Demise of the Four PsIncreasingly frictionless commerce requires a fundamental change in marketingBy Don Tapscott In the digital economy, the wealth embedded in customer relationships is now more important than the capital in land, plants, buildings, and even bank accounts. Relationships are now assets. This "relationship capital" accumulates and provides a new foundation for marketing and sales revenue. A firm's ability to engage customers, suppliers, and other partners in mutually beneficial value exchanges determines its relationship capital. The customer-facing aspects of relationship capital cause a profound rethinking of marketing. For the first time, companies can forge two-way, interactive, personalized relationships with all customers on a mass scale. THE RISE OF DEPTHWhile the virtue of deep relationships was always self-evident in theory, fostering them in reality wasn't practical. But now the ubiquitous, cheap, interactive Internet coupled with enormous, low-cost databases enables producers to develop a meaningful direct relationship with each customer. Sellers and buyers engage in ongoing dialog. Customers have come to expect you to tailor each iteration of your product to their needs and wants. These deep relationships are possible because of the rise of what I call the business web, or b-web. For most of the past century, the starting point for strategic thinking was the individual corporation. No longer. It is being replaced by the b-web, which is any system of suppliers, distributors, service providers, infrastructure providers, and customers that use the Internet as the basis for business communications and transactions. OPENED COLLABORATIONThe key to competing in the digital economy is business model innovation that exploits the power of b-webs. Many other names have been given to groupings of collaborating companies: clusters, swarms, virtual corporations, keiretsu, outsourcing partnerships, business ecosystems, and econets, for example. But each of these names refers to a unique form of a phenomenon that is far broader, as universal as the concept of the corporation itself. One company usually directs the activity in each web, and that lead company enjoys the lion's share of the web's profits. But the other participants are vitally important; each one contributes according to its core competencies, the things that it does best. B-webs are rewriting the rules of competitive engagement. Although b-web members must cooperate for the web to succeed, they also often compete vigorously with one another. On top of this, the webs themselves compete with other webs. THE FOUR PsThis new form of business architecture completely changes marketing. Every business school graduate and marketing manager has learned the four Ps of marketing: product, price, place, and promotion. The paradigm was one of control, simple and unidirectional: firms market to customers. We create products and define their features and benefits; set prices; select places to sell products and services; and promote aggressively through advertising, public relations, direct mail, and other in-your-face programs. We control the message. B-webs transform all these activities. Products. Products are now mass customized, service intensive, and infused with the knowledge and individual tastes of customers. Companies must constantly innovate, and product life cycles collapse. Through b-webs, customers co-create products and services. Products are becoming experiences. The old industrial approaches to product definition and product marketing die. Price. Enabled by online marketplaces, dynamic markets and dynamic pricing challenge vendor-fixed pricing. As customers gain access to systems that allow them to state what they're willing to pay and for what, we question even the concept of a "price." As John Svoikla points out in Red Herring, price is a crude measure. It reflects in a single number all the attributes that customers may value in a product: time, effort, craftsmanship, innovation, fashion, status, rarity, long-term value, and so on. Customers will offer various prices for products depending on conditions specified: If you deliver this afternoon, I'll pay A. If I can buy this quantity, I'll pay B. I'll accept certain defects and pay C. If someone else will pay D, then I'll pay E. Buyers and sellers exchange more information and pricing becomes fluid. Markets, not firms, will "price" products and services. Place. Every b-web competes in two worlds: a physical world, or "marketplace" and a digital world of information, or "marketspace." B-webs enable firms to focus on the marketspace, by creating not a great Web site but a great b-web and relationship capital. Within a decade, the majority of products and services in many developed countries will be sold in the marketspace. A new frontier of commerce is the "marketface," the interface between the marketplace and marketspace. For example, some aggregations have both online presence and physical stores (bricks and clicks). Gap Inc. customers who buy clothes online can return clothes to a nearby Gap store. Or they can browse the Web at their leisure and take printouts of desired items to the store. Gap has even put "Web lounges" in some stores where customers can place orders. Consumers like the greater choice and convenience. Promotion. Advertising, promotion, publicity, and public relations are archaic concepts. They exploited unidirectional, one-to-many, and one-size-fits-all media to communicate "messages" to faceless, powerless customers. The b-web upends control. It reduces friction among customers and between you and your customers. They often have access to near-perfect information about products, which shifts the power toward them. Customers, no longer external entities, participate in your firm's b-web through multidirectional, one-to-one, and highly tailored communications media. They control the marketing mix, not you. They choose the medium and the message. Rather than receiving broadcast images, they do the casting. Rather than getting messages from earnest PR professionals, they create "public opinion" online with one another. Marketers are losing control. CHANGE OF PERCEPTIONB-webs change most aspects of marketing. When customers participate in a b-web, everybody communicates - in multiple directions - and marketers can no longer control customer perceptions. DON TAPSCOTT [dtapscott@itemus.com] is chair of itemus inc. (www.itemus.com) and coauthor of Digital Capital (Harvard Business School Press, 2000). |
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