The Internet of Things (IOT), which we cover in one of our What’s Next? boxes (see Chapter 8) offers some promising consumer benefits. IOT connects devices (your sprinkler system, coffee pot, thermostat, and more) to the Internet. From there, the devices get smart — so for example, your sprinkler system sees there is a 90% chance of rain today and so it doesn’t water the lawn for the next three days. Yet there are tradeoffs as consumers lose privacy. This short (less than 3 minute) Bloomberg video can be assigned to students or shown in class to stimulate discussion. It might work well with Chapter 8 as you discuss Product or in Chapters 7 or 19 where we dig more deeply into privacy.
Welcoming unwelcome innovation
In my Principles of Marketing class I ask my students a simple True/False question: “Good marketing means giving customers the products and services they ask for.” I’m always surprised at how many say “True”. What they don’t yet realize is that customers don’t always know what they want or even what’s possible. Successful innovators often develop products that people aren’t asking for and, sometimes, they create products that are so disruptive they elicit a negative initial reaction from their customers. That doesn’t mean the idea is necessarily bad but it does mean they need good marketing to help customers get over that initial rejection and embrace the benefits possible.
Amazon is one of those companies that’s not afraid to take risks in all aspects of their business. Some of those ideas are spectacular failures but those that have succeeded have helped propel the company to becoming one of the world’s top three retailers. One of Amazon’s most recent initiatives is the “Amazon Key“. This new device replaces a traditional lock on a customer’s front door with a smart, electronic lock. This new lock allows Amazon delivery personnel to deliver products inside a customer’s house, not just at their front porch. The device includes video recording of the delivery as well as options for the owner to block entry. The idea has been met with understandable skepticism. Allowing strangers into our home feels like an invasion of privacy and there’s an inherent fear of theft when the consumer hasn’t personally vetted the delivery personnel.
Ask your students what they think about the innovative delivery idea. How can Amazon successfully promote the new concept in a way that gets customers past that initial rejection and to the point that they install the Amazon Key on their front door?
Promoting differentiation in a mature market
Bloomberg’s short article/interview entitled “A Folding Bike Helmet That Looks Good and Still Shields Your Brain” shows inventors can still find room to innovate, even in a mature product market. Spanish inventor, Carlos Ferrando, created a bike helmet that has two unique features – it collapses/folds to reduce space when not in use, and it is designed to be more aesthetically appealing than the traditional bike helmet. Ferrando said he wants his helmet to “normalize the idea of wearing one (bike helmet) as a fashion accessory”.
Ask your students who they think the target market for this product would be. If they say “bicycle riders” push them to go deeper. It’s true that anyone who rides a bicycle could benefit from this product but a mass market strategy is unlikely to be as successful for a product like this. A seg
mented strategy has a better chance of success. In chapter 4 we offer a possible market segmentation for the bicycle-riders product-market. If students believe this product could effectively serve multiple segments you might want to break them into groups and have each group focus on a particular segment. Ask each group to develop a promotional strategy for their target market. After a few minutes have each group share their strategy and discuss the differences. If the students did a good job there should be distinct strategies for each market. If the strategies are generally similar then they’ve taken a “Combiner” approach which doesn’t really cater to the unique attributes of each segment. Either way, you have a good discussion!
Smartphones top $1000 price point
Smartphones revolutionized the world and it wasn’t long after the first smartphone was released that everyone wanted one of their own. For years, smartphone manufacturers were able to capitalize on unmet demand but as the product-market reached maturity and demand became saturated, manufacturers needed to find ways to entice users to upgrade in order to protect their new revenue stream.
The classic approach in technology is to release new versions of products. If a manufacturer delivers enough added value with the new release, existing consumers will be willing to buy the new product to replace their old one. But how much is necessary to entice consumers to upgrade? That answer is dependent on several factors that influence consumer buying behavior. These influences are reviewed in detail in Chapter 5 – Final Consumers and Their Buying Behavior.
This article, “Your Next Phone Will Probably Cost $1000“, talks about the latest generation of smartphones to hit the market and the various influences that will determine their success or failure. In particular, the article notes that this is the first generation of products to pass the $1000 price barrier. The article suggests that surpassing that psychologically significant price barrier may slow adoption of the new line of phones.
Ask your students how many have purchased or intend to purchase one of these new phones, when they purchased (or intend to purchase), and why they chose to upgrade. This can lead to a good discussion regarding all of the influences that impact that purchasing decision. Some will choose to buy primarily because of psychological social needs – the desire for status or acceptance from peers. Others will apply a more economic assessment. Those individuals may justify the purchase based on faster performance, larger screen sizes, new features, etc. A full discussion of the various factors that influence consumer purchasing behavior is covered in Chapter 5 – Final Customers and Their Buying Behavior.
This conversation can also apply when covering the adoption curve discussed in Chapter 13. In any given classroom you’re likely to have students that can be classified as members of the early adopters and early majority segments of the adoption curve but you may also have members of other segments. Asking students from each group how they make decisions about when to buy can really help illustrate the differences between segments.
“We wanted [our restaurant] to be Instagrammable”
Most industries report a decline in the effectiveness of advertising as a means to tell customers about their product. As we note in chapter 16, customers tend to place more faith in what real people say about goods and services they might buy. Apps, including the online review site Yelp and social media site Instagram, offer customers an easy and fast way to hear about other customers’ experiences.
Restaurants have long benefited from word-of-mouth (telling a friend about that “great meal you had at the new bistro”). Today, some restaurants are looking for ways to be more “Instagrammable.” Read more at this trend in “Instagram is pushing restaurants to be kitschy, colorful, and irresistible to photographers,” The Verge, July 20, 2017.
This article could be discussed at many different points in the semester. It offers an interesting example of customer value (chapters 1, 8 and 17); for some target customers, improving the “shareability” of an experience enhances the experience. For many young people, sharing the experience is part of the experience. It also suggests how consumer behavior (chapter 5) with social media (chapter 16) can impact new product development (chapter 9). After sharing this example in class, students could be asked: why are these businesses doing this? They are likely to immediately get that it fosters word-of-mouth, but may not readily connect with other benefits.
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