The razor/blade business model has powered many profitable companies — from Gillette to Kodak to HP — all have taken little to no profit on equipment but made healthy profits on the blades (literally or film, or printer cartridges in the cases of Kodak and HP).
Keurig’s single-cup coffee brewing system has become very popular. Keurig makes money selling machines, its own Green Mountain Coffee, and licensing fees from other coffee sellers who use its K-Cups. Patents recently expired on K-Cup technology — so many competitors are offering the coffee without paying license fees to Keurig. So the new coffee makers with DRM (digital rights management) technology was designed to keep Keurig’s profits flowing. Unfortunately, customers are not happy. In this Verge article, “Keurig’s attempt to ‘DRM’ its coffee cups totally backfired” (February 5, 2015) you can read more about Keurig’s blunder. Of course it is not clear that, as disastrous as this may be, Keurig had other choices if it was seeking to maximize profits. For now though, profits are down and customer outrage is high.
The article might be used when you talk about patent protection. It also raises interesting ethical questions. It might also develop an interesting discussion around business models and strategy. For example, will complaints about Keurig’s DRM eventually fade away? Is it profitable enough of a strategy to weather the complaints?
Many of the most creative campaigns are for consumer brands — so I really enjoy seeing a B2B brand do something creative. Caterpillar (the high quality, premium priced tractor and heavy equipment maker) has been running a campaign for about a year now: “When you choose Cat®, you get what you pay for — durable and reliable equipment, and long-lasting relationships. Discover what we’re built for…” They have released a series of five (so far) clever videos that demonstrate their products in action. The videos are great two minute stories. Any one of the videos could be used to motivate topics as diverse as B2B, product quality, premium pricing, promotion — even international. One of my favorites is this play on the old game of Jenga but using 27 blocks that weight 600 pounds each:
Where does the FTC draw the line on misleading advertising. We have a recent example that you can show in class. Often such ads are pulled, but Nissan’s misleading ad is still available:
You might ask your students what might make this ad misleading. It turns out at least two factors contributed to the FTC’s decision. First, the truck couldn’t actually perform as shown in the ad. Minor issue right? Cables hidden in the sand actually pull the dune buggy up the dune. Second, camera angles were played with to make the dune steeper that it really was. While Nissan claimed the video was meant to portray a “fantasy scenario” — the FTC also felt that making it look like a YouTube video was also misleading. The ad does include a small disclaimer “Fictionalization. Do not attempt” which runs in small type in the first three seconds of the ad. This article, “FTC Says ‘No Way’ to Nissan Frontier – Pushing Dune Buggy Ad” (Adweek, January 23, 2014) notes that advertising agencies should know better and can be held liable. See more at the FTC’s website. We have also posted this at Learn the 4 Ps.
This video might be shown and discussed when you cover legal or ethical issues in advertising.
We don’t usually think about insurance and reinsurance markets — but risk management is an important behind the scenes, B2B business. Seeking to increase brand awareness, the Willis Group out of London, got into sponsorship . The resulting “Willis Resilience Expedition” (article at B2B Marketing, December 23, 2014) shows that careful planning can generate significant publicity. While this case study provides some details about the campaign and the media results, it is unclear what it cost. Consequently it is not possible to know the efficiency of the approach — but the impressions generated appear to be pretty significant.
This is a nice example of publicity in a non-traditional B2B market.
I read Tom Peters now classic In Search of Excellence shortly after I graduated from undergrad and started working in sales for Eastman Kodak. The book had a profound effect on me. I also remember that I used to show a Tom Peters video in class — one where he passionately walked around a stage sweating like a boxer in a ring. Tom is a bit older these days, but he is still a wise man. While much of this McKinsey Quarterly article (“Tom Peters on leading the 21st century organization ” September 2014) explains his views on leadership, there are also parts relevant to marketing. There is some discussion of strategy implementation. In chapter 8 we have a box highlighting the value of design — which Peters discusses here. And what he also talks about is the importance of “living” like your brand.
The economic recovery in the United States has not been the same across the income spectrum. While the wealthiest 5% are doing quite well, those in the traditional “middle class” have not seen similar gains. This Wall Street Journal article “How a Two-Tier Economy Is Reshaping the U.S. Marketplace” (January 29 2015, non-subscribers click here) points out that those at the top 5% of the income scale spent an inflation adjusted 12% more from 2009 to 2012. During that same time period, the bottom 95% spent 1% less. It also reports the top 5% now account for 30% of all spending — up from 23% just twenty years earlier. The article details some of the implications for sellers of cars, houses, and beer. Hint, apparently that $64,000 BMW M4 (see inset photo) is a hot seller.
Similar income distribution exists in China — and this has influenced the smartphone market there. Another Wall Street Journal article “In Smartphone Market, It’s Luxury or Rock Bottom” (February 1, non-subscribers click here) which describes the Chinese market, where Apple’s iPhone stands alone as a “luxury” and brands like Xiaomi (at on third the price of an iPhone with similar technical specs) dominate the low end.
This story has implications for when you cover segmentation and targeting (many of these firms are now targeting premium or budget — not the middle any longer) or consumer behavior.
Hey it is storage — cabinets, armoirs, chests of drawers — how can you make that appealing. IKEA tries (and I believe succeeds) in this cinematic and stunning ad is part of IKEA’s “Wonderful Everyday” campaign.
This short (1:26) video clip can bring Steve Jobs to your class to talk about when market research will and will not be helpful. Showing this could lead to a broader discussion about whether and when Steve Jobs is right and how marketing managers might generate those breakthrough ideas.
There is growing evidence about the best ways to learn and how to learn more efficiently. In anticipation of the next revision of Essentials of Marketing and tied to my “flipping the classroom” this semester, I have been looking through some of the academic literature in this area. In that search I came upon a review article “Strengthening the Student Toolbox” (American Educator, Fall 2013 – for a more “academic” treatment of the same research, see Dunlosky et al., 2013, “Improving Students’ Learning Techniques: Promising Directions From Cognitive and Educational Psychology” Psychological Science in the Public Interest) that summarizes the research in this area. I found the paper very interesting — and a pretty straightforward read. The study reviews 10 prominent learning strategies — and identifies which actually work.
It came as no surprise to me that practice testing and distributed practice (see the article for a detailed explanation) are clearly the most effective strategies. That adds to growing evidence that tools like McGraw-Hill’s SmartBook and LearnSmartcan help students learn better and more efficiently. Full disclosure, my marketing textbooks Basic Marketingand Essentials of Marketing use this adaptive learning technology. The constant testing and adaptive learning help student learn. We have a related post at Learn the 4 Pswhich offers some of these tips to students.
Have you utilized any adaptive learning technology? Do you have any tricks to implement distributed practice for your students?