Riding the Marketing

Information Wave
Harvard Business Review

Dr.Mohamed Radwan

Group Members
Norhan Ayman | Yara Mostafa

BMAM522 -External Analysis & Evaluation 2020

 “Getting Close to the
Customer”

Companies not only understand individual consumers

Marketing IT certainly accelerates the current shakeout
better but also employ information to develop and
in the retailing industry
market new products.

- Manufacturers are in a quandary about what to

produce
But while the latest customer information systems
support micro-marketing and other alternatives to mass - Retail merchandise buyers are overwhelmed by the
task of product selection
marketing, they are difficult and expensive to build.
- Advertisers feel swamped trying to convey
appropriate messages to so many market segments
about so many products.
Information system differs from traditional marketing in three ways :

The degree to which this information can be used

The scale of the database can be The depth of the information captured about each
bears little resemblance to the scattershot mass-
far greater than in the past individual is much greater.
marketing campaigns of the past.

Micro-marketing techniques are critical to the survival of large players, since they allow big companies to own niches in the manner of smaller,
more flexible competitors.

The efficient culling of so much

information allowed , The Great Atlantic &
Pacific Tea Company (A&P), a major
supermarket chain, both to target
individual customers and to centralize
The fourth largest U.S. mail order company, it
buying for cheaper prices.
has used its sophisticated customer information
systems to succeed where traditional techniques
regularly fail: selling merchandise on credit to
households with less than $25,000 in annual
A communication company. As advertising
income.
dollars continue to shift to narrow-channel
media like cable TV and specialized catalogs,
Donnelley offers its clients everything from
consumer and life-style data to customized
individual publications.

Large companies without the vision to develop their own marketing IT – or the niche-oriented strategy of a successful small company – will drown in the
wake of smarter competitors.
 Information Overload

Effective Marketing relies on 2 way information flow Marketers Prospects

Integrate this mass of information into a concrete

Lifestyle information to determine market
Detailed Demographic understanding of what products different
segment
consumers want and what they’re willing to pay.

Reaching the consumer with Yet when the number of market segments and the
appropriate information in the Positioning information to establish image, brand, number of products dramatically increase,
form of advertising, store and detailed product specifications. traditional means of exchanging this information
displays, and retail concepts become overloaded.

- The average grocery store now stocks around 20,000 items, with larger stores carrying two or three times that amount.
- Given the enormous variety of weights, flavors, colors, and sizes, the total number of stock-keeping units at a supermarket may run to several hundred thousand.
- This creates an information crisis for retail managers and for manufacturers in the buying process.
- Surveys of supermarket executives show that they expect technologies like point-of-sale scanning to help allocate shelf space and optimize product mix.

- The U.S. airline industry exemplifies the devastating leverage of customer information technology and the advantages of size in getting such expensive systems off the ground.
- Deregulation created information overload, customer reservation systems became the key to competitive survival.
- Now the industry is dominated by just a few large airlines, the two largest being the pioneers of computerized reservation systems.
 Building Databases to
Own Customers

Where marketers once aimed to build market share, they now aim to own a market niche.

The card-reading device transmits the

A&P has instituted a frequent-shopper
program in several regions of the
United States aimed at building a
sophisticated customer database.
Building a customer database of such
Customers at participating A&P stores are customer’s identity and a full list of his or her
The discounts are obtained by showing scale and depth will enable A&P to
invited to sign up for free Bonus Saver cards, purchases to an in-store computer that
the Bonus Saver card at the checkout form longterm relationships with its
which entitle them to check-cashing calculates discounts and saves information on
counter, where a cashier runs it through a customers and to focus its marketing
privileges. In addition, hundreds of items are each customer’s purchases. This information is
card-reading device connected to the efforts, gaining competitive advantage
marked with special discounts each week for then transmitted weekly to a mainframe
cash register. over smaller regional chains
holders of these cards. computer at A&P’s headquarters.

- Embarked on the Centralized Buying Strategy.

- The program allows central-office merchandise buyers to know the detailed characteristics of who is buying what products at which price in which store.
- By combining the frequent-shopper database with demographic and life-style data, central-office analysts can further understand customer needs. In cooperation with store managers,
merchandise buyers at company headquarters select products and prices tailored to customer preferences at each store and region.

- A&P planned to use customer purchasing profiles to aim promotions at individual consumers. The Bonus Saver cards already allow A&P to offer individualized incentives based on purchasing
histories.

- A&P may use advanced advertising technologies to reach households with direct marketing like versioning management programs.
 The New Marketing
Laboratory

Every catalog mailing and major promotional campaign

For every household, FingerHut’s database stores the
at FingerHut is based on statistically determined
name, age, and sex of each child. The company
predictions about consumer behavior. Such predictive
produces a monthly series of birthday flyers, tailored to
modeling is a good example of how customer
a specific age group and sex, which include selections of
information can be structured and sifted automatically
toys and gifts.
to target promotions.

As for the size and depth of its database, Finger- hut
captures as many as 1,400 pieces of information about a
household. These include typical demographic items like
income and home ownership, appliance ownership, and
purchasing histories for various categories of products.
In general, FingerHut’s primary marketing programs are
divided into three broad groups: front-end programs for
acquiring new customers, transition programs for
evaluating new purchasers and selecting those who may
become valuable customers, and back-end programs for
maximizing the value of proven long-term customers.
 The Curse of Irrelevant
Advertising
Junk mail is just poorly targeted direct mail
The problem is not too much advertising but that too
little of it is relevant to any particular consumer.
Since advertising noise levels have made it increasingly
difficult to differentiate brands and retail merchandise
buyers have become overwhelmed with the selection
manufacturers have shifted their marketing budgets
drastically from advertising to promotional discounts
and slotting allowances
To break through the barrage of contemporary
advertising, smart manufacturers are using customer
information technologies to target promotional and
marketing activity to ever smaller market segments
another form of owning the customer.
Advertisers are looking for new ways to reach individuals
more effectively through “narrowcasting” rather than
traditional broadcast media like TV commercials and
saturation newspaper ads. Examples: In-store coupons,
and special monitors that display advertisements in
doctor’s offices, cash-register waiting lines, and airport
lounges and interactive kiosks.
 A New Balance of Power

In a jumbled information economy of niche players and electronic shoppers, only one thing is certain: the current revolution in customer
information technology is fundamentally changing the nature of competition.

The balance of power between large and small

The marketing future will undoubtedly look different in
companies will change. As customer information
another respect as well: customer information
technology becomes more prevalent, only those
technologies will change the relative roles of retailers,
companies that can invest the resources and show
manufacturers, and media companies.
technological leadership will succeed.