I came across an article that discusses issues consumers in Massachusetts are having receiving their government-promised rebates for energy efficient products. The story reminded me of the example Professor Neidermier used in his Pricing lecture when he explained that it is hard to convince consumers to purchase products that use value-based pricing, such as new energy-efficient lightbulbs that are priced based on the economic value to the customer. Though the new lightbulbs are more energy efficient and will probably save the consumer money in the end, most consumers can not justify spending more than double a normal light bulb for the new ones.
This problem arises frequently in our increasingly environmentally-conscious society: products that are "greener" are generally more expensive. Though it is admirable that the government has attempted to step in and help change consumer patterns by offering rebates on "green" appliances, clearly the rebate system is flawed. If the government is truly committed to encouraging consumers to purchase more environmentally-friendly products, it should try a different tactic and subsidize the production and distribution of these products so they are no more expensive than the older, less environmentally-friendly products. Hopefully, once consumers become attached to the "green" products and recognize their benefits (the new light bulbs, for example, are last much longer than the old ones) the government could slowly remove itself from the equation and the price of the products could steadily increase.
Friday, April 23, 2010
To Brand or To Extend?
To Brand or To Extend?
Snapple, Gatorade, and Coca-Cola; three popular beverage drinks with brand value that numbers in the millions if not billions. Organizations strive to find products like these which can bring in not only significant profits, but a sustained competitive advantage. A simple way to test how valuable these brands are; compare the likelihood of you to buy a can labeled Coca-Cola and a can labeled Soda.
While it is great to introduce a new bestseller brand, can it be as valuable to sell an associated or extended brand? Can Coca-Cola sell a version of itself that will also make millions of dollar? Here is a big surprise for 2009, 93% of the best-selling new brands were not “new brands” but “extended brands”. Do you remember Bud Light Lime Beer, Campbell's Select Harvest Soup, and Dreyer's/Edy's Fun Flavors Ice Cream? These products were some of the industry leaders for product revenue [for newly introduced products] and they are certainly not unknown names to the consumer.
Studies from the Information Research Institute supports these findings as 46% of firms prefer to use extended brands for new products in order to capitalize on brand equity [and reduce advertisement costs to build product awareness]. Very much like “replacement R&D” in SABRE, organizations are touting this strategy with an additional knowledge in mind; consumers value health-conscious products and convenience-related products.
While “to brand or to extend” is the question, any good marketing plan must not only be strategically sound, but environmentally as well. A strategy that does not match the environment is bound to fail.
http://www.adweek.com/aw/content_display/news/client/e3i121152486b7856cddad1cfc160daf2e5
Snapple, Gatorade, and Coca-Cola; three popular beverage drinks with brand value that numbers in the millions if not billions. Organizations strive to find products like these which can bring in not only significant profits, but a sustained competitive advantage. A simple way to test how valuable these brands are; compare the likelihood of you to buy a can labeled Coca-Cola and a can labeled Soda.
While it is great to introduce a new bestseller brand, can it be as valuable to sell an associated or extended brand? Can Coca-Cola sell a version of itself that will also make millions of dollar? Here is a big surprise for 2009, 93% of the best-selling new brands were not “new brands” but “extended brands”. Do you remember Bud Light Lime Beer, Campbell's Select Harvest Soup, and Dreyer's/Edy's Fun Flavors Ice Cream? These products were some of the industry leaders for product revenue [for newly introduced products] and they are certainly not unknown names to the consumer.
Studies from the Information Research Institute supports these findings as 46% of firms prefer to use extended brands for new products in order to capitalize on brand equity [and reduce advertisement costs to build product awareness]. Very much like “replacement R&D” in SABRE, organizations are touting this strategy with an additional knowledge in mind; consumers value health-conscious products and convenience-related products.
While “to brand or to extend” is the question, any good marketing plan must not only be strategically sound, but environmentally as well. A strategy that does not match the environment is bound to fail.
http://www.adweek.com/aw/content_display/news/client/e3i121152486b7856cddad1cfc160daf2e5
Macy’s and Sears at Prom?
Macy’s and Sears at Prom?
Social media and social networks have become invaluable marketing tools used to attract a younger clientele to the products and services of an organization. Sites such as Facebook, Twitter, and MySpace have grown over the years as mainstream areas for trend-breaking ideas and styles. Especially for the younger population, these sites are used on a daily basis to chat with friends, post on walls, and receive event invitations.
Sears with Ultimate Prom Experience and Macy’s with Prom 2010 Tab on its Fan Page, these two organizations are becoming pioneers in the social network area of advertisement and promotion. Through the use of integrated marketing communications, there organizations are hoping to use Prom Advices to drive Prom Sales. More or less, these sites begin with the pretext of offering useful information then promotes the products of these organizations throughout the site.
In addition, both organizations use sweepstakes and discounts to further incentive the consumer beyond the more personalized atmosphere that is already a hallmark of these two sites. At the minimum, Sears and Macy’s hope that these social networks can bolster their brand awareness among teenagers, so that future purchases for other products may be diverted to their stores.
Of course, like you may have guessed, this is but only part of Sears and Macy’s integrated marketing communications plan. Print ads and magazine ads are still very much an integral part of their marketing mix.
http://www.adweek.com/aw/content_display/news/client/e3i9e0f4d3075c501ab9dee525ae8f2f6d4
Social media and social networks have become invaluable marketing tools used to attract a younger clientele to the products and services of an organization. Sites such as Facebook, Twitter, and MySpace have grown over the years as mainstream areas for trend-breaking ideas and styles. Especially for the younger population, these sites are used on a daily basis to chat with friends, post on walls, and receive event invitations.
Sears with Ultimate Prom Experience and Macy’s with Prom 2010 Tab on its Fan Page, these two organizations are becoming pioneers in the social network area of advertisement and promotion. Through the use of integrated marketing communications, there organizations are hoping to use Prom Advices to drive Prom Sales. More or less, these sites begin with the pretext of offering useful information then promotes the products of these organizations throughout the site.
In addition, both organizations use sweepstakes and discounts to further incentive the consumer beyond the more personalized atmosphere that is already a hallmark of these two sites. At the minimum, Sears and Macy’s hope that these social networks can bolster their brand awareness among teenagers, so that future purchases for other products may be diverted to their stores.
Of course, like you may have guessed, this is but only part of Sears and Macy’s integrated marketing communications plan. Print ads and magazine ads are still very much an integral part of their marketing mix.
http://www.adweek.com/aw/content_display/news/client/e3i9e0f4d3075c501ab9dee525ae8f2f6d4
Thursday, April 22, 2010
Does The Nice Company Finish Last?
Does The Nice Company Finish Last?
Corporate social responsibility [CSR] has always been a touchy subject in marketing. Is money spent on CSR worthwhile? Is the publicity valuable? Does it enhance shareholder wealth?
Research again and again has shown the publicity is more valuable than sales promotion and product advertisement. People view publicity with a level of authenticity that cannot be matched by other marketing mediums. But people have always been skeptical about how CSR can be incorporated in this marketing matrix to enhance brand equity.
CSR has been viewed as an unnecessary component of an organization by some because the goal of an organization is to make a profit. Ideally, the organization should achieve this objective by ethical and legal means but the only requirement is the latter. Because CSR is viewed as the job of the government, as the government would know best how to allocate money to achieve a socially optimum level of utility, opponents of CSR see it as wasteful of organizations.
This view, though rational, has potential flaws. CSR can be compatible with “bottom-line” ideology because CSR can augment the product perception of consumers. Consumers pay for quality, and a company that has positive publicity from CSR, can make statements that are readily more trusted by consumers. As such, these companies with CSR can spend less on advertisement, make more profit, and retain loyal customers.
Here is the solid evidence:
*70% of consumers are willing to pay a premium for products from socially responsible companies*
*28% of consumers are willing to pay at least $10 more for products from socially responsible companies*
http://www.adweek.com/aw/content_display/news/strategy/e3id9db7bed8e9402cbfb822466e4855c09
Corporate social responsibility [CSR] has always been a touchy subject in marketing. Is money spent on CSR worthwhile? Is the publicity valuable? Does it enhance shareholder wealth?
Research again and again has shown the publicity is more valuable than sales promotion and product advertisement. People view publicity with a level of authenticity that cannot be matched by other marketing mediums. But people have always been skeptical about how CSR can be incorporated in this marketing matrix to enhance brand equity.
CSR has been viewed as an unnecessary component of an organization by some because the goal of an organization is to make a profit. Ideally, the organization should achieve this objective by ethical and legal means but the only requirement is the latter. Because CSR is viewed as the job of the government, as the government would know best how to allocate money to achieve a socially optimum level of utility, opponents of CSR see it as wasteful of organizations.
This view, though rational, has potential flaws. CSR can be compatible with “bottom-line” ideology because CSR can augment the product perception of consumers. Consumers pay for quality, and a company that has positive publicity from CSR, can make statements that are readily more trusted by consumers. As such, these companies with CSR can spend less on advertisement, make more profit, and retain loyal customers.
Here is the solid evidence:
*70% of consumers are willing to pay a premium for products from socially responsible companies*
*28% of consumers are willing to pay at least $10 more for products from socially responsible companies*
http://www.adweek.com/aw/content_display/news/strategy/e3id9db7bed8e9402cbfb822466e4855c09
Facebook "Like" Buttons
The news by Mark Zuckerberg and Facebook to add billions of “Like” buttons on sites all across the internet is going to really change how firms advertise their products on the internet. Word of mouth and personal recommendations are the strongest forms of advertisement, and these buttons, in effect, allow internet users to personally recommend products to all of their friends on Facebook.
Right now, to my knowledge, the buttons are only featured on sites like CNN.com, the Wall Street Journal, and Yelp, but I can imagine that all other internet retail sites, like Amazon, will soon add this button so that their users can recommend products to all of their friends. I can even see myself clicking the “Like” button when I see an article or product that I like – in the past I rarely took the time to post any links to my Facebook wall to share with friends.
Because of the increasing connectivity between what people read online and what people recommend to their online friends, it means that both good press and bad press will spread even more rapidly over the internet.
With these new Facebook buttons integrated throughout the internet, firms and marketers will have to keep an even closer eye out for what their customers “Like” and recommend to their friends.
Better than the Wii?
Better than the Wii?
The Wii has been the *Golden Standard* in video game entertainment because of its motion sensor devices that is a technological superiority to the joysticks and buttons of the past. “Project Natal”, a potential challenger to this dominance, will be launch by Microsoft later on in the year to offer an innovative and virtual experience sure to excite gamers.
However, this breakthrough is both a homerun for marketing and gaming. “Project Natal” is a motion recognition device attached to Xbox 360s that will enable the creation of an interactive environment. Not only will “Project Natal” recognize your movements, which will be translated to the game, but it will recognize your features, which will be translated to marketers. Imagine the “Project Natal” cameras which see an iPod in your room, and then the information is transferred to marketers. Minutes later, an ad will pop up in the game which will display the iPad, a product that you will likely be interested in purchasing.
“Project Natal” is more or less a technique that could strengthen target marketing which is invaluable to marketers to persuade consumers to complete a purchase. Its profit potential may have legal implications [invasion of privacy], but its advertisement effectiveness should be a definite consideration for advertising agencies.
http://www.adweek.com/aw/content_display/community/columns/other-columns/e3i9d00b780a7553c2191ffbdf21f9ace0c
The Wii has been the *Golden Standard* in video game entertainment because of its motion sensor devices that is a technological superiority to the joysticks and buttons of the past. “Project Natal”, a potential challenger to this dominance, will be launch by Microsoft later on in the year to offer an innovative and virtual experience sure to excite gamers.
However, this breakthrough is both a homerun for marketing and gaming. “Project Natal” is a motion recognition device attached to Xbox 360s that will enable the creation of an interactive environment. Not only will “Project Natal” recognize your movements, which will be translated to the game, but it will recognize your features, which will be translated to marketers. Imagine the “Project Natal” cameras which see an iPod in your room, and then the information is transferred to marketers. Minutes later, an ad will pop up in the game which will display the iPad, a product that you will likely be interested in purchasing.
“Project Natal” is more or less a technique that could strengthen target marketing which is invaluable to marketers to persuade consumers to complete a purchase. Its profit potential may have legal implications [invasion of privacy], but its advertisement effectiveness should be a definite consideration for advertising agencies.
http://www.adweek.com/aw/content_display/community/columns/other-columns/e3i9d00b780a7553c2191ffbdf21f9ace0c
Pricing in the Music Industry
One of the industries that is facing some of the toughest marketing decisions right now is the music industry. Over the past few years, record sales have plummeted, and illegal downloading and music piracy have been blamed. It's tough enough to sell physical copies of CDs in music stores when the same music can be downloaded in iTunes without having to leave the comfort of home. However, it's even harder to convince people to pay for a download when the same songs can be downloaded for free from file sharing websites.
An article I read the other day brought up another reason the music industry may be suffering. The author argues that the ability to download (and pay for) individual songs may be more to blame for the drop in overall sales. In lecture, we discussed the merits of price bundling. The music industry used to price solely by bundling, charging a certain amount for a CD with multiple songs. Now that it is so easy to download individual songs, people are rarely buying entire albums, and they are spending less as a result. I would also argue that this makes it more difficult to develop a fan base and following for an artist. For example, someone that hears Kesha's "Tik Tok" may like the song and choose to buy it, but it's unlikely that they will buy her entire CD. They wouldn't be likely to want to pay to attend her concert if they don't know more than one of her songs, etc.
You can't deny that piracy has hurt the record industry, but it may not be the only reason for its demise. The move away from price bundling may be another reason, but there are also a lot of people who have purchased songs for $0.99 that would not have paid ten times that for a full CD if it were the only option.
I'm not sure what the next move for the industry should be. Universal Music Group recently announced that they will be lowering prices on all of their physical CDs, but I'm not sure if this will make a significant difference. At what price will people be willing to buy a physical CD rather than downloading it (illegally) for free or purchasing only the few songs they know and like? Is there any such a price? What do you think?
(For those who are interested, here is a link to the post I read: http://torrentfreak.com/is-piracy-really-killing-the-music-industry-no-100418/ and to an article about UMG's pricing announcement: http://www.billboard.biz/bbbiz/content_display/industry/e3i56ed42b9a46f8554e2671afccecca01b)
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