Marketing for MOST Module 10 – I.T & Marketing

Marketing for MOSTModule 10 – I.T & Marketing

技術経営コンソーシアム

開発担当者 ： Ritsumeikan Asia Pacific University 　教授 : Takamoto, Akihiro

更新日 October, 2003

IT and Marketing

1. Need for a new Marketing Paradigm.

2. e-commerce, e-business &e-marketing.

3. e-segmentation,e-targeting and e-positioning.

4. The 11 Immutable Laws of Internet Branding.

5. e-marketing research.

6. New Marketing Mix.

7. More on e-business.

8. Has IT changed Marketing?

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Marketing for MOST: Module 10 – IT and Marketing

“Embrace the Internet. Bring me a plan as to how you are going to transform your business beyond adding an Internet Site”

- Jack Welch, former CEO of GE

“ I think people still underestimate in the decade ahead how much digital approaches will change the way they work and the way they live”

- Bill Gates, The Richest Man on Earth

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Marketing for MOST: Module 10 – IT and Marketing

Is this WOW!

• The cost of sending mail to 10 million GE customers in 1985 :$ 3.3 million.

• The cost of sending the same e-mail to 10 million GE customers today : $ 0.

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Marketing for MOST: Module 10 – IT and Marketing

Customers

Websites

Intranets Extranets

The Internet

CompetitiveEnvironment

New-BusinessProductPotential

TechnologyDevelopments

InternetCapabilities

BusinessPartners

Competitors

Global Markets

VendorsSupplier

Constraints

CostContainment

PriceCompetition

Corporate CommunicationsHuman Resources

InformationManagement

Marketing

Sales

Product Distribution

Core BusinessFunction

Customer Support

ProductDevelopment

Research

Systems

Internet and E-Commerce

Bigdoli Hossein:electronic commerce: principal and practice(2000)

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Marketing for MOST: Module 10 – IT and Marketing

The Need for a New Marketing Paradigm

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Marketing for MOST: Module 10 – IT and Marketing

The Need for a New Marketing Paradigm

• There are three stages in the new Marketing Paradigm.

Stage 1: Selling concept, where starting point is the factory and the aim is profits through sales volume using selling and promotion.

Stage 2: Marketing concept, where starting point is the identifying the customers varying needs and the aim is profits through customer satisfaction using market STP.

Cont…

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Marketing for MOST: Module 10 – IT and Marketing

The Need for a New Marketing Paradigm

…Cont.

Stage 3: Holistic Marketing concept where the Starting point is identifying the individual customers needs and aim at profitable growth through capturing customer share, customer loyalty , and customer lifetime value. This is achieved using database management and value chain integration linking collaborators.

Right now we are passing the second stage and entering the third stage which, is part of the transition to the Digital Economy.

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Marketing for MOST: Module 10 – IT and Marketing

Changing Assumptions in Strategic Marketing Thinking

• Marketing department does the marketing.

• Marketer focuses on “interrupter” marketing.

• Marketing focuses on acquiring new customers.

• Marketing focuses on intermediate transactions.

• Marketing expenditures are viewed as expenses.

• Marketing integrates the work of exploring, creating and delivering customer value.

• Marketer focuses on “permission” marketing.

• Marketing focuses on customer retention and brand loyalty.

• Marketing focuses on capturing customer lifetime value.

• Many marketing expenditures are viewed as investments.

Old Marketing New Marketing

Reference:Marketingmoves: Kotler, Jain & Maesincee

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Marketing for MOST: Module 10 – IT and Marketing

Don’t we have to redraw Maslow’s Hierarchical chart?

Don’t we need to have another tier for information needs?

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Marketing for MOST: Module 10 – IT and Marketing

The New Economy

• Or the digital economy.• Paperless companies.• Data base emphasis.• Got to be tech savvy otherwise heavy.• Information transparency• Information overload.• The world is the playground.

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Marketing for MOST: Module 10 – IT and Marketing

The major shift towards Digital Economy

Digital economy has forced corporations to undergo a sea of change and there are nine new paradigms to be applied to operate efficiently in the new economy.

1. From asymmetry of information to democratization of information.

2. From goods for elites to goods for everyone.3. From make-and-sell to sell-and-respond.4. From local economy to global economy.

Cont…

Reference:Marketingmoves: Kotler, Jain & Maesincee

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Marketing for MOST: Module 10 – IT and Marketing

The major shift towards Digital Economy

...Cont.

5. From the economics of diminishing returns to the economics of increasing returns.

6. From owning assets to gaining assets.

7. From corporate governance to market governance.

8. From mass markets to markets of one.

9. From just-in-time to real-time.

Reference:Marketingmoves: Kotler, Jain & Maesincee

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Marketing for MOST: Module 10 – IT and Marketing

How corporations are adapting to the Digital Economy

• Estimates of World B2B transactions in 2004: $ 7.3 Trillion1.

• Ford and GM moved their B2B supply chain worth 300 and 500 billion USD online.

• Cisco Systems announced they won’t do business with suppliers, who can’t take orders via the net.

1. Gartner

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Marketing for MOST: Module 10 – IT and Marketing

More than 12% of the World Population is online

• WORLD Total 　 　 　 　 　 605.60 million

• AFRICA 　 　 6.31million• ASIA ／ Pacific 187.24 million• EUROPE 190.91 　 million• MIDDLE EAST 　 　 5.12 million• CANADA & USA 182.67 million• LATIN AMERICA 　 33.35 million

Source:Nua.com

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Marketing for MOST: Module 10 – IT and Marketing

Modes of communication between businesses and customers

B2C

Organizations Sites (Dell,Amazon)

Consumer Marketplaces

(Pets.com,Walmart.com)

C2C

Auctions(Ebay.com, ubid.com)

Consumer reviews(bizrate.com, Deja.com)

B2B

Organization Sites(Dell,IBM)

Business Marketplaces

(Commerce One, Vertical Net)

C2B

Customer Bids

(Priceline.com, hotwire.com)

con

sum

er

consumer business

busi

ness

Source:e Marketing excellence by P.R. Smith

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Marketing for MOST: Module 10 – IT and Marketing

e-commerce, e-business & e-marketing

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Marketing for MOST: Module 10 – IT and Marketing

Relationship between e-commerce, e-business and e-marketing

• e-commerce includes e-tailing and just simple exchange of goods and payments online.

• e-business involves all the business processes in the value-chain.

• e-marketing is at the heart of the business adding value to the products, widening distribution channels, boosting sales while getting closer to the customer and understanding them better.

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Marketing for MOST: Module 10 – IT and Marketing

Relationship between e-commerce, e-business and e-marketing

One perception is that e-marketing,e-commerce and e-business is one and the same thing?

Do you think that’s true?

EM=EC=EB

Source:e Marketing excellence by P.R. Smith

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Marketing for MOST: Module 10 – IT and Marketing

Relationship between e-commerce, e-business and e-marketing

Another perception is that e-commerce is a part of the process of e-marketing and both of them are part of the bigger process which is e-business.

EC

EM

EB

Source:e Marketing excellence by P.R. Smith

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Marketing for MOST: Module 10 – IT and Marketing

Relationships between e-commerce, e-business and e-marketing

There is still another perception and that

e-commerce, e-marketing and e-business are different processes altogether, although they overlap some of their functions.

EC EM

EB

Source:e Marketing excellence by P.R. Smith

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Marketing for MOST: Module 10 – IT and Marketing

How much money is generated from the NET?

Source:Activmedia

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Marketing for MOST: Module 10 – IT and Marketing

e-segmentation, e-targeting & e-positioning

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Marketing for MOST: Module 10 – IT and Marketing

e-segmentation

• The market is segmented based on customers like businesses, individuals and government.

• Segmentation of market based on B2B, B2C, C2B and C2C.

• The market is segmented considering the companies promotion mix ( offline vs. online mix).

• It is difficult to segment the market geographically as the Internet population is estimated at 20-30 million with 10% monthly growth rate all over the world.

Cont…

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Marketing for MOST: Module 10 – IT and Marketing

e-segmentation

…Cont.

• Demographically, the market is made up of young users with higher income levels.

• The psychographic segmentation is very accurate as the user’s browsing habits hint at his preferences.

• Product related segmentation is most important, as net users look for added values, technologically superior and best priced products.

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Marketing for MOST: Module 10 – IT and Marketing

e-targeting

• The target market for most of the companies has become large due to easy access all across the world.

• The target market should also be based on the companies product, and whether the product can be sold more effectively online or offline.

• Due to the availability of the internet the target market is huge but on the other hand competition is immense, therefore the company has to choose what region to target to create a niche market.

Cont…

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Marketing for MOST: Module 10 – IT and Marketing

e-targeting

…Cont.

• With the fast growth of the internet its difficult to imagine the scope of the target market.

• Target marketing on the net is more effective when, it is concentrated on small number of customers especially in the case of high value products, on the other hand for innovative products, bigger target markets have been successful as well.

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Marketing for MOST: Module 10 – IT and Marketing

e-positioning

• The most important strategy on the Internet is how to position your product.

• Only online, only offline, or offline-online available products.

• Shift from product-centric companies to customer-centric companies.

• Adding a new medium for providing information, and reach the customer through the web.

Cont…

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Marketing for MOST: Module 10 – IT and Marketing

e-positioning

Cont…

• Customization is the new mantra for customer value.

• Distribution channels are matched to customer’s preferences.

• Make profits on customers lifetime value.

• It’s a two way communication network via the web, which is necessary to expedite transactions.

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Marketing for MOST: Module 10 – IT and Marketing

The 11 Immutable Laws of Internet Branding

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Marketing for MOST: Module 10 – IT and Marketing

The 11 Immutable Laws of Internet Branding

1. The Law of either/or : the internet can be business or medium, but not both.

2. The Law of interactivity: online business cannot survive without interactive website.

3. The Law of the common name: most internet companies have a common word as their name which, is not very attractive

4. The Law of the proper name: name is the most important asset of the company on the net, so it better be something spectacular.

5. The Law of singularity: the internet is innovative and creative and to be the market leader is the mantra for success. The one who does it first reaps the most benefits.

6. The Law of advertising: advertising off the net will always be bigger than on the net, use the right kind of mix.

Cont…

Source:Immutable Laws of Internet Branding: Al Ries , Laura Ries: Harper Collins.

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Marketing for MOST: Module 10 – IT and Marketing

The 11 Immutable Laws of Internet Branding

Cont…

7. The Law of globalism: on the internet there are no boundaries and territories. The world is the playground.

8. The Law of time: the internet is very fast and you have to be quicker and focused to reap the benefits.

9. The Law of vanity: do not try and do everything, be selective and have common sense.

10. The Law of divergence: the internet is moving in the opposite direction of convergence.

11. The Law of transformation: to be successful on the internet, you have to believe that it has transformed our lives and will further affect it in different ways.

Source:Immutable Laws of Internet Branding: Al Ries , Laura Ries: Harper Collins.

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Marketing for MOST: Module 10 – IT and Marketing

e-marketing research

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Marketing for MOST: Module 10 – IT and Marketing

e-marketing research benefits

• Cost savings.• It is individually directed.• It is a good way to reach unreachable people

like doctors, lawyers, professionals.• It is fast and has maximum reach.• Sample size is not a problem.• It offers anonymity for the surveyed, therefore

there is more honesty.• It is easier to reach early adopters.

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Marketing for MOST: Module 10 – IT and Marketing

e-marketing research traps

• The users of the internet do not represent the whole population, they are different.

• Online research is not right for every company and product.

• Sample audience is not defined.• There is no interaction between the surveyor

and surveyed.

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Marketing for MOST: Module 10 – IT and Marketing

The New Marketing Mix

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Marketing for MOST: Module 10 – IT and Marketing

The New Marketing Mix in the Digital Economy

The New Marketing Mix

•Digital value added•Brand experience

Product

Price

Place

Promotion

•Representation

•New Distribution Models

•New Pricing Models

•Price Transparency

•Online vs. Offline Mix

•Integration

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Marketing for MOST: Module 10 – IT and Marketing

Product

• Can your product be produced in a better way using IT?

• Is the internet the right medium for your product?• Is your product easily deliverable?• Can your product be purchased without the customer

actually feeling it or touching it?• Can you make sure that utility of the product is the

same to the consumer, whether purchased offline or online?

• What are the added values to buy online?

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Marketing for MOST: Module 10 – IT and Marketing

Price

• Because customers have new buying models, new pricing approaches are essential.

• Price transparency is the way on the Internet.• Prices are complex and have a lot add-ons.• Fixed pricing has made way for leasing in a big way:

cars, computers, even music can be leased.• Pricing under pressure is experienced by all

corporations: “in the digital world the customer has become the true King”.

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Marketing for MOST: Module 10 – IT and Marketing

Place

• Does it matter whether you are in Timbuktu or in New York? Your store is online.

• New distribution models have given birth to 1) Disintermediation.

2) Reintermediation. 3) Info mediation.

4) Peer-to-Peer Services.5) Affiliation and collaboration.

• The world is the playground now and distribution has taken over the limitations of place, especially in “information intensive” businesses.

• Physical limitations do exist however, in many businesses.

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Marketing for MOST: Module 10 – IT and Marketing

Promotion

• Both, online and offline promotion is important to optimize the promotional mix.

• Both, offline and online communications have to be integrated.

• They have to be creative.• There has to be interaction with the customer.• Globalized approach.

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Marketing for MOST: Module 10 – IT and Marketing

What is the web’s advertising revenue?

                                                                                    Source: Jupiter Communications

Source:Jupiter Communications

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Marketing for MOST: Module 10 – IT and Marketing

The Fifth P- PEOPLE

• People are more important now than ever before.

• Customers have to be satisfied more as they have more alternatives and more information.

• Staff has to be trained as marketing tools are advancing rapidly technologically.

• As marginal costs are low repeat customers means lots of profits.

• Happy Staff= Happy Customers= Happy Shareholders.

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Marketing for MOST: Module 10 – IT and Marketing

More on e-business

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Marketing for MOST: Module 10 – IT and Marketing

What industries has the internet really revolutionized?

1. Information-intensive industries namely:• Financial services• Entertainment • Education • Government

2. Auction industry.

3. Travel Industry.

4. Some parts of retail industry, like books.

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Marketing for MOST: Module 10 – IT and Marketing

Let’s talk about the e-customer

• The e-customer is smart and well informed, well educated, more affluent, and an early adopter of technology.

• The e-customer is used to extras.• The e-customer wants simplified purchases.• The e-customer is lazy.• The e-customer wants the best price.• The e-customer is not very loyal.• The e-customer can be an individual, corporation,

government.• The e-customer wants interaction.

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Marketing for MOST: Module 10 – IT and Marketing

How do consumers actually use the internet?

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Marketing for MOST: Module 10 – IT and Marketing

What we pay for and what we don’t?

Pay Free

Internet access

Analysis

Entertainment

Customized services

Shopping info

Commodity or financial data

Search engines

E-mail

Purchases

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Marketing for MOST: Module 10 – IT and Marketing

Advantages of e-business for consumers

• Perfect for couch potatoes.• Price transparency.• Complete information.• Instant delivery.• Ease of payment.• Infinite product choice.• After sales service without leaving home.

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Marketing for MOST: Module 10 – IT and Marketing

Disadvantages of e-business for consumers

• Payment security.• No tangibility of goods.• Dependence on e-tailer’s word.• Addictive.• Makes them lazy.• Unlimited information leads to confusion.

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Marketing for MOST: Module 10 – IT and Marketing

e-tools

• The web, interactive television and cellular phones.

These tools enable marketers:

1. To get fine tuned.

2. To interact with buyers

3. Get direct response.

4. Brand building and customer service.

5. Cost savings.

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Marketing for MOST: Module 10 – IT and Marketing

Advantages of e-business for sellers

• Cost savings.• Interaction.• Removal of customer service bottlenecks.• Target approach and individualized service to the

customer.• Improved purchasing, recruiting, training and internal

and external communications.• Infinite database of customers.• Transparency of Information.• No boundaries.

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Marketing for MOST: Module 10 – IT and Marketing

Disadvantages of e-business to sellers

• Price transparency.• Technology dependence.• Limited product differentiation.• Minimal margins.• No physical interaction.• Frauds.

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Marketing for MOST: Module 10 – IT and Marketing

Model for a Virtual Organization

Alliance with small suppliers

Extranets

Intranets

Alliance with a major supplier

Cross-functional teams Engineering teams

Alliance with a major customer

Manufacturing teams

Customer response and order-fulfillment teams

Boundary of firmAlliance with subcontractors

Alliance with a competitor who provides services that are complementary

Reference:Burn Janice: e-business strategy for virtual organization.

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Marketing for MOST: Module 10 – IT and Marketing

Will Click replace the Brick?

• Maybe not, because we still enjoy going to the market.

• Maybe not, because the Brick and Mortar stores are integrating Bricks and Clicks very well( Walmart.com, Macy’s.com).

• Maybe not, because 90% of the goods we buy have to be touched and felt.

• Maybe not, because its still too early to say.

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Marketing for MOST: Module 10 – IT and Marketing

The new types of operational systems

• Click Only: only website business and no prior history. E.g. e.trade.com,etc.

• Click followed by Brick: some click only firms follow up with brick stores. E.g. Amazon.com, gateway.com

• Brick followed by Click: existing brick and mortar companies going online. E.g. Wal-Mart and walmart.com

• Brick and Mortar Only: only physical stores and no

online sales: E.g. some custom shops like REI.• Brick followed by Click Only: a brick and mortar store

followed up with an internet site and then, the the brick store abandoned. E.g. Egghead software.

Reference:Marketingmoves: Kotler, Jain & Maesincee

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Marketing for MOST: Module 10 – IT and Marketing

Has IT changed Marketing?

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Marketing for MOST: Module 10 – IT and Marketing

Has IT changed marketing?

• Certainly, it has broadened its vision and boundaries.

• Competition is at a new level, it’s not local anymore.

• It has dramatically changed the whole process of marketing.

• And yet, the essence of marketing remains intact: it is an art and science to best meet the needs of customers.

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Marketing for MOST: Module 10 – IT and Marketing

Shifts in Operational Marketing

• Reverse Product design.• Reverse Pricing.• Reverse Advertising.• Reverse Promotions.• Reverse Distribution Channels. • Reverse Segmentation.

Reference:Marketingmoves: Kotler, Jain & Maesincee

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Marketing for MOST: Module 10 – IT and Marketing

CRM

The most important aspect of the internet is its ability to let the organization interact with the customer.

Customer Relationship Management is now the focus of every marketing team, in every organization.

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Marketing for MOST: Module 10 – IT and Marketing

CRM

CRM helps a company develop customers who would :

• Buy more from the company irrespective of relatively higher prices than competition.

• Recommend the company to other customers.• Use company support service and facilities.• Make the company the standard for the organization

or family.• Try out the company’s new offerings and help them

make them better.

Reference:Marketingmoves: Kotler, Jain & Maesincee

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Marketing for MOST: Module 10 – IT and Marketing

Arthur M. Hughes’ five criteria for successful CRM

1. The company has well developed marketing processes.

2. The company can capture customers’ names, addresses, and purchase behavior with ease.

3. Data about customers’ repeat purchases can be captured at the point of sale.

4. The company has the skills to build and mine their databases.

5. The company can offer a frequency reward program with significant benefits for both parties.

Reference:Marketingmoves: Kotler, Jain & Maesincee

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Marketing for MOST: Module 10 – IT and Marketing

The CRM process

• Finding the target customers.

• Filling the target customers’ needs.

• Forming the link with target customers.

• Defining target markets.• Acquiring target markets.

• Translating the customer value into actionable customer benefits.

• Matching the market offerings with customer’s choice context.

• Designing market intelligence.• Gaining insight from customer

information.

Stage of CRM Key initiatives

Reference:Marketingmoves: Kotler, Jain & Maesincee

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Marketing for MOST: Module 10 – IT and Marketing

Have we adapted to this new style of living?

• Do you think we can work without Computers anymore. Imagine no e-mails.

• When we call the world without boundaries, isn’t the Internet really it.

• It is not for couch potatoes it’s for efficient people who believe in time savings.

• The Internet has given us more options than we ever had.

• A whole world is just a CLICK away.

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Marketing for MOST: Module 10 – IT and Marketing

Will it transform our lives?

• You are kidding yourself, if you disagree that it has not already transformed your life.

• How many people have not used the internet for purchasing anything?

• How many people are not using chats and emails as alternative to telephone?

• How many people don’t know what the internet is?

NEWS FLASH: We have been TRANSFORMED completely.

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Marketing for MOST: Module 10 – IT and Marketing

What will be the next big thing now?

• Wireless- net: it’s not that reliable right now but popularity is increasing because of reach to far off places.

• Peer-to-Peer: this technology helps individuals communicate with each other through their PC’s.

• Cellular Browsing: e-mailing through cellular phones is already very popular. Will it replace the PC in the future?

• Machine-to-Machine: right now companies like e-bay and yahoo auctions are acting as intermediaries, will machines play an important role in transactions between people.

In this fast paced world of technological advances, we won’t have to wait long to see the next big thing to emerge.

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Marketing for MOST: Module 10 – IT and Marketing

The Future

• The internet is in the early majority stage.

• In years to come, if you someone calls their kids Raj.com and Yuko.com, then don’t be taken aback.

• IT is a way for a better informed and a more efficient world.

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Marketing for MOST: Module 10 – IT and Marketing

The Future

But Beware:

• IT cannot create a single drop of water or a grain of rice by itself.

• IT can be a dangerous weapon if misused.

• The “highest human needs” may not be satisfied by IT.

• There is potential withering of human intellect through information overload.