Convergence marketing


Published on

Develop from the Book Convergence Marketin by Jerry Wind
and Vijay Mahajan

Published in: Marketing, Business, Technology
  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Convergence marketing

  2. 2. CONVERGENCE MARKETING Jerry Wind He 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 Mahajan He 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 2
  3. 3. THE HYBRID CENTAUR Vijay Mahajan Jerry Wind Traditional Consumer Centaur Cyber Consumer Offline Hybrid Consumer Online Erfi Ilyas, NPM 2004812002 3 Program DIE, UNPAR
  4. 4. 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 consumerthe new possibilities created by technology and the enduring behaviors of human being Erfi Ilyas, NPM 2004812002 4 Program DIE, UNPAR
  5. 5. AREA OF CONVERGENCE Company Consumers Erfi Ilyas, NPM 2004812002 Technology 5 Program DIE, UNPAR
  6. 6. FRAMEWORK FOR THE BOOK Understanding the Centaur Navigating The 5 Cs of Convergence 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 Part 1 (1-2) Part 2 (3-7) Erfi Ilyas, NPM 2004812002 Mastering Convergence Marketing Generate innovative convergence marketing and business strategy Part 3 (8-9) 6 Transforming the organization and implementing the strategy Running with the Centaur C-transform the organization to support the convergence strategies and develop an implementation plan Create value for shareholders and other stakeholders and prepare for the children of the centaurs Part 4 (10-11) Conclusion (12) Program DIE, UNPAR
  8. 8. CHALLENGE OF THE EMERGING HYBRID CONSUMER Illustrative Convergence Challenges for Marketing The Demand of the Centaur Desire for uniqueness, personalization, and Customization 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? Sally buys customized product from and a customized care package on Reapod, yet also purchases offthe-shelf products in Nordstrom’s and the grocery store Erfi Ilyas, NPM 2004812002 8 Program DIE, UNPAR
  9. 9. CHALLENGE OF THE EMERGING HYBRID CONSUMER Illustrative Convergence Challenges for Marketing The Demand of the Centaur Desire for social interaction Virtual communities 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 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 Erfi Ilyas, NPM 2004812002 9 Program DIE, UNPAR
  10. 10. CHALLENGE OF THE EMERGING HYBRID CONSUMER Illustrative Convergence Challenges for Marketing The Demand of the Centaur Desire for convenience and channel options 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. 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? Erfi Ilyas, NPM 2004812002 10 Program DIE, UNPAR
  11. 11. CHALLENGE OF THE EMERGING HYBRID CONSUMER Illustrative Convergence Challenges for Marketing The Demand of the Centaur Desire for value Competitive value equation 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. 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 Erfi Ilyas, NPM 2004812002 11 Program DIE, UNPAR
  12. 12. CHALLENGE OF THE EMERGING HYBRID CONSUMER Illustrative Convergence Challenges for Marketing The Demand of the Centaur Desire to make better decisions Choice tools 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. 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? Erfi Ilyas, NPM 2004812002 12 Program DIE, UNPAR
  13. 13. MYTHS OF THE TRADITIONAL CONSUMER • 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? Erfi Ilyas, NPM 2004812002 13 Program DIE, UNPAR
  14. 14. MYTHS OF THE TRADITIONAL CONSUMER • 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? Erfi Ilyas, NPM 2004812002 14 Program DIE, UNPAR
  15. 15. MYTHS OF THE TRADITIONAL CONSUMER • 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? Erfi Ilyas, NPM 2004812002 15 Program DIE, UNPAR
  16. 16. MYTHS OF THE CYBERCONSUMER • 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? Erfi Ilyas, NPM 2004812002 16 Program DIE, UNPAR
  17. 17. MYTHS OF THE CYBERCONSUMER • 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? Erfi Ilyas, NPM 2004812002 17 Program DIE, UNPAR
  18. 18. MYTHS OF THE CYBERCONSUMER • 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? Erfi Ilyas, NPM 2004812002 18 Program DIE, UNPAR
  19. 19. The Human Motivations • Self affirmation • Symbolic meaning • Scripts for shopping • Experience • Social influence How do human motivation such as self-affirmation, symbolism, buying scripts, experience, and social influence affect the way consumers approach your products and services? Erfi Ilyas, NPM 2004812002 19 Program DIE, UNPAR
  20. 20. Putting the Consumer at the Center What organizational architecture and process are needed to support these strategies? What business and marketing strategies are needed to develop these solutions What product & service solutions can meet these needs? Offline Consumer Who are the Centaurs and What do they need Erfi Ilyas, NPM 2004812002 20 Online Program DIE, UNPAR
  22. 22. NAVIGATING THE FIVE Cs OF CONVERGENCE Company Consumers Technology • Customerization • Community • Channels • Competitive value • Choice tools Erfi Ilyas, NPM 2004812002 22 Program DIE, UNPAR
  23. 23. 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 Erfi Ilyas, NPM 2004812002 23 Program DIE, UNPAR
  24. 24. Converging on Customerization Customized Operations Customized Marketing The concept of “customerization” goes beyond simply customizing the operations to customize both manufacturing and marketing interaction Erfi Ilyas, NPM 2004812002 24 Program DIE, UNPAR
  25. 25. High Customization options Low Customerization Standardization Mass Customization Low Marketing Customization Segment of one Personalization High Operational Customization Erfi Ilyas, NPM 2004812002 25 Program DIE, UNPAR
  26. 26. The Shift of Customerization Old Model-Mass and New Model-Marketing Segmented Marketing Customerization Relationship with Customer is passive customers participation in the exchange Customer is an active coproducer 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 Erfi Ilyas, NPM 2004812002 26 Program DIE, UNPAR
  27. 27. The Shift of Customerization (extended) Old Model-Mass and New Model-Marketing Segmented Marketing Customerization New Product Development Marketing and R&D drive Customer interactions new product drive new product development development, and R&D focuses on developing the platforms that allow customerization Communication Advertising and PR Erfi Ilyas, NPM 2004812002 27 Integrated, interactive, and customized marketing communication, education, and entertainment Program DIE, UNPAR
  28. 28. The Shift of Customerization (extended) Old Model-Mass and New Model-Marketing Segmented 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 Program DIE, UNPAR information Erfi Ilyas, NPM 2004812002 28
  29. 29. Why the centaur sometimes Prefers standardization • • • • • • • • • 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 Erfi Ilyas, NPM 2004812002 29 Program DIE, UNPAR
  30. 30. Convergence Strategies for Customerization and Standardization • • • • • • • • 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 Erfi Ilyas, NPM 2004812002 30 Program DIE, UNPAR
  31. 31. Convergence Strategies for Customerization and Standardization (extended) • • • • 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 Erfi Ilyas, NPM 2004812002 31 Program DIE, UNPAR
  32. 32. 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. Erfi Ilyas, NPM 2004812002 32 Program DIE, UNPAR
  33. 33. 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 Erfi Ilyas, NPM 2004812002 33 Program DIE, UNPAR
  34. 34. Converging on Communities Channel Virtual Physical Purpose Social Economic Erfi Ilyas, NPM 2004812002 34 Program DIE, UNPAR
  35. 35. Converging of Physical and Virtual Communities Physical Communities Parallel Universe Virtual Communities Gathering Lost Tribes Erfi Ilyas, NPM 2004812002 35 Program DIE, UNPAR
  36. 36. Strategies for Convergence Physical and Virtual Communities • Gather lost tribes • Create parallel universes • Engaged in cross-pollination • Take advantage of strengths and weaknesses of virtual and physical Erfi Ilyas, NPM 2004812002 36 Program DIE, UNPAR
  37. 37. Strategies for Social and Economic Convergence • 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 Erfi Ilyas, NPM 2004812002 37 Program DIE, UNPAR
  38. 38. Designing Communities • 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? Erfi Ilyas, NPM 2004812002 38 Program DIE, UNPAR
  39. 39. 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 Erfi Ilyas, NPM 2004812002 39 Program DIE, UNPAR
  40. 40. Converging on Channels Customer experience Niche/ Segmented Consistent Internal Structure and Branding Integrated/ Owned Separated/ Outsourced Erfi Ilyas, NPM 2004812002 40 Program DIE, UNPAR
  41. 41. 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 Simple to find specific and experiential, but information, information individual search is rich browsing difficult Selection Limited to store size and Virtually unlimited design Experience Tactile, directed to all senses Erfi Ilyas, NPM 2004812002 41 Intellectual, but becoming more tactile Program DIE, UNPAR
  42. 42. Illustrative Comparison of Strengths and Weaknesses of Online and Offline Worlds Online Offline Company cost of interaction High for routine Low for routine interactions, but some interactions, but high for time lower for exceptions exception Customization Difficult and time consuming Delivery/Returns for non digital product Simple and quick after Complex, involving the decision to purchase delivery channels is made, but still require trip to a store Delivery/Return of digital products More complex, requiring a trip to store Erfi Ilyas, NPM 2004812002 Simple 42 Easy Program DIE, UNPAR
  43. 43. 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 Erfi Ilyas, NPM 2004812002 43 Program DIE, UNPAR
  44. 44. Strategies for Integrating Customer Experience • 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 Erfi Ilyas, NPM 2004812002 44 Program DIE, UNPAR
  45. 45. Strategies for Integrating Structure and Branding Across Channel • • • • • • • • 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 Erfi Ilyas, NPM 2004812002 45 Program DIE, UNPAR
  46. 46. 4. Converging on Competitive Value The value equation has become much more complex in a convergent world. In addition to traditional sellerinitiated 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 Erfi Ilyas, NPM 2004812002 46 Program DIE, UNPAR
  47. 47. The New Value Equation • • • • • • • • • • • • • 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 Erfi Ilyas, NPM 2004812002 47 Program DIE, UNPAR
  48. 48. Illustrative Shift in Sources of Value Source of Value Offline 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, Automated service allows during-sale and aftercustomers 24/7 access sale service that required while reducing cost real people Brand Brand adds value by signaling status or product quality Erfi Ilyas, NPM 2004812002 48 Branding helps to increase trust in a virtual world and speed the ability to make decisions Program DIE, UNPAR
  49. 49. Illustrative Shift in Sources of Value Source of Value Offline Speed Limited by physical value Can deliver digital chain products in real time but physical products face the same challenges Convenience Fixed locations, business Anytime, anywhere hour 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 Erfi Ilyas, NPM 2004812002 Online 49 Program DIE, UNPAR
  50. 50. Illustrative Shift in Sources of Value Source of Value Offline 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 elearning Erfi Ilyas, NPM 2004812002 50 Program DIE, UNPAR
  51. 51. Illustrative Shift in Sources of Value Source of Value Offline 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/Psychologi Personal interaction and Enhance by whole new cal other traditional rewards range of rewards through of offline activities online interactions and empowerment through technology Erfi Ilyas, NPM 2004812002 51 Program DIE, UNPAR
  52. 52. Convergence of Product/Service Offering and Experience • 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 Erfi Ilyas, NPM 2004812002 52 Program DIE, UNPAR
  53. 53. Convergence of Seller-Initiated and Buyer-Initiated Pricing • 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 Erfi Ilyas, NPM 2004812002 53 Program DIE, UNPAR
  54. 54. Convergent Pricing Strategies • 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 Erfi Ilyas, NPM 2004812002 54 Program DIE, UNPAR
  55. 55. 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 Erfi Ilyas, NPM 2004812002 55 Program DIE, UNPAR
  56. 56. Illustrative Search Engine, Decision Making, Life Management Tools Search Engines Decision Tools Comparison engines Customer evaluations Expert evaluation Life Management Tools Erfi Ilyas, NPM 2004812002 Microsoft Office 56 Program DIE, UNPAR
  57. 57. Convergence Strategies for Combining DecisionMaking Tools and Human Expertise • 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 Erfi Ilyas, NPM 2004812002 57 Program DIE, UNPAR
  58. 58. Convergence Strategies for Combining ThirdParty and Company Information • 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 Erfi Ilyas, NPM 2004812002 58 Program DIE, UNPAR
  59. 59. Convergence Strategies for Combining Company Push and Consumer Pull • 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 Erfi Ilyas, NPM 2004812002 59 Program DIE, UNPAR
  60. 60. Terimakasih Erfi Ilyas NPM 2004812002 Erfi Ilyas, NPM 2004812002 60 Program DIE, UNPAR