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Adapting Marketing To The Adapting Marketing To The New EconomyNew Economy byby

Yohan WismantoroYohan Wismantoro

Management DepartmentManagement Department

Dian Nuswantoro UniversityDian Nuswantoro University

Retailing in E-Commerce :

Product and Service

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The Internet will The Internet will create new winners create new winners and bury the and bury the laggards.laggards.

Kotler on Marketing

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Adapting Marketing to the New Economy

Four Major Drivers of the Four Major Drivers of the New EconomyNew Economy:: Digitization and ConnectivityDigitization and Connectivity Disintermediation and ReintermediationDisintermediation and Reintermediation Customization and CustomerizationCustomization and Customerization Industry ConvergenceIndustry Convergence

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Procter & Gamble’s Reflect.com site allows customers Procter & Gamble’s Reflect.com site allows customers to design their own beauty productsto design their own beauty products

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“How Business Practices are Changing”Table 2-1: Old Economy vs. New Economy

Old EconomyOld Economy New EconomyNew Economy

Organize by product unitsOrganize by product units

Focus on profitable transactionsFocus on profitable transactions

Look primarily at financial Look primarily at financial scorecardscorecard

Focus on shareholdersFocus on shareholders

Marketing does the marketingMarketing does the marketing

Build brands through advertisingBuild brands through advertising

Focus on customer acquisitionFocus on customer acquisition

No customer satisfaction No customer satisfaction measurementmeasurement

Overpromise, underdeliverOverpromise, underdeliver

Organize by customer segmentsOrganize by customer segments

Focus on customer lifetime valueFocus on customer lifetime value

Look also at marketing scorecardLook also at marketing scorecard

Focus on stakeholdersFocus on stakeholders

Everyone does the marketingEveryone does the marketing

Build brands through behaviorBuild brands through behavior

Focus on customer retention and Focus on customer retention and growthgrowth

Measure customer satisfaction and Measure customer satisfaction and retention rateretention rate

Underpromise, overdeliverUnderpromise, overdeliver

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E-Business and E-Commerce (B2C, B2B, C2C, C2B, pure click or dot-E-Business and E-Commerce (B2C, B2B, C2C, C2B, pure click or dot-coms, click and brick: channel conflicts?)coms, click and brick: channel conflicts?)

Why did so many dot-coms fail??Why did so many dot-coms fail??(see p. 46) (see p. 46)

Web Sites (setting up/attractiveness;Web Sites (setting up/attractiveness;online advertising and measurement; online advertising and measurement; revenue and profit model)revenue and profit model)

Customer RelationshipCustomer RelationshipMarketing (CRM): databaseMarketing (CRM): databasemarketing, data warehouses,marketing, data warehouses,data mining, problems withdata mining, problems withdatabase marketing?database marketing?

How Marketing Practices are Changing:

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B2C: Customers can shop online at Calyx and B2C: Customers can shop online at Calyx and Corolla or ask for a catalog and shop by phoneCorolla or ask for a catalog and shop by phone

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B2B: www.transora.com: global online B2B: www.transora.com: global online marketplace for the consumer packaged goods marketplace for the consumer packaged goods

industryindustry

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A “Pure Click” company: CarPoint, the leading A “Pure Click” company: CarPoint, the leading metamediary for car buying, exists only on the Web.metamediary for car buying, exists only on the Web.

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Which is more important for Which is more important for developing an e-presence: the agility developing an e-presence: the agility of a pure click company, or the well of a pure click company, or the well defined and readily identifiable defined and readily identifiable resources of a traditional resources of a traditional brick and mortar brick and mortar company?company?

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Attracting and Keeping VisitorsAttracting and Keeping Visitors

How can we get more prospects to know and visit our site?How can we get more prospects to know and visit our site?

How can we use marketing to spread word-of-mouth?How can we use marketing to spread word-of-mouth?

How can we convert visitors into repeaters?How can we convert visitors into repeaters?

How do we make our site more experiential and real?How do we make our site more experiential and real?

How can we build a strong relationship with our customers?How can we build a strong relationship with our customers?

How can we build a customer community?How can we build a customer community?

How can we capture and exploit customer data for up-selling How can we capture and exploit customer data for up-selling and cross-selling?and cross-selling?

How much should we spend on building and marketing our How much should we spend on building and marketing our site?site?

Advertising on the InternetAdvertising on the Internet

What are the various ways that we can advertise on the What are the various ways that we can advertise on the Internet?Internet?

How do we choose the right sites for placing our ads or How do we choose the right sites for placing our ads or sponsorship?sponsorship?

Table 2-Table 2-2: Setting 2: Setting

Up a Up a Dot-com Dot-com PresencePresence

(p. 49)(p. 49)

See text for more info. on retailers, site organization, profits …

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Placing Ads and Promotions Online (p. 50)

Banner ads (53% of ad expenditures online; click-Banner ads (53% of ad expenditures online; click-through rates only .5%)through rates only .5%)

Sponsorships (30% of ad expend. online)Sponsorships (30% of ad expend. online) Microsite (small area paid for by ext. co.)Microsite (small area paid for by ext. co.) Interstitials/pop-upsInterstitials/pop-ups Browser ads (viewer is paid to watch ads)Browser ads (viewer is paid to watch ads) Alliances and affiliate Alliances and affiliate

programs (e.g., AOL and Amazon)programs (e.g., AOL and Amazon) Push technology (e.g., Real Video; Push technology (e.g., Real Video;

Infogate)Infogate)

See Belch and Belch (2004) See Belch and Belch (2004) Advertising and Promotion and IMCAdvertising and Promotion and IMC, , Chapter 15 for strengths and weaknesses of Internet advertising.Chapter 15 for strengths and weaknesses of Internet advertising.

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Infogate.com “pushes” targeted content and ads to those Infogate.com “pushes” targeted content and ads to those who are interested in a product or product categorywho are interested in a product or product category

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Measures of Effectiveness for Internet Advertising:

ViewersViewers (stay on site/page): number of viewers to a (stay on site/page): number of viewers to a site (and unique viewers)site (and unique viewers) Ad views/page views/impressionsAd views/page views/impressions: the number of times : the number of times

viewers see a Web page with an ad. (used to calculate viewers see a Web page with an ad. (used to calculate cost per thousand or CPM).cost per thousand or CPM).

HitsHits (leave the site or home page): number of times (leave the site or home page): number of times a specific component of a site is requested/clicked a specific component of a site is requested/clicked on.on. Clicks/click throughsClicks/click throughs: the number of visitors to a site : the number of visitors to a site

that click on an ad to retrieve information.that click on an ad to retrieve information. Click through rateClick through rate: % of ad views that result in an ad : % of ad views that result in an ad

click. (Cost per click can be calculated)click. (Cost per click can be calculated) Cost per thousand (CPM) example for “go.com”Cost per thousand (CPM) example for “go.com”::

CPM = $10,000 per mo. x 1000 / 500,000 views per mo. = $20CPM = $10,000 per mo. x 1000 / 500,000 views per mo. = $20

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Adapting Marketing to the New Economy (pp. 51-52)

Building a Revenue and Profit Model Building a Revenue and Profit Model Advertising incomeAdvertising income Sponsorship incomeSponsorship income Membership and Membership and

subscriptions (e.g., WSJ)subscriptions (e.g., WSJ) Profile income (privacy?)Profile income (privacy?) Product and service Product and service

salessales Transaction commission Transaction commission

and fees (other parties; eBay)and fees (other parties; eBay) Market research/informationMarket research/information Referral income (Edmund’s finders fee)Referral income (Edmund’s finders fee)

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Customer Relationship Marketing (CRM)Table 2-3: Mass Marketing vs.

One-to-One Marketing (CRM) (p. 53)

Mass MarketingMass Marketing One-to-One MarketingOne-to-One Marketing

Average customerAverage customer

Customer anonymityCustomer anonymity

Standard productStandard product

Mass productionMass production

Mass distributionMass distribution

Mass advertisingMass advertising

Mass promotionMass promotion

One-way messageOne-way message

Economies of scaleEconomies of scale

Share of marketShare of market

All customersAll customers

Customer attractionCustomer attraction

Individual customerIndividual customer

Customer profileCustomer profile

Customized market Customized market offeringoffering

Customized productionCustomized production

Individualized distributionIndividualized distribution

Individualized messageIndividualized message

Individualized incentivesIndividualized incentives

Two-way messagesTwo-way messages

Economies of scopeEconomies of scope

Share of customerShare of customer

Profitable customersProfitable customers

Customer retentionCustomer retention

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Adapting Marketing to the New Economy (pp. 53-56)

Database MarketingDatabase Marketing: A process by which companies : A process by which companies collect information on consumers, analyze to predict who collect information on consumers, analyze to predict who will buy, and then develop tailored messages to those will buy, and then develop tailored messages to those consumers. consumers. ((Bus. WeekBus. Week 1994) The ideal consumer = high volume user 1994) The ideal consumer = high volume user

Data WarehouseData Warehouse: storage files for data collected by the : storage files for data collected by the company’s contact center from customer purchases, company’s contact center from customer purchases, customer service calls, online inquiries, mail-in rebate customer service calls, online inquiries, mail-in rebate cards, etc.cards, etc.

Data MiningData Mining: extracting useful information about : extracting useful information about individuals, trends, and segments from the data.individuals, trends, and segments from the data.

Any problems with database marketing??Any problems with database marketing??

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Marketing Knowledge Management

Marketing knowledge Marketing knowledge

= the digitized “group mind” = the digitized “group mind” = “collective memory” of the marketing personnel and = “collective memory” of the marketing personnel and sometimes of consultants, partners, and former employees. sometimes of consultants, partners, and former employees.

Sometimes the knowledge management technology even Sometimes the knowledge management technology even allows marketing staff to chat in real time for problem allows marketing staff to chat in real time for problem solving, which is why the system also includes contact solving, which is why the system also includes contact information. information.

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Use in the Telecom IndustryUse in the Telecom Industry Representative FirmRepresentative Firm

Scanner Check-Out Data AnalysisScanner Check-Out Data AnalysisCall Volume AnalysisCall Volume AnalysisEquipment Sales AnalysisEquipment Sales AnalysisCustomer Profitability AnalysisCustomer Profitability AnalysisCost and Inventory AnalysisCost and Inventory AnalysisPurchasing Leverage with SuppliersPurchasing Leverage with SuppliersFrequent-Buyer Program ManagementFrequent-Buyer Program Management

AT&TAT&TAmeritechAmeritechBelgacomBelgacomBritish TelecomBritish TelecomTelestra AustraliaTelestra AustraliaTelecom IrelandTelecom IrelandTelecom ItaliaTelecom Italia

Use in the Retail IndustryUse in the Retail Industry Representative FirmRepresentative Firm

Scanner Check-Out Data AnalysisScanner Check-Out Data AnalysisSales Promotion TrackingSales Promotion TrackingInventory Analysis and DeploymentInventory Analysis and DeploymentPrice Reduction ModelingPrice Reduction ModelingNegotiating Leverage with SuppliersNegotiating Leverage with SuppliersFrequent-Buyer Program Management. Frequent-Buyer Program Management. Profitability AnalysisProfitability AnalysisProduct Selection for MarketsProduct Selection for Markets

Wal-MartWal-MartKmartKmartSearsSearsOsco/Savon DrugsOsco/Savon DrugsCasino SupermarketsCasino SupermarketsW. H. Smith BooksW. H. Smith BooksOtto Versand Mail OrderOtto Versand Mail OrderAmazon.comAmazon.com

Uses of Knowledge Management in Two Industries Source: Adapted from Kalakota and Robinson (1999)

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NEW ECONOMY

Don Tapscott (1997) : “Don Tapscott (1997) : “Digital EconomyDigital Economy: : Promise Promise And Peril In The Age Of Networked IntellegencyAnd Peril In The Age Of Networked Intellegency“, “, memaparkan bagaimana perekonomian bergeser memaparkan bagaimana perekonomian bergeser menuju pada perekonomian baru yang disebut menuju pada perekonomian baru yang disebut sebagai sebagai digital economy digital economy

Perekonomian baru (Perekonomian baru (digital economydigital economy) ) adalah adalah perekonomian yang didasarkan pada ilmu perekonomian yang didasarkan pada ilmu pengetahuan, sehingga disebut juga dengan pengetahuan, sehingga disebut juga dengan knowledge economyknowledge economy

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Digital Convergence

Computing

Content

Communications

Interactive Multimedia

Experience• Hal penting dalam perubahan

teknologi terhadap tata kehidupan manusia adalah dapat disatukannya tiga kegiatan pokok yaitu computing, communication dan content dalam satu sistem yaitu multimedia.

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