To accompany A Framework for Marketing Management, 2nd Edition Slide 1 in Chapter 2©2003 Prentice Hall, Inc.

Chapter 2Chapter 2

Adapting Marketing to Adapting Marketing to the New Economythe New Economy

PowerPoint by Karen E. JamesPowerPoint by Karen E. JamesLouisiana State University - ShreveportLouisiana State University - Shreveport

To accompany A Framework for Marketing Management, 2nd Edition Slide 2 in Chapter 2©2003 Prentice Hall, Inc.

ObjectivesObjectives

Identify the major forces driving the new economy.

Understand how business and marketing practices are changing as a result of the new economy.

To accompany A Framework for Marketing Management, 2nd Edition Slide 3 in Chapter 2©2003 Prentice Hall, Inc.

ObjectivesObjectives

Explore how the Internet has changed the way marketers use customer databases.

Understand how marketers practice customer relationship management.

To accompany A Framework for Marketing Management, 2nd Edition Slide 4 in Chapter 2©2003 Prentice Hall, Inc.

Drivers of the New EconomyDrivers of the New Economy

Digitalization and connectivity

– The Internet, intranets & extranets are key

Disintermediation and reintermediation

Customization and customerization

Industry convergence

To accompany A Framework for Marketing Management, 2nd Edition Slide 5 in Chapter 2©2003 Prentice Hall, Inc.

Changes in Business Changes in Business PracticesPractices

Old Economy

– Product unit organization

– Profitable transactions

– Financial scorecard– Stockholders– Marketing does the

marketing

New Economy

– Customer segment organization

– Lifetime value of customer

– Marketing scorecard– Stakeholders– Everyone does the

marketing

To accompany A Framework for Marketing Management, 2nd Edition Slide 6 in Chapter 2©2003 Prentice Hall, Inc.

Changes in Business Changes in Business PracticesPractices

Old Economy

– Build brands via advertising

– Customer acquisition– No customer

satisfaction measurement

– Overpromise, underdeliver

New Economy

– Build brands via performance

– Customer retention– Measure customer

satisfaction and retention rates

– Underdeliver, overpromise

To accompany A Framework for Marketing Management, 2nd Edition Slide 7 in Chapter 2©2003 Prentice Hall, Inc.

How Marketing Practices How Marketing Practices are Changingare Changing

E-Business

Setting up web sites

Customer relationship marketing

To accompany A Framework for Marketing Management, 2nd Edition Slide 8 in Chapter 2©2003 Prentice Hall, Inc.

How Marketing Practices are How Marketing Practices are Changing: E-businessChanging: 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.

To accompany A Framework for Marketing Management, 2nd Edition Slide 9 in Chapter 2©2003 Prentice Hall, Inc.

How Marketing Practices are How Marketing Practices are Changing: E-businessChanging: E-business

Internet Domains

B2C

B2B

C2C

C2B

B2C = Business-to-Consumer

Benefits include: greater ordering convenience, lower cost, easier information and price gathering

To accompany A Framework for Marketing Management, 2nd Edition Slide 10 in Chapter 2©2003 Prentice Hall, Inc.

How Marketing Practices are How Marketing Practices are Changing: E-businessChanging: E-business

Internet Domains

B2C

B2B

C2C

C2B

B2B = Business-to-Business

Volume is 10-15% higher than B2C.

Benefits include: lower costs via B2B auctions, buying alliances, greater access to information.

To accompany A Framework for Marketing Management, 2nd Edition Slide 11 in Chapter 2©2003 Prentice Hall, Inc.

How Marketing Practices are How Marketing Practices are Changing: E-businessChanging: E-business

Internet Domains

B2C

B2B

C2C

C2B

C2C = Consumer-to-Consumer

Transactions occur via online trading sites such as eBay.

Consumers are creating online product information via newsgroup and chat room dialogues.

To accompany A Framework for Marketing Management, 2nd Edition Slide 12 in Chapter 2©2003 Prentice Hall, Inc.

How Marketing Practices are How Marketing Practices are Changing: E-businessChanging: E-business

Internet Domains

B2C

B2B

C2C

C2B

C2B = Consumer-to-Business

Facilitate communication between customer and businesses.

To accompany A Framework for Marketing Management, 2nd Edition Slide 13 in Chapter 2©2003 Prentice Hall, Inc.

How Marketing Practices are How Marketing Practices are Changing: E-businessChanging: 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

To accompany A Framework for Marketing Management, 2nd Edition Slide 14 in Chapter 2©2003 Prentice Hall, Inc.

How Marketing Practices are How Marketing Practices are Changing: Web Site DesignChanging: Web Site Design

Context

Content

Community

Communication

Connection

Commerce

Customization

The Seven “C’s” of Web Site Design

To accompany A Framework for Marketing Management, 2nd Edition Slide 15 in Chapter 2©2003 Prentice Hall, Inc.

How Marketing Practices are How Marketing Practices are Changing: Web Site DesignChanging: Web Site Design

Placing Ads and Promotions Online

– Banner ads– Sponsorships– Microsite– Interstitials– Browser ads– Alliances and affiliate programs

To accompany A Framework for Marketing Management, 2nd Edition Slide 16 in Chapter 2©2003 Prentice Hall, Inc.

How Marketing Practices are How Marketing Practices are Changing: Web Site DesignChanging: Web Site Design

Advertising income

Sponsorship income

Alliance income

Membership and subscription income

Profile income

Product and service sales income

Transaction commissions and fees

Market research/ information

Referral income

Dot.com revenue and profit models:

To accompany A Framework for Marketing Management, 2nd Edition Slide 17 in Chapter 2©2003 Prentice Hall, Inc.

How Marketing Practices are How Marketing Practices are Changing: CRMChanging: CRM

Customer Relationship Marketing (CRM) allows companies to:

– Deliver real-time customer service

– Customize market offerings, products, services, media, and messages

To accompany A Framework for Marketing Management, 2nd Edition Slide 18 in Chapter 2©2003 Prentice Hall, Inc.

How Marketing Practices are How Marketing Practices are Changing: CRMChanging: 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

To accompany A Framework for Marketing Management, 2nd Edition Slide 19 in Chapter 2©2003 Prentice Hall, Inc.

How Marketing Practices are How Marketing Practices are Changing: CRMChanging: CRM

CRM Leads to One-on-One Marketing– Four Steps for One-to-One Marketing

Don’t go after everyone, carefully identify your prospects and customers.

Group customers by their needs and their value to the company; aggressively pursue the most valuable customers.

Build stronger relationships with customers via individual interaction.

Customize messages, services, and products for each customer.

To accompany A Framework for Marketing Management, 2nd Edition Slide 20 in Chapter 2©2003 Prentice Hall, Inc.

How Marketing Practices are How Marketing Practices are Changing: CRMChanging: 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