teachthe4ps.com - For instructors of marketing.

Internet entrepreneurs in Vietnam are figuring out how to overcome challenges posed by the country’s infrastructure.  Among Vietnam’s 88 million people, there is growing interest in the convenience of online shopping.  There are now more than two dozen Vietnamese sites copying Groupon’s “deal-of-the-day” concept.  These companies adapted the strategy used in more developed countries.  So for example, few Vietnamese consumers have credit cards or PayPal style accounts.  To over come this, at least one of the Groupon copycats NhomMua, relies on a team of more than 100 moped-driving couriers that deliver vouchers directly to consumers and then collect cash.  Read more in this Bloomberg Businessweek article, “Vietnam’s Dot-Com Boom” (January 19, 2012).  Also posted at Learn the 4 Ps.

The examples here might work well when you cover Place, retail, Price, or Promotion and want to provide an example of how a concept is adapted in international markets.

Remember when Apple was known for high prices.  That is no longer the case.  This article provides a nice example that will link to your discussion of skimming and penetration price policies.  In the old days Apple was a niche player known for high prices.  Now it owns some markets (tablet computers, smartphones, portable music players) and benefits from economies of scale.  The company offers even lower prices by keeping older products in its line and offering them for lower prices.  It will be interesting to see how they respond to the new Kindle Fire.  Read more at “Apple’s Lower Prices Are All Part of the Plan” (New York Times, October 23, 2011).  Also posted at Learn the 4 Ps.

It seems that it will only be a matter of time before our cell phones also act as our wallets.  They can already act as our phone, videophone, e-mailbox, newspaper, handheld gaming device, music player, GPS, camera, video recorder…  Will it change a baby’s diaper some day?  That’s an app I haven’t seen yet.

Sorry, I digressed.  Katie Boehret wrote a Wall Street Journal review of a new Android smartphone app, “Google Mobile App Aims to Turn Phones Into Wallets” (September 21, 2011, non-subscribers may need to click here).  It might be interesting to discuss the implications of this technology on consumer shopping behavior.  The article doesn’t really address that topic, but I think my students could come up with some interesting ideas — so I posted it with some questions over at Learn the 4 Ps.

The business side of online games is quite fascinating.  In our text book, the segmentation chapter opens with a case highlighting how Nintendo grew the gaming market by designing products for new gamers.  The easy-to-use Nintendo DS hand-held and the Wii console targeted girls and senior citizens with easy to learn, fun games.  Zynga did Nintendo one better when it developed online games for Facebook.  Its FarmVille soared in popularity with 10% of all Facebook users growing virtual crops online.

This example is a bit complicated, but it demonstrates a number of important marketing concepts:

• Price and the freemium business model.  Freemium refers to a business model where most customers use a product for free, while a few power users cover costs.  More than 95% of Zynga’s 150 million monthly visitors pay nothing to play its games.  The other 5% pay hundreds and even thousands a year for virtual products that enhance their gaming experience.  For example, $5 might get you a chicken in FarmVille, a skyscraper in CityVille, or an anglerfish in FishVille.  Of course they love to sell these low cost virtual products…
• Fixed and variable costs.  There are minimal fixed costs for creating a new anglerfish, but the variable cost of producing hundreds of thousands of them is very small.  Almost no variable cost.Segmentation and targeting.  In this post at TechCruch (“Who Spends The Most Money In Freemium Games?” September 8, 2011), you can see by age group, who uses mobile freemium games — and who “spends”.  Not surprisingly, while more than half of users are under age 24 — this younger market contributes just 21% of the spending.  Consequently, most of the action in online games targets an older demographic.  And of course a little analytics can identify what products encourage spending…
• Marketing research.   In “Virtual Products, Real Profits,” (Wall Street Journal, September 9, 2011, non-subscribers click here), Zynga’s president of data-analytics says, “We’re an analytics company masquerading as a games company.”  Zynga analyzes game player behavior and adapts the game to get players to play longer or spend more.  For example, after finding that FishVille players bought the translucent anglerfish much more often than other sea creatures, they created more variations on the anglerfish.

I don’t play these games — but I have Facebook friends who love them.  Some of your students might relate to these examples.  Also posted at Learn the 4 Ps.

We all teach price sensitivity (some of you may prefer the economics term price elasticity) when we cover Price.  In response to our depressed economy, most consumers have become much more price sensitive in the last few years.  One market segments has been almost immune to this trend — luxury shoppers.  This article in the The New York Times, “Even Marked Up, Luxury Goods Fly Off Shelves” (August 3, 2011) offers some great examples — Mercedes-Benz just had its best July in the last five years and “Neiman Marcus has sold out in almost every size of Christian Louboutin “Bianca” platform pumps, at $775 a pair” (right click my image and copy/paste to your slides).  The article also includes a chart that shows trends in U.S. luxury spending over the last few years.

This might be fun stuff to talk about you cover consumer behavior, the external market environment (economic environment – kind of a counter-example), pricing or price sensitivity.

Wal-Mart has long been positioned as the low-price leader.  Leveraging its supply chain and logistics system, competitors couldn’t match Wal-Mart’s cost structure.  Now at least some consumers perceptions are changing.  In this Wall Street Journal article, “Wal-Mart Loses Edge” (August 16, 2011, non-subscribers may need to click here) we read about recent consumer surveys that show the retailer losing its “lowest price” positioning.  In one survey of 1500 Wal-Mart shoppers, “86% no longer thought it had the lowest prices” while in another survey the number was 60%.  Whichever the number, this is a big problem for a retailer that has long enjoyed a well-deserved reputation for low prices.  While Wal-Mart’s perception of value fades, stores like Dollar Tree are seeing their perception of value rise.

While fewer consumers perceive Wal-Mart as the low price leader, what is the reality?  The article reports mixed objective evidence.  In comparisons with Target, with one study by Morgan Stanley showing that in Chicago Target is about even with Wal-Mart (though Wal-Mart was more than 20% lower priced than Safeway and Supervalu) and another study by Goldman Sachs showing Wal-Mart 6.2% lower than Target overall.

This case study could provide interesting fodder when you discuss positioning.  We define positioning in our books as “how consumers think about proposed or present brands in a market.”  You can remind students that perception is what counts among consumers.

You might recall that a few years ago Wal-Mart changed its tagline from “Always Low Prices – Always” to “Save Money.  Live Better.”  Wal-Mart wanted to appeal to a more upscale crowd and develop a greener image.  Perhaps this change de-emphasized the previous price positioning.  The new dual positioning may not be as clear to consumers — opening opportunities for dollar stores to take the lowest price mantel from Wal-Mart.

This opens the door to a good discussion with your students.  Asking them:  What should Wal-Mart do now?  Change its positioning?  Or try to re-gain the low price position?  Given its history and strengths, it seems clear to me that the retailer needs to regain the consumer perception of value.  Perhaps there is a need for more advertising?  Or should the store revisit the everyday low pricing model it has traditionally used — perhaps the hi-lo pricing models of some competitors have helped confuse the market and harmed Wal-Mart’s positioning.  Also posted at Learn the 4 Ps.

Many U.S. grocer stores use multi-unit price promotions — for example, 4 12-packs of any Coca Cola product for $12.  This article, “At Stores, Making 5 for $5 a Bigger Draw Than 1 for $1” (New York Times, July 17, 2011) describes the practice with a variety of good examples and some interviews with managers.  While most stores allow consumers to buy fewer items at the fractional price (one 12 pack of Coke for $3 in the previous example), the promotions typically encourage consumers to stock up.  So it provides an example of how marketers can influence consumer behavior.

I also found it interesting how much retailers monitor and tweak the strategy — looking very closely at which combinations bump sales the most.  That provides a different type of example of marketing research and consumer behavior — and of course this example can also be used in pricing or sales promotion.

The new Phantom jeans from True Religion have a list price of $375 — which is a deal when you consider Gucci jeans can go for $495 to $665.  You might ask the same question I did “How Can Jeans Cost $300?” — fortunately the Wall Street Journal (July 7, 2011 – non-subscribers may have to click here) asked the same question.  The article notes that costs are higher due to material costs and manufacturing — as well as the markups at wholesale and retail.  There is also a nice graphic that lists all of the material, trim, labor and other costs.  On top of that add the advertising costs — and relatively low sales volume.

This article might provide a nice addition to a discussion of branding, pricing, or manufacturing/costs (in Basic Marketing we cover marketing cost analysis and examine costs and production in our cross-functional chapter).

Amazon sells two variations of its Kindle e-book reader.  You can get a $25 discount if you are willing to put up with “special offers and sponsored screensavers.”   It appears that customers don’t mind the ads — or at least many will tolerate the ads in exchange for the lower price.  The ad-supported model outsells the ad-free model.  This could be the beginning of a new business model.   Read more about it at “Discounted Kindle points to future of ad-supported electronics,” (CNN, July 1, 2011).

Amazon’s strategy could stimulate a discussion of advertising, pricing, or business models.  You might ask students if they would be willing to put up with advertising to save money on an electronic gadget.  You could ask them what price would buy their willingness?  Also, what other products might be good candidates?  Also posted at Learn the 4 Ps.

As one of the world’s fastest growing economies, Brazil is a country our students should learn about.  Here we have a great combination of a video and article on Brazil — with a video showing a clever promotion to make customers aware that they can buy on credit.  Then, an article about potential problems for Brazil’s economy as more consumers use credit.

Brazil might want to learn from the experiences the United States has had with easy credit.  Apparently the Brazilian government is concerned — but many firms know that easy credit brings in customers. A recent Businessweek article, “Brazil’s New Middle Class Goes on a Spree” (May 12, 2011), describes how easy access to credit appeals to many Brazilians.  Unfortunately many of these consumers don’t understand what they are getting into with the sky high interest rates they are paying. Brazil’s government is putting in some controls, as it fears credit problems might drag down the economy.

You might start a discussion with the clever and seemingly innocuous video below. The short (0:54) video describes a campaign by Brazilian retailer Magazineluiza which targets elderly Brazilian consumers and informs them about credit through a crossword puzzle. After showing this in class, you could discuss the pros and cons of credit in an economy like Brazil’s. The article provides a nice background for your discussion.

This combination could work well in discussing international, ethics, public policy, promotion, and pricing.