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.
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.
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.
