It must be stressful to be working in the world of cell phone development and service right now. It seems to be a constant race to see who can provide the best phones for the lowest price with the service contracts that will attract customers from other providers. Some have been more successful than others; I recently read an article about a setback Nokia is experiencing.
Nokia Corp. is trying to launch it's new smartphone called the Lumia, and has been working with Microsoft for the software since last year. It was just recently announced that the 2 million + owners of current Lumia phones won't be able to upgrade to the new software. This will hurt sales because many people will probably wait for the new version which has the upgraded software, or just change to a new phone or provider. This could also impact the consumer's view and loyalty to the company, I know if I had this phone I would definitely not be happy I couldn't get the latest version without getting a new phone. It is interesting how problems a company can't foresee (or sometimes make poor decisions they could have avoided) can impact sales so much, especially in a market where there are many substitutes. To make it worse, the company announced that second-quarter earnings would be worse than expected, and a round of layoffs ensued.
It's a cutthroat business world out there, and it's interesting to watch the successes and failures that go on.
After doing an exercise for another class, I started thinking about what entrepreneurs have to do to make it big. Yes, they have to have some idea that is innovative enough to be successful; but they also have to be able to make the idea appealing enough to others as well. They have to market the idea to people who will want to invest in it which is sometimes easier said than done. For example, Greg Carr is working to improve living conditions for the people and to restore wildlife in the Gorongosa wildlife park in Mozambique. He is hoping to make it attractive enough to other investors so that tourism will increase and more money will flow to the country. This seems like it would be difficult to motivate others to do; how appealing can it be to others to invest in a country ravaged with AIDS and poverty? It takes a great leader to convince others that this will make them money. I'm not sure how many people he's convinced, but he has been fairly successful in his endeavors so far.
Brand loyalty is related to what the consumers are comparing the price to. An External Reference Price comparison is "a comparison provided by...retailers or manufacturers". Internal price references are "the price developed in the buyer's mind through experience with this product".
According to our book, frequent buyers are more likely to judge high prices because they have more experience and idea of what the product within a brand is worth. This is important because companies which make products that are used often, like laundry soap or butter, should be careful with price increases as to not encourage frequent buyers to switch brands. They should also try to foster brand loyalty through their advertising and marketing. This is because one study found that the consumers who use use the current price, or External Reference to make decisions, are brand loyal and spend about 60% of their purchases to one brand. The consumers who don't have brand loyalty use more Internal Reference - they think about what they have paid in the past for the product, and compare the current prices to that. Therefore, managers should price so that the product is competitive with other brands to encourage external reference consumers to stick with their brand, while keeping prices fair over time to encourage internal reference shoppers to look at the price and brand favorably.
Article with study info:
Loyalty Differences in the Use of Internal and External Reference Prices
Price discrimination is defined by the textbook as "the practice of employing price differentials that tend to injure competition by giving one or more buyers a competitive advantage over other buyers". This often happens in monopolistic or oligopolistic markets because it is easier to do when one has huge market power. They do it to gain higher profits and squeeze every last dollar out of the consumer and the consumers are charged the maximum price they are willing to pay for the product. This makes it so the producer captures all consumer surplus in the market. This is difficult to do because the producer has to have a very good idea of the demand of the consumers.
While this is illegal, there is a form that is legal called imperfect price discrimination. There can be different prices for different target markets. For example, at the movie theaters, amusement parks, and museums there are different prices for adults, seniors, students and children. It is based on the price elasticity of each group, with those who want to spend the least amount money and be the most affected by high prices are charged the lowest prices. Another example is ladies night in a bar, where the women don't have to pay the cover charge and/or get discounted drinks.
There also other types of price discrimination; in most cases consumer surplus is reduced. However, it could also be argued in cases that it is positive because there is less dead weight loss in society.
The textbook defines viral marketing as "a strategy to get consumers to share a marketer's message, often through email or online videos, in a way that spreads dramatically and quickly." This type of marketing advertises for a product or service, makes it easily accessible to many, and utilizes existing networks (YouTube has helped increase popularity tremendously). Here's some examples of viral marketing successes:
Hotmail:
Hotmail was one of the first web emails offered for free. It was started in 1996 and advertised at the bottom of each email "Get your free email at Hotmail". By December of 1997, there was more than 8.5 million subscribers and was sold to Microsoft for $400 million. Successful marketing to say the least.
Dove Evolution
This commercial shows a woman being made up for a commercial then being Photo-shopped, sending a message about self esteem and the reality of advertisements we see in magazines and on billboards. The first day it was released, it racked up 44,000 views and currently almost has 15 million. It won the most prestigious award for advertising, and was talked about on shows such as "The View", "The Ellen DeGeneres Show", and "Good Morning America". The clip had generated millions of dollars in free advertising just from word of mouth.
The Blair Witch Project
This movie was released in 1999, and it's commercials helped create hype for it's release. At the end, it advertised for an internet site, which still exists today. It features a timeline for the happenings of the blair witch and even has a picture of the filmmakers with a caption saying it was taken a week before they disappeared; combined with the filming style made it seem it actually could be a true story and it became a popular film, gaining popularity by word of mouth and the advertisements. Just the commercial has over 2 million hits on YouTube.
When I was reading I got a little confused about the difference between line and brand extension. So, after a little Google action, I finally figured it out.
Line Extension: An expansion of an existing line, such as
to:
It adds variety to expand it's client base and have a larger target market and creating excitement within existing customers.
Brand Extension: An established name reaching into another market. Creates diversity while increasing profits.
A brand that is well known is important to the products. Brand recognition can help consumers pick out products they trust the quality of, especially when shopping for a new product they don't know much about. A well-recognizable brand encourages more brand loyalty, which is an intangible asset which increases the value of the company and increases repeat purchases. There is a way to value this asset, and Interbrand lists the most valuable brands yearly.
One of the best examples of brand loyalty is beverages, especially between Coke and Pepsi. Many people chose one of the two and never drink the other. Coke has been number one on the list since their first listed in 2001. But interestingly, Pepsi does not even come close on the list. It is way down at number 22.
One reason could be the different messages each company. Coke tries to appeal to family and other things Americans value such as:
Santa
Family
Polar Bears
And, Patriotism
Meanwhile, Pepsi seems to be targeting the youth generation, to be the new, cool drink by hiring celebrities to represent the brand.
Pepsi's approach obviously isn't bad; according to Yahoo! Finance, they had 34.91B Gross Profit. However, their brand value and essence doesn't seem to be as deeply embedded in consumers.
According to the text book, all products go through a product life cycle: introduction, growth, maturity, and decline. The Zune by Microsoft has gone through all of them, and Microsoft had to adjust their marketing decisions accordingly. However, since half the world hasn't even heard of Zune, they may have had a little trouble doing that... or maybe their product was just really inferior to their competition's.
The first stage for the Zune, introduction (meaning they had no or negative profits), was in November of 2006. It was a pretty competitive product called Zune 30; it offered 30 gigs of memory, FM radio, and had a 3 inch screen. Microsoft's initial marketing technique was a campaign with "Music the way it wants to be". They advertised heavily on American college campuses and ran Zune-related events to increase awareness of the product. The first week of sales put it in second place of media players; however, it was only 9% of the market, while the iPod held 63%.
The second stage is growth which means rising sales and peaking profits. 1.2 million Zune players were sold about the first 6 months. The second generation of the Zune player came out a year after the introduction, in November of 2007. The transition to the maturity, or declining sales and profits, stage came very quickly at this point. In May of 2008, Microsoft announced it had sold about 2 million Zunes, about half of that since the introduction of the second generation of the player.
The fourth stage of this product decline, where sales fall rapidly, was very apparent within the next year: In January of 2009, Microsoft reported from 2007 to 2008 during the fourth quarter, sales had fallen $100 million. In 2011, it was announced Microsoft would discontinue the player.
Thought to be one of the biggest technology flops of all time, the Zune completed the entire product life cycle in just a few years.
On the topic of company transitions and marketing opportunities and marketing research, something in Chapter 5 was interesting to me, it says "when General Motors saw that 42 percent of Hummer H3 buyers were women (compared to 26.3 percent of H2 buyers), it recognized an opportunity to position the smaller sport utility vehicle to appeal to women buyers" (page 132). I set out on a mission to explore the history of the marketing decisions of this brand that may have influenced this change.
First a little history:
In the mid-80s, the military decided they needed something to replace the Jeep and sent a order out for a replacement contract. AMG won the contract, and the new machine, originally called the HMMWV, which soldiers nicknamed Humvee and Hummer to avoid the tongue-twister every time they had to hop in the car. The result was a beast; 15 feet long, 7 feet wide, and 5,200 pounds (Pace, n.d.).
By the end of the 80s, over 175,000 had been delivered to soldiers and to over 50 friendly nations .The vehicle was used by the tens of thousands all over the world, including in Panama in 1989 and 1990, Operation Desert Storm in '91, and more recently in the Middle East (HUMMER History).
In 1992, AMG started selling them for civilian use under the name Hummer. In December of 1999, GM started working with AMG. They renamed it Hummer H1, and in 2002, the Hummer H2 was created. H3s came to be in about 2006.
Their ads highlight their power and strength, which seems to be targeting more men than women. I tried to search for ads for all the Hummers, and failed to find one for the original. I'm assuming the Hummer H1 was sold to mainly men because of it's reputation and videos like this:
Also helping sales right along were images such as this:
The Modernista advertising agency started adding something to ads since 2001 that somehow helps move cars: the pull away shot of the earth at the end of every ad. They say it is because the Hummer is the ultimate in off-roading and can take you anywhere in the world (Patton, 2007). They also don't refer at all to the military use of the vehicle, and it seems to me they are targeting middle to upper class families, exemplified in this ad:
In a society where gas is getting more and more expensive and consumers are becoming more environmentally conscientious, the H3 was a great option. The women who bought the H3, 42 percent, were probably middle to upper class who wanted a sport vehicle but were turned away by the size of the H2.
Here's an interesting one ran during Super Bowl XL in 2006:
One thing Hummer did to enhance their image is they have donated many vehicles to the Red Cross. In 2006 they issued a press release stating they donated a fleet of H1, H2, and H3s to Red Cross chapters all over the U.S., and would donate $100,000 annually for six years (CSR, 2006).
GM has done a great job in marketing this vehicle to civilians while keeping it in military use. However, sales plummeted 67 percent in 2009. Harmful to the known gas-guzzler were economic forces such as the price of oil and the rising importance of going "green" in society. GM tried to sell the brand to a Chinese company called Sichuan Tengzhong Heavy Industrial Machines, but the deal collapsed in 2010 because the company said they could not clear the sale with the Chinese government, who is making a move to try to limit their dependence on oil. The company announced it would consider any offers made, but this failed and in 2010 GM announced they were officially shutting down the brand (Bunkley, 2010).
The evolution of car ads has been an interesting one to say the least. These days I see commercials that I can't even make a guess as to what they are trying to sell until the very end. In terms of car ads, it seems to me that some of their strategies are either showing new, technologically advanced features, or trying to appeal to their target market by instilling the idea that buying the car will make them feel or be perceived in a certain way.
Here's a little gem I found:
Kinda goofy that they go over ALL of the features of the little thing... Favorite moment is the magic glove that crawls out of the compartment all buy itself.
Here's a pretty interesting one:
Hmmmm... so when they did their research for their target market, did they find that all people who can afford a Jaguar and yachts and whatnot just want to be gorgeous? Or are they just making that assumption and trying to appeal to them by saying "you have a lot of money so buy this car and you will instantly be gorgeous!!"? Favorite moment: "EVERYONE cares what gorgeous says"
One more weird one I stumbled across:
So I'm guessing they are trying to target everyone... but what a weird way to do it. Favorite moment: freakshow scares away the bird flying up to the window.
The Persuaders clip got me thinking of when else word usage can sell, and I immediately thought of my evening job as a server and bartender. My tips directly correlate with the amount of sales I have; therefore, the more items I sell, or the more I can "upsell", the more money I will make. We have been taught to use "sizzle" words to make the product more appealing.
For example:
Instead of "the beef rib-eye is the featured entree tonight"
we are trained to say "we are featuring the beef rib-eye; it is flavorful, hearty, and marbled cut, perfectly seasoned and cooked to your liking"
Or
"Our cooked to order crab cakes are combined with southwestern flavors and grilled to a golden brown, served with lightly seasoned asparagus and creamy cole slaw" instead of "the crab cakes are served with asparagus and cole slaw".
Sizzle words work because they create a picture in your head of the item; the person selling you the food wants you to think about how the food is going to look, taste, and smell so it will get your mouth watering and your wallet open. Other words are "caramelized, home-made, marbled, fresh, crispy," etc.
Another interesting technique I have played around with, but haven't definitively had results with is the "Sullivan Nod". This is when you suggest something and then give a slight nod. The number of people who buy the item after seeing this subtle nod goes up, it is thought because people like approval even from those selling the item to them.
So next time you are eating out, listen for sizzle words and think about if it makes you want to buy it. And then, do it, because the server will appreciate it :)
Since all I watch is Netflix I don't see many commercials, so they are more interesting to me instead of really annoying like they are to most people. Someone told be about this one, I thought it was pretty crazy... check it out if you'd like, I'm mainly trying to figure out how to work this blog stuff.
