The Future of Marketing ( A Talk by Prof Jagdish Sheth) --------------------- I had the pleasure of listening to Prof Jagdish Sheth at a recent Digital Marketing event in Chennai. Prof Sheth. (Jag Sheth) is a known authority on marketing (jagsheth). In this write up I have tried to capture some salient points from his talk. The write up may seem a bit incoherent at times but that is because I could not make notes as fast as he was throwing up new thoughts. Happy Learning. ------------------- • There are only two things that drive business success. One is innovation and the other is marketing (in the words of Peter Drucker) Once upon a time we lived in the Agricultural Age o The characteristic of commerce in agricultural age was low scale and low speed o Total cost = Variable cost (Zero fixed cost) o There was ample land available thus fixed cost was basically zero o Any one who had land, had an advantage o Object of commerce was to maximize land usage and labour usage Then we moved to Industrial Age o The characteristic of this era was high scale but low speed o Total cost = Fixed cost + Variable Cost o Having scale was an advantage o The object of commerce was to maximise profit Then me moved to Digital Age o This age is characterized by high scale and high speed o Total cost = fixed cost (There is no variable cost) o One needs scale and one needs speed in this age o The object of commerce here is to maximize cash flows o Why do we say there are no variable cost ? : Look the following example. If a company wants to make say a computer software, the cost of making the first copy of the software is say $500million. But once the software is made, the cost of replicating the software is Zero. Thus there are only fixed costs and no variable cost. The cost of doing something once is enormous, the cost of replicating it is very low, which is why companies can afford give software for free…since the object of digital age is to maximize cash flow and not profit o Hence the model for businesses is not “invent and sell” any more. It is “invent and license” o My observation : I could not quite understand how can a company maximize cash flow without looking at profits. Aren’t profits what contribute to cash flow? Unless cash flow maximizing is happening via the balance sheet and not via the PnL account. But this thought of Prof Sheth certainly explains the shift in focus from profitability to valuation, in the digital age. Emerging Characteristics of Digital Media o Traditional media is time-bound and location-bound o Digital media is time-agnostic and location-agnostic o Digital media is : Anytime / Anywhere / Anyhow media Impact of Digital Media (based on some research done by Prof Sheth) o Is very addictive in nature o Makes artificial things appear real (In one his case study interview, he came across a lady who works at a senior corporate position who was in a hurry to reach home by 530 in the evening…because she needed to milk her cows on Farmville….else the milk would go wasted. These are not college kids. These are people to contribute to the economic GDP of the society) o Using a Apple Software, a good storyteller can single handedly create a Hollywood blockbuster for a $1 million in about 3 months time. He is the director- producer- editor- actor-script writer for the movie. Imagine the impact that this could have on the entire movie industry. o There is no concept of Intellectual Property (IP) in the digital age. Or to put it differently IP cannot be protected in the digital age o Branding has traditionally been driven by FMCG and consumer brands. Brand Gurus now need to do some reverse engineering and understand how brands like Twitter and Whats App were built and bring those methods and sciences to traditional branding. Similarly emerging markets will soon to be the place where brands will get created and evolved markets will need to learn from emerging markets o All current socio-economic activities are becoming peripheral and digital is becoming central o In agricultural age, every one knew everybody. Commerce happened between “known” people. In digital age, no one knows anybody. Commerce happens between “unkown” people (eg Ebay) o Age gap between generations used to be 20 years. It now down to 8 years. This translates to the fact that if a elder sister and a younger brother are 8 years apart, they belong to a different generation…and wont be able to relate to each other. o Creation of nuclear families is creating demand. A young couple, instead of living with their parents, now wants to live on their own. So this suddenly creates a demand for another TV set, another washing machine, another kitchenette and so on o In times to come, the biggest outsourcing of services will housekeeping services. The new generation does not know how to cook, how to clean and how to take care of the household o In America (already) of 3 meals a day, 1.5 meals are eaten outside (typically breakfast and lunch). And of the 1.5 meals that are had at home, 60% of these meals area ready-to-eat meals Definition of “Who is poor” needs to change for a market like India. As per research done by Dr Jagdish Sheth o Between 1950 and 2000, approximately 50,000 tons of gold has come into India (and a lot of it via the cash payment route). Of this 10,000 tons was exported back (jewelry making) but 40,000 tons continues to be in India. The value of this gold is $1.5 trillion. o 75% of this gold is actually held by people who are considered to be below poverty line ($2 per day earning per day) o When the rich want to invest they invest in stocks, property and bank balances. When the “poor” want to invest they invest in gold Some other interesting observations by Prof Sheth o Online education is going to be big business for India. Tutorvista has 3000 Maths teachers (teaching maths to American kids) and they are predominantly from rural India and not from the metros. Just imagine the potential opportunities for this country o The future of computer networks will be computer servers placed in the boot of a car. We will not need mobile towers any more. A mesh of these “car servers” can serve the purpose of mobile towers. While at office or on the move this server will be your single point of all communication needs. While parked in the garage, this server will serve your needs at home (and perhaps also talk to your refrigerator and tell you when you get into to car next morning that you need buy milk on the way back home) o Things that human civilization gives up as “must-do-activities” comes back as “hobbies” • Hunting • Gardening • Fishing • Soon, it will be cooking. No wonder the huge growth in interest in cookery shows on TV
Posted on: Mon, 28 Jul 2014 04:08:26 +0000
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