Adapting Marketing to the New Economy

Companies in 21st century have to adapt to ever changing environment. At present, companies represent a curious mix of old as well as the new economy. A great deal of research has already been done with respect to the old economy, but for the new economy, companies are learning it rather hard way. Companies have to choose elements from old and new economy wisely as to build a business model which would bring value to the company.

Technology revolution, globalization and market deregulation factors are among many sculpting the new economy. These 3 factors interact with each other at different levels creating the driving force for the new economy. The old economy was full of analog devices, which were running on a continuous signal wave, for example, gramophone records. In today’s world systems and devices are running on digital technology where information is carried in ones and zeroes.

However, this digital information cannot be exchanged between devices without connectivity through wire or wireless networks. This connectivity is achieved through intranet, extranet and internet.

Internet allowed players like Yahoo, Amazon, ebay to offer products like music, books, apparel, etc. directly to customers. This move de-stabilized the traditional distributors and retailers causing some to shut down their business. However, some of the players developed online portals to offer their products and services which in turn de-stabilized new online players. Some of the old players were successful with help of their brand strength and poor business models of pure online players.

In the old economy focus was only on standardization, mass production and singular marketing policy. However, with the amount of information available in the new economy, companies are best at understanding consumers. This better understanding has led to customized products, a shift from standardization. However, this customization has its drawbacks not only for companies but also for customer. Companies find it difficult to maintain the cost level for customized products to register profit. Customization is impossible for products, which require complex industrial engineering. Customer does not know real product appearance until it fully completed and also return policy is not there in customization.

The new functioning of economy has changed the way companies approach their business. Companies are looking forward to expanding across market segments to get maximum market share while keeping focus strictly on customer needs. For these companies are making organizational changes where departments are developed to manage a segment rather than a product. Companies are looking forward to developing consumer based brand equity to foster long term relation. Companies are coming up with products, which perform superior than consumer expectation there by creating a strong brand while the earlier branding task was accomplished through advertising. Companies are treating employees, distribution channel, and suppliers as their business partner and not customer.

Since companies have changed the way they function in the new economy, it is imperative that marketing practices also adapt. As consumers are looking forward going online for major of their purchase, businesses are looking towards electronic commerce (e-commerce) as a way forward. Research has shown online users usually buy music, software, books, apparel, etc. rather than goods like automobiles, house, etc. Business buyers are also coming online as well as suppliers, thereby substantially reducing the establishment cost. E-Commerce has also open doors for customer to customer relation through social networking and community forums, in which experience and discussion are done with respect to products. Through internet consumers are able to provide faster feedback to companies with respect to products and services.

As businesses are moving online, the focus shifts to developing of web sites to provide reliable and correct experience to consumers. Web site design, maintenance and security are of paramount importance for creating a favorable impression on consumer. Online marketing and advertisement have got prominence in this internet age.

The new economy had brought forward challenges and opportunities not only for companies but also for consumer.

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 

• Large investment required in computer hardware, database software, analytical programs, communication links and skilled personnel.
• The difficulty of getting everyone in the company to be customer oriented and to use the available information.

Not all customers wants a relationship with the company and may resent the company if they know that they are collecting personal information