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

1. CONVERGENCE MARKETING
Created by
Erfi Ilyas
NPM 2004812002
PROGRAM DOKTOR ILMU EKONOMI
UNIVERSITAS KATOLIK PARAHYANGAN
1

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. THE HYBRID CENTAUR
Vijay Mahajan
Jerry Wind
Traditional
Consumer
Centaur
Cyber
Consumer
Offline
Hybrid
Consumer
Online
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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
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5. AREA OF CONVERGENCE
Company
Consumers
Erfi Ilyas, NPM 2004812002
Technology
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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)
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7. PART 1
UNDERSTANDING
THE CENTAUR
1. THE CENTAUR AWAKENS
2. THE REALITY OF THE CENTAUR
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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 Reflect.com and a
customized care package on
Reapod, yet also purchases offthe-shelf products in Nordstrom’s
and the grocery store
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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
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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?
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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
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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?
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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?
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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?
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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?
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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?
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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?
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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?
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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?
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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
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Online
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21. 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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22. NAVIGATING THE FIVE Cs OF CONVERGENCE
Company
Consumers
Technology
• Customerization
• Community
• Channels
• Competitive value
• Choice tools
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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
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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
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25. High
Customization options
Low
Customerization
Standardization
Mass
Customization
Low
Marketing
Customization
Segment of one
Personalization
High
Operational Customization
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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
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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
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Integrated, interactive,
and customized marketing
communication,
education, and
entertainment
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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
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information
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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
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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
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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
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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.
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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
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34. Converging on Communities
Channel
Virtual
Physical
Purpose
Social
Economic
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35. Converging of Physical and
Virtual Communities
Physical
Communities
Parallel
Universe
Virtual
Communities
Gathering Lost Tribes
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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
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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
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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?
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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
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40. Converging on Channels
Customer
experience
Niche/
Segmented
Consistent
Internal Structure
and Branding
Integrated/
Owned
Separated/
Outsourced
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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
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Intellectual, but becoming
more tactile
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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
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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
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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
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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
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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
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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
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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
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Branding helps to increase
trust in a virtual world and
speed the ability to make
decisions
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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
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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
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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
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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
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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
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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
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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
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56. Illustrative Search Engine, Decision Making,
Life Management Tools
Search Engines
www.altavista.com
www.infoseek.com
www.hotbot.com
www.google.com
www.ask.com
Decision Tools
www.mysimon.com
www.dealtime.com
www.endmund.com
www.expedia.com
www.priceSCAN.com
www.bizrate.com
www.consumerreports.com
Comparison engines
Customer evaluations
Expert evaluation
Life Management Tools
Erfi Ilyas, NPM 2004812002
Microsoft Office
My.Yahoo.com
Ediets.com
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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
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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
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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
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60. Terimakasih
Erfi Ilyas
NPM 2004812002
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