Revisiting marketing in the digital age

what is outside-in marketing based on? The marketing mix is a classic tool to help plan what to offer and how to offer to the customers. E...

what is outside-in marketing based on? The marketing mix is a classic tool to help plan what to offer and how to offer to the customers. Essentially, there are four P's: product, price, place, and promotion. Product is often developed based on customers' needs and wants, captured through market research. Companies control the majority of product decisions from conception to production. To establish a selling price for the product, companies use a combination of cost-based, competition-based, and customer value based pricing methods. Customers' willingness to pay, estimated in consumer value based pricing, is the most important input that customers have in connection with pricing.

Once companies decide what to offer (product and price), they need to decide how to offer (place and promotion). Companies need to determine where to distribute the product with the objective of making it conveniently available and accessible to customers. Companies also need to communicate the information about the product to the target audience through various methods such as advertising, public relations, and sales promotions. When the four P's of the marketing mix are optimally designed and aligned, selling becomes less challenging as customers are attracted to the value propositions.

In a connected world, the concept of marketing mix has evolved to accommodate more customer participation. Marketing mix (the four P's) should be redefined as the four C's (co-creation, currency, communal activation, and conversation).

In the digital economy, co-creation is the new product development strategy. Through co-creation and involving customers early in the ideation stage, companies can improve the success rate of new product development. Co-creation also allows customers to customize and personalize products and services, thereby creating superior value propositions.

The concept of pricing is also evolving in the digital era from standardized to dynamic pricing. Dynamic pricing setting flexible prices based on market demand and capacity utilization—is not new in some industries such as hospitality and airlines. But advancement in technology has brought the practice to other industries. Online retailers, for instance, collect a massive amount of data, which allows them to perform big-data analytics and in turn to offer a unique pricing for each customer. With dynamic pricing, companies can optimize profitability by charging different customers differently based on historical purchase patterns, proximity to store locations, and other customer- profile aspects. In the digital economy, price is similar to currency, which fluctuates depending on market demand.

The concept of channel is also changing. In the sharing economy, the most potent distribution concept is peer-to-peer distribution. Players such as Airbnb, Uber, Zipcar, and Lending Club are disrupting the hotel, taxi, auto rental, and banking industries, respectively. They provide customers easy access to the products and services not owned by them but by other customers. The rise of 3-D printing will spur this peer-to-peer distribution even more in the near future. Imagine customers wanting a product and in a matter of minutes receiving the product printed in front of them. In a connected world, customers demand access to products and services almost instantly, which can only be served with their peers in close proximity. This is the essence of communal activation.

The concept of promotion has also evolved in recent years. Traditionally, promotion has always been a one-sided affair, with companies sending messages to customers as audiences. Today, the proliferation of social media enables customers to respond to those messages. It also allows customers to converse about the messages with other customers. The rise of customer-rating systems such as TripAdvisor and Yelp provide a platform for customers to have conversations about and offer evaluations of brands they have interacted with.

With a connected marketing mix (the four C's) companies have a high likelihood of surviving in the digital economy. However, the paradigm of selling needs to change as well. Traditionally, customers are passive objects of selling techniques. In a connected world, the idea is to have both sides actively obtain commercial value. With increased customer participation, companies are engaging customers in transparent commercialization.

From Customer Service Processes to Collaborative Customer Care

Prior to purchase, customers are treated as targets. Once they decide to buy, they are considered kings in a traditional customer-service perspective. Shifting to the customer-care approach, companies view customers as equals. Instead of serving customers, a company demonstrates its genuine concern for the customer by listening, responding, and consistently following through on terms dictated by both the company and the customer.

In traditional customer-service, personnel are responsible for performing specific roles and processes according to strict guidelines and standard operating procedures. This situation often puts service personnel in a dilemma over conflicting objectives. In a connected world, collaboration is the key to customer-care success. Collaboration happens when companies invite customers to participate in the process by using self-service facilities.

Integrating Traditional Marketing and Digital Marketing

Digital marketing is not meant to replace traditional marketing. Instead, the two should coexist with interchanging roles across the customer path. In the early stage of interaction between companies and customers, traditional marketing plays a major role in building awareness and interest. As the interaction progresses and customers demand closer relationships with companies, digital marketing rises in importance. The most important role of digital marketing is to drive action and advocacy. Since digital marketing is more accountable than traditional marketing, its focus is to drive results whereas traditional marketing's focus is on initiating customer interaction.

 The essence of Marketing is to recognize the shifting roles of traditional and digital marketing in building customer engagement and advocacy.

With increased mobility and connectivity, customers already have limited time to consider and evaluate brands. As the pace of life accelerates and their attention span drops, customers experience difficulty in focusing. But across multiple channels online and offline customers continue to be exposed to too much of everything: product features, brand promises, and sales talk. Confused by too-good-to-be-true advertising messages, customers often ignore them and instead turn to trustworthy sources of advice: their social circle of friends and family.

Companies need to realize that more touch-points and higher volume in messages do not necessarily translate into increased influence. Companies need to stand out from the crowd and meaningfully connect with customers in just a few critical touch-points. In fact, just one moment of unexpected delight from a brand is all it takes to transform a customer into the brand's loyal advocate. To be able to do so, companies should map the customer path to purchase, understand customer touch-points across the path, and intervene in select touch-points that matter. They should focus their efforts intensifying communications, strengthening channel presence, and improving customer interface to improve those critical touch-points as well as to introduce strong differentiation.

Moreover, companies need to leverage the power of customer connectivity and advocacy. Nowadays, peer-to-peer conversation among customers is the most effective form of media. Given this lack of trust, companies might no longer have direct access to target customers. As customers trust their peers more than ever, the best source of influence is the army of customers turned advocates. Thus, the ultimate goal is to delight customers and convert them into loyal advocates.
 One of the earliest and widely used frameworks to describe the customer path is AIDA: attention , interest , desire , and action. Unsurprisingly, AIDA was coined by an advertising and sales pioneer, E. St. Elmo Lewis, and was first adopted in the fields of advertising and sales. It serves as a simple checklist or a reminder for advertising executives when they design advertisements and for sales executives when they approach prospects. The advertising copy and sales pitch should grab attention, initiate interest, strengthen desire, and ultimately drive action. Similar to the four P's of marketing (product, price, place, and promotion), AIDA has undergone several expansions and modifications.

Derek Rucker of the Kellogg School of Management offers a modification of AIDA that he calls the four A's: aware , attitude , act , and act again. In this more recent framework, the interest and desire stages are simplified into attitude and a new stage, act again , is added. The modified framework aims to track post-purchase customer behavior and measure customer retention. It considers an action of repurchase as a strong proxy for customer loyalty.

The 4 A's structure is actually a concept that's simple to illustrate the basic channel-like process which consumers go through whilst evaluating providers as part of their factors to consider tools. Consumers comprehend a brandname (mindful ), like or don't prefer the brand (attitude ), pick whether to buy it (act ), and see whether or not the maker name is actually really worthy of a recurring purchase (act once again ). These people move to subsequent stage if it's treated as an specific route, the number of consumers looking into the process continues to diminish. People who just like the manufacturer label must have already been recognized as a result of the brand well before. Individuals who choose the manufacturer label must have appreciated the brand earlier. And so on. Similarly, whenever dealt with as a brandname route, the actual wide variety of providers which happen to be considered over the route continues to decrease. For illustration, the actual number of organizations individuals are less than the sheer amount of businesses people invest in, which frequently isn't nearly as much as the absolute quantity of companies people realize.

The four A's also reflects a primarily personal path. The major influence on customers' decision making as they move across the path comes from companies' touch-points (e.g., TV advertising at the aware phase, salesperson at the act phase, service center at the act again phase). This is within a company's control.

Customers who need more information will search for it and connect with other customers with better knowledge and more experience. Depending on the bias shown during the conversation, the connection either strengthens or weakens the brand's initial appeal. The new customer path should also recognize this connectivity among customers.

Based on these requirements, the customer path should be rewritten as the five A's:

 customers are passively exposed to a long list of brands from past experience, marketing communications, and/or the advocacy of others. This is the gateway to the entire customer path. A customer who has previous experience with a brand will likely be able to recall and recognize the brand. Advertising driven by companies and word of mouth by other customers is also a major source of brand awareness.

Aware of several brands, customers then process all the messages they are exposed to creating short-term memory or amplifying long-term memory and become attracted only to a short list of brands. This is the appeal phase. Memorable brands with wow factors are more likely to enter and even go higher on the short list. In highly competitive industries where brands are abundant and products are commoditized (e.g., the consumer packaged goods categories), brand appeal must be stronger. Some customers respond to brand appeal more than others. Youth, for example, are usually among the first to respond. That is why they are more likely to be early adopters of new products.

traditional marketing

Prompted by their curiosity, customers usually follow up by actively researching the brands they are attracted to for more information from friends and family, from the media, and/or directly from the brands. This is the ask stage. Customers can either call friends for advice or evaluate the short list themselves. When they decide to research some brands further, they might search online product reviews. They might also contact call centers and talk to sales agents for more information. They might also compare prices and even try out products at stores. Today, the ask is further complicated by the integration of the digital (online) and physical (offline) worlds. As customers browse through products in-store, they might also search for information on their mobiles. Since customers may go to multiple channels for more information, companies need to have a presence at least in the most popular channels.

At the ask stage, the customer path changes from individual to social. Decisions will be made based on what customers take away from the conversation with others. The brand appeal needs confirmation from others to allow the path to continue. Brands need to trigger the right amount of customer curiosity. When the curiosity level is too low, it means that the brand appeal, although existent, is rather low. But when the curiosity level is too high and customers are “forced” to ask too many questions, customers are confused about the initial message they encounter.

If they are convinced by further information in the ask stage, customers will decide to ac t . It is important to remember that the desired customer actions are not limited to purchase actions. After purchasing a particular brand, customers interact more deeply through consumption and usage as well as post-purchase services. Brands need to engage customers and make sure that their total ownership and usage experience is positive and memorable. When customers have problems and complaints, brands need to pay attention and make sure the customers receive solutions.

Over time, customers may develop a sense of strong loyalty to the brand, as reflected in retention, repurchase, and ultimately advocacy to others. This is the advocate stage. Active advocates spontaneously recommend brands they love without being asked. They tell positive stories to others and become evangelists. But most loyal advocates are passive and dormant. They need to be prompted by either a query or a negative advocacy. When they do encounter such a prompt, they feel obliged to recommend and defend the brands they love. Since loyal advocates take risks to recommend certain brands, they are also more likely to buy more of those brands in the future.

The stages in the five A's are not always straightforward and are sometimes even spiral, similar to the way women buy. With attention deficit, customers might skip a certain phase along the customer path. For instance, a customer might not be attracted to a brand at first, but a recommendation from a friend drives the customer to eventually purchase the brand. It means that the customer skips appeal and goes directly from aware to ask. On the other hand, it is also possible that some customers skip ask and impulsively act solely based on the initial awareness and appeal.

In other cases (e.g., in scarce and highly popular categories), loyal advocates might not necessarily be actual buyers. Tesla products, for example, are well advocated by non-buyers. This means that customers skip act and go directly to advocate. The new customer path is not necessarily a fixed customer funnel, and customers do not necessarily go through all the five A's. Thus, from aware to advocate , the path might expand or narrow in terms of the number of customers going through each stage.

The new customer path might also be a spiral, in which customers return to previous stages, creating a feedback loop. A customer who asks questions might add new brands to the “awareness list” or find a particular brand much more appealing. A customer who encounters product issues during usage might research more about the product before deciding whether to keep using it or to switch to another. Since the path might be a spiral, the number of brands considered throughout the customer path might also fluctuate across the five A's.

The time customers spend on their path to purchase also varies across industry categories depending on the perceived importance of the categories. In consumer goods categories, for example, aware and appeal occur almost simultaneously. Thus, strong brand awareness without equally strong brand appeal in those categories usually leads to nothing. The time spent on ask is also typically very short. Spontaneous discovery is very common. Customers instantly and impulsively decide which brands to choose as they stroll down the grocery aisles. Most customers catch only a glimpse of each considered brand in-store and typically do not research further. For big-ticket items such as real estate and cars, on the other hand, customers are willing to spend more time asking questions and doing extensive research before purchasing the items.

The five A's framework is a flexible tool that is applicable to all industries. When used to describe customer behavior, it draws a picture that is closer to the actual customer path. It allows for cross-industry comparisons, which reveal insights into industry characteristics. It also provides insights into a company's relationship with customers in comparison with its competitors. When a company, for example, finds that the most common path its customers often take is very different from the typical customer path in its industry, the company might discover either an authentic differentiation or a hidden customer experience problem.

Driving from Awareness to Advocacy: The O Zone (O3 )
The ultimate goal of Marketing is to drive customers from awareness to advocacy . In general, there are three main sources of influence marketers can use to do so. A customer's decisions across the five A's are usually influenced by a combination of their own influence, others' influence, and outer influence. Let us call them the O Zone (O3 ).

The outer influence comes from external sources. It is purposely initiated by brands through advertising and other marketing communications. It may also come from other customer interfaces such as sales force and customer service staff. From a brand's standpoint, outer influence is still manageable and controllable. The message, the media, and the frequency can be planned. The overall customer touchpoints can be designed, although the resulting customer perceptions may still vary depending on how satisfactory the experience is.

Similarly, others' influence also comes from the external environment. Typically, it comes from a close circle of friends and family as word of mouth. Others' influence can also come from a broader but independent community to which customers belong. For example, customers may be influenced by conversations they heard on social networking platforms. Customers may also be influenced by communal rating systems such as TripAdvisor and Yelp. Not all sources of others' influence are equal. Among many segments, the youth, women, and netizens (YWN) are the most influential. Others' influence coming from them is often the major driver of purchase.

Despite a brand's effort, it is essentially difficult to manage and control the outcome of others' influence. The only way for a brand to do so is through community marketing. Companies cannot directly control the conversation within the community, but they may facilitate discussion with the help of loyal customers.

On the other hand, own influence comes from within oneself. It is a result of past experience and interaction with several brands, personal judgment and evaluation of the brands, and ultimately individual preference toward the chosen brand(s). Often, personal preference (own ) is swayed toward certain brands by word of mouth (others' ) and advertising (outer ). Indeed, the three major sources of influence are always intertwined.

Outer influence often reaches customers first. If a brand successfully triggers conversation with Outer influence, it is usually followed by others' influence. Ultimately, the way these two sources of influence interact will shape customers' own influence.

Any particular customer is usually influenced by all three types, albeit with different proportions. Some customers have stronger personal preferences and are not influenced too much by an advertisement or a friend's recommendation. Some rely heavily on the recommendation of others, and some believe in the advertisers. Despite individual variations, today's customers rely more on others' influence than their own and outer influence for reasons we have already discussed. Research by Nielsen in 2015 reveals that 83 percent of respondents in 60 countries rely on friends and family as the most trusted source of “advertising,” and 66 percent pay attention to the opinions of others posted online.

Across the five A's, customers are most open to influence during the ask and act stages. In ask , customers seek advice and absorb as much information as possible from others' and outer influence with regard to a short list of brands. The ask stage serves as a window of opportunity for marketers to increase brand favorability. In act , customers shape their own perception of brands over time. Since they are no longer wary of outer pressure to buy at this stage, they have an open mindset. Brands that offer stronger customer experience during consumption and usage will be the preferred brands.

The level of experience that customers have also determines their customer path. First-time buyers of a product category typically go through the entire five A's and rely a lot on outer influence. Thus, many first-time buyers end up buying brands with the highest share of voice.

As they become more experienced after a few rounds of purchase, they rely more on others' , sometimes skip the appeal stage, and perhaps switch brands. The most experienced customers usually have stronger own influence. When they have finally found their favorite brands, they will skip most stages in the five A's and continue to use the brands perpetually until the brands disappoint them.

The O3 is another tool that helps marketers to optimize their marketing efforts. When marketers manage to identify the importance of outer , others' , and own influence, they will be able to decide which activities to focus on. When outer influence is more important than the rest, marketers can focus more on marketing communications activities. On the other hand, when others' influence is the most important, marketers should rely on community marketing activities. But when own influence is the most important, marketers should put more emphasis on building the post-purchase customer experience.



Digital Leadership Marketing Strategy
Thought Leadership Zen: Revisiting marketing in the digital age
Revisiting marketing in the digital age
Thought Leadership Zen
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