Posted by: Paul.Christ
on Dec 23, 2009
Luxury Prices: To Cut or Not to Cut? (CNN Money)
Of all marketing decisions, probably the most difficult to manage are those dealing with price. Price setting requires marketers take into consideration a wide variety of factors such as customers’ perceptions, distributors’ profit demands, competitors’ response and many more. These issues can be even more complicated when market conditions are changes. For instance, over the last 24 months many companies felt compelled to drop their price in order to appeal to cash-strapped customers. But now, with signs of a recovery on the horizon, marketers are beginning to plan for the future and many are considering raising price.
But as discussed in this story, keeping price low for an extended period of time will likely result in customers adjusting their expectations of what the product should cost. This could play havoc with companies that normally follow a premium price strategy but lowered their price during the economic downturn. As the economy recovers these brands may find raising price back to pre-recession levels will not be an easy sell to customers and distributors.
Of special note in this story are the marketers who avoided this problem as they chose not to drop price but instead made other changes to their marketing strategy.
New York-based upscale clothing line White + Warren has gotten similarly creative. The 12-year-old line, sold in more than 500 specialty stores across the country, has long been known as a maker of luxe cashmere. For Holiday 2010, its winter collection, the label introduced lower-priced pieces in new fabrications, like under-$100 rayon tops and dresses, while holding its cashmere prices fast.
Besides the ways discussed in this story, what other methods can marketers employ to avoid heavy discounting during down times?
Posted by: Paul.Christ
on Dec 21, 2009
Cancer Center Ads Use Emotion More Than Fact (New York Times)
In our Marketing Research tutorial we discuss the growing use of marketing research as a promotional tool and note that “While many companies claim the research supports their products, many of these claims may in fact be more fluff than substance since they are not grounded in good research methods.”
This story offers a nice example of exactly what we are talking about. The story discusses how certain health care facilities are promoting the benefits of their work by citing what they claim is research, though the legitimacy of this work is questionable. These facilities appear to be mixing internally compiled patient statistics with patient comments in order to present a positive spin for their services. However, there is no third-party support for what is being reported and regulation of such claims is hard to come by as the U.S. Federal Government is limited in how they can handle such advertising messages.
If a drug maker ran an ad for a cancer medicine, Food and Drug Administration regulations would require the company to be able to support any superiority claims with substantial evidence from rigorous clinical studies. But federal agencies cannot limit the ad claims made by nonprofit medical centers about their ability to cure people of diseases like cancer, according to the government’s main ad regulator, the Federal Trade Commission.
Are there any ethical concerns with the way these facilities promote their services?
Posted by: Paul.Christ
on Dec 17, 2009
It has been nearly sixty years since organizations began to understand the real importance of marketing strategy and planning. Prior to the 1950s most companies did not have marketing departments, but instead marketing activities were scattered among many departments such as advertising and sales. Things began to change as scholars and consultants pushed for companies to adopt strategies designed to unify a variety of marketing activities carried out in different parts of the company. By the 1960s most major college and university business programs were preaching the importance of marketing and an avalanche of books and magazines supported this cause.
With so much time and energy directed to improving marketing decision making, one might think that past mistakes attributed to lack of marketing knowledge would now be all but eliminated. In reality, there are many mistakes that are bound to be repeated no matter how much attention is directed to understanding marketing. Here are a few:
1. The Research Tells Us So
Relying on the results of market research as the deciding factor when making marketing decisions is a risky proposition. Why? Because research is inherently fraught with many potential problems. These problems are often the result of how the research is designed or how it is executed. It is particularly a problem if the researcher does not have access to all information. For instance, errors often occur with customer surveys including questions not being asked correctly and non-customers completing the survey. The bottom line is companies must perform market research to gain information needed to make informed marketing decisions. However, marketers must understand the limitations of research. In the end the marketer must weigh all available information to make their decision and not focus solely on what the research says.
2. All We Need to do is Pump More into Promotion
Wouldn’t it be great if marketing was this easy? Just spend more on advertising and other promotions and we will quickly see our sales increase. More likely what you’ll see is your profits decrease! The argument for more promotion as the medicine needed to fix lackluster sales is heard in nearly all organizations. But to view marketing problems in terms of promotional deficiencies is extremely shortsighted. Marketing is much more than advertising. Sales problems could be the result of numerous other marketing problems. Before deciding to spend more on promotion it probably makes more sense to spend time reviewing all marketing decisions to make sure problems do not lay elsewhere.
3. We Have the Best Product on the Market
Says who? The marketer might think it’s the best product, but remember the marketer is not buying the product. The marketer’s target market is supposed to buy it. If a marketer can’t understand why customers are buying a competitor’s product when the marketer thinks the competitor’s product is inferior then the marketer does not know the market well enough. More than likely how the product is positioned in customers’ minds is different than how the marketer sees things. This situation calls for extensive customer research to find out why the product is not performing as expected.
4. The Boss Knows What’s Best
A classic problem in many small businesses is when the person who built the business believes they know what works. The entrepreneur justifies this by telling everyone that the business is successful because he/she knows what the market wants. The boss often discounts market studies as a waste of funds, and worse yet, brushes aside marketing suggestions from others in the organization. While it is very likely the boss knows a lot about the market, it is unlikely the boss knows everything about the market. Making marketing decisions based on executive intuition works sometimes, but eventually lack of information, whether from refusing to undertake research or giving a cold shoulder to employees’ ideas, will lead to poor decisions.
5. Our Customers Only Care About Getting the Lowest Price
No they don’t. They care about the best value for their money. Customers first and foremost want to feel comfortable with their purchase and know they got their money’s worth from their decision. It is a miscalculation for marketers to believe customers reduce their purchase decision down to nothing more than selecting the product with the lowest price. Yet if a marketer undertakes a little research they will invariable find many other issues influence purchasing. Companies that feel they are losing out to lower priced competitors are really losing out to higher value competitors. Clearly to fight this requires marketing efforts that increase the value of the firm’s products in the minds of its target market.
6. We Know Who Our Competitors Are
Most marketers when asked to name their competitors can easily rattle off a list. While the length of this list shows strong knowledge of the market, what is more important is who is not on the list. Companies not viewed as competitors are potentially the biggest threat to a company, especially for companies operating in a rapidly evolving market. At the very least the marketer should have two lists – current competitors and potential competitors. The list for potential competitors should be heavily weighted with companies that are outside the current industry. In this way the marketer broadens the universe of potential influencers in their market. Having this knowledge not only makes the marketer aware of potential competitors but investigating firms in outside industries may also provide insight and ideas for product innovation, new markets and new channels for communication.
7. The Only Thing That Matters Is ROI
For many companies investing in a marketing decision must have only one payoff – profit on the investment. Yet if this approach drives all marketing decisions the company is at best an underachiever and at worst vulnerable to competitors. Why? Because not all marketing decisions should be tied to a positive return on investment. Sometimes a firm must make strategic decisions that sacrifice profits in order strengthen other parts of the company. For example, a company may spend significant funds to develop a new product that research suggests has little chance of being profitable. But the product may serve as a major annoyance to your competitor’s top product. Because of this the competitor may need to expend more resources to ensure their product retains its market position. Being forced to direct more funds to support their top product may slow down the competitor's efforts to compete against your top products.
8. Who Needs to Plan
Marketing executives within fast moving industries often feel planning beyond the short-term is useless since the market changes so rapidly. Yet failing to lay out a plan may lead to some big surprises, like running out of money! In a business environment where decisions are made quickly it is easy to lose track of where the money is going. A marketing plan can help the company insert controls on marketing expenditures. It also has the added benefit of having marketers take a step back to see where the company has been and may uncover important information that was not apparent earlier. Additionally, a marketing plan may help ensure that everyone within the company is on the same page with regard to the basic direction of the firm’s marketing efforts. This may prevent finger pointing down the road. Even if a plan is limited to only covering the next six months of operations it is an exercise that should not be avoided.
