Traditionally, the marketing of products and services has always occurred either through a face-to-face conversation, magazines, billboards, television, or even through a simple phone call. Yet, due to advances in technology where the scale and scope of the retail industry have come to encompass a global market place, the traditional processes by which marketing efforts have always followed started to change.
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Large companies have utilised the mass-market strategy as a means of promoting their products to consumers in their various target markets. The mass-market strategy primarily focuses on appealing to a wide range of possible consumers within a given market. For example, in the case of appliances such as microwaves, refrigerators or ovens, there is no specific segment of the population that these appliances attempt to target, aside from people that have need for and can afford them.
This means that demographics related to age, race, level of education, and ethnicity do not factor into the marketing strategy decision. Instead, when a mass marketing strategy is implemented it is normally the case when it attempts to appeal to consumers based on uniqueness, affordability and functionality.
Despite the obvious advantages in such a strategy, we currently exist within an era of unprecedented “data richness” so to speak, wherein companies find themselves far more capable of addressing the various needs of a customer based on their individual profiles as compared to simply blanketing a particular region with a mass marketing campaign and hoping people would “bite”.
It is based on this that customer information increasingly drives decisions with companies realising their current unprecedented capacity to reach out and communicate with customers as well as enhance a customer’s purchasing experience through customised marketing schemes (i.e., selling a product based on what a customer will require now and within the immediate future based on their data profile).
This is far different to the process of “pushing” particular products to customers regardless of whether they might need it or not. Such a level of marketing customization is indicative of companies placing more emphasis on customer lifetime value (CLV) (i.e., long term patronage of a customer of a particular brand, shopping centre, company, etc).
As such, this paper will explore the use of this contemporary marketing strategy by an international corporation in order to better understand its application within a real-world marketing strategy.
Brief Company History
Formally established in 1911, IBM has grown within the past 100 years into one of the largest technology-oriented enterprises in the world to date.
It was one of the first companies to develop the concept of the home personal computer, pioneered the development of the modern-day checkout line through the creation of the laser scanner, is the primary manufacturer of many of the cash registers in operation in grocery stores around the world and is one of the largest suppliers of automated teller machines used in nearly every single bank in operation at the present (Vayghan et al., 2007).
By 2005, the company shifted its operational makeup by selling its personal computer division to Lenovo and instead focusing on providing software and hardware-based solutions to other multinational companies and international organisations (Vayghan et al., 2007). This has resulted in the present-day IBM, which is known around the world as a business solutions provider that enables businesses to run more smoothly and efficiently under a technological infrastructure developed by IBM.
The gains achieved by IBM within the past 15 years can all be attributed to its marketing strategy of removing itself from direct competition within the currently oversaturated PC market (Company Overview, 2007).
Instead, the company has focused on direct business to business sales wherein its primary clients are multinational corporations, government and educational institutions, the airline industry, the food services industry as well as several other industries within the global economy today that rely on the technology, software and consulting expertise of IBM in order to resolve their technology-related issues (Company Overview, 2007).
As such, IBM does not market its services in the traditional sense but rather relies on direct business contacts, product roadshows and its reputation as one of the best companies in the world for technology-based solutions to gain clients.
Evidence of the effectiveness of such a method of marketing is actually seen by the average consumer on an almost daily basis wherein most automated teller machines, cash registers, and credit card readers encountered by a vast majority of the general public are all mostly made by IBM or one of its subsidiaries (Datamonitor: International Business Machines Corporation, 2010).
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In cases where IBM does direct marketing campaigns, the advertisements are not directed at the average consumer as seen in the case of numerous advertisements by companies such as Asus, Toshiba, and Apple which rely on a strategy of presenting how much better their product is compared to their competitors (Datamonitor: International Business Machines Corporation, 2010).
Instead, IBM’s marketing strategy revolves around presenting solutions involving software, consulting services and the implementation of a technological infrastructure that would resolve any and all issues a client would have regarding creating an efficient and effective business platform.
IBM’s solution-based marketing strategy takes into consideration the needs of a client and presents to them how IBM can help to address such issues and develop the company’s internal IT infrastructure in such a way that it addresses their concerns (IBM’s Strategy For Business Models, 2005). This method of marketing creates a distinct level of customer lifetime value (CLV) since IBM in effect, becomes the company’s “go to proprietor” for other additional services that it may need in the future.
For example, if a company goes to IBM regarding the implementation of a cash register system for one of its many grocery chains, IBM would be able to provide them with the solution, however, IBM would also attempt to showcase how they can further enhance such a system in the future and resolve other problems that the company may have in the form of creating a better product tracking system, a dedicated customer service system (IBM provides customer relations services to various clients) as well as other such products and services that the company may need (IBM case study, 2011).
By examining the business model of the client and anticipating what they may need, IBM helps to create better customer relations and customer patronage by being a customer-oriented company that provides product solutions to potential issues and concerns that may develop in the future through the normal business operations in a company (Soule, 2008).
This is somewhat similar to what American Express and Tesco do wherein they correlate what a customer needs in the future through their current product purchases, however, in the case of IBM it is more service-oriented.
There are three components within market orientation that determine how a company will implement a marketing strategy within the competitive environment that it finds itself in.
These components are comprised of the following:
- Customer orientation
- Competitor orientation
- Inter-functional coordination.
When it comes to marketing strategies involving customer orientation, a company utilises its available resources in gathering data on the needs and behaviours of the consumer segment that it is targeting. The same can be said for competitor orientation marketing strategies; however, in this case, it focuses on competitors within the same market instead.
Either method has a distinct weakness; focusing too much on consumer orientation can actually blind a company to changes in the market or may actually stifle innovation since the company focuses too much on consumer satisfaction rather than changing based on trends (Marketing Strategy – Broaden Penetration Through Partnerships, 1992).
Focusing too much on competitor orientation, on the other hand, results in too much time and capital being placed on competitive activities, which results in companies at times neglecting their consumer bases and focusing on getting ahead of the competition.
In the case of IBM, what was done was to focus on a customer-oriented strategy by providing solutions instead of merely software and hardware (International Business Machines Corporation SWOT Analysis, 2013). Not only that, the company also avoided the potential pitfall of being blind to changes within the market by taking itself out of the competitive direct to consumer PC market and instead of being focused on a niche market strategy involving multinational corporations, institutions and other such organisations (Medford, 1998).
This strategy can be considered a stroke of genius since it enabled the company to further enhance its reputation through better client services, which in effect resulted in additional clients for IBM (Research and Markets, 2005).
The end result of this particular marketing strategy enabled IBM to become the 2nd largest firm within the US based on the number of employees it currently has as well as enabling it to reach the fourth-highest position within the US market in terms of the sheer amount of market capitalisation it has at the present (Plescan et al., 2010).
Strengths and Weaknesses
As mentioned earlier, the current strength of the company lies in the fact that it does not provide individual products to consumers but rather sells IT based solutions to its clientele. This can come in the form of a technological infrastructure with long term IT support that ensures a continuous stream of income from such clients as they continue to develop and upgrade their systems in order to keep up with the current pace of technological improvements (Hamm, 2009).
On the other hand, the weakness of the company lies in the fact that as more IT based companies enter into the business to business solutions market, IBM does not have a fall back industry in the form of direct sales of computers to rely on for additional income.
Industry analysis- Necessity for Innovation and the Need to Change Markets
Lundquist (2004) indicated that research and development into new ways of producing and utilising technology are some of the practices most often seen in technology-intensive enterprises. This is due to the fact that technology has been under a constantly accelerating level of development and, as a result, has enabled new players to enter into markets whereas in the past distinct barriers to proper entry would have been present.
As such, failure to sufficiently innovate along with new technological trends and products can be thought of as a failure on the part of the managerial practices at a company since being able to anticipate trends and use them to either reach greater market penetration or keep the company relevant to consumers is a necessity in today’s technology-intensive market economy (Lundquist, 2004).
Nowhere is this more evident than in the IT services industry at the present wherein IBM has to directly compete with other business to business service providers such as Oracle, Cisco, Dell and now HP as this company transitions from a consumer-oriented approach to one that focuses primarily on selling to various businesses and organisations (Ferguson, 2005).
Recommendations to improve Organizational Performance
Management practices in some of today’s technology-oriented organisations (such as IBM) need to facilitate better collaboration and communication between global teams despite the distances and diverse cultural differences involved (Bailey & Dangerfield, 2000).
This means facilitating new means of cooperation through team exchanges (members of one team visiting the other), implementing means of open communication and conceptualisation between the two teams at all times and facilitating better cooperative practices through the development of cultural understanding regarding how particular business cultures work over diverse locations (Bailey & Dangerfield, 2000).
It is only through this that effective practices can be implemented, which result in the characteristics mentioned earlier that are deemed necessary for a technology-oriented company to survive and to thrive.
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