Futurecast In Marketing : Findings From An Academic Think Tank 9781845446185, 9780861766680

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European Journal of Marketing

ISSN 0309-0566 Volume 36 Number 4 2002

Futurecast in marketing: findings from an academic think tank Guest Editors Luiz Moutinho, Fiona Davies and Cleopatra Veloutsou Paper format European Journal of Marketing includes 12 issues in traditional paper format. The contents of this issue are detailed below.

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Access to European Journal of Marketing online _________________________________

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Editorial review board ____________________________

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Abstracts and keywords __________________________

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French abstracts__________________________________

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German abstracts _________________________________

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Spanish abstracts _________________________________

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Guest editorial ___________________________________

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Exploring key neo-marketing directions through the use of an academic ‘‘think tank’’: a methodological framework Luiz Moutinho, Fiona Davies and Graeme Hutcheson _________________

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Relationship marketing: what if . . . ? Cleopatra Veloutsou, Michael Saren and Nikolaos Tzokas ______________

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Determining marketing strategy: a cybernetic systems approach to scenario planning Robert E. Morgan and Shelby D. Hunt _____________________________

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Predicting a diverse future: directions and issues in the marketing of services Angus Laing, Barbara Lewis, Gordon Foxall and Gillian Hogg__________

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About the authors ________________________________

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CONTENTS

European Journal of Marketing 36,4 406

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EDITORIAL REVIEW BOARD Dr Ali Bin Khalifa Al-Khalifa University of Bahrain, State of Bahrain Professor George J. Avlonitis Athens University of Economics & Business, Greece Professor Michael Baker Westburn Publishers Ltd, UK Professor John M.T. Balmer University of Bradford Management Centre, UK Professor Jim Bell University of Ulster, Magee College, Northern Ireland Professor Stephen Brown University of Ulster at Jordanstown, Northern Ireland Professor Douglas Brownlie University of Stirling, UK Professor Francis A. Buttle Manchester Business School, UK Professor S. Tamar Cavusgil Michigan State University, USA Professor Brett Collins Auckland University of Technology, New Zealand Dr Nicole Coviello University of Calgary, Canada Dr David W. Cravens Texas Christian University, USA Professor Anthony C. Cunningham University College, Dublin, Ireland Professor Tevfik Dalgic University of Texas at Dallas, USA Professor Adamantios Diamantopoulos Loughborough University, UK Professor Gordon R. Foxall Cardiff University, UK Professor Pervez N. Ghauri University of Groningen, The Netherlands Dr Christina Goulding University of Wolverhampton, UK Ken Grant Monash University, Australia Professor Gordon E. Greenley Aston Business School, UK Professor Kjell Grønhaug Norges Handelshoyskole, Norway Dr Phil Harris Manchester Metropolitan University, UK Professor Roy Hayhurst University of Limerick, Ireland Professor Graham J. Hooley Aston Business School, UK Professor Ga´bor Hova´nyi University of Pecs, Hungary Professor Claes Hultman ¨ rebro University, Sweden O Dr Mark Jenkins Cranfield University, UK Professor David Jobber University of Bradford, UK Dr Laszlo Karpati University of Debreccan, Hungary Professor Hans Kasper University of Maastricht, The Netherlands Professor Erdener Kaynak Pennsylvania State University, USA

Professor Raymond LaForge University of Louisville, USA Professor Uolevi Lehtinen University of Tampere, Finland Professor Barbara Lewis UMIST, UK Dr Veronica Liljander Swedish School of Economics and Business Administration, Finland Dr Andrew McAuley University of Stirling, UK Professor Jan Mattsson Roskilde University, Denmark Professor Bill Merrilees University of Newcastle, Australia Professor Morgan Miles Georgia Southern University, USA Professor Carla Millar TSM Business School, The Netherlands Professor Luiz Moutinho University of Glasgow Business School, UK Professor Patrick Murphy University of Notre Dame, USA Aidan O’Driscoll Dublin Institute of Technology, Ireland Professor Adrian Palmer Gloucestershire Business School, UK Dr Paul G. Patterson University of New South Wales, Sydney, Australia Professor Chad Perry University of Southern Queensland, Australia Professor Nigel F. Piercy University of Wales, Cardiff, UK Professor Michael Saren University of Strathclyde, UK Professor Susan Shaw University of Strathclyde, UK Professor David Shipley University of Dublin, Ireland Dr Wai-Sum Siu Hong Kong Baptist University, Hong Kong Professor Richard Speed Melbourne Business School, Australia Professor Bernd Stauss Catholic University of Eichsta¨tt, Germany Dr Kate Stewart University of Ulster at Jordanstown, Northern Ireland Professor Len Tiu Wright De Montfort University, UK Professor Peter Turnbull University of Birmingham, UK Professor Caroline Tynan Nottingham Business School, UK Professor Eduard Urban University of Economics, Slovakia Professor Salvatore Vicari Bocconi University, Italy Dr Martin Wetzels University of Limburg, Maastricht, The Netherlands Dr Gordon Wills International Management Centres, UK

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European Journal of Marketing, Vol. 36 No. 4, 2002, Abstracts and keywords. # MCB UP Limited, 0309-0566

Exploring key neo-marketing directions through the use of an academic ‘‘think tank’’: a methodological framework Luiz Moutinho, Fiona Davies and Graeme Hutcheson Keywords Marketing, Forecasting, Methodology This paper is designed to set the scene in terms of introducing the methodological framework used in the academic ‘‘think tank’’ in marketing held at Lake of Menteith in Scotland in 1999. Some important academic insights and considerations are discussed at the outset with regard to the evaluation of future impacts on the multiple facets of the marketing discipline, although the amount and quality of dedicated academic research in this area has been limited. The new role of the marketing function and new customer market structures are debated, followed by a discussion of the intrinsic capabilities of scenario planning, as an environmental forecasting technique. Furthermore, we analyse the contribution of knowledge based systems to scenario planning and describe the design/development of an expert system at the Lake of Menteith gathering.

Determining marketing strategy: a cybernetic systems approach to scenario planning Robert E. Morgan and Shelby D. Hunt Keywords Industry, Marketing strategy, Competitive strategy Despite the vast proliferation of conceptual, theoretical, and empirical studies in adaptation-selection research, debate continues to surround a key question: how do firms strategically coevolve with their environments? This paper attempts to address part of this question by drawing on advances in strategic choice theory and resource-advantage theory. A scenario-based group methodology based around the ‘‘think tank’’ described in the first paper of this special issue is presented whereby marketing analyses of environmental contexts are described which lead to a series of recommended marketing strategies for response (selection), which fit the changing environments (adaptation). Various conclusions are derived from this marketing strategy determination process and finally, consideration is given to issues of complexity and chaos in environmental assessment terms.

Relationship marketing: what if . . . ? Cleopatra Veloutsou, Michael Saren and Nikolaos Tzokas Keywords Relationship marketing, Business strategy Academics and market professionals appreciate the importance of relationship marketing for contemporary firms. Yet, relationship marketing strategies and tactics are context specific. Based on opinions expressed in an academic ‘‘think tank’’ held at Lake Menteith in Scotland and the use of an expert system, this paper reports how business relationships may develop in the future and the practices that should be used under certain scenarios. It concludes with recommendations of areas where further research activity in relationship marketing is required.

Predicting a diverse future: directions and issues in the marketing of services Angus Laing, Barbara Lewis, Gordon Foxall and Gillian Hogg Keywords Services marketing, Globalization, Technological change Driven by technological developments, deregulation, and globalisation the service sector in post-industrial economies is facing unprecedented change. Utilising a scenario planning framework, the paper examines the impact of such changes on a cross-section of service categories. Acknowledging that the derivation of generic sector wide trends from the analysis of discrete service categories runs the risk of over simplification, three core trends were identified: the increasing importance of technological mediation; changing consumer and professional roles; and decreasing importance of relational factors in consumer decision making. These trends pose fundamental challenges to service providers and offer researchers a rich context in which to advance marketing theory.

French abstracts Explorer les directions essentielles de la ne´o-mercatique au moyen d’un ‘‘laboratoire d’ide´es’’ acade´mique: une structure me´thodologique Luiz Moutinho, Fiona Davies et Graeme Hutcheson Mots-cle´s Mercatique, Pre´visions, Me´thodologie L’article a pour but d’e´tablir le cadre dans lequel il introduit la structure me´thodologique, utilise´e dans le ‘‘laboratoire d’ide´es’’ acade´mique en mercatique, qui s’est tenu au Lac de Menteith, en Ecosse, en 1999. Il discute certains des aperc¸us et conside´rations acade´miques importants, qui se pre´sente`rent au de´part, en ce qui concerne l’e´valuation des impacts futurs sur les multiples facettes de la discipline de mercatique, bien que le nombre et la qualite´ des recherches acade´miques consacre´es a` ce sujet aient e´te´ limite´es. Il discute du nouveau roˆle de la fonction de mercatique et des nouvelles structures du marche´ du consommateur, et continue avec une discussion sur les capabilite´s intrinse`ques de la planification du sce´nario, en tant que technique de pre´vision environnementale. De plus, nous analysons la contribution apporte´e, par les syste`mes fonde´s sur la connaissance, a` la planification du sce´nario, et nous de´crivons la conception/le de´veloppement d’un syste`me expert a` la re´union du Lac de Menteith.

French abstracts

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Mercatique des rapports: que se passerait-il si . . . ? Cleopatra Veloutsou, Michael Saren et Nikolaos Tzokas Mots-cle´s Mercatique des rapports, Strate´gie commerciale Les acade´miciens et les professionnels du commerce appre´cient l’importance que reveˆt la mercatique des rapports pour les firmes contemporaines. Cependant, les strate´gies et tactiques mises en oeuvre dans la mercatique des rapports sont spe´cifiques au contexte. L’article se fonde sur les opinions exprime´es dans un ‘‘laboratoire d’ide´es’’ acade´mique, qui s’est tenu au Lac de Menteith en Ecosse, et sur l’utilisation d’un syste`me expert, pour rendre compte de la manie`re dont les relations commerciales peuvent se de´velopper a` l’avenir et des pratiques qui devraient eˆtre utilise´es dans certains sce´narios. Il conclut en donnant des recommandations concernant les domaines dans lesquels il est ne´cessaire de proce´der a` des recherches plus pousse´es en mercatique des rapports.

De´terminer la strate´gie de mercatique: une me´thode de planification du sce´nario, fonde´e sur un syste`me cyberne´tique Robert E. Morgan et Shelby D. Hunt Mots-cle´s Industrie, Strate´gie de mercatique, Strate´gie compe´titive Malgre´ la vaste prolife´ration d’e´tudes conceptuelles, the´oriques et empiriques mene´es dans le cadre des recherches sur l’adaptation et la se´lection, les de´bats continuent a` porter sur une question essentielle: comment les firmes co-e´voluent-elles de manie`re strate´gique avec leur environnement? L’article que voici s’efforce d’aborder une partie de cette question en se fondant sur les progre`s re´alise´s dans la the´orie du choix strate´gique et la the´orie des ressources et avantages. L’article pre´sente une me´thodologie de groupe fonde´e sur les sce´narios et de´rivant du ‘‘laboratoire d’ide´es’’ de´crit dans le premier article de cette e´dition spe´ciale: il de´crit les analyses mercatiques des contextes environnementaux qui ame`nent a` une se´rie de strate´gies de mercatique recommande´es pour la re´ponse (se´lection), et qui conviennent aux environnements changeants (adaptation). Il tire diverses conclusions de ce processus de de´termination de la strate´gie de mercatique et, pour terminer, il conside`re les questions de complexite´ et de chaos qui se posent, en ce qui concerne l’e´valuation de l’environnement.

European Journal of Marketing, Vol. 36 No. 4, 2002, French abstracts. # MCB UP Limited, 0309-0566

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Pre´dire un futur varie´: les directions a` suivre et les questions qui se posent dans la mercatique des services Angus Laing, Barbara Lewis, Gordon Foxall et Gillian Hogg Mots-cle´s Mercatique des services, Globalisation, Changement technologique Entraıˆne´ par les de´veloppements technologiques, la de´re´gulation et la globalisation, le secteur des services dans les e´conomies post-industrielles fait face a` des changements sans pre´ce´dents. L’article se sert d’une structure de planification des sce´narios pour examiner l’impact de ces changements sur une tranche des cate´gories de service. Ayant reconnu que la de´rivation des tendances ge´ne´riques, dans l’ensemble du secteur, provenant de l’analyse des cate´gories de service discre`tes, court le risque d’eˆtre trop simplifie´e, il identifie trois tendances principales: l’importance croissante de la me´diation technologique; les roˆles changeants du consommateur et du professionnel; et la perte d’importance des facteurs relationnels dans la prise de de´cisions par les consommateurs. Ces tendances pre´sentent des de´fis fondamentaux aux prestataires de services et offrent aux chercheurs un contexte riche dans lequel ils peuvent faire progresser leur the´orie de mercatique.

German abstracts Erforschung wichtiger neuer Marketingrichtungen durch einen akademischen Thinktank: ein methodologischer Rahmen Luiz Moutinho, Fiona Davies und Graeme Hutcheson Stichworte Marketing, Prognosen, Methodolgie Der Artikel stellt einfu¨hrend den methodologischen Rahmen vor, der 1999 beim akademischen Marketing-Thinktank am Lake of Menteith in Schottland verwendet wurde. Zu Beginn werden ¨ berlegungen diskutiert, in denen es um verschiedene wichtige akademische Erkenntnisse und U die Beurteilung der zuku¨nftigen Auswirkungen auf die verschiedenen Aspekte des Marketings geht. Die Zahl der akademischen Untersuchungen, die sich speziell mit diesem Bereich befassen, ist bisher jedoch gering und ihre Qualita¨t oft mangelhaft. Die neue Rolle der Marketingfunktion und die neuen Kundenmarktstrukturen werden diskutiert. Anschließend werden die intrinsischen Mo¨ glichkeiten der Szenarioplanung sowie eine umfeldspezifische Prognosetechnik ero¨rtert. Wir analysieren weiterhin, welchen Beitrag wissensbasierte Systeme zur Szenarioplanung leisten, und beschrieben den Entwurf/die Entwicklung eines Expertensystems auf dem Treffen am Lake of Menteith.

German abstracts

411

Beziehungsmarketing: was wa¨re, wenn . . . ? Cleopatra Veloutsou, Michael Saren und Nikolaos Tzokas Stichworte Beziehungsmarketing, Unternehmensstrategie Akademiker und Marktexperten sind sich bewusst, welche wichtige Rolle das Beziehungsmarketing fu¨ r Firmen heute spielt. Die Strategien und Taktiken des Beziehungsmarketings sind jedoch kontextspezifisch. Aufbauend auf den Meinungen, die bei einem akademischen Thinktank am Lake Menteith in Schottland zum Ausdruck gebracht wurden, sowie auf der Verwendung eines Expertensystems berichtet der Artikel, wie sich die Gescha¨ftsbeziehungen in der Zukunft entwickeln ko¨nnten und welche Praktiken bei bestimmten Szenarien angewandt werden sollten. Abschließend werden Empfehlungen fu¨r weitere Forschungsarbeiten zum Thema Beziehungsmarketing gegeben.

Bestimmung der Marketingstrategie: ein kybernetischer Systemansatz fu¨r die Szenarioplanung Robert E. Morgan und Shelby D. Hunt Stichworte Strategieplanung, Industrie, Marketingstrategie, Wettbewerbsstrategie Trotz der stark wachsenden Zahl konzeptueller, theoretischer und empirischer Studien zur Adaptations-Selektions-Forschung geht die Diskussion u¨ber eine wichtige Frage weiter: Wie entwickeln sich Firmen strategisch entsprechend ihrem Umfeld weiter? Der Artikel versucht, die Frage zumindest teilweise zu beantworten, indem er auf Weiterentwicklungen der Theorie der ‘‘strategischen Wahl’’ und der Ressourcen-Vorteil-Theorie zuru¨ ckgreift. Eine szenariobasierte Gruppenmethodologie, die auf dem im ersten Artikel dieser Sonderausgabe beschriebenen Thinktank aufbaut, wird vorgestellt. Es werden Marketinganalysen von Umfeldkontexten beschrieben, aus denen eine Reihe von Marketingstrategieempfehlungen hinsichtlich der Reaktion (Selektion) abgeleitet werden, die den vera¨nderlichen Umfeldern angepasst sind (Adaption). Aus diesem Prozess zur Bestimmung der Marketingstrategie werden verschiedene Schlussfolgerungen gezogen und abschließend Fragen der Komplexita¨t und des Chaos unter dem Aspekt der Umfeldbeurteilung behandelt.

European Journal of Marketing, Vol. 36 No. 4, 2002, German abstracts. # MCB UP Limited, 0309-0566

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Vorhersage einer diversen Zukunft: Richtungen und Fragen im Dienstleistungsmarketing Angus Laing, Barbara Lewis, Gordon Foxall und Gillian Hogg Stichworte Dienstleistungsmarketing, Globalisierung, technologische Vera¨nderung Der Dienstleistungssektor in den postindustriellen Volkswirtschaften sieht sich aufgrund von technologischen Vera¨nderungen, Deregulierung und Globalisierung vor nie da gewesene Vera¨nderungen gestellt. Mit Hilfe eines Szenarioplanungsrahmens untersucht der Artikel die Auswirkungen solcher Vera¨nderungen in einem Querschnitt von Dienstleistungskategorien. Obwohl, wie erwa¨hnt wird, eine Ableitung allgemeiner, sektorweiter Trends aus der Analyse ¨ bersimplifizierung in sich birgt, wurden einzelner Dienstleistungskategorien das Risiko einer U drei Haupttrends identifiziert: die wachsende Bedeutung technologischer Mediation, die vera¨nderliche Rolle von Kunden und Fachberufen und die abnehmende Bedeutung von Beziehungsfaktoren in der Entscheidungsfa¨llung von Verbrauchern. Diese Trends stellen grundsa¨ tzliche Herausforderungen an die Dienstleistungsanbieter dar und bieten Wissenschaftlern einen reichhaltigen Kontext zur Weiterentwicklung der Marketingtheorie.

Spanish abstracts Exploracio´n de direcciones clave de neomarketing mediante el uso de un ‘‘grupo de expertos’’ acade´micos: un marco metodolo´gico Luiz Moutinho, Fiona Davies y Graeme Hutcheson Palabras clave Marketing, pronosticacio´n, metodologı´a Este trabajo se ha diseþado para crear el escenario en cuanto a introducir el marco metodolo´gico empleado por el ‘‘grupo de expertos’’ acade´micos en marketing reunidos en el Lago de Menteith, Escocia, en 1999. Al comienzo se discuten algunas visiones internas y consideraciones acade´micas importantes relacionadas con la evaluacio´n de impactos futuros sobre las mu´ltiples facetas de la disciplina de marketing, aunque la cantidad y calidad de investigacio´n acade´mica especı´fica en este a´rea han sido limitadas. Se debaten los nuevos papeles de la funcio´n de marketing ası´ como las nuevas estructuras del mercado del cliente, seguido de una discusio´n de las capacidades intrı´nsecas de la planificacio´n de escenarios, como te´cnica de pronosticacio´n medioambiental. Asimismo, analizamos la contribucio´n de los sistemas basados en conocimiento a la planificacio´n del escenario y describimos el diseþo/desarrollo de un sistema experto en la reunio´n del Lago de Menteith.

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Marketing de relaciones: ¿y si . . . ? Cleopatra Veloutsou, Michael Saren y Nikolaos Tzokas Palabras clave Marketing de relaciones, estrategia de negocios Los acade´micos y profesionales del mercado aprecian la importancia del marketing de relaciones para las empresas contempora´neas. Sin embargo, las estrategias y ta´cticas del marketing de relaciones son especı´ficas del contexto. Este trabajo, basado en opiniones expresadas por un ‘‘grupo de expertos’’ reunidos en el Lago Menteith, Escocia, y el uso de un sistema experto, informa sobre co´mo las relaciones de negocios pueden desarrollarse en el futuro, y las pra´cticas que deberı´an emplearse bajo ciertas condiciones. Concluye con recomendaciones de a´reas donde se requiere una mayor actividad de investigacio´n sobre el marketing de relaciones.

Determinacio´n de la estrategia de marketing: un planteamiento de sistemas ciberne´ticos para la planificacio´n de escenarios Robert E. Morgan y Shelby D. Hunt Palabras clave Industria, estrategia de marketing, estrategia competitiva A pesar de la inmensa proliferacio´n de estudios conceptuales, teo´ricos y empı´ricos en la investigacio´n sobre adaptacio´n-seleccio´n, el debate continu´a rodeando una cuestio´n clave: ¿co´mo coevolucionan estrate´gicamente las empresas con sus entornos? Este trabajo intenta tratar parte de dicha cuestio´n utilizando avances en la teorı´a de eleccio´n estrate´gica y la teorı´a de recursos-ventajas. Se presenta una metodologı´a de grupo basada en escenario y centrada alrededor del ‘‘grupo de expertos’’ descrito en el primer trabajo de esta edicio´n especial, por la cual se describen ana´lisis de marketing de entornos medioambientales que conducen a una serie de estrategias de marketing recomendadas como respuesta (seleccio´n), que se adaptan a los entornos cambiantes (adaptacio´n). Se derivan varias conclusiones de este proceso de determinacio´n de estrategias de marketing y, finalmente, se consideran las cuestiones de complejidad y caos en te´rminos de la evaluacio´n medioambiental.

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Prediccio´n de un futuro diverso: direcciones y cuestiones en el marketing de servicios Angus Laing, Barbara Lewis, Gordon Foxall y Gillian Hogg Palabras clave Marketing de servicios, globalizacio´n, cambio tecnolo´gico El sector de servicios en las economı´as postindustriales, activado por desarrollos tecnolo´gicos, desregulacio´n y globalizacio´n, esta´ enfrenta´ndose a unos cambios sin precedentes. Este trabajo, utilizando un marco de planificacio´n de escenarios, examina el impacto de dichos cambios en una seccio´n cruzada de categorı´as de servicios. Reconociendo que la derivacio´n de tendencias gene´ricas en todo el sector a partir del ana´lisis de categorı´as discretas de servicios corre el riesgo de simplificarse en exceso, se identificaron tres tendencias centrales: la creciente importancia de la mediacio´n tecnolo´gica; las funciones cambiantes de consumidores y profesionales; la decreciente importancia de factores relacionales en la toma de decisiones del consumidor. Estas tendencias presentan unos retos fundamentales a los proveedores de servicios y ofrecen a los investigadores un contexto abundante donde avanzar la teorı´a de marketing.

Guest editorial About the Guest Editors Luiz Moutinho holds the Foundation Chair of Marketing and is the Director of the Doctoral Programme at the Department of Management Studies, University of Glasgow, in Scotland. He holds a PhD in Marketing from the University of Sheffield in the UK. Research interests include computer modelling in marketing management, consumer behaviour and the marketing of services. He has published extensively in academic journals in the UK and the USA. Between 1987 and 1989 he was the Director of the Doctoral Programmes at the Confederation of Scottish Business Schools and at the Cardiff Business School between 1993 and 1996. He has also received a number of awards for excellence in academic research in the USA, UK and Portugal. Fiona Davies is a Lecturer in Marketing and Strategy at Cardiff Business School, where one of her main research interests is the use of artificial intelligence techniques in marketing. She has worked for several years on developing and testing prototype expert systems in the marketing and strategy areas, investigating their potential as an aid to formulating company strategy, particularly in financial markets, and to selecting new export markets and retail locations. Her research also includes evaluating the potential of different types of neural network in the analysis of consumer and firm behaviour, e.g. market segmentation, modelling customer satisfaction, and predicting company performance. She has published widely in marketing and management journals. Cleopatra Veloutsou is a Lecturer in Marketing in the Department of Business and Management of the University of Glasgow. She holds an MBA and was awarded a PhD from the Athens University of Economics and Business in Greece. Her primary research interests include the areas of brand management, marketing organisation, relationship marketing and marketing communications.

This special issue of the European Journal of Marketing is solely dedicated to the presentation of the findings generated during an academic ‘‘think tank’’ in marketing, organised by the University of Glasgow at Lake of Menteith in Scotland in 2000. The ‘‘think tank’’ generated a great deal of interest, attracting 30 invited top academics and researchers (please refer to the list of names included in this issue). In the first paper of this special issue, Moutinho, Davies and Hutcheson explore the methodological underpinnings related to this two-day event. The article also includes some key academic insights and considerations regarding the evaluation of future impacts on multiple facets of the marketing discipline, although the amount and quality of dedicated academic research in this area has been limited. The authors explore the new role of the marketing function and new customer-market structures. Moutinho et al. then go on to the discussion of the intrinsic capabilities of scenario planning as an environmental forecasting technique. Furthermore, they analyse the contribution of knowledge-based systems to the scenario planning process and describe the design/development of an expert system prototype as a result of the academic gathering at Lake of Menteith. Veloutsou, Saren and Tzokas tackle the puzzling topic of ‘‘Relationship marketing: what if . . . ?’’ in the second article of this special issue. They argue the fact that relationship marketing strategies and tactics are clearly context specific. Their paper reports on how business relationships may develop in the

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future and on the practices that should be used under certain scenarios. They also stress some of the key issues that should be investigated in the future, such as changes in the importance of markets, changes in the relational behaviour of markets, the contribution of the elements driving the development of relationships and changes in the processes available to companies for the support of the relationships. Morgan and Hunt in their paper reflect on the determination of marketing strategy by using a cybernetic systems approach to scenario planning. They raise again a key question for debate: how do companies and organisations strategically co-evolve with their environments? In their paper, they attempt to address part of this important question by drawing upon advances in strategic choice theory and resource-advantage theory. They introduce a review of strategic choice research and develop arguments for this form of selectionadaptation founded upon socio-psychological theories of rationality, human behaviour and purposeful action. They argue that adaptation is a dynamic process which seeks to secure a company’s superior financial performance. A good analytical discussion on strategic choice strategic cognition and sensemaking is included, as well as a good overview of cycles of strategic adaptation (fit) and cybernetic systems. Finally, the last paper of this special issue is co-authored by Laing, Lewis, Foxall and Hogg, and evolves around an attempt to predict a diverse future through following some key directions and addressing specific issues related to marketing of services. These authors argue that the service sector in postindustrial economies is facing an amount of unprecedented change. They contend that such changes have the potential to challenge many of the assumptions central to conventional services marketing concepts, notably the nature of the service encounter and the relational nature of service purchasing. They then go on to examine the impact or such changes on a cross-section of service categories. While acknowledging that the derivation of generic sector wide trends from the analysis of discrete service categories runs the risk of oversimplification, they identify three core trends: the increasing importance of technological mediation, changing consumer and professional roles, and decreasing importance of relational factors in consumer decision making. These trends pose fundamental challenges to service providers and offer researchers a rich context in which to advance marketing theory. We hope that you will find the topics presented and discussed in this special issue as stimulating, thought-provoking and ‘‘mind-stretching’’ as we found them during the academic ‘‘think tank’’! We are sure that you will take the ‘‘mental challenge’’. Luiz Moutinho Fiona Davies Cleopatra Veloutsou

The research register for this journal is available at http://www.emeraldinsight.com/researchregisters

The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/0309-0566.htm

Exploring key neo-marketing directions through the use of an academic ‘‘think tank’’ A methodological framework

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Luiz Moutinho Department of Business and Management, University of Glasgow, Scotland

Fiona Davies Cardiff Business School, Cardiff University, Cardiff, Wales, and

Graeme Hutcheson Faculty of Education, University of Manchester, Manchester, UK Keywords Marketing, Forecasting, Methodology Abstract This paper is designed to set the scene in terms of introducing the methodological framework used in the academic ‘‘think tank’’ in marketing held at Lake of Menteith in Scotland in 1999. Some important academic insights and considerations are discussed at the outset with regard to the evaluation of future impacts on the multiple facets of the marketing discipline, although the amount and quality of dedicated academic research in this area has been limited. The new role of the marketing function and new customer market structures are debated, followed by a discussion of the intrinsic capabilities of scenario planning, as an environmental forecasting technique. Furthermore, we analyse the contribution of knowledge based systems to scenario planning and describe the design/development of an expert system at the Lake of Menteith gathering.

Introduction At this unique point in time, it is appropriate to step back and deliberate on the scope of the marketing field and the contributions it offers to society. Wilkie and Moore (1999) adopted several perspectives to do this, looking across time, across societies, and into the operations and structure of the aggregate marketing system itself, which emerges as a huge and complex human institution. Four fundamental issues serve to establish the identity of the field of marketing, distinguish it from other fields and disciplines and compel further research inquiry. These issues ask: (1) How do customers and consumers really behave? (2) How do markets function and evolve? (3) How do companies relate to their markets? (4) What are the contributions of marketing to organisational performance and societal welfare?

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Although the questions posed by these fundamental issues are durable, new answers will need to be sought to accommodate the following trends and disruptions that are shaping the direction of marketing: . the connected knowledge economy; . globalising, converging and consolidating industries; . fragmenting and frictionless markets; . empowered customers and consumers; and . adaptive organisations. These new directions challenge academic thinking in marketing to provide meaningful measures, inferences and calibration; understand functional interfaces; and rethink the role of theory (Day and Montgomery 1999). The new role of the marketing function Srivastava et al. (1999) developed a framework for understanding the integration of marketing with business processes and shareholder value. The framework redefines marketing phenomena as embedded in three core business processes that generate value for customers – product development management, supply chain management and customer relationship management – which in turn create shareholder value. Such a conceptualisation of marketing has the potential to introduce dramatic shifts in the scope, content and influence of marketing in the organisation. These authors highlighted the implications of an organisationally embedded view of marketing for the future of marketing theory and practice. A company must keep deepening its customer knowledge and putting it to work throughout the organisation. The key processes must be internally integrated and externally aligned with the corresponding processes of the company’s customers (Day, 2000). As marketing gains increasing prominence as an orientation that everyone in the organisation shares and as a process that all functions participate in deploying, a critical issue that arises is the role of the marketing function. Specifically, what role should the marketing function play and what value does the marketing function have, if any, in an organisation that has a strong market orientation? Moorman and Rust (1999) took the view that though a company’s market orientation is undeniably important, the marketing function should play a key role in managing several important connections between the customer and critical firm elements, including connecting the customer to: . the product; . service delivery; and . financial accountability. These authors collected data from managers across six business functions and two time periods with respect to marketing’s role, market orientation, the value

of the marketing function and perceived company performance. The results showed that the marketing function contributes to perceptions of firm financial performance, customer relationship performance and new product performance beyond that explained by a company’s market orientation. Marketing’s value, in turn, is found to be a function of the degree to which it develops knowledge and skills in connecting the customer to the product and to financial accountability. To service firms, the value of the marketing function also is related positively to marketing’s ability to connect the customer to service delivery. As we enter the twenty-first century, the marketing function remains concerned with serving customers and consumers effectively. Sheth et al. (2000) proposed that just as the marketing function gradually shifted from mass marketing to segmented marketing in the twentieth century, it will increasingly move towards customer-centric marketing in the next century. In the practice of customer-centric marketing, the marketing function seeks to fulfil the needs and wants of each individual customer. The antecedents of customer-centric marketing are the increasing pressure on companies to improve marketing productivity, increasing market diversity in household and business markets and technology applicability. On the basis of the shift towards customer-centric marketing these authors expect increased importance of marketing as a ‘‘supply management’’ function, customer outsourcing, cocreation marketing, fixed-cost marketing and customer-centric organisations. New customer-market structures and insights Critics have suggested that delighting the customer ‘‘raises the bar’’ of customer expectations, making it more difficult to satisfy the customer in the next purchase cycle and hurting the company in the long run. Although delighting the customer heightens repurchase expectations and makes satisfying the customer more difficult in the future and the delighting company is injured by raised customer expectations, the (non-delighting) competition is hurt worse through customer attrition to the delighting firm. If customers forget delighting incidents to some degree from occasion to occasion, the delighting company suffers if it is in a position to take customers from the competition. If taking customers from the competition is difficult, the delighting firm actually benefits from customer forgetting, because the same delighting experience can be repeated again with the same effect (Rust and Oliver, 2000). Parasuraman and Grewal (2000) proposed a conceptual framework portraying ‘‘markets’’ as consisting of ‘‘customers’’ and ‘‘consumers’’, specifying the distinction as well as linkages between the two, and outlining specific components of individual linkages between pairs of entities within markets. Buzzell (1999) analysed the nature, formation, evolution and functioning of markets. The focus of his discussion put an emphasis on the socio-cognitive dynamics in a product market, the emergence of technology, intensive markets and the modular architectures in the new marketing process.

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Jaworski et al. (2000) discussed two approaches to being market oriented – a market-driven approach and a driving-markets approach. Market driven refers to a business orientation that is based on understanding and reacting to the preferences and behaviour of players within a given market structure. Driving markets, on the other hand, implies influencing the structure of the market and/ or the behaviour(s) of market players in a direction that enhances the competitive position of the business. There are three generic ways of changing the structure of a market: (1) eliminating players in a market (deconstruction approach); (2) building a new or modified set of players in a market (construction approach); and (3) changing the functions performed by players (functional modification approach). Market behaviour can be modified directly or, alternatively, indirectly by changing the mind-set of market players (e.g. customers, competitors and other relevant stakeholders). The fundamental thesis is that product markets are neither imposed nor orchestrated by producers or consumers but evolve from producer-consumer interaction feedback effects (Rosa et al., 1999). Markets in which technology assumes a central role are becoming driving forces of the economy. John et al. (1999) labelled these ‘‘technology-intensive’’ (TI) markets. Modular product architectures are being adopted as the basis for new product designs in a growing number of markets. Sanchez (1999) explained how adoption of modular product architectures makes possible new kinds of processes for creating and realising products, as well as new approaches to identifying and managing organisational knowledge used in product creation and realisation. When managed strategically, modular product, process and knowledge architectures enable companies to create greater product variety, introduce technologically improved products more rapidly, bring new products to market more quickly and lower costs of product creation and realisation. The strategic use of modular architectures can affect the marketing process. Furthermore, modular architectures change the technologically determined possibilities for product creation and realisation in the marketing process, create new market dynamics and lead to new objectives and methods for the marketing process. Roberts (2000) examined emerging technologies and the markets that they create, reviewing ideas about how new rules might be developed for successful participation in them. The need to examine new markets is being driven by the convergence of information technology and telecommunications, increased channel turbulence caused by the Internet, the embodiment of information technology in new products, globalisation and the increasing concentration and

interdependence of industries. New rules to succeed in these markets depend on: . an understanding of the market; and . an ability to take that understanding and exploit it into profitable, customer-focused action.

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Roberts looked at market calibration, including the development of new stimuli, measures and models. He then took the results of that calibration to show how companies in the new millennium can focus marketing action not only on a well-targeted marketing mix that has historically been the focus of marketing in the 1990s, but by developing, maintaining and maximising their installed customer base. Ghosh and John (1999) extended transaction cost analysis into a governance value analysis (GVA) framework to address marketing strategy decisions, especially with regard to strategies grounded in co-operative relationships. Heterogeneous resources, positioning, the consequent attributes of exchange and governance form all interact to determine success in creating and claiming value. Marketing is poised for revolutionary changes in its organisational context, as well as in its relationships with customers. Driven by a dynamic and knowledge-rich environment, the hierarchical organisations of the twentieth century are disaggregating into a variety of network forms, including internal networks, vertical networks, intermarket networks and opportunity networks. The role of marketing in each network is changing in profound ways. Marketing increasingly will be responsible for creating and managing new marketing knowledge, education, real-time market information systems, intrafirm integration, conflict resolution, technology forecasting risk and investment analysis, transfer pricing of tangibles and intangibles and the co-ordination of the network’s economic and social activities. It will explore new frontiers in multilateral marketing, reshape markets through technology convergence and electronic commerce, organise consumer communities and aggregate consumer information and demand into saleable business assets. The most radical implication for marketing is the shift from being an agent of the seller to being an agent of the buyer, from being a marketer of goods and services to being a customer consultant and manager of his or her saleable consumption assets (Achrol and Kotler, 1999). In this article, Achrol and Kotler develop the theory of marketing networks. They assert that this new paradigm is necessary because marketing has moved beyond the old exchange and dyadic relationships world. Deshpande´ (1999) recommended an agenda for increasing marketing knowledge use based on a cross-disciplinary focus, a cross-cultural focus, a cross-functional focus and a customer-centric focus. Webster (2000) examined the historical evolution of the relationships among brands, consumers and resellers in a world increasingly dominated by very large retail organisations with substantial power within the marketing channel.

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It is widely believed that manufacturers’ brands are becoming less important as major retailers are becoming more powerful. This view is based on the mistaken assumption that brands are relationships with consumers, not resellers. Arguments about the decline of brands are often confused with arguments about changes in the brand management function. As major companies redefine their customer as the reseller, not the consumer, there are substantial implications for brand management and the role of the brand manager. Marketing strategy implementation will require increasingly careful co-ordination of marketing programmes with sales strategy to achieve the necessary co-ordination of reseller and consumer targeted communications to maximise the value of the brand to both the retailer and the end user. Service encounters are critical in all industries, including those that have not been traditionally defined as service industries. The increasing deployment of technology is altering the essence of service encounters formally anchored in a ‘‘low-tech, high-touch’’ paradigm. Bitner et al. (2000) examined the changing nature of service with an emphasis on how encounters can be improved through the effective use of technology. These authors explored the ability of technology to effectively: . customise service offerings; . recover from service failure; and . spontaneously delight customers. They examined the infusion of technology as an enabler of both employees and customers in efforts to achieve these three goals, although the infusion of technology can lead to negative outcomes and may not be embraced by all customers. The Lake of Menteith think tank These authors, then, give us several perspectives on the rapidly changing marketing function. Though these differ according to the relative emphasis they have placed on examining each of the trends listed earlier in this paper, they are in no way mutually exclusive – they are all parts of the big picture of the future of marketing. The idea for the Lake of Menteith think tank sprang from a belief in the value of taking a step back from our own, often highlyfocused, research to take a more holistic look at that big picture, pooling academics’ knowledge and ideas to examine the impacts of multiple trends in the marketplace. In order to provide a structured basis for discussions, the think tank was organised into three workshops. Their themes of marketing strategy, relationship marketing, and services marketing were those which had been identified from published research as key areas where the marketing function was changing and would continue to evolve. Keynote speakers (Shelby Hunt and Christian Gro¨nroos) were invited to present their ideas in the first two areas. Furthermore, it was decided to use the scenario planning approach to

stimulate discussion, with scenarios being structured so as to encourage consideration of market trends in combination. We now describe the rationale for, and benefits of, this approach, followed by a discussion of its implementation at Lake of Menteith, including the use of a knowledge-based system for recording the outcomes of participants’ discussions.

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Scenario planning Scenario planning is an approach to the development of strategy which differs significantly from more established approaches. Most organisations have traditionally taken a rational approach to strategy, seeking to make accurate predictions of the future and thus develop an optimal strategy (van der Heijden, 1996). However, turbulent market environments or even one unforeseen event can throw such predictions totally off course, making the strategy unworkable or unprofitable. The contrasting ‘‘evolutionary approach’’ advocated by Mintzberg (van der Heijden, 1996) suggests that strategy only evolves as a response to events – reactively rather than proactively – and thus questions the whole idea of forward strategic planning. Scenario planning, however, recognises that we can never predict the future with total certainty, but we can construct several possible ‘‘alternative futures’’ (Simpson, 1992) of the external environment, and work out the effect these would have on our business and how we could best respond. Although scenario planning has long been used by the military profession, its first major use in the business world is credited to Royal Dutch/Shell in London in the 1970s. As the company’s scenario planners had visualised (among other scenarios) the possibility of dramatic change in control of the oil industry, Shell was able to react quickly to the formation of OPEC and gain industry leadership while other companies were still considering their strategies (Tucker, 1999). Nowadays, in a rapidly changing market environment, many major companies such as British Airways, ICI, Levi-Strauss, 3M and Hewlett-Packard are employing scenario planning to aid strategy development (Business Europe, 1998; Legare, 1998).

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The scenario planning process Scenario planning has been defined as ‘‘creating stories of equally plausible futures and planning as though any one could move forward’’ (Tucker, 1999), or as creating tools for ‘‘ordering one’s perceptions about alternative future environments in which one’s decisions might be played out’’ (Schwarz, 1996, quoted in Desmarais, 2000). Thus, the first step is to involve the company’s decision makers, and to find out their opinions on the most important environmental trends, the greatest environmental uncertainties, and the decisions which will have greatest impact on the organisation (Tucker, 1999). Having gathered further information on these areas, alternative possible scenarios can be constructed. Schwartz (1996) advises construction of three scenarios:

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(1) worst nightmare; (2) the future will be radically different but better; (3) the ‘‘status quo’’ – the future will be much the same but a little better. While Wright (2000) advocates four: (1) the future will be much the same, but better; (2) the future will be significantly better; (3) the future will be much the same, but worse; (4) the future will be fundamentally different. Simpson (1992) cautions against developing too many scenarios, advising four as a reasonable number, with five as an absolute maximum. On the other hand, he suggests that the ability to generate only two scenarios would suggest an organisation suffering from myopia. He also warns of the need to ensure that scenarios are distinct, plausible and internally consistent, while Tucker (1999) believes that a good scenario is ‘‘possible and surprising’’ – thinking through the strategic response to a scenario should challenge managers, not allow them to opt to continue in well-trodden pathways. Bloom and Menefee (1994) suggest the criteria of credibility, completeness, realism, probability and uniqueness as the five crucial dimensions on which to evaluate scenarios. Once scenarios have been put together, companies may take two approaches to strategy formulation (Thomas, 1994), both of which would normally take place in the context of a workshop or brainstorming session. One is to test out the company’s current strategies to see whether, and how, they would work in the alternative futures. This may be very useful in determining the robustness of current strategy. The more ambitious and challenging path is to start from the future as envisaged in the scenario, and explore the strategies necessary for survival, profitability, gaining competitive advantage, etc. in that environment. Key prerequisites for such an approach are the suspension of assumptions which limit the bounds of participants’ thinking, all participants being regarded as equal, whether they are top managers or several rungs below on the hierarchy, and the presence of a facilitator (Thomas, 1994; Simpson, 1992). Tucker (1999) recommends if possible choosing a diverse group of participants, including some external to the industry. The brainstorming process should not be hurried (Simpson, 1992); the actual process of discussion and debate of different viewpoints, of considering the ‘‘what if’’ questions, is crucial to successful scenario planning (van der Heijden, 1996). The benefits of scenario planning Today’s business environment is changing more rapidly than at any time in the past. Unforeseen events may create radical changes in the political or economic environment. The pace of technological change creates opportunities for companies ready to exploit new possibilities, and new trends such as the rise of the prosumer are changing the interface between business and society. Thus

organisations need to be able to cope with uncertainty, to have the ability to seize their opportunities and minimise the consequences of negative happenings (Bloom and Menefee, 1994). Scenario planning meets this need. Moreover, scenario planning stimulates the organisational learning process (Senge, 1994). It encourages managers to stretch their thinking, to question the assumptions held by themselves and others about the future, and to challenge traditional ways of thinking, acting and planning (Schoemaker, 1993; Thomas, 1994; Senge, 1994). Senge (1990; in Thomas, 1994) identifies five disciplines that encourage organisational learning: (1) systems thinking; (2) personal mastery; (3) mental models; (4) building shared visions; and (5) team learning. Scenario planning fosters all these disciplines, helping managers to extend their focus, work together in planning the company’s future, and increase their confidence and capability in coping with uncertainty, thus increasing their adaptability and that of their organisation. In fact, Wright (2000) goes so far as to argue that ‘‘the scenario approach to strategy represents the quality approach to strategy, taking quality into the new field of strategic development.’’ The contribution of knowledge-based systems to scenario planning There is a large and well-known literature on how knowledge-based systems (or expert systems) have developed and the types of problems they are most suited to. This literature includes details on their construction and also how they have been applied, including some of the more high profile successes and failures (see, for example, Feigenbaum et al., 1988; Finlay and Dix, 1996; Giarratano and Riley, 1998; Hayes-Roth et al., 1983; Waterman, 1986). These will not, therefore, be described in any detail here. Although a number of expert systems were successfully developed in the 1970s and 1980s for a whole range of knowledge domains (e.g. chemistry, electronics, medicine, engineering, geology and management: see Giarratano and Riley (1998), for a discussion of these), it is widely believed that the technology was ‘‘oversold’’ by artificial intelligence (AI) companies, which goes some way to explaining the relative unpopularity of the approach today. There has, however, been somewhat of a resurgence of interest in AI techniques, prompted no doubt by the rapidly growing information environment, brought about by easy access to computing and the World Wide Web. The use of AI looks set to increase in the future as: . . . it is hard to believe that AI does not contain at least part of the solution to the problems posed by the plethora of data, including text and images, that needs to be retrieved, analysed, classified, routed, indexed, summarised, interpreted and so forth. In a sense the time has come

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for symbolic computation, and knowledge-based systems generally, to enter the mainstream (Jackson, 1999; pp. 31-2).

There are a number of benefits associated with the use of expert systems; benefits that can lead to competitive advantage: . Accessibility. Human expertise is not always available when it is needed or knowledge could reside in diverse sources and not be easily integrated. Expert systems facilitate access by organisational users to expert knowledge at all times. . Cost effectiveness. Knowledge held by experts can be disseminated to a large number of personnel and those who are less skilled, thus reducing the time and cost of accessing information. In addition, knowledge can be formalised, tested and validated, potentially improving the quality and outcomes of decisions and reducing the cost of error. . Knowledge accumulation. Organisational knowledge can be accumulated in a consistent and systematic way, assisting the development of expertise by others and preserving existing expert knowledge and ‘‘corporate memory’’. . Reliability and consistency. Expert systems can be regarded as more reliable in their reasoning than humans because they are principally deterministic, use a structured framework to address problems and are unbiased. . Training and creativity. The process of constructing an expert system can provide valuable insights into the knowledge domain and also provide valuable training opportunities (e.g. the statistics expert system constructed by Grabowski and Harkness (1996)). Expert systems may utilise a number of different techniques, from deductive logic, heuristics and probabilistic rules, to inference nets, production rules and fuzzy logic. This paper deals specifically with one technique – the use of production rules to represent expert knowledge in a way that allows them to be used as an expert system (i.e. a system that can usefully disseminate expert knowledge to non-experts). At its most basic level, a production rule is a fixed ‘‘if-then’’ statement that can be represented as: If < condition > then < action > Any number of conditions can be combined (for example, using the conditional elements ‘‘and’’, ‘‘or’’ and ‘‘not’’) making the action more specific (that is, a particular action will only happen when a combination of conditions occur). For example, authorising a loan may be based on a single piece of information (e.g. if salary is greater than $20,000 per annum, then authorise loan up to $15,000) or can be based on more detailed information involving a number of rules, as in the following example:

If salary is greater than 20k and job is secure and debts are less than 3k

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and all expenses are less than 7k then offer loan up to 15k What becomes obvious from the use of production rules is the huge number of rules required if every scenario is to be considered. For example, in a realistic expert system advising credit controllers, there will be many variables of interest (current salary, debts, past employment history, house ownership, criminal history, age, relationship with bank, etc.) with a number of levels of each variable. Providing a rule for each combination would be practically impossible due to the sheer number of variable combinations. The sheer number of rules required makes the problem intractable (due to the ‘‘combinatorial explosion’’, described in Hopcroft and Ullman (1979)). However, useful knowledge-based systems can be constructed using a relatively small subset of rules generated from scenarios. A few specific combinations of conditions provide the inputs for the scenarios with the outcomes provided by expert suggestions. Some restriction needs to be placed on the number of conditions, as too few will lead to an action being activated too often (e.g. if only current salary was used, the loan advice would be identical for everyone with the same salary) while too many conditions will require a very large number of rules to deal with all the possibilities (the rules will be very specific). To address this problem, either only those conditions that are essential are included, or only a restricted number of conditions are considered at a time. Scenario planning at the Lake of Menteith workshops The focus of scenario planning at this event was somewhat wider than it would be in the organisational situation, as the object was to consider the market environment impacting on companies or industry in general. However, the organisers followed the recommended approach by, several weeks prior to the event, asking respected academics and the invited workshop participants, in each of the three areas being considered, their opinions on the crucial environmental factors likely to impact on the area within the next five years. The replies were supplemented by searching relevant literature to ensure that as wide as possible a range of relevant aspects was included. This resulted in a total of 30 factors for strategic marketing, 16 for relationship marketing, and 15 for services marketing. The factors were then examined and three options selected for the way in which each factor could be predicted to change, following the basic model of increase/remain about the same/decrease. Descriptions of each set of factors, and the ways in which they could be predicted to change, are given in the paper focusing on that particular workshop.

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Ten scenarios were then drawn up for each area, giving predictions for change for five factors, and ensuring that these scenarios seemed intuitively plausible (see the Appendix). This is far more than the numbers recommended in the single company situation – however, this is justified by the scope of the exercise being wider, and the fact that, while having some knowledge of each area, the organisers would not claim to be experts – thus some scenarios might be rejected by the group as implausible or inconsistent. Indeed, groups tended not to work through the scenarios in the order given, but were selective in their choices – the rationale for selection will be discussed in the individual group papers. In addition, groups were given a supply of blank scenario forms on which they could specify their own preferred scenarios – ones which they thought particularly relevant, interesting or challenging. Every group made use of at least one of these. Prior to discussion of the scenarios, the groups were given a short demonstration of the expert system development tool, XpertRule (Attar Software, 1999), which was to be used to construct a simple knowledge-based system from the outcome of their discussions. We now discuss the details of this software, and the knowledge-based system prototypes which were built. The use of a knowledge-based system at the Lake of Menteith The knowledge-based system used at the Lake of Menteith think-tank was designed specifically to record the reasoning of experts when confronted with a number of scenarios. This type of information is very difficult to record in any structured way using logic rules or heuristics, but it can be recorded using simple production rules. The knowledge-based system did not attempt to define all of the outcomes available, or even define all of the input conditions, but employed a restricted set of five conditions for each scenario. The choice of five conditions was essentially an arbitrary decision and was made to try to obtain a suitably general knowledge-based system within the time constraints imposed by the workshop. The system was used to represent expert knowledge of a number of individual scenarios in a relatively unstructured way, the important criterion being to enable the information elicited from the experts to be retrieved easily by non-experts. The use of production rules provided a simple method to achieve this. In XpertRule, knowledge of a specific problem may be structured either in the form of a decision tree, or in the form of ‘‘pattern rules’’. However, the decision tree representation was inappropriate for this scenario building, due to the large number of input factors – although only five input conditions were specified for each scenario, the fact that these were chosen from a set of 15, 16 or 30 meant that the number of possible branches on the decision tree exceeded the limits of the software. Thus ‘‘pattern rules’’ were used – for instance, the first scenario for services marketing asked the group to predict the effect on services marketing when:

Personalisation increases Rationing of services stays the same The importance of marketspaces increases

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Bundling is more widely used Market transparency is as important as it is at present The group predicted increased prosumption, responsiveness to demand for flexibility in all elements of the marketing mix, and de-professionalisation, giving their reasons as a decline in professional status and deference, and the emergence of new channels which would change the marketplace. Thus the knowledge base was programmed with the rule: If personalisation increases And rationing of services stays the same And the importance of marketspaces increases And bundling is more widely used And market transparency is as important Then outcome is prosumption=de-professionalisation where ‘‘prosumption/de-professionalisation’’ is the name given in the system to the appropriate outcome. When a rule results in this particular outcome, the system is programmed to output the prediction: . There will be increased prosumption, and responsiveness to demand for flexibility in all elements of the marketing mix, as the emergence of new channels changes the marketplace. There will also be a trend toward deprofessionalisation – a decline in professional status and in deference toward professionals. As only five inputs are mentioned in the pattern rule, values of all other factors are immaterial in deciding whether that rule is activated. Thus the system, when running and being used to make predictions, asks first for the input factors mentioned in the first scenario programmed (e.g. for ‘‘personalisation’’ the user would select from the menu of increase, stay the same, decrease) until either all inputs match and the rule is activated, or an input does not match. Then any factors not yet input, relevant to the second scenario, are requested, and so on until all rules have been checked. Prediction(s) are then output corresponding to all rules whose conditions were satisfied. This is a very simple use of XpertRule, as every pattern rule leads directly to a final outcome, i.e. a prediction. In a more sophisticated model, the ‘‘then’’ clause of a rule could do many things, such as specifying the value of a

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variable, making a calculation, or specifying further conditions to be satisfied. Rules might also include an ‘‘else’’ condition, specifying what is to happen if the conditions in the rule are not satisfied. Many rules might, therefore, need to be considered before any final outcome was reached. Owing to the small number of scenarios considered at the workshop, a random selection of inputs to each knowledge-based system is very likely not to produce any predictions at all (i.e. so far the system only ‘‘knows’’ about a very small part of the domain of interest). For further development, adhering only to the five-factor scenario process would prove very time-consuming. It would be necessary to prioritise, by discussing the changes that were most likely to occur, and to look at all the factors to see if there were any scenarios where a change in one or two particular factors would determine the future, whatever happened to any other factors. However, the three small-scale prototypes built at Lake of Menteith give an insight into the potential of knowledge-based systems for storing expert marketing knowledge in an easily accessible way. Conclusion This introductory paper has explored the background to the Lake of Menteith think tank, and the methodology used to stimulate discussion and record findings. The usefulness of this methodology will not only depend on the results which can potentially be gained from it, but also on the attitudes and opinions of workshop participants: for instance, to what extent they feel that pre-written scenarios either provide a necessary focus or constrain their thinking; their ability to reach a group consensus; and their confidence that all necessary aspects are being considered in coming to that consensus. With this in mind, the next three papers record the experiences of the participants in each workshop, including discussion of the workings of the group as well as the results of their deliberations on the specific scenarios. References Achrol, R.S. and Kotler, P. (1999), ‘‘Marketing in the network economy’’, Journal of Marketing, Vol. 63, pp. 146-63. Bitner, M.J., Brown, S.W. and Meuter, M.L. (2000), ‘‘Technology infusion in service encounters’’, Journal of the Academy of Marketing Science, Vol. 28 No. 1, Winter, pp. 138-49. Bloom, M.J. and Menefee, M.K. (1994), ‘‘Scenario planning and contingency planning’’, Public Productivity and Management Review, Vol. 17 No. 3, Spring, pp. 223-9. Business Europe (1998), ‘‘Scenario planning’’, Business Europe, Vol. 38 No. 5, 11 March, pp. 9-10. Buzzell, R.D. (1999), ‘‘Market functions and market evolution’’, Journal of Marketing, Vol. 63, pp. 61-3. Day, G. (2000), ‘‘Managing market relationships’’, Journal of the Academy of Marketing Science, Vol. 28 No. 1, Winter, pp. 24-30. Day, G. and Montgomery, D.B. (1999), ‘‘Charting new directions for marketing’’, Journal of Marketing, Vol. 63, pp. 3-13. Deshpande, R. (1999), ‘‘‘Foreseeing’ marketing’’, Journal of Marketing, Vol. 63, pp. 164-7.

Desmarais, E. (2000), ‘‘The art of scenario planning: a review of two books’’, The Journal of Business and Economic Studies, Vol. 6 No. 1, Spring, pp. 81-4. Feigenbaum, E.A., McCorduck, P. and Nii, H.P. (1988), The Rise of the Expert Company, Times Books, New York, NY. Finlay, J. and Dix, A. (1996), An Introduction to Artificial Intelligence, UCL Press, London. Ghosh, M. and John, G. (1999), ‘‘Governance value analysis and marketing strategy’’, Journal of Marketing, Vol. 63, pp. 131-45. Giarratano, J. and Riley, G. (1998), Expert Systems: Principles and Programming, 3rd ed., PWS Publishing Company, Boston, MA. Grabowski, B.L. and Harkness, W.L. (1996), ‘‘Enhancing statistics education with expert systems: more than just an advisory system’’, Journal of Statistics Education, Vol. 4 No. 3. Hayes-Roth, F., Waterman, D.A. and Lenat, D. (Eds) (1983), Building Expert Systems, AddisonWesley, Reading, MA. Hopcroft, J.E. and Ullman, J.D. (1979), Introduction to Automata Theory, Languages and Computation, Addison-Wesley, Reading, MA. Jackson, P. (1999), Introduction to Expert Systems, 3rd ed., Addison-Wesley, Reading, MA Jaworski, B., Kohli, A.K and Sahay, A. (2000), ‘‘Market-driven versus driving markets’’, Journal of the Academy of Marketing Science, Vol. 28 No. 1, Winter, pp. 45-54. John, G., Weiss, A.M. and Dutta, S. (1999), ‘‘Marketing in technology-intensive markets: toward a conceptual framework’’, Journal of Marketing, Vol. 63, pp. 78-91. Legare, T.L. (1998), ‘‘Strategic dialogue’’, Marketing Research, Vol. 10 No. 1, Spring, pp. 14-19. Moorman, C. and Rust, R.T. (1999), ‘‘The role of marketing’’, Journal of Marketing, Vol. 63, pp. 180-97. Parasuraman, A. and Grewal, D. (2000), ‘‘Serving customers and consumers effectively in the twenty-first century: a conceptual framework and overview’’, Journal of the Academy of Marketing Science, Vol. 28 No. 1, Winter, pp. 9-16. Roberts. J.H. (2000), ‘‘Developing new rules for new markets’’, Journal of the Academy of Marketing Science, Vol. 28 No. 1, Winter, pp. 31-44. Rosa, J.A., Porac, J.F., Runser-Spanjol, J. and Saxon, M.S. (1999), ‘‘Sociocognitive dynamics in a product market’’, Journal of Marketing, Vol. 63, pp. 64-77. Rust, R.T. and Oliver, R.L. (2000), ‘‘Should we delight the customer?’’, Journal of the Academy of Marketing Science, Vol. 28 No. 1, Winter, pp. 86-94. Sanchez, R. (1999), ‘‘Modular architectures in the marketing process’’, Journal of Marketing, Vol. 63, pp. 92-111. Schoemaker, P.J.H. (1993), ‘‘Multiple scenario development: its conceptual and behavioural foundation’’, Strategic Management Journal, Vol. 14 No. 3, March, pp. 193-213. Schwartz, P. (1996), The Art of the Long View, Doubleday, New York, NY. Senge, P.M. (1994), ‘‘Learning to alter mental models’’, Executive Excellence, Vol. 11 No. 3, March, pp. 16-19. Sheth, J.N., Sisodia, R.S. and Sharma, A. (2000), ‘‘The antecedents and consequences of customercentric marketing’’, Journal of the Academy of Marketing Science, Vol. 28 No. 1, Winter, pp. 55-66. Simpson, D.G. (1992), ‘‘Key lessons for adopting scenario planning in diversified companies’’, Planning Review, Vol. 20 No. 3, May/June, pp. 10-22. Srivastava, R., Shervani, T.A. and Fahey, L. (1999), ‘‘Marketing, business processes and shareholder value: an organisationally embedded view of marketing activities and the discipline of marketing’’, Journal of Marketing, Vol. 63, pp. 168-79.

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Thomas, C.W. (1994), ‘‘Learning from imagining the years ahead’’, Planning Review, Vol. 22 No. 3, May/June, pp. 6-11. Tucker, K. (1999), ‘‘Scenario planning’’, Association Management, Vol. 51 No. 4, April, pp. 70-5. van der Heijden, K. (1996), Scenarios: The Art of Strategic Conversation, John Wiley, Chichester. Waterman, D.A. (1986), A Guide to Expert Systems, Addison-Wesley, Reading, MA. Webster, J.R. and Frederick, E. (2000), ‘‘Understanding the relationships among brands, consumers and resellers’’, Journal of the Academy of Marketing Science, Vol. 28 No. 1, Winter, pp. 17-23. Wilkie, W.L. and Moore, E.S. (1999), ‘‘Marketing’s contributions to society’’, Journal of Marketing, Vol. 63, pp. 198-218. Wright, A.D. (2000), ‘‘Scenario planning: a continuous improvement approach to strategy’’, Total Quality Management, Vol. 11 Nos 4-6, July, pp. 433-8. Appendix. Example scenario Please predict the effect on relationship marketing when the following conditions apply: .

The degree of customisation increases.

.

Prosumption increases.

.

Producing synergy by combining management functions becomes more common.

.

Parity becomes more commonplace.

.

The importance of company networks increases.

Predictions 1 2 Reasons 1 2

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Relationship marketing What if . . . ?

Relationship marketing: what if . . . ?

Cleopatra Veloutsou Department of Business and Management, University of Glasgow, Glasgow, Scotland

433

Michael Saren Department of Marketing, University of Strathclyde, Glasgow, Scotland, and

Nikolaos Tzokas University of East Anglia, Norwich, UK Keywords Relationship marketing, Business strategy Abstract Academics and market professionals appreciate the importance of relationship marketing for contemporary firms. Yet, relationship marketing strategies and tactics are context specific. Based on opinions expressed in an academic ‘‘think tank’’ held at Lake Menteith in Scotland and the use of an expert system, this paper reports how business relationships may develop in the future and the practices that should be used under certain scenarios. It concludes with recommendations of areas where further research activity in relationship marketing is required.

Introduction Marketing, as a body of knowledge, has always been concerned with understanding relationships between suppliers and their customers. However, it is only recently that relationship marketing (RM) has received increased attention from academics, with a number of conceptual and empirical works extending our understanding of the concept (Dwyer et al., 1987; Anderson and Narus, 1990; Webster, 1992; Morgan and Hunt, 1994). Soon after its early conception in Europe within the industrial marketing and purchasing (IMP) group (Hakansson and Ostberg, 1975; Arndt, 1979; Ford 1980), RM was introduced to services (Berry, 1983) and more recently to consumer markets (Christy et al., 1996). Despite considerable early criticism which attempted to reduce RM as another ‘‘management fad’’ or the ‘‘emperor’s new clothes’’ it is currently acknowledged that RM represents a paradigm shift in marketing. According to Gruen (1997), while: . . . the introduction of the marketing concept focused business on seeing customers as the centre of the universe and the organisation revolving around them . . . RM reorients the The relationship marketing group members at the ‘‘think tank’’ included, in alphabetical order: Professor Francis Buttle (University of Manchester), Professor John Fernie (Heriot Watt University), Professor Christian Gro¨nroos (Swedish School of Economics & Business Administration), Professor Michael Saren (University of Strathclyde), Professor. Antonis Simintiras (University of Wales, Swansea), Professor Peter Turnbull (University of Birmingham), Professor Nikolaos Tzokas (University of East Anglia) and Dr Cleopatra Veloutsou (University of Glasgow). All group members contributed equally to the scenario planning activities reported in this paper and the authors are grateful to these individuals for their insights and viewpoints.

European Journal of Marketing, Vol. 36 No. 4, 2002, pp. 433-449. # MCB UP Limited, 0309-0566 DOI 10.1108/03090560210417255

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positions of suppliers and customers through a business strategy of bringing them together in co-operative, trusting and mutually beneficial relationships.

The same author suggested that: . . . the domain of RM seeks to provide the means and directions for organisations to create and manage an environment dedicated to mutual value creation.

Researchers have attributed this paradigm shift of marketing to a number of changes in the contemporary business environment. RM, therefore, represents a strategic response by firms to gaining competitive advantage. This response is based on the thesis that an appreciation of the interdependence among market players and mutual effort based on trust and commitment would allow firms to remain competitive. According to Rindova and Fombrun (1999), the construction of competitive advantage is contingent on the micro-efforts of the firm, the macro conditions of the environment and the nature of the firm-constituent interactions. They postulated that competitive advantage is built on relationships and that: . . . relationships with constituents . . . are not just exchanges but sustained social interactions in which past impressions affect future behaviors (p. 706).

Such a strategic approach of RM is evident also in the writing of Hunt and Lambe (2000). These authors view the formation of market relationships as a strategic response to industry conditions, as a way to combine and use resources outside the firm and as a direct competence of the firm. In doing so they engage RM with the strategic discourse of the industry-based, resourcebased and competence-based theories of the firm. The aim of this paper is to contribute to this discourse through the use of an expert system. It does so by examining how changes in the parameters of the environment that gave rise to RM might affect its future development and practice. To set the stage for a meaningful discourse, the next section of the paper traces the development of RM and outlines the factors which have been put forward for its emergence. This is followed by a consideration of the scope and processes of RM. These are key areas, which will be primarily affected by any changes in the environment, simultaneously acknowledging their contribution to the formation of future environment(s) since they delineate the ways RM is perceived and practised. Discussion of the various scenarios, as they emerged from the use of the expert system, is followed by recommendations of areas where further research activity is required. From transactional to relationship marketing In their attempt to trace the evolution of RM, Sheth and Parvatiyar (1995) considered environmental conditions of the pre-industrial and industrial era. They attributed the emergence of RM as a reaction to the loss of direct interaction and emotional bonding between firms and their customers caused by mass production and the apparent separation of production and consumption activities of the pre-industrial era. According to Wikstrom (1996),

a transactional approach to marketing restricted the role of the end user to acceptance or rejection of the offer made and precluded firms from understanding the reasons underlying their decision as well as the process for the formation of their preferences. Similarly, different authors have provided their own account of the emergence of RM. They address the economics of customer retention (Rosenberg and Czepiel, 1984; Reicheld and Sasser, 1990) and the ineffectiveness of the mass media to assist the decision-making process of the customers and create useful dialogue (Copulsky and Wolf 1990; Shani and Chalasani, 1992). The latter, coupled with higher expectations from the customer base, who insist on more customised products and services, and a scepticism as regards the honesty and trustworthiness of even the most well known brands, changed the rules of the competitive game. Product quality, good service and a competitive price were suddenly reduced from being the ‘‘enablers’’ of a marketing transaction to simply ‘‘qualifiers’’ of a transaction. Whereas the reasons above led to RM by means of threatening and reducing marketing’s effectiveness in the marketplace, others unveiled opportunities for the firms. For example, changes in information and manufacturing technology allowed the emergence of technically and financially viable routes for one-toone interaction and mass customisation (Berry, 1995; Pine et al., 1995). Despite the many reasons that have been provided for the emergence of RM there is little discussion about emerging changes in the market environment and their potential direct effect on the practice of RM. For example, the apparent appeal of the as yet highly unregulated Internet may undermine the willingness of customers to enter into relationships with any firm owing to the proliferation of quick offers that try to cultivate an opportunistic character among customers. As firms try to master the complexity of the Internet and adjust their own processes, inevitable mistakes could undermine the trust and commitment of their customers. Furthermore, closed yet powerful networks or systems of firms may drive competition out of their respective industries and this may reduce the choice and power enjoyed by the final customer. What if . . . ? Scope of RM The scope of RM is at the core of its philosophy and outlines the way researchers view the relationships that firms develop with external and internal constituencies. The scope of RM has been addressed by a number of authors including, among others, Christopher et al. (1991), Doyle (1995), Kotler (1992), Morgan and Hunt (1994) and Webster (1992). According to Christopher et al. (1991), this scope includes the development and management of relationships with six markets, namely: internal, customer, referral, supplier, influencer and employee recruitment markets. A recent revision of the above six market models has placed customer markets at the core of RM (see Figure 1). The key tenet of this model is that ‘‘marketing’s new remit will revolve around maximising customer value through the boundary spanning roles of customer advocate, internal integrator, strategic director and, within network

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Figure 1. The six markets model

organisations, partnership broker’’ (Peck et al., 1999). The latter role of RM is further qualified by Gummesson’s (1987) dictum that ‘‘everyone in the firm is a part-time marketer’’. Processes of RM Managerial processes represent the actionable content of theories. We suggest that if theories denote perceived realities, managerial processes provide the means for constructing desired realities. Within RM it has been noted that the various conceptual definitions of the field lack an actionable content (Blois, 1996). Although the latter is valid criticism, careful examination of developments in RM suggests that significant progress has been made. This progress can be traced to attempts to define the nature of the ‘‘marketing relationships’’ as well as to suggestions made for operational frameworks that can lead to the creation of successful relationships. As regards the nature of the marketing relationship, considerable research effort has been directed towards the identification of the ingredients of a successful relationship. The success or not of the relationship is usually approached from a behavioural intention perspective. Such behavioural intentions include the: .

.

opportunistic behaviour (Williamson, 1975; Berry and Parasuraman, 1991); citizenship or membership behaviour (Morgan and Hunt, 1994; Sheth and Parvatiyar, 1995; Gruen et al., 2000);

.

.

propensity to leave the relationship (Brown and Peterson, 1993; Peterson, 1995); and patronage of the organisation and its products and services.

All these behavioural intentions have been examined within RM with the aim of increasing customer retention, which is a key concept in RM (Reicheld and Sasser, 1990; Garbarino and Johnson, 1999). It is now generally agreed that the commitment-trust framework developed by Morgan and Hunt (1994) provides the foundations of a marketing relationship that can lead to customer retention. An operational framework to assist firms in their RM efforts has been put forward by Payne (1995). He has developed a detailed planning template called relationship management chain (see Figure 2) to operationalise the six market model of RM. The focus of this template is customer value. It delineates the various managerial processes that need to be undertaken by the firm to define the value proposition, identify appropriate customer value segments, design value delivery systems and evaluate its value performance. These processes are based on the fundamental notion of customer value. Indeed, customer value is a cornerstone concept in the RM, suggesting that unless value is created and delivered to customers, the firm has no legitimate reason to exist nor can it accomplish its corporate

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Figure 2. The relationship management chain

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objectives (see for example, Alderson, 1957; Anderson, 1982; Drucker, 1973; Woodruff, 1997). A unique aspect of RM lies in the fact that it acknowledges the significant role of the customer in the value creation process. This has appeared in the literature as value co-production or prosumption (Rindova and Fombrun, 1999; Wikstrom, 1996). However, Tzokas and Saren (1997) draw attention to the fact that: . . . the current invitation to customers for joint value creation is limited to the characteristics of the product/service and constitutes a myopic view of the customer’s productive means and capabilities. Customers are invited to join the value chain of the firm productively, but the means offered to them are supplier specific (p. 111).

Unfortunately, although considerable attention has been directed towards the concept of value, it is mostly focused on how customers or suppliers perceive value (Wilson and Jantrania, 1994; Ravald and Gro¨nross, 1996; Woodruf, 1997; Anderson and Narus, 1998) rather than on the unique means that customers can use in order to produce value within a relationship (see Walter et al., 2001). In addition, value perceptions and customers’ value creation mechanisms have not been examined within specific industrial or consumer contexts. Environmental factors that may condition these perceptions and affect the effectiveness and efficiency of customers’ value creation mechanisms have not been scrutinised at all. What if . . . consumers demand even more customisation of products and services? From an operational perspective RM is using at present a number of techniques. They range from loyalty schemes (Gilbert, 1996; Macintosh and Lockshin, 1997; Sharp and Sharp, 1997) to data mining and information technologies (Petrison and Wang, 1993), relationship portfolio analysis (Bensaou, 1999), the lifetime value of the customer (Reichheld, 1993) and RM software (Hammond, 1999). With the recent development of the customer relationship management field these techniques assist the implementation process of the RM principles. As such they help to directly address Fournier et al.’s (1998) criticism that ‘‘RM is powerful in theory but troubled in practice’’. However, the success of most of these techniques depends on the collaboration of the final customer. Therefore, to truly address the above criticism we need to understand how change in the marketplace could affect the willingness of customers to participate and willingly provide information. What if . . . customer cynicism and mistrust towards suppliers’ mediated relationships rises? Whereas the extended scope of RM may help expand the role of the marketing approach within contemporary firms, Gruen (1997) reminds us of a more radical view, which suggests that marketing as a department or function is becoming obsolete. This is in agreement with Gro¨nroos’ (1994) statement where he maintains that: . . . the psychological effect on the rest of the organisation of a separate marketing department is, in the long-run, often devastating to the development of a customer orientation or a market orientation.

Based on the above two issues arise for the future of RM. First, the successful dissemination of the marketing concept within the whole of the organisation may bring the end of the marketing function as we understand it currently. Second, the extended scope of RM may impose requests for the marketing function, which it cannot fulfil because either it lacks the authority to do so (e.g. recruitment, which is traditionally based in the HRM function) or it does not have the necessary theoretical background or competence to deal with specific issues. In either case the extended scope of the relationship-marketing concept and its successful or not application within organisations may result in the ‘‘death’’ of the marketing function. The question that remains to be answered is whether this is a plausible future situation. Research objectives Every relationship is developed in a certain context, which determines its main characteristics, depth and importance. In different contexts, distinct types of relationships will be recognised as ‘‘successful’’. The existing principles of RM and relationship management are based on the current environment and context. However, there is no guarantee that these conditions will remain the same over time. Different future conditions will determine the relationship strategy. The importance and demands of the various internal and external markets may alter, while new operations and delivery processes may become available. Several factors can affect the developments in RM. Since the real future can not be predicted accurately, the best approach is to detect alternative possible scenarios, in an attempt to determine the future reality. A good approach when attempting this is to recognise high uncertainty and high impact factors and determine their immediacy within potential changes. In a business situation, detailed alternative strategies could be developed mostly for scenarios based on high impact and high immediacy factors, while changes in other factors should be monitored and analysed. The aim of this paper is to provide an insight on some of the important ‘‘what if’’ questions. The impact of changes in factors relevant to the main areas of interest for RM is investigated. In particular, the emphasis is on transformations of the markets that the company interacts with, their requirements and the operation and delivery processes available to the firm for the support of the RM programs. Thus, predictions for the development of the RM practices are provided. What is reported in this paper is a step towards the development of an expert system that could suggest to academics and practitioners appropriate strategies to future realities. Methodology – towards the identification of alternative futures The whole ‘‘think tank’’ exercise was based on the application of the scenario planning technique. The rationale behind its utilisation was the need to create stories of equally plausible futures and to enable the ordering of the participants’ perceptions about alternative future environments. Scenario

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planning encourages participants to stretch their thinking, to question the assumptions held by themselves and others about the future and to challenge traditional ways of thinking and planning. The experts attempted to forecast the developments of RM under various scenarios. Specific combinations of conditions provided the inputs for the scenarios with the outcomes provided by expert suggestions. Two different types of scenario-building approaches were used: ‘‘prescribed’’ (a priori by domain expert designers) scenarios and ‘‘self-designed’’ (by the group of experts) scenarios. The scenarios were built on the basis of ‘‘forced’’ combinations of clearly defined and explained factors related to the main area of analytical thinking. They were based on predictions on the advancement of factors linked together, to provide meaningful frameworks. In total, 16 factors were identified as very influential in shaping the trends of RM. The first seven factors are relevant to changes in the nature of the firm’s relationships with the various internal and external markets and the requirements of these markets. The remaining eight report changes in the operation and delivery processes of the relationship management chain. Table I lists these factors, their description and the prediction for their potential changes. The consideration and inclusion of ‘‘what if’’ questions is crucial to successful scenario planning analysis. Five predictions of changes in the factors were combined to develop the alternative scenario examined. Each scenario was based on different assumptions and a number of combinations of changes of the various factors. In total, seven scenarios were discussed from the group of experts. To predict the effect on RM under each scenario’s conditions, the group developed a certain approach. Group members attempted to identify a sector experiencing similar conditions with those described by the combination of factors. Using this technique to provide the starting point, the discussion expanded to other industries and issues. The participants’ reasoning and group thinking related to the way the scenarios were tackled and agreed on served as the input data for the development of a knowledge-based system. In this way the group knowledge could be accumulated in a consistent and academic expert knowledge and ‘‘memory’’ (please refer to the first paper of this special edition, which covers the overall methodolgical facets and specifics in more detail). The individual scenarios examined, the predictions made by the experts and the rationale for reaching specific conclusions for the future of RM, are presented in the following section. Predictions on relationship marketing under different scenarios Scenario 1 . The degree of customisation increases. . Prosumption increases.

Factor

Description

Prediction

Brand trust

The degree to which back-up for the branding strategy is derived more from the human element than from attributes of the product/service itself

Deriving more from the interaction with the contact personnel (human element), about equal from human element and brand attributes, more from brand attributes Become more important, be of similar importance, become less important Increase, stay the same, decrease

Value to consumer

Prosumption

Nature of relationships

Parity markets/products

Company networks

Precise significance to consumer of exceeding expectations Involvement of consumers in design/production of product/ service Critical definition of the type of customer/company relationship which will determine strategy Lack of perceived differentiation as seen by consumers Association of brands with networks of companies rather than single companies

Sales as natural outgrowth Evolution of relationship of relationship management to the extent that management the selling function becomes a natural result of the relationship Diagonal integration IT driven process by which firms move into new fields achieving new synergies and economies of scope Global individualism Combined effects of mass customisation with global oneto-one marketing Detrimental impact of Poor implementation of artificial relationship relationship management management programs, which has a detrimental effect on markets Customisation Degree of individualised tailoring of a product/service offering Database marketing Aggregating customer information for subsequent analysis Aggregation of customer Management of customer relationship interactions to provide incremental value

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Increase, stay the same, decrease Become more commonplace, occur as often as at present, become less commonplace Increase, stay the same, decrease Become more likely, be as likely as at present, become less likely

Increase, stay the same, decrease

Accelerate, move at a constant pace, decelerate Increase, stay the same, decrease

Increase, stay the same, decrease Increase, stay the same, decrease Increase, stay the same, decrease (continued)

Table I. Potentially influential factors on the advancement of relationship marketing

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Factor

Description

Prediction

New media

The opportunities offered by new technology to increase personal communication with customers

Increase, stay the same, decrease

Management processes

Combining previously independent management functions to produce a synergistic effect

Become more common, happen as often as it does now, become less common

Company/customer interface

Process related to managing all Increase, stay the same, points of contact between decrease company and customer

Table I.

.

Producing synergy by combining management functions becomes more common.

.

Parity becomes more commonplace.

.

The importance of company networks increases.

Under these conditions customisation will become the norm. Customers will be able to get exactly what they desire from the companies and they will expect to be able to get products and services that satisfy their needs and desires completely. Pressure on the companies will increase. Customers will become more demanding, and offerings will have to compete more aggressively to maintain their existing position in the marketplace. Mass customisation will not be sufficient for firms to compete in this future market. Firms will have to offer more. Margins will be under pressure, due to the increased competition and the cost of customisation. To provide the customised products/services, companies will have to find more effective ways to manage their activities. They will have to compete more as networks of businesses than as individual units. They will generally rely on their internal and external networking for the development and the delivery of their offerings. The role of employees will become crucial during the constant customisation exercise. Thus, the relationships developed mainly with the distribution network and the internal market will become more important and RM strategies will be developed to approach these markets more effectively, without neglecting the highly demanding customer market. Scenario 2 . .

.

Dependency on database marketing increases. Brand trust is derived equally from human elements and brand attributes. Opportunities to use new media increase.

. .

Effectiveness of managing company/customer interface stays the same. Detrimental impact of artificial RM increases.

If this becomes reality, it is expected that customers’ trust in the various companies and their products and brands will decrease. Customers’ cynicism and resistance to the marketing efforts and the operation and delivery processes of RM offered will rise. The dominant perception in the marketplace will be that companies use various techniques to their advantage and customers will keep trying to get the best offer available to them, without believing that companies will offer value in the long term. Brand loyalty will be on a decline, since the development of relationships with all the companies’ representatives, both employees and brands, will be very difficult. Customers will tend to switch suppliers often. However, under these conditions, the relatively strong companies, with the appropriate infrastructure, will become even stronger and the market will become highly concentrated. The dominant players will have to be very effective in the operation and delivery processes of RM and constantly improve their practices. They are expected to have high reliance on technology in general, but especially in databases and new media. To protect the customers, the need for regulation will increase. Thus there will be constitutional (governmental) intervention in the market. Scenario 3 . The degree of customisation increases. . Prosumption increases. . Effectiveness of managing company/customer interface increases. . Diagonal integration stays the same. . Trend towards global individualism increases. In a future market with the above conditions, customers will require to have products and services produced exclusively for them. To perceive that highly customised solutions are available to them, customers will expect to be able to participate in various managerial processes of the relationship management chain, ranging from processes during the development of the offerings and the definition of their value propositions, to operations and delivery processes. The increased effectiveness of the company/customer interface will facilitate the customers’ advanced involvement. Since customers are looking for value, customisation and a one-to-one marketing approach, one-to-one relationships are expected to develop. To create cost effective one-to-one contacts globally, mass customisation will be necessary, with high reliance on the development and management of technology-based systems. To be successful in such an environment, companies will need to improve certain skills that will allow them to deliver the requested offers effectively. For example, in order to communicate with their global customers, companies will need to increase their

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understanding of the principles and the implementation requirements of technology-mediated relationships. Scenario 4 . Prosumption increases. . Producing synergy by combining management functions becomes more common. . Importance of defining the nature of relationships increases. . Sales as a natural outgrowth of relationship management becomes more likely. . Detrimental effect on artificial RM increases. Once again, under these conditions the customers will be very disappointed from their past contacts with the various companies. As a result, they will be sceptical and cynical about the companies’ attempts to approach them. Their mistrust will be mostly based on previous misselling experiences. Companies will need to deal with the fact that the general perception in the market is a rather negative one. They will strive to (re)build trust with customers. To be successful in their reaction, major changes in the RM practices are required. Firms will need to find ways to develop a ‘‘real’’ RM approach. This will require the re-evaluation of the relationship requirements from the customers’ point of view. Based on the outcomes of this analysis, companies will have to develop the appropriate infrastructure to improve their position and the perception of their customers. Companies will have to exceed their discontented customers’ requirements and find a way to persuade their customers to give them another chance. This will involve reorganisation of their activities as well as greater institutional regulation. Scenario 5 . Producing synergy by combining management functions happens as often as it does now. . Importance of managing customer interactions increases. . Importance of defining the nature of relationships increases. . Effectiveness of management company/customer interface decreases. . Parity becomes more common. Under this scenario, existing firms will be failing to meet customers’ requirements. The disappointed customers will be seeking constantly alternative offers, in an attempt to satisfy their needs and desires more effectively. Owing to this constant quest for better alternative offers, customer loyalty will be very limited. The situation in the market could lead to various difficulties for the existing firms. Both the lack of satisfaction and the limited loyalty will allow new entrants to enter the market. Since customers are not

able to understand the real difference between the available offers, the new players will be competing on the basis of their additional elements of their offers, notably the development of more effective RM and management. Their reliance on the relational approach will force the new companies to develop and introduce new rules and standards for the operation and delivery of the relational programs. The most adaptable of the new firms will develop a competitive advantage by introducing a well developed relationship management chain and will be very successful in attracting and retaining customers. This type of company will manage to acquire a big customer base, since customers will tend to switch to these new offers to fulfil their desires. Scenario 6 . Opportunities to use new media stay the same. . The importance of company networks increases. . Sales as a natural outgrowth of relationship management is as likely as at present. . Diagonal integration increases. . Detrimental effect of artificial RM stays the same. Companies in this situation will compete more as networks than as individual entities. In addition, the reliance of the RM processes on information technology will increase. These attributes have two major side effects, some related to the markets that can be reached and others to the way that the relationships with these markets are managed. First, they allow firms to reach customers in geographically remote markets and become more global. In addition, because of their overall enhanced reliance on their network, new IT capabilities within these networks will emerge. Thus, members of the network will act as partners with interdependent activities and stronger structural connections. These developments will lead to increased concentration in the market, through virtual and real integration. E-commerce will become increasingly significant. The World Wide Web will be a key market space and its contribution to selling products will become more significant. Since technology will allow customers in the various markets to have access to the same information, global pricing strategies will have to be adopted. It can be argued that these conditions will facilitate the introduction of a truly IT era. Scenario 7 . Customisation increases. . The importance of company networks increases. . Importance of defining the nature of relationships increases. . The value to customer becomes more important. . Diagonal integration increases.

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While all other scenarios were suggested to the group of experts, this scenario was constructed by the group. The rationale used during the development of the rule in the scenario was the creation of ‘‘a probable future’’. Customers will be looking for the ‘‘best’’ available value. Firms will make an effort to provide more holistic services. In addition, the technological progress will push changes within the various industries. Technology will be used to deliver some of the highly customised offers. Customers will evaluate value through what is offered from networks, not what is offered from individual companies. As a result, firms will have not just developed close relationships with their networks, but rely on them. A number of structural and economic connections will appear, accelerating the interdependence of the members in the network. A number of alliances will appear, while it is expected to have increased integration. The members of the network will share information, plan and innovate together. Thus the need to relate with the suppliers and alliances market will increase. There will be high churn rates in the short run, but the system will find a balance in the long run. Conclusions and research directions The concept of RM is a relatively new area of research and analysis. It is well accepted that many companies have moved from a transactional to a relational approach. Current research aims to establish the categorisation and form of progression of the various steps between these two forms (Coviello et al., 1997). Relationship marketing research acknowledges in addition that the two relational and transactional forms are not necessarily mutually exclusive. There are normally for most firms more than one market to which companies relate. Various stakeholders are considered as potential markets of interest. To approach the various markets and to manage the relationship with them in the long run, companies should develop relationship management chains. They are expected to define the value proposition offered, to choose and target the appropriate segments and to develop appropriate operations and delivery processes. However, the system should be dynamic. The importance of the requirements of the various markets might change over time. The functions in the relationship management chain are not constant either. Their evolution is driven by the changes in the environment and the importance and requirements of the various markets and the tools that might be available to the firm in the future for the development of the relationship management chain. There are several areas on which research on RM should focus. The high risk and high uncertainty factors relevant to RM and management are those that should be prioritised. Some of the key issues that should be investigated in the future are: . Changes in the importance of the markets. It is recognised that firms operate in multiple markets. The six-market framework of Christopher et al. (1991) is a common means of representing this phenomenon. But it

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also creates a dilemma for the strategic management of the firm’s relationships in that, due to special needs, the role of different markets varies. For example, it is well documented that the internal market is very significant in the financial services industry. However, little is known about the role of other markets within this industry, such as the future effect of imminent new legislative framework throughout the EU known as the undertaking for collective investment in transferable securities Changes in the relational behaviour of markets. At present, research primarily focuses on the analysis of transactional forms of buying and selling behaviour. However, little is known about the relational behaviour of the various actors in the dyads and networks which comprise different markets and their future trends. The contribution of the elements driving the development of relationships. Most of the existing research analyses the role of human actors in the development of market and, more broadly, exchange relationships. However, other elements, such as the product, the brand, or the environmental context (e.g. mediated vs face-to-face) may potentially make a significant contribution during the development of relationships. Changes in the processes available to firms for the support of the relationships. Some of these changes will come about as a response to the changing market requirements. However, others could be resources driven. More up-to-date technologies and methods become available everyday, some of which could improve significantly the operations and delivery processes of the relationship management chain. For example, the successful implementation of micro-pricing for individual time/space on Internet sites could transform the opportunities for the cost/price customisation of Web-based relationships, thus potentially widening customer access and product/service delivery possibilities using this medium.

All these areas for further research have the same underlying purpose. They make an attempt to identify the factors that could be included in scenarios to manage the uncertainty associated with the development and implementation of relationship management. This is part of the future agenda and the future is the agenda for our research in RM. References Alderson, W. (1957), Marketing Behavior and Executive Action, Irwin, Homewood, IL. Anderson, J.C. and Narus, J.A. (1990), ‘‘A model of distributor firm and manufacturer firm working partnerships’’, Journal of Marketing, Vol. 54, pp. 42-58. Anderson, J.C. and Narus, J.A. (1998), ‘‘Business marketing: understand what customers value’’, Harvard Business Review, Vol. 76, pp. 53-65. Anderson, P. (1982), ‘‘Marketing, strategic planning and the theory of the firm’’, Journal of Marketing, Vol. 46, Spring, pp. 15-26.

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Arndt, J. (1979), ‘‘Toward a concept of domesticated markets’’, Journal of Marketing, Vol. 43, Autumn, pp. 69-75. Bensaou, M. (1999), ‘‘Portfolios of buyer-supplier relationships’’, Sloan Management Review, Vol. 40 No. 4, pp. 35-46. Berry, L. (1983), ‘‘Relationship marketing’’, in Emerging Perspectives on Services Marketing, American Marketing Association, Chicago, IL, pp. 25-8. Berry, L. and Parasuraman, A. (1991), Marketing Services: Competing Through Quality, The Free Press, New York, NY. Blois, K. (1996), ‘‘Relationship marketing in organisational markets: when is it appropriate?’’, Journal of Marketing Management, Vol. 12, pp. 161-73. Brown, S.P. and Peterson, R.A. (1993), ‘‘Antecedents and consequences of salesperson job satisfaction – metaanalysis and assessment of causal effects’’, Journal of Marketing Research, Vol. 30, pp. 63-77. Christopher, M., Payne, A. and Ballantyne, D. (1991), Relationship Marketing, ButterworthHeinemann, Oxford. Christy, R., Oliver, G. and Penn, J. (1996), ‘‘Relationship marketing in consumer markets’’, Journal of Marketing Management, Vol. 12, pp. 175-87. Copulsky, R. and Wolf, J. (1990), ‘‘Relationship marketing: positioning for the future’’, The Journal of Business Strategy, July-August, pp. 16-20. Coviello, N.E., Brodie, R.J. and Munro, H.J. (1997), ‘‘Understanding contemporary marketing: development of a classification scheme’’, Journal of Marketing Management, Vol. 13 No. 6, pp. 501-22. Doyle, P. (1995), ‘‘Marketing in the new millennium’’, European Journal of Marketing, Vol. 29, pp. 23-41. Drucker, P. (1973), Management, Harper & Row, New York, NY. Dwyer, F.R., Schurr, P.H. and Oh, S. (1987), ‘‘Developing buyer-seller relationships’’, Journal of Marketing, Vol. 51, pp. 11-27. Ford, D. (1980), ‘‘The development of buyer-seller relationships in industrial markets’’, European Journal of Marketing, Vol. 14 No. 5, pp. 339-53. Fournier, S., Dobscha, S. and Mick, D.G. (1998), ‘‘Preventing the premature death of relationship marketing’’, Harvard Business Review, Vol. 76, pp. 42-51. Garbarino, E. and Johnson, M.S. (1999), ‘‘The different roles of satisfaction, trust, and commitment in customer relationships’’, Journal of Marketing, Vol. 63, pp. 70-87. Gilbert, D.C. (1996), ‘‘Relationship marketing and airline loyalty schemes’’, Tourism Management, Vol. 17, pp. 575-82. Gro¨nroos, C. (1994), ‘‘From marketing mix to relationship marketing: towards a paradigm shift in marketing’’, Management Decision, Vol. 32 No. 2, pp. 4-20. Gruen, T.W. (1997), ‘‘Relationship marketing: the route to marketing efficiency’’, Business Horizons, Vol. 40 No. 6, pp. 32-9. Gummesson, E. (1987), ‘‘The new marketing: developing long term interactive relationships’’, Long Range Planning, Vol. 20, pp. 10-20. Hakansson, H. and Ostberg, C. (1975), ‘‘Industrial marketing: an organisational problem’’, Industrial Marketing Management, Vol. 4, pp. 113-23. Hammond, M. (1999), ‘‘IBM software analyzes customer data’’, PC Week, p. 150. Hunt, S. and Lambe. J. (2000), ‘‘Marketing’s contribution to business strategy’’, International Journal of Management Review, Vol. 2 No. 1, pp. 17-44. Kotler, P. (1992), ‘‘Total marketing’’, Business Week, p. 2.

Macintosh, G. and Lockshin, L.S. (1997), ‘‘Retail relationships and store loyalty: a multi-level perspective’’, International Journal of Research in Marketing, Vol. 14, pp. 487-97. Morgan, R.M. and Hunt, S.D. (1994), ‘‘The commitment-trust theory of relationship marketing’’, Journal of Marketing, Vol. 58, pp. 20-38. Payne, A. (1995), Advances in Relationship Marketing, Kogan Page, London. Peck, H., Payne, A., Christopher, M. and Clark, M. (1999), Relationship Marketing: Strategy and Implementation, Butterworth-Heinemann, Oxford. Peterson, R. (1995), ‘‘Relationship marketing and the consumer’’, Journal of the Academy of Marketing Science, Vol. 23, pp. 278-81. Petrison, L.A. and Wang, P. (1993), ‘‘From relationships to relationship marketing – applying database technology to public relations’’, Public Relations Review, Vol. 19, pp. 235-45. Pine, B.J., Peppers, D. and Rogers, M. (1995), ‘‘Do you want to keep your customers forever’’, Harvard Business Review, Vol. 73, pp. 103-14. Ravald, A. and Gro¨nroos, C. (1996), ‘‘The value concept and relationship marketing’’, European Journal of Marketing, Vol. 30 No. 2, pp. 19-30. Reichheld, F. (1993), ‘‘Loyalty based management’’, Harvard Business Review, March-April, pp. 64-73. Reichheld, F. and Sasser, W. (1990), ‘‘Zero defections: quality comes to services’’, Harvard Business Review, September-October, pp. 105-11. Rindova, V.P. and Fombrun, C.J. (1999), ‘‘Constructing competitive advantage: the role of firmconstituent interactions’’, Strategic Management Journal, Vol. 20, pp. 691-710. Rosenberg, L.J. and Czepiel, J.A. (1984), ‘‘A marketing approach to customer retention’’, Journal of Consumer Marketing, Vol. 1, pp. 45-51. Shani, D. and Chalasani, S. (1992), ‘‘Exploiting niches using relationship marketing’’, Journal of Consumer Marketing, Vol. 9, pp. 33-42. Sharp, B. and Sharp, A. (1997), ‘‘Loyalty programs and their impact on repeat-purchase loyalty patterns’’, International Journal of Research in Marketing, Vol. 14, pp. 473-86. Sheth, J.N. and Parvatiyar, A. (1995), ‘‘Relationship marketing in consumer markets: antecedents and consequences’’, Journal of the Academy of Marketing Science, Vol. 23 No. 4, pp. 255-71. Tzokas, N. and Saren, M. (1997), ‘‘Building relationship platforms in consumer markets: a value chain approach’’, Journal of Strategic Marketing, Vol. 5 No. 2, pp. 105-20. Webster, F.E. (1992), ‘‘The changing role of marketing in the corporation’’, Journal of Marketing, Vol. 56, pp. 1-17. Wikstrom, S. (1996), ‘‘Value creation by company-consumer interaction’’, Journal of Marketing Management, Vol. 12, pp. 359-74. Williamson, O. (1975), Markets and Hierarchies: Analysis and Antitrust Implications, The Free Press, New York, NY. Wilson, D.T. and Jantrania, S. (1994), ‘‘Understanding the value of a relationship’’, Asia-Australia Marketing Journal, Vol. 2 No. 1, pp. 55-66. Woodruff, R.B. (1997), ‘‘Customer value: the next source for competitive advantage’’, Journal of the Academy of Marketing Science, Vol. 25, pp. 139-53.

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Determining marketing strategy A cybernetic systems approach to scenario planning Robert E. Morgan School of Management and Business, University of Wales, Aberystwyth, Wales, and

Shelby D. Hunt Texas Tech University, Lubbock, Texas, USA Keywords Industry, Marketing strategy, Competitive strategy Abstract Despite the vast proliferation of conceptual, theoretical, and empirical studies in adaptation-selection research, debate continues to surround a key question: how do firms strategically coevolve with their environments? This paper attempts to address part of this question by drawing on advances in strategic choice theory and resource-advantage theory. A scenario-based group methodology based around the ‘‘think tank’’ described in the first paper of this special issue is presented whereby marketing analyses of environmental contexts are described which lead to a series of recommended marketing strategies for response (selection), which fit the changing environments (adaptation). Various conclusions are derived from this marketing strategy determination process and finally, consideration is given to issues of complexity and chaos in environmental assessment terms. If choice is real, the future cannot be certain; if the future is certain, there can be no choice (Loasby, 1976, p. 5).

Introduction and background Firms vary in the extent to which they adhere to their business and marketing plans (Covin et al., 1997). Prescriptive planning modes imply some form of strategic persistence characterized as ‘‘. . . the extent to which a firm’s strategy remains stable over time’’ (Finkelstein and Hambrick, 1990, p. 487). In contrast, firms engaged in emergent planning modes exhibit flexibility in their implementation of plans and thereby adjust specific strategies to the dynamic conditions in the organizational, competitive, or macro environments (Stone and Brush, 1996). Mintzberg and Waters (1985) illustrate this effect in their juxtaposition of intended strategies (the consequence of prescriptive processes)

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The Marketing Strategy Group members at the ‘‘think tank’’ included: Douglas Brownlie (Stirling University); Susan Hart (University of Strathclyde); Graham Hooley (Aston University); Shelby Hunt (Texas Tech University); Constantine Katsikeas (Cardiff University); Simon Knox (Cranfield University); Dale Littler (University of Manchester Institute of Science and Technology); Robert Morgan (University of Wales Aberystwyth); and Michael Thomas (University of Strathclyde). All Group members contributed equally to the scenario planning activities reported in this paper and the authors are grateful to these individuals for their insights and viewpoints.

with realized strategies (the resultant strategy having been modified by environmental forces following emergent processes). Central to this consideration is the selection-adaptation debate, which has maintained centerstage for several decades in strategy and organization research as well as work within sub-fields of economics and decision science. Despite the vast proliferation of conceptual, theoretical, and empirical studies in this area, debate continues to surround a key question: how do firms strategically coevolve with their environments? This paper attempts to address part of this question by drawing on advances in strategic choice theory and resource-advantage theory. Specifically, we present a review of strategic choice research and develop our arguments for this form of selection-adaptation founded on socio-psychological theories of rationality, human behavior, and purposeful action. In this respect we argue that adaptation is a dynamic process, which seeks to secure a firm’s superior financial performance. This is determined by comparison with competitor referents, and results from marketplace positions of competitive advantage. Such advantage is established from strategic responses to environmental change founded on managers’ cognitive frameworks and mental models. To illustrate this, we present a scenario-based group methodology, based around the ‘‘think tank’’ described in the first paper, whereby marketing analyses of environmental contexts are described which lead to a series of recommended marketing strategies for response (selection), which fit the changing environments (adaptation). The framework used for scenario planning here includes the definition of scope; the identification of key uncertainties; the construction of scenarios; and the selection of strategic responses. Various conclusions are derived from this marketing strategy determination process and finally, consideration is given to issues of complexity and chaos in environmental assessment terms. Adaptation-selection debate: key themes There are three main theoretical strategy traditions in the examination of how firms coevolve with their environments: sociology; economics; and strategy and organization. First, sociologists typically align themselves with one of two perspectives, that of population ecology or institutional theories. The former is a non-deterministic approach, which declares that managerial intention will make little difference, if any, to strategic adaptation (Hannan and Freeman, 1977). Institutional theories instead focus on the reasons why firms within a population share like characteristics. Strategic adaptation is reflected in the firm’s congruence with shifting population norms such that longevity and survival are founded on competitive similarity and not competitive distinctiveness (DiMaggio and Powell, 1983). Second, economists have made a significant contribution to adaptationselection in the form of the following theories. Industrial organization theory maintains the view that firms should select attractive industries within which to operate and they should base their strategic decision making on their

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positioning within these industries. This theoretical stance emphasizes the context of industry structure (Porter, 1980, 1985; Bain, 1959) and the role of public policy (cf. Hunt, 1999) more than that of firm strategy. Transaction costs theorists believe that the strategic adaptation of the firm is to continually balance the external market coordination costs with the internal bureaucratic, hierarchy, control costs (Williamson, 1991). Behavioral theorists such as Cyert and March (1963) argue that the personal interests of managers should be maximized while taking account of the strategic adaptation processes involved in allocating resources to satisfy stakeholder expectations. Evolutionary theory views adaptation as contingent on the firm’s accumulated skills and tacit knowledge (Nelson and Winter, 1982); as knowledge is augmented and skills improve so strategic adaptation evolves. Similarly, resource-based theory extends this view by addressing such forms of adaptation, and incorporates skills and tacit knowledge with other tangible and intangible resources where these should be managed to create superior performance (Penrose, 1959). The dynamic capabilities approach/knowledge-based theory reflects the firm’s innate capability to continually adapt its core competence via its foundation on intellectual capital, which is a precondition for adaptation (Teece et al., 1997). Third, strategy and organization researchers have arguably made the most significant contribution to managerial practice from activities associated with the following viewpoints. Proponents of contingency theory consider that organizational configurations differ as a result of environmental change and it is the responsibility of managers to ensure constant strategic adaptation to govern structural-environmental fit (Lawrence and Lorsch, 1967). Organizational learning theorists posit that adaptation is the outcome of (single-, double-, and triple-loop) learning where reflection on past strategic actions and new insights developed to consider future actions forms the basis of continual adaptive and generative learning, and unlearning (Fiol and Lyles, 1985). The theory of strategic choice (Thompson, 1967; Child, 1972, 1997; Miles and Snow, 1978) asserts that: . . . adaptation is a dynamic process subject to both managerial action and environmental forces. The implication of strategic choice theories for firm strategy are that management should take into account the multiple ways in which organizations interact with their environments through the process of mutual adaptation between the organization and its environmental domain (Lewin and Volberda, 1999, p. 522).

Table I illustrates these adaptation-selection perspectives and provides associated statements that reflect their implications on the management of strategy. Of these theoretical standpoints, we will develop the last, strategic choice, in our evaluation of adaptation-selection. Strategic choice and resource-advantage Strategic choice is regarded as the means that: . . . an organization uses strategy to adapt and/or change aspects of its environment for a more favorable alignment (Manu and Sriram, 1996, p. 79).

Dominant paradigm (theoretical roots) Sociology Population ecology

Institutional theories

Economics Industrial organization

Selection/adaptation

Strategy implications

Population and structural inertia

Management makes no difference; new entrants redefine industries; established incumbents should focus on what they do best until selected out Established firms should adopt fast follower strategy

Population isomorphism based on industry norms and shared logics Level of industry attractiveness and competitive advantage within that industry

Transaction costs

Minimization of transactions costs

Behavioral theory of the firm

Satisfying multiple stakeholders, structural inertia due to satisficing, uncertainty avoidance and slack Success reinforces incremental improvements and proliferation of routines as source of inertia (e.g. sunk costs, commitments, social structures) Idiosyncratic resources are the basis of sustained competitive advantage; causal ambiguity evaluating own and competitive competencies is the source of optimal performance Sustained competitive advantage based on dynamic capabilities and intellectual capital

Evolutionary theories

Resource-based theory of the firm

Dynamic capabilities/ knowledge-based theory of the firm Strategy and organization Contingency theory

Environment source of variation in performance

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Managers should choose an attractive industry; define performance frontier for a generic strategy; reduce intraindustry rivalry Managers should focus on relative coordination costs of transacting inside versus outside the firm Periodic restructuring and rationalization. Exploration requires strategic intent to allocate slack to innovation Managers should overcome preference for improvement of prior and commensurate skills that result in incremental developments Managers should maximize unique core competency, correct causal ambiguity in judging own and competitors’ core competencies Management should focus on knowledge creation and integration, continuously renew knowledge base Top management must interpret and react to changes in environment, maintain fit through changes to organization form (continued)

Table I. Extant theories informing the selectionadaptation discourse

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Dominant paradigm (theoretical roots) Organizational learning

454 Strategic choice

Table I.

Selection/adaptation

Strategy implications

Variation in performance results from changes in environment and organization ability to adapt through learning Variation in performance results from environmental changes and from firm shaping of environment

Managers need to balance single-, double- and triple-loop learning Managers should achieve dynamic fit through monitoring and shaping of environment

Source: Adapted from Lewin and Volberda (1999, p. 524)

Often considered synonymous with strategic orientation, strategic thrust, strategic predisposition, and strategic fit, strategic choice is arguably relatively enduring. Many studies drawn from multiple industries and varied environmental contexts have reported that firm strategies may remain remarkably consistent for long periods (Schul et al., 1995). Strategic choice is typically consistent because it comprises: . . . a pattern in a stream of decisions (past or intended) that both guides the organization’s ongoing alignment with its environment and shapes internal policies and procedures (Hambrick, 1983, p. 5).

By implementing the chosen strategy, the firm attempts to secure its primary objective: superior financial performance. Here superior implies not only more than (scale) but also better than (extent) by means of comparison against a competitor referent(s). For firms, a consideration that reigns in strategic terms is therefore how to make sense of their industry and competitive environments such that suitable relevant and timely comparison can be made with referents. This is especially crucial given that: . . . the specific referents used for comparison purposes vary from time to time, firm to firm, industry to industry, and culture to culture . . . Therefore, the [resource-advantage] theory provides a framework for investigating the role of different understandings of financial performance on firms, industries, productivity, economic growth, and societal welfare (Hunt, 2000, p. 124).

Drawing on resource-advantage theory (Hunt, 1995; Hunt and Morgan, 1996), it can be claimed that resources are crucial in determining the nature of competition; tangible and intangible resources that enable the firm to efficiently/effectively provide a market offering of value to a market segment(s). Because many resources are characteristically heterogeneous and immobile, firms are able to distinguish themselves by the extent to which they can provide a market offering of value to a market segment(s) in both efficient and effective terms. With the benefit of gaining a comparative advantage in

resources, firms can then attempt to secure marketplace positions of competitive advantage, which can result in superior financial performance. Figure 1 provides a schematic of these consequences of resource-advantage. Firms should seek to be positioned in cells 2, 3, or 6 in order to enjoy superior financial performance. While in contrast, cells 4, 7, and 8 are connoted to be positions of inferior financial performance where competitive disadvantage is exhibited by firms as a result of the high relative resource costs (inefficiency) or low relative value produced by these resources (ineffectiveness). The dynamic property of resource-advantage theory is illuminated in that firms are considered to learn through competing with referents based on their relative financial performance, signaling their relative market position, which is determined by their relative resource endowments (Hunt, 1995). For the firms recognizing their inferior performance levels (Figure 1: cells 4, 7, and 8), they have two options in order to neutralize and/or leapfrog those referents exhibiting competitive advantage: acquisition and/or reactive innovation. That is, disadvantaged firms can attempt to imitate the superior resource(s), find a like resource, or find a superior resource to those of the advantaged firm(s). All of these alternatives ensure, other things being equal, that the firm moves out of the disadvantage zone. In the case of the latter, however, it especially means an improved competitive position as a result of leapfrogging the advantaged firm(s) in terms of either relative resource efficiency or relative value, or possibly both. In contrast, the advantaged firms will remain as such provided they: develop proactive innovation practices; sustain investment in the resources producing .

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Figure 1. Competitive position matrix

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competitive advantage; or, their disadvantaged and indeterminate/parity position firms fail in their resource acquisition and reactive innovation efforts (Hunt and Morgan, 1996). Feedback in the resource-advantage, marketplace position, and financial performance chain is the basis for organizational learning. Competition is therefore considered to be a disequilibrating, on-going process among firms for a comparative advantage in resources that will yield marketplace positions of competitive advantage leading to superior financial performance. Consequently, resources are a key feature of the strategic actions that firms take in responding to signals from their environments and especially their competitor referents. We move now to examine the way in which these assessments and this form of learning are conducted within firms. Strategic choice, strategic cognition, and sensemaking Miles and Snow (1978) have provided one of the most frequently cited approaches to conceptualizing and operationalizing strategic choice. These authors classified firms according to how they responded to three key elements of an adaptive cycle. It is suggested that firms can be associated with a strategic choice depending on how they tackle their strategic management of product-markets (the entrepreneurial problem), systems for producing and distributing products (the engineering problem), and the development of organizational structure and processes to support the entrepreneurial and engineering decisions (the administrative problem). Accordingly: . . . the adaptive cycle is a general physiology of organizational behavior. By dealing with the organization as a whole, the adaptive cycle provides a means of conceptualizing the major elements of adaptation and of visualizing the relationships among them (Miles and Snow, 1978, p. 27).

However, there is a vital omission within the adaptive cycle as with other similar studies – the normative view is held where strategists are assumed to make accurate and consistent assessments of their environments (Bourgeois, 1985). Imagine a hypercompetitive environment characterized by rapid technological change, constant developments in regulatory activity, ease of market entry/exit by firms, and shifting, ambiguous consumer demands. Such an environmental context plays a formidable host to incumbents and new entrants in search of above average earnings. Indeed, under these conditions, the competence-destroying change that can unfold may not only eliminate existing bases of competitive advantage, but it can also introduce a new form of intra-competitive rivalry where a variety of technological and managerial platforms may be used to change the market even more. While these circumstances may appear rare, they reflect the environmental properties that represent the reality in many competitive marketplaces nowadays (Brown and Eisenhardt, 1998). In response, Bogner and Barr (2000) suggest that: . . . to act effectively under such circumstances and to build new understandings of the environment, managers must engage in adaptive sensemaking processes (p. 213).

For some time, cognitive scientists have indicated the way in which individuals’ mental models and cognitive frameworks explain how they understand, interpret, and behave within their environments. This theoretical argument applies similarly to the relationship between the strategic cognition of managers and their subsequent organizational action (Barr et al., 1992). It has been argued that mental models of managers may be better predictors of strategic responses than other frequently cited managerial characteristics and the cognitive frameworks that they construct affect each component of the sensemaking process (Daft and Weick, 1984) from scanning and interpretation through to strategic action (Thomas et al., 1997). Scanning is concerned with information acquisition and processing (Sawyerr, 1993; Lozada and Calantone, 1996), which enables the individual to both recognize and sense (Kiesler and Sproull, 1982) issues. Consequently, scanning identifies some stimuli as more salient to the firm than others. Cognitive frameworks also provide rules and relationships that affect sensemaking in terms of interpretation, which relates to the ways and means of imputing some form of understanding from information (Taylor and Crocker, 1981). As a consequence of understanding these stimuli, some informed action should be taken to respond accordingly. While these three properties of sensemaking can be associated with individual-level functioning, they all readily apply to collective activities at the firm level; where many have conceived of the organization as an interpretation system per se (Daft and Weick, 1984). Organizational interpretation research has tended to focus on what form of comprehension can be made of particular cues, signals, or events, consistent with all managers and which forms the basis of developing action necessary for strategic response(s) (Bartunek, 1984). Thus, strategic action forms the logical extension of interpretation. This association is central to this paper in that we are attempting to explore the interpretation of possible strategic ‘‘futures’’ and then consider strategic actions that can be recommended to fit such futures. It has been suggested that: . . . interpretation may hold the key to organization adaptation models that attempt to link changes in top managements’ reading of the environment (Tushman and Romanelli, 1985). This interpretation/action linkage is also reflected in the work of Whetten (1988), and Ranson, Hinings, and Greenwood (1980), who argue the reciprocal link between managers’ understanding of the environment and firm action (see also Weick, 1995). Actions involve change in some form . . . These actions have been tagged with such labels as strategic adaptation, change, and reorientation (Thomas et al., 1997, p. 304).

Cycles of strategic adaptation and cybernetic systems The sequence implied in the quotation above indicates some form of cycle between scanning, interpretation, and strategic action. All elements of this system are interdependent. Cybernetic systems provide an ideal comparison for many of the dynamics at work within this form of adaptive cycle. Quite simply, cybernetics can be considered to be an engineering notion of control. An

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Figure 2. Negative feedback in cybernetic systems

example of such a system might be a domestic central heating system, composed of an appliance and a regulator. A regulator detects changes in temperature within a room, which in turn connects to the appliance to engage more heat or less according to the setting of the regulator. The system constantly assesses the temperature within the room and the response of the appliance, where necessary, ensures a consistent temperature setting over time. A key principle at work here is negative feedback; the automatic regulation of temperature is a result of negative feedback provided by the regulator, which results in the system achieving its predetermined goal – in this case, a consistent temperature (Ashby, 1945). There are many forms of such cycles, but the one that interests us in this paper is the dynamic form. Dynamic cycles describe the state where a cybernetic system constantly adapts to changing environmental conditions in the pursuit of a predetermined goal, which in organization and strategy terms is posited to be superior financial performance (Hunt and Morgan, 1996). In strategy and organization research much of extant theory is founded on this conceptualization of organizational responses to dynamic environments (Beer, 1967). Take, for instance, Figure 2, which illustrates this system at work in managing strategy. Scanning activities inform managers of the specific ingredients and extent of environmental change, which is then interpreted by the managers, who act as regulators within the cybernetic system, inducing a response in the form of strategic adaptation. Although possessing inherent limitations, this form of rational system can assist in explaining competitive dynamics where negative feedback is either over- or under-corrected in resource-advantage terms, which can account for variations marketplace positions over time (Richardson, 1991) (see also Figure 1). An analogy might be one that describes filling a bowl of water. At first, the water may be too cold and so more hot water is introduced into the blend. As a consequence of introducing too much hot water, more cold

water is added at a faster rate, which reduces the temperature, but below the predetermined goal temperature – and so the ratio is corrected until the objective is achieved. In organization and strategy, there are three main considerations when examining how firms attempt to adapt to their environments and pursue their goals. These are quantitative approaches; the law of requisite variety; and regulators. First, quantitative approaches describe a host of methods and techniques that forecast or attempt to model phenomena. These approaches are often relevant to securing an understanding of events, but drawbacks include the assumptions that: environmental disturbances affecting firms can be plotted on a probability distribution; and the fact that events that are unique or rare in their occurrence are not important (Parker and Stacey, 1994). Second, the law of requisite variety reflects environmental complexity; the potentially unlimited environmental disturbances that can affect a firm and the similar variety of potential actions that the firm can make in response. Given this overwhelming complexity, it is the duty of various gatekeepers to draw attention to certain environmental themes, thereby selecting out noise and distilling the most relevant considerations for the firm (cf. Ashby, 1945). Finally, regulators can present in two forms: error-controlled regulation and anticipatory regulation (Stacey, 2000). The former takes place when a fault of some kind has occurred (e.g. insufficient safety warnings on product packaging) which lead directly to action taking place as a consequence, not of anticipation, but rather, as a retrospective measure. The latter, anticipatory regulation, is a feature of the firm’s information acquisition and processing that makes managers aware of a range of likely future environmental variations that may at one extreme be mild in potential impact to those at the other pole that could be regarded more as environmental ‘‘shocks’’. The traditional manifestation of this form of activity within the firm is the planning system. In this respect, the planning system is a sensing mechanism that attempts to regulate the internal activities of the firm with the external market, competitive, industry, socio-political, economic, legal, and technological conditions such that it can gain comparative advantage in resources. Consequently, firms can then attempt to secure marketplace positions of competitive advantage, which can result in superior financial performance. Much of the existing research supports the view that cybernetic principles and negative feedback apply to models of strategic decision making. However, within the sub-field of strategic cognition, it has recently been established that: From the perspective of the practitioner . . . the ultimate aim of . . . research is to enhance the practice of strategic management, through the development of intervention techniques for facilitating strategic conversations. Although significant progress has been made in the development of techniques for exploring actors’ representations of strategic phenomena, there have been few published attempts to rigorously evaluate . . . these procedures for practical use in applied settings (Hodgkinson et al., 1999, p. 977).

This paper responds to this observation and continues with an exploration of one such technique integral to the anticipatory regulation mode of strategic

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decision making described above: ‘‘actors’ representations’’ or managers’ perceptions and strategic actions within a process of scenario planning. Scenario planning Scenario planning involves analysis of a possible future environment(s) for an organization, which can then be considered in terms of its strategic implications (Courtney et al., 1997). This mode of planning is frequently believed to be the same in practice as other comparable methods: contingency planning, sensitivity analysis and cognitive modelling approaches such as cognitive mapping, perceptual mapping, and strategic mapping. In strict terms, contingency planning is concerned with assessing one uncertainty. For example, an airline company might engage in contingency planning where it is uncertain whether government regulators would approve an intra-industry merger between two other airline companies competing in its strategic space. In this instance, a case is presented and the firm considers an exception or contingency. Sensitivity analysis, on the other hand, evaluates the effect of a change in one variable, where all other variables are held constant. Finally, cognitive modelling approaches involve the use of developments in operations research and information technology to describe, in process terms, qualitative data on a cognitive modelling basis. In contrast to these methods, scenario planning enables the simultaneous effect of particular uncertainties to be evaluated where multiple variables may change under each scenario, thereby providing a rich set of actualities to be considered on which future strategic actions can be taken. This has been characterized by Shotter (1993, p. 150) where such cognitive frameworks can facilitate the process of: . . . generating a clear and adequate formulation of what the problem ‘‘is’’, of creating from a set of incoherent and disorderly events a coherent ‘‘structure’’ within which both current actualities and further possibilities can be given an intelligent ‘‘place’’.

Scenarios first emerged during the Second World Ward when the US Air Force based their thinking on what its opponents might do under certain circumstances (Schwartz, 1996). In the 1960s, Herman Kahn, one of the Air Force strategy team members, reconceived scenario thinking as a tool for business and organizational planning. However, the most important work in scenario business applications emerged in the 1970s specifically for use at the London headquarter offices of the Royal Dutch/Shell oil company – the developers of this planning approach were Pierre Wack and Edward Newland and their pioneering accounts are reported in Wack (1985a, b). Forming one of the main pillars to organizational learning at Royal Dutch/Shell, scenario planning was central to the company’s senior management activities and continued to be fundamental feature of the planning cycle for some time (de Geus, 1988). Evidence from surveys conducted in the 1980s reveals that half of the largest US- and European-based companies were then incorporating scenario planning in their strategy process activities (Linneman and Klein, 1983) and it can be suggested that its practice has since proliferated

(Hodgkinson et al., 1999). Since the work of Wack and Newland (Wack, 1985a, b), several scenario construction techniques have been described which range from top management discussions and delphi-based approaches through to computer modelling activities and advanced multi-criteria decision analysis tools (Warren, 1995). Scenario planning is a practitioner-derived planning technique (Gilbert, 2000) and reports of its use, prevalence, and advocacy within the academic literature are primarily limited to cases of successful execution and practice (Tessun, 1997; Wright and Goodwin, 1999). Nonetheless, there have been some criticisms of the technique (Hodgkinson and Wright, 1997) and certain accounts of the frequency of scenario planning breakdowns in practice (Mintzberg, 1994). Despite this, recent research evidence builds on the planning-performance debate (Brews and Hunt, 1999) and reports a positive relationship between the comprehensiveness of scenario planning use and business performance gains (Phelps et al., 2001). The benefits and characteristics of scenario planning list as follows (Raubitscheck, 1988; Schoemaker and van der Heijden, 1992; Tenaglia and Noonan, 1992; Foster, 1993; Bonnet and Olson, 1994; Clemons, 1994; Mason, 1994; Schriefer, 1995; Elkington and Trisoglio, 1996): . based on the belief in an uncertain and unpredictable future; . recognizes interactivity among multiple variables; . forces managers to confront uncertainty by providing several future outlooks; . finds that extrapolation from historical developments does not ‘‘inform’’ the future; use is made of not only facts from environmental trends, but also draws heavily on the perceptions of managers; . emphasizes causal processes and incorporates dynamism into analysis; . there are no ‘‘guaranteed solutions’’ only hypothesized futures; . primarily qualitative in orientation but occasionally supported by quantitative elements; . exploration-centered with the aim of developing descriptions of the future. Although there are many variants on the following, Table II describes the main stages in the process of scenario planning. For a more extensive sequence of the discrete stages within scenario development see Schoemaker (1995). In addition, a more comprehensive account of scenario building is offered by Schwartz (1996), who also provides a user’s guide to the ‘‘scenaric’’ approach outlined in his book. Assessment of scenarios and marketing strategy recommendations Competitive, industry, and macro environment In order to derive a list of competitive, industry, and macro environmental variables for consideration in this exercise, suitable batteries were evaluated.

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Stage

Description

1. Define scope

Recall the law of requisite variety above, because of the potentially unlimited environmental disturbances that can affect a firm, the scope of scenario building must be delimited in order to determine which variables are to be considered (and to reject all those that variables of no relevance). Sometimes referred to as ‘‘vision building’’ (Schoemaker, 1995), this stage sets the frame of analysis for a future time period

2. Identify key uncertainties

This stage begins to populate the ambiguity concerning the selected variables. Consideration is also given to the drivers underlying change in these variables and the interaction among them so as to provide greater texture to the developing environmental profile

3. Construct scenarios

It is recommended that only a few scenarios be constructed from the environmental variables. Van der Heijden (1996) suggests that two or three at most are sufficient with a no surprise and challenger scenario as possibilities for deliberation

4. Select strategic responses

This involves reflection on scenarios and generation of possible strategic alternatives, with one strategy, or a combination of several, being recommended for implementation. Caution should be exercised in selecting a strategic response with a short ‘‘shelf life’’ – the nature of competitive reaction to the proposed strategy should be considered (Clark and Montgomery, 1999)

462

Table II. Developing scenarios: a framework

Assessments of environmental change have been conducted by many researchers, such as Hambrick (1982) and Boyd and Fulk (1996) in executive scanning, as well as the work of Khandwalla (1976, 1977), Miller and Friesen (1984), and Miller and Dro¨ge (1986), among others, in environmental uncertainty, hostility, dynamism, and heterogeneity research. These extant batteries were not considered appropriate for present purposes. Therefore, alternative approaches were evaluated such John Naisbitt’s Megatrends, the ideas generated by futurists such as Peter Schwartz, and similar popular trends studies such as ‘‘Outlook 2000’’ (American Marketing Association, 2000). The key feature of our conceptualization of environment was based on resource-advantage theory which suggests that competitive processes are significantly influenced by five main environmental phenomena: the societal resources on which the firm draws; the societal institutions that form the rules of the game; the actions of competitors and suppliers; the behaviors of consumers; and public policy decisions. We needed a battery that could reflect variables across each of these factors. Consequently, a bibliographic study was conducted to construct the factor list displayed in the Appendix. The ‘‘think tank’’ exercise reported in this special issue was based on the application of the scenario planning technique; the rationale was to create

stories of plausible futures and to enable the determination of marketing strategy responses to alternative future environments. We used two different types of scenario-building approaches: prescribed scenarios and self-designed scenarios. Specific combinations of conditions provided the inputs for the scenarios (this activity provided the first three stages to the framework described in Table II which concerned the definition of scope, the identification of key variables, and scenario construction). An independent panel conducted this process and the marketing strategy group members of the ‘‘think tank’’ were required to develop separate strategic responses according to a hypothetical firm X operating in these environments. Four of the scenarios developed in this way are described below. In addition to this, the marketing strategy group of the ‘‘think tank’’ was asked to develop stage 3 in Table II (that is, to construct self-designed scenarios) and the same group was then also required to elicit compatible strategic responses for firm X (stage 4 in Table II). There are three such self-designed scenarios described below. Scenario appraisal and recommendations for strategic fit Scenario 1: . Value-based (effective) competition stays the same (factor 1 in the Appendix). . Tangible resources become less of a critical factor (factor 4 in the Appendix). . Brand equity becomes more important (factor 5 in the Appendix). . Organizational learning remains of same importance (factor 9 in the Appendix). . Customer intelligence becomes more of a critical factor (factor 11 in the Appendix). Under these conditions, plant, machinery, and allied physical materials are deemed less critical to organizational effectiveness and there is little payoff from investment in organizational learning activities. Despite this, the incidence of customer sensing activities increases, brand equity becomes critical, and competition is promoted by firms increasing the value of their market offerings, while adopting cost constraints. We were drawn in this scenario to the elements of brand equity and value-based (effective) competition. Both of these factors intimate a move in this marketplace toward evolving customer-centric factors, especially when incorporating the heightened customer sensing activities. Without wishing to discount the remainder of the scenario elements, these factors were believed to be the main drivers of change within this market-space. Reflecting on expectancy-valence theory, the strategic response(s) of a firm needs to be conditioned by: the expectation (perceived probability) that the firm is capable of performing in a manner that will result in competitive success; and the valence, which is described as the subjective reward or payoff from responding to the threat

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(Jayachandran, 2000). Therefore, consideration was given to marketing strategy recommendations that exploited firm capabilities while also ensuring that the proposed strategy would head off future negative threats from the competitive interests described in the scenario. Consequently, the recommended marketing strategy response we established was that firm X should increase brand promotion and improve value-based marketing activities. Scenario 2: . Efficiency competition remains of same importance (factor 2 in the Appendix). . Relational resources remain of similar importance (factor 3 in the Appendix). . Product innovation becomes more critical (factor 8 in the Appendix). . Competitive intelligence becomes more becomes more of a critical factor (factor 10 in the Appendix). . Economic freedom is the same (factor 14 in the Appendix). On initial examination of this scenario, it can be observed that the dynamic elements are product innovation and competitive intelligence; both of these environmental properties are characteristic of high-technology sectors where the former is relentless and the latter is required to ensure distinctiveness. The constancy of efficiency competition (firms attempt to decrease costs while maintaining acceptable value in market offerings) suggests that product innovation is not centered on value in market offerings but might imply that such cost advantages are gained through partnership and alliance arrangements, at least to a certain extent. Nonetheless, this does provide an interesting conundrum: providing high customer value is not a key driver of change under this scenario, but rather product innovation is such a driver and competitor referents provide a fundamental comparison in this regard. Given what we have learned about high-technology marketing and its common radical (product) innovation tradition, we conceived that under this scenario firm X should invest heavily in research and development and commercialization activities, as well as encouraging market-driven research and development processes with an emphasis on speed to market (see Bahrami and Evans (1989) and Dvir et al. (1993) for comparison with such empirical evidence). Scenario 3: . The importance of niche marketing stays the same (factor 6 in the Appendix). . The extent of free trade decreases (factor 20 in the Appendix). . Formal institutions stay the same (factor 22 in the Appendix).

. .

The use of IT for disintermediation increases (factor 25 in the Appendix). Efficient consumer response becomes more critical (factor 28 in the Appendix).

This scenario provides an interesting set of interactions. Trade restrictions are mounting, while the formal regulatory framework in the guise of formal institutions remains the same. Similarly, rapid consumer response activities and disintermediation are critical, encouraging mass customization it might be suggested, but niche marketing remains the same. First, we focus on the customer and channel concerns of response speed and disintermediation respectively. Both are related features of changing market structures, which might imply the emerging role of trade restrictions (see Sampler (1998) for an excellent account of how the information age is restructuring markets and competition, inducing greater intrusion on the part of regulators). For instance, Sampler (1998, p. 343) believes that: . . . with the ever increasing rate of new information technology products and the introduction of public information infrastructures, such as the Internet, we are witnessing a real-time revolution in the nature of competition.

That said, information technology must be managed and harnessed in ways that improve the competitiveness of firms. Disintermediation is a prime competitive lever, which enables firms to re-write norms and by-pass traditional constituencies within the supply chain. The role of trade restrictions is a little at odds with other factors in this scenario and also it is a variable that can only be indirectly managed through lobbying activities with public policy makers. Hence, it was not of central interest in this scenario assessment. The marketing strategy recommendation we therefore made for firm X was to develop e-commerce/e-business capabilities so as to ensure improved disintermediation for the purpose of improving speedy customer response. This naturally involves assessing all integral elements of the value-chain and improving on key areas that add value. A tactical recommendation made also was for firm X to identify the potential worth of engaging in political lobbying activity, although this was seen as a feature of managing around rather than attempting to manage directly. Scenario 4: . The amount of process innovation increases (factor 7 in the Appendix). . Product innovation becomes more critical (factor 8 in the Appendix). . Strategy creation is of similar frequency (factor 12 in the Appendix). . The extent of democracy increases (factor 18 in the Appendix). . The rule of law increases (factor 21 in the Appendix). Under these conditions, process-based innovation concerns modification or improvement to existing technology processes (Ettlie et al., 1984). This form of

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innovation is akin to the discovery mode of innovation discussed by Daft and Weick (1984), which emphasizes active detection of issues identified for change and requires efficiency in organizational response. Also product innovations arise from the encouragement of ‘‘new and broader perspectives’’ (Dewar and Dutton, 1986, p. 1424), which are considered by firms along with opportunistic behavior in the management of innovation. As for process innovation, Daft and Weick (1984) offer a parallel for product innovation in their enacting organization. This mode of organizational behavior is distinctly proactive (Brown and Duguid, 1991) in addressing the marketplace and it has been established that firms pursuing this form of innovation: . . . gather information by trying new behaviors and seeing what happens. They experiment, test, and stimulate, and they ignore precedent, rules, and traditional expectations (Daft and Weick, 1984, p. 288).

Product innovation is, therefore, seen as being the outcome of a market-shaping approach, which is highly innovative and reflects a pioneering stance to innovation strategy. Of particular interest here is the fact that strategy creation (developing new strategies at corporate and business unit levels) remains the same, while innovation practices are de facto at a tactical level and not a strategic level, and simultaneously the macro-level influences of greater democratization occur with a proliferation in the rule of law. For firm X we therefore recommend that in its marketing strategy the emphasis should be placed on social responsibility, not only in governance terms, but also in terms customer awareness ‘‘doing the right thing’’ and ‘‘being seen to be doing the right thing’’. From a strictly commercial viewpoint, responsible product innovation should be pursued while also attempting to fine-tune internal features through process innovation. Self-designed rule 1: . Relational resources are likely to become more important (factor 3 in the Appendix). . The use of IT for disintermediation is likely to increase (factor 25 in the Appendix). . Role of trust is likely to become increasingly important (factor 15 in the Appendix). . Organizational learning becomes more of a critical factor (factor 9 in the Appendix). . One-to-one interactivity is likely to increase (factor 30 in the Appendix). This self-designed rule was introduced as a scenario where many factors were simultaneously acting in concert. These five factors are ‘‘increasing’’ or becoming of more ‘‘importance’’ and they all have a bearing on the exigencies of external relationships and their structure. Moreover, the prominence of one-to-

one interactivity in this scenario is crucial and the role of information technology as a resource-advantage appears to be key in the prospect of enhancing these relationships, especially with customers. Notably, trust forms an intrinsic role in these developments, as does the prospect of developing a mass-customization strategy based on IT disintermediation. In order to gain market leadership, firm X must consider its comparative advantage in resource terms (Figure 1). An audit of existing relationships would yield some insight into the structure of relationships and the resources required to support, sustain, and develop these collaborative arrangements, and thereafter, the strategy should be to strengthen the relationship portfolio in areas of weakness. Such an audit is not straightforward to accomplish, but necessary in order to determine the profitability of the current/potential relationship portfolio (Gummesson, 1995). Furthermore, a qualitative approach toward assessing both the efficiency and effectiveness enhancing characteristics of each relationship will be worthwhile (Hunt, 1997). That is, the optimum relationships mix needs to be established for firm X that enables enhanced financial performance to be established from collaboration with suppliers, competitors, employees, and customers. Of special importance here, given the emerging role of organizational learning and the importance of trust, is the ‘‘organizational capital’’ (Hunt, 2000) or ‘‘behavioral assets’’ (Falkenberg, 1996) that support these relationships. These factors go beyond physical assets and include characteristics such as organizational systems and procedures, and the routines and collective competencies that combine to form the soft and inherently intangible assets that reflect a firm’s real value. Thus, it is vital for firm X to address the issue of relational resources as a priority. All other factors above follow from this and because these relational resources are heterogeneous and immobile, marketplace positions of advantage can be developed, allowing superior financial performance to be gained against firm X’s referents. Self-designed rule 2: . Process innovation is likely to increase (factor 7 in the Appendix). . Product innovation is likely to become more of a critical factor (factor 8 in the Appendix). . Role of formal institutions is likely to decrease (factor 22 in the Appendix). . Knowledge management is likely to become more critical (factor 29 in the Appendix). . Defunctionalization of marketing is likely to increase (factor 24 in the Appendix). The role that innovation plays in creating competitive advantage and superior financial performance has been considered by researchers. In strict academic terms, a number of authors have presented theories of market dynamics, which question classical economic models and reintroduce Schumpetarian innovation

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as the driving force behind markets (Dickson, 1992; Hunt and Morgan, 1995). Moreover, the links between knowledge, market orientation, and innovation are becoming more apparent within the literature. For example, Slater (1997, p. 165) argues: . . . successful innovation is the product of a market-oriented culture coupled with entrepreneurial values. In practical terms this means the willingness to take risks and learn from mistakes.

For this scenario, innovation is central but closely related to knowledge management. Cohen and Levinthal (1990) were among the first to synthesize knowledge management and innovation. In presenting their concept of absorbtive capacity, these authors argued that the ability of a firm to recognize the value of information is critical to understanding its innovation capability. Also, Menon and Varadarajan (1992) note that a firm with a focus on gathering and utilizing information will exhibit a significant pro-innovation orientation reflected in its inventiveness and creativity. The sustenance of the knowledge and innovation relationship is elusive, but it has been argued that: . . . revolutionary periods of generative learning may provide a window of competitive advantage . . . Eventually the window will begin to close as knowledge about this innovation diffuses to competitors (Slater and Narver, 1995, p. 64).

These considerations are central to our recommended strategy for firm X here. Theoretical associations between innovation, knowledge management, and defunctionalization (likened to market orientation) mean it is necessary for firm X to evaluate its performance in innovation and R&D practices, and develop greater efforts toward serving current and future market needs (for an elaboration here (see, Han et al., 1998). Furthermore, creatively segmenting the market might enable firm X to revisit traditional market behavior and encourage the greater role of innovations in developing resource-advantage and marketplace competitive advantage. Self-designed rule 3: . Redistribution is likely to increase (factor 19 in the Appendix). . Democracy is likely to increase (factor 18 in the Appendix). . Informal institutions are likely to increase (factor 23 in the Appendix). . Role of trust is likely to become increasingly important (factor 15 in the Appendix). . Productivity is likely to increase (factor 17 in the Appendix). The recommended strategy for firm X here must reflect a political form of strategy where the redistribution of economic wealth is a matter of policy anchored to greater democratic principles, emerging informal institutions, and a greater social consciousness with trust as a key factor. Of considerable importance is balancing the multiple and potentially conflicting stakeholder interests of investors, government, society, customers, and employees, among

others. These stakeholders must accord with the suitability of the proposed strategy for firm X, as well as its validity and feasibility as a sound business proposition. Working within this framework, it is important to consider productivity as a factor. This element means that the ratio of inputs to outputs will change such that more is produced with potentially less input. Consequently, internal systems and procedures need to be tested and developed in order to remove slack and tighten the value chain. Lean thinking must be pervasive, not only in traditional areas such as physical transportation, logistics, and distribution, but also in internal systems and standard operating procedures for all functional areas within the firm (from identifying emerging customer needs to improving the time-to-market of new products and after-sales service). However, it should be recognised that macro-level factors play a significant part in moulding these decisions, and above all, stakeholder interests should be considered, evaluated, and appreciated in the determination of marketing strategy. Conclusions The scenario planning processes described above illustrate, to a certain extent, the imprecise nature of this form of planning. The recommendations are neither right nor correct because we are dealing with uncertainty, and given this fact, there can be no one best way (Loasby, 1976). However, it remains that we must somehow plan, whether it is for reasons that attempt to reduce corporate anxiety, bolster shareholder trust, or for others that concern internal resource allocation decisions; future insights are fundamental to the nature of planning. But: . . . what is the right decision? It varies from case to case, but after doing scenarios for twenty years, I believe there is one common element to all correct decisions. They include a consideration of the bigger picture . . . On the most mundane level, a tiny business . . . has its fate coupled to the Thai currency, the yen, the pound sterling. On then loftiest level, our fulfilment on earth depends literally, as never before, on allowing the possibility of fulfilment for individuals everywhere. Scenarios help us perceive the nature of these interconnections (Schwartz, 1996, p. 209).

While such a dramatic statement forms the epilogue to arguably one of the most influential publications in scenario planning, the evangelical nature of this prescription pays only superficial attention to the complexities at work within these ‘‘interconnections’’. Consider, for instance, the notion of chaos theory and complex adaptive systems. Industries can be conceptualized as complex dynamic systems, which are characterized simultaneously by unpredictability and some form of underlying order (Levy, 1994). Most strategy and organization research is founded on assumptions of linearity. Chaos, however, is the science surrounding non-linear dynamic systems which attempts to advance knowledge in many areas by applying the principle of emerging distinctive patterns to unpredictability (Cartwright, 1991). By overlaying strategy determination with chaos theory and complex adaptive systems theory, new, provocative, and challenging fundamentals are introduced. For instance, inter-firm behavior and

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competition has been extensively modelled using game theory (Camerer, 1991), but such models assume equilibrium development and do not adequately capture the true nature of industry dynamics. As Hunt and Morgan (1996) suggest, industry evolution is both dynamic and path dependent. Resources and capabilities developed in one time period (tx1) determine the nature of future competitive processes in subsequent time periods (tx2, txnth). Furthermore, the nature of competitive advantage gains can be self-reinforcing (Levy, 1994), which suggests that industries are not neatly organized as linear systems. Chaos theory dictates that: . small environmental changes multiply over time because of the complex, non-linear, dynamic, and recursive interconnections within the industry and competitive environments (Anderson, 1999); . environmental changes are difficult to forecast or construct scenarios around because of the scale, scope, and sensitive interactions within such dynamic systems (Cartwright, 1991); . chaotic systems such as industry competition do not achieve stable equilibrium – so often assumed in game theoretic approaches based on comparative static analysis (Allen, 1988); and . although complex in form, chaotic systems do exhibit some order within randomness – however, this is constrained by several factors which mean that only short-term future forecasts are useful and even these are limited by the fact that at any moment a sudden and unexpected disturbance can dramatically change the complexion of the environment (Radzicki, 1990). The extent of complexity in organizational processes that the above introduces requires many questions to be asked in the pursuit of effective planning. Particularly important are the distinctions between knowledge creation (the know-how of planning), and both the know-why of planning and the knowwhat of planning. Answers to each of these questions underlie knowledge development and future insights. Know-how represents an understanding of the generative processes that constitute knowledge per se. Know-why describes an understanding of the factors underlying various phenomena. Know-what illustrates an understanding of the kinds of phenomena worth considering (Garud, 1997). Know-how has been likened to processes of learning-by-doing (Argote and Epple, 1990), where prior experience and understanding frequently informs the way in which the future is considered. This invokes a path dependent limitation on knowledge and, in itself, is not sophisticated and lacks an awareness of frame-breaking opportunities (Hodgkinson et al., 1999). Knowwhy, on the other hand, reflects learning-by-studying (Cohen and Levinthal, 1990), which questions the principles underlying our understanding. This form of knowledge does not accept a consideration at first hand and deep-grained insights of antecedent variables are required before a holistic picture can be

constructed of the issues surrounding a factor(s) – this naturally moves towards a greater level of knowledge sophistication whereby the quest for causality drives understanding. Know-what is akin to learning-by-using. This form of knowledge creation is typically episodic and characteristic of the chaotic environment – given that the environment changes in a rapid and seemingly random fashion, knowing what factors we need to consider is the first question we must ask ourselves. However, it is likely that this will become our first strategic dilemma in the scenario planning stakes in that know-what knowledge acquisition is neither cumulative nor path dependent, which means that episodic changes cause a significant change in strategic perspective, which makes redundant prior insights and ensures that sequential build up of knowledge is not path-consistent (Nicholls-Nixon, 1997). A final consideration is that of managers’ ‘‘information literacy’’ (Mutch, 1999, p. 323). Organizations, their managers, and decision makers must ask themselves what use they make of information and to what extent they are information literate. The relevant literature has emphasized processes and methods that support the construction of meaning without paying sufficient attention to the constraints on such construction. Although there are substantial efforts that managers can make in their attempts to understand and use information appropriately, there are also formidable barriers and obstacles to overcome in constructing a complete, uniform, consensual, and accurate understanding of future events. Overlaid on this are the questions of setting the frame for analysis (know-what) and understanding the underlying dynamics (know-why), and the properties of environmental change (know-how). Moreover, given the nature of complex dynamic systems, such chaos does mean that the pursuit of order and understanding from this randomness is not straightforward. Therefore, it is probably best if we prepare ourselves and recognize that: ‘‘. . . a complete understanding of some of the things we plan may be beyond all possibility’’ (Cartwright, 1991, p. 54). The choice is not whether to plan or not, but whether to plan well or plan poorly. Some, if not most, strategic decisions at time tx1 restrict the range, as well as the desirability and feasibility of both strategic and tactical options at tx2 where ‘‘x’’ may be years or even decades. To never plan is indeed a plan: it is to plan to ever be responding in crisis fashion to the dictates of the environment in general and a firm’s competitors in particular. References Allen, P.M. (1988), ‘‘Dynamic models of evolving systems’’, System Dynamics Review, Vol. 4, Summer, pp. 109-30. American Marketing Association (2000), ‘‘Outlook 2000: a look at the trends that will shape the new year’’, Marketing News, 17 January, pp. 9-18. Anderson, P. (1999), ‘‘Complexity theory and organization science’’, Organization Science, Vol. 10 No. 3, pp. 216-32. Argote, L. and Epple, D. (1990), ‘‘Learning curves in manufacturing’’, Science, Vol. 247, pp. 920-4. Ashby, W.R. (1945), ‘‘The effect of controls on stability’’, Natura, Vol. 155, pp. 242-3.

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Appendix Factor

Description

1. Effective competition

Extent to which competition is promoted by firms increasing the value of their market offerings, while ‘‘holding the line’’ on costs 2. Efficiency competition Extent to which firms compete by decreasing the costs of their market offerings, while maintaining acceptable value 3. Relational resources Use of partnership and alliances to compete 4. Tangible resources

Plant and machinery, etc.

5. Brand equity

Value of the brand, alone, to the market offering

6. Niche marketing

Importance of focusing on relatively small segments of overall demand Innovation directed at process improvement Innovation directed at new products and/or improvements of existing products

7. Process innovation 8. Product innovation

9. Organizational learning Ability of the organization, itself, to learn 10. Competitive intelligence

Monitoring the actions of competitors

11. Consumer intelligence

Monitoring the tastes, preference and purchasing behavior of consumers

12. Strategy creation

Developing new corporate and business unit strategies Rights to what one owns and produces Right to make economic decision unfettered by government Confidence in the reliability, integrity and competence of others

13. Property rights 14. Economic freedom 15. Trust

Prediction

Determining marketing strategy

Increase, stay the same, decrease

477 Become more important or relevant, remain of same importance, become less important or relevant Become more important, remain of similar importance, become of less importance Become more of a critical factor, remain of the same importance, become less of a critical factor Become more important, remain of similar importance, become of less importance Increase, stay the same, decrease Increase, stay the same, decrease Becomes more of a critical factor, remains of same importance, becomes less of a critical factor Becomes more of a critical factor, remains of same importance, becomes less of a critical factor Becomes more of a critical factor, remains of same importance, becomes less of a critical factor Becomes more of a critical factor, remains of same importance, becomes less of a critical factor Less frequent, of similar frequency, more frequent More critical, the same, less critical Of more importance, of same importance, of less importance Become more important, remain of similar importance, become of less importance (continued)

Table AI. Environmental factors: individual items, associated descriptors and calibration

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Factor

Description

16. Economic growth

Increase in gross domestic product

17. Productivity

478

18. Democracy 19. Redistribution 20. Free trade 21. Rule of law 22. Formal institutions 23. Informal institutions

24. Defunctionalization of marketing/process based management

25. Use of IT – disintermediarization 26. Speed

27. Use of IT – communications 28. Efficient consumer response 29. Knowledge management 30. One-to-one interactivity Table AI.

Prediction

Increase in importance, remain the same, decrease in importance Ratio of output to input Increase, stay the same, decrease Government ‘‘of the people, by Increase, stay the same, the people, and for the people’’ decrease Government taking income Increase, stay the same, from those who produce it and decrease giving it to favored others Absence of tariffs and other Increase, stay the same, trade restriction decrease Published laws, applicable to Increase, stay the same, all, and non-capriciously decrease administered Legal constraints, e.g. Increase, stay the same, constitutional law, statutory decrease law, and common law Cultural constraints, e.g. Increase, stay the same, customs, traditions, decrease conventions, and codes of conduct Trend towards bringing down Increase, stay the same, barriers between key decrease managerial functions within the organization, as well as the blurring of boundaries between traditional marketing areas Using IT to bypass traditional Increase, stay the same, distribution channels decrease Extent to which firms use Increase, stay the same, market-related velocity as a decrease major value-creation tool to create competitive advantage Extent to which evolution in Increase, stay the same, telecommunications impacts on decrease the industry Faster supply chain/stock on Greater, about the same demand/efficient transmission on the industry Extent to which corporate Become more critical, stay the knowledge is used as a same, become less critical competitive weapon Owing to impact of technology, Increase, stay the same, most marketing programs will decrease be evolving on an individual basis

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Predicting a diverse future

Predicting a diverse future

Directions and issues in the marketing of services Angus Laing

479

Department of Management Studies, University of Aberdeen, Aberdeen, UK

Barbara Lewis UMIST, Manchester, UK

Gordon Foxall Keele University, Keele, UK, and

Gillian Hogg Glasgow Caledonian University, Glasgow, UK Keywords Services marketing, Globalization, Technological change Abstract Driven by technological developments, deregulation, and globalisation the service sector in post-industrial economies is facing unprecedented change. Utilising a scenario planning framework, the paper examines the impact of such changes on a cross-section of service categories. Acknowledging that the derivation of generic sector wide trends from the analysis of discrete service categories runs the risk of over simplification, three core trends were identified: the increasing importance of technological mediation; changing consumer and professional roles; and decreasing importance of relational factors in consumer decision making. These trends pose fundamental challenges to service providers and offer researchers a rich context in which to advance marketing theory.

Introduction The service sector in post-industrial economies is a multi-faceted construct. Ranging from leisure services to corporate legal services, what is conventionally described as the service sector encompasses retail and professional services, consumer and business services, public and private services. The breadth and diverse nature of the sector is reinforced by increasing diversity in the modes of service delivery, in sources of service provision, and in patterns of consumer-provider interaction. Reflecting such diversity, the emerging body of services marketing literature may best be viewed as a broad disciplinary church which increasingly acknowledges the necessity of different approaches and processes to the marketing of different categories of services (Silvestro et al., 1992; Hill and Motes, 1995; Ettenson and Turner, 1997). In exploring the future trajectory of development of services marketing theory, this breadth and diversity raises fundamental questions as to whether emerging developments and trends will be common, or indeed have common impacts, across the sector as a whole or whether trends will be specific to particular categories of services.

European Journal of Marketing, Vol. 36 No. 4, 2002, pp. 479-494. # MCB UP Limited, 0309-0566 DOI 10.1108/03090560210417273

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This tension between generic sector-wide developments and service specific developments is central to any discussion over the future evolution of services marketing theory and literature. Indeed, such tension arguably dictates the approach that requires to be adopted in seeking to identify the potential trajectory, or trajectories, of services marketing evolution. That is initially the adoption of a service, or service category, specific approach (see, for example, Clemes et al., 2000) and subsequent to such contextually anchored scenario analysis identify what, if any, trends have generic impact on the service sector as a whole. Such an empirically grounded ‘‘case study’’ approach ensures that developments emerging in specific service settings are captured and inform analysis of potential trends in other service settings. Equally critical to any attempt at scenario planning and trend identification is understanding the genesis of current thinking on the nature of the field under examination. Reflecting both the importance of preceding developments in influencing the direction of change, and the cumulative nature of change (Tellis and Crawford, 1981), the starting point in identifying potential trajectories of development in services marketing is thus ‘‘to go back to the future’’ and review the key themes which have emerged in the services marketing literature over the past two decades. Evolution of services marketing: underpinning themes The development of services marketing has been likened to human evolution (Fisk et al., 1993). From the initial crawling out of the primeval swamp of mainstream marketing to walking erect as a distinct disciplinary area contributing to mainstream marketing theory, the nature and parameters of services marketing have been in constant flux (Hogg and Gabbott, 1998). Such flux reflects not only this broadening and deepening of the research base, but equally the impact of developments in the service sector itself, most notably the impact of deregulation and technological change. While acknowledging the breadth and diversity of the service sector, it is possible to identify certain generic themes within the literature, although the relevance of such themes varies across the different components of the sector dependent on the specific nature of the service (Clemes et al., 2000). In looking back to the future, to the current state of services marketing literature, two broad research themes may be regarded as providing the critical foundations underpinning the future direction of development of services marketing. These are the management of the service delivery process and the nature of interaction between consumers and suppliers. The concept of the service encounter is central to the marketing of services, is indeed the focal point of marketing activity. Reflecting the inseparability of production and consumption in service industries, the service encounter is the actualisation of the service, that is the intersection of service capacity and demand. Carlzon (1987) graphically describes the service encounter as ‘‘the moment of truth’’ where the service is actually delivered. More specifically,

Suprenant and Solomon (1987) have defined the service encounter as being: ‘‘. . . the dyadic interaction between the customer and the service provider firm.’’ The service encounter can be seen as that point at which the consumer can evaluate the service offering and the service supplier manage consumer perceptions of the service (John, 1996). Critically, these encounters may be viewed as complex social interactions rather than simple exchange relationships given the high levels of interpersonal interaction which have conventionally characterised the service delivery process (McCallum and Harrison, 1985; Glynn and Lehtinen, 1995). As a consequence of such complexity, the dynamics and management of the service encounter have attracted significant academic attention over the past two decades (see, for example, Czepiel et al., 1985; Solomon et al., 1985; Bitner, 1990; Czepiel, 1990; Bitner et al., 1994; Price et al., 1995; Grove et al., 1998). The primary focus of this research has been on the interpersonal interactions between consumers and service providers in terms of the management of service quality and consumer satisfaction. This is exemplified in the prominence of what has been termed the dramaturgical model of the service encounter with its focus on the analysis of the service encounter in terms of the actor/audience interaction, the setting and the performance (Grove and Fisk, 1983; Grove et al., 1992, John, 1996). However, this predominant focus on interpersonal interactions and their surrounding contextual environment may place artificial boundaries on the nature of the service encounter. By focusing on the interpersonal interactions occurring between the consumer and the service provider within the service providers’ physical environment, the conventional conceptualisation of the service encounter is in essence an organisationally defined and managed artifice. Yet the process of interaction between individual consumers, conventionally within the service providers’ environment, is an equally significant influence on consumer behaviour and satisfaction (Martin and Pranter, 1989; Harris et al., 1995; McGrath and Otnes, 1995), as is the consumer’s interaction with impersonal components of the service delivery process. For the consumer, the service encounter thus encompasses a number of interactions, both personal and impersonal, and related experiences alongside their formal interaction with the organisation providing the service. In this regard, many of the technological developments impacting on the service sector, in particular those facilitating ‘‘self-service’’ utilisation of services, may be regarded as having significant consequences. The Internet driven information revolution is widely perceived to be transforming the way both businesses and consumers operate (Doherty et al., 1999). This is particularly seen to be the case in those areas of the service sector, notably financial or travel services, where transactions do not require interpersonal interaction. In such circumstances, the Internet effectively serves as a new distribution channel (Alexander and Colgate, 1998). However, the impact of this information revolution will potentially be equally great in those services, notably professional services, which are characterised by high levels of interpersonal interaction and where a significant component of the service

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product is information and expertise. For such services the Internet may be viewed primarily as an information resource, rather than as a distribution channel. Yet, the Internet in this capacity may have the potential to fundamentally change the way in which consumers interact with service providers. In turn, the established format of the service encounter, that is the ‘‘interactions between the customer and the organisation that provides the service’’ (John, 1996, p. 60), in such services is called into question by the changes in consumer access to service information. The information revolution engendered by the Internet in terms of consumer access to specialist technical information, formerly the preserve of professionals, has fundamentally changed the informational asymmetries which have conventionally characterised the delivery of professional services (Jadad, 1998). Professional dominance and power in the service encounter has conventionally been based on the existence of an imbalance in knowledge and expertise between the professional and service user (Wilson, 1994). The Internet, with its breadth of information, and more significantly its scope for interaction between consumers through providing virtual discussion forums and facilitating the emergence of consumer communities, has the potential to redress these informational asymmetries and empower consumers to challenge the established legitimacy of service professionals. This empowerment of consumers arguably has profound implications both for the management and design of the service encounter. Such changes in the format of the service encounter will impact inevitably in turn on the nature of the interaction between the service provider and the consumer, given that over an extended time horizon: . . . encounters provide the social occasions in which buyer and seller can negotiate and nurture the transformation of their accumulated encounters into an exchange relationship (Czepiel, 1990, p. 13).

Successive consumer-supplier interactions, that is service encounters, are widely viewed as providing the basis on which long term relationships are established in both consumer and business-business service markets (see, for example, Storbacka, 1994; Berry, 1995; Eriksson and Vaghult, 2000). The development and maintenance of such long-term interactive relationships has constituted a central plank of the evolving body of services marketing theory from the early 1990s onward (Gro¨nroos, 1994; Aijo, 1996; Gummesson, 1999). This reflects the impact of the underlying characteristics of services, most notably intangibility, heterogeneity and inseperability, on consumer behaviour in terms of both selection and evaluation of service providers (Gabbott and Hogg, 1998). In this regard, long-term relationships are perceived to provide a critical means by which service users, both consumer and organisational, are able to reduce risk and uncertainty in the purchasing of services given the complexities of assessing service quality (Gwinmer et al., 1998). It is necessary, however, to recognise that the impact of such characteristics and, hence, the

importance and nature of relationships, varies across the spectrum of services, with for example:

Predicting a diverse future

. . . the characteristics that pertain to services in general are present in their purest form in professional services . . . (Venetis, 1994).

Consequently, for consumers the formation of long-term relationships with service organisations, while being critical in respect of professional services, is relatively unimportant in respect of generic retail services (Ettenson and Turner, 1997). This variability in the nature and format of such relationships reflects both the complexity of the service, but more significantly, the level of consumer involvement in the production of the service (Gordon et al., 1998). Yet, given increasing competition in many service industries as a result of deregulation and globalisation, service organisations are confronted by the need to enhance customer retention, with the development of closer relationships being perceived as the route to achieving such retention (Mattsson, 1997; Eriksson and Vaghult, 2000). However, this increasing emphasis on the centrality of close customer-supplier relations to the marketing of services can be viewed as being challenged, at least within consumer services, by the twin trends of technological mediation and commodification. One of the key developments in service industries over the past decade has been the increasing investment in technology in the service delivery process. From the introduction of ATMs through to online medical consultations, technology has revolutionised many areas of the service sector. Replacement of service staff with technology not only offers a means of addressing variability in the service delivery process, but also facilitates cost reduction through increasing the self-service component of the service delivery process. However, by reducing the personal interaction, that basic social building block of service relationships, such developments may be viewed as undermining the development of closer customer-supplier relationships. Alongside this process of increasing technological mediation has been the emergence of a parallel process of commodification. Conventionally, many professional services such as stockbroking or property conveyencing were produced by the service provider as a bespoke offering for an individual client. Reflecting the impact of socio-economic changes which have seen an increasing proportion of the population making use of such services (Hart and Hogg, 1998), service providers in these markets are increasingly offering standardised ‘‘off-the-shelf’’ service packages alongside more conventional bespoke service offerings. Such services may in effect be viewed as commodity rather than specialist products. While this may offer service providers the opportunity to effectively grow the market for such services, the reduction in the level of consumer involvement in the production of the service affects not only the format of the service encounter, but equally the nature and depth of the customer-supplier relationship. Hence, while consumers purchasing such commodity services may have more frequent interactions with service providers those interactions become more superficial and do not possess what

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Czepiel (1990) described as that ‘‘special status’’ which has conventionally characterised client-supplier relationships in professional services. Taken together with the changing parameters of the service encounter and the increasing role of technology in the service delivery process, it is arguable that this trend towards increasing commodification is likely to generate ever greater diversity of consumption and supply within the service sector. Alongside the ‘‘information empowered’’ consumer seeking to determine the service offering provided, there will be the consumer who wishes the service professional to determine what service offering is to be provided. Alongside the service provider marketing standardised technologically mediated service packages there will be others marketing personalised bespoke services. It is against such a complex contextual backdrop that the exploration of potential trends, and research opportunities, in the development of services marketing need to be undertaken. Methodology The whole ‘‘think tank’’ exercise was based on the application of the scenario planning technique. The rationale behind its utilisation was the need to create stories of equally plausible futures and to enable the ordering of the participants’ perceptions about alternative future environments. Scenario planning encourages participants to stretch their thinking, to question the assumptions held by themselves and others about the future and to challenge traditional ways of thinking and planning. Specific combinations of conditions provided the inputs for the scenarios with the outcomes provided by expert (academic) suggestions. We used two different types of scenario-building approaches: ‘‘prescribed’’ (a priori by domain expert designers) scenarios and ‘‘self-designed’’ (by the group of experts providing the input) scenarios. The scenarios were built on the basis of ‘‘forced’’ combinations of clearly defined and explained factors related to the main area of analytical thinking. The consideration and inclusion of ‘‘what if’’ questions is crucial to successful scenario planning analysis. The participants’ reasoning and group thinking related to the way the scenarios were tackled and agreed on served as the input data for the development of a knowledge-based system. In this way the group knowledge could be accumulated in a consistent and academic expert knowledge and ‘‘memory’’. Please refer to the first paper of this special edition which covers the overall methodological facets and specifics in more detail. Towards an identification of trends in services marketing: scenario planning in services If all services marketers were laid end to end they would not reach a conclusion (with apologies to George Bernard Shaw).

The breadth and diversity of the service sector, when taken together with the range of influences which have the potential to impact on the sector, present

enormous challenges to both practitioners and academics in identifying potential trends in the evolution of services marketing. This complexity is enhanced by the inevitably diverse experiences and perspectives of services marketing professionals and academics involved in any scenario planning activity. The group involved in this particular scenario planning exercise, although sharing common interests in the marketing of services, represented a diverse range of expertise and experience. Consequently, this exploration of trends, and prediction of developments in services marketing theory, will, as with any scenario planning activity, reflect a partial and idiosyncratic interpretation of emerging influences on the sector. In order as far as possible to minimise such partial and idiosyncratic interpretation of emerging influences by the group in the scenario planning process, use was made of a predetermined range of 15 factors which had been identified as having the potential to affect the service sector. (For a discussion of the derivation of this range of influencing factors refer to the paper addressing the scenario planning methodology.) These factors, which may be viewed as either increasing or decreasing in importance across different parts of the service sector, are listed in Table I. These factors were utilised to develop ten pre-determined scenarios for the group to analyse and explore the implications for the development of services marketing theory and practice. (For a discussion of the process of development of these scenarios refer to the paper addressing the scenario planning methodology.) Of these pre-determined scenarios, four were identified by the group as reflecting recognisable emerging scenarios with which they had some familiarity, and hence were examined. Emanating from the analysis of these scenarios, the group constructed two additional scenarios utilising the factors listed in Table I. These scenarios focused on professional and public service sectors respectively where there were perceived to be a number of common trends which would impact fundamentally on the nature of the marketing activity undertaken. The individual scenarios, in terms of the market conditions applying, together with the scenario specific implications for services marketing, are outlined in the following section. Subsequent to the individual scenario analysis, broader conclusions regarding the development of services marketing theory, together with research implications, are explored. Pre-determined scenario 1 1. Personalisation: increasing importance. 4. Rationing: constant importance. 5. Bundling: increasing importance. 11. Marketspaces: increasing importance. Under such market conditions the relationship between consumer and producer is likely to undergo significant re-definition. The emergence of new marketing channels as part of broader change in the marketplace would be critical in this

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Factor 1. Personalisation 2. Customer expectations 3. Accountability 4. Market transparency 5. Rationing of services 6. Bundling 7. Simplification 8. Internationalisation 9. Multi-dimensional competition 10. Impact of technology 11. Marketspaces 12. Info-mediaries 13. Virtual experiences 14. Syncographicsa

Table I. Potential influences on the service sector

15. Innovationa

Description Marketing strategy favouring the involvement of a human element in delivering a service Monitoring customer expectations in order to maximise the exchange process Being a good corporate citizen, effectively delivering brand promises and being perceived to do so Emerging trends in company practices which are transparent to the consumer, thus generating trust and consumer loyalty Maximising resources per output in provision of services, through limiting availability to the market Trend towards aggregating a physical good or other service with the basic service offering Trend towards decreasing consumer complexity and increasing consumer knowledge Trend towards the dominance of global service companies operating in multiple markets Appearance of non-traditional service providers who are blurring distinctions between markets Impact of new methods, processes and materials which are transforming the make-up of production and industry New cyber markets based on new information technology which radically transform traditional market structures New cyber channels which provide consumers with quick and convenient information and access to service providers Impact of technology, such as virtual reality, in the provision of services or as a substitute for services Focusing service provision on the major turning points in an individual’s lifecycle Creative thinking capacity to develop new systems and services which bring sustainable differential advantage

Note: a Factor not utilised in scenarios considered

redefinition of market relationships. A central part of this redefinition would be the trend towards increased pro-sumption with increasingly empowered consumers taking a more active role in the design and delivery of the service offering. Within this process, consumer deference to professional judgement would decline, being replaced by professional deference to consumer judgement. The service professional would in effect change from being a ‘‘priest’’ to whom the communicant defers, to being a technician to whom the consumer dictates (Klein, 1995). This, in turn, would force service providers to become increasingly responsive to consumer demands for flexibility in patterns of service provision, with customisation of the marketing mix becoming the norm. For service professionals there would be a marked reduction in professional autonomy and status. Contexts within which such a scenario may be envisaged as applying would be education and healthcare, specifically where delivered in the private, for profit, sector.

Pre-determined scenario 2 2. Customer expectations: increasing importance. 5. Rationing: decreasing importance. 9. Multi-dimensional competition: increasing importance. 11. Marketspaces: increasing importance. 12. Info-mediaries: increasing importance. With the market environment characterised by increasing competition due to the entrance of non-traditional providers into established marketplaces, as well as the impact of emerging cyber markets, established service providers would face growing pressures to reduce cost structures. Consequently, there is likely to be increasing emphasis on ‘‘production-lining’’ service provision to enhance operational efficiency. At the same time, service providers will be confronted with better informed consumers with increasingly clear service expectations in terms of both service delivery and outcomes. This consumer emphasis on measurable service outcomes will force service providers to develop means of effectively communicating performance standards. This is likely to be accompanied by the emergence of niche brands in place of traditional broad service offerings as service providers seek to deliver increasingly tightly defined value offerings to consumers. Such patterns of development may be anticipated to impact most directly on areas like retail financial services and travel services. Public funded education services may confront broadly similar scenarios. Pre-determined scenario 3 1. Personalisation: decreasing importance. 5. Rationing: increasing importance. 8. Internationalisation: increasing importance. 12. Info-mediaries: increasing importance. Increasing consumer knowledge and awareness of service offerings, due to enhanced information channels and the process of internationalisation, will increase consumer expectations of both process and outcome dimensions of service delivery. This will impact inevitably on consumer assertiveness. When coupled to the increasing de-personalisation of services and the associated emphasis on technological mediation, a critical outcome is likely to be reduction in consumer trust in service providers. Such changes in the format of the service encounter will in turn change the nature and dynamics of the relationship between consumers and service providers. Likely outcomes of such changes include the emergence of networks of independent providers of complementary services offering niche products and personalised service, and the growth of specialist communication channels providing consumer information. Among service industries potentially confronting such scenarios

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are established professional services including legal and accounting services in respect of both consumer and business-business markets. Pre-determined scenario 4 1. Personalisation: increasing importance. 2. Customer expectations: increasing importance. 10. Technology: increasing importance. 13. Virtual experiences: increasing importance. The effective impact of trends towards the personalisation of the service encounter and the importance of technology in the delivery of services is likely to be significantly greater diversity in patterns of service provision. Specifically, it is probable that there will be an increasingly clear dichotomy between service provision targeted at price sensitive low income consumers, with an emphasis on utilising technology to reduce costs, and personalised service geared to the needs of higher income consumers. This increased targeting will reflect enhanced knowledge and understanding of customer expectations. An inevitable corollary of such a pattern of development will be a growing emphasis on de-marketing to non-target consumers and, hence, more diversity in access to service provision, which raises issues of ‘‘social exclusion’’. The retail sector may be perceived to be one context where such a scenario may be played out. Group-generated scenario 1 Drawing on research experience in professional services (see, for example, Laing, 1995; Laing and McKee, 2000; Hart and Hogg, 1998; Foxall and Greenley, 1999) the group explored potential developments in the market for consumer professional services and their implications for the marketing of such services. Legal services and specialist financial services, e.g. stockbroking, were considered to be archetypal examples of such services. Utilising the predetermined factors listed in Table I, the following five factors were identified as impacting on the marketing of this type of service. 1. Personalisation: increasing importance. 4. Market transparency: increasing importance. 7. Simplification: increasing importance. 9. Multi-dimensional competition: increasing importance. 10. Impact of technology: increasing importance. The critical development facing these types of services is the emerging distinction between specialist and commodity service providers. Reflecting both the impact of technology, particularly the emergence of new information and distribution channels, and the emergence of non-traditional suppliers, service providers operating in such markets are facing increasing pressures to

become either high added value specialist suppliers or low cost commodity suppliers. The conventional generic service supplier serving both markets is increasingly uncompetitive. The parameters of this shift are represented in Figure 1. Confronted with such a market environment, service providers will need to redefine their services in terms of the value offer they represent to discrete segments of the market. In turn, such redefinition will of necessity lead to the redesign of the service product itself. Central to this will be changes in the staff and skill mix, the nature and location of service facilities, and the role of technology in the service delivery process. As a consequence, the nature of the service encounter and the supplier-customer relationship will undergo fundamental change. This is likely to be associated with increased emphasis on branding, with the development of increasingly standardised service offerings together with the emergence of large multiple outlet service retailers at the commodity end of the market. Those service providers operating at the specialist end of the market will face pressures to merge, or enter strategic alliances, in order to have the capacity to invest in the support infrastructure required to deliver such high value specialist services. These developments are as likely to affect business to business services of this type as they will consumer services.

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Group-generated scenario 2 Despite large-scale privatisation in many post-industrial Western economies, a number of key services remain within the public sector, most notably health and education. Organisations responsible for the delivery of such services, superficially at least, face very different challenges to those service organisations operating in commercial market environments. Utilising the predetermined factors listed in Table I, the following five factors were perceived as likely to impact significantly on the marketing of public sector services, most notably education services.

Figure 1. Commodity versus specialist services

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1. 3. 5. 7. 9.

Personalisation: decreasing importance. Accountability: increasing importance. Rationing: decreasing importance. Simplification: increasing importance. Multi-dimensional competition: increasing importance.

Within an increasingly globalised economy the capacity of governments to increase public sector spending significantly is perceived to be limited. Yet, public sector service providers are under pressure to enhance both the quality and scale of service delivery in order to meet the needs of that global economy. The resultant policy emphasis on enhancing operational efficiency will in the long-term have fundamental implications for the design and delivery of such services. The end-point of such a process of development is likely to be a costled commodity service delivering standardised packages offering specified measurable outcomes. Critically, the relationship between the service professional and the service user (for example, the student) will undergo a fundamental re-configuration, shifting from an essentially personalised to a largely impersonal service. Such changes may be viewed as mirroring the developments at the commodity end of commercial professional service markets. Consequently, implicit in this are similar changes in the organisation and staffing of the service delivery process. Specifically, there is likely to be an increasing emphasis on technological mediation and self-service. Associated with this is the likelihood of a shift towards developing partnerships with nontraditional service providers to develop the necessary service content and, more importantly, the necessary service channels. Conclusion: tentative steps towards the future Drawing together the different strands of these multiple scenarios poses significant challenges in that the service sector is characterised by increasing diversity in modes of service delivery, in sources of service provision, and in patterns of consumer-provider interaction. Specifically, moving from the identification of service specific operational developments to the identification of generic strategic trends runs the risk of both over simplification and of failing to capture those underlying shifts which will in the longer term revolutionise the service sector. Acknowledging these risks, a number of generic strategic themes can be identified from the preceding scenario analysis. These themes pose significant challenges to services marketing professionals, and research opportunities for services marketing academics, in that they impact on many of the established assumptions concerning the nature of both the service encounter and customer-supplier relationships. . Technological intermediation. Whether serving as a distribution channel for services (e.g. financial or travel services) or addressing information asymmetries between consumers and professionals (e.g. health or legal services), emergent intermediary mechanisms have the potential to

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reconfigure fundamentally the service encounter and customer-supplier relationships. Yet, current understanding of consumer usage of such new intermediary mechanisms is limited. For example, can consumers who are predisposed to utilisation of such mechanisms be identified, and what are the motivating factors encouraging or discouraging such utilisation? Equally, what impact do these mechanisms have on consumer behaviour within the service encounter in terms of the roles and scripts of professionals and consumers? At the same time, from the organisational perspective, how does such technological mediation impact on the ability of service suppliers to manage relationships, specifically to maintain that ‘‘special status’’ of close relationships in the absence of personal mediation? Consumer and professional roles. The informational empowerment of consumers through the emergence of new intermediary mechanisms, together with the trend towards the commodification of services, raises fundamental questions about the respective roles of professionals and consumers in the service encounter. Indeed, this raises questions about the very nature of the concept of professionalism. The emergent shift in the service encounter from one of professional dominance to one of partnership between consumer and professional has fundamental implications for the design and management of the service encounter, and the recruitment and training of professional staff. Of more significance, however, beyond such operational issues this change raises a number of largely unanswered questions about the boundaries of consumerism in professional services. Specifically, it raises the question of whether or not in complex professional services consumer judgement ought to be given equal weighting to that of professionals in decisions affecting the outcome of the service. Addressing this question is central to defining the evolving nature of consumerism in the service sector and, in turn, the dynamics of the service encounter. Service quality and relationships. The increasing emphasis on the role of technology in the service encounter and the concomitant reduction of variability in the service offering is a critical theme across the service sector. Such technologically based ‘‘production-lining’’ is core to the development of consistent service quality standards as part of the process of commodification of many services. The central emphasis on branding and measurable quality specifications in commodified services raises major questions over the ongoing importance of relationships in the marketing of such services. For the consumer, the development and articulation of measurable performance standards may be viewed potentially as a substitute for the development of a close relationship with a supplier as a means of handling risk and uncertainty. Thus, the commodification of services may not only make the management of customer-supplier relationships more complex as previously discussed,

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but may more fundamentally erode the very basis for customers developing close relationships with service suppliers. In conclusion, if there is one overarching common theme to emerge from this process of scenario analysis it is that the complexity of services marketing, and services management more generally, is set to increase, with service providers facing unprecedented challenges. These challenges offer services marketing academics a rich context in which to push back the boundaries of marketing theory and challenge prevailing orthodoxies. References Aijo, T.S. (1996), ‘‘The theoretical and philosophical underpinnings of relationship marketing’’, European Journal of Marketing, Vol. 30 No. 2, pp. 8-18. Alexander, N. and Colgate, M. (1998), ‘‘The evolution of retailer, banker and customer relationships: a conceptual framework’’, International Journal of Retail and Distribution Management, Vol. 26 No. 6, pp. 225-36. Berry, L. (1995), ‘‘Relationship marketing of services: growing interest, emerging perspectives’’, Journal of the Academy of Marketing Science, Vol. 23, pp. 236-45. Bitner, M.J. (1990), ‘‘Evaluating service encounters: the effects of physical surroundings and employee responses’’, Journal of Marketing, Vol. 54 No. 2, pp. 69-82. Bitner, M.J., Booms, B.H. and Mohr, L.A. (1994), ‘‘Critical service encounters: the employee’s viewpoint’’, Journal of Marketing, Vol. 58 No. 4, pp. 95-107. Carlzon, J. (1987), Moments of Truth, Ballinger Books, Cambridge, MA. Clemes, M., Mollenkopf, D. and Burn, D. (2000), ‘‘An investigation of marketing problems across service typologies’’, Journal of Services Marketing, Vol. 14 No. 7, pp. 573-94. Czepiel, J.A. (1990), ‘‘Service encounters and service relationships: implications for research’’, Journal of Business Research, Vol. 20, pp. 13-21. Czepiel, J.A., Solomon, M.R. and Surprenant, C.F. (Eds) (1985), The Service Encounter, Lexington Books, Lexington, MA. Docherty, N.F., Ellis-Chadwick, F. and Hart, C. (1999), ‘‘Cyber retailing in the UK: the potential of the Internet as a retail channel’’, International Journal of Retail and Distribution Management, Vol. 27 No. 1, pp. 22-36. Eriksson, K. and Vaghult, A.L. (2000), ‘‘Customer retention, purchasing behaviour and relationship substance in professional services’’, Industrial Marketing Management, Vol. 29, pp. 363-72. Ettenson, R. and Turner, K. (1997), ‘‘An exploratory investigation of consumer decision making for selected professional and non-professional services’’, Journal of Services Marketing, Vol. 11, pp. 91-104. Fisk, R.P., Brown, S.W. and Bitner, M.J. (1993), ‘‘Tracking the evolution of the services marketing literature’’, Journal of Retailing, Vol. 69 No. 1, pp. 61-103. Foxall, G.R. and Greenley, G.E. (1999), ‘‘Consumers emotional responses to service environments’’, Journal of Business Research, Vol. 49, pp. 149-58. Gabbott, M. and Hogg, G. (1998), Consumers and Services, John Wiley and Sons, Chichester. Glynn, W.J. and Lehtinen, U. (1995), ‘‘The concept of exchange: interactive approaches in services marketing’’, in Glynn, W.J. and Barnes, J.G. (Eds), Understanding Services Management, John Wiley and Sons, Chichester.

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About the authors Luiz Moutinho Luiz Moutinho holds the Foundation Chair of Marketing and is the Director of the Doctoral Programme at the Department of Management Studies, University of Glasgow, in Scotland. He holds a PhD in Marketing from the University of Sheffield in the UK. Research interests include computer modelling in marketing management, consumer behaviour and the marketing of services. He has published extensively in academic journals in the UK and the USA. Between 1987 and 1989 he was the Director of the Doctoral Programmes at the Confederation of Scottish Business Schools and at the Cardiff Business School between 1993 and 1996. He has also received a number of awards for excellence in academic research in the USA, UK and Portugal.

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Fiona Davies Fiona Davies is a Lecturer in Marketing and Strategy at Cardiff Business School, where one of her main research interests is the use of artificial intelligence techniques in marketing. She has worked for several years on developing and testing prototype expert systems in the marketing and strategy areas, investigating their potential as an aid to formulating company strategy, particularly in financial markets, and to selecting new export markets and retail locations. Her research also includes evaluating the potential of different types of neural network in the analysis of consumer and firm behaviour, e.g. market segmentation, modelling customer satisfaction, and predicting company performance. She has published widely in marketing and management journals. Graeme D. Hutcheson Graeme D. Hutcheson is currently a member of the Management and Institutional Development Group at the Faculty of Education, Manchester University. His main interests are in the development and application of generalized linear modelling techniques, modelling consumer and social behaviour and the application of management expert systems. Cleopatra Veloutsou Cleopatra Veloutsou is a Lecturer in Marketing in the Department of Business and Management of the University of Glasgow. She holds an MBA and was awarded a PhD from the Athens University of Economics and Business in Greece. Her primary research interests include the areas of brand management, marketing organisation, relationship marketing and marketing communications. Michael Saren Michael Saren is Professor of Marketing at the University of Strathclyde and he is also Director of Research for the Department of Marketing. Previously he was Professor of Marketing and also Head of Department at the University of

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Stirling. Prior to this he was a Senior Lecturer at the University of Bath where he was awarded his PhD in Management in 1979. Professor Saren is currently working on a number of research projects including an EC-funded investigation into new product development processes with Professor Tzokas. His other research interests cover the areas of marketing and management of technology, relationship marketing, consumer culture and he is co-editor of a new journal, Marketing Theory, published by Sage. In the past he has secured research funding from both public and private sectors including the EC, ICL, ESRC and SERC. In addition, Professor Saren has acted as consultant to several major companies. He has also held external examinerships at 19 universities in the UK and overseas. His work has been published in many academic management journals in the UK, Europe and the USA, including the International Journal of Research in Marketing, Omega, British Journal of Management and Industrial Marketing Management. Nikolaos Tzokas Nikolaos Tzokas graduated and received an MBA from the Athens University of Economics in Greece. He was awarded a PhD from the School of Management at the University of Bath and currently is a Professor of Marketing at the University of East Anglia. His research areas of interest include relationship marketing, customer relationship management, new product development, and sales management. Robert E. Morgan Robert E. Morgan is Professor of Marketing & Strategic Management at the School of Management & Business, University of Wales Aberystwyth, UK. His research interests concern strategic marketing decision processes, organisational cognition and global marketing strategy. He has acted as advisor, workshop leader and executive educator to several large organisations (e.g. BBC; BT; MITEL; RS Components), and Government Departments and Agencies (e.g. Department of Trade and Industry; Foreign and Commonwealth Office, HM Treasury) on these topics and published his research widely. With over 90 research articles published, his most recent papers have appeared in Journal of Business Research, Industrial Marketing Management, Journal of Marketing Management, Omega and Journal of Strategic Marketing, among others. Shelby D. Hunt Shelby D. Hunt is the J.B. Hoskins and P.W. Horn Professor of Marketing at Texas Tech University, Lubbock, Texas. A past editor of the Journal of Marketing (1985-87), he is the author of Modern Marketing Theory: Critical Issues in the Philosophy of Marketing Science (South-Western, 1991) and A General Theory of Competition: Resources, Competences, Productivity, Economic Growth (Sage Publications, 2000). He has written numerous articles on competitive theory, macromarketing, ethics, channels of distribution,

philosophy of science, and marketing theory. Three of his Journal of Marketing articles, ‘‘The nature and scope of marketing’’ (1976), ‘‘General theories and fundamental explananda of marketing’’ (1983), and ‘‘The comparative advantage theory of competition’’ (1995), have won the Harold H. Maynard Award for the ‘‘best article on marketing theory.’’ He received the 1986 Paul D. Converse Award from the American Marketing Association for his contributions to theory and science in marketing. He received the 1987 Outstanding Marketing Educator Award from the Academy of Marketing Science and the 1992 American Marketing Association/Richard D. Irwin Distinguished Marketing Educator Award. Angus Laing Angus Laing is currently a Senior Lecturer in the Department of Management Studies at the University of Aberdeen. His core research interest lies in marketing and in the professional service sector. Having published in European and American academic and professional journals on the marketing and distribution of financial services, his current research focus is on service management and marketing in health care and related professional services. Recent funded research projects have addressed the role of marketing in public sector organisations, relationship management in occupational health, and innovation in community pharmacy. Alongside this research activity he undertakes extensive consultancy and training work with a range of public and private sector organisations. Barbara Lewis Barbara Lewis is Professor of Marketing in the Manchester School of Management. Her teaching and research is related to service sector industries with particular interest in customer care and service quality. She has published widely in journals and at conferences; was founder editor of the International Journal of Bank Marketing; convenor of the UK Services Marketing Workshops for a number of years; and has recently been a co-author of a major text – Services Marketing, a European Perspective. Gordon Foxall Gordon Foxall is Distinguished Research Professor at Cardiff University. He holds doctorates from the University of Strathclyde (PhD Psychology) and Birmingham (PhD Industrial Economics and Business Studies) and a superior doctorate from the University of Birmingham (DSocSc). His chief research interests lie in psychological theories of consumer choice and consumer innovativeness. He is particularly concerned with the development of consumer behaviour analysis, which is concerned with relating consumer choice systematically to the situational contexts in which it occurs. This interdisciplinary research programme integrates economic psychology and marketing by means of a novel methodology that has wide-ranging implications for our understanding of both consumer choice and marketing

About the authors

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management. A prolific author, Gordon Foxall has published 16 books and over 250 articles, papers and chapters. Among his books are the best-selling consumer behaviour text (co-authored with Ronald Goldsmith and Stephen Brown) Consumer Psychology for Marketing and the critically acclaimed threevolume set, Consumer Behaviour Analysis: Critical Perspectives (Routledge, 2002).

498 Gillian Hogg Gillian Hogg is currently Professor of Marketing in the Caledonian Business School at Glasgow Caledonian University. Prior to this she worked at Stirling and Strathclyde Universities. Professor Hogg has published widely on services marketing with a particular emphasis on consumer behaviour in services. She is co-author of Consumers and Services with Professor Mark Gabbott and is currently Deputy Editor of the Journal of Marketing Management.