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The impact of Porters strategytypes on the role of market

research and customerrelationship management

Michael J. Valos and David H.B. BednallDeakin University, Melbourne, Australia, and

Bill CallaghanStrategic Mapping, Melbourne, Australia

AbstractPurpose This paper seeks to investigate the influence of Porters strategy types on the use ofcustomer relationship management (CRM) techniques and traditional market research, againsttheoretical and empirical evidence that differences in strategy types may result in variation infavoured marketing information sources and procedures.

Design/methodology/approach Depth interviews generated a series of scale items, which werecombined with others derived from the literature in a questionnaire measuring strategy types, the rolesof market research, and the characteristics of CRM systems. Responses were obtained from 240 seniormarketing managers in Australia, and applied to the testing of five research propositions.

Findings ANOVA found no differences in CRM usage among the strategy types. Variation waswidespread, however, in four roles of traditional market research: enhancing strategic decisionmaking, increasing usability of existing data, presenting plans to senior management, and achievingproductivity and political outcomes.

Research limitations/implications Future researchers using the Porter strategic types shouldseparate marketing differentiators from product differentiators because they function and competedifferently.

Practical implications All organisations can benefit from CRM systems, but marketingdifferentiators exhibit a relatively higher usage of traditional market research. This is likely to bebecause they compete by creating softer product differences, while others do so on hardercharacteristics such as price or product functionality.

Originality/value This is the first study to use the Porter types to explain differences between theroles and uses of market research and CRM within organisations.

Keywords Marketing strategy, Market research, Market information systems, Customer relations,Marketing management, Decision support systems

Paper type Research paper

IntroductionMarketing managers face new choices when seeking information to facilitate theirbusiness strategy. According to Malhotra and Peterson (2001) the informationprovided by customer relationship management (CRM) systems may complement orcorroborate that from traditional market research. CRM has been defined in a numberof ways, but here we are treating it as the collection and analysis of customer data (itsinternal use) rather than as a builder of relationships with customers (its external role).

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0263-4503.htm

Market researchand CRM

147

Received December 2005Revised November 2006,

December 2006Accepted January 2007

Marketing Intelligence & Planning

Vol. 25 No. 2, 2007

pp. 147-156

q Emerald Group Publishing Limited

0263-4503

DOI 10.1108/02634500710737933
http://www.emeraldinsight.com/0263-4503.htmhttp://www.emeraldinsight.com/0263-4503.htm


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Recent research has highlighted the various alternative roles that market researchplays in strategic decision-making. Toften (2005) found instrumental use (applyingfindings to an immediate problem) and the conceptual role (general enlightenment onfuture issues) to be correlated with marketing performance. In contrast, the symbolic

and political modes of use did not improve performance. Ganeshasundaram andHenley (2006) found a paradox in the roles for market research in practice: while muchmore background research was being conducted, it was considered of less value thandecision research.

This paper reviews the literature dealing with the roles of marketing research, CRMand business strategy. Hypotheses are presented regarding the impact of strategy inexplaining differences in how organisations use both marketing research and CRM.The findings are reported of a quantitative survey carried out to examine differencesbetween the types and uses of traditional and CRM methods of data collection,conclusions drawn and implications discussed. The paper concludes with guidelinesfor the use of both types by marketing managers in practice.

Traditional roles of marketing researchA number of typologies and taxonomies classify market research roles. Severalfunctions of market research have been described: action-oriented versusknowledge-enhancing (Slater and Narver, 2000), strategic versus tactical (Raphaeland Parket, 1991), risk-identifying versus opportunity-identifying (Sherman, 1999),exploratory versus confirmatory (Hart et al., 1999), strategic direction-setting,opportunity analysis, monitoring and control (Roberts, 1992), and even a role asevidence to win an argument (Culkin et al., 1999).

Traditionally, the role of market research is to support strategic decision-making(Hamlin, 2000; Raguragavan et al., 2000). Yet the review by Hart et al. (1999) of 20 yearsof academic literature examining factors influencing the use of marketing

information did not include business or marketing strategy amongst the ninevariables it considered. The fact that our own review has covered the major seminalstudies, such as those of Deshpande and Zaltman (1982, 1987) suggest a gap in themarket research literature. It could be that too much market research is not appropriatefor the strategic context in which the organisation finds itself, reducing its role as adecision-making support. Thus, the influence of general marketing strategy mayexplain differences in the observable roles of marketing research.

Impact of CRM on traditional roles of marketing researchA second gap in the market research literature relates to the emerging role of CRMsystems, which provide information that may complement or corroborate informationfrom traditional market research (Malhotra and Peterson, 2001) or even replace it.

Authors such as Javalgi et al. (2006) propose a two-way information flow betweentraditional market research on the one hand and CRM systems on the other. This occursthrough the intelligence generation and intelligence gathering aspects of marketorientation. OMalley and Mitussis (2002) assert that CRM systems with adequatecustomer databases and data mining techniques are required for the implementation ofrelationship marketing and the achievement of customer intimacy because individualcustomer preferences must be understood. Baker and Mouncey (2003, p. 417) ask. . . whether the pursuit of relationship marketing, perhaps through CRM initiatives,

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demands any changes in how market research is undertaken or delivered. Their answerrelates to the concept of a listening organization which combines the traditional role ofmarket research with integration of internal databases, customer contact points andother internal customer listening systems.

Since, market research and CRM may fulfil similar functions in providinginformation to support strategic decision-making, their use should likewise be relatedto the firms strategy. Yet research is minimal with respect to differences in either MkIS(Ashill and Jobber, 2001) or CRM, according to organisational strategy.

Strategy and marketing informationRecent research by Maltz et al. (2006) examined links between strategy and marketinformation usage, comparing organisations that competed, respectively, with aninnovation orientation and a speed (of response) orientation.

Generic conceptualisations of strategy are still in use when academics seek toexamine its impact on differences in the internal characteristics of organisations.

ORegan and Ghobadian studied differences in strategic types and leadership,departmental cooperation and culture. Strategic typologies devised by Miles and Snow(1978) and Porter (1980) assume that the classification of business units ororganisations according to marketing strategy provides more specific and appropriateguidelines for human resource, organisational structure and information requirements.

According to Porter (1980), there are three successful generic strategies. Thedifferentiator strategy achieves competitive advantage through offering somethinguniquely different from competitors. In contrast, the cost leader strategy does so bygreater efficiency in production and resource usage. The focus strategy can be adoptedby differentiators or cost leaders, but differs in that it targets a market niche ratherthan the broad market. These internal contrasts suggest that differentiation and costleadership require contrasting roles for market research and CRM systems.

In this paper, we use the Porter strategic types as a means of examining the impactof strategy on both CRM usage and alternative roles of market research. For example,it is possible that a differentiator would use CRM to build strong differentiatingcustomer relationships while cost leaders, with a lesser focus on innovation, might useit as part of a more defensive customer retention strategy. Further, differentiatorsmight well use market research in a background role, as they focus on innovation andthe future, while cost leaders may consider background research of less value thandecision research, and find the instrumental role more relevant than the conceptualrole.

Hagen and Amin (1995) found differences in external environment scanning andopportunity analysis practices between differentiators and cost leaders. While theamount of market research was similar for both strategies, the type of issues being

researched differed. However, Hambrick (1982) found no differences between theexternal environmental scanning of these two strategy types.

Drawing on non-Porter literature, Du Toit (1998, p. 207) found differences betweenMiles and Snows prospectors, analysers and defenders in the way in whichinformation was managed [for competitive advantage] in terms of internal records,competitive information and external information. More recently, Narver and Slatersuggested that there would be differences among those three types in terms of theirapproach to the generation of market intelligence.


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This proposition assumes that cost leaders enjoy greater certainty in their product andcustomer decisions, and are more familiar with their customers whose needs changeslowly.

This research agenda dictates a quantitative analysis in which strategies can be

compared in terms of the usage of traditional marketing research and CRM.

MethodologyIn the first phase of the study, 16 preliminary discussions about market research and itsvalue to the organisations were held with senior marketers and research managers inAustralia and the USA. The objective was to generate additional scale items for theeventual survey instrument, to supplement those available for modification from theliterature review. The discussion agenda focused on the roles of market research andthe characteristics of CRM systems in general, and in particular on recent trends andissues, including the role and usage of marketing metrics and single-source databases,outsourcing and the impact of new organisational structures on the research function.

Academic colleagues reviewed the questionnaire before administration to the eventualrespondents, as a check on completeness and clarity.

In the second phase, a survey sample was selected from the Dun & Bradstreet list ofthe top 1,000 senior marketing managers in for-profit Australian companies. Afterpreliminary contact to establish contacted to confirm the name of the person withmajor responsibility for marketing, a self-completion questionnaire was distributed bymail. Follow-up, as necessary was by letter, telephone or e-mail. A return of 24 per centwas achieved.

To measure the role of market research, the seven-item scale of Maltz and Kohli(1996) was used, plus 11 items generated from the depth interviews.

The role and usage of CRM systems and subsystems within the company wasmeasured by five items derived from the depth interviews, which covered CRM, datawarehousing, and sales, service and billing databases. To classify business strategytypes, a non-hierarchical Wards cluster analysis was undertaken on eight itemsmeasuring Porter strategy types from Pelham and Wilson (1996) and three items fromthe depth interviews. The focus was initially on the three-cluster solution, given thePorter typologies expected, but other solutions were also explored.

One-way ANOVA was used to identify differences between market research rolesand CRM usage among the Porter types. ANOVA determines the degree to whichdifferences found between the means of different groups or categories can be attributedto sampling error (Hair et al., 1995, p. 617). Statistical significance was established atthe 5 per cent level, which is consistent with a sample of this size. Dunnetts T3 test ofsignificance was further applied, as the Levene test showed unequal variance within

the variables used in the ANOVA.

FindingsTable I shows the role variables derived from a Varimax factor analysis andsubsequent Cronbach a test, based on data collected by seven-point Likert scales.

Three strategies were identified by the cluster analysis: cost leadership, marketingdifferentiator (i.e. brand differentiation) and product differentiator (i.e. differentiationby innovative feature). Somewhat surprisingly, the focus strategy was not confirmed in


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Costle

ader

strategy

(CL)(n

99)

Marketing

differentiator

strategy

(M)(n

89)

Product

differentiator

strategy

(P)(n

51)

Marketresearchrolepropositions

Mean

(SD)

Mean(SD)

Mean(SD)

Significantdifferentmeans

Fratio

Fprob.

Enhancingdecisionmaking(0.9

0)

4.1

8(1.8

1)

4.7

1(1.5

7)

3.5

2(2.4

)

M.

P

6.5

2

0.0

0

Increasingusabilityofex

istingdata(0.7

6)

3.2

8(1.6

8)

3.9

9(1.5

1)

2.5

5(1.9

9)

M.

P,

M.

CL

12.2

0.0

0

Communicatingactionst

oseniormanagement(0.6

7)

3.5

1(1.7

7)

3.8

2(1.5

2)

2.8

8(2.1

8)

M.

P

4.5

8

0.0

1

Achievingproductivitya

ndpoliticaloutcomes(0.6

3)

3.1

0(1.5

2)

3.6

2(1.5

2)

2.7

5(2.0

6)

M.

P

5.0

8

0.0

1

CRM

proposition

CRM

reliance(0.7

7)

3.9

4(2.2

6)

4.0

2(2.1

8)

3.6

2(2.1

1)

N/S

0.5

4

0.5

8

Table I.ANOVA comparison ofmarket research roles andCRM reliance, by Porterstrategy type

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the cluster analysis solution. Previous researchers, for example Miller (1987), have alsofound variations from the original Porter typology when using cluster analysis.

The findings show that marketing differentiators rely more than productdifferentiators on market research for enhancing strategic decision-making,

increasing usability of existing data, presenting marketing activities to seniormanagement and for productivity and political outcomes. The sole difference betweenmarketing differentiators and cost leaders in terms of any of the four roles of marketresearch under study was that they allocated a stronger role for market research inincreasing usability of existing data.

Lastly, and surprisingly, no significant differences were found among marketingdifferentiators, product differentiators and cost leaders in the usage of CRM systems tosupport marketing decision-making.

Discussion and contributionThe first gap in the research literature to be examined by this study was the impact of

marketing strategy on four roles market research fulfils in organisations. Four researchpropositions were tested, with marketing strategy as an explanatory variable. In otherwords, the research propositions assumed the role of market research would changeaccording to strategic context.

While differences were found among each of the four roles of market research,related to strategy type, the only one relating to cost leaders was that they have lessneed for the market research that increases usability of existing data. It may be thatadopters of this strategy use market research to find price points or features that can bedeleted from products to reduce production or marketing cots, and hence prices.This market research is perhaps more straightforward to interpret than the sortcommissioned by marketing differentiators, which is likely to be related to productpositioning or advertising tracking and may involve the development of emotional

bonds with target customers.On the other hand, each of the four roles for market research differed in the

comparisons between marketing differentiators and product differentiators, varietiesof Porters single differentiator first identified by Miller (1987). Marketingdifferentiators rely more than their product-focused counterparts on each of the fourmarket research roles discussed in research P1-P4, possibly because they differentiatethemselves on branding and intangible aspects of their offer rather than on functionaland objective product criteria. They may consequently be more uncertain about waysto differentiate themselves in the absence of real rather than perceived productdifferences.

In contrast, product differentiators appear to favour intuitive decision-making overmarket research in their product innovation decision-making. They concentrate on

features to develop rather than developing the emotional aspects of brands. It seemslikely that the marketing managers of the marketing differentiators were moresophisticated in their use of market research, given that the role of research is strongerin this group than for either cost leaders or product differentiators.

Another difference between these two strategic types is that marketingdifferentiators are more likely to use market research in non-rational or internalpolitical roles. Piercy (1983) has previously identified this as misuse of marketresearch.


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The second research gap addressed in this study was the impact of marketingstrategy on the role of CRM as a source of marketing information. Cost leaders appearto be no more or less reliant than either kind of differentiator on CRM systems. Therewere also no significant differences in the role of CRM between marketing

differentiators and product differentiators. One interpretation of these findings is thatcost leaders rely more on retention of customers than on acquisition, on account of theirlower priced and older generation products, and that database marketing and CRM areconsequently more likely to be useful. A competing view might be that differentiatorsneed to offer higher levels of service and spot demand trends quickly, and that CRMcan facilitate the achievement of those objectives.

This study makes an overall contribution to the study of the role of market researchas a facilitator of strategy implementation and enhancer of strategic decision-making.This is the first study to examine the influence of Porters strategic types on firstly,CRM usage and secondly, the roles for which market research is used. It is necessary toinclude CRM as CRM can usurp the traditional role of market research. CRM does thisby obtaining information form data mining and tracking consumer interactions and

consumer behaviour. It can thereby address a number of marketing questionseffectively that were historically answered by primary external market research(Weber, 2001; Malhotra and Peterson, 2001). Previous authors (Hart et al., 1999) havenot included strategy as a contingent variable to explain the different waysorganisation utilise market research.

The technical limitations of the study include: a cross sectional design, a crossindustry sample and a single respondent for each business unit surveyed.Nevertheless, the respondents were senior marketing executives the sample was large.

Research implicationsFuture researchers using the Porter types should ensure that differentiators are split

into their marketing and product sub-types. Differences between those were found inthis study, in terms of the respective roles allocated to market research, and treatingthem as a single group potentially obscures important variation in strategyimplementation. It would also be beneficial to separate traditional market research intothe two categories identified by Ganeshasundaram and Henley (2006), decisionresearch and background research and study each role separately. This wouldpermit examination of the notion that cost leaders operate in a more certain andpredictable environment and their research is more for insurance or long-termknowledge than short-term action; they consequently favour background research.In contrast, it is to be expected that the more innovative and dynamic environment inwhich product differentiators operate will require research to lead to immediate action;decision research may therefore be preferred.

Practical implicationsAll marketing managers appear to benefit from CRM, given that strategy is not adeterminant of CRM usage. However, different approaches to the implementation ofmarketing strategy do suggest guidelines for the usage of traditional market research.Marketing managers need to consider their organisational structure in choosing theroles for market research. For example, organisations with centralised structures arelikely to encourage non-rational and political uses of market research.

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Market research managers operating in a strategic environment designed bymarket differentiators may require enhanced communication skills, because therequirements they have to specify in their briefs to research sub-contractors andthe findings they must subsequently convey to marketing managers are typically

subtle and complex aspects of branding and differentiation, given that their productsand services have limited objective competitive advantage. On the other hand, themarket research undertaken for product differentiators and cost leaders will relate tomore obvious competitive advantages, such as functionality or price, and thus be easierto communicate.

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Further reading

Subramanian, R., Fernandes, N. and Harper, E. (1993), An empirical examination of therelationship between strategy and scanning, Mid-Atlantic Journal of Business, Vol. 29No. 3, pp. 315-30.

Corresponding authorMichael J. Valos can be contacted at: [email protected]

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