Slide 0 in Chapter 2

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Chapter 2 Adapting Marketing to the New Economy
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Drivers of the New Economy
Digitalization and Connectivity
Customization and Customerization
Industry convergence
Disintermediation and Reintermediation
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Changes in Business Practices

• 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

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Changes in Business Practices

• 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

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How Marketing Practices Are Changing E-business

• Internet Domains
• B2C
• B2B
• C2C
• C2B

• B2C Business-to-Consumer
• Benefits include greater ordering convenience,
  lower cost, easier information and price
  gathering
• CDNow is oneexample

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How Marketing Practices Are Changing 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.

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How Marketing Practices Are Changing E-business

• Internet Domains
• B2C
• B2B
• C2C
• C2B

• C2C Consumer-to-Consumer
• Consumers are creating product information online
  via newsgroup and chat room dialogues.
• Transactions occur via online trading sites such
  as eBay.

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How Marketing Practices Are Changing E-business

• Internet Domains
• B2C
• B2B
• C2C
• C2B

• C2B Consumer-to-Business
• Facilitate communication between customer and
  businesses.

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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

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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

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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

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How Marketing Practices Are Changing CRM

• CRM Leads to One-on-One Marketing
• Four Steps for One-to-One Marketing
• Dont 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.

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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