Marketing Strategy in the New Digital Age

Conducting business in the new digital age will call for a new model for marketing strategy and practice. According to one strategist: "Sparked by new technologies, particularly the Internet, the corporation is undergoing a radical transformation that is nothing less than a new industrial revolution. . . . To survive and thrive in this century, managers will need to hard-wire a new set of rules into their brains. The 21st century corporation must adapt itself to management via the Web."⁶ Suggests another, the Internet is "revolutionizing the way we think about . . . how to construct relationships with suppliers and customers, how to create value for them, and how to make money in the process; in other words, [it's] revolutionizing marketing."⁷

Some strategists envision a day when all buying and selling will involve direct electronic connections between companies and their customers. The new model will fundamentally change customers' notions of convenience, speed, price, product information, and service. This new consumer thinking will affect every business. Comparing the adoption of the Internet and other new marketing technologies to the early days of the airplane, Amazon.com CEO Jeff Bezos says, "It's the Kitty Hawk era of electronic commerce." Even those offering more cautious predictions agree that the Internet and e-business will have a tremendous impact on future business strategies.

The fact is that today's economy requires a mixture of Old Economy and New Economy thinking and action. Companies need to retain most of the skills and practices that have worked in the past. But they will also need to add major new competencies and practices if they hope to grow and prosper in the new environment. Marketing should play the lead role in shaping new company strategy.

E-business involves the use of electronic platforms—intranets, extranets, and the Internet—to conduct a company's business. The Internet and other technologies now help companies carry on their business faster, more accurately, and over a wider range of time and space. Countless companies have set up Web sites to inform about and promote their products and services. They have created intranets to help employees communicate with each other and access information found in the company's computers. They have set up extranets with their major suppliers and distributors to assist information exchange, orders, transactions, and payments. Companies such as Cisco, Microsoft, and Oracle run almost entirely as e-businesses, in which memos, invoices, engineering drawings, sales and marketing information—virtually everything—happens over the Internet instead of on paper.⁸

E-commerce is more specific than e-business. E-business includes all electronics-based information exchanges within or between companies and customers. In contrast, e commerce involves buying and selling processes supported by electronic means, primarily the Internet. E-markets are "marketspaces," rather than physical marketplaces. Sellers use e-markets to offer their products and services online. Buyers use them to search for information, identify what they want, and place orders using credit or other means of electronic payment.

E-commerce includes e-marketing and e-purchasing (e-procurement). E-marketing is the marketing side of e-commerce. It consists of company efforts to communicate about, promote, and sell products and services over the Internet. Thus, Amazon.com, Schwab.com, and Dell.com conduct e-marketing at their Web sites. The flip side of e-marketing is e-purchasing, the buying side of e-commerce. It consists of companies purchasing goods, services, and information from online suppliers.

In business-to-business buying, e marketers and e-purchasers come together in huge e-commerce networks. For example, GE Global eXchange Services (GXS) operates one of the world's largest business-to-business e-commerce networks (www.gegxs.com). More than 100,000 trading partners in 58 countries—including giants such as 3M, DaimlerChrysler, Target, J.C. Penney, Sara Lee, and Kodak—use the GXS network to complete some 1 billion transactions each year, accounting for $1 trillion worth of goods and services.⁹

E-commerce and the Internet bring many benefits to both buyers and sellers. Let's review some of these major benefits.

Internet buying benefits both final buyers and business buyers in many ways. It can be convenient: Customers don't have to battle traffic, find parking spaces, and trek through stores and aisles to find and examine products. They can do comparative shopping by browsing through mail catalogs or surfing Web sites. Direct marketers never close their doors. Buying is easy and private: Customers encounter fewer buying hassles and don't have to face salespeople or open themselves up to persuasion and emotional pitches. Business buyers can learn about and buy products and services without waiting for and tying up time with salespeople.

In addition, the Internet often provides buyers with greater product access and selection. For example, the world's the limit for the Web. Unrestrained by physical boundaries, cybersellers can offer an almost unlimited selection. Compare the incredible selections offered by Web merchants such as Amazon.com or eVineyard to the more meager assortments of their counterparts in the brick-and-mortar world.

Beyond a broader selection of sellers and products, e-commerce channels also give buyers access to a wealth of comparative information, information about companies, products, and competitors. Good sites often provide more information in more useful forms than even the most solicitous salesperson can. For example, Amazon.com offers top-10 product lists, extensive product descriptions, expert and user product reviews, and recommendations based on customers' previous purchases.

Finally, online buying is interactive and immediate. Buyers often can interact with the seller's site to create exactly the configuration of information, products, or services they desire, then order or download them on the spot. Moreover, the Internet gives consumers a greater measure of control. Like nothing else before it, the Internet has empowered consumers. For example, 27 percent of car buyers go online before showing up at a dealership, arming themselves with car and cost information. This is the new reality of consumer control.¹⁰

E-commerce also yields many benefits to sellers. First, the Internet is a powerful tool for customer relationship building. Because of its one-to-one, interactive nature, the Internet is an especially potent marketing tool. Companies can interact online with customers to learn more about specific needs and wants. In turn, online customers can ask questions and volunteer feedback. Based on this ongoing interaction, companies can increase customer value and satisfaction through product and service refinements. One expert concludes: "Contrary to the common view that Web customers are fickle by nature and will flock to the next new idea, the Web is actually a very sticky space in both business-to-consumer and business-to-business spheres. Most of today's online customers exhibit a clear [tendency] toward loyalty."¹¹

The Internet and other electronic channels yield additional advantages, such as reducing costs and increasing speed and efficiency. E-marketers avoid the expense of maintaining a store and the related costs of rent, insurance, and utilities. E-tailers such as Amazon.com reap the advantage of a negative operating cycle: Amazon.com receives cash from credit card companies just one day after customers place an order. Then it can hold on to the money for 46 days until it pays suppliers, book distributors, and publishers.

By using the Internet to link directly to suppliers, factories, distributors, and customers, businesses such as Dell Computer and General Electric are cutting costs and passing savings on to customers. Because customers deal directly with sellers, e-marketing often results in lower costs and improved efficiencies for channel and logistics functions such as order processing, inventory handling, delivery, and trade promotion. Finally, communicating electronically often costs less than communicating on paper through the mail. For instance, a company can produce digital catalogs for much less than the cost of printing and mailing paper ones.

E-marketing also offers greater flexibility, allowing the marketer to make ongoing adjustments to its offers and programs. For example, once a paper catalog is mailed to final consumer or business customers, the products, prices, and other catalog features are fixed until the next catalog is sent. However, an online catalog can be adjusted daily or even hourly, adapting product assortments, prices, and promotions to match changing market conditions.

Finally, the Internet is a truly global medium that allows buyers and sellers to click from one country to another in seconds. GE's GXS network provides business buyers with immediate access to suppliers in 58 countries, ranging from the United States and the United Kingdom to Hong Kong and the Philippines. A Web surfer from Paris or Istanbul can access an online L.L. Bean catalog as easily as someone living in Freeport, Maine, the direct retailer's hometown. Thus, even small e-marketers find that they have ready access to global markets.