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The prospective paradigm of Marketing Studies: Internet of Things

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A Semi-Academic Journal about #IoT:
Today’s entry-level technologies are tomorrow’s daily rutine. Especially in urban life cycle, technology driven solutions has been a common, normal expectation of daily lives. When we consider digital natives, we see that they have been living their lives out loud through social media. This is just the beginning. What social media brought to the discipline of marketing is just outdated now. We need to reconsider; what is next?

Veröffentlicht in: Marketing

The prospective paradigm of Marketing Studies: Internet of Things

  1. 1. 1 The prospective paradigm of Marketing Studies: Internet of Things Semi-Academic Journal by Yiğit Kalafatoğlu, February 2014 Istanbul Bilgi University, Ph.D Student Contributor: Ozan Demirci Marmara University Today’s entry-level technologies are tomorrow’s daily rutine. Especially in urban life cycle, technology driven solutions has been a common, normal expectation of daily lives. When we consider digital natives, we see that they have been living their lives out loud through social media. This is just the beginning. What social media brought to the discipline of marketing is just outdated now. We need to reconsider; what is next? Keywords: Marketing Mix, Relationship Marketing, Marketing 3.0, Social Media, New Media, Internet of Things, Net of Things, Web 3.0
  2. 2. 2 Introduction Raising awareness for Internet of Thing (IoT) issue is important. IoT; in which shortly refers to machine-to-machine communication over Internet as a protocol is going to be real game changer. This paper provides a brief overview of these expectations, resources and predictions of future marketing agenda. Starting from the early marketing studies, it is questioning how buyer behavior is going to be affected when artificially intelligent devices will begin to decide instead of mankind.
  3. 3. 3 The Life of P Grönroos (1994) states that the concept of the marketing mix is still controlling marketing field both theoretically and practically, fourty years after its establisment. In 1964 McCarthy has first used that concept - and mediatly so called '4 Ps' of today - to define then the marketing process from A to Z (Sinh, 2013). AMA (American Marketing Association) defines marketing recently as “the process of planning and executing the conception, pricing promotion and distribution of ideas, goods and services to create exchange and satisfy individual and organizational objectives” (Grönroos, 1994). New approaches have always been emerging in marketing research. During the decade 4 Ps also know as the marketing mix, have always been criticised by several studies. However, it remains as a main framework for tackling marketing problems. According to Palmer (2004) the term marketing mix is a conceptual framework rather than science. It is a set of tools in large scale for marketing managers in order to satisfy their consumers and their needs. Thus with this set they can build up their plans and strategies and achieve their goals. What makes the marketing mix so popular and powerful is that; it definitely simplifies the decision making process and briefly draws borders for marketers to take action. Thus, that makes 4 Ps referral tools in the era. As Goi cited (2009) from Van Waterschoot the Marketing Mix serves also as “as a creator of differentiation” besides its dominance in marketing theory and practice (Grönroos, 1994) since its introduction. Goi highlights also Kent's comparision of the marketing to Christianty and marketing mix to its doctrines. It was almost that effective, as all other religions and beliefs. Sinh (2003) lays emphasis on two main benefits of marketing mix. Firstly the job of marketing managers will be perceived as an exchange process of benefits. The firm's / the brand's competitive strengths benefits will be
  4. 4. 4 exchanged within the marketing mix against others' benefits. Also the marketing mix “helps to reveal another dimension of the marketing manager’s job” and that is the second main benefit. However, changes in industries, development on distribution technologies, globalization of markets and new organizational understandings has persuaded marketing professionals and scholar to explore new fields and theoritical approaches. As a result, numbers of academic studies added more Ps into the marketing mix and this is broadening the scope of marketing. As Goi (2009) cites Booms & Bitner suggested 7 Ps in 1980 instead of four. These new Ps were participants, physical evidence and process. Goi also cites that Kotler came up with political power and public opinion and MaGrath came up with personnel, process management and physical facilities. In 1987 Judd came up with another new P, which is people (Goi, 2009). According to Goi (2009), Vignalis and Davis propounded an S - service - for the mix next to the Ps. Finally in 1999 Goldsmith claimed for a marketing mix consisted of following Ps: “Product, price, place, promotion, participants, physical evidence, process and personalisation” (Goi, 2009). Figure 1. Extension of McCarthy’s 4 Ps (Sinh, 2013)
  5. 5. 5 As Sinh (2003) explained the 4 Ps model has certain limits of itself within. Sinh states that this model sees only from the viewpoint of the marketer and all the affiliations related to them. So mainly it does not include all of the affiliations between the consumer and the seller. As Maclaren et al. (2010) refers to Grönroos, marketing mix only includes assumed one-shot actions of marketing. Moreover as Maclaren et al. refers to Kotler, marketing main ambition should be loyality, experience and satisfaction of the customer. And these only could be based on continuous and repetitive actions. The concept of 4 Ps also criticised by being production-oriented. It was very useful for defining the marketing concept while the pyhsical products were the main commodities of the economy. Thus, besides being relevant with marketing management perspective; marketing mix concept was not customer- oriented, however this lead the mix to face with the need of consumers perspective and added several Cs and Es to it: As Goi (2009) cites from Lauterborn (1990) all variables must be seen from the viewpoint of the consumer. So there should be customer solution instead of product, customer instead of price, convenience instead of place and communication instead of promotion. The 4 Cs model can be achieved in this way. As Constantinides (2006) pointed out the Marketing Mix does not include the real compenent of marketing; customers. It only deals with itself within itself. Customers are only passively included but they are not included with their true nature, as an active subject with their motivations and impulses. Constantinides pointed out that the Marketing Mix also abandoned the theory. Constantinides says that the Mix is not good enough to identificate the marketing actions. Thus, the paradigm “relationship marketing” which basically focused on a long-term relationship and transactions between brands and the customer came
  6. 6. 6 to scene. Because the mix assumes primarily independent exchanges between marketers and their customers, is silent about the potential buyer-seller interaction and relationships. As Goi (2009) cites from the Fakeideas blog, The Marketing Mix is product oriented and not adaptable to service sector. Also the article reminds that most of the firms own more than one brandname for a certain product. It could be possible that related products of the same firm are sold through the same market. The Marketing Mix is not just product oriented, it is also single product oriented and does not applicable for the previous reasons to the most of the firms, too. Additionally the Marketing Mix does not include 'relationship building' and it is not 'customer-focused' as Goi (2009) mentioned.
  7. 7. 7 In a Relationship Regarding to Sinh (2013), goal of the relationship marketing is “long-term relationship between the customers and the suppliers”, which is a win-win situation for both of them, where transaction marketing deals only with new customers. For the transaction marketing is only quantity of sales important, in which case no relationship can be bounded. On the contrary within the relationship marketing customers are also involved to the process, they are both subjects and goal of the marketing in this scenario. The definition of Grönroos (1996) for the relationship marketing is also similiar: “Marketing is to establish, maintain, and enchance relationships with customer and other partners, at a profit, so that the objectives of the parties involved are met.” That means; relationship marketing should be designed to develop strong connections with customers rather than setting them as a passive receivers. This is also a tension point in the field. For example; Kotler (2010) describes relationship marketing as “how to keep consumer coming back and buying more”. We are going to discuss the outcomes of this definition and the new approaches but; from that point of view it is obvious that here should be a bond between the buyer and seller. Here the main question definitely is “how can a seller establish those kinds of strong relationships?” The answer is intangible anyway. Relationship marketing should provide information directly suited to customer needs and interests and by promoting open communication. Besides selling a product, seller must integrate emotions, feelings and promises to its marketing strategy. That is the main point relationship marketing paradigm contrasts with transactional marketing approach, which focuses on increasing sales in any kind of branded effort.
  8. 8. 8 Due to the fact that, the new paradigm offers constructing powerful and long lasting relations with the buyers; it necessiate brand promises, trust in resources involved and belief in one other. One of the main points about relationship marketing is that; this long lasting relationship should carry mutual benefits for both buyers and the sellers. Figure 2. Forms of Buyer-Seller Interactions from conflict to Integration As Kurtz (2010) highlighted for the relationship marketing model customers are as involved as the other participants to the system. Marketers stir up the customers for commitment to various brands of them. In this way thay they can easily figure out their demands and wishes. Once the marketers figured it out, they revise and develop their products, so the products will be sold more and more. It also lowers the expenditure because keeping the old, convinced and happy customers is much more cheaper than gaining new and unconvinced ones (Kurtz, 2010). The players within the market can play with equal technical conditions. If it happens states Grönroos (1994), the interaction processes must be managed for better quality. In that case functional quality came up in relationship marketing
  9. 9. 9 and rises to the the leading role, as Grönroos states. Long-term relationship is the core of relationship marketing. In the light of this fact, it is vital to explain how to establish. It is obvious that; customer is in the center. So, a seller must integrate customer service and quality with marketing. There are several ways to achieve long-term relationships:  Gathering information to identify current and potential customers.  Analyzing and using to modify marketing mix.  Monitoring customer satisfaction or dissatisfaction  Using data identification and and customer knowledge to establish unbreakable bonds with customers. Marketing mix management with its Ps has reached the end of the road as a universal marketing approach. Most certainly, relationship marketing developed as a new approach for managing marketing problems, organizing the firm marketing, and other areas as well. Today, we are discussing the end of relationship marketing to add new dimensions to marketing. We always need to ask if this is enough for contemporary marketing envinroment. Although, todays sophisticated technology and Internet is pushing marketing knowledge forward once again. The deficiency of the relationship marketing is that; today’s consumer is not satistfiy by getting analyzed and offered in a way they may want to. It’s more about being involved in the process of marketing rather then being interconnected. As a result, relationship marketing is lack of involving costumer in to the marketing process and we need to reconsider the paradigm.
  10. 10. 10 From Relationship to Social Relativity Recalling Kotler's (2010) definition, marketing is in the third phase of its evolution. First there was sale-oriented transaction marketing, and then came relationship marketing, which involves customer to sell more. According to Kotler, marketing today cannot settle only with the invitation of customers, it also realise their participation in production processes and marketing communication practices. Figure 3 – Comparison of Marketing 1.0, 2.0, 3.0 Kotler’s representation of newly defined concept of marketing is “3.0” which also refers to the development of new wave technology has begun with the rise of social and technical development of Internet. This change also known as Web 2.0, which includes content sharing, creativity, segmentation, social components, and added functionality. Some of the added functionality is peer- to-peer sharing of files, easier communication and networking on various social marketing sites, video sharing, and blogging. Just like marketing; Internet was firstly production-firm based.
  11. 11. 11 Later on, within the expanding penetration of usage and the increase in infrastructure; user generated content changed the way Internet percieved. Web directories evolved to social tagging, personal Web sites shifted to blogs, and online versions of encyclopedias morphed into Wikipedia. In the Web 2.0 world, collaborating on social networks and sharing information helped shape the trend relatively quickly. Tasner (2010) counts Web 2.0's four elements of marketing advantage. These are social network sites, social media, user-generated content and social bookmarking services. Social bookmark services, where users bookmark their favourite links online and share with other users, lays in the core of the Web 2.0. On top of that there is the self-explanatory user-generated content. It can be found almost on every website nowadays. With their own material (UGC) users can express themselves much more easily via social networks. The top layer is the social media, which comprises all of the elements mentioned above. Within the social media creations, feelings and ideas of both users and brands can spread virally to other users and also to marketers just within seconds. Kotler (2010) draws attention to interlinked economy in his book Marketing 3.0 to point out that both techonogical developments and globalization are the major factors that shaped the new consumer. “Information technology enables the exchange of information among nations, corporations, and individuals around the world” he says. Of course the rise of the information technologies has emerged a better and qualified transcation of services and goods between markets, all around the world. The consumer is empowered like never before. The rise of social media is simply a reflection of the migration of consumers’ trusts from companies to other consumers. That is how the buying decision journey has changed today. In the year of 2011 Google aslo started to give more importance on the new consumer and ran several studies on different fields of business. Most of these researches were about to clarify why and how consumers are purchasing online
  12. 12. 12 and if the online search behaviours are effecting offline purchase decisions. As a result, Google decleared the term Zero Moment of Truth which is described as “moment when you grab your laptop, mobile phone or some other wired device and start learning about a product or service (or potential boyfriend) you’re thinking about trying or buying” (Google, 2011). Besides being a perspective for understanding the consumer, Zero Moment of Truth (ZMOT) became very important for marketing professionals. Google is still running different studies about purchase journeys of consumers. One of these studies ran in early 2012, looked at 3.000 shoppers. Results were totally heterogeneous. However the most common outcome was online searching habit: No matter where consumers entered their journey, they touched down on search at least once, and usually many times (Google, 2012). This result shows us that; ZMOT definitely states; today’s consumer is living online. They click seach button, find the information, looking at website ratings, product reviews, videos and conversations running on social networks, and making desicions according to results they got. That is why online behaviours are vital for marketing communications. According to Google (2011) “networked communication is re- shaping three critical moments of a buyer: stimulus, shelf and experience.” These moments are also knows as “the classical mental model.” Figure 4 – The Classical Mental Model (Google, 2011).
  13. 13. 13 For example; in the classical mental model; consumer gets situmulated with a commercial. Thinks about buying the advertised product; goes to store, sees the product on the shelf, makes the buying decision, purchases the product, and finally experiences it. But today same consumer shares every detail of his or her experience on social media. For example writes a blog post, leaves comments on e-commerce sites post his or her feelings about the product on Facebook or Twitter. Of course, search engines are indexing everything and when another consumer makes a online search about the same product, former experiences shapes its perception. Acutally; that is what we call the Zero Moment of Truth. Then what has changed? Marketing still stands on Ps, it is about product segmentation, target audiences, brand positioning etc. However according to Kotler (2010) changing business envinroment will continue to re-shape marketing practices. As a result; he states “climate concerns, new social media, consumer empowerment, new wave technology, and globalization—will continue to create a massive shift in marketing practices.” It is so obvious that Google’s “the new mental model” just fits the Kotler’s prediction of a new massive shift in marketing practices. Figure 5 – The New Mental Model (Google, 2011).
  14. 14. 14 Of course, people was always talking about brands, exchanging experiences and those were effecting the buyers’ decision. But today; almost every discussion and conversation is being made on the Internet and search engines like Google are indexing each of him or her. Due to the fact one person’s experience comes out as another ones perception about the seller. As it is obvious, customer has empowered by social media. They build communities, integrate into other point of view and expands one others experience. How can brands involve into this life cycle? The answer is simple. Participation and and being a part of the conversation. Social media has no borders; it’s about communities that are being built around values. Collaboration and systematic integration is vital for the concept. Brands today has became contributors and supporters rather than advertisement publishers. Brands are expected to provide social good for the universe. Consumers are pushing firms to act like saviour of humanity and the guarantors of the nature. Any brand, doubltlessly is responsible from the sustainability of nature goods in contemporary market. And that knowledge is driven by social network communication. There is no escape. There are dozens of new approaches effecting to the field of marketing just like but what should be next within the Internet? In the light of these facts; we can assume that just like the buyer school of thought which affected the discipline of marketing seriously in the decade; social media and the term ZMOT is affecting the studies of buying behaviour once again. Yes, empowered consumer, social media and globalization are very important and there are thousands of new studies will run around the intersection of these triology. But, what about the new wave technology?
  15. 15. 15 Almost every device around the consumer is becoming “smart” People are spending more time with devices rather than each other. Maybe the basic needs mentioned in Maslow’s hierarchy has not changed but the world is changing. So, it is time to reconsider how the practices of marketing will transform when the homes, cities, things became smarter and devices start to communicate with each other.
  16. 16. 16 Protocol: A new P in Marketing? The term Internet of Things (IoT) will probably lighten these considerations, but for today IoT is being studied mostly by engineers and programmers. As Chaouchi (2010) describes “The Internet of Things (IoT) is somehow a leading path to a smart world with ubiquitous computing and networking. It aims to make different tasks easier for users and provide other tasks, such as easy monitoring of different phenomena surrounding us.” That should remind us the early stages of web. Once upon a time, Internet was being considered just as a technical tool. But today it is obvious that Internet is a social platform. So, just like Internet’s itself we must expect that the term IoT will reveal the prospective paradigm shift in the field of marketing. Adler (2013) estimates that “Internet of Things or IoT market value are massive, since by definition the IoT will be a diffuse layer of devices, sensors, and computing power that overlays entire consumer, business-to-business, and government industries”. Today Internet is connecting people on social networks but tomorrow physical things going to connect to each other. Devices will decide instead of people for many things. That may sound like science fiction but its important to remember that, today’s technology was yesterday’s fiction already. The connection of physical things to the Internet makes it possible to access services beyond that can be provided right now. The Internet of Things (IoT) for marketing is based on this vision. Current topics show us that several applications like tablets, wearable computers like Google Glass etc are drawing attention to Internet of Things. However, marketing studies should look further. Chaouchi (2010) especially draws attention that these new technologic services will be based on no human interaction. As a result “the traffic generated by these object-to-object-oriented services will need to match a certain business model with new participants”.
  17. 17. 17 Adler (2013) predicts the top business-to-business and government applications: tablets, wearable computers, and PCs combined (Business Insider, 2013).  Connected advertising and marketing.  Intelligent traffic management systems.  Waste management systems.  Smart electricity grids that adjust rates for peak energy usage.  Smart water systems and meters.  Industrial uses. As it is obvious; Internet of things is not yet a reality but becoming important day by day. Unfortunately, literature is lack of social interpretation. We need to consider what will happen when next: 1. Deciding technologies based on receiving information 2. Considering data, planning and taking action 3. Autonomous communication and execution 4. Desicion making and buying In the future, it could be possible for a smart fridge to identify the products those are being stored inside like; “one kilo of apples, two bottles of milk, 250 grams of meat, two cans of soda” etc. It can even define the brands of those products like one can of Pepsi, one can of Sprite. A smart fridge can also log the periods those goods are consumed by household. As a result it is very possible for a smart fridge to understand and index the consuming attitudes of a family and make decisions and recommendations for them. Yes, a fridge can automatically make a purchase when it understood that family will ran out of milks. Even, it can recommend family to buy brands, may request consent to buy the cheapest, or the most expensive one, or the best it thinks for the household. Sounds futuristic; but its not an utopia.
  18. 18. 18 This scenerio is far beyond just connecting devices. Connecting devices; is a service-oriented approach; mostly diffused in information and entertainment markets. Just like, telephone, computer and home consumer electronic appliances. However, potential of IoT is way above those fields. In the light of these facts we need to reconsider marketing for the future. For decades, buyer behavior school of thought studied demographic information on how many and who are the customers. Why consumers behave the way they do in marketplace and tried to understand brand choice behavior as opposed to other types of choices. Behavioral sciences; explanations of human behavior, psychology, sociology and anthropology; has generated the phenomenon and it stayed up-to-day. The paradigm shifted from sellers market to buyers market during decade. Continuously globalization and technological improvements increased the capabilities and importance of marketing studies. Within the rise of Web 2.0 and social media, consumer is empowered. The relationship between firms and customers are intertwined. But it is obvious that; a new paradigm is on the way and we need to add artificial intellegence, decisive devices and IoT to the marketing field.
  19. 19. 19 References Adler E. (2013) “Here's Why 'The Internet Of Things' Will Be Huge, And Drive Tremendous Value For People And Businesses” Business Insider http://www.businessinsider.com/growth-in-the-internet-of-things-2013- 10#ixzz2sq2kU3SD Chaouchi, H. (2010), "The Internet of Things Connecting Objects to the Web", STE Ltd and John Wiley & Sons, Inc. Constantinides, E. (2006), “The Marketing Mix revisited: Towards the 21st Century Marketing, Journal of Marketing Management, 22(3-4), 407-438. David L. (2013), Contemporary Marketing, 14th Edition Kurtz, 010, 2008 South-Western, a part of Cengage Learning Goi, C. L. (2009), “A review of marketing mix: 4Ps or more?”, International Journal of Marketing Studies, 1(1). Google (2011), ZMOT: “Winning the Zero Moment of Truth” http://v1.zeromomentoftruth.com/google-zmot.pdf Google (2012), “Zero Moment of Truth Handbook” http://www.thinkwithgoogle.com/research-studies/2012-zmot-handbook.html Grönroos, C. (1994), “From marketing mix to relationship marketing: towards a paradigm shift in marketing”, Asia- Australia Marketing Journal, 2(1), 9-29. The IoT Council, http://www.theinternetofthings.eu Kotler, P. Kartajaya, H. Setiawan, I. (2010), “Marketing 3.0 From Products to Customer to the Human Spirit”, John Wiley & Sons, Inc. Lauterborn, B. (1990), New Marketing Litany: Four Ps Passé: C-Words Tak Over. Advertising Age, 61(41), 26. Maclaren, P., Saren M., Stern, B., Tadajewski, M. (2010), “The SAGE Handbook of Marketing Theory”, 155, Sage Publications Ltd. Sinh, N. H. (2013) “The Fall of the Marketing Mix: A Paradigm Shift Needed?” Hồ Chí Minh City Open University, Số 12 (22) - Tháng 09-10/2013 PHÁT TRIỂN & HỘI NHẬP Tasner, M. (2010) “Marketing in the Moment: The Practical Guide to Using Web 3.0 Marketing to Reach Your Customers First”, Pearson Education, Inc.