ch#10 presentation slides

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CHAPTER 10

VALUE-BASED MARKETING IN

THE DIGITAL AGE

Presented by :

Sajal Safdar L-115607Sarah Fazal L-115675 Wajiha Malik L-115645

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VALUE-BASED MARKETING IN THEDIGITAL AGE

This chapter covers following important topics:

y The development of the Internet and its key featuresy The drivers of the new e-marketsy Role of Internet in reshaping marketing and

competitiony Creating value through the weby Implications for marketing strategy y Responding to the threats and opportunities from the

Internet

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THE GROWTH AND DEVELOPMENTOF THE INTERNET

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GROWTH OF THE NET

y Three breakthroughs:

1. Commercial use of Internet2. Low cost computers and software3. Web browsers

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GROWTH OF THE NET

y Factors enhancing the growth of Internet:

1.New Internet devices2. Broadband communications3. Customer-focused innovation

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DRIVERS OF CHANGE IN THENEW ECONOMY

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DIGITISATION

GOING DIGITA L: MOORE S L A W Moore s Law states that every 18 months, computer processing power doubles while cost stays constant.

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DIGITISATION

IMPL

ICATIONS

OF M

OORE'S L

A W

1. Resource Substitution Atoms to Bits2. The Developing Digital Environment

3. Digitizing Marketing Processes

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NETWORKS

NET W ORK S AN D M ETCA LF S L A W Metcalf s Law states that the value of any network is proportional to the square of the number of users.

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NETWORKS

IMPL

ICATIONS

OF M

ETCA LF

'S L

A W

1. Unbundling Products and Information2. Unbundling Value Chains and Reshaping Industries

3. The Growth of Specialists4. Disintermediation and Reintermediation

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INDIVIDUAL CUSTOMISATIONy From Broad Messages To I nteraction

Sales Era

Message Pool of Customers

Figure 1.1One message broadcast to all customers

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INDIVIDUAL CUSTOMISATION Brand Management Era

DifferentMessages

Figure 1.2

Different messages broadcast to each segment

M1

M2

M3

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M=Market Segment



INDIVIDUAL CUSTOMISATION Information Era

I ndividualMessage

Figure 1.3One to one interactive messages to each individual

I ndividualC ustomer

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S ource : Value Based Marketing - Marketing S trategies for Corporate Growth and S hareholder Value, by

Peter Doyle , 2nd

edition



CREATING VALUE THROUGH

THE WEB

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HOW THE WEB CREATES VALUE FORCUSTOMERSy The web offers customers seven benefits:

1. Customization2. Greater Assortment3. Lower Prices4. Greater Convenience5. More Information6 . Greater Assurance7. Entertainment

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HOW THE WEB CREATES VALUE FORCUSTOMERS1. C ustomization

The Internet enables customers to have products andservices personalized to their needs.There are four forms of customization:

i. Cosmetic Customizationii. Transparent Customization

iii. Adaptive Customizationiv. Collaborative Customization

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CUSTOMIZATION

A daptive

C hange

N o C hange

N o C hange C hange

C ollaborativeTransparent

C osmetic

Product

Message

Figure 1.4 Dimensions of Customization

17S ource : Value Based Marketing - Marketing S trategies for Corporate Growth and S hareholder Value, byPeter Doyle , 2 nd edition



HOW THE WEB CREATES VALUE FORCUSTOMERS

2. G reater A ssortment Web-based businesses can provide customers with a muchgreater product assortment.

3. Lower Prices Web-based companies offer substantially lower prices.

4.G reater C onvenienceInternet shopping offers great convenience. Customers can shop24/ 7 from their offices and home, and can also do comparisonshopping.

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HOW THE WEB CREATES VALUE FORCUSTOMERS5. More I nformation

The Net offers customers unlimited information at zero cost.6. G reater A ssurance

Web-based companies give customers greater confidence thattheir requirements will be satisfied.

7.E

ntertainment As companies shift to more sophisticated sites, shopping on theInternet becomes increasingly entertaining.

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HOW THE WEB CREATES VALUE FORCOMPANIES

y The web offers benefits to companies through:

1. Improvement-Based Business Models2. Revenue-Based Business Models3. Mixed Models

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1. I MP ROVE MENT -B A SE D BUS INE SS MO DE LS

Improvement-based benefits from the web createshareholder value in three ways:

i. Cost Savingsii. Enhancing the Brand Image

iii. Greater Business Effectiveness

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2. REVEN UE -B A SE D BUS INE SS MO DE LS

Revenue-based models generate direct benefits in the formof revenue from customers.There are two types of revenue-based models:

i. Purchase-Base Revenue Modelsii. Provider-Based Business Models

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i. Purchase-Based R evenue ModelsPurchase-based revenue models obtain revenues frompurchasers in three main ways:

Sales of company s productsPay-per-useCharging annual subscription fees

ii. Provider-Based Business ModelsProvider-based business models obtain revenues not from users,but from other companies wanting to gain access to the web siteusers.

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3. MIXE D M O DE LS

Many companies, such as Dell and Cisco, create bothimprovement-based and revenue-based benefits.

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IMPLICATIONS FOR

MARKETING STRATEGY

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FROM CAVEAT EMPTOR TO CAVEATVENDITOR

y From buyer beware to seller bewarey Four factors strengthen the hands of buyer and

intensify competition between suppliers:1. Instant Choice2. Comparison Shopping3. Purchasing Power4. Global Reach

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NEW MARKET OPPORTUNITIESy E-commerce has created entirely new high-growth

markets and new sources of competitive advantage.y The main sources of opportunities arise from the

following:1. Declining Market Entry Barriers

2. Deconstructing Value Chains3. Convergence of Industries4. Superior Customer Value

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NEW MARKET STRATEGIESy The core of marketing strategy is segmentation and

positioning. Segmentation refers to the choice of customers a

firm is targeting for its product or service. P ositioning refers to the value proposition that the

firm hopes will attract the customers in the chosenmarket segment.

y In the information environment both thesedimensions have to change.

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NEW MARKET STRATEGIES

From Segmentation to Personalization

Traditionally the aim of the marketing has been to groupcustomers into market segments with similar wants andcharacteristics.The objective of the segmentation is different now; the aim

is to segment not by similarity of needs but rather by thepotential lifetime value of the customer.

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NEW MARKET STRATEGIESFrom Brand Propositions to C ustomization

Traditionally marketing has focused on developing a uniqueselling proposition that would give the firm a competitiveadvantage to a market.In the networked world, competitive advantage is gained

from matching the needs of the individual customer moreprecisely.Now it is about making to order rather than making for orders .

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THE CHANGING MARKETING MIX

y

Product Policy y Pricing Policy y Communications and Promotiony Distribution

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PRO DU CT PO LICY

Increased demand for more customized products andcommunications24/ 7 accessHelpful websitesPortfolio planning services

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PRICING PO LICY

Critical factor in online markets Access more information about prices than ever beforeCompanies seek to dominate new markets

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THE CHANGING MARKETING MIXCO MMU NICATION S AN D P RO MOTION S

Reach and richness are important factors in onlinemarkets.Internet brings trade-off between reach and richness.

N o. of people

receivinginformation

Detail of

informationprovided

Reach Richness

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Traditional Advertising vs. Online AdvertisingT raditional A dvertising O nline A dvertising

y Provides high reach but

sacrifices richnessy Message sent by the seller tothe customer

y Target promotions and ads onone-to-many basis

y Provides less productinformation

y Less opportunity forimmediate interaction

y Provides tradeoff between

reach and richnessy Customers seek out thesupplier's message

y Target promotions and ads onone-to-one basis

y Provides extensive productinformation

y More opportunity forimmediate interaction

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THE CHANGING MARKETING MIXD I STRI BUTION

Zero cost interaction between companies and customersDisintermediation with big cost savingsDirect interaction over the Internet, without any intermediary

F or example:

If airlines do direct booking and ticketing on the Internetthey save agency commissions of at least 10 percent.

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HOW COMPANIES NEED TO

RESPOND TO THE OPPORTUNITIESAND THREATS FROM THE

INTERNET?

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FUTURE PERSPECTIVESRECOGNIZE THE NE W CONTEXT O F BUSINE SS1. T he I nternet C hanges E verything

Creating instantaneous, universal and free communicationDestroys the nature of traditional business

2. R eengineer T he Business ModeImproves the efficiency of traditional business

3. C ustomize MarketingShifting power to customers

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FUTURE PERSPECTIVESCHANGING THE STRATEGY

4. T hink O utside T he Box

Changing strategy is not just selling but thinking creatively 5. Move Fast

High speed of competitionFor example, Amazon took just 45 days to become a market

leader.6. Take A n O ffensive PostureExploit the first mover advantage

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FUTURE PERSPECTIVESRE STR UCT URING THE ORGANIZATION

7. Build N etworksCreating virtual businesses with suppliers and partnersUsing digital technology to form networks

8 . I nvest I n H uman C apitalMake bureaucratic structure obsoleteRethink about payment systems and rewards

9 . Make Managers R esponsibleTaking responsibility for building a cultureIntroduce evaluation and reward systems

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THANK YOU

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