One of the most important job requirements that attract someone to become a marketer is the almost constant challenge of coming up with new ideas. As we discuss in our What is Marketing? tutorial, being creative is a key characteristic separating marketers from those in many other professions. Those attracted to marketing find it stimulating to be challenged, nearly every day, to come up with something new. The most obvious examples can be found in the need for marketers to continually create new products, new promotions and new pricing programs. These and many other decisions require active exploration of new ideas using research techniques including: internal marketing research methods, such as brainstorming; customer research methods, such as focus groups; and competitive analysis.
Yet, there is one area within marketing that seems somewhat limited in what can be presented as new. These are the general approaches for generating revenue. Most businesses are limited to one of two methods: selling a product (i.e., good or service), or selling space that others are willing to pay to use (e.g., website advertising space).
So it is intriguing to see this story from National Public Radio discussing what seems like a third option, especially for Internet marketers. Essentially the approach, offered by a startup company called Flattr, is a form of social tipping, where someone, who likes what a marketer is offering, gives the marketer an additional thank you reward in the form of a digital gratuity (called microdonations). With this method, once a month the marketer will receive funds based on how many digital gratuity points they receive.
As the story discusses, a reward from one person may be pretty meager, often representing just one cent. However, for a popular website, thousands of visitors offering one cent can add up to quite a nice amount of revenue. Whether there are many websites that can generate significant money from Flattr remains to be seen. But if this takes off, expect competitors to offer similar services and expect more websites to add this as revenue-producing options.
A few days ago we discussed the emergence of a new market for recreational marijuana and how this can be viewed within Product Life Cycle (PLC) theory. Well, today we have another example of a product form that is poised for growth – 3D printers. Unlike the recreational marijuana market, which most people fully understand, 3D printing technology is less understood and, consequently, few non-technical people currently see a reason to investigate this for a potential purchase.
However, this lack of interest should not be viewed as a reason why 3D printers will not be successful. This same mentality proceeded many other significant technology products such as personal computers, cellphones, flat panel television and tablets. People knew so little about these technologies they initially saw no need to purchase. But once they learned the benefits these products provided, their interest rose significantly to the point where they became buyers.
As discussed in this 24/7 Wall St. story, the parallel between 3D printers and other technological innovations suggests all the elements are in place for 3D printers to jump from the Introduction stage of the PLC to the Growth stage. We can see this in two ways. First, there is an increase in the number of competitors offering products. Second, there has been a notable reduction in price compared to the high price skimming approach used in the early Introduction stage.
While price may still seem quite lofty for the average consumer (e.g., $999 for low-end model), if this product can successfully cross the technology chasm, expect to see rapid price drops over the next year or so. Also, expect to see advertising that appeals to a much wider audience than just commercial product designers and the medical community. For instance, we are likely to see promotions directed to artists and craft people as well as educators. And soon we may even see an ad that targets 3D printers as a fun activity for kids.
A consumer products company (CPC) that primarily sells products through retailers, often faces a difficult choice when it comes to allocating promotional funds – use a push approach or use a pull approach. As we discuss in our Types of Promotion tutorial, promotions that are directed primarily to the final consumer (e.g., advertising, coupons) fall under the category of pull promotions since these are intended to capture the attention of those who will be the ultimate users of the product. By doing this, a CPC hopes to generate demand that will bring people to a store (or online). Targeting promotions directly to consumers is particular effective when a CPC is having problems getting a retailer to stock a product. The promotions are then a way to convince retailers to be ready for customers who will come looking to buy. For retailers, this may persuade them to carry a product that they did not previously carry.
An alternative to the pull promotional strategy is the push approach (e.g., product stocking incentive, discounts) where a CPC directs a large percentage of its promotional spending to the retailer rather than to the final consumer. The idea is to convince the retailer to not only carry a product but to employ extra effort to promote it to their customers. For instance, to receive a push promotion a CPC may require the retailer to carry the product and also to locate the product in a high-traffic area of a store. In doing so, the CPC expects sales opportunities will be much better than if the product was placed on a bottom shelf in the middle of a long aisle.
Now, some companies will use both methods though, in general, the bulk of promotional spending is usually directed to just one approach rather than splitting it evenly between both. Because of this, when a company shifts focus from one method to the other, there is usually an underlying reason for making this move. In most cases, this reason has to do with the ineffectiveness of the other approach and the need to try something different. Yet, major changes like this do not always work. A good example may be seen in this AdAge story. It talks about how Campbell Soup Company experienced a decline in sales despite shifting a sizeable amount of promotion from consumer-directed pull promotion to trade-directed push promotion.
It is not entirely clear why Campbell made the switch. However, the change was likely needed in order to persuade retailers to stock a number of new product offerings that were recently introduced. Now that the retailers have accepted these products, expect Campbell to again direct the majority of their promotional funds to pull spending.
Whether or not you agree with the legalization of marijuana, from a marketing perspective what is evolving is certainly an intriguing case study on how markets evolve. In some respects, this market can be examined from a Product Life Cycle (PLC) standpoint, with the legal recreational marijuana retailing business being in Introduction stage. However, PLC analysis is somewhat less effective in suggesting that the current purchasers are considered Innovators and Early Adopters. Such analysis is generally limited to New-to-the-World products rather than something that has been available, albeit illegally, for a long time.
Maybe a better way to analyze this is to say recreational marijuana is a new retail distribution outlet. While currently limited to Colorado and soon to the state of Washington, over the next few years many predict this channel will expand into many other areas of the country. As the market grows, it will also be fascinating to see the retail strategies marketers use to broaden distribution. Currently these products are sold within small independent retail stores, but some day we may see marijuana sold in large corporate chain stores and retail franchises. We could also see other retail options, such as sales through vending machines (see included YouTube video) or as discussed in this National Public Radio story, via mobile truck retailer.
Of course, distribution will not be the only marketing area impacted. For instance, promotional decisions will also be significant. While mainstream media are not likely to accept direct advertising of marijuana any time soon, it will be interesting to see if they permit ads that indirectly allude to the drug by using creative words and images to get the point across.
While some marketing options will be limited by government regulation, expect marketers to find creative ways to take advantage of whatever opportunities are available.
When we think about retail formats, likely the most under-appreciated is the vending machine. While online retail sites, such as Amazon, and big-box retailers, such as Wal-Mart, receive a heavy dose of press coverage, vending seems to always be looked at as an also-ran – something that is there but not all that interesting compared to more publicized retail options.
If you view vending machines as just a piece of machinery that you need to smack to get your packaged snack to fall, then take a look at this story from SelfServiceWorld. It reports on innovative forms of vending that sell products not previously offered through that outlet. For example, the story discusses the selling of cupcakes that are freshly baked each day. There is also a vending machine stocked with fresh salads and a vending machine in Australia selling bananas.
Obviously because these products have a short expiration dates, the key to these vending machines is the need to supply inventory on a regular basis. That requirement alone is likely to prevent fresh vending options from appearing in most corporate cafeterias. Despite this limitation, fresh vending is one area of retailing that is poised for growth, so expect to see more products distributed this way.