convergence marketing

1

CONVERGENCE MARKETING

Created by

Erfi IlyasNPM 2004812002

PROGRAM DOKTOR ILMU EKONOMI

UNIVERSITAS KATOLIK PARAHYANGAN

2

CONVERGENCE MARKETING

Jerry WindHe was an early champion of digital marketing,

highlighting the revolutionary changes of the internet on consumer behavior, marketing and business strategy

He urged executives to consider the potential of this new technology to transform their businesses

Vijay MahajanHe point out that not everything had changed, and that

many aspects of consumer behavior and marketing remained the same. He urged the executives to consider

enduring human characteristic that would continue to shape marketing and business strategy

Erfi Ilyas, NPM 2004812002 Program DIE, UNPAR3

THE HYBRID CENTAUR

TraditionalConsumer

CyberConsumer

Centaur

Offline Online

Vijay Mahajan Jerry Wind

HybridConsumer


What is Converging

Convergence, means more than the

fusion of different technologies

(television, computers, wireless, PDAs)

or combination of channels.

More basic convergence within the consumer-

the new possibilities created by technology and

the enduring behaviors of human being


AREA OF CONVERGENCE

Technology

Company

Consumers


FRAMEWORK FOR THE BOOK

Understan-dingthe Centaur

Navigating

The 5 Cs of

Convergence

Mastering

Convergence

Marketing

Transforming

the organiza-

tion and

implementing

the strategy

Running with theCentaur

Understanding

the changing

Centaurs and

their need

Identify the need

of the Centaur

that can be met

by new

technology in

unique or

different way

Generate

innovative

convergence

marketing and

business

strategy

C-transform the

organization to

support the

convergence

strategies and

develop an

implementation

plan

Create value for

shareholders

and other stake-

holders and

prepare for the

children of the

centaurs

Part 1 (1-2) Part 2 (3-7) Part 3 (8-9) Part 4 (10-11) Conclusion (12)


PART 1

UNDERSTANDING

THE CENTAUR

1. THE CENTAUR AWAKENS

2. THE REALITY OF THE CENTAUR


CHALLENGE OF THE EMERGING HYBRID CONSUMER

The Demand of the CentaurIllustrative Convergence

Challenges for Marketing

Desire for uniqueness,

personalization, and

Customization

Sally buys customized product

from Reflect.com and a

customized care package on

Reapod, yet also purchases off-

the-shelf products in Nordstrom’s

and the grocery store

Customerization

How can company offer the right

mix of standard and customized

products? How do they need to

rethink their approaches to new

product development? How can

companies offer the right balance

of personalization and mass

marketing message?





Desire for social

interaction

Sally enjoys meeting friends in the

store – getting book

recommendations from her

physical community – but goes to

iVillage to discuss her medical

problems with experts and other

woman

Virtual communities

How can companies combine real

world communities and virtual

communities in a way that leads

to profit? Should companies

create their own communities?

Given that consumers are

participating in a number of

communities already, how can

companies tap into them





Desire for convenience

and channel options

Sally wants to walk in or log in,

interacting where and when she

desire, anytime and anyplace.

She wants the company to be

accessible and responsive – on

her schedule not the company’s.

Channel options

How can companies combine

multiple channel into a seamless

interface? How can they

anticipate how consumers will

interact with them? How can they

add new channels to existing

systems and assure high levels of

service and quality across phone,

click and visit?





Desire for value

Sally mix purchases in physical

store with online markets

throughout the day. She buys

shoes at Nordstrom online and

returns them in a physical store.

In purchasing her airline tickets,

she actively names her own price

but then buys at discount, and

she also purchase through

auction on eBay.

Competitive value

equation

How do companies need to

reshape their pricing strategies in

an environment in which

customers have many more

pricing options (auction, name

your own price, etc)? How can

company address the higher

expectations of customers for

value and service? How do

information, education, and

entertainment contribute to value





Desire to make better

decisions

Sally goes to MySom to compare

prices for a digital photo frame,

yet Hotwire and Priceline keep

their sophisticated pricing tools

hidden from the customer.

Choice tools

Given that customer have access

to more search engines and

decision making tools, how do

companies need to transform their

strategies? How can companies

put more tools into the hand of

customers, to simplify their lives,

without giving away their business

or driving customers to rivals?

How can they best balance

company-initiated messages with

unbiased information?


• Myth 1: Only the elite want customization

How can you expand the customization of your products,

services, marketing message, and experience? Do your

customer want to customization today? Will they in the

future?

• Myth 2: Price is the bait set by the seller

How can you use new pricing models to attract and retain

customers while increasing profits?

MYTHS OF THE TRADITIONAL CONSUMER


• Myth 3: The consumer is on the couch

How can you increase your interaction with proactive

customer

• Myth 4: Location, location, location

How can you rethink your location so that you can meet

customers wherever they want to interact with company?



• Myth 5: Consumers are islands

How can you use social interactions and communities online and offline to benefit your business

• Myth 6: Consumers will accept what you tell them

Can you provide decision making tools and information to customer in a way that benefits your business?



• Myth 1: People don’t want to be troubled with shopping

How can you use the fact that people like to shop in designing your business? When do they like to shop in stores and when do they prefer to shop online.

• Myth 2: Efficiency is all that matters

Is your online business model built around transaction efficiency? When do your potential customers care about transaction efficiency? When are they willing to tradeoff efficiency for other benefits?

MYTHS OF THE CYBERCONSUMER


• Myth 3: Consumer want to get the best price

What price are your customers willing to accept? How can

you offer a fair price without offering the lowest price? How

important is it to your customers to get the cheapest price?

• Myth 4: Consumer are either online or offline

How can you best combine online and offline channels?



• Myth 5: Ease of visiting stores will lead to more purchasing

How can you make your online offering more sticky to turn browsers into buyers.

• Myth 6: The internet is inherently fascinating and attractive.

How can you keep your online offerings new and interesting? How much of internet in your online business is driven by novelty and how much will endure when the hype has passed? With the rise of the internet, how do your offline offerings need to change?



• Self affirmation

• Symbolic meaning

• Scripts for shopping

• Experience

• Social influence

The Human Motivations

How do human motivation such as self-affirmation,

symbolism, buying scripts, experience, and social

influence affect the way consumers approach your

products and services?


Putting the Consumer at the Center

Consumer

Who are the

Centaurs and

What do they

need

Offline Online

What product & service solutions can

meet these needs?

What business and marketing strategies

are needed to develop these solutions

What organizational architecture and

process are needed to support these strategies?


PART 2

NAVIGATING THE FIVE Cs

OF CONVERGENCE

1. CONVERGING ON CUSTOMERIZATION

2. CONVERGING ON COMMUNITIES

3. CONVERGING ON CHANNELS

4. CONVERGING ON COMPETITIVE VALUE

5. CONVERGING ON CHOICE


NAVIGATING THE FIVE Cs OF CONVERGENCE

Technology

Company

Consumers

• Customerization

• Community

• Channels

• Competitive value

• Choice tools


1. Converging on Customerization

Companies can offer customized product, marketing

message, and experiences, and this combination,

referred to as “customerization,” is transforming

interaction with customer. Yet, with all the options in

the world, hybrid consumers in some situations still

buy standardized products off the shelf and respond to

mass market message


Converging on Customerization

CustomizedOperations

CustomizedMarketing

The concept of “customerization” goes beyond simply

customizing the operations to customize both

manufacturing and marketing interaction


Customization options

Segment of one

PersonalizationCustomerization

StandardizationMass

Customization

Operational Customization

Mark

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miz

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Low

Lo

wH

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High


The Shift of Customerization

Old Model-Mass and

Segmented Marketing

New Model-Marketing

Customerization

Relationship with

customers

Customer is passive participation in the exchange

Customer is an active co-producer

Customer Needs Articulated Articulated and unarticulated

Segmentation Mass market & target segments

Customization segments and “segments of one”

Product and service offerings

Line extensions and modification

Customized products, services, and marketing



(extended)Old Model-Mass and

Segmented Marketing

New Model-Marketing

Customerization

New Product

Development

Marketing and R&D drive new product development

Customer interactions drive new product development, and R&D focuses on developing the platforms that allow customerization

Communication Advertising and PR Integrated, interactive, and customized marketing communication, education, and entertainment



(extended)Old Model-Mass and

Segmented Marketing

New Model-Marketing

Customerization

Distribution Traditional retailing and direct marketing

Direct (online) distribution and rise of third party logistics services

Branding Traditional branding & co-branding

The customer’s name as the brand: My Brand or Brand 4 ME

Basis of competitive advantage

Marketing power Marketing finesse and “capturing” the customer as “partner” while integrating marketing, operations, R&D, and information


• Fitting in with the crowd• Experience• The need for fit• Uncertainty• The complexity of choice• Unarticulated needs• The right to change one’s mind• Integration• Repair and reselling

Why the centaur sometimes Prefers standardization


• Integrate online and offline customization• Ask the next question• Invite the customer into the lab• Use the customized choices to inform mass

production• Understand the value chain of your brand• Understand your segments• Increase digital content• Grab the low-hanging fruit of superficial

customization

Convergence Strategies for Customerization and Standardization


• Keep standardized offerings a click or step away

• Design for future customization

• Limit complexity by offering the right selection

• Personalize messages and products based on careful observation

• Simplify customerization

• Understand the level of attention customers want

• Create and integrated view of the customer

Convergence Strategies for Customerization and Standardization(extended)


2. Converging on Communities

The emergence of virtual community, knitting together

people with common interests from around the globe,

is one of the most significant innovations of the

interconnected world. But these virtual communities

have to be considered in broader context.

How these virtual communities converge with physical

communities and how the economic and social

purpose of communities can be drawn together.


Illustrative Characteristics of Online and Offline Communities

Offline Online

Geographical

scope

Geographically bound Boundless and global

Temporal scope Specific meeting times Anytime

Reach ability Expensive and complex Cheap and simple

Speed of communication

Slow Instantaneous

Ability to change Difficult Easy

Potential for engagement

Somewhat limited Greater

Identity & Anonymity

More fixed More fluid and anonymous

Experience Face to face virtual


Converging on Communities

Virtual Physical

Social Economic

Channel

Purpose


Converging of Physical andVirtual Communities

Physical Communities

VirtualCommunities

Gathering Lost Tribes

Parallel

Universe


• Gather lost tribes

• Create parallel universes

• Engaged in cross-pollination

• Take advantage of strengths and weaknesses of virtual and physical

Strategies for Convergence Physical andVirtual Communities


• Embed the economic in the social

• Tap into the energy of the community through community generated content

• Create customer communities to enhance customer service and product development

• Build bridges to existing communities

• Sustain trust

• Balance control with organic growth

• Use communities for customer feedback

Strategies for Social and Economic Convergence


• Should the company create a new community or tap into existing communities?

• If the company taps into an existing community, it needs to consider how receptive the community will be

• If the company creates its own community, should it do so as a joint venture with another organization?

• What type of community should be created• Finally, how does this design community relate

to the company’s business and marketing strategies?

Designing Communities


3. Converging on Channels

The power of the internet is not in transaction that

begin and end online, but in customer interactions that

run across multiple channels, from online to offline and

back

How companies can use convergence strategies to

present a unified face to customers and develop

coherent branding and internal structures


Converging on Channels

Niche/Segmented

Consistent

Integrated/Owned

Separated/Outsourced

Customer

experience

Internal Structure

and Branding


Illustrative Comparison of Strengths and Weaknesses of Online and Offline Worlds

Offline Online

Access Limited geography and often time

Anytime, anywhere

Search Browsing is more holistic and experiential, but individual search is difficult

Simple to find specific information, information rich browsing

Selection Limited to store size and design

Virtually unlimited

Experience Tactile, directed to all senses

Intellectual, but becoming more tactile



Offline Online

Company cost of interaction

High for routine interactions, but some time lower for exceptions

Low for routine interactions, but high for exception

Customization Difficult and time consuming

Simple

Delivery/Returns for non digital product

Simple and quick after the decision to purchase is made, but still require trip to a store

Complex, involving delivery channels

Delivery/Return of digital products

More complex, requiring a trip to store

Easy



Offline Online

Time for first purchase

Very slow Slow

Time for repeat

purchasing

Slow Very fast


• Give customers the best of both world

• Let customer decide how they want to interact

• Understand the context and timing for interaction

• Create seamless interface between online and offline experience

• Treat consumers the same across channels

• Incorporate digital interfaces into the offline experience

Strategies for Integrating Customer Experience


• Develop the right brand or set of brands• Leverage the assets of existing business• Manage offline/online channel conflict• Use partnership and alliance to complement the

weaknesses• Create the right degree of separation• Create integrated information systems• Create integrated supply chains and logistics• Manage the path of evolution

Strategies for Integrating Structure and Branding Across Channel


4. Converging on Competitive Value

The value equation has become much more complex

in a convergent world. In addition to traditional seller-

initiated pricing, companies also have developed a

wide range of buyer-initiated pricing mechanism.

New source of value are being combined with

traditional sources, and experience is becoming

increasingly important in the overall value equation


• Product/Service Offering• Pricing• Service• Brand• Speed• Convenience• Novelty• Peace of mind• Experience and Entertainment• Information in Context• Education and Personal Growth• Control• Social/Psychological Rewards

The New Value Equation


Illustrative Shift in Sources of Value

Source of

ValueOffline Online

Product/Service

Offering

Physical products and face-to-face services

Digital products and online services can be delivered more efficiently

Price Fixed pricing models with discounting

Dynamic pricing models

Service Traditional before-sale, during-sale and after-sale service that required real people

Automated service allows customers 24/7 access while reducing cost

Brand Brand adds value by signaling status or product quality

Branding helps to increase trust in a virtual world and speed the ability to make decisions



Source of

ValueOffline Online

Speed Limited by physical value chain

Can deliver digital products in real time but physical products face the same challenges

Convenience Fixed locations, business hour

Anytime, anywhere

Novelty Difficult to make new Easy to make new

Peace of mind Physical relationship can contribute to peace of mind (eye contact, handshakes)

Virtual relationship may make trust more important and harder to achieve



Source of

ValueOffline Online

Experience and

Entertainment

Companies offer real experience, but have limited opportunities for entertainment

Virtual experience offer tremendous opportunities for interactive entertainment and they are becoming increasingly realistic

Information in context

Off-side information is searched for and obtained, but often out of context

Information can be provided within the context of purchase decision

Education and personal growth

Costly to provide Inexpensive, accessible and more effective e-learning



Source of

ValueOffline Online

Control Customer has limited control or control is expensive (personal tailoring)

Through customization and personalization, customer has control over product and service offering

Social/Psychological

Personal interaction and other traditional rewards of offline activities

Enhance by whole new range of rewards through online interactions and empowerment through technology


• Increase novelty and entertainment value

• Create experiences that reinforce the brand

• Create pathways to entertainment that run from offline to online and back

• Integrate pre- and post-purchase experience

• Invite spectators to play

• Move more of the experience online

• Provide education

Convergence of Product/ServiceOffering and Experience


• Flexible seller-initiated pricing

How can you increase the flexibility of your pricing online and offline

• Buyer-Initiated Pricing

Name-your-own price

Auctions

Aggregating Buying Power

Fire sales

Barter

Risk/Reward Sharing

Convergence of Seller-Initiated andBuyer-Initiated Pricing


• Offer multiple pricing options to the same customer

• Create consistent value propositions online and offline

• Recognize that people look for more than price and product

• Be aware of how dynamic pricing strategies affect other drivers of value

• Offer a limited version for free• Offer bundling of online and offline products

Convergent Pricing Strategies


5. Converging on Choice

Information asymmetries have traditionally been a

source of value for companies, and decision making

tools were jealously guarded. But now, better tools for

search, decision making, and life management are in

the hands of customers.

How companies need to combine human expert and

decision models, third party and company information,

and company push with customer pull in giving

consumer tools to make better decision


Illustrative Search Engine, Decision Making,Life Management Tools

Search Engines www.altavista.comwww.infoseek.comwww.hotbot.comwww.google.comwww.ask.com

Decision ToolsComparison engines

Customer evaluationsExpert evaluation

www.mysimon.comwww.dealtime.comwww.endmund.comwww.expedia.comwww.priceSCAN.comwww.bizrate.comwww.consumerreports.com

Life Management Tools Microsoft OfficeMy.Yahoo.comEdiets.com

http://www.altavista.com/

http://www.infoseek.com/

http://www.hotbot.com/

http://www.google.com/

http://www.ask.com/

http://www.mysimon.com/

http://www.dealtime.com/

http://www.endmund.com/

http://www.expedia.com/

http://www.pricescan.com/

http://www.bizrate.com/

http://www.consumerreports.com/


• Use virtual advisors and agent to increase trust online

• Take the tools to the point of decision

• Charge for advice and decision support

• Look for ways to put value-added tools into the hands of consumers

• Increase the expertise of human experts

Convergence Strategies for Combining Decision-Making Tools and Human Expertise


• Be completely unbiased when you can

• Provide both company and competitor information

• Offer third-party evaluation

• Differentiate

• Make unbiased information a selling point

• If not, make your biases clear

Convergence Strategies for Combining Third-Party and Company Information


• Recognize the limits of marketing messages

• Build credibility by creating a brand that consumers will recognize and value

• Focus marketing message on the intangibles and affect

Convergence Strategies for Combining Company Push and Consumer Pull


Terimakasih

Erfi IlyasNPM 2004812002