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Chapter 11
Marketing Strategies for a Digitally Networked
World
I. “Opportunities in the App Economy” gives insights into how apps, bite-sized software
programs that run on a mobile phone or within social networks, have revolutionized every aspect
of a consumer’s life.
II. Strategic Challenges Addressed in Chapter 11
This chapter addresses several timely and important questions that marketing managers in
today’s companies and entrepreneurs must ask:
oDoes every company need a digital or social media strategy?
oDo recent technological advances represent threats or opportunities?
oHow should marketers address the development of strategies to take advantage of—
or defend against—the rapid pace of change inherent in today’s networked world?
oWhat marketing roles can the internet, social networking, and other recent and future
technological developments play, and which of these should significant resources be
allocated?
The chapter begins by reviewing several trends that highlight the growing importance of
social networking and other related digital developments.
oIt then identifies the fundamental principles that underlie today’s digital phenomena
and the key advantages and disadvantages inherent therein, all of which every
marketer must clearly understand.
oNext, it identifies some of the roles that digital networking technologies can
plausibly play in marketing strategies, and articulates a decision framework for
managers to use to decide which of the growing array of such tools their firms should
employ—from web-based marketing research to advertising on mobile phones or
tablets to the delivery of digitized information, goods, and services over the web.
oFinally, it takes a brief look into what it is likely to take to effectively serve the
dot-com and mobile markets of tomorrow.
III. Does Every Company Need a Digital or Social Media Strategy?
The rise of consumers’ adoption of personal devices, home networking and broadband,
combined with the increasing importance of the internet in media, retail, banking, and
health care, means that every consumer-facing industry must better understand the
intricacies of technology adoption and use.
The long-term prospects of doing business in the digitally networked world with both feet
are enormous.
The growing market acceptance of the internet and various digitally networked
technologies—both software and hardware—and the inherent advantages that they bring
suggest that nearly every company needs to examine how it will be affected by and can
take advantage of these developments.
The outcome of such an examination might well be the development of the company’s own
digital or social media strategy.
IV. Threats or Opportunities? The Inherent Advantages and Disadvantages of the Digitally
Networked World for Marketers
Eight potentially attractive elements characterize the advantages of the new internet,
telecommunication, and social networking technologies:
oThe ability to optimize
oThe syndication of information
oThe increasing returns to scale of network products
oThe ability to efficiently personalize and customize market offerings
oThe ability to disintermediate distribution
oGlobal reach
oRound-the-clock access
oThe possibility of instantaneous delivery
Collectively, these elements lie at the heart of viral marketing, wherein those who see
something they like on the web or on their mobile phones share it with others.
A. The Ability to Optimize
In many aspects of marketing practice, it can be difficult for marketers to
understand what is working, what’s not, and why.
The beauty of today’s digital technologies is that everything is measurable.
As the digital landscape changes so fast, new companies with new metrics and
techniques are fueling rapid innovation in the digital marketing and big data arenas,
and attracting considerable amount of venture capital as well.
oThus, while marketers are excited about—and even obsessed with—all the
data that is now available to them, knowing exactly what to do with the data,
and how to make the most of it, is not always clear.
B. The Syndication of Information
Syndication involves the sale of the same good—typically an informational good
—to many customers, who may then combine it with information from other
sources and distribute it.
Though internet marketers rarely use the word syndication to describe what they
do, it lies at the heart of many e-commerce business models.
oInktomi, an originator of syndicated content, provides its search engine
technology to many branded search engine sites.
oYellowBrix, a syndicator, provides news articles in electronic form and
delivers them to other sites, each of which appeals to a different target
audience.
oE*Trade, a distributor of syndicated information, brings together from many
sources content relevant to its investor clientele and packages it in ways
useful to these clients.
Why is syndication important?
oFirst, because it delivers informational goods rather than tangibles, a person
or a company can syndicate the same informational goods or services to an
infinite number of customers with little incremental cost.
oThe process can be automated and digitized, enabling syndicated networks to
be created, expanded, and flexibly adapted more quickly than would be
possible in the physical world.
oBy using technology called Really Simple Syndication (RSS), syndicated
content can be fed to users, having preferences for such content.
C. Increasing Returns to Scale of Network Products
The characteristics of informational networks where a product becomes more
valuable as the number of users increases is often called a positive network effect
or network externality.
Given the growing power of digital marketing, marketing professionals now think
of media as divided into three categories:
oOwned media (such as a brand’s website, blog, or Twitter account)
oPaid media (print and broadcast ads and the like, along with such things as
paid search or online display ads)
oEarned media (places where customers themselves—and their Facebook
pages or tweets, for example—become the medium)
D. The Ability to Efficiently Personalize and Customize Market Offerings
Some companies track the products a customer buys and, using a technology
known as collaborative filtering, are able to compare one customer’s purchases
with those of others and thereby recommend products they think a customer would
like, personalized to the customer’s taste.
oIf the companies do this well, the customer’s purchases go up, and he or she
becomes a happier customer because the company helped him or her find
products that he or she wanted.
When formal decision rules can be identified in the way customers behave (for
example, reminding customers of, or making special offers for, upcoming birthdays
or offering supplementary items based on past purchases), rules-based
personalization can be done.
Mass-customization techniques, which are user-driven instead of marketer-driven,
allow customers to specify the nature of what is offered to them.
In today’s highly competitive markets, personalization and customization can help
build customer loyalty and makes it less likely that customers will switch to other
suppliers.
E. Disintermediation and Restructuring of Distribution Channels
The internet makes it possible for marketers to reach customers directly, without the
expense or complication of distribution channels, a phenomenon known as
disintermediation.
Someone must perform the functions normally performed by channel members—
taking orders, delivering products, collecting payment, etc.—so those who consider
disintermediating their channels and selling direct must determine how they will
perform these functions and must evaluate whether doing so is more effective and
efficient than using intermediaries.
F. Global Reach, 24/7 Access, and Instantaneous Delivery
With the internet, typically there is no extra cost entailed in making information,
digital goods, or services available anywhere one can gain access to the web—
literally, global reach, making the offering available 24 hours per day, seven days
per week, 52 weeks per year and, in some cases, providing instantaneous delivery.
oIn our increasingly time-pressed world, access and service like this can be of
great value to customers.
G. Are These Digital World Fundamentals Opportunities or Threats?
Most marketers can choose to take advantage of one or more of the fundamental
attributes and benefits offered by today’s digital and social networking
technologies.
oTo that extent, these technologies constitute opportunities available to
marketers who employ them.
Viewed differently, however, they raise complex ethical issues, and they also
present potentially significant threats:
oThe fact that the variable cost for syndicated goods approaches zero sounds
good, until one realizes that for most products, price, over the long run, is not
far from variable cost.
oThere are few barriers to entry, and many internet strategies are easily
imitated.
oOther threats include privacy and security issues, which can drive away
customers rather than attract them is they are not handled with care.
H. First-Mover Advantage: Fact or Fiction?
In the internet gold rush in the late 1990s, and again in the later rush to build social
networking sites, the key to success was said to be first-mover advantage.
oThe first firm to establish a significant presence in each market niche would
be the one that succeeded.
Being the first mover can bring some potential advantages, but not all first movers
are able to capitalize on the advantages.
oThus, many are surpassed by later entrants.
V. Developing a Strategy for a Digitally Networked World: A Decision Framework
A. Marketing Applications for a Digitally Networked World
The consumer experience process is a six-stage process that begins with
communicating one’s wants and needs to prospective sellers; moving through the
awareness, purchase, and delivery processes; obtaining any necessary service or
support after the purchase to support its use or consumption; and ultimately
sometimes returning or disposing of the product.
Customers first provide information about their needs to sellers, whose customer
insight permits them to develop goods or services intended to meet the customer’s
needs.
While there may be several back-and-forth iterations in the insight stage, as new
product developers invent and refine their product ideas, ultimately some good or
service is developed, and information about the product—promotion, customer
acquisition, and brand building—then flows to customers to inform and
encourage them to buy.
If the customer likes what is offered, a transaction—an agreement to buy—ensues,
requiring that information about pricing, terms, delivery, and so on flows to the
customer, and cash—either now or upon delivery—flows the other way.
With a transaction consummated, delivery of the good or service is made, with the
product flowing to the customer and money or other compensation flowing to the
seller.
But the seller’s job is not yet done for the customer may need some kind of
customer support or service during use, in which case additional information may
flow in either direction or additional goods or services may flow to the customer,
possibly in exchange for additional revenue.
Finally, the customer may need to return, dispose of, or discontinue use of the
good or service, at which point the product may be returned to the seller, cash may
flow back to the customer (as a result of the product’s return or some kind of
trade-in, perhaps), and another transaction—with this or another seller—may ensue,
thereby repeating much of the process.
Applications for Customer Insight
oDigital and social networking technologies generate the insight essential to the
development of compelling new products in the following ways:
Sifting through the trove of data posted daily on social networking sites
—and providing it in an organized manner to customers willing to pay
for it—is becoming a big business. In some industries, keeping track of
what customers are saying about your business can be crucial.
Marketing researchers are increasingly turning to the internet to conduct
marketing research due to its cost-cutting, time-saving advantages over
traditional survey methods.
oTraditional researchers debate the web’s merits on a number of dimensions:
In terms of representativeness of the current makeup of the web
audience, somewhat whiter, richer, younger, and more educated than the
population as a whole
In terms of self-selection biases, where people volunteer to participate
in web-based polls
In terms of randomness, or lack thereof, of web samples
Applications for Product Promotion, Customer Acquisition, and Brand Building
oThe tools that today’s au courant web marketers use comprise a variety of
time-tested tactics like banner ads, search engine marketing (SEM), search
engine optimization (SEO), e-mail marketing, blogs, and promotional
websites.
oSEM and SEO enable marketers to take best advantage of consumers’ search
efforts on search engines.
oThe confluence of GPS technology and mobile phones makes it possible for
marketers to deliver promotional messages to customers who are nearby.
oThough the commercial potential of video search has not yet been widely
tapped, some observers believe that it is a plausible candidate on the short list
for the web’s “next big thing.”
Applications for Conducting Transactions
oDynamic pricing is a controversial system that gauges a customer’s desire to
buy, measures his means, and sets prices accordingly.
oAnother arena where internet and mobile transactions are growing in number
is banking, with or without banks.
oWith services like Google Wallet on an Android phone, the user simply taps
her phone at a point of sale terminal, listens for the beep, and the transaction
is done in seconds.
With near field technology (NFT), there is no more swiping a credit
card or scrawling your name at the terminal.
Applications for Delivering Digital Products
oAn increasing array of goods and services can be digitized and thereby
delivered to customers via any digital medium, including the internet,
satellites, and mobile telephones.
oHealth care appears to be an arena where digital delivery offers significant
benefits.
A fast-expanding array of telemedicine applications, some using
two-way video, is bringing medical expertise to the most remote places.
oDelivering products digitally is not confined to consumer marketing.
An entire industry , software-as-a-service (SaaS) has sprung up to
deliver the benefits of software without the hassle involved in owning
and maintaining the software itself.
Application for Customer Service and Support:
oSavvy marketers know that, for all the hoopla about acquiring new customers,
the real driver of the bottom line is the ability to profitably retain existing
ones and that effective, responsive customer service is a key ingredient in
doing so.
They also know that customer retention is a competitive necessity.
oThe growing number of web-based or app-based customer service
applications offers the tantalizing combination of better service and
significant cost savings.
The trick is to focus on the customer service benefits first, rather than
mere cost cutting.
oOne myth some companies have bought into is that the internet is a
self-service medium.
They assume that they can let customers do all the work, but most
customers really do not want to do more.
One solution is coproduction, in which companies carefully consider
which burdens they can remove from the customer, using digital
technologies, and which customers can perform, assessing costs and
benefits to both parties.
Applications for Product Return and Disposal
oCustomers’ experiences with goods and some services do not end until the
products are consumed, returned, or disposed of.
Some companies have found ways to use digital technologies to
facilitate these processes.
B. Developing Digital World Marketing Strategies: The Critical Questions
Can We Digitize Any or All of the Necessary Flows at Each Stage in the
Consumer Experience Process?
oIn considering whether to employ new digital technologies at any stage of the
consumer experience process, a company should ask whether any of the flows
—information, goods or services, or cash—can be digitized.
For cash, the answer is an automatic yes.
For goods and services the question is more difficult.
Text, audio, and visual images (moving or still) can be digitized,
as can books, music, photos, and, given enough bandwidth,
movies and other videos.
But, not taste, fragrance, etc.
Can We Do So First and/or In a Proprietary Way?
oA key question in deciding whether or not to employ a new digital application
is whether one can do so in a proprietary way, thereby deterring imitation, or
do so with a sufficient head start so that competitive advantage can be
established before others follow.
How Valuable and How Time-Critical are What Kinds of Information to the
Recipient?
oThe more valuable and time-critical the information, the more sensible it is to
invest in digital applications to provide easy, timely, 24/7 access to those who
can benefit from the information.
Can Digital and Social Networking Tools Reach and Build Relationships with
Customers in the Target Market?
oSimply, reaching customers with digital tools may not be enough, especially
for marketers of commodity-like products.
oGoing beyond reach to build mutually beneficial relationships may be what is
needed.
Are Digital Tools Measurably Effective and Efficient Compared to Other
Solutions?
oMarketers’ concerns over the effectiveness and efficiency of their websites
have led to the development of web analytics, software solutions that monitor
and summarize website usage patterns.
oThe technology can uncover a variety of problems that can plague websites:
Cumbersome navigation
Content that cannot be easily found
Underperforming search engine strategies
Unprofitable online marketing partnerships.
oThe result of these analyses can improve customer satisfaction and response to
the website, strengthen the marketer’s hand in negotiating terms of
partnership deals, and even identify new market segments that might be better
served with tailored sites.
oSetting SMART objectives that the latest tools or activities are intended to
meet—specific, measurable, attainable, relevant, and timebound—and
running cost-benefit analyses to assess their likely performance are necessary
for making go/no-go decisions and for prioritizing which initiatives should be
pursued first.
VI. Managing Digitally Networked Strategies: The Talent Gap
Setting out the opportunities that new digitally networked technologies provide—for
almost any company, of any size, in any industry, anywhere—and the fundamental
principles and forces driving these technologies is easy, relatively speaking, as is providing
conceptual frameworks for thinking about the issues and trade-offs involved.
oA much more difficult challenge is finding the people to manage and lead the
necessary efforts and initiatives in this complex and rapidly changing arena,
especially when it comes to marketing, rather than purely technological issues.
It is difficult to reach a wide audience with many of today’s highly targeting tools as well
as to figure out how to buy the new media efficiently.
Changing habits is never easy, for marketers or for anyone else.
VII. Developing Strategies to Serve Digital And Social Networking Markets
A. Serving the Digitally Networked Markets of Tomorrow
Internet or social networking entrepreneurs should consider the various ways in
which revenue can be generated on the web or in other settings such as mobile
phones.
oUnderstanding one’s revenue model and being willing to change it as market
and technological conditions warrant are essential.
Such entrepreneurs must ask not what can I sell but what do today’s and
tomorrow’s customers need, and how and where they might want to consume what
I have to offer?
Would-be entrepreneurs must realize that barriers to entry are incredibly low in this
new world.
oIt is not really the ideas that count.
oWhat matters is the team that will execute an idea to deliver the performance
and value that customers, whether businesses or consumers, or even potential
acquirers of the nascent business want and will pay for.
oThus, execution is key.
