Blog Entry 5: Pricing
Class 10
2/24/2014

We've all heard of the 4 P's, Product, Place, Promotion, and Price. The first 3 focus on marketing costs to the firm. But Price is different; price brings money in. Because of this, it's crucial to get pricing right. Without revenue, you have no value as a company. To show us how to get pricing right, HBR lists 5 important components: 

1. Understanding the value-pricing approach
2. Assessing the product's value to customers
3. Assessing price sensitivity
4. Price customization
5. Integrating price with the other marketing-mix elements


Below I have listed Figure A of our text, the Value-Pricing "Thermometer"

It's important to note that the firm essentially creates value when they offer a product that the consumer perceives as more valuable than the company's COGS for that product. Figuring out the value is key. So how do we do that?

One way to determine objective value is through cost-structure studies. Market researchers tend to like to use true economic value (TEV). To determine perceived value, researchers can use a direct-response survey. These are a good start, but sometimes returns overoptimistic results, as people don't actually have to spend their own money in these situations. 

Another important factor in determining price is sensitivity. Products like airplanes and houses have greater price sensitivity than say deodorant or pencils.Competitive factors also play a role in price sensitivity.  For example, today at CVS, I needed extra strength Mucinex-D. The cashier scanned the barcode and much to my dismay popped up with a $27.99 price tag. Immediately I asked for generic, and she said there wasn't a form yet. Had there have been more competition in the Pseudophedrine marketplace, I would have gone with the cheaper price. 
In addition to the price sensitivity, price customization is important as well. Perceived value can change drastically across different consumers. This can be attributed to:

• Taste
• Importance of performance
• Ability to pay
• Intensity of use
• Category knowledge

By understanding these elements, marketers can better decide how to price their product. 

Finally, we must tie price into the other 3 marketing mix elements. The most important measure to consider is consistency. If you are viewed as a premium product, you can charge a premium price, like Mucinex-D. However, if you are viewed as a value item, your pricing should match. 

That's all for today!

Blog Entry 4: Using Data for Insights, CRM/CLV
Class 6
2/10/2014

Data is a wonderful asset. There are more and more ways to collect, store, and organize data than ever before. Today our challenge lies within using this data in a productive manner. Through Customer Relationship Management (CRM), we can better understand the customer experience and find ways to market to them most effectively. 

In my opinion, no two CRMs need to look the same. A CRM should be built around specific company needs. This can differ based on B2B vs. B2C companies, various industries, company cultures, and technological capabilities. Some of the most import parts of CRM are to have clean data. Companies often have data which is repetitive or incorrect, which can lead to wrong conclusions about customers. 

A lot of CRM has to do with acquiring customers. How can we do that? According to our class discussion, on of the options is to creating a need or want. In the following clip, Don Draper of Mad Men talks about creating "an itch" and using your product as the calamine lotion to soothe that. 

http://www.youtube.com/watch?v=MoKtk8L77-U 

Whatever you are selling, should go beyond the product's obvious utility. If you can create a deeper connection with the product to the consumer, you have a better chance to optimize customer relationships. This can help to increase purchase frequency, increase average transaction size, and increase retention. As your customer relationships strengthen, their lifetime value, given by the CLV formula to the right increases:

My favorite part about this module is that everything is connected. Precise and accurate data is the foundation for a healthy CRM system. You can creatively use the data to help retain customers and strengthen your CLV. As a final parting gift, this TED talk by David McCandless on data visualization sums up how you can make an impact with today's technology.

http://www.ted.com/talks/david_mccandless_the_beauty_of_data_visualization.html

Blog Entry #3: Segmentation, Target, Positioning, and Differentiation

Class 5
2/2/2014

During class this week, four main topics were covered: Segmentation, Target, Positioning, and Differentiation. Our first task before class on Monday was to watch a video by Malcolm Gladwell and read the HBR article Market Segmentation, Target Market Selection, and Positioning. My takeaways from both the article and video are as follows:


Malcom Gladwell: Choice, Happiness, and Spaghetti Sauce

Howard Moscowicz was looking for the perfect pepsi, but he should have been looking for the perfect “pepsis.” He made a name for himself though, in Campbell’s soup, specifically with Prego. Prego was struggling to compete against Ragu, a lesser spaghetti sauce. He made 45 varieties of spaghetti sauce. He took all of these sauces, tested them out all over the country and had people rate their feelings on spaghetti sauce. There are people who like plain sauce, extra chunky sauce, and spicy sauce.

1. He fundamentally changed the way food industry makes people happy. He’s made the realization that people don’t know what they want.
2. He also introduced the notion of horizontal segmentation. In terms of mustard, there are only different kinds of mustard that suite different kinds of people. There is no good mustard and bad mustard hierarchy.
3. Howard also confronted the notion of the platonic dish. There is no “one right way” to make a dish. The “authentic way” is not necessarily “the right way."
4. In embracing the diversity of human beings, we will find a sure way to happiness.

I greatly enjoyed this video!

Market Segmentation, Target Market Selection, and Positioning
This article was fairly straightforward and introduced the concepts of market segmentation, target market selection, and positioning. Market Segmentation helps divide consumers into groups of potential customers based on their behaviors and needs. The segments should clearly differ from one another but also show a great deal of homogeneity as well. 

To exemplify segmentation, the article used nonprescription drugs, and explained how one group chose gentleness, while another chose effectiveness. I think we can use the idea of segmentation based on usage for sunscreen. Sunscreen can be evaluated along three different dimensions: sunblockage, gentleness and scent. By looking at the consumer, we can tell what kind product to take to market to meet their needs. For example: for a baby, a mother will be most concerned with blocking the sun and keeping their child from breaking out. For people without sensitive skin, they may opt for the best smelling lotion that still blocks the sun. For a teenager trying to get their mom to stop bothering them about lotion, they may choose one that won't cause breakouts and smells nice. 

After we've segmented the market, we need to select which market is best. The objective should be to maximize firm profit. To do so, we must understand differentiation which can be done through data collection. Once the target market has been selected, the product has to get there. A comprehensive understanding of positioning can help complete the sales cycle. Moscowicz would be a good person to consult here!

That sums up this week's post! Stay tuned for an in depth look on the Fashion Channel Case coming up soon.

Marketing Myopia, a Reflection
Classes 3-4
1/22/2014


After further analyzing Levitt’s work and writing my essay, I have developed a modern day example of Marketing Myopia.


Two companies, Blockbuster and Redbox, have been competing fiercely in the DVD, game, and rental marketplace in recent years. Their individual focuses on “customers” versus “products” complement Levitt’s theory well.
Blockbuster focused their attention on movie and game rentals. They were consumed with how to sell the best product possible, not how to please the customer. Problems such as late fees, location, and the selection process greatly hurt Blockbuster, and in turn created an opportunity for Redbox to enter the marketplace.


When Redbox entered the market in 2002, their focus was simple: “focus on new releases, don't make anyone buy a membership, and make the price as low as it'll go” (www.redbox.com/history). By aggressively cutting the price and not the cost, focusing on the consumer, and innovating a new rental experience, Redbox (with the help of Netflix as well) eventually drove Blockbuster out of business.


Redbox recognized that DVD rentals were more than a physical product to the consumer, they were convenience. Now 68% of Americans live within a five minute drive to a Redbox location.

I’m interested to see where the DVD rental business goes from here. As a consumer, my chief problem with Redbox is that I still have to physically drive to drop off my DVDs (call me a lazy millennial, but it’s the truth). Currently Redbox has the upper hand in movie selections (over Netflix, Xfinity, AT&T, etc.), so I believe they have the opportunity to invent a working website similar to Netflix where rental is done at the touch of a button and streamed onto the TV, laptop, etc.

Marketing Myopia

Class 2

1/20/2014

For my first blog entry, I will be speaking about Marketing Myopia, and the effect it has had on the business world for the last several years.

So, what is "myopia" exactly? 

In class we talked about the formal definition, which was a condition in which the visual images come to a focus in front of the retina of the eye resulting especially in defective vision of distant objects, aka nearsightedness.

For our practical use, we’ll say it’s the inability of management to exercise foresight.

Some examples might include:

Railroads and Hollywood. Owners of railroads thought they were in the “railroad business” not the “transportation business.” A similar idea comes from Hollywood. People used to think they were only in the “movie industry” when in reality they were in the “entertainment industry.”

Modern Parallels? 

Home landline vs. cell phone. Sony thinking of themselves as just the record or cd company, when they should have been thinking about mp3s. Best Buy and Macy’s were all brick and mortar until eventually they absolutely had to go to the web.

The bottom line to all of these examples is that businesses, specifically upper level management, needs to be CUSTOMER focused, and not PRODUCT focused.

So why do companies miss the mark on this?

They use the notion of, “don’t break it if it’s not broken.” They also are fooled by a few myths:

1.       Population Myth: The belief that profits are assured by an expanding and more affluent population

2.      Product Improvement Myth: You change the same product just a little bit but aren’t giving the people what they want. You can make small improvements but aren’t really dynamically changing it for the better.

Seabring example

Henry Ford and Mass Production: His real genius was marketing. We think he was able to cut his selling price and therefore sell millions of $500 cars because his invention of the assembly line had reduced the costs. Actually he invented the assembly line because he had concluded that at $500 he could sell millions of cars. Mass production was the result, not the cause, of his low prices.

Thus, we should debunk another myth

3.      Cost Reduction Myth: The belief that profitable margins will continue to grow based on decreasing costs

That sums up my thoughts for now! Stay tuned for more as I finish up my critique on Theodore Levitt’s essay and more modern day examples on Marketing Myopia.