adding value through marketing

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Adding Value through Marketing 7BSP0419 (Semester B 2010-11) Cova (1996) argues that the postmodern individual in the light of shifting markets and advances in technology ‘is both isolated and in virtual contact with the whole world electronically. Postmodern daily life is characterised by ego concentration encouraged by the spread of computers’. With reference to examples discuss the opportunities for organisations to develop new products for this changing world. ‘Sustainability is a tendentious catch-all term with a certain political flavour and its own contradictions’ – Hutchinson and Young (2005). Evaluate the extent to which a sustainable and green approach to marketing can add positively to the bottom line in an age of consumer confusion and possible indifference. References

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Page 1: Adding value through marketing

Adding Value through Marketing

7BSP0419 (Semester B 2010-11)

❶ Cova (1996) argues that the postmodern individual in the light of shifting markets and advances in technology ‘is both isolated and in virtual contact with the whole world electronically. Postmodern daily life is characterised by ego concentration encouraged by the spread of computers’. With reference to examples discuss the opportunities for organisations to develop new products for this changing world.

❷ ‘Sustainability is a tendentious catch-all term with a certain political flavour and its own contradictions’ – Hutchinson and Young (2005). Evaluate the extent to which a sustainable and green approach to marketing can add positively to the bottom line in an age of consumer confusion and possible indifference.

❸ References

Deniz Kurugollu10283502

MSc Marketing

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9th May 2011

❶ ‘Postmodern individual in the light of shifting markets and advances in technology is both isolated and in virtual contact with the whole world electronically’ (Cova, 1996). In this respect, postmodern consumer daily life has been shown to change dramatically. This brings with new opportunities for new product and service development so as to meet those postmodern consumers’ demands. This essay will address to the postmodern consumer life and the respective product or service developments. It follows the structure shown in Table 1.

Table 1: The post modern consumerPost modern consumer life

New product and service developments

Hyper-reality Planet CalypsoIndividualism 3D printing, Mini Cooper, NikeCustomization RSS (Really Simple Syndication) Right here, right now Virtual banking Prosumer Twitter, Facebook, Foursquare → Google

Analytic

One of the emerging concepts that postmodernism has brought to our glossary is ‘hyper-reality’. Hyper-reality is characterized by image, illusion, and simulation where we know something to be false but feel it to be true (Cova, 1996). In this context, Elliott and Percy (2007) point out that rationality is not strong enough to stop us enjoying ourselves. As a result, postmodern consumers favour simulation to reality, and prefer to experience their consumption activities in a virtual way (Cova, 1996). In this respect, hyper-reality receives significant support from the internet and computer technologies as providing consumers with virtual experiences. This consequently leads to new product developments. For

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example, ‘Planet Calypso’ owned by the company MindArk is an entertainment and business platform which enables players and organizations to build, design and trade their own virtual planets online. To a devoted ‘postmodern’ consumer it seems that hyper-reality is such serious that he bought a virtual property for $6 million (Trendhunter, 2011a).

Post-modernity has brought about ‘individuals’ who make use of the market offerings in a way that they create their own consumption patterns. They want to be involved in the process as a producer of experiences, not as a target of final goods and services (Cova, 1996). In this regard, many brands now offer customers to personalize their consumption objects in line with their own tastes and preferences. For example, The Mini Cooper allows consumers to customize their cars on website before it goes to personalized production process (Mini, 2011). Likewise, Nike and many others allow customers to design their own shoes (Nike, 2011). The most significant development in this area can be seen in recently emerging technology ‘3D printing’. This technology can be regarded as the latest manifestation of customization (BBC, 2011). It does not only provide large variety of usage area such as health, fashion, and even food but also, enables to produce them at lower cost (Trendhunter, 2011b). It seems that 3D printer will become a casual item in the postmodern consumer’s house in the near future. Rapp and Collins (1990) defines marketing in the era of customization as ‘an extremely personal form of marketing that recognize, acknowledges, appreciates, and serves the interests and needs of consumers whose personal identities and marketing profiles become known to the marketers’. In this sense, RSS (Really Simple Syndication), a free internet service which sends to subscribers electronically what they want to read, watch, and listen can be taken as a good example of new service development for postmodern consumers. On the other hand, some businesses also use this new service to organize their business operations

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at lower cost. For example, Union Bank of California’s use targeted RSS feeds based on job description and location to send memos instead of using broadcast emails, which in turn accelerates the operations and saves time. Consequently the bank is expected to save $750.000 (Beizer, 2007).

Firat and Shultz (1997) indicate that the postmodern consumer has a ‘right here, right now’ attitude. In other words, consumers of today are seeking immediate gratification in return for their consumption. Hence, this requires instant, ubiquitous marketing in order to meet the expectations of those postmodern consumers. In this respect, ‘virtual corporation’ and ‘virtual marketing’ has been shown to take place in postmodern daily life (Aijo, 1996). For example, virtual banking has emerged as a new service development practised by several banks such as ING, HSBC, Citibank, and so on (CR, 2009). By using web ready devices such as smart phones, customers of these banks can carry out all financial transactions anytime, anywhere.

Finally, the internet and web-integrated devices such as smart phones provide consumers with opportunities to be virtually in touch with the whole world (Cova and Pace, 2006). This significant development in web technologies has morphed consumers into ‘prosumers’ (Gerhardt, 2008). Prosumer stands for the combination of ‘producer and consumer’. Prosumers are keen adopters of web technologies to stay connected to outside world whenever and wherever they want. The term ‘self-exposure’ can be used to explain this group. They are inclined to share everything from their current location and time (e.g. Foursquare), likes and dislikes (e.g. Twitter, Facebook) to even their private lives (e.g. blogs). In this context, there is an enormous opportunity for marketers to understand their customers’ insights since prosumers expose considerable amount of information about themselves. As a matter of fact, new product and service developments such as Google Analytics appear in the market to capture prosumer insight and allow marketers to

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customize their offerings to suit individual needs and wants in real time (Derrick, 2006; Google, 2011).

❷ Sustainability has been shown to become an important topic in the companies’ board room recently. It has also started to take place on the management hierarchy as a separate discipline, now companies have a ‘Chief Sustainability Officer’. There seems to be a lack of understanding about the terminology. In general, sustainability is referred to environmental issues only or it is used to mention about philanthropic efforts. However, Werbach (2009) propose four equal dimensions for true sustainability; Social, Economic, Environmental, and Cultural (see Figure 1). It can therefore be suggested that sustainability is a holistic approach for organizations to consider in a wider context.

Socialpoverty, education, public health,

labor and human rights

Economicoperating profitably

Environmentalprotecting and restoring the

ecosystem

Culturalprotecting and valuing cultural

diversity

Sustainability

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Figure 1: True sustainabilityAdapted from: Werbach, 2009

It is evident that playing ‘the sustainable’ creates positive buzz and PR for the sake of companies by empowering the brand image in the mind of consumers. Sustainable efforts also help businesses to save their operating costs, to attract new customers, and even to build new brands. Consequently, it adds to the bottom line. Pinault (in Bourne, 2011) states that ‘sustainability is as much to do with the bottom line as it does with the environment’. For example, P&G declared its 2012 goals to generate $20 billion in sales from green brands (Sherwin, 2008). On the other hand, talking about sustainability without really making some good practices and tangible efforts are deemed to blame for ‘greenwashing’ (Davis, 2009). According to the research (Havas Media, 2010), confusion, lack of clarity and perceived higher prices prevent responsible purchasing.

In the light of foregoing, this essay will address to the given benefits of sustainable efforts and the unlikely events of being classified under ‘greenwashing’ by using the examples from real organizations. It follows the structure illustrated in figure 2.

Benefits Challenges

disparity

the nature of business

portfolio contradictions

branding opportunities

reputation & credibility

cost saving

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Figure 2: Benefits & Challenges

Cost savingIt can be suggested that sustainable efforts ought to be considered as investment to cut operational costs in the longer term rather than expenditure. For example, Macy’s announced to install energy saving LED light bulbs in its stores in America. Although this new energy savvy attempt will require initial outlay for the company, it is planned to cut energy consumption (i.e. cost) by 73 per cent in the longer term (Bourne, 2011). Similarly, Levi’s has introduced Water-Less jeans, which require an average of 28% and as much as 96% less water to produce. The company is expected to cut cost equivalent to 16 million litres of water in only three month period (Bourne, 2011).

Reputation & CredibilitySilverstein (2010) states that corporate sustainability does not directly affect brand purchase decision, but the ‘meaningfulness’ of the brand in the mind of consumers. Davis (2009) claims that consumers concern what companies are doing to contribute global issues and expect them to show their environmental and social commitments to those problems. Research (Jobber, 2010) reveals that consumers are ready to pay price premium and also more forgiving of businesses if they believe that the company is socially and environmentally responsible. In this respect, it can be suggested that commitment to sustainability can be used as a signal for reputation management and brand credibility, which in turn is followed by positive word-of-mouth and attracting new customers; consequently, it positively effects to the bottom-line.

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BrandingSustainability programmes have recently been shown to become sub-brands of the main company or a brand on its own. For example, Plan A by M&S, Virgin Unite by Virgin, and Ecomagination by GE can be classified under the sustainability programme as brands (Sherwin, 2008). This implies that there is an opportunity for companies to differentiate their brands in terms of sustainability. However, it should be noted that integrity is the key for those sustainable activities to be meaningful in the eye of consumers (Havas Media, 2010).

Portfolio contradictionThe key challenge for marketing managers is to integrate sustainability with overall business strategy and consumer insights (Davis, 2009). In this respect, portfolio inconsistency may put sustainable efforts under criticism. An example of this can be taken from Virgin Group. Despite of investing great amounts in sustainable issues such as biofuels and carbon reducing technologies, the company also has Virgin Galactic (taking consumers on trips to space) in its portfolio (Sherwin, 2008). The latter seems paradoxical to the former efforts on the basis of wasting resources.

The nature of businessSometimes the business itself may become a challenge in acting sustainably, in particular socially responsible. For example, tobacco companies can be classified under this circumstance. Considering the social dimension of Werbach (see figure 1), public health can be regarded as a conflicting issue for those companies. For instance, although Philip Morris (2011), under its charitable giving program, focuses on areas such as hunger, poverty, rural living conditions, education, and so on; the dominant health-related facts of cigarette may prevent consumers from matching the company with socially responsible activities.

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Disparity between ‘said’ and ‘done’There is a delicate balance between being sustainable and greenwashing. Even a trivial disparity between what companies claim and what they actually implement may attach a negative label to the brand name. As previously mentioned, sustainable efforts have significant power to create buzz and PR. However, this may work negatively as well. For example, clothing brands like Primark and Nike still carry the negative image resulted from their operations in supply chain (Harrison and Scorse, 2010). Again, it should be noted that integrity is vital in terms of sustainable efforts to add true value at the end of the day.

❸ References

Aijo, S. T. (1996) ‘The theoretical and philosophical underpinnings of relationship marketing: environmental factors behind the changing marketing paradigm’. European Journal of Marketing. 30 (2) pp. 8-18.

BBC (2011) ‘3D printing offers ability to print physical objects’. Available at: http://www.bbc.co.uk/news/technology-11834044 [Accessed 9th May 2011]

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Beizer, D. (2007) ‘E-mail is dead’. Available at: http://www.fastcompany.com/magazine/117/next-tech-email-is-dead.html [Accessed 9th May 2011]

Bourne, L. (2011) ‘Fashion companies go green, cut costs’. Available at: http://www.nbcnewyork.com/blogs/threadny/THREAD--120714254.html [Accessed 9th May 2011]

Cova, B. (1996) ‘The postmodern explained to managers: implication for marketing’. Business Horizons, pp. 15-23.

Cova, B. and Pace, S. (2006) ‘Brand community of convenience products: new forms of customer empowerment – the case ‘My Nutella the Community’. European Journal of Marketing. 40 (9) pp. 1087-105.

CR (2009) ‘Best online banking options’. Available at: http://www.consumerreports.org/cro/money/credit-loan/online-banking/overview/index.htm [Accessed 9th May 2011]

Davis, M. (2009) ‘A new sustainable language for business’. Available at: http://www.brandchannel.com/brand_speak.asp?bs_id=227 [Accessed 9th May 2011]

Derrick, S. (2006) ‘The revolution masterclass on interpreting web data’. Revolution. March, pp. 78-81.

Elliott, R. and Percy, L. (2007) Strategic Brand Management. 1st ed. New York: Oxford University Press.

Flrat, A.F. and Shultz, C.J. (1997) ‘From segmentation to fragmentation: markets and marketing strategy in the postmodern era’. European Journal of Marketing. 31 (4) pp. 183-207.

GE (2011) ‘Ecomagination’. Available at: http://www.ecomagination.com/ [Accessed 9th May 2011]

Gerhardt, W. (2008) ‘Prosumers: A new growth opportunity’. Available at: http://www.cisco.com/web/about/ac79/docs/wp/Prosumer_VS2_POV_0404_FINAL.pdf [Accessed 9th May 2011]

Google (2011) ‘Google Analytics’. Available at: http://www.google.com/intl/en_uk/analytics/ [Accessed 9th May 2011]

Harrison, A. and Scorse, J. (2010) ‘Multinationals and anti-sweatshop activism’. The American Economic Review. 100 (1) pp. 247-273.

Havas Media (2010) ‘Brand Sustainable Futures’. Available at: http://www.havasmedia.com/#/en/MediaAndPressRoom/BrandSustainableFutures [Accessed 9th May 2011]

Jobber, D. (2010) Principles and Practice of Marketing. 6th ed. Berkshire: McGraw Hill

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M&S (2011) ‘Plan A’. Available at: http://plana.marksandspencer.com/ [Accessed 9th May 2011]

Mini (2011) ‘Design your Mini’. Available at: http://www.mini.co.uk/html/ecom/ecom.html [Accessed 9th May 2011]

Nike (2011) ‘NikeID’. Available at: http://store.nike.com/gb/en_gb/?l=shop,pwp,c-300/hf-4294967255/f-787/t-Men%27s_NIKEiD&sitesrc=GBLP_IDNS#l=shop,pwp,c-300/hf-4294967255/f-787/t-Men's_NIKEiD [Accessed 9th May 2011]

Philip Morris (2011) ‘Our charitable giving programme’. Available at: http://www.pmi.com/eng/about_us/charitable_giving/pages/charitable_giving.aspx [Accessed 9th May 2011]

Pinault, H., in Bourne, L. (2011) ‘Fashion companies go green, cut costs’. Available at: http://www.nbcnewyork.com/blogs/threadny/THREAD--120714254.html [Accessed 9th May 2011]

Rapp, S. and Collins, T. (1990) The Great Marketing Turn Around: The Age of The Individual and How To Profit From It. New Jersey: Prentice-Hall

Silverstein, B. (2010) ‘Consumers Rank Ikea, L'Oreal, Home Depot High in Corporate Sustainability’. Available at: http://www.brandchannel.com/home/post/2010/10/22/Brand-Sustainable-Futures-2010.aspx [Accessed 9th May 2011]

Sherwin, C. (2008) ‘Brand green: ten features for success’. Forum for the future. Available at: http://www.forumforthefuture.org.uk/ [Accessed 9th May 2011]

Trendhunter (2011a) ‘Planet Calypso’. Available at: http://www.trendhunter.com/trends/planet-calypso#!/photos/109836/8 [Accessed 9th May 2011]

Trendhunter (2011b) ‘3D printing’. Available at: http://www.trendhunter.com/trends/3d-food-printer [Accessed 9th May 2011]

Virgin (2011) ‘Virgin Unite’. Available at: http://www.virgin.com/company/virgin-unite [Accessed 9th May 2011]

Werbach, A. (2009) Strategy for Sustainability: A Business Manifesto. Massachusetts: Harvard Business Press