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DOI: 10.1177/097215090500600107 2005; 6; 95 Global Business Review

Joffi Thomas and Rajen K. Gupta Marketing Theory and Practice: Evolving through Turbulent Times

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Contemporary developments in marketingtheory and practice have to be seen againstthe backdrop of changes in the macro en-vironment to understand its causes as well

Joffi Thomas is a Research Scholar at the Management Development Institute, Gurgaon, Haryana. E-mail:[email protected] K. Gupta is Professor, HR and OB, at the Management Development Institute, Gurgaon, Haryana. E-mail:[email protected]

Marketing Theory and Practice:Evolving through Turbulent Times

Joffi ThomasRajen K. Gupta

The macro-environmental changes brought about by technological advances and globalization in the lastdecade had significant influences at all levels: the economy, industries, markets and the consumer. Thearticle reviews developments in marketing theory and practice over the last two decades against the backdropof these macro-influences which led to borderless, connected knowledge economy, globalizing, convergingand consolidating industries, fragmenting and frictionless markets, active, connected, informed anddemanding customers and a complex, distinctly different competitive scenario.

Organizations� attempts to adapt to these changing environmental realities have effected changes in thefocus (value distribution to value creation), emphasis (customer acquisition to customer retention) andscope (immediate customer to value-chain) of marketing. Changes in marketing practice have brought aboutfundamental theoretical shifts in marketing. The shifts are from a goods-centred view to service-centredview and co-creating valued customer experience; attention to social processes in consumption/marketingthan the economic processes alone; and from firm perspective to customer perspective in understandingmarketing/consumption phenomena. The dominant marketing mix paradigm was found inadequate in incorp-orating these theoretical shifts and this led to the development of the relationship marketing paradigm inmarketing. The research areas, relationship marketing, services marketing, market orientation and marketingproductivity received increased attention from the research community during the last decade.

its implications. The last two decades havewitnessed dramatic changes in the market-ing environment characterized by unpre-cedented levels of diversity, knowledge

GLOBAL BUSINESS REVIEW, 6:1 (2005)Sage Publications New Delhi/Thousand Oaks/LondonDOI: 10.1177/097215090500600107



96 l Joffi Thomas and Rajen K. Gupta

richness and turbulence, as envisaged byAchrol (1991). The turbulence in the businessenvironment created by macro-environmentalchanges, namely, technological advancesand globalization, poses challenges that areto be addressed by marketing practitionersand these issues then have a role in drivingthe practice as well as the theory developmentin the discipline. The article starts by settingthe context enumerating the major changesin the environment in the last decade whichhas direct implications for marketing. It laterreviews the major areas of research and thenthe innovations in practice. Figure 1 gives anoverview of how the macro-environmentalinfluences and changes at different levels�the economy, industry, market and customer�are effecting developments in marketingtheory and practice.

Environmental Changes

Technological advances and globalizationcan be identified as the two key macro influ-ences that had significant impact at all levelsin the last two decades.

Technology Advances and Globalization

The technological developments, especiallyin computers and communications, havemade the traditional economic concepts ofscale, scope and structure irrelevant in thenew economy, removing the time and placebarriers of doing business (Sheth 1992).The emergence of the Internet as a cost-effective faster information channel hasmade it feasible for firms to focus on theircore competence and outsource other act-ivities to be performed. Though the infor-mation revolution and services revolution

are two sides of the same coin, the techno-logical forces combined with forces ofglobalization have resulted in the trans-formation of the economy, industries, mar-kets and customers, resulting in a connectedknowledge economy, borderless globaleconomy, globalizing, converging and con-solidating industries, fragmenting andfrictionless markets and active, connected,informed and demanding customers.

Borderless Global Economy

There is increasing globalization of thedomestic economy, primarily through globalsourcing and competition (Sheth 1992).Marketing practices will have to understandand adjust to this reality of a borderless econ-omy (Ohmae 1990). Borderless marketsemerge when four flows of products/ser-vices, people, money and information (Reich1991) are driven by market practices andwithout government intervention. In aborderless economy, marketing practicesrelated to procurement, marketing mix andcustomer understanding are bound tochange. The traditional beliefs about the roleof the market economy and private enter-prises across the world have been changingover the last decade. This has resulted inprivatization of the public sector, less regu-lation of most industries and development ofpro-competitive policies to encourage innov-ation and the efficiency of different sectorsof the economy, across the globe. Also, sig-nificantly different market practices acrossnations, which were based on governmenttrade and employment policies, are likely togive way to more market-based practices inthe future. The World Trade Organization andinternational financial institutions played a



Marketing Theory and Practice: Evolving through Turbulent Times l 97

major role, along with technology advancesin the making of the borderless global econ-omy. Day and Montgomery (1999) have iden-tified five environmental trends whichinfluence marketing: these are the connectedknowledge economy, consolidating, con-verging industries, fragmenting and friction-less markets, demanding consumer andadaptive organizations.

The Connected Knowledge Economy

Marketing in the old economy operatedunder the implicit assumption of diminish-ing returns. There the assumption was thatfirms, after reaching a particular size, facean upward facing marginal cost curve. Thus,it was presumed that the firm has no incentiveto grow beyond a particular size and hence

Figure 1Environmental Changes and Developments in Marketing Theory and Practice




there is room for more players. This was infact considered the appropriate model for�make and sell� firms that employ a lot ofresources in bulk processing. In emergingincreasing returns industries, there is a tend-ency for bigger firms to become even bigger(Arthur 1996). Arthur cites three reasons forthe increasing return transformation of theindustries: (i) upfront costs, (ii) networkeffects, and (iii) grooving in. Products inindustries like pharmaceuticals, computerhardware and software, aircraft and missiles,telecommunication, bioengineered drugs,are difficult to design and typically havelarge R&D costs relative to their productioncosts. Given high �upfront costs�, the unitcosts reduce with increasing sales. Many ofthe high-tech products (for example, com-puter hardware and software) need to becompatible with a network of users (networkeffects). With more number of users, it is like-ly to become the standard. Thus, it bringseconomies in marketing the product. Further,as customers get used to certain products,they tend to get �grooved in� with the sup-pliers, depending on the switching costsinvolved.

Globalizing, Converging andConsolidating Industries

Advances in information technology coupledwith increased reach, power and accessibilityof the media have accelerated the global-ization process. There has been a continualprogression from a world of distinct and self-contained markets to one of linked globalmarkets. This is being accelerated by thepersistent forces of homogenization of cus-tomer needs, gradual liberalization of tradeand the recognition of competitive advan-tages of a global presence. The distinction

between many of the traditional industrialclasses is also blurring because of the digital-ization that has enabled product functionand customer benefits to merge. The ques-tion emerges as to whether the personal com-puter is a consumer product, an educationalproduct or an entry into the network or busi-ness. The customer perceived value for thesame product could be distinctly differentfor different groups depending on the bene-fits sought. This convergence of industriesbrings varied sets of competitors for the sameproduct and they can be very diverse andunexpected. Isolating mechanisms in theindustry, such as patent protection, importbarriers, regulation, distinct local tastes, etc.,creates stability in the market structure andpatterns of competition. When these isolat-ing mechanisms are removed, the consumerhas a greater array of choices before him/her. Industries facing intensified competitioncan thus no longer sustain a large numberof competitors comfortably, resulting inconsolidation, convergence and globalization.

Fragmenting and Homogenizing Markets

The impact of the key macro influences ofglobalization and technology advances areforcing changes in how the markets functionand firms relate to consumers. Two poten-tially conflicting forces, homogenization andfragmentation, are at work in most marketsleading to a different balance as these con-flicting forces are reconciled (Day andMontgomery 1999). Globalization haspowerful influence on the homogenizationof different markets. As intense communi-cation occurs across the globe, internationalbrands get built. Further, better education,wider travel and more leisure lead to the




convergence of lifestyles. At the same time,mass customization and sense and respondstrategies (Haeckel 1999) adopted by organ-izations can lead to the fragmentation ofmarkets over time. The increase in numberof offers/competitors makes it imperativefor a firm to continuously modify its marketofferings. Also, with a wide variety of com-parable competitive offerings, there is anincrease in customer switching due to variety-seeking or value-seeking customers.

Active, Connected, Informed andDemanding Customers

Globalization and technology forces havetogether significantly increased customerchoice and have given them total access bydrastically removing time and place barriers.This has permanently altered the competi-tive landscape of business across the globe.The saturation of markets in developedcountries, combined with the growth poten-tial in developing countries, has made lead-ing global companies compete with eachother in most of their markets as well as withregional players in those markets. This hasresulted in intense competition in manyareas and has therefore spurted innovativedevelopments in marketing theory to enableorganizations to understand customers andmarkets. The technology has helped in in-forming, empowering and enabling theconsumers �total access�, as McKenna (2001)propounds. The Internet has enabled in-formation sharing among co-consumers andhas facilitated the formation of consumercommunities. With easier access to infor-mation, consumers can better discriminatewhile making choices, and as they emboldeneach other to act and speak out (Prahaladand Ramaswamy 2004). These developments

have changed the consumer from a passivemember in the value-chain to an active par-ticipant in value-creation activities by inter-acting with firms and judiciously makingchoices. Thus, the role of the consumer haschanged from isolated to connected, fromunaware to informed and from passive toactive (Prahalad et al. 2004).

Theoretical Developments inMarketing Discipline

The last decade has been one of market-ing (Brownlie et al. 1999). With globalizationimperatives gaining a stronghold, marketswere being offered as a solution to the chal-lenges of whole societies. Traditional market-ing paradigms and concepts appeared lessrelevant in the demanding environment.There has been rethinking on the scope ofmarketing as well the methodological issuesin knowledge creation, starting from itsphilosophical foundations of realism andrelativism. The proponents of postmodernthinking in marketing have driven home theimportance of methodological pluralism, theneed for rethinking on the dominant market-ing paradigm and the development of a gen-eral theory of marketing. These develop-ments brought about fundamental shifts inmarketing, effecting a paradigm shift, andmade the discipline focus on research areasdemanding an understanding of both theor-etical concepts and practical issues.

Fundamental Shifts in Marketing Discipline

Marketing discipline has undergone funda-mental shifts in the last two dacades to re-main up-to-date with changes in differentlevels of the economy. Fundamental shifts




have occurred in (i) the approach (goods-services and co-creating valued customerexperience); (ii) domain (increased attentionto social processes than economic processesin consumption); and (iii) perspective (firmto consumer) of marketing.

Goods to Services and Co-creatingCustomer Experience

The information revolution which broughtwith it a revolutionary new capability toleverage knowledge and informationin firms led to the emergence of the con-nected knowledge economy. There has beenshift from the traditional product-centredview of marketing to a service-centred view(Vargo and Lusch 2004) to co-creating cus-tomer experiences providing unique cus-tomer value (Prahalad and Ramaswamy2004). In the service-centred view of market-ing, the basic fundamental units of exchangeare specialized skills and knowledge and notjust the product or service and the focusshifts to the whole process of creating value.In this view, tangible goods are consideredonly as distribution vehicles for serviceprovision and co-creating valued consumerexperiences. At the same time, the view en-compasses the traditional differentiationbetween tangible goods and intangibleservices, or the traditional external-orientedview of marketing, and the cross-functionalorganizational process, or the internal-oriented view of marketing.1

Attention to the Social Processes ofConsumption/Marketing

The service-oriented view of marketing,with the objective of co-creating satisfiedcustomer experience, requires a holistic view

of the consumption/marketing process fromthe customers� perspective. This includes thesocial processes of consumption along witheconomic processes. As all economic ex-changes are embedded in social exchanges(Granovetter 1985), marketing disciplineshave started paying attention to the social pro-cesses of consumption, employing groundedtheories and interpretative research methods.Interpretative research on different aspectsof consumption in the nineties is a step inthis direction.

Firm Perspective to Customer Perspective

In the firm perspective, customers are con-sidered passive and treated as operandresources (resources to be acted on). That iswhy marketers �segment�, �penetrate� and�promote� goods in the hope of attractingcustomers (Vargo and Lusch 2004). Whenfirms take a customer perspective, theyrecognize that customers are active partnersin the marketing/consumption process andview them as operant resources (resourcesemployed to act on operand resources);hence, they work together to co-create value.

From Marketing Mix to RelationshipMarketing Paradigm

The dominant marketing mix paradigmintroduced in the sixties was inadequate toincorporate the fundamental shifts in themarketing discipline. The four Ps of market-ing mix, namely, product, price, place andpromotion were particularly designed toaddress the typical situations that involvedconsumer packaged goods marketing in aNorth American environment with hugemass markets, highly competitive distributionsystems and a very commercial mass media




(Grönroos 1997). Grönroos (1997) showedthat the 4P model of the marketing mixparadigm does not include an explicit inte-grative dimension. This model constitutes aproduction-oriented definition of marketingand not a customer- or market-oriented one.This paradigm also isolates marketing fromother departments�design, production de-liveries, technical service, complaints hand-ling, invoicing, and other activities of thefirm. Further, the paradigm sees marketingas an economic process and not as a socialprocess.

In relationship marketing, the focus ofmarketing shifts from transactional ex-changes to relational exchanges. In the rela-tionship marketing paradigm, possiblemarketing approaches or strategies can beseen as a continuum. Transactional and rela-tional exchanges can be seen as two ends ofthe continuum. Grönroos (1997) argues thatrelationship marketing has the necessaryingredients for the development of a generaltheory of marketing. In such a theory, themanagerial approach includes the notion ofthe marketing mix and other concepts andmodels.

Relationship marketing, unlike the mar-keting mix paradigm, explicitly takes intoconsideration the various interfaces the firmhas with the customer. Hence, the paradigmcan incorporate, manage and explain boththe components of customer perceivedquality, namely, the technical as well thefunctional quality. In relationship marketing,the functional quality dimension becomesmore important as how the interactionprocess is perceived grows in import-ance over time. The concept of relationalexchanges with different entities (cus-tomers, employees, suppliers, competitors,

government department, etc.) brings theintegrative dimension of marketing in focus,and consequently, the strategic importanceof marketing to the organization. The ninetiesthus saw the development of the relationshipmarketing paradigm, as different researchersbrought out the inadequacy of the marketingmix framework. Grönroos (1997) reports thatthe paradigm shift is already under way inservices marketing in Europe and Australiaand to some extent in North America, andin industrial marketing in Europe.

Areas of Research

The decade saw theory building and devel-opment, particularly in the areas of relation-ship marketing, service quality, marketingorientation and marketing productivity.

Relationship Marketing Relationship marketinghas attracted unprecedented attention ofresearchers in the last decade. Theoreticaldevelopments in relationship marketing inthe eighties and nineties were more of a re-discovery of an approach that has longproved to be the cornerstone of many busi-nesses (Payne 2000). Sheth and Parvatiyar(1995a, 1995b) point out that there has beena decline in relationship orientation in the in-dustrial era from the pre-industrial era, withthe addition of middlemen in the marketingchain. As strong customer relationships cancontribute simultaneously to improvedtopline (increased customer share) and bot-tomline (decreasing marketing and servicingcosts) growth, the process of relationshipdevelopment, understanding antecedentsand consequences of relationships and meas-urement of relationships became topics ofresearch interest in relationship marketing.




There are narrow as well as broad definitionsof relationship marketing. Hunt and Morgan(1994) define relationships as �all marketingactivities directed towards establishing de-veloping and maintaining successful rela-tionships�. Sheth and Parvatiyar (1995) havelater made a call to delimit the domain ofmarketing to include only those relation-ships that are focused on serving the needs ofthe customer. Four prominent academic com-munities�the IMP-Interaction group, theNordic school, the Anglo-Australian groupand the North American group�have madesignificant contributions to developing thetheoretical bases and empirical evidences ofrelationship marketing thought. The IMPgroup has contributed the interactionapproach and network approach to under-standing and developing relationships,particularly in the business to businesscontext (Hakansson and Snehota 2000). TheNordic community has focused on servicesmarketing in Scandinavia and Finland andthis approach in services marketing later gotinternational acceptance (Grönroos 2000).Grönroos identified two key characteristicsof service that later got acceptance in otherbusiness contexts as well. First, consumptionof a service is process consumption ratherthan outcome consumption, and hence man-agement of all customer interfaces becomessignificant for marketing. Second, customerstake a holistic view of the offering that onlyevaluates the product or services offered.The Nordic school has identified three pro-cesses of interaction, dialogue and value thatcontribute to relationship development. TheAnglo-Australian approach takes broaderapproach to relationship and addresses sixmarkets: internal, referral, influence recruit-ment and supplier alliance markets, in

addition to the customer markets (Payne2000). Although Berry (1983) conceptualizedthe term relationship marketing for the firsttime, North American contribution to theconcept came in the nineties. Analyticalmodels incorporating the antecedents andconsequences of relationship in differentcontexts�business-to-business: channels(Morgan and Hunt 1994; Ganesan 1994);goods (Doney and Canon 1997); consumerservices (Sirdeshmukh et al. 2002); and re-cently in consumer goods (Chowdhury andHolbrook 2001) �were developed by NorthAmerican scholars during this period. Trustand commitment have been established asthe key mediating variables in customerrelationships. Trust in different facets of thefirm, product/brand and customer interfacepersonnel has been researched by variousscholars, linking it to customer intentions, re-lationship satisfaction and loyalty. Relation-ship marketing is still in a nascent stage ofdevelopment (Sheth and Parvatiyar 1995a,1995b) as the consensus in definition of keyconstructs such as trust is evolving. The chal-lenges for researchers are to develop the keyconstructs, adopt a holistic approach andmake the research more relevant to market-ing practice.

Services Marketing and Service Quality The earlyliterature in service marketing which startedbefore the eighties witnessed explosivegrowth in the number of publications andincreasing theoretical and empirical rigourin the content through the nineties. In thelast decade, service marketing became anestablished field within the marketingdiscipline. Many of the primary topics in thefield conceptually matured during thisperiod. Brown et al. (1994) have divided thedevelopment of service literature into three




stages: crawling out (pre-1980), scurryingabout (1980�85) and walking erect (1986�present). The specific topics that were ad-dressed during this period were servicequality, service encounters/experiences,service design, customer retention, relation-ship marketing and internal marketing.The single-most researched area in service isservice quality. The interest in service qualityparallels the focus on quality, total qualitymanagement and customer satisfaction.Most of the recent work on service quality inmarketing can be credited to the pioneeringand continuing contributions of Parasuramanand his colleagues (see Parasuraman et al.1985). The ongoing research, supported bythe Marketing Science Institute, has pro-duced a well-received conceptual framework(the Gaps model) and a measurement instru-ment, SERVQUAL, for assessing servicequality. Other researchers have contributedempirical studies on service satisfaction, aclosely related topic that is sometimes diffi-cult to distinguish from service quality (Bitner1990; Bitner et al. 1990; Crosby et al. 1990;Oliva et al. 1992). While service satisfactionand service quality are clearly related, re-searchers do not share common definitionsof the terms, nor is there clear understandingexpressed in the literature as to how the tworelate. Exploration and discussion of theseissues will certainly continue in the nearfuture (see Rust and Oliver 1993). The devel-opment of services marketing has contrib-uted to the emergence of service-orienteddominant logic of marketing proposed byVargo and Lusch (2004).

Market Orientation Market orientation wasoriginally defined as an organization-levelculture (Deshpande and Webster 1989)�aset of shared values and beliefs about putting

the customer first in business planning.Recently, market orientation has been re-defined and measured as a set of activitiesor behaviours relating to the gathering ofmarketing intelligence, cross-functionaldissemination of marketing intelligencewithin a firm and the response based on thisintelligence. The decade witnessed increasedresearch activity in market orientation, itsantecedents and consequences (Jaworski andKohli 1987), effect of market orientation onbusiness profitability (Narver and Slater1990), developing scales for measuring mar-ket orientation, etc. It was found that a mar-ket orientation leads to higher (a) customersatisfaction and repeat business; (b) esprit decorps, job satisfaction and employee commit-ment; and (c) business performance (ibid.).A market orientation is likely to be morestrongly related to performance under condi-tions of high market turbulence, technologic-al stability, market competition and weakeconomic conditions. Market orientation hasbeen shown to be an important determinantof business performance in marketing re-search. Marketing Science Institute (MSI) hascontributed in a significant way to the devel-opment of this concept. In 1987, it organizedits first conference in Cambridge on �Devel-oping a Marketing Orientation�. The thenMSI Executive Director noted that the threethemes that represented most of the workdone till then were: (a) need for measurementof the level of market orientation; (b) needfor understanding whether there is an opti-mal level of market orientation; and (c) needfor determining market orientation as a basisrather than as a substitute for innovation ina company. The most significant and histor-ical development came with the identifica-tion of market orientation as a high priorityresearch area in 1994�96.




Marketing Productivity With the growing recog-nition of the need for market orientation atthe enterprise level, organizations realizedthat it requires the coordination of differentfunctions; it needs to be viewed as a continu-ous process. The responsibility for develop-ing customer focus therefore started shiftingfrom the marketing function. This has in away contributed to the decline of the im-portance of marketing function within theorganization, as it has not been able to leadthis organizational transformation. Thedecline in sales growth in saturated marketsof developed countries, combined with thatin the pricing power of firms, made it dif-ficult to calculate returns on marketinginvestment to the top management. Lack ofa good practical model to trade off marketingstrategies has made top managements viewmarketing expenditure as short-term ratherthan long-term costs, and as financially un-accountable (Rust et al. 2004). The increasingneed in marketing practice to link marketingmetrics to financial metrics has made MSIassign the highest research priority for 2002�2004 for �Assessing marketing productivityand marketing metrics�. Techniques forevaluating financial return from particularmarketing expenditure got developedduring the last decade (see Berger et al. 2002).The concepts of customer equity andcustomer lifetime value (CLV) have beenused in recent years to measure the returnson marketing (Berger and Nasr 1998;Blattberg and Deighton 1996; Blattberg et al.2001; Mulhern 1999; Reinartz and Kumar 2000;Rust et al. 2000). Recent improvements incustomer equity measurement consider thefirm as having a portfolio of customers indifferent relationship stages and propose

customer portfolio lifetime value (CPLV)(Johnson and Selnes 2004).

Innovations in Marketing Practice

Adapting Organizations

The decade has seen firms adapting to changesin their customers, competitors, markets,industry and the economy and becomingmarket driven/market driving. A five-yearstudy of 30 companies around the world con-ducted by Kim and Mauborgne (1997), ana-lysed the correlation between high growthand a variety of other factors. High-growthcompanies paid little heed to matching orbeating competition. Instead, they sought tomake the competition irrelevant by offeringa quantum leap in value. The strategy of masscustomization, in a way, avoids the need topredict change, as the changes at the indi-vidual customer level are monitored and theresponses to these changes are built into theorganization�s operations through flexibleprocesses and empowered employees.Haeckel (1999) labels the strategy of certainorganizations as �sense and respond�, whichfocuses on modular customization, allowingit to economically produce what its consumersdemand. Such companies realize economiesof scale by reusing modular assets to reducethe cost of customization. The strategy of makeand sell stresses efficiency and predictability;that of sense and respond prioritizes flex-ibility and responsiveness. Marketing prac-tice has experienced a shift in its focus (valuedistribution to �co-creating unique customervalue�, emphasis (customer acquisition tocustomer retention) and scope (attention




from immediate customer to the value-chain) in the last decade.

Shift in Focus of Marketing: Value Distributionto �Co-creating Customer Value�

Shifts in the role of the consumer in market-ing/consumption to a more �active, informedand connected consumer� (Prahalad andRamaswamy 2004) made the traditionalsystem of value creation inadequate in ad-dressing changing customer needs in anincreasingly competitive market scenario.The traditional value-creation model wasfirm centred, considered products/servicesas the sole basis of value, and treated the con-sumer/market as operand resource. In thenew frame of value creation propounded byPrahalad and Ramaswamy (2004), value isco-created by the consumer and the firm(and not by the firm alone), the total cus-tomer experience in consumer firm inter-action (than products/services) and thecustomer/market is treated as an operantresource.

Organizations are now employing moreinteractive strategies than broadcast strat-egies. The mass-market broadcast model ofmarketing targets certain markets on thebasis of descriptive information about thecustomer. In the interactive model, the firmdevelops the ability to interact with indi-vidual customers and customize offeringsaccording to requirements, employinginformation technology and networks. Thishas made the customer an active participantin the value-creation process and hasresulted in the shift from mass productionto mass customization.

Shift in Emphasis: Customer Acquisition toCustomer Retention

The decade has seen the focus of organ-izations shifting from customer acquisitionto customer retention. Re-engineering ofbusiness processes and implementation ofquality management systems in organ-izations have resulted in quality improve-ment and cost reduction across industries,increasing comparable customer offers andintensifying competition. Also, with thesaturation of markets and declining salesgrowth, customer retention assumed greaterimportance than customer acquisition. Firmshave started to view customer interactionsas relational exchanges, rather than as transac-tional exchanges. Concerted efforts towardsemploying customer loyalty programmes,and integration of marketing efforts andinitiatives to develop a customer-orientedculture have started taking shape in organ-izations. The concepts of CLV and customerequity got attention with the shift from trans-actional to relational orientation. There hasalso been a shift in the traditional sales orien-tation in marketing to customer orientationand towards creating market-driven/market-driving organizations.

Broadening Scope of Marketing: ImmediateCustomer to Customer Value Chain, Hierarchiesto Networks and Competition to Collaboration

Even as the competition is getting intense,there is more collaboration among compe-titors as well. The purely competitive orient-ation of the firms is now being replaced withcollaboration in the form of strategic alli-ances and partnerships. In many markets, a




firm happened to be a customer, supplierand a rival at the same time. As the distinc-tions among these roles are gradually gettingblurred, particularly in the emerging indus-tries, the collaborative approach in address-ing the market is getting more importance.For example, Sony and Philips are workingtogether to develop optical media standardsand supplying components to each other.The decade has also seen the formation ofnetworks around a new technology or a newproduct initiative and competition acrossdifferent networks rather than within thefirms. These developments have also seen achange in organizational forms from centrallycoordinated multi-level hierarchies towardsmore flexible network structures that consistof large numbers of functionally specializedfirms tied together in cooperative exchangerelationships. For example, Nike or GaloobToys does practically no manufacturing onits own, but focuses all its energy on market-ing. They work closely with the dedicatedpartners on the supply side as well as on thedistribution side, expecting them to playproactive roles in designing winning tech-nologies, services and marketing strategies.Thus, the effort to deliver better value hasmade these firms broaden their attention toother members in the value chain than justto its immediate customers.

Decision Making in an�Information-intensive Environment�

There has been a significant increase in theuse of information technology tools tocapture, process and use information in de-cision making, resulting in an increase in thespeed and amount of information beingtransmitted within and across the organ-ization. This increase in the quantity of

information has helped organizations iden-tify patterns in them, resulting in qualitativetransformation of how the information isused in the organization (Glazer 1991). Themajority of the larger firms have employedenterprise computerization, using ERP andCRM packages. Firms have also started touse data mining tools such as SAS, etc., totrack and analyse information on customers,markets and competition. Market researchto capture data directly from the field wasincreasingly employed. As in theory, therehas been a shift in emphasis to use more ana-lytical and modelling tools and techniquesto facilitate decision making in the highlycompetitive environment. This has also ledto the increase in interaction between themarketing academicians and the practitioners.

Impact of Information Technology on Marketing

Advances in information technology in thelast few decades have had tremendous im-pact on businesses and have transformed themarketing function.

Internet, Electronic Networks and Marketing PracticeRapid and universal acceptance of theInternet as a medium of information andcommunication has had remarkable impacton business/marketing in less than twodecades of commercial use. Marketing pro-fessionals have been quick to recognize theopportunities offered by the Internet. As tradebarriers fall and global markets emerge, com-panies are adopting electronic commercepractices in order to remain competitive orto increase their market share. The Internet/electronic network is used by business/marketing in four ways: as an informationsource; communication channel; transactionfacilitator; and distribution tool.




Internet as Information Source and InteractiveMedia The Internet with its different searchengines works as an information source forconsumers and business customers. It hasincreased the power of the informed, con-nected customer by reducing informationasymmetry between the firm and the cus-tomer. As the consumer became more in-formed, the options for differentiating thefirm�s offer (based on brand image alone) wasreduced and this had a role in the reductionof brand loyalty. At the same time, the elec-tronic network provided new options to thefirm to improve its total offering by pro-viding additional services. The Internetoffers an interactive communication channeland a new media which provides the optionto customize/personalize information andservices. The media has been innovativelyemployed by different firms to provideenhanced/new service. Digital EquipmentCorporation (DEC, now part of Compaq)used the Internet to publish press releases,product announcements, new services, salespromotions and other information, since theearly eighties. DEC has also innovativelyused the net to test ALPHA, its new clientserver, by allowing potential customers toload software and test it on their own.

Internet as a Transaction Facilitator and DistributionVehicle The Internet has created a new elec-tronic marketspace which eliminates muchof the paperwork, decreasing the high costsof creating, processing, distributing, storingand retrieving paper-based information.This reduces processing time and allowsincreased automation, thereby loweringoverhead and inventory costs. Consequently,it permits just-in-time production andpayments. Furthermore, companies of everysize can now participate in a truly global

market and reach customers in remotelocations. Online auctions and use of onlinecatalogues for direct marketing are two areasin which the electronic network has per-formed a role as transaction facilitator. Oneof the early examples of the use of onlineauctions is the used car auction in Japan in1985. Hello Direct Inc., a telecommunicationsproducts mail-order company in California,has used the Internet to provide customizedinformation and online sales. Use of theInternet in this case gives the online cata-logue service providers valuable informationabout customer preferences and facilitatestwo-way interaction with the customer.Electronic marketplaces constitute not justa medium for marketing communication,but also offer a means of distribution, espe-cially for digital product categories (Hoffmanand Novak 1996). Many software, educationand entertainment service providers use theInternet to offer their products in directlydownloadable form.

Role of Marketing in the Organization

Adaptation of firms to changing environ-mental forces through changes in marketingapproach, organizational form and strategiesfor competing has been affecting the role ofmarketing in the organization as well.Marketing operates at three distinct levelsof strategy: corporate, business or SBU(strategic business unit) and functionallevels. At the same time, there are threedistinct dimensions of marketing: marketingas culture, strategy, and tactics (Webster1992). Though each marketing dimension isfound at each level of strategy, the emphasisaccorded varies with the level of strategywithin the hierarchy of the organization.Marketing as culture, a basic set of values




and beliefs about the central importance ofcustomer that guides the organization, isprimarily the responsibility of the corporateand SBU-level managers. Marketing asstrategy is the emphasis at the SBU levelwhere the focus is on market segmentation,targeting and positioning, in defining howthe firm is to compete in the chosen busi-ness(es). At the operating level, marketingmanagers focus on marketing tactics�thefour Ps of product, price, place and promo-tion. Each level of strategy and dimensionof strategy must be developed in the contextof the preceding level. As we move downthe levels of strategy, we move from strategyformulation to implementation. Marketing,conceptualized and treated as an economicprocess and particularly as a profit maxi-mization problem in the early decades (fiftiesand sixties), emerged as a managerial ap-proach. Hence, marketing operated mainlyat the functional and tactical levels. The mar-keting mix framework was also responsiblefor a focus on the tactical dimension, at theexpense of a broader, integrated organization-wide perspective. In fact, it very well servedthe purpose of mass marketed consumerpackaged goods in the US context. The limit-ations of this approach to marketing becameapparent in the eighties, as new forms of or-ganization came into existence. The range ofmarketing relationships can be seen to bein a continuum of transactions�repeatedtransactions�long-term relationships�buyer�seller partnerships�strategic alliance�network organizations�vertical inte-gration. As marketing relationships movedalong this continuum through the eightiesand nineties, the role of marketing in organ-izations was also in transition. Marketingpractice became more multifunctional and

the organizational role of marketing evolvedfrom a set of specialized, functional respon-sibilities for team-based processes. Day andMontgomery (1994) have identified the skillsa marketer needs, such as �market sensing�,the ability to understand customers closely,market relating skills, and the ability tomaintain and enhance customer relation-ships. In the changing context, in additionto the conventional market sensing skills,there is a need to forecast technologicalchanges, consumer needs and market struc-ture. Similarly, while the market relatingskills in brand and image building, market-ing communications, customer services andloyalty programmes will be needed, in anetwork economy the skills in negotiation,inter-organizational collaboration and con-flict management have become much moreimportant than before. Thus, the decade hasseen marketing gradually shredding itsoverly functional orientation to a customer-oriented culture in the organization. Greyser(1997) observes that there has been �a simul-taneous upgrading of the orientation anddownsizing of the formal function�. Increas-ing importance of the marketing orientationhas raised concerns about the death ofthe marketing function in recent times. Atthe same time, the marketing function in theorganization is called on to perform a keyrole in connecting the customer to the firm�smarket offering and become more account-able for the resources employed. The role ofmarketing in the organization is currently ina state of transition. Therefore, Kumar(2004a) calls for a �change in the role ofmarketing from promotions focussedtacticians to customer focused leaders oftransformational initiatives that are strategicfunctional and cross functional oriented.�




Conclusion

A rich understanding of the forces operatingat different levels in the external environment,economy, industry, market and the consumercan help design �sense and respond� organ-izations (Haeckel 1999) with better �marketsensing and market relating capabilities�(Day and Montgomery 1994). Marketing

researchers will have to employ suitableapproaches, tools and techniques to helporganizations take proactive decisions inturbulent times. These attempts in thenineties have led to changes in marketingtheory and practice and the knowledgeabout these past developments can help inanticipating and analysing future develop-ments in marketing, as well as help organ-izations prepare for the future.

NOTE

1. In the traditional external-oriented view,marketing�s function is to cater to customer needsby interacting with customers, while the internal-oriented view recognizes the need for internal

marketing, market orientation, etc., and the sharedresponsibility of marketing to deliver products/services.

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