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The impact of Porters strategy


types on the role of market
research and customer
relationship management
Michael J. Valos and David H.B. Bednall
Deakin University, Melbourne, Australia, and

Bill Callaghan

Market research
and CRM

147
Received December 2005
Revised November 2006,
December 2006
Accepted January 2007

Strategic Mapping, Melbourne, Australia


Abstract
Purpose This paper seeks to investigate the influence of Porters strategy types on the use of
customer relationship management (CRM) techniques and traditional market research, against
theoretical and empirical evidence that differences in strategy types may result in variation in
favoured marketing information sources and procedures.
Design/methodology/approach Depth interviews generated a series of scale items, which were
combined with others derived from the literature in a questionnaire measuring strategy types, the roles
of market research, and the characteristics of CRM systems. Responses were obtained from 240 senior
marketing 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 was
widespread, however, in four roles of traditional market research: enhancing strategic decision
making, increasing usability of existing data, presenting plans to senior management, and achieving
productivity and political outcomes.
Research limitations/implications Future researchers using the Porter strategic types should
separate marketing differentiators from product differentiators because they function and compete
differently.
Practical implications All organisations can benefit from CRM systems, but marketing
differentiators exhibit a relatively higher usage of traditional market research. This is likely to be
because they compete by creating softer product differences, while others do so on harder
characteristics such as price or product functionality.
Originality/value This is the first study to use the Porter types to explain differences between the
roles 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

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

Marketing Intelligence & Planning


Vol. 25 No. 2, 2007
pp. 147-156
q Emerald Group Publishing Limited
0263-4503
DOI 10.1108/02634500710737933

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148

Recent research has highlighted the various alternative roles that market research
plays in strategic decision-making. Toften (2005) found instrumental use (applying
findings to an immediate problem) and the conceptual role (general enlightenment on
future issues) to be correlated with marketing performance. In contrast, the symbolic
and political modes of use did not improve performance. Ganeshasundaram and
Henley (2006) found a paradox in the roles for market research in practice: while much
more background research was being conducted, it was considered of less value than
decision research.
This paper reviews the literature dealing with the roles of marketing research, CRM
and business strategy. Hypotheses are presented regarding the impact of strategy in
explaining differences in how organisations use both marketing research and CRM.
The findings are reported of a quantitative survey carried out to examine differences
between the types and uses of traditional and CRM methods of data collection,
conclusions drawn and implications discussed. The paper concludes with guidelines
for the use of both types by marketing managers in practice.
Traditional roles of marketing research
A number of typologies and taxonomies classify market research roles. Several
functions of market research have been described: action-oriented versus
knowledge-enhancing (Slater and Narver, 2000), strategic versus tactical (Raphael
and 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 as
evidence 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 years
of academic literature examining factors influencing the use of marketing
information did not include business or marketing strategy amongst the nine
variables it considered. The fact that our own review has covered the major seminal
studies, such as those of Deshpande and Zaltman (1982, 1987) suggest a gap in the
market research literature. It could be that too much market research is not appropriate
for the strategic context in which the organisation finds itself, reducing its role as a
decision-making support. Thus, the influence of general marketing strategy may
explain differences in the observable roles of marketing research.
Impact of CRM on traditional roles of marketing research
A second gap in the market research literature relates to the emerging role of CRM
systems, which provide information that may complement or corroborate information
from traditional market research (Malhotra and Peterson, 2001) or even replace it.
Authors such as Javalgi et al. (2006) propose a two-way information flow between
traditional market research on the one hand and CRM systems on the other. This occurs
through the intelligence generation and intelligence gathering aspects of market
orientation. OMalley and Mitussis (2002) assert that CRM systems with adequate
customer databases and data mining techniques are required for the implementation of
relationship marketing and the achievement of customer intimacy because individual
customer preferences must be understood. Baker and Mouncey (2003, p. 417) ask
. . . whether the pursuit of relationship marketing, perhaps through CRM initiatives,

demands any changes in how market research is undertaken or delivered. Their answer
relates to the concept of a listening organization which combines the traditional role of
market research with integration of internal databases, customer contact points and
other internal customer listening systems.
Since, market research and CRM may fulfil similar functions in providing
information to support strategic decision-making, their use should likewise be related
to 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 information
Recent research by Maltz et al. (2006) examined links between strategy and market
information usage, comparing organisations that competed, respectively, with an
innovation orientation and a speed (of response) orientation.
Generic conceptualisations of strategy are still in use when academics seek to
examine 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 or
organisations according to marketing strategy provides more specific and appropriate
guidelines for human resource, organisational structure and information requirements.
According to Porter (1980), there are three successful generic strategies. The
differentiator strategy achieves competitive advantage through offering something
uniquely different from competitors. In contrast, the cost leader strategy does so by
greater efficiency in production and resource usage. The focus strategy can be adopted
by differentiators or cost leaders, but differs in that it targets a market niche rather
than the broad market. These internal contrasts suggest that differentiation and cost
leadership require contrasting roles for market research and CRM systems.
In this paper, we use the Porter strategic types as a means of examining the impact
of 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 differentiating
customer relationships while cost leaders, with a lesser focus on innovation, might use
it as part of a more defensive customer retention strategy. Further, differentiators
might well use market research in a background role, as they focus on innovation and
the future, while cost leaders may consider background research of less value than
decision research, and find the instrumental role more relevant than the conceptual
role.
Hagen and Amin (1995) found differences in external environment scanning and
opportunity analysis practices between differentiators and cost leaders. While the
amount of market research was similar for both strategies, the type of issues being
researched differed. However, Hambrick (1982) found no differences between the
external environmental scanning of these two strategy types.
Drawing on non-Porter literature, Du Toit (1998, p. 207) found differences between
Miles and Snows prospectors, analysers and defenders in the way in which
information was managed [for competitive advantage] in terms of internal records,
competitive information and external information. More recently, Narver and Slater
suggested that there would be differences among those three types in terms of their
approach to the generation of market intelligence.

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To sum up, a gap exists in the market research literature in the matter of differences
between Porters strategy types and a number of roles for market research: enhancing
strategic decision-making, increasing the usability of existing data, presenting
marketing activities to senior management, and achieving productivity and political
outcomes. Piercy (1983) observed the non-rational use of market research in response to
the politicised information environment inside firms. There is also a gap with respect
to differences among the Porter types in terms of relative reliance on and usage of CRM
systems.
Research question and propositions
On the basis of our literature review, the main research question this study addresses is:
RQ1. Does strategy explain differences in the use by organisations of marketing
research and CRM?
The answer is sought by the testing of five research propositions.
P1.

Differentiators will place greater reliance on market research in its enhancing


strategic decision-making role than will cost leaders or focus strategists.

This proposition assumes that differentiators face major and more difficult decisions in
terms of investing in product innovation, and invest more in brand building. Their
marketing decisions will be less about price and more about maintaining a unique
difference compared with their competitors:
P2.

Cost leaders will place greater reliance on market research in its increasing
usability of existing data role than will differentiators or focus strategists.

This proposition assumes that cost leaders will use incremental market research to a
greater extent than the breakthrough variety, and have a greater need for market
research to explain past findings. Their culture is more cost conscious, and any
investment capable of which leveraging past research will be regarded favourably:
P3.

Differentiators will place greater reliance on market research in its


communicating marketing activities to senior management role than will
cost leaders or focus strategists.

This proposition assumes that differentiators operate in an area of greater uncertainty


and faces higher risks in their decision-making. Senior management will demand
greater confidence that the actions taken by marketing managers are on track
because the chance of a big mistake is greater.
P4.

Cost leaders will place greater reliance on market research in its achieving
productivity and political outcomes role than will differentiators or focus
strategists.

This proposition assumes that cost leaders need to show a more immediate return on
marketing expenditure. On the other hand, differentiators operate in an area of greater
uncertainty and have longer term payback scenarios.
P5.

Cost leaders and focus strategists will place greater reliance on CRM systems
than differentiators.

This proposition assumes that cost leaders enjoy greater certainty in their product and
customer decisions, and are more familiar with their customers whose needs change
slowly.
This research agenda dictates a quantitative analysis in which strategies can be
compared in terms of the usage of traditional marketing research and CRM.
Methodology
In the first phase of the study, 16 preliminary discussions about market research and its
value to the organisations were held with senior marketers and research managers in
Australia and the USA. The objective was to generate additional scale items for the
eventual survey instrument, to supplement those available for modification from the
literature review. The discussion agenda focused on the roles of market research and
the characteristics of CRM systems in general, and in particular on recent trends and
issues, 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 eventual
respondents, as a check on completeness and clarity.
In the second phase, a survey sample was selected from the Dun & Bradstreet list of
the top 1,000 senior marketing managers in for-profit Australian companies. After
preliminary contact to establish contacted to confirm the name of the person with
major responsibility for marketing, a self-completion questionnaire was distributed by
mail. Follow-up, as necessary was by letter, telephone or e-mail. A return of 24 per cent
was 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 was
measured by five items derived from the depth interviews, which covered CRM, data
warehousing, and sales, service and billing databases. To classify business strategy
types, a non-hierarchical Wards cluster analysis was undertaken on eight items
measuring Porter strategy types from Pelham and Wilson (1996) and three items from
the depth interviews. The focus was initially on the three-cluster solution, given the
Porter typologies expected, but other solutions were also explored.
One-way ANOVA was used to identify differences between market research roles
and CRM usage among the Porter types. ANOVA determines the degree to which
differences found between the means of different groups or categories can be attributed
to sampling error (Hair et al., 1995, p. 617). Statistical significance was established at
the 5 per cent level, which is consistent with a sample of this size. Dunnetts T3 test of
significance was further applied, as the Levene test showed unequal variance within
the variables used in the ANOVA.
Findings
Table I shows the role variables derived from a Varimax factor analysis and
subsequent Cronbach a test, based on data collected by seven-point Likert scales.
Three strategies were identified by the cluster analysis: cost leadership, marketing
differentiator (i.e. brand differentiation) and product differentiator (i.e. differentiation
by innovative feature). Somewhat surprisingly, the focus strategy was not confirmed in

Market research
and CRM

151

Table I.
ANOVA comparison of
market research roles and
CRM reliance, by Porter
strategy type

Enhancing decision making (0.90)


Increasing usability of existing data (0.76)
Communicating actions to senior management (0.67)
Achieving productivity and political outcomes (0.63)
CRM proposition
CRM reliance (0.77)

(1.81)
(1.68)
(1.77)
(1.52)

3.94 (2.26)

4.18
3.28
3.51
3.10

(1.57)
(1.51)
(1.52)
(1.52)

4.02 (2.18)

4.71
3.99
3.82
3.62

Marketing
differentiator
strategy
(M) (n 89)
Mean (SD)
(2.4)
(1.99)
(2.18)
(2.06)
3.62 (2.11)

3.52
2.55
2.88
2.75

Product
differentiator
strategy
(P) (n 51)
Mean (SD)

N/S

M.P
M . P, M . CL
M.P
M.P

Significant different means

152

Market research role propositions

Cost leader
strategy
(CL) (n 99)
Mean (SD)

0.54

6.52
12.2
4.58
5.08

F ratio

0.58

0.00
0.00
0.01
0.01

F prob.

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the cluster analysis solution. Previous researchers, for example Miller (1987), have also
found variations from the original Porter typology when using cluster analysis.
The findings show that marketing differentiators rely more than product
differentiators on market research for enhancing strategic decision-making,
increasing usability of existing data, presenting marketing activities to senior
management and for productivity and political outcomes. The sole difference between
marketing differentiators and cost leaders in terms of any of the four roles of market
research under study was that they allocated a stronger role for market research in
increasing usability of existing data.
Lastly, and surprisingly, no significant differences were found among marketing
differentiators, product differentiators and cost leaders in the usage of CRM systems to
support marketing decision-making.
Discussion and contribution
The 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 research
propositions were tested, with marketing strategy as an explanatory variable. In other
words, the research propositions assumed the role of market research would change
according 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 less
need for the market research that increases usability of existing data. It may be that
adopters of this strategy use market research to find price points or features that can be
deleted from products to reduce production or marketing cots, and hence prices.
This market research is perhaps more straightforward to interpret than the sort
commissioned by marketing differentiators, which is likely to be related to product
positioning 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, varieties
of Porters single differentiator first identified by Miller (1987). Marketing
differentiators rely more than their product-focused counterparts on each of the four
market research roles discussed in research P1-P4, possibly because they differentiate
themselves on branding and intangible aspects of their offer rather than on functional
and objective product criteria. They may consequently be more uncertain about ways
to differentiate themselves in the absence of real rather than perceived product
differences.
In contrast, product differentiators appear to favour intuitive decision-making over
market research in their product innovation decision-making. They concentrate on
features to develop rather than developing the emotional aspects of brands. It seems
likely that the marketing managers of the marketing differentiators were more
sophisticated in their use of market research, given that the role of research is stronger
in this group than for either cost leaders or product differentiators.
Another difference between these two strategic types is that marketing
differentiators are more likely to use market research in non-rational or internal
political roles. Piercy (1983) has previously identified this as misuse of market
research.

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The second research gap addressed in this study was the impact of marketing
strategy on the role of CRM as a source of marketing information. Cost leaders appear
to be no more or less reliant than either kind of differentiator on CRM systems. There
were also no significant differences in the role of CRM between marketing
differentiators and product differentiators. One interpretation of these findings is that
cost leaders rely more on retention of customers than on acquisition, on account of their
lower priced and older generation products, and that database marketing and CRM are
consequently more likely to be useful. A competing view might be that differentiators
need to offer higher levels of service and spot demand trends quickly, and that CRM
can facilitate the achievement of those objectives.
This study makes an overall contribution to the study of the role of market research
as 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 to
include CRM as CRM can usurp the traditional role of market research. CRM does this
by obtaining information form data mining and tracking consumer interactions and
consumer behaviour. It can thereby address a number of marketing questions
effectively that were historically answered by primary external market research
(Weber, 2001; Malhotra and Peterson, 2001). Previous authors (Hart et al., 1999) have
not included strategy as a contingent variable to explain the different ways
organisation utilise market research.
The technical limitations of the study include: a cross sectional design, a cross
industry sample and a single respondent for each business unit surveyed.
Nevertheless, the respondents were senior marketing executives the sample was large.
Research implications
Future researchers using the Porter types should ensure that differentiators are split
into their marketing and product sub-types. Differences between those were found in
this study, in terms of the respective roles allocated to market research, and treating
them as a single group potentially obscures important variation in strategy
implementation. It would also be beneficial to separate traditional market research into
the two categories identified by Ganeshasundaram and Henley (2006), decision
research and background research and study each role separately. This would
permit examination of the notion that cost leaders operate in a more certain and
predictable environment and their research is more for insurance or long-term
knowledge than short-term action; they consequently favour background research.
In contrast, it is to be expected that the more innovative and dynamic environment in
which product differentiators operate will require research to lead to immediate action;
decision research may therefore be preferred.
Practical implications
All marketing managers appear to benefit from CRM, given that strategy is not a
determinant of CRM usage. However, different approaches to the implementation of
marketing strategy do suggest guidelines for the usage of traditional market research.
Marketing managers need to consider their organisational structure in choosing the
roles for market research. For example, organisations with centralised structures are
likely to encourage non-rational and political uses of market research.

Market research managers operating in a strategic environment designed by


market differentiators may require enhanced communication skills, because the
requirements they have to specify in their briefs to research sub-contractors and
the findings they must subsequently convey to marketing managers are typically
subtle and complex aspects of branding and differentiation, given that their products
and services have limited objective competitive advantage. On the other hand, the
market research undertaken for product differentiators and cost leaders will relate to
more obvious competitive advantages, such as functionality or price, and thus be easier
to communicate.
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Corresponding author
Michael J. Valos can be contacted at: michael.valos@deakin.edu.au

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