Why Functional Specialists Should Be Encouraged to Use the Internet: the Changing Pattern of Influence in Buying Centers

ABSTRACT - It is hypothesized that the influence structure of industrial purchasing centers will vary depending upon whether or not the company is Internet-enabled as functional specialists will become more knowledgeable. Analysis of the research data shows that the marketing managers in the Internet-enabled companies are significantly more influential over the stages of the decision compared to both their counterparts in non Internet-enabled companies and to their CEOs.

Citation:

Roger Marshall, Na WoonBong, Park ChanWook, and Peter Allan Reday (2005) ,"Why Functional Specialists Should Be Encouraged to Use the Internet: the Changing Pattern of Influence in Buying Centers", in AP - Asia Pacific Advances in Consumer Research Volume 6, eds. Yong-Uon Ha and Youjae Yi, Duluth, MN : Association for Consumer Research, Pages: 64-69.

Asia Pacific Advances in Consumer Research Volume 6, 2005      Pages 64-69

WHY FUNCTIONAL SPECIALISTS SHOULD BE ENCOURAGED TO USE THE INTERNET: THE CHANGING PATTERN OF INFLUENCE IN BUYING CENTERS

Roger Marshall, Nanyang Technological University, Singapore

Na WoonBong, Kyunghee University, South Korea

Park ChanWook, Kyunghee University, South Korea

Peter Allan Reday, Ashland University, U.S.A.

ABSTRACT -

It is hypothesized that the influence structure of industrial purchasing centers will vary depending upon whether or not the company is Internet-enabled as functional specialists will become more knowledgeable. Analysis of the research data shows that the marketing managers in the Internet-enabled companies are significantly more influential over the stages of the decision compared to both their counterparts in non Internet-enabled companies and to their CEOs.

PROBLEM ORIENTATION

For decades, ever since the importance of the group purchase process within industrial organizations was identified and encapsulated into models of industrial purchase behavior, research has been carried out with regard to the power structure and size of organizational buying centers. It is our belief, however, that a sweeping change is taking place in the structure of company buying centers because of the impact of Internet.

It is often said that we live in an information age. The important implication of the statement is that those who have information have power, should they choose to use the information. It is a basic premise of Internet business models that information is readily available to anyone who cares to tap into the appropriate network; thus the hierarchical nature of information diffusion within organizations (and, thus, the traditional power structure) is no longer necessarily applicable. This idea is neatly encapsulated in the work of Evans and Wurster (Evans and Wurster 1997), who emphasize the possibility of almost immediate diffusion of information within either an intranet system or on the World Wide Web.

This suggests to us the possibility that everyone in the buying centerBwho cares to seek for it, at leastBcan now have access to information that was exclusive to information gatekeepers in the past. Past studies have documented the typical influence of various role players in industrial buying centers, but it seems likely to us that in this new information age new patterns may begin to appear. It is the primary purpose of the research reported here to speculate what these patterns might be and to conduct some preliminary field work to test these speculations.

SELECTION OF A SPECIFIC SERVICE

To facilitate this study of the influence of Internet on buying centers, we have selected advertising as the service to be purchased by industrial buying centers. The rationale for this choice is based not only upon the importance of the decision but, mainly, the convenience of having specific, published, recent data about the size and influence structure within such selection teams (as this literature calls corporate buying centers purchasing advertising agency services).

Few would argue with the statement that advertising expenses are generally increasing. Among the many reasons for this must be the availability of a wider, technology-enabled media selection, plus increasing competition in so many markets, and the need to reach diverse and wider markets with globalization that must place pressure upon the structure and maintenance of an appropriate company or product/service image. At a firm level, organizations are thus often faced with a number of escalating concerns. Basic costs are rising, technical complexity of the media decision is increasing, the use of Internet, inratranet and extranet to further develop customer relationships and expedite operations all call for further image co-ordination. All this, plus the fact that few firms have the internal expertise to manage this communication process themselves so find it necessary to entrust the reputation and image of the company to the hands of another organizationB it is little wonder that the selection of advertising agency service is so important.

As long ago as 1988 a call was made to delineate the organizational decision process that results in an advertising agency being hired, and to identify the key participants in it (Harvey and Rupert 1988). This call has oft been heeded, and so we have fairly detailed answers (Cagley, et al. 1984; Cagley 1986; Lynn 1987; Harvey and Rupert 1988; Marshall and Na 1994; Kim and Waller 1999; Na, Marshall et al. 1999; Na and Marshall 2001). These, and other appropriate papers, will be inspected shortly as the research hypotheses are develop.

HYPOTHESES DEVELOPMENT

Size of the Buying Center

The buying center includes all members of the organization who are involved in the buying process. The structure of this group fluctuates as expertise is required, or time-pressure is felt. As purchasing groups are usually informal in nature, there is often no audit trail to enable the precise structure of buying centers to be defined. Over the years, however, many studies have been conducted to investigate the mean size of buying centers in various types of organizations. Variables such as the size of the organization (Bellizzi 1981; Crow and Lindquist 1985); the value or importance of the purchase made (Johnston and Bonoma 1981); the length of time a buying relationship has existed (Lynn 1987) and the type of industry the purchasing firm operates in (Crow and Lindquist 1985) have been included in these studies to investigate their impact on the size of an organization’s buying center. A summary of the figures from current research is presented in Table 1.

It can be seen, from a scrutiny of the Table, that buying centers concerned with purchasing advertising agency services are significantly smaller than those for most industrial goods. There seems a consensus that this is mainly because of the specialized nature of the service being purchased.

None of this research has taken explicit notice of the use, or lack of use, of Internet, and what impact on the size of the buying center this factor might have. Thus there is no guide whatsoever in this matter, other than the development of a logical argument from our current observations. It is quite clear that anybody in the buying center can gather any amount of information about almost any agency anywhere in the world, should they so desire. As few have the motivation to search for this particular information, however, we cannot see that the size of the buying center should differ whether Internet is widely used by company executives or not. That is, it is interest that probably drives extended search behavior, and we believe that few people other than those explicitly involved in the advertising agency purchase situation would have that interest. This logic is especially compelling in the agency situation, where it has already been noted that the specialized purchase topic results in a smaller than usual purchase team. Hence:

Hypothesis 1: No significant difference exists in the sizes of buying centers of companies that widely use the Internet and those that do not.

TABLE 1

COMPARISON OF BUYING CENTER SIZE IN REPORTED STUDIES

The structure of Influence within Buying Centers

Although we do not believe that the size of agency buying centers will vary with the introduction of Internet usage, the same is not true for the influence structure within centers. Again, there is no specific literature to help formulate our ideas about what this change might be, so we will again weave a picture of what may be going on here, using only the woof of logic and the warp of observation. That there will be some sort of differential impact caused through the level of technology utilized by companies within which buying centers operate, however, can be justified by reference to the established literature. Right from the beginning of academic interest in buying centers, it has been postulated by a number of authors that the structure of the buying center will be affected by the environmental factors surrounding it. Webster and Wind (1972) and Sheth (1973), in their early models, postulated that different types of influence surround the center like the skins of an onion; with physical, economic and legal environmental factors the outer layer, and then organizational, technical, economic and cultural factors in successive layers of influence getting ever closer to the buying center itself. The same set of factors, albeit presented rather differently, figure in the models and lists of later authors also (see, for instance Hart (1984)). None of these authors tell us just what to expect in this specific situation, where the technological factors are so critical, however; but none could have possibly imagined the sweeping power of the Internet, either.

There is strong evidence that information empowers the holder in situations such as this. The Technology Gatekeeper idea of Allen (1984), as well as the well-developed Opinion Leadership construct (e.g. Childers (1986)), are predicated on this principle. It has been noted above that the buying center for advertising agency services is small, as the interest and the knowledge required to participate in the purchase process is limited. Thus it seems likely that the influence structure with the buying center will vary according to the acquisition of specialist knowledge by interested parties.

The literature about advertising agency selection is very specific about these influence structures. There are two main players in the process, the CEO and the marketing manager. In situations where there is an advertising manager, then s/he tends to supplement or complement the marketing manager’s influence (Marshall and Na 1994; Na and Marshall 2001). The pattern of influence suggested by this latter research follows a fairly common-sense path; the CEO is most influential during the initiation and the final stages of the decision, whilst the marketing manager has the greatest influence during the identification of potential agencies and the review process.

The pattern of influence that might evolve with the widespread adoption of Internet within a firm, we believe, is that the marketing manager (or advertising manager if there is one) will generally become more powerful. This is because although more information is available to both the marketing manager and the CEO, it seems unlikely that a general manager could be bothered to seek it out. On the other hand, a marketing manager is probably interested in the information for it’s own sake, in the acquisition of knowledge that will add to his/her stock of expertise, and in gaining credibility in the eyes of his/her employer.

Hypothesis 2: Marketing Managers will have more influence throughout the advertising agency selection process in companies that widely use the Internet than in those companies who do not.

The corollary of this situation is straightforwardBthe CEO of companies using Internet extensively will have less influence than their counterparts in companies that make less use of Internet. This is because gaining and losing influence within any buying center is a zero-sum game; power gained by one player must be at the expense of another and, as we have seen, there are few powerful players in this particular purchase situation. Thus our final research hypothesis:

Hypothesis 3: CEOs will have less influence throughout the advertising agency selection process in companies that widely use the Internet than in those companies who do not.

RESEARCH METHODOLOGY

Overview

An initial survey was distributed to interested MBA students, studying on a part-time basis. With their cooperation contact was made with the Marketing Managers of a number of companies. These company officers were given a questionnaire that helped identify the influence structure over stages of the advertising agency selection process. Consequent analysis breaks them into two groups, high and low Internet usage, then compares their decision structures.

TABLE 2

PROFILE OF TWO SAMPLE GROUPS

Sample

The sample is a convenient quota sampleBresponses were collected until we had a reasonable balance of companies, in terms of Internet usage. Data from 36 companies were finally used; profiles of the companies, sorted into their operational categorization, are contained in Table 2. There is some evidence of a difference between the two groupsBthe low-user companies tend to be larger in terms of employee numbers but smaller in terms of dollar sales and advertising expenditures as a percentage of sales Bthis might indicate that the high users are in a more high-tech environment, which is not, of course, surprising. The literature on advertising agency selection has not related any of these factors to influence structure, so this difference in the sample is ignored.

Research Instrument

    Initial survey cum letter

The preliminary instrument was distributed to MBA students, and simply contained an explanation and a few questions to classify the companies for whom they worked. This was to minimize the amount of information needed to be collected from the marketing managers.

    Main survey instrument

Naumann, Lincoln and McWilliams (Naumann, Lincoln et al. 1984) set the precedent of breaking the buying process for advertising agency services into four stages; initiating the selection or change of an agency, establishment of objectives and need configuration, identification and evaluation of possible agencies, and the final selection. Others have followed this lead, (e.g. (Harvey and Rupert 1988; Marshall and Na 1994; Kim and Waller 1999; Na and Marshall 2001). It was nevertheless decided to further split the identification and evaluation of possible agencies into two stages as it was felt that the two processes are actually different and, if they were to be collected separately, accuracy of the findings would be enhanced.

The second questionnaire (meant for the Marketing Managers) comprises of three sections. The first is used to identify the team members participating in the advertising agency selection. The identification of participants was by free elicitation, which is claimed to minimize the bias imposed by forced choice scale and to allow the flexibility to cope with the complex structures involved (Robles 1984). When identified, a constant-sum technique is used in the second section of the instrument, where 100 points are distributed between all the identified selection-team members. This is not a classical "snowball" technique, where the responses of all members of the buying center are solicited then averaged, to better arrive at a fair rating of influence, but is entirely the subjective opinion of the marketing managers. In this preliminary work we do not think that this bias matters, as it is the same for all the companies surveyed and we are interested in the comparison between the two groups rather than the absolute levels of influence.

The third section of the instrument elicits information to allow differentiation between companies that use Internet in the selection process of advertising agencies and companies that do not. Three, 5-point Likert-style questions are used, to enable a scale to be developed.

Procedure

As mentioned above, a strictly convenient basis was used for selecting companies, asking part-time MBA students to provide the contact to their companies. It is hard to obtain this type of data and the method used is far from ideal. The working principle, however, is that if there really is as much difference between Internet-users and non-Internet-users as anticipated, then it will show despite the less-than-ideal sample. The MBA students made contact with their colleagues and passed the relevant questionnaire to them, along with a stamped, addressed envelope for their response. The questionnaire was short, easy to answer and asked nothing of a confidential nature; consequently there was a very low refusal rate and no apparent lack of understanding.

FIGURE 1

RELATIVE INFLUENCE OF MARKETING MANGERS AND CEOs IN COMPANIES EXTENSIVELY USING INTERNET AND THOSE NOT

RESULTS

Preliminary matters

Cronbach’s alpha for the three-item, 5-point scale used to ascertain Internet usage is 0.945, suggesting that the items do form a reliable scale. The single item consequently formed from the scale mean value was then used to divide the respondent companies into two groups, high and low Internet usage. A t-test between the Internet usage variable of the two groups (high and low usage) shows that separation was achieved (Mean_{(High use)}=4.5, Mean_{(Low use)}=1.83, t=18.28, p<0.001).

Hypothesis testing

A further t-test reveals that, as suspected, the mean size of advertising agency selection teams between the two groups is statistically no different (Mean size_{(High use)}=2.95, Mean size_{(Low use)}=3.00, t=0.128, p=0.899). This was as anticipated (in Hypothesis 1), and that the overall mean size of the selection teams is 2.97 adds credibility to the findings, as this is in line with previous findings.

Effect of Internet usage on the influence of Marketing Managers (By Stages)

The data presented in Figures 1A and 1B sum up the difference in influence structure between the two groups of companies. As can be seen, the marketing managers are empowered in the companies in which Internet is used extensively. To give statistical support to the charts, Table 3 shows the stages of the decision for which the mean influence of the marketing managers and CEOs are statistically different. Thus marketing managers with greater information access (in high Internet-usage companies) gain power at the beginning and end of the process and only show no such increase in the middle part, where they are already the strongest player anyway. CEOs’ influence loss is ubiquitous. Both Hypothesis 2 and 3 are strongly supported.

DISCUSSION

This simple research illustrates an idea that most people are already familiar withBthat ownership of information can lead to power. Actually, the idea is just a little more complex than thisBit is reputed that Einstein said that imagination is more powerful than knowledge; we understand this to mean that knowledge/information only leads to power if it is applied. This idea is neatly demonstrated here in that the information that marketing managers seem to have acquired has indeed led them to a more powerful position when applied in a very practical decision situation.

The finding reported here make intuitive senseBCEOs are usually not really that interested in advertising matters per se; under pre-Internet conditions they merely wanted to be assured that an optimal decision is made and therefore seemed to retain control of the all but the "donkey-work" of the advertising agency purchase decision. In the high Internet-usage situation, where their marketing manager is seen to be very knowledgeable about the matter, it appears that they are prepared to empower the expert, thus freeing their own valuable time for other, more appropriate, matters.

The guesswork above is linked to the fact that the information enabling marketing managers in high Internet-usage organizations to gain influence is also available to their CEOs. As stated in the introduction, however, it seems improbable that CEOs would bother, as the Internet offers themBin turnBa wealth of other, more critical, information of a more strategic than operational nature.

TABLE 3

SIGNIFICANCE OF BETWEEN-GROUP INFLUENCE DIFFERENCES

IMPLICATIONS

Decision-making is the central operational business of business, therefore anything that can add to the efficiency of the process is valuable. It is obvious that the availability of good information makes decisions easier to make, it is also fairly obvious that the Internet should make a great deal of information available to aid with these decisions. What is not quite as clear is that a distinction needs to be made between Internet information that provides support for operational decisions and that which supports strategic, more competitive decisions. Functional, middle-management specialists should, perhaps, concentrate on the acquisition of the former information type, which will lead them to become more expert, while strategists should try to avoid getting overwhelmed by the information needed at this operational level.

This is merely another restatement of the fact that managers already understand, the need for specialization. However, deliberately using the Internet to reinforce this process is, perhaps, not as commonly understood. That this is true is witnessed by the fact that we found 15 of the 36 companies we conveniently selected not to be going through this process. Furthermore, the fact that the companies we worked with were already enlightened enough to encourage their staff to undertake part-time MBA studies may well have contributed to the higher proportion of companies we found that do make quite extensive use of Internet. Finally, it has to be said that we have no means of telling whether the empowerment that seems to be taking place is planned, or is simply happening as a positive spin-off from Internet usage.

The obvious marketing message this research holds is the empirical fact that the target executive for advertising agents is the CEO when Internet is not widely used, and the marketing/ advertising manager when Internet is widely used. Thus the ideas of Sheth and the other, earlier marketing writers is justified, and the environmental factors do impinge upon buying center dynamics, and in a far more dramatic way than they can possibly have imagined.

Of course, we have only checked one decision situation. It seems very probable to us that the same situation is true for the purchase of other professional services (the advertising agency selection situation has already been shown to be very similar to the accounting services selection decision (Lynn 1987; Harvey and Rupert 1988). The extent to which the findings reported here generalize to the wider buying center situation is an entirely open question, but there seems no reason why the logic should not be transferred.

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