DESIGN AND IMPLEMENTATION OF AN ONLINE MARKETING INFORMATION MANAGEMENT SYSTEM
CHAPTER TWO
LITERATURE REVIEW
2.1 Definition—Marketing Information System (MkIS)
Simply put, a MkIS is a computerized system that is designed to provide an organized flow of information to enable and support the marketing activities of an organization. The MkIS serves collaborative, analytical and operational needs. In the collaborative mode, the MkIS enables managers to share information and work together virtually. In addition, the MkIS can enable marketers to collaborate with customers on product designs and customer requirements. The analytical function is addressed by decision support applications that enable marketers to analyze market data on customers, competitors, technology and general market conditions. These insights are becoming the foundation for the development of marketing strategies and plans.
The MkIS addresses operational needs through customer management systems that focus on the day-to-day processing of customer transactions from the initial sale through customer service.
MkIS systems are designed to be comprehensive and flexible in nature and to integrate with each other functionally. They are formal, forward looking and essential to the organization’s ability to create competitive advantage. The MkIS is the firm’s “window on the world” and, increasingly, it is the primary customer interface. Figure 1 presents the basic architecture of the MkIS.
2.2 The Strategic Role of the Marketing Information Systems
Historically, the role of the marketing function has been to support “make and sell” business strategies that emphasized increases in market share over the creation of long-term customer value. This view started to change after World War II with the recognition that satisfying the customer’s needs and wants should be the focus of a firm’s business activities.
The emphasis on the customer elevated the importance of marketing as a core business function on a par with research and development and production. The marketing function has become the firm’s window to the world in the sense that it must monitor the marketing environment for changes in buyer behavior, competition, technology, economic conditions, and government policies. Marketing is a “strategic” function in that marketing activities enable organizations to identify and adapt to changes in the market environment.
The strategic function of marketing is further emphasized as Internet-based technologies have enabled radically new approaches to selling where information technology for the first time touches customers and provides new means for collecting marketing information. In a knowledge-intensive economy, the ability to collect, analyze and act upon marketing information more rapidly than the competition is the core competency from which competitive advantage flows. Marketing information systems provide the information technology backbone for the marketing organization’s strategic operations.
In a broader sense, the MkIS creates an organized and timely flow of information required by marketing decision makers. It involves the equipment, software, databases, and also the procedures, methodologies and people necessary for the system to meet its organizational objectives. MkIS encompasses a broad spectrum of activities from simple transaction processing complex marketing strategy decision making.
2.3 The Role of the Internet
Information technology has transformed how firms conduct business. For example, financial service providers such as banks, stockbrokers and insurance companies could not do business today without their client-server-based information technology. This technology has long supported marketing activities. However, it is the recent advent of the Internet, and especially the browserbased World Wide Web, which has ignited a revolution in MkISs.
The term “cybermarketing” is often used to describe the Internet’s convergence of computers, information systems, telecommunications and the customer with the marketing process. Internet marketing is characterized by interactivity, graphical user interfaces, multimedia content, and one-to-one connectivity. Internet technologies are not only providing new ways to reach the customer, but also to enable the reengineering of the entire marketing process and, indeed, the entire enterprise. It is no longer acceptable to view marketing as a standalone activity with lengthy time lapses between product concept, marketing strategy and commercialization.
Marketing has become interactive and real time. The rapidly growing field of marketing automation encompasses customer management functions to support e-commerce. As depicted in Figure 2, customer management applications include marketing decision support systems, customer relationship management, sales force automation, customer service and e-commerce activities. These activities are often described as “front office” customer-oriented activities. “Back office” enterprise resource planning (ERP) activities include manufacturing, finance and human resources. “Supply chain management” (SCM) activities encompass electronic procurement, inventory management, quality management and logistics systems to link an organization with its suppliers. These three elements comprise the enterprise information system.
Large integrated enterprise software companies such as Oracle, SAP, PeopleSoft, and IBM address all three major applications and they are beginning to use Web-based technologies to redesign business processes throughout the organization. The result is leaner organizations, faster response times, and lower costs. Decision makers are able to integrate information from customers, suppliers, and the internal organization to obtain an enterprise-wide view of their ability to develop and execute marketing strategy. Until truly integrated browser-based systems are widely in use, the principal challenge for marketers is to tie e-commerce generated data with legacy information systems in order to create a unified view of each customer. Marketers will need to understand all the various ways that customers are touching the business through existing interfaces and e-commerce. Many of the older interfaces, such as telemarketing centers, point of sale (POS) systems, and the sales force are likely to be supported by legacy client-server technology.
Marketers need to consolidate data from those systems with that from the Web-based ecommerce sources into a holistic view of the customer and make it available to decision makers.
2.4 Benefits of the Marketing Information System
The MkIS increases the number of options available to decision-makers and supports every element of marketing strategy. MkIS affects marketing’s interfaces with customers, suppliers and other partners. The primary benefits of the MkIS impact in the areas of functional integration, market monitoring, strategy development, and strategy implementation.
2.4.1. Market Monitoring.
Through the use of market research and marketing intelligence activities the MkIS can enable the identification of emerging market segments, and the monitoring of the market environment for changes in consumer behavior, competitor activities, new technologies, economic conditions and governmental policies. Market research is situational in nature and focuses on specific strategic or tactical marketing initiatives. Marketing intelligence is continuous in nature and involves monitoring and analyzing a broad range of market-based activities and information sources. There are three major sources of market information.
The first is syndicated data published by market research companies and industry associations. Company-sponsored primary research is another option. It is much more focused since you ask specific questions of respondents within your markets. But, it is considerably more expensive and time consuming. Perhaps the best data available are your own customer’s behavior captured from web site viewing, point of sale (POS) transactions, and systematic feed back from the sales force.
2.4.2. Strategy Development.
The MkIS provides the information necessary to develop marketing strategy. It supports strategy development for new products, product positioning, marketing communications (advertising, public relations, and sales promotion), pricing, personal selling, distribution, customer service and partnerships and alliances. The MkIS provides the foundation for the development information system-dependent e-commerce strategies.
2.4.3. Strategy Implementation.
The MkIS provides support for product launches, enables the coordination of marketing strategies, and is an integral part of sales force automation (SFA), customer relationship management (CRM), and customer service systems.
The MkIS enables decision makers to more effectively manage the sales force as well as customer relationships. Some customer management software companies are extending their CRM applications to include partner relationship management (PRM) capabilities. This has become increasingly important as many marketers are choosing to outsource important marketing functions and form strategic alliances to address new markets.
2.4.4. Functional integration.
The MkIS enables the coordination of activities within the marketing department and between marketing and other organizational functions such as engineering, production, product management, finance, manufacturing, logistics, and customer service.
2.5 Marketing Information System Functional Components
As shown in Figure 3, a MkIS consists of four major components: (1) user interfaces, (2) applications software, (3) databases, and (4) systems support.
1. User Interfaces. The essential element of the MkIS is the managers who will use the system and the interfaces they need to effectively analyze and use marketing information. The design of the system will depend on what type of decisions managers need to make. The interface includes the type of hardware that will be used, the way information is analyzed, formatted and displayed, and how reports are to be compiled and distributed. Issues to resolve are ease of use, security, cost, and access.
2. Applications Software. These are the programs that marketing decision makers use to collect, analyze, and manage data for the purpose of developing the information necessary for marketing decisions. Examples include the marketing decisions support software (MDSS) and customer management software for on-line sales and customer service.
3. Marketing Databases. A marketing database is a system in which marketing data files are organized d stored. Data may be collected from internal and external sources. Internal sources largely result from transactions. They provide data from e-commerce sites, sales results, shipping data, inventories, and product profitability. External sources include market research, competitor intelligence, credit bureaus, and financial institutions. Data can be organized in a flat file (Text file with one data record per line) or a relational database (Data is stored in tabular form where each row represents one entity and each column represents one characteristic of that entity). For instance, each row could represent a customer with the columns providing name, identification number, and purchase information.
4. System Support. This component consists of system managers who manage and maintain the systems assets including software and hardware network, monitor its activities andensure compliance with organizational policies. This function may also include a help desk for system users.
2.6 MARKETING DECISION SUPPORT SYSTEM
Marketing decision support systems (MDSS) constitute a set of core applications of the MkIS.
The MDSS provides computer-based tools, models, and techniques to support the marketing manager’s decision process. In the general case, MDSS is optimized for queries of historical data.
MDSS data typically are derived from both internal and external market sources. The MDSS features inquiry and report generation functions where the manager can access marketing data, analyze it statistically, and use the results to determine an optimal course of action.
A. Marketing Decisions Support System Functions
The MDSS can provide analytical models for forecasting, simulation, and optimization. MDSS tools include simple spreadsheets such as Excel, statistical analysis packages such as SPSS and SAS, on-line analytical processing (OLAP) tools, data mining applications, and neural networks.
The MDSS provides the user with the ability to explore multiple options. Typical MDSS functions include models and tools for:
1. Sensitivity analysis. Decision-makers can explore changes in a strategic variable such as price and model its impact on demand or competitive behavior.
2. What-if analysis. Can be easily accomplished with a spreadsheet. Revenues and costs can be manipulated to show the impact of each variable on profits and cash flows.
3. Goal setting. Analysis focuses on the desired result and builds the resource base necessary to accomplish the goal.
4. Exception reporting. Analysis looks for results that exceed or fall short of stated goals or benchmarks. Which products or segments exceeded sales forecasts? Sometimes called gap analysis.
5. Pareto analysis. Analysis looks for activities that generate disproportionate results. For instance, the top 20 percent of customers may account for 80 percent of sales revenues.
6. Forecasting models. Econometric models are used to analyze time series data for the purpose of predicting future sales and market share levels.
7. Simulation models. Monte Carlo simulations address marketing decision making under conditions of uncertainty. Variables such as the market price, unit variable cost, and quantity sold are not known ahead of the product investment decision. Simulation models allow the marketer to analyze risk and assess the probabilities of likely outcomes of their decisions.
8. Scorecards and dashboards. Scorecard systems can present a consistent framework for tracking the effectiveness of marketing activities. They often have different modules for senior executives, marketing managers, product managers, and customer service managers. Scorecard systems allow the user to “drill down” on an analytic and workflow basis to determine the status of any strategic initiative. Dashboards allow frontline managers to monitor their critical performance indicators. These systems are often used in conjunction with “best practice” standards for call-center-based customer support.
B. MDSS Analyses
Marketers typically use MDSS models and tools to analyze markets, customers, competitors, and internal operations. The following list presents some of the most common types of issues targeted by MDSS analyses.
1. Market segment analysis. Use ofmodeling techniques to identify segments and analyze economic trends, demographics and behavior.
2. Market share analysis. Analyze trends and determinants of market share.
3. Competitor analysis. Analysis of competitors’ market positions, economics customer base, and marketing strategies.
4. Pricing analysis. Identifies and analyzes the factors that influence a firm’s ability to set prices including price elasticity and demand analysis. Includes internal economics and market related factors.
5. Cost analysis. Studies a firm’s overall cost structure and its impact on product cost. Margin analysis combines cost analysis with pricing analysis. Variance analysis looks for explanations of costs overages and underages.
6. Sales analysis. Studies the distribution of a firm’s sales by region, product, brand, sales territory, etc.
7. Sales forecasting. Develops estimates of sales potential by product, region, sales territory, brand, etc.
8. Sales force productivity. Studies sales force effectiveness and efficiency and contributing factors.
9. Advertising analysis. Analyzes advertising effectiveness, media choices and brand awareness.
10. Distribution. Analyzes channel decisions from economic and strategic perspectives.
11. Simulation. Simulates decision making under various strategic scenarios.
12. Customer satisfaction. Analyzes issues concerning the customer’s expectations and outcomes with the product.