Chapter 18

Mattress firms creating value (?) with financing deals…

October 31, 2019 by Joe Cannon Leave a Comment

The mattress industry is a pretty crazy (check out “The Great Mattress Conspiracy: Why Are There So Many Mattress Stores?” on Endless Thread, podcast and story). You might check out the podcast for a fun example when you cover retailing. Or ethics. You might also check out one of our previous posts, “The Gray World of Online Reviews” (Teach the 4 Ps) — tags include ethics and online reviews.

Onto our story of the day and we are back in the retail mattress industry. With the emergence of new mattress products designed for easy shipping, online mattress stores (Casper, Leesa, Tuft & Needle), this market continues to be very competitive. Retail brick-and-mortar store Mattress Firm has closed 700 stores and is in Chapter 11 bankruptcy. Now they are competing on financing. In fact, Mattress Firm will give you six years of 0% interest on a mattress purchase of up to $3999. Financing is certainly one way to create value for customers — and the automobile industry has done it for years — but does it make sense for buyers of mattresses. We will see. Learn more reading “6-year, 0% loan for a mattress? Intense competition continues to grip mattress industry,” USA Today, October 25, 2019.

Ever-Increasing Airline Fees

October 21, 2018 by Jon Firooz Leave a Comment

Jet Blue and United Airlines recently raised their checked baggage fees from $25 to $30 for the first bag checked (see this article to read more). Just 10 years ago checked baggage fees were unheard of but they are the norm today and airlines are increasingly looking for ways to add charges and fees to improve their bottom line. Air travel is basically commoditized and, as a result, leisure travelers tend to search for the lowest price when booking travel. This significantly hurt airline profitability until they started charging additional fees for checked bags, carry-on bags, early check-in, seat reservation, leg room, in-flight snacks, entertainment, and more. Now airlines can benefit from the high margin they get on these fees yet still advertise low fares.

This topic presents numerous angles for a conversation with students. Is it ethical for airlines to advertise low prices when the end price a consumer will pay will likely be significantly higher? Why were the airlines able to enact this trend in adding supplemental charges? i.e. if one airline started charging for checked bags, why didn’t others push free bags as a differentiator? How does the airline industry’s status as an oligopoly affect this market dynamic? How do business travel and loyalty programs make it easier for airlines to push price increases like this?

Wendy’s Salad Giveaway

September 26, 2018 by Jon Firooz Leave a Comment

Wendy’s and McDonald’s are once again competing for customers. The most recent efforts have centered around luring customers into installing their mobile apps. Wendy’s has been giving away free burgers to help promote use of their mobile app and now they’re using giveaways to promote both the app and their new Harvest Chicken Salad (read more here). Until October 7, customers can get a coupon for a free half-size salad if they download the Wendy’s app.

Given students’ propensity for free food this may be a good discussion on a number of fronts. This can fit into promotions, new product introduction, and even a pricing discussion if you want to talk about the impact of cannibalism on a product portfolio or have students calculate the number of return trips necessary for Wendy’s to break-even on the promotion.