Mass Marketing to Micro Marketing: Democratization of Goods

Executive Summary

"Marketing is a management process directed at satisfying customer needs and wants through an exchange process."

~Smith, Bucklin & Associates

Thus, the very essence of marketing is defined to be satisfaction of customers. Everyone wants to be treated like an individual. Customers want products that serve their exact needs. Product innovation, instead of being a process of designing standardized products born from inherent compromises, is transformed into a quest for the perfect match between product and individual buyer. Ensuring this for all your targeted customers is micromarketing. Micromarketing is the practice of tailoring products and marketing programmes to suit the taste of specific individuals and locations. Thus, micromarketing as a concept is not new to marketing. But it has changed its form evolving perennially in a circle of marketing orientations.

In today’s competitive markets, many marketing organizations are considering how micromarketing efforts can directly impact their bottom line by achieving greater results with a fixed marketing budget. The challenge is that micromarketing requires a new level of understanding of customers, prospects, and the demographic makeup of targeted areas. Marketers depend on marketing research to determine what consumers want and what they are willing to pay for.

Technology is available today to market to people on an individual basis . Marketers are faced with the challenge of influencing the decision making of retailers and reaching a consumer audience that is more fragmented than ever. Companies are rediscovering their customer. The definition of customer extends to include both retailers as well as end users. Micromarketing is facilitated using new techniques like customer intimacy, experiential marketing and storytelling. We analyze the possibilities of theses and the future direction and momentum of micromarketing.

Micromarketing : D emocratization of goods

Cell phones that play broadcast-quality music videos and weather forecasts. Video games with ad messages that can be swapped out online in real time. Streaming audio. Pod casting. Text messages. Instant messaging

Historical Perspective

The marketing landscape changed dramatically during the last century. Since the 1990s we see that retailers have been increasingly taking advantage of the opportunities offered by improved customer information to customize the marketing mix at the store level.

In around 1900, marketing was characterized by a great number of often privately owned small stores. Storekeepers applied local marketing in a natural way. Storekeepers typically owned one or two independently operated stores. The storekeeper knew all customers and therefore could tailor his products and marketing programs to individual customer needs. Storekeepers had to deal with powerful manufacturers. Management focused mainly on products and production.

Markets became more saturated by 1930s. Managers shifted their focus from “production” and “the product” to the selling of products and adopted the selling concept. The selling concept centralizes methods and techniques for selling products and services. This concept dominated until the early 1950s.

With the occurrence of higher degrees of market saturation, the marketing concept was introduced. Pursuit of economies of scale led to a change from an individual- to a mass approach. Chains started to emerge and store size increased dramatically. Chains’ increased attention for positioning resulted in a focus on similarity between stores. The idea was that all stores should sell the same products and have the same prices and promotions (mass marketing). On the manufacturer side we see an increased focus on retailer preferences and needs.

Lately, there has been the adoption of the customer concept. The customer concept implies that firms initiate relationships with selected individual customers with whom superior customer values are designed, offered, redefined and realized in close cooperation with other partners in the marketing system in order to realize long-term profits. As a consequence manufacturers pay more attention to positioning. This raises the question of how customer value should be delivered. In the past, customers judged the value of a product or service on the basis of a combination of quality and price. Today’s customers consider aspects such as convenience of purchase, after-sales service, dependability, etc. Firms that strive for operational excellence want to be leaders in price and convenience. Hence, R&D is very important for this discipline. Marketing in these firms serves to promote the acceptance of innovations.

Since the concept was first introduced, it as been modified, repackaged, and renamed as "customer focus", "the marketing philosophy", "market driven", "customer intimacy", and "the marketing concept".

Firms that adopt a customer intimacy strategy to deliver superior customer value tend to customize products and services to the needs of individual customers.

Circle of Micromarketing

The introduction of scanning and customer information systems in the 1990s allowed retailers to map the types of customer a store attracts. Retailers now have detailed knowledge about what their consumers buy and how consumers react to the marketing instruments. This information is used to further adapt stores to customer needs. Thus, we see that some retailers have returned to the situation of 100 years ago when store keepers customized individual stores to customer needs.

Besides, manufacturers also may know the store’s customers. This situation is entirely new and is an important difference with the situation 100 years ago. Manufacturers use this opportunity to give store level advice on the marketing instruments. The shifted power balance requires manufacturers to focus on optimization at the category-level instead of optimization at the brand level .The consequences of micromarketing for the retailer and manufacturer marketing strategies are different. For the retailer micromarketing fits within the marketing concept. That is, the retailer adapts his product to fulfill the needs of the store’s customers. For the manufacturer, the application of local marketing implies a shift from the marketing concept to the customer concept. Adoption of the customer concept requires customization at the individual store level.

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Facilitators to Micromarketing and the Decline of Mass marketing

1. Increase in concentration
2. Power
3. Sales and customer information
4. Marketing and management

Concentration

Retail chains driven by economies of scale started to grow in the 1920s. Major changes in retailing started with the introduction of self service in the 1940s. This introduction marks the start of the emergence of supermarkets, characterized by a dramatic increase over the years in size, turnover, and merchandise sold. Parallel to the increase in size, there was an increased concentration in retail organizations. An ongoing process of national and international mergers and takeovers has resulted in a market that is dominated by a few firms leading to an increase in market share.

Sales- and customer information

The introduction of scanning in the 1970s marks a fundamental change in available information. Before scanning, data collection focused on reporting the current state. Scanning allowed for a more accurate and detailed data collection. To analyze the dramatic data explosion, supermarkets introduced customer cards that link customers to sales. List brokers also started to collect detailed customer information on a large scale.

Power

Power is the ability of one channel member to control the decision variables in the marketing strategy of another member in a given channel at a different level of distribution i.e. it refers to influencing the other’s conduct. There has been a power shift from manufacturer to retailers. The possible causes include

- concentration among retailers
- consolidation into fewer and bigger stores
- improved information systems
- the fragmentation of consumer markets
- improved quality of retail management personnel
- a decline in manufacturers’ advertising

Thus, although changes have led to a situation where retailers exert more control at the instrument level, this has not been translated into an increase in retailer performance. This phenomenon can be explained by the fact that manufacturers took actions to defend their position. The possible actions a manufacturer may take include:

- reducing the competition
- reinforcing the position toward the consumer
- cooperating with the retailer
- circumventing the retailer

Reinforcing the position toward the consumer: It is more difficult for retailers to circumvent the manufacturer when consumers have stronger preferences for specific manufacturer brands. Manufacturers may reinforce their position by being innovative and by striving for sustainable differentiation for their brands. Manufacturers may also choose to cooperate with the retailer.

There can be two major tools to enhance retailer cooperation:

1. Customer satisfaction assistance; an investment by a manufacturer to reduce the retailer cost of improving customer satisfaction
2. Customer satisfaction index bonus ; a lump sum monetary reward to the retailer based on some measure of customer satisfaction

Another possibility for manufacturers to defend their position is to circumvent the retailer, thus approaching consumers directly (direct marketing), or setting up vertical-marketing systems.

We see that all these act towards strengthening customer satisfaction directly or indirectly and the most important ingredient of customer satisfaction is the customization of the goods and services provided. Hence, marketers today are preoccupied with customizing retailing policies to exploit differences across stores in consumer characteristics and the competitive environment. This is Micromarketing. It includes local marketing and individual marketing. Individual marketing entails the products and marketing programs being tailored to the needs and preferences of individual customers. Local marketing lies between these two extremes and implies segmentation on a local level.

Application of the concept

This consumer focus can be seen as a process that involves three steps. First customer wants are researched, then the information is dissiminated throughout the firm and products are developed, then finally customer satisfaction is monitored and adjustments made if necessary.

Techniques that firms use to understand the customer include:

- Quantitative marketing research - such as; surveys and questionnaires
- Qualitative marketing research - such as; focus groups and advisory panels
- Market research and industry research - such as; Porter 5 forces analysis
- Face-to-face meetings with customers
- Face-to-face meetings with frontline staff - sales reps, clerks, and receptionists
- Customer complaints department
- Customer hotlines - Web and telephone
- Visits to customers' facilities
- Frequent user programs and databases
- User groups - Beta testing
- Conferences

A marketing oriented firm will typically show the following characteristics:

- Extensive use of various marketing research techniques
- Broad product lines
- Emphasis on a product's benefits to customers rather than on product attributes
- Use of product innovation techniques,such as brainstorming, concept testing, force-field analysis.
- The offering of ancillary services like credit availability, delivery, installation, and warranty
- Customer satisfaction and complaint monitoring procedures, including; exit interviews, customer complaints database, and Web and telephone information hotlines.
- Organizational structure in which the marketing manager reports directly to the CEO.

Micro-Advertising ?

For marketers, the evolution from mass to micromarketing is a fundamental change driven as much by necessity as opportunity. Marketers are no longer able to reach a “mass market.” Even if they could, there is no longer a “one-product-fits-all” mentality that would appeal to consumers. Thus, traditional marketing is much less powerful. With thousands of print, radio and cable outlets, the market is much more segmented. Marketers have to move toward micro-marketing. Tools are evolving. Also, as companies consolidate and are getting larger, it impacts the kind of marketing they can do.

Advertising was about to whither into insignificance as technology dictates that companies must turn to constant innovation and full-spectrum marketing to build an enduring relationship with customers. Future consumers would not have to sort our conflicting assertions made by manufacturers and merchants but will rely on independent sources. Consumers would increasingly look at such factors as company reputations, personal recommendations and e-mail conversations and less on traditional advertising. Third-party information sources accessible by home computer would barge the advertising industry into insignificanc e as more and more products were bought from the home, a trend exacerbated by the emergence of hdtv, broad-band fibre connections, and other new media technologies.

What the new media technologies, from VideoCarts in supermarkets to electronic networks up to and including fully emersive vr are doing is creating a new media ecosystem within which advertising will rapidly speciate into new varieties. Furthermore, it discounts the historical trend that computers are following towards becoming cheap, commodity articles rather than 'high tech products'.

Companies are taking measures to make their supply chain more efficient. Most marketing research is focused on what consumers buy. Understanding needs of retailers is equally important but far more difficult to do because of paucity of data.

It used to be that B2B companies emulated the marketing of consumer packaged goods companies. Now, consumer companies are learning the importance of channel relationships from the B2B companies.

Marketing is becoming stories about brands. The history of brands over the past 100 years has gone through four stages.

- Brands as symbol of quality
- Brands represented a collection of benefits for the consumer
- Brands portrayed as a lifestyle
- Brands have become a story, a stylized story. People don’t want to be a segment; they want a story unique to them.

Advertising as an industry is not going away, but it is shifting to the new channel.

Contextual Advertising

Live or die, the Do-Not-Call-Registry should be viewed as the tipping point for the end of interruption marketing. Consumers do not wish to be bothered. Tyranny of choice is a key inquiry marketing driver. The cumulative effect is that consumers are weary of the many choices. Along came the Internet. Search engines made self-service product research possible. Two elements: overwhelming choice and the arrival of the Internet and search engines produced a profound and fundamental shift in the search behavior. The best you can hope for in this new environment is to be visible and available while they self-educate. The marketers' job is to ensure their brand is in the seeker's path, be it a search engine or an article on a niche topic.

The days are here for contextual advertisements. A contextual ad is the advertisement that dynamically appears on a Web site. It is displayed on a content page that contains relevant material. The ad serving is automated, based on algorithmic relevancy consideration. Advertising on a website is targeted to the specific individual who is visiting the Web site.

This "consumer democracy" is the rise of choice, and the decline of mass marketing.

Banner Advertising

Banner ads are micromarketing component if they're fine-tuned to a particular page's content, and only when they're an integral part of the conversation on that page. But customizing banner creative on an ongoing basis for hundreds of pages of ever-changing Web content is unrealistic. That's part of the reason banner ads perform poorly.

Stigma

Regarding the perils in direct marketing like blocking email advertisements and joining “do not call” lists, we can say that it is making companies more efficient. It fosters focus in their marketing approach. They now need to reach the customers who want to be reached. Word-of-mouth advertising is the single most powerful method of getting the word out. Advertising should be used to create awareness. Customers are now taking a more active role in building awareness on their own through their own research. This requires something more subtle, like a public relations campaign rather than traditional advertising.

There is a growing concern over privacy. Online tracking technology allows marketers to see what someone is viewing and display targeted ads or send targeted spam that corresponds to what the consumer is interested in. The technology is way ahead of customers’ comfort levels. A key part of the discussion is that all of us are prejudiced as adults. We must wonder if our children, who have known nothing but the Internet and email, will be as concerned about privacy.

With an increasing flow of information both ways, there’s almost a caste system developing where certain customers are worth more than others. It could develop further separation between the “haves” and the “have nots.” Its class market segmentation at work. There are clear social issues and impacts. This must be tackled with due care.

Customer Relationship Management: The Future of Micromarketing

CRM enables the organization to better serve its customers through the introduction of reliable processes and procedures for interacting with those customers. It is used for personal information gathering and processing. The marketing information part provides information about the business environment. The sales force management part keeps track of customer preferences, buying habits, and demographics, and also sales staff performance. The customer service part automates some service requests, complaints, product returns, and information requests.

Functions of CRM

- Identify how each individual customer defines quality, and then design a service strategy for each customer based on these individual requirements and expectations

- Tracks customer interests and personalize product offerings accordingly

- CRM technology can track customer interests, needs, and buying habits as they progress through their life cycles, and tailor the marketing effort accordingly. This way customers get exactly what they want as they change.

- The technology can track customer product use as the product progresses through its life cycle, and tailor the service strategy accordingly. This way customers get what they need as the product ages.

- In industrial markets, the technology can be used to micro-segment the buying centre and help co-ordinate the conflicting and changing purchase criteria of its members Besides, it can be used on a large scale, has the ability to interface with users via multiple communication channels, can maintain a huge database and most importantly, is inbuilt with customer privacy considerations e.g. data encryption and the destruction of records to ensure that they are not stolen or abused.

References

- Snider, Harvard Business Review
- "The Marketing Revolution will be televised, online and on demand" by Scott Donaton, Advertising Age.