1991), ‘‘Firm resources and sustained competitive advantage’’, Journal of Management, Vol. 17 No. 1, pp. 99-120. Brynjolfsson, E. (1993), ‘‘The productivity paradox of information technology: review and assessment’’, Communications of the ACM, December. Brynjolfsson, E. and Hitt, M.L. (1996), ‘‘Paradox lost? Firm-level evidence on the returns to information systems spending’’, Management Science, Vol. 42 No. 4, April, pp. 541-58. Brynjolfsson, E. and Hitt, M.L. (2000), ‘‘Beyond computation: information technology, organizational transformation and business performance’’, Journal of Economic Perspective, Fall, Vol. 14 No. 4, pp. 23-48.
Foss, N.J. (1996), ‘‘Knowledge-based approaches to the theory of the firm: some critics’ comments’’, Organization Science, Vol. 7, pp. 470-6. Hitt, M.A., Ireland, R.D., Camp, S.M. and Sexton, D.L. (2001), ‘‘Strategic entrepreneurship: entrepreneurial strategies for wealth creation’’, Strategic Management Journal, Vol. 22, pp. 479-91. Hoskisson, R.E., Hitt, M.A., Wan, W.P. and Yiu, D. (1999), ‘‘Theory and research in strategic management: swings of a pendulum (yearly review of management)’’, Journal of Management, May-June, Vol. 25, pp. 417-56. Lei, D., Hitt, M.A. and Bettis, R.A. (1996), ‘‘Dynamic core competences through meta-learning and strategic context’’, Journal of Management, Vol. 22, pp. 549-69. Lieberman, M.B. and Montgomery, D.B. (1988), ‘‘First-mover advantages’’, Strategic Management Journal, Vol. 9, pp. 41-58. Peteraf, M.A. (1993), ‘‘The cornerstones of competitive advantage: a resource-based view’’, Strategic Management Journal, Vol. 14, pp. 179-91. Porter, M.E. (1980), ‘‘Competitive strategy’’, Free Press, New York, NY. Porter, M.E. (1985), ‘‘Competitive advantage: creating and sustaining superior performance’’, Free Press, New York, NY. Porter, M.E. (2001), ‘‘Strategy and the Internet’’, Harvard Business Review, March, pp. 63-78. Rayport, J.F. and Sviokla, J.J. (1995), ‘‘Exploiting the virtual value chain’’, Harvard Business Review, November-December, pp. 75-85. Rumelt, R.P., Schendel, D. and Tecce, D.J. (1994), ‘‘Fundamental issues in strategy’’, Harvard Business School Press, Boston, MA. Schumpeter, J.A. (1934), ‘‘The theory of economic development: an inquiry into profits, capital, credit, interest, and the business cycle’’, Harvard University Press, Cambridge, MA. Shapiro, C. and Varian, H.R. (1999), ‘‘Information rules: a strategic guide to the network economy’’, Harvard Business School Press, Boston, MA. Teece, D.J., Pisano, G. and Shuen, A. (1997), ‘‘Dynamic capabilities and strategic management’’, Strategic Management Journal, Vol. 18 No. 7, pp. 509-33. Wernerfelt, B. (1984), ‘‘A resource-based view of the firm’’, Strategic Management Journal, Vol. 5, pp. 171-80. Williamson, O.E. (1975), ‘‘Markets and hierarchies: analysis and antitrust implications’’, Free Press, New York, NY. Williamson, O.E. (1985), ‘‘The economic institutions of capitalism’’, Free Press, New York, NY. Williamson, O.E. (1989), ‘‘Transaction cost economics’’, in Schamlensee, R. and Willig, R.D. (Eds), Handbook of Industrial Organization, Vol. 1, Elsevier Science, Amsterdam, pp. 135-82.
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Literati Club
Awards for Excellence We are pleased to announce that Professor Len Tiu Wright was presented with a leading Editor award at this year’s Literati Club Awards for Excellence. This was in recognition for her excellent work as Editor of Qualitative Market Research: An International Journal
Len Tiu Wright is Research Professor at De Montfort University, UK. She has worked at the universities of Keele, Birmingham and Loughborough with visiting appointments at other UK and overseas institutions. Len Tiu has consultancy and industrial experience and has researched in the Far East, Europe and North America. Her writings have appeared in books, in American and European journals, and at conferences where some have gained best paper awards. She is on the editorial boards of a number of leading marketing journals. She is the Founding Editor of Qualitative Market Research: An International Journal.
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Literati Club
Awards for Excellence Ken Clarke Director of Millward Brown, Warwick, UK
is the recipient of the journal’s Outstanding Paper Award for Excellence for his paper
‘‘What price on loyalty when a brand switch is just a click away?’’ which appeared in Qualitative Market Research: An International Journal, Vol. 3 No. 3, 2001
Ken Clarke read Philosophy, Politics and Economics at Merton College, Oxford, and began his business career with the British Market Research Bureau in London. From there Ken joined Unilever where he held posts in market research, new product development and marketing. In addition to his operational responsibilities, Ken also chaired the steering committee responsible for guiding Unilever’s Basic Research Programme of research into market research, whose objective was to test and improve research techniques and optimise their application. He then held positions as a Sales and Marketing Director within Unilever and outside, before joining Millward Brown as a director in 1986. His current research interests focus on the dynamics of customer relationships and also of employee relations. His non-research interests include support for Everton FC, an area of activity where dynamism has rarely featured in recent years. He is now retired from Millward Brown and works as an independent consultant.
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Conference announcement
Qualitative Market Research: An International Journal Volume 5 . Number 4 . 2002 . 313 .
Conference announcement e-Business conference The third annual conference in the series, entitled ‘‘e-business’’, will be held at The Annex, Winterbourne House on Wednesday 4 December 2002. The conference will bring together practitioners and academics in the spirit of mutual enquiry. The conference is held in association with IBM and the Qualitative Market Research journal. IBM will be sponsoring the best paper prize. The conference theme will reflect the diverse impact of e-enabled processes on business activity. Papers detailing emerging theories, cutting edge research and best commercial practice and that facilitate exchange between scholars and practitioners are anticipated. Conference themes The term e-business relates to both the diversity of and interconnectedness between business activities. These range from the vertical (data gathered from customers, through internal processes to connecting with employees) to the horizontal (from the supply chain through to the customer). Increasing demands for these are in turn creating demands for e-marketing. In the modern increasingly dynamic and rapidly changeable business environment the ability to integrate internal and external processes to meet the needs of customers is a source of competitive advantage. Vertical links . Data gathering, data analysis, conversion into business intelligence, utilization by sales teams and product developers.
Connecting employees with internal data flows, connecting strategic and managerial decisions with data flow.
Horizontal links . Supply chain management (SCM) – linking the firm to its suppliers. . Enterprise resource planning (ERP) – internal processes such as sales force automation, accounts, billing, budgets, manufacturing, purchasing, warehousing. . Customer relationship management (CRM) – linking the firm to its customers – call centres, e-commerce. e-Marketing and research . Applications of theory and implementations such as for e-marketing communications and e-direct marketing, branding, Web site provisions and implications of customer empowerment. . Marketing research and case studies concerning SMEs and large organisations, e.g. from ICT linkages and knowledge creation to changing buyer and consumer behaviour in the private and public sectors such as those for dot.com firms, financial services and government organisations. Further information about the conference (including a registration form), links to The Birmingham Business School, IBM, Qualitive Market Research journal (QMRIJ), the city of Birmingham, can be found at the conference Web site at: http://bss2.bham.ac.uk/business/ page1457.htm Enquiries should be directed to: Ms Annie Smith, The Birmingham Business School, The University of Birmingham Winterbourne, 58 Edgbaston Park Road, Birmingham, UK. Tel: +44 121 414 6235 Fax: +44 121 414 7791 E-mail: [email protected]
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Author and title index Volume 5, 2002
Drent, R., see Scholl, N. 3, p. 172
E
Issue & page 3, p. 199 A Abbott, J., see Dobbs, T. Alda´s-Manzano, J., see Bigne´, J.E. 1, p. 28
4, p. 310
Driver, J. and Louvieris, P. Integrating the enterprise: the role of a language system for a marketing conception
Analysing qualitative data: computer software and the market research practitioner Maclaran, P. and Catterall, M.
Exploring the needs of SMEs for mobile data technologies: the role of qualitative research techniques Harker, D. and Van Akkeren, J. F
Assessments of the ‘‘new economy’’ scenario Fuentelsaz, L., Maicas-Lo´pez, J.P. and Polo, Y.
4, p. 281
From bricks to clicks: understanding the e-consumer Dennis, C., Harris, L. and Sandhu, B.
4, p. 301
Fuentelsaz, L., Maicas-Lo´pez, J.P. and Polo, Y. Assessments of the ‘‘new economy’’ scenario
B 2, p. 87
2, p. 123
2, p. 96
3, p. 164
Bigne´, J.E., Alda´s-Manzano, J., Ku¨ster, I. and Vila, N. The concept mapping approach in marketing: an application in the travel agencies sector
G 2, p. 96
Grace, D. and O’Cass, A Brand associations: looking through the eye of the beholder
2, p. 112
(A) grounded theory of beer consumption in Australia Pettigrew, S.
Blankson, C. and Omar, O.E. Marketing practices of African and Caribbean small businesses in London, UK
Gura˜u, C., see Ranchhod, A.
Brand associations: looking through the eye of the beholder Grace, D. and O’Cass, A.
H Halingten, A., see Verville, J.C. 3, p. 199
Branthwaite, A. Investigating the power of imagery in marketing communication: evidencebased techniques
Harker, D. and Van Akkeren, J. Exploring the needs of SMEs for mobile data technologies: the role of qualitative research techniques Harris, L., see Dennis, C.
C 2, p. 87
Hinton, M., see Corner, I.
Catterall, M., see Maclaran, P.
4, p. 252
(The) concept mapping approach in marketing: an application in the travel agencies sector Bigne´, J.E., Alda´s-Manzano, J., Ku¨ster, I. and Vila, N.
3, p. 172
Integrating the enterprise: the role of a language system for a marketing conception Driver, J. and Louvieris, P.
3, p. 164
Investigating the power of imagery in marketing communication: evidence-based techniques Branthwaite, A.
4, p. 239
Corner, I. and Hinton, M. Customer relationship management systems: implementation risks and relationship dynamics
4, p. 239
Customer relationship management systems: implementation risks and relationship dynamics Corner, I. and Hinton, M.
I
Izzo, G., see Langford, B.E.
D 4, p. 281
4, p. 235
Hughes, T.J. Marketing principles in the application of e-commerce
K
Dennis, C., Harris, L. and Sandhu, B. From bricks to clicks: understanding the e-consumer Dobbs, T., Stone, M. and Abbott, J. UK data warehousing and business intelligence implementation
Koll, O., see Vallaster, C. Ku¨ster, I., see Bigne´, J.E. L Lace, J., see Ranchhod, A.
314
Author and title index to volume 5, 2002
1, p. 58
Langford, B.E., Schoenfeld, G. and Izzo, G. Nominal grouping sessions vs focus groups
4, p. 291
Liebermann, Y. and Stashevsky, S. Perceived risks as barriers to Internet and e-commerce usage
Qualitative Market Research: An International Journal Volume 5 . Number 4 . 2002 . 314–315
4, p. 291
Perceived risks as barriers to Internet and e-commerce usage Liebermann, Y. and Stashevsky, S.
2, p. 112
Pettigrew, S. A grounded theory of beer consumption in Australia Polo, Y., see Fuentelsaz, L.
Louvieris, P., see Driver, J. Q M 1, p. 28
2, p. 135
2, p. 123
4, p. 252
3, p. 188
Maclaran, P. and Catterall, M. Analysing qualitative data: computer software and the market research practitioner
(A) qualitative study of the influencing factors on the decision process for acquiring ERP software Verville, J.C. and Halingten, A. R
Maicas-Lo´pez, J.P., see Fuentelsaz, L.
1, p. 6
Managerial understanding of contemporary industrial marketing issues Palmer, R.
Ranchhod, A., Gura˜u, C. and Lace, J. On-line messages: developing an integrated communications model for biotechnology companies
4, p. 268
Reflections on customer knowledge management in e-business Rowley, J.E.
4, p. 268
Rowley, J.E. Reflections on customer knowledge management in e-business
Marketing practices of African and Caribbean small businesses in London, UK Blankson, C. and Omar, O.E. Marketing principles in the application of e-commerce Hughes, T.J.
S Sandhu, B., see Dennis, C.
Mulders, S., see Scholl, N.
Schoenfeld, G., see Langford, B.E. N 1, p. 58
1, p. 19
3, p. 210
Nominal grouping sessions vs focus groups Langford, B.E., Schoenfeld, G. and Izzo, G.
Stashevsky, S., see Liebermann, Y. Stone, M., see Dobbs, T.
‘‘Not in front of your mother!’’: online marketing for pharmaceutical products addressing taboo topics Wrobel, U.
T 4, p. 261
O 4, p. 235
Omar, O.E., see Blankson, C.
3, p. 210
There’s no business like e-business Palmer, R.A. U
O’Cass, A., see Grace, D. 1, p. 6
Scholl, N., Mulders, S. and Drent, R. On-line qualitative market research: interviewing the world at a fingertip
On-line messages: developing an integrated communications model for biotechnology companies Ranchhod, A., Gura˜u, C. and Lace, J.
UK data warehousing and business intelligence implementation Dobbs, T., Stone, M. and Abbott, J. V
1, p. 40
Vallaster, C. and Koll, O. Participatory group observation – a tool to analyze strategic decision making
3, p. 188
Verville, J.C. and Halingten, A. A qualitative study of the influencing factors on the decision process for acquiring ERP software
On-line qualitative market research: interviewing the world at a fingertip Scholl, N., Mulders, S. and Drent, R.
Van Akkeren, J., see Harker, D. P 2, p. 135
Palmer, R. Managerial understanding of contemporary industrial marketing issues
4, p. 261
Palmer, R.A. There’s no business like e-business
1, p. 40
Participatory group observation – a tool to analyze strategic decision making Vallaster, C. and Koll, O.
Vila, N., see Bigne´, J.E. W 1, p. 19
315
Wrobel, U. ‘‘Not in front of your mother!’’: online marketing for pharmaceutical products addressing taboo topics
Note from the publisher
Qualitative Market Research: An International Journal Volume 5 . Number 4 . 2002 . 316
Note from the publisher Forthcoming in 2003 The first issue for the 2003 volume will be a special issue entitled: ‘‘SME and consumer e-business research’’. This issue will encompass both practitioner and academic views of research in the world of the Internet and comprise a further selection of papers from the Business Intelligence and e-Marketing Workshop held at IBM Warwick in December 2001. Articles will include: . Building an e-business scenario for small business: the IBM SME Gateway project. . Innovative use of the Internet in established small firms: the impact of knowledge management and organizational learning in accessing new opportunities. . Integrating the Web and e-mail into a push-pull strategy. . Channel conflict and high involvement Internet purchases – a qualitative cross cultural perspective of policing parallel importing. . Following the yellow brick road – young adults’ experiences of the information super-highway. . An investigation of online consumer purchasing. The past 12 months have seen an excellent growth in the usage of the Emerald Fulltext database. During this period the database has been accessed over 20 million times, from which in excess of 5.5 million articles have been downloaded. Over 800 universities, corporate and public institutions now subscribe to the Fulltext database. This journal itself is steadily increasing its usage via the Emerald database. Between August 2001 and August 2002 the journal registered 120,121 hits on abstracts, contents pages and articles with 37, 216 actual article downloads. The top three articles appeared in volume 4 issue 3 ( a special issue on ‘‘Research in cyberspace’’) and were as follows: (1) ‘‘What price on loyalty when a brand switch is just a click away?’’, by Ken Clarke. (2) ‘‘Internet marketing research: opportunities and problems’’, by Olivier Furrer and D. Sudharshan.
‘‘Data data everywhere – and not a byte of use?’’, by Julie Abbott. During this period we have registered article downloads from 114 countries with the heaviest usage coming from the UK, USA, Australia and Malaysia. Over the past 12 months we have initiated many changes at Emerald which we hope will be of benefit to our readers, our authors and hopefully our new authors. I would like to take this opportunity to highlight a summary of these enhancements: . We have improved and expanded our authors resources Web sites (www. emeraldinsight.com/literaticlub). Here you will find no end of useful information on how to get published, your copyright rights, call for papers, Literati Awards, etc. We also have a new section called ‘‘Conference Central’’ which will continue to grow to be a one-stop shop to find the most relevant conference to attend. . Our Research Register (www.emerald insight.com/researchregister/index.htm) continues to grow. This is an online forum for the circulation of pre-publication information. By registering and broadcasting your current research activities you will gain exposure to potential collaborators and this will also put you in the spotlight with regard to Editors. It also informs our readers as to what is the cutting edge of current research. . The Managing Editors at Emerald (myself included) have been running Author Workshops, both at international conferences and by invitation to University departments. These workshops provide an insight into the world of scholarly publishing and give advice to new authors on how to transform their research findings into publishable work. If you feel that this service would be of use to your department or conference, then please do get in touch with me via the e-mail address below. Electronic access is available not just to subscribers to the Fulltext database but also to all individual subscribers. No matter when your subscription to the journal commenced, by logging on to the journal you will have access to the full journal archive. Richard Whitfield Managing Editor, Emerald [email protected]
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