Computers as a Marketing Tool Essay
In our increasingly complex society computers are being used in business more and more. They can be used to process information on which to base decisions as well as a storage system making information readily available. It is reasonable to say that, without the power of computer systems, today’s modern business world could not function. One particular organisational function they facilitate is marketing. Philip Kotler (1994) describes marketing as “a social and managerial process by which individuals and groups obtain what they need and want through creating, offering and exchanging products of value with others”. Computers can aid this in many ways – particularly through information systems. These are a type of work system which use information technology (with the computer being the hardware) to capture, transmit, store, retrieve, manipulate or display information (Alter, 1999). When considering how computers may be useful in marketing, databases are usually what first and foremost come to mind. An electronic database can prove to be a very useful tool in marketing.
A database is a filing system which holds a shared collection of data and data relationships used to meet the information needs of an organisation. With the aim of eliciting a desired measurable response in target groups and individuals, database marketing uses database technology and sophisticated analytical techniques combined with direct marketing methods (Kotler, 1994). The database can be used for the likes of developing names and addresses for the purpose of direct mail campaigns, building customer profiles, monitoring demographics, building customer relations, identifying niche markets and aiding market research for example. Online Analytical Processing (OLAP) is another area that uses the database as a marketing tool. OLAP is a category of database software providing an interface such that users can transform or limit raw data according to functions pre-defined or defined by users as well as quickly and interactively examine the results (Foldoc, 2000).
It looks at possible future developments such as patterns and trends and so is widely used by marketing professionals in order to generate ‘what if’ scenarios eg what may happen if a product is aimed at a particular market. The computerised database can be used in yet another way. Profit Impact of Marketing Strategies (PIMS) is a large database that was designed in the 1970s and has been developed continually since. It holds useful information and experiences of some 3,000 businesses eg statistics relating to market shares, research and development spending, advertising costs, breadth of production line, quality and vertical integration (Calpoly, 2000). Other businesses can use this database for such things as testing and planning strategies, solving various business problems, benchmarking and generally better understanding their environment.
The Strategic Planning Institute (SPI), who expanded PIMS to its current size and deal with clients who wish to access it, define the database as “a collection of statistically documented experiences drawn from thousands of businesses, designed to help understand what kind of strategies work best in what kinds of environments” (Strategic Planning Institute, 2000). It is clear, particularly from the definition given above, that PIMS can be a most useful tool to aid any organisational function – including marketing strategies. For example, it can help organisations to understand how customers make buying decisions, obtain a clear up-to-date picture of their markets and monitor trends and new market segments. In addition, PIMS can aid decisions relating to product lines to be sold, customer segments to target, channels of distribution, product and pricing strategies and overall effective marketing plans (PIMS Consulting Services, 2000).
Examples of organisations who make use of the PIMS database in relation to strategy formation include Honeywell and Hydro Aluminium. Using computers to actually acquire information eg use the PIMS database or customer databases is one area. Computers also provide a means of communicating information in both directions both in real time and not. Electronic Data Interchange (EDI) is a means of transferring commercial messages between the likes of manufacturers, suppliers and retailers (Bronzite, 1991). Such things as invoices, stock checks, purchase orders, purchase progress reports and other standardised document forms can be exchanged bi-directionally between computer systems instantaneously for automatic processing. This system saves money (it is cheap, paperless and instant) and strengthens relationships between customers and suppliers by providing a good means for useful and vital communication.
In particular, EDI aids marketing by providing the likes of sales data to aid with planning as well as market research eg who is buying what (this relates to Electronic Point of Sale discussed later). From the supplier point of view, it can be a “tie that binds” in the sense that getting customers to invest in sharing information about sales and inventories can be a powerful disincentive to switching suppliers (Zineldin, 2000). Users of EDI include banks (they use SWIFT [Society for Worldwide Interbank Financial Telecommunications], a world-wide banking system involving global electronic transfer of information and funds), apparel manufacturers Benetton and Levi Strauss as well as most supermarkets. Tesco is one such supermarket. It uses EDI to communicate with suppliers and warehouses in order to facilitate day to day running (the uses of EDI as described above) (Thompson, 1997).
They also use it for such things as gathering sales information, which is a vital part or marketing. In actual fact, Tesco has become somewhat dependent on EDI (as have all supermarkets) and has even complimented it with a secondary system called Tesco Information Exchange (TIE), which is used for the same purpose as EDI as well as promotions management and closer sales tracking. TIE is Internet based (an area discussed later) (Tesco, 2000). A system that can be linked to the above-mentioned EDI is Electronic Point of Sale (EPOS). EPOS has gained wide acceptance among retailers, replacing the conventional till with a computer (Avon-Net, 2000). Before EPOS (note, note all retailers currently use EPOS particularly small ones), tills were used only for the purpose of handling monetary transactions.
Now they can be used for gathering information, running automatic stock replenishment systems and dealing with alternative payment methods such as credit cards (this is called Electronic Funds Transfer at Point of Sale [EFTPOS]) also. Large retailers such as supermarkets and other big chains will have their tills networked and probably linked to an EDI system. This can provide management and suppliers with access to relevant and up-to-date marketing information such as buying patterns, demographics, profitability evaluations as well as stock levels eg if the stock level is low, it can be replenished quickly (Tesco, 2000). Referring back to the Tesco supermarket chain, this is a system they use and find successful. Stock levels, stock movement, buying patterns and such are easier to monitor due to the bar code (a machine-readable code). Checkout systems (EPOS tills) scan the bar code which provides an instant record of sales and stock movements (Thompson, 1997).
This information can then be used to monitor stock levels by simple deductions upon sale. Another area relating to EPOS that should be mentioned is the use of the store loyalty card as a means of gathering marketing information. Basically, regular customers are issued with a loyalty card that they hand over at the checkout every time they purchase. According to their purchases, they gain some type of reward such as future discounts. At the same time, the retailer acquires useful, invaluable information such as who is buying what, when and how many ie customer profiles. This data can then be used to market specific items to specific people to whom they may interest (Alter, 1999). Computers play a big part in information flow in organisations. They are used in order to facilitate the various systems in place by acquiring, monitoring and communicating information and data. In order that information is communicated in an organised and purposeful manner, routine and non-routine processes collectively referred to as an Information System (IS) are devised or employed (Cleary, 1998).
There are likely to be various information systems in organisations, particularly large ones, each providing different people/functions with different yet relevant and useful information. Although these systems are generally organisational-wide, they are naturally linked to each organisational department/function and indeed each function can and will have its own information subsystems. For example, specific marketing information can be passed to management for decision making purposes via an organisational-wide system using the marketing department’s own subsystems. One such organisational-wide information system is the Management Information System (MIS). This is defined as “the combination of human and computer based resources that results in the collection, storage, retrieval, communication and use of data for the purpose of efficient management of operations and for management planning” (Kelly, as cited in Lucey, 1991).
The words ‘operations’ can easily be replaced with ‘marketing’ when considering how the system specifically handles marketing information. Basically, a MIS is a system that provides management with information for the running of the organisation. It is important to be clear on where information gathered by a MIS comes from. The process of using IT in business is referred to as data processing (DP) of which the resulting systems are referred to as transaction data processing systems (TDPS). TDPS deal with information concerning routine, operational level activities. MISs run upon TDPS, extracting information which is most useful (Clarke, 1995). Roger Clarke (1995) states that the MIS is only capable of providing part of management’s needs as, being built on TDPS, they have access to only internal, historical data. In order to remedy this, Decision Support Systems (DSS) can be put in place. They help gather external, future-oriented data and collate it with internally sourced data for help in making decisions in semistructured and unstructured situations (Alter, 1999).
A DSS need not be solely organisational-wide, each function can have its own DSS. For example, the Marketing DSS can be used for such things as making various and vital forecasts, planning more effective advertising and evaluating marketing plans amongst other things. Fletcher (1990) comments that computerised DSS systems offer marketers the same benefits acquired by other departments in an organisation in that unstructured, qualitative information and ‘what if?’ scenarios can be handled (these are characteristic of marketing information requirements). Yet another common information system which uses computers (and is relevant when discussing both MIS and DSS) is the Executive Information System (EIS). This extremely user-friendly system (one needn’t be a computer expert or have extensive knowledge of the system in order to use it and understand outputs) is said to have taken over where MIS fall short in that they are more flexible and more interactive (Alter, 1999).
They also deal with external information. In addition, the EIS can be said to merge MIS and DSS in that specific information requirements of senior executives can be addressed better. Figure 6 displays a typical EIS data structure. Lucey (1991) says of EIS, “they assist top management by providing information on critical areas of the organisation’s activities drawn from both internal and external databases”. Examples of organisations who use EIS in particular include ICI and British Airways. One organisation in particular who found EIS useful was brewers Scottish and Newcastle who used the system to deal with information management related to product sales and market share (Shaw, 1991). The information systems discussed are only a few of many types (computers and information technology are highly customisable and so different systems appear), however they are the most common. No matter what type of information system is in place, the function will usually be the same – to facilitate the running of the organisation by acquiring and communicating useful information.
As previously mentioned, as well as gathering and storing information, computers can communicate it in various ways also. The Internet, in addition to EDI, is an example of a major means of communicating information – in fact, it is probably the biggest information resource on the planet (it is a global entity). It can be described as “a collection of millions of computers that are all linked together on a computer network (the biggest wide-area network [WAN] there is) which allows them to communicate with on another” (Brain, 1999). The various functions served by the Internet makes it a powerful tool. Services (functions) include electronic mail, file transfer, the world-wide web (WWW – a massive information resource), real-time chat facilities and newsgroups amongst other things.
The Internet has many commercial/business applications, particularly much so where marketing is concerned. The number of people who own or have access to a computer connected to the Internet is growing at a phenomenal rate so a global market is easily obtainable for any organisation. Specific uses in relation to marketing include research (there is information available on just about any subject), electronic mailshots (sending promotions and such to people electronically rather than sending a leaflet or letter by conventional post), online surveys (questionnaires can easily be issued and their results quickly retrieved), sales can be made (selling and such over the Internet is referred to as e-commerce), product promotion and building customer relations.
The list of applications is endless. However, Mosad Zineldin (2000) sums up the usefulness of the Internet to marketing by commenting that “marketing on the Internet marries the needs of consumers with the ever-evolving cyber technology” resulting in “companies going electronic to communicate with their customers, create an awareness of their product and, perhaps, make a profitï¿½the Internet enables companies to engage consumers in a way that no other medium can”. Internet technology can be used by organisations to create Intranets (a private network which can be used for the likes of passing corporate information) and Extranets (like an Intranet but for customers, suppliers and other associates).
Examples of organisations who make use of this technology include Tesco for their TIE (this would be an Extranet) and the Bank of Scotland who randomly issue online questionnaires to people visiting their website in order to gain information such as just who is and is not banking with them. The Internet is one of the biggest, fastest growing and arguably exciting products of IT and computers. By considering the areas discussed, computers in various shapes and forms no doubt aid the marketing function (and practically all other functions) a great deal.
There is now a great dependency on them. Naturally they are not 100% reliable and can present problems concerning such things as cost, achieving competitive advantage (is it possible with IT being so widely used and available?), applying the technology to specific problems and structures and of course high speed of evolution – today’s system can be obsolete tomorrow. However, when consideration is given to the time, money and effort saved by computers, particularly in the marketing function’s complex and huge environment, the benefits clearly outweigh the drawbacks. The discussed areas are only the tip of the iceberg – there is evidence of computers being used successfully as a marketing tool everywhere.