Today’s marketing realities
Marketing in the boundary-less world is not an easy task. Three areas of marketing which have been transformed by digital are the speed, relevance and reach of campaigns. Marketing is concerned with understanding people’s motivations and using the insights to create campaigns that promote brands and encourage people to buy their products. It is a creative and often an intuitive process.
While we see that Apple, Sony, and TAG Heuer have achieved exponential sales growth in established but stagnant markets, there are many others who are not so successful. Why is it so? The successful companies have clarity; they have adopted a clear vision, segmented their markets correctly and have positioned their products precisely. They have adopted product innovation, practical advertising strategies and they are in touch with their customers on regular basis. Companies such as Harley-Davidson, Virgin Atlantic Airways, and Boston Beer have adopted a different approach to marketing that focuses on stretching limited resources, staying in close contact with customers, and creating more satisfying solutions to customer needs. These companies have realized that changing market scenario in fact have created new behaviors, new opportunities, and new challenges.
Today companies need to be aware of some glaring marketing realities, such as:
Deregulation: Many countries have deregulated industries to create greater competition and growth opportunities. The U.S. economy grew at an annual average rate of 4.3 percent in the second half of the 1990s, while Germany, France, and Italy grew at an average annual rate of 2 percent. An in-depth research on the topic finds that bigger regulation in big markets has stunted investment and economic growth. This scene was particularly seen in the late 1990s, which was also known as a period of significant technological innovation. Some serious analysis validates a significantly positive impact of deregulation on investment in the transport, communications, and utility industries. It is healthy to various controls for sector or country-specific shocks and for labor market liberalization. The most important component of reform is liberalization of entry into markets. A reduction in entry barriers leads to a reduction in the markup of prices over marginal costs, and hence to a reduction in the penalty for expanding the capital stock and production. The deregulation process has seen spurt in blurring marketing channels such as in the United States, long-distance telephone companies can now compete in local markets and local phone companies can now offer long distance. Similarly, electrical utilities can now enter local markets.
Intensified competition: Established brands are facing intense competition from domestic and foreign brands, which is resulting in rising promotion costs and shrinking profit margins. They are being further knocked by powerful retailers who command limited shelf space and are putting out their own store brands in competition with national brands. For example in India, on an average, regional brands are approximately 40% cheaper than national brands and, in that sense, cater to the value segment. These small and medium brands have been giving sleepless nights to their multinational counterparts, be it a Cavinkare in the South, or a Ghadi detergent in UP or WaghBakri tea in the West. Small and regional brands score because they are often close to the market, they respond faster to changes and are willing to learn from their mistakes. Most of the regional brands have made their transition from Local to National brands and international brands.
Customers are more empowered: Customers are more empowered and expect higher quality of goods and services and also customization. They are leading a busy and stressful life, and hence they are starved for time. They therefore want more convenience. Unlike past, today’s customers do not show brand loyalty. They can obtain extensive product information from the Internet and other sources, which permit them to shop more intelligently. They are showing greater sensitivity in their search for value. Today’s customer demand transparency which marketers need to adopt at all levels.
Privatization: Many countries have converted public companies to private ownership and management to increase their efficiency, such as British Airways and British Telecom in the United Kingdom. China has started to clean up and integrated some of its state owned firms, some countries, like Argentina or the Czech Republic, implemented privatization programs rapidly, while India is going gradual on the privatization spree.
Customization: Product customization is the key for marketing success. It helps brands boost sales. Sellers of everything from dress shirts to handbags and even consumer packaged goods are discovering the value of letting customers create their own unique products. Retailers use Big Data to present a personalized set of products to their customers; Amazon has become successful for it has adopted customization. Now brands are taking a big step forward into mass customization. They are discovering that they can elevate customer loyalty and engagement and use their customer base as an engine of advocacy to potential buyers. By going online, companies essentially enable consumers to design their own goods. On line marketing helps companies to interact with each customer personally, to personalize messages, services, and the relationship.
Merging of industries: Industries boundaries are blurring at an incredible rate as companies are recognizing the new opportunities lie at the intersection of two or more industries. Pharmaceutical research companies once believed to be chemical companies are now adding formulation of new drugs, new cosmetics, and new foods. Shiseido, the Japanese cosmetics firm, now markets a portfolio of dermatology drugs. Giant computer companies such as Dell, Gateway, and Hewlett-Packard started selling a stream of entertainment devices from MP3 players to plasma TVs and camcorders (portable combined video camera and video recorder). The shift to digital technology, in which devices needed to play entertainment content are more and more like PCs, which is fueling massive convergence.
Retail transformation: We are seeing retail landscape changing rapidly and radically. Internet is making consumers more informed, and product choices are multiplying rapidly. Technological advances and public policy liberalization are contributing to new flows of information, knowledge, and resources. As a result, retailers are facing more and more pressure. Lowered entry barriers entry are bringing in many new small players, online marketing is outdoing geographic proximity and expanding market demand for highly specific offerings, small niche players can reach consumers regardless of physical location, technologies such as on-demand fulfillment are changing how and where retailers hold inventory, new retail models are arising out of new technologies and new ways to connect with consumers. We are also seeing small retailers succumbing to the growing power of giant retailers.
Changing technology gives way to creative destruction: Creative destruction is a process through which something new brings about the termination of something existed before it. The concept was coined by economist Joseph Schumpeter. The digital revolution has created an Information Age. The Industrial Age was characterized by mass production and mass consumption, stores stuffed with inventory, ads everywhere, and rampant discounting. But, the digital revolution hit the computer makers first, driving companies like IBM, Infosys, Microsoft and HP into a restructuring which cost these companies scrapping a millions of jobs, but it connected the world. The power of ever-cheaper computing then moved on to attack other companies too, because it enabled smaller companies to arrange the computational resources that only big ones previously had. This truth abruptly removed major barriers to entry.
Disintermediation: means reduction in the use of intermediaries between producers and consumers, for example by investing directly in the securities market rather than through a bank. The amazing success stories of online dot coms such as AOL, Amazon, Yahoo, e-bay, Flipcart, Alibaba, Shutterfly and dozens of others have created disintermediation in the delivery of products and services. This fact has given sleepless nights to many established manufacturers and retailers. In response to disintermediation, many traditional companies engaged in re-intermediation and added online services to their existing offerings. Many brick-and-click competitors became smarter than pure-click firms, since they had a larger pool of resources to work with and well-established brand names.
Marketing and its tools are changing so quickly, that marketing team needs to become work as a research department. Today marketing is beyond the 4 Ps – product, price, place and promotion, it is all about experience. People have changed.
