We can say
with some confidence that “the marketplace isn't what it used to be.” It is
changing radically as a result of major societal forces such as technological
advances, globalization, and deregulation. These major forces have created new
behaviors and challenges:
Customers increasingly expect higher quality and service and
some customization. They perceive fewer real product differences and show less
brand loyalty. They can obtain extensive product information from the Internet
and other sources, permitting them to shop more intelligently. They are showing
greater price sensitivity in their search for value.
Brand manufactures are facing intense competition from domestic
and foreign brands, which is resulting in rising promotion costs and shrinking
profit margins. They are being further buffeted by powerful retailers who
command limited shelf space and are putting out their own store brands in
competition with national brands.
Store-based retailers are suffering from an
oversaturation of retailing. Small retailers are succumbing to the growing
power of giant retailers and “category killers.” Store-based retailers are
facing growing competition from catalog houses; direct-mail firms; newspaper,
magazine, and TV direct-to-customer ads; home shopping TV; and the Internet. As
a result, they are experiencing shrinking margins. In response, entrepreneurial
retailers are building entertainment into stores with coffee bars, lectures,
demonstrations, and performances. They are marketing an “experience” rather
than a product assortment.
COMPANY RESPONSES AND ADJUSTMENTS
Companies are
doing a lot of soul-searching, and many highly respected companies are changing
in a number of ways. Here are some current trends:
§
Reengineering:
From focusing on functional departments to reorganizing by key processes, each
managed by multidiscipline teams.
§
Outsourcing:
From making everything inside the company to buying more goods and services
from outside if they can be obtained cheaper and better. A few companies are
moving toward outsourcing everything, making them virtual companies
owning very few assets and, therefore, earning extraordinary rates of return.
§
E-commerce:
From attracting customers to stores and having salespeople call on offices to
making virtually all products available on the Internet. Consumers can access
pictures of products, read the specs, shop among on-line vendors for the best
prices and terms, and click to order and pay. Business-to-business purchasing
is growing fast on the Internet: Purchasing agents can use bookmarked Web sites
to shop for routines items. Personal selling can increasingly be conducted
electronically, with buyer and seller seeing each other on their computer
screens in real time.
§
Benchmarking:
From relying on self-improvement to studying “world-class performers” and
adopting “best practices.”
§
Alliances:
From trying to win alone to forming networks of partner firms.
§
Partner-suppliers:
From using many suppliers to using fewer but more reliable suppliers who work
closely in a “partnership” relationship with the company.
§
Market-centered:
From organizing by products to organizing by market segment.
§
Global and local:
From being local to being both global and local.
§ Decentralized:
From being managed from the top to encouraging more initiative and
“intrepreneurship” at the local level.
MARKETER RESPONSES AND ADJUSTMENTS
Marketers
also are rethinking their philosophies, concepts, and tools. Here are the major
marketing themes as the millennium approaches:
§
Relationship
marketing: From focusing on transactions to building long-term,
profitable customer relationships. Companies focus on their most profitable
customers, products, and channels.
§
Customer lifetime
value: From making a profit on each sale to making profits by managing customer
lifetime value. Some companies offer to deliver a constantly needed product on
a regular basis at a lower price per unit because they will enjoy the
customer’s business for a longer period.
§
Customer share:
From a focus on gaining market share to a focus on building customer share.
Companies build customer share by offering a large variety of goods to their
existing customers. They train their employees in cross-selling and up-selling.
§
Target marketing:
From selling to everyone to trying to be the best firm serving well-defined
target markets. Target marketing is being facilitated by the proliferation of
special-interest magazines, TV channels, and Internet newsgroups.
§
Individualization:
From selling the same offer in the same way to everyone in the target market to
individualizing and customizing messages and offerings. Customers will be able
to design their own product features on the company’s Web page.
§
Customer database:
From collecting sales data to building a rich data warehouse of
information about individual customers’ purchases, preferences, demographics,
and profitability. Companies can “data-mine” their proprietary databases to
detect different customer need clusters and make differentiated offerings to
each cluster.
§
Integrated marketing
communications: From heavy reliance on one communication tool such as
advertising or sales force to blending several tools to deliver a consistent
brand image to customers at every brand contact.
§
Channels as partners:
From thinking of intermediaries as customers to treating them as partners in
delivering value to final customers.
§
Every employee a
marketer: From thinking that marketing is done only by marketing,
sales, and customer support personnel to recognizing that every employee must
be customer-focused.
§
Model-based decision
making: From making decisions on intuition or slim data to basing
decisions on models and facts on how the marketplace works.
Successful companies will be those who can keep their marketing
changing as fast as their marketplace and marketspace.
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