marketing marketing 300 discussion section

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agenda  Evaluations  Exam  Quiz  Promotions  Skimming and Penetration Pricing

Evaluations

About the exam…  Some, um, minor changes.  More questions  What’s on the exam  Most of exam is not cumulative  Questions on targeting, segmenting, positions, life cycles are fair game  Attend lecture!

Quiz Trade shows are a sales promotion device usually aimed at promoting products or services to: a) Final consumers. b) Business/industrial customers. c) A firm's own employees. d) All of the above. e) None of the above.

Quiz In total, advertising costs less than sales promotion. a)True b)False

What would you do? If you were presented with the following situations, how would you, as a manager, respond?

Razor Blades Improved razor blade that customers aren’t motivated to buy Who is your target, and what is your goal?

Razor Blades Why might people be uninterested? – People don’t know that it’s improved – Improvement isn’t really an improvement that anyone cares about (improvement does not offer a benefit) – Improved product is still inferior to another product What might make someone interested?

Razor Blades Coupons Sampling Aisle displays explaining benefits More market research?

Shaving Cream Snack Food A grocery chain doesn’t think there’s demand for your new edible shaving cream and so won’t stock it

Shaving Cream Snack Food What is the problem, and what is your goal? Who do you direct your efforts towards?

Shaving Cream Snack Food Store (push strategy): Free product for each case sold (effectively a discount that might get passed on to end user) Pay stocking allowance (slotting fee) Help set up sampling area in stores

Shaving Cream Snack Food End User (pull strategy): Advertising in various media Couponing Samples in mail (if possible) YUM.

Shaving Cream A competitor (not you!) wants to test market a new type of shaving cream, and wants to track sales to fine-tune its marketing mix. In this situation, what are your firm’s goals, and who is your target? How might you achieve those goals through promotion?

Shaving Cream Special deals that cause consumers to stockpile your stuff (ex. buy 1 get 2 free) Big display to draw attention towards your product (need retailer’s assistance for this!) Others?

Thinking harder… When competitor tries to enter the market, is your goal …to maintain your market share by offering clear benefits …or to disrupt competitor’s entry through “dirty tricks?” …or “anything it takes?” What are ethical dimensions of this? What about the ethics from a consumer’s perspective?`

Some Might Say…

What happens when you run out of ideas

What happens when you run out of ideas

the bleeding edge

Pricing Strategies

January 2007: $599 March 2007: $399

Oops “I have received hundreds of s from iPhone customers who are upset about Apple dropping the price of iPhone by $200 two months after it went on sale… We have decided to offer every iPhone customer a $100 store credit…” – Steve Jobs EPIC FAIL …OR IS IT?

Skimming What is “skimming”? – Selling high to first adopters – “Skimming the cream” What kind of situation might this be good for? – Small number of people willing to pay a lot – Few substitutes – If you don’t know shape of demand curve What is the objective of skimming? – Profit-maximization

Skimming

Skimming

Skimming

Skimming

Skimming

Skimming

Skimming

Skimming Other examples?

Penetration Pricing What is “penetration pricing”? – Selling cheap to whole market What kind of situation might this be good for? – Large potential market / high potential sales volume – Large potential competitor base – Need economies of scale What is the objective? – Expansion of market share – Possibly profit-maximization

Penetration Pricing PalmPilot March 1996: $250 1,000,000+ sold Apple Newton March 1993: $1000 “discontinued”

Penetration Pricing Other examples?

Discussion Question What technique would you use for each of the following, and why?

Skimming or Penetration? A new-fangled jet-powered unicycle? Skimming is ideal – A new technology that no one else offers – Small group of people will likely want to be first ones to get it (first adopters) – Price competition likely to follow

Skimming or Penetration? Mysterious soft drink that causes all skin problems to vanish Skimming – A few people will really want this – Cost-benefit will make it worth it to buy even if expensive Penetration – Large potential market – More people will buy if perceived as good value

Skimming or Penetration? DVD of very popular, critically acclaimed movie Skimming – A few fans will want it more than general public Penetration – Skimming approach might be risky – High level of competition already

Skimming or Penetration? A new piece of musical gear Skimming – If device does something completely new or unusual – If there’s a market of “gearheads” who always rush out and get the latest gizmos Penetration – If there are many competitors whose products do similar things – If you can use as a tool to build dependence on other product

Skimming or Penetration? A new children’s toy Skimming – If toy is very unique – If having “popular brand” is important for kids Penetration – If many competitors – If toy is not unique or brand is not important

have a good weekend