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The Next Convergence: Energy, Telecommunications and Internal Infrastructure

Fortnightly Magazine - March 15 1997

turns strategic clarity about boundaries and value propositions into a management failure. Indiscipline ranges from not enforcing product quality and consistency, to frequently altering marketing messages or advertising approaches. It also includes bouncing from one customer segment to another without establishing successful dominance in any one segment, and cavalier behavior about customer requests for help or complaints.

Ineptness relates to not installing the proper marketing and sales business processes. Ineptness includes poor product design, inadequate or nonexistent post sales support, failure to launch products in time or on budget. It also includes sending poorly trained people into the field, miscalculating the margin contribution or competitor response to an offering. Poor tactical execution cannot redeem a stellar strategy. Nor can it turn superb customer insight into profitable revenues. This is probably the most common error. To some extent every company is making it. Organizational ineptness makes it impossible to dive through marketing windows.

Under-investment is the second most pervasive error. Under-investment pertains to undernourishing a whole portfolio of marketing activities from market research to product design and product launches to advertising. Distribution channel management, vendor alliances and, of course, the Strategic BCCS System suffer from under-investment. Retail marketing requires money and in much greater amounts than many realize or accept.

Establishing Marketing Domains

Customers are domiciled in three marketing domains: Commodities & Staples; Products & Services; and Experiences & Fashion (see Exhibit 3).

The objective of the new marketing is to first move customers up the Commodities & Staples domain and then to the next higher domain: Products & Services. Since the domains are nested, it is possible, to turn a commodity into a product with imaginative marketing, and a product into a commodity through carelessness. The energy industry is noted for turning services into commodities.

The control and choice of the domain surprisingly often resides with the merchant. If the offering is purely or mostly a price discount then the customer is moved into the Commodities & Staples domain. If nonprice features are added to the commodity the offering becomes differentiated. These nonprice features include applying financial and intellectual capital to physical capital. By adding these features, brand equity is created. The customer is then moved into the Products & Services domain. If substantial intellectual capital is added to a product, it then becomes a highly differentiated offering. Price competition is eliminated. In these rare instances, the customer is moved into the Experience & Fashion domain.

Since the customer occupies each of the three domains simultaneously, it is largely the merchant's choosing in which domain the point of contact with the customer occurs.

The Challenge Incumbents Face

If today's retail energy companies hope to move energy consumers to the next higher level, they will have to adopt the new marketing. The need to embrace new marketing is especially critical for the incumbents, which are utility holding companies. Moreover, the current twin challenges of home-market defense and customer accumulation outside the home market will be replaced in five or so years by the even greater challenge of repeat revenues in a highly competitive