The Effect of the Internet Use on Customer Relations and Targeting Activities: An Empirical Study of UK Companies

The purpose of this research is to investigate the effects of the Internet use on customer relations and targeting activities. Based on the previous literature, the effect of the Internet on marketing activities has been categorised into four basic dimensions, 1) marketing and customer relations activities, 2) marketing targeting activities, 3) marketing performance, and 4) marketing efficiency. However, few empirical studies have been done regarding customer relations and targeting activities that are affected by the use of the Internet, and the effect of that on marketing efficiency. By studying the practice of 123 UK companies, it has been found that the use of the Internet positively influences customer relations and targeting activities, marketing performance and marketing efficiency. DOI: 10.4018/ijom.2012070103 40 International Journal of Online Marketing, 2(3), 39-51, July-September 2012 Copyright © 2012, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. The Internet enables Boeing to share design tools and process with engineers, customers, maintenance people, project managers and component suppliers across the globe. Using The Internet, Boeing’s customers no longer need to wait 3 years to place an order. It aims to deliver a plane in 8-12 months and to build 620 aeroplanes annually, up from 228 in 1992. However, there are many reasons behind that. First, the current trends in the market environment, such as shrinkage of markets, increase of competition, technology turbulence, and diffusion of the IT through the organisations. These trends call for increased outsourcing activities, transformations in the value chains of the organisation and their distribution channels, and the formation of new network inter-organisational structures. In fact, these trends are calling for enhanced communication capabilities and increased inter-organisational exchanges. Second, the Internet offers an array of opportunities for marketers. Evans and King (1999) defined some of these benefits as; multiple marketing usage, access to commercial research, competitive intelligence, customer service, just in time inventory planning, sales channels, support for channel partners, image enhancement, rabid growth, global reach, around the clock presence, ability to normally target marketing efforts, cost effectiveness, up to minute information, and multimedia vehicle. Furthermore, among the several ways in which the Internet transforms the marketing functions are disintermediation, customer relations management, mass customisation, sales force automation, and collaboration and coordination (Eid & Trueman, 2004; Even et al., 2010; Kalakota & Whinston, 1997; Papows, 1998; Peppers & Rogers, 1999; Rose et al., 2011; Venkatraman & Henderson, 1998). Disintermediation; the web enables marketers to uncover new ways to eliminate process redundancies and establish direct interface with customers, suppliers, and strategic alliance partners, thus reducing transaction cost significantly (Papows, 1998). Customer relations management, the speed interactivity, continuity, and customisation capabilities of the Internet enable marketers to manage customers as a strategic asset. Customer service and support functions can be significantly strengthened. Web sites and e-mail systems are being used to answer customers’ queries about products, availability, upgrades, and repairs as well as to show customers new products and gather their ideas. Mass customisation; the internet and e-mail system provide marketers extraordinary capabilities to target specific groups or individuals precisely and enable them to practice mass customisation and one to one marketing strategies by adapting communications and other elements of the marketing mix to customer segments of size one (Peppers & Rogers, 1999). Sales force automation; the Internet and the Web can play an important role in enhancing the productivity and effectiveness of the sales force by facilitating the selective automation of processes related to supporting the field sales force and integrating sales activity into a company’s information structure, (Kalakota & Whinston, 1997). Collaboration and Coordination; the Internet provides a universal connectivity in synchronous and asynchronous modes that facilitates intraand interorganisational coordination on an unprecedented scale (Even et al., 2010; Venkatraman & Henderson, 1998). On the other hand, Soh et al. (1997, p. 217) found that businesses use the Internet for marketing and advertising; customer services and support; information gathering, and, to lesser degree, electronic transactions. A great deal of the buyer-seller relationship between firms is being replaced or significantly transformed by the Internet. These systems include ERP (Enterprise Resource Planning) on the back end and CRM (Customer Relationship Management) on the front end of a company’s supply chain (Borders et al., 2001; Even et al., 2010; Turban et al., 2002). However, using the Internet, companies can deliver three forms of service to customers (Skinner, 1999, p. 128): 1. The same level of service through the Internet that that they can currently get directly from a sales person but with more convenient way. For example, visitors to International Journal of Online Marketing, 2(3), 39-51, July-September 2012 41 Copyright © 2012, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. the company’s web site can hunt for a part by its number, by a description, or by its manufacturer. They can place an order for parts, pay for them electronically, track the status of previous orders, and even speed delivery time by connecting directly from the company’s web site to the shipping company’s site. 2. Personalise interactions with their customers and build consumer loyalty. 3. Companies can provide valuable new service inexpensively. A Company could, for example, draw on data from its entire customer base to make available wide-ranging knowledge of some topic. For instance, if a customer has a problem with a product, he/she might consult a site’s directory of Frequently Asked Questions (FAQ) to see how others have solved it. The combination of these three levels of service could make the Internet channel very compelling for customers and because these services are basically just electronic exchange, they can be delivered at very low cost. Moreover, the technology allows companies to offer increasing higher level of service without incurring incremental costs for each transaction. For example, Cisco systems products reduced its annual operating expenses by nearly $270 million. But Cisco’s managers say the real value of the electronic channel is that it allows the company to provide buyers with a range of advantagesconveniences, information, personalisation, and interactivity-that competitors cannot (Skinner, 1999, p. 128). However, despite the greater growth of the Internet use in most developed nations and developing countries as well, systematic research in this field is still scarce. Most of the recent literature have done in an exploratory manner, yet only a handful have made an attempt to study the effect of the Internet on customer targeting activities (Avolonitis & Karayanni, 2000; Clarke & Flaherty, 2003; Karayanni & Baltas, 2003; Rose et al., 2011). Therefore, this paper is an attempt to determine the effect of Internet usage on marketing activities. Factors examined include the following: 1) marketing activities, 2) activities and 3) marketing efficiency. OBJECTIVES OF THE PAPER The present paper pursues the following objectives: • To identify the customer targeting activities that are affected by the Internet use and, • To specify and test hypothesised relationships derived from the literature review. In the following sections, first the development of the literature review and the hypotheses of the study are presented. Next, the methodology of the study is discussed followed by the analysis and results. More specifically, the hypothesised relationships is tested using SPSS and data collected by mail survey of 123 companies. Finally, the conclusions and their implications are discussed. Literature Review, Conceptual Model, and Hypothesized Relationships The purpose of this research is to investigate the effects of the Internet use on marketing activities and performance. Consequently, based on the previous literature, the effect of the Internet on marketing activities has been categorised into four basic dimensions, 1) customer relations activities, 2) customer targeting activities, 3) marketing performance, and 4) marketing efficiency. The four dimensions are discussed below: Customer Relations Activities Sales management includes customer classification and market segmentation, selling, service, and relation of existing customers. These activities seem to be very crucial for industrial marketers (Webster, 1984). This research focuses on sales activities that may be improved by using the Internet. For example, market segmentation, customer classification, 42 International Journal of Online Marketing, 2(3), 39-51, July-September 2012 Copyright © 2012, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. management of customer database, and electronic transmission of advertisement material (i.e., electronic catalogues) to the customer (Avlonitis & Karayanni, 2000; Furnell & Karweni, 1999; Lancioni et al., 2000; Rose et al., 2011). Customer Targeting Activities The Internet is becoming an essential tool in marketing. Its use has revolutionised the dynamics of international commerce and, like the telephone and fax machine, may be a major democratic force since it allows companies of different sizes to compete. Advantages have been cited by researcher such as low set-up cost, globalness, ease of entry, time independence, interactivity (Bennett & Roger, 1997). Others see better information management, better integration of suppliers and vendors, better channel partnership, lower transaction cost, better market understanding, expanded geographical coverage (Damanpour, 2001). Opportunities exist for improved communication, corporate logistics, competitive advantages, collaboration, information reach and retrieval, marketing and sale promotion, data transmission, globalisation (Ellsworth & Ellsworth, 1995, 1996). Furthermore, this technology is linked to more rapid internationalisation, reduced importance of scale economies, reduced importance of global advertising cost as a barrier to entry, price standardisation, reduced importance of traditional intermediaries, electronic support for interfirm networks, new world wide marketing research medium (Even et al., 2010; Quelch & Klein, 1996). There is also the possibility of simplifying the operational issues of doing business in other countries, reducing the dependence on agents and distributors, providing access to low cost or no cost market research, monitoring the on line efforts of competitors’ product offerings and pricing, improving the feedback that comes directly from global market, enabling firms to reach a larger audience at a relatively low cost. Marketing Performance Marketing performance is evaluated not only in the basis of sales, but also on other criteria that are essential to marketing. Bondra and Davis (1996) stated that the measures of IT (i.e., The Internet) performance should be closely linked to the objectives that were to be achieved through the applications by the sales and marketing management. In empirical research sales, cooperation, return on assets and investments, service to customers, profits, market share, customer satisfaction, and outcomes given comparison levels have all been used either separately or in ad hoc combinations in the assessment of marketing performance (Anderson & Narus, 1990; Rose et al., 2011). However, the Internet is an out-directed IT that can be used both as a direct sales channel and as an interactive communication tool (i.e., sales force and marketing tool). Thus, it may affect sales performance in two ways: • Through achieving direct sales (i.e., via the WWW); and • Indirectly, through enhancing interorganisational relationships, providing higher levels of productivity. However, the Internet creates the potential to interact with customers on a global scale. This interaction may, in turn, allow marketers to target their customers on a one-to-one base basis and to build brand loyal relationships (Arnott & Bridgewater, 2002, p. 87). Thus, this research focuses on performance issues that relates to marketing productivity such as sales, new orders, better service quality, superior customer relationships, new service development and adaptability to customer needs (Avlonitis & Karayanni, 2000; Mang & Stauss, 1999; Poon & Swatman, 1998). Marketing Efficiency The Internet has been characterised as a tool for facilitating sales force efforts, thus leading International Journal of Online Marketing, 2(3), 39-51, July-September 2012 43 Copyright © 2012, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. to higher level of marketing efficiency (Anderson, 1996). Marketing efficiency resulted from cost reduction resulted through the use of the Internet in carrying out marketing activities, for example, reduction in cost of sales, customer service costs, time of routine service jobs, sales people travel time, and number of marketing people employed (Avlonitis & Karayanni, 2000; Borders et al., 2001; Chan & Swatman, 2000; Furnell & Karweni, 1999; Honeycutt et al., 1998; Lancioni et al., 2000; Lord, 2001; Lynn et al., 2002; Osterle et al., 2001; Rose et al., 2011). Osterle stated that the main benefits to be gained from implementing the Internet solution are as follow (Osterle et al., 2001, p. 127). • Efficiency of information processes for the customer. The convergence of information in the Internet (see enables customers to obtain all relevant information on existing and new products (price, technical descriptions, sales conditions, and interchangeability) via one channel. Since the site is maintained centrally, the company can easily assure that the information is up to date and benefit from cost savings in producing and distributing catalogues, price lists, and technical documents. • Improved customer service level. Additionally, previously unavailable, features have been introduced with the Internet and will yield significantly higher services levels. Such as technical documents download and electronic order tracking. • Order processing efficiency. With the Internet, order-processing efficiency has increased remarkably. This has been mainly due to the homogenisation of master data, which reduces matching efforts and, consequently, eliminates misunderstandings as well. The third group of variables focuses on customer targeting activities that might be affected by Internet use, and the consequent performance outcomes. As mentioned in chapter three, based on the previous literature we can categorise the effect of the Internet on marketing into four basic dimensions, customer relationships, customer targeting activities, marketing performance, and marketing efficiency.