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Adapting Marketing to the New Economy
In this chapter, we will address the following questions:
1. What are the major forces driving the new economy? 2. How are business and marketing practices changing as a result of the new economy? 3. How has the Internet changed the way marketers use customer databases and practice customer relationship management?

MARKETING MANAGEMENT AT NTT DOCOMO
All over Japan, NTT (Nippon Telephone and Telegraph) DoCoMo makes money when mobile phones ring. Loosely translated, docomo means “everywhere”—an apt description of the service’s pervasive reach. More than 31 million customers use the DoCoMo phone service for Internet access as well as telephone calls. On the Web, they can subscribe to the latest installment of a manga graphic story, send and receive instant messages from friends and relatives, subscribe to weather reports, and even order goods. Rather than browse in a store, a customer can use the phone’s compact Web viewing screen to look for a particular item (such as running shoes), choose a brand from among thousands listed, select a particular style and size, and place an order. Because the customer’s address is already in the system’s memory, the order will be sent automatically to a nearby 7-11 store for pickup or, for an extra fee, delivery. DoCoMo uses its technology and networks to track the goods and services accessed by each customer and summarize all transactions into a single monthly bill listing subscriber fees, usage fees, and all purchases. Content providers charge the equivalent of a few dollars for monthly subscriptions; DoCoMo profits by collecting these fees from customers and subtracting a 9 percent commission before sending the remainder to the providers. These commissions add up, given that the average mobile 23

ISBN: 0-536-55105-7

A Framework for Marketing Management, Second Edition, by Philip Kotler. Copyright © 2003 by Pearson Education, Inc. Published by Prentice Hall.

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Part I Understanding Marketing Management phone user in Japan spends about $63 per month, compared with $53 per month for the average user in the United States. Customers can even pay their DoCoMo bills at the nearest 7-11 store. Based on DoCoMo’s huge popularity in Japan—and its enviable earnings record of $3 billion yearly—NTT has launched a similar system in Germany, the Netherlands, and Belgium.1 oday’s companies need fresh thinking about how to operate and compete in the new economy, a hybrid economy made up of old and new elements. NTT DoCoMo is quickly gaining experience in this hybrid economy by blending advanced technology to provide superior service, customer by customer. Many standard marketing practices of the old economy, such as mass media advertising, sales promotion, and sales force calls, will continue to be important. However, now businesses also have to quickly anticipate and respond to emerging customer needs and expectations driven, in part, by the Internet and other technologies—or risk having competitors satisfy those needs first. In this chapter, we will first describe the key drivers of the New Economy and examine how business and marketing practices are changing.2 Then we will look at how companies are using the Internet, customer databases and datamining, and customer relationship management (CRM) to improve their marketing performance.

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THE MAJOR DRIVERS OF THE NEW ECONOMY
Many forces play a major role in reshaping the world economy, among them technology, globalization, and market deregulation. Here we will describe four specific drivers that underpin the new economy: (1) digitalization and connectivity; (2) disintermediation and reintermediation; (3) customization and customerization; and (4) industry convergence.

Digitalization and Connectivity
Much of the world’s business is now carried over networks connecting people and companies. These networks are intranets when they connect people within a company to one another and to the...
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