Week 1.2 Evolution of North American Business

In today’s economy, marketing is a crucial part of any organization. 

Was this the case in the 1800s? 

The answer is no. 

Marketing evolved over time. There have been distinct stages of marketing starting in the 1800s. The following presentation describes six different eras in the history of North American business: production era (1860-1920), sales era (1920-1960), market concept era (1950-1990), market orientation era (1990-present), customer experience management era (2000-2020), and social media marketing era (2005-2020).  

The History of Business in North America (~ 5 min)

if (False) { } else { }

Production Era

In the mid-1800s, production was very limited in North America due to the lack of availability of technology at the time. It was not possible to produce a variety of goods. Buyers were willing to accept nearly any goods that were produced. Production was the major concern of businesses, not marketing. There was no concept of marketing. The production era continued up to the 1920s.

Sales Era

In the 1920s, firms started to produce faster as a result of improvements in technology. Faster production led to accumulation of unsold goods as firms were able to produce more goods than their buyers could consume. How were they to sell these unsold goods? The solution was to hire salespeople. Salespeople were responsible for finding buyers. There was no concept of marketing. The goal was to find buyers for the goods that the firm could produce with their resources.  

Marketing Concept Era

In the 1950s, the marketing concept came to life. Companies recognized that they were in business to satisfy the needs and wants of consumers. Marketing was not about trying to sell what the firms can produce. It was about figuring out what to produce to satisfy consumers’ needs and wants. This was the action of applying marketing concept at the beginning of the production cycle in the form of idea generation and design of products, rather than at the end of the production cycle in the form of trying to find buyers.   

Market Orientation Era

Market orientation started in the 1990s. Firms focused on continuously collecting information about customers' needs. They also paid attention to competitors' capabilities. The information was shared in every level of organization from idea generation to production. The goal was to use the information regarding customers’ needs and wants to create value, ensure customer satisfaction, and develop customer relationships.

Customer satisfaction is defined as the match between customer expectations of the product and the product's actual performance.

Customer satisfaction is the key to success of businesses. Satisfied customers tend to be loyal which leads to long-term customer relationships. 

Customer relationship management (CRM) is defined as the process of building and developing long-term relationships with customers by delivering customer value and satisfaction.

Long-term customer relationships enable organizations to achieve revenue growth and perseverance of their market share in highly competitive markets. Businesses understand the importance of satisfied customers in their endurance. Satisfied customers come back for future purchases which is more valuable than a single transaction. Many organizations calculate customer lifetime value to identify the potential in each satisfied customer. 

Customer lifetime value (CLV) is the profit generated by the customer's purchase of an organization's product or service over the customer's lifetime. 

Woman sneezing into kleenex tissue.

Examples:

  1. Lexus estimates that a retained and satisfied customer is worth over $600,000 in lifetime sales.
  2. Kleenex tissue consumption adds up to $1,400 on average over the lifetime of a single customer. 

Customer relationship management (CRM) requires the involvement of every level of organization from managers to all employees. Information technology helps to improve CRM. As a result of technology, we are able to identify customers’ purchase behaviour especially on online buying. The scope of CRM has been widened to include electronic customer relationship management (eCRM). 

eCRM is a web-centric approach to managing long-term customer relationships electronically.

An important part of eCRM is interactive marketing. 

Interactive marketing involves two-way buyer–seller electronic communication. Companies listen, understand, and respond to customers’ needs by empowering the customers. Customers are involved in new product generation and/or creating new promotional tools for an existing product. The goal is to provide the medium for interactions with the customers and to engage customers in a deeper level than ever before with the use of technology. 

Bottle of Dove Cream Oil.

Example: Dove asked its customers to go online to create new ads for its Dove Cream Oil product. This type of interaction allows customers to participate in the decision-making and creation of the type of messages the company will publicize.

Customer Experience Management Era

Cinderella's Castle in Disneyland.

In the market orientation era, we discussed the importance of customer relationship management (CRM). CRM is necessary for customer relationship development but it is not sufficient. To be effective, CRM must include a customer experience management (CEM) strategy.

CEM is managing the customers' interactions with the organization. The goal is to leave a positive impression of the organization so that the customer is satisfied with the experience, and will remain loyal to the organization. CEM relates to the notion that "it is the experience that counts, not the product or service per se." 

CEM enables companies to achieve higher revenue and profit growth compared to companies that do not engage in CEM. Companies that have invested heavily in CEM include Apple, Amazon, Zappos, Starbucks, and Disney.

 

Apple iPhone.

Engagement in CEM requires a new type of organization called a customer-centric marketing organization (CCMO).

In CCMO-based organizations, the customer is the main focus. The company's brands, products, and marketers work together sharing all available information regarding the customers' needs, expectations, and budgets. Firms such as Apple, FedEx, and Starbucks have already made the shift to CCMO, resulting in delivering excellent customer experiences. 

 

 

 

Social Media Marketing Era

The popularity of social media led to a new era called the social media marketing era. 24-7 connectivity and the ease of access to social media enabled the shift in the economy from traditional selling methods to social media marketing. Most customers search for purchases through social networks.

There are two distinct dimensions to social media marketing

  1. Social media marketing can be consumer-generated. Consumers positively spread the word about the brands for which they are fans. They make negative remarks and leave negative comments about the brands/companies for which they are non-fans. 
  2. Social media marketing can be used by marketers. Marketers use social networks professionally to promote their brands or organizations. Other than social networks, online tools such as blogs, wikis, and podcasts are employed by marketers. Social networking sites such as Facebook, LinkedIn, Google+, Twitter, Snapchat, and other shared media sites such as YouTube are very popular in connecting with customers and building positive relationships. 
3 overlapping circles from left to right, represent consumers, social media and marketing
Social Media Marketing. Social media marketing has two dimensions 1) consumer-generated and 2) used by marketers.

As a result of the popularity of social media, a new form of economy is born, that is called socialnomics. Many consumers search for the products and services they need on social media, as they can read positive and negative comments on different brands. Online communities can build or destroy brands and can make traditional marketing obsolete.

Critical Thinking Question: Recall your own or your family’s experiences in making purchase decisions. Did you or your family search for products/services through social media? How did the feedback from social media influence your purchase decision? 

The power of social media is also reflected on the growth of social CRM (social customer relationship management). Many companies use social media to engage customers in conversations for mutually beneficial value.

Ethics and Social Responsibility 

Ethics refer to correct actions when faced with moral dilemmas. Unethical marketing practices would include price fixing, bribery, deceptive advertising, and unsafe products. All organizations have social responsibility in their actions and practices. 

Social responsibility is when individuals and organizations are part of a larger society and are accountable to that society for their actions. Social responsibility is sometimes referred to as corporate social responsibility (CSR)

View of Earth from outer space.

There is also the concept of societal responsibility, which is a broader concept than social responsibility.

Societal responsibility refers to obligations that organizations have to

  1. the preservation of the ecological environment, and
  2. the general public. 

Many organizations emphasize the importance of triple-bottom-line. Triple-bottom-line refers to the need for improving the state of people, the planet, and profit simultaneously.  

The concept of triple-bottom-line is reflected in the actions of many Canadian companies as they do care about preserving the ecological environment. They have responded by engaging in green marketing.  

Green marketing is marketing efforts to produce, promote, and reclaim environmentally sensitive products. 

Examples of green marketing activities:

Adidas polo shirt.

The Adidas Group is committed to using 100% “Better Cotton” in all its products. “Better Cotton” is produced more sustainably than traditional cotton, by cutting water consumption considerably and addressing pesticide management and labour conditions.

Best Buy logo.

Best Buy hosts “Tech it Away” e-waste drives at Canadian schools to recycle used electronics in exchange for grants. In 2010, Best Buy and 3 Vancouver schools diverted 54,000 kg of e-waste from landfills, with each participating school receiving $10,000 in technology grants from Best Buy.

Bombardier train.

Bombardier's new ECO4 train technologies generate overall energy savings of 50% compared to previous models. ECO4 technologies include low-energy interior climate systems and use of more sustainable materials.

 

Sustainable Marketing

Sustainable marketing involves sustainable development which is conducting business in a way that protects the natural environment while also making economic progress. 

Ecologically responsible initiatives such as green marketing are a part of sustainable development. This can include initiatives related to working conditions at offshore manufacturing sites that produce goods for North American companies. Some companies, such as Reebok, Nike, Levi Strauss, and Mattel, have imposed codes of conduct to reduce abusive working conditions at offshore manufacturing facilities.

  • Reebok, for example, now monitors the production of its equipment to ensure that no child labour is used in making its products.

Concept Check Questions: 

1. The match between customer expectations of the product and the product’s actual performance is called

 

2. The process of building and developing long-term relationships with customers by delivering customer value and satisfaction is called

 

3. Some Canadian companies are now transitioning from the market orientation era to the _______________ era.