How does a dominant firm increase its customer base? One tactic targets a new market with a new but related marketing mix. Starbucks’ continues to look for growth — and is now looking for it from its Seattle’s Best brand that it acquired eight years ago. This article “Starbucks Targets Folks Who Shun Starbucks” (Bloomberg BusinessWeek, April 21, 2011) gives some insights about product, price, promotion, and place elements for Seattle’s Best.
Here is a suggestion for using this article in class or as an assignment. Since most of our students are familiar with Starbucks, it might be fun to draw a 3 column figure — with the left column headed with “Marketing Strategy,” followed by “Product,” “Place,” Promotion,” “Price,” and “Target Market.” Then head each of the next two columns with “Seattle’s Best” and “Starbucks.” You could let students break into teams to complete the picture – or simply ask students to fill in the cells on the figure you draw on the board. I find that my students learn a lot from these types of compare and contrast in strategies. To give students more insight into the perhaps less familiar Seattle’s Best brand, you could show one or more of the three ads in the video clip below. Also posted at Learn the 4 Ps.
Just yesterday we posted “Get to Know Groupon” with a few articles about Groupon and other daily deal sites. Then today, we get a consumer warning about these sites in “10 Things Daily Deal Sites Won’t Say” (SmartMoney, March 29, 2011). This article brings up all kinds of ethical and strategy questions for marketers — a good supplement if you plan to talk about it in class or buy a daily deal.
Let’s get up to speed on Groupon. I definitely missed this one. I thought the Groupon thing was just kind of a niche idea; I thought it would never take off and hoped it wouldn’t. We don’t need to make consumers more price sensitive – do we? I also thought they were nuts last year for turning down a $6 billion buyout offer from Google.
What is Groupon? Groupon is the most well-known of a variety of different “Deal-of-the-day” websites. Groupon is now in more than 250 geographic markets around the world – with most promotions for small local firms. Customers sign up to receive a daily e-mail with a deal like “Get $20 worth of pizza from Giovanni’s Pizza for only $10.” If you want to buy the discount – you have to buy that day. The retailer and Groupon typically split the $10 – about in half though that varies. So a retailer receives $5 for a coupon that gives a customer $20 worth of pizza. This raises a variety of interesting questions – good in-class discussions – about when this might make sense.
Well Groupon appears to be here stay—so I have a few different articles to get you up to speed. From a teaching perspective there are two issues. First, there are real questions about whether using Groupon makes sense for small businesses (the subject of the first three articles above). It might make sense for a company trying to attract new customers – and confident it can retain them. For different perspectives on this issue, see: “Is Groupon a Good Deal for Small Business?,” (Fox Business, January 27, 2011). And do we want to attract the deal-prone consumer — will they be loyal and profitable? For one perspective on this issue see “Beware of Innovations from Daily-Deal Sites,” (Harvard Business Review, March 25, 2011).
On the other hand, it makes little sense to send out a deep discount coupon to your regular customers. The first two articles above all deal with that issue. Second, there are concerns with Groupon’s long-term marketing strategy. With few barriers to entry, new competitors are springing up all over. This has given small businesses buying power vis a vis Groupon and its competitors (see “Burned by Daily-Deal Craze, Small Businesses Get Savvy,” Wall Street Journal, March 24, 2011 – non-subscribers may have to click here or check out the video below). It also naturally leads to questions about Groupon’s strategy moving forward. With few barriers to entry, how can Groupon get a sustainable competitive advantage? Groupon is trying – check out “Are Four Words Worth $25 Billion for Groupon?” (Bloomberg Businessweek, March 17, 2011) to read about how Groupon is trying to move ahead with a new location based strategy.
As you can imagine, Groupon could be used to discuss consumer behavior, sales promotion, retailing, and marketing strategy planning.
Seth Godin recently had a nice post “On pricing power” (February 17, 2011) at his blog. I have little to add — I just suggest you read it because I think you will like it.
This article “Someday, Store Coupons May Tap You on the Shoulder” (New York Times, December 25, 2010), describes how advances in technology are having an impact on coupons. Marketers face an interesting problem. They want to make coupons easier to use – but not too easy to use. As we know, coupons provide a way to segment the market — offering lower prices to deal-prone consumers while selling at the regular price to a segment that is not so price sensitive. The article describes where this may lead in the coming years.
Well, back to work. I took a couple weeks away from the blog.
While this article deals with the psychology of holiday (so last month) discounts, “Many Discounts, Few Deals” (Wall Street Journal, December 15 - click here for a backdoor to the article if you don’t subscribe) the principles are universal and apply to discounting year-round. So what do you think, do we promote our $29.50 jeans as “50% off” or as “$15.” Marketers are still trying to figure out how consumers process prices.
There are a lot of examples you can use when teaching pricing or consumer behavior. Also posted at Learn the 4 Ps.
When we teach students about exchange rates, it helps to have some good examples of how the changes impact consumer buying power. This article, “Japanese Splurge on Imports, Foreign Deals” (Wall Street Journal, November 28, 2010 - non-subscribers may have to link here). In Japan, the yen has become very strong of late. Consequently, many imported goods now cost 20-30% less than even just a few months ago. This article offers examples useful in teaching exchange rates related to price and exporting. It might also be a good example to use when discussing the economic dimension of the external market environment.
We have long known that online sellers have the ability to offer the same product to different customers at different prices — in fact Amazon was caught doing this back in 2000 with a resulting PR disaster. This is a great article in Slate‘s online magazine which offers some nice detail and examples in a short easy read (“How Much Is That Doggie in the Browser Window?” Slate, December 6, 2010).
Students usually find this practice abhorrent — and claim it must be illegal. Selecting some of these examples might lead to an interesting in-class discussion of price discrimination along strategic, legal, and ethical lines.
Amazon.com comes up with some very creative marketing strategy ideas. While not all of them work, many do and the company’s stock and sales have been soaring. One of its very successful programs is Amazon Prime. For $79 a year, Prime members have all Amazon orders shipped with free two-day delivery (full disclosure, Joe is a very satisfied Prime customer). This Bloomberg Businessweek article, “What’s in Amazon’s Box? Instant Gratification” (November 23, 2010), describes how this brilliant “Place” decision has built loyalty and sent major competitors scrambling. This provides a great example of a firm leveraging its strengths (wide selection and low prices) — making it hard for other online retailers to copy the strategy. Combine this with Amazon’s new smartphone comparison shopping app (which makes Amazon’s price shopping advantage even more apparent) — and Amazon is looking pretty good moving forward.
This article could provide great examples of sustainable competitive advantage, place, retailing, or price. Also posted at Learn the 4 Ps.
How does a dominant firm increase its customer base? One tactic targets a new market with a new but related marketing mix. Starbucks’ continues to look for growth — and is now looking for it from its Seattle’s Best brand that it acquired eight years ago. This article “Starbucks Targets Folks Who Shun Starbucks” (Bloomberg BusinessWeek, April 21, 2011) gives some insights about product, price, promotion, and place elements for Seattle’s Best.
