Keep Your Friends Close and Your Competitors Closer

On to week 4 of Marketing Management and we take a closer look at competitor. Even before getting to the lecture and discussion on the subject, I found that there was some debate as to the proper way of handling competition in marketing. Some of the articles presented to us conflicted with one another on how to handle the matter. Some urged for greater attention to be paid to a company's competitors while others suggested a more internally focused approach. After reviewing all of the materials, I was left with many thoughts and a few that connect to some current events.

Going a la carte

The live class had a conversation that briefly mentioned cable providers and their struggles in surviving against places that offer on demand material without the hefty price of subscribing to an all inclusive service. Just before this lecture was recorded, I watched a piece on my local news about cable companies making a change to accommodate this customer demand. Rather than forcing customer's to pay for a variety of channels, many or more likely a majority of which are never viewed, customer's would now be able to pick and choose which channels they would like to receive. This "a la carte" option would be much more consumer friendly and allow them to avoid paying for the aspects of the service they have no interest in. As a consumer and a cable customer, I would love having an option like this as the majority of channels my family subscribes are simply part of the package and have no real benefit to us. I would be impressed to see a cable or satellite provider offer this to customers. I think it would be a great marketing campaign that would attract many customers, wouldn't you?

Apparently, this is not something that marketers were forecasting as a new business strategy as this concept is not something being brought on by companies but rather being pushed for by government. Connecticut Senator Blumenthal recently signed on as a co-sponsor on Arizona Senator McCain's "a la carte" bill that is trying to put pressure on companies to switch to this approach to benefit consumers. The bill now has bipartisan support but is likely to meet resistance in Congress. 

In my opinion, this is a great opportunity for a company to jump ahead of the competition and offer this service without being mandated to do so. On the local piece that I watched, every person interviewed supported the bill and said they would much rather choose their TV programming in this manner. This seems like a concept that can be researched very easily and would satisfy many customers. So why not look for a competitive advantage in the industry and make this a la carte dream a reality? I'm talking to you, Comcast.

Customer Loyalty

What I'm about to suggest is quite radical. Don't give up on it too early. There may be a problem with too much customer loyalty.

As this marketing class was quick to establish, the goal of a business is to gain repeat customers. Customer retention is hugely crucial to a company's success, making customer loyalty essential. I am not disputing the importance of keeping customers, but some of the class discussion centered around technology got me thinking a bit. Certainly, a company wants brand loyalty. The ultimate goal of Apple is for all of its customer's to choose Apple products over any competitors. What I begin to question is where does that loyalty need to stop? Does a company want that to stretch to product loyalty?

Let me further explain. If a customer becomes absolutely loyal to a product, that means they are likely in love with everything that product has to offer. Couldn't this lead to a customer becoming satisfied with only a current offering and not at all intrigued by a new model coming out of the same product. Perhaps a customer loves the iPhone 5 so much that they'll have no interest in the new offerings that come along with the iPhone 6. Or what about those users who have an iPhone 5 and love the multiple purposes it serves. Because of their ultimate satisfaction with the product, they see no use for the iPod or iPad whatsoever. What I am suggesting is that you certainly want brand loyalty but not necessarily product loyalty. If a consumer becomes to enveloped by one particular product, they may not see or even care to see the benefits of another.

So how much brand loyalty is too much? Maybe I'm getting carried away a bit, but this concept would only come into play in certain situations. During this week's lecture, there was a lot of discussion regarding Samsung and Apple and their different offerings. One student made a point that the latest iPhone is rumored to be complete with a larger screen, reminiscent of the Galaxy S3 and S4 offered by Samsung. This is showing that Apple is currently chasing their competitors when it comes to their market planning. But is this a good thing for them to do? Thus far, Apple has survived on doing things their own way and have built a loyal customer base that expects them to continue doing what they do well in their next products. With a very strong sense of brand loyalty, would it make sense for Apple to alter their brand to match their competitors? If they do choose to change based on their competition, their strength in brand loyalty may turn into a weakness as the consumer's who prefer Apple for being Apple may no longer be satisfied with their new product offerings. 

In the end, customer loyalty is still the ultimate goal as it is the key to customer retention. These two ideas were merely suggestions and help lead me to two conclusions. One is that a company must be strong in marketing all of its product to its consumers, showing the specific benefits of each offering so as to not have one constantly overshadow another. Secondly, a company must be smart in sticking to their competitive advantage and providing their loyal customer base with what they are demanding which us ultimately defined by conducting quality market research.

Unforeseen Competition

One topic that was covered quite a bit within the week's material deals with identifying competitors. Different levels of competitors were discussed and it was pointed out that they can be in different industries altogether from what a specific product or service actually is. It was also brought up that often times competitors arise that are completely new and were never anticipated to be competitors. This is the case for the cigarette industry.

http://www.nbcnews.com/video/nightly-news/52558842#52558842

The above link brings you to the NBC Nightly News story about e-cigarettes. They are becoming increasingly popular among today's cigarette smokers. Some use this product as a safer alternative to cigarettes while others use it as a tool towards quitting. Regardless of the intended use, there a certainly benefits to the product as mentioned in the video. More importantly for the cigarette industry, they are taking market share.

Because of the growing popularity, the top cigarette companies should now view e-cigarettes as competition. Indeed they are doing so as the industry leaders are now showing interest in either developing their own version or becoming involved with pre-existing products. This is a perfect example of an industry being introduced to a new competitor and being forced to respond accordingly in order to maintain their market share and not lose their competitive advantage.

Moving Forward

No matter the approach a company decides to take in regards to viewing its competition, it is important that they continue to look towards the future. In doing the same, I am looking forward to connecting this new knowledge to Pharmasim and better analyzing my competition for decision making. I continue to find connections between the course material and the simulation that will enhance my decision making and overall experience. It's almost as if the course was designed that way.

Market Planning, Market Analysis, and more Market Planning

Another week of marketing down and this one came with much greater pleasure for me. For once, I feel I’m finally caught up with the work and not rushing to get through the material (as I post this blog last minute of course). Having more time on my hands, I was able to enjoy class a little more and gain a greater appreciation for the material. Now, for what I came away with this week.

Dishonesty in Marketing

Referencing the question that was posed in class discussion, I would agree with the general feeling of the class that most companies would prefer not to alter their marketing and be dishonest based on what the customer wants. However, I think there are numerous examples of where this does not hold true. One such example I can think of is not at all company specific but rather can be linked to much of the food industry: the declaration of “0g Trans Fat”. The consumers who are becoming more health conscious realize how bad trans fats can be and are looking to avoid their consumption. Companies are claiming that their foods do not contain trans fat when in reality many of them do. The amounts are low enough per serving size that they can legally claim this as true but in reality it is not the case. This scenario is companies taking advantage of a loophole created by the FDA, but I still feel it fits in this discussion.

Another example I can think of is in regards to flavoring and is again more of a generalization than a specific attack. I look at different juices and see that there are many options that are organic, completely naturally flavored, and very health conscious. Then I see advertisements for a product where the commercial says “natural flavor”. The intention here is to make the consumer think they are drinking an all-natural product that will be quite healthy for them. The reality is that while they are not lying about containing natural flavors, there are also artificial flavors present. Sometimes the natural versus artificial flavoring will be at 10% to 90% respectively, yet a company can still prompt you to enjoy their “naturally flavored” product. This is another example of marketers misleading customers based on what they seek in a product.

I am happy to say that in my current organization we strive to avoid any dishonesty regardless of what the consumer wants. One opportunity that we have is in one of our specialty products. We offer an ice cream that is made without sugar as the number of diabetics who frequent our store looking for something for their needs is quite high. Most of the customers who fall into this category are calling for a “sugar-free” product. What we offer is a “no sugar added” product. The product is made using Splenda rather than sugar, including any additional ingredients we add to it for different flavors. However, the ice cream mix that is used does have very low amounts of natural sugar in the mix. Sugar-free would be much more marketable to those following a regimented diet compared to no sugar added. However, we chose to go the honest route instead of lying and telling customers something they’d rather here.

Identifying the Right Metrics

A continuing topic that has appeared in back to back weeks is an organization setting metrics to measure their performance. Throughout the discussion on the subject, there has been a consensus that results based metrics are clearly the better indicators of how a company is performing. The other metrics, in-process metrics, are not nearly as effective at telling a company how well they are doing. They are not nearly as measurable and cannot help determine how well a company is performing and how good a job they are doing of meeting their ultimate goal of profit.

Wait a minute—I thought that companies were striving to earn loyalty from their customers? Didn’t our class just spend a great deal of time concerning how repeat customers are essential for the success of the business? Repeat customers are much better to have than trying to constantly get new customers. So when I look at these in-process metrics, I see a great value in them. Customer satisfaction is a metric I would certainly want measured. If a customer is not happy, they are certainly less likely to come back to a particular product or even a company as a whole. An in-process metric like product defects sure sounds important to me if you want to keep customers. They’ll be much more inclined to steer clear of a product if its constantly defective. Results based metrics are certainly good at telling you all about your sales and the amount of current customers you have. But in the end of the day, the main goal is customer retention and in-process metrics will give you a much better clue as to how many of those customers intend on coming back compared to results based metrics. If a company wants those ever so important results based metrics to look satisfactory in the next year, they ought to pay attention to the in-process metrics as well.

Market Anaylsis in PharmaSim

A note from the simulation activity in regards to market analysis. The market research that is conducted and made available to students using the simulation offers a great deal of insight that (once I become more adept using the simulation) will help to make decisions. In comparison to the total marketing budget, the cost of such research is quite low and is well worth the money spent. After completing phase 10, I note a total marketing budget of $51.4 million. The total cost of the research made available for period 11 is a mere $741,422. That is less than 2% of the total budget. Again, money well spent when it comes to informed decision making.

Price Discrimination

One classmate question that I found intriguing was actually touched upon briefly in class but still left me with some thoughts. The question asked about companies offering discounts based on volume as we do in the simulation to retailers or wholesalers and how that fits into violation of rules prohibiting price discrimination. The answer seems to be that this is not price discrimination in anyway because the same discounts are available to all those who purchase the product. They all have an opportunity to earn the same price break by purchasing in the same amounts. It is not offered to a particular group but rather made available to everyone. But I don’t see this as being all that true. Certain retailers have a greater buying power than others based on their product offerings, size of their store, number of chains they have open, or other factors. A company like Walmart has a tremendous advantage in buying power over many others retailers. So if a volume discount is being offered at an amount that only Walmart can feasibly buy, isn’t that in effect giving a particular company a special discount on a product? While it may be a legal loophole, it sure looks like it could be a case of price discrimination.

Looking Back

In taking a look at some previous blog’s from classmates, one in particular caught my attention. Jennie’s blog about her experience at Friendly’s interested me. Her dissatisfaction with her experience was quite obvious and left her with questions about the marketing strategy of Friendly’s. Her prices went up without explanation and she was left in wonderment. I would certainly share the same reaction in being displeased, but in thinking about it, it makes sense that she was unaware of the change. A company would not want to promote a price increase for the same offering. Rather, they want to market a product or service and offer an extra incentive for it, in hopes that people will try it, like it, and come back for more. They don’t want to alert you when you’ll have to spend more to keep you away. Jennie was clearly one who was coming back for more, until the deal was no longer present that is. Now Friendly’s must do their market research and identify Jennie’s displeasure with the price increase and determine whether or not they should reinstate that fine deal. My advice to Jennie: come to my ice cream shop for your sundae instead. Homemade is always better. It’s a bit of a drive but well worth it.

Working with Pharmasim

I finally have had an opportunity to devote some time to the simulation. Going into my first run through of the simulation, I wanted to make sure that I first and foremost became familiar with how to use the simulation, properly executing decision, and all of the basics in using the program. I was trying not to concern myself too much with results, how effective my decisions were, and heavily scrutinizing where I went wrong. This would prove to be quite difficult as I progressed. Nonetheless, I've gained a better understanding of the simulation and its operation and have come away with a few different observations.

I Have No Clue How Long a Period Is

I tried to seek out the answer to this to no avail. I'm sure it's out there somewhere and I'm simply overlooking it. But what I was estimating a period to be seemed like a very low assumption to what it actually is. The most notable factor this is based on is the rate of inflation. Early on I paid little attention to raising the price until I finally realized just how quickly competitor's prices were rising and how far behind my prices were compared to them. Finally, I raised my prices a bit and when comparing them to the inflation rate, I was not even close. I now believe that these periods are much longer than the perhaps 1-3 months I had assumed. If not, I'd hate to see the cost of fuel.

Can't Forget About the Science Behind the Product

In adding a new product, I found that you had to start from scratch in every area of the simulation compared to making alternations to the Allround brand with suggestions already being made for you. It was in the advertising that I had the most trouble as it took me some time to figure out what I was supposed to be advertising. I guess I forgot that people with allergies tend to sneeze, feel congested, and have a runny nose because I neglected these other areas in advertising, solely focusing on the fact that the drug was intended to combat allergies. I now know more attention must be paid to ensuring that all treatments are properly covered in advertising.

Capacity is the 8th Wonder of the World

I was aware that in our simulation in particular, the ability to make changes to manufacturing capacity was taken away from us. What I was not aware of was how much of a frustration capacity would be. It seemed to me that every time I advanced, I was working over capacity and I was completely unaware of how to get back down below capacity. My original inclination was to begin discontinuing brands to get under capacity but just as I was about to take that step, more capacity was added. In no time, I was over that additional capacity. My initial thought is that it is a good thing that the company is increasing its manufacturing and increasing its sales but a company is also not capable of running over capacity for any kind of duration. I'm exactly sure what is triggering this to occur or how best to change it without eliminating brands altogether. Capacity is proving to be very frustrating, confusing, and annoying. Good thing I'll never experience any struggle like that in the workplace.

More to Learn

Mostly I have learned that there is a ways to go. Much more time needs to be spent working in the simulation to get a better feel for different actions. I need to devote more time to reading into the various information that has been given and connecting them to my decisions. At this stage, I know well enough how to operate and progress through the periods. Now it is time to be more conscious of exactly what decisions I'm making, their effect on the company, and analyzing the results I achieve. I'm eager to begin the "Try This!" so I can go into the simulation with a little better direction than I previously had.

My Second Week in Marketing

After the first week being a short one running into the weekend and a technical issue giving us a fits, I found myself cramming to find time for the material of week two. Despite the time crunch, I found myself once again intrigued by the topics and discussion that was occurring, prompting many thoughts.

Missing a Mission

A good portion of this week’s material focused on the mission statement of an organization, the details contained it, and how it is the basis of a company creating a plan and getting all employees moving in a common direction. Upon looking at my current organization I realized that there is no mission statement. Currently I am a store manager of a small ice cream parlor that has been family owned for over 30 years. I am the first of my kind as the store has never had anyone in a managerial position outside of the owners. Because of this situation, I don’t find much need for a written mission statement as is the case in most organizations. In the Lehmann text, there is a discussion about marketing planning that I see as being applicable to mission statements as well: “the plan is a written document, not something stored in a marketing manager’s head”. In the case of my organization, there is no need because the mission is not really applicable to rest of the organization. We have anywhere from 3-8 employees at any given time during the year, most of who are not yet legal adults. Their needs and desires are far different from that of the owners. While the owner worries about making a living, supporting his family, and properly running his business, the employees mostly think about getting out of work as early as possible and when that paycheck is coming in so they can plan their next outing. In this scenario, there is no need for the mission of the organization or the strategies which are being undertaken to be written down and made public information. The thoughts rarely need to leave the owner’s head and only do so when I can assist in decision making or planning. When that situation does arise, a direct conversation does the trick rather than having to reference the old company manual.  By and large, this organization has been a one man show and has presented no need for a traditional written mission the way a standard organization does. There is never a change management. There are no different departments working towards a common goal. There is just a man producing products and his employees serving customers and cleaning up shop. The mission is simple: provide great customer service and keep people coming back for more.

Speaking of coming back for more…

It is undeniable that an organization survives based on having loyal, repeat customers (with the exception of a mortuary). Being a part of a small business is no different and perhaps even more so true compared to larger organizations. The lessons from this week stressed the importance of keeping customer’s satisfied and coming back for more. A lot was made about the metrics and how to measure quality and performance. In my organization, we are lucky to be able to get very accurate and reliable metrics directly in store. First of all, we see exactly who are repeat customers are on a daily basis. We recognize those coming in for the usual and are well aware if somebody hasn’t stopped in for a while. We see exactly what products are selling more and what is not going as fast. Therefore, we know what customers like and what they prefer given the options presented to them. We know that we can test a product and determine its potential based on how well it sells and what customers think. One of my best metrics we have for determining the quality of our products is the sample spoon. When a customer comes in whether they are a new or a returning customer and they try something new that we have introduced or perhaps just something they’ve always skipped over and never had before, we receive instantaneous feedback. Sometimes they will declare its delicious and get it. Other times they will say it’s not to their liking. Perhaps it was good but not good enough to stray from the usual. No matter what their reaction, it is right there in front of us and easy to interpret. The immediate response that is available in our organization makes for great opportunity to give the customers more of exactly what they want, improve upon what they don’t like, and ensure a quality experience. And that is what brings people back for more.

One area this week that I found myself questioning after further thought was the concept involved with earning more money through repeat customers. It is completely sensible to me that repeat customers are less expensive than trying to acquire new customers. But it was also explained that as you receive more loyalty and get the same people coming back, you will continue to bring in their money and your expenditures will be going down, increasing your profitability. While in theory this may be true, I question its validity in one sense: is any organization ever done looking for new customers? No matter how successful you are, there is always room for growth and the potential to provide to more customers. Does an organization ever stop their efforts to acquire new customers? Customers that can turn into loyal customers just like the current ones you have? Based on that logic, the expenses would never really end up going down. Regardless of lower expenses or not, the fact still remains that it is those loyal customers who are the crux of an organization’s success.

Cohen’s Eight Principles

1.       Maintain absolute integrity
2.       Know your stuff
3.       Declare your expectations
4.       Show uncommon commitment
5.       Expect positive results
6.       Take care of your people (customers and employees)
7.       Put duty before self
8.       Get out in front

In the text Drucker on Marketing, Cohen explains how marketing is leadership using 8 principles he found in researching effective leaders. In looking at my current organization, I see many of these qualities within the owner that make him an effective leader. One of the principles that he follows well is #3. There are not many expectations of the employees in our organization. They are not expected to accomplish great things nor are they challenged with impossible tasks. The expectations are made very clear and are more importantly explained as to their importance. If something is expected to be done, there is reason behind it. More so than declaring specifically what is expected, I think it is very helpful for employees to understand why it is they are doing something. Another principle that he excels in is #6. Our little store is known for exceptional customer service and making sure that everyone who walks through our door is treated wonderfully. The same way we are to treat our customers is the same way that the owner treats his employees. This makes it much easier to replicate this attitude and conduct towards customers, which also reflects on principle #8. Being that we are a small business, the owner, in addition to running the business, as all the same jobs as the employees. Everything that is expected of us is done by him on a daily basis. Thus, there is always an example being given of the appropriate way of doings, reflecting back on #3. Additionally, this keeps the owner in tune with the customers and the daily operations of the store, making it easier for him to ensure that he is properly managing every aspect of the organization and making him an effective leader.

In looking back at our lack of a traditional mission statement, I think that the owner being such an effective leader is partially responsible for why we are able to get away without one. Being so heavily involved in every aspect of the organization makes it much easier to keep control of what goes on and ensuring that things are done the way he sees fit. But in addition to that, it is his ability to effectively lead his people that allows his ideas and his way of doing business to be implanted in the rest of our minds, even without a document spelling out how we are supposed to operate. This type of leadership would help to instill a mission statement or even a marketing or strategic plan in any organization. Certainly there is a need for the written documents in the larger organizations but having an actively involved, caring, and committed leader will only strengthen the mission, take what is on paper, and help put it into action.

A smaller approach

I'm beginning to see that most of what is discussed may not necessarily be reflective on a small business. My current position and my previous work experience has been in small businesses. So far I am enjoying seeing what is applicable in a small business setting and comparing it to how larger organizations operate. Seeing what classmates have to say is helpful, but at the same time I am often visualizing myself working for a large corporation and applying these concepts. I think that having an appreciation of both ends of the spectrum will enhance my experience with marketing.

Introduction to Marketing

Week 1 was set to be an introduction to marketing. I was hoping I was not going to be reading the Merriam-Webster definition of marketing or a reiteration of the 4 p’s as my previous marketing courses have been focused on. What I discovered instead was a great deal of information, some of it that may even be controversial, that took a much more in depth looking at marketing. There were many things I found to be quite interesting in the week 1 material.

The Artificial Need

I took a specific interest in this week’s discussion about whether or not companies create an artificial need for their products. Drucker states that the primary purpose of a business is to create a customer. In order to create a customer, you must have something to offer the customer that catches their attention and will address a want or need that they have. I tend to think that in most cases it is not creating an artificial need that attracts people to a product but rather suggesting a way that a product will fulfill a need that is already present. Taking the bottled water example from class, the immediate need that was addressed by having bottled water is to take water with you on the go. You will not spill as you would with a conventional drinking glass. Water is now readily available at all times. No need was artificially created or perhaps even prevalent in many consumers’ minds. All that occurred was that this idea was suggested to consumers. The same holds true for the fast food examples that were also discussed. The suggestion was made that a fulfilling meal could be made in a very short amount of time that satisfied a consumer’s need for a meal during the day.

With that said, I can see an argument for the contrary. Why is it that people drink bottled water when they’re not on the go? Why do people with a full fridge leave home and quickly return with a bagged dinner? The original suggested needs are no longer being fulfilled. Rather it is a company who has successfully integrated their product or service as being commonplace in the consumer’s life. This has become the norm and although there may not be an overwhelming need for a specific product or there is a more than suitable alternative, the consumer has become so used to and comfortable with something that it now becomes a preference. Thus, a customer is created.

Profit Maximization

The hot topic of profit maximization presented some interesting arguments this week. My view on the matter is heavily influenced by my experience with a local, family owned ice cream parlor. In this shop, the owner makes a comfortable living, but nothing that would create a big demand for his job. After being in business for 30+ years, there is not currently and has never been a focus on profit maximization. The main focus there has always been to create quality products and provide exceptional service to keep people coming back for more. The prices are very affordable. The only instances where prices get raised are when the prices of supplies demand an increase. The nearest competitors charge nearly double his prices for similar products but his prices remain low. The profit margin for each individual item that is sold on a daily basis is quite low. The only way that this store remains in existence and the owner gets to have a decent living is by having happy, returning customers. Had he ever switched to a profit maximization focus and not kept his prices low and focus on creating a good experience for every customer that came through the door, the business would not have survived for over 30 years.

What's to Come

The big takeaway from week 1 for me is that I am far from fully grasping what marketing is. More importantly, I am actually intrigued to do so. I am anxious to learn more about some of the topics that were teased early on, such as the difference between marketing and sales, the need for marketing throughout the entirety of a business, or the ethical considerations in marketing. There is a great deal left to learn, some of which I find myself already internally debating on whether or not I buy into. Only one week in but based on what has been learned and what has been hinted at so far I have find this course should be much more interesting than what I was expecting and am looking forward to what is to come.