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Chapter 14
Marketing
Strategies for
the New
Economy
McGraw-Hill/Irwin
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
Does Every Company Need
a New-Economy Strategy?
• New economy means the industries that:
– Fuel the development of or participate
significantly in electronic commerce and the
Internet,
– Develop and market computer hardware and
software, and
– Develop or provide any of the growing array
of telecommunications services.
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Does Every Company Need
a New-Economy Strategy?
• Long-term prospects for doing business in
the new economy are enormous.
• Nearly every company needs to examine
how it will be affected by and can take
advantage of new technologies.
• The fact that one’s competitors will surely
develop and deploy such strategies is a
further argument for doing so.
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The Inherent Advantages and
Disadvantages of the New Economy
• Syndication involves the sale of the same
good to many customers, who may then
combine it with information from other
sources and distribute it.
– Originator
– Syndicator
– Distributor
– Really Simple Syndication (RSS)
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The Inherent Advantages and
Disadvantages of the New Economy
• Why is syndication important?
– It delivers informational goods, rather than
tangible goods.
– The syndication process can be automated
and digitized, enabling syndicated networks to
be created, expanded, and flexibly adapted
far more quickly than would be possible in the
physical world.
– Syndication via the Internet—and via mobile
phones or other mobile devices—opens up
endless opportunities for marketers.
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The Inherent Advantages and
Disadvantages of the New Economy
• Increasing returns to scale of network
products
– The characteristic of informational networks—
a product becomes more valuable as the
number of users increases—is often called a
positive network effect, or network externality.
– This characteristic has led to the seemingly
crazy strategy of giving one’s Internet product
away for free, often a strategy of choice for
new-economy marketers!
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The Inherent Advantages and
Disadvantages of the New Economy
• Increasing returns to scale of network
products
– Companies that can identify and exploit
opportunities where they can benefit from the
increasing returns to scale that result from
positive network effects can sometimes grow
very quickly on relatively modest investment.
– The social networking phenomenon.
– The question of cash flow.
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The Inherent Advantages and
Disadvantages of the New Economy
• The ability to efficiently personalize and
customize market offerings
– Collaborative filtering
– Rules-based personalization
– Customization techniques, which are userdriven instead of marketer-driven, allow users
to specify the nature of what is offered to
them.
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The Inherent Advantages and
Disadvantages of the New Economy
• Disintermediation and restructuring of
distribution channels
– Disintermediation: The Internet makes it
possible for marketers to reach customers
directly, without the expense or complication
of distribution channels.
– Deciding to disintermediate or restructure
one’s channel should not be done lightly.
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The Inherent Advantages and
Disadvantages of the New Economy
• Global reach, 24 x 7 access, and
instantaneous delivery
– Global reach is a reality; making products and
services available 24 hours per day, seven
days per week, 52 weeks per year; and, in
some cases, providing instantaneous delivery.
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The Inherent Advantages and
Disadvantages of the New Economy
• Are these new-economy attributes
opportunities or threats?
– Most marketers can choose to take
advantage of one or more of the benefits
offered by new-economy technologies.
– To that extent, these technologies constitute
opportunities available to marketers who
employ them.
– They also raise complex ethical issues.
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The Inherent Advantages and
Disadvantages of the New Economy
• For most products, price, over the long
run, usually is not far from variable cost.
• If variable cost is zero, will prices drop to
near zero, too?
• Few barriers to entry.
• Many Internet strategies are easily
imitated.
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The Inherent Advantages and
Disadvantages of the New Economy
• Defenses
– The patent and copyright system.
– Versioning: Marketers who determine which
features will be valuable to some customers,
but of little value to others, can package and
repackage information differently and serve
market segments with margins that need not
fall to zero.
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The Inherent Advantages and
Disadvantages of the New Economy
• First-mover advantage: fact or fiction?
– In the Internet gold rush in the late 1990s, the
key to Internet success was said to be firstmover advantage.
– Being the first mover can bring some potential
advantages, but not all first movers are able
to capitalize on those advantages.
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Developing a New-Economy Strategy:
a Decision Framework
• Marketing applications for new-economy
tools
– The six-stage consumer experience process.
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A Customer Experience Model for New-Economy
Marketing Decision Making
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Developing a New-Economy Strategy:
a Decision Framework
• Product promotion and brand building
tools
– Search, e-mail marketing, blogs, promotional
sites, and banner advertising.
– Mobile advertising
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Developing a New-Economy Strategy:
a Decision Framework
• Product promotion and brand building
tools (cont.)
– The fastest growing of these is search.
• The paid inclusion model and search engine
optimization.
– E-mail marketing is also on the rise.
• Opt-in e-mail and permission marketing.
• Viral e-mail.
– Promotional sites
• Use of affiliate schemes and aggregators.
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Developing a New-Economy Strategy:
a Decision Framework
• Product promotion and brand building
tools (cont.)
– Banner advertising includes rich media;
cliffhangers; superstitials; streaming audio;
and vFlash.
– A way to make Web advertising more
measurable is to have advertisers pay for
performance, rather than for placement,
regardless of the type of ad employed.
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Developing a New-Economy Strategy:
a Decision Framework
• Applications for conducting transactions
– Dynamic pricing: A system that gauges a
customer’s desire to buy, measures his
means, and sets the price accordingly.
– Making it easy for customers to pay, as
PayPal does in the United States.
– Use of digital signatures to make Web
transactions more frequent and more secure.
– Internet banking.
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Developing a New-Economy Strategy:
a Decision Framework
• New-economy applications for:
– Delivering digital products
– Customer service and support
– Product return and disposal
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Developing a New-Economy Strategy:
a Decision Framework
• The Critical Questions
• Can we digitize any or all of the necessary
flows at each stage in the consumer
experience process?
– For cash, the answer is yes except where
currency issues pose problems.
– For goods and services, the question is more
difficult.
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Developing a New-Economy Strategy:
a Decision Framework
•
Can we do so first, and/or in a
proprietary way?
–
–
Barriers to entry on the Web are low, and
most good ideas can be quickly imitated.
A key question in deciding whether or not to
employ a new-economy application is
whether one can do so in a proprietary way,
thereby deterring imitation, or do so with a
sufficient head start.
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Developing a New-Economy Strategy:
a Decision Framework
• How valuable and how time-critical are
what kinds of information to the recipient?
– The more valuable and time-critical the
information, the more sensible it may be to
invest in new economy applications to provide
easy, timely, and 24 x 7 access to those who
can benefit from the information.
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Developing a New-Economy Strategy:
a Decision Framework
• Can new-economy tools reach and build
relationships with customers in the target
market?
– Simply reaching customers with neweconomy tools may not be enough.
– Going beyond reach to build mutually
beneficial relationships may be what is
needed.
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Developing a New-Economy Strategy:
a Decision Framework
• Are new economy tools measurably
effective and efficient compared to other
solutions?
– Marketers’ concerns over the effectiveness
and efficiency of their Web sites have led to
the development of Web analytics, software
solutions that monitor and summarize Web
site usage patterns.
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Managing New-Economy Strategies:
The Talent Gap
• Observers note that the shelf life of chief
marketing officers (CMOs) is short—a
mere 26 months, on average, according to
a recent study—much shorter on average
than that for CEOs, CFOs, or CIOs.
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Developing Strategies to Serve NewEconomy Markets
• What industries will be next to get the dotcom treatment?
– Jewelry; checks; telecom; hotels; real estate
brokerage; software.
• Serving the dot-com markets of tomorrow
– Understanding one’s revenue model and
being willing to change it as market and
technological conditions warrant are essential.
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Take-Aways
• Seven potentially attractive elements
characterize many new-economy
technologies:
– The syndication of information, the increasing
returns to scale of network products, the
ability to efficiently personalize and customize
market offerings, the ability to disintermediate
distribution, global reach, 2437 access, and
the possibility of instantaneous delivery.
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Take-Aways
• First-mover advantage is simply wrong.
Best beats first.
• Most observers now believe that the
Internet is better suited for delivering
measurable marketing results—as is direct
marketing—than for brand building.
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Take-Aways
• Web-based customer service applications
offer the tantalizing combination of better
service and significant cost savings.
– The trick, of course, is to focus on the
customer service benefits first, rather than
mere cost cutting, since customers are quick
to discern when cost cutting takes
precedence over genuine service
responsiveness.
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Take-Aways
• Keys to success in tomorrow’s neweconomy ventures include:
– Clearly understanding one’s business model
(Exactly where will revenue come from:
commerce, content, community, or
infrastructure?),
– Filling real (though perhaps latent) customer
needs, and
– Putting together the right management team
that can deliver the performance and value
that customers want and will pay for.
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