How Business and Marketing are Changing?

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.