What is marketing

Case: Buy Now, Pay Later. Does It Work the Same Way for

Computers and Cars?

In October 2002, IBM introduced a new financing plan called Total

Usage Financing, designed to stimulate spending for its on-demand com

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puting services from cash-strapped businesses. The plan spread the cost

of technology purchases over several months and included a revolving

line of credit. Like a pitch from a car manufacturer, IBM announced a

“triple zero” financing package, that offered large and mid-sized busi

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nesses zero down, zero payments, and zero interest until 2003.

Other technology companies followed suit. The same month, Micro

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soft unveiled a new program that allowed small businesses to take out

loans to finance software purchases. It also launched a special 24-month

zero-percent financing promotion targeting customers of Microsoft’s

Business Solutions division, which sells enterprise resource planning

and customer relationship management software.

In November 2003, Hewlett-Packard introduced a program offering a

3-month deferral on any large purchase, including hardware, software,

and services.

Question 1: What are the opportunities and threats of such policies?

Question 2: In which case can supply trigger demand

The danger of these three approaches is clear. They focus on the com-

pany and forget that the sales exchange involves two parties. Without cus-

tomers to purchase products, there is no justification for production. On the

contrary, the marketing philosophy centers on the customer; it emphasizes

that the key worth of a product lies in the value that it provides to the user.

A company that concentrates too much on the physical attributes of a prod

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uct, its logistics, or financial profit risks forgetting that the customer pur

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chases a product only as a means to resolve or address a problem.

This customer orientation involves all the departments of a company,

because customer satisfaction on all levels, from the product design to its

(after-sale) maintenance, is the final measure of success for the company, as

well as its long-term promise of success.

Being tuned in to customers in order to satisfy them better is more than

a philosophy. It is a discipline that requires an organized and responsive

company, not to mention everyone’s involvement. All members of the

organization, from researchers to CEOs, including switchboard operators

and production workers, are involved and responsible for the quality of cus

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tomer relations.

When the company’s organization is turned upside down, the customer

becomes the sturdy base of a long-lasting exchange relation between the

company and its customers (see Figure 1.2). This management philosophy

was made popular by Jan Carlzon, as CEO of Scandinavian Airlines (SAS) in

the beginning of the 1980s. As SAS was losing money while facing a bigger

competitor, Carlzon asserted that the company had lost its focus on

 

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What is marketing

Every company that believes that customers will buy its products if they

are “good” (of good quality and with good performance) automatically has a

product orientation. This implies that customers are able to recognize the

product’s quality and that they are possibly willing to pay more if the prod

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uct justifies it.

This viewpoint is even stronger for high-technology companies that

favor product development based on performance or state-of-the-art fea

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tures that are often far from the customer’s needs. From supercomputers to

supersonic jetliners, some companies have conceived technological wonders

at such a high cost that their markets never materialized.

Production orientation refers to the belief that if an acceptable product is

available at a reasonable price, it will be purchased. In other words, if a suffi

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cient quantity is produced and the logistics department distributes and sup

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plies the product, the customers will do the rest. This philosophy, which is

usually related to an excess of demand (common in postwar Europe and

today’s developing countries), can also be found in the high-tech sector.

Actually, this infatuation with new technology can be beneficial to a

company that is capable of immediately flooding the market with large

quantities of its product(s). Such a company, however, should beware of the

day when the product no longer pleases the customers and sales suddenly

start to plunge. The production-capacity surplus—the cost of inventory and

distribution—can even kill a company. For instance, Sega had to exit the

videogame hardware business after the failure of its Genesis 32x (called

Mega Drive 32x in Europe) and then its Dreamcast consoles. Those product

were loaded with state of the art technology but were not compatible with

previous Sega models, meaning that the players could not run their existing

videogames. Furthermore, the catalog of games for these new consoles was

not very large at the time they were launched, which frustrates customers

even more. At the same time, Sega had overproduced those models expect

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ing a big demand, just because of the novelty of the technology. Ultimately,

stuck with huge inventories, upset distributors, and significant financial loss,

Sega walked out of the market leaving more room to Sony and Microsoft.

In order to sell products to customers, other companies have adopted a

third approach, namely, the sales orientation. According to this approach,

for the customer to make a purchase, his or her interest in the product must

be stimulated through price reductions and special large-scale sales promo

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tions, using gifts and contests or other more aggressive sales techniques such

as high-pressure selling. The objective is to sell quickly by encouraging the

customer to buy a product immediately, even if it does not correspond

exactly to his or her requirements.

This approach is usually indispensable during the start-up stage where

the “professionals-who-sell” [6] approach to customer is made directly by

the founders, or the professionals who have invented a new product or

service. This approach is effective for only a short period of time. First, it

may quickly impede growth if the sales effort is limited to a few major

executives. Second, and not only in the start-up period, it usually backfires.

As a matter of fact, by selling products that do not really meet an actual

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