Lesson 3/Week 8: Pricing/Channels and IMC

Moving on to the next couple questions for this week:  Google's target audience and its tangible products

Google really targets anyone who has a need to move information around.  One of its core missions is to organize all of the world's data.  It the traditional sense, Google's customers are really advertisers, and it obtains most of its revenue from AdWords and AdSense.  It designs tons of free software though and is the market leader in search engine technology, which helps to make its advertising business much more attractive.  They also make quite a few tangible products.  For these, they target customers who want really great designs (like Apple) and want an alternative to iOS or Microsoft.    

Some of their tangible products include:

• Chromebook - laptops running the Chrome OS designed by Google
• Nexus 5 - newest android smartphone manufactured by LG, but marketed as the "Google phone"
• Chromecast - USB media streaming device that turns regular TVs into SmartTVs
• Google Glass - wearable computer with a Heads-Up-Display and camera, allowing consumers to interact with applications and the Internet via voice commands
• Google driverless car - just what it says, trying to eliminate congestion and accidents

These are just some of the tangible products, to say nothing of its software based solutions that make people's information gathering and sharing much easier and lives more productive.  

Lesson 3/Week 8: Pricing/Channels and IMC

After discussing the Colgate-Palmolive Cleopatra case in our private team forums, and in the Breeze session, it's back to blogging this week.  Material covered so far includes:

• Read Chapters 8 "Developing Channel and Logistics Strategy" and 9 "Developing Marketing Communication and Influence Strategy" in the Marketing Plan Handbook
• Watched Camtasia video on Marketing Channels and Integrated Marketing Communications

The points of discussion this week center on the following questions:

1. Reflect on a firm or product you like which you believe is highly effective in bringing all the elements of the Mix together to create beautiful symphony for their consumers.
2. Who are the target audience for the company's market offerings?
3. What are the tangible products the company offers?
4. How does the company utilize price, and place to enhance the value of its offerings and why do you think there choice work well together?
5. Does the company have a unique approach to communications with their target audience? How is the approach well suited to the other elements of their mix?  

When I read this, Google is the first company to pop into my mind.  I really love how they have attempted to disrupt a lot of different markets.  I first appreciated their efforts to make maps and navigation capabilities free on smartphones, which really hurt Garmin.

Living in Kansas City, I have anxiously been awaiting the launch of their new Google Fiber Internet and TV service  (https://fiber.google.com/about/).  I really think they bring the four T's together in this offering in a beautiful way.  First, the product is amazing, offering the potential to have Gigabit internet speeds that far exceed anything in the market right now.  Google claims 100x faster than today's average broadband speeds.  Second, the price is very competitive, or even less, than the competition's flagship internet bundles.  At a $120/month, it is a compelling value.  It seems to be a neutral pricing strategy.  What is more revolutionary is that they are giving away free broadband internet (lower tier speeds like 5 mb/s download) as long as customers pay a one-time $300 construction fee.  I pay $37.99 right now for speeds not all that much faster from Time Warner.  So this is going to put a lot of pressure on ISPs to lower prices, which is great for the consumer.

Next, the "place" in the marketing mix refers to whatever community in a given area has pre-registered for a "Fiberhood" in sufficient quantities to make it worth Google's time to build the network.  By being exclusive and forcing customers to band together to sign up en masse to get their neighborhood connected, it is creating a lot of buzz.  By only moving to selected cities and publicizing their efforts widely, it is building a lot of excitement and demand for them to expand rapidly.  Right now, they are taking a very methodical approach.  Kansas City, Provo, and Austin are the three pilot cities, with San Antonio, San Jose, Portland, Salt Lake City, Phoenix, Nashville, Atlanta, Charlotte, and Raleigh-Durham on tap.

Their promotion has been very effective, but understated.  They know their technology is awesome, and have focused on getting out the message across various KC suburbs as to the required timeline to sign up when your area is eligible.  If you pass on the first opportunity, there may never be another, because I believe they have to build right to the house.  Most of the advertising is on television and is direct marketing.  Word of mouth communications are very positive among the communities that already have the service too.  They have focused largely on creating 'pull' demand from customers through their process of getting sufficient commitments before spending CAPEX.

Google has done well with coordinating the mix with Google Fiber.  I only wish my local city council in Overland Park hadn't messed up royally and angered Google.  As a result of their mismanagement of the contract process, we are on indefinite hold while the rest of KC gets the service.    

Lesson 3/Week 6: Invent on Behalf of the Customer

The final discussion prompt for this week was to consider how product development has been affected by shorter product lifecycles and how technology has affected product development.  I stumbled on a website article that claimed 50% of annual company revenues across a variety of industries come from new products that are less than 3 years old (link below).  That’s amazing, as it means that the Maturity stage in the graph below is a relatively short time frame.  Companies are then not able to harvest profits for an extended period of time.  Product development must be focused on continual innovation to survive then. 

I would think this makes it much more critical to keep development costs under control.  As the article mentions, forecasting is huge for demand because decisions to move forward have to be made quickly.  If a company takes too long to launch the product, someone else will capture the market first.  Thus, I think product development timelines have probably decreased on average.  I think technology helps firms meet the accelerated timelines though.  Better manufacturing technology, supply chains, and logistics can counter some of the shorter lifecycles and allow companies to meet time-to-market challenges.   

An example that crossed my mind is the movie industry.  I think they can predict the total gross revenue from a movie fairly accurately now just from the first two or three days’ ticket sales.  Movies are basically following an extremely condensed version of the product life cycle graph below.  The growth, maturity, and decline stages happen within a span of 3 weeks now.  I can remember 20 years ago a blockbuster would stay in theaters for a whole summer.  Nowadays if I can’t catch the movie in the first 3 weeks, it’s hardly playing anywhere.  I’m not sure there is as much impact to the product development stage for the industry compared to tangible products, but it does seem that trilogies have gone from every 3-4 years between movies (original Star Wars) to every other year (Hunger Games or Lord of the Rings as examples).  This probably has a lot to do with making sure the actors cast do not change so much in appearance.

http://www.sourcingfocus.com/site/opinionscomments/the_product_life_cycle_is_in_decline/

Lesson 3/Week 6: Invent on Behalf of the Customer

Another question we were asked to think about for this week concerns the various levels of products we currently use.  There are generally 3 levels of a product:

• Core – the benefits itself we set out to obtain as consumers
• Actual – the physical product we purchase
• Augmented – additional non-tangible benefits a product can offer and customers find useful

The first two levels are fairly self-explanatory.  However, the idea of augmented products includes areas like sales service, help lines, warranties, or free delivery.  Here are a couple of my favorite products:

Core	Actual	Augmented
Blu-Ray movie player, games console	PS3	PS Network for games, Smart-TV replacement
Mobile communication and information capability	HTC One M8 Cell Phone	Sprint’s 4G LTE network, Google Android Apps
Sustenance	Papa John’s Pizza	Fast service, convenient online ordering, frequent promotions

Lesson 3/Week 6: Invent on Behalf of the Customer

One of the questions for this week’s learning blog was to consider products that have become obsolete.  Products are tools that provide consumer benefits, and if a better tool comes along that provides the same core benefit but is easier to get, cheaper, or more fun, the old tool will be obsolete.  I went searching for examples, and found a link with some of the biggest ones over the last 10-15 years. 

http://www.businessinsider.com/21-things-that-became-obsolete-this-decade-2009-12?op=1

The first one on the list was the one that immediately came to my mind:  The PDA.  I remember I was issued one of these at Officer Candidate School in the Navy in 2000.  I though my Palm was the greatest thing ever.  Of course, it became completely obsolete when Blackberry allowed calendars, phone calls, messaging, email, notes, etc., all in a single product.  Then the touch-screen smartphone killed it.  Palm tried to get into the smartphone market, but they were too far behind.  I believe they were bought by HP and then discontinued.

The next one was E-Mail accounts you had to pay for.  My first interaction with email was through school in the late 90’s, so college students by and large had free access early on.  But America Online was selling it as part of their service, which got killed by Gmail, Yahoo!, and Hotmail.

There are lots of other great examples, like video rental stores supplanted by Netflix/RedBox, dial-up internet replaced by DSL/Cable broadband, Maps (I still have a few stuffed in the side pocket of my car though), VCR’s, and long-distance charges (killed by Skype, VoIP, and cell phones). 

I’d love to have been a fly on the wall when executives were trying to decide what to do after becoming aware of all of the threats posed to these now obsolete products.  How much marketing myopia was going on?

Lesson 3/Week 6: Invent on Behalf of the Customer

Materials covered this week included:

• Read Chapter 6: Developing Product and Brand Strategy, the Cleopatra case, and the article Apple and Innovation:  From Ruins to Riches
• Watched the Rory Sutherland's TedTalk video and Parts 1/2 of the recorded lecture

Deliverables:

I have an idea I'm excited about for our Individual Ideation Project.  My segment will focus on meeting the needs of working adults who are pursuing graduate degrees and are also looking to change careers  We'll see if it gets picked by the Prof as one of the best ideas...

I also have to complete a 10 question quiz, so I'll have to review the first six weeks' worth of material. 

Lessons Learned:

This week's lesson was focused on the product development process.  We learned about the product life cycle, which is a cool concept.  I never paid much attention to it, but I guess all products eventually die.  The four stages are:  Introduction, Growth, Maturity, and Decline.  The early stages are characterized by rapid sales growth, which levels off by the Maturity stage and eventually declines.  Profits are highest in the maturity stage.  

There are various things a company can do to prolong this cycle and harvest profits for as long as possible.  For instance, marketers can continue with product development, changing features that refresh an offering.  They can do marketing development by expanding to new geographical markets.  They can also target deeper market penetration by highlighting secondary uses and trying to improve the usage rates of a product. 

We also learned about the new product development process, which has 8 steps, although different sources will have a different number.   It all starts with Ideation, and ultimately ends with Commercialization.  The biggest takeaway for me was that it is important that there IS a process, even more than what the specific steps are.  Companies have to be disciplined in how they go about developing new products, or it will just increase the already high failure rates.

In Sutherland's Life Lessons from an Add man, he made awesome points about how so much value is intangible value, which relates to the book's concept of brand equity.  My favorite quote was (paraphrasing) "Saving is just needlessly delaying consumerism."  What would the world be like without brands.  I am convinced that if I ever want to strike out on my own, building a brand may be the most important part of the business.  Continual innovation combined with a strong brand may be the only thing that comes close to creating sustainable competitive advantage.

Lesson 2/Week 4: STDP

This week we are studying Segmentation, Targeting, Differentiation, and Positioning.  I had to read the HBR article on the topic last week to get ahead as our team is required to submit the first part of our consulting group's marketing plan at the end of this week.  We were responsible for looking at the electric and hybrid vehicle markets in North America to try and identify the best segments to target.  I also read Chapter 4 in the textbook in preparation for my responsibility to focus on the STDP part of the marketing plan.

There were numerous questions posed this week for learning:

How does segmentation facilitate consumer obsession?
I think segmentation helps because it forces the company not to view all its customers as being the same, because they're not.  Grouping them into logical cohorts allows the company to pinpoint a marketing message that will speak directly to that group.  The text talks about how companies are going away from undifferentiated marketing because it's not as effective.  My guess is that marketers want their customers to feel like they're being obsessed over, and treating them as unique through a disciplined segmentation process seems a necessary part of the process.

When a firm chooses a particular segment for targeting what are its primary considerations?
I think a firm should choose by balancing areas like market factors, competitive factors, business environment factors, and economic & technological factors, as the book lays out on pg 73.  There are always trade-offs, but the firm will seek to find the optimal mix of growth rates, barriers to entry, bargaining power for buyers/suppliers, investment required, political/legal/regulatory concerns, threat of substitution, and the degree of differentiation it feels it can bring to the market.  These are just some of the primary considerations, but there are others.

What is positioning?  Where does it reside?
To me, this is communicating the aspects of the brand or product that differentiate your offering based on what customers find meaningful and what influences their buying decisions.  This is basically the book definition, and it is a good one.  If a company has solid positioning, it should be able to obtain a competitive advantage.  I would think it should reside in any medium the firm is spreading its marketing message for a particular brand or product.  It should be on the product's website, television and print ads, etc.

Think about a couple of companies competing in the same space with different segment focuses.  Discuss these firms and their various approaches.  Why are they different?
An example that comes to mind is Goldman Sachs vs. Edward Jones in the wealth management/Personal Financial Adviser space.  Both essentially compete for assets to manage from investors for retirement, but they target very different segments.  Goldman goes after the high net worth individuals and leverages its reputation as a top notch investment bank on Wall Street.  Goldman Sachs' Asset Management division tends to operate in large cities.  Edward Jones, in contrast, focuses on investors of modest means who are interested in long-term buy and hold strategies and highly value personal attention.  Because of this, Edward Jones will set up it's financial advisers in an office by themselves, and try to blanket an area with many offices so customers feel more like they're visiting a neighborhood adviser.  Both are very successful models, just different target segments.

Looking forward to reading our first case, The Fashion Channel for next week....