END OF THE MASS MARKET
During the late 1990s and through the early 2000’s, we witnessed the death of the concept of
mass market. It is now widely accepted that communicating with users by e-mail, Web sites,
telephone and to a lesser extent mail and fax will bring not only measurable cost reductions,
but also an increase in customer satisfaction as messages are more targeted to their specific
needs. But there are also those organizations that feel if most of their competitors focus on
more direct communications, there will be less competition in the mass communication market
and thus they may achieve a louder voice. Additionally, mass marketing does contribute to
brand awareness and brand reinforcement. However, the success of the Internet provides
considerable evidence that one-to-one marketing is and will be appropriate for many packaged
goods and other high- and low-involvement products and services that in the past sold almost
exclusively with brand advertising. It is even applicable to
high-involvement products and services as consumers may “experience” the good first
but then use one-to-one channels for purchase.
Through the 1970s, only high-end retailers, cataloguers, and personal-service firms could
afford to practice one-to-one marketing. For the most part, they did it the old-fashioned way
with personal selling and index-card files. In the 1980s, as the mainframe computer became
more practical, airlines got into the act with a proliferation of frequent flyer programs.
Frequency marketing programs such as these relied on monthly statement mailings and large,
batch-processed databases of customer records.
During the 1990s, bookstore chains, supermarkets, warehouse clubs, and even restaurants
began to track individual purchase transactions to build their “share of the customer.” Many of
these programs now run on PC platforms or workstation environments much more powerful
than the most capable mainframes of the 1970s. They also are being executed in or close to
real-time environments. It is possible today to track 5 or 6 million customers for the same real
cost as tracking a single customer in 1950. With Internet-based databases and remote access,
this capability literally has exploded in the last few years.
In the 2000’s the situation has become even more interesting as one-to-one marketing has
become increasingly pervasive. With an increasingly powerful array of much more efficient,
individually interactive vehicles, the options are virtually unlimited, including on-site
interactivity, Web site connections, fax-response, e-mail, and interactive television.
Most households today either have direct Internet access, or with TV sets that also provide
real-time interactivity through the Internet. We are closing rapidly on the time where
individuals will interact with their television and/or computer simply by speaking to it. Via
various Web sites, computers work for us to enable us to remember transactions and
preferences and find just the right entertainment, information, products, and services.
Likewise, online capabilities enable providers to anticipate what a consumer might want today
or in the future. Unfortunately, the system has been slower to protect consumers from
commercial intrusions that they may not find relevant or interesting.
The increasing level of market definition and refinement (and resulting opportunities for
marketers) is possible through the massive social, economic, and technological changes of the
past three decades. There is no longer a U.S. mass market because lifestyles have changed so
dramatically. Some of the important demographic shifts have been:
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Increasing diversity of the population. The United States has always been an
immigrant nation. However, large numbers of immigrants from Latin America
and Asia have increased the proportion of minorities in the country to one in
three, up from one in five in 1980. This diversity is even more noticeable in the
younger market.
Changing family and living patterns. There has been a substantial rise in the
divorce rate, cohabitation, non-marital births, and increased female participation
in the labor force. In addition, married couples with one earner make up only 15
percent of all households. Dual-earner households have become much more
common—the additional income is often necessary for the family to
pay their bills. Thus, the stereotypical family of the 1950s has been replaced by
two older and harried, working parents with much less time available. There is
also an emergence of nontraditional households such as same sex parents, single
parents and multi-generation. The first set of baby boomers are entering
retirement. They are more active, have a greater awareness of health
maintenance, and have a higher disposable income, which is presenting new and
greater marketing opportunities. They will also live longer than prior
generations due to advances in medical research.
Emergence of a new children’s market. Minorities are over-represented in the
younger age brackets due to the higher fertility and the younger population
structure of many recent immigrants. The result is that one in three children in
the United States is black, Hispanic, or Asian. In addition, nearly all of today’s
children grow up in a world of divorce and working mothers. Many are doing
the family shopping and have tremendous influence over household purchases.
In addition, they may simply know more than their elders about products
involving new technology such as computers.
Income and education increases are two other important demographic factors
impacting the marketing management arena. Generally, income increases with
age, as people are promoted and reach their peak earning years, and the level of
education generally has increased over the last few decades. Family units today
often have higher incomes because they may have two earners. Accordingly,
there is an increased need for products and services because they likely have
children and are homeowners.
In sum, the need for market analysis and marketing decision-making, and managers to perform
those tasks has never been greater. But, as the course will demonstrate, the complexities of, and
challenging experience.
A. “The Changing Image of Marketing”
Focus: the changing perceptions of marketing in the contemporary business environment.
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Teaching Objectives
in the larger business environment.
To provide students a new and possibly different perspective on the role of marketing
in business and society.
To indicate areas where the marketing process and concept will be useful to the
student in assessing business developments.
Discussion
INTRODUCTION
consumer.”
With this definition in mind, it’s apparent that marketing and many other business activities are
related in some ways. In simplified terms, marketers and others help move goods and services
through the creation and production process; at that point, marketers help move the goods and
services to consumers. But the connection goes even further: Marketing can have a significant
Marketing Basics
In introductory marketing you learned some basics—first the four P’s, and then the seven P’s:
Product—What are you selling? (It might be a product or a service.)
Price—What is your pricing strategy?
Place or distribution—How are you distributing your product to get it into the
marketplace?
product?
Services add three more “P” considerations, that of people, process, and physical evidence,
their service difference
People deliver the service.
The process is the method of delivering a service.
differentiation efforts.
The sum of the above is called the marketing mix. It is important to have as varied a mix as
possible in marketing efforts, since each piece plays a vital role and boosts the overall impact.
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what you do in business.
Product
Marketers identify a consumer need and then provide the product or service to fill that need.
The marketer’s job is to pinpoint and understand existing needs, expand upon them, and
identify new ones. For example, because there are more singles and small families these days
offered in smaller packages.
How can this impact other professionals in the business/marketing process? Let’s say your
company has developed a new product that generates enormous consumer demand. Your
marketing department may ask you to find a way to speed up the workflow in order to crank
out more products faster. A year after the product is introduced, however, the market might be
expensively.
This relationship works both ways. There may be production and industrial engineers who may
see a way to change the work process that would create additional options for consumers.
Those engineers will also be instrumental in design and development of products for which
human factors and ergonomics are important considerations. Maybe there’s room to add
consumer demand for the new line.
Price
Ideally, a marketer wants to be proactive in setting price rather than simply react to the
marketplace. To that end, the marketer researches the market and competition and plots
possible price points, looking for gaps that indicate opportunities. When introducing a new
same product or service.
Various other technical professionals can have an important impact on marketers’ pricing
decisions. Again, you may be asked to determine if productivity can be enhanced so that the
product can be manufactured and then sold—for a lower price.
Place or distribution
discounters? Does the product serve a niche market? The answers to all of these questions also
help shape how a product can be distributed in the best way.
warehousing.
Promotion
Promotion encompasses the various ways marketers get the word out about a product—most
notably through sales promotions, advertising, and public relations.
Sales promotions are special offers designed to entice people to purchase a product or service
first few times a prospective customer sees an ad, it usually barely makes a dent. Seeing the ad
over and over is what burns the message into people’s minds. That’s why it’s good to run ads as
frequently as possible.
Public relations refers to any non-paid communication designed to plant a positive image of a
aspect of public relations.
As with price, changes in demand created by promotions can have a direct impact on the work
of many other professionals.
Process
How difficult or easy is it for the customer or prospect to interact with a company. “Your
through to gain insight to the effectiveness of their strategy.
People
People are heterogeneous and thus a customer will never quite receive the same
experience from different employees and may not receive the same expected service
interaction. Therefore soft standards while placing boundaries also allows provides
flexibility to the employee in managing a specific customer interaction. High margin
retailers may allow employees to provide upt to $75 worth of value to satisfy a customer.
This does not mean a discount but rather a=some appropriate response which may cost
the company up to $75.
Physical evidence
professional offices as well as other services.
All are critical core competencies that an organization can leverage in their service
differentiation efforts.
Marketing, engineering, and many other professional activities are interrelated and
interdependent disciplines. By understanding the role that marketers play in moving a good or
II. Background Article
Issue: New Approaches to Marketing
Source: “New Economy Calls for New Marketing,” Computerworld
(Philippines), January 5, 2001.
Discussion
managers and sales personnel.
Kotler noted that future marketers must understand technology to respond to the new
forces of today’s economy where digitalization and the Internet are becoming major
sources of efficiency and profitability among companies.
The Internet, according to Kotler, paves the way for high competition, proliferation of
The marketer should exploit e-business to his company’s advantage. “Go electronic and
paperless. Partner with your employees, customers, suppliers, and distributors for co-
prosperity,” he said. The global economic slowdown is also making companies
reevaluate their strategies and current resource allocations to cope with falling prices and
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of the economy.
“Companies are setting up separate Web portals for customers, partners, and employees.
7-11’s fifth generation information system connects stores, headquarters, and suppliers,”
according to Kotler. He also cited Procter & Gamble’s market planning dashboard to
promote technology use in the marketing of its products. “By setting up a dashboard for
times.”
BEYOND THE WEB SITE
Companies need to beyond the static web sites of a few years ago by featuring online
buying and selling, recruitment, and e-learning, said Kotler. “. . . utilizing the Internet
goes beyond the company’s Web site.” An organization should also develop its
and customer relationship management (CRM) systems.
Kotler also pointed out that marketers should “…keep in mind though that e-marketing
doesn’t negate marketing fundamentals such as segmentation, targeting, positioning, the
marketing mix, customer satisfaction, and value as well as customer relationship.”
Instead, the Internet creates some new challenges for the marketer, ranging from the
building brand recognition on the Internet.
Electronic marketplaces have significantly reduced search and transaction costs for
finding the lowest price on a global scale, noted Kotler. “With the use of e-procurement,
companies can offset the price fall and save on operating expenses in the long term.”
On CRM, Kotler noted that the two best defenses against lower prices brought about by
view of the customer across channels.”
CRM requires building a customer database by collecting all the pertinent information
about individual customers and prospects, noted Kotler. “But not every business needs
CRM since it is a high investment and operating expense,” he said. “But it can pay in
certain situations for companies such as banks, insurance, credit card, and telephone
companies that collect a lot of data.”
marketing department must centralize information about customers and prospects and
develop campaigns around it.”
IV. Case
SendWine.com
HBS Case: 800-211 TN: 801-198
Teaching Perspectives
(GIRF).
How should SendWine.com spend the venture capital money it attracted? Should the company
consolidate its niche position in wine gift-giving? Or should it aggressively expand into new
gift-giving categories under the “Send.com” name? In July 1999, the CEO of SendWine.com
faced some critical decisions. The company, an online service that enabled gift-givers to send
spend this money?
The CEO began to explore the business idea in 1995, when he learned that it was illegal to ship
wine to consumers across most state borders. In 1997, The CEO (Lannon) established a
company called “The Wine Line,” and assembled an FTD-like network to make sending gifts
of wine legal. The Wine Line took gift orders over a toll-free telephone number. About 100
premium specialty gifts.
By early 1999, SendWine faced competition. Au Internet, a wine retailer, raised $46 million
from VC firms that also backed Amazon.com, and a marketing agreement with Amazon
seemed likely. Well-known portals like Yahoo! were hosting gift retailers, providing them with
software templates to create web sites. Amazon itself was offering gifts other than books.
revenues, and preempt competition? While debating these strategy issues, Lannon also
wondered how to deal with the stresses that rapid growth was already placing upon his young
organization.
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reducing the probability of preemption by competitors. GBF and GIRF strategies are usually
incompatible: a GIRF strategy typically involves a process of exploring customer needs, then
fine-tuning a value proposition (often through trial-and-error) to meet those needs. If a value
proposition that is in flux (due to GIRF experiments) is promoted aggressively through a GBF
teaching goals include:
Studying the tradeoffs involved in targeting a tightly focused set of customer
segments, versus a more “promiscuous” positioning strategy that seeks to serve
many different types of customers; understanding how a broader positioning
approach complicates a company’s branding and marketing communications
strategy.
A secondary teaching objective for the case is to help students understand how a venture
capitalist might evaluate an Internet startup. To put themselves in the shoes of a VC trying to
decide whether to invest in SendWine.com in July 1999, students may have to put aside
memories of April 2000, when dot.com valuations—especially those for retail sites—dropped
segments.
As of the Fall of 2000, VCs were bidding up the valuations of wireless Web startups,
application service providers, and optical networking firms; they were encouraging startups in
these fields to “get big fast.” If students can be sold on the “old wine in new bottles” notion,
retailer.
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Questions
1. Imagine you are a venture capitalist in July 1999, and you have been asked to invest in a $30
million “B” round for Sendwine.com. Would you invest? What criteria would you use to assess
this opportunity? How is SendWine positioned against those criteria?
3. What would you recommend as a marketing plan for SendWine.com for the 1999 holiday
season? How should they reach their target consumer base? How much would you spend?
(Assume Sendwine can raise additional capital if needed.)
4. What challenges does Lannon face in building the SendWine organization? How should he