Chapter 14

Marketing
Strategies for
the New
Economy

McGraw-Hill/Irwin Copyright 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
 Does Every Company Need
a New-Economy Strategy?
New economy means the industries that:
Fuel the development of or participate
significantly in electronic commerce and the
Internet,
Develop and market computer hardware and
software, and
Develop or provide any of the growing array
of telecommunications services.

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 Does Every Company Need
a New-Economy Strategy?
Long-term prospects for doing business in
the new economy are enormous.
Nearly every company needs to examine
how it will be affected by and can take
advantage of new technologies.
The fact that ones competitors will surely
develop and deploy such strategies is a
further argument for doing so.

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 The Inherent Advantages and
Disadvantages of the New Economy
Syndication involves the sale of the same
good to many customers, who may then
combine it with information from other
sources and distribute it.
Originator
Syndicator
Distributor
Really Simple Syndication (RSS)

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 The Inherent Advantages and
Disadvantages of the New Economy
Why is syndication important?
It delivers informational goods, rather than
tangible goods.
The syndication process can be automated
and digitized, enabling syndicated networks to
be created, expanded, and flexibly adapted
far more quickly than would be possible in the
physical world.
Syndication via the Internetand via mobile
phones or other mobile devicesopens up
endless opportunities for marketers.
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 The Inherent Advantages and
Disadvantages of the New Economy
Increasing returns to scale of network
products
The characteristic of informational networks
a product becomes more valuable as the
number of users increasesis often called a
positive network effect, or network externality.
This characteristic has led to the seemingly
crazy strategy of giving ones Internet product
away for free, often a strategy of choice for
new-economy marketers!
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 The Inherent Advantages and
Disadvantages of the New Economy
Increasing returns to scale of network
products
Companies that can identify and exploit
opportunities where they can benefit from the
increasing returns to scale that result from
positive network effects can sometimes grow
very quickly on relatively modest investment.
The social networking phenomenon.
The question of cash flow.

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 The Inherent Advantages and
Disadvantages of the New Economy
The ability to efficiently personalize and
customize market offerings
Collaborative filtering
Rules-based personalization
Customization techniques, which are user-
driven instead of marketer-driven, allow users
to specify the nature of what is offered to
them.

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 The Inherent Advantages and
Disadvantages of the New Economy
Disintermediation and restructuring of
distribution channels
Disintermediation: The Internet makes it
possible for marketers to reach customers
directly, without the expense or complication
of distribution channels.
Deciding to disintermediate or restructure
ones channel should not be done lightly.

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 The Inherent Advantages and
Disadvantages of the New Economy
Global reach, 24 x 7 access, and
instantaneous delivery
Global reach is a reality; making products and
services available 24 hours per day, seven
days per week, 52 weeks per year; and, in
some cases, providing instantaneous delivery.

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 The Inherent Advantages and
Disadvantages of the New Economy
Are these new-economy attributes
opportunities or threats?
Most marketers can choose to take
advantage of one or more of the benefits
offered by new-economy technologies.
To that extent, these technologies constitute
opportunities available to marketers who
employ them.
They also raise complex ethical issues.

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 The Inherent Advantages and
Disadvantages of the New Economy
For most products, price, over the long
run, usually is not far from variable cost.
If variable cost is zero, will prices drop to
near zero, too?
Few barriers to entry.
Many Internet strategies are easily
imitated.

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 The Inherent Advantages and
Disadvantages of the New Economy
Defenses
The patent and copyright system.
Versioning: Marketers who determine which
features will be valuable to some customers,
but of little value to others, can package and
repackage information differently and serve
market segments with margins that need not
fall to zero.

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 The Inherent Advantages and
Disadvantages of the New Economy
First-mover advantage: fact or fiction?
In the Internet gold rush in the late 1990s, the
key to Internet success was said to be first-
mover advantage.
Being the first mover can bring some potential
advantages, but not all first movers are able
to capitalize on those advantages.

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Developing a New-Economy Strategy:
a Decision Framework
Marketing applications for new-economy
tools
The six-stage consumer experience process.

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A Customer Experience Model for New-Economy
Marketing Decision Making

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Developing a New-Economy Strategy:
a Decision Framework
Product promotion and brand building
tools
Search, e-mail marketing, blogs, promotional
sites, and banner advertising.
Mobile advertising

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Developing a New-Economy Strategy:
a Decision Framework
Product promotion and brand building
tools (cont.)
The fastest growing of these is search.
The paid inclusion model and search engine
optimization.
E-mail marketing is also on the rise.
Opt-in e-mail and permission marketing.
Viral e-mail.
Promotional sites
Use of affiliate schemes and aggregators.
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Developing a New-Economy Strategy:
a Decision Framework
Product promotion and brand building
tools (cont.)
Banner advertising includes rich media;
cliffhangers; superstitials; streaming audio;
and vFlash.
A way to make Web advertising more
measurable is to have advertisers pay for
performance, rather than for placement,
regardless of the type of ad employed.

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