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ROT068

BLURRING

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THE LINES
WHY ITS

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TIME TO RE-THINK
MARKETING yo
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The time has come to develop new mental models that reect the complex inter-linkages
between modern consumers and business. by Yoram Wind
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WHEN I BEGAN MY ACADEMIC CAREER in the mid-1960s, the primary ways, which I will describe, along with their implications for
focus of marketing research was consumer marketing. Even then, rethinking our approach to Marketing.
however, most of my contemporaries recognized that the core
principles of consumer marketing could be modied and applied 1.The blurring of B2B and B2C
to business-to-business interactions for goods and services, as well The lines between business-to-business (B2B) and business-to-
as to the sale of raw materials to industrial buyers. Despite some consumer (B2C) marketing are blurring. In recent years, eBay has
obvious parallels between them, in the early development of these become one of the planets largest retailers, but without any stores
elds it made sense for consumer and industrial marketing to or display shelves and without holding any actual inventory.
advance independently. Instead, it serves as a massive virtual ea market for buyers and
Unfortunately, my contemporaries and I were so successful in sellers. These customers may start out small but then emerge as
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separating consumer and industrial marketing that we managed to industrial sellers and buyers as their volumes increase. Large cor-
create separate silos. The two elds have matured signicantly porations such as Sun Microsystems, recognizing the perishable
since then, and the environment has changed so dramatically that nature of their products, have begun to sell merchandise directly
we cannot continue with this separation. The lines between con- on eBays auction platform. There are multiple business partners
sumer and industrial marketing are now blurring in ve important involved in the sale process, such as companies involved in bill

62 / Rotman Magazine Spring 2008

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payment, escrow and shipping, and customers lead the way in cre-
ating new services such as automotive sales, so that when a catego-
ry reaches a critical mass of items, eBay then creates a new section
connecting the desire of producers to have an effective market for
digital songs and the desire of consumers to have an easy way to
purchase and share digital music les. At what point does industri-
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in its virtual store. The ourishing of small businesses around the al marketing occur in a continuously-recongured value chain,
globe in recent years has further blurred the lines. The needs of with consumers at its core?
small businesses overlap with those of individuals, a fact that is
exploited by companies such as Staples or Home Depot, which 3. The blurring of relationships with customers
cater to both markets, selling ofce supplies and building materials With the emergence of online communities, opportunities for cus-
to students and homeowners as well as ofces and contractors. tomers to collaborate with one another and directly with compa-
And while Costco is primarily viewed as a B2C operation, some 40 nies have increased enormously. Firms are nding ways to tap into
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per cent of its members are actually small businesses. customer insights, so that innovations that once owed through
B2B channels now percolate out of communities that involve both
2. The blurring of value chains customers and rms.
Hong Kong-based Li & Fung manufactures apparel and other MITs Eric von Hippel and his colleagues have found that the
items through a exible, virtually-congurable network of suppli- majority of signicant product innovations in many industries are
ers across many different countries: a network of seven factories in initially sparked by lead users and later rened by companies. This
ve countries that is created to deliver an order for 100,000 shirts means that while companies have traditionally looked to their own
on one day might be very different from the one used a week later. labs or to partners for ideas, an equally-important source of innova-
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Relationships are congured on the y, with Li & Fung as the con- tion can be their relationships with their own customers.
trolling hub of a dynamic network. Because the relationships Peer-to-peer networks are taking on increasing prominence in many
between the rms involved are exible partnerships, there appears areas. For example, high net-worth individuals, tired of the hard sell
to be little traditional marketing involved: Li & Fung typically con- of wealth management rms, have created networks to share nan-
tracts for no more than 70 per cent of its partners capacity to cial advice and ways to manage their money with one another. They
ensure their independence and exposure to new ideas from other exchange ideas and offer advice, as well as making investments
companies. This example is consistent with the new concept of together or obtaining group discounts on services and products.
marketing, which is moving toward managing strategic partner- Open source software and the Wikipedia online encyclopedia are
ships and positioning rms between vendors and customers in the other examples of how people have come together in grassroots net-
value chain with the aim of delivering superior value to customers. works to develop new products.
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A proliferation of such strategic alliances is blurring the bound- In addition to trust building through marketing initiatives and
aries between rms. the selling power of real performance, we also have peer-to-peer
When Apple set up its iTunes store, it brought together a set rating systems, whereby buyers rate sellers after each interaction
of recording companies with content and customers who wanted (and sellers can also rate buyers), offering buyers a cumulative
to download their 99-cent tunes. It was a stroke of genius in scorecard for assessing a specic seller. The importance of peer-to-

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In contrast to the industrial-market focus
on nding raw materials and turning them
into nished products, the focus today is

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on adding value through knowledge.

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peer interaction is also seen in referenceability: recent studies have
found that a customers willingness to refer another consumer to a
company, and to act as an advocate for that company, is the clearest
actions in any eld. As the world around us changes, failure to chal-
lenge and rethink our models continuously will hold us back. At
the same time, we must recognize that every new mental model we
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sign of customer satisfaction. This creates a shift from a transac- adapt can come with its own set of blinders. Following are nine
tional focus to a focus on building relationships with customers. important concerns that new marketing models must address.

4. The blurring of functions within the rm 1. Expand the focus from buyers to stakeholders
Through electronic data interchange, companies such as Procter Since business decisions are affected not only by customers but
& Gamble and Wal-Mart have transformed their relationships by by end consumers, distributors, suppliers, employees, share-
connecting retail shelves and inventories directly to manufactur- holders and others who are all heterogeneous, marketing con-
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ing. This has blurred the lines not only between rms but between cepts and approaches should not be restricted to buyers but
operations, marketing, sales, IT, nance and other functions with- should apply to all stakeholders. With the increasing pressure
in the rm. These relationships would seem to bypass some mar- for corporate social responsibility, it is clear that companies
keting issues in a traditional sense, but they also raise new chal- need to develop strategies including marketing strategies
lenges for industrial marketing: How are these relationships devel- that address the needs of all stakeholders. Thus, industrial mar-
oped in the rst place? How do new entrants break in? In a certain keting decisions need to take into account the impacts on end
sense, this is a classic example of the straight rebuy that we talked consumers and other stakeholders. These cannot be considered
about in the 1960s, with a direct computer link between the two in isolation if the company is to understand and manage the full
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companies. But these links have proven to be much more robust impact of its strategic decisions.
and interactive, bridging disciplinary silos.
2. Recognize new forms of relationships and empowered
5. A blurring of products, services, and customer experience consumers
Businesses are increasingly based upon knowledge networks, Whether rms like it or not, new technologies have empowered
which presents a very different set of challenges for companies. In consumers, leading to a shift in the relationship between compa-
contrast to the industrial-market focus on nding raw materials nies and customers. Alvin Tofer has referred to this trend as the
and turning them into nished products (i.e. adding value through emergence of the prosumer a blend of producer and consumer.
manufacturing), the focus today is on adding value through knowl- This empowered consumer, who is often involved in developing or
edge. Where purchasing raw materials is a procurement and mar- customizing products and services, behaves more like an active
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keting challenge, nding knowledge is much more of a human buyer in an industrial market. Instead of buyers and sellers, we see
resource challenge encompassing all the management disciplines. models of co-producers, where the customer is not a passive recip-
ient but an active collaborator. We have seen similar shifts in indus-
Rethinking Our Mental Models trial relationships. In this environment, instead of merely provid-
Mental models play a powerful role in shaping our perception and ing marketing messages, rms must provide tools for customers to

Rotman Magazine Spring 2008 / 65

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create their own products and services. Dell, for example, allows markets and the expansion of multinational rms have also
consumers or industrial buyers to customize their products. changed the practice of industrial marketing. It can no longer be
Companies can use the Internet to provide buyers with search assumed that marketing functions including research, new
engines and tools that give them the comparative information, and product and service development and even sales are best per-
decision aids that help them make optimal buying decisions. formed by the rm itself. Forward-thinking companies are mov-
Customer relationship management (CRM) must be augmented ing to hybrid marketing systems that combine direct sales forces
with customer-managed relationships (CMR), whereby customers with diverse channels, deconstructing their vertically-integrated

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are recognized as being in the driver's seat. This is a very different value chains and creating a value network based on strategic
relationship between buyer and seller, and entails a different role for alliances ranging from outsourcing of various functions to co-
Marketing. American Airlines used this approach in developing its branding, co-promotion and co-marketing.
Sabre reservation system, empowering agents with a platform to
search and maintain relationships with many different airlines. 4. Bridge disciplinary silos
Vertically-integrated rms often deal with consumer marketing
3. Re-examine the role of outsourcing and traditional make- and industrial marketing in different parts of the organization. We
buy decisions need to bridge the walls between the marketing functions (such as

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One of the most signicant changes in the global business envi- customer service and sales) and marketing and other business func-
ronment has been the rise of low-cost manufacturing in locations tions (such as operations and nance). This is critical given that
such as China and the emergence of business process outsourcing most marketing decisions are interrelated and, in turn, affect and
in places like India. The increased technological sophistication are affected by the other functions. For example, is an electronic
and size of these markets have fundamentally transformed the data interchange relationship the domain of marketing, operations
nature and scope of business relationships. For example, a compa- or IT? The answer is, all three.
ny with a service centre in Bangalore might be interacting with a
client rms end customers, so the partner carries part of the B2C 5. Recognize the importance of brand equity
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relationship even though the outsourcing relationship would be Brand equity is an increasingly important driver of rm decisions.
characterized as a B2B interaction. The development of global But building brands can be very expensive, so companies are looking

Build Your Brand But Dont Forget to Deliver an Experience by George Stalk
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For most companies, branding is about posi- keep his promise. He didnt arrange for that will meet their performance require-
tioning, advertising, packaging, and catchy immediate pickup, nor did he schedule the ments. In the trade-off between cost
logos and slogans. That is no longer enough. service appointment promptly. With that sin- and quality, the perceived status and
Branding in todays marketplace is about the gle incident, the dealer decimated the posi- condence associated with buying a
total experience a customer has with your tive feelings my wife had towards his brand. name brand isnt enough to close the
products or services. It is about enticing Todays consumers are not a happy lot and sale any more.
customers, gaining their trust, and making they wont tolerate much abuse. They are: Short of money: Pressures on income are
the experience so pleasant that they are increasing for most consumers. They have
proud of their choice and will tell others Pressured for time: Only a few years no extra money to be wasted by underper-
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about it. ago, a half hour to prepare food at home forming suppliers.
Recently, I was in the market for a vehicle was considered normal for fast-home-
that would be safe and meet the needs of cooked offerings. Today, if the food isnt Now more than ever, companies cannot
my busy wife and children. We narrowed the on the table in ve minutes or less, its afford to forget that the customers expe-
choice to two vehicles. I travel a great deal, not fast enough. rience is an integral part of branding. We
so when one dealer promised that in the Starved for afnity relationships: When call this chain end-to-end learning
event of a breakdown he would pick up the consumers are short on time they are because the customer is learning who and
vehicle immediately and take it in for servic- short on relationships. Many new retail for- what we really are. Theyre learning about
ing, my wife was sold. mats from coffee shops to destination us based on what we do, not what we say.
For the rst two months, my wife told restaurants play up the need to belong. That empirical experience is indelible so
everyone how much she enjoyed the vehicle Jaded and sceptical: Todays marketplace wed better be sure that we know what
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and appreciated the security in the dealers offers customers unprecedented choice. were teaching them.
guarantee. She was a walking brand builder They know that in many categories of The challenge of managing a customers
for that manufacturer. But the rst time the goods and services, they can buy lower- experience comes from the fact that it hap-
vehicle needed service, the dealer failed to cost but high-quality private-label brands pens out on the front lines of the company. >>

66 / Rotman Magazine Spring 2008

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copyright. Permissions@hbsp.harvard.edu or 617.783.7860
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at ways to leverage brands across consumer and industrial markets. pre-purchase to purchase to use to post-purchase disposal. This is
Companies such as Canon, Hewlett-Packard, Dell and IBM, as shifting the dominant logic of Marketing from one based on eco-
well as some pharmaceutical and nancial rms, have successfully nomic models that were applied to manufacturing and tangible
built meaningful brands across B2B and B2C markets, nding that goods to a logic focused on intangible resources and the co-cre-
brand building in one market pays off in the other. ation of value and relationships. This shift away from traditional
industrial transactions leads to deeper and more complex relation-
6. Unleash the power of technology ships between companies, corporate customers and end users, as

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Web-based platforms for interaction are transforming relationships well as new revenue models.
between buyers and sellers in both consumer and industrial mar-
kets. The rise of blogs, for instance, has changed the ow of com- 7. Design business models for the developing world
munications to include B2C, C2B, B2B and C2C, and increased Eighty-six per cent of the worlds population is in developing coun-
their informality, frequency and intensity. We are also seeing a con- tries and we need new approaches to reach them. C.K. Prahalad
vergence of communications across different channels. Google has has shown that with new models, even low-income segments can
become the ubiquitous search engine, replacing the push of mar- be protable as companies discover a fortune at the bottom of the
keting messages with the pull of searches for information, even as pyramid. But these markets require rethinking business and rev-

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it creates a powerful, unconventional advertising platform for busi- enue models, product and service offerings, channels and relation-
nesses. Given these changing channels, communications increas- ships more than ever. For example, ITC created electronic hubs in
ingly reach both B2C and B2B buyers. small villages across India, providing information and trading plat-
forms for rural farmers. This satellite-based network links the
6. Shift from a transactional focus to the total customer farmers to pricing information for agricultural products, markets
experience and suppliers, transforming the process of rural farming while
Companies in both industrial and consumer markets are starting enriching the lives of the farmers (who are both business people
to focus on dimensions beyond product-feature functionality and consumers). The opportunity to build a B2B market across
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and price. Some are even bundling products with services and India in this way could not have been recognized or achieved
concentrating on shaping the total customer experience from through the approaches used in developed countries. The emerging
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Frequently, managers who are making Before launching that next advertising consumer distemper to service calls and
major decisions on new investments or campaign or promotion, ask yourself how product returns? Can you measure the eco-
process redesign have little idea of the your investment decisions affect the cus- nomic implication of xing these problems?
end-to-end impact those decisions will tomer experience, and if everyone from
have on the customer experience. One senior executives to counter clerks is 5. What is the dollar value of delivering an
client has created a series of videos aware of how much the brand's value hinges experience that consistently produces brand
demonstrating its target customer experi- on the quality of experience you deliver. boosters and eliminates brand blasters?
ence. These videos are shown not only to Here are some questions to consider:
marketing managers, but also to the sys- Brand management is at a turning point.
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tems developers who are building the sup- 1. Can you describe the end-to-end experi- As the cacophony of the marketplace
port infrastructure that will enable the ence (learn-buy-get-use-pay-service) that escalates, only those brands that deliver
experience. No written list of systems different customer segments experience? will succeed. Increased advertising invest-
requirements can ever substitute for the ment alone wont move the sales needle:
visceral understanding that people develop 2. Could you present it in a video for instead, refocus your brand management
when they see and hear the customers employees? on the outcomes that matter most those
experience with the product. that affect the lives of your customers.
Brand relationships are not conned to con- 3. Do you have specic measures that track
sumer products. They exist with hospitals, your ability to overcome the dissatisfactions
taxi companies, cleaners, garages, airlines, (such as long waits for delivery and repairs or
George Stalk is senior partner and
restaurants, and more. The strength of a inaccuracies in orders and billings) cus-
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managing director of Boston


brand experience is inextricably linked to tomers encounter? Consulting Group of Canada Ltd.
every aspect of buying and using a product, and an adjunct professor of
not just to the inherent performance of the 4. Can you map the ripple effects of prob- Strategic Management at the
product itself. lems from misleading marketing claims to Rotman School of Management.

Rotman Magazine Spring 2008 / 67

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copyright. Permissions@hbsp.harvard.edu or 617.783.7860
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Cross-cultural acquisitions, alliances

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and other relationships are required to
succeed in developing markets, but
they also pose distinctive challenges .

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markets of Asia and other parts of the world present tremendous monitor marketing effectiveness of the rm toward its clients and
opportunities, but also challenges in forging relationships with prospects, but also track key indicators of the clients customers.
companies with different cultures and business practices. Cross- You might, for example, need to track a companys share of wallet,
cultural acquisitions, alliances and other relationships are required account protability and growth with business customers and the
to succeed in these markets, but they also pose distinctive chal- corresponding measures of the effectiveness of the company with
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lenges and present new risks. Have we changed our view of mar- its end customers.
keting to reect this global reality?
In closing
8. Rethink the role of market research The breakthroughs made in business and industrial marketing
The increased complexity of the business environment requires over the past few decades have allowed companies to harness the
more effective marketing research and modeling approaches, yet power of new concepts and tools in their interactions with one
critical business decisions such as mergers and acquisitions are another. It is now time to build on this foundation by employing
often made with no marketing input at all. Equally disturbing is the broader thinking that embraces both consumer and industrial
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fact that many decisions are being made on non-projectable, non- markets, as well as mental models that better reect the increas-
generalizable focus group interviews or convenience-based sam- ingly complex inter-linkages between consumers and business.
ples. It is critical to develop more effective data mining and other
analytics as part of a decision support system as well as marketing
research and modeling tools. We are seeing increased rigor and
innovation in this area such as internet-based conjoint analysis
studies and increased use of adaptive experimentation. To help
managers make better decisions, companies are using a variety of
Yoram (Jerry) Wind is The Lauder Professor and professor of
tools such as simulations and game theory to allocate resources
Marketing at the Wharton School of Business. The co-author of
and prioritize marketing and business strategies. Competing in a Flat World: Building Enterprises for a Borderless World
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and The Power of Impossible Thinking: Transform the Business of Your


9. Rethink metrics and dashboards Life and the Life of Your Business (Wharton School Publishing,
2007 and 2005), he is also the editor of Wharton School Publishing.
With increasing attention being paid to the ROI of marketing, we
must rethink the measures we use to track and evaluate these This is an excerpt from a paper that recently appeared in the Journal of
investments. New-and-improved dashboards should not only Business & Industrial Marketing, published by Emerald.

68 / Rotman Magazine Spring 2008

This document is authorized for educator review use only by Mohammad Ekhlaque Ahmed, Institute of Business Management until February 2016. Copying or posting is an infringement of
copyright. Permissions@hbsp.harvard.edu or 617.783.7860