As regular readers of this blog know, the recently published 17th edition of Essentials of Marketing includes several examples each chapter of companies, brands, or practices that demonstrate “Marketing for a Better World” (#M4BW). Marketing managers are not always looking to do the right thing for society — but many are finding ways to increase profits and make for a better world. This article “Supply Chains as a Game-Changer in the Fight Against Climate Change” (BCG, January 26, 2021) includes lots of practical advice you might share with your students.
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.
Students don’t often think about how Place and choice of distribution channel can differentiate a product or deliver value (often through convenience). And not too many of us think about vending machines as a channel of distribution for much more than snacks and soft drinks. That is why this example, where the Applestone Meat Co. offers self-serve vending machines stocked with vacuum-sealed packages of meat, including everything you might expect to buy at a high-end butcher shop: Porterhouse steaks, rack of lamb, sausages, and ground beef. You can read more, and perhaps clip an image to drop into your slides when you cover Place in Chapters, 10, 11 and 12.
As an aside, if you, like me, didn’t get the “Horn & Hardart” reference in the article’s title, check out this Wikipedia entry and learn a little history.
Snap Kitchen is trying to find that sweet spot many consumers want — tasty, convenient and healthy food at a fair price. There is a good sized target market that wants a healthy grab-and-go meal. And if it’s tasty, they might even pay a premium for it. This is the target market that Snap Kitchen is finding. The fast-growing chain now has 44 stores and also sells through 5 Whole Foods Markets stores. You can read more in this Bloomberg Businessweek article, “Forget the Salad Bar. A $50 Million Startup Best on Healthy Grab-and-Go Meals” (August 25, 2016).
This article might be useful in a number of places in the introductory marketing class. In chapter 3 we cover social cultural trends – and more Americans are seeking healthy food choices. The article sets up a potential discussion of consumer behavior and competition. How can Snap Kitchen keep out the competition? Especially from grocery stores that seem to be trying to move into that same upscale grab-and-go food market with fresh in-store sushi and deli counters. There are also distribution questions (consider Place chapters 10 — introduction and 12 — retailing).
It was hard to miss the story of Mylan’s pricing of the EpiPen as it played across the business news cycle for a couple of weeks in late August and early September 2016. Now that the dust has settled a bit, we will offer some perspective and ideas about how this might be used in a principles of marketing class.
The pricing of pharmaceutical drugs has unique challenges including long product development cycles (with most ending in failure), patent protection, sometimes life-saving qualities, and frequently paid for by insurance (for more, see the What’s New? box in Essentials of Marketing 15th edition, chapter 17).
Focusing on maximizing profits, companies can make a lot of money charging a high price for a drug that is on patent (or in this case has no adequate substitutes) and saves lives (that tends to reduce price sensitivity). On the other hand, high prices can bring in new competitors, or in this case attracts negative publicity and possibly increased regulation.
We have pulled together a few articles that you might read to understand this topic better. A Bloomberg Businessweek article, “The EpiPen Drama Shows What’s Wrong With How Drugs Are Priced” (September 1, 2016) provides a good overview of the issues and history. Among other things, it notes that when Mylan acquired marketing rights for EpiPen in 2007, a pair of the auto-injectors cost around $100. They now cost over $600. That is a big margin on a product estimated to cost about $20-30 each to produce. Most of the cost is for the auto-injection system as epinephrine “drug” that is delivered costs less than a dollar.
Another interesting teaching element of this case is how the profits are distributed along the long channel of distribution for the drug: Mylan gets $274, while “…your insurer keeps $249. The pharmacy benefits manager that negotiates between Mylan and your insurer gets $40. Your local pharmacist keeps $27. The wholesaler gets $10.” (NBC News, September 6, 2016). This raises questions about the efficiency and value provided by this channel of distribution. This suggests an opportunity to discuss EpiPen when you cover Place.
There is also an opportunity to explore some of Mylan’s promotion and targeting practices for EpiPen (see Bloomberg Businessweek, “How Marketing Turned the EpiPen Into a Billion-Dollar Business,” September 23, 2015). The company aggressively built the EpiPen brand name, started selling the delivery devices only in two-packs, and sought to have them stocked in schools and public places (including every room in Disney World hotels). With expiration dates, most of those EpiPens will go unused — and have to be replaced. What are the ethics here? And why do they cost less than $100 in Canada? The certainly raise issues that could be used when discussing Product as well as segmentation and targeting.
This case primarily deals with ethics and marketing strategy. It covers more than pricing — as profits from successful drugs are used to fund R&D for new drugs. Yet when some families have to decide between buying EpiPens and a month’s worth of groceries, important questions are raised. These are questions our students should wrestle with. We think that the case provides an opportunity to discuss a range of marketing issues in your class.