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Impact of Internet and Technology on Service Marketing - Iloka Benneth Chiemelie, Teng King Wee, Njoku Stanley, Kueh Yi Kia

0.1 INTRODUCTION
     They have been criticism on the investment of technology in the service sector by economist Hackett (1990) and Roach (1991) due to low corresponding improvement compared to that observed in manufacturing. However, other studies by Champy (1993) criticized Hackett and Roach by pointing out that information and communication technologies are vital in service sector for quality service delivery.
     Recent years have seen an increased acceptance of technology in business-to-business exchanges. The role of technology is seen as a fundamental shift in the nature of service delivery (MacDonald and Smith, 2003; Leek et al., 2003; Parasuraman, 1996) and has drawn significant attention from academia (e.g. Osmonbekov et al., 2002; Rao et al., 2002; Wilson and Vlosky, 1998; Bauer et al., 2002; Archer and Yuan, 2000; Dabholkar and Bagozzi, 2002; Dabholkar, 1996; Meuter et al., 2002; Selnes and Hansen, 2001; Rust and Kannan, 2002) media(e.g. Bitner, 2001; Johnson, 2001; Heun, 2001) and government (e.g. e-payment of tax and e-health provision).
     With the recent development of information and communication technologies, a growing number of business-to-consumer (B2C) and business-to-business (B2B) firms are shifting from expensive conventional business practices to low-cost automated services technologies. However, cost saving is not the only motivation for shifting to technologies, especially in the business context. Other benefits include efficiency, return on investment, accessibility and effective management(Dabholkar, 1996; Gallagher, 2002).
     Based on the theories above, this research based paper will analyze the impact of technology in service marketing. The main objective of this paper is to provide evidence that technology has an impact on service marketing. This impact could be positive or negative, thus to meet the requirements of this research paper, we will not introduce any premature argument or comparison of the impacts posed on service marketing by technologies. This paper is divided into three section based on a clear understanding of technology and service marketing. The main body links technology to service marketing by providing clear examples and critiques for the adopted theories. The conclusion is a summary of the paper providing relevant recommendations and guidelines for further research work on the same topic.  
1.0 THEORETICAL BACKGROUND
     The most widely used technology in service marketing is information and communication technology (ICT). This is the convergence of computing, telecommunication and imaging technologies. Information and communication technology have had a radical impact on IT users, their work and their working environment. In its various manifestations, IT is used in service marketing for data processing, information gathering, collection of materials, knowledge accumulation, and expedites communication (Leek et al., 2003). In facts, IT plays a vital role, if not most in all service marketing function of today’s business world. 
     Marketing involves creating customers interest for a product or service, thus service-marketing is a branch of marketing that focus on creating customer’s interest for a service. Kotler (1991) described service as any act or performance offered by one part to another that is essentially intangible and does not result to any ownership. Collins and Payne (1991) shared more light on Kotler’s idea by defining services as any complementary activity that does not directly produce a physical product – that is the non-goods part of the transaction between customers and provider. They are 5 elements that are used to differentiate a service from product and they include:
  • Lack of ownership – you can’t own and/or store a service just like you can for a product. For instances, when you buy burger from KFC, you can keep (store) the burger which was given in exchange for your money (service), but you can’t keep or own the service offered you (e.g. customer assistances, and delivery service).
  • Intangible – you cannot touch or hold a service (Berry, 1991). Taking education as an example, you can buy your books which are the product, touch and keep hold of it, but you can’t touch or keep hold of the lectures you receive from the same books.
  • Inseparable – service can’t be separated from the service provider. Take for instances when you are in a shopping mall, you buy your goods and go home with them, separating them from the shopping mall, but you can’t go home with the services offered to you by the sales girls in locating the product you are looking for.
  • Perishable – service has a specific time and can’t be stored for a later use like product. If you are travelling by air, the service will only last for the duration of the journey, while the free duty (products) can be taken home for a later use.
  • Heterogeneous – different services are different in the experience you gain from it. Let’s take a hair salon for an instances, the same service will be different in a different hair salon, because the hair dresser is more or less experiences or due to the organization’s culture.
1.1 THE 7-PS OF SERVICE MARKETING
     The traditional marketing mix originated from marketing of goods for consumer markets and consists of 4P’s: Price, Promotion, Place, and Product. The marketing mix approach has been criticized for being incomplete, because it does recognize customer-needs and industrial marketing (Bitner, 1995; Gronroos, 1990; Gummesson, 1997)Judd (1997) proposed the fifth element as people, but Booms and Bitner (1981) created 7P’s by adding Participants, Physical Evidence, and Process to the original 4P’s.
Figure 1
Source as adopted from: 7P’s of marketing by Booms and Bitner (1981).
     The figure one above highlights all the elements involves in the 7p’s of service marketing and further explanation of the impact of technology on service marketing will be based on analysing all the elements.
2.0 IMPACT OF TECHNOLOGY ON SERVICE MARKETING
Figure 2
     Figure (2) above generally illustrates how technology is implemented in services marketing and the significant impact it can have. These impacts are further explained below. From the diagram above, it can be noticed that “Face-2-Face” for technology to be fully implemented into service marketing, deploying conventional marketing practices are still very important.
     Zeithaml et al. (1990) suggested improved service as being critical in gaining a competitive edge, which in turn can be facilitated by information technology. They pointed out a union of “high tech” and high touch” as being important, and stressed that decisions regarding the type of technology to be employ should not rate precedence over strategic consideration. It has been highly believed that information technology has a positive impact on firm’s performance, though some cautions has been mentioned regarding the possibilities of technology replacing all conventional business practices (Urgo, 1996). Furthermore, Rubenstein and Geisler (1990) stated that to effectively use information technology, human resources as well as technology must be invested in.
     Concerning the impact of technology on service marketing, Heskett et al. (1990) pointed out that the use of information technology will affect both customer and the service providers.  Our interest in the service marketing function follows that of Jackson (1990) who argued that services can be changed effectively by the use of information technology. Such benefits include minimized bargaining power between consumers and marketers, reduced new market entry by competitors, and improved new product and market development.
     Studies related to the impact of technology on service marketing have been conducted. In recent papers, Mather and Dagi (1996) found that the use of information technology contributes to successful implementation of international strategies in service industries. Arguing based on Martell (1988) information technology will fasten changes related to marketing activities. Specifically, it will enable service firms to:
  • Track competitors pricing more effectively in other to determine their own pricing strategies.
  • Conduct market researches more accurately.
  • Enhances more efficient and effective marketing communication.
     Porter and Millar’s (1985) study suggested that utilizing information technology changes the production process, reduces cost, widens markets, and facilitates new business creation. Jackson (1990) based his argument on the same issues, relating technology to competitive advantages, arguing that developed nations should use their technologies to compete with low-price competitors from developing nations.
     Not with standing all the positive impacts, they have been noticeable lagging in the implementation of technology in service marketing. For instances, Bonk (1996) stated that management of small and medium-sized services in Korea must implement technology in other to survive the era of globalization thus suggesting in adequate adoption of technology in Korean service firms. It has also been reported that the adoption of information technology has been incomplete in the UK, and in general, has not been used by marketing managers (Fletcher, 1990). This lagging has been credited to the nature of marketing itself, which does not encourage the use of information technology in its activities(Kench and Evans, 1991). Marketing always stress on the qualitative and creative nature of its activities. Segmentation, promotion, innovation and creative strategies are all necessary elements of a marketing manager’s role and such task are difficult to computerize.
     Despite such limitations, use of information technology in marketing could be endless, and the impact of technology on service marketing firms and its marketing efforts is potentially significant (Hartland-Swann, 1990). However in other for service marketers to adopt and use technology effectively, the benefits, challenges and characteristics that discourages it use must be studied and analyzed. For this paper, our analysis will be based on the 7p’s of service marketing. Thus, the impact of technology on service marketing will be analyzed below with clear examples and implementation based on the points highlighted above.
3.0 LINKING THE IMPACT OF TECHNOLOGY TO THE 7P’S OF SERVICE MARKETING
3.1 PRODUCT
     Many might argue that there are no products which are not suitable for internet transaction. The internet has offered opportunities for product argumentation by allowing individual customers to customize their products and augmented services according to their taste(Balasubramanian et al., 2001). This makes products and services more tailored towards the needs of particular customers. Some pure-play (online only) marketers offer services and products that are not seen in the market; thus success have been claimed for the variety of different product, both physical goods (e.g. DVDs and I pads) and services (e.g. Direct banking, insurance, travel, etc.).
     As the world continues to get smaller through technology, service marketers are creating a new brand of Pavlov Dog’s that make online impulse purchases. Service marketing has basically eliminated intermediaries (middle-men) and the cost they bring along, thus creating new products, at lesser price and higher values. Bevan and Murphy (2001) stated that value is created not by the individual marketer, but by the integrated service offering of value-as-convenient and value-as-excellence.
     Technology has increased the creation of new products such as EBay and Face book. EBay is an online service provider that supports instantaneous and live transactions between customers and sellers. Customer can purchases their products from EBay, bargain or talk with their suppliers at Skype, and make payments from PayPal. This is an example of how technology has impacted on service marketing. By allowing all transactions online, technology has been able to eliminate the cost of building a market for sales, a bank for the payment and maintenance cost. This on the other hands, reduces the selling prices, increases customers bargaining power, reduces time of delivery through faster delivery routes like DHL, increased customers trust through feedback forums, and increased orders through impulse purchases. Nevertheless, a hindrance to this positive result is the fact that technology has also increased online crimes such as counterfeiting, imitation, fraud and misguided communication strategies. These negativities, no matter how little tend to have catastrophic impact on the image of the company involved.
     Thus, it is necessary to summarize the impact of technology on service marketing with relations to products by saying that technology increases new markets, reduces cost, leads to better value chain management, enhances customers-company trust but could also dent company’s image due to high accessibility. Comparing EBay to the conventional market system shows that technology has created more excellence for companies and convenience for customers.
3.2 PRICE
     Initially, it was believed that technology (e.g. internet) could benefit organization due to better value chain management and elimination of intermediaries, hence improving profit margins if organizations choose not to pass the benefits to their customers. However, because customers has become more empowered by being able to check, negotiate and track prices of the services they desire through technology (e.g. computers, and mobile phones), the issue of pricing has become a pressure point for service marketers (Ancarani, 2002). The internet has the criteria of an efficient market except for low price dispersion(Strauss et al., 2003).
     The two major impact of technology on service marketing is the difficulty it creates in constructing market positioning and differentiation using price (Simon and Schumann, 2001). An example the impact of technology on service marketing with regards to price is the airline industries. Compared to the counter branches, a flight from New Jersey to Oklahoma at $20 from November to December 2011 using American Airways will have a daily or weekly increase in price for the same airline, the same aircraft and the same destination. Usually they tend to be lower than the prices offered at their brick and mortar branches. This is because consumers, who have access to information technologies, can compare prices of other airlines by just a click compared to those who purchase from physical branches. Technology thus, makes price differentiation and positioning difficult in service marketing, because service industries don’t even know the consumer they are dealing with until they provide the firm with their information, and online consumers tend to be price rather than brand or company orientated.
     Additionally, the advent of online auction has had the impact of pushing prices downwards (Hackney and Griffiths, 2002). Service companies that use technology (virtual world) to perform their day-to-day activities like Amazon.com, have contributed to effective price competition by forcing the prices of their bricks and mortar competitors down. This they have done through creating value for their products, offering convenience to their customers (24/7), and delivering excellence to their markets through customer feedback. Service marketers should consider this when planning market positioning, and price differentiation.
3.3 PROMOTION
     Promotion tools such as advertising, sales promotion and direct marketing has been enhanced by advancements in technology, which has offered the potentials for mass communication with customers. Tele-marketing, e-mail, the internet as well as other digital Medias, have supplemented the conventional tools. The synergy created by technology innovation in service marketing outweighs the use of traditional tools by far. Hardaker and Graham (2001) suggested that the use of technology has increased effectiveness and efficiency in communicating with customers. Technology has the potential to deliver clear information in service marketing, entertain and be creative in communication (Adams and Clark, 2001).
     Let’s take for instances some of the marketing tools like advertising. It has been argued that although the internet is a young medium for undertaking adverting, it has already reached maturity level and have been adopted as a branding medium (Meadows-Klue, 2002). Technology has made advertising far effective and efficient through reduced advertising cost, and wider customer coverage. They are slowly replacing traditional methods like banners, and even some conventional methods like new papers are presently adopting the use of internet. This is because technology (the internet) offers an effective advertising medium, through worldwide coverage, and efficient because this advertisements are visible 24/7 and at a lower price. As low as US$ 5, service marketing firms can place advertising in web portals and it will be made visible to all viewers across the globe. Thus, offering a better advertising medium than the conventional methods (e.g. new papers, bill boards etc.) that are limited to specific region and more expensive.
     Direct marketing is another instance of how the technology has impacted service marketing with regards to promotion. Direct marketing enables customer-company relationship through the creation of trust in virtual world (Chadwick, 2001)Allan and Chudry (2000, p. 82) state that the internet provides an excellent medium for communicating with customers on individual level because it is immediate and has direct interaction capabilities. Compared to traditional marketing tools, technology has provided customer conveniences and created brand loyalty. This is because it has reduced queue, and inconveniencies posed by traditional method in terms of time spent. Within seconds, service marketers can send out a direct email to all the contacts in their database, greeting their by their names, proving them with information related to the products they need. By using the company’s email, customer can know who is contacting them, and since technology does not allow duplication, www.newinti.edu.my can only be from Inti College Sarawak, thus, builds customer trust and loyalty in service marketing.
Figure 3
Source as adopted from: Apple’s Official Website 
     Figure (3) above clearly illustrated how technology can be fully incorporated into promotion and other service marketing elements to yield a positive return. From the figure above, we can see that basically all activities involved in traditional business transactions and other activities that seem impossible in traditional system of business has been made possible and easy by adopting the necessary technologies to carry out these activities.
3.4 PLACE
     A notable impact of technology on service marketing is the potential it offers service marketers to shift from non-virtual marketplace to a market-space, incorporating transaction and distribution virtually(Lockett and Blackman, 2001). The ability of service marketers to establish contact with and subsequently serve customers has received appraisal from researchers as a cost-reducing way of distributing service directly from service providers to their consumers. The internet technology for instance has been seen as exciting, and for some service marketers the opportunity to enter new markets which had previously been inaccessible to them (Allan and Chudry, 2000).
     Pure-play service firms for instances Amazon.com, offer the best clue on how technology enhanced service marketing with reference to place. Technology offers cheaper and easy means of business establishments, and market entry through the internet. Companies that don’t have the funding to establish the normal brick and mortar shops can just design a website and start running their business transactions virtually. The internet presently provides all facilities for business such as e-procurement (purchases), e-payment (paying for goods ordered), e-delivery (keeping track of your goods when they are being delivered) and e-feedback (giving feedback on the quality of the service you received). This is more convenient, less expensive, and more effective, compared to the traditional business methods.
3.5 PEOPLE
In service marketing, the people factor is widely accepted as having a great deal of influence on consumer satisfaction. The variability in service delivery is often contributed by individuals or service deliver mangers involved in the interchange. Likewise, customer satisfaction is always related to the personality of the person who provides the services, their reluctance to trust in and rely on provider’s abilities. Technology does not provide a great deal of positive influence on the people factor due to lack of personal interplay (face-to-face) in carrying out the service functions.
Taking online marketing for an example, there is no personal interaction between a customer and their service providers, or between other customers. Trust has to be generated by other means such as brand and direct messaging. This is because, since the internet offers an easy way of establishing business, it also ushered in a new era of fraud, and it is difficult to establish who the culprits are since it does not offer any physical evidence of existence like the brick and mortar stores. Thus this is a negative effect of technology on service marketing.
3.6 PHYSICAL EVIDENCE
Particularly related to service marketing, physical evidence offers consumers the chance to come back and give clues about the quality of services received. Such physical evidence cannot be seen in virtual companies that implements internet technologies in all their business activities, as physical entity does not exist. Because of the lack of proximity in electronic service marketing, it is possible to employ technology to deliver virtual evidence to the customers instead.  This can be the form of a combination of graphics, brand or third-party endorsement, as well as pre-, during-, and post-transaction reassurance sought by customers who are not convinced by the virtual evidence they see.
Taking EBay for example, customers are encouraged to report back on the services provided by the sellers and, similarly sellers can report back on consumer’s behaviour such as prompt payment.  Such service provides an assurance on the kind of individual browsing through the site, and consumers might be discouraged to pay online due to lack of evidence and might prefer streaming down their search options to get a physical outlet where they can make the payments for a particular service.
3.7 PROCESS
Process basically refers to the service element that allows consumers to experience the service being offered by an organization. For instances when you want to enrol for a new academic semester, the process starts by filling up the enrolment form, paying the enrolment fee and getting the receipt of payment from the relevant department.
Technology has improved the process involved in service marketing. For instance road transportation has been a system used with paying directly at the service provider. But advancement in technology has offered e-booking and reservation to all means of transportation. The banking sector is a good example of how technology has influenced easy and convenient banking. Through e-banking, technology has eliminated time consumes in filing up form, queuing for turn, and risk of transactions involving bulk cash. Basically all other transactions conducted in traditional bank sectors are done through e-banking; this has improved consumer conveniences, and encourages online transactions. It is also consider a safe means because it does not involve possession of bulk cash just like the traditional banking sector does when dealing with big transactions.
4.0 CONCLUSION
The use of 7 Ps model offers service marketers the structure to evaluate the impact of technology of each service marketing element. While technology is viewed as a friend, stranger or intruder by some, the idea is that it is becoming more and more adopted. Nowadays, online promotion by organizations is almost expected and organizations encourage visits to their websites by the use of integrated marketing communication tools such as text messaging, broadcast and print adverts.
However, although technology has brought many positives impacts on service marketing like increased sales, conveniences, customer loyalty, it is still not very well received and adopted by potential customers. Thus, the assertion of online only by some web based service firms like Amazon.com has been described as myopic and premature.
Originally heralded for its low price options, technology has been superseded by the value of perception for customers in service marketing. Customers are indeed willing to pay a higher price in the bricks and mortar stores compared to online because they can perceive value for doing so.
In terms of process, organizations uses technology to design the steps they want to customer to incorporate in ordering services, but in reality customers might not use their steps or circumnavigate to much physical process. For instances, majority of customers prefer to pay for the goods they purchased online through wire transfer or PayPal compared to Credit Cards because of the perceived side effect of online theft that could mount huge some of expenses for the victimized consumers.
Technology can only compliment distribution activity. For instances, that you track your service online, and see that it is nearing the completion stage does not necessary means you will see the completed stage of the product or service involved. History has shown that to rely on technology without alternative means of distribution might be myopic, and has resulted in closure of some pure-play businesses (e.g. Boo.com). However technology can add value if it is seen as an integral part of the whole distribution process, but in most cases, there is a need for both conventional and virtual distribution to merge together.
The continued deployment of technology as part of service marketer’s toolbox is assured, if creative use is made in new technology to reassure consumers reduced risk, and create value for transaction as well as maintaining relationship.  Service marketers need to evaluate their service offerings frequently to stay in touch with the happenings in the marketing systems as a way to create a kind of virtual evidence for their services. This haven been done, will go far in reducing if not eliminating all the negative impacts posed by technology on service marketing.
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