Organizational, strategic and technical barriers to successful implementation of database marketing

[•UTTERWORTH ~] E I N E M A N N

0268--4012(95)00005.-4

International Journal of Information Management, Vol. 15, No. 2, pp. 115-126, 1995 Copyright © 1995 Elsevier Science Ltd

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Organizational, Strategic and Technical Barriers to Successful Implementation of Database Marketing

K FLETCHER AND G WRIGHT

This paper evaluates the strength of perceived barriers to the adoption of database marketing (DBM) in the UK financial services sector. Using an obtained sample of 46 per cent of all major banks, building societies and insurance companies it is revealed that organizational and strategic barriers are seen as less important than technical barriers for both adopting and non-adopting organizations. This result, coupled with the low level of sophistication of current systems and the interest and importance of DBM to the majority of financial services organizations, suggests that current systems are unimpeded by organizational and strategic barriers. We argue that the future promise of more sophisticated DBM applications to give strategic advantage is thus likely to be compromised, due to the lack of an awareness, amongst our respondents, of the criticality of organizational and strategic barriers which are well documented in the literature.

Keith Fletcher and George Wright are with the Strathclyde Graduate Business School, 199 Cathedral Street, Glasgow G4 0QU, UK.

1pARSONS, G L (1983) ' I n f o r m a t i o n technol - ogy: a new competitive weapon' Sloan Management Review 25 (1) 3-13; MCFAR- LAN, F W (1984) 'Information technology changes the way you compete' Harvard Business Review 84 (3) 98-103; IVES, B AND LEARMOUTH, G (1984) 'The information system as a competitive weapon' Com- munications of the ACM 27 (12) 1193- 1201; PORTER, M E AND MILLAR, V E (1985) 'How information gives you competitive advantage' Harvard Business Review July/ August, 149-160 2GIBSON, C AND NOLAN, R (1974) ' M a n a g i n g the four stages of CDP growth' Harvard Business Review January/February, 76-88; PRICE WATERHOUSE (1990) Price Water- house Information Technology Review Price Waterhouse, London; NOLAND, R (1979) 'Managing the crises in data processing' Harvard Business Review March/ April, 115-126 3MUNRO, M C AND HUFF, L (1985) ' I n fo rma- t ion technology and corporate strategy'

cont inued on page 116

Introduction For many years both practitioners and academics have been arguing that using information technology within an organization can bring substantial gains, l These gains initially arose through increased efficiency as back-office operations, such as accounting, stock control and wage processing were computerized but as organizations became more sophisticated in their information systems then operations transferred to front-office applications, such as marketing. 2 The strategic use of information technology, compared with transaction processing or oper- ational control, has gained the most attention in recent business literature 3 perhaps because it has been shown that simply automating existing processes brings marginal savings of 10-20 per cent, while a more fundamental improvement to business practices can triple the return. 4

However , the initial enthusiasm for the strategic use of information technology (IT) has been reduced by evidence that IT can be a competit ive burden 5 instead of giving competit ive advantage, and that the advantage might not be sustainable. 6 There have been some well publicized failures in at tempting to implement IT 7 such as Taurus, the London Stock Exchange computer project which was cancelled in early 1993 after 12 years of planning and a cost to the City estimated at £400 million. Such failures have focused attention on the problems of implementing IT.

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Barriers to implementation of database marketing: K Fletcher and G Wright

continued from page 115 Business Quarterly (Canada) 50 18-24; CLEMONS, E (1986) 'Information systems for sustainable competitive advantage' In- formation & Management 11 (3) 131-139; REIMANN, B C (1989) 'Sustaining the competitive advantage' Planning Review 17 (2) 30-39; GOLDSMITH, N (1991) 'Linking IT planning to business strategy" Long Range Planning 24 (6) 67-77 4ERNST, R (1989) 'Why automating isn't enough' Journal of Business Strategy May/ June, 38-42 5WARNER, X (1987) 'Information technology as a competitive burden' Sloan Manage- ment Review Fall, 55-59 6WISEMAN, C (1988) 'Attack and counter attack: the new game of information technology' Planning Review 16 September/ October, 6-14; MmON, M, CECIL, J, BRADI- CICH, K AND HALL, G (1988) 'The myths of realities of competitive advantage, the challenge of information technology' Datamation 34 71-76; THACKRAY, J (1990) 'Information's vain hope' Management To- day October, 119-122 7NISSE, J (1987) 'UBS coping with failure' The Banker June, 63, 66; DONNELLY, R (1987) 'Exxon's "office of the future" fias- co' Planning Review 15 (4) 12-16; CAUL- KIN, S (1989) 'Crippled by computers' Man- agement Today July, 85-88 8SCHULTSZ, D AND DEWAR, R (1984) 'Tech- nological challenge to marketing management' Business Marketing (USA) March, 20-31, 36, 38, 40-41 9RUCKS, A AND GINTER, P (1982) 'Strategic MIS: promises unfulfilled' Journal of Sys- tems Management March, 16-19 10BEATrY, C AND GORDON, J (1988) 'The implementation of CAD/CAM systems' Sloan Management Review 29 (4) 25-38 z lOp cit, Ref 4 12SCARBOROUGH, H AND LANNON, R (1988) 'The successful exploitation of new technology in banking' Journal of General Management 13 (3) 28-51; WILSON, T (1989) 'The implementation of information systems strategies in UK companies: aims and barriers to success' International Jour- nal of Information Management 9 (4) 245- 258 13OALLIERS, R (1991) 'Strategic information systems planning: myths, reality and guide- lines for successful implementation' Euro- pean Journal of Information Systems 1 (2) 55-64 14pRICE WATERHOUSE (1992) Price Water- house Information Technology Review Price Waterhouse, London

Problems and issues in IT use

In discussing the problems and issues in the use of IT, many different factors are usually mentioned. Schultz and Dewar 8 referred to the technological challenge to marketing management, which they detailed as the way technology was changing the market place and the need to change organizational structures to meet the challenge. Indeed, these two elements, technology and organization, are frequently mentioned when impediments to successful implementation or use of IT initiatives are discussed.

Rucks and Ginter 9 reflected on the previous decade and argued that the promise of strategic MIS was largely unfulfilled and that this was due to organizational structure deficiencies, communication problems between users and information systems (IS) staff, and deficiencies in strategic planning models which did not reflect reality.

Beatty and Gordon 1° researched the barriers that exist to successful introduction of IT systems (in this case CAD/CAM) and reported that they fall into three categories: structural, human and technical. Structu- ral barriers are those factors inherent in the organizations structure or systems that are not compatible with the new technology. This can include communication, authority flows and planning systems, and reflect how the organization has traditionally done things. A failure to perceive the strategic benefits of the investment, a lack of co-ordination and co-operation due to organizational fragmentation, and a perception of high risk are all symptoms of organizational problems. Human barriers include psychological problems that arise in most periods of change, such as uncertainty avoidance, and resistance to loss of power or status. Technical barriers, they noted, were factors in the technology itself, such as lack of system compatibility.

Ernst 1~ also stresses functional, technical and human factors relating to business process improvements. For Ernst, functional barriers relate to information and work flows and include identification of strategic information needs. Technical factors relate to the need for flexibility and information handling capacity, with the dangers of disjointed islands of automation being created which limit information flow. Human factors relate to need for job redefinition and the resistance to change which lead to a lack of company wide flexibility or commitment.

Other authors have confirmed that the key barriers to IT implementation tend to be organizational, rather than technical, and that these barriers are often understated. 12 Galliers, for instance, focused on general management problems in successful planning of strategic information systems and concluded ~3 that key factors were the attitude, commitment and involvement of management; the current sophistication of IS within the company; the ability to measure and justify the benefits of strategic IS; and the integration of IS into business strategy.

While the perception of the importance of these barriers is likely to change over time, Price Waterhouse, who conduct a yearly survey of IT executive views, report that senior IT executives view the major problems facing them as cost containment, integration of systems, meeting deadlines and the choice between open and propriety systems.14 The barriers identified by Price Waterhouse are thus mainly technical in nature and while organizational issues were noted, such as the need for retraining and redundancy caused by the trend towards PCs, downsizing and open systems, the senior IT executives' concerns were mainly on the fragmentation of data and systems caused by

1 1 6 International Journal of Information Management 1995 Volume 15 Number 2

15"IURNBUt.I., I' AND LEWIS, B (1982) ' B a n k

marketing' European Journal of Marketing 6 (3) 36-44 I¢'M('IVER, (; AND NAYLOR, (i (1986) Marketing Financial Services IOB, London IVMITCHt~I,L, J AN[) SPARKS, L (1988) ' T e c h -

n o l o g y and bank marketing information system" Journal of Marketing Management 4 ( 1 ) 50-61 I'~WIELI), I) AN[) SMI'I[t, S (1987) 'Banking on the new technology: choices and con- straints' International Journal of Informa- tion Management 7 (3) 115-129 P~('O~NAN, N (1987) 'The technical environment of banks and its implications" The International Journal of Bank Marketing 5 (4) 15-31 2'~[<V['l,l., J (1987) 'The impact of technology on bank operations and bank marketing' The International Journal of Bank Market- ing 5 (4) 5-14; DOVER, P (1986) ' Innovation in bank: the in-home computerised banking example" The International Journal of Bank Marketing 5 (1) 39-54; HEFFERNAN, S (1984) 'New technology and competit ion in British banking' City University Business School Working Paper No 63 :IsPEED, R (1988) "The response of banks and building societies to recent changes in their environment and the competitive strategies available to them" Proceedings of Marketing Education Group Conference 3 474-502 Z-'HOWARD, r: V (1989) 'Strategic thinking in insurance' Long Range Planning 22 (5) 76-79; ENNIZ~W, WRI(}|IT, M AND WATKINS, T (1990) 'New competit ion in financial services" Long Range Phmning 23 (6) 811-90


decentralization and the cost explosion caused by open systems and end-user control.

Overall, research into the barriers to organizations' adopting IT intervention are consistent with a general conclusion that organizational barriers are more important than technical barriers, but that this is frequently not recognized by the adopting firms. Organizational barriers relate to structural issues, such as fragmentation and poor relations between functional departments, and an acceptance, by senior management, of the strategic benefits of IT intervention and a clear strategy for its implementation. These organizational barriers are likely to be a particular problem for marketing applications of IT, due to its boundary-spanning activities and its interface with the market place. While this is a general conclusion, there is a lack of empirical evidence relating specifically to the marketing function.

It is therefore not clear whether, in practice, organizations have yet learnt that the adoption of new technologies which lead to fundamental change require a much greater focus on the strategic and organizational implications of the technological intervention, as well as the immediate technical problems of incompatibility, fragmentation and cost containment.

Any lack of appreciation of the organizational barriers is likely to be of paramount importance in industries such as the UK financial services sector which, since deregulation, has invested heavily in IT in attempts to gain competitive advantage. This was the stimulus to this research which considers a major marketing innovation, database marketing, and investigates the proposition that UK companies in the financial services sector, while recognizing the strategic potential of IT in marketing, do not recognize the organizational and strategic implications of this intervention.

IT in the finance industrv

The financial services industry, and banks in particular, have traditionally been hostile to the marketing concept 15 and thus while the industry typically has a high level of computerization this has tended to be an aid in transaction processing (ie back-office application) rather than strategic or front-office in application.

In the latter half of the 1980s, there was evidence that while banks were becoming more market orientated 1~' they had not implemented the systems necessary to support such an orientation. ~7

Wield and Smith Is review the competitive pressures on banks and the technical changes taking place and argue that the organizational and political aspects of technological change are as important as the systems themselves. Others have also shown the interaction between technological and organizational change in the finance industry t9 and how competitive forces are driving this, along with the increased market focus, z° Indeed, the changes which are taking place are not limited to the banking sector. Building societies 2j and insurance companies e2 are undergoing similar changes.

In this study, we survey the financial services sector and investigate perceptions of barriers to the use of a computerized customer information file to drive marketing campaigns, commonly called database marketing.

The concept of database marketing (DBM) grew during the late 1980s when developments in computer software and hardware allowed the

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23RAPP, S AND COLLINS, T (1987) Max# marketing McGraw Hill, New York 24SHAW, R AND STONE, M (1988) ' C o m -

petitve superiority through database marketing' Long Range Planning 21 (3) 24-40 25FLETCHER, K, WHEELER, C AND WRIGHT, J

(1990) 'The role and status of UK database marketing' Quarterly Review of Marketing 16 (1) 7-13; FLETCHER, K, WHEELER, C AND

WRIGHT, J (1991) 'Database marketing: a channel, a medium or a strategic response' International Journal of Advertising l0 (2) 117-127 26precision Marketing (1992) 26 October, 20 eTprecision Marketing (1990) 26 February, 37 28TAYLOR, J AND OAKE, J (1991) ' M a x i m i s -

ing financial services: sophisticated database marketing' International Journal of Bank Marketing 9 (2) 17-20 29FLETCHER, K, WHEELER, C AND WRIGHT, J

(1992) 'Success in database marketing: some crucial factors' Marketing Intelligence & Planning 10 (6) 18-23; FLETCHER, K, WHEELER, C AND WRIGHT, J (1984) 'Strategic implementation of database marketing: problems and pitfalls' Long Range Planning 277 (1) 133-141 30BOWER, J AND HOUT, T (1988) 'Fast-cycle capability for competitive power' Harvard Business Review November/December, 110-118; STALK, G (1988) 'Time--the next source of competitive advantage' Harvard Business Review July/August, 41-51

existing skills of direct marketing to move from a tactical to a strategic role. According to Rapp and Collins, z3 database marketing is 'the ability of a company to use the vast potential of today's computer and telecommunications technology in driving customer-orientated programmes in a personalised manner'.

Shaw and Stone 24 provide a more specific definition: database marketing is an interactive approach to marketing communication, which uses individually addressable communications media (such as mail, telephone and the sales force), to extend help to a company's target audience, to stimulate their demand and to stay close to them by recording and keeping an electronic database memory of customer, prospect and all communications and commercial contacts, to help improve future contracts.

These definitions, both from practitioners, are illustrative of a general agreement that DBM is a customer-oriented approach to marketing, and that its special power lies in the techniques it uses to harness the capabilities of computer and telecommunications technology. A review of the nature of DBM, and its development in the UK is included in Fletcher et al.25

In a recent pan-European study among leading financial institutions it was found that over 80 per cent of the institutions interviewed were in the process of creating a customer orientated information system. 26 However, the survey also highlighted the poor quality of existing customer information files and the problems experienced by organizations which attempting to use these files in database marketing programmes. While there has been a major trend towards the use of direct marketing in the industry, and while the need for database marketing has been recognized, another survey, conducted by Logica, found only 20 per cent of leading financial services companies had any significant corporate marketing systems and, of these, few came close to satisfying current marketing requirements. 27 Logica concluded that while database marketing systems are not cheap, companies which ignore them do so at the risk of weakening their long term viability.

Taylor and Oak 28 reported that the major barrier to impede Derby- shire Building Society from moving towards using DBM for a more pro-active marketing approach to the competitive environment was the limitation of its existing information systems. Derbyshire's MIS gave no real input to strategic planning and was incapable of cost-effectively fulfilling DBM's needs, such as profiling, response modelling, etc. In particular, the mainframe database was inaccessible and poorly struc- tured. Overall, it was account led and the holding of marketing information on the mainframe was considered as being too expensive. The company's eventual solution was to create a highly flexible, interactive, PC-based marketing information environment, capable of integration with the mainframe.

Fletcher et a129 found that while DBM had many strategic possibilities these were often not being exploited due to a mixture of organizational and strategic factors, such as a lack of commitment at a senior level, lack of marketing orientation and skills, poor organization climate and structure, as well as inadequate technology and systems.

Thus, while IT does have many strategic possibilities which justify the cost of the investment, its successful use is likely to create organizational disruption and change. Such change, if unanticipated, can reduce the success of the application through reducing the speed of response 3° and

] ] B International Journal oflnformation Management 1995 Volume 15 Number 2


unsuccessful IT applications may become a competitive burden. The research reported in the present study investigates the current

usage and sophistication of database marketing systems in the UK financial services industry, and reports on potential barriers to its implementation.

Methodology A sample of all major banks, building societies, insurance companies in the UK financial services was the bias of the study. This consisted of the largest 180 life and general insurance companies (by gross premium income), the largest 44 building societies (by total assets) and the largest 28 banks (by net interest income and other operating income). Two mailings of a questionnaire received a usable response rate of 109 (30 per cent of respondents), covering 86 companies (46 per cent of firms). For industrial surveys of this type, this would be considered a medium to good response rate. The sample was compared with industry structure and was found to be representative of the industry.

Direct marketing was defined, in the questionnaire, as an interactive system of marketing, based on a mailing list, which uses one or more marketing media to effect a measurable response and/or transaction at any location. Respondents then stated whether they used direct marketing on a yes/no basis.

The additional definition was then given: 'Database marketing (DBM) stores this response and adds other customer information (lifestyles, transaction history etc) on an electronic database memory and uses it as a basis for longer term customer loyalty programmes, to facilitate future contacts, and to enable planning of all marketing'. Respondents then stated whether they had or did not have such a system.

Previous piloting had ensured these definitions were acceptable to the target audience.

The level of perceived sophistication of the respondent's system was measured on a seven-point scale (low level to high level). Elsewhere in the questionnaire we took three further, more factual measures, of sophistication. These further measures investigated the degree of measurement of the results of promotional campaigns and the degree and type of customer information held in the customer information file. Our obtained significant positive correlations between these latter measures and our measure of perceived sophistication confirmed the validity of our subjective measure, since the high positive correlations indicate that subjective perceptions are reflected in objective reality.

For those respondents who did not have a DBM system, intention to adopt was also measured on a seven-point scale, from no intention to strong intention.

The 11 possible barriers to implementing database marketing, detailed in Table 1, were obtained from our overview of the literature and from expert IT and DBM consultants at Price Waterhouse in Glasgow, UK. Respondents were asked 'Which, to your mind, of the following are, or could be, barriers to implementing database marketing (DBM) in your organization?' The 11 barriers were presented alongside seven- point scales, rated not a barrier (1) to a major barrier (7).

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Table 1 Barriers to implementing DBM

mean

B1 High cost of development 4.99 B2 High fragmented systems 4.92 B3 Data quality 4.82 B4 Account-based customer records 4.33 B5 No clear DBM strategy 4.08 B6 Lack of company-wide marketing orientation 4.07 B7 Lack of direct marketing specialists 3.55 B8 Fragmented sales and marketing organization 3.55 B9 Lack of board level backing 3.45 B10 Agency relations 2.78 B l l Poor relations between marketing and IT 2.73

3~This difference was significant at the 5 per cent level using a two-tailed Mann- Whitney test

Findings First, the use of direct marketing and database marketing was investigated. The use of direct marketing was claimed by 75 per cent of firms, but when firms were questioned further regarding the existence of an electronic database memory and other elements necessary for a database marketing system only 54 per cent of firms claimed to have such a system.

Next, the DBM users were asked about the sophistication of their system and inspection of Figure 1 reveals that generally a low level of sophistication was claimed. (When the means were compared between marketing and IT respondents, no significant differences were found.)

The non-DBM respondents were asked whether they intended to adopt a DBM system in the foreseeable future and Figure 2 indicates that the majority did have such an intention. A comparison of marketing and IT respondents showed that marketing respondents expressed a greater intention to adopt a DBM system than IT respondents (means of 5.8 and 4.9 respectively). 3~

Overall, the findings suggest a majority of firms are users of database marketing, although at a low level of sophisticatioon. The majority of organizations who do not at present have a DBM system intend to develop such a system within the foreseeable future.

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1 2 0 International Journal of Information Management 1995 Volume 15 Number 2

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Barriers' to implementation of database marketing. K Fletcher and G Wright

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Table 2 Mean scores of non-DBM users and DBM users on perceived barriers to implementing DBM

Barriers Non-DBM DBM

B1 3.5 4.8 B2 5.4 4.6* B3 5.0 4.7 B4 4.7 4.0 B5 4.5 3.8* B6 4.4 3.8 B7 4.1 3.2* B8 3.8 3.4 B9 3.8 3.3 B10 2.8 2.8 B l l 2.5 2.9

* Denotes that the difference between the perceived strength of a barrier was signif icant at the 5 per cent level, for a two-tai led Mann- Whitney test

3ZUsing a Wilcoxon matched pairs, signed ranks test with two-tailed significance levels. For details, see WRIGHT, G AND FOWLER, C (1986) Investigative Design and Statistics Penguin, H a r m o n d s w o r t h

It would seem, therefore, that our respondents are thus in a good position to comment on the problems they are facing, or expect to face in the future.

Barriers to adoption of DBM

The perception of barriers to implementing database marketing in the respondents' organization was investigated by asking respondents to rate each of 11 barriers, on a seven-point scale, with '1' meaning that the barrier was non-existent to '7' meaning that the barrier was a major one. The results are shown in Table 1, which presents the means ranked in order of importance. It can be seen that the first four items relate to technical problems with the system, ie cost, fragmentation and poor quality data. The next five items relate to organizational and strategic issues, such as no clear DBM strategy, lack of marketing orientation, lack of specialist DM staff, fragmented sales and marketing organization, lack of board-level backing, and poor relations between marketing and IT. The last-but-one barrier, agency relations, is interorganizational.

Comparison of the degree of perceived importance of each of the technical barriers (B1 to B4) with each of the intra- and interorganizational barriers (B5 to Bl l ) revealed that in only two of the 28 comparisons were the technical barriers not perceived as significantly more important than the organizational barriers. 32 The non-significant paired comparisons were B4 with both B5 and B6. Table 1 reveals that these barriers were consecutive and are all rated at around the mid- point of the seven-point scale that we utilized.

Since it was possible that the perception of barriers might differ between marketing and IT staff, and between DBM users and non-users this was analysed further. The results of Mann-Whitney tests to compare the perception of barriers between the two sub-groups of DBM and non-DBM users, and marketing and IT personnel are presented in Tables 2 and 3.

Inspection of Table 2 reveals that DBM respondents generally perceive the barriers to be less important than non-DBM respondents, and significant differences occur on three barriers. While non-DBM respondents gave the problem of highly fragmented systems first place, this fell to third in importance for DBM respondents. No clear DBM strategy, and a lack of direct marketing specialists were fifth and seventh

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Table 3 Mean scores of marketing and IT directors on perceived barriers to implementing DBM

Barriers Marketing IT

B1 5.0 4.8 B2 5.6 4.3* B3 4.9 4.5 B4 4.9 3.7* B5 4.2 3.8 B6 4.3 3.9 B7 3.6 3.5 B8 3.4 3.4 B9 3.7 3.2 B10 2.2 3.3* B l l 2.8 2.5

* Denotes that the difference between the perceived strength of a barrier was signif icant at the 5 per cent level, for a two-tai led Mann- Whitney test

33pETRISON, L AND WANG, P (1993) 'Rela- t ionship issues in creating the customer database' Journal of Direct Marketing 7 (4) 54-62

in importance for non-DBM respondents, but sixth and ninth in importance for DBM respondents.

The analysis of difference in perceptions of importance of barriers for marketing and IT personnel (Table 3) shows marketing personnel as perceiving the barriers of being of more importance than IT personnel, and significant differences occurred on three items. Highly fragmented systems was first in importance for marketing, but third for IT personnel. Account based customer records was third equal for marketing and sixth for IT, and 'Agency relations' was the only item where marketing rated a barrier lower than IT personnel, and placed it last at l l th compared with the IT personnel ranking of ninth.

Correlation matrix o f barriers

Nature of the barriers to implementing DBM was investigated further by studying the inter-correlations which existed. As we argued earlier, barriers 1 to 4 were considered to be technically orientated barriers, while the remaining barriers related more to strategic and organizational variables. We obtained a moderate degree of inter-correlation between the technical barriers, with only barrier 6 not having significant correlations with the others.

A similar moderate degree of correlation was also found to exist between the strategic and organizational barriers with only barrier 10, 'Agency relations', revealing little association with the other variables in this grouping. As we noted earlier, 'Agency relations' was the only interorganizational barrier in our set of seven organizational and strategic barriers.

Barriers 5 to 11 formed a relatively cohesive group with 13 of the 21 correlations showing significant positive correlations. The perception of barriers did not seem to relate to our measure of the sophistication of existing users' systems, other than a significant negative correlation with 'no clear DBM strategy'.

The measure of intention obtained from the non-adopters of DBM showed a significant, negative correlation on five potential barriers: 'Agency relations', 'lack of board level backing', 'no clear DBM strategy', 'lack of a company-wide marketing orientation', and 'lack of direct marketing specialists'. In other words, organizations which have a strong intention of adopting DBM view these barriers as of less importance than those organizations which have a weak intention to adopt DBM.

Factor analysis

The next stage of the analysis was to factor analyse the inter- relationships between the barriers. Factor analysis allows the grouping of highly inter-correlated variables (in our case, barriers). Such group- ings are called 'factors' and factor analytic techniques are used to distinguish factors such that the factors, themselves, are not inter- related.

Whilst differences were obtained between IT and marketing respondents in their perception of the barriers, the development of successful DBM systems requires that these two functional areas work closely together. 33 Thus conflicts must be resolved, or managed, and the views of both will be instrumental in decision on implementation and development. For this reason, responses of IT and marketing personnel were combined and the general attitude considered, despite the differences.

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Table 4 Results of the factor analysis

Loadings

Factor 1: Stategic marketing Fragmented marketing and sales organization Lack of board level backing No clear DBM strategy Lack of company-wide marketing orientation

Factor 2: System quality Highly fragmented systems Data quality Poor relations between marketing and IT

Factor 3: Information quality Highly fragmented systems Account-based customer records

Factor 4: Direct marketing Lack of direct marketing specialists Fragmented marketing and sales organizations Lack of company-wide marketing orientation

0.65 0.86 0.73 0,52

0.61 0.82 0.66

0.56 0.95

0.87 0.43 0.50

34WRIGHT AND FOWLER (1986) op cit, Ref 32

Further research, using a larger sample, might wish to study whether differences in factor loadings occur between the two groups of IT and marketing personnel.

Of particular interest in the analysis is identification of which barriers are most closely identified with (ie load significantly on) the same factor as DBM sophistication, since these will be those most heavily correlated with, and perhaps casually related to, DBM sophistication.

The analysis utilized the method 'principal component analysis'. 34 Our analysis delineated four major factors which accounted for 63 per cent of the total variance in the inter-correlation matrix. Factor loadings over 0.4 in absolute magnitude are interpreted. Table 4 identifies which of our variables created the four factors.

The first factor is named Strategic Marketing, since it contains the barriers of fragmented marketing, sales organization and lack of marketing orientation company-wide, with the strategic dimension being added by the lack of board-level backing and no clear DBM strategy.

Factor 2 contains two technical barriers, highly fragmented systems and data quality, with a third barrier of poor relations between marketing and IT. This is named System Quality as it relates to the ability of the system to respond to users needs.

The third factor is named Information Quality as it contains the two technical barriers of highly fragmented systems and account-based customer records which would make the collation and analysis of customer oriented information from diverse sources difficult and again would result in lack of user satisfaction with the system.

Factor four returns to the marketing issues with 'Lack of direct marketing specialists', 'Fragmented marketing' and 'Sales organization', and 'Lack of company-wide marketing orientation'. It is thus similar to Factor One, but dominated by the narrow DM focus. It is named Direct Marketing as it relates to the ability of the organization to conduct integrated direct marketing campaigns.

Factors five, six and seven (not reported in Table 4) were dominated by single variable loadings. These were 'Agency relations' (Barrier 10),

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'DBM sophistication' (the independent measure) and 'High cost of development' (Barrier 1). This means that these variables are, in general, little related to our larger set of barriers, whose inter-relations are described above.

Overall, a major factor analytic result is that database marketing sophistication is separable from both organizational and technical considerations.

The factor analysis thus supports and enhances our conclusions drawn from the analysis of the initial correlation matrix, which showed DBM sophistication as being unrelated to perceptions of two major dimen- sions of technical and organizational barriers.

350p cit, Ref 12 360p fit, Ref 19

Discussion

The findings show that database marketing is of interest and importance to the majority of firms which form the finance industry. The low level of sophistication of present systems, and the intention of most non- adopters to move to a DBM system in the near future, suggests that many technical and organizational problems still exist for the industry as it adjusts to the changing structures, information flows and strategies which are associated with database marketing.

The dominant barriers are technical ones, led by concerns about the high cost of development. Organizational issues relating to lack of marketing orientation, fragmented organizations, lack of DBM strategy and direct marketing specialists are a second major grouping, but clearly are seen as being of less importance.

While it could be argued that it is reasonable for IT respondents to be concerned more with the technical issues rather than the organizational problems relating to implementation and use, our findings showed a high measure of agreement between the IT and marketing respondents. Indeed, the two items which marketing respondents rated as significantly more important, highly fragmented systems and account based customers records, relate to the technical ability of the system and its suitability for database marketing purposes. Our findings thus support the findings of Scarborough and Lannon, and Wilson, 35 in that technical barriers may be overstated. The overall conclusion from the literature is that organizational barriers are more important than technical barriers but our respondents do not perceive this to be the case.

The dominance of cost as a barrier replicates the recent Price Waterhouse finding, but the factor analysis suggests this does not, in general, relate to the other barriers faced, either technical or organizational. In fact we obtained a significant correlation of cost with only one other barrier, lack of board level backing. This indicates that whilst cost is a major constraint, as with no money the system cannot be built, board level backing is crucially linked to the surmounting of this barrier.

In short, our study indicates that the technical issues dominate and the organizational problems are not seen as being related to these problems or of equivalent importance, contrary to the findings of Cowan. 36

Much of the literature could contend that this is unlikely, in practice, to be the case since the restructuring of information flows and the need for increased customer data capture will create a need for redefinition of tasks and responsibilities and an increase in communication across functional boundaries. Thus, structural problems as highlighted by

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~70p cit, Ref 10z VLETCH~-:R E7 AL(1992) op cit, Ref 29 38S.CARBOROUGH AND LANNON (1988) op cit, Ref 12 3~Op cit, Ref 9 a°Op cit, Ref 13


Beatty and Gordon, and Fletcher et a137 are to be expected, yet our respondents do not perceive a link.

The following questions must therefore be asked, 'Why do our findings show a downgrading or organizational problems in comparison with technical problems, since this is in contradiction to previous research on the adoption of IT interventions?', 'ls database marketing different from other specialized applications of information system use?', and 'Does the financial services industry have unique characteris- tics which explain the findings?.

It could be argued that the finding that the industry perceives no organizational/strategic problems facing it is veridical. While this would be in contradiction to other research, such as Scarborough and Lannon, 38 it is possible that the industry has changed since their study and that these barriers have been overcome, because of an increased awareness of these issues in organizations over the period.

Support for this latter proposition comes from other areas of our research (not reported in detail here) into the decision processes of those respondents who had adopted DBM. The perception of low organizational and strategic barriers, but not the technical, correlated significantly with an increased degree of search, consultation and confidence in the decision-to-adopt process. It would seem, therefore, that the decision to move towards a DBM system is an informed, rather than uninformed decision. It is therefore possible that, during the consultation process, the human and organizational issues have been resolved.

An alternative explanation of our results relates to the present level of sophistication of DBM system (see Tables 2 and 3). Specifically that current DBM systems, with their low level of sophistication, are at present unimpeded by organizational and strategic barriers.

Bearing in mind the premise of Rucks and Ginter, 3'~ that the unfulfilled promise of strategic MIS is due to organizational, communication and strategic problems, then the future promise of DBM to give strategic advantage in the UK financial services sector is likely to be similarly compromised. Any lack of an awareness of the importance of organizational and strategic barriers, identified by Gailiers ~f~ as a major factor in successful implmentation will, if left unaddressed, lead to future difficulties with the implementation of more sophisticated systems. The present inadequacies of marketing information systems in the finance sector identified by Logica will continue unless these wider issues are dealt with. As Logica conclude, database marketing systems are not cheap, successful implementation entails major organizational and strategic changes. Companies which ignore the problems and issues created do so at the risk of weakening their long term viability.

If our respondents, in fact, hack an awareness of the true, critical barriers that they will meet, then the implication for both marketers and IT specialists is that the competitive advantage which can follow from the adoption of DBM systems is not likely to bc achieved by the majority of firms. The high expense incurred in building a system may not be justified and this could lead to recriminations between the players involved, since some organizations may find that their competitive position is compromised due to the increased cost burden created.

Clearly, further research is needed into the nature of the decision to adopt IT innovations, the organizational learning that is required for successful implementation and the factors which differentiate successful

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and unsuccessful adopters of DBM. Given this knowledge, IT and marketing change agents will be better able to manage the adoption process such that the substantial benefits of strategic IT, identified by researchers and commentators in the early 1980s, can be achieved.

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Organizational, strategic and technical barriers to successful implementation of database marketing

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