- Posted by: Paul Christ
As we note in our Product Decisions tutorial, crafting a product is far from being a simple process. Rather marketers must manage numerous decisions involving a number of components that combined to make up the Total product. While most customers may only be familiar with the “actual” product (i.e., that part of the product they physically handle), marketers must also be concerned with other decisions that shape the Total product a customer buys.
One of major decision relates to augmented products, which are product elements that provide additional value for customers. Some augmented product decisions are service based, such as crafting useful guarantee and warranty policies, and tied directly to the product. However, complementary products, which represent additional add-on options that support or provide additional functionality to the actual product, may not necessarily be tied to a specific product. While complementary products add value for the user of the actual product, depending on demand, these can potentially serve as their own actual product.
A good example can likely be seen in this story from Advertising Age. It details a new specialized Wi-Fi-enabled refrigerator being offered by Budweiser. The refrigerator communicates with a specialized mobile app to let the owner know when the refrigerator is running low on, well, beer of course! The app also presents several other features including sending reminders to stock up on beer ahead of when favorite sports team are playing.
While the Bud-e Fridge is directed to brand loyal Budweiser drinkers, nearly any beer can be stocked inside. So the demand for this refrigerator may extend well beyond being a complementary product for Budweiser and could someday become a legitimate stand-alone product with its own complementary products.
- Posted by: Paul Christ
For most consumers, understanding why companies charge what they do for a product is an absolute mystery. This is especially perplexing for them when they see two similar products side-by-side, but one costs 25% more than the other.
While pricing is confusing to customers, it is also a challenging and often complex decision for marketers. This is due to numerous internal and external factors affecting what will eventually impact the final price. But as we noted, customers don’t really understand pricing or what factors impact price. They only know, that for some products, the amount of money they need to give up to purchase the product does not make sense to them.
A good example of pricing that may not seem to make sense to some customers is noted in this story from NBC News. The story examines the continuous price increases impacting the breakfast cereal market despite an overall decline in consumer cereal purchasing.
The fact cold cereal sales are declining may be an indication this product category, which has been in the Product Life Cycle Maturity stage for many years, is now inching toward the Decline stage. As evidence, the story notes the overall cereal product category market has dropped by nearly $4 billion since 2000. This is not to say all breakfast brands are declining, as there are several brands and even product forms that are growing. Yet, one strong indication breakfast cereal is entering the Decline stage can be seen with manufacturers’ pricing strategy. Several of the top manufacturers seem to be moving toward a “milking” strategy (no pun intended!!) in which product suppliers raise price in order to get the most out of those who are still loyal to a brand. This price increase seems to be happening in three ways in the cereal market: 1) companies are simply raising the price they charge for the same size product; 2) companies are keeping the price the same but are decreasing the size of the package; and 3) companies are drastically reducing the number of coupons they offer. The last one is essentially raising the price for people who are accustomed to waiting to make their purchase with a coupon.
If the breakfast cereal market is entering the Decline stage, do not expect this product market to fade away anytime soon. Most likely it will stay in the Decline stage for a very long time. Thus suggesting that a price increase can be a very profitable decision for breakfast cereal companies.
- Posted by: Paul Christ
In our last post regarding ad blocking, the general tone is one that paints an unclear picture for the future of online and mobile advertising. While we suggested several options marketers may have to address ad blocking, many ad industry folks are truly concerned that the long-term prognosis does not seem all that rosy for advertising delivered through computers and mobile devices.
Well, that is a picture that has been painted for many companies and industries in the past only to see the prediction of dire straits never coming about. Certainly the most obvious recent example is Apple, which in the mid-1990s was mostly written off as a computer company that was reaching the end of its life. Of course, naysayers were proven wrong when Steve Jobs brought new ideas to the company, and everyone knows the rest of the story.
In terms of industries, certainly the intercity bus industry is another good example of something that was heading to the mothballs. Long predicted to whither away due to automobiles and airlines, the demand for bus seats is now growing. While some of this growth is affected by rising costs and unpredictable delays of other transportation options, especially air travel, bus companies’ efforts to improve the customer riding experience, including more comfortable seats and Internet service, are altering customers’ perception of bus travel.
On an even larger scale, consider what is happening in many big U.S. cities. At one point, large cities were predicted to become nearly ghost towns (granted a bit overstated!) as people bolted for suburban living. But cities soon learned by offering economic incentives to locate in the city, companies with creative ideas could help lure people back and revitalize urban areas.
At the core of these examples is the idea that even when marketers are immersed in troubling times, re-creation through innovation can turn things around. And this may be just what will happen in the online and mobile ad industry. As discussed in this story from Mobile Marketer, advertisers are reportedly jumping at the opportunities that may exist with the new interactive 360 video technology introduced by Facebook this week. Advertisers are anxious to try out this new advertising approach as they see real value in terms of audience interest, and more importantly, audience involvement. While it remains to been if such ads will also be susceptible to being blocked, the potential entertainment value of this ad format sets it apart from other formats. And, if this is the case, many using ad blocking may be persuaded that there is real entertainment value found in watching advertisements, and the best way to obtain this value is to turn ad blocking off.