Under Topic 2, students will
understand what are the
Major Force driving the New Economy, how are business and marketing practices
changing as a result of the new economy and how are marketing using the Internet,
customer database and customer relationship management in the new economy?
Firstly let us look at some of the major forces that are
driving the new economy. (P. Kotler)
some of the forces are as follows;
Digitalization and
Connectivity - Today most
appliances and systems operate with digital information, which converts text,
data, sound and images into a stream of zeros and ones that can be combined
into bits and transmitted from appliance to appliances.
Disintermediation and
Reintermediation - Thousands
of entrepreneurs took advantage of the digital revolution and create on-line
companies striking fears in many established manufacturers and retailers.
(Yahoo.Com, Amazon.Com, eBay.Com etc.). Some companies went out of business
while others became successful.
Customization and Customerization - Companies grew proficient at gathering information
about individual customers, business partners (suppliers, distributors,
retailers) enabling them to increase their ability to individualize market
offering, messages and media.
A company is customerized when it is able to
dialogue with individual customers and respond by customizing its products,
services and messages on a one to one basis.
Industry Convergence - Industry boundaries are blurring at an incredible
rate. Pharmaceutical companies are adding new product line into their
businesses. Example – Pharmaceutical
companies – from chemical products, they now include biogenetic research,
cosmetics, and health food (nutriceutical) into their operation.
How
Business Practices Changing?
The changes in
technology and economy are citing new set of beliefs and practices on the part
of business firms. Today you will see organization directing their focus on customer,
mainly customer satisfaction.
In the Old Economy organizations were
more focus in the following areas;
1. Organize by Product Unit.
2. Focus on profitable transaction.
3. Focus on Financial scoreboard.
4. Focus on Shareholders.
5. Marketing does the marketing.
6. Build Brands through advertising.
7. Focus on customer acquisition.
8. No customer satisfaction measurement.
9. Overpromise, under-deliver.
In the New Economy, organizations are
now more focused towards the following areas;
1. Organize by customer segments.
2. Focus on customer lifetime value.
3. Look at marketing scoreboard.
4. Focus on Stakeholders.
5. Everyone does the marketing.
6. Build Brands through performance.
7. Focus on customer retention.
8. Measure customer satisfaction & retention rate.
9. Under-promise, over-deliver.
Hybrid
Organization
Also in the new
economy, there are new Hybrid organizations/firms were companies adopt some of
the old ways of operation and combine some new ways of operations thus creating
an Hybrid form of organization. A firm that has adopts a Hybrid type of setting
is due to the following reasons;
·
To
retain skills and competencies that has worked in the past.
·
To
add new understandings and competencies to grow &prosper.
·
To
retain their traditional consumers (who do not buy on-line).
How Marketing Practices Are Changing: E-business?
E-business
describes the use of electronic means and platforms to conduct a company’s
business.
1. Business
conduct faster.
2. Business
conducted more accurately.
3. Business
conducted over a wider range of time and space, at reduced cost.
4. Business
able to customize and personalize customer offering.
E-Commerce
- is more specific than e-business; in addition to providing information to
visitors about the company’s background, the company also offers product &
services online.
Examples of companies doing e-commerce;
·
Amazon.com
·
eToys
·
e-Plasticnet etc
E-Marketing
describes company efforts to inform, communicate, promote and sell its products
and services over the internet. E-commerce and e-marketing takes place over
four major Internet domains;
1. B2C
– (business to consumer)
2. B2B
– (business to business)
3. C2C
– (consumers to consumers)
4. C2B
– (consumers to business
5. Governments
also operates internet domain such as; G2C; G2B; B2G; and C2g
B2C
– Business to Consumers
Research and statistic
has shown that in 2000 – 106 million American went on-line;
·
80% looking for information.
·
73% researching a product or service
before buying.
·
68% looking for travel information.
·
65% looking for information on movies,
books and leisure activities.
How
Marketing Practices Are Changing: Setting up web sites
Designing an attractive website;
Rayport and Jaworski have proposed that effective
web sites feature seven design elements called 7 Cs.
1. Context:
Layout & Design.
2. Content:
Text, pictures, sound and video the site contains.
3. Community:
How the site enables user to user communication.
4. Customization:
Sites ability to tailor itself to different users or to allow users to
personalize the site.
5. Communication:
Two way communication between site to user, user to user,
6. Connection:
Degree of connectivity to other sites.
7. Commerce:
Sites capability to enable commercial transactions.
Placing Ads and
Promotion Online
Companies have to
decide which form of advertising will be most cost effective in achieving their
advertising objectives.
Building a
Revenue and Profit Model
Dot-com companies need
to tell their investors how they will eventually make profit.
·
Advertising income.
·
Sponsorship income.
·
Membership and subscription income.
·
Profile income.
·
Product and Service sales income.
·
Transaction commissions and fees.
·
Market research and Information.
·
Referral Income.
How Marketing Practices Are Changing: Customer
Relationship Marketing
Winning companies are more productive in acquiring,
keeping, and growing customers. These companies improve the value of their
customer base be excelling at the following customer strategies;
1. Reducing
customer defection rate.
2. Increasing
longevity of customer relationship.
3. Enhancing
the growth potential of each customer (cross selling, upselling).
4. Making
low profit customers more profitable or terminating them.
5. Focusing
disproportionate effort on high value customers.
Marketing practices are changing from mass production and mass
distribution to a more customer approach marketing. Below are the differences
that has taken place over the years from mass marketing to that of Changes are
taking place.
Mass
Marketing
·
Average
customer.
·
Customer
anonymity.
·
Standard
product.
·
Mass
production.
·
Mass
distribution.
·
Mass
advertising.
·
Mass
promotion.
·
One
way message.
·
Economies
of scale.
·
Share
of market.
·
All
customers.
·
Customer
attraction.
One to One
Marketing
·
Individual
customer.
·
Customer
profile.
·
Customized
market offering.
·
Customized
production.
·
Individualized
distribution.
·
Individualized
message.
·
Individualized
incentives.
·
Two
way messages.
·
Economies
of scope.
·
Share
of customer.
·
Profitable
customers.
·
Customer
retention
Data Warehouses and Datamining
Smart companies are capturing information every time
a customer comes into contact with any of its department. This maybe done from
a customer purchase, a customer requested service call, an online query, or an
mail in rebate card. Data are collected and organized into a data warehouse.
Datamining is when marketing
statisticians extract useful information about individuals, trends, and
segments from the mass of data.
Downside of Database Marketing
1. Large
investment required in computer hardware, database software, analytical
programs, communication links and skilled personnel.
2. The
difficulty of getting everyone in the company to be customer oriented and to
use the available information
3. Not
all customers wants a relationship with the company and may resent the company
if they know that they are collecting personal information
Views of
Leading CEO’s
“Every now & then a technology come along that is so profound, so
universal, that its impact will change everything. It will transform every
institution in the world. It will create winners, losers, change the way we
teach our children, communicate and interact as individuals. – Lou Gerstner,
Chairman of IBM.
“The Internet ranks as priority No.1, 2, 3, and 4! … Embrace the
Internet. Bring me a plan for how you are going to transform your business
beyond adding an Internet site. – Jack
Welch, former CEO of GE.
Summary
New technological advances
and new market forces are creating a new economy. Companies and marketers need
to add new tools and practices if they hope to be successful.
Four specific drivers of
the new economy are digitalization and connectivity, distintermediation and
reintermediation, customization and customerization, industry convergence.
Digitalization in particular has introduced exciting new capabilities for
consumers and for businesses.
The new economy is
shifting several old economy business practices toward organizing by customer
segments, focusing on customer lifetime value, focusing on stakeholders and
getting everyone to do marketing, building brands through customer behaviour
and focusing on customer retention.
Companies face many
questions in adopting e-marketing, knowing how to design an attractive website,
knowing how to advertise on the website, and knowing how to build a sound
revenue and profitable model for their dot.com business.
Companies are also
becoming skilled in Customer Relationship Management (CRM) which focuses on
meeting the individual needs of valued customers and building a customer
database and doing datamining to detect trends, segments, and individual needs.
Marketing
deals with identifying and meeting Human and Social Needs. One of the
shortest definitions is “meeting needs profitably.”
The companies
at the greatest risk are those that fail to monitor their customers & competitors,
and fail to continuously improve their value offerings.
One CEO
repeatedly warned “Change or Die”
Source: Marketing Management 11th Edition; Philip Kotler
(2003) Prentice Hall
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