Impact of Technology on Marketing
Technology has always been the prime mover of development of human kind. From the time man started using stones for hunting animals and digging out roots, the human race has come a long way in the development of technology. What is interesting to note is that the rate of development in technology is accelerating day by day. In our own life-time, we see so many technologies coming into the horizon and getting obsolete; slide rules, punch cards, telex machines, valve radios, wall clocks (hand-winding type), mechanical typewriters and so on. Most electronic gadgets become outdated within six months.
Our households have acquired so much of technology about which our own grandparents would not have had the faintest idea. The modern house resembles a factory with a water treatÂment plant (Aqua Guard), pressure vessels, grinders, microwave ovens, freezers, automatic laundry, air-conditioning equipment, electronic equipment (radio, CD player, electronic watches and wall clocks, TV, VCR, PC, Internet, telephone, fax, Casio electronic organ and a host of electronic games).
Alvin Toffler explains the acceleration in development of techÂnology by looking at the progress in transportation. In 6000 BC the fastest transportation available to man over long distances was the camel caravan, averaging eight miles per hour. It was not until about 1600 BC when the chariot was invented that the maximum speed rose to roughly twenty miles per hour. So impressive was this invention and so difficult was it to exceed this speed limit, that nearly 3500 years later, when the first mail coach began operating in England in 1784, it averaged a mere ten miles per hour. The first steam locomotive, introduced in 1825, could muster a speed of only thirteen mph. It was probably not until 1880s that man, with the help of a more advanced steam locomotive, managed to reach a speed of one hundred miles per hour. It took the human race millions of years to attain that record. It took only 58 years, however, to quadruple the limit, so that by 1938 airborne man was cracking the 400 mph line. It took a mere twenty years flick of time to double the limit again. And by the 1960's rocket planes approached speeds of 4800 mph, and men in space capsules were circling the earth at 18,000 mph.
If technology has affected people so much, naturally, it should have also had its impact on organizations. Traditionally, technology used to trickle down from the military to industry and then to the household. For example, the radio was used by defence before it percolated down to the common man. Interestingly, the process is now reversed with a technology trickle-up from the household. For example, compact discs were first used for reÂcording music rather than for storing sensitive military informaÂtion or weather forecast data.
DEVELOPMENTS IN TECHNOLOGY
Developments and advances in technology have changed the way of conducting business. Significant developments in electronics have led to computerization of every aspect of business including rail reservations, banking, scheduling, inventory, payroll, accounting and production.
Advances in telecommunications and information technologies have reduced the barriers of time and place in doing busiÂness. Companies have dedicated satellites across the globe to pass information from one division to another. A company like American Express, which has the largest number of credit cards in circulation, is now able to claim that they can service customers in any part of the globe within eight hours through satellite communication.
Improvements in optical fiber technology, videophone and teleÂconferencing facilities are likely to make air-travel across the globe redundant. It is now possible for customers and suppliers to transact business at anytime from any part of the globe. No wonder, airline industry the world over is facing a recession. Of course, it is only business travel that is declining while tourists' traffic is on the rise.
Research on superconductivity, biotechnology and ceramic materials are likely to bring about major improvements in the quality of life. Already, advances in electronics are resulting in market egalitarianism. Luxury and comfort are now within the reach of the common man with the development of a number of smart products like, intelligent washing machines, microwaves, cameras, camcorders, automobiles, etc.
'All these developments basically started with the invention of "the wheel." Then came the digital computer. A related development in computing having a great impact on our lives is based on fuzzy logic. The next wave that is likely to sweep the world is the biotech wave, called the Dolly Effect.
Invention of the Wheel
The greatest invention ever made in the history of mankind is the wheel. Like Newton getting the idea of gravitational force from a falling apple, the man/woman who developed the wheel must have modeled it like the sun or the full moon. Can we say that great ideas invariably come from above! There is no other object that we find on the earth, which is as perfect as a wheel. No animal has a wheel on the heel and uses the same for locomotion. Today, we cannot think of high-speed cars and bikes without a wheel. It helped man play God in creating so many objects out of the wheel. Man harnessed animal energy (horsepower) to make his first chariot. Coupled with wind energy, you have a mill or a water pump. The wheel in conjunction with a motor becomes many things; a car, an earth moving equipment, or textile machinery.
The Yin/Yang of the Modern World
The next best thing that happened to mankind is the use of binary system (0,1) for computing. Interestingly, nothing on this earth can be a perfect binary system. Nothing can be classified as black or white. But the basic binary code can be used to explain all kinds of phenomena on the earth. We can find parallels to this from the Chinese philosophy called Dao. The Dao is a road or a path, which describes the way we do things. To maintain harmony with the Dao is to live in harmony with the way the universe works-keeping us in tune with nature and natural law, Dao uses Yin/Yang to express a system of relationship, patterns, and functions. Everything in the Chinese view of the world and of life is related to a dynamic balance between the Yin and the Yang. Everything has an inside (Yin) and an outside (Yang), a top (Yang) and a bottom (Yin). The important point is that nothing is ever entirely Yin or Yang. Everything contains the possibility of changing into the opposite. Life takes place in the alternating rhythm of Yin/Yang-as day gives way to night, and night to day; a time of light and activity (Yang) is followed by darkness and rest (Yin). Here again the idea seems to have come from above (looking at the sky!).
The intermingling, changing pattern of Yin/Yang is beautifully illustrated by the symbol of Tai ji tu. Yin is dark, complex, intuitive, contemplative, soft, receptive, and feminine. Yang is bright, direct, rational, active, hard, creative, and masculine. The Taj ji tu diagram suggests a spinning wheel, opposites whirling into each other. The dots symbolize the Daoist notion that once anything reaches its extreme, it develops the seeds of its contrary.
Figure.1 Tai ji tu of the Ying Yang
Whatever be the origin of the binary system, the order of the day is digitization. We have digitized communication, digitized music, and we have the digital TV, digital watch and so on. Whether it is audio or video, everything gets converted to the simple binary system of Os & Is. Our modern world seems to toÂtally revolve under the Yin/Yang system.
The Fuzzy World
Another interesting thing that is likely to have a very great impact on our lives is the field of fuzzy logic. Without knowing what it is, a number of us may be using neuro fuzzy washing machines and other fuzzy logic-based products.
"Toss a load of clothes into a fuzzy washer and press start, and the machine begins to churn, automatically choosing the best cycle. Place chilli, potatoes, or lasagna in a fuzzy microwave and push a single button and it cooks for the right time at the proper temperature. There are smart toilets available in Japan that spray warm water like a bidet, blow warm air to dry and dispense scent. According to Davis and Davidson, new models analyze urine and measure body temperature, weight, blood pressure and pulse.
What is fuzzy logic Traditional logic, Set theory, and Philosophy have compelled sharp distinctions. For example, true and false are absolutes in logic. These days it is very difficult to say whether a person is a male or a female. Looking at modern poetry we cannot say whether it is poetry or prose. There is nothing absolute in reality. You will always find a little Yin in the Yang and Yang in the Yin. This leads to vagueness when trying to classify objects or persons.
There is a certain amount of fuzzyness about everything on this earth. When the weather forecast says that there is a 70 percent chance that it would rain tomorrow, it is not exactly seventy perÂcent but it needs to be read as around seventy percent. The same applies when we talk about population in India or the distance of Mars from Earth. The words we speak are also mostly fuzzy.
There is a separate field of fuzzy logic which studies fuzziness. It does not categorize objects into this or that (0 or 1) as in the binary system. But it assigns a weightage for membership in each set. For example, pickle may get a weightage of 0.6 as processed food but 0.3 as vegetables. While cancer or AIDS may get a weightage of 1.0 as a disease, common cold may get a rating of 0.3 as a disease and 0.9 as a thing s of nuisance value.
There are fuzzy chips developed which work on the above logic of weightage-based membership in different sets. "While switches are used in traditional chips, which are either ON, or OFF 'sieves' are used in fuzzy chips that model fuzzy logic. Instead of admitting or stopping current, they let different levels of current to pass. By changing the mesh size, they perform fuzzified logical operations.
What is neuro fuzzy Neural networks are modeled on the human brain. They have the capacity to 'learn.' That is, they use experience to become better and better at classifying that basic feat of thought. Exposed to enough examples, they can generalize on others they haven't seen. For instance, if a character-recognizing neural net sees sufficient A's, it can come to recognize A's even in fonts it has never encountered. According to McNeill, Daniel and Freiberger Paul, neural network also help to detect explosives at airports, identify bad risks for mortgage loans, and recognize words in human speech.
The neural networks try to mimic the brain. According to Donald Hebb, we store memories not in individual cells, but in cell assemblies, in strings of cells. Every time electric current passes from one neuron to another, across the microscopic gaps called synapses, it forges a better connection and makes it easier for the current to pass the next time. A synapse is like a tollbooth at a bridge, but a special, friendly kind where the toll decreases every time you cross. Any oft-followed path would constitute a cell assembly, a memory, so the brain would have assemblies for different objects, say, square, rabbit, and sea. This scheme could work because the brain has between 10 and 100 billion neurons, and each can have 1000 to 5000 synapses.
But the neural networks cannot derive structured rules; they can only become better and better at recognizing patterns. This can be solved by the Fuzzy systems. The neuro fuzzy washing maÂchines adjust the wash cycle-based on the kind of dirt, amount of dirt, load, type of detergent, quality of clothes, hardness of water and other factors. It is able to choose the most appropriate wash cycle from among 3800 different patterns of operation.
The fuzzy products of the future According to Bart Koasako, fuzzy logic is likely to lead to a number of applications as described below.
- Vast expert decision-makers, theoretically able to distil the wisdom of every document ever written,
- Smart cars with sonar devices that pump the brakes if the car ahead on the freeway stops too quickly. With a fuzzy naviga- tor, a computerized map, and emitters and receivers in the asphalt, such vehicles could drive themselves.
- Sex robots with humanlike repertoire of behaviour.
- Computers that understand and respond to normal human language.
- Machines that writes interesting novels and screenplays in a selected style.
- Molecule-sized soldiers of health that will roam the blood stream, killing cancer cells and slowing the aging process.
Kalman Filter, which guided Patriotic missiles against Iraqi SCUDs, is based on the Bayesian principle. It adjusts the trajectory of the anti-missile based on new information received on a continuous basis and manages to intercept the missile. Though it had a very high level of accuracy, it had a few misses too. Now it has been shown that Kalman Filter programmed on Fuzzy logic can be still more accurate.
The Dolly Effect
The seeds of biotech revolution got sown in the year 1953 with the discovery of DNA (Deoxyribonucleic Acid) by Watson and Crick. We already have a number of bio-engineered products. We have bio-engineered tomatoes that have built-in resistance to parasites, viruses and herbicides. We have apples that will not turn brown when cut and exposed to the atmosphere and so on.
Biotech drugs are coming in gradually. Bovine Somatotropin (a bio-drug) injections are used on cows to increase yield of milk by 40 percent. Transgenesis, the process of introducing genes from one species to another, has resulted in strange animals like Geep (goat + sheep) and more than 1000 strains of altered mice and 12 varieties of pigs. Pigs grafted with human skin are expected in the market for people who like to have leaner pork. The culmination of all these is the cloning of the sheep, Dolly, which has come to be known as the Dolly Effect.
The biotech revolution however, is not likely to take off until 2010 or 2020. We have got to wait for redundancy of information technology for biotech to gain prominence.
Nonetheless, there is agreement among people that the next wave will be a biotech wave as shown in Figure-2.
Figure.2 The waves of economic change
The blending of genetics and computers is likely to take place. This would help us mimic the brain using bio-computers that could be programmed to learn. Bio-computers, the size of miÂcrons, programmed using fuzzy logic, can change the world beyond recognition. The computing power of the present day neural networks is less than that of a cockroach. With the blending of genetics and computers, it is expected to rise to the level of the human brain.
India has realized the relative importance of biotechnology as can be seen from the following achievements, as listed by DAVP (Department of Audio-Visual Publicity), Government of India.
People generally associate biotechnology with cloning. Far from leading the human race to uniformity, biotechnology is expected to help preserve bio-diversity and also lead to the creation of new species of plants and animals of use to human beings.
A novel targeted gene delivery system dedicated for liver cells developed and patented in US.
Identification of mutation conferring resistance to HIV infection in Indian population.
Cloning and sequencing of at least six genes achieved; specially the seed storage, amino acids, bio-synthetics and genes for plant defense, for enhancing nutritional quality. A US patent granted for the seed storage protein gene.
Plant tissue culture established as an industrial activity; 45 lakh plants of forest and horticultural species field planted in 4000 hectares; 40% increase in yield achieved in tissue cultured cardamom plants.
Biobenefication and desulphurization technologies perfected and transferred to industry, bioremediation field-tested for wasteland recovery.
Transgenic silkworm with luciferous gene can act as a bioreactor for producing proteins of agricultural and therapeutic importance.
Biofertilizers and biopesticide formulations demonstrated in farmer's field; production units set up.
1000 genetically superior calves born through Embryo Transfer Technology (ETT), including 100 buffalo calves.
First indigenous recombinant vaccine strain for oral cholera, VA 1.3, and Rotaviral diarrhea enter clinical trials.
Liposome intercalated Amphoterincin B, a drug for curing systemic fungal infections and leishmaniasis commercialized.
Skin culture technology for burn, nevi vitiligo, cord blood and bone marrow preservation technologies transferred to hospitals.
Centres for DNA finger printing; Plant Genome, Brain Research; a Golden Jubilee Women's Biotechnology Park and Biovillage being established.
A widespread bioinformatics network with [NTERNET-based BiotechÂnology Service Provider established.
Exhibit.1 India's achievements in biotechnology
INFORMATION TECHNOLOGY IN RETAILING
Currently the buzzwords amongst retailing circles are data warehousing and data mining. They create a warehouse of data about customers from various sources and then look for a pattern that could be exploited, which is called data mining.
During a data mining exercise, the analysts in a retail chain found that beer and diapers were bought together. Upon further examination they found that most of the sale took place in the evening, mainly after office hours. Parents having young babies picked up diapers while going back home and also picked up the beer for the night. The retail chain profitably exploited this by having a special display of diapers and costly beers together near the entrance of the store. As people were anxious to get back home early, they did not go inside to pick up their favourite beer; but instead settled for the costly beer kept near the diapers.
Technology has made it possible to transform the retail enviÂronment away from customer loyalty and towards customer intiÂmacy away from mass marketing and towards micro marketing. With the help of shopper I.D. cards it is possible to log in indiÂvidual data and offer customized services and products to indiÂvidual customers. The personalized shopper database is useful for moving towards one-to-one relationship marketing.
The Pola Corporation example, shown in Exhibit-2, illusÂtrates how miniaturization of computers has been effectively tapped for the selling of cosmetics.
Pola Corporation, one of Japan's leading cosmetics manufacturers developed a 'make-up-adviser', a hand-held computer, which gave advice on make-up, and put up the same on the market in February 1987. As the newly developed computer was designed for 1, 30,000, Pola door-to-door sales-women throughout Japan, it was compact enough to fit inside a handbag. The computer used a question answer routine to accurately analyze the client's skin type and gave advice on make-up.
India is not far behind, when we look at some of the new deÂvelopments. The following attempt by Pond's is a case in point.
Pond's Institute, the division through which Pond's has launched its Interactive Cell, advises on make-up through interactive touch-screen kiosks in addition to a telephone helpline. Pond's consumers will also be able to access advice through a website 24-hours (www.pondsinstituteindia.com) "We are using technology innovatively as a means of marÂketing communication to contact the consumer directly at the retail level. This Centre will provide, inform, guide and advise customers on the various aspects of beauty and skin care," says a Pond's spokesperson.
A customer can sit in front of a computer terminal and design his own car or a fridge and get it fabricated and delivered to his house on the same day; thanks to flexible automation.
Japan's National Bicycle Industrial Co. dealers fax National a set of specifications based on the customer's requirements for model, colour, components, and personal measurements. Computers digest the specs and print out custom blueprints from which the customer's bicycle is created out of cut-to-fit and common parts. Robots do most of the welding and painting while skilled workers complete the assembly - inÂcluding silk-screening, the customer's name onto the frame. Within a day this one-of-a-kind bicycle (out of 11 million combination of parts) is finished, packed, and ready for shipment.
Home shopping through Online Services and Internet are alÂready in vogue in developed countries. Even cable networks have been offering home-shopping services. Currently, efforts are on, to develop remote shopping using virtual reality. It uses computer generated three-dimensional images and a variety of instruments to create the illusion that its user is wandering through a store environment.
Interactive video monitors are being tested for consumers deÂsigning custom products and ordering products currently not in stock. Intelligent labels that can be updated seven days a week and 24 hours a day that could help retailers cross-sell and up-sell merchandise are also entering the market.
The following example illustrates the point as to the extent to which service companies customize their services to build indiÂvidual relationships through the use of IT.
Check into a Ritz-Carlton hotel anywhere in the world and you will be greeted not only by the doorman, but also by a number of small, pleasant surprises. The hotel does not need to ask the name of your employer, your home address, whether you want a non-smoking room, or if your preference is for a non-allergenic pillow. All of this information was obÂtained during your previous visit to Ritz-Carlton.
To your delight, the desk clerk greets you by name when you phone for a morning wake-up call and asks if you would, as usual, prefer breakfast in your room. When you awaken the next day, your favourite newspaper, The wall Street Journal, is outside your door. You didn't even have to ask. Indeed, you sense that the hotel staffs is somehow able to anticipate and respond to your every need, providing you with a feeling of satisfacÂtion that comes from being among people who care about you as an individual "Why would I ever stay anywhere else?" you wonder.
Ritz-Carlton tries to deliver exactly what each and every individual customer wants. It is a planned strategy that embodies a management system which is a combination of elements like focussing in individual customer needs, information technology, flexible processes, empowered employees and continuous learning about customers' needs by observing them over time. In fact, the staff at Ritz-Carlton discreetly record on small paper pads, the unique habits, preferences and dislikes of each of its guests. This information is then transferred into a corporate-wide "guest-history. Database", which is used to delight the customers during their successive visits.
IT has greatly contributed to the retail revolution, which is sweeping the entire world. What used to be a fragmented indusÂtry has got consolidated due to the sophisticated use of IT systems. Large retail chains are gobbling up small-town retailers. Retailing has now become a global business, thanks to the sophisticated IT systems being used by them. Typically, the retail stores were all along operated by owners, but currently the shift is towards systems-driven stores. The major shifts that are taking place in the retail industry are summarized in Table-1.
Table.1 Retail revolution
Retail store chains are becoming more powerful than the manufacturing companies. They directly compete with manufacturers by introducing store brands. These private label brands typically offer more value for money, as they are priced low in relation to the company brands.
The days of mass marketing are over. The retailers are now moving away from the traditional segmented approach of marketing to customizing relationship with individual customers. Instead of maximizing value per transaction they are now able to exploit the lifetime value of a customer by taking a holistic approach to customer satisfaction and building relationship with individual customers. All these are possible mainly due to the use of IT in retailing. With the introduction of tele-shopping, on-line shopping and virtual shopping malls, the retailing wars of the future are not likely to be fought in the marketplace but rather in the virtual Marketspace.
INFORMATION TECHNOLOGY IN DISTRIBUTION
There are several reasons attributed to the success of Asian Paints, including penetration into the rural markets, introduction of smaller pack sizes and an intricate understanding of the Indian market. But the fact that is not known to many is that Asian Paints derives its competitive advantage from its superior capaÂbilities in Information Technology as compared to other paint majors. They have made substantial investments in hardware and in-house development of software suited to their specific needs. Their four factories, fifty-four stocking points and the central distribution centre are connected through computer networks. Their production plans are based on the market forecasts for a range of more than 2000 products (Different brands, shades and sizes) made using computerized forecasting models. Consequently, they manage with the lowest inventories and offer the highest service levels in the paint industry. They have the capability to service more than 85% of their orders within 24 hours.
Effective use of IT in distribution can help companies:
- reduce inventories
- reduce delivery time/unproductive waiting time
- reduce stock-outs/lost sales
- respond faster to market changes
- reduce rush orders
- cut down overproduction
- reduce unnecessary movement (forwarding and back-tracking)
- reduce paper-work and wasteful processing
- plan production better
All the above benefits result in improved service at a lesser cost. Looking at the enormous benefits, one may wonder as to why Indian companies have not computerized their distribution as yet.
Distribution in India is very unique as compared to other countries. Indian wholesalers can be said to operate with amazing efficiency when we look at the paltry margins (4-5%) they get from the manufacturers. However, they do not follow proper systems and procedures that are amenable to computerization. They also tend to keep large inventories to safeguard against the vagaries of the Indian environment, viz., "bandhs," strikes and natural disasters. Hoarding and black-marketing is also prevalent in certain product categories. Moreover, basic commodities like sugar, steel, and fertilizers etc. continue to be rationed (as opposed to marketing) where the production people decide what should be consumed by the public.
Since India is a vast country (area-3, 287,263 sq. km.) with its population spread across 5 lakh plus villages and 3696 towns, physically moving goods from production units to consuming centers itself continues to be a big challenge to any marketer. Though India has progressed a great deal in the telecom sector, considerable improvements have to be made in the telephone systems before we can have reliable data transmission from one place to another. However, a number of Indian companies are realizing the importance of cutting costs distribution and are gradually resorting to the use of IT to achieve this.
In the West, IT is drastically changing the distribution systems. Electronic networking has become all pervasive. The boundary of the organization is blurring, as it becomes more of a network, with electronic links forward into customers, backwards to supÂpliers and sideways to business partners.
In the case of industrial products, focus is shifting to supply chain management involving reduction of rejection rates, improvement of cycle times, and decrease in inventory throughout the supply chain. Hence, companies are shifting to closer relationship with fewer companies. Major industrial customers such as Ford, GM, Motorola, Texas Instruments and Xerox have cut the number of suppliers they use by 20 percent from 90 percent during the past decade.
The interest in improving supply chain operations has resulted in large part, because of the maturing of systems thinking, and the opportunities presented by information technology. Software suppliers provide packages of varying quality (MRP, ERP etc.) to assist an organisation in planning its logistics and supply chain operations.
Another interesting development is the use of Electronic Data Interchange (EDI). EDI has been around for some years, handling relatively simple transactions such as orders, invoicing, delivery, payment and so on. Currently, major companies are shifting to EDI resulting in all participants in the supply chain joining the network. The ones that do not respond to this get locked out. It is becoming clear that the first stage in the use of EDI is concerned with simple efficiency but as experience accumulates it stimulates new thinking about the sharing of information, partnership and supply chain improvement.
Susan Dentzer in an article on Death of the Middleman says, "Middlemen who transported products from factories and farms to far away consumers have been a prime force in the U.S. economic growth over the past 175 years. But now, those in the middle of the economic food chain are under pressure for a slew of reasons. And the overarching lesson is that the mix of falling prices, heightened competition and advancing information technology is transforming the economy in ways that we are only beginning to understand."
In fact the conventional wholesalers and distributors in the U.S. numbering about 300,000 are under threat from 'power retailers' like Wal-Mart and Office Depot, which exact big disÂcounts from large manufacturers, cut out the middlemen and sell to consumers at prices approximating yesteryear's wholesale ones. Wal-Mart operates on an Every Day Low Pricing (EDLP) policy i.e. it offers products at the lowest price in every location in which it operates. This is possible because all the Wal-Mart stores are linked to the respective suppliers through elecÂtronic networks. As and when products are scanned at the checkout counters in the stores, the information is transferred to the respective manufacturers instantaneously; thus enabling them to plan their production and distribution.
Wal-Mart has made heavy investments in IT, satellite communications, company-owned aircraft and videoconferencing facilities. These investments enable its 4,000 vendors to respond quickly to sales data beamed directly from stores. The company's 19 distribution centers serviced by 2000 company-owned trucks manage to deliver new orders in less than 48 hours. Wal-Mart follows the logistics system called "cross-docking". In this system, goods are continuously delivered to warehouses, where they are selected, repacked, and then despatched to stores, often without ever sitting in inventory. Instead of spending valuable time in the warehouse, goods just cross from one loading dock to another in 48 hours or less. The store managers get into videoconferencing to share best practices and learn from each other.
Wholesalers and distributors have also been squeezed by the rise of the mighty transportation companies, such as UPS and Federal Express. Fred Smith, the founder of Federal Express, developed his vision based on system innovation. He realized that the major cost of overnight delivery would be sorting and handling. He decided to try a new system instead of establishing many small distribution points, which would be difficult to coordinate. He decided to have all incoming mail sorted at one central hub, Memphis.
His idea works every evening. At around midnight, some 65 Federal Express planes converge in Memphis to disgorge about 600,000 envelopes and packages. The mail is quickly sorted on a 45 miles conveyor belt and loaded back into the planes by 4.00 a.m. When the planes arrive at their destinations, the mail is loaded into small delivery vans and rushed to recipients before noon.
With small-package delivery becoming more competitive and less profitable, FedEx moved into heavier cargo - especially overseas consignment. The information technology and the transportation systems that FedEx had developed for small packages are now being harnessed to distribute other companies' products. Now, the company has a Business Logistics Services programme that handles every warehouse function from inventory management to book keeping. FedEx promises delivery to any part of the world within 48 hours from its Singapore warehouse.
Sales executives working for a number of US companies use their notebook PCs to establish connection with the main server of their company before starting their sales negotiations. They collect the customer specifications and feed it into their PCs to get a prompt response from the company on the prices. DeÂfeaturing or adding features also gives prompt response on prices from the company. After settling on the features and the price, they connect to the production planning to get the possible date of delivery. Then, finally the order is entered into the company records and scheduled for production even before the sales executive leaves the customer's premises with the payment for the product.
Until recently, Anderson Windows, a US based company, made a range of standard windows in large batches, but more and more customers demanded unique designs. Trying to fulfil all these demands was a nightmare. The product ranges increased from 28,000 to 86,000 and fifteen page quotes were not unusual. An increase in errors damaged the company's quality reputation. The company solved these problems by issuing distributors and retailers with an interactive electronic catalogue and design package. Now dealers can process orders in one-fifth the time, and the direct link with Anderson's production system mean that turnÂaround time has improved and error rates have plummeted. Although, the product list has grown to 188,000, fewer than one in 200 van loads contain an error. The company can now produce in lots of one and exactly satisfy customer requirements.
Some companies offer all the above facilities on the internet itÂself. For example, Dell Computer of US sells PCs not by model but by configuration. A typical phone customer dials in with a configuration and a budget in mind, and uses an interactive exchange with the sales rep at the other end to identify an optimum; involving permutations on capacities and speeds of different components, that will meet his/her budget.
Dell's Website automates this process. Customers choose the broad-type of the system: a high-end multimedia, gamers or a home-office machine. They are then directed to a screen where each sub component of the configuration is displayed. There are separate lists of CPU-type, memory, hard disk, multimedia components, modems et al. Customers can change their choices, and as they do so, get the price for the selected configuration on the screen. When they are satisfied, they can close the deal. At Dell's end, this system is linked to its just-in-time manufacturing system.
Distribution of Services
Service industries like Banking, Distance Learning, Stocks and Securities Trading, and Currency trading have benefited a great deal by the use of IT. Banks use ATMs to deliver their services. With smart-phones, it is possible to carry out banking operations sitting at home.
Education as we know is undergoing a major paradigm shift. MBA on a CD-ROM is a reality today. With the use of Multimedia and video-clippings the lessons are delivered through a computer. In India, Kirloskar Multi-Media and Baron Hexa (both based at Bangalore) are two firms, which have done some pioneerÂing work in the area of computer-based training. In this mode, it is possible to get the best authors to write the lessons. We can also build1 FAQs (Frequently asked questions and their answers) quizzes and assignments into the lessons. It is possible to restrict entry to advanced lessons only to those who have acquired minimum proficiency in basic lessons, as tested by the computer-based quizzes. By this process, if a person manages to get to the end of the CD-ROM, it may ask for the printer to be switched on, to enable the computer to print the degree certificate for the student.
B. School, a subsidiary of Brilliant Tutorials has launched an unique distance learning MBA programme. It comprises of hundred lessons made available to the students in the text, audio and video formats. People of repute have authored the lessons. At this rate, the classrooms and the teachers may become a thing of the past. Satellite-based, real-time, two-way, full motion videoÂconferencing is also being used for distance learning. Indira Gandhi Open University has acquired capabilities to conduct such classes.
Virtually anything can be distributed through cyberspace. InterÂnet has emerged as a major competitor to the postal system with more and more mail getting distributed electronically (E-mail). A lot of software is distributed through the Internet. They allow users to download the sample version for trial before placing a firm order. Banking services are distributed through the net (e.g. http://www.sfnb.com). The World Wide Web offers a number of distance-learning programmes. (See http://www.hoyle.com distance.htm for a listing of different distant learning courses on the net.)
Consumer product companies typically tie-up with banks for money collection and with courier companies for distribution of goods. They use the Web for promotion and order booking. Even religious organizations operate in a similar fashion. Visitors to these sites can browse through their videos, audios and books and place orders for the same by giving their credit card particulars. A person in distress can also receive prayers through the Net and communicate with the godmen. Of course, in return, they will ask for donations and support to their religious activities. Even God needs money to sustain his ministry!
The largest bookshop in the world, Amazon is on the web (http://www.amazon.com). It has over two and a half million titles. But such stock is only virtual-the company buys in to match customer orders.
Currently, Internet has a large number of sites that distribute pornographic material (e.g. http://www.smutland.com). It is forecast that it would soon be possible to have virtual-sex. That is, you slip into a virtual-reality body suit and when your partner (lying somewhere in cyberspace) fondles your computer-generated image, you actually feel it on your skin and vice-versa.
In sum, we notice the convergence of IT, telecom and systems thinking in distribution. As such, distribution itself is getting integrated with broader business functions like operations manageÂment, marketing, information systems, financial management and strategy. Companies can gain sustainable competitive advantage by making the right kind of investments in IT, telecom and systems to improve distribution. It has been amply demonstrated by the case histories of Asian Paints, Wal-Mart and FedEx.
In the case of industrial products, investments in IT have lead to greater coordination, collaboration, cooperation and communication (4Cs) between the company and its customers. This helps companies to develop intricate understanding of each other's business and customize products and services to suit the specific needs of the user.
As far as India is concerned, there is a tremendous scope for improvement. Apart from Asian Paints, companies like Dabur, HLL and Godrej have made large investments in IT for distribution. Apart from these few companies, no big strategic thinking has gone into revamping distribution in India. Another example of the use of IT in distribution can be found in Exhibit-2.
Until recently, the buying cycle from purchase to delivery could take days or even weeks. During that lime, products and inventory might cross the United States a handful of times before finally being delivered to the end user. Today, thanks to constant improvements and innovations in technology, shipping companies are transforming themselves into hubs for information management, and traditional shipping is quickly giving way to a logistics revolution.Skyway Freight Systems, Inc. (http://www.skyway.com) is a leading provider of integrated logistics solutions and information technology-based supply chain management services. Whereas traditional shipping companies focus only on moving inventory from one location to another, Skyway takes things one step further as a logistics company that rethinks the whole order-to-delivery sequence. Skyway Direct-to-Store provides customized solutions that reduce demand fulfilment time and cost by integrating technology into its delivery mechanisms. Its logistics people can contact drivers on the road using cell phones and email, while customers can track the progress of their deliveries - everything from personal computers to office equipment - on the Skyway Web site.Further, Skyway can customize its programs to include a variety of value-added retail services, such as whole order delivery. Using whole order delivery, shipments from multiple origins with different modes of transport can be merged in transit and delivered as a single order with one set of paperwork to the store or consumer. By using technology, Skyway is developing better and more cost-efficient ways of helping its clients to do business with their customers. By customizing its services, it is earning the loyalty of its customers - giving them what they want the way they want it.If you are interested in providers of logistics-supply chain software, you will find a list of them in Marketplace 1 to 1 (http://www.1to1.com/I1to1/061898).
Exhibit.2 Skyway and the logistics revolution
INFORMATION TECHNOLOGY IN MARKET RESEARCH
The use of computers for data analysis, by market research companies is an accepted norm. However, the use of quantitative models is on the rise. Marketing & Business Associates (MBA), a marketing research firm, has a Discreet Choice Model which helps develop predictions to a lot of 'what if scenarios'. Its Diffusion Model predicts how a product or service will gain annual demand in a market.
Hyderabad-based MBL-RCG has its Stochastic Reaction Monitor which studies marketing strategies of a company vis-aÂvis those of its competitors and how a change in marketing inputs will affect sales. MBL-RCG also plans to launch its Visionary Shopper, which simulates a supermarket on a computer.
Other research models introduced are Locator of Research InÂternational (RI) India, which helps companies position new brands, Quantum's Heleyen's Model which studies social behaviour and segments brands accordingly, and MARG's Semiotic Solutions that analyses symbols and packaging.
Recent advances in computer graphics and three-dimensional modeling promise to bring simulated test marketing to a much broader range of products. For example in the Harvard Business School's Marketing Simulation Lab., a consumer can view shelves stocked with any kind of product. The shoppers can pick-up a package from the shelf by touching its image on the monitor. In response, the product moves to the centre of the screen, where the shopper can use a three-axis trackÂball to turn the package so that it can be examined from all sides. To "purchase" the product, the consumer touches the image of a shopping cart and the product moves to the cart. Just as in a physical store, products pile up in the cart as the customer shops.
During this virtual shopping, the consumer reveals several information to the researcher, which cannot be captured, in the traditional marketing research. The order of searching the item, the time spent by the customer on each item and the quantity bought, get recorded automatically. It also gets closer to reality than the traditional research methods. Virtual shops can be used to design stores, test different displays, for pricing, and ad impact.
Electronic questionnaires have been in vogue in the US for quite sometime. However, with the addition of the multimedia, electronic questionnaires can be administered in shopping malls on a Laptop computer being carried by the field investigators. The advantage here is that, the actual brands can be shown on the screen and the customers merely have to click the brands they are aware, brands they have tried in the past, the current brand and so on. While checking about ad-awareness, the actual ad-clippings can be shown to the respondents.
INFORMATION TECHNOLOGY IN ADVERTISING
Advertising was traditionally used to announce the availability of products in certain outlets. Thereafter, it started playing several roles such as persuading the customer, brand building, positioning, conveying the USP (Unique Selling Proposition) and so on. Most of the consumer product companies have come to the stage where they cannot do business without advertising. But the imÂpact of advertising on either sales or profitability was not fully understood. David Ogilvy once said, "50 percent of the money spent on advertising goes waste, but the problem is that I do not knew which 50 percent."
The inability to assess the impact of advertising stems from the basic fact that advertising has always remained a one-way communication. It used to be said that advertising was the smartest form of communicating without telling the truth. With the cost of media skyrocketing, and the attention span of the customers shrinking with ad clutter, we cannot blame the advertisers for not giving the entire truth. On the other hand, withholding of vital information will also amount to telling a lie.
Now with the arrival of the Web-based advertising it is becoming a dialogue between the seller and the buyer. On the Web customer can be provided access to tons and tons of information that was not possible in short ads. Internet advertising defined the phrase, Information Rich Advertising (IRA). It is a direct reÂsult of the fact that everything on the Web is connected. You can not only provide information about your products, factories, people, patents and facilities but also provide links to the competitors sites to enable the customer make a comparative analysis and make an informed and educated choice.
One of the earliest examples of IRA was the $6.SO billion networking equipment company Cisco's on-line advertising in 1994. Like most others, Cisco's pioneering ads were in the form of horizontal strip-ads placed on other web pages. These strips-called banners in on-line advertising-were hyper linked to a detailed ad on Cisco's own Web-server. Users who clicked on the banner reached the details page, which carried, in easily digestible layers, details about the company's own products, and links to neutral, third-party information, such as reviews in technical magazines. It also included links to the ads and home pages of competing products.
In the past, when consumers were dissatisfied with a product or a service, at most they would communicate their displeasure to an average of ten others. But in the Web age, a disgruntled customer can reach tens of thousands of customers by announcing his experience in interest groups and other forums available on the net. Thus net-based advertising empowers customers to read, see, and hear advertising voluntarily.
The other major advantage is that the company can have a count of the number of hits to its homepage. It can also get the e-mail address of the browsers and start corresponding with them using customized communication.
FROM E-COMMERCE TO E-BUSINESS
Sharad Goel reports in Economic Times, "Imagine attending classes in Zurich while being in Delhi, purchasing gifts from London while holidaying in Ooty, buying books from a store that does not exist in the real world, participating in an event in Singapore while attending office in Kanpur or even paying bills and making reservations at midnight. If you think it Is not possible, welcome to the cyberworld. Mind you, you also have virtual cops making arrests for visiting unauthorized sites. This business through the Internet, known as ecommerce, is popular overseas and various studies have indicated that Internet commerce revenues by the year 2002 will touch about $300 billion."
One problem with electronic shopping was that the virtual marketspace resembles a virtual jungle littered with homepages offering products and services of diverse nature. Customers experienced difficulty in making a focussed search for products or services of acceptable specifications. If you are searching for an executive position in the Middle East offering a salary above a certain minimum, you had to sift through a myriad of information and at the end of it may not even find any suitable openings. Then came Junglee (a search engine), which created a single window marketplace on the Web by making every item from every supplier available for purchase, thereby saving consumers and enterprises time and money. A Web shopper can locate, compare and transact millions of products from across the Internet shopping malls through one window. Junglee has been now sold to Amazon, the largest retailer on the Internet.
Currently, the shift is from E-Commerce to E-Business. E-ÂBusiness will make the business process cost-effective and far more efficient. E-Commerce becomes E-Business when a comÂpany connects its business systems directly to its critical constituÂencies - customers, employees, vendors and suppliers - via IntraÂnet, Extranet and over the Internet.
Typically, when the customer accesses the Internet and places the order, it gets communicated to the company, distributors and the bankers. The product will be shipped by the distributor on intimation to the company and banker. The banker will collect the money and deposit with the company account. When the stock with the distributor goes below a certain minimum level, the company replenishes the stock. All these transactions take place on the real-time.
Figure.3 The Internet, Intranet and Extranet
E-Commerce can be carried out in any part of the world. All you need is a home page and a tie-up with credit-card companies for collection; and a courier company for delivery of products anywhere in the world. The market place thus becomes irrelevant in E-Commerce. We now call it market space and not market place. Basically, space and time become irrelevant on the Net as you can transact from anywhere and at any time.
E-Commerce basically linked customers in any part of the world to the company. Interestingly, E-Business can now link suppliers from any part of the world. For example, Sundaram Fasteners is linked to General Motors through Extranet and they have access to GM's production plans and inventory figures. This helps both the parties to efficiently co-ordinate their activities. Extranet also links the dealers, retailers and distributors so that the company can have better controls on the delivery of finished goods. All consultants, ad agencies, and market research agencies are linked with the company through the Extranet making it possible for them to provide service of value to the company. Interestingly, the suppliers, marketing intermediaries and the consultants have access to the internal company databases. Of course, the level of access may be regulated.
Internet is in the public domain. The customers, competitors and the general public can access information about the company through the web pages on the Internet. They can also give feedÂback to the company about its products, services and social responsibility.
The Intranet allows free access to information across various departments in the company and also across business units spread across the world. This helps the company in several ways. Primarily, the communication across departments get greatly enhanced leading to break-up of the great China walls across various departments, viz., marketing and manufacturing, manufacturing & design/engineering, finance and marketing, and top management and others. It allows for greater coordination between units spread across the globe. In fact, product development teams are nowadays made up of people drawn from different countries. Without ever meeting together they are able to develop new products at a faster rate, thanks to the Intranet.
IMPACT ON MARKETING
As technology changes, consumers, competitors, and markets change. Technology also directly affects companies through new methods, tools, and techniques for use by marketing management and it impacts marketing decision areas, including new products, pricing, distribution and promotion. Right from the way we identify the needs and wants of people, technology impacts in every aspect of need fulfilment.
The developments in information technology has made it possible to collect data from individual customers over a period of time and to analyze and study the pattern of their individual preferences. The new product development process uses a number of novel methods to reduce the time for development of a new product. Without developing a prototype, customer preferences can be obtained based on computer-simulated model of the new product. Manufacturing process has undergone a sea change with the use of flexible automation. In the same assembly line, one can produce different models of a car, bicycle or any product as per the specifications given by the customers. Product distribution cost is greatly reduced by the use of IT. Retailing is undergoing a major change with the introduction of bar coding for products and the use of point of sale systems.
More importantly, the borderline between marketing and other functions has vanished due to the integration of business functions through networking. In a networked organization, it is very difficult to say for example, where marketing ends and manufacÂturing begins. It is one whole-reengineered process that aims at satisfying customer's order. What is of relevance is that how efÂfectively and efficiently the organizations manage the customer order fulfilment cycle. It does not matter whether marketing played a major role or finance played the major role.
The implications for marketing are dramatic. Will marketing exist the way we understand marketing today? Unless they redeÂfine their roles and take some corrective actions, the marketing function may get relegated to the sides. Their monopoly over customers is also coming to an end with everyone having access to customer data. Research reports are available to every-body on the Intranet. Every department, right from design to manufacturing has started interacting with the customers. There is nothing that marketing can do about these developments.
The only way marketing executives can survive is by going out of their air-conditioned cabins and get greater insights about the changing needs of customers-especially those needs that cannot be assessed by other departments from their cursory glance at market research reports or occasional interaction with the current customers. Marketers should meet those who use competing products,lapsed customers and potential (future) customers and identify new opportunities that may emerge in the future. That way they could get access to the top management by providing them insights about future opportunities and play a leading role in formulating strategies for the whole organization.
Additionally, they should put in efforts to understand other functions, the technology used in the design and manufacture of their products and also the culture, vision, mission etc. of the company so that they can gain some credibility and respect in the organization. This is a great opportunity for marketers since cusÂtomer is always the starting point of any planning process. MarÂketers can avail this opportunity to get integrated with other deÂpartments and command their respect.