Chapter 2

Adapting Marketing to
the New Economy

PowerPoint by Karen E. James

Louisiana State University - Shreveport

©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 0 in Chapter 2
 Objectives

 Identify the major forces driving

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

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

 Explore how the Internet has

changed the way marketers use
customer databases.
 Understand how marketers
practice customer relationship
management.

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

 Digitalization and connectivity

– The Internet, intranets & extranets are key
 Disintermediation and reintermediation
 Customization and customerization
 Industry convergence

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

Old Economy New Economy

– Product unit – Customer segment
organization organization
– Profitable – Lifetime value of
transactions customer
– Financial scorecard – Marketing scorecard
– Stockholders – Stakeholders
– Marketing does the – Everyone does the
marketing marketing
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 4 in Chapter 2
Changes in Business Practices

Old Economy New Economy

– Build brands via – Build brands via
advertising performance
– Customer acquisition – Customer retention
– No customer – Measure customer
satisfaction satisfaction and
measurement retention rates
– Overpromise, – Underdeliver,
underdeliver overpromise
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 5 in Chapter 2
 How Marketing Practices
are Changing

 E-Business
 Setting up web sites
 Customer relationship marketing

©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 6 in Chapter 2
 How Marketing Practices are
Changing: 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.
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 7 in Chapter 2
 How Marketing Practices are
Changing: E-business

Internet Domains  B2C = Business-to-

Consumer

 B2C  Benefits include:

greater ordering
 B2B convenience,
lower cost, easier
 C2C
information and
 C2B price gathering

©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 8 in Chapter 2
 How Marketing Practices are
Changing: E-business

Internet Domains  B2B = Business-to-

Business
 Volume is 10-15%
 B2C higher than B2C.
 B2B  Benefits include:
lower costs via
 C2C B2B auctions,
buying alliances,
 C2B greater access to
information.
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 9 in Chapter 2
 How Marketing Practices are
Changing: E-business

Internet Domains  C2C = Consumer-to-

Consumer
 Transactions occur
 B2C via online trading
 B2B sites such as eBay.
 Consumers are
 C2C creating online
product information
 C2B via newsgroup and
chat room dialogues.
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 10 in Chapter 2
 How Marketing Practices are
Changing: E-business

Internet Domains  C2B = Consumer-

to-Business
 B2C  Facilitate
 B2B communication
between
 C2C customer and
 C2B businesses.

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

©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 12 in Chapter 2
 How Marketing Practices are
Changing: Web Site Design

The Seven “C’s” of Web Site Design

 Context  Communication
 Content  Connection
 Community  Commerce
 Customization
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 13 in Chapter 2
 How Marketing Practices are
Changing: Web Site Design

 Placing Ads and Promotions Online

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

©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 14 in Chapter 2
 How Marketing Practices are
Changing: Web Site Design

Dot.com revenue and profit models:

 Advertising income  Product and service

sales income
 Sponsorship income
 Transaction
 Alliance income commissions and fees
 Membership and  Market research/
subscription income information
 Profile income  Referral income

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

©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 16 in Chapter 2
 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
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 17 in Chapter 2
 How Marketing Practices are
Changing: 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.
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 18 in Chapter 2
 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
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 19 in Chapter 2