Marketing Convergence Across Digital and Physical, Anthony Mullen
Convergence marketing
description
Transcript of Convergence marketing
1
CONVERGENCE MARKETING
Created by
Erfi IlyasNPM 2004812002
PROGRAM DOKTOR ILMU EKONOMI
UNIVERSITAS KATOLIK PARAHYANGAN
2
CONVERGENCE MARKETING
Jerry WindHe was an early champion of digital marketing,
highlighting the revolutionary changes of the internet on consumer behavior, marketing and business strategy
He urged executives to consider the potential of this new technology to transform their businesses
Vijay MahajanHe point out that not everything had changed, and that
many aspects of consumer behavior and marketing remained the same. He urged the executives to consider
enduring human characteristic that would continue to shape marketing and business strategy
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THE HYBRID CENTAUR
TraditionalConsumer
CyberConsumer
Centaur
Offline Online
Vijay Mahajan Jerry Wind
HybridConsumer
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What is Converging
Convergence, means more than the
fusion of different technologies
(television, computers, wireless, PDAs)
or combination of channels.
More basic convergence within the consumer-
the new possibilities created by technology and
the enduring behaviors of human being
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AREA OF CONVERGENCE
Technology
Company
Consumers
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FRAMEWORK FOR THE BOOK
Understan-dingthe Centaur
Navigating
The 5 Cs of
Convergence
Mastering
Convergence
Marketing
Transforming
the organiza-
tion and
implementing
the strategy
Running with theCentaur
Understanding
the changing
Centaurs and
their need
Identify the need
of the Centaur
that can be met
by new
technology in
unique or
different way
Generate
innovative
convergence
marketing and
business
strategy
C-transform the
organization to
support the
convergence
strategies and
develop an
implementation
plan
Create value for
shareholders
and other stake-
holders and
prepare for the
children of the
centaurs
Part 1 (1-2) Part 2 (3-7) Part 3 (8-9) Part 4 (10-11) Conclusion (12)
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PART 1
UNDERSTANDING
THE CENTAUR
1. THE CENTAUR AWAKENS
2. THE REALITY OF THE CENTAUR
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CHALLENGE OF THE EMERGING HYBRID CONSUMER
The Demand of the CentaurIllustrative Convergence
Challenges for Marketing
Desire for uniqueness,
personalization, and
Customization
Sally buys customized product
from Reflect.com and a
customized care package on
Reapod, yet also purchases off-
the-shelf products in Nordstrom’s
and the grocery store
Customerization
How can company offer the right
mix of standard and customized
products? How do they need to
rethink their approaches to new
product development? How can
companies offer the right balance
of personalization and mass
marketing message?
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CHALLENGE OF THE EMERGING HYBRID CONSUMER
The Demand of the CentaurIllustrative Convergence
Challenges for Marketing
Desire for social
interaction
Sally enjoys meeting friends in the
store – getting book
recommendations from her
physical community – but goes to
iVillage to discuss her medical
problems with experts and other
woman
Virtual communities
How can companies combine real
world communities and virtual
communities in a way that leads
to profit? Should companies
create their own communities?
Given that consumers are
participating in a number of
communities already, how can
companies tap into them
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CHALLENGE OF THE EMERGING HYBRID CONSUMER
The Demand of the CentaurIllustrative Convergence
Challenges for Marketing
Desire for convenience
and channel options
Sally wants to walk in or log in,
interacting where and when she
desire, anytime and anyplace.
She wants the company to be
accessible and responsive – on
her schedule not the company’s.
Channel options
How can companies combine
multiple channel into a seamless
interface? How can they
anticipate how consumers will
interact with them? How can they
add new channels to existing
systems and assure high levels of
service and quality across phone,
click and visit?
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CHALLENGE OF THE EMERGING HYBRID CONSUMER
The Demand of the CentaurIllustrative Convergence
Challenges for Marketing
Desire for value
Sally mix purchases in physical
store with online markets
throughout the day. She buys
shoes at Nordstrom online and
returns them in a physical store.
In purchasing her airline tickets,
she actively names her own price
but then buys at discount, and
she also purchase through
auction on eBay.
Competitive value
equation
How do companies need to
reshape their pricing strategies in
an environment in which
customers have many more
pricing options (auction, name
your own price, etc)? How can
company address the higher
expectations of customers for
value and service? How do
information, education, and
entertainment contribute to value
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CHALLENGE OF THE EMERGING HYBRID CONSUMER
The Demand of the CentaurIllustrative Convergence
Challenges for Marketing
Desire to make better
decisions
Sally goes to MySom to compare
prices for a digital photo frame,
yet Hotwire and Priceline keep
their sophisticated pricing tools
hidden from the customer.
Choice tools
Given that customer have access
to more search engines and
decision making tools, how do
companies need to transform their
strategies? How can companies
put more tools into the hand of
customers, to simplify their lives,
without giving away their business
or driving customers to rivals?
How can they best balance
company-initiated messages with
unbiased information?
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• Myth 1: Only the elite want customization
How can you expand the customization of your products,
services, marketing message, and experience? Do your
customer want to customization today? Will they in the
future?
• Myth 2: Price is the bait set by the seller
How can you use new pricing models to attract and retain
customers while increasing profits?
MYTHS OF THE TRADITIONAL CONSUMER
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• Myth 3: The consumer is on the couch
How can you increase your interaction with proactive
customer
• Myth 4: Location, location, location
How can you rethink your location so that you can meet
customers wherever they want to interact with company?
MYTHS OF THE TRADITIONAL CONSUMER
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• Myth 5: Consumers are islands
How can you use social interactions and communities online and offline to benefit your business
• Myth 6: Consumers will accept what you tell them
Can you provide decision making tools and information to customer in a way that benefits your business?
MYTHS OF THE TRADITIONAL CONSUMER
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• Myth 1: People don’t want to be troubled with shopping
How can you use the fact that people like to shop in designing your business? When do they like to shop in stores and when do they prefer to shop online.
• Myth 2: Efficiency is all that matters
Is your online business model built around transaction efficiency? When do your potential customers care about transaction efficiency? When are they willing to tradeoff efficiency for other benefits?
MYTHS OF THE CYBERCONSUMER
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• Myth 3: Consumer want to get the best price
What price are your customers willing to accept? How can
you offer a fair price without offering the lowest price? How
important is it to your customers to get the cheapest price?
• Myth 4: Consumer are either online or offline
How can you best combine online and offline channels?
MYTHS OF THE CYBERCONSUMER
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• Myth 5: Ease of visiting stores will lead to more purchasing
How can you make your online offering more sticky to turn browsers into buyers.
• Myth 6: The internet is inherently fascinating and attractive.
How can you keep your online offerings new and interesting? How much of internet in your online business is driven by novelty and how much will endure when the hype has passed? With the rise of the internet, how do your offline offerings need to change?
MYTHS OF THE CYBERCONSUMER
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• Self affirmation
• Symbolic meaning
• Scripts for shopping
• Experience
• Social influence
The Human Motivations
How do human motivation such as self-affirmation,
symbolism, buying scripts, experience, and social
influence affect the way consumers approach your
products and services?
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Putting the Consumer at the Center
Consumer
Who are the
Centaurs and
What do they
need
Offline Online
What product & service solutions can
meet these needs?
What business and marketing strategies
are needed to develop these solutions
What organizational architecture and
process are needed to support these strategies?
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PART 2
NAVIGATING THE FIVE Cs
OF CONVERGENCE
1. CONVERGING ON CUSTOMERIZATION
2. CONVERGING ON COMMUNITIES
3. CONVERGING ON CHANNELS
4. CONVERGING ON COMPETITIVE VALUE
5. CONVERGING ON CHOICE
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NAVIGATING THE FIVE Cs OF CONVERGENCE
Technology
Company
Consumers
• Customerization
• Community
• Channels
• Competitive value
• Choice tools
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1. Converging on Customerization
Companies can offer customized product, marketing
message, and experiences, and this combination,
referred to as “customerization,” is transforming
interaction with customer. Yet, with all the options in
the world, hybrid consumers in some situations still
buy standardized products off the shelf and respond to
mass market message
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Converging on Customerization
CustomizedOperations
CustomizedMarketing
The concept of “customerization” goes beyond simply
customizing the operations to customize both
manufacturing and marketing interaction
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Customization options
Segment of one
PersonalizationCustomerization
StandardizationMass
Customization
Operational Customization
Mark
etin
g
Cu
sto
miz
atio
n
Low
Lo
wH
igh
High
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The Shift of Customerization
Old Model-Mass and
Segmented Marketing
New Model-Marketing
Customerization
Relationship with
customers
Customer is passive participation in the exchange
Customer is an active co-producer
Customer Needs Articulated Articulated and unarticulated
Segmentation Mass market & target segments
Customization segments and “segments of one”
Product and service offerings
Line extensions and modification
Customized products, services, and marketing
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The Shift of Customerization
(extended)Old Model-Mass and
Segmented Marketing
New Model-Marketing
Customerization
New Product
Development
Marketing and R&D drive new product development
Customer interactions drive new product development, and R&D focuses on developing the platforms that allow customerization
Communication Advertising and PR Integrated, interactive, and customized marketing communication, education, and entertainment
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The Shift of Customerization
(extended)Old Model-Mass and
Segmented Marketing
New Model-Marketing
Customerization
Distribution Traditional retailing and direct marketing
Direct (online) distribution and rise of third party logistics services
Branding Traditional branding & co-branding
The customer’s name as the brand: My Brand or Brand 4 ME
Basis of competitive advantage
Marketing power Marketing finesse and “capturing” the customer as “partner” while integrating marketing, operations, R&D, and information
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• Fitting in with the crowd• Experience• The need for fit• Uncertainty• The complexity of choice• Unarticulated needs• The right to change one’s mind• Integration• Repair and reselling
Why the centaur sometimes Prefers standardization
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• Integrate online and offline customization• Ask the next question• Invite the customer into the lab• Use the customized choices to inform mass
production• Understand the value chain of your brand• Understand your segments• Increase digital content• Grab the low-hanging fruit of superficial
customization
Convergence Strategies for Customerization and Standardization
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• Keep standardized offerings a click or step away
• Design for future customization
• Limit complexity by offering the right selection
• Personalize messages and products based on careful observation
• Simplify customerization
• Understand the level of attention customers want
• Create and integrated view of the customer
Convergence Strategies for Customerization and Standardization(extended)
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2. Converging on Communities
The emergence of virtual community, knitting together
people with common interests from around the globe,
is one of the most significant innovations of the
interconnected world. But these virtual communities
have to be considered in broader context.
How these virtual communities converge with physical
communities and how the economic and social
purpose of communities can be drawn together.
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Illustrative Characteristics of Online and Offline Communities
Offline Online
Geographical
scope
Geographically bound Boundless and global
Temporal scope Specific meeting times Anytime
Reach ability Expensive and complex Cheap and simple
Speed of communication
Slow Instantaneous
Ability to change Difficult Easy
Potential for engagement
Somewhat limited Greater
Identity & Anonymity
More fixed More fluid and anonymous
Experience Face to face virtual
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Converging on Communities
Virtual Physical
Social Economic
Channel
Purpose
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Converging of Physical andVirtual Communities
Physical Communities
VirtualCommunities
Gathering Lost Tribes
Parallel
Universe
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• Gather lost tribes
• Create parallel universes
• Engaged in cross-pollination
• Take advantage of strengths and weaknesses of virtual and physical
Strategies for Convergence Physical andVirtual Communities
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• Embed the economic in the social
• Tap into the energy of the community through community generated content
• Create customer communities to enhance customer service and product development
• Build bridges to existing communities
• Sustain trust
• Balance control with organic growth
• Use communities for customer feedback
Strategies for Social and Economic Convergence
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• Should the company create a new community or tap into existing communities?
• If the company taps into an existing community, it needs to consider how receptive the community will be
• If the company creates its own community, should it do so as a joint venture with another organization?
• What type of community should be created• Finally, how does this design community relate
to the company’s business and marketing strategies?
Designing Communities
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3. Converging on Channels
The power of the internet is not in transaction that
begin and end online, but in customer interactions that
run across multiple channels, from online to offline and
back
How companies can use convergence strategies to
present a unified face to customers and develop
coherent branding and internal structures
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Converging on Channels
Niche/Segmented
Consistent
Integrated/Owned
Separated/Outsourced
Customer
experience
Internal Structure
and Branding
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Illustrative Comparison of Strengths and Weaknesses of Online and Offline Worlds
Offline Online
Access Limited geography and often time
Anytime, anywhere
Search Browsing is more holistic and experiential, but individual search is difficult
Simple to find specific information, information rich browsing
Selection Limited to store size and design
Virtually unlimited
Experience Tactile, directed to all senses
Intellectual, but becoming more tactile
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Illustrative Comparison of Strengths and Weaknesses of Online and Offline Worlds
Offline Online
Company cost of interaction
High for routine interactions, but some time lower for exceptions
Low for routine interactions, but high for exception
Customization Difficult and time consuming
Simple
Delivery/Returns for non digital product
Simple and quick after the decision to purchase is made, but still require trip to a store
Complex, involving delivery channels
Delivery/Return of digital products
More complex, requiring a trip to store
Easy
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Illustrative Comparison of Strengths and Weaknesses of Online and Offline Worlds
Offline Online
Time for first purchase
Very slow Slow
Time for repeat
purchasing
Slow Very fast
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• Give customers the best of both world
• Let customer decide how they want to interact
• Understand the context and timing for interaction
• Create seamless interface between online and offline experience
• Treat consumers the same across channels
• Incorporate digital interfaces into the offline experience
Strategies for Integrating Customer Experience
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• Develop the right brand or set of brands• Leverage the assets of existing business• Manage offline/online channel conflict• Use partnership and alliance to complement the
weaknesses• Create the right degree of separation• Create integrated information systems• Create integrated supply chains and logistics• Manage the path of evolution
Strategies for Integrating Structure and Branding Across Channel
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4. Converging on Competitive Value
The value equation has become much more complex
in a convergent world. In addition to traditional seller-
initiated pricing, companies also have developed a
wide range of buyer-initiated pricing mechanism.
New source of value are being combined with
traditional sources, and experience is becoming
increasingly important in the overall value equation
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• Product/Service Offering• Pricing• Service• Brand• Speed• Convenience• Novelty• Peace of mind• Experience and Entertainment• Information in Context• Education and Personal Growth• Control• Social/Psychological Rewards
The New Value Equation
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Illustrative Shift in Sources of Value
Source of
ValueOffline Online
Product/Service
Offering
Physical products and face-to-face services
Digital products and online services can be delivered more efficiently
Price Fixed pricing models with discounting
Dynamic pricing models
Service Traditional before-sale, during-sale and after-sale service that required real people
Automated service allows customers 24/7 access while reducing cost
Brand Brand adds value by signaling status or product quality
Branding helps to increase trust in a virtual world and speed the ability to make decisions
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Illustrative Shift in Sources of Value
Source of
ValueOffline Online
Speed Limited by physical value chain
Can deliver digital products in real time but physical products face the same challenges
Convenience Fixed locations, business hour
Anytime, anywhere
Novelty Difficult to make new Easy to make new
Peace of mind Physical relationship can contribute to peace of mind (eye contact, handshakes)
Virtual relationship may make trust more important and harder to achieve
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Illustrative Shift in Sources of Value
Source of
ValueOffline Online
Experience and
Entertainment
Companies offer real experience, but have limited opportunities for entertainment
Virtual experience offer tremendous opportunities for interactive entertainment and they are becoming increasingly realistic
Information in context
Off-side information is searched for and obtained, but often out of context
Information can be provided within the context of purchase decision
Education and personal growth
Costly to provide Inexpensive, accessible and more effective e-learning
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Illustrative Shift in Sources of Value
Source of
ValueOffline Online
Control Customer has limited control or control is expensive (personal tailoring)
Through customization and personalization, customer has control over product and service offering
Social/Psychological
Personal interaction and other traditional rewards of offline activities
Enhance by whole new range of rewards through online interactions and empowerment through technology
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• Increase novelty and entertainment value
• Create experiences that reinforce the brand
• Create pathways to entertainment that run from offline to online and back
• Integrate pre- and post-purchase experience
• Invite spectators to play
• Move more of the experience online
• Provide education
Convergence of Product/ServiceOffering and Experience
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• Flexible seller-initiated pricing
How can you increase the flexibility of your pricing online and offline
• Buyer-Initiated Pricing
Name-your-own price
Auctions
Aggregating Buying Power
Fire sales
Barter
Risk/Reward Sharing
Convergence of Seller-Initiated andBuyer-Initiated Pricing
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• Offer multiple pricing options to the same customer
• Create consistent value propositions online and offline
• Recognize that people look for more than price and product
• Be aware of how dynamic pricing strategies affect other drivers of value
• Offer a limited version for free• Offer bundling of online and offline products
Convergent Pricing Strategies
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5. Converging on Choice
Information asymmetries have traditionally been a
source of value for companies, and decision making
tools were jealously guarded. But now, better tools for
search, decision making, and life management are in
the hands of customers.
How companies need to combine human expert and
decision models, third party and company information,
and company push with customer pull in giving
consumer tools to make better decision
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Illustrative Search Engine, Decision Making,Life Management Tools
Search Engines www.altavista.comwww.infoseek.comwww.hotbot.comwww.google.comwww.ask.com
Decision ToolsComparison engines
Customer evaluationsExpert evaluation
www.mysimon.comwww.dealtime.comwww.endmund.comwww.expedia.comwww.priceSCAN.comwww.bizrate.comwww.consumerreports.com
Life Management Tools Microsoft OfficeMy.Yahoo.comEdiets.com
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• Use virtual advisors and agent to increase trust online
• Take the tools to the point of decision
• Charge for advice and decision support
• Look for ways to put value-added tools into the hands of consumers
• Increase the expertise of human experts
Convergence Strategies for Combining Decision-Making Tools and Human Expertise
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• Be completely unbiased when you can
• Provide both company and competitor information
• Offer third-party evaluation
• Differentiate
• Make unbiased information a selling point
• If not, make your biases clear
Convergence Strategies for Combining Third-Party and Company Information
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• Recognize the limits of marketing messages
• Build credibility by creating a brand that consumers will recognize and value
• Focus marketing message on the intangibles and affect
Convergence Strategies for Combining Company Push and Consumer Pull
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Terimakasih
Erfi IlyasNPM 2004812002