Monthly Archives: January 2012

Small product changes, but a big strategy shift for Apple’s new iPhone 4S

 

Apple announced its new iPhone 4S on Oct. 4 and many industry watchers expressed disappointment that it was not the much–anticipated iPhone 5. These people are missing a critical marketing point: Great marketing does not require every product to consist solely of “knock-it-out-of-the-park” innovation. Great marketing also uses more modest product changes to build a company’s advantage, especially when it provides opportunities to tap into a new market segment. In the iPhone 4S, Apple now has a broader product offering, with pricing and partnering variations that allow them to access a new market segment.

Think about it. Smart phones are a still a fast-growing, critical market, but not every consumer has $300+ to spend on a phone. Many consumers do not have the cash, and may want to buy a lower-cost phone. Apple now has a product for that segment. With a two-year contract for services, customers can get the iPhone 3GS for free! Or, they can buy the iPhone 4 for only $99! Suddenly, the iPhone is an alternative to price-conscious consumers, and it gives Apple access to a new segment.

And, as all good marketers know, once you gain a customer’s loyalty, they are more than likely to stay with the company over time, eventually moving to that newer, higher-priced model.

Group Activities and Discussion Questions:

  1. Show any video which details the new iPhone 4S. (There are videos available on several Web sites, including Apple.com, brandchannel.com, and wallstreetjournal.com.)
  2. Market segmentation exercise – Divide students into groups:
    • Have students identify a different market segment that would be good candidates for the iPhone 3G, iPhone 4G, iPhone 4S.
    • Have students identify competing smart phones for each of those segments.
    • What marketing strategy and tactics can be used for each segment?
  3. Buying behavior exercise – Divide students into groups:
    • Have students build the consumer buying model for purchasing an iPhone: problem recognition, information search, alternative evaluation, post-purchase behavior. Discuss.
    • Similar to consumer purchasing, have the groups next construct the model for organizational buying: they are the buying team for Medtronic and need to purchase a new phone for 1,000 sales professionals. Discuss.
    • What marketing strategy and tactics can be used?

(Sources: Wall Street Journal, Advertising Age, Brandchannel.com, Business Week, New York Times)

 

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Netflix changes strategy to try and regain share

Netflix has been in the news repeatedly for changing their market strategy, and then changing it yet again, back to what it was. First, it was one company, and raised prices, then it split into two units (still with the higher prices), and now they are one again. Confused? You’re not alone. Consumers and investors are still puzzled, and no one seems happy. No one that is except for the comic geniuses at Saturday Night Live– they put together a comedy sketch poking fun at the company which aired in October: http://www.hulu.com/watch/284938/saturday-night-live-netflix-apology

Let’s start with Netflix’s summer announcements: In July, prices were raised from $9.99/month to $15.98/month for unlimited movie streaming and DVD rentals. However, if a customer wanted only DVDs, that price was $7.99/month for one DVD, and $11.99/month for two DVDs. Customers do not like price hikes! According to various news accounts, Netflix lost anywhere from 600,000 to 1,000,000 subscribers in the three-month period following the July announcement.

In September, in an attempt to placate customers, Netflix released a letter from its CEO that (kinda sorta) apologized to subscribers and attempted to explain its actions. This letter announced the company’s plan to split into two different business units: movies online (still named Netflix) and DVDs sent by mail (named Qwikster). Once again, consumers made their displeasure heard by bombarding the message boards with thousands of messages to Netflix; by some accounts, more than 16,000 messages in the first day of the announcement!

Then in October, Netflix announced that is reversing its previous decision to split the business into two separate units and will remain a single business unit. Marketing strategy needs to be flexible, but this might be taking it a step too far.

Now it is a new year and Netflix is on the move once again, adding subscribers and original programming content. They have replaced 600,000 of the 800,000 subscribers they lost last fall, taking their subscriber base to 24.4 million. They have also invested in producing original content with a new series set to debut in February, launching all eight episodes at once. Netflix CEO Reed Hastings says his company’s strategy is to be “additive to cable, not competitive.”

Group Activities and Discussion Questions:

1. Start by having students examine the Netflix Web site. (www.netflix.com )

  • Click on the “how it works” tab for frequently asked questions.
  • In groups, have students examine competing services from cable companies and DVD rental services such as Red Box.
  • Compare prices and service offerings
  • Discussion questions:

i.      How do these companies differentiate from competition?

ii.      Link market needs to actions, and to marketing tactics?

2. Market segmentation exercise – Divide students into groups:

  • Have students identify different market segments that would be interested in either online streaming alone, DVDs alone, or combined services.

i.      Demographics, psychographics, emotions, attitudes, lifestyle, etc.

  •      2. What marketing tactics can be used for each segment?

3. Market strategy – class discussion:

  • Using the market strategy grid (current/new markets, current/new products), discuss the different strategies that Netflix is exploring.
  • How does Netflix compare to cable TV services?

(Sources: Wall Street Journal, Advertising Age, Brandchannel.com, Business Week, New York Times, Hulu)

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Product placements are ready for prime time

If you want to get a customer’s attention, marketers know that there is no substitute for showing a customer how a product really works in the real world. And if you want to show them product on a large scale, then get it placed in a television show or a movie.

Product placement might not be an official one of the famous marketing 4Ps (product, price, promotion, place), but maybe it’s time to add it as a unique fifth P. Companies that are able to get their products shown on the big screen – or even a small screen – bring their products to the attention of millions of viewers, all of whom have opted-in to watching a show or movie.

Case in point – “Modern Family” TV show on ABC turns down 90% of the requests they get for product placements. To this show, the product must be relevant to the characters and the storyline. Episodes use products that are germane to the scene and the story. A good example was having a Toyota Prius driven by an environmentally conscious character. Another example had one technology-loving character using an iPad even before it was commercially available.

Is it worth the cost to marketers? Considering that the average 30-second commercial costs more than $249,000 on Modern Family, several seconds of airplay of the product in use can easily recover the costs.

Group Activities and Discussion Questions:

  1. Ask students to name their three favorite TV shows and/or movies that they recently viewed.
  2. Next, ask them to name at least five products that they can recall seeing in the show. Were those products there by accident?
  3. Show a video clip of one of the TV shows or movies. The clips can easily be found on www.hulu.com, www.youtube.com, and other sites.
  4. Ask students to name the top five brands that appear in movies or TV shows.

5. Divide students into teams.

  • Have each team choose two products they would like to have placed in a TV show.
  • Give these choices to another team and ask the team how they would use the products in the show.

 

Sources: Advertising Age, Brandchannel.com

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