LEAD STORY-DATELINE: Wall Street Journal, May 7, 2002.

The great success of GE has always been rooted in its R&D. Not only has GE "brought good things to life," it has changed the way we live, with several key inventions, some of which include:

In recent decades, GE has shifted its research focus toward "short term technology research," with its growth mostly driven by its NBC-TV network and GE Capital, its financial services arm. However, its direction is now changing back again to focus on innovative technologies. With Jeffrey Immelt taking over as the new CEO of GE, there is resurgence in the importance of R&D at GE. Earlier this year, Immelt invested $100 million to upgrade GE's Niskayuna Research Center in upstate New York. One of GE's goals is to use ever-improving technologies to create products, as it has with MRI machines or CT scanners that can change the way an industry operates. In addition, many resources are being pumped into "long-term research projects" that may never actually yield marketable products, or if they do, it may be 10 years down the road.

Immelt views R&D as the core of a company's long term success, as he asserts, "The better a company's technology is, the more products it eventually sells." There has been a shift in focus away from shorter-term, customer based projects that were pursuing slight tweaks to existing products, such as modifications to the washing machine to "spin more water out of clothes." The major focus of R&D is now on broader, less-immediate kinds of scientific research.

In order to pick which R&D initiatives to pursue, GE researchers and management team had to "winnow down more than 2,000 proposals submitted last year." The team was asked to narrow these down to 20 "big ideas." Criteria that the researchers were asked to consider in narrowing their choices included:

1. How does this project fit into a specific GE business or market?
2. Could this technology transform a certain business or industry (i.e. the CT scanner for medicine)?
3. Is it a business GE already knows well and is well staffed in?
4. Is it a growing industry?

From this process, the team selected a few key long term research areas to direct their R&D efforts which include:

1. Nanotechnology (the study of matter on a molecular scale)
2. Light sources generations ahead of the bulb (such as wall coatings that can emanate light)
3. Advanced propulsion (to find ways of powering aircraft higher and faster)
4. Biotechnology such as molecular imaging, for early detection of illnesses at a molecular level

GE's goal is to develop 25 percent more new products and increase the number of new patents it wins next year. GE spends $2.3 billion for research, development and engineering, a figure that has grown seven percent from 2000. To keep researchers from getting too theoretical, and ensure projects stay linked to GE businesses and customers, scientists from the R&D division are required to meet regularly with marketing and other executives from GE's business units. The VP of R&D claims, "Scientists at GE can do long term research, but they have to be willing to spar with the marketing guys. This is the best of both worlds."

TALKING IT OVER AND THINKING IT THROUGH!

1. Reflect on the statement made by GE's CEO, "The better a company's technology is, the more products it eventually sells." Can the best technology sell itself? What role does marketing play in selling new technology?
   
   
2. If you were the CEO of GE, how would you balance the goals of keeping investors happy with short-term profits, while still investing vast resources in long-term projects that may never yield marketable products, or yield profits 10 years down the road?
   
   
3. Given the list of major inventions made by GE over the years, what casual observations can you make about the investment made (in terms of time span and money), and risk taken versus the return on this investment?
   
   
4. Comment on the VP of R&D's statement, "Scientists at GE can do long term research, but they have to be willing to spar with the marketing guys. This is the best of both worlds." What kinds of disparities or frustrations are these two groups likely to encounter as they attempt to meld their separate goals and frames of reference?

THINKING ABOUT THE FUTURE!

GE has faced sluggish growth in this rough economic climate. To rejuvenate its growth, GE must look long and hard at its business portfolio and narrow its focus to its core competencies, placing its resources in that which GE can do best. The new CEO, Jeffrey Immelt, has publicly stated some "bare minimum" standards by which to streamline focus—those initiatives that are technology based and global reaching, and services that positively "touch customers." GE is sure to face tremendous pressure from its investors, as its share price was down 23 percent in 2002. They want change, and they want it fast. However, as one can see from the history of invention and innovative technology, change cannot come overnight. It may likely need to rely on its "cash cows" such as generated from GE Capital, to underwrite the future "stars" that need time to percolate in the R&D labs at GE. Some earnings are likely to come in the form of revenue from selling off business units that no longer fit the core competencies in the business portfolio GE is trying to reshape.

SOURCES:

"GE Goes Back to The Future," Wall Street Journal, May 7, 2002.

- Susan Sesolak

LEAD STORY-DATELINE: Harvard Business Review, October 2001.

Professor Stephen Brown argues that customers really do not know what they want, and that the formal marketing management process and a "mindless devotion to customers" have led to sombre, look-alike marketing communication and "stagnation in the market." Professor Brown argues that marketing needs to concern itself with 'teasing' customers and making it harder for them to get products—after they have been tantalized and tormented to the point where they literally crave them.

Professor Brown puts forward five principles of retromarketing, which he argues "replaces the seven Ss with seven veils." He states that these five forces are "flim, flam, flirt, fiddle, and fangle." The five principles he puts forward are:

1. Exclusivity
   
   
2. Secrecy
   
   
3. Amplification
   
   
4. Entertainment
   
   
5. Tricksterism
   
   

It is suggested that you examine the detail of the five principles before reading on to consider a rejoinder set out below:

Dear Professor Brown,

You prankster you, for as ring-master of alliteration and allegory, you almost tricked me into believing that all we marketers have to do is convince management to adopt the esaet ("tease" when viewed in a mirror) principles of retromarketing (or are there no principles involved?), and then customers will continue to come back as long as they are having fun. I say 'almost tricked me' for reasons that will shortly become obvious.

For some time, I have gleefully monitored examples of this approach, such as our homegrown Antipodean funster, Big Kev. The big man's interpretation of the past heroes you put forward—P.T. Barnum, the travelling medicine men of the 1800s, and the UK promoters of the now globally ubiquitous banana in the 1900s—is no less a work of art than those Northern hemisphere examples you cite. This television sales personality with the catch-cry "I'm excited!" has become a recognizable brand, and has now moved on to become a corporation.

I continue to be impressed by the television ratings achieved by reality television shows such as Survivor, Big Brother, and Temptation Island, and I await the interactive program Fat Cow Motel. The way these shows trick the players, all the while entertaining and involving the viewers, is no doubt a throwback to the days of travelling medicine shows. As you rightly remind us, we now send jokes, text messages, and even advertisements to our friends using cell phone (mobile) short messaging services (SMS) and e-mail over the Internet. This has become such a widely adopted form of connectivity that Australia's biggest telephone company, Telstra Corporation, generates some $A14 million each month from its cellphone customers, who send 70 million messages to each other. Of course, this is retromarketing in its purest form, since word-of-mouth has been in use since humans first used their vocal chords to form words.

However, this approach does not always work. The AI: Artificial Intelligence moviemakers you cite did not achieve their planned outcomes. They did make good use of experiential elements in Web site design, e-mail, and chat groups when they integrated the Internet into their launch marketing communication and pre-release of assorted merchandise. Many people were attracted to the film by a 'wired' contextual marketing campaign only to be disappointed that the campaign theme had nothing to do with the movie. The positive word-of-mouth on Cloudmakers.org as well as over the Net before the movie's release turned into negative commentary after the release. For many reasons, including mixed themes, the movie could not be considered a box-office success. If this is an example of retromarketing, it shows that the approach is not without its dangers and past lessons are not always learned.

There is a bigger picture that keeps pushing its way forward in my mind that also causes me to hesitate in recommending adoption of retromarketing. Moore and Lewis (2001) remind us that in the past 5,000 years, various world cultures have spawned approaches to doing business that have cycled through ensuing eras, such that we must accept a view of the origins of marketing practice that is quite different to the U.S.-centric view that begins post World War II. Over this long period, many people have had a great deal of fun, but it seems it has not lasted for too long. Businesses came and went, much as the power of the nations that spawned them waxed and waned. Of course, along the way there was serious fun to be had. However, more recent business failures and near misses both in the United States and Australasia seem to indicate that more planning and scrutiny is required, and perhaps a little less fun. Moreover, the fact that these events keep happening makes me wonder if we are not all going around in circles, a commercial Groundhog Day if you will.

I laughed for a short while at the thought of today's marketers digging out the snake oil sales lines of the past and marketing products that might have been at home on the streets of Rome or Carthage. I accept such notions as retailing being 'theatre of the mind' and why gamblers in Las Vegas might want to experience a mock sea battle before throwing their money overboard. I can even accept that some of the retromarketing tricks you put forward actually work for a short time and in some markets.

However, making money is indeed a serious matter, as anyone who has lost their life's savings or pension fund through failure of companies to manage themselves and their customers will surely tell you. And that's one reason why the vast majority of marketing organizations have adopted an approach to ensure that their customers keep coming back: the very analysis, planning, implementation, and control (APIC) approach you appear to eschew. It's not because Professor Kotler says so; it's because, with notable exceptions, there's a history of this formal approach working to the benefit of all concerned. But you didn't fool me, Stephen. I know that when you advise companies to conduct marketing research, you do so because such research is a necessary ingredient to this APIC approach, not because you are helping them to design a new conjuring trick to titillate their customers.

In closing, let me say that while I have misgivings about the implications of every organization in every market adopting the trickster approach, you do marketing science a great service by exercising our minds. That's no lie, and like Big Kev, I'm excited!

Best wishes,

Associate Professor Stewart Adam

TALKING IT OVER AND THINKING IT THROUGH!

In this section, we consider further some of the points raised by Professor Stephen Brown in his advocacy of a fun-focused approach to marketing like in the 'bad old days' and why he sees marketing in a 'sorry state of affairs.'

1. Professor Stephen Brown advocates five retromarketing tricks. After reading either of the cited papers, elaborate on the five principles of retromarketing.
   
   
2. Do you believe that marketing organizations unnecessarily 'pander to customers'? Explain your reasoning.
   
   
3. Consider the definition of the marketing management in your textbook. Does it involve customers and managing relationships? Is this latter aspect important?
   
   
4. Describe the steps in the marketing process.
   
   
5. The fifth and last principle suggested as a means of enlivening marketing in the retromarketing approach is tricksterism. Thinking of the meaning of the term and the examples mentioned by Professor Brown, do you see any issues with adoption of this principle (or any of the principles for that matter)? Explain.

SOURCES:

Moore, Karl and David Lewis. "Foundations of Corporate Empire," Financial Times Prentice Hall, London, 2001.

All quotations are from the paper:Brown, Stephen. "Torment Your Customers (They'll Love It)," Harvard Business Review, October 2001, pp.82-88.

All quotations are from the paper:Brown, Stephen. "Treat 'em Mean," BRW, January 10-16, 2002, pp.64-67.

- Stewart Adam

LEAD STORY-DATELINE: Business Review Weekly, February 2, 2001.

Black and white television transmissions were first beamed into Australian homes in 1956, and followed by colour television transmissions in 1975. The VCR was introduced to the world market in 1978 and by the mid 1980s most homes had one. The compact music disc (CD) hit the world scene in 1984 and today most people have a CD player in their home, car, office or strapped to their body (Sony Discman). The digital video disc (DVD) is a more recent product that is taking the market by storm. Video rental companies in Australia claim the DVD is now 10% of their business and likely to become 20% by the end of 2001.

The VCR did not cause television viewing to alter radically, and despite the concerns of advertisers, those who 'zap' commercials from their recorded programs are more than likely already familiar with the ads they are deleting and still watch those they have not seen before. The DVD coupled with newer technologies may do what the VCR did not do—threaten television viewing as we know it.

Given that television in its current guise is ubiquitous, while only about half of Australian and US homes have computers, it makes sense for companies like Microsoft and AOL to drool over the convergence of the Internet and television. However, the hardware companies and telecommunications companies, like Japan's NTT, also have a perspective on how they would like television and the Net to evolve. NTT (DoCoMo) has achieved success in Japan with its mobile commerce (m-commerce) phones and are determined to see this technology dominate in the world at large.

In 2001, we are experiencing the rollout of high and standard definition television (HDTV/SDTV) in Australia following European rather than US standards. Those who have a 16:9 aspect ratio or wide-screen television (most televisions are still 4:3 picture format) and a decoder box can view digital free-to-air television (FTA-TV), and watch DVD recorded movies filmed in this same wide-screen format. Quality wide screen televisions like Grundig and Loewe together with a high quality matched DVD player cost anywhere from $A4,000 to $A10,000, while home entertainment centres that use a plasma screen (a plasma wall was once mooted by IBM) run from $A30,000 to $A100,000. Digital scan televisions sport an optional VGA port and can run the Internet (say email client on a connected PC) in a secondary window while others watch a television show in the main window. The digital television decoder boxes available in Australia in early 2001 are relatively featureless, and digital television broadcasts are limited mainly to sporting programs such as cricket.

However, the techno junkie now has an even more powerful television function to play with, which may take the market by storm, if some pundits are correct. Viewers will soon be able to own a set-top box—the personal video recorder (PVR)—that captures programs from cable, satellite or free-to-air (FTA-TV), automatically 'zaps' commercials and picks out the programs to record from the viewers' known preferences. It seems that viewers will have to buy their digital televisions, DVD players, digital decoders, cable or satellite service and then turn around and buy this new wizardry … assuming they want to watch television without the interrupt marketing they have come to expect. It is to be hoped that consumers can keep up with the technology as well as the Joneses! More to the point can television, as we know it, continue to mesmerise audiences if the masses stop viewing commercials?

TALKING IT OVER AND THINKING IT THROUGH!

In this section, we consider aspects of the introduction of new products. We also ask you to consider the role of television and newer variants in integrated marketing communication. The issue of privacy of information is also raised:

1. Using Ansoff gap analysis, explain how the convergence of technologies mentioned might assist the industry players mentioned to set strategic marketing objectives.
2. In the new product development process, concept testing (sometimes confused with idea screening which usually occurs earlier) is recommended. Why might this be necessary in the case of the PVR? And how might such testing be undertaken?
3. Form three syndicates in class. Assign to each syndicate one of the following product concepts: a) set-top box PVR for standard television; b) A personal computer PCI card PVR that enables TV to be captured television to CD-ROM; and c) digital wide screen TV with DVD that is capable of split screen presentation of TV shows and can present the Internet / Web via a connected PC, and connects to a surround sound speaker system (Home Entertainment Centre). Have each syndicate discuss the benefits of the product as well as the negative features involved.
4. Is television advertising always mass media communication, and will PVRs automatically change this?
5. Do you think that advertisers will win or lose audiences should PVRs come into widespread use?
6. Do you think that advertisers will win or lose audiences should digital television come into widespread use?
7. Do you feel that privacy issues might detract from market adoption of PVRs?

DIGGING DEEPER

The new television function referred to earlier has been dubbed PVR(for personal video recorder). Watts (2001) points out that the PVR is viewed by some as the end of mass-market advertising, while others do not believe there is a real need for this product at all. One reason why industry might in fact favour such a technology is that the set-top box could record and report which shows are viewed and which commercials were zapped and which were not. Television commercial viewing could then be accurately correlated with brand purchases by known householders. However, permission would be needed, just as it is needed where online marketers use opt-in and opt-out permissions in the case of email advertising and research. In the sense that the new technology identifies the household, it is indeed a personal video recorder. However, it is anybody's guess whether or not the PVR will achieve anything like the adoption rates and levels of the VCR. For one thing, there is so much more choice between technologies today. For instance, will consumers buy a set-top box PVR, or will they buy a less expensive version such as Hauppage's WinTV-PVR (Windows television personal video recorder)? The latter is a PCI card and software that permits television broadcasts and camcorder input to be saved to a hard drive or burnt to a CD-ROM. Although disk space intensive, it is a least-cost solution for those wanting a PVR (Moon 2001).

However, one reason the technology may not be adopted is its potential intrusiveness should personal information be sought by the providers of the set-top boxes or software for on-selling to other networked marketing companies. Thus, the PVR is a two-edged sword, as is most one-to-one marketing from a privacy viewpoint.

SOURCES:

Moon, Peter. "TV and Video on Your PC", The Australian Financial Review, February 28, 2001, 20.

Watts, Tim. "The Prime-time Killer on TV", Business Review Weekly, February 2, 2001, 60-61.

- Stewart Adam

LEAD STORY-DATELINE: Harvard Business Review, November-December, 2000.

Our current use of the Internet in business seems to be based on an outmoded model. We see admissions that "the Internet has been a letdown for most companies" (Kenny and Marshall 2000) and that small business in Australia and New Zealand, to name but two countries, has not gained much from use of the Internet (Poon and Swatman 1999). There is no doubting that companies, particularly the large corporations in the United States, have ploughed billions into their Web sites. However, managers' expectations have not been met by the money spent on these Web sites (Kenny and Marshall 2000; Adam and Deans 2000).

So what's wrong? After all, Napster and Gnutella worked for the NetGen when it came to using the Net for peer-to-peer music access. Is it simply that people want everything on the Net or Web to be free? This does not seem to be the situation. For instance, Fader (2000) points out that "since using Napster, a greater share of consumers have increased their purchasing of CDs than have decreased their purchases". It seems that today there is no one right way to go about marketing online, however there are some basic principles business might follow, and these will become more important in the future. For example, empirical studies show that "retailers carrying differentiated goods [should] make information environments maximally transparent, but [they should] avoid price competition by carrying more unique merchandise" (Lynch and Ariely 2000, p.83).

Kenny and Marshall (2000) rightly point out that with the advent of newer devices such as WAP phones, DoMoCo's mobile Interent phones, the always ON cable-connected home and wireless-connected car (Microsoft 2000) we will experience the ubiquitous Internet. Moreover, the ubiquitous Internet (Net) will penetrate our lives differently to the online model business and government currently use to push their wares at the passer-by. We see this as ubiquitous peer-to-peer marketing (upMarketing) that will dominate online marketing strategy in the future. Rather than turning to the Web for identifiable marketing communication as is currently the case, people will be much more reliant on peer-to-peer advocacy. Kenny and Marshall (2000) cite the case of J&J's use of talking electronic postcards that young teenage girls can send to each other and that in the process allow them to pass on a free skin analysis and a free sample of 'Clean and Clear'. This they term contextual marketing, thereby serving notice that it is perhaps current business use of the Net that is out of step with the way people want to use the Net. So, rather than measure Internet usefulness to business in terms of 'click-throughs' (marketing communication) and sales (transactions), we should be rating the degree to which business Web sites are interactive with the segments and individuals they seek to serve.

TALKING IT OVER AND THINKING IT THROUGH!

In this section we consider the nature of ubiquitous peer-to-peer marketing more deeply:

1. What is meant by the term contextual marketing?
2. Why will the Internet become ubiquitous?
3. In what ways do you see your life changing over the next two to three years due to the advent of the ubiquitous Internet? And in five to seven years ….? Do you see your life becoming more or less complicated?
4. Select a number of favourite commercial Web sites. Do they use contextual marketing? If so, elaborate. If not, why not?

DIGGING DEEPER

Rayport and Svoikla (1994) coined the term 'marketspace' to describe the creation of value for customers in the online domain. Their use of context referred to access modes (eg. networked computers) rather than the context within which a product is offered. This view of context would include Internet capable mobile phones so popular in Japan, and in Korea where there are more mobiles phones than people, but which commentators do not see being adopted in the United States (Cornell 2000). However, access modes are involved when it comes to providing a contextual setting. Kenny and Marshall (2000) cite Unilever as an example of a company intent on providing the right contextual setting when offering their myriad food brands (such as Fray Bentos and Tetley Tea) in the United Kingdom. Unilever plans to allow access via many electronic means to a digital recipe book, which in turn promotes use of the company's products. Whether the consumer is in-store or online, or somewhere in between, she or he will be able to search the recipe book for an e-solution. One can imagine such a device connected to a traditional shopping trolley, and reading specials and sales promotions from aisle located narrowcast antennae and displaying this information as consumers pass each product category.

The real question is the extent to which any business can differentiate its offering and the extent to which the each customer requires something different from the marketing organisation. Peppers and Rogers present a Strategy Map (customer differentiation matrix) for the purpose of developing marketing strategy based on the answers to four questions: How different are your customers in terms of their value to you? How different are your customers in terms of what they need from you? How capable is your business, in terms of identifying and interacting with its customers individually? and How capable is your business, in terms of tailoring its behaviour to the needs of small groups of customers or even individual customers? (1999, pp.166-167). Not all businesses fall into the quadrant whereby both the customer's value to the business and the customer's perceived needs are highly differentiated. Those that do are eminently suited to one-to-one marketing, and perhaps able to effectively use contextual marketing techniques online. As Peppers, Rogers and Dorf point out, and perhaps this is why business is not getting the value it seeks from the Net: "Most organisations will discover that the customer base is a lot closer to 1 to 1 than the enterprises capabilities are" (Peppers, Rogers and Dorf 1999, pp.168-169).

SOURCES:

Adam, Stewart, and Deans, Kenneth R. "Online Business in Australia and New Zealand Crossing a Chasm", AUSWEB2K Conference Proceedings at Southern Cross University, June 12-17, 2000, 19-34.

Cornell, Andrew. "Japan Leads Way with Mobile Internet", The Australian Financial Review, December 28, 2000, 7.

Fader, Peter S. "Expert Report of Peter S. Fader, PhD", Accessed August 2000.

Kenny, David F., and Marshall, John F. "Contextual Marketing: The Real Business of the Internet", Harvard Business Review, November-December, 2000, 119-125.

Lynch, John G., and Ariely, Dan. "Wine Online: Search Costs Affect Competition on Price, Quality, and Distribution", Marketing Science, Vol. 19, No. 1, Winter 2000, 83-103.

Microsoft Corporation. "Your Car.NET", Communiqué, December-January, 2000/2001.

Microsoft.net

Peppers, Don; Rogers, Martha; and Dorf, Bob. "The OnetoOne Fieldbook", Doubleday, 1999.

Rayport, Jeffery F., and Svoikla, John J. "Managing in the Marketspace", Harvard Business Review, November-December, 1994, 141-150.

- Stewart Adam

LEAD STORY-DATELINE: Financial Times, June 8, 2000.

What is the fastest growing product category for Coke and Pepsi? It is not cola, it is not even citrus-based beverages (Mountain Dew or Citra), it is bottled water. Both the cola giants have entered the bottled water market in a big way, and are fighting each other as well as other established players in this fiercely competitive market. Pepsi introduced its Aquafina in the US market six years ago, and put nearly $10m last year into its campaign. Coke, on the other hand, entered the market last year with Dasani and had a promotional budget of $15m.

The relative maturity of the soft drinks industry is partially behind these moves. People are becoming more health conscious and rising standards of living in developing countries have given a boost to mineral water demand. In the US, where soft drinks sales rose 0.5% last year, bottled water sales grew by 35%. According to Michael Bellas, president of Beverages Marketing, after milk, of all the non-alcoholic ready-to-drink beverages, water is the leading product globally. Given that bottled water fits very well with Coke and Pepsi's existing business, they want a share of this burgeoning market too.

Despite its impressive growth rates, however, the bottled water market will not be an easy market for the new entrants. The market is dominated by such global giants as Danone (owner of Evian) and Nestle (owner of Perrier and Poland Spring). Compared to Perrier's $1.5 sales last year in the US, Pepsi's Aquafina sales were only $285m. One major advantage that the two soft-drink giants have is their distribution network. They have the ability to sell, and according to Tom Pirko, president of consulting group BevMark, that is what really matters.

TALKING IT OVER AND THINKING IT THROUGH!

1. What are the two major reasons for Coke and Pepsi to get into the bottled water market?

2. Where would you put Pepsi's Aquafina and Coke's Dasani on the BCG matrix for bottled water?

THINKING ABOUT THE FUTURE!

As consumers become more health conscious, the demand for soft drinks is likely to get affected. However, major soft-drink marketers are already preparing for this market reality. They have diversified not only into bottled water, but also into other more "health-friendly" categories such as fruit juices and sports drinks. Although the soft drinks market has matured in many western countries, it still has a lot of potential in some developing countries. There, we will see a more diversified product portfolio gaining ground as global marketers will enter those markets with their full range of products. For example, even though Pepsi has been in India for only a decade, it already has launched Aquafina there.

SOURCES:

Liu, Betty . "Bottled Water Sales Flow as Carbonated Drinks Lose Sparkle", Financial Times, June 8, p. 20.

- Praveen Aggarwal