Marketing in an electronic age.

Marketing in an Electronic Age.

Robert Buzzell, ed. Harvard Business School Press, $32.95. High Technology editor Bob Haavind delivered a scathing editorial blast earlier this year. American firms, he said, are throwing away their major advantage, that of being domestic enterprises, closer than any foreign firm to the customer and the $4 trillion economy. Haavind may have sounded the alarm too late. Foreign firms increasingly are making use of sophisticated technologies to tap the U.S. markets. An article in a recent Business Week chronicled the approach of Custom Vetement Associates, the New York subsidiary of the French clothing maker, Vestra. Local U.S. retailers such as Saks Fifth Avenue, it said, have been given "terminals made for the French national Videotex system. These link retailers with the main manufacturing operation in Strasbourg. Tailors take key measurements from customers and plug them into a terminal. Every night the data are sent to a central computer in New York and beamed via satellite to France. In the morning, after nine inspectors look at different pieces of data, a computer-controlled laser cutter selects the appropriate material and cuts the garment. The staff of tailors does the finishing touches, and the suit is shipped within four days.'

Such seemingly Buck Rogers electronics and telecommunications links have arrived. The effects of the technology revolution on marketing, selling, distribution, and servicing may be more profound than the highly touted changes in the factory. Long-time Harvard Business School marketing professor Robert Buzzell provides a useful guide to the coming--or arrived--revolution in this collection of articles stemming from a Harvard Business School seventy-fifth anniversary symposium.

Topics range from an examination of pioneering distribution companies such as American Hospital Supply and McKesson Drug to an assessment of media fragmentation and its effect on advertising and marketing decision-making.

Changes in distribution are occurring at an extraordinary pace, altering the traditional way of doing business in every industry. The new buzz term is EDI, for electronic data interchange. EDI provides, say authors Louis Stern and Patrick Kaufmann: "(1) reduced order lead time; (2) higher service levels; (3) fewer out-of-stock situations; (4) improved communications about deals, promotions, price changes, and product availability; (5) lower inventory costs; (6) better accuracy in ordering, shipping, and receiving; and (7) a reduction in labor costs.' Quite a list!

There's not a touch of futurism here. McKesson Drug is a prime case in point. The firm is linked electronically to both its suppliers and customers. The linkage has resulted in a revolutionary array of advantages for both parties. The pharmacist-customer typically reduces the ratio of inventory to sales, thus radically reducing McKesson's inventory and the attendant carrying charges. Service has not deteriorated as a result of a much lower inventory; it has improved.

McKesson itself has experienced even greater benefits. It has been able to reduce the number of its distribution centers from 92 to 56, with no service deterioration. It cut back telephone clerks by 250 (most customers, even small enterprises, have a direct order entry terminal) and reduced the number of buyers, who now use electronic links with suppliers, from 160 to 13.

In addition, McKesson offers its customers a number of so-called "value-added services'--software programs such as "Econoprice,' which provide the retail pharmacist with instantly updated pricing labels, and "Econoclaim,' which speeds third-party health insurance claim processing.

The book chronicles two other effects of the new technology. Cable television's growing intrusion has cut the network share of viewing time from 90 percent in 1970 to 68 percent in 1985. "Fragmentation' and "de-massification' of media is the fast-arriving wave of the future. Companies and their advertisers will be able to--and will be forced to--target their product appeals in a much more selective fashion.

Even product design will be affected profoundly. If, and it looks increasingly likely, two-way cable becomes a big factor in marketing, the market research will take on a whole new look. Ongoing "conversations' with consumers to assess potential new products will be standard fare. Already, a firm's product development team can instantaneously amass finely tuned data at an unheard of pace and then adjust test markets and ad campaigns virtually overnight.

What does it mean? One of Buzzell's experts, Michael Ray of Stanford University, predicts greater "consumer sovereignty.' All selling, including media selling, he says, will become personal, tailored selling; moreover, consumer choic will dramatically increase. Ray is a lonely voice in this thick volume. The rest of the book reads like a primer on increased opportunities for consumer manipulation. Orwell's footfall, only a couple of years later than he projected, is getting louder daily.

The book should be of interest to two disparate audiences. On the one hand, business people who have been slow to exploit the new technology and associated linkups in their marketing and distribution programs and are (1) slipping hopelessly behind aggressive domestic competitors and (2) losing their primary domestic, home-court advantage vis-a-vis foreign competitors. On the other hand, the non-business reader is provided a rare opportunity to peek at the businessperson's perspective on the long-predicted, finally arriving, thoroughly linked-up electronic age.