Convergence Marketing : Strategies for Reaching the New Hybrid Consumer

Overview

Meet the "centaur": today's hybrid, "converged" consumer Not just bricks. Not just clicks. They want both—and more. Meet the 400,000,000+ "centaurs" worldwide who'll make or break your company "Customerization": when and how to customize—and when not to How to combine standardization, mass customization, and personalization—profitably Community: Physical to virtual and back again Centaurs are social animals: you must be wherever they choose to socialize Channels: "Call, click, or visit" How to support high-value ...

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Overview

Meet the "centaur": today's hybrid, "converged" consumer Not just bricks. Not just clicks. They want both—and more. Meet the 400,000,000+ "centaurs" worldwide who'll make or break your company "Customerization": when and how to customize—and when not to How to combine standardization, mass customization, and personalization—profitably Community: Physical to virtual and back again Centaurs are social animals: you must be wherever they choose to socialize Channels: "Call, click, or visit" How to support high-value relationships that cut across multiple market channels Competitive value propositions: reshaping the value equation Strategies for leveraging all your new sources of value, from entertainment through innovative pricing to peace of mind Choice tools: "Give me search engines and tools to make better decisions" How to cope with the empowered consumer Beyond the silo: Refocusing technology, marketing, and business strategy on the "centaur"—and on transforming the organization Processes, structure, people, incentives, technology: aligning your entire organization to serve tomorrow's best customers Case studies: beyond theory to reality How today's smartest enterprises are meeting the challenge of the centaur

Today's consumer is a centaur: a new hybrid who's mastering the latest technologies but is still driven by age-old human desires and motivations. "Cyberconsumer" business models ignored human reality: that's why they failed. But "back-to-basics" ignores the deep changes the Internet has wrought. The genie's out of the bottle: your customers have profoundly new expectations—and you have powerful new tools for delivering on them.

Convergence Marketing Strategy illuminates the "centaur," showing what today's customers can do, what they're choosing to do, how they're evolving, and where they're headed. Jerry Wind and Vijay Mahajan identify "5Cs" at the heart of the new consumer relationship: customerization, community, channels, competitive value propositions, and choice tools. Most important, you'll discover how to respond today-and begin optimizing your entire organization to serve tomorrow's fastest growing markets and most valuable customers!

Advance raves for Convergence Marketing from business and marketing leaders worldwide:

"The concept of the hybrid is exactly right. There are no extremes-despite what the media ('out with the old') or those averse to change ('only the old') would have you think."

— Bruce Newman, President, The Franklin Mint

"Technology is only the beginning. This book shows how to transform your marketing and business strategies, approaches, structures, and processes-turning technology-enabled opportunities into real profits."

— Mikko Kosonen, CIO and Chief Strategist, Nokia

"Convergence Marketing Strategy is a brilliantly conceived blueprint for marketing in the age of the hybrid consumer. Its revelation is timely: success isn't just about hardware and software, but also the "heartware" and "spiritware" of the emerging hybrid consumer."

— Y.Y. Wong, Chairman, The WYWY Group

"Simply thinking about this book's core idea can change your approach to marketing research and strategy—and your tactical decisions about advertising, price, channels, and product development. This is fundamentally exciting and important."

— Russ Winer, J. Gary Shansby Professor of Marketing Strategy,
University of California at Berkeley

"The Web is not replacing old-style marketing with the "cyber" variety. The Centaur is a neat metaphor for showing how they integrate. I love the way this book debunks today's marketing myths. Whatever you think about post-Web marketing, buy this book and think again."

— Tim Ambler, Grand Metropolitan Senior Fellow,
London Business School

"This book offers the best guidance I have seen for navigating your company to meet the needs of today's hybrid consumers. Prediction: You will finish this book loaded with ideas—and call a meeting to forge a new marketing strategy for winning in this new world where the consumer is king."

— Phil Kotler, S C Johnson Professor of Marketing,
Northwestern University

"At the center of tomorrow's converged future is the centaur: the hybrid consumer who is tech savvy+uniquely human. Wind and Mahajan elucidate the logic+emotion of centaurs and articulate the effective strategies+tactics for marketing to them. A must read for any manager interested in reaching the consumers of today+tomorrow."

— Arvind Rangaswamy, Professor of Marketing,
Penn State University

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Editorial Reviews

Soundview Executive Book Summaries
During the advent of the Internet, marketers thought of consumers in terms of those who shopped in the non-virtual marketplace (traditional consumers) and those who shopped online (cyberconsumers). In reality, neither extreme truly reflected the habits of tech-savvy consumers. This new audience took on the hybrid qualities of the centaurs of Greek myth - half man, half beast - as they shuttled between online and offline storefronts and information centers, according to their needs. The companies best suited to meet these needs are those that engage in strategies of convergence, adjusting and adapting their businesses between online and offline environments to meet centaurs on their own terms. The authors of Convergence Marketing examine many ways companies can successfully engage centaurs, and look into the future of business and technology.

New and emerging technologies have changed the way customers behave - what they expect and how they view their relationships with corporations - both online and offline. These centaurs - consumers who interact with companies in both marketing spheres - are radically transforming the practice of marketing. They have enduring human needs and desires, but these have been sharpened and attenuated by the promise of technology. Centaurs desire uniqueness, personalization and customization; social interaction; convenience and channel options; value; and the ability to make better decisions.

The authors write that the right balance of "bricks" and "clicks" depends on both the type of business and its consumers. Businesses must take their understanding of their audiences' complex behaviors and build products and services to meet those needs. The authors remind companies that the consumer must be at the center of this process.

With new technologies, consumers can do things they never could do before. With these new capabilities, customers are changing in ways heretofore unimaginable by combining their traditional behaviors with the constantly advancing possibilities of the technology. Indeed, there is a convergence of the consumer with the technology.

Consumers can have very different reactions to personalization and customerization. Sometimes, they even prefer standard, off-the-shelf products to similar products with many different customizable options, for a number of reasons, including: fitting in with the crowd, experience, uncertainty and unarticulated needs. The authors write that companies can effectively and creatively combine standardized and customized marketing messages and experiences by integrating online and offline customization, asking the next question, using customized choices to inform mass production and increasing digital content.

The authors write that companies can build interactions and bridges between virtual and physical communities by:

  • Gathering lost tribes. Take natural physical communities that are diffused and give them a place to meet online.
  • Creating parallel universes. Sometimes, the physical community becomes the basis for the virtual community, and vice versa.
  • Engaging in cross-pollination. Even when parallel universes are not created, the interactions in the virtual community may lead to interactions in the physical community, and vice versa.


One of the key convergence challenges as virtual communities develop is to give them viable economic foundations without eroding their social fabric. This is not a new challenge - when communities are exploited for economic gain, their social strength is undermined. Companies must balance the economic and social objectives of the community by embedding the economic in the social, tapping into the energy of the community through community-generated content, building bridges to existing communities and sustaining trust.

The need to have clicks and bricks is now fairly obvious, and the authors write that companies need to create a coherent customer experience across multiple channels. People have always had the desire for speed, convenience and relevant channel options. But, a failure of integration or operation of the online and offline businesses can create slow and inconvenient interaction that undermines the reputations of both the online and offline businesses. Putting the right pieces together in the right way is critical.

The Internet is a rich and active source of information that consumers use in making key decisions. Consumers are overwhelmed with choices and data, both of which have been accelerated by online technologies, creating the need for search engines (like Yahoo) to find information, decision-making tools (like Expedia) to transform that information into knowledge, and life management tools (like Microsoft Office) that help consumers make sense of it all.

The authors write that convergence requires a fundamental set of difficult changes. Implementing convergence strategies entails a number of significant challenges, including:

  • Do not make convergence change an IT initiative.
  • Anticipate resistance.
  • Change business practices, not just technology.
  • Do not be limited by past experiences.
  • Make the path to change temporary.


Why Soundview Likes This Book
The authors of Convergence Marketing are amazingly thorough in their coverage of the issues and ideas that surround a better approach to marketing in the 21st century. Throughout their book, they offer marketers myriad ways to connect the online markets with offline markets into a unified strategy. By looking at consumers and their behaviors with an updated perspective, they are able to help companies tap into the vast potential of convergence marketing. Copyright (c) 2002 Soundview Executive Book Summaries

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Product Details

  • ISBN-13: 9780130650757
  • Publisher: FT Press
  • Publication date: 10/1/1901
  • Pages: 368
  • Product dimensions: 5.98 (w) x 8.97 (h) x 0.78 (d)

Meet the Author

YORAM (JERRY) WIND is The Lauder Professor, Professor of Marketing, Founding Editor of Wharton School Publishing, and Academic Director of The Wharton Fellows Network at the University of Pennsylvania. He is also the Founder and Director of the SEI Center for Advanced Studies in Management, The Wharton School's think tank. Wind led the development of a number of key Wharton programs including the reinvention of the Wharton MBA curriculum and the creation of the Wharton Executive MBA Program. Among his many affiliations is former chancellor, the International Academy of Management (IAM). One of the world's most cited marketing authors, his books include Driving Change: How the Best Companies Are Preparing for the 21st Century, and The Power of Impossible Thinking. Dr. Wind has served as an advisor to many Fortune 500 firms and non-U.S. multinationals throughout the financial services, pharmaceuticals, information, and consumer packaged goods industries, and as advisor and board member for a wide range of entrepreneurial ventures. His consulting focuses on global corporate and business strategy, corporate transformation, marketing strategy, and especially new business development. He is the recipient of all the major marketing awards. Wind received a Ph.D. from Stanford University.

VIJAY MAHAJAN is John P. Harbin Centennial Chair of Business and Professor of Marketing at the McCombs School of Business of the University of Texas at Austin. He has served as a marketing consultant to such companies as Edward Jones, Dell, and Frito-Lay, and has run executive development programs throughout North America, South America, Europe, and Asia. Mahajan serves on the advisory boards of several high-tech start-ups in Austin and is author of several books and award-winning articles, including New Product Diffusion Models (International Series in Quantitative Marketing, Volume 11). He has received several lifetime achievement awards for his research on innovation diffusion and marketing research and strategy.

ROBERT GUNTHER, founder of Gunther Communications, has collaborated on or co-authored more than ten books, including Hypercompetition, Buyout: The Insider's Guide to Buying Your Own Company, The Wealthy 100, Leveraging Japan, Wharton on Managing Emerging Technologies, Wharton on Dynamic Competitive Strategy and Wharton on Making Decisions.

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Read an Excerpt

Part IV: Transforming the Organization

The challenge of the centaur goes beyond marketing and business strategies to the heart of organizational architecture. Many firms, believing the Internet was merely a new channel for reaching consumers, did not fully appreciate the depth of the impact of the new hybrid consumer. The expectations of consumers have been raised.

Technology has moved out of the back office into the customer interface, giving customers much more direct access to the company. In the old world, a sales rep or retailer could create a friendly façade for the company. These intermediaries knew how to navigate the complex channels for interacting with the company so they could present a fairly coherent face to the consumer (even then, the system was often slow, frustrating, and inefficient). But today, when the centaur is much more directly wired into the company, managers need to be able to organize to interact with customers and truly have a coherent architecture for meeting the ever-increasing demands of the centaur. Most organizations are not designed for this.

As illustrated in the figure above, this section of the book focuses on the organizational architecture the company needs to create to run with the centaurs. How can companies meet these rising expectations? The very technologies that create these new challenges often offer the potential for solutions, if they can be applied correctly. The technologies for customerization and personalization, building community, designing and managing chan-nels, reshaping the competitive value equation, and providing decision-making tools can all be applied within the organization. In Chapter 10, we explore how managers can apply the 5Cs of convergence within their organizations to create a "convergent organization." But just as the emergence of the hybrid consumer has been a challenging and circuitous process, so the process of implementing organizational convergence presents substantial challenges. In Chapter 11, we examine the pathways to convergence and strategies for implementation. How do WalMart and Amazon make their way to the hybrid model? What are the organizational issues involved in implementation? Finally, in the conclusion, we explore lessons learned and offer a few strategies to help you initiate your own process of transformation to meet the challenge of the new hybrid consumer.

Chapter 10: Designing the Convergent Organization

How can organizations address the gaps between their architectures and the needs of the hybrid consumer? This chapter explores how the same technologies and approaches that led to the emergence of the hybrid consumer can be applied within the firm to create a convergent organization. This organization can use the 5Cs to redesign culture and values, processes, structure, customer interface, boundaries, performance measures, and human resources.

John Sanderson, the CEO of a major packaged goods manufacturer, has been up all night wrestling with a problem he was thinking about on a trip back from California to Chicago. As he returned home from a meeting with leaders of the company's online startup, based in Silicon Valley, he was thinking about how his organization has already begun to transform its approach to marketing to meet the new hybrid consumer. It established this separate company to create a customized line of food products online. It began to build online communities around recipes and cooking, linked to sites with similar interests. The company has experimented with auctions and other pricing models for higher-end products and bulk orders. And it has offered customers engines for comparing products, sorting based on many attributes, creating and analyzing diets, and searching for difficult-to-find ingredients.

But the more the organization tries to "run with the centaurs," the more he feels it keeps tripping up. The company is not flexible enough. It is weighed down by traditional information systems, organizational structure, and processes. Perhaps most significantly, it is hampered by legacy mindsets. The technology is there to do much more, but the organization is not designed to take advantage of it. A traditional airplane cannot be expected to travel at supersonic speeds merely by adding an engine. It needs an entirely new design.

As he stretches out in first class on the red eye home, he realizes that he needs to do more than transform his approach to marketing. To deliver on the promise of the 5Cs —customerization, community, channels, competitive value, and choice tools—he needs to challenge his current view of the business and transform his entire organization. This is what keeps him awake on the flight home.

Could he transform his successful organization without destroying it? If he undertakes a radical overhaul, can the organization still meet its earnings targets? Will the current employees be able to operate in this new environment? What will it do to the organizational culture? And after all is said and done, how can he be sure that this organizational change will actually better meet the needs of the hybrid consumer? Sanderson is not alone in this challenge. Companies such as WalMart, Kmart, and Staples are wrestling with similar questions as they draw together their online and offline businesses.

Then it hits him: the same approaches that have created the challenge of the hybrid consumer can be applied within the organization to create solutions. Sanderson pulls out a legal pad and sketches out a chart, illustrated in Exhibit 10–1. For each of the 5Cs, he examines implications for organizational architecture. As he has done in exploring consumer markets, he now examines what has changed as a result of the new technology, what are the opportunities to do things differently, and what aspects of the organization remain the same. He is excited to see the possibilities for transforming the organization.

Sanderson realizes that while the new hybrid consumers want to interact with the company in diverse ways, they also expect to have a coherent experience across all these channels. It is difficult to deliver this type of coherence with a piecemeal organization. In the past, when the customer was distant from the organization, the complexity was not apparent, but now that the customer is more directly connected to the organization, the inconsistencies, the complexity, and divisions within the organization have become much more transparent. Sanderson realizes that to achieve coherence, he needs to find ways to bring the separate parts of the organization together. He needs to achieve an organizational "c-change," redesigning his organizational architecture to meet the challenge of the centaur. In this chapter, we'll examine how the 5Cs can be applied within the organization to create innovative organizational designs that are better suited to meet the external challenges of delivering the 5Cs to consumers. We'll explore how companies are engaged in transforming their organizations to meet the challenge of the centaur and to take advantage of the new technologies and approaches offered by the 5Cs.

The Need for Organizational Convergence

Changing the organization appears to be essential in making technology investments pay off. Erik Brynjolfsson and Lorin Hitt, studying both econometric data and individual company cases, found that the returns from investments in IT are far greater in firms that make complementary changes in their organizations—such as new business processes, new skills, and new structures. The impact of these changes may be as much as an order of magnitude larger than the investments in the technology itself.2

The communications and information technologies that drive convergence work against the grain of the traditional organization. The traditional organization is built upon separation and specialization. Because of the need for specialization, poor communication mechanisms, and high coordination costs, the large organization could not operate as a total organism. Instead, it was broken down into component parts, divisions How do you need to change your organization to support convergence marketing?

and strategic business units (SBUs), brands and product lines. The supply chain was broken into suppliers, manufacturers, and buyers. Industries were broken into fairly neat sets of com-petitors. The car companies in Detroit could look out their cor-porate windows and see their competitors. The customer was outside the organization, and there was a clear boundary between the inside and outside.

This led to the creation of a variety of ways to slice up the traditional organization into "silos" by function (finance, operations, marketing, etc.) brand, customer, and geography, as shown in Exhibit 10–2. Each of these silos creates pieces of the organization that are separated from the whole. While this creation of silos may facilitate management and control, breaking a complex organization into small pieces reduces interaction among the pieces and increases complexity for customers. For example, one customer may be forced to interact with several separate divisions of a single company. Is customer relations a marketing, information technology, or operations issue? Is a telephone customer with a cell phone and several landlines a "business" or "residential" customer? Should a road warrior who buys a laptop be viewed simply as a customer in his home country? What geographic division should serve a customer in Singapore who orders online from a U.S. business unit? Should an upscale customer in Manhattan be considered part of the same "U.S." market as the poor Hispanic worker in Los Angeles?

The implementation of e-business initiatives has, in many cases, added to the silos in the organization. The rise of e-business has often led to the creation of independent e-business units within organizations. For example, Procter & Gamble created Reflect.com as a separate unit or Kmart set up the independent BlueLight.com website. Without careful management, the separation of online and offline businesses can lead to a rift between these organizational units and reduce the likelihood of seamless convergence.

While pharmaceutical firms usually market brands, their customers, who often suffer from multiple ailments, are seeking integrated wellness solutions. Separate marketing campaigns target doctors and consumers, yet physicians are a part of both audiences. The organizational separations do not make sense. But how can companies remove the brick walls of these silos without losing the benefits of specialization and their ability to manage the business?

To counteract the weaknesses of these silos, companies have moved to matrix structures, in which one silo is overlaid upon another silo. But these matrix organizations often become complex to manage, eroded functional expertise, made accountability more difficult to assign, and presented the customer with an even more complex organization....

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Table of Contents

Foreword.

Preface.

Acknowledgments.

I. UNDERSTANDING THE CENTAUR.

1. The Centaur Awakens.

2. The Reality of the Centaur.

II. NAVIGATING THE FIVE CS OF CONVERGENCE.

3. Converging of Customerization.

4. Converging on Communities.

5. Converging on Channels.

6. Converging on Competitive Value.

7. Converging on Choice.

III. MASTERING CONVERGENCE MARKETING.

8. Transforming Marketing.

9. Convergence Marketing Strategies.

IV. TRANSFORMING THE ORGANIZATION.

10. Designing the Convergent Organization.

11. C-Change.

12. Conclusion.

Index.

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Preface

Preface: Running with the Centaur

"A businessman is a hybrid of a dancer and a calculator."

—Paul Valery, French Poet and Philosopher

The Internet revolution didn't turn out to be anything like we thought it would be. At the end of the 1990s, the discussion of many observers, we among them, focused on the rise of the "cyberconsumer" and the emergence of "Internet marketing." At the extreme, the image of this cyberconsumer was humorously caricatured in a series of Sprint commercials introducing its wireless web, in which people hunched over their computers in dark rooms were invited at long last to step out into the sunlit world. The business model designed for the cyberconsumer was the "pure play" Internet firm, either a separate dot-com or a stand-alone division of a larger company. But the cyberconsumer was largely a myth. Consumers didn't behave anything like we thought they would.

Today, we are entering the age of the centaur. Consumers act across multiple channels. They combine timeless human needs and behaviors with new online activities. They are like the centaur of Greek mythology--half human and half horse—running with the rapid feet of new technology, yet carrying the same ancient and unpredictable human heart. This consumer is a combination of traditional and cyber, rational and emotional, wired and physical. This consumer is not either/or, but both.

The authors came to this center from opposite directions. Jerry Wind was an early champion of digital marketing, highlighting the revolutionary changes of the Internet on consumer behavior, marketing and business strategy. He urged executives to consider the potential of this new technology to transform their businesses. Vijay Mahajan pointed out that not everything had changed, and that many aspects of consumer behavior and marketing remained the same. He urged executives to consider the enduring human characteristics that would continue to shape marketing and business strategy. As we discussed the issue from these two viewpoints, working on a series of projects that led to this book, we came to the conclusion that we were both right: the reality was the hybrid consumer.

This is not to suggest that there are three separate segments (traditional, cyberconsumer and centaur). The reality is convergence. The entire market is becoming centaurs, either directly or indirectly (even if someone is not online, their behavior will still be affected by new technologies, channels and products, and service offerings). This is why we focus so much on the centaur. The centaurs, in turn, are heterogeneous, so there will be many segments among these hybrid consumers.

Even the most tech savvy of U.S. consumers—the 18 to 25 year olds of Generation Y—are not strictly cyberconsumers. A recent survey of more than 600 Gen-Y respondents (51 percent of whom had made online purchases in the past year) found that nearly 40 percent learned about the product online, but bought at a physical store, whereas only 9.3 percent began and ended their search online. When asked where they would prefer to shop, nearly three-quarters chose a store rather than online. Across the spectrum, consumers are combining various channels and approaches, searching online to buy offline, searching offline to buy online—and everything in between. Charles Schwab found that while about 90 percent of all trades are handled online, 60-70 percent of new accounts are set up in branch offices. People want to be able to see whom they are working with when they turn over their money.

Benefits of Convergence

The power of hybrid models can be seen in the success of Tesco, which raced past pioneers such as Peapod and Webvan to become the largest online grocer in the world. Tesco, using its century-old platform of retail stores in the U.K. as the launching pad for its online service, created a profitable online business that was handling 70,000 orders per week by mid 2001 and had racked up more than $400 million in sales the year before. Tesco could set up its online grocery business for a fraction of the investment of Webvan because it was able to build off its existing infrastructure. Tesco has moved into the U.S. market, purchasing a 35 percent investment in Safeway's online grocery service in June 2001, and announcing plans for expansion into South Korea.

The power and profit of the hybrid model can also be seen in the success of Staples.com, which expected to grow online revenues to $1 billion in 2001, nearly 10 percent of company sales. Even more significant, Staples found that the addition of the new channel is not cannibalistic, but synergistic. Overall, customers who shop in the store and catalog spend twice as much as those who shop in the store alone, and customers that shop using the store, catalog, and online channels spend an average of $2,500, nearly four times as much as store shoppers.

The results achieved by Staples and other firms offer a sense of the potential return on investment from meeting the centaur. Convergence strategies offer a variety of opportunities for generating new revenues, reducing costs and creating valuable options for the future.

Changing Mind Sets

There is emerging evidence of the immediate benefits of convergence strategies, if investments are made strategically, but these short-term gains are not the only opportunity. Our focus is to look at the opportunities, both short- and long-term, created by the emergence of the hybrid consumer and how companies can capitalize on these opportunities. The last category may be the most important: the options that convergence strategies create for the future. This book takes a broader view of the strategic impact of the centaur for marketing and business strategy, and the architecture of the organization.

If you believe, as we do, that the centaur is the future of our markets, then the ability to succeed in the future depends on understanding and "running with" the centaur. Failure to understand these changes creates the risk of significant lost opportunities. What can the integration of the offline marketplace and the online marketspace do for consumers that neither can do alone? What business principles will guide the integration? How is marketing changing? How do these shifts affect short-term and long-term profitability and growth?

What Is Converging

Convergence, as we discuss it here, means more than the fusion of different technologies (television, computers, wireless, PDAs) or the combination of channels (such as Tesco's or Staple's bricks-and-clicks model). We focus on a more basic convergence within the consumer—the new possibilities created by the technology and the enduring behaviors of human beings. This convergence will shape how the Internet and other new technologies unfold, and the opportunities created for companies. What can consumers do with the technology that they could not do in the past? When will they continue to do things in the way they always have?

Although most of the focus in this book is on business-to-consumer interactions, many of the insights apply equally to business-to-business strategy. The line between B2B and B2C is already blurring. In an environment in which Sun Microsystems is selling products on eBay, is this B2B or B2C? In an environment in which a customer may soon be able to click an order button for an automobile and set in motion a global supply chain to deliver that car, where does B2C end and B2B begin?

Lessons from the Dot-Coms

This book examines the practices of a variety of companies, but we must stress at the outset that these firms are not held up as ultimate models. They all have something to teach us, but many of the successful companies of a year or two ago are now fighting for their lives. And some companies that were all but written off are back in force. We suspect the same unpredictable dynamic will be seen in the future.

This is a particularly dangerous time to engage in benchmarking or to search for excellence. It is not a time for simple recipes. Instead, it is far more important to gain a deeper understanding of how consumers are changing and how they are remaining the same. The actions of these hybrid consumers will shape the way technology is adopted and, ultimately, the future of your markets.

We should take a balanced view of dot-com failures. Mark Twain once said, "We should be careful to get out of an experience only the wisdom that is in it." Twain gives the example of a cat who sits on a hot stove, and learns not to sit on a hot stove again—but also won't sit on a cold stove. The failures of the first wave of dot-coms offer many lessons about what to do, and what not to do, but we need to be careful in taking lessons from them. Although some of the companies that failed had weak business models, some actually had brilliant marketing strategies and business models. The failure of the business is not necessarily an indictment of the idea. Some may have arrived slightly ahead of their time. Some may have suffered from poor execution. It may be that the time is now right for these ideas to flourish.

During the Internet bubble, we have engaged in one of the most extensive, investor-financed experiments in new business models and paradigms. There has been an explosion of experimentation. Although many of these experiments proved to be unprofitable, many new ideas were developed and tested. Incumbent companies and startups that are still alive can benefit greatly from the acceleration of knowledge from this dot-com "school of hard knocks." Pick through the wreckage and look carefully at what happened. Then take away the lessons that you can use.

The Implications of the Centaur

In this book, we offer insights to top executives and key organizational change agents on the characteristics and behavior of these hybrid centaurs and how we need to reshape our marketing and business strategy to meet them. The book explores different intersections between the consumer, technology and company and their implications for marketing and business strategy and organizational design.

We examine the emergence of the centaur, and the marketing, business and organizational challenges and opportunities created.

Part I offers a portrait of this centaur, what has changed and what remains the same. We also discuss how the focus on the customer has often been lost in the emphasis on technology. These centaurs are complex beings, with a love-hate relationship with the technology, buying books from Amazon.com one day and relaxing in an armchair sipping cappuccino at Barnes & Noble the next.

Part II explores issues at the intersection between the consumer and technology. We consider five key issues at the core of addressing these new hybrid consumers—customerization, communities, channel options, new competitive value propositions, and choice tools. Although these issues have been discussed in the context of the cyberconsumer, they are quite different from the perspective of the centaur. Sometimes consumers want customerization (customized products and services as well as customized marketing), but other times they want to pull standard products off the shelf and receive mass marketing messages. Consumers are members of both physical and virtual communities. The hybrid consumers want to be able—in the words of Fidelity—to "call, click, or visit." They are redefining the traditional sources of value, buying products by auction or fixed price or name-your-own price depending on their mood and purchase situation, creating a new value equation. Finally, the Internet offers powerful tools to find information, make decisions, and manage one's life. These tools empower consumers, changing the way they interact with the company. How can you create convergence strategies to address these interrelated issues?

Part III examines the impact of the centaur on marketing and business strategies. As the consumer connects much more directly to companies, marketing has a deeper role to play. Marketing creates new opportunities for growth and rethinking the company's offering, pricing and market boundaries. The centaur has also transformed the traditional 4 Ps of marketing, along with strategies for segmentation, positioning, customer relationships, branding, and marketing research.

As these changes send shockwaves through the organization, another type of convergence is called for—in organizational design. Part IV explores some of the fundamental transformations established organizations need to undergo to meet the centaur. To navigate the whitewater rapids of convergence and change, organizations need new organizational architectures. They need to change their architectures, creating a broader "c-change" to facilitate convergence across the organization and its ecosystem.

The overall objective is to suggest a new consumer-centric mental model through which to examine the entire business. The kind of shift we are talking about is what Bill Gates describes in the transformation of Microsoft's original mission of "a PC on every desk" to its current mission to "empower people through great software, any time, any place and on any device." The focus is on the convergence of technology and consumer needs.

This book is designed to be an interactive experience. Each chapter begins with a dialogue representing different viewpoints on convergence. Callouts highlight key convergence questions that you can use to challenge yourself and to assess your company's progress. Finally, the close of every chapter offers an "action memo," a set of illustrative hands-on experiments for exploring and applying convergence strategies. We have found the only way to master these new technologies and strategies is to actually experience them and apply them to your own business. These "action memos" are not intended to be exhaustive or to summarize key themes of the chapter, but represent a starting point for your own experiments. We encourage you to share those experiments with us, and other readers, at the Convergence Marketing Forum (convergencemarketingforum.com).

The Relentless March of the Centaur

As Internet penetration increases—and new technologies emerge—we are seeing a relentless march of these new hybrid centaurs. We cannot judge the potential of the Internet and other technologies by their current primitive level of development. John Hagel, author of Net Gain and Net Worth, says if we compare the Internet to a ballgame, we are still waiting for the national anthem to finish. Michael Nelson, Director of Internet Technology and Strategy at IBM, estimated in 2000 that we were maybe 3 percent of the way into the Internet revolution. He also points out that increased speed of connection, which has been a central focus of attention in the evolution of the Internet, is only a small part of the power of the emerging online world. In addition to raw speed, the fact that the Internet will be always on, everywhere, natural, intelligent, easy, and trusted, will deepen the role of the Internet in our lives.

Nelson compares the development of the Internet to the early days of the electric grid. "The Internet right now is at the light bulb stage," Nelson said. "The light bulb is very useful, but it is only one of thousands of uses of electricity. Similarly, when the next-generation Internet is fully deployed, we will use it in thousands of different ways, many of which we can't even imagine now. It will just be part of everyday life—like electricity or plumbing is today. We'll know we've achieved this when we stop talking about 'going on the Internet.' When you blow dry your hair, you don't talk about 'going on' the electric grid."

There will be naysayers who will use the limitations of the current state of technology as a reason for inaction. Customization is often neither cheap nor simple. Early interfaces with online sites were clunky at best and many home connections remain slow. Throughout this book, we look at the current and future potential of technology and explore how the consumer will interact with it. We won't waste your time giving you a repair manual for a Model T, but instead explore how motor vehicles (particularly newer, more reliable versions) create opportunities for activities such as commerce and family vacations by car. While we must be realistic, we cannot become too mired in the past when the future is so rapidly emerging.

Children of Centaurs: In the Forests of the North

It is clear that we are just getting started with the Internet, and we are even earlier on the learning curve for the new wireless consumers beginning to emerge. Even as businesses are scurrying to absorb the revolution of the Internet, teenagers in Europe and Asia are already shaping the next revolution in mobile communication and commerce. This revolution will play out differently in different parts of the world, and it will probably play out differently than we expect, unless we truly understand the new hybrid consumer. It poses new convergence challenges, but raises the same timeless questions: How will consumers interact with the technology?

Again, this interaction between people and technology will not always be as businesses anticipated. Helsinki teenager Lauri Taehtinen, speaking on a panel of Finnish teenagers at the Wharton Fellows in e-Business Program, said that when he goes out on a Friday night, he doesn't make plans anymore. Instead the 19-year-old goes downtown and starts sending short messages on his mobile phone, pinging his friends to see who's out there. They connect by cell phone and then decide where they want to go for the evening. While companies are excited about developing mobile information services that might help customers identify night clubs or order fast food, Taehtinen and his peers are more interested in connection. In an environment in which virtually every teenager carries a mobile phone (Finnish market penetration of 78 percent means almost every citizen above the age of 10 carries at least one mobile phone), the mobile conversation is continuous and ubiquitous. Among U.K. teens, short messages outnumber phone conversations three to one, and the parallel phenomenon of instant messaging is one of the most popular applications of teenagers on the PC in the United States and other parts of the world.

The very fact that short messages (SMS) are the top application of mobile phones in Finland is, at first, a surprising thing. The handsets, designed for voice, are not friendly to the process of messaging. Users tap out their 160-word messages on numeric keyboards through complex, rapid-fire keystrokes, smart systems, and creative workarounds. With users paying a charge to send each message on most systems, it would seem unlikely that SMS would be a central part of the mobile phone business. But these young centaurs want to communicate, and they don't let the technology get in their way. It was only in the interaction between consumers and technology that that power of short messages became apparent. Just as email has been the killer application of the Internet, mobile technology is being bent to the human desire to communicate and connect.

"People don't want to be entertained," Taehtinen bluntly states. "They don't want information. If you go into Internet cafes, you see people are not reading the news; they are all sending email or chatting online. They are willing to pay for social interaction. People want to belong to something."

Enduring Lessons

While communications and information technology may be ephemeral and uncertain, there are at least two enduring lessons: The first is that the new technologies, as much as their proponents may want them to, do not replace the old. They live side by side, and they converge. The second is that people are complex, retaining the same enduring human needs even as they adapt to new technologies and behaviors. These may seem like fairly obvious, even simplistic, statements. But they have been overlooked more often than recognized in the mad rush to adopt new technology.

These realities have fundamental implications for marketing and business strategy. What they mean is that there needs to be a convergence of the old technology and the new to create a portfolio of technologies and channels. The storefront and catalog don't go away when you add the Internet. And, even more important, there is an interaction between humans and technology that changes both. There is a convergence of old consumer behaviors and new behaviors that affects the trajectory of technology, the strategies for marketing and, ultimately, the design of the business.

More Human

The wonderful thing about our interactions with machines is not in the ways machines can be made to behave in more human ways, but in the way these interactions make it easier for us to see what distinguishes us as humans. The more we move to machine-mediated interactions, the more we see the fundamental and enduring behaviors that are at the core of marketing and business strategy. It is this interaction between man and machine that is changing us, transforming the practice of marketing and our organizations.

In this book, we examine how we need to transform our thinking about the nature of these emerging consumers. We explore how to reach these centaurs and establish long-lasting relationships with them. We look at the ways that they remain the same and the ways that they are fundamentally different in their expectations and behaviors. And we consider how they have irrevocably changed—and continue to change—the theory and practice of marketing, and the design of our organizations.

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Interviews & Essays

Author Essay
The Power of Convergence in the Post-Dot-com Age

In January 2001, as the cracks in the Internet revolution were beginning to show, the two of us met in Silicon Valley for a session of the Wharton Fellows program, focusing on the challenge of “e-transforming” organizations. Jerry Wind, founding director of the program, had long been a champion of the revolution of digital marketing, encouraging executives to seriously examine the implications of the Internet and other innovations. He noted that the new technologies created opportunities for customers to do things they could never do before. Companies needed to rethink their marketing and business strategies, as well as their organizational architecture.

In a presentation to the Wharton Fellows program in the amphitheater of Xerox PARC research center, near the epicenter of the technology revolution, Vijay Mahajan pointed out that not everything had changed. There were enduring human needs and behaviors. Many online businesses were based on the idea that consumers are only interested in transactional efficiency and informational efficiency. But consumers have much deeper needs. This is why when we travel on business, we buy our family members toys and souvenirs at the airport that we could easily buy more efficiently and cheaply online or at home. Buying the product in transit shows we care about our children and are thinking about them.

As we continued our discussions on the impact of the Internet on business, we came to a surprising conclusion: We were both right. The Internet has created tremendous changes that offer great opportunities to rethink our relationships with customers, our strategies and the design of our organizations. At the same time, the Internet doesn’t change everything, as some early proponents claimed. The key is to look more closely at the transformations. What can consumers do that they couldn’t before? What enduring needs remain that will shape their behavior? What are the opportunities of serving this emerging hybrid consumer?

The result of these discussions is our book, Convergence Marketing: Strategies for Reaching the New Hybrid Consumer. We explore the emergence of a hybrid consumer -- which we describe as a “centaur,” who runs with the fleet hooves of new technologies but carries the same enduring human needs and desires. We identified five sets of issues that are critical in shaping a strategy for “running with this centaur” -- customerization, community, channels, competitive value, and choice tools. These 5Cs are areas in which technology creates opportunities for customers to do things they could not do before, but these are also areas in which the interaction between consumers and technology is complex.

Consumers want customized products and marketing messages in some cases but also still want standardized offerings and messages. They are part of virtual communities but also physical communities. They want to be able to interact through multiple channels, making their investments online one day and the next day calling or visiting an investment adviser. Consumers take advantage of auctions and other new buyer-initiated pricing models, but they still buy fixed price products. In addition to the product and service offering, they also expect information, education and entertainment as part of the value equation. Finally, customers have access to powerful choice tools online, including search engines, decision tools, and life management tools, but organizations need to combine these with human experts. Companies also need to balance unbiased information with their own marketing messages. In all these areas solutions are not either/or but both. The key is convergence.

As John Hagel wrote in the foreword to our book, this focus on convergence represents the “the beginning of a third era of the Internet.” With every new technology, there will be some who say it changes everything. Others will defend the status quo. More often than not, as we discovered, the answer and the greatest opportunities lie along the middle path, capitalizing on the power of convergence strategies and convergence organizations. (Jerry Wind and Vijay Mahajan, with Robert Gunther)

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  • Anonymous

    Posted December 26, 2001

    great read/highly informative

    This book outlines the essential approach on needs to have while marketing products to consumers in the present day. Traditional marketing methods in some ways are no longer applicable and a drastic switch to internet based marketing isn't the answer either. just as a traditional consumer adapted to the internet, marketing needs to do the same, this is where this book steps in. a definite must read!!!

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