Explain the major societal force behind New Marketing Realities Introduction

Interactive digital technologies, fragmented micro-media, social mega-nets, mobility and mass personalization are new methods for proliferation of customer touch-points and interactions across an ever more fragmented media environment are redefining conventional marketing, communications and commerce. Meanwhile, consumer expectations and access to information are on the rise, while attention, patience and loyalty are in sharp decline. Marketings control over branding, messaging and positioning are in unprecedented decline as peer-to-peer, crowd sourced, and affinity-based community interactions gain increasing influence. gainst this backdrop, the re!uired cycle time between developing insights, driving execution, and observing outcomes "and repeating the cycle# is accelerating at an unprecedented rate. $odays market tempo is already outpacing the rate at which most organizations can collect, synthesize, analyze, understand and act on information. $oo often, the bulls eye has shifted before the aim has settled.

Major Societal Forces

$oday, ma%or, and sometimes interlinking, societal forces have created new marketing behaviors, opportunities, and challenges. &ere are '( key ones. 1 Network Information !echnolog"# $he digital revolution has created an Information ge that promises to lead to more accurate levels of production, more targeted communications, and more relevant pricing. $ %lobali&ation. $echnological advances in transportation, shipping, and communication have made it easier for companies to market in, and consumers to buy from, almost any country in the world. International travel has continued to grow as more people work and play in other countries. ' (eregulation. Many countries have deregulated industries to create greater competition and growth opportunities. In the )nited *tates, laws restricting financial services, telecommunications, and electric utilities have all been loosened in the spirit of greater competition.

*ri+ati&ation. Many countries have converted public companies to private ownership and management to increase their efficiency, such as the massive telecom company $elephonic +$+ in +hile and the international airline ,ritish irways in the )nited -ingdom.

-eightened .ompetition# Intense competition among domestic and foreign brands raises marketing costs and shrinks profit margins. ,rand manufacturers are further buffeted by powerful retailers that market their own store brands. Many strong brands have become megabrands and extended into a wide variety of related product categories, presenting a significant competitive threat.

Industr" .on+ergence# Industry boundaries are blurring as companies recognize new opportunities at the intersection of two or more industries. $he computing and consumer electronics industries are converging, for example, as fuels this massive convergence. pple, *ony, and *amsung release a stream of entertainment devices from M./ players to plasma $0s and camcorders. 1igital technology

Retail !ransformation# *tore-based retailers face competition from catalog houses2 direct mail firms2 newspaper, magazine, and $0 direct-to-customer ads2 home shopping $02 and e-commerce. In response, entrepreneurial retailers are building entertainment into their stores with coffee bars, demonstrations, and performances, marketing an 3experience4 rather than a product assortment. 1icks *porting 5oods has grown from a single bait-and tackle store in ,inghamton, 6ew 7ork, into a /88-store sporting goods retailer in /8 states. .art of its success springs from the interactive features of its stores. +ustomers can test golf clubs in indoor ranges, sample shoes on its footwear track, and shoot bows in its archery range.

(isintermediation# $he amazing success of early dot-coms such as 9:, mazon.com, 7ahoo;, e,ay,

<=$> 1<, and others created disintermediation in the delivery of products and services by intervening in the traditional flow of goods through distribution channels. $hese firms struck terror into the hearts of established manufacturers and retailers. In response, traditional

companies engaged in reintermediation and became 3brick-and-click4 retailers, adding online services to their offerings. *ome became stronger contenders than pure-click firms, because they had a larger pool of resources to work with and established brand names. 2 .onsumer 3u"ing *ower# In part, due to disintermediation via the Internet, consumers have substantially increased their buying power. ?rom the home, office, or mobile phone, they can compare product prices and features and order goods online from anywhere in the world (@ hours a day, A days a week, bypassing limited local offerings and realizing significant price savings. <ven business buyers can run a reverse auction in which sellers compete to capture their business. $hey can readily %oin others to aggregate their purchases and achieve deeper volume discounts. 14 .onsumer Information# +onsumers can collect information in as much breadth and depth as they want about practically anything. $hey can access online encyclopedias, dictionaries, medical information, movie ratings, consumer reports, newspapers, and other information sources in many languages from anywhere in the world. .ersonal connections and user-generated content thrive on social media such as ?acebook, ?lickr "photos#, 1igg "news stories#, Bikipedia "encyclopedia articles#, and 7ou$ube "video#. *ocial networking sitesCsuch as 1ogster for dog lovers, $rip dvisor for ardent travelers, and Moterus for bikersCbring t +ar*pace.com auto enthusiasts talk about together consumers with a common interest.

chrome rims, the latest ,MB model, and where to find a great local mechanic. 11 .onsumer *articipation# +onsumers have found an amplified voice to influence peer and public opinion. In recognition, companies are inviting them to participate in designing and even marketing offerings to heighten their sense of connection and ownership. +onsumers see their favorite companies as workshops from which they can draw out the offerings they want. 1$ .onsumer Resistance# Many customers today feel there are fewer real product differences, so they show less brand loyalty and become more price- and !uality-sensitive in their search for value, and less tolerant about undesired marketing. study found record levels of marketing resistance

from consumers2 a ma%ority reported negative opinions about marketing and advertising and said they avoid products they feel are over marketed.

5hat are the major and recent capabilities of compan" and marketer in coping up with new marketing era6
Introduction ,ecause the market is increasingly complex, dynamic and uncertain, what might once have been considered a 3strategy4 is little more than a 3hypothesis4 in todays changing environment. Be can say with some confidence that the marketplace isnt what it used to be. It is dramatically different from what it was even '8 years ago. $hese ma%or societal forces create complex challenges for marketers, but they have also generated a new set of capabilities to help companies cope and respond. 1 Marketers can use the Internet as a powerful information and sales channel# $he Internet augments marketers geographical reach to inform customers and promote products worldwide. Beb site can list products and services, history, business philosophy, labama, flea %ob opportunities, and other information of interest. In (88D, a Montgomery,

market gained national popularity when owner *ammy *tephenss rap-style advertisement spread virally through the Internet. +reated for E',F88, the advertisement was viewed more than '88,888 times on 7ou$ube and landed *tephens on $he <llen 1e5eneres *how. *tephens now sells $-shirts, ring tones, and other branded merchandise through his Beb site, advises retailers about advertising, and hosts hundreds of visitors from all over the world at his store each month. $ Marketers can collect fuller and richer information about markets7 customers7 prospects7 and competitors# Marketers can conduct fresh marketing research by using the Internet to

arrange focus groups, send out !uestionnaires, and gather primary data in several other ways. $hey can assemble information about individual customers purchases, preferences, demographics, and profitability. $he drugstore chain +0* uses loyalty-card data to better

understand what consumers purchase, the fre!uency of store visits, and other buying preferences. Its <xtra +are program netted an extra /8 million shoppers and E'( billion a year in revenue across @,888 stores.

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Marketers can tap into social media to amplif" their brand message# Marketers can feed information and updates to consumers via blogs and other postings, support online communities, and create their own stops on the Internet superhighway. 1ell +orporations G1ell9utlet $witter account has more than D88,888 followers. ,etween (88A and Hune (88I, 1ell took in more than E( million in revenue from coupons provided through $witter, and another E' million from people who started at $witter and went on to buy a new computer on the companys Beb site.

Marketers can facilitate and speed external communication among customers# Marketers can also create or benefit from online and offline 3buzz4 through brand advocates and user communities. Bord-of-mouth marketing agency ,zz gent has assembled a nationwide volunteer army of D88,888 consumers who %oin promotional programs for products and services they deem worth talking about. In (88F, 1unkin 1onuts hired ,zz gent to help launch a new espresso beverage, :atte :ite. $hree thousand trained volunteers "called ,zz gents# in '( test markets experienced the :atte :ite, formed their opinions, engaged in natural conversations about the product, and reported back to ,zz gent via the companys reporting interface. increased by more than 'F percent in test markets. fter four weeks, product sales had

Marketers can send ads7 coupons7 samples7 and information to customers who ha+e re8uested them or gi+en the compan" permission to send them# Micro-target marketing and two-way communication are easier thanks to the proliferation of special-interest magazines, $0 channels, and Internet newsgroups. <xtranets linking suppliers and distributors let firms send and receive information, place orders, and make

payments more efficiently. $he company can also interact with each customer individually to personalize messages, services, and the relationship.

Marketers can reach consumers on the mo+e with mobile marketing# )sing 5.* technology, marketers can pinpoint consumers exact location and send them messages at the mall with coupons good only that day, a reminder of an item on their wish list, and a relevant perk "buy this book today and get a free coffee at the bookstores coffee shop#. :ocation based advertising is attractive because it reaches consumers closer to the point of sale. ?irms can also advertise on video i.ods and reach consumers on their cell phones through mobile marketing.

.ompanies can make and sell indi+iduall" differentiated goods# $hanks to advances in factory customization, computer technology, and database marketing software, customers can buy MJM candies, $ , *+9 %ugs, or Makers Mark bottles with their names on them2 Bheaties boxes or Hones soda cans with their picture on the front2 and &einz ketchup bottles with customized messages. ,MBs technology allows buyers to design their own car models from among /F8 variations, with F88 options, I8 exterior colors, and 'A8 trims. $he company claims that K8 percent of the cars bought in <urope and up to /8 percent bought in the )nited n*tates are built to order.

.ompanies can impro+e purchasing7 recruiting7 training7 and internal and external communications# ?irms can recruit new employees online, and many have Internet training products for their employees, dealers, and agents. >etailer .atagonia has %oined Balt 1isney, 5eneral Motors, and Mc1onalds in embracing corporate blogging to communicate with the public and employees. .atagonias $he +leanest :ine posts environmental news, reports the results of its sponsored athletes, and posts pictures and descriptions of employees favorite outdoor locations.

.ompanies

can

facilitate

and

speed

up

internal

communication

among

their emplo"ees b" using the Internet as a pri+ate intranet# <mployees can !uery one another, seek advice, and download or upload needed information from and to the companys main computer. *eeking a single online employee portal that transcended business units, 5eneral Motors launched a platform called my *ocrates in (88D consisting of announcements, news, links, and historical information. 5M credits the portal with E'A.@ million in cost savings to date. 14 .ompanies Internet# +orporate buyers can achieve substantial savings by using the Internet to compare sellers prices and purchase materials at auction, or by posting their own terms in reverse auctions. +ompanies can improve logistics and operations to reap substantial cost savings while improving accuracy and service !uality. can impro+e their cost efficienc" b" skillful use of the

*ERFE.! .9M*E!I!I9N:

.erfect competition a market characterized by a large number of firms so small relative to the overall size of the market, such that no single firm can affect the market price or !uantity exchanged. .erfectly competitive firms are price takers. $hey set a production level based on the price determined in the market. If the market price changes, then the firm re-evaluates its production decision. $his means that the short-run marginal cost curve of the firm is its short-run supply curve.

.haracteristics
a

;arge Number of Small Firms:

perfectly competitive industry contains a large number of small firms, each of which is relatively small compared to the overall size of the market. $his ensures that no single firm can exert market control over price or !uantity.
b

Identical *roducts: <ach firm in a perfectly competitive market sells an identical product, what is often termed Lhomogeneous goods.L $he essential feature of this characteristic is not so much that the goods themselves are exactly, perfectly the same, but that buyers are unable to discern any difference.

*erfect Resource Mobilit": .erfectly competitive firms are free to enter and exit an industry. $hey are not restricted by government rules and regulations, start-up cost, or other barriers to entry. Bhile some firms incur high start-up cost or need government permits to enter an industry, this is not the case for perfectly competitive firms.

*erfect <nowledge: In perfect competition, buyers are completely aware of sellersM prices, such that one firm cannot sell its good at a higher price than other firms. <ach seller also has complete information about the prices charged by other sellers so they do not inadvertently charge less than the going market price. .erfect knowledge also extends to technology. ll perfectly competitive firms have access to the same production techni!ues.

$ Monopolistic .ompetition
Monopolistic competition Is a form of imperfect competition where many competing producers sell products that are differentiated from one another "that is, the products are substitutes, but, with differences such as branding, are not exactly alike#. In monopolistic competition firms can behave like monopolies in the short-run, including using market power to generate profit. In the long-run, other firms enter the market and the benefits of differentiation decrease with competition2 the market becomes more like perfect competition where firms cannot gain

economic profit. )nlike perfect competition, the firm maintains spare capacity. Models of monopolistic competition are often used to model industries. $extbook examples of industries with market structures similar to monopolistic competition include restaurants, cereal, clothing, shoes, and service industries in large cities. Monopolistically competitive markets have the following characteristicsN
a

$here are many producers and many consumers in a given market, and no business has total control over the market price. +onsumers perceive that there are non-price differences among the competitorsM products. $here are few barriers to entry and exit.O .roducers have a degree of control over price.

b c d

$he long-run characteristics of a monopolistically competitive market are almost the same as in perfect competition, with the exception of monopolistic competition having heterogeneous products, and that monopolistic competition involves a great deal of non-price competition "based on subtle product differentiation#. firm making profits in the short run will break even in the long run because demand will decrease and average total cost will increase. $his means in the long run, a monopolistically competitive firm will make zero economic profit. $his gives the amount of influence over the market2 because of brand loyalty, it can raise its prices without losing all of its customers. $his means that an individual firmMs demand curve is downward sloping, in contrast to perfect competition, which has a perfectly elastic demand schedule.

Oligopolistic Competition
9ligopolies are typically composed of a few large firms. <ach firm is so large that its actions affect market conditions. $herefore the competing firms will be aware of a firmMs market actions and will respond appropriately. $his means that in contemplating a market action, a firm must take into consideration the possible reactions of all competing firms and the firmMs countermoves. It is very much like a game of chess or pool in which a player must anticipate a whole se!uence of moves and countermoves in determining how to achieve his ob%ectives. ?or example, an oligopoly considering a price reduction may wish to estimate the likelihood that competing firms would also lower their prices and possibly trigger a ruinous price war. 9r if the firm is considering a price increase, it may want to know whether other firms will also increase

prices or hold existing prices constant. $his high degree of interdependence and need to be aware of what the other guy is doing or might do is to be contrasted with lack of interdependence in other market structures.

.haracteristics
a *rofit maximi&ation conditions: n oligopoly maximizes profits by producing where marginal revenue e!uals marginal costs. b c =bilit" to set price: 9ligopolies are price setters rather than price takers Entr" and Exit: ,arriers to entry are high. $he most important barriers are economies of scale, patents, access to expensive and complex technology, and strategic actions by incumbent firms designed to discourage or destroy nascent firms. d Number of firms: L?ewLPa LhandfulL of sellers. $here are so few firms that the actions of one firm can influence the actions of the other firms. e ;ong Run *rofitsN 9ligopolies can retain long run abnormal profits. &igh barriers of entry prevent sideline firms from entering market to capture excess profits. f *roduct differentiation: .roduct may be standardized "steel# or differentiated

"automobiles#. g *erfect <nowledge ssumptions about perfect knowledge vary but the knowledge of various economic actors can be generally described as selective. 9ligopolies have perfect knowledge of their own cost and demand functions but their inter-firm information may be incomplete. ,uyers have only imperfect knowledge as to price, cost and product !uality.

Monopolies
monopoly occurs when one company controls the market for an item. when only one company sells a particular product on the market. monopoly occurs

product can be a good, such

as %ewelry, computers or energy, or it can be a service, such as garbage disposal or sewage removal. <conomists differentiate between different types of monopolies based on why the monopoly exists, such as where the barrier to entry for new companies comes from, which could be high entry costs or legal restrictions. $ypes of monopoly occurN

Natural Monopol" natural monopoly occurs when the type of industry makes it financially impractical, if not

impossible, for multiple companies to engage in the business. ?or example, if you had multiple companies attempting to offer sewage services, that would re!uire multiply sewer lines running to homes which is financially--and likely spatially--impossible. $his makes the sewage industry a natural monopoly. b %eographic Monopolies

5eographic monopolies occur when there is only one company that offers a particular good or service in an area. ?or example, in a small town there may only one general store, which has a monopoly on the goods it sells. ,ecause of the small size of the town, it may not be financially feasible for another company to come in--if the profits were split neither business would make money. c !echnological Monopolies

$echnological monopolies occur when the good or service the company provides is has legal protection in the form of a patent or copyright. ?or example, if a company develops and patents a drug to cure brain cancer, that company has a legal monopoly over that drug. d %o+ernment Monopolies

*ometimes a government will pass laws reserving a specific trade, product or service for government agencies. ?or example, many times a government agency will be in charge of running water. $he legal barriers that are put up prevent other companies from competing with the government.