Nokia Failures

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.

http://online.wsj.com/article/SB10001424052702304898704577480340752531300.html?grcc=22222Z0ZwdgtZ0Z0Z0Z0Z0&mod=WSJ_article_forwdgt

Entrepreneurs

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.

Reference Price and Brand Loyalty

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

Tridib Mazumdar and Purushottam Papatla

Marketing Letters , Vol. 6, No. 2 (Apr., 1995), pp. 111-122

Published by: Springer

Article Stable URL: http://www.jstor.org/stable/40216365

Price Discrimination

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.


http://www.revisionguru.co.uk/economics/pricedis.htm

http://tutor2u.net/economics/revision-notes/a2-micro-price-discrimination.html

Viral Marketing

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.

Line Extension vs. Brand Extension

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.

to:

The Value of a Brand: Coke vs. Pepsi

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.

 http://www.interbrand.com/en/best-global-brands/best-global-brands-2008/best-global-brands-2011.aspx

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.