Marketing in new economy – How marketing is updating itself?

The changes in technology and economy are eliciting a new set of beliefs and practices on the part of business firms. Let’s look at the major business beliefs in the old economy and how these beliefs are shifting to the new economy. The new economy is affecting both , the way business and marketing are conducted.

Let us start by analyzing Marketing in the new economy

FROM ORGANIZING BY PRODUCT UNITS TO ORGANIZING BY CUSTOMER SEGMENTS

A company making two or more products normally assigns product managers or product divisions to manage them GE’s appliance Division would assign different people or business units to manage their washing machines, dryers, refrigerators, and stoves. This makes sense, but it also makes sense to add marketing groups that address the needs of different customer groups, such as households and building contractors, who buy differently. This would mean a switch from being product-centered to being customer-segment centered.

FROM FOCUSING ON PROFITABLE TRANSACTIONS TO FOCUSING ON CUSTOMER LIFETIME VALUE

One of the changes that has happened to Marketing in the new economy is that companies normally focused on individual transactions changed their attitude and concentrated on individual customer lifetime value and designing their market offerings and prices to make a profit over the customer’s lifetime. The company will sometimes underprice to gain new customers and will be generous in its pricing and services to existing customers with an eye toward retaining them for the long run.

FROM FOCUSING ON JUST THE FINANCIAL SECORECARD TO FOCUSING ALSO ON THE MARKETING SCORECARD

Most senior managers will judge the company’s performance by financial results as reflected on the profit and loss statement and the balance sheet. Top management in new economy companies will also examine the marketing scorecard to interpret what is happening to market share ( not just sales revenue), customer loss rate, customer satisfaction, product quality relative to competitors, and other measures. The recognize that changes in marketing indicators predict changes in financial results.

FROM FOCUSING ON SHAREHOLDERS TO FOCUSING ON STAKEHOLDERS

Top management sees its primary mission as making profits for shareholders. The costs of working with other stakeholders, such as employees, suppliers, and distributors, are kept under tight rein. They treat business as a zero-sum game, where by paying the least to employees, suppliers, and distributors, the company will be left with the most profit Top management in new economy companies respects the importance of creating co prosperity among all the business partners and customers. These managers carefully define their stakeholders and develop policies and strategies to balance the returns to all the key stakeholders. They believe business success depends on high-level performance by employees and business partners.

FROM MARKETING DOES THE MARKETING TO EVERYONE DOES THE MARKETING

Companies generally establish a marketing department to be responsible for creating and delivering customer value. Unfortunately, this leads other departments in the company to feel less responsible for company performance vis-a-vis customers. But as the late David Packard of Hewlett-Packard observed, “Marketing is far too important to leave to the marketing department.” Every employee has an impact on the customer and must see the customer as the source of the company’s prosperity.

FROM BUILDING BRANDS THROUGH ADVERTISING TO BUILDING BRANDS THROUGH PERFORMANCE

Relying on heavy advertising to build brand knowledge and preference in the target public’s mind certainly worked well in the old economy. Built brands, ultimately, are built by the customer’s experience with the brand and by word-of-mouth. Companies are recognizing that a whole set of tools can help build brands, including sponsorships, event management, public relations, and charitable gifts.

FROM FOCUSING ON CUSTOMER ACQUISITION TO FOCUSING ON CUSTOMER RETENTION

Most companies seek growth and reward salespeople handsomely for finding new customers. As a consequence, salespeople spend less time ensuring the satisfaction of existing customers, with the result that some current customers defect. New economy companies place much more emphasis on customer retention. Attracting a new customer may cost five times as much as doing a good job to retain existing customers.

FROM NO CUSTOMER SATISFACTION MEASUREMENT TO IN-DEPTH CUSTOMER SATISFACTION MEASUREMENT

Many companies fail to systematically measure and track customer satisfaction and the factors shaping it. Instead they rely on anecdotal information that is not reliable. An increasing number of companies are making customer satisfaction a major probity. For example, IBM systematically measures how satisfied customers are with each IBM salesperson they encounter, and makes this a factor in each salesperson’s compensation.

FROM OVER – PROMISE, UNDER -DELIVER TO UNDER-PROMISE, OVER-DELIVER

One of the major changes which has happened to Marketing in the new economy. To get the order, salespeople frequently over-promise on quality or delivery, and worry later about the repercussions. This is true of ads that exaggerate the performance of company products. New economy companies recognize that customer satisfaction is a function of the match between customer expectations and company performance. These companies what their mes-sages and promises to be accurate. Some would even prefer that their salespeople under-promise and over-deliver, as a way to create customer delight.

THE NEW HYBRID

The fact is that today’s economy and most com-panies are a hybrid of the old economy and the new economy. Companies need to retain skills and competencies that have worked in the past, but they will also need to add new understandings and competencies if they hope to grow and prosper. Today’s marketplace is made up of traditional consumers (who do not buy online, cyber consumers (who mostly buy online), and hybrid consumers (who do both).

Most consumers are hybrid: They shop in grocery stores but occasionally order from Peapod; they buy books in Barnes & Noble bookstores and sometimes order books from bn.com People still like to squeeze the tomatoes, touch the fabric, smell the perfume, and interact with salespeople. Consumers are motivated by other needs than only shopping efficiency. Most companies will need a presence both offline and online to cater to these hybrid consumers. The task today is for companies to rethink and revise their overall company strategy and within that, their marketing strategy.