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In
Chapter 1, we discussed sweeping changes in the marketing landscape
that are affecting marketing thinking and practice. Recent
technological advances, including the widespread use of the Internet,
have created what some call a New Economy. Although there has been
widespread debate in recent years about the nature of—even the
existence of—such a New Economy, few would disagree that the Internet
and other powerful new connecting technologies are having a dramatic
impact on marketers and buyers. Many standard marketing strategies and
practices of the past—mass marketing, product standardization, media
advertising, store retailing, and others—were well suited to the
so-called Old Economy. These strategies and practices will continue to
be important in the New Economy. However, marketers will also have to
develop new strategies and practices better suited to today's new
environment.
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In
this chapter, we first describe the key forces shaping the new digital
age. Then we examine how marketing strategy and practice are changing
to meet the requirements of this new age.
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Major Forces Shaping the Internet AgeComments by Dr. Laukamm
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Many
forces are playing a major role in reshaping the world economy,
including technology, globalization, environmentalism, and others. Here
we discuss four specific forces that underlie the new digital age (see
Figure 3.1): digitalization and connectivity, the explosion of the
Internet, new types of intermediaries, and customization and
customerization.
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Digitalization and ConnectivityComments by Dr. Laukamm
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Many
appliances and systems in the past—ranging from telephone systems,
wrist watches, and musical recordings to industrial gauges and
controls—operated on analog information. Analog information is
continuously variable in response to physical stimuli. Today a growing
number of appliances and systems operate on digital information, which comes as streams of zeros and ones, or bits. Text, data, sound, and images can be converted into bitstreams.
A laptop computer manipulates bits in its thousands of applications.
Software consists of digital content for operating systems, games,
information storage, and other applications.
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For bits to flow from one appliance or location to another requires connectivity,
a telecommunications network. Much of the world's business today is
carried out over networks that connect people and companies. Intranets are networks that connect people within a company to each other and to the company network. Extranets connect a company with its suppliers, distributors, and other outside partners. And the Internet,
a vast public web of computer networks, connects users of all types all
around the world to each other and to an amazingly large "information
repository." The Internet makes up one big "information highway" that
can dispatch bits at incredible speeds from one location to another.
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The Internet ExplosionComments by Dr. Laukamm
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With
the creation of the World Wide Web and Web browsers in 1990s, the
Internet was transformed from a mere communication tool into a
certifiably revolutionary technology. During the final decade of the
twentieth century, the number of Internet users worldwide grew to
almost 400 million. By early 2002, Internet penetration in the United
States had reached 66 percent. Although the dot-com crash in 2000 led
to cutbacks in technology spending, research suggests that the growth
of Internet access among the world's citizens will continue to explode.
The number of Web surfers worldwide reached 533 million last year and
is expected to approach 1.5 billion by 2007.2
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This explosive worldwide growth in Internet usage forms the heart of the so-called New Economy. The Internet has been the
revolutionary technology of the new millennium, empowering consumers
and businesses alike with blessings of connectivity. For nearly every
New Economy innovation that has emerged during the past decade, the
Internet has played a starring—or at the very least a "best
supporting"— role. The Internet enables consumers and companies to
access and share huge amounts of information with just a few mouse
clicks. Recent studies have shown that consumers are accessing
information on the Internet before making major life decisions. One in
three consumers relies heavily on the Internet to gather information
about choosing a school, buying a car, finding a job, dealing with a
major illness, or making investment decisions. As a result, to be
competitive in today's new marketplace, companies must adopt Internet
technology or risk being left behind.3
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New Types of IntermediariesComments by Dr. Laukamm
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New
technologies have led thousands of entrepreneurs to launch Internet
companies—the so-called dot-coms—in hopes of striking gold. The amazing
success of early Internet-only companies, such as AOL, Amazon.com,
Yahoo, eBay, and E*Trade, and dozens of others, struck terror in the
hearts of many established manufacturers and retailers. For example,
Compaq Computer, which sold its computers only through retailers,
worried when Dell Computer grew faster by selling online. Toys "R" Us
worried when eToys lured toy buyers to the Web. Established store-based
retailers of all kinds—from bookstores, music stores, and florists to
travel agents, stockbrokers, and car dealers—began to doubt their
futures as competitors sprung up selling their products and services
via the Internet. They feared, and rightly so, being disintermediated by the new e-tailers—being cut out by this new type of intermediary.
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The
formation of new types of intermediaries and new forms of channel
relationships caused existing firms to reexamine how they served their
markets. At first, the established brick-and-mortar firms—such as Staples, Barnes & Noble, and Merrill Lynch—dragged their feet hoping that the assaulting click-only firms would falter or disappear. Then they wised up and started their own online sales channels, becoming click-and-mortar
competitors. Ironically, many click-and-mortar competitors have become
stronger than the click-only competitors that pushed them reluctantly
onto the Internet. Charles Schwab is a good example. In fact, although
some click-only competitors are surviving and even prospering in
today's marketplace, many once-formidable dot-coms—such as eToys,
Pets.com, Garden.com, and Mothernature.com—have failed in the face of
poor profitability and plunging stock values.
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Customization and CustomerizationComments by Dr. Laukamm
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The Old Economy revolved around manufacturing companies
that mainly focused on standardizing their production, products, and
business processes. They invested large sums in brand building to tout
the advantages of their standardized market offerings. Through
standardization and branding, manufacturers hoped to grow demand and
take advantage of economies of scale. As a key to managing their
assets, they set up command-and-control systems that would run their
businesses like machines.
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In contrast, the New Economy revolves around information businesses.
Information has the advantages of being easy to differentiate,
customize, personalize, and send at incredible speeds over networks.
With rapid advances in Internet and other connecting technologies,
companies have grown skilled in gathering information about individual
customers and business partners (suppliers, distributors, retailers).
In turn, they have become more adept at individualizing their products
and services, messages, and media.
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Dell
Computer, for example, lets customers specify exactly what they want in
their computers and delivers customer-designed units in only a few
days. On its reflect.com Web site, Procter & Gamble allows people
to reflect their needs for, say, a shampoo by answering a set of
questions. It then formulates a unique shampoo for each person. And
cereal maker General Mills is even considering a Web site that lets you
design your own cereal:
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General Mills is expected to introduce www.mycereal.com, a Web site that allows users to mix and match more than 100 different ingredients to create and name their own breakfast cereals, delivered to their homes in single-serving portions. You want Cheerios to come with the marshmallows from Lucky Charms? Done. Mix Cinnamon Toast Crunch with French Toast Crunch? Sure. Wheaties with blueberries, almonds and grains? No problem. Add a tropical touch to your Cocoa Puffs? Have them throw in some coconut shreds and dried mango. Databases connected to the Web site are set up to provide suggestions based on health and nutritional criteria, including cholesterol, blood pressure, and sugar content. For a price of approximately $1 per serving, General Mills will deliver a one- or two-week supply of your personalized cereal mix to your home.4 Comments by Dr. Laukamm
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Customization differs from customerization.
Customization involves taking the initiative to customize the market
offering. For example, a Levi's salesperson takes the person's
measurements, and the company customizes the jeans at the factory. In customerization,
the company leaves it to individual customers to design the offering.
For example, jeans customers may take their own measurements and add
specific features that they may want in their jeans, such as colorful
patches. Such companies have become facilitators and their customers
have moved from being consumers to being prosumers.5
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