The challenge facing most marketing organizations as they enter the 21st century is how to transition from traditional functions and operations to the new world of the 21st century and the global marketplace. We argue that the best mechanism for making the adjustment to the new marketplace realities is integrated marketing communication. Therefore we start with the transitioning process. Exhibit 1.1 illustrates the challenge.

Most marketing and communication organizations know their current location; that is, they understand the marketplace they occupy, the prevailing competitive framework, the target markets they serve, and so forth. As a result, most firms and managers have fairly well-established patterns for communicating with customers and prospects and investing in processes and systems, and they have some idea of the return they can likely expect from those investments. Although they may not consider these conditions ideal, most managers clearly understand where their organization is in today's marketplace.

By the same token, most organizations have some idea of where they need to be or where they would like to be in the future. While the view may be a bit fuzzy because of unknown market or technological changes, for the most part senior management knows where it is trying to drive its organization one, three, or five years out.

Marketers and marketing managers also have a fairly clear understanding of where their firms and brands are in the marketplace. For example, they have many guideposts marking present success such as market share, sales performance, profit and loss accounts, and the like. These tell them how they are doing. In addition, most marketing people have some vision of the future or where their marketplace is going and how they might fit.

Thus the challenge for both senior managers and marketing managers is not "Where are we today?" or "Where do we need to be in the future?" but "How do we get there?" That, in our experience, is the transition with which they are struggling. And that transition faces every senior management team and every marketing manager in every organization around the world.

The same transitional challenge confronts most marketing communication managers. They generally know what communication programs are in place now. They also know what seems to work and what doesn't, but often not why for either. Therefore most know what they can and can't do with communication to influence customers and prospects in today's marketplace. In addition, most communication managers can wax eloquent about what the marketplace of the future will or might be: electronic systems, interactive communication, information on demand, World Wide Web, and so on. But, like senior management and marketing managers, most have difficulty identifying how they might get to this new marketplace and what needs to be done to make the transition. There are so many variables. So much change. Such dynamic structures. The traditional "plan, develop, execute, and evaluate" model doesn't seem to work anymore. The old models are less and less relevant given the challenges of a global marketplace where border-crossing, new cultures, new languages, and new media abound. Yes, how and in what ways, or with what mechanisms, to make the transition to the new global marketplace is the question and the challenge.

That's what this book is about. How to get from here to there. How to get from a domestic or a national or even an international marketing and communication process and program to one that is global in scope, that is customer focused in orientation, and that takes full advantage of the new and emerging technologies.

This book, however, is not about technology. It is about how to develop and execute effective and efficient marketing communication programs. True, we will make use of the new technologies, but new media and new technology will not drive our focus. Instead the new media and the new technologies will be used to make the transition from where firms and brands are to where they need to be. Thus we will focus on controlled and controllable technology and how it can and will be used to create global communication systems and global marketing communication programs.

GLOBAL BUILDING BLOCKS

To illustrate the marketplace transition, we start with some basic tools of the new global marketplace. In our view four major interrelated elements or building blocks are driving changes in the marketplace and thus marketing and marketing communication: digitalization, information technology, intellectual property, and communication systems. All have contributed and will contribute to the development of the global marketplace and the global marketing communication programs that must be developed for organizations to succeed. These global building blocks form the backbone for the major communication renaissance that is affecting marketing communication everywhere. Each is discussed in some detail on the following pages. The impact of these building blocks on the development and implementation of marketing communication programs will become more apparent in later chapters.

Digitalization

There is little question that digital technology has had a sweeping impact. The ability to convert almost all types of knowledge, information, and materials into 1s and 0s and to manipulate those digits through computers and other electronic systems has literally changed the world. The computer, which was originally conceived as a sort of electronic abacus that could be used to simplify and take over mundane, repetitious tasks such as accounting, calculating, and record keeping, is now recognized as one of the most creative tools man has ever devised. However digitalization is used -- whether to develop computer-assisted design and manufacturing systems, to store and manage huge sets of data, to analyze disease and uncover new treatments, to create new logistical and distribution systems, or to organize and manage satellites thousands of miles in space -- our ability to convert almost everything man does into a digitized form has changed and challenged almost everything in society, even business and human relationships.

The impact of digitalization on businesses and their marketing and communication activities has been so immense that we seem scarcely to have scratched the surface of the changes it will create. Just look at the impact of digitalization on Eastman Kodak, the photography giant. Eastman Kodak, for all intents and purposes, invented, developed, and brought to market the entire field of consumer and pleasure photography. Using the basics of film, paper, and chemicals, Kodak built a global business in photography and, in spite of tough competition from Fuji and others, still controls more than half of the world's sales of film and developing. Today, however, the traditional film-, chemical-, and paper-based photography market is challenged by digital photography. Digital photography requires no film, no chemicals, and no paper, only electrons in the form of 1s and 0s. Think how radically digitalization has changed and will continue to change the traditional photography business. Think what type of impact the shift to digitalization will have on Eastman Kodak, its manufacturing facilities, and certainly its marketing communication activities. How successfully Eastman Kodak handles the transition will determine how successful it will be in the 21st-century global marketplace.

Information Technology

By information technology we mean all those devices, techniques, and capabilities that allow human knowledge, data, or experience to be transferred quickly and easily between organizations or individuals around the world. Information technology is comprised of new electronic forms of data storage, transmission, analysis, and distribution, ranging from mundane tools such as customer databases and the Internet to the most complex forms of mathematical analysis and calculation. The basis of information technology, however, is the formalization of methods of data transfer that allows knowledge to be distributed to all levels of interface. The growth of the World Wide Web is only the tip of the information technology iceberg. Today, for less than $1,000, a consumer can buy a computer with Internet access. Suddenly consumers can literally shop the world for products and services. They are not limited by space or time to fill their wants and needs. How dramatically is this changing the marketing arenas in which most organizations operate? Just look at what Amazon.com has done to the retail book business. It has literally made every book currently in print available to consumers. It has made logistics and information technology, not retail locations and store ambience, the keys to book-selling success. Indeed, upstart Amazon.com is forcing traditional book super-retailers such as Barnes & Noble and Borders Books & Music to match its systems and processes, not the other way around. And the same is true for the Charles Schwab brokerage house. In stock market transactions and brokerage, Schwab has rewritten the entire book on how this business operates. On-line trading is rapidly becoming commonplace. Such is the power of information technology now and into the future.

Intellectual Property

Historically, nations, business organizations, and individuals have been valued on the basis of their tangible assets -- raw materials, land, factories and buildings, and even cash and precious metals. Today the new wealth is knowledge, experience, understanding, and capabilities. Yesterday countries that controlled raw materials or converted raw materials into finished products were wealthy. Today wealth is created by the human mind: books, music, art, movies, computer programs -- all are the new corridors to wealth and power around the world. For example, the largest export of the United States is now entertainment in all its forms and formats, not traditional manufactured goods or even services, and that trend will likely continue in the future.

Communication Systems

While one might argue that communication systems are part of digitalization or information technology, we consider them separately because they are so critical to the future of marketing and marketing communication. Historically, communication systems have been linear, developed, organized, and delivered from a single source, whether that was a newspaper, a radio or television station, or a magazine, to masses of listeners or readers or viewers. There was a single originating source, in many cases controlled or at least regulated by various levels of government. Communication systems were designed to distribute identical content, that is, either entertainment or information, to large groups of people, commonly in single geographic areas. Thus we saw the development of the mass markets and mass audiences that many advertisers believe are desirable and still grapple for today.

Communication systems, however, have changed dramatically in the last few years. Primarily they have increased greatly in number. Increased competition has forced most of them to become more targeted and focused on specific groups of consumers or viewers or readers. In addition, many forms of media have become interactive; that is, audiences can be both receivers and senders of messages and information. There are fewer and fewer passive audiences of the past. These two changes have radically altered how people and organizations and even businesses communicate.

With this quick review of the four building blocks -- or, better said, driving forces -- that are behind the development of the global marketplace, we next look at the marketplace transitions that have already occurred. Then, in Chapter 2, we relate those to the new global marketplace we see developing.

MARKETPLACE, MARKETER, AND MARKETING COMMUNICATION TRANSITIONS

To explain and illustrate the various marketplace, marketing, and marketing communication transitions that have occurred or are in the process of occurring, we have identified four specific market structures: the manufacturer-driven marketplace, the distribution-driven marketplace, the interactive marketplace, and the global marketplace. In the following sections, we describe and discuss the first three. We hold the fourth marketplace, the one we call global, for Chapter 2 since that will form the crux of this book.

As will be noted in the following paragraphs, while we separate the four marketplaces for discussion, we do so only for the convenience of the reader. In many cases the organization finds itself in some type of blended or evolving marketplace. That simply means that while we define and describe the various marketplaces, there are generally shades and variations of several marketplaces in which individual organizations are operating. For example, there are major differences in marketplace structures in the United States, Japan, and Poland. Yet international organizations may market successfully in each. By the same token, organizations may be producing and marketing a wide range of products, some sold directly to end users and others using very complex and complicated distribution systems, with each individual market appearing to be successful in its present state. The same is true for communication systems. In the United States, for example, choices of media modes and manners for reaching customers and prospects are almost unlimited. In India, however, mass media are still emerging, and there is still much reliance on local forms of media such as outdoor, cinema, and even street demonstrations and sampling. Thus the structures we describe next are meant primarily as illustrations. They outline the basic marketplace structures and serve as departure points for explanation of the changes and dislocations global marketing and marketing communication managers will find themselves addressing as they make the transition from "where they are" to "where they need to be" in the 21st-century global marketplace.

To complicate the discussion further, many marketing and marketing communication managers will find their organizations operating in all of the marketplaces described here at the same point in time. That might include various product or service lines, or it might be on the basis of various countries and markets. Indeed the transition from one marketplace to another is not, in most cases, linear or even clearly defined. Even worse, there is no real end in sight. That is, in our view, no organization will "achieve globalization" in marketing and marketing communication and be done with it. Instead managers will face continuing change, continuing response to customer needs, continuing challenges from competitors and technology, and continuing change and evolution in relationships and ways of doing business. The following marketplace descriptions will be useful as we define and illustrate how marketing and marketing communication must transition to the new global marketplace.

The Manufacturer-Driven Marketplace

Most marketing history and certainly most of today's marketing activities assume a marketplace in which the manufacturer or producer of products and services has most of the marketplace power. From the earliest forms of commerce, the manufacturer (or producer or grower or maker) took his or her wares to market. Buyers met sellers at the market or bazaar. From the ancient souks of the Middle East to the shopping malls of today, the marketplace has been driven by what producers have offered and what customers have been able to purchase. Buyers searched for what they needed. If those needs were not filled, they simply did without. Sellers, on the other hand, controlled the supply and thus the marketplace. We illustrate these traditional marketplaces in Exhibit 1.2.

As shown in our illustration, sellers brought their goods and services to the marketplace, where buyers came in search of the things they needed. Pricing, distribution, and marketing communication occurred on the spot and instantaneously. Because the manufacturer or seller controlled the supply of products or services, it also exerted control over the marketplace. Indeed, in these simple buyer-seller relationships, sellers always control the four major power elements in the marketplace. They control facilities to produce, make, or assemble product or service offerings. (In our 21st-century global model that would be the digitalization and information technology building blocks.) In the past producers also controlled information technology, crude as it was, necessary to create a marketplace in which the products or services could be offered. (In our building block model, we call these information technology and intellectual property.) Producers also controlled the communication systems that existed in the marketplace simply as a way of advising or informing customers of the availability and location of products and services being offered. By controlling these four building blocks, sellers dominated channels and consumers or buyers. For example, even in ancient times, farmers owned the land and thus the production of food and clothing. With this control the farmer could decide when and where and what bazaar to visit, what products to offer at that time, at what price, and whom to tell about availability. Thus makers or manufacturers or growers or weavers controlled the marketplace.

Such markets still exist today, although we may have added extensive distribution systems involving intermediaries and facilitators. For example, pharmaceutical companies produce medicines presumably designed to heal the sick or cure various diseases at a profit. The pharmaceutical company decides which diseases to focus research on. It then decides what physicians it will tell about the developed drug and through which distributors (e.g., pharmacies or chemists) it will make the drug available. It develops the price for the drug and controls the amount it will supply in alignment with the government legislation of the day, of course. Patients who suffer from the disease must accept the form and manner in which the pharmaceutical company wishes to market its products. Thus we might say the pharmaceutical company is an excellent example of a manufacturing organization that controls the manufacturer-driven marketplace.

Today, in many situations, manufacturers of all types of products and services still dominate the marketplace. They decide how much they will make in their plants or what plants they will build to produce what goods or services. They then bring those products or services to market, deciding during the process how much they will make, how they will price it, how they will distribute it, whom they will tell about availability, and the like. Almost all of our present-day marketing and marketing communication systems have been developed to support this manufacturer-or producer-controlled model. The most common model is based on the famous 4Ps (extended to 6Ps by Philip Kotler) model of marketing: product, price, place (distribution), and promotion. It is a linear, single-focus model based on transactions and exchanges between sellers and buyers that is used, or at least adapted, by many types of organizations around the world.

In terms of our four building blocks of today's marketplace, the selling organization controls the development of digitalization, deciding where and when such technology should be applied in the development of the product or services. Information technology is also under the control of the seller, whether that technology is used to enhance the manufacturing of a product, the handling of data, or the billing of customers.

The same is true of intellectual property. The knowledge or wisdom or experience of the organization has much to do with its success in the marketplace. The ability to develop new products, to obtain patents, to develop unique manufacturing skills, and the like gives the marketer great power in the marketplace. In addition, the marketing organization certainly controls the communication systems. Almost all media are designed to cater to the needs and wishes of the marketing organization. That is, media gather audiences that they then either rent or sell to marketing organizations as vehicles and methods of promoting their products and services.

Since we are specifically concerned with marketing communication in this text, we have illustrated how communication occurs in the manufacturer-driven marketplace in Exhibit 1.3.

As shown, in the manufacturer-driven marketplace, the seller or producer or marketer has almost total control over the communication systems. The buyer or consumer comes to the marketplace seeking goods, but the search is totally up to him or her. The marketer or seller controls that information as it sees fit. Thus almost all communication is outbound, and it is almost all linear in structure; that is, it flows out from seller to buyer with little or no return loop.

In this arena the producer is always looking for media systems that can be used to inform buyers. Producers continually seek media that are inexpensive and broad ranging since the seller generally never knows who potential buyers might be. This is how traditional forms of mass media developed, and it is still the basis for much traditional advertising and promotional activity throughout the world. It is designed for a seller trying to influence a buyer, the marketer convincing the customer of the value of the product or service. Thus the goal of the communication demands that the messages almost always be persuasive in nature. Most valuable to our analysis, this is the basic marketing model from which all organizations and all managers are or will be trying to make a transition.

The Distribution-Driven Marketplace

Over the last thirty or so years, the traditional manufacturer-driven marketplace has evolved into what we now call the distribution-driven marketplace. This has come primarily as the result of retailers, distributors, wholesalers, or other forms of channel organizations gaining control of the four marketplace building blocks. In most developed economies this type of marketplace is represented by the example in Exhibit 1.4.

As shown, the distribution-driven marketplace is now in the center of the system. From that central location, channels control marketplace power. That is, channels now dominate sellers and buyers. This control in the retail area is a result of huge investments in real estate and other place-based facilities along with major changes in various forms of technology. These retailers, whether they be physical or virtual, have made wide varieties of products and services available to buyers. In other words, retailers have created marketplaces for themselves, often becoming destinations in and of themselves for the actual end users. The Mall of America in Minneapolis is an excellent example of this development of retail. Today the Mall of America is the third most visited location for overseas visitors to the United States. Moreover, these large-scale, edge-of-town malls are becoming commonplace throughout the developed world.

As shown in the illustration, many distribution-based organizations have captured the traditional role of seller that originally was controlled by the manufacturer. They have thus captured the interface with the consumer or end user, allowing them to obtain large amounts of marketplace data and information. In addition, the commodification of products and services has enabled the distribution channel to take marketplace power from the manufacturer. This is increasingly true in many consumer product categories and increasingly in the business-to-business arena as well. Examples of these types of dominant retailing or distribution systems abound -- Wal-Mart, Carrefour, Marks & Spencer, Tesco, IKEA, Toys Us, and so on.

While one might argue that retailers or forms of retailing have always existed and have always had marketplace power, it has been only within the last twenty or so years that they have begun to concentrate and consolidate into massive, logistically driven distribution systems that control dominant shares of many total retail markets. Much of this concentration and consolidation has come as a result of channel or distribution organizations mastering the four building blocks we have been discussing.

Beginning in the 1970s, the development of Universal Product Codes (UPCs), electronic point-of-sale (EPOS), scanners, and increased computer capability allowed retailers and distributors to capture, store, manage, and analyze massive amounts of market data at the retail and even at the individual market level. These data allowed retailers to track product movement, determine effective pricing margins, and know what customers bought and when they bought. They provided a much better understanding of the flow of products and services through the channel systems than had previously been possible. As channels gained control over close-in marketplace information (that is, individual market and often even household consumer level data and individual customer level data in the business-to-business market), marketplace power quickly shifted from manufacturers to retailers or channels. This massive amount of marketplace data generally came as a result of the rapidly developing digitalization and information technology. From this, channels have been able to create tremendous amounts of intellectual capital in terms of how the marketplace(s) works, what consumers respond to, what they are willing to pay, and so on. They have leveraged this information against manufacturers who often have only broad ideas of market demand, consumer needs, and pricing levels. In addition, because the channels have greatly improved the source, knowledge, and shopping convenience of consumers and end users, they have created powerful communication systems, many of which are simply the retail stores and facilities themselves. Thus distribution channels of today use not only the traditional media systems but also the retail facilities as forms of communication to bring buyers to the marketplace and to fulfill their needs. Consequently in market after market, channels or distribution systems have gained marketplace power and now in many instances can dictate the rules of transaction to product manufacturers.

In terms of marketing communication, the present-day marketplace is controlled by or at least greatly influenced by the retailers, channels, or distributors. That influence is shown in Exhibit 1.5.

Distribution is now in the center of the marketing communication system. Manufacturers or producers, while they still try to speak to or communicate with consumers and end users, generally through forms of mass media, increasingly have focused their communication efforts through their distribution channels. Thus they have become dependent on the channels to provide information about usage and purchases of their products or services by ultimate consumers or end users.

At the other end of the communication system, consumers or end users have come to rely on the channels or distribution systems to provide the products and services they want or need. Being in the middle of this communication exchange system, the retailer or distributor is now the dominant element in this distribution-driven marketplace. As illustrated in Exhibit 1.5, most marketing communication is controlled by the distribution system operator, who communicates upstream to the manufacturer or producer to obtain needed products. This is then matched against expected or anticipated demand downstream to consumers and end users to advise them of available products and services. Thus, while there is some interactive communication, primarily between producers and distributors or channels, most of the communication is still outbound and one way, from the channel outbound to the consumer or end user.

The communication systems that have developed in this marketplace are also generally one way and outbound. For the most part these communication systems are still fairly traditional, relying on established media systems such as newspapers, radio, television, and magazines. Interestingly, however, the use of targeted communication from the channel to known customers is increasing, often to encourage continuity of purchase. This occurs as the distribution channel learns more about the end user through various forms of digitized data gathering. Retailers have made substantial investments in databases, data management, and targeted communication approaches such as direct mail and telemarketing as they attempt to leverage the marketplace knowledge they have accumulated over time to make their communication programs more relevant to consumers.