Adapting Marketing to the
New Economy
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Case Study: Charles Schwab
Major forces driving the new economy
E-Commerce domains
Challenges faced by Click-only companies
E-Marketing
Invented discount brokerage category
• Two sequential decisions were faced
by him:
Should it go online?
Should it integrate its online and
offline trading systems?
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The Major Drivers of the New
Economy
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Procter & Gamble’
Gamble’s Reflect.com site allows customers
to design their own beauty products
Digitalization & Connectivity
The Internet Explosion
Disintermediation
Customization and Cutomerization
Industry Convergence
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Buyer Benefits of ECommerce
Seller Benefits of ECommerce
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• Convenience
• Easy and private
• Greater product access/selection
• Access to comparative information
Relationship building
Reduced transaction costs
Increased speed and efficiency
Flexibility
Global access, global reach
• Interactive and immediate
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The Impact of B2C Web Sites
Figure 3-2
E-Marketing
Domains
• Lower consumer search costs;
• Manufacturers can contact consumers
directly;
• More intensive price competition among
firms?
• Any online loyalty from customers?
• Disintermediation?
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The Impacts of B2B Sites
C2C E-Commerce
• More information and lower transaction
costs;
• Prices are transparent;
• Buying alliances;
• Differentiation or price competition?
• More efficient markets.
• Helping consumers exchange goods
or information, e.g., eBay.
• Auction sites facilitate the exchange
process;
• Newsgroups / forums
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C2B E-Commerce
Pure Click Companies
• Allow consumers to search out sellers,
learn about offers, initiate purchase,
or dictate purchase terms;
• Some sites facilitate the feedback
process between customers and
companies.
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Search Engines and Portals;
Internet Service Providers, e.g., AOL
Commerce Sites, e.g., Amazon, CDNow
Transaction Sites: eBay;
Content Sites, e.g., New York Times
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The Reasons for the failure of
many dot-coms
• Low entry barrier and intensive
competition;
• Conducting mass marketing;
• Over emphasis on acquisition vs. retention
• Poor web site design / distribution systems
• No sound business model which can
deliver profits.
Brick and Click Companies
• Channel conflict was initially a concern;
• E-commerce often created new customers,
rather than cannibalizing existing one;
• Many firms now enjoy greater success
than their click-only competition. Why?
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E-Marketing
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Seven C’s of Web Site Design
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Setting up web sites
Placing online ads and promotions
Creating or using web community
Using e-mail and webcasting
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Content
Context
Community
Communication
Connection
Commerce
Customization
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Online Forms of Ads
and Promotions
–Banner ads
–Content sponsorships
–Microsites
–Viral marketing
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Creating or Participating in
Web Communities
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Charlesc Schwab
• Attracting consumers with common
interests and well-defined
demographics;
• Offering targeting opportunities to
advertisers.
Invented discount
brokerage category
First U.S. major player
to go online
Initially offered twotiered trading system
to protect profits / stop
cannibalization
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Later became first
true click-and-mortar
full-service brokerage
Now world’s largest
e-commerce site
85% online trades;
21% of trade volume;
Strong stock return
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