A Strategic Framework Fordigital Marketing Management/Digital Transformation

A Strategic Framework forDigital Marketing Management/Digital Transformation

Abstract

The purpose of this article is to develop a conceptual framework that further our understanding of the role that digital marketing can play within firms and specifically within business processes that create and capture customer value and, in turn, shareholder value. The framework highlights how digital marketing efforts must be ingrained as an input to business processes and how it results in output that build, sustain and deepen customer and shareholder value. In detail, the goals of the article are three-folded: First, to articulate the role of digital marketing as generator and integrator of market and customer inputs to the business processes. Second, to depict how digital marketing can affect cash flows positively (e.g. brand equity) and reduce risk. Third, to specify the role of digital marketing in the relationship among business processes and cash flows.

1. Introduction

According to Srivasta, Shervani and Fahey (1999) the role of marketing in any organization can be seen either narrowly to customer view or broadly to marketing perspective to organization, in here we embrace the holistic view. Srivastava et al. (1999) present an organizationally embedded view of marketing as an entity that can be viewed as part of the three core business processes namely customer relationship management, supply chain management and product development management. In turn, these three core processes create value for the customer and eventually value for the shareholder.

Since the publication of Srivastava et al. (1999), marketing as function, practice and science has witnessed considerable shift from the use of traditional marketing strategy, programs and tools (TV, radio, newspaper, magazine, e-mail, static websites and trade events) to encompass ever increasingly amount of digital marketing tools (search engine marketing, website morphing. marketing automation, predictive algorithms, behavioral andmobile marketing, augmented reality, digital signage, social media, internet of things). Ad spending shift from late 1990s to today by Fortune 500 companies illustrates the change from traditional/analog to digital. Today, which was unheard of roughly 15 years ago, most of the big companies have created specific budgets for digital marketing and have created a digital marketing unit with Chief-of-Digital marketing (CMO)to take care of digital marketing activities within their organizations in cooperation with the CIO.

Digital marketing in here is understood broadly, reflecting the widespread definition of marketing developed by American Marketing Association (Italics added), to encompass “Digital marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large in digitized way.”

Due to the witnessed shift in the marketing activities and increasing focus on value based marketing activities the purpose of the article is to develop a conceptual framework that broadens our understanding of the role of digital marketing in general and specifically in relation to business processes that create the value. The intent of the framework is to highlight how digital marketing is linked to the three core business processes and how it may influence the outputs of those processes. Specifically the research aims to answer following research questions: Is and how is digital marketing influencing the three core business processes? And how subsequent value created and captured is changing?

A conceptual framework is presented that integrates digital marketing into three core business processes named here as customer experience management, supply chain management and innovation as an entity that is partly controlled and influenced by marketing actions. It is also shown how digital marketing creates value for both customers and shareholders in the customer relationship management. Moreover, it is also depicted how the digital marketing enhances the value created in the supply chain management. Additionally, it is illustrated how digital marketing influences innovation. More importantly, the traditional view of digital marketing as customer focused is expanded to encompass a more broad idea of market perspective to digital marketing with the developed strategic framework pinpointing to the digital marketing management.

1. Methodology

We follow qualitative exploration research design. One of the researchers developed the digital marketing framework first as pedagogical tool based on the literature review and conceptual analysis. Pedagogically idea is to show the broader view of the digital marketing rather than the narrow view e.g. social media only focus or neglecting industrial marketing activities. After enactment it has been employed in numerous digital marketing classes from 2009 onwards. Main five iteration rounds with the students, executives, colleagues and the four expert interviews led to reanalysis and rewriting of the framework proposed.

The first iteration took place at the Helsinki School of Economic which is nowadays Aalto School of Business. The digital marketing framework has been utilized in the Aalto School of Business from 2009 onwards at the Master level digital marketing class that has been lectured sometimes twice a year due to its popularity. Altogether, the class has attracted over 1000 students. Each class has evaluated the overall teaching but also specifically provided comments on the digital marketing framework. Over the years the digital marketing framework has been clarified and improved based on the comments and discussions with the students (most of the students at Aalto School of Business work part-time while they study so they have also practical experience).

The second iteration started almost parallel to the first, as the digital marketing framework has been utilized also in the University of Oulu, Oulu Business School (AACSB) from 2010 to 2014 while teaching three day executive MBA course “Digital Marketing”. Altogether, the class has attracted over 100 executives (with academic qualifications). Over the five years the digital marketing framework has been clarified and improved based on the comments and discussions with the executives.

The third iteration involved international aspect as the digital marketing framework has also benefitted from other international student and executive exposure from Italy, Greece and Australia during the period of 2010-2015. Altogether over 150 students and executives have participated Digital Marketing or similar classes. Similarly, the digital marketing framework has benefitted from the comments received during several guest lectures given in Finland and abroad.

The fourth iteration is most recent one and the digital marketing framework has been utilized in the University of Cape Town, South Africa in 2016 while teaching “Digital Marketing” class. Altogether, class attracted over 30 bachelor students with divergent backgrounds. Based on the student feedback, comments, one workshop, and discussions the digital marketing framework has been further clarified and improved. Digital marketing framework has been also used at the DBA course “Digital Marketing Management” at the Aalto Executive Education and also at the doctoral course “Digital marketing” at the Oulu Business School.

The iterations from one to four mainly involved students, executives and those participating the guest lectures given at different institutions. The fifth iteration involves in-depth interviews. In 2013 four key-informant interviews (Kumar et al., 1993) lasting over one hour each were conducted to discuss digital marketing trends but also more specifically focus on the digital marketing framework. Key-informants were selected to reflect the areas of the three main business processes and idea was to use them to clarify and depend the understanding of each digital marketing technology and its relation to the business processes (value creation and capture).

First, key-informant (with over 10 years of experience in digital marketing) was selected from advertising industry that has been heavily influenced by digitalization of advertising. Second, key-informant chief-of-sales (of one of the fastest growing software companies in Finland, over 10 years of experience in digital marketing) was selected from the business-to-business industry selling digital marketing tools to the business-to-business industry. Third, key-informant, CEO, digital marketing consultant and software house owner (with over 10 years of experience in digital marketing) was selected from retailing industry. Fourth, key-informant (with over 10 years of experience in digital marketing) was selected from the consumer orientated industry (games and gamification).

Each iteration with the executives and students has brought small changes to the digital marketing framework especially to the sections dealing specifically with each business process and what digital marketing technologies could be aligned with that process and how. At first, the digital marketing framework was presented as integrative framework at the end of a course but as years followed it became clear that students and executives wanted to digital marketing framework to be presented during the first lecture to orient themselves to what was to unfold. More importantly, the feedback from the students from diverging backgrounds, executives, those participating guest lectures helped to fine grain the business process specific digital tool utilization and metrics related to their measurement. Also students provided ample of examples from their everyday life where they have encountered different types of digital marketing tools being used.

1. Elements of the digital marketing framework

3.1 Digital marketing Strategy

First element is the strategy. Usually, the business strategy gives company the guidance on what business we are in and where we aim to be in the 3-4 years’ time. It gives general direction. Then, the other element is the customer strategy which says what type of customers we want to acquire and with what costs and then what type of customers we don’t need and with what cost we are going to defend our existing customer base. These two strategies give direction for the three core processes that create and hopefully also capture value for us.

3.2Value management (Value co-creation and capture)

3.3Customer experience management

Role of the digital marketing is to complement traditional marketing activities while in some rare case also to replace some marketing activities.

3.4 Supply chain management – demand chain management

3.5 Innovation