Marketing Strategies – New Economy

PPT11.S. Venkat

Discussion Questions1. 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 wedigitize?

Can we do so first, and/or beProprietary?

How valuableand time-criticalis what kindof information?

Can we reachand buildrelationships withour target market?

Measurablyeffective?

Measurablyefficient?

Customer Insight

Product promotion and brand building

Transaction

Product delivery

Customer supportand service

Product return ordisposal

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?