Tag Archives: retail

Tesla Shifts Retail Strategy, Then Shifts Again

Tesla, Tesla, Tesla… It’s so much fun to track this company. Not only are the products innovative and exciting to follow, it is also a marketing case study in nearly constant motion.

Case in point: At the end of February the company announced it would be closing its retail stores in order to cut costs and lower the pricing of the Model 3 to make it more affordable (at a starting price of $35,000). Tesla believes that car buyers will increasingly rely on on-line ordering instead of physical stores. Tesla stated that in North America, a customer can buy a Tesla on their phone in approximately a minute. Which begs the question, just because customers can do this, will they do it?

However, two weeks later, Tesla reversed its strategy and stated it would instead keep most of its 378 retail stores and would instead raise prices of cars by 3%, excluding the Model 3 cars. Tesla hoped to cut costs by closing stores, but landlords, customers, car dealers, and lawmakers protested the closings. The stores will still function as a showroom and location for test-drives, but sales will still be done online.

Where do you want to stop for your next car?

Group Activities and Discussion Questions:

  1. Discuss the distribution model used by Tesla and compare it to the distribution model used by other automotive manufacturers.
  2. Here is an interesting video on why Tesla cars cost so much: https://www.wsj.com/video/the-secret-to-why-a-tesla-costs-so-much-hint-batteries/65F3A21D-0837-4DA6-B739-612124815603.html (Hint – it’s the batteries.)
  3. Poll students: How many would buy a car online instead of at a dealer/store?
  4. What are advantages and disadvantages of buying cars online only?
  5. Why has Tesla disrupted the traditional automotive sales model?
  6. Will other automotive companies follow the Tesla model?

Source: Wall Street Journal, New York Times, Assoc. Press, other news sources

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Why are Prices Going Up?

Pricing is a very strategic part of marketing and planning. And, yes, price is also one of the four P’s and is usually referred to as a tactic. However, when an organization is setting strategic objectives, the price level is a critical factor that may be adjusted to help a company meet its objectives. However, raising prices can be difficult as consumers tend to balk at paying more for a product or service that they have had for years. Among companies raising prices are two affecting many college students: Netflix and Whole Foods.

In January, Netflix raised prices for its subscription plans by 18% to $13/month. The increase is intended to help Netflix cover increasing costs for original content and streaming services. Some of its highly-rated content includes “Bird Box,” “Stranger Things,” and “The Crown.” According to Netflix, it has 10% of all U.S. TV screen time, or a billion hours each day.

In February, Whole Foods raised prices on hundreds of its products in order to cover increasing costs of inflation, including transportation, ingredients, and more. The price increases range from a few cents to several dollars, depending on the product and manufacturer.

Is it worth the price?

Group Activities and Discussion Questions:

  1. Question students: Why are Netflix and Whole Foods raising prices? How does the price increase fit into the company’s strategy? What environmental factors should be considered?
  2. Show a video about Netflix price increase: https://mashable.com/video/netflix-raises-prices/?jwsource=cl#tzDtP.YOImq1
  3. Discuss the six steps for pricing (determining objectives, estimating demand, determining cost/profit relationships, select price level, set list price, and make adjustments).
  4. Discuss the various pricing models in class: demand-oriented, cost-oriented, profit-oriented, and competition-oriented.
  5. Divide students into groups and have each group work on any/all of the six steps.
  6. When setting the price level, assign each team a different model to use (demand-oriented, cost- oriented, etc.).

Source: Ad Week, Wall Street Journal, other news sources

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A&W Canada: No more plastic straws

Look at the photo above. What do you notice about? Yes, it states that “Change is good.” That’s a good thing of course. But, notice what the entire sculpture is made out of – plastic straws! These are the last of A&W Canada’s stock of plastic straws. The Canadian chain has been moving to paper straws over the last few months, and to celebrate the transition, it used its last 140,000 plastic straws to make the 35-foot sculpture.

Last summer, A&W Food Services of Canada promised to reduce landfill by eliminating the plastic straws. It was the first quick-service restaurant chain in North America to make such a bold promise to improve the environment.  The company estimates that the change will keep 82 million plastic straws from littering the oceans and land.

The ban on the plastic straws is one part of the company’s environmental initiatives which include food sources, packaging, energy, water usage, and waste.

Indeed, change IS good.

Group Activities and Discussion Questions:

  1. Discuss the impact of environmental concerns on companies.
  2. What are companies doing about these concerns?
  3. View A&W Canada’s Web site values section: https://web.aw.ca/en/our-values
  4. What does this move do for the company’s brand?
  5. Divide students into teams. Have each team research the environmental values of a competing fast-food restaurants (e.g., McDonalds’, Wendy’s, etc.)
  6. How does A&W’s commitment impact its positioning in the marketplace?

Source:  Griner, D. (11 January, 2019). A&W Canada used the last of its plastic straws to make a sculpture announcing the change. AdWeek.

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