Chapter 2 Adapting Marketing to the New Economy

Chapter 2 Adapting Marketing to the New Economy Power. Point by Karen E. James Louisiana State University - Shreveport © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 0

Objectives § Identify the major forces driving the new economy. § Understand how business and marketing practices are changing as a result of the new economy. © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 1

Objectives § Explore how the Internet has changed the way marketers use customer databases. § Understand how marketers practice customer relationship management. © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 2

Drivers of the New Economy § Digitalization and connectivity – The Internet, intranets & extranets are key § Disintermediation and reintermediation § Customization and customerization § Industry convergence © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 3

Changes in Business Practices Old Economy – Product unit organization – Profitable transactions – Financial scorecard – Stockholders – Marketing does the marketing © 2003 Prentice Hall, Inc. New Economy – Customer segment organization – Lifetime value of customer – Marketing scorecard – Stakeholders – Everyone does the marketing To accompany A Framework for Marketing Management, 2 nd Edition 4

Changes in Business Practices Old Economy – Build brands via advertising – Customer acquisition – No customer satisfaction measurement – Overpromise, underdeliver © 2003 Prentice Hall, Inc. New Economy – Build brands via performance – Customer retention – Measure customer satisfaction and retention rates – Underdeliver, overpromise To accompany A Framework for Marketing Management, 2 nd Edition 5

How Marketing Practices are Changing § E-Business § Setting up web sites § Customer relationship marketing © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 6

How Marketing Practices are Changing: E-business § Business practices are changing. . . – E-business uses electronic means and platforms to conduct business. – E-commerce web sites facilitate the online sale of products and services. – E-purchasing from online suppliers. – E-marketing efforts include those that inform, communicate, promote, and sell products and services over the Internet. © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 7

How Marketing Practices are Changing: E-business Internet Domains § B 2 C § B 2 B § C 2 C § C 2 B © 2003 Prentice Hall, Inc. § B 2 C = Business-to. Consumer § Benefits include: greater ordering convenience, lower cost, easier information and price gathering To accompany A Framework for Marketing Management, 2 nd Edition 8

How Marketing Practices are Changing: E-business Internet Domains § B 2 C § B 2 B § C 2 C § C 2 B © 2003 Prentice Hall, Inc. § B 2 B = Business-to. Business § Volume is 10 -15% higher than B 2 C. § Benefits include: lower costs via B 2 B auctions, buying alliances, greater access to information. To accompany A Framework for Marketing Management, 2 nd Edition 9

How Marketing Practices are Changing: E-business Internet Domains § B 2 C § B 2 B § C 2 C § C 2 B © 2003 Prentice Hall, Inc. § C 2 C = Consumer-to. Consumer § Transactions occur via online trading sites such as e. Bay. § Consumers are creating online product information via newsgroup and chat room dialogues. To accompany A Framework for Marketing Management, 2 nd Edition 10

How Marketing Practices are Changing: E-business Internet Domains § B 2 C § B 2 B § C 2 C § C 2 B © 2003 Prentice Hall, Inc. § C 2 B = Consumerto-Business § Facilitate communication between customer and businesses. To accompany A Framework for Marketing Management, 2 nd Edition 11

How Marketing Practices are Changing: E-business § Brick and click firms have often faced channel conflict issues § Brick and click firms tend to be more successful than pure click e-tailer competitors because. . . – Customer acquisition costs are lower – Resources, knowledge, customer base, supplier relationships are superior © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 12

How Marketing Practices are Changing: Web Site Design The Seven “C’s” of Web Site Design § Context § Communication § Content § Connection § Community § Commerce § Customization © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 13

How Marketing Practices are Changing: Web Site Design § Placing Ads and Promotions Online – Banner ads – Sponsorships – Microsite – Interstitials – Browser ads – Alliances and affiliate programs © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 14

How Marketing Practices are Changing: Web Site Design Dot. com revenue and profit models: § Advertising income § Sponsorship income § Product and service sales income § Alliance income § Transaction commissions and fees § Membership and subscription income § Market research/ information § Profile income § Referral income © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 15

How Marketing Practices are Changing: CRM § Customer Relationship Marketing (CRM) allows companies to: – Deliver real-time customer service – Customize market offerings, products, services, media, and messages © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 16

How Marketing Practices are Changing: CRM § Effective Customer Relationship Marketing requires: – Reducing customer defection rates – Extending the life of the customer relationship – Enhancing customer sales / profit potential – Making low-profit customers MORE profitable or terminating them – Focusing on high value customers © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 17

How Marketing Practices are Changing: CRM § CRM Leads to One-on-One Marketing – Four Steps for One-to-One Marketing l Don’t go after everyone, carefully identify your prospects and customers. l Group customers by their needs and their value to the company; aggressively pursue the most valuable customers. l Build stronger relationships with customers via individual interaction. l Customize messages, services, and products for each customer. © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 18

How Marketing Practices are Changing: CRM § Customer Databases and Database Marketing are the key to Effective CRM § Database uses include: – Best prospect identification – Matching offers to customers – Deepening customer loyalty – Reactivating customer purchasing – Avoiding serious mistakes © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 19