Thanksgiving is now behind us, which can only mean one thing... It's beginning to look a lot like Christmas... EVERYWHERE!
Yes, that's right, 'Tis the season for advertisement OVERLOAD! From newspaper inserts, to internet ads and of course the endless television commercials, our halls will be decked with advertisements of this years hottest gifts and gadgets until next year!
It seems as though this time of year has become all about consumption, rather than what it's intended for- giving. I mean just look at the entire concept of Black Friday.
Black Friday, the day after Thanksgiving here in the U.S. is the largest shopping day for Americans. Once we are done giving thanks for everything we are lucky to have in our lives and filling up on turkey and stuffing, we brave the cold weather, the late night and early morning hours, and most of all the CROWDS in order to score what's sure to be the season's hottest gifts at widely discounted prices.
And while Black Friday sales offer shoppers great discounts, they come with a slight danger. In 2008 a Walmart employee in a New York store was trampled to DEATH by shoppers rushing into the store.
A fight breaks out in a Target parking lot
It seems as though Black Friday brings out the worst in consumers as fights break out among shoppers over merchandise, leading to injuries ranging from minor cuts and scrapes, to severe injuries requiring hospitalization, and even death.
While consumers are in competition in order to get their hands on the limited number of products available at such steep discounts, the retailers are also in a price war with their competitors over which store offers the lowest price, which store posts their sales flyers first, and more recently- which store opens the earliest.
The trend of Black Friday has lead to the rising trend of stores opening on Thanksgiving day in what is referred to as Gray Thursday. Big-Box stores such as Target, Walmart, and Best-Buy in certain states now open on Thanksgiving night, as early as 6 p.m.
One of Target's many Black Friday Ads this season
With consumers lobbying for the first spots in lines, this seems to leave no room for Thanksgiving dinner as some dedicated consumers may line up as early as 9 p.m. Wednesday night, the day BEFORE Thanksgiving.
So is it really worth standing in line for days, missing Thanksgiving with your family, risking your life just to get a good deal on a TV? Think twice about what this season is really all about.
COME ON DOWN! There are four main components in the marketing mix, Product, Place, Promotion and Price! Price refers to the monetary amount which is exchanged for the ownership or use of a good, a service, or an idea.
Consumers spend a large amount of time considering the price of a good, service, or idea in determining its value when it comes its perceived benefits such as its quality, durability, status, etc.
In other terms, Value= the Perceived Benefits
the Price
The greater the benefits, the greater the value, and the more a customer is willing to pay.
This gives companies a lot to think about when selecting the right price for their product, service, or idea. Obviously the ultimate goal is to turn a profit, meaning that the company's production costs associated with the product, service or idea are covered from their sales, and there is still money left over.
In other terms, Profit= Total Revenue x Total Costs
where total revenue is the unit price x quantity sold,
and total costs are fixed costs + variable costs So how do company's determine what price will give their product, service or idea the most consumer value, while also producing the greatest potential profit for the company?
Using several different pricing approaches the price for a product, service, or idea can be established. These approaches are broken down into 4 distinct categories of pricing strategies, demand-oriented pricing, cost-oriented pricing, profit-oriented pricing, and competition-oriented pricing.
Demand- Oriented Pricing takes into account the styles, preferences, tastes, and needs of the consumer. Demand can be generated using several different pricing strategies.
using penetration pricing, a low price is initially set in order to generate demand.
By offering consumers their first month of service for free, Netflix has established a penetration pricing strategy to attract subscribers.
in a price skimming strategy, a high price is initially set in order to satisfy the needs of consumers while associating the high price with a high value, and covering the initial production and marketing costs.
The new Google Glasses are priced at $1500, a clear price skimming strategy implemented by Google to position Google classes as a high quality product in the "eyes" of consumers.
company's may adopt a price lining strategy when selling a complete line of products with different features, distinguishing such features such as quality by establishing an even incremental increase in price as the quality of the product increases within the product line.
each jacket may be set at different prices within even increments based on its features compared with that of other jackets in the line.
using odd-even pricing products or services are priced at dollars to cents under an even number, presuming that consumers will see this as a good deal.
Arizona Iced Tea is priced at 99 cents, which is interpreted by the consumer as "less than one dollar."
in setting a target price company's work backwards with manufacturers to determine the price a consumer would be willing to pay for a particular product, and tailor the product to suit that specific price.
Cannon uses target pricing with their cameras.
company's use bundle pricing to sell two or more products at one single package price. The idea behind this is to lower marketing costs while selling a variety of products.
Kentucky Fried Chicken's Value menu offers combinations of entrees sides and drinks at one package price.
in yield management pricing the price of the good, service, or idea is always changing based on the time of day, week, month, or season.
Airlines use yield management pricing strategies to maximize profits by charging more during holiday seasons when there is an increased demand.
using prestige pricing a high price is set to attract consumers concerned about status and quality of products.
The cost of one Cartier 'love bracelet' in yellow, pink, or white gold is $6,600- clearly a high quality product intended for consumers of high status.
Cost-Oriented Pricing focuses on the costs of producing a product, service or idea rather than the demand that it creates.
in standard markup pricing a fixed percentage is added to the cost of all products to arrive at the final price.
in cost-plus pricing a specific amount is added to the cost of a product to arrive at a final price.
Profit-Oriented Pricing targets a specific profit that is desired.
Target profit pricing sets a specific dollar volume desired as a profit.
Target return-on-sales pricing sets a specific percentage desired for profit.
Target return-on-investment sets a specific percentage desired for a return on an investment.
Competition-Oriented Pricing focuses on prices of similar products and competitors within the market.
Customary pricing follows the standard, or traditional price of a product within the marketplace.
Above-, at-, or below-market pricing uses the prices of similar products in the marketplace as a benchmark in establishing the price.
in a loss-leader pricing strategy, a product is intentionally sold below market value and its customary price in order to attract sales.
It is important to consider the demand, the costs involved in production, the desired profit, and the prices of competitors in establishing the right price for a product. Once an appropriate pricing strategy is selected, hopefully the right price will be produced so consumers see value in the product, and company's can produce a profit!
Pricing, like life, is one big balancing act- but if you work hard at establishing the right pricing strategy for your product, the price will be right!
Sarah Jessica Parker once said, "trends come and go, but friendships never go out of style." In marketing, however, products can and do go out of style.
The stages a new product goes through in the marketplace is referred to as the product life cycle which includes a products Introduction, Growth, Maturity, and Decline.
a visual of the stages of the product life cycle
In the introduction stage a product is first acquainted with its target market. Because the product is new, profits are low and marketing expenses are generally high. Companies establish their pricing strategies within this stage. In penetration pricing an initially low price is set in order to stimulate sales. In price skimming an initially high price is set in order to offset high production costs.
The growth stage is when companies see rapid sales and profitability. Marketing strategies are changed so as to promote or continue repeat businessfrom satisfied customers. Changes are made to products to help differentiate the product from that of the competition.
These changes made in the growth stage that help differentiate a product from the competition come in handy during the maturity stage where there is a large amount of competition in the market causing a slowing of sales and profits. Marketing in this stage is centered upon holding market shares.
Lastly, the decline stage goes along with its name, and is characterized by a decline in sales. Marketing is no longer relevant to the future worth of the product and therefore companies have two options for a product in the decline stage- Deletionwhichinvolves dropping the product from a company's product line, or harvestingwhich involves keeping the product in the product line, but diminishing marketing costs.
As we know in business you can never predict the market, therefore it is nearly impossible to predict the length of time a new product will spend in each stage of the product life cycle. Not all products spend the same amount of time in each stage of the product life cycle. There are high-learning products, low-learning products, fashion products, and fad products.
high-learning products require a large amount of consumer education and therefore spend a large amount time in the introductory phase. In the ever-advancing world of technology perhaps the newest trend to come is that of the Google Glass. As a Media Studies, Journalism, and Digital Arts major, I have spent a decent amount of time in several of my classes talking about this new technological advancement and I was shocked when a student asked what they were in our marketing class last week. This just goes to show that high-learning products such as Google Glass need to spend a large amount of time in the introduction stage to generate awareness.
Google Glass
low-learning products require little to no consumer education, allowing sales to begin immediately. The benefits of such a purchase are easily understood thus creating a market full of competition. Marketing strategies within this phase aim to broaden product distribution so as to produce a large market share. Examples of low-learning products are razor's, toothpaste, and several other everyday items.
fashion products are styles of the times. These products go in and out of style on a regular basis going through each stage of the product life cycle. In the decline phase, fashion products are harvested as they will most likely become in style again.
Leopard is a fashion product
fad products experience rapid sales upon introduction into the market, quickly followed up by a fast decline in sales. I can remember being in middle school when Crocs were popular, and then the following month they weren't cool at all. Another example of a fad I witnessed were the rubber bracelets that were shaped like different animals, places, or things called Silly Bandz, which were everywhere for the two months they were actually popular.
Silly Bandz shaped like characters from Yo Gabba Babba, a popular children's television show
Companies oftentimes place the primary focus of their marketing strategy on products, services, and ideas that are "new." But what exactly makes something "new?"
The problem here is in the term "new" itself. If you've just come out from living under a rock for the past 10 years you may think a basic cell phone is a new technology, however, smartphones are wildly popular in today's society.
We can then realize that there are several different viewpoints of the word "new" as it pertains to marketing- new as it relates to existing products, new in legal terms, new from a company's perspective, and new in the eyes of the consumer.
Products that contain different features, whether new or improved, as existing products are considered new. As Apple is now on its 6th version of the iPhone, the iPhone 6 and iPhone 6+ are considered to be new products as they contain different features (better camera's, different shapes and sizes, larger screens) than their predecessors.
As far as in the eyes of the law, the Federal Trade Commission (FTC) classifies products with the term new for its first six months of regular distribution. On September 19, 2014 Apple released its iPhone 6. As long as Apple does not release a new model of the iPhone within six months, this product will be classified as new until March 19, 2015.
New products from an organizational standpoint are assessed based on risk into 3 main categories; product line extensions, jumps in innovation or technology and brand extensions, and true innovation.Product line extensions require the least amount of risk for a company and include improving a line of a product that the company already sells, such as Coke producing Coke Life, a healthier and more natural soda, in addition to its Diet Coke and Coke Zero products.
jumps in innovation or technology occur on a pretty regular basis in today's technologically driven society. An example of this is each time a cell phone company comes out with a new smartphone. Meanwhile at this same risk level, Brand extensions occur when an established brand enters a new product market. In "sticking" with Coke (Bad pun) an example of this is producing merchandise with the Coke Logo on it such as tee shirts and baseball caps.
Coke Merchandise
True innovation involves a radical invention and a completely new product idea. This occurred when Apple introduced their iPad, combining features of their computers with features of their iPhones, a game-changing invention.
Products can also be defined as new based on their methods of consumption. In this way, consumers classify new products based on the degree of learning that is involved.
In continuous innovation consumers do not need to acquire any new methods of use in order to utilize the product. We see this in everyday products such as toothpaste where companies can add qualities such as whitening benefits or breath enhancers to the product without changing its terms of use.
Colgate toothpaste is still used in the same way, it just has added benefits to help increase its demand.
In dynamically continuous innovation consumers change minor habits of product use, while the product itself does not change. Products that have gone through dynamically continuous innovation oftentimes have undergone slight changes in their logo or in their packaging. The marketing strategy here is to exploit the benefits of the product through its use.
In sticking with the toothpaste example from continuous innovation; for years I had been using this specific flavor of Crest toothpaste which came a stand up bottle which I found convenient to place on the counter. One day I went to the store to buy more and I noticed it now came in a tube. At first I did not see the need to change its packaging- and was a little worried at how I'd store my toothpaste in its new container, but after using it I realized that the tube is a way more effective medium for toothpaste as consumers can "squeeze" more out of the product, while companies have a box that they can place additional marketing features on, a dynamically continuous innovation.
In discontinuous innovation consumers must learn completely new methods of using the product. If you've bought a computer that uses the Microsoft system anytime since October 26, 2012 you'll notice that the new Windows operating system, Windows 8, is now installed in that device. This system looks, and works entirely different than that of its predecessor, Windows 7. With this, consumers have to adapt to learning how to navigate through this new system.
The new look of the Windows operating system, Windows 8
So the next time a friend, family member, coworker, or stranger asks you if your shoes, cell phone, or cookies that you're eating are new, think twice about your answer!
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