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Running head: MARKETING IN THE 21ST CENTURY Marketing in the 21st Century Melissa Berrier Walden University MARKETING IN THE 21ST CENTURY 2 Abstract The Internet has changed how companies and consumers create, sell, market, and engage with products and services. The Internet affects the individual marketing mix variables through nine identified factors. The factors are personalized marketing, dynamic pricing, advertising methods, products and price information, e-commerce, mass advertising versus personalized marketing, word-of-mouth advertising, globalization, and user-generated products. Companies use technology to research consumers and provide personalized marketing messages. Dynamic pricing is affected as consumers have access to company pricing and competitive pricing. Information on products and pricing is available to consumers on the internet, and traditional stores are no longer necessary for purchases. E-commerce allows businesses to sell product and consumers to buy products anytime and anywhere which removes geographic and time barriers to purchasing. Mass advertising and personalized marketing both contribute value but firms weigh the costs of each. Word-of-mouth advertising places emphasis on consumer feedback and interaction. Companies can expand sales and market share by selling products globally. The internet facilitates the sharing of user-generated products, forcing companies to integrate these products into their business models and engage with consumers. These major factors of changing marketing mix variables affect future growth. Companies must recognize and then integrate these factors into the marketing plan for sustainable and long-term company growth. MARKETING IN THE 21ST CENTURY 3 Marketing in the 21st21st Century The individual marketing mix variables are changing in the 21st Century with the increased usage of the Internet. The factors include personalized marketing, dynamic pricing, advertising methods, products and price information, e-commerce, mass advertising versus personalized marketing, word-of-mouth advertising, globalization, and user generated products. Marketers should review and adapt their marketing plans to account for each of these factors. Companies that integrate the Internet and technologies into current marketing plans will achieve competitive advantage. Personalized Marketing As the cost of technology for personalized marketing decreases, companies have the opportunity to develop and implement personalized marketing strategies. Companies can individually tailor the marketing mix down to the smallest target segment, the individual (Arora et al., 2008). Personalized marketing is a strategy and differentiator within competitive industries, such as banking, apparel, and restaurants (Arora et al., 2008). Personalized marketing will be profitable when the marketer generates more sales for customer engagement than the implementation costs (Vesanen, 2007). Before implementing personalized marketing strategies, marketers should weigh the benefits and costs for the company and its consumers. The company benefits of personalized marketing are higher product price, better response rates, customer loyalty, customer satisfaction, and product differentiation (Arora et al., 2008; Vesanen, 2007). When benefits exceed costs, personalization creates value for the customer (Vesanen, 2007). Marketers identify these value opportunities to engage with the consumers MARKETING IN THE 21ST CENTURY 4 through the preferred marketing channel using the ideal message. Consumers benefit from the personalized marketing strategies with products chosen based on past purchases for preference match, individualized communications, and the targeted experience (Vesanen, 2007). Company costs to implement personalized marketing strategies are the technology investments, education of technology and new processes, risk of irritating customers, and brand conflict (Vesanen, 2007). Since personalization means something different to every business, each company will determine its best personalization strategy, which can be from promotion, product or service, price, delivery, or any combination (Vesanen, 2007). Potential costs for consumers are privacy risks, spam risks, spent time, extra fees, and waiting times (Vesanen, 2007). Two companies overcame these risks to their competitive advantage. Portola Plaza Hotel and Amazon.com utilized personalized marketing to increase revenue and greater customer satisfaction (Arora et al., 2008). Portola Plaza Hotel sent personalized email invitations to loyal customers, which resulted in increased revenue, profits, customer satisfaction, and customer retention (Arora et al., 2008). Amazon.com recommends books and music to consumers (Arora et al., 2008). These examples illustrate how companies use technology to create individualized customer service experiences. Dynamic Pricing A second factor of future changes in the marketing mix variables is pricing. Dynamic pricing is the adjustment of prices based on supply and demand conditions (Garbarino & Lee, 2003). The available pricing information to consumers places pricing strategy as a critical factor in the marketing mix (Garbarino & Lee, 2003). When considering pricing strategies, companies MARKETING IN THE 21ST CENTURY 5 need to consider the information available to consumers, socially accepted circumstances of dynamic pricing, and consumer trust based on individual dynamic pricing. Company pricing processes and consumer reactions are changing because of the internet and technology. Companies use technology and the Internet to freely change prices at the individual-level for profitability and capture consumer surplus (Garbarino & Lee, 2003). With the Internet, consumers have transparent pricing information and can spot price differences easily (Garbarino & Lee, 2003). Price comparison websites, blog reviews, and smartphone applications allow consumers to price compare (Hong, 2012). Companies must carefully balance this shift in knowledge from company control to complete consumer accessibility to mitigate any negative publicity. Consumers allow for price discriminations in certain circumstances, such as special group pricing, valued-customer discounts, and geographic price difference at an aggregate marketsegment level (Garbarino & Lee, 2003). However, price discrimination can turn to distrust and outweigh expected profits in other circumstances (Garbarino & Lee, 2003). In 2000, Amazon consumers reacted negatively upon learning the company engaged in dynamic pricing (Garbarino & Lee, 2003). Irate consumers and bad publicity led to Amazon removing dynamic pricing (Garbarino & Lee, 2003). To maintain consumer trust, companies can consider dynamic pricing strategies in price insensitive markets, new product launches, and economic downturns. Consumer may allow dynamic pricing in markets where consumers are not price sensitive (Garbarino & Lee, 2003). Consumers allow for dynamic pricing in new product launches, as companies may have not MARKETING IN THE 21ST CENTURY 6 priced products appropriately (Calantone & Di Benedetto, 2007). Finally, companies should lower overall prices to budget-constrained consumers during a recession (Hong, 2012). Advertising Methods The advertising methods are the third factor affecting changes to the marketing mix variables. New media channels are replacing traditional marketing methods (Griffiths & Howard, 2008). The Internet allows consumers to interact with companies through text, chat, blogs, videos, customer ratings, discussion boards, and social media (Griffiths & Howard, 2008). To react to the increased communications channels with consumers, companies must meet consumers at all communication channels. The new media creates challenges for marketers, as they must extend their brand presence on all new media (Kotler & Keller, 2012). Marketers must learn the technologies, and implement these channels into the marketing plan. Retailers that speak to their customers can maximize the relationship to promote individualized products and services (Griffiths & Howard, 2008). Consumers control their social media habits and their role in the market (Riegner, 2007). Companies can strategically interact directly with individuals through the channels to promote additional products and services with the result of securing lifetime customers. Social media shifts the communication flow from traditional one-way flow to two-way flow (Kotler & Keller, 2012). Social media allows consumers and companies to open dialogues about the brands, prompting companies to embrace the new media channels to engage consumers and build brand loyalty. MARKETING IN THE 21ST CENTURY 7 Product and Price Information The fourth factor in future changes in the marketing mix is the shift of product and price information from companies to consumers. Companies and competitors place information on the internet, flowing to and from consumers. Companies are losing power as it shifts to the consumer (Griffiths & Howard, 2008). Consumers use the Internet to compare product quality and prices easily, shifting the control of information from retailers to consumers (Griffiths & Howard, 2008; Nelson, Cohen, & Rasmussen, 2007). Consumers use Internet searches on products, prices, and benefits before making the purchase (Hong, 2012). Consumers can identify multiple sellers through search engines to locate the lowest prices for goods (Nelson et al., 2007). To create a competitive advantage over competitors, companies need to clearly state product features on the Internet (Griffiths & Howard, 2008). Consumers use the Internet as a research tool in purchase decisions. The future strategy for marketers is to provide adequate product information, benefits, photos, and prices to prompt the consumer search into an immediate sale. E-Commerce Electronic commerce, known as e-commerce, is the fifth marketing mix that will change in the future. E-commerce provides strategic advantages over brick and mortar stores, allows consumers to purchase from the Internet, and extends the consumer base globally. A company’s benefits by adding additional marketing channels, more market coverage, lower channel cost, and customized selling (Kotler & Keller, 2012). MARKETING IN THE 21ST CENTURY 8 The advantages of brick and mortar stores over pure-click retailers are consumers can examine the physical product and private information is more secure (Griffiths & Howard, 2008). Consumers prefer to see the product in person prior to purchasing (Griffiths & Howard, 2008). Brick and mortar stores with online presence can strategize to capture sales by placing kiosks in stores, offering Internet incentives to loyal customers, and creating customer-shopping lists. Companies gain competitive advantage against pure-click competitors by using the same strategy in traditional stores and online to create a seamless brand presence (Griffiths & Howard, 2008). E-commerce allows consumers to purchase products through the Internet, at any location they can login. Mobile commerce is the future of e-commerce where consumers connect to the brands through smartphones (Kotler & Keller, 2012). Companies can use emails, texts, and GPS to drive consumers into physical stores or purchase on smartphones (Kotler & Keller, 2012). Mobile commerce is the next channel that companies should integrate into the current marketing channels. As companies add e-commerce to the marketing mix, marketers define goals for each channel, eliminate dilution and cannibalization, and establish long-term relationships with retailers for highest sales (Kotler & Keller, 2012). The Internet extends the sales market to a global consumer base, no longer restricted to physical stores or country borders. As a result, marketing adaptations include catering to local consumers’ shopping habits, translating the website in multiple languages, and offering more products. A global consumer base provides growth opportunities for companies that can drive traffic to the Internet sites. For example, Coach sells its luxury products via Internet, catalog, and MARKETING IN THE 21ST CENTURY 9 company stores in North America, Japan, Hong Kong, and China (Kotler & Keller, 2012). Coach expands its global reach as consumers with Internet access can now shop the luxury brand. Mass Advertising versus Personalized Marketing The sixth marketing issue to consider is mass advertising versus personalized marketing. An analysis of mass marketing and personalized marketing reveals both advantages and disadvantages for companies. The advantages of mass advertising are building brand preference and awareness, educating consumers on product benefits, and shifting consumers’ perceptions about the product (Havlena et al., 2007; Kotler & Keller, 2012;). Another advantage of mass media is the stimulation of personal communication (Kotler & Keller, 2012). For example, consumers can view a popular television commercial, extend its viewership by watching repeatedly on YouTube, and share with friends on Facebook. The disadvantages of mass media are the rising advertising costs and the broad market reach. Marketing executives spent 40% of their advertising dollars on television in 2007 even though recall was only 6% (Nunes & Merrihue, 2007). Online companies, such as 1800Flowers.com Inc., spend marketing dollars on mass media (Nunes & Merrihue, 2007). Marketers use multiple medium to convey messages, reinforce brands, and engage consumers (Havlena, Cardarelli, & deMontigny, 2007). Despite the disadvantages of mass media, companies use the broad reach of mass media to drive consumers to the Internet and solidify brand awareness and sales. The advantages of personal marketing are its effectiveness in reaching the target market and the increasing consumer time spent on the Internet. Personal communication is more MARKETING IN THE 21ST CENTURY 10 effective than mass communication since consumers inundated with advertising block out nonrelevant communications (Havlena et al., 2007; Kotler & Keller, 2012). Personalized marketing targets the product message to each consumer by providing relevant information. Consumers spend 25% of media time on the Internet (Kotler & Keller, 2012). As a dominant medium, companies should use the Internet to personalize marketing messages through the dominant channel where the consumer spends time. The disadvantages of personalized marketing are the rising advertising costs, upfront investment in technology, software applications, and time to personalize marketing messages (Nunes & Merrihue, 2007). Search engine companies charged 13% for cost per click advertising from 2005 to 2006 (Nunes & Merrihue, 2007). Personalized marketing is no longer the cheap advertising channel; however, the Internet still provides cost-effective potential for effective personalized marketing. Companies should determine an overall marketing strategy and determine whether mass advertising, personalized marketing, or a combination will reach the target market with the fewest advertising dollars. Word-of-Mouth Advertising Word-of-mouth advertising is the seventh factor changing the future marketing mix. Companies can use the Internet as a word-of-mouth (WOM) advertising medium to influence personal relationships in a timely manner (Kotler & Keller, 2012). WOM is an effective channel for companies to reach consumers, whether through social media, online communities and forums, and blogs (Kotler & Keller, 2012). WOM is the most important factor in the consumer decision-making process because trust exists in the personal relationships between the two MARKETING IN THE 21ST CENTURY 11 parties (Keller, 2007). Consumers trust friends over companies. WOM’s potential to create consumer engagement outranks other forms of advertising (Keller, 2007). Companies can use WOM advertising to strengthen relationships with current customers, release new products, and reach new consumers through social media. Examples include increasing followers on Facebook, email marketing, and Twitter through positive interactions. Marketers can shape and control the advertising message to its target market to influence WOM conversations (Keller, 2007). WOM can positively influences’ consumers’ attitudes and brand preference as consumers are more trustworthy that companies (Shang, Chen, & Liao, 2006). Consumers question the source for trustworthiness, credibility and likability (Kotler & Keller, 2012). However, trusted companies use WOM advertising to generate conversation, engage with consumers, and drive purchase intent (Keller, 2007). Trusted companies control the conversations about their brands and companies in social media where consumers typically have control. For example, companies ask consumers to create and post homemade commercials on YouTube. Companies can add WOM advertising as an effective marketing channel to the traditional marketing channels to increase overall market saturation. Globalization Companies should consider global expansion for strategic marketing reasons as an increased consumer base, innovative product development, and stronger brand loyalty. One appealing target segment if the bottom-of-the-pyramid (BOP) market segment for its growth and market potential. MARKETING IN THE 21ST CENTURY 12 If a company reaches saturation in the domestic market, then the company should consider expansion into a neighboring country with similar cultural, economic, and social factors (Douglas & Craig, 2011). Emerging markets such as India, China, and Brazil are ideal since the growth rates are faster than the U.S. (Douglas & Craig, 2011). Product innovation may be necessary to adapt to local preferences such as colors, scents, and flavors (Kotler & Keller, 2012). Traditional marketing communications channels may not be effective, and require adaptation to the local buyer (Majumder, 2012). Therefore, marketers should create a broader marketing strategy to include a global focus (Douglas & Craig, 2011). Marketers can create strong brand loyalty within a country through manufacturing within the new country. Besides gaining access to the foreign market, global companies manufacture products locally at lower costs and creating goodwill through job creation (Pecotich & Ward, 2007). Consumers’ overall preference for domestic products is greater than imported products, (Pecotich & Ward, 2007). Job creation in local communities increases company and brand loyalty. One possible target segment to consider is the BOP market. The BOP market may be dismissed due to low income and marketing and distribution challenges (Majumder, 2012). However, this market is important for long-term growth since 90% of future population growth will occur in less developed countries (Kotler & Keller, 2012). In 2002, the spending power of the 20 largest emerging economies was $1.7 trillion (Anderson & Billou, 2007). BOP consumers are brand conscious, value-driven, and innovative, and have low disposable incomes with daily salaries (Anderson & Billou, 2007; Majumder, 2012). Companies can tap into the BOP market MARKETING IN THE 21ST CENTURY 13 by selling products in smaller packages, where consumers are in the small towns, at lower costs for future growth. The companies that can execute marketing strategies in the emerging markets will have competitive advantage over other similar companies. User Generated Products Companies must contend with user-generated content by incorporating customers into the new product development process. Users are creating content and products without manufacturing assistance to serve their own needs. Lead users of the innovation develop their own solutions to problems before companies can create products to solve the problem (von Hippel, 2007). Companies can capture this market by selling adjunct products and support services (von Hippel, 2007). In reaction to the user-generated products and services, companies can sponsor think tanks, events, conferences that gather the target market. Companies can enhance the user-generated products and services and make them better before selling commercially. Companies can mass customize products more efficiently than individual users (von Hippel, 2007). As a result, companies can mainstream the product to create more sales, reach a broader audience, and build a customer base. The Internet allows consumers to create virtual communities to seek product information, exchange information, and learn from other consumers (Shang, Chen, & Liao, 2006). Companies should manage the advantages and disadvantages of these communities as part of the long-term marketing plan. The advantages of consumer communities are sharing information and feelings about the brand, continue company traditions and rituals, and provide assistance and credibility about the brand (Shang, Chen, & Liao, 2006). Consumers can share easily and often MARKETING IN THE 21ST CENTURY 14 their opinions on social media channels such as LinkedIn, Facebook, Twitter, and Instagram. Therefore, companies can use these consumer communities to their advantage by engaging consumers through social media and creating contests for brand loyalists. The disadvantages of consumer communities are lack of control over consumer content on the Internet, and the instant information dissemination. Consumer communities threaten companies due to lack of control of negative messages from unsatisfied customers (Shang, Chen, & Liao, 2006). Companies must manage each channel daily to react to consumers, and shift control back to the companies. Conclusion The marketing mix has changed and will continue to change as companies and consumers use the Internet. There are nine factors that affect the future marketing mix: personalized marketing, dynamic pricing, advertising methods, products and price information, e-commerce, mass advertising versus personalized marketing, word-of-mouth advertising, globalization, and user generated products. Consumers have more power to purchase products when they want, where they want, and state their opinions. Companies that integrate these factors into their marketing mix can create competitive advantage to ensure long-term growth strategies. MARKETING IN THE 21ST CENTURY 15 References Anderson, J., & Billou, N. (2007). 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