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Marketing For The New Age.
By Dietmar Kielnhofer Ph.D.
Sunday, 29th April 2012
 
Does Marketing in its present application become obsolete or are we just transcending to a different, more complex business world where distribution and access to information is taken for granted! 

In times of economic uncertainty the question that inevitably arises is which market segment has the strongest growth AND profit potential. Shareholders and directors indisputably ask the question that is on everybody's mind: how do we expand our business in a stagnant economy and how relevant is our business model?

The hospitality industry has had to redefine its industry from 20 years ago as new entrants are competing in marketing segments that they thought were exclusively reserved for hotel operators – a rather parochial view at the time but not unusual.

Growth patterns showed only an upward trajectory when hotel operators had better clarity with what their industry segments were and who were their competitors. The new marketing mantra becomes more customer centric and lifestyle driven instead of product driven.

Satisfying the emotional needs of customers and engaging designers to create a unique product became thus the differentiating factor that galvanized growth and lead to the birth of lifestyle companies.

Dietmar Kielnhofer, Ho Chi Minh City

MARKETING FOR A NEW BUSINESS ERA

How The Internet Changed Buying Behavior

The function of marketing as we know it has not changed dramatically over the last 20 years. Identifying new consumer markets, developing product offerings and brainstorming about product extensions, spotting trends before anybody else spots them, determining the right price points, advertising a product's key features and public relations have been around for 60 years and will still be around in another 100 years.

The same, long-established marketing techniques apply to segmenting the market; targeting the right customers, smart packaging, designing a communications strategy and positioning the product. The outcome of a successful marketing campaign or product launch always begins with having access to excellent market research. But this is where the similarities in the basic application end.

The internet revolutionized marketing, especially distribution channels and the way we communicate with consumers and how research is being conducted, in particular the latter. Then there was the age of mass marketing - quantity over quality and specifics. In the last decade marketing has gone high tech and become a lot more sophisticated. Competitive advantage rests in originality, the speed of innovation and how effective we communicate to our target market.

Conventional versus New Age Marketing

First there was word of mouth advertising (still very powerful), the radio, followed by TV ad's and now it is a myriad of electronic channels that broadcast 24/7. With 24 hour TV network, the internet and full time bloggers are living in the ultimate shoppers and consumer's paradise (or nightmare, depending on one's viewpoint).

In this media cyber world, buyers get bombarded with advertisements that are as subtle and permeating as water boarding. Whilst in the past companies depended on old-fashioned print material to showcase their product features, an increasing emphasis has shifted to websites and consumer blogs where a product's features are displayed and advertised - very often with 360 degree views and descriptions that conventional print material can never achieve.

Opinion makers (and shapers) like Oprah Winfrey can have significant impact on future purchasing behaviors; their opinion can make or break a product. It is a benign interpretation of George Orwell's classic novel 1984 where Big Brother sees and knows everything – commercialization and timely access to information rules.

Customers are not as gullible as guile marketers tell us or led us to believe. Prior to making a purchasing decision consumers consult independent websites, bloggers or trade publications to obtain information for what they deem relevant to their needs and wants; I refer to this as objective information gathering unencumbered by third parties.

So are we seeing the death of mass marketing, characterized by cheap leaflets and flyers clogging our inbox with spam i.e. Nigerian money scams or buying generic drugs over the internet?  Is it the beginning of niche marketing or do we notice a subtle adaptation of new technology simply not available before? Or do we experience a change in general consumer trends and behavior? Are we as consumers, finally adapting to the wired (technological) world?

There is nothing new about niche marketing, it was always in existence but it reached new levels with younger consumers who grew up with the internet and felt comfortable with this medium. Consumers became more wary and suspect of what slick marketers tell them; a sort of informational overload. Don't trust "Big Brother", only believe and trust what you have researched yourself. Generation Y, defined as people born between 1981 and 2000, don't know a life without computers and the internet; it might represent a utopian life style of totalitarianism for older generations who grew up without computers, but for the young generation it is the new norm.

With new internet savvy customer's, emphasis tends to be more on style and show than substance and functionality. Consequently, search engine optimization is absolutely imperative to a successful and sustainable cyber marketing strategy.

Anachronistic marketing vernacular stipulates that the product takes center stage. Marketing is as much about relationship building, cultivating customers and determining their value as it is about managing distribution channels and sales optimization. There is nothing wrong with this notion, except that demographics are changing and the corresponding consumer behavior has changed with it.

This young generation places a different set of values on the product than their parents. Without compelling reasons, brand loyalty loses its attractiveness in a wired world, especially for Generation Y. Their value proposition is diametrically opposed to their parent's value expectations - namely consistency and reliability. So how do we adopt to this ever changing environment without losing sight of what is really important? Are we flexible (and mentally agile) enough to change strategies whenever consumer trends change or new technology appears on the horizon? Well the answer is simple. We better be because our competitors certainly will.

When Amazon launched its hugely successful Kindle electronic reader it not only revolutionized the way we read but also how we purchase, read and store books / information. Not to be outdone, Barns & Noble which until then relied on its traditional business models of selling books in brick and mortar shops, came up with its own innovation; the Nook. And this year apple raised the ante again by launching its ipad. Sony is following suit and so are others who all want a part of the lucrative electronic reader market. Marketing is as much about invention and innovations as it is about selling goods at a profitable target market.

In a classical "pull strategy" the consumer demands the product and marketers pull it through the various delivery channels with corresponding advertising and promotional strategies that entice the consumer to purchase the product or service. Apple computer takes the pull strategy to new levels by awakening a "latent demand" that the consumer did not know he even had, thus creating the hype for apple products as a MUST HAVE product a vital part of the IN-CROWD. It sold over million pieces of its ipad since it was launched.

A phenomenal number bearing in mind one year ago the ipad did not even exist and consumer did not know they needed it. As marketers become more savvy, pull demand will be the dominant channel distribution for customers of choice as the need for a product has been created prior to the customer's demands. Hotel companies design cool looking websites with user-friendly booking interfaces in order to entice the customer to book directly instead of going to commission driven third party online travel agents.

On the other side of the distribution spectrum is the push strategy.  Here the product is pushed towards the buyer through the distribution channels. Push marketing is where the advertising and promotional strategies are designed to entice the consumer in to buying a product thus creating demand.

The downside with this strategy, is despite focus groups and beta testing and extensive marketing research, the buyer may not even want the product. High tech and electronic companies fall victim to this strategy where top management is heavily influenced through  R&D and engineers instead of marketers.

Marketing and Content: Information and Distribution for a New Generation

Instead of having sales managers shouldn't we hire sales consultants? Who determines what the intricate needs of the customers are and how to satisfy these needs?

Sales manager's performance metrics were traditionally based on achieved unit sold and revenue per consumer in a certain market segment versus a predetermined target market. Would it not make sense to measure the long term value of a client versus short term goals? Without falling into clichés, wasn't marketing always destined to meet the needs of the customer or finding solutions to problems?

This might be a philosophical answer but essentially it hits the nail on the head. In future, brand equity will be measured by how customer centric a company is (as opposed to product centric) and how sustainable their business model of generating customer demand is. Market share growth and profitability per account remains an important key metric.

Too often companies measure their performance in pure financial terms and glossy corporate magazines highlight their annual performance mostly in terms of share price valuation, EPS, ROI and other profit measures. Hardly do they use indicators such as guest satisfaction. In a customer centric company (like hospitality organizations) this benchmark will be as closely measured as other financial metrics.

Unlike real estate and IT companies the financial success of hotels depends on their ability to execute service at the highest standards. There is a tendency in particular in the service industry (as opposed to the fast moving consumer goods industry), to measure also the long-term value of an account / client versus short term profit maximization. A yardstick that will be difficult to balance as Wall Street traditionally measures a company's success ratio on its quarterly share price appreciation and not how well it fairs with its key constituents.

The Growth Market

Hotel companies don't excessively promote their product features and location, the differentiating factor is service. Rosewood Hotels, Peninsula and Four Seasons hardly talk about the brand superiority of their guest rooms because that is taken for granted. This form of specialized advertising is targeted towards the sophisticated and cultured customer who wants a personalized product and service away from the mass market. Daimler achieved it with the Maybach car brand.

Bentley and Rolls-Royce do not (overly) advertise their automobile's superior technology and engines performance, instead they stress driving comfort and security - the intangible elements of a brand and clear value differentiator. They evoke emotions and an elitarean image first rather than functionality.

Luxury products, like Patek Philippe, Bvlgari and Tiffany jewelry and silk Hermès scarves for instance sell a sophisticated understatement that is difficult to emulate or surpass. In times of economic uncertainty the question that invariably arises is which market segment has the strongest growth AND profit potential.

During an economic crisis where G.D.P. contracts for a prolonged period and organic growth is anemic at best, shareholders and directors inevitably ask the question: how do we expand our business in a shrinking economy. The hotel and hospitality industry had to redefine its industry meaning 20 years ago as new entrants competed in marketing segments what they thought was exclusively reserved for hotel operators – a rather parochial view at the time but not unusual.

These traditional operators thought their business models were based on selling mere accommodation – in simple terms a commodity. It never occurred to (some) of them that the emergence of service apartments changed the competitive landscape as they provided a similar product as hotels.

Growth patterns only changed when hotel operators redefined their industry segments and marketing mantra by becoming more customer centric and lifestyle driven by identifying the intricate needs and preferences of their consumer markets by evoking emotions and experiences that full service apartment operators, cannot or will not duplicate. Satisfying the emotional needs of customers and engaging designers to create a unique product became thus the differentiating factor to galvanize growth.

Another good example of analyzing a growth market is the media and publishing industry.  Traditional publishing houses have to transform themselves from simple media enterprises to an innovative integrated media business; becoming a one stop shop if they want to grow their business and want a larger share of the action. 15 years ago they were content publishing magazines and newspapers and receiving hefty fees for advertising.

With the shift to online content these publishing houses have to change their business model in order to remain profitable and allocate a significant amount of their resources to provide the same information online. 

According to Erling Omvik, the editor of Fredrikstad Blad, a Norwegian newspaper, employees were spending about 90 percent of their time working on the printed newspaper and 10 percent on the on-line version. The paper has transformed its operations, demanding that reporters, advertising representatives and the rest of its 64 employees devote equal time to the print edition, which has a circulation of 21,000 and the web version.

The web site was enhanced with faster, more thorough coverage of local events. The number of daily visitors has risen 27 percent, to 26,000, according to mecum. Advertising revenue in the first half of this year more than doubled from a year earlier, to 812,000 Euros, which required both, a new mind set and skill set amongst its key associates as the (general) media industry transformed itself from a staid business model to a more progressive, customer orientated movement.

The New York Times and Washington Post do not only compete with other established news papers but with Yahoo, Hotmail, AOL and other news portals that provide up to date news. WikiLeaks very clearly illustrates the need for objective and unbiased news where the customers decide what to read and when and where to read it.

In politically oppressed countries like North Korea, Cuba and Saudi Arabia for instance, the internet is only one form to express one's political views and share opinion with other likeminded people. It is also a communication tool to review services, perform research and obtain product specific information.

Information becomes transparent and is swiftly shared by bloggers and micro sites. Social websites like Facebook and MySpace did not exist seven years ago. Facebook targets by year end 500 million members and growing. A popular site of holiday seekers is trip adviser where potential tourists obtain information about the destination they intent to visit.

A hotel service and product consequently becomes transparent in its facilities as the customer's review is more objective than the glossy brochure with eloquent product description. Thanks to Google and other search engines the computer tells us where to find the latest holiday destination, where to find the best hotel deals, which airlines have the best offer and what are the latest must have gadgets. It is not companies and their marketing executives any longer that tell consumers what and where to shop. It is travel blogs and consumer forums were information is shared with everybody who has access to a computer and the Internet. The age of "classified information" is over.

Information and knowledge becomes a public domain - accessible by everybody anytime. A recent example is WikiLeaks as the Pentagon can testify. A website not related to marketing but information sharing, according to Pentagon sources, highly classified information with anybody who is interested with the progress or lack thereof, in Iraq and Afghanistan and other controversial topics.

As a company, having a social media strategy is not a luxury anymore, it is a prerequisite if one is serious targeting potential consumers in an upwardly mobile society. It is part of the integrated function of marketing targeting young affluent customers who are comfortable with the internet and the associated distribution platform.

Monitoring emerging micro trends, whether it is social media, or examining purchasing behavior, or evaluating changing demographics, adapting one's strategy will be the differentiating factors between the winners and losers in this millennium.

About the author:

The author of this article lives in Ho Chi Minh City and works as a General Manager for a multinational company headquartered in New York whose stock is listed on the New York Stock Exchange. He has worked in international companies in senior management positions in Africa, the Middle East, Europe and South East Asia and can be contacted under kielnhofer@yahoo.com.

The thoughts expressed in this article are those of the author only.
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