Against the Odds – The Marketing Dilemma of Physical Products in an Increasingly Virtual World
Klaus Oestreicher

Abstract:
Objectives:
The overarching battle between the physical place and the virtual space is part of an intensive discussion. Much related literature addresses exemplarily the dilemma of the global Home Entertainment Industry and its struggle to compete with its physical product of optical discs against virtual services of dematerialised downloads. With regard to effects on an increasing number of further industries in the near future an additional question is, how marketing strategies and tactics in a declining physical market place may be sustainable and how effective applied frameworks, which were created for markets of different rules, can fight against increasing emergent online developments.The underlying long-term study this paper presents in some excerpts researches the Home Entertainment Industry and intends to find explanations, why this industry has failed so far to provide sustainable answers, which may be helpful for other industries, too, to recognise underlying patterns being advantageous to develop a sustainable, future-oriented marketing strategy. Within the objectives of this paper the marketing mix is exemplarily challenged. Created several decades ago, before ICT-based opportunities changed the environment of market activities, it is still widely used in practice, but academically critically discussed. The marketing mix refers much to transaction, which as the criticism highlights, neglects the shift to relationships being the basis for successful customer lifetime value and long-term organisational advantages. One of the implicit challenges is that the virtual space threatens the P, place, directly. The music industry’s professional body IFPI recommended its members in 2009 to reflect on a strategy of access instead of physical sales: Virtual dissemination vs. physical distribution / unlimited access instead of limited product offer. This example gives reason to question, whether a number of marketing frameworks can still have the same value in such a changed world.

Methods:
The research adopted the strategy of a case study using grounded theory. It is a single case study, based on one industry, the Home Entertainment Industry. It is undertaken in qualitative form and follows an inductive approach. Case study and grounded theory are appropriate to find explanations for the contribution of theory development. By this research strategy the case can be underpinned by rich data, which does not only rely on academic theories and findings alone, but studies developments happening “out there” in the real life and the interaction between agents and occurrences.

Results:
The results of the research provide evidence that the Home Entertainment Industry is unlikely to be able to survive in its present structure, when it relies on its physical product as the major focus of its established business model. Alienating market linkages caused by shifting consumer behaviour, which is influenced by postmodern trends, weaken this industry’s relations with its hyper-consumers. The postulate of consumer culture theory that the link (social experiences and sharing) is more important than the thing (product) allows explanations, that a physical product does not necessarily support the tribal affiliation. Further, the easiness of access, the decisively increased availability of content, beyond institutional control, offers rich experiences for consumers, which are not possible by an industrially pre-determined and filtered product offer. The facilitation of access and direct consumption do a job for consumers, which was impossible before the times of ICT. Hence, the proposition is that as long as this industry continues to emphasise the physical product it will endanger its existence by becoming obsolete. A consequence, which may be shared by other industries soon.
The marketing mix in its present structure helps physical products and distribution much better, than virtual services. It is therefore suggested that the marketing mix needs to be reviewed. A future marketing mix should consider that transaction (effect) is increasingly subject to relationships (cause), which the postmodern consumer frequently favours. The place will often be replaced by space as virtual distribution augments. Price is likely to follow more innovative models, which may find some explanation by the model of 0-economy and
similar innovative market linkages. In the consumers’ desire of social links promotion is expected to find improved opportunities in an environment of facebook and the like. Overall, the product becomes for specific industries a service. Similar findings can be stated for the further three established Ps.

Conclusion:
It is too early to formulate a new theory based on these findings, since the focus of the research in one industry is too narrow and presently only a few other products can be dematerialised as easily as music, movies or games. But identified evidence supports the assumption that with growing technological advantages, such as e-books and 3-D laser printers, other industries will find themselves in similar threatening environments challenging their business models, structure and existence.The marketing mix’s present structure should be reconsidered since it is at the risk of reduced relevance for postmodern requirements in a more and more ICT-dependent world. This should not be part of a P-extension as various academics suggest, but by a clear focus on the new orientation, which respects tactically the marketing mix’s original intentions of organisational marketing strategic guidance in the market place.

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