marketing
300
discussion section
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Announcements?
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agenda
 Evaluations
 Exam
 Quiz
 Promotions
 Skimming and Penetration Pricing
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Evaluations
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About the exam…
 Some, um, minor changes.
 More questions
 What’s on the exam
 Most of exam is not cumulative
 Questions on targeting, segmenting, positions, life cycles are
fair game
 Attend lecture!
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Quiz
Trade shows are a sales promotion device
usually aimed at promoting products or
services to:
a) Final consumers.
b) Business/industrial customers.
c) A firm's own employees.
d) All of the above.
e) None of the above.
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Quiz
In total, advertising costs less than sales
promotion.
a)True
b)False
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What would you do?
If you were presented with the following
situations, how would you, as a manager,
respond?
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Razor Blades
Improved razor blade that customers
aren’t motivated to buy
• Who is your target, and what is your goal?
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Razor Blades
• Why might people be uninterested?
– People don’t know that it’s improved
– Improvement isn’t really an improvement
that anyone cares about (improvement does
not offer a benefit)
– Improved product is still inferior to
another product
• What might make someone interested?
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Razor Blades
• Coupons
• Sampling
• Aisle displays explaining benefits
• More market research?
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Shaving Cream Snack Food
A grocery chain doesn’t think there’s demand
for your new edible shaving cream and so
won’t stock it
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Shaving Cream Snack Food
• What is the problem, and what is your goal?
• Who do you direct your efforts towards?
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Shaving Cream Snack Food
Store (push strategy):
• Free product for each case sold
(effectively a discount that might get
passed on to end user)
• Pay stocking allowance (slotting fee)
• Help set up sampling area in stores
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Shaving Cream Snack Food
End User (pull strategy):
• Advertising in various media
• Couponing
• Samples in mail (if possible)
YUM.
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Shaving Cream
A competitor (not you!) wants to test
market a new type of shaving cream, and
wants to track sales to fine-tune its
marketing mix.
• In this situation, what are your firm’s goals, and
who is your target?
• How might you achieve those goals through
promotion?
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Shaving Cream
• Special deals that cause consumers to stockpile your stuff (ex.
buy 1 get 2 free)
• Big display to draw attention towards your product (need
retailer’s assistance for this!)
• Others?
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Thinking harder…
• When competitor tries to enter the market, is your goal
• …to maintain your market share by offering clear benefits
• …or to disrupt competitor’s entry through “dirty tricks?”
• …or “anything it takes?”
• What are ethical dimensions of this?
• What about the ethics from a consumer’s perspective?`
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Some Might Say…
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What happens when you run out of ideas
1901
1998
1971
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What happens when you run out of ideas
2003
2008
2006
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the bleeding edge
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Pricing Strategies
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• January 2007: $599
• March 2007: $399
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Oops
“I have received hundreds of
emails from iPhone customers
who are upset about Apple
dropping the price of iPhone
by $200 two months after it
went on sale… We have
decided to offer every iPhone
customer a $100 store
credit…” – Steve Jobs
EPIC FAIL
…OR IS IT?
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Skimming
• What is “skimming”?
– Selling high to first adopters
– “Skimming the cream”
• What kind of situation might this be good for?
– Small number of people willing to pay a lot
– Few substitutes
– If you don’t know shape of demand curve
• What is the objective of skimming?
– Profit-maximization
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Skimming
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Skimming
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Skimming
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Skimming
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Skimming
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Skimming
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Skimming
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Skimming
•Other examples?
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Penetration Pricing
• What is “penetration pricing”?
– Selling cheap to whole market
•What kind of situation might this be good for?
– Large potential market / high potential sales volume
– Large potential competitor base
– Need economies of scale
• What is the objective?
– Expansion of market share
– Possibly profit-maximization
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Penetration Pricing
Apple Newton
March 1993: $1000
“discontinued”
PalmPilot
March 1996: $250
1,000,000+ sold
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Penetration Pricing
•Other examples?
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Discussion Question
What technique would you use for each of the
following, and why?
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Skimming or Penetration?
A new-fangled jet-powered unicycle?
• Skimming is ideal
– A new technology that no one else
offers
– Small group of people will likely
want to be first ones to get it (first
adopters)
– Price competition likely to follow
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Skimming or Penetration?
Mysterious soft drink that causes all skin
problems to vanish
• Skimming
– A few people will really want this
– Cost-benefit will make it worth it to buy
even if expensive
• Penetration
– Large potential market
– More people will buy if perceived as good
value
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Skimming or Penetration?
DVD of very popular, critically acclaimed movie
• Skimming
– A few fans will want it more than general
public
• Penetration
– Skimming approach might be risky
– High level of competition already
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Skimming or Penetration?
A new piece of musical gear
• Skimming
– If device does something completely
new or unusual
– If there’s a market of “gearheads”
who always rush out and get the latest
gizmos
• Penetration
– If there are many competitors whose
products do similar things
– If you can use as a tool to build
dependence on other product
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Skimming or Penetration?
A new children’s toy
• Skimming
– If toy is very unique
– If having “popular brand” is
important for kids
• Penetration
– If many competitors
– If toy is not unique or brand is not
important
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have a good weekend
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