Abstract

Technology has a profound impact on business research, and especially on marketing, because (1) technology changes the way marketing managers do their job, (2) these changes lead to major changes in the topics that are important to study, and (3) technology provides new ways of doing research. The most important result of technological advance is the increasing impact of information technology, resulting in the growing importance of service and relationships in the economy. Future advances in marketing are likely to build from advances in technology and relating improvements in communicating, storing, and processing information about customers.

 

This article offers an overview of how technology influences the way business research is done, especially in the field of marketing. The article explores the proposal that research in marketing follows advances in technology. Technology influences the way marketing is done in practice, the focus of research topics, and the design of research methods.

This article offers examples of how advances in technology modify major marketing practices. The service revolution leads not only to fast growth of the service sector but also to a shift of emphasis from goods to service among goods sector firms.

Technology supports the tasks of reaching customers and satisfying specific needs, which increases the demand for more sophisticated models of market segmentation and customization. Technology advances influence customer relationship management to the extent that gathering customer information, interacting with customers, and, eventually, building relationships with them become easier. These changes in the way marketing managers do their job lead scholars to observe and analyze market trends and propose new and improved models applicable in the field.

The information technology revolution leads to the transformation of central marketing frameworks. Topics such as service marketing, customization, and relationship marketing, which benefit from technological advances, have developed into “hot topics” in the marketing literature. Regarding research methods, technological advances provide researchers the opportunity to make use of new tools to collect and analyze market data. Computers and sophisticated software facilitate data analysis, resulting in new substantive and theoretical results.

 

2. Technology and marketing

Increasing demand for both new and traditional services drives growth of the service sector, resulting in service becoming the core economic and marketing activity in most developed economies. The service sector grows steadily in its contribution to the gross domestic product in almost every country and accounts for most of the growth in new jobs Marketing practice continually adapts to the increased demand for service and, as a result, the topics that are important to study in academia are changing over the years. Scholars are able to look at marketing practice and propose new theories and models to improve marketing management. Three major marketing areas especially benefiting from advances in technology are service marketing, customization, and customer relationship management.

 

2.1. Service marketing

Implementable technology innovations in business lead to an increase in available information and knowledge about markets, customers, and competitors, and as a result companies can offer more, newer, and better services to satisfy specific needs of their customers. The increased availability of information and service provide the structural change necessary to the rise of a new paradigm: the service revolution, which makes service the focus of business in virtually all developed economies.

The focus on service brings a new philosophy into marketing management that is applicable to all businesses, including those that involve tangible goods in the process of service provision. Marketing shifts the center of its attention from products to customers (and relationships with them), and businesses compete vigorously in applying technology to service. As service becomes more important, companies realize the necessity of enhancing service quality perceptions and, consequently, service quality and customer satisfaction become increasingly critical metrics in successful marketing in such diverse industries as health care organizations fast-food, and amusement parks.

The new paradigm has led the service sector to become the largest sector ofmost developed economies. For example, in the early 1950s, goods represented about 65% of the U.S. gross domestic product (GDP), whereas services represented about 35%. Since the 1950s, a large shift has occurred as goods now represent about 26% and services represent about 74% of the U.S. GDP. A similar pattern is observable in nations such as Japan,where services represent 74% of the GDP, and in the European Union, where services represent 70% of the GDP. Additionally, today in the U.S. about 80%of the work force is employed in jobs in the service sector. In the European Union, about 67% of the labor force works in the service sector. In developing nations this percentage is lower, but the evolution to a servicedominated economy is likely to take place over time as per capita income rises. In India, for instance, about two-thirds of the workforce is in agriculture (60%), whereas less than one-quarter is in services (23%). However, services are themajor source of economic growth in that country and today the service sector accounts for 51.4% of India's GDP.

Totally new markets arise as a consequence of technological expansion: examples are personal computers, software, and cell phones. Technology also allows higher levels of service in the goods sector, effectively turning every business into a service business. For example, Ford, Chrysler, and General Motors, besides making cars, are regularly offering leasing services. Many goods are now largely commodities and, as a result, service becomes the core business of most enterprises. Companies as diverse as Dell and IBM are popular examples of this trend, offering highly differentiated, high-value service and relying on these services as their most important source of profits. Companies whose core business is a service, such as the mobile service companies, invest regularly in technology to provide better service.

More recently, computers and the rapid expansion of the information economy and electronic networks have converged in the concept of e-service, the provision of service over electronic networks such as the Internet. The rise of interactive computer networks is currently one of the most impactful technological developments. These networks promise the capability of supplying new interactive services to billions of people around the world. Therefore, service marketers must do a good job of adapting to this technological environment by becoming effective interactive marketers and bearing in mind that tools such as search engines (e.g., Google) portend a fundamental shift in how marketing should be done. Such tools facilitate the consumers' search process, easily providing them with information and making a wider number of offers readily available. Even though search engines are not the end users, interactive service providers must market their services to them.

Marketers are used to utilizing traditional media such as television or magazines, but now new modes of communication are available. The Internet and other computer networks offer the capability of sending a message to customers and also receiving messages from them. Consumers can now participate more fully in the process of goods/services provision, they can share their opinions with the company, and companies can supply them with new interactive services. By using information technology, companies have an increased ability to be customer-centric and market driven. Information technology permits interactive communication and personalization, assisting companies on collaborating with and learning from customers to offer services suited to their customers' dynamic needs. Therefore, the information revolution and the service revolution are two sides of the same coin, as technology applications generate knowledge and information used to expand service provision.

 

2.2. Customization

This section describes how technology contributes to the offering of individually customized goods and services. Readily available information technology and flexible work processes permit companies to customize goods or services for individual customers in high volumes at low cost. Mass customization is the ability to provide individually designed goods and services to every customer: consumers can choose from large assortments and match product configurations to their exact preferences. For example, Levi Strauss sells custom-fitted jeans and Nike allows customers to personalize their own sneakers. Even though this idea seems to be highly accepted, the evolution of service shows that mass customization still focuses on the product, rather than on the customer. When making customers choose from large assortments, mass customization leaves too much work for the customer, which can lead to dissatisfaction in the long run.

Instead, the service paradigm is about personalization: companies should know about their customers' personalities and provide them with individualized, personalized service, rather than mass-customized service. Interactive communication gives companies the ability to learn and to store more information about the customer, which in turn gives companies the ability to personalize its services to the exact customer's desires and to develop relationships with their customers. Until the 1960s, advances in technology allowed the production of standardized goods and the use of mass merchandising, mass communication, and mass media (Pine, 1993). In the late 1960s and beginning of the 1970s, as a result of the increase in computerization and available information, segmentation models experienced a great development as managers were able to identify approximately homogeneous subgroups that were reachable, measurable, and sizable. The use of computers to collect and analyze customer data was suddenly viable and psychographic and demographic data were heavily used to segment customers. In the 1980s niche marketing intensified this movement: markets were divided into smaller groups of consumers and companies were able to offer products to attend to very specific needs (i.e., the number of alternatives in the same product category increased, and these alternatives differed in the needs they attended).

From the late 1980s up to the present day, marketing has been actively pursuing research on scanner data and integrated databases, implementation of strategies based on those and programs directed at single households or individuals. The resulting information assists managers to direct promotion to consumers who demonstrate particular buying habits or to target those who use a competitor's product. Computer-aided technologies and general production technology allow companies to customize virtually any good. Varki and Rust (1998) demonstrate that technology impacts optimal segment size; applying technologies to segmentation makes the size of the segment needed formaximumprofits to decrease. The more technology is used, the more customization is needed to attend these smaller segments. Technological developments reduce the costs of customization enough to make the tradeoff between offering a customized product and the cost of doing so worthwhile and, as a result, customization becomes more widespread.

As technology contributes to the acquisition, storage, and analysis of customer data, the trend towards customization intensifies. Gathering and storing information about customers provides enterprises with precious market knowledge that was hard to conceive of a few decades ago. Scanner data, for example, obtained from purchases at retailers' checkouts, allow a great advance in understanding customer behavior (what, when, where, with what frequency they purchase, etc.). A strong stream of research – both academic and managerial – has grown based on these databases, resulting in the delineation of diverse marketing strategies. interactive communication, combined with the focus on customers, is turning personalized service into reality. Managers can learn about individual customer behavior and develop tools that consider customer heterogeneity and result in the offering of individualized service. Information technology increases interaction between the company and the customer, increases market knowledge, and assists segmentation, customization, and personalization. Communicating with customers has become easier with the advent of the Internet and cell phones. Providing customers with information that might be useful for them and for the company and personalizing products to attend to individual needs also becomes easier. More than communicating with customers, companies can now communicate with them at the individual level, which may reduce information overload and aid customer decisions. Considering that response to a firm's interventions is highly heterogeneous across customers , individual-level communication is relevant for marketing theory and practice.

Fragmentation of media is another significant consequence of technology. In the 1960s three major television networks dominated the market in the U.S., with popular programs sometimes watched by over 50% of all American homes with television (and 85% of those homes tuned to television at dinner time to watch the news). At that time, obtaining wide reach by sponsoring a popular program was relatively easy. By 1980, the three major networks still owned 87% of the viewing audience, but in the 1990s that percentage was reduced to 62%. In 2003 the big-three networks accounted for only 29% of all television viewing. Certainly, some of the reduction seems to be a result of technology creating more alternatives. Cable television arrived in 1980, expanding the range of television choices to over 300 channels that compete for the attention of the audience, distributing the mass audience into smaller percentages per channel. Cable penetration has eroded network viewing, fractioning audiences and destroying the former network oligopoly. Consequently, television is not as effective a mass medium as before. In some cases such as the Super Bowl broadcast, reaching a substantial amount of the population is still possible; however, in general, mass media do not exist on the same scale as previously. As the economy advances in the information and service era and personalization becomes more critical, media will inevitably become even more fragmented.

Consequently, increasing efforts in terms of integrating communication approaches to reach a considerable percentage of the population of interest will become a necessity. Through customization and personalization, technology helps improve service and increase revenues. Nonetheless, thus far businesses are paying attention mostly to the cost side, focusing primarily on how to save money. There is empirical evidence suggesting that the best way to achieve profitability is not necessarily from cutting costs, but from improving revenues through achieving higher levels of service quality and customer satisfaction. Even though show that the relationship between customer satisfaction and long-term financial performance is positive for firms that successfully achieve both cost reduction and revenue expansion, research shows that attempting to emphasize both cost reduction and revenue expansion simultaneously usually fails. Although no company can neglect cost reduction, firms that adopt primarily a revenue expansion strategy through service quality and relationship management may perform better than firms that emphasize cost reduction.

 

2.3. Customer relationship management

Companies used to be primarily focused on the product and on “low-cost mass production”. Because of the difficulties in reaching and interacting with customers, companies were often led to neglect building and cultivating relationships with their customers. Relationship marketing has become feasible because firms are now able to interact with individual customers and process information much more efficiently than previously. The emphasis on service and on customers leads companies to focus on developing approaches to build direct ties with customers and examples are the establishment of complex wholesale and retail structures, the sophisticated mix of communications media, and the improvement of market segmentation models and direct marketing strategies. This trend towards relationship marketing is happening in part because information technology gives the company the ability to customize its services and to develop customer relationships. Research reflects this paradigm, as increasingly research takes into consideration the context of relationships (e.g., Woodside, 2005). In this context, the ability to acquire, manage, and model customer information is a key asset of the firm that can become a source of sustained advantage.

The new service economy works differently than the old goods economy. The goods economy was focused on transactions, attracting customers, and selling products; brand equity, aproduct-centered concept, was the core of marketing management. Considering that the typical customer does not reconsider his/her choice of service provider (e.g., a bank) at every transaction, and maybe not even after a few transactions, the service economy must instead focus on relationships, retaining customers, delivering value to customers, and managing through customer equity. Even though mass marketing may still exist, the focus is increasingly on long-term customer relationships even in the goods sector.

Managers may wonder what the advantages of investing in relationships with customers are and how they can justify this investment. The ultimate goal of investing in relationships is to initiate the chain of effects that projects and maximizes profitability through customer equity. Businesses should allocate their investments in the three factors that drive customer equity:

value equity, brand equity, and relationship equity. Marketing investments produce improvements in the drivers of customer equity, which lead to improvements in customers' perceptions and, consequently, in customer attraction and retention. These, in turn, increase customer lifetime value, customer equity and, eventually, return on marketing expenditures. One of the main consequences of technology to customer relationship management is the increased number of levels on which businesses can interact with their customers to satisfy their needs. Companies can interact with customers at the aggregate level through offering service improvements and other general improvements. At the segment level, companies can achieve specific niches and offer tailored products and services through mass customization.

Finally, interacting with customers at the individual level is possible through CRM tools, direct contacts, and personalized goods and services. The service revolution transformed customers into “co-producers” which can be observed in the increase in self-service (e.g., self-service airport check-in)  the increase of and emphasis on the “experience” of the consumer (e.g., IMAX movie theaters), and the extended number of options to solve a problem without interacting with employees (e.g., Internet FAQ, automated call centers).

3. Technology and research methods

The consequences of technology advances such as the Internet or scanner data for research in marketing were largely unforeseen only a few decades ago. The use of computers in marketing research began in the early 1960s and, since then, innovative methods of data collection and analysis help researchers to be more productive (Bucklin and Gupta, 1999). The use of computers brings new sources of information, new uses of advanced technology, and emphasizes speed and accuracy, which together transform both managerial practice and academic research (Holbert, 1994), and provide opportunities for solving marketing problems and developing more effective marketing strategies.

The late 1980s and early 1990s was a period of transition for marketing research. During that period, technologies such as single-source data, integrated computer systems, software for data collection and analysis, and powerful mathematical tools for statistical analysis and modeling of marketing phenomena came onto the scene (Stewart, 1991). With such explosive data growth, technology has transformed marketing research into an “information business” and major efforts have been done to develop systems that make this amount of information meaningful (Gold, 1992).

Technology is also at the basis of fundamental changes in the business climate. First, technology is responsible for the return of the individual to the focus ofmarketing strategy via the collection, storage, and use of disaggregate information. Second, technology offers a stronger support for managerial decision making. Managers are now able to access data collected via observation (rather than only through surveys), store data in dynamic research systems, and transform data into knowledge more effectively. Very specific segments of customers are located, sometimes, down to the level of single individuals. To reach these segments, technology has made possible the use of novel channels of distribution, promotional vehicles, and tailored messages. Certain innovations in marketing research were at the foundation of this shift. Some examples are geodemographic segmentation and the identification of increasingly more specific segments, online databases, real-time databases, and the delineation of new uses of media such as direct mail for targeting individual customers (Bult and Wansbeek, 1995).

Overall, today the service sector dominates most developed economies, markets are highly segmented, customization and personalization are becoming widespread, and companies are increasingly investing in relationships with customers. Moreover, new data sources are emerging, for example, from Internet surfing and purchases and experimental data such as eyetracking data (e.g., Pieters et al., 1999, 2002), while the development of marketing management support systems facilitates decision making (Leeflang andWittink, 2002). Given this scenario, marketing research methods also require reinvention (Shugan, 2004).

3.1. The consequences of technology for sampling, data

collection, and data analysis Consumer panels first appeared in the 1950s when marketing variables started not only to be measured but also to be tracked. In the 1960s econometric and normative models emerged, making research focus shift from description to understanding. In this era “marketing research has learned the art of data collection” (Sheth, 1971, p.13) and there were developments in simulation, Markov models, game theory, time series, and multivariate statistics. In the late 1970s single source data became available through a combination of electronic tools such as lasers scanners at checkout counters, television meters, and computers that pool and retain information at these details of aggregation (Smith, 1990). Single source data refer to electronically collected data (consumer purchase data, store data on sales, prices and promotions, and manufacturer data on television advertising and coupons) on packaged grocery products that are provided by one single supplier (e.g., AC Nielsen). Data can also be obtained through “loyal customer” cards containing previously collected (and updated at each new purchase) demographic data about individual shoppers. Scanners at checkout provide retailers with an immediate record of sales by product, currency amount, and other specific information. In the early 1980s software that allows linking scanner data to a precise vector of demographic factors (that might cause purchase behavior) at the household level created a research revolution. Single-source integrated systems have allowed a considerable number of causal factors to be considered and psychological constructs were supplemented by behavioral data linked to causal factors (Smith, 1990).

Until recently, telephone surveys were a reasonably effective way of achieving respondents (Sudman and Blair, 1999). Nonetheless, technology has reduced the value of telephone interviewing because of cell phones becoming the sole phone in many households and because of increasing difficulties in reaching householders at their home phones. The rising ownership of personal computers connected to the Internet creates a new way to reach the general population. Internet surveys and online focus groups (Reid and Reid, 2005) increasingly propagate and provide researchers with a simple and relatively cheap way of achieving a broader population (Dillman, 2000). Internet-based transactions create large databases of information about customers, their demographics, and their purchase habits. As people make use of the Internet for personal communication, research, shopping, and entertainment purposes, the tendency is that more services are offered (such as cable television converged with the Internet) and that the demand for these types of services increases. As a consequence, people may be willing to exchange information in electronic panels for “free” Internet services, that is, they may be willing to allow companies to track their behavior while surfing in the web or using, for example, a free e-mail service. Using this system, data regarding key variables of interest can be electronically captured and entered into databases that allow tracking and cross-referencing. Such cyber panels can help companies to focus on highly targeted populations as they move toward highly segmented forms of marketing (Sudman and Blair, 1999).

Advances in technology also cause the costs of computing data to drop rapidly, which makes the process that starts with data collection and includes storage, analysis, and finally reports on customer profiles and behavior to become more affordable. Efficient and cost-effective data-warehousing technology and data-mining techniques allow researchers to analyze the growing information pool to get insights for targeting and discriminating customers and eventually building relationships with them. The costs of inputting information and generating valuable databases are dropping, which makes the amount of available information and the complexity of databases very likely to increase even more in the next few years. Even though the huge volume of data now available seems to be good, the overwhelming amount of information creates a demand for the development and application of new models and methods to analyze them (Gold, 1992; Leeflang and Wittink, 2002). To conduct longitudinal research, for instance, researchers need the existence of longitudinal data, powerful computational methods to analyze the data, and a good and reliable data storage system (Menard, 2002). Beginning in the 1970s, there was a huge increase in the ability to use computational methods, leading to a “multivariate revolution” (Sheth, 1971) and an increase in the use of methods that were not used before due to their complexity (e.g., Bayesian methods), especially in the past 15 years (Rossi and Allenby, 2003). The applicability of such models would not be possible without the availability of detailed data sets for many products, access to appropriate software and estimation methods, and sophistication on the part of both the model builder and the model user (Leeflang and Wittink, 2002).

The development of techniques that assist market segmentation and market modeling such as automatic interaction detector (AID), conjoint analysis, multidimensional scaling (MDS), and canonical analysis allows the development of more accurate models of segmentation, identifying more precise segments (Beane and Ennis, 1987). Traditional clustering  procedures used to be based on the premise of exclusivity: each customer would be classified as an element of only one segment (Wind, 1978). The idea that consumers can belong to more than a single segment or that brands may compete in a number of subsets of brands was conceptually accepted a long time ago, but was not technically feasible to model. Overlapping clustering and fuzzy clustering procedures alleviate the restrictions of traditional clustering (non-overlapping) and allow consumers to belong to more than a single segment (Wedel and Steenkamp, 1991). Fuzzy clustering permits a less sharp boundary between clusters because this technique uses membership degrees between zero and one to each cluster, rather than a categorical assignment to one cluster. The fuzzy latent class model (FLCM) allows items to be either crisp (belong to one category) or fuzzy (belong to multiple categories) (Varki et al., 2000). Another method, the generalized fuzzy clusterwise regression (GFCR) simultaneously allows consumers to belong to more than one segment and brands to compete with different subsets of brands on different benefits (Wedel and Steenkamp, 1991).

In the past 15 years, due to developments in computational methods and the availability of detailed marketplace data, the Bayesian approach has become widespread in marketing research (Rossi and Allenby, 2003). Bayesian models facilitate incorporating customer heterogeneity into marketing models and offer guidance in decisions such as choosing explanatory variables that maximize profits or choosing the best model or information set for a given situation. Simulation methods (e.g., Markov Chain Monte Carlo) have allowed researchers to build models using a sequence of conditional distributions (hierarchical models), giving much more flexibility to the models.

4. Conclusion

Marketing has entered a new era and mainstream marketing in the new era focuses on offering services suited to the customer and on the use of information to build relationships with customers. Advances in information and communication technology impact the way marketing is done and the way research is conducted. Marketing practice is centered on the customer now, rather than on the product. Companies are investing in relationships with their customers and offering value to customers through high-quality service. The current role of marketing is to employ its measurement and modeling skills to connect the customer to the product, to financial accountability, and to service delivery (Moorman and Rust, 1999), and to help the firm match its knowledge and strategic assets to the markets that have the greatest potential for maximizing customer equity (Hogan et al., 2002). Because research in management must not only follow market practice but also offer managerial insights to be applied in practice and lead market trends, this “new” marketing generates new research topics. The future of research in business seems to be tied to technological change. As the latter advances, different tools and strategies are developed, and, consequently, research is transformed.

Considering that information technology is the driver of the shift toward service in the economy, we can predict with a high level of confidence that the focus on service will only intensify, given that information technology will continue to advance. Revolutionary technologies such as the Internet, cell phones or the fiber optic network create a platform that allows communication in multiple ways. As communication becomes almost instantaneous and companies and customers have the opportunity to know a great deal about each other, offering service becomes easier and less costly, and customer relationships deepen. Increased computing capacity leads to unprecedented customization ability, so as the service sector expands, goods become more information-laden and tend to be differentiated based on information and service.

In a nutshell, technology changes the implementation of strategies and tactics in practice and increases firms' ability to gather information about customers, allowing interactive communication and supporting the development of relationships. Technology changes research by providing researchers with improved tools to study market data. Therefore, the future of business research is intimately related to advances in technology.