Tag Archives: brand management

Amazon Raises Price for Prime Membership

Pricing is a very strategic part of marketing. And, yes, we know that price is one of the four P’s and is usually referred to as a tactic. However, when an organization is setting strategic objectives, price is a critical factor to meeting the objectives. However, it is relatively rare for companies to increase prices. Consumers tend to balk at paying more for a product or service that they have had for years. Except it appears, when the company is Amazon, then customers go along with the increase.

Beginning in May, new subscribers to Amazon Prime will pay $119 per year for shipping and entertainment membership programs; existing subscribers will pay the new fee when renewing after mid-June. This is an increase of $20 per year (20%), but it is only the second time that the company has raised the price for Prime. In 2014, Prime cost subscribers $99 per year, and in 2005 when it launched, the price was $79 per year. (What may be more surprising about the move though is that the company announced that is has more than 100 million Prime members worldwide. Amazon had never previously reported the level of members.)

Why the price increase? Prime is expensive for Amazon to fund. Since 2014, the number of products available for free two-day shipping has increased from 20 million to more than 100 million. The company has a significant investment in its logistics network and costs of shipping continue to rise. In addition, Amazon has spent lavishly to acquire, and create, an extensive library of movies and TV shows that are included in the benefits of Prime memberships. Prime delivers value to subscribers beyond the two-day free shipping option.

Is Prime still worth the price?

Group Activities and Discussion Questions:

  1. Pricing is a complex topic. Discuss the six steps for pricing (determining objectives, estimating demand, determining cost/profit relationships, select price level, set list price, and make adjustments).
  2. Discuss the various pricing models in class: demand-oriented, cost-oriented, profit-oriented, and competition-oriented.
  3. For Amazon Prime, divide students into groups and have each group work on any/all of the six steps.
  4. When setting the price level, assign each team a different model to use (demand-oriented, cost- oriented, etc.).
  5. Debrief the exercise. Compare the various pricing models and discuss advantages/disadvantages of each.

Source: CNN Money, Recode, Washington Post, other news sources

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Diversity: Brands Embrace Hijabs

Macy’s recently made history (or is it herstory?) as the first U.S. department store to sell hijabs for Muslim women. Fashion designer Lisa Vogl developed the modest active wear line for the store. The Verona Collection includes a selection of ready-to-wear items including tops, dresses, pants, cardigans, and hijabs in a variety of fabrics and colors. Items are priced between $12.95 and $84.95.

And, Macy’s is not the only company to carry modest clothing for Muslim women; designer Hana Tajima has several collections carried by international brand Uniqlo. Fashion brand Dolce & Gabbana has also debuted hijabs on the runway.

Nike has also gotten in the game. The company designed and sells a performance hijab for Muslim female athletes. American Olympian fencer Ibtihaj Muhammad made history by wearing a hijab at the 2016 Rio Olympics. The Nike Pro Hijab will be available soon and is priced at $35.00.

And, let’s not forget Mattel, a classic American brand that now has its first hijab-clad Barbie doll. It also honors Olympian Ibtihaj Muhammad. The doll is part of Barbie’s “Shero” line of toys that celebrate women breaking boundaries in sports and science. Also in the Shero line are athletes including Gabby Douglas and Chloe Kim, pioneers Amelia Earhart and Katherine Johnson, and artist Frida Kahlo.

It’s time for inclusivity.

Group Activities and Discussion Questions:

  1. Poll students: Are there market segments that are marginalized? How can these segments be included by brands to expand their reach and encourage diversity?
  2. Video of Macy’s: https://youtu.be/aWVB_bi8RQ0
  3. Video of Nike ad: https://youtu.be/T1Qyg8l-l8U
  4. Nike Pro Hijab Web site: https://www.nike.com/us/en_us/c/women/nike-pro-hijab
  5. Video Uniqlo: https://youtu.be/5xbLFJulZNo
  6. Mattel Sheroes Web site: https://barbie.mattel.com/en-us/about/role-models.html
  7. What other market segments could be represented with new lines of products?
  8. Divide students into teams and have each team develop a product for a different market segment.

Source:  Brandchannel.com. (7 February, 2018). Diversity watch: Brands making strides, slowly, on hijabs.

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Where’s the Chicken?

In what might arguably be one of the most ironic situations faced by a restaurant, KFC ran out of chicken and had to close more than half of its 900 restaurants in the UK. Yes, you read that right – Kentucky Fried Chicken ran out of chicken (which I guess makes it KF instead of KFC).

The supply chain issue that closed the 562 outlets was blamed on switching KFC’s delivery contract from South African-owned distribution group Bidvest Logistics to DHL. DHL blamed “operational issues” for the snafu. Some of the outlets were able to remain open, but with a limited menu.

Indeed, one can understand that it is a complex task to get fresh chicken to 900 restaurants across the country. According to news reports, the GMB union warned KFC that switching suppliers was a mistake. It certainly appears that they were right.

(Update: As of Feb. 28, 97% of KFC stores were open, but according to Reuters the company is now reporting facing another shortage… this time it’s gravy!)

Group Activities and Discussion Questions:

  1. In order to be successful, companies must be able to physically get a product into the hands of the customers. Discuss how a distribution channel works.
  2. Show the video of the KFC issue: https://youtu.be/jM53cQJACCg
  3. For KFC, what distribution channels are used now?
  4. How can the channel be expanded? What approach could be used?
  5. Divide students into teams. Have each team draw a flow chart for the distribution of the product.

Source:   BBC (19 February, 2018). Chicken chaos as KFC closes outlets.

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