5.12 Changes in the market response


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Internet Marketing Intelligence

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Kunnskapskilden –  Internet Marketing Intelligence

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Internet Marketing Intelligence




Kunnskapskilden – Internet Marketing Intelligence
Internet Situational Analysis of 1to1 Marketing/CRM


Research Project: Internet Situational Analysis of 1to1 Marketing/CRM  from Jan Vig  at Griffith University , Australia  1999/2000



Chapter 1 Introduction/overview

Chapter 2 Search Strategy

Chapter 3 One to One Marketing and its environment

Chapter 4 Environmental Scan

Chapter 5 Market analysis

Chapter 6 Competitors Analyses

Chapter 7 SWOT

Chapter 8 Critical Success factors

Chapter 9 Segmentation, Customer analysis and target markets

Chapter 10 Business Objectives and Strategies

Chapter 11 Marketing Mix tactics and Conclusions



Chapter 5

Market Analysis



Chapter 5 Market analysis

5.1 Trends

5.1.1 Mega trends

5.1.2 Emerging Web Trends

5.1.3 1999 Web Trends

5.1.4 Where in the world is the Net taking us?

5.1.5 Future.sri.com

5.1.6 Predictions for the Web in 1999

5.1.7 Other trend forecasts

5.1.8 E-Commerce

5.1.9 Trends Technology

5.1.10 Drivers for Change – Consumers

5.1.11 Demographics

5.2 Internet statistics

5.2.1 Internetstatistic.com

5.2.2 E-Marketer STATISTIKK

5.2.3 NUA

5.2.5 Activmedia

5.2.6 Dataquest

5.2.7 Surveyn.Net – Internet User Survey #2

5.2.8 Other Statistik

5.2.9 Web shopping Statistics

5.3 One to One marketing / Relationship marketing

5.3.1 Relationship Marketing

5.3.2 1:1 marketing

5.3.3 Permission marketing

5.3.4 Power tools for 1:1

5.3.6 Critical Questions

5.3.8 The state of one to one online, part II

5.4 Customer care/ customer service

5.4.1 Customer Care Pricewaterhous & Coopers

5.4.2 Customer Relationship Management CRM

5.4.3 Customer service

5.4.4 Collect customer information

5.4.5 Customer service

5.4.6 Internet Customer Service

5.5 Personalization

5.5.1 Personalization: Marketing to one:

5.5.2 There are 4 ways to ad personalization to the web site

5.5.3 Different articles about personalization

5.6 Privacy

5.6.1 Information sources on Internet concerning privacy

5.6.2 Articles about privacy

5.7 Security

5.7.1 Different articles concerning security

5.7.2 NUA Security Issues

5.8 The Market place 1to1 after Peppers & Rogers

5.8.1 Communications and Media

5.8.2 Customer Knowledgebase

5.8.3 Mass Customization

5.8.4 Distribution and Channel

5.8.5 Organizational Structure

5.9 The future of One to One Web Technology

5.9.1 The Future of One-to-One Web Interactivity

5.9.2 The Future of One-to-One E-Mail

5.9.3 The Future of One-to-One Web Site Personalization

5.9.4 The Future of One-to-One Push

5.2.5 The Future of One-to-One Community

5.9.6 The Future of One-to-One Web Presentation and Conferencing

5.9.7 The Future of One-to-One Advertising and Promotion

5.9.8 The Future of One-to-One Web Site Tracking and Analysis

5.9.9 The future of tracking in a word: databases.

5.10 Products and customers

5.10.1 Who is buying what over the Internet?

5.10.2 Customer-business interaction

5.10.3 Business relationships and communications

5.11 Changes in the market place

5.11.1 Drivers of Change

5.11.2 Consumer Behaviour

5.11.3 Industry Response

5.12 Changes in the market response

5.12.1 Product & Service Offering

5.12.2 Relationship Marketing

5.12.3 One to One Marketing

5.12.4 Mass Customisation

5.12.5 Future Delivery Mediums

5.13 Changes in delivery mediums

5.13.1 Post

5.13.2 Fax

5.13.3 CDs and Disks

5.13.4 Kiosks

5.13.5 Pagers and PDAs

5.13.6 Telephones and Smartphones

5.13.7 Interactive TV

5.13.8 Web TV

5.13.9 Internet E-mail

5.13.10 Internet World Wide Web

5.13.11 Proprietory ISPs

5.13.12 Summary





Changes in the marketresponse


Research Project: Internet Situational Analysis of 1to1 Marketing/CRM  from Jan Vig  at Griffith University , Australia  1999/2000




Use of direct telesales is raising customers’ confidence. Home shopping, entertainment on-demand, and home banking will pave the way for using the new mediums for more complex 1to1 products and services.


Relationship Marketing is still an objective but smarter and more fickle consumers, and diverse lifestyles, will make that objective more difficult to achieve and internal capabilities are lacking. Those with strong brands feel in the most advantageous position. They continue to make significant investments in Relationship Marketing.


1 to 1 Marketing is attributed to the ideas of Don Peppers and Martha Rogers. Its aim is to understand the particular needs of individuals, and then to meet those unique needs. The objective is a

significant share of each customer’s life time purchases.


Companies saw 1 to 1 Marketing as an ideal, but thought it too difficult and non profitable. There were issues of cost justification, privacy, process complexity, lack of internal capabilities (especially with technology), and the impact on existing distribution channels.


Companies appear to be locked into the mass market paradigm. Larger companies are making significant investments in data mining, kiosks, and interactive-TV.


Mass Customisation seeks to provide cost effective 1 to 1 Marketing in mass markets. Many ideas for Mass Customisation come from Joseph Pine II. Mass Customisation embodies Rapid New Product Development. It is an holistic approach that also includes the selling and servicing activities. Design, development and production are undertaken simultaneously.


Mass Customisation uses a component approach with a product database as its foundation.

Feedback loops ensure components continue to reflect customers’ changing needs. Staff and organisations need to become market focused. New «intelligent» technology, owned by the customer, will link to 1to1 systems. Mass Customisation meets the challenges of an increasingly demanding and fragmenting customer base.


Mass Customisation will become more relevant as customers focus on added value. Service elements are likely to be the first options.


Barriers to embracing Mass Customisation include a mass marketing culture, a population that is

mostly financially unsure, legacy systems, risks of new technology, and possible compliance difficulties.


In the One to One Industry industry, many companies are using the new interactive technologies to provide customisation. In an increasingly fast paced society, «time» is becoming an important element of the marketing mix: time to market, response time, delivery time, service time, timeliness, any time, my time!


Companies have concerns about too quickly embracing the new delivery mediums. Reasons are

manifold and extend right across the business. One of the biggest questions was whether consumers will

embrace these new mediums and if they did, which ones.


Never-the-less, most organisations are making substantial investments in pilots. Favourite mediums are telesales (well underway), followed by Kiosks, Interactive TV, and the Internet (WWW).


5.12.1  Product & Service Offering



If we take a look at the Industry mentioned in chapter 5.8 we see that the Industry is quite diversified.

We have companies who are offering:

  • products and services that help the businesses to interact with customers (call centers consultants, web consultants, software etc)
  • products and services that help the businesses to remember customers (consultants, data mining, CRM, data warehousing, security, software etc.)
  • mass customization products and services that help customizing the businesses product and services for each customer (consultants-system, Graphic Design, Software=Web, Software personalization
  • distribution and channel products and services that help building closer relationship with and/or through distributors (channel management , electronic commerce, software etc.)
  • organizational structure products and services that help changing the organization to support 1to1 relationship.


The shift:

  • there is a definite shift throughout the industry towards direct sales, especially in telesales and trough Internet.
  • this shift is so significant that even companies who have previously sold exclusively through middlemen are now establishing direct selling operations. They recognize that this is a sensitive area – there is a danger of losing a share, but without attaining a compensating share of the direct market.


Direct sales through Internet demand simple products:

  • the product has to be easy to promote in the media.
  • customer need to reach a sufficient level of understanding if they are to have the confidence to order through Internet
  • high cost of technology, media advertising, and low conversion rates.
  • administration within e-commerce needs to be infrequent and efficient.


Over time customers will become familiar with the concept of buying direct, particularly over the Internet


Some of the tech products, which are offered are quite expensive and can not be afforded by smaller and middle sized companies today.


Many have concerns at selling commodity products in a mass market:

  • it promotes a downward spiral of price cutting.
  • media advertising costs rise as competitors strive to gain larger market shares in order to reduce their unit costs.
  • telesales only give an edge until most insurance is sold this way.
  • Internet sales reduce costs further, but are at risk from so called intelligent agents. Despite their name, these agents will tend to evaluate on price; certainly not on the intangibles like service quality.


Many are doubtful whether there is a need within the mass market for the more comprehensive products:

  • they have a high cost of development, sales and administration.
  • there are long lead times from concept to launch.
  • a long sales process can lead to a premature termination.
  • a number of basic products can meet the more comprehensive needs. Whilst this might mean duplication of cover (e.g. more than one product with legal advice cover) there is still a significant cost saving to the consumer.


Customers are just not asking for options, but rather the emphasis is on price.

This suggests customers see:

  • the various products offerings as broadly similar.
  • that it is more important to have the basic cover rather than go through a time consuming and perhaps fruitless acquisition process.
  • they perhaps lack the knowledge and experience to define more specific needs.


Comprehensive also applies to the service offering. For example,

  • ease of selling and switching unit trust shares.
  • the provision of support information on ethical investments, company financial performance, or get-rich-quick schemes.




5.12.2 Relationship Marketing



Relationship Marketing (RM) has for some years been the Nirvana but it is only being realised in part.


The benefit of RM is that it develops:

  • a high degree of trust.
  • a greater awareness and interest in a company and its products.
  • a propensity for the customer to choose rather than be sold to.
  • a virtuous circle leading to additional sales at a lower sales cost.


In theory, a relationship should prove to be a higher attractor than price. This is especially so if the relationship allows the consumer to experience added value, such as good after care service.

  • customers are getting more knowledgeable and consequently smarter and more skilful in shopping around for the best deal; they expect excellent service as standard rather than as a bonus.
  • shopping around undermines marketing techniques such as lost leaders.
  • targeting customers with the right product at the right time is difficult:
  • marketing models such as the Family Life Cycle are becoming less relevant as lifestyles fragment.
  • much existing data is hard transaction data that is fragmented across many product based systems.
  • consolidating this data into a customer database is proving more difficult than expected.
  • the added value of overlaying this core data with bought-in demographic data is declining, as lifestyles became more varied.
  • the frequent use of mail-shots and the rise push is increasingly irritating customers. 


However, the implicit trust in brands may be declining,


BT invests £30m on two call centres … each one is the size of one & half football pitches ….. «this is all about building relationships» Alan Cunningham, BT’s general manager ….


GTE Telesystems takes its call centre database displays visual icons on the screens of the customer service representatives. An algorithm rates each customer with one, two, or three calendar pages to indicate longevity, sticks of dynamite appear if there have been service problems, and moneybags show volume. Voila, an instant snapshot and a way to differentiate customers consistently, on-the-spot, for far better one-to-one marketing.


From Don Peppers’ 1:1 community discussions


5.12.3 One to One Marketing



The ultimate form of Relationship Marketing (RM) is 1-to-1 Marketing, though many might suggest that is simply an attempt to return to the earlier days prior to mass marketing.


The term 1-to-1 Marketing is attributed to Don Peppers and Martha Rogers. They describe it in their 1992 book The One to One Future. Their most recent book Enterprise One to One, provides practical ideas and examples of implementing 1-to-1, especially though using the new interactive mediums

(http://www.marketing1to1.com ).


1-to-1 is different from RM in that:

  • RM works with aggregates of customers whereas 1-to-1 works with individuals.
  • RM attempts to find and match these segments with existing products, whereas 1-to-1 aims to provide products to fit the particular needs of an individual customer.
  • RM separates the 3 stages of product design, sales and build. 1-to-1 though, consolidates these into a seamless task whereby design and build are the outcome of the sales process (i.e. needs analysis) – see the next section on Mass Customisation.
  • RM tends to focus on market share, whereas 1-to-1 focuses on share of a customer’s life time purchases.
  • in reality RM tends to use marketing actions involving one-way mass media advertising and general special offers open to all customers. 1-to-1 uses interactive dialogues and custom promotions addressed to individuals.



To summarise, RM works in the product dimension whereas 1-to-1 works in the customer dimension. Don Pepper’s has created the Customer Differentiation Matrix to position an

enterprise’s customers:


Customer differentiate matrix (PEPPERS)


Customer Valuations refers to the value of the customer to the enterprise and is usually calculated on a Life Time Value (LTV) basis. Customer Needs refers both to the product and to the service element. For example, customers A & B both require a bank account but A values the ability to transact business 24 hours per day, 7 days a week. Whilst today few companies are in quadrant 4, Peppers provides strategies for moving one’s customer base to this quadrant.


The benefits of 1-to-1 are:

  • reduce customer attrition rates and churn.
  • increase sales per customer
  • lower sales cost.
  • customer lock-in in a non coercive manner.
  • intimate feedback on existing and new products and services.
  • clear business justification for the new interactive mediums.



  • adding personal soft lifestyle data is extremely expensive to collect and difficult to process.
  • getting approval for advertising spend is relatively easy compared to justifying the case to collect personal data whose benefits are long term and not guaranteed.
  • customers and civil liberty bodies may feel that privacy is being eroded, especially where databases contain the softer data, such as aspirations, desires, likes and dislikes; as well as a full transaction log of past actions and a prediction of future behaviour.
  • difficulties in recruiting staff with the right personality. For instance, staff who inspire customers to divulge their dreams, and then go on to suggest a method to realise them.
  • communicating customer’s ideas and requirements for new products and services requires new internal processes.
  • customer service is extremely difficult if all customers have a different product specification or service arrangement.
  • implementing new processes, new technologies and new ways of thinking, working and remunerating is very difficult, especially within existing distribution channels.
  • organisations typically divide themselves into divisions for handling different products, and then further split themselves into functional silos. Integrating these is a challenge.
  • new technologies like data mining, natural language processing, and the interactive technologies are in their infancy.
  • the technological difficulties of creating a customer database. They are often under the exclusive control of marketing and are separate from the transactional systems. 1-to-1 Marketing needs a customer view at the transaction level enhanced by a customer history of all interactions.


Companies are taking some 1-to-1 initiatives: or at least trying to work on a more 1-to-1 basis. How good is that withing the 1to1 Industry themselves

See http://www.1to1.com for examples.

  • a number of banks are segmenting customers based on their profitability.
  • Peppers & Rogers is doing that themselves.


Some of the larger companies are making significant investments in specific technological areas:

  • data mining is one area, but few wished to discuss the matter. Perhaps there is a feeling that data mining will be the marketing equivalent of the «cruise missile».
  • Note: 1-to-1 Marketing sees data mining as a useful precursor in order to segment customers based on their likely behaviour but not as a substitute for a collaborative interaction where a customer divulges his/her actual intentions.
  • a number of companies are developing pilots using interactive kiosks .
  • similarly, some are engaging in Interactive-TV pilots.


Microsoft submits its push technology to the world wide web consortium …. called channel definition format (CDF) it allows web sites to personalise their content ….. AOL adopts CDF ….


5.12.4 Mass Customisation



Mass Customisation (MC) addresses the concerns expressed by many companies as to the expense of 1 to 1 Marketing and the difficulties in cost justifying such an approach.


The term was first coined by Stan Davis in his 1987 book Future Perfect. The further developments by

  1. Joseph Pine II are described in his 1993 book Mass Customization.


The post war years of high consumption and shortages of manufacturing capacity led to significant developments in automation of the production process. With Mass Production reaching a high level of sophistication, emphasis then switched to logistics, with concepts such as JIT. Only in recent years has attention been given to the product design and development process, particularly where time-to-market gives a competitive edge. This is typical in industries with fast technological developments, as well as those exhibiting the traits of fast changing consumer fashion and tastes, such as the music business.


Rapid New Product Development (NPD) has been the holy grail of the insurance industry for many years. The author’s experience suggests that earlier attempts to address this issue was due to the need to overcome long IT development times and high costs, rather than a marketing requirement. This is definitely changing as consumers become more financially astute, more fragmented in their needs, and more influenced by the fast changing world exhibited within other markets. Pine says today is an era of High Market Turbulence.


MC embraces in a holistic way the total business process from:

  • identifying individual consumer needs.
  • designing and developing products and services (P&S) to meet those needs.
  • manufacturing and delivering the P&S.
  • supporting the customer throughout the P&S life cycle, possibly including disposal.

Like all businesses it must achieve all this profitably and speedily.



The typical attributes of a MC environment are:

  • the design, development and production activities become a single iterative process.
  • the design of components that can inter-operate (a Lego™ approach)
  • a product database describing the components and the business rules for their use, etc..
  • the selection and combining of these components to meet unique needs. The embedding of the customised product definition within the customer’s own unique P&S offering (e.g. their policy record).
  • a framework of high level process definitions with flexibility at the detail level. The rules within each unique offering ensures adherence to compliance requirements.
  • highly skilled staff operating the processes. Motivation and rewards stem from meeting customer needs to a high level of satisfaction.
  • information feedback loops within the processes. These ensure that new and existing components reflect changing consumer needs.
  • integrated organisational structures and re-engineered business processes — no longer can marketing,
  • NPD, sales, servicing, claims, actuarial, purchasing, HR, and IT work in isolated silos.
  • tightly integrated distribution and supply chains.
  • elimination of distributors and suppliers who add no value.
  • technology plays an important role throughout the whole business process. Increasingly the process
  • technology will include technology owned by the customer.
    – e.g. 1) an investment offering is carried in a Personal Digital Assistant (PDA) which is in regular communication with the stock market prices and, when required communicates with the insurer.
    – e.g. 2) cars will automatically communicate with insurers and loss adjusters after being involved in an accident.




The benefits of MC are:

  • greater customer satisfaction and repeat business due to a better fit between customer needs and the P&S offering.
  • greater conversion of inquiries to sales because there is less time for assessing competitive offerings.
  • a capability to address a wide and fragmenting market (the core mass market as well as many niches).
  • ability to «stake-out» a market position due to being first to market to meet new needs.
  • higher profits due to the greater value added but at a cost that is comparable to a mass production.



Compared to 1-to-1 Marketing

  • a range of core products with limited options provides sufficient capability to make customers feel they are getting a product(s) tailored to their needs.
  • in time the market may embrace MC as consumers became more experienced and knowledgeable or embrace other criteria than costs (e.g. ethical investments based on personal attitudes and beliefs).
  • MC makes it difficult for customers to do comparative shopping, especially if they are deploying automated Internet robots.
  • MC may help to meet the competitive threat posed by the new entrants who tend to «cherry pick». by internally applying some of the principles of MC, it helps to achieve fast NPD.
  • customising the service element may be the first application of MC. For example, letting customers communicate with the company when and how they want to, as in telephone banking.



Barriers to Mass Customisation:

  • Note: many of the barriers mentioned under 1-to-1 Marketing are also seen as relevant to MC and are not repeated.
  • a mass marketing culture based on a belief that standard products and services meet the needs of a substantial number of customers.
  • most of the population is Financially Aware but Financially Unsure, though it is generally agreed that this is changing.
  • whilst there are few component based packages in use, many are probably being used for internal purposes (e.g. NPD and servicing) rather than supporting the sales and marketing process.
  • legacy systems will not support MC.
  • the costs and risk of using the new technology to support MC. Without technology, selling and servicing will be too expensive.
  • the MC concept could in practice be over-complex both for sales professionals and for the customers, causing compliance difficulties.




The use of MC and Mass Personalisation is becoming more prevalent:

  • Gateway 2000, suppliers of PCs, allows customers to use the Internet to specify a unique personal configuration. An opening page lists a number of useful starter configurations (http://www.gw2k.com ).
  • Various motor manufacturers provide showroom systems to customise a car from the hundreds of permutations available. A specified delivery date is usually within a few days. The necessary finance can also be arranged online at the same time.
  • Other web sites re-route e-mail, telephone and fax communications to customers wherever they are in the world.
  • Motorola Pagers produce custom pagers in lots of 1, from a possible 29 million permutations. From entering the custom order on a portable PC at the customer’s office, the order hits the production line within 20 mins and rolls off in a box at the other end within the hour (http://www.motorola.com ).
  • Personics Corp., a music store, allowed customers in the stores to put together their own personal compilations that were then created in 5 minutes complete with custom labels. (Recording companies objected to the scheme).
  • Federal Express customers track the whereabouts of their parcels in real-time (http://www.fedex.com).
  • The Yearlings TV Guide Internet web site creates a personalised TV listing guide based on a personal list of interests (http://www.yearling.com ).
  • Sabena Airlines will page a friend an hour before your flight lands.
  • Zacks Stockwatch allows investors to keep track of their personal investment portfolio
  • (http://www.zacks.com/docs/investorama/ ). Each day they receive an up-to-date statement.



5.12.5 Future Delivery Mediums



Larger organisations are concerned about too quickly embracing the new distribution mediums

  • there is a need to avoid eroding the substantial investment in established distribution methods (e.g. branch network).
  • the brand and all that it signifies is more significant than the distribution method.
  • there is a risk of de humanizing customer interaction and thus undermining the relationship.
  • the need to recruit new staff with the appropriate skills and personality and then to train them.
  • the need to create a customer service culture throughout the organization.
  • the inflexible functional organizational structures, and complex and inefficient processes.
  • a dependence on legacy IT systems and difficulties in creating new customer based administrative systems.
  • the risks with new technology.
  • the difficulty in estimating the ROI.
  • the need to pace their customer base in the adoption and use of these new technologies.
  • whether these new technologies will really take-off, especially for the mass market, and whether users will want to use them .


Favourite mediums are telesales (well underway), followed by Kiosks, Interactive TV, and the Internet (WWW).



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