Digital Marketing
Saugata Bhattacharya
Senior Manager @ Oracle Corp | Operations l Strategy l IIFT Delhi(International Business) I IIM Ahmedabad
Focus - "Arcelik's Stride to Digital Marketing"
Literature
My motivation to write this article originates from attending marketing lectures at the Indian Institute of Management Ahmedabad. These lectures profoundly influenced my perspective, prompting me to scrutinize every online purchase and interaction through a new lens. Embracing digital platforms to convey narratives globally and efficiently reach target audiences isn't merely an option but a necessity for business sustainability.
However, as products shift from being simply product-centric to being driven by market forces, the intensity of this model escalates. This transition often leads products towards commoditization, compelling them to establish a robust presence on social media, websites, and marketplaces. Ultimately, consumers gravitate towards platforms offering the most cost-effective and beneficial options.
Conversely, some brands manage to maintain their differentiation through continuous innovation and operational efficiency. These brands typically offer value-based pricing and maintain exclusivity through select distribution channels. However, the challenge lies in the longevity of innovation. As products mature along their lifecycle curve, they tend to rely more on incremental rather than revolutionary innovations.
Inevitably, all products will eventually face commoditization. Amidst this evolution, maintaining omnipresence across omnichannels, targeted marketing, and ensuring the value proposition resonates with consumers becomes paramount. This approach, often referred to as a theorem of digital marketing, underscores the importance of leveraging online platforms for convenience and differentiation.
In management parlance, this strategic approach is encapsulated as digital marketing, emphasizing the necessity of adapting to and thriving in an increasingly digital marketplace.
Introduction
"The best way to predict the future is to create it." - Peter Drucker
In January 2020, Arcelik Turkey, the leading player in household appliances, stood at a pivotal omnichannel juncture. Having primarily focused on offline sales, Arcelik recognized a burgeoning online demand by 2015, exacerbated by the entry of global appliance brands and online marketplaces into the Turkish market. Feeling the pressure to catch up with competitors, Arcelik embarked on a comprehensive company-wide omnichannel transformation slated for full implementation by 2020.
However, this transformation encountered resistance from both dealers and employees. To build trust and secure buy-in from dealers, Arcelik initiated efforts while also conducting trials with one of their smaller brands on online platforms to gain insights into e-commerce dynamics. By early 2020, Arcelik faced mounting pressure from the expanding presence of online marketplaces and surging online consumer demand. Balancing the need to swiftly address online demand while maintaining positive relations with existing partners became imperative for Arcelik.
Regional Manufacturer to a Global Brand Narrator
Build a Persona - Meet Sarah
Disclaimer- The image used below is an AI image and does not represent a real individual
Background
Sarah is an HR Specialist working for a mid-sized tech company, living in a bustling urban area. She's married and enjoys spending weekends cooking with her spouse and trying new recipes. Sarah values sustainability and tries to make environmentally conscious choices in her daily life.
Demographics:
Psychographics:
Behavior:
Micro Moments:
How Arcelik can appeal to Sarah
Omnichannel
Omnichannel refers to a business strategy aimed at providing customers with a seamless and integrated shopping experience across various channels, whether online or offline. The primary objective of omnichannel marketing is to ensure a cohesive customer journey, irrespective of where or how customers engage with the brand—be it through a website, mobile app, physical store, social media platform, or any other medium.
Key features of omnichannel marketing include:
Arcelik's Omnichannel Journey
Ar?elik embraced an omnichannel approach by understanding the evolving consumer landscape and strategically adjusting their business practices. Here are the pivotal steps and factors that contributed to Ar?elik's omnichannel transformation:
Arcelik - Product, Price, Promotion and Place
Product : Arcelik provides a diverse array of products spanning refrigerators, washing machines, dishwashers, ovens, air conditioners, and small kitchen appliances. Their product line emphasizes innovation, quality, and user-friendly features. For example, they integrate smart technologies to improve energy efficiency and convenience, appealing to consumers seeking modern and efficient home appliances. Arcelik also prioritizes sustainability by designing products that minimize environmental impact through energy-efficient operations and the use of eco-friendly materials.
Price : Since 2020, Arcelik has implemented an internal carbon pricing strategy known as the Shadow Price mechanism to influence investment decisions aimed at reducing greenhouse gas emissions across its global operations. This approach involves allocating annual budgets for energy efficiency projects, which have successfully decreased both energy consumption and greenhouse gas emissions. Previously, from 2010 to 2020, Arcelik utilized the Implicit Carbon Price Model, calculating the cost-effectiveness of energy efficiency investments based on reduced emissions. Now, under the Shadow Price mechanism, investments exceeding €50,000 and 50 kW capacity incur a carbon price of €50 per ton of CO2 equivalent, further incentivizing sustainability efforts. A prudent pricing manifests in Arcelik's Global Sales across platforms:
Promotion :
Place : Arcelik employs a multi-channel distribution strategy to ensure their products are accessible to consumers globally. They utilize both online and offline channels, including their own branded stores, retail partnerships, and e-commerce platforms. This omni-channel approach allows them to reach a diverse audience and maintain visibility in both local and international markets. They also focus on after-sales service and support to enhance customer satisfaction and loyalty.
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Arcelik - Content Marketing
Analyzing Ar?elik's omnichannel journey through the perspective of content marketing illustrates how strategically they leverage valuable and relevant content to engage their audience across various channels. Here's an overview of Ar?elik's approach:
Digital Marketing - IMC SEO PPC
The transition from offline to online has revolutionized consumer convenience. For businesses, this shift has enabled seamless integration and authentic storytelling. It has also fostered efficiency and sustainability through economies of scale and scope. Online platforms have replaced traditional word-of-mouth with compelling brand narratives. Businesses now leverage evolving technologies to market their products digitally, eliminating the need for door-to-door sales tactics. In management parlance, this transformation is referred to as Digital Marketing.
The theory of digital marketing encompasses various principles and strategies aimed at leveraging digital technologies to achieve marketing objectives. Here are key theories:
The Product Business Model - "Brands"
Price Value Based: Personifying the value of a product requires a delicate balance of differentiation, luxury, and pricing strategy. Even the most luxurious products can only sustain their value and appeal by positioning themselves effectively in terms of buying experience and pricing. Apple exemplifies this strategy with its MacBooks and iPhones, utilizing specialized retail outlets alongside a strong digital presence for promotions, ultimately drawing consumers primarily to their retail stores.
Similarly, consider Lladro, renowned for its luxury porcelain figurines and decor items. Potential buyers of these high-priced items often prefer the experience of visiting upscale retail outlets in prestigious malls rather than purchasing online.
Luxury automotive brands like Jaguar and Bentley also illustrate this principle. Jaguar maintains its prestige by avoiding significant price reductions, while Bentley maintains exclusivity by selling to deserving customers through appointments, ensuring their brand retains its elite status.
Rolex demonstrates how limited supply enhances demand. By deliberately restricting production, Rolex creates a market where iconic models like the Daytona or Rainbow command prices significantly higher than their retail value in the secondary market. This scarcity enhances the allure and desirability of their timepieces.
Channel Exclusive: Brands gain the differentiation edge through enhancing their efficiency through automation, innovation and attention to detailing, catering to the niche audience who are potential consumers of un-commoditized merchandize that propagates value, style and invokes desire. Such brands often sell through designated specialized channels only.
Communication, Information and Persuasion : For exclusive brands, effective communication, information dissemination, and persuasion strategies are crucial to maintaining their premium image and attracting discerning consumers.
The Product Business Model - "Commodity"
Often referred to as the "Nut and Bolt Business," this model applies to commoditized products lacking differentiation. This means consumers can purchase from any platform offering the best ROI, whether it's a marketplace, company website, or local offline store. What they're buying isn't a distinct product but rather a commodity that represents the basic qualities of the product, indistinguishable between multiple manufacturers.
At this stage, the once-strong brand and its entire value chain experience diminishing intensity. It becomes merely a commodity. Consequently, price competition intensifies as numerous dealers and retailers vie to sell the product under their local banners at prices that sustain relevance and profitability. This scenario typically arises due to market saturation, pricing pressures, and competitive dynamics.
The A-I-D-A Model
Certainly! Here's a rewritten version of the AIDA model explanation:
The AIDA model is a fundamental framework in marketing that outlines the stages consumers typically go through when making a purchasing decision. AIDA stands for Attention, Interest, Desire, and Action:
The AIDA model serves as a practical guide for marketers to understand and influence consumer behavior effectively, ensuring that marketing efforts are strategically aligned with each stage of the consumer decision-making process.
Segmentation, Targeting, Positioning (STP) Model
STP enables marketers to allocate resources strategically by pinpointing and comprehending the distinct preferences and requirements of their target audience, thereby boosting the chances of achieving successful marketing outcomes and enhancing customer satisfaction.
Take the example of Richard Milles, a luxury watch brand that divides its market by income levels and lifestyle (demographics and psychographics). They aim their marketing efforts at affluent professionals who appreciate fine craftsmanship and consider luxury watches as symbols of status. In terms of positioning, the company highlight superior craftsmanship, exclusivity, and timeless elegance to differentiate itself from competitors in the luxury watch market.
Customer and Product Analytics
Having discussed Arcelik and its adoption of an Omnichannel strategy, along with the role of digital marketing in supporting these efforts, let's now delve into customer preferences and the impact of digitization on their buying journey.
Digital marketing isn't solely focused on enticing consumers to make online purchases. It also aims to encourage consumers to research products online and then visit physical stores to make their purchases. Take the example of smart TVs: many consumers use websites, search engines, content marketing platforms, social media, and email marketing to gather information about various models. They also consult traditional sources like newspaper ads, flyers, and brochures to educate themselves about the product. Once consumers have gathered sufficient knowledge through these online and offline channels, they often prefer to visit their nearest offline dealer or showroom to make their purchase. This hybrid approach, where online channels drive offline sales, exemplifies the effectiveness of an online-offline marketing model. Having said that, this trend might just change in the days to come. This is because of two major factors. One, most of the products are fast getting commoditized.
The commoditization Effect:
The leading smart TV models largely feature similar features and functionalities, distinguished primarily by the operating systems from major tech companies they utilize. Aside from the platform, most major brands offer comparable features with little differentiation. Consumers increasingly prefer devices capable of streaming Netflix or Prime Video, leading some to opt for game consoles, laptops, or third-party streaming devices. These accessories have gained popularity by bridging the gap between Internet-enabled devices and traditional cable setups, providing access to streaming apps that encourage long-term adoption of smart TVs. Advertisers have also redirected their investments toward smart TV manufacturers, drawn by enhanced data capabilities, improved frequency capping, and greater control over ad inventory.
Take the example of Samsung smart phones. The wide array of smartphone choices, including Samsung's extensive lineup, has led to commoditization where distinguishing based solely on hardware features is increasingly challenging. Competition, especially from Chinese brands offering feature-rich devices at lower prices, pressures Samsung to balance profitability and competitive pricing. Over time, smartphones from various brands converge in technological capabilities, diminishing differentiation based solely on technical specs. Despite Samsung's reputation for high-quality and innovative smartphones like the Galaxy series, perceptions can be overshadowed by lower-priced alternatives offering similar performance. Samsung spans multiple price segments, from budget-friendly to premium devices, sometimes leading to perceptions of commoditization in lower-priced ranges where differentiation hinges more on price than unique features.
There is a limit to Innovate
Apple, once renowned for revolutionary product design under Steve Jobs, has shifted under Tim Cook to focus on incremental improvements rather than groundbreaking innovation. This is particularly evident in the iPhone, where updates like iOS 14 offer minor enhancements without introducing significant new features. The hardware follows a similar pattern, with occasional notable changes such as removing the home button, but overall, designs have remained largely unchanged since the iPhone X. Despite newer models lasting longer, consumer demand has waned due to perceived lack of compelling new technologies.
The below product lifecycle curve shows that every product after a point will reach its zenith of innovation. The product lifecycle outlines the stages a product typically undergoes from introduction to decline: starting with low initial sales, followed by growth, peak market penetration in maturity, and eventual decline due to shifting consumer preferences or newer alternatives.
Conclusion:
There are several key takeaways from this article. The emphasis on digital channels for marketing and distributing products has never been more critical than it is today. Modern businesses aiming for sustainability cannot rely solely on physical stores; they must integrate their presence across various platforms to effectively communicate their story to a global audience. Another important lesson is that over time, every brand is likely to become commoditized. What starts as a product-driven business inevitably evolves into a market-driven enterprise.
Here are a few examples:
What firms can do
When the product differentiation decreases, the next thing that firms can undertake is to get efficient and reduce their costs. Few ways to become efficient over time:
Target customers strategically, focusing on those likely to contribute to sales growth. High customer acquisition costs and narrow margins result when firms advertise to a broad audience.
Reduce churn rate ,keeping customers engaged and retained. (Churn rate refers to the percentage of customers or subscribers who discontinue their service or stop purchasing from a company within a specific period.) Mathematically churn rate=(No of customers lost/No of customers at the beginning)*100. If there are more substitutes in the market,the churn rate will become higher as the number of customers lost will be high.
In essence, modern firms must adapt to evolving business models. Prioritizing customer needs and focusing on innovation are crucial. When innovation opportunities are limited, efficiency becomes key through cost-cutting to increase margins. Leveraging network effects can also indirectly benefit firms. For instance, Reliance Jio has expanded beyond telecom services into digital sectors like Jio Fiber (broadband), JioMart (e-commerce), and Jio Platforms (digital services and apps), creating a vertically integrated ecosystem.
It's essential not to be complacent with past success but instead to evolve with the market—embrace digital transformation for sustained growth and relevance. Get online !!
General Manager (E&I) at Linde Engineering India | EPC Projects | Change Management | IIMA - SMP (Pursuing)
2 个月You have done additional research and comprehended the case. Very detailed analysis covering major marketing fundamentals. Enjoyed and learned after reading it.
Manager at Oracle India Pvt. Ltd, Oracle Cloud Architect Certified, IIM Lucknow
4 个月Good one, strategy along with transformation and innovation in the business is very much needed.