What is Market Creation? Tsunehiro Fukushima explains Loyalty Marketing in the CX Era, Part 4


What is the concept of market creation? To continue to be chosen by customers, it is important to continue to provide value that other companies cannot match, but even the best value cannot necessarily be maintained forever. As times change, society, markets, and customer lifestyles and values naturally change. It is not uncommon for a product to become obsolete over time, even if it was a spectacular value when it was first introduced to the market. This is especially the case in mature markets where commoditization and information technology have advanced. The concept of market creation is essential for companies to achieve competitive advantage and sustainable development in such business environments.

Marketing in the 21st century is changing from a predatory model to a cost-per-customer model.

Marketing in the 20th century was dominated by ideas and methods based on the expansionary trend of the market. Since the Industrial Revolution, the world’s population had exploded, and the assumption that “markets would expand” was unwavering. At this time, marketing was based on the basic competitive principle of “competition for the taking” i.e., predatory marketing. Marketing was based on how to capture ever-increasing demand faster and in greater numbers than other companies, and how to compete for that ever-increasing demand.

Marketing is an analogy for war. Consider, for example, the word “strategy,” often used in corporate activities, which itself describes planning for war. The same goes for “tactics.” The word “tactic” is used to describe the art of war or the art of fighting. Marketing has long been described in war terms because it has been conceived of as a battle for increasing demand, that is, fighting against an opponent.

However, as we enter the 21st century, the world population will reach a turning point and begin to decline. Markets will find it harder to expand and will shrink. A few tenths of a percent reduction may not sound like much, but it is a big difference. For example, imagine pushing a heavy cart with many loads on it. If the road is flat, you will have no difficulty. But what if it is even slightly downhill? It becomes very difficult to push the cart. Marketing to a growing or declining population, even if only by 0.1%, requires a fundamental change in thinking.

So how should we think about marketing in an era of a declining population? Business activities are recouped through sales, and since sales are the number of customers who purchase from a company x the annual unit price, there is no choice but to increase the unit price per customer in an era of decreasing customer numbers. We need to shift our marketing perspective from one of competing for markets to one on how to increase the unit price.

The concept of increasing the cost per customer can be paraphrased as marketing to nurture customers. Nurturing does not mean educating customers. It means increasing the value we give to each customer and nurturing them. Customers will pay for the benefits, so if a brand wants them to pay twice as much, it must give customers more than twice the benefits.

Loyalty marketing is necessary to increase customer value

What do we need to add more value to our customers? Loyalty marketing, which we have explained in the past, is about strengthening the bond with customers so that they trust the company and its brand and feel comfortable that they will receive value from the company. But there is something even more important. It is to increase the value itself that customers perceive. It is necessary to change customer norms and form new habits. Even if it is the same product, if the brand can present use for it that has not been noticed before, they can increase the number of situations in which customers like the product. This is exactly what market creation is all about: discovering the latent desires of customers without being bound by the conventional wisdom of existing customers or existing businesses and developing usage scenarios and methods of utilization that satisfy those desires.

Since market creation is a completely different concept from the traditional idea of competition, which is to fight and defeat one’s opponent, it may be better described as a marketing plan than a marketing strategy. Of course, if competitors appear in a new market after market creation has been achieved, traditional competitive marketing will also be necessary.

Loyalty marketing and market creation are strongly related: the concept of “deepening” customers to make them into larger customers is loyalty marketing, while the concept of “expanding the surface” is market creation. Dr. Nobuyoshi Umezawa, one of the world’s leading researchers on market creation, has shown in empirical studies that market creation is nearly 100 times more successful than competitive marketing in existing markets. Dr. Chan Kim, who conveys the same concept in different words, also criticizes in his book “Blue Ocean Strategy” that conventional competitive marketing is of no use in market creation. You can now understand that a completely different methodology from competitive marketing is needed to realize market creation.

We use weapons and bombs to fight our opponents, but we do not use weapons and bombs to nurture our customers. You have to plow the fields and spread fertilizer. The same is true of marketing. Market creation and loyalty marketing have the same purpose. Aim to increase opportunities to provide many benefits and make customers happy. This will lead to greater customer growth and loyalty.

Tsunehiro Fukushima will direct your marketing efforts

At transcosmos, we offer marketing strategy proposals in line with the 5A concept advocated by Philip Kotler. For actual proposals, Tsunehiro Fukushima, the commentator of this article, supports loyalty marketing optimized for the digital age. First of all, please tell us your company’s concerns.

Tsunehiro Fukushima
Corporate Executive Officer, transcosmos inc.
Director, Japan Marketing Association
After completing graduate studies at Tokyo Institute of Technology, he joined Ajinomoto Co., Inc. He then worked for GE Capital, Mitsubishi Corporation, Gurunavi, Inc., and Medical Data Vision Co., Ltd., where he served as head of big data business and marketing. His areas of expertise include new business and new product development, brand theory, medical business, and loyalty marketing. At transcosmos, he is in charge of marketing-related business development and is the exclusive provider in Japan of the 5A diagnosis introduced in the book “Kotler’s Marketing 4.0”.