The Art, Science, and Psychology of Pricing Products and Services

17 Saturday Feb 2024

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Pricing is one of the most important decisions that businesses make, as it directly affects their revenue, profit, and customer satisfaction. However, pricing is not just a matter of numbers and calculations. It also involves understanding how customers perceive and evaluate the value of products and services, and how they react to different pricing strategies and tactics. In this article, we will explore the art, science, and psychology of pricing, and how to use them to create effective and profitable pricing policies.

The Science of Pricing

The science of pricing refers to the use of data, analytics, and research methods to determine the optimal price for a product or service. The science of pricing aims to answer questions such as:

– What is the demand curve for the product or service, and how does it vary across different segments, markets, and channels?

– What is the price elasticity of demand, and how does it change with different factors, such as income, competition, seasonality, and promotions?

– What is the value proposition of the product or service, and how does it compare to the alternatives available to the customers?

– What are the costs and margins associated with the product or service, and how do they affect the break-even point and the target profit?

The science of pricing relies on various tools and techniques, such as:

– Conjoint analysis, which is a method of measuring how customers value different attributes and features of a product or service, and how they trade off between them.

– Elasticity studies, which are experiments that measure how customers respond to changes in price, and how their demand and willingness to pay vary with different levels of price.

– Price segmentation, which is a strategy of dividing the market into different groups based on their price sensitivity, preferences, and behavior, and offering different prices to each group.

– Value-based pricing, which is a strategy of setting the price based on the perceived value of the product or service to the customer, rather than the cost or the competition.

The science of pricing can help businesses to:

– Maximize their revenue and profit by finding the optimal price point that balances the trade-off between volume and margin.

– Increase their market share and customer loyalty by offering competitive and fair prices that reflect the value of the product or service.

– Enhance their differentiation and positioning by communicating the value proposition of the product or service through the price.

The Art of Pricing

The art of pricing refers to the use of creativity, intuition, and judgment to design and implement pricing strategies and tactics that appeal to the emotions and psychology of the customers. The art of pricing aims to answer questions such as:

– How do customers perceive and process the price information, and what are the cognitive biases and heuristics that influence their decision making?

– How do customers evaluate the price relative to other cues, such as quality, brand, reputation, and social norms?

– How do customers react to different pricing formats, such as discounts, bundles, subscriptions, and freemiums?

– How do customers feel about the price, and what are the emotions and motivations that drive their purchase behavior?

The art of pricing relies on various principles and practices, such as:

– Pricing and the psychology of consumption, which is a theory that explains how pricing policies affect the extent to which customers use and enjoy the products or services that they have paid for, and how that influences their satisfaction and loyalty.

– Pricing and the psychology of persuasion, which is a theory that explains how pricing policies can influence the customers’ attitudes and beliefs about the product or service, and how that affects their willingness to buy and recommend.

– Pricing and the psychology of framing, which is a theory that explains how pricing policies can affect the customers’ perception and evaluation of the price by changing the context, reference, or presentation of the price.

– Pricing and the psychology of anchoring, which is a theory that explains how pricing policies can affect the customers’ expectation and negotiation of the price by providing a starting point or a reference point for the price.

The art of pricing can help businesses to:

– Increase their sales and conversions by creating and capturing the customers’ attention, interest, and desire for the product or service.

– Improve their customer experience and satisfaction by creating and delivering value, delight, and happiness to the customers through the product or service.

– Build their brand equity and reputation by creating and reinforcing a positive and distinctive image and identity for the product or service through the price.

Retail pricing ending in .89 and .99 is a common example of psychological pricing, which is a strategy of using the customers’ emotions and perceptions to influence their purchase decisions. One of the main reasons why retailers use this tactic is to create the illusion of a bargain and to make the customers feel that they are getting more value for their money.

There are several psychological mechanisms behind this effect, such as:

– The left-digit effect: This is the tendency of customers to focus more on the first digit of the price than the last one, and to round down the price to the nearest whole number. For example, a price of $4.99 is perceived as closer to $4 than to $5, even though the difference is only one cent. This makes the customers think that they are saving more than they actually are.

– The charm effect: This is the tendency of customers to prefer prices that end with an odd number, such as 9, rather than an even number, such as 0. This is because odd numbers are seen as more authentic and less manipulated than even numbers, which are associated with round numbers and standard prices. For example, a price of $9.99 is perceived as more genuine and attractive than a price of $10.00, even though the difference is only one cent.

– The signal effect: This is the tendency of customers to associate prices that end with 9 or .99 with discounts and sales, and to infer that the product is of high quality and low price. This is because retailers often use these prices to indicate that the product is on offer or that it is the best deal available. For example, a price of $19.99 is perceived as more appealing and valuable than a price of $20.00, even though the difference is only one cent.These psychological effects can have a significant impact on the customers’ purchase behavior and satisfaction, and can increase the sales and profits of the retailers. However, they are not always effective, and they depend on various factors, such as the type of product, the target market, the competition, and the customer expectations. Therefore, retailers should use these pricing tactics carefully and strategically, and test their results and outcomes.

The Integration of the Art and Science of Pricing

The art and science of pricing are not mutually exclusive, but rather complementary and synergistic. The best pricing policies are those that combine the data-driven insights and the evidence-based methods of the science of pricing with the customer-centric insights and the emotion-based methods of the art of pricing. The integration of the art and science of pricing can help businesses to:

– Achieve a competitive advantage and a sustainable growth by creating and delivering superior value to the customers through the product or service and the price.

– Adapt to the changing market conditions and customer preferences by monitoring and analyzing the performance and feedback of the product or service and the price, and making adjustments and improvements accordingly.

– Innovate and differentiate their product or service and their price by experimenting and testing new ideas and concepts, and learning from the results and outcomes.

Conclusion

Pricing is both an art and a science, and it requires a balance and a blend of both. By understanding and applying the art, science, and psychology of pricing, businesses can create and implement effective and profitable pricing policies that support their strategic goals and objectives, and that satisfy and delight their customers.

References

– Gourville, J. T., & Soman, D. (2002). Pricing and the psychology of consumption. Harvard Business Review, 80(9), 90-96. ¹

– Stiving, M. (2022). The art of pricing. Forbes. ²

– Udemy. (n.d.). Price to profit: Psychology & science of pricing. ³

– Wealth With Purpose. (n.d.). The art & science of pricing. ⁴

Source

Why Prices End in 99… and Other Psychological Pricing Tactics

5 Psychological Pricing Tactics That Attract Customers, With … – NetSuite

Why do prices end in 99: Psychology of Pricing — Ready Set Life ….

Party Like It’s 19.99: The Psychology of Pricing – Wise Bread

Why Do Prices End in .99? (Explained) – TME.NET

A Response is Only a Marketing Milestone

07 Tuesday Jul 2015

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Every journey has one or more milestones, but only one destination.

Every journey has one or more milestones, but only one destination. Direct marketing is no different. Many direct marketers measure success by the number of responses from a given campaign. A campaign isn’t truly successful until the marketing communication sparks a conversation that eventually leads to a conversion.

Going from conversation to conversion requires a deeper understanding of the target audience. Focus beyond response rates, and measure success on the number and quality of conversions. This approach aims much higher than the traditional response rate model. Without responses, there would be no conversions. Not every response leads to a conversion. Every organization leveraging the services of a direct marketing company is interested in acquiring new customers while keeping the ones they already have.

This requires thinking beyond responses, and setting your sights on conversions.

Every communication, regardless the channel, begins with a conversation. The conversation should be a well-orchestrated channel-neutral communication blending the perfect message and creative strategies. If the conversation is interesting, it will trigger a response. If it is compelling, however, the response will become a conversion. Conversions make the cash register ring. Moreover, conversions are used to calculate ROI. Can it get any better than this? Yes, it can!

The goal is to go from conversation (marketing) to conversion (sales). Savvy direct marketers have raised the bar well beyond the reach of printers-turned-marketers and traditional letter shops, by measuring success on the quantity and quality of a conversion. The single-channel, one-dimensional approach of every high-volume direct mail company consistently falls short of the Direct Marketing Association’s (DMA) reported 4.4% average response rate. Increase the quantity of conversion rates by creating and developing relevant messaging that speaks to every individual in a personality-centric tone specific to their temperament.

The quality of a conversion correlates directly to an individual’s purchase. The more an individual spends—as the result of a marketing campaign—the higher the quality of the conversion. Many years of experience has taught marketers the importance of multi-channel marketing. Not every communication channel is appropriate in every situation. In fact, a channel-propensity model should be developed for every campaign. A channel-propensity model is used to determine every individual’s preferred method of communication. Do not inundate an individual with an Omni-channel approach. Instead, use the top two or three communication channels to present your products or services.

The SAS Institute in Cary, NC recently reported the effectiveness of multi-channel marketing. In their report, they leveraged information from hundreds of marketing campaigns to show the financial benefits of using multiple channels for your communication. Multichannel customers spend three to four times more than single-channel customers (Raj 2015). The quality of a multichannel customer far exceeds the quality of a single-channel customer.

Measure your campaign response milestones, but never lose focus on the destination–conversions.

References:

Raj, W. 2015. Four multichannel marketing strategies that deliver exceptional customer experiences.

http://www.sas.com/en_us/insights/articles/marketing/four-multichannel-marketing-strategies.html?utm_source=LINKEDIN_COMPANY&utm_medium=social&utm_campaign=Customer%20Intelligence

Advertising Demystified

17 Friday Apr 2015

Posted by in Advertising, Marketing Philosophy, Marketing Strategy

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Begin with the communication objective

An advertising campaign starts by identifying a communication objective. One important issue is establishing the right combination of information to properly communicate the message and satisfy the communication objective. The advertising budget should be established before the creative strategy is written.

The creative strategy is the roadmap for the campaign.

A target audience is the keystone for a creative strategy. The objectives as well as the key benefits need to be defined in the creative strategy. According to Arens, Schaefer, & Weigold (2009), the detailed creative strategy consists of the following elements:

  • The basic problem the advertising must address.
  • The objective of the advertising.
  • A definition of the target audience.
  • The key benefits to communicate.
  • Support for those benefits.
  • The brand’s personality.
  • Any special requirements.

These elements represent seven important steps for writing a creative strategy. Each step needs supporting research and business decisions distilled into a clear and concise set of instructions to guide the creative team. At a bare minimum, a creative strategy should contain an objective statement, a support statement, and a tone or brand character statement.

Choosing the correct media for an advertising campaign

Before selecting the most effective media for an advertising campaign, the media planners and buyers need to be aware of the alternatives or options available. In addition, there should be a complete understanding of how the target audience accepts, reacts, and responds to the various media.

Special consideration is given to the reach and frequency of each medium (Arens, Schaefer, & Weigold, 2009). Reach is defined as the number of unique individuals that will be exposed to the advertising using a specific medium. Frequency is defined as the number of times a single member of the target audience will be exposed to the advertisement during the lifespan of the campaign.

In many cases, a media planner leverages several communication channels simultaneously as part of an overall cross-media campaign strategy. This approach is very effective when the selected media complement one another. For example, a broadcast email campaign works very well if coupled with a campaign-specific website. The recipient is already on-line when receiving the email message, so it makes sense to make the call-to-action a simple link to the online-advertisement.

Print, radio, television and more…

Print media, as with other communication channels, has several pros and cons. One advantage that print media has over the television and radio is that it is capable of delivering more detailed information. Moreover, the target audience has the opportunity to read and re-read the advertisement as well as pass it along to others. Print media also offers very good controls over target segmentation. For example, magazine advertising offers options for delivering targeted advertising in geographic and demographic specific editions of their publication. The downside of print advertising, particularly in newspapers and magazines, is the existence of competing advertising in the same publication. Magazine advertising is expensive compared to other print media communication channels.

Television advertising is known traditionally as the medium with the longest reach. The mass coverage of television advertising is appealing to companies needing to carry consistent messages across several geographic areas. Using sight, sound, motion, and color allows advertisements to be entertaining in addition to informative. One major problem with television advertising is with ad skipping technologies. Digital video recording devices (DVRs) are a household mainstay. Consumers are recording programs and watching them at their own convenience—skipping the commercials along the way. Production costs and lead-time to produce a television advertising are a disadvantage when compared to other communication channels.

Out-of-home, direct mail and specialty advertising

Advertisers leverage various forms of out-of-home media when the need arises to expand their market coverage beyond the reach of traditional marketing channels. Depending on the specific out-of-home medium, certain factors are considered before a campaign is deployed. Outdoor advertising, which encompasses several variations of billboards and bulletins, is considered to be a low cost alternative to traditional alternative to television, radio, and newspaper advertising. Covering more than 9000 markets across America, outdoor advertising gives advertisers the ability to rapidly reach any portion of their geographic market (Arens, Schaefer, & Weigold, 2009). The anticipated return on investment (ROI) is a consideration as each medium is compared for effectiveness. Message saturation and the cost for exposure is part of the metric used in determining the viability of a particular form of advertising.

Direct mail advertising is considered to be one of the most effective communication channels. Measurable results, such as response rates, are considerably more accurate in a direct mail campaign because of the targeted method of deployment. A well-formulated direct mail campaign consists of a targeted mailing list and variable, relevant messages. Outdoor and transit advertising rely on the target audience to pass-by or be passed by a marketing message. Direct mail advertising is delivered one-to-one to the intended audience. If the advertiser needs to deploy a campaign where the message needs to be unique to each recipient, direct mail using variable data driven content is the only solution. Newspaper advertisements are not unique to each reader. Television and radio advertisements are directed to a local, regional, or national audience with a common, non-personalized message at each level.

Specialty advertising serves a purpose beyond traditional communication channels. Premiums, for example, are used to enforce the brand or continue a message from other advertising efforts. My refrigerator is covered with magnets (specialty advertising) from various local television stations, pizza delivery companies, and insurance companies. You might also find a few desk calendars from local businesses in my home office.

Planning a media advertising campaign

Media planning, if not a science, is certainly an exercise in mathematics.

While I agree that creativity is an integral part of planning an advertising campaign, decisions on the placement and timing are equally as critical. Advertising is only effective when the intended audience is exposed to the message. Not just any set of eyes and ears, but the target audience. A media planner must consider many things simultaneously while constructing a plan to deploying an advertising campaign.

 

Media planning framework ensures the media plan is aligned with the advertising and marketing plans. Media objectives are goals derived from the advertising strategy. Audience objectives and message-distribution objectives are two major components of a media objective (Arens, Schaefer, & Weigold, 2009). The audience objective is the underlying definition of the target audience the advertiser intends to reach. The definition includes the demographic, psychographic, and geographic information of the audience. For example, targeting a certain age group in a campaign is considered an audience objective.

The advertiser’s ethical responsibilities

It is the responsibility of an advertiser to do what is morally acceptable by society. It is possible, as proven by Calvin Klein and Abercrombie & Fitch, to act unethically without breaking any laws (Arens, Schaefer, & Weigold, 2009). The morals of our society has been challenged and changed many times over. We would never have seen a television commercial during an episode of Leave it to Beaver featuring a scantily clad female eating a cheeseburger while washing a car. The personal value system of our society has become more tolerant and less traditional.

The advertising industry has several mechanisms in-place to help regulate and control the content of an advertisement. There are still a few irresponsible marketers who believe that it is easier to apologize than ask permission.

The agency responsible for spawning ethically challenged advertising does not suffer nearly as bad as the company represented in the offensive advertising.

Consumer groups can impact advertising by complaining directly to the company whose products are being touted inappropriately. I like the idea of self-regulation. When advertising agencies scrutinize one another, everyone benefits.

Expect a few critics

Responsible advertisers create advertising copy best suited to attract a target audience to a specific product or service, and at the same time maintain certain sensitivity to societal issues. Advertising is a part of society. In many cases, advertising influences society. The many cultures that makeup a society dictate levels of acceptance. Some advertising copy sparks interest from certain groups within a society, and at the same time offends others. Is this irresponsible advertising? Perhaps. I believe this is more of a case where the advertiser uses a targeted message, but chooses a media vehicle that crosses into markets outside the intended target. I believe that satellite radio, simply because of the broad reach, could cross cultural boundaries.

Public service announcements are by nature intended to be in the best interest of a society. However, all other advertising runs the risk of sparking controversy. Many complaints are centered on claims of false advertising or puffery. In contrast, some consumers are convinced that purchasing products that are frequently advertised decreases the risk of dissatisfaction. The theory is that a company in the public spotlight is less likely to misrepresent their products and services (Arens, Schaefer, & Weigold, 2009). Other criticism includes the idea that advertising affects the value of products, therefore creating an economic impact to a society.

References:

Arens, W., Schaefer, D., & Weigold, M. (2009). Essentials of Contemporary Advertising. McGraw-Hill Irwin, New York.

How Advertising Content and Design Influence Buying Behavior

16 Thursday Apr 2015

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Creativity in advertising sparks emotion and motivates a prospect or consumer to react. The content of an advertisement is responsible for informing, persuading, and reminding—ultimately influencing buying behavior. The design is directly responsible for attracting attention. It is important to engage the viewer and peak their interest all the while establishing credibility building desire.

Everything from images, graphics, text, and colors contribute to influencing buying behavior.

The three components of a message strategy, verbal, nonverbal, and technical, combine to describe how an idea will be communicated. In the case of the multi-media communication channels (i.e. television, internet), the verbal elements are derived from copy and converted into a script and delivered as a sound byte. When the medium is print, the verbal elements are designed to be read and understood. The nonverbal elements of a message strategy encompass visuals, such as graphics, and their usage specific to the media. A message strategy developed for radio would not include nonverbal elements. It would, however, include the technical element. Slogans, jingles, contact information, and even disclaimers are considered members of the technical element within a message strategy.

The combination of the message strategy elements are intended to engage a buyer and effect their behavior. The message strategy continues the vision identified in the creative strategy to cascade a common message across different media as part of an overall advertising strategy.

References:

Arens, W., Schaefer, D., & Weigold, M. (2009). Essentials of Contemporary Advertising. McGraw-Hill Irwin, New York.

Multiattribute Theory and Wal-Mart

07 Wednesday Jan 2015

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Wal-Mart has quickly become a worldwide retail behemoth. In the wake of their success, however, many of the Wal-Mart patrons have formed a love-hate relationship with the American-based juggernaut. Simply put, there are enough weighted advantages to shopping at Wal-Mart to dilute any ill feelings and incentives for consumers to shop elsewhere. A multiattribute attitude model exposes this phenomenon and helps explain the reasoning behind Wal-Mart’s loyal following.

It Starts With Consumer Attitude

A Wal-Mart consumer—as with any consumer—establishes certain attitudes towards the companies they frequently shop. An attitude, as defined by Solomon (2008), endures over time.

An attitude takes years to evolve, but a moment to change.

Consumers are beginning to realize the impact to the local community and economic state of their neighborhoods resulting from the success of Wal-Mart.

Cognitive dissonance explains the healthy percentage of Wal-Mart patrons that feel the stores are bad for our country, but continue to shop there (Basker, 2007). With 46 percent of Americans living within five miles of a Wal-Mart store, it is easy to understand the mix of love and cynicism towards the company. Many people believe that Wal-Mart, while good for helping consumers save money, is bad for free and competitive enterprise. Small niche retail stores cannot compete with Wal-Mart’s volume buying induced pricing.

The basic multiattribute approach for modeling attitudes uses attributes, beliefs, and weights as the basis for determining the propensity for a consumer to choose one option over another.

The Fishbein model also uses three components of attitude—salient beliefs, object-attribute linkages, and evaluation—for determining a measurable score representing a consumer’s attitude. Several attributes needed to fairly assess the popularity of Wal-Mart over several competitors include environmental responsibility and local economic sensitivity.

Using the Fishbein model, a comparison of Wal-Mart, Target, Kmart, Sears, Costco, and Sam’s Club against nine attributes shows which retail chains have the highest and lowest probability of success in a market based on specific weights assigned to the attributes. The priority, or importance, of each attribute weighted against the scored beliefs is used to calculate an overall score for each chain. The store with the highest score is recognized as having the most perceived differences in overall attitude. Table 1.1 shows how the multiattribute model can used to determine which entity has the most favorable attitude. The lowest score represents the company with a market of consumers with less disparate attitudes.

Note: In this hypothetical example, Wal-Mart scored the highest indicating that this particular shopper will have a higher propensity to visit their store over the others.

Note: In this hypothetical example, Wal-Mart scored the highest indicating that this particular shopper will have a higher propensity to visit their store over the others.

What does it mean?

The importance of each attribute carries the most impact compared to the other variables used in the Fishbein formula. Quality, variety, and product guarantees are the top three attributes in the hypothetical analysis shown in table 1.1. Companies, such as Wal-Mart, can use the results from a multiattribute analysis to help improve their image. In some situations, the information gleaned using a multiattribute model can be based on biased input. Before setting marketing direction based on multiattribute analysis, it is important to make sure the information is not skewed as a result of the halo effect (Beckwith & Lehmann, 1975).

Wal-Mart can capitalize on their advantages and perhaps add attributes to strengthen their position in the market. However, with the importance of customer loyalty and retention lurking in the shadows, it may just be smarter to concentrate efforts on the attributes deemed the most important by their target audience. There is a certain amount of tolerance with the shopping public which seems to be tested each time a new story is revealed regarding Wal-Mart’s mistreatment of employees. Target is only a few discounted prices away from winning over several Wal-Mart loyalists.

References

Basker, E. (2007). The causes and consequences of Wal-Mart’s growth. The Journal of Economic Perspectives [Electronic version]. Retrieved January 7, 2015, from http://www.jstor.org/stable/30033740

Beckwith, N., & Lehmann, D. (1975). The importance of halo effects in multi-attribute attitude models. Journal of Marketing Research. [Electronic version]. Retrieved December 28, 2014, from http://www.jstor.org/pss/3151224

Solomon, M. (2009). Consumer behavior buying, having, and being (8th ed.). Upper Saddle River, NJ: Pearson Prentice Hall.

Multi-role Decision Making

30 Tuesday Dec 2014

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Sometimes, it takes a village to make a decision

More often than not, a consumer’s decision to purchase a product or service is influenced by various individuals or groups in assorted roles. In many situations, individuals or groups play a number of specific roles (Solomon, 2008). Understanding each role and how it affects a purchase decision is an advantage to any marketer. Children, for example, acting in the role of initiator or influencer sometimes manipulates parents into making purchases. However, the initiator is only one of several contributors in the decision-making process.

How Does it Happen?

In the following example, a multi-role decision making process involves both internal and external influences.

A typical American household––Your thirteen year old daughter comes home from school sobbing and announces she has no friends. Being the good parent that you are, you ask her why. She’s says she’s just a nobody. You ask her why she feels she’s a nobody. She says “Because I’m the only kid in class who doesn’t have a cell phone.” Kindly grandpa says, “Well we can’t have that little princess. I’ll get you one for your birthday.” She says, “I have to have unlimited text messaging too.”

A child feels pressure from friends to join in the ranks of the cellular community. The child, hoping to convince her parents to buy her a cell phone is positioned as the benefactor of the decision. The grandparent is providing additional pressure on the parents by assuming the role of the accommodator. The kids in the young girl’s class combine efforts and take on the role of facilitator. It is the peer pressure from the children in class that is the catalyst for the decision. Although influenced by all of the other roles, the parent is ultimately the decision maker.

This example goes beyond parental yielding and follows the pattern of multi-role decision making. While common in family life, organizational decision making follows many of the same traits.

Organizational decision making can involve many individuals in one or more roles including, initiator, gatekeeper, influencer, buyer, and user.

Family as well as organizational decisions is subject to many levels of influence, including peer-pressure.

Social conditions also play a role in the decision making process. A cell phone to an adult is a necessity, whereas with a child it is more closely related to a status symbol. Every child in the class with a cell phone is in a different social class than those without. The parents become vicariously a member of the same less-fortunate social class as their child. This offers additional pressure on the parents to buy the child a cell phone. Pressure-proofing a child is nearly impossible. Adolescence children are susceptible to influences from both parent-pressures and peer-pressures. When confronted by these two choices, a child will choose peer-conformity (Brittain, 1963). As a result, the parents become the minority voice in the decision making process.

It is important to understand when it is beneficial to market to multiple decision makers and influencers. It is never a bad idea to have someone on the “inside” evangelizing your products or services. There is a very good reason grocers and product placement experts reserve the bottom two shelves for the Frosted Flakes and competing sugary cereals. It places the products directly in line-of-site of the freckle-faced influencer for this particular category of products.

 

References

Brittain, C. (1963). Adolescent choices and parent-peer cross-pressures. [Electronic version]. American Sociological Review. 28(3), 385-391. Retrieved December 30, 2014, from http://www.jstor.org/pss/2090349

Solomon, M. (2009). Consumer behavior buying, having, and being (8th ed.). Upper Saddle River, NJ: Pearson Prentice Hall.

Rhetoric & Stereotypes Drive Ineffective Marketing

29 Monday Dec 2014

Posted by in Marketing Philosophy, Marketing Psychology, Marketing Strategy

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What is Rhetoric & Stereotypes?

Politicians, individuals with tattoos, feminists, and senior citizens are groups within our society with little in common. While there could be overlap between these four groups, such as senior citizens with tattoos, or feminists practicing politics–there are four generalizations distinguishing these groups.

The exaggerated and oversimplified opinions used to define these groups are known as stereotypes.

When stereotypes take on the form of rhetoric language they become insulting and offensive to the group being described. Moreover, accepting a stereotype without the benefit of facts is lazy, irresponsible, and depriving our own intellect.

The phrase “senior citizen” is a euphemism. It is a combination of words with a positive meaning used to describe our elders. Specifically, it is used when referring to individuals at or over the age of retirement. The euphemism, senior citizen, is quickly converted from a positive phrase to one of negativity when described by a stereotype. One version of this stereotype defines a senior citizen as an elderly, slow moving, health challenged, frequent occupant of the passing lane, with an annual pass to the local shuffleboard courts. This version is localized to the state of Florida where many senior citizens choose to retire and enjoy life. Although geography separates several versions of this stereotype, a few of the components are common. Senior citizens are weak, elder, and set in their ways. While there may be some truth to these stereotypes, as it relates to a few senior citizens, it is unfair for the rest to be pigeonholed into the same group.

For several decades feminists have endured a single, simple stereotype. The culture of the 1970s is responsible for the current stereotype. This stereotype paints the negative picture of a feminist as a masculine female, most likely a lesbian, with a complete wardrobe of plaid flannel shirts, and no male friends. There is complete disregard for the true purpose and beliefs of feminists. As with the negative stereotype of a senior citizen, this interpretation of a feminist is insulting and narrow-minded. There is no truth in the common stereotype of a feminist. A feminist is someone, male or female, who believes in gender equality—nothing more. This stereotype was most likely derived from a group of individuals who did not understand, or agree with, the purpose and vision of feminism.

As tattoos become more mainstream they continue to be associated with certain stereotypes. All versions of stereotypes describing tattooed persons cast a shadow of negativity on both males and females. Stereotypes are especially cruel to a female with tattoos. Recent attempts have been made to shine positive light on tattoos. The euphemism “body art” is used to imply that a tattoo on a female is more about an appreciation of art rather than an indication of sexual promiscuity. Men with tattoos are perceived as rebellious, irresponsible, unintelligent, and sometimes even criminal (Hudson, n.d.).

Everyone does not share this interpretation of a tattooed person. Younger generations do not judge a person with a tattoo-riddled body—they simply accept them for what’s behind the ink. Body piercings follow a similar stereotype. It is not uncommon to see a person with tattoos also sporting a few piercings.

A politician is stereotyped as a habitual self-serving liar with an ego quenched only by four years of occupying the desk in a certain oval office.

While this stereotype is true for a few politicians, the rest are guilty by association. Most of the politicians who have served throughout our history are recognized as statesmen—and rightly so. Interesting enough is the fact that attorneys share a similar stereotype. It would be worth investigating the possibility that only politicians who were previously lawyers live up to the stereotype. The stereotype of a politician is negative and insulting, but it does not necessarily mean it is false.

There is a lot of rhetoric surrounding politicians, tattooed persons, feminists, and senior citizens. These groups are all victims of several fallacies some of which are unjust and borderline prejudice.

Side Note: It is morally irresponsible to contribute to or encourage stereotyping. This and all of the supporting rhetoric are designed to slant the truth about these groups. While there are probably a few members of each group that could be the poster child for the group’s stereotype, the entire group suffers—society suffers.

Stereotypes are unfortunately derived from little to no real facts about a particular group of individuals. These same stereotypes are rarely questioned and always used in everyday conversation, and everyday marketing communication. There are, however, several methods used by responsible marketers to identify the characteristics of individuals to produce effective marketing results.

Data Modeling & Persona Development

Using demographic, psychographic and geographic information, a savvy marketer can create an accurate profile for just about anyone–including politicians. Information is gathered from various sources, appended and associated with the basic contact information for every individual in a marketing list. This extended information is used to identify specific segments and unique characteristics within each segment. There are several mainstream sources for this information, most of which originates from U.S. Census data and individual surveys. Not every piece of information is available for every individual. This is when marketers rely on data modeling techniques to “fill in the blanks.”

Two common approaches to deriving missing information are linear and logistic regression. These modeling methods use information from other records in a marketing list to “predict” and populate missing data. While not 100% accurate, it is more effective than using “default” or “generic” information–as with the use of the broad net approach of stereotyping. At the end of the day, the goal is to develop a persona for the purpose of creating a message strategy to communicate on a one-to-one level with each and every person in a marketing list–the target audience.

A target audience is comprised of many different personas. Some with tattoos, others are politicians… but all are consumers.

An inexperienced marketer’s approach of stereotyping will exclude many individuals likely to want and/or need a particular product or service. Effective marketing begins with sound data modeling, and a complete understanding of the various personas contained within your marketing list. Stereotype-driven marketing can only be produced for the masses. True one-to-one marketing requires each and every communication to be timely, relevant and understood by the recipient. Speaking to each individual at a level he or she can understand gives the best chance of a marketing communication transitioning from conversation to communication.

 

 

References

Hudson, Karen (n.d.). Tattooed & Pierced – Breaking the Stereotype. Retrieved March 16, 2009, from About.com website: http://tattoo.about.com/cs/articles/a/break_stereotyp.htm

Moore, B. N., & Parker, R. (2007). Critical Thinking, 8th Edition. Boston, MA: The McGraw-Hill Companies senior citizen. (n.d.). The American Heritage® Dictionary of the English Language, Fourth Edition. Retrieved March 16, 2009, from Dictionary.com website: http://dictionary.reference.com/browse/senior citizen

Wallflower (2007). “Feminist” is not an insult. Retrieved March 16, 2009, from ProgressiveU.org website:http://www.progressiveu.org/010616-feminist-is-not-an-insult

 

 

What is Advertising’s Role in Business?

20 Friday Jul 2012

Posted by in Marketing Philosophy, Marketing Strategy

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Sometimes we forget basics. Advertising as a non-personal, paid communication about products (Arens Schaefer, & Weigold 2009). Advertising has an important role in business. Without advertising, many great products would be the world’s best-kept secrets.

Advertising allows businesses to ‘spread the word’ about their products and services.

Sometimes the message is designed for the masses, and in other cases a more strategic approach is used to deliver advertising in a more controlled environment. Advertising gives businesses a competitive advantage. Businesses use different forms of advertising leveraging various media to raise public awareness regarding their products. Advertising is the only way for businesses to tout their product’s uniqueness and differentiate themselves from their competition.

Advertising can take many forms. Each form, method, or technique can be used across several simultaneous marketing channels and advertising conduits. For example, comparative advertising as part of a marketing campaign can run concurrent in print, on television, radio, and the Internet. Advertising is one part of a cohesive marketing mix. Specifically, advertising falls under “promotion”—one of the 4 Ps of the marketing mix. Businesses are constantly seeking new ways to advertise.

References:

Arens, W., Schaefer, D., & Weigold, M. (2009). Essentials of Contemporary Advertising. McGraw-Hill Irwin, New York.

Choose a Marketing Strategy

28 Monday May 2012

Posted by in Marketing Strategy

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All too often, organizations struggle to choose a marketing strategy that best fits their overall goals and objectives. Sometimes the strategy for a given product or service will be in complete contrast to other marketing strategies within an organization. It is perfectly acceptible to use different strategies–across the product portfolio–to help springboard a particular product into the spotlight. Remember, speed to market is crutial. The cost-leader strategy, differentiation strategy, and focus strategy each offer unique advantages.

Cost-Leader Strategy

The Cost-Leader Strategy is the strategy a firm follows to become a leader in market share. Basically the strategy focuses providing the product to the market at the lowest cost. Every action the firm takes is designed to lower the cost of delivering the product to the consumer ensuring the firm maintains the high volume turnover require in this strategy. As a result this strategy also requires the firm to constantly monitor competitive challenges and quickly responding to these challenges by anticipating them and using its cost advantage to dominate its competitors. New technologies and innovations are quickly adopted to lower production costs and increase its advantage in the marketplace.

This aggressive approach to remaining the market leader requires the firm to constantly expand the total market by seeking new users, new uses for the product and encouraging current users to use more of the product. All of these focuses will serve to increase quantity demanded resulting in still lower costs through economies of scale allow the firm to reinforce its dominance in the industry. Wal-Mart is the classic example of this strategy in action.

Differentiation strategy

The Differentiation Strategy is based on exploiting identified weakness in the position of the cost-leader or other firms in the marketplace. These might be consumer dissatisfaction with the choices available, customer services or quality of the product offered by the Cost-Leader. The firm that is following the Differentiation Strategy than develops an aggressive strategy designed to exploit this weakness and gain market share at the cost of either the Cost-Leader or other weaker firms. Target is an excellent example of this strategy countering with smaller, friendlier stores easier for the customer to navigate when in a hurry.

Focus strategy

The Focus Strategy is a strategy based on avoiding competition with the major firms in the industry by focusing on serving niche markets too small for the large firms to exploit economically. Usually these are specialty markets that are too dispersed or fragmented for a large firm to serve profitably. Often they are isolated geographically or require a special knowledge of products and market demographics. The firm then focuses on making itself master of this niche but building a value chain based on its unique needs. The Gap succeeds with improved quality and selection in the clothing field it specializes in.

Choose the marketing strategy that will bring the most success to your organization. Considering there is only one cost-leader in each industry, most companies choose a differentiation strategy. This means, of course, that you will be going toe-to-toe with the competitor with the lowest price. In this scenario, do not compete on price. Prove why your products and services are better–and enjoy the success.

Complex Campaigns Can Benefit From Project Management

04 Wednesday Jan 2012

Posted by in Marketing Strategy, Marketing Technologies

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Complex cross-media marketing campaigns require a well-organized symphony of coordination and scheduling. Formal project management techniques can greatly increase the timeliness, efficiency, and profitability of a direct marketing campaign. With so many moving parts, it makes sense to leverage traditional project management techniques to command control and guarantee speed-to-market.

In nearly every aspect of our lives, we organize tasks into simple to-do lists. A typical day can be filled with chores and activities identified by an objective and a due date. A formal project—no matter how small—shares common characteristics with larger and more complex projects. In each case, the organization and structure of project management offers the framework necessary for these projects to succeed—on time and within budget. Project management can be scaled to match the scope and complexity of a project. The overall methodology and discipline, as defined in this paper, has become the main ingredients in the recipe for success.

What is Project Management?

A project can be defined as a series of interrelated tasks with a clearly identified timeline and predetermined costs. Larson & Gray (2011) describe a project as a temporary endeavor with an established objective (pg. 5). Moreover, a project has a start date and an end date, predetermined costs, and involves doing something never before realized. The predetermined timeline encompasses a project life cycle. Overseeing the project life cycle is the foundation for project management.

Project management is the coordination and day-to-day direction throughout the stages of a project life cycle. Specifically, project management is the planning, organizing, and directing of tasks and resources for a relatively short-term objective (Hanford, 2010). With an ever-changing, competitive, and fast-paced environment, it is imperative for businesses and organizations to leverage project management for effectively monitoring initiatives and ensuring success.

Speed to market is sometimes the competitive edge that a company needs to make the leap from market follower to market leader.

Project management offers an organization the ability to have higher success rates with lower uncertainty and costs associated with a project (Manu, 2007). In short, project management means an overall product life cycle can be reduced resulting a competitive advantage for an organization. Project management is an important tool for businesses to translate strategies and objectives into realities.

The Project Life Cycle

 The individual phases of a project are organized into a project life cycle. The project life cycle is comprised of several stages. The number of stages varies based on the type of project or specific industry (Larson & Gray, 2011, pg. 7). The basic project life cycle consists of four stages: defining stage, planning stage, executing stage, and closing stage.  Project life cycle management is a granular approach for controlling the logical sequence of activities as defined by a project scope.

Undefined requirements, miscommunication, and lack of sponsorship all contribute to failed projects. A structured project life cycle approach supports a clearly defined scope and objectives while offering the best chance for achieving the project goals. A large percentage of projects fail to deliver because organizations often downplay the importance of project life cycle management. Regardless of the methodology, organizing a project into stages and identifying a project plan derived from a comprehensive project life cycle guarantees success.

During the defining or planning stage, a project undergoes an initiation process. Part of the initiation process includes the challenging task of defining the overall business opportunity (Westland, 2007, pgs. 3-4). In some cases—as it relates to innovative technology-centric projects—the business opportunity can be subjective. The trailblazing Apple iPhone project in 2007 redefined the traditional project life cycle methodology to include a significant research and development initiative to help prove the business opportunity. Without the ability to draw upon previous experience, and particularly market acceptance, Apple’s definition of the business opportunity surrounding the iPhone was assumed (Müller, 2010).

An innovative product, such as the Apple iPhone, requires a unified approach to project management. One slight misstep in any of the project life cycle stages could be the difference between a history-making product launch and an overall corporate embarrassment. Regardless of the chosen methodology, every project life cycle includes a planning phase as the first stage of the project. As proven time and time again by companies such as Apple—planning, research, and critical thinking in the early stages of a project makes for a more effective execution stage. Apple’s 10-to-3-to-1 approach to product research results in a single product design from which a formal project life cycle is developed (Walters, 2008). Critical thinking and research is mandatory in the development of a project life cycle. The planning stage of a project is the foundation for all subsequent stages. Schedules, budgets, and resources are determined at this stage of the project life cycle. A miscalculated budget or misaligned resources can be fatal to a project and devastating to a company and its reputation.

Project Organization

Once designed, planned, and accepted by management, a project must be organized. Three common project management structures used to implement projects are: functional organization, dedicated project teams, and matrix structure (Larson & Gray, 2011, pg. 65). Projects do not fit within the normal framework of an organization. A project by definition has a predetermined time to live, and therefore in conflict with an organization’s day-to-day management of ongoing activities.

The structure and organization required for effective project management is alien to many traditional companies. Regardless, the organization must adopt a structure that will have the least impact on corporate culture. Integrating a project into the existing management framework of an organization provides a high level of flexibility. One notable downside to organizing projects within the functional organization is the pace at which the project moves. Projects take longer to complete when communication follows normal management channels.

In contrast, organizing projects as dedicated teams eliminates the extra layers of management and streamlines communication. The results are faster turn-around times and a unified project team. The cost of a dedicated team, however, sometimes outweighs the benefits. A matrix arrangement leverages the advantages of functional organization and dedicated teams approaches to create a hybrid structure. The three different matrix forms are: weak matrix, balanced matrix, and strong matrix (Larson & Gray, 2011, pgs. 73-74).

Organizational culture is a company’s fingerprint in the industry. Organizational culture is the defining characteristic of a company—it cascades across all projects. An organization’s culture is many times a reflection of its leaders. Leadership is crucial in an organization. A project manager is in a position of leadership. There is a distinct difference between project management and project leadership. As the leader of a project, a project manager can exercise leadership by inspiring and motivating the teams, and by understanding the bigger picture.

Sponsorship is vital in a project. A project sponsor is one of many stakeholders with an active interest in a project. The project sponsor is the liaison between the project manager and the executives. In certain cases when it becomes necessary to acquire more resources or change direction, a project sponsor would most likely be responsible for final approval. Successful projects share a common trait. They all have a strong and common bond between the project manager and project sponsor. Open communication between these two individuals is essential.

Project Team

The five-stage team development model provides the framework for project managers to build an effective team. The five stages defined by Larson & Gray (2011) include: forming, storming, norming, performing, and adjourning (pgs. 377-378). The goal of a project manager during the team-building phase of a project is to develop a cohesive group of individuals with a positive synergy. In an idea situation, a project manager would draw upon a pool of unlimited resources to choose candidates with strong compatibility and cohesion. In lieu of a perfect world, project managers yield to the effectiveness of the five-stage model to develop his or her team.

Before the project team begins the five-stage development process, a recruiting and selection process must take place. Choosing the most capable individuals for a project team ensures success (Kristoff, 2008). A project manager must understand the specific needs of the project before selecting individuals for the project team. Additionally, a project manager should consider the schedule and be sensitive to the pace at which each team member performs. Some team members, while a perfect match for a particular task, might not work comfortably at a pace required by the project timeline.

Work Packages

Objectives, deliverables, and milestones are the first three elements of a project scope. Defining the project objective is the single most important step in developing a project scope.

A well-defined project scope is used to establish a priority matrix. The priority matrix is an effective tool for establishing project priorities. Once the priorities are determined, the project manager can create a work breakdown structure (WBS). The work breakdown structure is a detailed outline of the project. Creating a hierarchical framework of the elements within a project provides a project manager the ability to manage specific costs and efforts associated with each deliverable or subdeliverable.

Project deliverables are known as work packages. Work packages are the most granular level of a work breakdown structure. The project is at the highest level, followed by the deliverables. Each deliverable can have one or more subdeliverables. The work packages of a project can be managed, tracked, and budgeted independently. This allows a project to easily be distributed across virtual teams if necessary. A project manager needs to be aware, however, of work packages that are on the project’s critical path. Any time delays or constraints to tasks on the critical path will affect the overall timeline.

Project Management Software

There are several software packages to help organize and manage projects. Microsoft Project, for example, offers all of the tools and reporting that a project manager would need to handle even the most complex projects. In situations where several projects are running concurrently as part of an overall program, a project manager can manage the project portfolio. Project management software makes if possible to create a work breakdown structure, estimate and manage schedules and costs, and monitor activities.

Managing risks is an important aspect of project management. Project management software provides mechanisms for assessing risks. Change control is often an area for exposing project scope creep. The change control management features in Microsoft Project help track changes and report the cost and time impact a change will have on the overall project. Large integrated projects will benefit from the use of project management software. The reporting capabilities alone will justify the costs.

Project management structure, methodology, and techniques can be applied to any type of project—no matter the size. Every project shares the common characteristics of a beginning and end date, defined set of deliverables, and an overall objective. Project management brings organization and framework to the project to help ensure success. While every aspect of traditional project management may not apply to all projects, the basic principles remain effective and relevant for every situation. Marketers are not exempt from the challenges of budgets, timelines, and competing priorities. Apply project management techniques to gain a competitive edge.

 

References

Hanford, M. (2010). Program management: different from project management. Retrieved March 5, 2011, from http://www.ibm.com/developerworks/rational/library/4751.html

Kristoff, S. (2008). Building a successful project team. Retrieved March 7, 2001, from http://www.suite101.com/content/building-a-successful-team-a41946

Larson, E., & Gray, C. (2011). Project management: the managerial process. New York: McGraw-Hill/Irwin

Manu, K. (2007). The importance of project management in organizations. Retrieved March 7, 2011, from http://www.articlesbase.com/leadership-articles/the-importance-of-project-management-in-organizations-246928.html

Müller, C. (2010). Apple’s approach towards innovation and creativity. Munich: GRIN Publishing GmbH

Walters, H. (2008). Apple’s design process. Retrieved March 6, 2011, from http://www.businessweek.com/the_thread/techbeat/archives/2008/03/apples_design_process.html

Westland, J. (2007). The project management life cycle. Philadelphia: Kogan Page

Economic Forces Changed the Printing Industry

21 Monday Nov 2011

Posted by in Marketing Technologies

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The printing industry in the United States has enjoyed success in spite of many years of technology stagnation.

A recent wave of innovation has fueled changes that are beginning to affect the organizational environment. Forces specific to the general environment are causing the printing industry to be reinvented, while forces within the task environment are redefining the supply-chain. From production employees to raw material suppliers, everyone’s role, responsibility, and relationship is changing to accommodate the paradigm shift of this five-century-old industry.

Forces within the general environment are driven by the changes surrounding all three segments of the printing industry. Technological forces are the most predominate in the pre-press and press organizations. Pre-press concentrates on the preparation of materials for printing (Brown, 2009). Typesetting, for example, belongs in the pre-press segment of the printing industry. The advent of computers and desktop publishing software has redefined the role of a typesetter. Instead of manipulating the movable type invented by Gutenberg over five centuries ago, a graphic designer uses computers to set type and perform composition tasks.

The press or output segment of the printing industry is facing change due mostly to technological forces. Digital printing technologies are challenging traditional offset and web printing companies by allowing smaller companies to compete in the same market as large commercial printers. The most costly components of print production is addressed and solved with digital printing. The equipment is easier to maintain and waste is virtually eliminated.

The opportunities and threats created by technological forces are cascaded through several other general environment forces (Jones & George, 2007). For example, demographic forces are created by the need for employees with education and skills to match the new technologies. While jobs such as journeyman typesetter have become obsolete, advances in technology defined new positions. The demographic of a graphic designer is in complete contrast to a journeyman typesetter. Typesetting was a trade that could only be mastered by working as an apprentice. Today, graphic designers can learn the skills necessary for this position while attending college or a trade school.

The learning curve necessary to become a proficient digital pressman is minimal. As a result, the average age of a digital pressman is ten years younger than a journeyman offset pressman. Another ripple effect caused by a younger workforce surrounds sociocultural forces. The overall environment and culture in the workplace is changing to suit the personalities, tastes, and interests of a younger demographic.

The overhead and wages necessary to run a successful printing business today is noticeably less than in previous years. Many businesses have made financial cuts to their printing and advertising budgets. This economic force has challenged many of the well-established commercial printing companies. However, the smaller organizations are better poised to burden the financial strain.

The Economic forces resulting mostly from the demand of cost-conscience consumers have created a crowded playing field of competitors. The smaller businesses are beginning to win bids that would have never been considered in the past. Customers that would have never been able to afford traditional printing services are not only leveraging these services, but also in some cases justifying their own installation of digital printing equipment.

The low cost of digital printing has spawned a trend of in-house printing departments. Suppliers sell the raw materials to both commercial printers and in-house facilities, and therefore not affected by the loss of commercial printing to in-house manufacturing. Distributors are removed from the supply chain in an in-house printing environment. The most disconcerting change is that the customers now become competitors. The same economic forces that cause companies to become financially frugal shift direction and expose new revenue streams for in-house production facilities.

Digital printing technologies have reshaped the printing industry. An industry that once enjoyed an exclusive membership has been diluted by technology. Although technology can be interpreted as threat to the printing industry, many opportunities have emerged as a result. Moreover, opportunities for many new entrepreneurs to explore are now possible mostly due to advances in technologies in the printing industry.

The Bureau of Labor Statistics (2008) reports that 69.3% of the printing businesses in the United States employs less that ten people. General environment technological forces are responsible. Sociocultural forces endorse the changes, and demographic forces change the face of the manufacturing workforce in the printing industry—all for the better.

References

Brown, R. (2009). A Capsule History of Typesetting. Retrieved November 16, 2009, from http://www.historybuff.com/library/reftype.html

Bureau of Labor Statistics. (2008). U.S. Department of Labor, Career Guide to Industries, Retrieved November 14, 2009, from http://www.bls.gov/oco/cg/cgs050.htm

Jones, G., & George, J. (2007). Essentials of Contemporary Management. McGraw-Hill Publishing. Boston.

Vitamin Enhanced Water Could Make a Bigger Splash

28 Tuesday Jun 2011

Posted by in Marketing Strategy

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There is a global opportunity for companies producing vitamin enhanced water, but do the marketing executives see it? China is the second largest market for energy drinks in the world. According to research by Zenith International (2009), the United States and Canada combined to consume 37% of the overall volume of energy drinks in 2008 (Just-Drinks.com). The Asia Pacific region boasts 30% of the global volume.

With a strong distribution channel, competitive pricing, smart positioning, and aggressive advertising Glaceau VITAMINWATER® enhanced water can become the number one energy drink in China.

Overall sales of energy drinks worldwide have doubled in the last five years (Roethenbaugh, 2009). Clever marketing and product positioning has blurred the line between energy drinks and the six categories of water that struggles to compete in the same market. Flavored waters muddy the market with nothing more that bottled water with a twist. Clustered water, the latest version of ultra purified H2O, has yet to take hold. Fitness and oxygenated waters appeal to athletes and casual gym patrons. Premium waters are typically enjoyed at fine restaurants as an alternative to tap water. Vitamin enhanced waters are targeted to health conscious individuals.

The market leader in energy drinks manufactures and distributes a product containing high levels of caffeine. The public perception is that caffeine is the most effective stimulant for energizing your mind and body. However, other energy drink companies have made attempts to make a splash in the market by using energy boosting ingredients such as green tea and ginkgo biloba (AllBusiness.com, 2005). These particular products find themselves competing with soft drinks, smoothies, and iced teas for market share—and as a result, barely providing competition for the caffeine based products.

The most compelling statistic that would encourage Glaceau to re-position their VITAMINWATER® enhanced water in the energy drink market is the 12% annual growth prediction taking sales to over $9 billion dollars in the U.S. (ReportBuyer.com, 2007). Based on this prediction, and the knowledge that the Asia Pacific market enjoys similar sales forecasts, the timing is perfect for Glaceau VITAMINWATER® enhanced water to enter this new market. The industry for bottle waters, fitness drinks, and enriched waters is flourishing. PepsiCo cites the declining popularity on carbonated soft drinks is partly responsible for the increase in sales of their sports drink, Gatorade (Farrell & Rappeport, 2010).

The largest segment for the VITAMINWATER® enhanced water product in the Asia Pacific market is in China. The most recent census data shows the average total consumption expenditure for a Chinese family is 7142 Yuan, or approximately $1,053 U.S. dollars (Coutsoukis, 2004). Nearly 38% of the total expenditure is on food. Based on this information alone, Glaceau should be skeptical when deciding whether or not the market can sustain the energy drink business. One existing company has a proven track record in the Asia Pacific market.

Red Bull, the world’s leading manufacturer of energy drinks, has enjoyed several years of success in China. However, their flagship product is targeted specifically to males between the ages of 18 and 24 (Yates, 2008). Glaceau VITAMINWATER® enhanced water, with a slight product repositioning, can cast a wider net and attract a strong target audience comprised of males and females between the ages of 18 and 49. China has approximately 700 million people that fall within this demographic model. Many, of course, do not have the income to justify purchases outside of the bare essentials. However, companies currently with market saturation have isolated the target audience.

Constant adjustments to the U.S. – China trade agreements need to be considered when planning a manufacturing and distribution strategy. There have been several talks within the last few months regarding trade barriers (Lawder, 2010). Depending on the outcome of the trade agreements between the United States and China, Glaceau may need to establish production and distribution within China as opposed to exporting the VITAMINWATER® enhanced water product from the United States.

A few trade sectors in China are suffering from overcapacity (Gunn, 2010). The overcapacity is mostly within the industrial and commercial sectors. Environmental issues and increasing social tension are a few current weaknesses that should be monitored, but not distract from the plan to introduce VITAMINWATER® enhanced water to the Asia Pacific market. China’s overall economic position is strong—boasting a $53 billion dollar surplus in the first quarter of 2010.

The China Food & Drink Report (2010) exposes one of China’s weaknesses as their under-developed agriculture and distribution system (Business Monitor International). Moreover, the health scares with products produced in their own country has opened a door for imports. The timing could not be better for Glaceau VITAMINWATER® enhanced water to spring into the spotlight, and begin an aggressive campaign to dominate the energy drink market.

The Chinese government is overwhelmed with issues regarding the environment. While the 8% average growth has enhanced the standard of living for the population, it has also contributed to their environmental challenges. Any company, regardless of origin, with the intent to develop a manufacturing facility in China will find most of the opposition coming from special interest groups. Glaceau must continue to monitor and assess political risks. Coca-Cola Company has been conducting business in the Asia Pacific market for many years. Their experience in this area will help foster the necessary relations with key government officials and organization for success.

Glaceau is a privately owned subsidiary of Coca-Cola Company. The company began manufacturing enhanced waters in 1998. The Smartwater product, an electrolyte enhanced water, is the foundation for the VITAMINWATER® enhanced water product. Glaceau VITAMINWATER® enhanced water is produced in eleven flavors and enriched with energy enhancing natural ingredients and vitamins. VITAMINWATER® enhanced water is positioned to compete with traditional bottled water, sports drinks, and flavored waters. The brand is recognized world wide as simply another variation of enhanced bottled water.

Glaceau has positioned its VITAMINWATER® enhanced water product as a healthy alternative to soda. However, the Asia Pacific market currently perceives VITAMINWATER® enhanced water as a product for the affluent. VITAMINWATER® enhanced water in the Asia Pacific market is available in upscale restaurants and high-end retail outlets. This is in complete contrast to the public perception of the same product in North America. The company acknowledges the need to tap into a market with the potential to dwarf sales in other global markets.

What if, and at the same time, VITAMINWATER® enhanced water is re-positioned as an energy drink?

The competition for energy drinks in China is far less crowded than with specialty waters. This is unexpected considering that caffeine-based energy drinks originated in Japan and Thailand (AllBusiness.com). The Austrian-distributed drink, Red Bull, has dominated this category for several years. Glaceau can make a strong impact and at the same time broaden the definition of energy drink to include healthy alternatives. Health conscious consumers, regardless of location, would cross over to create a new market.

All mind and body stimulating energy drinks that would compete with VITAMINWATER® enhanced water in the Asia Pacific market contain caffeine. Glaceau boasts no artificial flavors, colors, are any chemical stimulants as contained in the products of the competitors. Glaceau can leverage their all-natural approach as the differentiator that will eliminate the caffeine-based products from the competition. The current VITAMINWATER® enhanced water product line will not be adjusted or altered for the Asia Pacific market, but rather re-positioned as a healthy alternative energy drink.

There are over 500 energy drink products worldwide. Five producers dominate the market share.  Red Bull is the leader with 42.7% overall sales. Hanson Natural, the manufacturer of Monster brands has 16% of the market. PepsiCo has pushed their SoBe and Amp products to an impressive 13.2%. Rockstar International enjoys 12% and Full Throttle by Coca-Cola has 10% of the market (Simon & Mosher, 2007).

Each of these producers of energy drinks leverage caffeine as their main ingredient. Glaceau VITAMINWATER® enhanced water, repositioned to compete in the energy drink market, would enjoy immediate success by attracting health conscious energy drink consumers. The assumption is that many consumers remain leery of the chemical-based energy drink, and because there are no alternatives choose to consume the caffeine riddled energy drinks. There is little competition in the energy drink market for products that bring a healthy natural alternative to the mix.

Glaceau VITAMINWATER® enhanced water has a strong global presence, with the exception of the Asia Pacific market. This is due mostly to the fact that the product was perceived by the Asian population as an upscale water only available to the affluent. In all fairness to the consumers, without a marketing plan to properly position the product—there would be no reason to think otherwise. The strategy is to create a drink category that attracts consumers from both the energy drink category and the fitness water category.

Better positioned as an energy drink, Glaceau VITAMINWATER® enhanced water can make an immediate impact to the Asia Pacific market by advertising the differentiator. VITAMINWATER® enhanced water is an all-natural alternative to the chemical laden products in a can. Unlike other energy drinks, VITAMINWATER® enhanced water is safer for a broader age group. Energy should be replaced naturally. With Glaceau VITAMINWATER® enhanced water, you can reenergize and “harness your energy—naturally.”

References

AllBusiness.com (2005). In the energy drinks market by 2009 the United States is expected to have the largest market. Business Wire. [Electronic version] Retrieved July 21, 2010, from http://www.allbusiness.com/consumer-products/food-beverage-products-nonalcoholics/5178192-1.html

China Food & Drink Report – Q3 2010. (2010). Business Monitor International. [Electronic version]  Retrieved July 26, 2010, from ProQuest: http://proquest.umi.com/pqdweb?index=7&did=2062171471&SrchMode=1&sid=4&Fmt=2&VInst=PROD&Type=PQD&RQT=309&VName=PQD&TS=1280177041&clientId=74379.

Cateora, P. & Graham, J. (2007). International marketing. New York: McGraw-Hill Irwin.

Coutsoukis, P. (2004). Per capita annual living expenditure of urban households (2004) – China statistics census. Retrieved July 24, 2010, from http://www.allcountries.org/china_statistics/10_7_per_capita_annual_living_expenditure.html

Farrell, G. & Rappeport, A. (2010). PepsiCo net income falls 3%. Financial Times. [Electronic version]  Retrieved July 26, 2010, from ProQuest: http://proquest.umi.com/pqdweb?did=2087426421&sid=1&Fmt=3&clientId=74379&RQT=309&VName=PQD

Gunn, N. (2010). Coface’s China country rating and business climate rating. Retrieved July 21, 2010, from http://import-export.suite101.com/article.cfm/cofaces-china-country-rating-and-business-climate-rating

Just-Drinks.com (2009). Energy drink sales hindered by Thai decline – research. Retrieved July 20, 2010, from http://www.justdrinks.com/analysis/energy-drink-sales-  hindered-by-thai-decline-research_id98736.aspx

Lawder, D. (2010). US-China talks to focus on trade barriers—Geithner. Retrieved July 26, 2010, from http://www.reuters.com/article/idUSNLLIGE64020100518

ReportBuyer.com (2007). New report predicts energy drink sales in the U.S. to exceed $9 billion by 2011. Retrieved July 20, 2010, from             http://www.reportbuyer.com/press/new-report-predicts-energy-drink-sales-in-the-us-to-exceed-9-billion-by-2011/

Roethenbaugh, G. (2009). Global energy drinks market 2003-2008. Retrieved July 25, 2010, from http://www.researchandmarkets.com/reports/c29596

Simon, M. & Mosher, J. (2007). Alcohol, energy drinks, and youth: A dangerous mix. Retrieved July 20, 2010, from http://www.marininstitute.org/alcopops/energy_drink_report.htm

Yates, D. (2008). Is coffee an old man’s beverage? Retrieved July 21, 2010, from http://www.energydrinkreviewer.com/

Public Relations: The New Marketing Ethos

04 Friday Feb 2011

Posted by in Marketing Strategy

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Many paradigm cases of public relations, advertising, and marketing activities exist to provide a basis for believing there are few differences between them. Advertising and public relations are individual instruments of marketing. Both have strengths and weaknesses, and each has a specific purpose. However, the gap between advertising and public relations is closing. Eventually, there will be more similarities than differences—and as a result, public relations tactics will take the place of traditional advertising methods.

Social Media is a Marketing Conduit

The popularity of social media is largely responsible for the convergence of public relations and advertising. Social media communication channels are accelerating the inevitable overlap in definition between public relations and advertising. Public relations activities are a form of marketing. Public relations communicates information about a company and its products and services—but from a neutral, broad, human-interest perspective. Whereas, advertising is more focused on a persuasive, non-personal marketing communication (Arens, et. al., 2009, p. 4). Both methods of marketing, however, require viable and effective communication channels.

Social media is quickly becoming the desired conduit for social marketing. Companies selling ideas, attitudes, and behaviors as opposed to products and services first realized social marketing in the 1970s. Social marketing and public relations are both designed to influence a target audience or general society. Social media—not available in the 1970s—has given public relations professionals a conduit to their publics. Social networking has extended the principles of marketing and redefined the marketing mix.

The four ‘P’s of marketing—product, price, place, and promotion—are joined by four additional ‘P’s. Marketing communications across social media channels require and understanding of the expanded marketing mix. The social marketing ‘P’s include publics, partnership, policy, and purse strings (Weinreich, 2010). A social marketing or public relations ‘public’ is the target market, special audience, or segment of the general public identified by an organization. Market research is often used to isolate and group individuals for the purpose of targeted marketing communications.

Social media channels, as with most Internet-based communication conduits, are easy to penetrate but difficult to control. While it is simple for public relations professionals to participate in social media activities—such as forums, blogs, and moblogs—it is impossible to control access to the content. Moreover, the Internet encourages content sharing and site linking making it difficult to know exactly who is ultimately at the receiving end of a social media communication.

Public relations strategies include providing honest, objective information to various publics through effective communication channels (Shauib, 2011). Social media has evolved from a communication channel to a marketing conduit. Press releases, one of the most effective tools for a public relations agent, provides one-way communication to a company’s publics. Social media, however, includes mechanisms that will allow the publics to communicate back to the company. Similarly, brands are using social networking to create goodwill with its consumers and prospects by encouraging an open dialog between the company and the consumer.

Social media bolsters partnerships between businesses with complementing products or services. Partnerships and strategic alliances can amplify brands, enforce messages, and influence public opinion.  Kellogg Company, for example, partnered with the National Cancer Institute to raise awareness by showing the relationship between eating habits and the likelihood of contracting cancer (Caywood, 1997, p. 439). Social media is an excellent communication channel for cause-related marketing.

Policy, one of the social media specific ‘P’s in the marketing mix, takes place when a public relations message motivates individual behavior or influences change. The use of public relations in education and Government organizations is primarily for public persuasion. A public relations professional can leverage social media channels to communicate information about the current policies of government agencies (Cameron, et. al., 2008, p. 408). If successful, promoting policies through social media communication channels will encourage support from the people.

When social media is used to raise awareness for non-profit and cause-related organizations, there is usually a strong message that pulls on the heartstrings. At the same time, a compelling call-to-action pulls on the purse strings. Social service organizations rely on public relations marketing to not only develop public awareness and recruit new members, but also raise and replenish operating funds. Fund-raising events are critical to the longevity of a non-profit organization.

Not all press releases are the same

While social media channels deliver public relations marketing messages to target audiences in real-time, the approach and composition of a message for social media is different than traditional press releases (Dubois, 2010). Public relations is quickly becoming the marketing approach of choice for businesses of all sizes. A public relations professional relies heavily on the traditional press release to compliment other public relations activities.

The use of social media to deliver press releases moves public relations ahead of traditional advertising as an effective marketing communication option. Any communication—press release or otherwise—requires a different strategy when delivered using an online method. Every online communication should be designed for two-way communication. Dean Guadagni (2009) identifies the three common non-interactive as: broadcasting, announcements, and crowdsourcing. However, crowdsourcing offers a feedback loop between consumers and businesses.

A press release or other marketing communication deployed across Internet channels should always be positioned as an interactive communication. Not only should the message engage the audience, but also all interaction should be acknowledged and an open dialog created. A company can glean information about their publics by offering surveys and polls as part of the message strategy. Additionally, feedback from the target audience presents a company with insight into the psyche of their customers. Social media—when used for marketing communication—should not be exempt from targeted communication strategies.

Target audiences, market segments, and defined publics are unique groups that can impact the company’s goals. The process of identifying a target audience for public relations and advertising is similar. A public relations professional defines his or her ‘publics’ by using traditional methods of gathering data through primary research. This approach can be expensive, but the results are specific to the business needs. In other words, primary research approaches—such as focus groups, surveys, interviews, and observation—allow companies to identify and learn more about their target market.

Secondary research is less costly and easier to obtain. The results, however, may not be as accurate as information gleaned from primary research. Secondary research is typically a great way to quickly identify a target audience. Basic demographic, psychographic, and geographic information is important for understanding the ‘anatomy’ of the members in a target audience. This information alone is enough to develop communication strategies across social media channels, but a physical address, email address, or phone number is necessary for a direct marketing communication.

Both advertising and public relations use a mass marketing or broadcast approach to deliver messages to their respective target audience. A public relations professional will cast a wider net than an advertising professional when identifying their publics. A segmented public encompasses the target audience, but also includes secondary audiences, policymakers, and gatekeepers (Weinreich, 2010). A public relations campaign is intended to create goodwill for a product, company, or cause. One common goal of both advertising and public relations is to communicate with the target audience or segmented public in a language best understood.

Advertising is Becoming Less Effective

Every successful message strategy begins with an effective use of language. Whether the marketing campaign uses advertising methods or public relations tactics, the message must be written specifically for the intended audience. The clarity and simplicity of a message has a direct impact on the success of the communication. Jargon and clichés should always be avoided. A public relations message can lose credibility if euphemisms or discriminatory language is used (Cameron, et. al., 2008, p. 150).

Advertising messages do not carry the same credibility as pubic relations messages. Consumers know that advertisements are designed to sell a product or service. Most consumers have become callused against catchy slogans and gimmicks, leaving the door wide open for public relations style communications to replace traditional advertising. The writing styles between an advertising copywriter and a public relations writer is vastly different. Advertisements typically concentrate on a single benefit of a product or service. Public relations materials are written in a journalistic style, while offering more in-depth information about a company, product, or services (Mathlesen, 2010).

While advertising continues to have its place in the marketing toolbox, public relations is proving to be a more versatile solution. Toyota Motor Corporation experienced first hand the issues surrounding the use of advertising in a situation better suited for public relations. In March 2010—in the wake of public concern over safety issues—Toyota spawned an advertising campaign designed to promote brand loyalty and build retention. The problem, however, was that Toyota failed to address specific concerns surrounding congressional inquiries and safety investigations. Moreover, Toyota did not seem humbled by the problems and made no effort to apologize to their customers (Fredrix, 2010).

Toyota’s advertising arrogance had a negative impact on their loyal following. A public relations campaign would have provided the goodwill needed at a time when the public was unsure about the company. Additionally, public relations becomes the credibility conduit between the consumer and the company. The public trusts anything written in a press release or other public relations communication. Ford Motor Company was faced with similar challenges in 2000 when many Bridgestone tire clad Ford Explorers were responsible for over 250 traffic deaths. Ford chose to reduce their advertising efforts until the public trust was regained.

The general public is skeptical of advertising. Advertising is considered self-serving and ineffective. Branding is an important part of marketing. Public relations tactics continue to be more effective than advertising for building brands. The top five brands according to The Economist magazine are Google, Apple, Coca-Cola, Starbucks, and Ikea. In contrast, the top five advertisers are, General Motors, Proctor & Gamble, Ford, PepsiCo, and Pfizer (Elliott, 2010).

Public relations offers credibility, clarity, and cost advantages over advertising. The public has weathered advertising promises for many years. No matter how cleverly disguised, an advertisement is still designed to sell. The journalistic approach of public relations messages creates a newsworthy credibility that will never exist in advertising. Claims and comparisons sometimes cloud the underlying intention of an advertisement. A public relations message is always clear, concise, and directly to the point.

One of the greatest advantages of public relations over advertising is the cost. Marketing publicity is a form of public relations that involves getting stories published about a company’s products and services. Each product inherits the credibility of the publication. Consumer Reports, for example, is known for unbiased reviews and comparisons of thousands of consumer products. Several magazines and websites specialize in restaurant and travel reviews. All of this publicity is impartial and free.

Public relations is viral. A public relations campaign can be spread across many communication channels simultaneously. Social media offers additional advantages to public relations over advertising. Word of mouth communication is commonplace on the Internet. With a single click of the mouse, a consumer can easily share information and opinion about a product or service to thousands of individuals.

For years, the words advertising and marketing were synonymous. The recent economic challenges have forced consumers to make cutbacks on products and services. Advertisers are creating more aggressive campaigns in hopes of creating a spending frenzy. In the aftermath of government bailouts and mass media coverage of mismanaged corporations, the public is desensitized to advertising. Companies need to bring themselves into the public spotlight and win the trust of their target audience. Public relations produce goodwill in the company’s various publics (Turney, 2001).

Public relations activities blaze the trail so that advertising is more effective. Moreover, advertising is more effective if following a public relations campaign. While advertising cannot perform the same function as public relations, marketing campaigns using public relations tactics can accomplish the goals of traditional advertising—increase sales and raise company or product awareness. Advertising will always be an important instrument of marketing. Public relations is proving to be a viable alternative to traditional advertising, and the lines between the two are fading. Public relations has supplanted advertising and quickly become the new marketing ethos.

References

Arens, W., Schaefer, D., & Weigold, M. (2009). Essentials of contemporary advertising. McGraw-Hill Irwin: Boston.

Cameron, G., Wilcox, D., Reber, B. & Shin J. (2008). Public relations today: Managing competition and conflict. New York: Pearson.

Caywood, C. (1997). The handbook of strategic public relations and integrated   communications. McGraw-Hill: Boston

Dubois, L. (2010). How to write a social media press release. Retrieved January 30, 2011, from http://www.inc.com/guides/2010/11/how-to-write-a-social-media-press-release.html

Elliott, J. (2010). Advertising vs. PR. Retrieved January 28, 2011, from http://www.tvaproductions.com/article/advertising-vs-pr—17.php

Fredrix, E. (2010). Toyota: No apologies for safety problems in latest ad campaign. Retrieved January 31, 2011, from http://www.huffingtonpost.com/2010/03/07/toyota-no-apologies-for-s_n_489229.html

Guadagni, D. (2009). Social media: 5 strategies for interactive communications. Retrieved January 28, 2011, from http://innerarchitect.com/2009/06/22/social-media-5-strategies-for-interactive-communications/

Mathlesen, S. (2010). Advertising vs. public relations. Retrieved January 30, 2011, from http://www.suite101.com/content/advertising-vs-public-relations-a187370

Shauib, Y. (2011). Publics and target audiences. Retrieved January 28, 2011, from http://yashuaib.tripod.com/id12.html

Turney, M. (2001). Public relations and marketing were initially distinct. Retrieved, January 25, 2011, from http://www.nku.edu/~turney/prclass/readings/mkting.html

Weinreich, N. (2011). What is social marketing? Retrieved January 28, 2011, from http://www.social-marketing.com/Whatis.html

Advertising 101: Understand the Listening Process

01 Saturday Jan 2011

Posted by in Marketing Psychology

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Communication, no matter the media, requires a sender and a recipient—a delivery mechanism and a target. The recipient, or target, is responsible for listening to the communication. Without listening there cannot be comprehension or understanding. Listening provides a springboard of information from which to build the framework of a conversation. The only problem with listening is that there simply is not enough of it. The result of not properly listening while communicating is misspoken, misrepresented, or ill-timed responses.

Listening is a five-step process consisting of listening preparation, receiving, constructing meaning, responding, and remembering (Hybels & Weaver, 2007). The first three steps are crucial. Skipping a step can be disastrous.  How accurate of a response can be derived without first preparing to listen followed by receiving information? There could not be enough information to accurately construct a meaning. The first step, preparation, is the foundation for listening. Having the proper mindset and environment are critical. The second step in the active process of listening is receiving. Hybels & Weaver (2007) define receiving as the process of taking in, acquiring, or accepting (p. 80). It is this step where we typically fall short in the art of communication.

Receiving, while mostly associated with the hearing sense, is really a function of all five senses. Using a combination of each of the five senses is active listening. Another form of listening, described by Dalmar Fisher (1999) as “reflective listening,” collects information and interacts with the speaker. A typical interaction might include repeating or rephrasing the information so as to better understand the meaning.

Listening orientation is an important process for gathering, filtering, and reacting to information. The four components of listening orientation are, “empathy, acceptance, congruence, and concreteness” (Fisher, 1999). Empathy, the most difficult component, involves listening accurately and non-judgmentally. Our natural instinct of agreeing or disagreeing based entirely on our own point of view creates an empathy barrier. As long as there are emotions drawn from personal experiences influencing opinion on what we hear, pure empathy is impossible.

Congruence, if practiced by the listener, can encourage the speaker to become more open and direct. Congruence refers to “the openness, frankness, and genuineness on the part of the listener” (Borgatti, 2000). Without congruence, empathy becomes difficult. If you are holding a grudge or upset with the speaker, it is nearly impossible to listen with an open mind.

Acceptance in communication refers to the unconditional respect a listener has for a speaker. Proper active listening identifies acceptance as one of the most important of the four components. Acceptance is closely related to empathy (Borgatti, 2000). If the listener indicates acceptance, the speaker will use more candor.

The final component of listening orientation is concreteness. Being vague in a conversation tends to encourage a volley of abstract phrases as opposed to getting directly to the point and being effective. Sometimes the topic of a conversation might be too sensitive to discuss causing communication to have little to no concreteness.

The four components of listening–empathy, acceptance, congruence, and concreteness—are important for active listening. Moreover, proper active listening is most effective when the speaker recognizes all four components practiced by the listener. Reflection, or reflective listening, reinforces listening orientation. Specifically, reflective responses provide the indication needed by a speaker to recognize an active listener. Borgatti (2000) identifies the following principles of reflective listening.

More listening than talking is a difficult principle to follow—especially for outgoing individuals. Effective listeners ignore impersonal, distant, or abstract comments—and only respond to communication that is relevant and personal. They restate or clarify what the speaker has communicated. Proponents of reflective listening try to understand the feelings contained in what others are communicating and strive to understand the speaker’s frame of reference. They do not use their own frame of reference to interpret what is being communicated. The main thing to remember is to respond only with acceptance and empathy. In the words of Stephen Seckler (2008), “Listening is more powerful than talking.”

A reflective listener responds to feelings as well as content. It is important to consider the substance of a speaker’s message before composing a response. Proper reflective listening requires the listener to respond to not only positive comments, but negative and ambivalent as well. Leveraging the four components of listening orientation will ensure a well-rounded reflective listener.

While stereotyped reactions and pretending to understand are detrimental to the success of reflective listening, not being able to recognize the nonverbal clues means only capturing partial messages. Professor Albert Mehrabian’s (2007) communication model shows only 7% of meaning in a communication is the words that are spoken. The way the words are spoken are responsible for 38% of the meaning in a communication. The lion share of meaning in a communication is non-verbal. Facial expression, posture, and gestures account for 55% of the meaning in a communication. Non-verbal communication accounts for as much as 93% of the meaning in a communication (Hybels & Weaver, 2007).

Mehrabian’s model has become one of the most widely referenced statistics in communication. The theory is particularly useful in explaining the importance of meaning (Chapman, 2009). With 7% of meaning in communication coming from words, along with 38% from tone and inflection, hearing is responsible for less than half of the total meaning of a communication. This leaves four other senses to help properly interpret a communication—to listen.

Hearing is not the only sense capable of listening. All five senses are used in active listening. Silent signals are sent at the same time a verbal communication is taking place. In many cases, these non-verbal messages are unintentional (Hybels & Weaver, 2007). Having the ability to read, understand, and interpret these signals are part of an overall listening strategy. As Hybels & Weaver (2007) point out,  “to be unaware of non-verbal communication is to miss a significant portion of what goes on in any communication situation” (p. 132). Using all five senses to listen—we need more of it.

Following all of the facets of receiving information in the five steps of listening is constructing meaning. With all of the information captured through various senses, a meaning is derived. Properly interpreting the cues, signals, and impulses requires the full and active use of all the senses (Hybels & Weaver, 2007). Misinterpreting any of the information could lead to unnecessary or inaccurate responses.

Responding and remembering are the final two elements in the listening preparation model. Both of these elements are optional. Responding is an important aspect of two-way communication. Listening preparation, receiving, and constructing meaning are all pre-processes of responding. Remembering, while an option, is important for reflecting back on a communication. The speed at which we communicate can make it difficult to construct meaning. Retrospect becomes crucial, but only possible if we are able to retain information from a communication.

Listening and hearing are two different components of communicating. You hear with your ears, but listen with all of your senses. Hearing is the act of perceiving sound by the ear, while listening requires concentration so that your brain processes meaning from words and sentences (Treuer, 2006). Most people tend to be hard of listening as opposed to hard of hearing. Listening expands on hearing when we pay attention to the meaning of what we hear. To listen properly, we need to be open to the meaning of the other person’s words. We need to “enter into the experience those words are meant to convey” (Sherven & Sniechowski, 2009). Listening is not automatic. It takes a concentrated effort to listen. Sometimes we choose to listen selectively.

Selective attention is sometimes worse than not listening at all. Only absorbing bits and pieces of information and filling in the rest with your imagination can lead to an unjust response. Hybels & Weaver (2007) define selective attention as, “the ability to focus perception” (p. 82). Everyone wants to be understood. Sometimes too much information in a short amount of time makes it nearly impossible to construct meaning. Few people can give attention to a message for more than 20 seconds (Hybels & Weaver, 2007).

Listening is an art. Developing a mastery of this art takes commitment and practice. Improving your listening efficiency is an ongoing process. Our listening efficiency is affected by our own culture, lifestyle, and emotion. “Effective listening is knowing the difference between what is said, what you hear, and what is meant” (Steele, 2009).  Our minds have the ability to listen many times faster than a person can talk. Steele (2009) identifies four stages of listening to become an effective listener. By looking directly at the person speaking, we can better sense and interpret the message. Sensing, the first stage, is learning to read body language, tone, and inflection. Interpreting the message is closely related to the receiving element of listening preparation. Evaluating or understanding and ultimately responding to a communication round out the four stages of listening (Steele, 2009).

There should be a certain amount of responsibility on the part of the speaker. Realizing there are four listening styles, a speaker should be able to communicate with everyone. The analytical listeners will be thoughtful and skeptical while attaching themselves to every word. The driver style of listener requires a speaker to be at a faster pace and quicker to the point. Amiable listeners appear to hang onto every word and care about the speaker. An expressive listener likes to be involved and be a part of what is going on (Steele, 2009).

A breakdown in communication can affect many aspects of your life. An inability to properly communicate can be devastating to both personal and professional relationships. There are noted differences by gender in the methods and effectiveness of communication. The average woman uses 25,000 words per day, while a man uses less than half (Steele, 2009). This could explain certain problems in a relationship.

The non-verbal aspects of communication vary drastically by gender. Women in North America initiate more eye contact than men (Hybels & Weaver, 2007). Because of this, it is more apparent that women have a better chance of interpreting the 93% of a communication that is non-verbal. Eye contact means observing, reading, and interpreting, facial expressions, posture, and gestures that accompany words. Women prove to be better listeners because they use several senses simultaneously to communicate. For example, women use touch more than men while communicating (Hybels & Weaver, 2007).

Overall, listening is more than hearing words, nodding, smiling, and even responding. The important thing to remember is that it is not always necessary to respond. It is, however extremely important to listen. The goal is to open the meaning of the words we hear by listening with all of our senses. “It is no longer about sound but about the thoughts, feelings, point of view, expectations, memories, sensations, beliefs—the whole of the other person—or at least as much of the whole as is available at the moment” (Sherven & Sniechowski, 2009).

Listening takes practice and intention. Listening expands on hearing and leverages all of the five senses to properly interpret a communication. The benefits of listening, as opposed to hearing, are endless. Communication is an integral part of our lives. In our relationships, we communicate one on one with our partner. The level, quality, and frequency of communication in business can affect the bottom line. Whether resolving problems, socializing, or closing a business deal, you cannot succeed without communicating.

Listening makes simple communication effective communication. Proper listening techniques–empathy, acceptance, congruence, and concreteness—guarantee effective communication. Anxiety and cognitive dissonance are two barriers that could keep us from listening and properly comprehending a communication. Other barriers include laziness, closed-mindedness, insincerity, boredom, and inattentiveness. Listening becomes easier if the person speaking uses techniques such as assertiveness and getting to the point before the audience loses interest.

While we cannot control how people communicate with us, we can choose to listen. When interaction is required, we can be better prepared to compose a response. We should all communicate with individuals at a level they understand. And above all, we should listen. Simply put, there should be more of it.

References

Borgatti, Stephen. (2000). Active Listening. MB119: Interpersonal Communication. Retrieved May 10, 2009, from http://www.analytictech.com/mb119/reflecti.htm

Chapman, Alan. (2009). Mehrabian’s Communication Research. Retrieved May 10, 2009, from http://www.businessballs.com/mehrabiancommunications.htm

Fisher, Dalmar. (1999). Communication in Organizations. Mumbai, India: Jaico Publishing House.

Hybels, Saundra & Weaver II, Richard L. (2007). Communicating Effectively. Boston, MA: McGraw Hill Companies, Inc.

Mehrabian, Albert. (2007). Nonverbal Communication. Edison, NJ: Transaction Publishers, Inc.

Seckler, Stephen. (2008). Counsel to Counsel: Listening is More Powerful than Talking. Retrieved May 10, 2009, from http://www.counseltocounsel.com/2008/03/listening-is-more-powerful-than-talking.html

Sherven, Judith & Sniechowski, Jim. (2009). There is a Real Difference Between Hearing and Listening. Retrieved May 11, 2009, from WomenTodayMagazine.com at http://womentodaymagazine.com/relationships/listening.html

Steele, Jonathan. (2009). The Art of Listening. Retrieved May 11, 2009, from http://www.speechmastery.com/art-of-listening.html

Treuer, Paul. (2006). Hearing vs. Listening. Retrieved May 10, 2009, from http://www.d.umn.edu/kmc/student/loon/acad/strat/ss_hearing.html

Watch Your Language

30 Thursday Dec 2010

Posted by in Marketing Philosophy, Marketing Strategy

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Successful marketing communication requires a strong understanding of the language of the intended audience. Never assume that a whimsical or clever catch-phrase or slogan will be understood by everyone. Language is an evolution of culture, and cultures are geographically bound. Therefore, language is a unique representation of culture in a specific time and location. Language is mostly thought of as spoken words with inflection, tone, and pronunciation linked to a country, state, or region. Variations of language within the same culture are separated by a historical timeline.  Hath, henceforth, and hither were commonplace in a Shakespearean play. These words would disrupt and confuse a conversation in a modern day culture.

From Old English through Middle English and into Modern English, sometimes referred to as the Queen’s English, cultural changes influenced language. Alterations of dialect, such as pronunciation, were a direct result of the separation of societies into culturally common groups. The wealthy were educated and pronounced every word with accuracy. The lower class societies could not afford books or to properly educate their youth. As a result, a variation of the language was evolved—influenced by culture. While the words were identical, the pronunciations were radically different. History can have an intense effect on language (Ellis-Christensen, 2009).

Over the past 1000 years, England has hosted many cultural changes with accompanying languages. The United States, a young country by comparison, has spawned many variations of its own language. Derived from the Queen’s English, American English has morphed into the many dialects we use today. We have more variations of language spread across many regions within our borders than ever before. The southern states are recognized as a culture with a slower, more deliberate, pronunciation of our modern vocabulary. Extra syllables are sometimes added as well as vowels accented to create the slow southern drawl we have come to associate with southern cultures.

The pronunciation of our American English vocabulary is bound to geographic regions in our country. There are subtle differences in speech between North Carolina, Tennessee, and Virginia. Individuals from this part of the country can identify a person from one of the other southern states. The New England states have a vernacular all its own. New York has New England and Canadian influence in the northern counties. The boroughs of New York City each enjoy a variation of the New York recognizable accent.

New York, like many other diverse densely populated regions in our country, has their own language. Once again, culture influences the evolution of these languages. A stoop is the Brooklyn word for the front stairs of a building. Dogs are attracted to and a fireman would attempt connecting a fire hose to a Johnny pump. Most of New York City uses the plural of you—yooze.

The United States has managed to incubate language more granular than that of a single culture. From cultures, through societies, and down to individual neighborhoods—language is altered and molded to be unique. Words are pronounced differently and new words are formed as a way to express independence from other cultures. Society affects language. Social boundaries are blurred as schools host multilingual classrooms (Budach & Rampton, 2008). Students from many cultural and ethnic backgrounds find common ground by developing a language unique to their social environment. A variation of language is created by the melting pot of several cultures proving once again that our cultural background forges our language.

Every country has a rich history of language and culture. As long as cultures change and societies are born, language will be as unique and versatile. While the base language for each country can be linked to a culture, societies and even neighborhoods can be responsible for the many variations of a single language. Words, expressions, and non-verbal communication are all part of the language with which we communicate. Our cultural background affects our gestures and reactions as much as our dialect and inflection. Communication is defined as, “Any process in which people share information, ideas, and feelings” (Hybels & Weaver III, 2007). Not only is language influenced by culture, but communication in general. Marketing communication should be indigenous. For your next marketing campaign–watch your language!

References

Budach, G. & Rampton, B. (2008). Language in late modernity: Interaction in an urban school. Language in Society, 37(4). p. 600. Retrieved April 4, 2009, from ProQuest Direct database.

Hybels, S. & Weaver, R. (2007).  Communicating Effectively.  Boston, MA: McGraw Hill Companies, Inc.

Leila, M. E. & Goodman, J. E. (2008). A Cultural Approach to Interpersonal Communication. Language in Society, 37(4). p. 619. Retrieved April 4, 2009, from ProQuest Direct database.

A Mediated Culture

23 Tuesday Nov 2010

Posted by in Marketing Philosophy

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Mass media has a direct affect on modern culture. This is especially true in the United States where the majority of mass media originates. The moods and attitudes of our society are influenced by messages delivered through mass media channels. Mass media and advertising affect our actions, thoughts, and values. We are at the point where mass media creates and reflects our culture–a mediated culture.

Society controls mass media and vice-versa

A look back through the history of our society will reveal that we were not always influenced by mass media. This is due largely to the fact that our current level of media saturation has not always existed. Television, the most popular mass media medium, was less predominant in the 1960s and 1970s. Even if you were one of the fortunate families to own a television set, only three main channels existed. Additionally, a few public broadcasting and independent stations were in operation. Radio and television shows in the 1960s were targeted to an audience with very high moral values. The audience demographic consisted primarily of two-parent, middle-class families. The programming was a reflection of everyday life. Families living three decades ago would never have tolerated a reality show. Television shows such as, “Leave it to Beaver” was a representation of actual middle-class life in the early 1960s. The same families gathering in front of a television set to watch a 1960s situation comedy would have never accepted the programming of today. Our moral values in the early days of television dictated content and influenced advertising. We controlled mass media by our level of acceptance.

Still photography, motion pictures, telegraphy, radio, telephone, and television were all invented between the years 1860 and 1930. Mass media emerged into a capitalization of the leisure industries to eventually become the dominator of mental life in modern society. Adolf Hitler used radio for propaganda sparking concern that mass media could be used for mind control. Early studies of mass media by sociologists proved that media effects were direct and powerful. However, the level of influence on an individual depended on certain factors such as class and emotional state.

C. Wright Mills defines mass media as having two important sociological characteristics: first, very few people can communicate to a great number; and, second, the audience has no effective way of answering back (The Power Elite, 1956). The introduction of the internet into mainstream mass media has changed communication into a bidirectional process. Responding to email advertisements and answering messages in a chat room change Mills’ definition of mass media. The internet reaches a broad audience but has less of an impact on shaping society.

The majority of research in the 1960s was concentrated on television. Television was believed to be the most pervasive medium. The Mass Communication Theory provides research on the cultural quality of media output. D. McQuail identifies cross-media ownership, and the increasing commercialization of programming by a few select large corporations as a pattern of control. The conflict perspective aligns with this theory.

Media output is controlled and regulated by government. History has shown restrictions ranging from complete censorship to a lighter advisory regulation.

Everyone agrees that mass media is a permanent part of modern culture. The extent of the influence mass media has on our society is the cause of much debate. Both legislature and media executives combine efforts and produce reports showing that mass media is not responsible for shaping society. Sociologists and educators debate these findings and provide a more grounded, less financially influenced theory. Sociologists have three perspectives on the role of mass media in modern culture. The first, limited-effects theory, is based on the premise that people will choose what to watch based on their current beliefs. According to a study by Paul Lazarsfeld, media lacked the ability to influence or change the beliefs of average people (Escote 2008). Individuals living through the early days of mass media were more trusting of news stories. This is evident in the famous radio broadcast, “War of the Worlds.” A startling one out of six people believed we were being invaded by aliens. While the limited-effects theory, also known as the indirect effects theory, was applicable 40 years ago; society is not as naive today. Competing newscasts give us the opportunity to compare stories and accept only what is common between them. Unless the “War of the Worlds” was carried on every major mass media station, society today would recognize it as fiction. Even then, we would be skeptical until our President addressed the nation.

The class-dominant theory argues that the media is controlled by corporations, and the content–especially news content–is dictated by the individuals who own these corporations. Considering that advertising dollars fund the media, the programming is tailored to the largest marketing segment. We would never see a story that draws negative publicity and emotion to a major advertiser. The class-dominant theory in a newsroom extends beyond corporate control. A journalist with a specific agenda can alter or twist a story to suit their own needs.

The third, of the three main sociological perspectives, is the culturalist theory. As the newest theory, the culturalist theory combines both the class-dominant and limited-effects theory to claim that people draw their own conclusions. Specifically, the culturalist theory states that people interact with media and create their own meanings. Technology allows us to watch what we want and control the entire experience. We can choose to skip certain parts of a horror movie and even mute content on live news casts. People interpret the material based on their own knowledge and experience. The discussion forums in an online classroom is one example of the culturalist theory. Although all the students read the same text and study the same content, each student produces a different view based on experiences outside of the classroom. The result is a widely divergent group of posts and many opposite opinions open for discussion.

The Functionalist Perspective

Functionalists believe that mass media contributes to the benefit of society. Charles Wright (1975) identified several ways in which mass media contributes to creating equilibrium in society. He claims the media coordinate and correlate information that is valuable to the culture. The media are powerful agents of socialization. Through the media, culture is communicated to the masses. Serving society through social control, the media act as stress relievers which keep social conflicts to a minimum.

The functionalists idea of equilibrium is evident in news broadcast as well as late night drama programs. In both instances, all human acts lacking morality are reinforced by showing them as unacceptable and wrong. Crimes, such as murder, robberies, and abuse are shown as deviant behavior. Mass media make our world smaller. People gather in groups to watch, they talk about what they see, and they share the sense that they are watching something special (Schudson 1986).

Functionalists view mass media as an important function in society. Mass media can influence social uniformity on scale broader than every before. The internet reaches more individuals in most social groups more often than television or radio. Mass media has been accused of creating dysfunction. Postman (1989) argued that popular media culture undermines the educational system. Claims have been made that there is a link between television viewing and poor physical health among children.

The Conflict Perspective

Conflict theorists believe that mass media is controlled by corporations with the intent of satisfying their own agendas. News casts and sitcoms are not designed to entertain and inform, but rather to keep our interests long enough to deliver a well paid advertisement. The conflict perspective views mass media as a conduit for social coercion. The controllers of mass media use programming and advertising to influence certain social classes. Trends are introduced through mass media and mimicked by the public lending credence to the theory that coercion, domination, and change in our society is partly due to television, radio, print, and the internet. From the conflict perspective, modern mass media are instruments of social control (Sullivan 2007). While functionalists and interactionists agree that mass media is necessary, followers of the conflict perspective view mass media as a necessary evil. As instruments of social control, mass media plays an important role in shaping our society.

The Interactionist Perspective

From the interactionist perspective, mass media is used to define and shape our definitions of a given situation. This perception of reality seems to evolve as our everyday values and cultures change. A definition of the average American family from the 1950s and 1960s is drastically different from what we expect today. The mass media portrayal of family life has always been a benchmark to compare our own lives and successes. Mass media serves as our social acceptance gauge by providing symbols representing what is proper and what is unacceptable. The interactionist perspective shares similarities with the functionalist perspective. Both theories agree that mass media symbolizes a perfect society that individuals strive to emulate. Celebrities, athletes and other role models promote clothing, brands, and behavior while sometimes encouraging values and moral guidelines.

Mass media is defined as “the channels of communication in modern societies that can reach large numbers of people, sometimes instantaneously (Sullivan 2007).” Only recently has technology been advanced enough to realize so many methods of communication. Television, radio, and print were the original members of mass media. The internet brought chat-rooms, email, and the idea of social networking to an already media saturated society. Television and radio represent “push” communication. The consumer has little choice over the content streamed through the cable and onto their television. They can choose to change stations or turn off the television. The internet, specifically web sites, can only be delivered to a consumer if they have made a request to “pull” the content. Mass media has completed a paradigm shift from content and programming we chose to accept, to content designed to shape our society. In the 1960s and 1970s, society controlled mass media. Today, mass media has the single largest impact on our culture.  Guidelines for behavior, major beliefs, and values are all influenced by mass media. Every sociological theory concludes that mass media affects modern culture–a mediated culture.

References

Escote, Alixander (April 2008). Limited Effects Theory. http://www.socyberty.com/Sociology/Limited-Effects-Theory.112098

CliffsNotes.com (July 2008). The Role and Influence of Mass Media. http://www.cliffsnotes.com/WileyCDA/CliffsReviewTopic/topicArticleId-26957

Sullivan, Thomas J. (2007). Sociology: Concepts and Applications in a Diverse World. Boston: Pearson Education, Inc.

Wright, Charles (1975). Mass Communication: A Sociological Perspective.

Schudson, Michael (1989). The Sociology of News Production. Sage Publications, Ltd.

Leon-Guerrero, Anna (2005). Social Problems: Community, Policy, and Social Action. Pine Forge Press

Mills, Charles Wright (1956). The Power Elite. Oxford Press

Netflix: An Online Business Beyond Genius

10 Wednesday Nov 2010

Posted by in Internet Marketing

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Most businesses—regardless the core offering—begin as a simple vision. Sometimes, as with the case of Netflix, a frustrating situation exposed a need and at the same time inspired an entrepreneur. A video rental late fee was the trigger that motivated Reed Hastings to develop one of the most successful click-and-mortar businesses to date—Netflix.com (Jayalath & Wood, 2005). Creating a lucrative e-commerce business requires many of the same basic components as a traditional business—including a cohesive business model, compelling marketing plan, and strong implementation strategy.

A perfect storm of advances in technology, adaptation of DVD media over VHS, and an unmet consumer demand is responsible for the successful launch of Hastings’ vision.

Netflix began its journey of trail-blazing business process innovation in 1997. Reed Hastings, along with partners Marc Randolph and Mitch Lowe, decided to disrupt the traditional video rental business by introducing a new twist on the home movie service (Thomas, 2010). A perfect storm of advances in technology, adaptation of DVD media over VHS, and an unmet consumer demand is responsible for the successful launch of Hastings’ vision. Not unlike other innovative start-up companies, Netflix has undergone several strategy shifts. Each change in focus or direction has assured the company remains dominate in the movie rental industry.

Success is never guaranteed, but a strong business strategy and cohesive implementation plan will increase the odds. Hastings began his business by declaring a simple yet effective mission statement, “our appeal and success are built on the most expansive selection of DVDs; an easy way to choose movies; and fast, free delivery (Brill, 2003).” While the original concept remains the same, the business strategy has evolved to satisfy new market opportunities. Notwithstanding slow adoption by the Internet user community, Netflix has become the perfect model from which all eBusinesses could learn.

Finding the Sweet Spot

Translating market opportunity into business opportunity requires a seven-step process. Hastings followed the seven-step framework to create the original company, but also continued to leverage individual steps to re-evaluate the Netflix position in the changing market. There are four key environments to consider when analyzing a market opportunity—customers, company, technology, and competition (Rayport & Jaworski, 2004).  If the four key environments were signified by using overlapping circles of a Venn diagram, the market opportunity sweet spot would be represented in the area where all four circles intersect.

The first step of the seven-step process used by Netflix involved the identification of the unmet or underserved customer needs. Hastings, being a customer himself, was able to draw upon personal experience to help establish the opportunity nucleus. This set of unmet or underserved needs stemmed mostly from processes dictated by traditional video rental businesses. The movie rental industry had already established methods surrounding video rental, late return policies, and membership rules. Hastings believed that without competition, these brick-and-mortar movie rental companies would never have a reason to change.

Following the problem recognition step, a company needs to identify the target audience. Part of this process includes grouping customers into segments. Rayport & Jaworski (2004) refer to the most basic form of segmentation as the distinction between must-have and nice-to-have customers (pgs. 86-87). Segmentation for Netflix includes identifying customers using geographic, demographic, and behavioral segmentation approaches. The target audience for Netflix expands beyond the regions and primary market areas that typically define traditional brick-and-mortar businesses. The Netflix target audience is not limited by geography, but rather bound by technology.

The relative advantage to Netflix competitors begins with the use of technology. An Internet-based system allows a user to find movie titles easier than strolling the aisles of a video rental store. The entire supply-chain of the Netflix mail-order fulfillment system is more desirable than issues surrounding weather, store hours, and drop boxes. Netflix began its business with a distinct competitive advantage.

The next few steps—in the case of Netflix—were overlapping. Step four of the seven-step process involved assessing the resources necessary to deliver the benefits. Step five required an in-depth look into the technology required—including the impact of new technologies. The technology available in 1997 was primitive compared to what is available today. Broadband is commonplace, making the online users’ experience many times better than before—also positioning Netflix for the future. After distilling the opportunity into concrete terms, step six of the market opportunity analysis framework, Netflix justified their position in the market and identified the sweet spot of opportunity for their business.

Defining a Business Model

The value proposition, online offering, resource system, and revenue model combine to define the business model. The Netflix market position as described by Susan Verghese (2005) boasts “an easier way to choose movies, fast and free shipping, and no late fees or due dates.” The value proposition is comprised of three components—segment choice, benefit choice, and resource choice.  Netflix’ segment choice encompasses all existing competitors’ customers as well as individuals beginning to desire movies-on-demand. The benefit choice revolves entirely around the convenience of making movie selections online. The resource choice is based on a strong distribution network and supply chain that rivals the competition.

The online experience of Netflix is their differentiator in the market. Following the membership model of other movie rental businesses, Netflix expanded the scope of their offering to include several levels of membership. Rounding out the business model, Netflix created an online community where member could contribute by offering and sharing reviews. The online business model developed by Netflix has become a beacon for others to follow (Venuto, 2010).

Creating the User Experience

Rayport & Jaworski (2004) identify seven design elements of a customer interface (pg. 151). Netflix follows best practices across all 7Cs—context, commerce, connection, communication, content, community, and customization. The context of Netflix’ site follows basic rules for ease of use and navigation standards for the web. Netflix.com uses a clean, uncluttered design to present an online movie rental experience second to none. The color scheme and graphic elements remain true to the corporate brand.

Content on the Netflix website consists mostly of movie imagery, descriptions and storylines, and member posted reviews. A non-member is presented with content designed to encourage enrollment, while the member community enjoys a user-specific experience. The movie titles presented to each member are relevant to his or her likes and dislikes—based on individual movie reviews. The content includes static information regarding the Netflix organization, its affiliates, career listings, and social networking links.

Netflix provides a robust community design element to their site. Members are invited to participate in reviews, forums, and blogs. Additionally, the tell-a-friend option creates a viral element useful in word-of-mouse marketing. The community element of Netflix.com falls short of providing functionality that allows member-to-member communication. The user provided movie ratings are real-time, but the written reviews are moderated before posting live to the site.

Every member can manage his or her own personal movie queue. Much like a playlist, the Netflix queue is used to control and manage the titles and order that the movies should be delivered to the member. The site uses this customization element to provide a member-specific experience to the user. Other customization features include the movie suggestion section. Every member receives an interactive list of movie titles that can be added to their playlist. Analyzing the member’s previously watched movies and the associated ratings provide enough information to create a suggested playlist.

Netflix has mastered the challenges associated with integrating their website and other communication channels. For example, each time a movie is returned—an email is delivered to the member. The member is asked to review the movie and offer additional comments if desired. Periodically, the member receives an email asking for information regarding the timing and condition of a DVD once delivered. This information is used to monitor the quality of service of the fulfillment centers.

The Netflix website offers no external links. The connection design element is not used on the Netflix member site. However, in the non-member and public areas within the website, Netflix offers external links to the websites of major publications, well-known critics, and other movie review sites. Netflix banner ads can be found on many popular sites. Each banner ad links to the Netflix main page.

Netflix’ commerce capability is limited only by its business model. The site, framework, and infrastructure can accommodate a full e-commerce shopping cart—but the only transactions are one-time enrollments and subscriptions to the monthly service. A member only revisits the commerce section of the site if a subscription needs to be changed. Transactions are automatic and recurring. Members spend the majority of their time within areas of the Netflix website that offers movie reviews and search capabilities.

The majority of communication from Netflix to their membership community falls within the generalized online framework for marketing communications (Rayport & Jaworski, 2004, pg. 197). Netflix uses several communication strategies for prospecting and acquiring new members. Of the four categories of communication—direct, personalized, mass marketing, and general approaches—Netflix relies mostly on the general approach of banner ads, email, and viral marketing. Members opt-in to receive special notices, offers, and incentives.

Netflix uses banner advertising to direct traffic from sites with a similar audience demographic as their current target market. Several years ago, Netflix made several attempts to create an additional revenue stream by including third-party advertisements in their own DVD mailings. This concept started when Netflix realized an opportunity to promote an upcoming movie by including imagery on the famous Netflix red envelopes (Anderson, 2005).

Company Culture and Considerations

Reed Hastings defined his approach to managing expectations within his organization as “freedom and responsibility” (Conlin, 2007). Netflix allows its managers to structure their own compensation plans, but expects ultra-high performance in return. Netflix operates as a single organization—with only an online presence. The supply chain, however, extends into many market areas. This model allows for low-cost, quick distribution of the movies.

The satellite fulfillment offices also present challenges with human resources. The turnover in the fulfillment centers is high. The culture at the corporate office level is revolutionary. However, the lack of culture at the lower levels presents challenges associated with recruiting, hiring, training, and retaining employees. Netflix’ culture has evolved over the years, but the underlying message remains the consistent—reward the employees that contribute the most.

The culture of Netflix is unique and proprietary, but effective. The company might struggle to service sixteen million members if a rigid traditional culture were adopted. The processes developed and enforced by the Netflix management team are the true strength of the organization. While the recent addition of streaming on-demand movies from a Wii console or PC reduces the demand of physical media, the rapid growth of the member base offers a balance.

Conclusion

Netflix has reported 550 million in revenue for the third quarter of 2010. The Netflix business model is a chameleon to technology. As new technology becomes available, such as faster connection speed, Netflix finds new opportunities. With the adoption of new products and services, Netflix can continue their rapid rate of growth—with no end in sight. Netflix has had a negative impact on several mainstream brick-and-mortar movie rental chains. Additionally, if Netflix’ streaming video service gains momentum, the U.S. Postal Service could feel a decline in service.

Netflix has managed to operate in a space free and clear of regulations. Their competitive advantage revolves around their supply-chain and fulfillment processes. Technology plays an important role in the distribution system of Netflix. Every order is automatically queued to the fulfillment office closest to the delivery address. A cohesive business model, compelling marketing plan, and strong implementation strategy is the only common ties between Netflix and other successful online businesses. Their success comes from technology, vision, and innovation. While difficult situations sometimes inspire genius solutions—Hastings vision to eliminate movie rental late fees has proven to be far beyond genius.

References

Anderson, D. (2005). Netflix stirs up excitement for ‘Geisha Girl.’ BrandWeek. [Electronic version]. Retrieved November 8, 2010, from http://www.brandweek.com/bw/news/recent_display.jsp?vnu_content_id=1001524775

Brill, R. (2003). The Brill report: Netflix. Retrieved November 6, 2010, from http://www.tcf.net/netflix.html

Conlin, M. (2007). Netflix: Flex to the max. Retrieved November 4, 2010, from http://www.businessweek.com/magazine/content/07_39/b4051059.htm

Jayalath, H. & Wood, A. (2005). The outlook for online DVD rental: A strategic analysis of the US and European markets. HighBeam Research. Retrieved November 6, 2010, from http://www.highbeam.com/doc/1G1-182523311.html

Thomas, J. (2010). When was Netflix founded? Retrieved November 8, 2010, from http://www.life123.com/technology/home-electronics/netflix/when-was-netflix-founded.shtml

Rayport, J. & Jaworski, B. (2004). Introduction to e-commerce. Boston: McGraw-Hill

Venuto, D. (2010). A better business model from Netflix. Retrieved November 6, 2010, from http://www.minonline.com/minsiders/Domenic-Venuto/A-Better-Business-Model-From-Netflix_11158.html

Verghese, S. (2005). Can Netflix play David to the Goliaths entering the DVD online rental space? Retrieved November 7, 2010, from http://www.virtualstrategist.net/Issue7/7-1-1.HTM

Understanding Consumer Attitudes

17 Sunday Oct 2010

Posted by in Marketing Strategy

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Consumer attitudes are both an obstacle and an advantage to a marketer. Choosing to discount or ignore consumers’ attitudes of a particular product or service—while developing a marketing strategy—guarantees limited success of a campaign. In contrast, perceptive marketers leverage their understanding of attitudes to predict the behavior of consumers. These savvy marketers know exactly how to distinguish the differences between beliefs, attitudes, and behaviors while leveraging all three in the development of marketing strategies.

An attitude in marketing terms is defined as a general evaluation of a product or service formed over time (Solomon, 2008). An attitude satisfies a personal motive—and at the same time, affects the shopping and buying habits of consumers. Dr. Lars Perner (2010) defines consumer attitude simply as a composite of a consumer’s beliefs, feelings, and behavioral intentions toward some object within the context of marketing. A consumer can hold negative or positive beliefs or feelings toward a product or service. A behavioral intention is defined by the consumer’s belief or feeling with respect to the product or service.

A marketer is challenged to understand the reason a particular attitude might exist.

Perhaps the attitude formed as the result of a positive or negative personal experience. Maybe outside influences of other individuals persuaded the consumer’s opinion of a product or service. Attitudes are relatively enduring (Oskamp & Schultz, 2005, p. 8). Attitudes are a learned predisposition to proceed in favor of or opposed to a given object. In the context of marketing, an attitude is the filter to which every product and service is scrutinized.

The functional theory of attitudes—developed by Daniel Katz—offers an explanation as to the functional motives of attitudes to consumers (Solomon, 2008). Katz theorizes four possible functions of attitudes. Each function attempts to explain the source and purpose a particular attitude might have to the consumer. Understanding the purpose of a consumer’s attitude is an imperative step toward changing an attitude. Unlike Katz’s explanation of attitude—as it relates to social psychology, specifically the ideological or subjective side of man—consumer attitudes exist to satisfy a function (Katz, 1937).

The utilitarian function is one of the most recognized of Katz’s four defined functions. The utilitarian function is based on the ethical theory of utilitarianism, whereas an individual will make decisions based entirely on the producing the greatest amount of happiness as a whole (Sidgwick, 1907). A consumer’s attitude is clearly based on a utility function when the decision revolves around the amount of pain or pleasure in brings.

The value-expressive function is employed when a consumer is basing their attitude regarding a product or service on self-concept or central values. The association or reflection that a product or service has on the consumer is the main concern of an individual embracing the value expressive function (Solomon, 2008). This particular function is used when a consumer accepts a product or service with the intention of affecting their social identity.

The ego-defensive function is apparent when a consumer feels that the use of a product or service might compromise their self-image. Moreover, the ego-defensive attitude is difficult to change. The ego-defensive attitude—in general psychology—is a way for individuals deny their own disconcerting aspects (Narayan, 2010). A marketer must tread lightly when considering a message strategy to a consumer with an attitude based on the ego-defensive function.

The knowledge function is prevalent in individuals who are careful about organizing and providing structure regarding their attitude or opinion of a product or service (Solomon, 2008). A marketer can change a consumer’s knowledge function based attitude by using fact-based comparisons and real-world statistics in the message strategy. Vague and non-relevant marketing campaigns are ineffective against a knowledge attitude audience.

Advertising campaigns that appeal to consumer behaviors based on the value-expressive or utilitarian functions are the most common (Sirgy, 1991). Utilitarian advertisements deliver a message regarding the benefits of using a product or service. Advertising targeted to consumers with value-expressive attitudes will typically include product symbolism and an image strategy. In either case, it is important to understand why a consumer holds a particular attitude toward the product or service.

The ABC Model of Attitudes—consisting of the three components: affect, behavior, and cognition—accentuates the relationship between knowing, feeling, and doing (Solomon, 2008). Affect is the feeling an individual has regarding an object. In the current context, affect represents the emotion or opinion about a product or service. Behavior is the responses of a consumer resulting from affect and cognition. Behavior only implies intention. Cognition is an individual’s belief or knowledge about an attitude object.

The hierarchy of effects is the result of all three components working together. The hierarchy of effects is a concept used to distinguish between the involvement levels or motivation an individual might have toward the attitude object. The standard-learning hierarchy, low-involvement hierarchy, and experiential hierarchy are the three hierarchies of effects. Dr. Jill Novack, from Texas A&M University, includes a fourth member of the hierarchy of effects. Novack states that behavioral influence should be included, and represented by the component order—behavior, belief, and affect (Novack, 2010).

The standard-learning hierarchy, also known as the high-involvement hierarchy assumes that the consumer will conduct extensive research and establish beliefs about the attitude object. The consumer will then establish feelings regarding the attitude object. The feelings—or affect—are followed by the individual’s behavior. The cognition-affect-behavior approach is prevalent in purchase decisions where a high level of involvement is necessary.

The low-involvement hierarchy consists of a cognition-behavior-affect order of events. A consumer with an attitude formed via the low-involvement hierarchy of effects bases the purchase decision on what they know as opposed to what they feel. The consumer establishes feeling about a product or service after the purchase. This limited knowledge approach is not suitable for life-changing purchases such as a car or new home.

The experiential hierarchy of effects is defined by an affect-behavior-cognition processing order. In this scenario, the consumer is influenced to purchase based entirely on their feeling regarding a particular product or service. Cognition comes after the purchase and enforces the initial affect. Emotional contagion is common in attitudes formed by the experiential hierarchy of effects (Solomon, 2008). Emotional contagion, in this situation, suggests that the consumer is influenced by the emotion contained in the advertisement.

The elaboration likelihood model (ELM) offers a theory concerning attitude change. Similar to the ABC model of hierarchy, the ELM model is based on the level of involvement in the purchase (Petty & Cacioppo, 1981). Depending on the level of involvement and motivation, the consumer will follow one of two possible routes. The central route is when the consumer is highly involved in every aspect of the purchase. A consumer following the central route extends extra effort in researching and understanding the products or services. The peripheral route—as the name implies—is followed by a consumer with low involvement in the purchase process.

Social judgment theory offers another explanation for attitude changes, whereas a consumer compares current information to previous notions (Novack, 2010). Incoming messages are filtered down two possible paths—latitudes of acceptance and latitudes of rejection. If the new information is similar to existing information, the consumer follows the latitude of acceptance. In contrast, if the information is disparate, the consumer follows the latitude of rejection (Solomon, 2008).

Multiattribute models are used to understand and measure attitudes. The basic multiattribute model has three elements—attributes, beliefs, and weights. Attributes are the characteristics of the attitude object. Beliefs are a measurement of a particular attribute. Weights are the indications of importance or priority of a particular attribute. A multiattribute model can be used to measure a consumer’s overall attitude.

The most influential multiattribute model—the Fishbein model—also uses three components of attitude.  The first, salient beliefs, is a reference to the beliefs a person might gain during the evaluation of a product or service. Second, object-attribute linkages, is an indicator of the probability of importance for a particular attribute associated with an attitude object. Evaluation, the third component, is a measurement of importance for the attribute. The goal of the Fishbein model is to reduce overall attitudes into a score. Past and predicted consumer behavior can be used to enhance the Fishbein model (Smith, Terry, Manstead, & Louis, 2008).

A more advanced and automated modeling technique, semantic clustering, is used to analyze and predict consumer attitudes. While proven effective for measuring the flow and direction of information, recently semantic clustering is being used to elicit attitudes toward brands (Shaughnessy, 2010). Blogs and forums are a prime target for an analyst using the semantic clustering technique.

Results from a multiattribute will reveal several pieces of information that can be used in various marketing applications. If the competitor scores higher on a particular attribute, a marketer should downplay the attribute and emphasize the importance of a high-scoring attribute of his or her own. Likewise, if the score reveals a broken connection between a product and attribute, the marketer can develop a message strategy to establish the link. Differentiation is an important advantage to marketers. Using the results of a multiattribute model, a marketer can develop and market new attributes to existing products.

Changing a consumer’s attitude towards a product, service or brand is a marketer’s Holy Grail. Three attitude change strategies include: changing affect, changing behavior, and changing beliefs (Perner, 2010).  Classical conditioning is a technique used to change affect. In this situation, a marketer will sometimes pair or associate their product with a liked stimulus. The positive association creates an opportunity to change affect without necessarily altering the consumer’s beliefs. Altering the price or positioning of a product typically accomplishes changing behavior. One example is the use of coupons or incentives to promote sales.

Changing beliefs is the most difficult of the three. A marketer can leverage several approaches to changing a consumer’s beliefs about a product. Four common approaches include: change current held beliefs, change the importance of beliefs, add beliefs, and change ideal. Changing beliefs is sometimes a necessary, for example, when a mature product is to be reintroduced into the market (Arora, 2007).

Marketing spans many disciplines including mathematics, and psychology. Math plays an important role is predicting consumer behavior. Understanding the reasons behind consumer behavior requires knowledge of several theories of psychology. These two disciplines combine to aid in the complete rationalization of consumer behavior. Attitudes are easily formed, but difficult to change. Marketing is an ongoing attempt to instill a positive attitude toward a specific product or service.

Attitudes can be influenced by many factors outside the product attributes. Social and cultural environment as well as demographic, psychographic, and geographic conditions can sometimes shape consumer behavior. Consumer attitude, if positive, is an advantage to a marketer. A savvy marketer can build a model for prospecting new consumers from the attributes of a satisfied customer. Direct marketing companies create higher response rates by using look-alike modeling based on existing customers—individuals with a positive attitude.

Consumer behavior is the study of how a consumer thinks, feels, and selects between competing products. Moreover, the study of attitudes is critical to understanding the motivation and decision strategies employed by consumers. The combination of beliefs, attitudes, and behaviors influence how a consumer reacts to a product or service. Marketers develop relative, compelling marketing messages using the same combination of information, and ultimately influence consumer behavior.

References

Arora, R. (2007). Message framing strategies for new and mature products. The Journal of Product and Brand Management, 16(6), 377.  Retrieved October 4, 2010, from ABI/INFORM Global. (Document ID: 1373518421).

Katz, D. (1937). Attitude measurement as a method in social psychology. [Electronic version]. Social Forces, 15(4), 479-482. Retrieved October 3, 2010, from JSTOR:             http://www.jstor.org/stable/2571413

Narayan, S. (2010). The perils of faking it. Retrieved October 3, 2010, from http://64.74.118.102/2010/02/04214927/The-perils-of-faking-it.html

Novack, J. (2010). Internal influences – lifestyle and attitude. Retrieved, October 3, 2010, from http://www.marketingteacher.com/lesson-store/lesson-internal-influences-lifestyle-attitude.html

Oskamp, S. & Schultz, W. (2005). Attitudes and opinions. Lawrence Erlbaum Associates, NJ.

Perner, L. (2010). Consumer behavior: the psychology of marketing. Retrieved October 2, 2010, from http://www.consumerpsychologist.com/

Petty, R. & Cacioppo, J. (1981). Attitudes and persuasion: classic and contemporary approaches. Dubuque, IA: William C. Brown.

Shaughnessy, H. (2010). How semantic clustering helps analyze consumer attitudes. Retrieved, October 4, 2010, from http://blogs.hbr.org/research/2010/07/every-day-in-the-english.html

Sidgwick, H. (1907). Methods of ethics (7th ed.).  Macmillan and Company, London.

Sirgy, J. (1991). Value-expressive versus utilitarian advertising appeals: when and why to use each appeal. Retrieved October 2, 2010, from http://www.allbusiness.com/professional-scientific/advertising-related-services/270171-1.html

Smith, J., Terry, D., Manstead, A., Louis, W., Kotterman, D., & Wolfs, J. (2008). The Attitude-Behavior Relationship in Consumer Conduct: The Role of Norms, Past Behavior, and Self-Identity. The Journal of Social Psychology, 148(3), 311-33.  Retrieved October 4, 2010, from ABI/INFORM Global. (Document ID: 1501929231).

Solomon, M. (2008). Consumer behavior buying, having, and being (8th ed.). Upper Saddle River, NJ: Pearson Prentice Hall.

Ethical imperatives of a marketing company

03 Sunday Oct 2010

Posted by in Marketing Psychology

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A marketing company is faced with a plethora of moral challenges. Considering that it is the responsibility of a marketing company to provide services on behalf of other companies, it stands to reason that any unethical decision or approach reflects on the company being represented by the marketing firm. Moreover, antitrust concerns are always prevalent due to the fact that the marketing company has access to internal knowledge of many companies—some of which are competitors in the same market.

Unlike other types of businesses, a marketing company must be trusted with a client’s most valuable asset—their customer data. In many cases, customer records for several companies are comingled and hosted on a common platform. The marketing company is responsible for protecting the integrity of the information, but at the same time ensure that the proprietary information is not shared with competitors.  All the while, the marketing company is expected to create revenue-producing campaigns.

A marketing company’s success is based entirely on the performance and effectiveness of their strategies and campaigns. If a marketing company represents several clients in the same industry, there is an inescapable moral dilemma. The marketing strategy for one company could benefit from knowing the marketing strategy and corporate direction of another. The marketing industry is crowded and fierce. Pressure to retain a customer could lead to unethical decisions by campaign managers and salespersons within a marketing company.

The temptation for a salesperson to leverage information from one account for the purpose of producing revenue-generating campaigns for another is not uncommon. Pressure from upper management, coupled with personal financial responsibilities, can influence the salesperson to make immoral decisions. If caught, the individuals responsible can face serious legal problems.  Velasquez (2006) defines one of the five characteristics of moral standards as one “not established by law or legislature” (p. 9). Marketing ethics are based on—among other things—advertising truthfulness and honesty, and privacy in database marketing.

Antitrust laws were designed to allow businesses to compete fairly. Having access to a competitor’s playbook—in this case, their marketing strategy—exposes an unfair advantage. The Federal Trade Commission created the Bureau of Competition to promote competition and protect consumers (Feinstein, 2010). The Compliance Division of the Bureau of Competition would be responsible for investigating complaints and enforcing the laws. Any legislation, passed or pending, should be in the foreground of all decisions made by an agency in the marketing industry.

A proven record of capabilities and performance is imperative, but not at the risk of a bad reputation. A marketing company that cannot be trusted to represent the best interest of their client’s will not sustain business. Moreover, the same effort and expertise should be used on every marketing campaign—regardless of the client. Ethical guidelines are critical to establishing a trustworthy reputation in the marketing industry. Enforcing the guidelines is critical for maintaining the reputation and business.

Before ethical guidelines can be established, research regarding ethics in the marketing industry must be conducted. Whether the research is empirical or conceptual, the results will be enough to formulate a series of ethical guidelines for the marketing industry. Research should continue until there is enough information regarding all current ethical dilemmas in order to establish an internal corporate ethical policy. The most prevalent ethical issues facing the marketing industry are product safety and reliability, advertising truthfulness and honesty, fairness in pricing, and forthrightness in selling (Murphy, 2002).

The American Marketing Association has established a code of ethics that provides a strong framework for which an internal, company-specific, code of ethics can be developed. The company’s ethical guidelines should include details regarding product development, promotion, distribution, pricing, and market research. Each area has its own unique ethical challenges. For example, ethic issues regarding promotion would encompass false and misleading advertising. Coercion is associated with the distribution or supply-chain process. The code of ethics needs to take into consideration every aspect of the business.

Marketing research has always been under the microscope of morally sensitive consumers. No one is comfortable giving personal information to a complete stranger. A corporate policy on ethics would offer support to the researchers in the field, and help alleviate any concerns by the survey audience. A published policy on the storage, usage, and privacy of information collected in the field will put at rest any concerns by the general audience. Additionally, an acceptable usage policy could serve as an addendum to the corporate code of ethics.

Corporate ethical guidelines concerning antitrust issues are becoming more important today than ever before. While the current code of ethics developed by The American Marketing Association concentrates on issues affecting consumers, there is little written regarding antitrust or business-to-business relationships. Legislation on the subject of antitrust has been in effect for over one hundred years.  The aim of antitrust legislation is to create a level playing field for competitors (Fontenot, 2010). At the same time, however, antitrust laws and corporate adopted ethic guidelines are designed to protect the organization.

A corporate guideline of ethics needs to go beyond the issues covered by legislation. The Sherman Antitrust Act of 1890, the Clayton Act of 1914, the Robinson-Patman Act of 1936, and the Federal Trade Commission Act of 1914 together ensure inter-firm competition without interfering with the spirit and creativity of the marketing industry. Standard Oil, Alcoa, American Tobacco, IBM, and Microsoft—to name a few—have faced charges for antitrust violations. These situations may have been avoided if an internal corporate code of ethics was developed and enforced.

The company’s code of ethics should be a culmination of two moral philosophies—moral idealism and utilitarianism. The moral idealism approach assumes many expectations drawn from industry standards to establish a universal acceptance approach (Sobel, 2010). The utilitarian approach will take into consideration social costs and benefits of the policies defined in the corporate code of ethics (Velasquez, 2006, p. 60).

The company’s code of ethics will ultimately define the ethical culture of the organization.

At one time or another, every company is faced with moral challenges. The need for scruples spans every department at every level. The need for written policies regarding the company’s position on certain ethical issues is crucial. A company-wide adopted code of ethics demonstrates the company’s moral responsibility. This is not only important to the employees, but many clients and prospects insist on such a policy. It is not unreasonable for a potential client to ask for documentation concerning service levels, continuity plans, and ethical standards.

Certain types of business conducted within a marketing company are bound by pre-existing regulations. For example, if a marketing company were to produce a campaign that leveraged information—such as personal health data—the HIPA regulations would need to be followed. Similarly, under certain conditions, the Sarbanes-Oxley Act of 2002 would be enforced to ensure the proper reporting of financial information resulting from campaigns.

A formal code of ethics should include sections covering the acceptable use of the company’s inter- or intra-net. A policy explaining the proper etiquette and protocol of communicating electronically is very important. A large percent of daily communication between employees and clients happens via email. The casualness of an email message sometimes lends itself to the inadvertent mention of sensitive company or client information.

Electronic communication has become the standard. This method of communication, however, exposes several vulnerabilities and concerns. Security of everyday, casual email messages is non-existent. The corporate code of ethics should address problems related to the flippant attitude sometimes portrayed in electronic communication. Casual comments can very easily be taken out of context and leveraged against a company for proving a lack of ethical standards.

Email etiquette and voice mail policies—at the corporate level—need to be well documented, distributed, and enforced as part of a corporate code of ethics. Email messages are no longer used only to send quick messages to the next cubicle (Woloch, 1999). Important corporate communications, such as policies and contract negotiations, are distributed across email channels. The simplistic nature of email communication lends itself to vulnerabilities as it is used more often to communicate sensitive information.

One of the most important considerations for adopting a code of ethics is current technology. New technologies are realized every day. Companies are beginning to leverage technologies that did not exist a decade ago. Social networking, instant messaging, and text messaging are becoming mainstream communication tools for businesses in every industry. The code of ethics adopted by any company should include current issues that are easy to understand and enforce. The code of ethics for a marketing company will need to expand beyond the typical policies for interoffice communication. Social media has become a viable communication channel for corporate marketing and advertising.

A company code of ethics should never be a company secret, but rather the roadmap for morality.

Every employee, at every level, within the corporate structure should be trained to understand, abide by, and enforce the company’s code of ethics. The employees are the face and voice of the company. Every action is subject to scrutiny. The company will succeed by standing strong, unified, and embracing the adopted code of ethics. However, when an employee recognizes a situation that is contrary to his or her own moral virtues, there needs to be a mechanism for grievance.

The company’s code of ethics must include the procedure for reporting unethical behavior. A formal grievance procedure will encourage employees to become actively engaged in enforcing the corporate code of ethics. Moreover, the company is making a global statement regarding the widespread acceptance of the code of ethics policies. The grievance procedure will need to include sections explaining the differences, and reporting steps, between an illegal action and an unethical action. An illegal action, for example, should be reported to authorities responsible for upholding the laws.

Once adopted, the code of ethics will be circulated throughout the organization. Every employee will be required to attend training sessions that will enforce the importance of a company code of ethics on ethics while explaining the details of each internal policy. Most large organizations have an extensive human resources department. The HR department is already well versed in the methods and techniques for training employees on company policies and procedures. The challenge, of course, is managing competing schedules and the demands of clients while isolating the necessary time to train every employee.

While it is true that companies conduct ethics training to comply with legal mandates, positive fallout includes increased employee morale and retention (Tyler, 2005). With a well-defined code of ethics and a company-wide adoption of the policies, ethical issues can be addressed before they become a concern. As policies within the code of ethics change to address the company’s social costs, new training will be necessary to implement and enforce these policies. The corporate code of ethics is always evolving.

A marketing company must not only adhere to their internal policies, but also inherit the policies of their clients. Every marketing company eventually becomes an extension of other businesses. Any wrongdoing by the marketing company is reflected upon its clients. In some cases, as with Nestle in the 1960s, the burden of responsibility is entirely with the company—not the marketing firm or outside vendors. After many years of unethical behavior resulting in public boycotts, Nestle pledged to adopt the WHO/UNICEF International Code of Marketing of Breast-milk Substitutes (Sikkink, 1986). The development of a formal code of ethics by Nestle Corporation might have thwarted the unethical actions by their marketing and advertising team.

Businesses of every size leverage marketing companies for promoting their products and services. Any marketing company, bound by its own code of ethics, will accept projects that will not jeopardize their moral standards. Ethical dilemmas occur when a marketing firm is forced to choose between their moral compass and their bottom line. The policies outlined in the corporate code of ethics are only a guideline for moral standards. The decisions faced by a marketing company may not be as black and white as a code of ethics. In these situations, the company must look beyond these policies.

Companies find themselves, many times, faced with an ethical dilemma. In many cases, the problem is not internal to the company, but the result of a decision made by a client. A marketing company can be asked to develop a marketing strategy for a controversial product. There will always be a desire to be profitable, but to what end? A formal statement of ethical principles will add the necessary structure for an organization to become strong moral stewards. At the same time, a code of ethics can cause personal conflict. A marketing company armed with a code of ethics becomes the moral compass for their clients and a beacon of societal principles for the consumer.

References

Feinstein, R. (2010). Bureau of competition: 2010 user’s guide. Retrieved August 28, 2010, from http://www.ftc.gov/bc/BCUsersGuide.pdf

Fontenot, R. (2010). Antitrust issues in marketing. Retrieved August 29, 2010, from http://hercules.gcsu.edu/~rfonteno/Strategic/Anti-trust%20Issues%20in%20Marketing.pdf

Murphy, P. (2002). Marketing ethics at the millennium: Review, reflections, and recommendations. Retrieved August 28, 2010, from http://www.ethicalbusiness.nd.edu/pdf/Marketing_Ethics_Millennium.pdf

Sikkink, K. (1986). Codes of conduct for transnational corporations: The case of the WHO/UNICEF code. [Electronic version] International Organization, 40(4), 815-840. Retrieved August 27, 2010, from JSTOR: http://www.jstor.org/stable/2706830

Sobel, J. (2010). Kant’s moral idealism. [Electronic version] Philosophical Studies, 52(2), 277-287. Retrieved August 27, 2010, from http://www.springerlink.com/content/h386362587434775/fulltext.pdf

Tyler, K. (2005). Do the right thing: ethics training programs help employees deal with ethical dilemmas Retrieved August 29, 2010, from http://findarticles.com/p/articles/mi_m3495/is_2_50/ai_n11841923/

Velasquez, M. (2006). Business ethics – concepts and cases. Pearson Prentice Hall. New Jersey

Woloch, L. (1999). Email etiquette. Retrieved August 27, 2010, from http://www.theproductivitypro.com/newsletters/Number%202%20March%201999.htm

iPod or Zune: Which side of the marketing fence are you on?

19 Sunday Sep 2010

Posted by in Marketing Strategy

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The battle for digital media player dominance has raged on for many years. Two companies show their prowess as they compete for similar markets. Only one company can be the market leader. And yet, both companies—Apple and Microsoft—have developed a cult-like following. Competitor brand loyalty is a difficult obstacle to overcome. Apple and Microsoft use two different marketing strategies to attract a similar audience.

As with any new technology, the first generation will quickly test the market for price and feature acceptance. The Apple iPod, introduced in 2001, was targeted to the older college crowd and young professionals. The first Apple iPod commercial was developed around the message strategy of style and portability. While the first generation iPod was several times larger and thicker than the stylish designs of today, they were much smaller than their predecessor—Sony’s Walkman and Discman.

The Sony Walkman, introduced in 1979, weighed 14 ounces and priced just under $500 (McCracken, 2009). The Sony Discman weighed slightly less, but had a tendency to skip. Apple’s first generation iPod boasted a storage capacity of one thousand songs, weighed less than half of the Sony Discman, and did not skip while playing your favorite songs.

Five years after the inception of the Apple iPod, Microsoft introduced their version of a portable digital music player—the Zune. In November 2006, the Microsoft Zune was hyped as an alternative to the iPod. The audience targeted by Microsoft in their first wave of advertising overlapped the demographic beleaguered by Apple. While the target audience was the same, the approach by each company was quite different. Apple used a live actor in a real-life situation to showcase the ability to transfer music from their computer to the iPod. Microsoft, however, was not introducing a new technology during the launch of the Zune. Their approach used graphics and animation to show different music genres all the while techno background music provided a pulse.

It is apparent that Apple’s task was more difficult as they concentrated their message strategy on sparking motivation within the market. At first glance, it seemed that the Apple iPod was positioned to satisfy a hybrid utilitarian-hedonic need. It is certainly better to take your music wherever you go rather than only having access to your favorite tunes on your computer, therefore resolving a utilitarian need. On the other hand, the excitement associated with adopting new technology satisfies a hedonic need (Solomon, 2009).

Microsoft had the advantage of monitoring the results from Apple’s early marketing efforts before entering the market. Catering to a digital media player savvy audience, Microsoft positioned the Zune as an independent device—not tethered to Apple iTunes for content—and compatible with the Microsoft operating systems. Having the largest market share of computer operating systems, Microsoft assumed a natural following. So much, in fact, that they failed to re-enforce the idea of solving music portability issues.

By the time that Microsoft zoomed in on their target audience, Apple had saturated the market. The Apple iPod quickly became the music player of choice for children between the ages 6 and 12 (Bulik, 2008). The addition of video capabilities in the later generation iPods created new market opportunities for Apple. Corporations are leveraging iPods for employee training. BCC News first reported the use of iPods for workplace training in 2006 (http://news.bbc.co.uk/2/hi/business/4859302.stm).

Both, the iPod and Zune, have enjoyed many years of success. Each device has evolved and embraced new technology as it becomes available. These devices have more storage, quicker retrieval, better screen resolution, and longer battery life. The latest version of each device boasts a touch screen. While the functionality of the iPod and Zune are comparable, Apple and Microsoft currently each concentrates their marketing efforts on different segments of the population. For Apple, the focus has shifted more towards the aesthetics of their device in anticipation of a self-image congruence purchasing decision (Solomon, 2009).

Microsoft is targeting a niche audience with the Zune poised for gaming, and at the same time creating a cult product. The Zune’s narrow-focus marketing strategy places it higher on Maslow’s Hierarchy of Needs. Gaming is a hobby, and in many cases a lifestyle.  The Microsoft Zune satisfies the upper-level need of self-actualization (Solomon, 2009). Apple and Microsoft dominate the market with their innovative products and services. Their digital music players originally competed for consumers in the same market. However, each company has migrated toward their respective strengths resulting in a respectable following.

References

BBC News (2006). Hospitals train staff with iPods. Retrieved September 13, 2010, from http://news.bbc.co.uk/2/hi/business/4859302.stm

Bulik, B. (2008). Little ears are big bucks for music players. [Electronic version] Advertising Age. Retrieved September 13, 2010, from http://adage.com/article?article_id=123205

McCracken, H. (2009). The original Walkman vs. the iPod Touch. Retrieved September 13, 2010, from http://technologizer.com/2009/06/29/walkman-vs-ipod-touch/

Solomon, M. (2009). Consumer behavior buying, having, and being (8th ed.). Upper Saddle River, NJ: Pearson Prentice Hall.

De-commoditize and Return to Profitability

20 Friday Aug 2010

Posted by in Marketing Strategy

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Your company has long been positioned as a leader in your industry.  The entrepreneurial and competitive spirit cascading through the organization inspires innovation. Without innovation, your company will find itself blending into the background with hundreds of other companies in the same market. Returning to profitability does not mean living in the past, but rather positioning for the future—without losing sight of how you got here.

From your early and humble beginnings, you realized that your products and services were becoming a ‘commodity.’ The moment when the majority of companies within a given industry can provide the same products or produce the same services—it becomes a ‘commodity.’ By leveraging existing or developing new technologies to make your products and services different from the competition, you ‘de-commoditize’ your business. In contrast, offering the services that make your company unique to other companies to add to their marketing mix ‘commoditizes’ your own services.

De-commoditization is a never-ending, full-time job. Most likely, technology has played an important role in your success. However, technology is also responsible for spring-boarding small companies onto your playing field—competing for your customers. Companies that leverage off-the-shelf solutions share the same capabilities, have identical advantages, and compete for business based entirely on price. Your company must establish a differentiator and separate from the pack to once again take the lead.

The window of opportunity for enjoying the exclusiveness of a new product or service is narrow. It is simply a matter of time before your closest competitors mirror your efforts. In many cases, your competition finds a way to offer the same services at a lower cost—making your services a ‘commodity’, and being in a better position to compete. You can combat this problem by making constant enhancements to your products and services—making it difficult for your competition to keep up.

Be aggressive and take charge of your organization. Do not become a spectator in your industry!

An Ounce of Prevention Saves a Gallon of Gasoline

13 Tuesday Jul 2010

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Lightning does not strike twice, but thrice in the automobile industry. Over the past four decades, the automobile industry has been faced on three different occasions with consumer demand misaligned from automaker’s supply. Lessons from the first incident, in 1973, should have thwarted similar fallout from future situations. A short attention span, narrow focused direction, and greed are all responsible for the automobile industry’s inability to proactively produce automobiles that address the concerns of today’s consumer.

Making Decisions Without an Ear to the Ground

For whatever reason, the automotive industry seems to have a history of making decisions in a vacuum. The general public is sensitive to the aggressive increases in fuel prices, and yet the manufacturers produce automobiles with very low MPG ratings. The motive in the past, according to Paul MacDuffie in his 2008 Knowledge@Wharton article, was the irresistible profit margins on light trucks. Does greed continue to be the driving force behind the automobile industry’s selective hearing? One of the biggest mistakes any industry can make is to not listen to the consumer. With a deaf ear, the automobile industry repeated their mistakes again in the 1980s.

To combat the fuel shortage in the 1970s, auto manufacturers shifted to unleaded fuel, catalytic converters, and a recalculation of horsepower ratings (De Lorenzo, 2008). Of course, this did nothing for the actual rising costs of fuel. It did, however, mask certain sensitive issues such as MPG rating. As a result, consumers continued to purchase gas-guzzling automobiles. In the 1980s, automobile manufacturers perceived the fuel shortage as a temporary problem. They predicted that an aggressive drop in fuel prices would follow the shortage—and it did.

In 2005, Fox News reported that the latest fuel shortage would finally force the automobile industry to start developing fuel-efficient vehicles (2005). After surviving the affects of two previous shortages, the automobile industry felt confident that this too would pass. When the prices exceeded everyone’s predictions, analysts began to make predictions regarding the consumer’s tolerance. Automobile manufacturers were banking on the fact that Americans would probably pay nearly six dollars per gallon before giving up their sport utility vehicles. Fuel prices in Europe are nearly twice as much as in the United States.

The automakers gambled on the fact that the consumers would bounce back from the impact of high fuel costs and continue to purchase SUVs. One big mistake was to incubate the impression that the automobile industry is more interested in a profit than the economic welfare of the public. The lack of marketing research—an ear to the ground—during these times of crisis would have helped the automobile manufacturers develop products to combat the fuel shortages.

With the most recent fuel shortage, the automobile industry faced preemptive criticism. The consumers seemed to take the proactive role and demand better fuel economy. Avoiding a black eye, the automakers introduced several new hybrid and fuel cell model vehicles. The market conditions have changed. The industry is driven by the wants, needs, and concerns of the consumers as opposed to the arrogance of the industry. Pressure from several fronts has forced automakers to shift their focus.

As with any plan to change corporate direction, a formal strategy is necessary (Cateora & Graham, 2007). Automobile manufacturers can ensure success by conducting marketing research to determine the best array of products for the current consumer. Post-sales surveys are important to help fine tune the marketing mix. The most important tactic the automobile industry could add to their latest strategy is to become more sensitive to the concerns of society. Be a partner to the consumer and a friend to the environment.

The automobile is not entirely at fault. Without a demand for the gas-guzzling SUVs, automobile manufacturers would have no reason to produce them. The automobile industry could claim that they were simply satisfying the demands of the consumer, and it is the consumer that is thumbing their noses at rising fuel costs. While this may be true, it is the automobile industry that has thumbed its nose at the environment by not driving efforts and steering the public into environmentally friendly automobiles—until now.

The automobile industry is no longer behind the curve. Manufacturers are tuned into the pulse of the consumer. This is not the result of learning from their mistakes, or even proactively anticipating the financial burden of rising fuel costs. The automobile manufacturers realized that the consumers are demanding less dependency on fossil fuels. Moreover, automobile manufacturers have grown a conscience regarding the impact of internal combustion engines to our environment. And while an ounce of prevention can save a gallon of gasoline, an ounce of forward thinking can save a planet.

References

Cateora, P. & Graham, J. (2007). International marketing. New York: McGraw-Hill Irwin.

De Lorenzo, P. (2008). Rants #427 – Autoextremist ~ the bare-knuckled, unvarnished, high-octane truth. Retrieved July 12, 2010 from http://www.autoextremist.com/current/2008/1/13/rants-427.html

FoxNews.com (2005). High gas prices changing auto market. Retrieved July 12, 2010, from http://www.foxnews.com/story/0,2933,170297,00.html

Knowledge@Wharton (2008) Behind the curve: Have U.S. automakers built the wrong cars at the wrong time—again? Retrieved July 12, 2010, from http://knowledge.wharton.upenn.edu/articles.cfm?articleid=2012

Pure Water Fuels Pure Marketing

28 Monday Jun 2010

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Very few products of nature can be processed and packaged into a form more appealing than the packaging provided by Mother Nature herself. The marketing strategy of Fiji Natural Artesian Water has proven the effectiveness of carrying forward the environment, beauty, and overall surroundings associated with their product—water. Fiji Water leverages every advantage of having a clean and pure product—including the source and environment where it originates—to maintain a branding strategy second to none.

The bottled water industry generates roughly 11 billion dollars in revenue each year (Alsever, 2009).  Companies conventionally versed in the production of soft drinks continue to test the waters hoping to cash in on a health conscience society. Dasani by Coca-Cola and Aquafina by Pepsi own an impressive share of the market. However, Nestle Waters is the industry giant with their many domestic brands dominating grocer’s shelves across the country. Nearly half of the 8.7 billion gallons of bottled water consumed by Americans in 2008 was produced using a purification process (Fishman, 2007). Most of the Nestle Waters brands, such as Zephyrhills, are produced from spring water. Fiji Natural Artesian Water is the only bottled water from an artesian source.

Fiji Water created a pure marketing strategy atop one of the purest products in the industry. The foundation for their three product level approach is the core benefits associated with their bottle water. Fiji Water is simply a pure tangible good as there are no accompanying services. Every consumer of this artesian water not only gets a superior product, but an experience as well. The consumer is buying an experience with the added benefit of great tasting, pure and clean water.

Second only to oxygen, water is very important to good health and well-being. Simply put—we need water to sustain life. Not just any water, but clean healthy water. The Fiji Water consumer is really buying—in addition to pure clean water—a healthy lifestyle enveloped by the idea of tranquility and beauty associated with a pristine tropical rainforest. Nature provides credibility to Fiji Natural Artesian Water.

Following the three levels of product, Fiji Water transitioned the core benefits into an actual product by identifying brand name, features, packaging, and quality level (Kotler & Armstrong, 2008).  Fiji Water created their brand by riding the coattails of brand equity already established by the Fiji name. Fiji Water benefits from the namesake associated with the pristine, pure, unindustrialized tropical rainforests of the Fiji Islands. With the name Fiji comes certain connotations responsible for the perception of their product. Fiji suggests a specific environment in much the same way a connotation suggests a rose signifies passion.

Fiji Water recognized the need to differentiate its product from others in the market, and created a distinct packaging strategy. If a consumer could first taste the water drawn from ancient artesian wells there would be little need be concerned with packaging. The majority of bottled water populating the store shelves is packaged in clear plastic containers. The content while diversely different looks exactly the same. The packaging influences the consumer. Moreover, the packaging narrates the contents by offering visual suggestions of the water’s origination.

Many bottled water brands, especially those produced from springs, include a label with images depicting a serene picturesque water source. None represent the contents better than Fiji Water. Starting with the basic shape of the packaging, Fiji distinguishes itself from others. The square bottle is easily recognized and positively associated with the product—Fiji Natural Artesian Water. The full experience associated with consuming water from an artesian aquifer at the very edge of a rainforest starts with a sophisticated label. Instead of a simple tag, Fiji Water draws the consumer into an environment of palm leaves and Hibiscus blooms. The multi-dimensional labeling technique entices the consumer to purchase and consume the contents.

Introducing line extensions, brand extensions, multibrands, and new brands are techniques associated with brand development (Kotler & Armstrong, 2007). Introducing an extension to the same line could dilute the current product offerings. For example, adding an antioxidant ingredient would create opportunities in similar markets, but at the risk of losing credibility with the current product. The consumers might begin to question the natural benefits of Fiji Water if other ingredients need to be added. Introducing a brand extension such as coconut milk would benefit from the brand name recognition and allow Fiji Water to expand into other markets. The Fiji brand has been developed to include a certain brand experience. It would not be a good branding strategy for Fiji Water to dip their toes into other areas outside their core competency. Any brand development strategy that uses the current brand name will be successful.

Fiji Water uses geography to their advantage. While the cost of distribution is far greater than competing products produced in the United States, distance is used in Fiji’s mainstream marketing. Directly from a rainforest hundreds of miles from the nearest continent—Fiji Water is the natural choice for a health conscience society. A cohesive brand development strategy compliments a pure marketing campaign promoting the purist of water—Fiji Natural Artisan Water.

References

Alsever, J. (2009). Bottled Water Sales Slow Amid Backlash. Retrieved December 20, 2009 from, http://www.msnbc.msn.com/id/34451973/ns/business-going_green/

Fishman, C. (2007). Message in a Bottle – Bottled Water – Luxury Water – Mineral Water. Retrieved December 20, 2009 from, http://www.fastcompany.com/magazine/117/features-message-in-a-bottle.html?page=0%2C0

Kotler, P. & Armstrong, G. (2008). Principals of Marketing. Pearson Prentice Hall. Upper Saddle River, New Jersey.

IHOP: An American Icon–not exempt from marketing research

22 Saturday May 2010

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Successful and accurate marketing research evolves from a structured eleven-step process. Understanding and solving a marketing problem, as with any problem, can be over or under engineered. Over engineering simply means that unnecessary steps are used in the marketing research plan. Moreover, using too few steps would result in limited information and potentially less accurate results. The challenge is to leverage only the steps necessary to deliver an accurate analysis. In some cases, there will be marketing research projects that require all eleven steps.

The customer landscape is constantly changing

Well-established companies sometimes forget the importance of understanding the demographic anatomy of their current customers. Without information harvested from marketing research, a company runs the risk of losing business to competition. This is especially true if the competitor uses marketing research to inspire direction and drive marketing decisions. Marketing research is not a one-time process. Cultures and sub-cultures within our society are constantly changing—and as a result, consumers do not respond to the same marketing as in the past.

It is irresponsible for a company to not periodically survey their customers so as to better understand their wants, needs, and desires. The International House of Pancakes (IHOP) is far too familiar with the economic rollercoaster caused by stiff and faster moving competition. While the traditional tabletop survey cards are sufficient for improving the quality of service at the local level, a structured marketing research plan is required to provide the information necessary to remain competitive in the market.

The International House of Pancakes is a restaurant chain with over fourteen hundred locations. There are a few locations with overlapping markets, but each market is burdened with its own unique set of challenges. The International House of Pancakes must design a marketing research plan that is managed at the corporate level and deployed at the franchise level, but provides information relevant to all. A plan of this complexity will leverage all eleven steps in the marketing research process.

Burns & Bush (2008) identify the eleven steps of marketing research as: (1) establish the need for market research, (2) define the problem, (3) establish research objectives, (4) determine research design, (5) identify information types and sources, (6) determine methods of accessing data, (7) design data collection forms, (8) determine sample plan and size, (9) collect data, (10) analyze data, and (11) prepare and present the final research report (p. 63). In every marketing research campaign the first step remains the same—establish the need. Both, the corporation and the individual franchises need marketing research. Without information gleaned from the data collected and analyzed during marketing research campaigns, marketing managers at both the franchise and corporate levels cannot make educated decisions. The need for marketing research is constant, and based on the reality that the customer landscape is constantly changing.

Create a structured plan

One of the most difficult steps in the marketing research process is defining the problem. In some cases, many people within the organization have their own interpretation of the problems facing the company. Step two, defining the problem, is critical to the success of a marketing research plan. The International House of Pancakes has enjoyed moderate success in the shadow of an unpredictable economic time. Additionally, they have become complacent as it relates to catering to a changing market.

At the corporate level, the International House of Pancakes needs to define new market areas and better leverage existing opportunities. Franchises need to have a clear snapshot of how they are perceived in the eyes of their customers. Retention of existing customers is the springboard for new business. Creating a profile and understanding the wants, needs, and desires of IHOP’s existing customers will help define the model for marketing campaigns to attract new customers.

The International House of Pancakes is recovering from a loss of 3.1% in the fourth quarter of 2009 (Shauk, 2010). With the majority of consumers tightening their belts, it is imperative for the corporation to find the right marketing mix to survive, prosper, and grow. Marketing research can help determine areas with existing franchises and a lower market share. Information is key in making marketing decisions. The overall marketing research plan is designed around addressing and solving the problem.

Establishing research objectives, the third step in the process, presents a few challenges. Considering that the overall business is down, surveying existing customers will provide only a fraction of the information needed to complete the marketing research analysis. An in-store survey will suffice for capturing information regarding the merit of service, diversity of the menu, and quality of the food. Each franchise will offer an incentive-based survey to each of their patrons.

The franchise-level marketing research campaign will be coupled with a corporate-level survey that is designed to reveal any hesitation by prospective customers to frequent their local International House of Pancakes. The questionnaire will be presented through on-line channels as well as telephone surveys. The overall marketing research objective is to poll a minimum of two hundred individuals in each market area.

The fourth step, determining research design, is significant to the accuracy of information captured during the research campaign. A descriptive research design will be used describe the current customer or prospect. A cross-sectional methodology within the descriptive research approach is the best solution for establishing a benchmark of a particular point in time. The information from these surveys will be used to help recognize and forecast trends.

As part of the fifth step, researchers need to identify information types and sources. The International House of Pancakes has been in existence for over half a century. From the beginning, the company has expanded through franchising. The holding company, DineEquity, also owns the Applebee’s Neighborhood Grill and Bar restaurant franchise (Meece, 2007). Applebee’s and IHOP appeal to two different markets with some overlap. Both restaurant chains operate in the casual dining and family dining categories. Therefore, it would stand to reason that some information from previous marketing research campaigns could be shared.

Secondary data, such as the information captured over the past several years, can be used to backfill missing information from current campaigns. Information from a data provider is necessary for creating a list of contacts for the telephone survey. This secondary data will be broken down into segments based on geography, age, income, and number of individuals in the household. The primary data accumulated during the marketing research campaigns will be joined with the secondary information provided by one or more outside list providers.

The methods for accessing the data, the sixth step, will mostly revolve around unobtrusive techniques such as self-surveys over the Internet. Additionally, a telephone survey will allow a more personal approach. The telephone survey campaign will allow the marketing researchers to cover a wider area in less time than an in-home survey. A savvy researcher can monitor inflections and emotions in the voice of the persons being surveyed to measure the integrity of the responses (Tyebjee, 1997).

The seventh step in the marketing research process involves designing the actual forms used to collect data. One of the challenges is creating questions that will generate responses to satisfy the marketing objectives defined in step three of the marketing research process. The franchise-level in-store surveys, for example, will use a combination of dual-choice categorical scale questions coupled with several synthetic metric scale questions. Questions regarding gender, or any question requiring a simple “yes” or “no” response, will be developed using a dual-choice categorical scale. Questions concerning the quality of service, frequency of visits, or overall rating of a consumer’s IHOP experience will leverage either natural or synthetic metric scale questions. In all cases, the questions will be brief and clear—not leading, loaded, double-barreled, or overstated (Burns & Bush, 2008).

Determining the sample plan and size is a very important eighth step in the marketing research process for the International House of Pancakes. The in-store table card surveys should be used throughout the year to ensure the individual restaurants are listening to the voice of their patrons. A timeline needs to be determined to as the extent of the survey for the marketing research campaign. Information captured within the survey time window will be combined with data from other research initiatives in the same timeframe for final analysis.

Several factors are considered when deciding how many individuals is to be sampled. While accuracy and confidence of the data is a concern, sensitivity to the marketing research budget is a factor. A larger sample equates to more accurate results. Time and budget constraints, along with the logistics of surveying everyone in the target audience, makes it necessary to establish a sample size that will best represent the majority. A stratified sampling approach is recommended for selecting the list of individuals to participate in the telephone survey. The optimum number of individuals to contact, or sample size, is determined by using the confidence interval formula. Variability, confidence level, and accuracy are the three elements considered when leveraging this formula (Birchall, 2009).

Collecting data is the ninth step in the marketing research process. The method by which the data is collected is directly related to the accuracy of the information captured. For example, it is nearly impossible to know for sure who responded to a survey hosted on-line. In contrast, information captured during a telephone survey seems to have more credibility. An in-person method would provide the most credible results, but time and budget for this particular marketing research project limit data collection to telephone surveys, online surveys, and in-store self surveys.

Each data collection method poses certain risks of error. An on-line survey can result in data skewed by bogus responders and a misrepresentation of the population. Telephone surveys are met with challenges associated with the overuse of this conduit by traditional telemarketers. A substantial percentage of telephone survey attempts typically result in a non-response. An individual might refuse to take the survey or break-off during the interview.

Bringing it all together

The tenth step in the marketing research process is data analysis. Interpreting the information collected during the research campaign is accomplished by choosing an analysis type that will produce results to meet the research objective. The research objective is to describe the target audience. The International House of Pancakes’ survey results from current customers combined with the sample data captured from the on-line and telephone surveys can be summarized into percentages and averages.

The data collected across all research channels will be summarized. Categorical questions can be summarized using percent distribution. Depending on the categorical data, a frequency distribution might be used to summarize the findings (Burns & Bush, 2008).            Further analysis could include cross-tabulation to better understand the relationship between variables recognized during the marketing research campaign.

The final step in the marketing research process is the preparation and presentation of the findings. The marketing research report is a document that will be used by the key decision makers within the International House of Pancakes executive team. Decisions regarding business direction and overall marketing plans rely on the accuracy of the information contained in the final report. The marketing research report will include a full analysis of the information and recommendations as concluded by the marketing research team. The results will be compiled and presented in an informative manner that will best reflect the efforts of the marketing research team.

The International House of Pancakes is an American icon. But longevity does not equate to success. The company needs to change as society dictates and continue to serve the public at a level that will ensure repeat business and continued growth. Franchises need marketing research to provide information regarding lifestyle, interests, and spending habits of their respective target audiences. Corporate headquarters needs marketing research to help determine the viability of expanding into other geographic areas. The pulse of the community is measured through marketing research.

The eleven-step marketing research process is neither over nor under-engineering a plan necessary to deliver information to help marketing managers of the International House of Pancakes set direction and devise a marketing strategy. Every aspect of the corporation can benefit from a well-designed marketing research plan. The International House of Pancakes’ greatest assets are their customers. Understanding the psyche of these individuals is invaluable.

References

Birchall, J. (2009). Sampling and samples. Retrieved May 16, 2010, from             http://www.marketresearchworld.net/index.php?option=com_content&task=view&id=23&Itemid=1&limit=1&limitstart=2

Burns, A. & Bush, R. (2008) Basic Marketing Research. Pearson Prentice Hall. New Jersey.

Meece, M. (2007). Can the IHOP Corp. do for Applebee’s what it did for itself? The New York Times. [Electronic version]. Retrieved May 15, 2010, from http://query.nytimes.com/gst/fullpage.html?res=9400E3DD173BF932A2575BC0A9619C8B63

Shauk, Z. (2010). IHOP owner’s earnings hobbling back. Glendale News Press [Electronic version]. Retrieved May 16, 2010, from http://www.glendalenewspress.com/articles/2010/03/03/business/gnp-ihop030410.txt

Tyebjee, T. (1997). Telephone survey methods: The state of the art. [Electronic version]. The Journal of Marketing, 43(3), 68-78. Retrieved May 15, 2010, from JSTOR: http://www.jstor.org/stable/1250148

Is Apple too good to use market research?

27 Tuesday Apr 2010

Posted by in Marketing Philosophy

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Apple Computer is basking in the warmth of success following the recent release of yet another technology widget—the Apple iPad. Apple’s CEO, Steve Jobs, has on several occasions downplayed the value of market research. Jobs argues that you cannot ask consumers to decree the next big thing. Moreover, customers cannot see the value or need until they see the product (Breillatt, 2010). While this philosophy has served Apple well, there are many aspects of marketing research that could assist in marketing decisions post innovation.

Consumers do not know what they do not know

Considering market research is as close as a marketing manager might get to a crystal ball, it stands to reason that without it many businesses are shortsighted. Conversely, Apple continues to lead the industry in innovative products without leveraging market research, but at the risk of alienating their cult following by not being prepared to accommodate the long lines of hopeful buyers at their retail stores. A blend of secondary data accompanied by information captured using a causal design marketing research campaign would have given Apple an idea of the number of units to produce and deliver to the individual retail outlets.

At the very least, and in lieu of market research, Apple should have eavesdropped certain social media channels to get a feel for the anticipation surrounding the release of their first generation iPhone. Apple aficionados were encouraged by the media to join a waiting list (Paulk, 2007). The waiting list idea was a reactive approach to predict the number of clients to expect on the launch date. The problem with this, of course, is that the information was collected too late to affect the manufacturing schedule. As a result, thousands of Apple iPhone early-adopters were disappointed.

Apple could enjoy greater customer satisfaction by using market research to help determine a branding and positioning strategy. It is true that many consumers are loyal to the brand, and will simply buy the products because Apple designs them. However, the iPhone and iPad cross into other industries and compete with well-established brands. A marketing manager at Apple must identify a target market before a campaign strategy can be designed. Consumers are fickle—especially technology enthusiasts.

Apple could use market research to determine everything from a branding and positioning strategy to a target market for their new iPad. An Apple iPad has been described as something between a laptop and a smartphone (Stone, 2010). Without running the risk of leaking intellectual property by using a focus group or conducting test marketing, Apple could employ a descriptive research study to better understand their market. Using experience surveys to current users of smartphones and non-apple laptops would provide information for a marketing manager to use to establish a message strategy for promoting the new trend-setting iPad device.

The what-if logic used in a causal design marketing research campaign could provide an early indication of the percentage of consumers willing to abandon their current devices for Apple’s new technology. The results of a survey based on the “Hierarchy of Effects” model can help isolate the hand-raisers from the naysayers and ultimately produce a roadmap for developing a marketing mix. Although the product has been determined, a well-informed marketing manager decides price, place, and promotion.

The emerging technology associated with the Apple iPad is in itself an environmental factor. A technology dependent society has directed cultural trends in favor of the Apple iPad. Without competition, Apple can take the same whatever-the-market-will-bear approach that was used to introduce the iPhone; or perhaps market research might reveal a better option is a skimming strategy. The iPad has enough differentiation to justify a higher price.

Market research would help a marketing manager determine the best positioning strategy for the iPad. Feedback from a needs analysis could support a decision to position the iPad using a use or application strategy. The new device offers a combined functionality of an Amazon Kindle, personal digital assistant, and a laptop. Touting the advantages of combining all of these capabilities into a single device would be the first step in establishing an application strategy (Burns & Bush, 2008).

Identifying the target market is one of the most important steps in ensuring the success of a product. Apple might have their pulse on their target audience vicariously through the visionaries within their own organization. However, not everyone is ready to abandon his or her smartphones, laptops, and e-book readers for the next great Apple innovation. Apple can use marketing research to make better marketing decisions without jeopardizing the entrepreneurial spirit of their innovation team. Even a marketing manager for Apple Computer can benefit from a well-defined marketing research strategy.

References

Breillatt, A. (2010). You can’t innovate like Apple. [Electronic version]. Pragmatic Marketing. Retrieved April 10, 2010, from http://www.pragmaticmarketing.com/publications/magazine/6/4/you_cant_innovate_like_apple

Burns, A. & Bush, R. (2008) Basic Marketing Research. Pearson Prentice Hall. New Jersey.

Paulk, W. (2007). Get on the iPhone waiting list! Retrieved April 26, 2010, from http://ezinearticles.com/?Get-­on-­the-­iPhone-­Waiting-­List!&id=591466

Stone, B. (2010). With its tablet, Apple blurs the line between devices. [Electronic version]. New York Times. Retrieved April 26, 2010, from http://www.nytimes.com/2010/01/28/technology/companies/28apple.html

Dominos Pizza – Beyond the Dough

09 Tuesday Mar 2010

Posted by in Marketing Strategy

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Much like the soft elastic dough used as the foundation for which their mainstay product is built, Domino’s Pizza has shaped their marketing strategy into a juggernaut that has enjoyed nearly half a century of success. Currently a market follower—second only to Pizza Hut—Domino’s longevity and rapid rate of growth is due largely to their ability to establish, maintain, and remain true to their original marketing mix. Domino’s success, however, is due to the fact that they have been able to differentiate themselves on a very crowded playing field.

Most companies, at least the successful ones, concentrate on the four Ps that compose their marketing mix. Albeit product, price, place, and promotion are the cornerstone of many marketing strategies—Domino’s Pizza has leveraged the four Cs, or consumer’s viewpoint, to establish their marketing mix. Customer solution, cost, convenience, and communication are considered each time Domino’s Pizza introduces a new product or initiates a new promotion.

The science of marketing was the last thing on the minds of the Monaghan brothers when they borrowed $500 to purchase Dominick’s Pizza in 1960. With a down payment of $75, Tom and Jim Monaghan took ownership of a small pizza shop in Ypsilanti, Michigan. Their sights were firmly set on building a dynasty of three locations and monopolizing pizza delivery in a small concentrated area. From inception, the Domino’s logo contained three dots. These dots, still present on the current logo, represent Tom Monaghan’s original vision of opening three locations and develop a triangulation delivery strategy (Miranda, 2009).

In the early years of business, pizza was the only item on the menu at Domino’s. Side items were never considered to be a part of the menu. Remaining sensitive to competitors and allowing competition to affect product pricing is a classic trait of a market follower (Kotler & Anderson, 2008). Domino’s was eventually forced to add medium and extra large sizes to remain competitive.

Domino’s Pizza has chosen a market follower strategy. Product, one of the four Ps of the marketing mix, is an area where the market leader continues to influence Domino’s. Competition forces changes to the market followers. The first change to the product offering at Domino’s happened almost three decades after they opened. In 1989, Domino’s Pizza introduced a deep-dish pizza (Laukens, 2010). While it would stand to reason that the new addition to the menu was an answer to a competing product, Domino’s had entered a market where deep-dish was the only acceptable version of a pizza.

Market research had revealed that Domino’s market demographic was culturally diverse. Domino’s responded by adding several other variations of the basic pizza. Hand tossed and thin crust pizzas were added to the menu to satisfy demand in specific market areas and remain competitive. Domino’s keeps a watchful eye on the consumer reaction to specific product and pricing. The ability to see their company from the buyer’s viewpoint is a significant advantage for any company.

Domino’s Pizza listens to feedback from the consumers, and at the same time occasionally glances over the shoulder of their competition for inspiration and influence. From the customers’ feedback and buying habits, Domino’s is able to glean information to help influence direction.  Domino’s strengths, weaknesses, opportunities, and threats have changed many times over. The entire pizza industry has evolved into a highly competitive array of corporate giants. And yet, it remains important to perform a SWOT analysis as often as possible.

Domino’s strengths include their ability to remain unscathed, although influenced, by their competition. Moreover, their visionary approach to creating a better consumer experience by developing better manufacturing methods is at the foreground. Hard work, persistence, and thinking outside the pizza box have been Domino’s formula for success. Although not the market leader, Domino’s Pizza is recognized as the leader of innovation. The pizza industry is crowded with businesses trying to outdo one another with a product that is not well received if strayed too far from the original. Domino’s decided to create a value proposition beyond the product. Tom Monaghan’s goal of perfecting the pizza delivery was tested when Domino’s once again raised the bar. In 1986, Domino’s Pizza created a slogan and spawned an aggressive advertising campaign in an attempt to differentiate themselves from other pizza businesses.

Taking advantage of an impatient consumer base, Domino’s touted, “you get fresh, hot pizza delivered to your door in 30 minutes or less—or it’s free.” Competition scrambled to find an answer, but without the automation invented and deployed by Domino’s it would be impossible. Domino’s was the first to use a production assembly line method for producing pizzas. A belt-driven pizza oven produced a continuous stream of pizzas allowing the manufacturing and delivery process to become manageable, and for the most part—predictable.

Domino’s rode the wave of success for many years. Convenience for the consumer was a definite advantage. During this time, Domino’s Pizza opened several thousand new franchises and was taking over the market. Then as quickly as the innovative wildfire had spread, it was extinguished. The market momentum was quickly lost when a woman in St. Louis was involved an automobile accident with a Domino’s Pizza delivery driver. News turned into bad publicity and in 1993 the 30-minute guarantee was discontinued.

Domino’s strength, the ‘S’ in a SWOT analysis, was their ability to produce and deliver a product faster and more efficiently than their competition. Not promoting the 30-minute guarantee created a level playing field allowing the focus to shift toward product and price. However, Domino’s had continued the use of their belt-driven pizza production oven and therefore better positioned to compete in the pizza price wars.

Domino’s Pizza exposed several weaknesses, the ‘W’ in a SWOT analysis, in their approach to advertising and marketing. A short-lived villainous character named The Noid was used to promote the fact that Domino’s could deliver a fresh hot pizza even on the coldest days. They were able to perform such a feat, when others struggled, because they invented a different type of pizza box. The message was not that Domino’s Pizza recognized the fact that no one wants a cold pizza and offered a remedy, but rather an annoying fictitious character was lurking in hopes of ruining your pizza. The Noid was short-lived marketing trend that caused more confusion than confidence.

One important attribute of a good company is the ability to learn from past experiences and change with the times. Domino’s quickly recognized a need to innovate, and once and for all solve the problem of cold pizza delivery. This time, however, Domino’s Pizza would show the world that they are the trendsetters from which all others grasp firmly the coattails.  Crisper crust, bubbling cheese, and hotter topping were the new promise spoken loudly in Domino’s advertising. This was made possible by their invention of the HeatWave® bag. This new technology, and the creative marketing, caused Domino’s competition to sweat. Once again, Domino’s became consumer centric and focused on a better customer experience as opposed to getting caught up in product and pricing battles.

Opportunities, the ‘O’ in a SWOT analysis, are seemingly limitless for Domino’s Pizza. They have been able to succeed in non-traditional markets by creating a cultural-specific product mix. Today there are over 8000 stores in 50 international markets. Although only producing what is classified as consumer products, the marketing considerations in all markets are the same—convenience. It is rare for a consumer to plan days in advance to have a pizza, but instead decides at a moments notice. The core benefit, at least from Domino’s perspective, is convenience.

A market niche competitor, California Pizza, has attempted to attract some of the frozen pizza consumers by offering variations of their most popular products. This seems to be a shortsighted attempt at trying to capture some of the market share. If Domino’s Pizza were to manufacture and distribute their product in the frozen food aisle, their current business would change. As with the California Pizza Kitchen product expansion, the original product is not viewed the same. While there are plenty of opportunities for Domino’s to grow, expanding their product offering beyond what can be produced and delivered in the same timeframe as their pizza would have a counter-effect on success in the market. Chicken wings and various deserts were added as an answer to a competitor’s advantage.

The final element in a SWOT analysis is the identification of threats in the market. Every competitor is recognized as a threat. Becoming too diverse with the product offering can also be perceived as a threat. In both cases, it is wise to understand the cause and effect associated with adding product, making marketing promises, and expanding into too many markets. There will always be a tipping point from which recovery is futile.  A bad customer experience is no longer shared between a close-knit group of family and friends. Blogs can influence buying decisions and become a threat to the Domino’s brand.

Social media has become a huge part of society. The early adopters molded social media into a peer-to-peer communication channel. Unlike traditional broadcast mediums, social media offers two-way communication. An individual, or a business, can post information and receive instant feedback. This form of communication is a perfect fit for an impatient society. However, as Domino’s discovered in April 2009, social media can unravel many years of branding.

A video produced on a hand-held camera was posted on a popular social media site. The video contained disturbing footage of two Domino’s Pizza employees tainting products by various questionable unsanitary methods (Clifford, 2009). In only a few days, the video was viewed over one million times. The Domino’s Pizza brand was in serious jeopardy. Nearly fifty years after Domino’s Pizza was started, they found themselves under a microscope.

Domino’s marketing team used a proactive approach to thwart permanent damage. Quickly realizing the extent of the damage and the affected demographic, Domino’s created a Twitter account to handle the customer comments and introduced their own video featuring an explanation and public apology from the CEO. Domino’s ability to quickly adapt to a changing society afforded them the opportunity to devise a damage control plan and dilute a potentially devastating situation.

For the most part, the Internet has become the hottest new medium. Domino’s recognized the power of the Internet as a consumer conduit well in advance of their competition. They leveraged this new channel in 1996 by introducing the Domino’s Pizza website. Not nearly as sophisticated as the current website, and bound by the limited technologies of the early Internet, Domino’s used their first website to expand their brand and specific marketing messages across an untapped and unmeasured channel. In the same year the corporate website was launched, Domino’s boasted sales in excess of 3 billion dollars. Domino’s has become comfortable using the Internet as a marketing channel.

The ability to identify—and remain true to—the four Ps in their marketing mix is the primary reason Domino’s Pizza has endured and survived many decades of a fickle economy and a demanding consumer. Their product mix has evolved to include pizza, salads, sandwiches, chicken wings, and specialty desserts. The quality has been improved over the years, including a recent overhaul of their pizza crust and sauce recipes. Their brand name remains strong regardless of the recent challenges of managing public relations through social media channels.

Domino’s product pricing is competitive with others in the industry. Campaigns and promotions are designed to not only attract new customers, but also to retain existing ones. Over 8000 locations promise convenience for Domino’s consumers. It is difficult to find an area not identified serviced by a Domino’s Pizza franchise. Currently, Domino’s is positioned firmly within the market true to their original intention.

Consistency in products between franchises, reading the pulse of the consumer, and setting the pace for all others to follow is at the core of Domino’s success. The future will depend greatly on the ability of Domino’s marketing team to remain proactive, centered, and focused on the customers’ needs. It will always be important to realize shifts in the target market and leverage new opportunities to expand their customer base.

Domino’s has broadened and narrowed the range of ages of their target audience. During the second attempt at their “30-minutes or less” campaign, Domino’s concentrated on a target audience of 30 years old and younger. A critical marketing mistake was not realizing sooner that thirty percent of their original demographic—49 years old and under—remembered the first 30-minute guarantee in a positive light. The latest marketing efforts epitomize everything that Domino’s has strived to create. They will always position themselves to make decisions based not only on the traditional four Ps of marketing, but also from the viewpoint of their consumer. Using comments, criticism, and complaints as fuel—Domino’s recently introduced their pizzas reinvented. Domino’s has once again differentiated itself in the market. The pizza pendulum of success has swung toward Domino’s Pizza.

References

Clifford, S. (2009). Video prank at Domino’s taints brand. Retrieved January 25, 2010, from     http://www.nytimes.com/2009/04/16/business/media/16dominos.html

Kotler, P. & Armstrong, G. (2008). Principals of marketing. Pearson Prentice Hall. Upper Saddle River, New Jersey.

Laukens, D. (2010). The history of Domino’s Pizza. Retrieved January 23, 2010, from http://www.recipepizza.com/the_history_of_dominos_pizza.htm

Miranda, E. (2009). Internet marketing – Franchises: Domino’s Pizza. Retrieved January 23, 2010, from http://www.wsicorporate.com/article/Franchises_dominos_pizza

Advertising – Then and Now

09 Tuesday Mar 2010

Posted by in Marketing Philosophy

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Arens, Schaefer, & Weigold (2009) developed a timeline indicating the first known advertising message was created in 3000 BC. Although the actual message bore a closer resemblance to a classified advertisement, the evolution of advertising had begun. The nonpersonal, persuasive, structured communications we recognize today are a progeny of advertising efforts spanning the past few centuries. Early advertising and distribution was limited to a small geographic area surrounding a vendor. Everyday advertising, such as a merchant’s signage, used symbols instead of words to indicate the type of business and product or services offered.

During the preindustrial age, advertising was reaching far beyond the simple signage and word of mouth of local merchants. Handbill, posters, and signs became popular formats for advertising. The printing press was one of the most important developments in the history and evolution of advertising.  By the middle of the 1600s, the printing press was enjoying the bicentennial of its introduction by Johannes Gutenberg. Gutenberg’s invention was one of three major developments that can be attributed to the birth of modern advertising (Arens, Schaefer, & Weigold, 2009).

The first newspaper advertisement appeared in 1650. While a large percentage of the population could not read, the local newspapers were becoming recognized as a medium for delivering advertising to the masses. Merchants, vendors, and manufacturers used newspapers to extend their marketing boundaries beyond the small concentrated areas surrounding their physical locations. Print advertising first appeared in America within the pages of the Boston Newsletter–published in 1704. Ben Franklin is responsible for creating the structure and format of print ads. His techniques for making print ads more legible and easier to understand continue to be used in modern print advertising. Ben Franklin was the first in America to recognize the need to large headlines, white space, and illustrations in advertisements.

England had enjoyed several hundred years of advertising before the American colonies were born. English author, Samuel Johnson, recognized the oversaturation of advertising. In 1758, Johnson insisted that in order to stand out, advertisers needed to embellish their messages. Puffery, as recommended by Johnson, is the exaggeration of the benefits or capabilities of a product or service in an advertisement. While an accepted practice of the industrializing age, puffery is not tolerated in modern advertising.

The industrializing age began in America in the early 1800s—nearly half a century behind the Industrial Revolution in England—introducing machines to mass-produce goods. The sudden surplus of goods and products exposed a need for aggressive marketing and broad saturation advertising. Retailers assumed the responsibility of advertising to the consumers. The industrialization age was followed by the industrial age and once again the face of advertising changed. Advertising during the industrial age—recognized as the first seventy-five years of the twentieth century—focused on the promotion of consumer-packaged goods.

The postindustrial age of the 1980s through 1990s faced the challenges of marketing to an environmentally sensitive society. Demarketing techniques were used in advertising in an attempt to make consumers aware of a company’s environmentally responsible manufacturing and supply-chain methods. Consumers today are not only better informed about products and services, but also the companies that produce them. The modern consumer will research a company and absorb feedback from word-of-mouse channels such as blogs and forums to offset the positive-only hype from advertising. The green movement is represents a marketing potential of 500 billion dollars (Hopkins, 2009).

Modern advertising trends are constantly changing. Mostly driven by advances in technology, advertising media is becoming broader reaching and less expensive to leverage. The Internet has evolved into an advertisers low-cost playground. Email campaigns are less expensive to produce than traditional print campaigns. The Internet also allows a more strategic direct and targeted approach to advertising. Email is a less formal and more personalized alternative to traditional direct mail campaigns.

Regardless of the message and media, advertisers are spending more time identifying their target audience. The recent economic downturn has caused consumers to tighten their belts. Recovery takes longer than downturn (Libey, 2004). During the recovery, consumers strive to become better educated about the products they purchase. Advertising, using every popular medium, to a target audience in the only way a business can stand out on the very crowded playing field with their competitors. In modern advertising, every marketing dollar counts. A savvy marketer will use several techniques, such as predictive modeling, to select a target audience for a specific product or service. The marketing message, advertisement, and call to action will be written specifically for the target audience. Identifying a target market and creating an advertising campaign with relevant content and a compelling message positions a marketing manager for the highest likelihood for success.

The advertising industry has been redefined several times. The types of advertising agencies within the industry have grown. While there have always been local, regional, and international specialists within the industry, niche or creative boutique type agencies are beginning to become prevalent. Many companies are using in-house departments for concept, design, and creative while relying on traditional agencies for media placement. The purpose and definition of advertising has remained consistent across each ring of growth.

References

Arens, W., Schaefer, D., & Weigold, M. (2009). Essentials of contemporary advertising. McGraw-Hill Irwin. Boston.

Hopkins, D. (2009). Riches in niches: Connecting to true browns. Retrieved February 8, 2010, from http://www.targetmarketingmag.com/article/riches-niches- connecting-true-browns-403940/1

Libey, D. (2004). Signs of real economic recovery. Retrieved February 6, 2010, from http://www.targetmarketingmag.com/article/signs-real-economic-recovery- 28914/1

Advertising Media: More Choices Than Ever

09 Tuesday Mar 2010

Posted by in Marketing Technologies

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Advertising media are the delivery mechanisms, or media vehicles, for all non-personal communication. Advertising media includes television, radio, print, and digital media. Each medium has several strengths and weaknesses. It is important to understand the different applications of each medium and the relationship of each communication channel to the target audience. Successful advertising is dependent on delivering a message to the target audience through the most effective advertising medium.

Advertising in the United States precedes the Declaration of Independence by three score and a decade. Advertising Age published a timeline (2005) revealing the past 295 years of advertising in America. The first newspaper advertisement appeared in a Boston Newspaper and was published in 1704. It was composed as a simple classified advertisement to sell an estate in Long Island (Advertising Age, 2005). Throughout the same century, articles and news stories gave way to advertising.

In 1843, Volney Palmer opened the first advertising agency (Holland, 1974). The agency, originating in Philadelphia, could only draw upon print media as a communication channel for their advertising campaigns. The first American-based advertising agency was formed eighty years before advertisers acknowledged the radio as a media vehicle, and over a century before television was invented.

At the turn of the twentieth century, newspaper and magazine advertisements were responsible for the lion’s share of revenue from print media advertising. In 1900, receipts from newspaper and magazine advertising topped 150 million dollars (Sherman, 1900). Advertising agencies found creative ways to position advertising for not only competing with other advertisements, but also vying for time against the articles. Compelling headlines atop an article were no match for a catch phrase and illustration in an advertisement. In his early twentieth century article, Sherman (1900) acknowledged that advertising had become a reader’s priority (p. 3). Individuals were actually reading the advertisements in a publication before they would read the articles.

A few decades into the twentieth century, the radio was beginning to be recognized as a viable alternative to print media. At the very least, radio could be used in conjunction with print media for enforcing a brand. The additional communication channel offered options to advertising agencies never before considered. The concept of cross-media advertising was born.

When television was invented, advertisers were already accustomed to creating advertising messages for electronic media. While it should have been a simple transition, developing marketing campaigns for television introduced several new challenges to advertisers.  The influence of both print and radio advertising is evident in early television advertising. Postwar television advertisements seemed to be nothing more than a spokesperson reading a script, but with the simple visual element of a printed sign or poster resting on an easel.

James Schwoch (1990) attributes the slow transition to the fact that radio performers were tasked with promoting a product on the new medium (p. 55). They were not accustomed to facing a camera while being illuminated by excessive lighting all the while surrounded by large production crews. As a result, television advertisements were nothing more than radio ads with the addition of a moving picture.

In much the same way as electronic media gained the advertising spotlight over print media, digital media has become the communication channel of the twenty-first century. Advertising agencies are only beginning to understand the extensiveness of digital media. Just over forty years ago, the Internet was discovered. The Internet of today in no way resembles the humble beginnings of four decades ago, but rather a powerful communication channel with the combined benefits of both print and electronic media to advertisers. With a plethora of options for delivering an advertising message, media planners are tasked with choosing the media best suited for the advertising campaign.

Depending on geography, a consumer may be exposed to several thousand commercial messages per day (Arens, Schaefer, & Weigold, 2009). Each message is competing for attention, and ultimately to raise awareness about a particular product or service. Every advertiser has the same advantages and disadvantages with advertising media. While advertising is a very crowded playing field, savvy media planners who understand the strengths and weaknesses of each advertising medium level the field. Technology has contributed to the expansion of advertising media from traditional print, through broadcast channels, and into the digital world. Early adopters of new media usually enjoy the benefits of a less crowded playing field, but at the risk of not reaching a broad enough audience. Riding the coattails of technology is a risky proposition usually reserved for the advertisers with products and services attractive to a digital audience. Companies are perceived as trendy or leading edge when using the latest technologies to host and deliver advertising messages.

With several advertising media options, a media planner is tasked with identifying the medium best suited for the campaign. Reach and frequency are considered for each media alternative—weighed against the strengths and weaknesses of each medium—and if deemed a proper fit, added to the media mix for an advertising campaign. The four top-level media alternatives include television, radio, print, and digital. Within each medium are contained specific ingredients of the media mix.

Print media encompasses any message that is produced on printed surfaces (Arens, Schaefer, & Weigold, 2009). Print media includes—but not limited to—newspapers, magazines, billboards, posters, and brochures. Print media is the oldest form of advertising communication. While evidence of print media used in advertising can be traced back to 3000 B.C., developments during the preindustrial age are responsible for the birth of print media in modern advertising.

Magazine advertising is a member of the print media mix. Magazines have been established as one of the best methods for communicating an advertising message to a select audience—second only to direct mail. The articles and editorial within a magazine are written with a particular audience in mind. As a result, any advertising within the magazine will be exposed to the same target audience. Additionally, magazines offer a longer shelf life than many other advertising media.

Magazine advertising, compared to other print media, requires a longer lead-time and advanced planning by advertisers. The frequency at which a magazine is published results in limited exposure and latency between campaigns. As digital media is becoming the preferred publication platform for both publishers and subscribers, hard-copy magazine circulations are declining. One ongoing debate surrounding magazine advertising revolves around the question of whether or not a consumer is willing to pay for access to extra advertising (Depken and Wilson, 2004).

Newspapers attract advertisers that are looking for more frequency and a concentrated reach. George and Waldfogel (2003) explain the importance of advertising in newspapers to consumers that share a similar preference (p. 765). Consumers will sometimes discuss an advertisement with other consumers. The cost of advertising in a newspaper is substantially less than advertising in a magazine. A daily newspaper offers advertisers the ability to reach a local or regional audience quickly and often. Newspaper advertising is not limited to printing within the pages of the actual newspaper, but extends into inserts and supplements using the physical newspaper as a carrier of externally printed content.

Newspaper advertising is idea for advertisers attempting to reach a mass medium. Newspapers are one of the few print media that a consumer may interact. It is not uncommon for a reader to highlight or circle classified advertising and clip coupons from an advertisement in a newspaper. Advertising in a newspaper is less competitive than in a magazine. One reason is because of market relevancy. In a publication such as a magazine, the reader demographic is narrowed to an audience interested in the variety of content contained therein. Every advertiser in a magazine is competing in the same market.

As with any advertising media, there are several shortcomings associated with newspaper advertising. Newspapers are printed on paper not suited for reproducing high quality images and graphics. Inconsistent and inaccurate color is a concern for an advertiser tasked with branding a corporate logo and imagery. A newspaper is responsible for delivering news and information to a local or regional area. Advertising, while an important revenue stream, takes a backseat to articles and editorial. Newspaper ads are typically placed at the discretion of the newspaper editor.

Television and radio are referred to as electronic media. Electronic media offers capabilities not available in print media. By using either television or radio as the media vehicle, advertisers can give their campaigns a voice. In the case of television, advertisements leverage the benefits of full motion and rich audio. Both television and radio have the potential to reach a large audience with an advertising message blurring the lines between informational and entertaining.

Arens, Schaefer, & Weigold (2009) polled adult viewers before concluding that television can stake claim to the most authoritative, influential, persuasive, and exciting of all advertising media (p. 328). The same survey reveals that radio is positioned well below newspapers and magazines in the authoritative and persuasive categories.  Television offers advertisers more options for the creative team to design and distribute an advertising message. Sight, sound, and motion are used in tandem to breath life into an advertising message. Prior to the Internet, television was the only medium that could reach a target audience and touch several senses concurrently.

Broadcast television advertisers can draw upon several advantages electronic media has over other forms of advertising. The mass coverage offered by broadcast television attracts national advertisers. The broadcast television medium has a low cost for exposure. Advertisers weigh the advantages—such as the ability to isolate a market segment by choosing the programming within which the advertising will air—against the various disadvantages associated with broadcast television.

Some disadvantages are not unique to broadcast television, or even electronic media in general. Ad skipping, bypass, or opt-out technology is prevalent in almost every advertising media. A newspaper advertisement can be easily overlooked as a reader chooses to concentrate only on editorial. Radio advertising is bypassed simply by station surfing during commercials. Digital media, the newest member of the media mix, is not immune to ad skipping techniques. An Internet user is in complete control of the browsing experience. They can easily click and move away from the advertising content. Broadcast email leverages automatic filters to trap unsolicited email messages.

Cable television advertising boasts a few advantages over broadcast television advertising. Considering the programming on cable television is more specialized, advertisers can compose a more relevant message and select a more specific target audience. Cable television advertising is also less expensive than broadcast television advertising.

One distinct disadvantage of advertising on cable television is fragmentation. The selection of channels and variety of programming on cable television reduces the audience saturation for each station. The quality of cable television, especially the smaller local stations, is a factor a media planner may consider when developing a strategy.

Satellite broadcast television is competing heavily with cable television for market share. Consumers are not concerned with which option offers less commercials, but rather more channels. When the competitive dust settles, the consumer is mostly concerned with price and value. The average household spends less than one-half of one percent of their budget on television services (Goolsbee and Petrin, 2004, p. 365). Revenue generated from advertising funds television programming.

Radio advertising shares many of the same benefits of television advertising. One difference is the fact that radio is considered a one-on-one medium. An advertiser can format a message and leverage the predictability of a listener. Radio stations concentrate on a specific genre, which in turn attracts a particular market. Satellite radio is a threat to traditional radio. Unlike television, satellite radio is a subscription service with many stations commercial free.

Cost and audience are the two main advantages of radio advertising. Radio stations typically have loyal listener base and the cost to reach the audience is less than television advertising. Considering that radio is only heard, advertisers are challenged with describing a product without the benefit of a visual element. Radio advertisements tend to sound similar, especially if the disk jockeys are the spokespersons on several advertisements.

The Internet has exposed several new concepts to advertisers. Unlike the other advertising media, the Internet requires a consumer to pull or request information. Whether through a link on a popular search engine or typing directly into the address bar of a browser, a consumer invokes a request. In marketing terms, the consumer skips several stages of the purchasing cycled and quickly becomes a prospect or hand-raiser.

The Internet is a fresh new venue for advertisers. The same rules that a media planner would apply to other advertising media hold true for digital advertising. The demographic of Internet user is very broad. A single advertising strategy for each campaign is not practical. Individual web sites have a specific target audience. Advertisers select web sites that attract a target audience within their market, and then purchase space for listings, banner ads, and hyperlinks.

E-Mail advertising is one of the most popular and least expensive forms of advertising. Irresponsible advertisers with a blithe disregard to the long-term effect of oversaturation have created undue challenges for future advertisers hoping to leverage this medium. There are several ways for advertisers to differentiate themselves from solicitors and make it past junk mail filters. Using a CAN-SPAM compliant email service is a must.

Internet advertising is interactive. Individuals can interact with content and provide real-time feedback. The Internet is global. Consumers are using the Internet to become better informed about products and services. Many consumers research a product on-line and compare pricing before making a purchase (Brown and Goolsbee, 2002). The disadvantage of Internet advertising includes the cost to reach a target audience. Search engines use a pay-per-click model and advertisers bid for positioning on the search term results page.

Several mainstream insurance companies advertise across all advertising media. Each campaign is targeted to a specific demographic and delivered using the communication channel most widely accepted by their market. While each advertising media is used concurrently during an advertising campaign, the specific strengths of each medium are leveraged. Brown and Goolsbee (2002) recognize that the Internet fosters price differentiation within the insurance industry (p. 482). Moreover, insurance companies actually encourage consumers to shop pricing of their competitors.

Insurance companies use print media and electronic media to enforce their brand and drive traffic to their web site. The corporate web site is positioned to be their best salesperson on their best day. The Internet has become a virtual extension to many businesses. In addition to a traditional storefront, many insurance companies created a click-and-mortar environment to reach beyond physical boundaries.

Doraszelski and Markovich (2007) report that more than $280 billion was spent on advertising in 2006 (p. 557). The ability of advertisers to recognize the advantages of one advertising medium over another creates measurable results and a guaranteed profit for agencies and the companies they represent. Digital media is currently enjoying the spotlight from advertisers. However, the traditional tried-and-true media vehicles remain a plausible option. Individually, each media is a powerful communication channel. Combined, as in a cross-media campaign, they become exponentially more effective.

References

Advertising Age. (2005). The advertising age timeline. Retrieved March 6, 2010, from http://adage.com/century/timeline/index.html

Arens, W., Schaefer, D., & Weigold, M. (2009). Essentials of contemporary advertising. McGraw-Hill Irwin. Boston.

Brown, J., Goolsbee, A. (2002). Does the Internet make markets more competitive?  [Electronic version]. The Journal of Political Economy, 110(3), 481-507. Retrieved             March 8, 2010, from JSTOR: http://www.jstor.org/stable/3078438

Depken, C., Wilson, D. (2004). Is advertising good or bad? Evidence from U.S. magazine subscriptions. [Electronic version]. The Journal of Business. 77(2) S61-S80 Retrieved  March 3, 2010, from JSTOR: http://www.jstor.org/stable/3663733

Doraszelski, U., Markovich, S. (2007). Advertising dynamics and competitive advantage. [Electronic version]. The RAND Journal of Economics, 38(3), 557-592. Retrieved March 4, 2010, from JSTOR: http://www.jstor.org/stable/25046325

George, L., Waldfogel, J. (2003). Who affects whom in daily newspaper markets? [Electronic version]. The Journal of Political Economy, 111(4), 765-784. Retrieved March 2, 2010, from JSTOR: http://www.jstor.org/pss/3555158

Goolsbee, A., Petrin, A. (2004). The consumer gains from direct broadcast satellites and the competition with cable television. [Electronic version]. Econometrica, 72(2), 351-381. Retrieved March 8, 2010, from JSTOR: http://www.jstor.org/stable/3598906

Holland, D. (1974). Volney B. Palmer: The nation’s first advertising agency man. [Electronic version]. The Pennsylvania Magazine of History and Biography, 98(3), 353-381.             Retrieved March 4, 2010, from JSTOR: http://www.jstor.org/stable/20090872

Schwoch, J. (1990). Selling the sight/site of sound: Broadcast advertising and the transition  from radio to television. [Electronic version]. Cinema Journal, 30(1), 55-66. Retrieved March 8, 2010, from JSTOR: http://www.jstor.org/stable/1224850

Sherman, S. (1900). Advertising in the United States. [Electronic version]. Publications of the American Statistical Association, 7(52), 1-44. Retrieved March 7, 2010, from JSTOR: http://www.jstor.org/stable/2276425

SEO: More Than a Catch Phrase

10 Tuesday Nov 2009

Posted by in Internet Marketing

≈ 2 Comments

Recently, I have witnessed many new self-proclaimed Internet marketing gurus flooding the scene with a plethora of catch phrases and their own recipe for the secret sauce of success. Each time a new article is published or a book is released, my inbox is flooded with overzealous Internet consultants armed with the confidence fueled by their newfound knowledge.While I would never discount the knowledge that can be gained from someone with hands-on real-world experience, I am flustered by those that sell their ideas based on nothing more than theory. I say, “Show me a portfolio of more than one site, then your ideas may have merit… otherwise don’t waste my time.”

The thing that slips their mind is that all of the articles are public domain, and anyone in the business is actively seeking new ways to increase the exposure and marketing performance of their website(s). For those not afraid to do a little research, every search engine has extensive documentation, hints, tricks, and examples on techniques to optimize your website.

Google has done an outstanding job of writing documentation on how their system crawls and indexes a website. You can view the Google Basics site at http://www.google.com/support/webmasters/bin/answer.py?answer=70897.

As with Google, Yahoo offers detailed guidance for submitting your site for indexing within search engines. The instructions for submitting your site to Yahoo can be viewed at http://help.yahoo.com/l/us/yahoo/search/indexing/indexing-06.html;_ylt=Av3OleH86oCfgTXvyRcje4ZYqCN4.

Take control of your own Internet marketing efforts. Whether you create and maintain “description” and “keyword” meta tags or you hire a consultant to do your bidding, the results are the same. The search engines are not able to distinguish between text entered by you or someone else.

The “real” secret as with any marketing effort–Internet or otherwise–is to make sure the content is relevant. Moreover, the keywords and description meta tags need to contain words and phrases that best represent your site.

Of course, to remain one step ahead of your Internet competition, leverage other forms of marketing to drive traffic to your site.

Does it make a sound?

09 Monday Nov 2009

Posted by in Marketing Philosophy

≈ 1 Comment

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We have all heard the basic philosophical question, “If a tree falls in a forest and no one is there to hear it, does it make a sound?” Similarly, there is a question posed to marketers, “If a campaign is created and deployed and the product is not relevant to the audience, will there be a response?”

The marketing philosophy question is much easier to answer. Never expect a response from an audience not properly identified as having a propensity to respond. Direct marketing is no place for the faint-hearted. Leave the scatter gun approach to marketing for the corporate branding saturation marketing teams.

Spend time researching and understanding ways to communicate with your target audience. Ask yourself, “Who are my potential customers?” Every market segment has their own preferred method of communication. Not only do we marketers need to use the appropriate conduits when communicating, the content within the communication should be relevant.

Do I need to market?

08 Sunday Nov 2009

Posted by in Marketing Philosophy

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There is a question that resonates, especially during financially challenging times, regarding the importance of marketing. Many people ask, “do I really need to market to my existing customers?” Remembering, of course, that if you are not in constant communication with your customers–someone else will be. My response to the question of maintaining a strong retention-based marketing program is this…

You only need to market to the customers you want to keep!

Retention programs are more important now than ever before. It is your existing customers that will carry you through the economic challenges.