C H A P T E R

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McGraw
-
Hill/Irwin

©2008 The McGraw
-
Hill Companies,


All Rights Reserved


C

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ELEVEN



Marketing
Strategies
for

the New
Economy



11

Discussion Questions

1.
What do we mean by the “new
economy”?





This refers to the industries that fuel the
development of or participate significantly in
electronic commerce and the Internet,
develop and market computer hardware and
software, and develop or provide any of the
growing array of telecommunications
services.




Discussion Questions

2. Does every company need a new
-
economy strategy?



Why or why not?


Reasons why

•
Growing penetration of the Internet and
mobile telephony in all segments of the
population around the world

•
Inherent efficiencies of the Internet to
reduce transaction and other costs

•
Strong venture capital support for high
technology industries will spawn further
innovation

•
Many established bricks and mortar
companies have had success with their
Internet gambits



Reasons why not

•
Many once
-
promising Internet business
models have failed to make money

•
B2B hubs

•
B2C e
-
tailers

Seven key elements characterize

new
-
economy technologies: are they
advantages or disadvantages?


Syndication of information


Increasing returns to scale of networks


Personalization and customization


Disintermediation


Global reach


24x7 access


Instantaneous delivery



Syndication of information

•
Definition?

involves the sale of the same good
—
typically an
informational good
—
to many customers, who then combine
it with information from other sources and distribute it.


•
Advantages?

A company can syndicate the same
informational goods or services to an almost infinite number
of customers with little incremental cost. The syndication
process can be automated and digitized, enabling
syndicated networks to be created, expanded and flexibly
adapted far more quickly than would be possible in the
physical world.


•
Disadvantages?

It is difficult to police the information that
gets sent out. For example, copyrighted material could be
sent out for free and without permission, causing the authors
or companies to lose money.



Increasing returns to scale of networks

•
Definition?

The lower cost of subsequent
transactions arising from positive network effects.


•
Advantages?

Companies like Cameraworld.com
are benefited by building a community of photo
enthusiasts who share insights with one another
via the Cameraworld website.


•
Disadvantages?

For companies that are new to
the market it may be difficult to get customers to
switch because of the relationships already
developed with other companies.



Personalization and customization

•
Definition?

Personalization

is marketer
-
driven, in
other words a marketer can personalize the
message it sends to each customer (i.e. send a
reminder of an upcoming birthday).
Customization

is user
-
driven, which allows users to specify the
nature of what is offered to them.

•
Advantages?

Personalization and customization
can help build customer loyalty and make it less
likely for customers to switch to other suppliers.

•
Disadvantages?

Once again, for competitors it is
difficult to get potential customers to switch
because of the loyalty they have with the
company they are currently doing business with.



Disintermediation

•
Definition?

Marketers reaching customers directly
without the expense or complication of distribution
channels.


•
Advantages?

Cuts out the middleman and his
costs, which can increase profits for some
businesses. Note, however, that the middleman’s
functions typically must still be provided.


•
Disadvantages?

Performing the functions the
former middleman played may turn out to be
expensive and/or difficult.


Global reach

•
Definition?

Information, digital goods or services
available anywhere one can gain access to the
Web.


•
Advantages?

Reaches distant markets easily
and inexpensively.


•
Disadvantages?

Global reach is limited to those
who can gain access to the Web, which is not
available in all parts of the world and all economic
levels.


24x7 access

•
Definition
:
Allowing customers access 24 hours
per day, seven days per week, 52 weeks per
year.


•
Advantages
:
Great advantage to customers in
our increasingly time
-
pressed world.


•
Disadvantages
:
Even though customers have
access 24x7, most companies can’t operate all
those hours, which can make it frustrating for the
customer



Instantaneous delivery

•
Definition?

Delivery of information, digital goods
and service over the Web instantaneously.


•
Advantages?

Fast and convenient delivery in our
increasingly time
-
pressed world.


•
Disadvantages?

May require more effort by the
purchaser, which may offset the convenience.
Instantaneous delivery is limited to information,
digital goods and services.


Discussion Questions

3. Are these new economy attributes
opportunities or threats?




Variable cost for syndicated goods
approaches zero


zero price


Few barriers to entry


Internet strategies may be imitated


Privacy issues

>
Cookies

>
Click streams


Security issues


Versioning

>
The value of information to different kinds of
customers is likely to vary substantially


Versioning

>
Time

>
Convenience

>
Comprehensiveness

>
Manipulation

>
Community

>
Support

>
Freedom from annoyance, speed, user
interfaces, image resolution


Now can use:

>
Market segmentation, targeting, differentiation,
positioning




Discussion Questions

4. What factors should be considered
in coming up with marketing
strategy decisions in the new
economy?



How should marketers decide

what new
-
economy tools to apply?

Can we

digitize?

Can we do so
first, and/or be

Proprietary?

How valuable

and time
-
critical

is what kind

of
information?

Can we reach

and build

relationships
with

our target
market?

Measurably

effective?


Measurably

efficient?

Customer Insight

Product
promotion

and brand
building

Transaction

Product delivery

Customer support

and service

Product return or

disposal

New Economy Strategy Tools



Really Simple Syndication (RSS)



Collaborative Filtering



Rule Based Personalization



Customization



Disintermediation



Global Reach



24/7 Access



Instantaneous Delivery



Instant Messaging (IM)



Search




Paid Inclusion




Search Engine Optimization



New Economy Strategy Tools



E
-
mail Marketing




Viral E
-
mail



Blogs



Promotional Sites




Affiliate Schemes




Aggregators



Banner Advertising




Rich Media




Cliffhangers




Superstitials




Streaming Audio




V Flash



Opt
-
In E
-
mail




Permission Marketing



Dynamic Pricing



Digital Signatures



Co
-
production

Discussion Question

5.
Many of you may have thought of
ideas for entrepreneurial new
-
economy ventures. What are some
key questions we have learned to
date to test the merit of those
ideas?


The basics already covered

•
Is the market attractive?

•
Large and growing market, favorable macro
trends

•
Is the industry structurally attractive?

•
Five forces favorable on balance

•
Threat of new entrants

•
Bargaining power of suppliers

•
Rivalry among existing competitors

•
Bargaining power of buyers

•
Threat of substitute products

•
Driving forces
-

CSFs favorable



The basics already covered

•
Does my idea satisfy some target
customers’ wants and needs better than
current solutions?

•
Who is the target market?

•
What
benefits

will we offer them?

•
Do we have some basis for establishing
sustainable competitive advantage?

•
Unique or proprietary technology or capabilities

•
Difficult for others to imitate or duplicate



What questions have often been overlooked
by would
-
be entrepreneurs in the new
economy?

•
Where will our revenue come from? Who
will pay? For what? How much will they
pay? When?