Marketing, which will continue to remain the key to company adaptability and profitability even in the new millennium, will have a mutated look in the future years, opines Philip Kotler, the distinguished Professor of International Marketing. And, as suggested by him, the major developments in the evolving marketplace/marketspace will be as follows:
* There will be a substantial disintermediation of wholesalers and retailers owing to electronic commerce. Virtually all products will be available without going to the shop. The buyer will be able to access pictures of any product on the Net, get the much-needed information, shop online for the best prices and terms and click order and payment over the Internet. Expensively printed catalogues will disappear from market. Business purchasing agents will also shop on the Net, either advertising and waiting for bidders or simply surfing in their “book-marked" websites.
* Shop-based retailers will find the numbers of buyers dramatically diminished. In order to combat this, more entrepreneurial retailers will build entertainment and theatre into their shops. Shops selling books, food and clothes will also have coffee bars, for instance. The sellers will crave to market an “experience" rather than an assorted product.
* Companies will build proprietary customer databases containing rich information on individual customer preferences and requirements that they might use to mass-customise their offerings to their buyers.
u Business will be able to retain customers through finding imaginative ways to exceed customer expectations. Thus the rivals will find it increasingly difficult to acquire new customers and most of the organisations will spend time figuring out how to sell more products and services to their existing customers. Companies will focus on building customer share rather than market share.
* Organisations will persuade their accounting departments to generate real numbers on profitability by individual customer, product and channel and will soon come up with reward packages and incentives for their more profitable customers.
* Companies will switch from a transaction perspective to a customer loyalty-building perspective. Many will move to customer lifetime supply whereby they will offer to deliver a regularly consumed product on a regular basis at a lower price per unit. They can afford to make less profit on each sale because of the long-term purchase contract.
* Most of the companies will outsource over 60 percent of their activities and requirements. A few will outsource 100 percent, making themselves virtual companies owning over very few assets and therefore earning extraordinary rates of return.
* Many sales people will be franchisees rather than company employees. The organisation will equip them with the latest sales automation tools, enabling them to develop individualised multimedia presentation and customised market offerings and contracts. Buyers will prefer to meet salespeople on their computer screen rather than in their office. They shall interact with each other on their computer screens in real time. Sales people will have less of travelling and airlines will shrink.
* Mass TV advertising will greatly diminish due to several viewing channels. There will be very few printed newspapers and magazines. On the other hand, marketers will reach their target markets more effectively by advertising through specialised online magazines and news-groups.
* Companies will be unable to sustain competitive advantages. Their rivals will be quick to copy an advantage through benchmarking, reverse engineering and leapfrogging. Firms will believe that their only sustainable advantage lies in an ability to learn faster and change faster.
Hence, according to the marketing Guru, the global marketplace will evolve at an unthinkable pace. And the key to competitive success will be to keep ones marketing changing as fast as ones marketplace.

Changing rules: the evolving concept of marketing
Hounded by nerve-wrecking competition and increasing awareness and sensitivity of the buyers, the corporate players are yearning to get close to the buyers. To woo them better the organisations are going to any extent by initiating/resuming dialogue with customers by scrutinising market research, by coming up with new ideas to add value to their products, by bolstering customer relationships and by adopting innovative measures to speed products to market. All these abide by the classic definition of the marketing concept: Giving customers what they want. While their benefits have surely been enormous, this race to embrace the marketing concept has given rise to some unanticipated consequences.
In many a case the competitors are conversing with the same customers, analysing similar market research data, trying to come up with new ideas from the same sources and benchmarking the same companies. Thus they are approaching market with the same perspective and are offering products that, while offering high value, are completely indistinguishable. This lack of differentiation presents an important challenge to the concept of marketing. Ergo, the concept of marketing itself is evolving.
The core assumption of the current view of marketing that is all about “giving customers what they want" is that the buyers know what they want. The evolving marketing concept is challenging this view. Increasingly strategies are been framed on the assumption that, at least at the very start, the customers do not know what they want. On the contrary, they learn to want and to aspire. Under the conventional view of customers, how they perceive, value and select brands are the “essential rules of the game". The rules of the game ought to evolve as buyers learn. The evolution depends on what the sellers teach the buyers to ask for. For instance, Motorola, Nokia and Ericsson are shaping buyer perceptions of cellular phones. Thus brand strategies play a pronounced role in defining the rules of the game.
The emerging concept suggests that marketing is part learning - gaining an understanding of what buyers know now and of the process of buyer learning - and part teaching - playing a role in the buyer learning process. It is about being market driven and market-driving.

Consumer learning
At the root of much consumer learning are the goals that motivate. Over time, the goals associated with product categories and brands grow from a simple set of functionally oriented goods to a more elaborate set of functionally and emotionally oriented goals. The goals associated with brands differ from brand to brand in the same category. For instance, among sport-utility brands, Mercedes-Benz provides safety and prestige, Range Rover enables its owners to portray themselves as refined individuals who are sensitive to tradition and Lexus provides peace of mind and a more modern, smart self-image. Thus links between brands and goals are nurtured over time. And these brand-goal links are fundamental results of consumer learning. The concept of brand-goal links has important competitive implications. The conventional view is that the customer compares brands along only one dimension, making comparisons across brands simple. In formal economic terms, the consumers seek a single goal-utility.
The emerging view is that buyers seek many different goals and that within the same category some brands can be linked with multiple goals in unique combination. Volvo has, for example, successfully linked both “be a responsible parent" and “add excitement to life" to the Volvo brand through its new V70 station wagons, which combine a high performance engine, suitable racing, with a family car, blurring the age-old distinction between a family car and a sports car. By successfully linking these goals - along with the “safety" so long associated with the brand - Volvo has defined the brand as delivering value that none other can. Brand-goal links such as these built through strategy and learned by consumers prove themselves to be unique.

Brand perceptions Perceptions of brands in the same category are not necessarily equal. We can have a richer and more complicated set of associations for “Coca Cola" or “Jaguar" than we do for “Cott" or “Mitsubishi". A richer set of associations can increase the ease with which we recall a brand, affect our feelings towards it (increasing trust or confidence, for instance) and affect our price sensitivity. It is hard to justify a price premium for a brand about which we know little.

And, also, even brands with the same associations can be perceived differently because the vividness of those associations differs. Both Levi's and Lee jeans are “American", rugged, associated with American West, and are similarly designed and priced. Yet perceptions of Levi's are likely to be more powerful and more vivid. These differences are the results of brand strategy.
The process of acquiring brand perceptions has important implications for the marketing concept and for the nature of competition. If consumers know what they want, then they establish the perceptual dimensions along which they perceive brands and all brands are subject to them. On the other hand, if the buyer perceptions are learned and if that learning depends on the strategies of brands, then marketing has a completely different objective: to influence the evolution of perceptions in a way that competitors cannot effectively imitate. The aim is to create vast inequalities- in the richness of perception - between a brand and its competitors.

Brand preferences
Buyers may sample a number of brands, liking some more than the others. This experience triggers the process of consumer inference: “what are the characteristics of the ones I like and one I like not." Obvious differences in brands or attributes are assumed to be the “cause" of such differences. It may be concluded that one has preference for a brand or some combination of attributes. If you prefer Starbucks coffee to other brands, you might judge that you do so because of the darker roast and particular blend of beans. In reality, of course, the source of a satisfactory outcome can never be precisely determined.
Nevertheless, buyers form a naïve theory relating brand features to satisfaction which is reinforced by advertising and repeat purchase. In the process, preferences are formed and evolved, based on the interaction of buyer experience and brand strategy. This suggests that what customers want depends on what customers have experienced. Brand strategy plays a defining role in this evolution and can have enduring consequences.

Decision making
Buyers learn how to choose brands. The conventional view is that buyers consider all the alternatives, evaluate the differences - making the necessary trade-offs - and ultimately choose the brand that maximises self-interest.
In fact, people make decisions in many ways, responding to the situation and the need. We draw on a repertoire of decision rules. In purchasing a battery we use a very different decision process that we would in buying jeans. In case of buying a battery, we only consider brands we have tried or, at least, our acquaintances have and put aside lower-priced alternatives as too risky. In the case of jeans, we may compare all the brands to Levi's, not one to each other.
The decision rules buyers learn depend on the strategies brands pursue. If all brands deliver value with respect to the same goals and comparisons between brands are easy, buyers may simply exhaustively compare alternatives. In more complex situations, buyers may resort to simplify matters by using simpler decision rules. They may buy the one on special offer or the one recommended by a friend.

Competitive advantage
Consumer learning has got profound implications for the nature of competition and competitive advantage. If buyers learn what they want, competition is less a race to meet consumer needs than a battle over how perceptions, preferences and decision-making will evolve in a market. It is a battle over the rules of the game. And following are the ways to gain competitive advantage on others:

Pioneering advantage
In many markets, the pioneer or the first entrant outsells the others in its category, in some cases for decades. Brands like Wrigley chewing gum, Gerber baby food and Kleenex tissues have retained the largest shares of their markets despite numerous competitive entries. The traditional view of the marketing concept suggests that pioneers have higher shares because they have pre-empted the best position in the market leaving less attractive positions for later entrants. (Discussed in details under Rules of marketing: Pioneer Vs Late Entrant)

Product differentiation
Consumer learning occurs in mature markets as well. Product differentiation is one such example. The classic view of product differentiation is that it is about discovery: finding a relevant, widely valued but unmet dimension. This approach implicitly assumes that buyers value some aspects of the product that have simply been ignored. Once all valuable aspects have been discovered, further differentiation is impossible.
A consumer learning perspective suggests, in contrast, that differentiation can be successful even if no undiscovered dimension of preference exists. Differentiation is possible so long as a new dimension exists that buyers can learn. The differentiating attribute need not be relevant. The strategy of “meaningless differentiation" is widespread. For example, Alberto Culver differentiated its Natural Silk shampoo by adding silk and advertised that it “puts silk in a bottle". Culver, however, later said that silk does nothing for hair.
Throughout the evolution of the marketing concept, the basic notion that competitive advantage can be created by giving customers what they want has remained unchanged. All that has changed is the way in which customers are satisfied. Today's organisations are gaining a deeper understanding of customers. They are learning about the goals they hope to achieve in their lives and then creating powerful links between these goals and their brands.

Rules of marketing: Pioneer Vs Late Entrant
The time of market entry is a critical factor for the success of the new product. A company finds itself with two alternatives: it can compete to make an entry into the new product market first or it can wait for its rival to spearhead the entry and then follow only if the market has been proven feasible. The companies who strive to pioneer the entry into the market like Intel, 3M, Sony and Merck, search aggressively for new products and invest heavily in research and development to buttress their strategic objectives. And those who follow steal into the market only when their rivals have confirmed the market viability. For instance, Matsushita follows Sony in introducing consumer electronic products. Cyrix and AMD introduce the new generations and follow quickly with lower-priced alternatives. All these lead to an intriguing strategic question: Is it better to take the lead or wait patiently and follow a pioneer?

Pioneering advantage
None denies that here are potential advantages of being the first in the market. Over the decades, a long list of reasons that can add to an enduring performance advantage for pioneers has been developed. These can be divided into two main sections: customer-based advantages and operation/cost-based advantages.

Customer-based advantages
Customer-based sources of pioneering advantage fall into four main categories as follows:

Customer education and choice formation
For many a product, buyers are initially sceptic about the contribution of the product attributes and features to the product's value. Preferences for various aspects and their desired levels are learned over time. This allows the pioneers to shape the consumer preferences in its favour and set certain standards to which buyers refer in evaluating the product of the late entrants. In many a case, exemplified by Walkman, Kleenex, Polaroid or Hover, the pioneers' products are treated as prototypical or “original" for whole of the product category.

Access to customers
When a pioneering product appears in the market, it simply steals the show and it captures more attention of the customers and distributors than any other late entrant. Moreover, advertisement of the product that takes the lead is not cluttered by the messages from rivals. Even in the later stag, the followers must continue to spend more on advertising to achieve the same effect as pioneers. The first entrants can also set standards for distribution, occupy the best locations or select the best distributors, which can give it easier access to customers. For instance, Starbucks, as the pioneer, was able to open coffee parlours in more prominent locations than its rivals.

Switching costs Switching costs arises when investments are required that would be lost while switching over to another product. To site an example, if one has developed skill in the traditional QWERTY keyboard, switching to a more efficient Dvorak keyboard would require relearning how to type, an investment that in many cases would exceed the expected efficiency gains.

Pioneering products have the first chance to become the trusted brand. And the late entrants would need to convince the buyers to bear the costs and risk of switching to an untried brand of unknown quality.

Network externalities
The value to buyers of many high-technology products depends not only on their attributes but also on the total number of users. The value of videophone, for instance, depends on the number of people using it. The first entrant surely has the opportunity to build a large installed base before competitive entry. This reduces the followers' ability to introduce differentiated products.

Operation/cost-based advantages
Operation/cost-based sources of pioneering advantage fall into three main categories as follows:

Experience effects and economies of scale
Taking the lead into the market means that pioneers can build production volume and accumulate research and market experience before any other rival. This potential cost advantage can be used to achieve higher margins or to protect customer-based advantages through lowering prices to discourage rivals from entering the market.

Patents
Patents offer a means of keeping experience proprietary and limit limitation. However, they offer a significant barrier in only a few industries such as pharmaceuticals.

Pre-emption of scarce resources
The first entrants have the opportunity to acquire scarce resources when demand for them is still not too high and they are therefore cheaper. In some cases, they may be able to monopolise an important input factor. For instance, Minnetonka, a small US manufacturer of consumer goods, was able to protect Softsoap, the first liquid soap, against competitors such as Procter and Gamble by buying up a full year's supply of the small plastic pump required for the dispenser. Subsequently, however, P&G's size told and its Ivory brand ousted Softsoap.

Trailing advantage
Potential sources of follower advantage fall into two categories.

Free Riding
The first entrants are the first to invest significant resources into such areas as research and development, market infrastructure, buyer education and employee training. These investments cannot always be kept proprietary. And the late entrants can free ride on them. For instance, IBM, although not the pioneer, was the first to push its personal computer as a standard for the whole product category. This offered clone makers such as Compaq, which followed IBM, a larger market without bearing the cost of developing the market. Before Starbucks, few Americans were willing to pay a premium for good-tasting coffee. Today, any coffee bar can benefit from the consumer education effort by Starbucks. The widespread use of electric cars will require a network of battery recharging stations. Early market entrants will be likely to carry these investments disproportionately.

Incumbent inertia
When followers enter the market, they have significantly more information than their pioneers had at the time of their entry into the market. They can afford to worry less about customer or technology uncertainty, imitate best practices and avoid the pioneer's mistakes. Before a market comes into existence, market research results are not often reliable. Once the buyers have gained an experience of the product, they also happen to know what they want. To place an instance, before entering the US market, Toyota interviewed owners of Volkswagens, the leading small car in those years, to learn what they loved and hated about small cars. Inertia is not necessarily irrational. Companies have investments in specific assets. Thus, switching costs faced by pioneers may make new practices less attractive to them than to followers. With fixed assets, incremental changes often look more attractive than radical changes.
Thus, firms considering pioneering a new market should base their decision on a careful evaluation of the potential sources of advantage and disadvantage. Expectations of a sustainable long-term advantage due to pioneering should remain moderate. Market share advantages are often more easily established but generally at the expense of operational efficiency. Pioneers should remain operationally flexible and not hesitate to learn from followers.
Changing rules: Exploring competitive games
In making decisions about the marketing mix, managers ought to consider not only the likely response of consumers but also the response of the rival concerns. To site an example, the impact of a price cut may be diminished if the competitors follow suit. For instance, price cuts in the ready to eat cereal category in the US by Post and Nabisco initially increased their market share from about 16 percent to a little over 290 percent. In response to this, Kellogg's announced a 20 percent across-the-board price cut due to declining shares of its major brands. General Mills and Quaker oats also subsequently reduced their prices. At the end, Post and Nabisco's share was up only slightly.
A central characteristic of competition is that companies are mutually dependent - the outcome of a company's marketing action depends to a great extent on the reaction of its rivals. The little research that has been conduced in this arena suggests that, across product categories and marketing mix instruments, there is significant variation in the type of interaction that takes place. The techniques used in measuring competitive interaction and a gist of the information available on the type of interaction actually found in the marketplace have been given below.

Measuring competitive interaction
In previous studies, four approaches have been used to measure the competitive interaction between market-players: reaction function estimation, menu approaches, conjectural variation models and time series casual approaches.

Reaction function estimation
This begins with mathematical models of demand and company behaviour. Each company's optimal response function, called a “reaction function", is derived from these models. It describes, under various assumptions, each company's best response to a change in rival's marketing strategy.
Menu approach
This begins with the assumption that a certain type of behaviour characterises the market interaction between companies. Market equilibria are derived for a variety of assumed behaviours. Based on relatively sophisticated hypothesis tests, the objective is to test statistically which form of assumed behaviour best fits the observed data. Since researchers infer company behaviour by deciding which form of interaction fits the data best from a menu of competing possibilities, this approach is often referred to as the menu approach.

Conjectural variation approach
This treats company's conduct as a single parameter to be estimated. Rather than assuming various behaviours and testing which best fits the data, this approach entails the estimation of a conjectural variation or “conduct" parameter. Instead of assuming a specific type of market interaction, this approach allows the data to describe it.

Time series causal approach
This uses time series data to deduce chains of cause and effect in competitive interaction. One valuable use of this approach is to confirm leader-follower relationships estimated by the other approaches.

Type of interaction
Previous research has attempted to classify or categorise competitive interaction, specifying three basic forms. First, independent behaviour implies a lack of competitive response. Second, cooperative behaviour implies that companies' actions move together in a coordinated fashion. Finally competitive behaviour implies that companies maximise their own profits by responding competitively to rivals' actions. Such interactions are not always easily inferred from actual market data. For instance, while simultaneous price increases might be evidence of cooperation, simultaneous price cuts may be indicative of retaliatory behaviour. Recently, a more detailed set of interactions - comprising of three forms of symmetric and two forms of asymmetric behaviour - has been specified.

Forms of symmetric competitive behaviour
* Co-operative promotions imply that promotional decisions are made in a co-ordinated function, i.e. if one company increases its promotional intensity the other reduces its promotional intensity to accommodate. Instances of this type of interaction might include the alternating promotions run by Coke and Pepsi.
* Alternatively, non-cooperative promotions imply that an increase (or decrease) in one company's promotional intensity is met by an increase (or decrease) in that of its rival's. Two companies competing for end-of-year market share with extensive coupon drops will be an example of such behaviour.
* Finally, a lack of response of both the rivals is also symmetric. Such a detached behaviour might be expected in markets where demand substitutability is weak. Since there will be little or no cross-promotional response, the competitive response is also expected to be quite small.

Forms of asymmetric competitive behaviour
* Leader-follower behaviour occurs when one company (the follower) reacts to the other's actions, whereas the other (the leader) does not. For instance, private labels are often found to follow national brand's marketing efforts.
* In dominant-fringe interaction, two companies' competitive strategies take opposite directions - one company may behave cooperatively while the other behaves non-cooperatively. To site an example, a weaker of “fringe" company may simply not be willing to tackle a dominant company directly and may thus accommodate its larger rival's promotional efforts. But a company with a dominant market share might fiercely defend its position, adopting a non-cooperative stance.
There is no one pattern of competition between companies in any industry in any setting. The pattern of competitive interaction in any category is the result of a complex set of variables. Several issues like demand-side factors, market and industrial structure, company “personality" and category characteristics interact in a complex fashion to determine strategic behaviour. Thus, managers ought to consider the direction and size of the competitive response when evaluating the likely impact of a change in their firm's marketing mix.

Changing rules: colluding with a competitor
Collusion is a hated word in many countries like the UK, US, Australia, New Zealand, Canada and certain EU institutions. In the US a manager can be jailed for colluding with a competitor. Yet elsewhere collusion is not a crime and is regarded as a natural business practice. Based on a study of over 7,000 cases of collusion over the past five years across a broad spectrum of industries, four factors can be singled out to make collusion work - the four Cs viz. Communication, Constraints, Co-ordination and Confusion. They are managed using “facilitators" who ensure that the Cs can survive in the long run. The ultimate goal for colluders is a covert cartel. A cartel is a publicly known agreement among companies selling substitutes. A covert cartel is the same thing except that the public is unaware of the arrangement.

Communication
To collude effectively, companies must send information to each other. Or else the cartel falls apart. Managers can simply call a competitor on the telephone or meet in an office or some other discreet location. Companies have also used a number of less obvious means of communication which include announcing pricing plans over online networks (US airlines were caught doing this using their reservation systems): using “meet or beat" pricing announcements over public broadcasting media - these serve to establish price floors; organising joint trade events, symposiums, workshops and association meetings.

Constraints
In order for the cartel to survive, it is essential that all of the players have a similar sense of constraints. Consider the simple case where the actual sales potential for a given market is $500 million. Company A correctly perceives the potential as $500 million but Company B perceives the potential to be at least $ 900 million. Each of the two companies starts with a 50 percent market share. Company B will be erroneously tempted to engage in aggressive marketing in order to expand its total revenue to absorb some of the perceived excess demand. While doing so, it will cut into the share of Company A. Company A will, surely, retaliate and the covert cartel will crumble. A number of facilitators help to ensure that market constraints are similarly perceived by competitors. This include the formation of trade associations, workshops, seminars, industry-level training courses and other forums open to all players within the same industry. These lead to discussion of historical and future industry prospects and even in some cases to the publication or sharing of data among cartel members.

Coordination
Coordination of research and development activities, distribution, production, positioning or even pricing can help companies split the market, block further entrants or obtain cartel-level prices despite the being multiple suppliers. A good example is provided by the two soda companies that were caught in the famed “Cola Payola" case, in which they used retailers to help co-ordinate promotions so as to block a third entrant. Brand A would be on promotion at retail from January 1 to February 23; Brand B would be on promotion from February 24 to April 16 and so on. Since retailers promote only one brand at a time there was simply no room in the calendar for a third party to be promoted. Other facilitators include having board members sit on several companies competing in the same industry. Cross-ownership also facilitates co-ordination.

Confusion
Confusion requires that consumers, employees, regulators and potential entrants should not fully understand the working o the cartel. This involves elaborate use of peripheral cues or signals. One of the most common coordination schemes - Round Robin collusion - generates such signals. This scheme works as follows. Let us suppose there is a covert cartel of seven companies in the chemical industry. Al the companies sell to clients around the Pacific Rim. This is a case of multi-market contact. The same companies compete against each other at different, rather disparate locations. Suppose all the seven companies meet and decide to increase prices throughout the region to monopolistic levels. Company A will volunteer to increase its price in, say, Indonesia, citing a plausible reason. Its own market share will fall in Indonesia and everyone else's share will rise. The other competitors will use the same story in other Pacific Rim countries, each taking its turn as the “bad guy" in order to help the others out.
With the four Cs in place, a number of companies have been able to maintain the illusion that there is no collusion in their sector for a long time. They have been so successful that citizens in countries where no price-fixing laws exist often do not realise that price-fixing is a daily event for most of the products they purchase.

The above article has been abstracted/condensed from the views of the following professors in Mastering Marketing published by Business Standard in partnership with Financial Times. All rights of the authors and publishers are reserved.
* Philip Kotler, Professor of International Marketing at the Kellogg Graduate School of Management, Northwestern University
* Gregory Carpenter, Professor of Marketing at the Kellogg Graduate School of Management, Northwestern University
* Venkatesh Shankar, Assistant Professor of Marketing and director of Quality Enhanced Systems and Teams (Quest) at the Smith School of Business, University of Maryland
* William Putsis, Jr, Associate Professor of Marketing at London Business School
* Philip Parker, Professor of Marketing, Insead