As I begin to read over my classmate’s posts, I realize that their experiences are similar to mine and my teammate’s as we progress through the simulation.  They all seem to say what an experience that this has been thus far and I can attest that my team’s experiences are similar.  Kristen, I would have a tendency to believe that my teammates would concur with me that we concur with you regarding your statement of the importance of the marketing update report.  I believe that my team kept a constant eye on it at every move…not that it was easy watching every factor change and trying to keep up with those changes.

Push strategies and pull strategies seem to be the primary topic of the majority of posts.  Mindy, Kenny, Andrew, Justin…the list goes on and on of all of the people who mentioned the push/pull strategy.  Even I made mention of the push/pull strategy.  Now that we are all familiar with the push/pull strategy, I have a question.  Why do you think that the automobile industry was used as a primary example by the majority of people?  Just something to ponder…..

As I peruse the McKinsey Report Executive Summary (I hate to admit this, but if I was an executive, I personally would have trouble sitting down and digesting the entire 32 pages in one sitting…let alone the 168 page full report)  I see many  aspects of our class reflected within it.  Economic impacts, estimations, benefits, distributions….  A very interesting report chock full of information!

“Let’s face it, everyone is uncomfortable with change.” 

(Cohen, p.139)

In Cohen's book, he points out the fact that even though the Wright Brothers introduced a powered aircraft in 1903 and approached the United States Military with the idea, they waited four years before they opted to test it.  Maybe the concept finally got through to the military that other countries had already purchased a plane or two.  Or was it simply a resistance to change? 

To be honest, I can see how a resistance to change would come into play in this situation.  At the turn-of-the-century, yes I'm talking about into the 20th Century; it was probably a very difficult concept to imagine a metal tube with wings flying high above the earth.  I can see it now, as people go about their daily lives tending to the cattle and feeding the pigs, they suddenly hear an unfamiliar noise and wonder where it's coming from.  They can't quite figure it out until they look up in the sky and see a UFO, except that it is actually an IFO (identified flying object).  It would probably be similar to our concepts regarding flying saucers, Sasquatch, and alien abduction.  I don’t think that I would want to be one of the Wright Brother’s neighbors at the time because I would probably think that they were crazy. 

But looking at the target market that the Wright Brothers approached, I do believe that they were correct.  The market segment was correct, too.  The Wright Brothers definitely had a competitive advantage but a very small marketplace with a huge potential to grow.  But this was not a mass market, like in Pharmasim.  It was in a stage of preliminary development, but I don’t think that the Wright Brothers knew that quite yet, for that matter, I don’t think that the Competitive Advantage Matrix analysis existed, either.  The problem with the Wright Brothers target market was that the market, or the consumer, or the buyer (okay-let’s simplify this: the person who made the decisions) got it wrong…all wrong.    

On a side note:  How many people get the Smith Brother’s and the Wright Brother’s images mixed up in their mind?  The Smith Brothers made cough drops and the Wright Brothers made planes.  But using hindsight as a guide, imagine the potential of a product extension and growth opportunities!  A product linkage is already made subconsciously among many people but I will let you be the judge:  

 

Change is omnipresent, no matter where you are or what you are involved with.  It seems though, that change is more present within my life of recent.  As most of you know, we are rapidly approaching the arrival of a new bundle of joy.  Well, as most people can figure out, a ton of disposable diapers will be necessary in my house.

With both my mother and my mother in law currently assisting us and living with us, I am subjected to many stories. One of those stories included diapers. It was odd, that I almost felt like they were ganging up on me as they told me the story of cloth diapers.  It went kinda like this: A tradition of using pure cotton cloth, in order to protect a baby's sensitive skin, was in place.  Rather than simply open up the trash can and toss away the soiled cloth, they were rinsed out and reused.  Over and over and over and over again.

Now I am sure that I am not telling anyone here something that they don't already know, especially about cloth diapers relative to disposable diapers.  But, according to my mother and mother-in-law, the transition from cloth diapers to disposable diapers within each of their communities is still ongoing.  Is this a resistance to change?  Possibly.  Even though the disposable diaper is very popular within many cultures, many people are still highly uncomfortable with the use of disposable diapers.  As well, debates happen all of the time as to the naturalness of cotton in relationship to the types of materials that are used in disposable diapers.  But I for one, am extremely glad for the advent of the disposable diaper and as a household of two little ones (okay...you caught me jumping the gun, but I figured that I would include the newborn since I don't know when you will be reading this just like I don't know when she will be born) support the change to disposability.  And don’t expect me to abandon it anytime soon…

The Honda Motor company spent over $3.5 million for one commercial that starred Matthew Broderick for the SuperBowl in 2012.  The company depicted him as a modern- Day version of Ferris Bueller to promote the CR-V.  the movie, Ferris Bueller's Day Off, was released in 1986, meaning that if, at age of 10 to 15 years old, a person viewed the movie, the current day add would invoke memories of childhood days (and skipping school) while gently reminding potential customers, who are supposed to be in the years of the need of the product because they now fall in to the 36 year to 42 year age range where their children are beginning to grow up, they are supposed to have expendable income, and they are mildly pushed into a bit of luxury for themselves, of all of the features and must haves of the CR-V. (Whew!  Quite a mouthful)

Not only does this ad solidify the statement that is made in the article, "Effects of Advertising on Consumer Buying Behavior" which states, "overall advertising is a huge investment for corporations," but it also fits into the AIDA model described in "Consumer Awareness of Promotion: the AIDA Acronym."

 Matthew Broderick Honda Advertisment

Attention was brought to the product through the use of a very well-known movie and actor. Interest was generated in the product by demonstrating that the product can be versatile through showing the various uses of the space (large dog, large dog crate, showing a person dressed in active-wear), fit for a family (amusement park, games, large stuffed panda, which also demonstrated the amount of space in the CR-V in the back seat and the front), has modern technology as shown in the phone hook-up, redefines the level of activeness by showing Matthew performing Tai Chi on the beach, at the racetrack, and performing karaoke, which are all freedom enhancing activities, and ends with Matthew exiting his vehicle at a nice restaurant (a nod to the potential market) and then appealing to a slightly younger set market with the valet zooming off into the horizon and jumping over the crest of a hill, all while displaying the smooth lines, curves, and other attributes of the vehicle AND referencing the movie in at least 20 different ways. Desire for the product is created through all of the visual stimulation (as well as within the customer's mind as they picture themselves doing the same thing).  Action, well... On a personal level, I think that action is mostly initiated through dealerships but I am sure that Honda would like to think that the commercial is inventive enough to entice a person to put down the pizza and wings, get out of there La-Z-Boy recliner, and head on down to the local Honda dealer to purchase the CR-V.  But, I will admit the ad is quite a bit of marketing genius! Kind of like the Volkswagen promotion with the Trek mountain bike, except, while I could be wrong, I don't think that Honda want any awards like the Volkswagen campaign did.


And so it goes...

After the customer is enticed by the Ferris Bueller Honda advertisement, they are supposed to go to the dealership and want to test drive the automobile. This is where relationship selling comes into play. Images suddenly come to mind of being mobbed by men in salmon colored polyester leisure suits and a dark toupee that is coiffed into an Elvis type of hairstyle. But that isn't the way that it is or the way that it has to be nowadays. In the days of old, you would expect to see the aforementioned types of salesman (you may still see these types of people in some areas, though) , flying out of the doors and beginning to estimate how

much money that you have to spend by the way that you look. But, with the advent of social media, the minute that the customer begins to even smell something fishy, they tell two friends, who tell two friends, and so on except that instead of just telling two friends, they have the ability to tell 200 or more friends. As well, that number continues to multiply as their initial message is shared over and over again.


Relationship marketing, especially in the auto industry, is extremely important. However, there are a growing number of different companies who are utilizing some of these methods. Nordstrom's is a prime example, especially the shoe department. They know my wife by name, although she did make me a promise that she would not go in there until after the baby is born. (I am hoping that it will be wayyyy later... Like two years after the baby is born... But since she is on bed rest right now, she can't go anywhere, especially with my mother in town.)  Even the market that I spoke about last week engaged in relationship marketing. (For some strange reason, I see many trips to that market in my near future.)


But relationship marketing is also within social media. As the article, "Demystifying Social Media" points out:

"It means that the core concept for campaigns must invite customers into an experience that they can choose to extend by joining a conversation with the brand, product, fellow users, and other enthusiasts. It means having ongoing programs that share new content with customers and provide opportunities for sharing back. It means offering experiences that customers will feel great about sharing because they gain a badge of honor by publicizing content that piques the interest of others."

Using social media as well as other methods, a company can push strategies to entice buyers. Coupons and discounts can easily be distributed as well as incentives announced through social media. This strategy is often used within the automobile industry, for example, Honda currently has 13 incentives including special financing, military incentives, a contest called CR-V competitor conquest, and a CR-V loyalty program. Another good example of push strategies is energy drinks. The tactics with these companies is to send people into the streets to give drinks away, thereby pushing their product on to the consumer.


A good example of pull strategy is children's toys, especially around the holidays. Perhaps the most famous one within the last 20 years

would be Tickle-me-Elmo.  Apple Computers also uses a pull strategy by using product placement, advertisements, and public relations to increase demand.

... As I picked up my mother at the airport this evening, I had a bad experience at Starbucks. My mother arrived from a two day and total of 20 hours in the air flights that took her across the Atlantic Ocean, through a couple of different countries, and put her a day behind. She waited in line for customs for about an hour and a half and I waited on the other side for about an hour. We were both tired and the only thing that I wanted to do was to get home. But, my mother has an affinity for Starbucks coffee and she has made it her tradition to always get a coffee after she arrives in the United States at Starbucks. Now, I must tell you that she does not speak English very well but she manages. She wanted to use her English skills to place her order and I stood in the background.  Somehow, and I don't know how, her order for a straight up Venti coffee turned into a Caramel Macchiato.  She went back to the counter to try to explain, but the barista was quite rude and ended up grabbing the beverage from her hands and put her order at the end of the line. We ended up waiting over 15 minutes for a simple cup of coffee. At that point in time, it didn't matter if they use the push or pull strategy; they were at a total standstill in my book. Starbucks just got 'unliked' on my Facebook page and I hereby remove the badge of honor that I once carried so proudly. Ahhh, the power of social media.

So, after driving around New York City, or at least what seemed like New York City, we arrive home and I get the news that my mother in law will be arriving shortly (Tuesday evening).  Ummmmm, I am wondering if I will survive the next three months with me being the only male among five females (my wife, my mother, her mother, my daughter, and my daughter who is still in the womb).  Maybe I will head to the Honda dealership to see if they engage in a push strategy, a pull strategy, or straight up relationship marketing.

In order to take advantage of the supply chain a company must be able to utilize the entire supply chain for optimal productivity.  They must review the entire supply chain to determine the lowest cost to perform the value added operations and the best overall process.  How chain costing affects me in my own personal little world might not be as big in scope as it is to a company or a large corporation.  However, it does have its effects.

For example, just the other day my wife asked me to stop at a particular store on my way home from work to purchase milk.  Now looking at this from my point of view, I was going to stop at the large big box grocery store that is on my direct path to my doorstep.  Why?  Because it was a matter of convenience.  It meant that I spent less time in traffic.  Thus, less of an overall headache and because it was also on my way home meant that I could stay on my normal route and be at home within five minutes of the purchase.  But, the biggest benefit of all (at least in my mind) was that I would be able to save about $.30 a gallon if I purchased it at the big box grocery store rather than the store that she likes to go to.  In this instance the big box price objective would be sales oriented with the greater number of units being sold and equating to a penetration model.

Have It Your Way

My wife had other ideas.  She wanted to make sure that I did not stop at the large big box grocery store that is on my way home from work.  She preferred that I went to the locally owned and operated market on the other side of town that she liked to shop at.  Why?  Because they were customer oriented in their pricing approach.  They knew her, they knew what she liked and what she did not like, and to her the value in shopping at that store was very high. (And because all she had to do was call them and they would have everything bagged and prepared when she got there…talk about spoiled).  In all reality, I guess you could say that the smaller store was more profit oriented because many items did seem higher in price.  But on overall level, anything that we purchased at that store was high quality. 

Now I'm not sure if this store uses a markup or a profit maximization approach (probably a combination of both) but this is what I do know:  in order for me to travel to that store to purchase one gallon of milk it would encompass an extra 45 minute drive round trip, 1 gallon of gas minimum (idle time included), an extra 15 minutes to park the car and a minimum of a block's walk to the market, as well as the meter fee.  So, undervaluing my time at minimum wage of $7.25/hour, gas at four dollars a gallon, plus the premium of $.30 per gallon of milk, I am looking at a premium of $11.55 for a simple gallon of milk. 

Drucker maintained that businesses should start with the price and work back to determine the allowable costs rather than adding up all the costs and then additionally adding a profit on top.  “Drucker felt strongly that to assign the correct price, one must first look at prospective customers and how they see the product or service in the context of the market.”(Cohen, 2012)  I do see where Drucker is coming from, but since my purchase was small and I do not have economies of scale on my side, I guess I was attempting to use one of Drucker's five deadly sins in order to justify my purchase of a gallon of milk. 

But, No! Wait! There is more! 

I made an executive decision to stop at the big-box grocery store and purchased a gallon of milk.  I got back into my car and no sooner did I start the engine then my phone rang.  It was my wife and she stated that my daughter needed her sleepy cookies.  My daughter’s sleepy cookies are actually animal crackers, a specific brand of animal crackers that can only be purchased at her favorite store.  If any of you have children then you just might understand my plight.  Without her single animal cracker right before she goes to bed, my daughter will not sleep through the night and with her not sleeping, Mom and Dad don't sleep.  But, the story of the animal cracker will be saved for another day.  Instead, my wife informed me that she had phoned an order to the store and it will be ready for pickup in 10 minutes.

After driving across town, paying the meter fee, walking two blocks in the rain without an umbrella, I am finally upon the threshold of the store, soaking wet.  I go to the counter to pick up the order, but on the way through the store and out of casual observation, I did not see very many discounts or allowances to price influence any of the shoppers.  Instead, I noticed higher prices at the store compared to the big-box grocery store for similar items.  It was clear to me that there were no price influences or adjustments to entice shoppers to purchase the products.  You can be sure when I state that there is no such thing as an everyday low price or even a high/low pricing philosophy at this store, there is no such thing.

When I get to the counter, I am surprised at the size (and number) of bags that are pulled out of cold storage.  Here I was thinking that since I had already bought the milk that I would get the animal crackers and be on my merry way.  Instead, I realize that I was now going to have to carry 2 large shopping bags and 2 gallons of milk two blocks to my car...in a heavy rain. Instant *facepalm*.

They'rrre GR-R-REAT!!

I was beginning to struggle with the balancing between the bags and the milk and in the meantime wondering how I'm going to make it two blocks without the paper bags ripping in the rain.  I stood at the entrance of the store for a moment preparing myself for what seemed like a really long walk when I was approached by an employee.  The employee said to me "Mr. Alissa, can I help you to your car?" I kindly thanked him and told him it was not necessary.  He insisted on helping me and stated that he was not made of sugar and would not melt in the rain.  He suggested that I leave the groceries with him, get my car and he will help me load them into the car once I arrive.  It was at this point in time that I truly understood why my wife shops at this store-- value created.

While there may be many who do not respond to service levels and favor low prices (including bringing their own bags, self-checkouts, and bagging groceries themselves), I now believe that I am one of those ‘irrational’s’ who buck that trend.  As Cohen point out, “There are many reasons why a potential customer may not buy in addition to price. As Drucker confirmed, price is only one measurement of value… price can be successfully set only by first determining its relative importance to the customer.” (Cohen, 2012)  However, I do believe that the definition of an ‘irrational’ is dependent upon that person’s personal experience as well as other inputs, such as economic factors and other outside influences.

So how does this apply to Pharmasim?  Well, in essence if the customer is not happy, they will not purchase your product, no matter how much money you spend in reports, marketing efforts, or shelf space.  You must keep your customer happy, as this small grocery store did for me.  I will gladly drive to the other side of town and pay higher prices because they proved that they care about me.  

I could never see this small grocery store use marketing tactics like Nordstrom’s, although I have noticed many CCTV cameras placed in strategic locations around the store.  As well, I think that the store has their own personal ‘Guido’ to take care of things should they go south.  He is quite an intimidating person.  You never know, he could end up working for Hy-Vee Food Stores and play the role of the Incredible Hulk in the annual Spring Time Party (without the costume).

As I am perusing the Internet, I run across a recent article which explains the

success behind the “Got Milk” campaign.  The creator of the slogan states, “‘That your life turned upside down without milk with certain things,” said Jeff Manning…The idea was to give people a feeling of what Manning calls “milk depravation…This was a huge turning point for the milk industry,” he said.’ (Torres, 2013) That slogan became the theme for many advertising campaigns and co-brands, including toys, fast food restaurants, and even rock bands.  Milk has certainly made my life a bit easier.  Well, animal crackers, too.   

Cohen, William (2012-09-26). Drucker on Marketing: Lessons from the World's Most Influential Business Thinker (p. 201). McGraw-Hill. Kindle Edition.

Cohen, William (2012-09-26). Drucker on Marketing: Lessons from the World's Most Influential Business Thinker (p. 206). McGraw-Hill. Kindle Edition.

Torres, Chris. “Branding guru: Milk’s message can boost fruit, veggies.” Lancaster Online. 4 Feb. 2013. Web. 11 May 2013. http://lancasteronline.com/article/local/810988_Branding-guru--Milk-s-message-can-boost-fruit--veggies.html.

Boeing vs. Gillette

One thing that caught my attention with this week’s lecture was the comparison of airline engines and disposable razor blades.  Interesting concept.  But in reality, it makes much sense.  When Boeing sells a jet engine, the amount of upkeep and maintenance that is involved (fans, compressors, turbines, lots of moving parts) can be high.  So, it would stand to reason that the company does not make that much income off of the actual engine but generates more income with the replacement and maintenance parts (as well as labor costs).  But compare it to razor blades?  Yes, it can be a valid comparison.

How, you ask?  “It's pretty simple: invest in an installed base by selling a product at low prices or even giving them away, then sell a related product at high prices to recoup the prior investment. King Gillette launched us down this road.” (Picker, 2010)  Gillette held a patent on the product until 1921 but then opted to drop the price of its handle to match other competitors and focus upon the selling of the blade and the handle separately.  They then lowered the number of blades in a package from 12 to 10, thereby increasing revenues by decreasing product delivered.  Over the years, many various competitors have entered (and left) the marketplace, including Ever-Ready, Gem Junior, Schick, and Bic.  In the end, the razor has evolved into a commodity.  An airliner’s engine, on the other hand in NOT a commodity and remains within a niche market.

But why are they a valid comparison?  Because they both sell the primary use item at a loss or near loss and make up the difference with sales that are generated by replacement parts.  Other items that can be considered to use the same or similar strategy are computers, automobiles, large machinery, industrial equipment, and some household appliances.  It is important to note that as the price decreases (especially within the household items and computers) that consumers can find it easier to replace the item rather than purchase parts.  One of the best examples of a household item that fits this description is the toaster.

The adoption of innovation generally refers to the consumer who has adopted a new product or a behavior.  There are many reasons for adoption of an innovation.  Some reasons include culture, dominant design, politics, and economics.  Applying the adoption of innovation theory percentages that were given in the lecture, one would ascertain that 2% of consumers used disposable razors when they were first introduced.  As the product became more widespread, early adopters were at 14% and the early majority came in at 34%.  The late majority also ranks at 34%, but they are usually unconcerned with product features. I guess that leave 16% of the population with scratchy faces and beards.

But has Gillette re-invented the razor?  Well, it is safe to assume that they have tried to.  With the invention of the ‘Fusion ProGlide,’ a new product was born.  Can this be considered a product extension?  The answer is yes.  Brand extension is induced by competition and Gillette brought a ‘new’ product into the marketplace due to the same.  The added value of the ‘Fusion ProGlide’ is that it turns shaving into gliding, at least that is what the advertisements say.  

As the typical shave is turned into a glide, the advertisements tout the Fusion ProGlide as Clay Matthews (the Green Bay Packer’s football player) is a big meanie football player that likes a close shave and a another commercial that features a boxer who has sensitive skin.  Andre 3000, Gael Garcia Bernal, and Adrien Brody serve as posterboys, and Kate Upton promotes manscaping using the new product of the Fusion ProGlide Styler.  Yes, a product extension of a product extension.  (Google manscaping to determine what it means...)

 Will the new product extension (Fusion ProGlide Styler) cannibalize the Fusion ProGlide?  Probably, at least to a small countable point.  As pointed out within the lecture regarding Pharmasim, I would be keeping my eye on trade publications, Standard and Poor’s, or Moody’s in order to see exactly where the product classification is falling within the sales figures.  As well, if the gross margin is less for the Styler product than the fusion ProGlide, it may affect the bottom line sales figures.  But in my home, I will stick to using the Fusion ProGlide blades that already fit into my Gillette produced handle…without the Styler, if you catch my drift.  But, I will conclude that watching Clay Matthews run around a football field entices me to purchase a product over seeing Joe Namath in pantyhose.  (Yes, a reference to a complimentary shaving product by a different manufacturer and a commercial that I saw on YouTube…)

The issues surrounding the demand of Allround in the Pharmasim simulation can be estimated using the total market as a guide. For example, if the market dictates 100,000 units per year total and the demand for Allaround is at 50% relative to other products available on the market, that would equate to 50,000 units on an annual basis. However, it is generally not that easy. Let's say that there are eight products competing for the same market. If Allround is ranked third in sales and has a market share of 27% and the total market usage of all products similar is at 925,000 it would equal 249,750.  Admittedly, this is a very estimated way to look at the big picture. 

References:

Picker, Randy. "Gillette's Strange History with the Razor and Blade Strategy." HBR Blog Network. Harvard Business Review, 23 Sept. 2010. Web. 4 May 2013.