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Marketing beyond the textbook emerging perspectives in marketing theory and practice Contemporary markets are subject to fierce competition as the result of digitization, social media, and increasingly powerful and demanding consumers that force organizations to develop an array of novel strategies and approaches to stay competitive. Organizations’ attempts to deal with the emerging complexity often go beyond the scope of introductory marketing textbooks. Building upon the important foundation of introductory marketing textbooks, Marketing Beyond the Textbook expands the traditional domain of marketing by providing a critical but constructive approach to the discipline. Emerging perspectives in marketing theory and practice are extensively discussed in relation to the contemporary organization and structure of markets. Hence, this book provides students and reflective practitioners with essential concepts and tools that support the comprehension of present challenges and decisionmaking associated with these. In twelve essays, Marketing Beyond the Textbook deals with particular challenges facing the discipline, taking as its starting point marketing areas well-known to scholars, students and practitioners. By doing so, these essays together seek to expand the depth as well as the scope of the reader’s marketing knowledge.

| Marketing beyond the textbook

Anders Parment, Ph.D., is a research fellow and senior lecturer at Stockholm Business School, Stockholm University. His research focuses on consumer behaviour, branding, and generational marketing. Dr. Parment is also a well-known speaker and strategy consultant.

Laurell Parment

Christofer Laurell holds a Ph.D. in Business Administration from Stockholm Business School at Stockholm University. Dr. Laurell’s research interests are focused on how digitization and social media challenge traditional marketing strategies.

Marketing beyond the textbook emerging perspectives in marketing theory and practice

Art.nr 38826 2:a uppl.

www.studentlitteratur.se

978-91-44-10525-3_Cover.indd All Pages

Christofer Laurell & Anders Parment

2014-12-18 09:25

Copying prohibited All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage and retrieval system, without permission in writing from the publisher. The papers and inks used in this product are eco-friendly.

Art. No 38826 ISBN 978-91-44-10525-3 First edition 1:1 ÂŠâ&#x20AC;&#x2030;The authors and Studentlitteratur 2015 www.studentlitteratur.se Studentlitteratur AB, Lund Cover design: Jens Martin/Signalera Cover illustration: Shutterstock/cobalt88 Printed by Specialtrykkeriet A/S, Denmark 2015

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Contents

Introduction 9 Contents 12 References 14 Chapter 1 Markets, Marketing and Consumers – a Story of Rapid

Change 15 Digital Technology and its Impact on Society and Marketing 16 Markets Undergoing Digitization and the Rise of Long Tails 17 The Interplay between Markets and Marketing 23 The Changing Role of Consumers 29 References 33

Chapter 2 Company and Marketing Strategy 37

Strategy in Introductory Marketing Textbooks 38 Depicting Characterizing Traits of Digital Business Strategy 42 The Merger of Marketing and IT Strategy 44 Scope of Digital Business Strategy 45 Scale of Digital Business Strategy 48 Speed of Digital Business Strategy 49 Sources of Value Creation and Appropriation 51 The Interplay between Strategy, Technology and Marketing 52 References 54

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Chapter 3 Sustainability 57

Deceptive Practices and Social Criticism of Marketing 58 Greenwashing 60 High-Pressure Selling 62 Harmful Products 63 Overselling, False Wants, and Planned Obsolescence 63 High Prices and Extensive Markups 64 High Costs for Marketing Communications 66 Society Bears the Costs of Non-Sustainable Consumption 66 Consumer Actions to Promote Sustainable Marketing 67 Consumerism 67 Environmentalism 71 Consumers’ Sustainability Claims and Sustainable Marketing 72 Sustainable Marketing Communications 74 References 76

The Rise of Business Intelligence as a Strategic Tool 82 Business Intelligence – Important for an Increasing Number of Organizations 83 Issues in Business Intelligence Implementation and Practice 84 Scanning the Macro and Micro Environments 84 Proactive and Reactive Attitudes 86 Is Business Intelligence Proactive or Reactive? 86 Methods and Implementation Issues 90 Marketing Intelligence – Great in Theory, Problematic in Practice 91 Market-Driven or Market-Driving? 93 Market-Driving is often a Successful Approach 96 Latent Buyer Needs 98 References 99

Chapter 4 Business Intelligence 81

4 ◆ Contents

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Chapter 5 Customer Satisfaction and Loyalty 103

The Tricky Balancing Act of Measuring Customer Satisfaction 104 Feedback Bias 105 Asking Customers Activates their Criticism 106 The Concept of Customer Satisfaction: Expectations vs. Outcome 108 The Subjective Nature of Customer Satisfaction 110 One Single Aggregate Customer Satisfaction Measure 110 Customer Satisfaction Measurement Reflects the Experience of Current

Customers 111 Turning Non-Customers into Customers – a Process that is Difficult to Track 112 Making Use of Survey Results 114 Time Series – Measuring Customer Satisfaction over Time 115 Alternative Approaches to Customer Satisfaction Measurement 116 The Emotions Matrix 118 Customer Loyalty 119 What is Customer Loyalty? 120 Two Loyalty Dimensions 122 Loyalty and Profitability 122 Turning Loyalty Insights into Action 125 Turning True Friends into True Believers 125 Dealing with Butterflies 126 Dealing with Barnacles 127 Measuring Loyalty 127 Correlation between Loyalty Dimensions 131 References 131

Contents ◆ 5

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Chapter 6 The Branded Society 135

The Increasing Reach of Brands and Branding Practices 136 The Branded Society 138 Who has Power over Brands? 139 The Interplay between Globalization, Internationalization, and the Branded Society 141 The Abundance of Choices 142 The Branded Society and a Market-Based Ideology 143 From Lack of Information to Information Overload 145 Is More Available Information an Opportunity or a Problem? 147 Branding Practice – Criticism 148 References 150 Chapter 7 Branding 155

The Role of Branding 155 The Shift to Corporate Branding and the Increasing Diversity of Brands 157 Employer Brands 159 Place Brands 160 Personal Brands 161 Brand Management 163 The Concoction of Brands in the Contemporary Brand Landscape 167 Making Use of Real People in Branding 169 References 170

The Traditional Approach to Marketing Channels 174 Dealers were Assumed to have an Advantage in the Local Neighborhood 174 Financial Optimization 174 Franchising 175 The Emergence of a Modern Approach to Marketing Channels 176 From Scarcity of Goods to Oversupply 177

Chapter 8 Marketing Channels 173

6 ◆ Contents

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Changing Market Characteristics: Internationalization and Transparency 177 Branding: from Products to Customer Experience 178 The Increased Importance of Services 179 The Wheel-of-Retailing 180 A Downward Shift in Power towards Retailers and Consumers 181 Contemporary Marketing Channels Practices 182 Proactive and Reactive Retailers 182 Fashion Clothing Retailing 183 Direct vs. Indirect Marketing Channels 186 Design Issues in Contemporary Marketing Channels 187 The Retailer’s Role in Promoting the Brand it is Selling 189 Location 190 Channel Ownership – Replication or Direct Channels? 191 How Many Brands? 193 References 195 Chapter 9 Promotion 199

The Conceptual Foundations of the Promotion Concept 200 A Changing Understanding of the Promotion Concept 204 Promotion – the Property of Organizations? 205 The Creating Consumers 209 Managing the Creating Consumers 212 Understanding Promotion as a Manageable and Unmanageable Concept 218 References 219 Chapter 10 Social Media Marketing 221

Social Media in Introductory Marketing Textbooks 222 Conceptual Foundations of Social Media 225 Consumers in Social Media 230 Social Media and the Transformation of Spaces into Commercial Places 234 References 237

Contents ◆ 7

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Chapter 11 Services and Services Marketing 241

Services in Contemporary Markets 241 Characteristics of Services 243 Services are Intangible 244 Production and Consumption Cannot be Separated 245 Services are Heterogeneous 247 Services are Not Sustainable 248 Service Quality – Difficulties in Making it Consistent 251 Key to Convincing Buyers: The Moment of Truth 252 Customer Responsiveness to Signals 253 Delivering the Unexpected and Exceeding Expectations 254 Service Recovery 255 References 257 Chapter 12 Experience Marketing in Global Marketplaces 261

Index 281

Experience Marketing 262 Characterizing Traits of Experiences 263 The Three Phases of Consumers’ Experience 265 Physical Retail Experiences 268 Static and Dynamic Retail Design Elements and their Contribution to the Retail Experience 270 Digital Retail Experiences 272 Global Marketplaces 274 The Role of Experience Marketing when Approaching Global Marketplaces 276 References 278

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ÂŠâ&#x20AC;&#x2030;The authors and Studentlitteratur

Introduction

Marketing is a body of knowledge that is constantly subject to change. This is because alterations in markets, shifts in consumer behavior, emerging technologies, product innovations and novel marketing practices continuously challenge existing conceptualizations of marketing. Regardless of whether you are currently taking, or have recently taken, an introductory university course module on marketing or if you are a marketing practitioner deeply involved with strategic and tactic marketing decisions, our ambition is that this book will help you develop your understanding of increasingly dynamic markets and complex consumers. As the title suggests, this book attempts to go beyond the knowledge provided in marketing textbooks. In this vein, we attempt to question the existing body of knowledge that marketing professionals have accumulated by reading introductory textbooks and taking introductory marketing course modules. Regardless of where marketing course modules are taken or in what industry the reader might be working, the shared body of knowledge concerning marketing often tends to transcend countries and cultures. This means that marketing is a truly international discipline, and also the point of departure of this book. The readerâ&#x20AC;&#x2122;s existing knowledge of the subject field therefore provides an important foundation from which to read this book. What, then, is the body of knowledge we are talking about? It is marketing strategy, marketing intelligence, market segmentation, positioning, branding, the marketing mix (product, price, place and promotion; see Borden, 1964) and services marketing. This body of knowledge has been

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surprisingly stable over the last decades and is, with different emphasis and level of depth, represented in all existing marketing textbooks. Does this mean that this body of knowledge is outdated and that there is a strong need to replace it with content, theories, models and perspectives that better reflect contemporary markets? We believe that this is not necessarily the case. This body of knowledge has, however, been significantly updated throughout the years and although it is hardly fully reflected in marketing textbooks, extensive research has been conducted in most if not all basic marketing fields. What is then needed, in our opinion, is to challenge the existing body of knowledge that dominating marketing textbooks convey. In this book, we therefore attempt to do so by presenting twelve essays on a variety of marketing-related areas of knowledge. These twelve areas are of particular interest as they draw from contemporary changes in market dynamics and consumer behavior that bring with them emerging challenges for many organizations. In writing the book, our ambition has been to challenge existing thinking in a constructive way. By doing so, we have tried to avoid the fallacy of being critical without presenting alternative solutions to contemporary problems. We also believe that the dominating perspective found in the existing body of knowledge is needed, for several reasons:

of whether they graduated in 1979, 1988, 1994 or 2015. Hence, it represents a platform of the joint understanding of marketing theory and practice among marketing practitioners. • It provides a necessary and natural reference in dealing with emerging perspectives and ideas, since it is difficult to discuss emerging perspec tives and ideas unless there is a body of knowledge to relate to that provides a contextual point of departure. • It reflects the history of marketing in terms of how it emerged and has developed over the decades.

• It is known and to a significant extent used by practitioners, regardless

10 ◆ Introduction

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Numerous studies suggest that introductory courses are crucial for the understanding a student develops of a particular area of knowledge. For instance, Lowry and Moser (1995) suggest that the introductory coursebook accounts for 75 to 90 percent of what a student learns. This means that first impressions matter, even if they later on prove to be questionable in light of additional knowledge. The present book should therefore be understood in such a context. As introductory books reflect an overview of a vast body of knowledge, subfields of marketing that might be increasingly important to the discipline are sometimes omitted. Our book attempts to fill this gap by providing twelve essays on topical and contemporary marketing issues. This means that some of the assumptions that introductory textbooks make will be questioned. This questioning should not be interpreted as these books “being wrong”, but rather as stimulating ways to reflect upon the assumptions underlying theories, reasoning, and models. The extent to which we relate to the existing body of knowledge varies substantially across the chapters. The reason for this is simple. In some subfields of the marketing discipline, there is a relatively clear knowledge base to relate to. When it comes to others subfields, such as social media marketing and sustainability, the phenomena at hand are, if not new, at least emerging and, for this reason, conceptually ambiguous. Segmentation on contemporary markets could easily be related to a traditional perspective on segmentation, and the same holds for marketing channels. Social media marketing, however, could in contrast be related to many of the subfields of marketing, even though the more obvious alternative is to the area of marketing communications which reflects the way organizations used to – and to a significant extent still do– communicate with their markets. Taken together, this book will expand your perspectives of the marketing discipline. It will close the gaps in introductory marketing textbooks, and relate emerging perspectives of marketing to contemporary challenges that the discipline faces. This means that the reader will be well prepared after reading this book, in terms of understanding how dynamic markets and increasingly complex consumer behaviors can be explained and successfully tackled. Introduction ◆ 11

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Contents

concepts are understood in introductory marketing textbooks and how digitization impacts these concepts. In this vein, the digital transformations of markets, organizations and consumers are illustrated to impact strategy in terms of its scope, scale, speed and how sources of business value creation and value appropriation should be understood. Chapter 3 deals with sustainability in a marketing context. More particularly, it discusses the social criticism of marketing, deceptive practices, and consumer actions and movements, such as consumerism and environmentalism, greenwashing and environmental certifications. Chapter 4 digs into the world of marketing intelligence and organizations’ attitudes – proactive and reactive – towards the market environment. Market-driven vs. market-driving approaches are discussed as well as issues related to data collection, addressing latent consumer needs, and implementation problems in the practice of marketing intelligence. Chapter 5 deals with customer satisfaction and customer loyalty, two key concepts in marketing. The latter may create problems unless organizations understand the complex foundation of customer loyalty. Key problems involved in measuring customer satisfaction, including negative effects of asking consumers to evaluate products and offers, are addressed in the chapter. Chapter 6 describes the emergence of the branded society and its associated character. In this context, the increasing reach of brands and branding practices are described and analyzed. The transition from companies defining brands to grassroots influencing the interpretation of brands is discussed. Against the background introduced in Chapter 6, Chapter 7 deals with the contemporary role of branding, the increasing diversity of brands, the

Chapter 1 deals with the rapid change of markets, marketing and consumers as a result of emergent digital technology and its associated impact on society. The changing role of the consumer, the interplay between markets and marketing, and the rise of long tails are dealt with in the chapter. Chapter 2 discuss company and marketing strategy, both how these

12 ◆ Introduction

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evolving role of brand management, the concoction of brands and different brand arenas, i.e. corporate brands, employer brands, place brands, and personal brands. In Chapter 8, a traditional approach to marketing channels is contrasted with an emerging approach that may be more readily applicable on contemporary markets. Crucial issues in designing marketing channels and the role of marketing channels in marketing communications are discussed. Chapter 9 illustrates how the concept of promotion is viewed in introductory marketing textbooks and how consumers to a large extent are regarded as passive receivers of promotional messages. In contrast, we show that consumers can take part in promotional activities – activities that potentially can become an integrated part of promotional efforts of organizations. Chapter 10 deals with the rapid developments in Information and Communication Technologies (ICTs) that have significantly reduced the cost of establishing communication channels. Hence, a plethora of new media has emerged as a result. In this chapter, we will review how introductory marketing textbooks deal with this phenomenon and thereafter depict the conceptual foundations of social media. This is followed by a discussion on the role of consumers in social media and the transformation of digital spaces into commercial places. Chapter 11 deals with services and services marketing. Over time, a strong development towards services has taken place in modern economies. This development has implied that a larger share of the products being created in typical markets has a high degree of services content. We emphasize that demanding and aware buyers, intensive competition, price transparency, and an oversupply of products implies that working with services and services marketing is often key to viability and strong competitive advantages. In the chapter, we also discuss the service economy, service characteristics, the Moment of Truth and service recovery. Chapter 12, the last chapter, deals with experience marketing in global marketplaces. This is done by discussing how the developments of services marketing have come to mean that the role played by consumer experiences has become increasingly emphasized. When analyzing the benefits of Introduction ◆ 13

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experience marketing from the perspective of global marketplaces, however, we present a number of emerging challenges that are increasingly relevant for marketers to consider.

References

Borden, N.H. (1964). The Concept of the Marketing Mix. Journal of Advertising Research, 4(June), 2–7. Lowry, J.R. & Moser, W.C. (1995). Textbook Selection: A multistep Approach. Marketing Education Review, 5(3), 21–28.

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Chapter 2 Company and Marketing Strategy

In the previous chapter, we reviewed how three central concepts underpinning contemporary understanding within the marketing discipline are currently being challenged by macro-environmental forces and particularly the rise of digital technologies. Against this background, which emphasizes a number of implications related to how these undergoing changes can be tackled, this chapter will add to this menu by providing a number of constructive and conceptual ways of understanding the changing marketing landscape. This will be done by taking as its point of departure the interrelated concepts of company, business and marketing strategy. Within the field of marketing management, these concepts guide the overall business and marketing efforts undertaken by organizations as they provide organizations with long-term goals as well as short-term objectives that the organization is expected to strive towards. Therefore, company, business and marketing strategy are relatively normative in their nature as they explicitly point out what organizations are supposed to do. In this chapter, we will • illustrate how the central conceptual building blocks of company and

marketing strategy are understood in introductory marketing textbooks • depict the interplay between strategy, technology, and marketing.

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Based on this review, we will continue the discussion from the previous chapter by illustrating how digitization impacts company and marketing strategy. The point of departure for this discussion will be the works by Bharadwaj et al. (2013) who show that strategy is facing four main challenges related to digital transformations of markets, organizations and consumers that impact the scope, scale, speed and sources of business value creation and value appropriation in the setting of digital business strategies.

Strategy in Introductory Marketing Textbooks

planning also represents the first step for other kinds of planning processes in organizations. In this way, the strategic planning constitutes the starting point of a multi-level strategy process that is deployed in a top-down manner through the organization. With few exceptions, introductory textbooks assume large organizations – often with numerous Strategic Business Units (SBUs). For instance, Kotler and Armstrong (2012) suggest that most organizations prepare three types of plans: strategic plans, annual plans, and long-range plans. What differentiate annual and long-range plans from the strategic plan is that the former are mainly focused on current businesses areas. Strategic plans instead deal with how the business portfolio, e.g. the strategic

The notion of strategy has its roots in military terminology but its contemporary connotation is more generally associated with “a careful plan or method for achieving a particular goal usually over a long period of time” (Merriam-Webster, n.d.). In introductory marketing textbooks, the notion of strategic planning often represents the starting point when discussing strategy that represents “the process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities” (Kotler & Armstrong, 2012, p. 38). From this relatively general perspective, strategy is therefore understood to provide the framework of organizations’ being and acting. Strategic planning taking place in an organization is accordingly seen as a matter of adapting the organization to allow it to take advantage of opportunities that arise in the environment. For this reason, strategic

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Business unit, product, and market level

Corporate level Defining the company mission

Setting company objectives and goals

Designing the business portfolio

Planning marketing and other functional strategies

FIGURE 2.1 Corporate level and business unit level (Kotler & Armstrong, 2012, p. 39).

business units (SBUs), could be structured in the future, thereby influencing how the annual plans and long-range plans are designed, as strategic plans represent the framework from which the other two are derived. When taking part in strategic planning, different levels of an organization play different roles in the creation of strategic plans (see Figure 2.1).

• The first step of the strategic planning process starts at the corporate

level, where the overall purpose and mission of the organization is formulated. This is essentially a question of having a clear idea of what the organization wants to accomplish in relation to opportunities in the marketplace. The answer to what an organization wants to accomplish is often identified as a result of a process that consists of reviewing what in fact constitutes the core business, who the primary target customers are and what they value. Based on this review, many organizations develop a mission statement that represents “the organization’s purpose – what it wants to accomplish in the larger environment” (Kotler & Armstrong, 2012, p. 39). • The second step is to formulate supporting objectives and goals, based on the mission, that will guide the organization in operationalizing its intentions and implement it throughout the organization. • The third and last step at the corporate level consists of designing the business portfolio of the organization, i.e. what kinds of businesses, products and services an organization should provide to the market. The analysis of an organization’s business portfolio is often conducted in two sequential steps. First, the current business portfolio is analyzed in order to create insights into which SBUs such as organizational divisions, 2. Company and Marketing Strategy ◆ 39

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SBUs’ markets and the position of these SBUs in their markets. This is also the same approach as developed by the Boston Consulting Group, the growth-share matrix, which represents one of the more commonly applied tools for analyzing current business portfolios. The growth-share matrix is the quintessence of the traditional approach to company and marketing strategy through its clear focus on developing, keeping or eliminating SBUs depending on their performance, profitability and future potential. In the second step, the future business portfolio is analyzed in order to create a suitable mix of strategic business units that will contribute to the future growth and profitability of the company. One of the tools that is often used when conducting business portfolio analysis of future portfolios is the product/market expansion grid. This tool illustrates how the four respective strategies of market penetration, market development, product development and diversification can help organizations achieve future profitable growth based on the current performance of individual SBUs. Based on these subsequent steps of strategic planning on the corporate level, detailed marketing and other departmental plans that support the overall framework of the strategic plan are produced by individual business units. This means that organizational functions such as marketing, finance, accounting, purchasing, operations, information systems and human resources need to work in close contact with each other in order to achieve objectives that are aligned with the company strategy following the arguments provided by Kotler and Armstrong (2012). It is in this setting that marketing planning takes place with the purpose of supporting and upholding the organization’s strategic planning process by providing detailed plans of how to take advantage of identified market opportunities. This means that company strategy and marketing strategy support each other, but that marketing strategy in contrast to company strategy represents

product lines or individual products are successful and which are not. This information is then used to change the distribution of resources, often in favor of businesses that achieve good results and that the organization would consequently like to invest even further resources in. Two main variables for analyzing the SBUs that together make up the current business portfolio of an organization are the attractiveness of the

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“the marketing logic by which the company hopes to create customer value and achieve profitable consumer relations” (Kotler & Armstrong, 2012, p. 48). Marketing, however, is also argued by Kotler and Armstrong (2012) to play an increasingly vital role in relation to strategic planning based on three main arguments.

1 Marketing provides a guiding philosophy of how modern organizations should be structured as the marketing concept in itself implies that the strategic planning of organizations should be carried out based on the idea of creating profitable relationships with consumer groups central to the organization. 2 Marketing often interacts closely with strategic planning by providing input to the company level by identifying attractive market opportunities. Furthermore, marketing also provides assessments of how the organization might take advantage of these opportunities in light of its current capabilities by utilizing such tools as segmentation, targeting, differentiation and positioning. 3 From the perspective of individual business units, it is the role of marketing to create appropriate strategies for reaching objectives set by individual business units as well as delivering results by creating and applying suitable marketing mixes. Based on this review of how strategy should be understood from the company and marketing perspective, respectively, strategy when implemented therefore becomes a matter of several interrelated processes that should be aligned with each other in order to provide successful results. The overview presented in introductory textbooks indeed suggests that strategic planning in terms of both company strategy and marketing strategy are highly connected with each other, due to the fact that the first provides a direction for the organization to strive towards and that marketing strategy both helps to support strategic planning and to provide and deliver tangible results due to its closeness to the consumer and the market. In our view, this understanding and perspective of strategy provides a framework of how to understand the purpose of strategy, as well as how 2. Company and Marketing Strategy ◆ 41

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strategic processes take place within the setting of organizations from a general point of view. In light of the previous chapter, however, there is obviously a need to explain how company and marketing strategy, and processes of strategic planning, become altered on contemporary markets. This is because the roles of marketing, markets and consumers have become transformed as new technologies have changed fundamental conditions for how these concepts are to be understood in relation to each other – a development that is deemed to have consequences for strategic planning. To explain how the generic understanding of strategy presented in introductory marketing textbooks is affected by this development, the following sections will try to depict how strategy is currently facing four main challenges in terms of its scope, scale, speed and sources of business value creation and value appropriation.

Depicting Characterizing Traits of Digital Business Strategy

has been conceptualized as a functional-level strategy similar to how marketing strategy is discussed in introductory marketing textbooks in relation to company strategy. As such, it has been argued that IT strategy is governed by the company strategy and the chosen business strategy. As markets have come to be altered as a result of digital information technologies, this perspective has become increasingly problematic to apply. This is because information technologies have come to have a great impact on business and company strategy. During the decade that has passed since the dotcom bubble, many firms have taken advantage of advancements in the areas of information, communication and connectivity technologies, and accordingly adapted

Since the introduction and gradual diffusion of digital information and communication technologies, the field and concept of strategy have become altered as a result of the way in which digitization markets are organized and developed. One of these alterations which has been possible to spot is how IT strategy has become increasingly important for many organizations and is increasingly incorporated as part of organizations’ strategic planning. Bharadwaj et al. (2013) argue that IT strategy over the last three decades

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their business infrastructure to the requirements of the digital era. In contrast to traditional business strategies, Bharadwaj et al. (2013) suggest that digital technologies provide markets with new characterizing traits. This development has significant consequences for how business strategy is structured because of this shift since it: • enables organizations to carry out their businesses across boundaries

of time, distance and function • enables different forms of dynamic capabilities that in many ways can be deemed to be essential when navigating turbulent business environments • transforms the structure of social relationships between commercial actors and consumers through the emergence of social technologies • makes the entanglement of products, services and underlying IT infrastructure increasingly present • enables different sectors of the economy to also become increasingly integrated through cross-boundary disruptions taking place in the junction of industry borders. Based on these observed developments, Bharadwaj et al. (2013) question whether IT strategy is merely a functional-level strategy that is guided by company and business strategy. Instead, they argue that IT, company and business strategy seem to have become fused on contemporary markets into what they term digital business strategy, which is defined as “organizational strategy formulated and executed by leveraging digital resources to create differential value” (Bharadwaj et al., 2013, p. 472). Based on this definition, digital business strategy goes beyond thinking of IT strategy from only a functional point of view. Instead, it regards IT strategy as a provider of resources to other functional levels within organizations such as marketing. It also places emphasis on the notion of digital resources and thereby links digital business strategy to not only traditional IT strategy measurements such as efficiency and productivity. Therefore, digital business strategy enables organizations to create differential business value at large, thereby adding to organizations’ attempts to create competitive advantages.

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The Merger of Marketing and IT Strategy In the light of introductory marketing textbooks, the notion of digital business strategy could be argued to claim territories traditionally belonging to the marketing discipline. This is because essential components of marketing strategy are focused on carrying out segmentation, targeting, differentiation and positioning, and through these efforts, also take part in and contribute to the creation of differential effects on key markets. Instead of considering marketing strategy as giving way to IT strategy, it could also be a matter of IT strategy and marketing strategy becoming fused with each other. This is because information and communication technologies provide digital resources on which the creation and implementation of marketing strategies rests. Regardless of which, it becomes clear that both marketing strategy and IT strategy represent important processes to take into consideration for organizations striving to achieve attractive results on contemporary markets. The reason is that both marketing strategy and IT strategy, when merged into the notion of digital business strategy, become essential to formulating company strategy, which does not necessarily become a superordinate concept in these settings. We argue that it is possible to draw upon both perspectives in under standing how successful strategic planning should be carried out on contemporary markets based on two arguments:

cornerstone and a key assumption in introductory marketing textbooks (cf. Parment & Söderlund, 2010), forces organizations to keep their consumers in mind in both their long-term and short-term efforts. • IT strategy puts much needed emphasis on digital resources that both restrict and enable organizations in their attempts to create value for consumers and build strong customer relationships. In the next sections, we will continue to review this interplay between company strategy, IT strategy and marketing strategy. This will be carried out by taking our point of departure in the four main challenges that strategy currently faces as argued by Bharadwaj et al. (2013).

• The marketing concept (cf. Houston, 1986; McNamara, 1972), a

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Scope of Digital Business Strategy

As previously discussed in regard to the generic process from which company strategy is derived, organizations need to choose what SBUs they should focus financial, marketing and managerial resources on in order to achieve profitable growth. The reason for this is simple. Resources are always limited, and that holds not only for non-for-profit organizations but also basically for all for-profit businesses. Accordingly, organizations are forced not only to choose attractive alternatives but to constantly review whether their SBUs meet the minimum criteria related to the contribution of the strategic business units to the total business portfolio. Reviewing the current and future business portfolio, however, is essentially a matter of managing the scope of an organization’s strategy. The scope of an organization’s strategies is fundamental to its success, as the logic of diversification has been shown to impact the performance of organizations (e.g., Wade & Hulland 2004). Therefore, the processes and interplay between an organization’s competencies and resources on the one hand, and its stakeholders and external environments on the other, become central to improving performance. Following the arguments presented by Bharadwaj et al. (2013), digital business strategy brings several challenges to strategic planning in terms of its scope. As markets are becoming increasingly digital, this also means that products and services become increasingly entangled with the IT infrastructure based on which they are developed, distributed and sold. This has consequences for digital business strategy as it, in contrast to a traditional view of IT strategy, becomes inherently trans-functional and spans over different functional organizational levels. In this setting, digital resources provide a “connective tissue” (Bharadwaj et al., 2013, p. 473) that is essential for digital business strategy as it enables both internal and external information exchanges to become interconnected with each other with the help of IT capabilities. As many markets are still undergoing processes of digitization and technological restructuring, these developments will likely increase the integration between business strategy and digital business strategy over time.

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15 mm

| Marketing beyond the textbook

Laurell Parment

Marketing beyond the textbook emerging perspectives in marketing theory and practice

Art.nr 38826 2:a uppl.

www.studentlitteratur.se

978-91-44-10525-3_Cover.indd All Pages

Christofer Laurell & Anders Parment

2014-12-18 09:25