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Changing Market Relationships in the Internet Age

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Jean-Jacques Lambin

Conclusion. Upgrading the marketing function

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1More countries, more customer segments, more distribution channels, more direct and substitute competitors, new market actors, new communication technologies, new virtual market places, fast changing technologies, new media controlled by consumers, new civil society stakeholders, … The growing complexity of the global market has numerous causes. To cope with this increased complexity, the firm has to redefine the way the marketing function operates by broadening and upgrading its role, by changing priorities and by developing new capabilities. Ten priorities can be identified.

View the market as a dual-trading arena

  • 1 Jingzhi Guo and Chengzheng Sun, (2004), op.cit.,p. 9.

2With the development of the Internet technology a distinction should be made between the Global Traditional Market (GTM) and the Global Electronic Market (GEM). In the GTM, being customer-oriented is not enough. Other market actors can have a decisive influence. Thus, the role and importance of competitors, distributors, influencers, and other market stakeholders should be systematically analysed and monitored within the firm’s market information system. A GEM can be defined as a virtual market, i.e. as an online network where buyers, sellers, and distributors exchange information and conduct trade. GEM globally produces and distributes digital products and services, while GTM collaborates with GEM to consume or continue the physical part of production and distribution. The firms in traditional markets extend their demand and supply to GEM, while firms of electronic markets create new demand and supply for GTM. Firms of both GTM and GEM collaborate and specialise to present an integrated global market, where almost all of them benefit from this emergent dual-trading arena model (Guo and Sun, 2004)1. Thus, today a market is at the same time a physical and a virtual entity.

Place a stronger emphasis on innovation strategies

  • 2 Flash Euro Barometer 144, Innobarometer : A Survey Organised in 2003 by the Directorate General En (...)
  • 3 Innovation Becoming Higher Priority in Global Companies, press release, The Conference Board, June (...)

3Innovations remain the best way to build a sustainable competitive advantage. Given that the average life cycle of a new product is from 12 to 24 months, developing new product concepts is a major challenge. There are numerous examples of disruptive innovations having reactivated a mature market by upsetting traditional market boundaries. A recent study shows that in the EU15 (Innovator Barometer, 2003)2, the 10 per cent highly innovative companies have over 50 per cent of their turnover generated by products or services introduced during the past two years. In a similar study by the Conference Board in the US (2005)3, sales of new products introduced in the three preceding years are expected to generate 34 per cent of total revenue, up from 21 per cent only seven years ago. Excellent companies should have permanently new product projects in their portfolio. The market-driven management model relies on two tracks for innovation development : the commonsensical “market pull” track where new product ideas come from the market, but also the more proactive (and risky) “technology push” track, where innovative ideas come from R&D.

Reinforce strategic marketing

4Many marketing departments are too shortterm oriented and are inclined to adopt a narrow definition of their role, limited to brand management, advertising, positioning issues and promotions. These operational marketing tasks have to be performed of course, but in a fast changing environment, the firm’s strategic options are vulnerable and have to be revised more frequently. The key tasks of strategic marketing are : reference market definition, market segmentation analysis, business opportunity analysis, competitive advantage definition, segment targeting and positioning, and marketing strategy development. These strategic options will determine the long-term future of the firm. It is once these strategic options are clearly stated that marketing mix decisions (the 4 or 7Ps) can be made on good grounds. This implies formalising the role of strategic marketing in the organisational structure of the firm, since every function should participate in the choice of the strategic marketing options.

Reinforce collaboration with the other functions

5The market orientation culture is the responsibility of every function within the firm. Addressing strategic marketing issues, developing innovations or implementing Customer Relationship Management (CRM) implies the cooperation of the entire organisation and not simply of the marketing function. Market driven management is too complex to be confined to the sole marketing department. In the new context, cross functional co-ordination is particularly important because it implies the involvement of all levels in the firm’s organisation. Marketers have a key role to play in disseminating the market orientation culture. They have to take the lead in turning the organisation in this direction. The cross functional team approach is a good and flexible way for responding to high priority opportunities faster than conventional functional organisation.

Develop customer solution strategies

6Business definition should be made by reference to the customers’ generic needs and to the virtual market and not simply to products. More and more smart customers are looking, not for products or services, but rather for a “solution-to-their-problems”. What makes a solution valuable for the customer is that it focuses on results by applying level of expertise and a proprietary method. For the firm, developing solution strategies implies more than simply bundling products and services. It is the level of customisation and of integration that sets solutions above products and services that justify a price premium. To become a solution provider, the firm must often augment its internal capabilities by finding partners who can help provide the complete solution. The benefit for the firm is higher profit margins and longer customer contracts.

In B2C markets, treat large distributors as B2B customers

7In B2C markets, the balance of power evolves continuously between the two key market actors, manufacturers and distributors, changing the nature of their relationships, moving from a “manufacturer-dominated” business model to a “retailer-dominated” model. In this new context, the brand manufacturer has to decide which defence strategy to adopt. Global retailers are very powerful actors and the manufacturers should treat them as customers in their own rights and develop B2B marketing programme in parallel with the B2C marketing programme. If retailers (or distributors) have to be viewed by manufacturers as customers, the first step is to understand their needs and strategic objectives and to design an adapted B2B marketing programme. The Internet technology creates a variety of opportunities for reaching customers online and offline simultaneously while avoiding the risks and pitfalls of disintermediation.

Capitalise on the power of user-generated media

  • 4 Court D. (2007), The Evolving Role of the CMO, The McKinsey Quarterly, 3, pp. 29-39.

8The Internet growth has tremendously increased the importance of user-generated media, like bloggers, aggregators, chat rooms or independent sites such as YouTube, Wikipedia and other online market places. Increasingly, consumers sceptical of advertising, rely on Web-based research and on user-generated media they trust more to narrow down the choice of brands or companies. In the US, over half of all electronic goods consumers and 80 percent of insurance purchasers researched the subject online before talking to the sales staff or to agents (Court, 2007)4. Online aggregators collect and analyse information from different data sources and create a new landscape in information retrieval with or without the permission or knowledge of the data sources. Thus, marketing departments have to enhance their awareness of those social-networking media and to develop strategies to capitalise on suggestions or remarks made by consumers or to defend themselves from attacks. The online communities in the Internet offer new possibilities for valuable insights into and on the innovation process by integrating consumers in the product development. The emerging “prosumer paradigm”, where consumers participate and co-create products and services, is the new challenge to be addressed by the market driven firm.

View marketing budgets as investments

9Companies are increasingly under the scrutiny of shareholders and investors, in particular companies quoted in the stock market. The marketing function is a big spender but has not developed metrics to track the impact œ even less the financial impact œ of operational marketing expenditures. Rules of thumb œ such as “day-after” recall in advertising œ popular in the 1960s and 1970s are not acceptable any more. Marketers need a more rigorous approach that treats marketing outlays not as “spending” but as investments. In other words, it is necessary to boost marketing’s ROI. Few companies track their progress “end to end”, by following the chain all the way, from (a) the effect of spending on a brand’s driver, (b) to the influence of this driver on consumer loyalty and (c) the influence of loyalty on revenues and margins, and (d) finally to the question of whether any increase in profits justifies the spending. Tools, methods and techniques exist, that are greatly facilitated today by the Internet technology and by the computers’ power, making the marketing ROI challenge a realistic objective.

Be aware of your corporate social responsibility

10Consumers are represented today by powerful and vocal consumerist groups and by NGOs. Just as significant is the growing influence of environmental groups, human rights activists, labour and religious groups and a host of other relationship organisations who collectively make up “civil society”. Successful companies must learn the importance of also satisfying these non-customer groups. If companies shy away from broad debates about current social issues, they are likely to face mounting criticisms over their activities as well as a greater risk of becoming embroiled in local political tensions. Consumers do not like to be associated to corruption and poor ethical behaviour. As the world becomes more linked and interconnected by global media and by Internet, the power of the civil society has increased considerably making companies more vulnerable when confronted with an alleged and actual corporate social misbehaviour. Thus, being market-oriented means also being publicly driven.

Develop new capabilities and skills

11In the new world economy, the Corporate Marketing Officer’s job has never been so difficult, but also so potentially rewarding. Today’s marketers need to be skilled in operational marketing and well trained to analyse international markets, to understand cultural differences, to get insights from consumers all over the world, to acquire new skills in digital marketing and to be financially accountable to their CEOs. Thus, today’s challenge of market-driven management is to broaden and to upgrade the traditional marketing function.

Notes

1 Jingzhi Guo and Chengzheng Sun, (2004), op.cit.,p. 9.

2 Flash Euro Barometer 144, Innobarometer : A Survey Organised in 2003 by the Directorate General Enterprise, Brussels, European Commission.

3 Innovation Becoming Higher Priority in Global Companies, press release, The Conference Board, June 30, 2004. Quoted by : Webster F.E. and al .(2005), op.cit., p. 41

4 Court D. (2007), The Evolving Role of the CMO, The McKinsey Quarterly, 3, pp. 29-39.

© Presses universitaires de Louvain, 2008

Conditions d’utilisation : http://www.openedition.org/6540