all right so how's everybody doing today
good all right fantabulous yeah
yeah getting experience excellent all
right all right
so
we're going to talk about um
global marketing
this semester
and we're going to talk about how that's
a little bit different from
international business
and also many of you have taken
in fact several of you have also been in
my course on
cultural aspects of international
business
and we're going to talk a little bit
about the
different
trade dynamics
legal dynamics regulatory dynamics and
cultural dynamics we're going to talk
about that a little bit
um throughout the semester but that's
not the focus of the course
but it's important
to ground you that we talk a little bit
about that but the way the course is
organized is to specifically focus
upfront on
the marketing components of
operating
in a global economy
so
first of all
let's just
start at the beginning so to speak
let's talk about
marketing
what are the key activities
involved in marketing
there's five key components
to marketing
this is a bit of a generalization but
just so that we could get our
arms around this and then we're going to
talk about some of the implications in a
global setting
but the first activity in marketing
now mind you each of these activities
have like 30 to 50 sub components
but just to give you an overview
the first activity
is to identify an unmet need
now we could spend a lot of time talking
about how that's done but we're not
going to talk about that right now
so that's the first step is to identify
an unmet need
which is going to involve doing research
and there's
two
types of
research that could be done qualitative
and quantitative research
who could tell me what's the difference
what's the difference between
qualitative
and quantitative research go ahead yeah
right yes quantitative is what you can
do it based off of numbers and
statistics and boil it down into you
know more real figures whereas
qualitative would be more like getting
general feels and something like that
say like forming a focus group and
seeing what kind of ideas pop us as a
result of it
um you've made some good points
first of all one of the things that
daniel did was give us an example of
qualitative research a good example of
qualitative research
is a focus group
a focus group
consists of 10 to 12 people
and there's a moderator or a facilitator
for that discussion
and
there's um
a discussion that takes place about a
particular product
or a particular service for example
to try and understand
what how
we can meet an unmet need
or
to identify what the unmet need is
so that's the first step is to do
qualitative research
a
research plan that involves
two cities
and
four sets
of
focus groups
will cost about 50 000
so that's how much it's going to cost to
do
four sets of focus groups in two cities
so
we want to get somewhat of a
representative sample where possible so
we don't want to just unless there's a
product that was specifically wanting to
sell in new york for example we're not
going to want to do all our focus groups
in new york
so we're going to have to pick
um the cities that are going to be the
most representative of
our target market
and daniel told us last time what
the definition is for target market who
remembers
what is the target market and what is
the target audience what's the
difference
i think i
i recall is saying that
the target market is the people that you
want buying your product then the target
audience is the met the people you want
the message getting to exactly so the
target market is who it is that we want
to buy our product or service
and the target audience
is who we want to reach with our
advertising so do you see the difference
you see why that and very often they're
not the same
the target market is everybody
that we want to buy our product
it doesn't mean every person it just
means
every
man for example
but our target audience
the person that we want to reach with
our advertising or the person that we
want to receive our message
might just be
hispanic men
so you see very often the target
audience is a subset of the target
market
and the reason that's important and
especially
with respect to our discussion of global
marketing is because very often we are
going to have to customize our
advertising campaign
very often our target audience is going
to be
a subset of
our target market
especially when we
already determined that we want to sell
our product or service
in
many markets around the world
because we said that the us is only five
percent of the world population
so why is the u.s so strategic
to many companies why is the u.s market
so strategic why is that significant why
would so many companies spend so much
time money and effort to try and sell
their product in the united states if
that's only five percent of the world's
population
five percent
do you is it am i making this up five
percent or you think it's more
is it fifty percent because it's really
it's only five percent there's
approximately
six billion people in the world
and approximately 300 million of them
live in the united states
now unless i did my calculations wrong
that's only five percent so why do we
always talk
about getting um distribution in the
united states what do you think why is
that so important how wealthy the united
states is compared to other countries we
control majority of the world as well so
absolutely so the per capita income
is
much higher in the united states than it
is in other markets
so if you're going to sell
flat panel
1080pi
high definition
flat panel
plasma monitors
see that's something you have to
rehearse before class right
anybody know what it is i just said
do you guys know what that is
good good
then
you have to find markets where
the people have enough purchasing power
where they have enough disposable income
where they could afford to buy
those high definition flat panel
monitors
which the price i can tell you has come
down quite a bit over the last five
years
which
is an illustration of what type of
pricing strategy
why is it that
really
maybe seven years ago
flat panel monitors they didn't have
high definition available
in the us at that time but
why were those flat panel
42-inch
monitors
that were selling for literally
10 000
selling now for let's say around fifteen
hundred to two thousand dollars
what else and now it costs less to make
some of these tvs ah well this is
interesting tell us why why that is some
of it has to do with the technology used
now than it did 10 years ago but also
the cost of labor
because most of these companies do it
for example in china where they pay they
don't pay their workers anything so also
making the tv is a lot less expensive
than those 10 years
all right well let's let's come back to
that for then
there's something more we need to talk
about that but first let's identify the
pricing strategy
that
allowed us to go from ten thousand
dollars
for a flat panel monitor to
approximately nowadays it's very common
um to get a good flat panel monitor
large screen for about fifteen hundred
to two thousand dollars they even have
some that are less than a thousand
dollars now so
why is that because there's a higher
demand and when there's a higher demand
it will reach a
lower equilibrium
interesting
so we're going to talk about those
factors that are controllable and those
factors that are not controllable
but we need to ask ourselves
is it really an invisible hand
that's at work there
or is it something that us as business
and marketing executives can control so
the marketing mix
remember the marketing mix
the marketing mix is the four ps
one of the marketing mix elements is
price
that's something that business
executives can determine
price product place and promotion
that's the marketing mix but tell me
what is the pricing strategy
well at the time it was probably
prestige pricing because it was it was
something that was
you know it was something new it was it
was something that was high line
and you know they had to put it at you
know somewhere where it was
you know it was the new it was the cool
thing to have
um and we're going to talk about how
that relates to
this model
sometimes it's also referred to as the
adoption curve model
i was also going to suggest that i
forgot what the what what it's actually
called but um there's also a pricing
strategy where you'll start out uh extra
high and then as time goes on you'll say
okay we might need to lower it because
of demand or because of popularity
yes so who could tell us what that is
who said that you
yes
what is your name noah noah noah lasko
yeah all right
so
skimming
so there's a component of prestige
pricing
and there's um certainly very clear
evidence of a skimming pricing strategy
which is basically what you described
you start at a high price
and then in a very deliberate and
planned way
the company
lowers the price over time
so it's not a knee-jerk reaction to
what's happening in the economy or what
competitors are doing
if you have a skimming strategy which is
very popular in
the technology sector
because of this newness factor like you
mentioned
so
new technology is introduced at a high
price
and then you achieve a certain level of
penetration in the marketplace
and then how do we get people to
adopt
how do we get more people to purchase a
product well in elastic markets
we have to lower the price so an elastic
market
is a price sensitive market not all
markets are price sensitive so in a
price sensitive market if you lower the
price
demand
is going to increase that's what viennef
is talking about
in some markets you could lower the
price
and demand won't increase
it's inelastic it's not price sensitive
like what for example what would be a
good example what do you think like
utilities like water or electricity
yeah so what do you think about that if
you lower the price of
water
or electricity
generally you're not going to
start taking more showers
because the price per gallon
of water at your home has gone down
it doesn't mean that there can't be any
change
in demand there might be some change but
when we talk about um a market being
elastic versus inelastic we want to see
a significant change
we're expecting to see a significant
change if the market is truly elastic
just like when we talk about the growth
rate of a category the category grows
two percent three percent per year
you could say that's mature
basically a category that's mature is
experiencing no or little growth
so two percent
is not what we mean when we talk about
growth
when we're talking about growth in a
category we're talking about something
that's meaningful
20 30 40 50
and in some cases more
all right so we talked about skimming as
a pricing strategy
strategy
depends on the competition or just like
the
random the company decides to use a
storage
um it's part of their strategic plan so
as part of the marketing plan of the
organization they're going to determine
that they're going to introduce the
product on january 1st
at 800
and then
on june 1st
they're going to introduce to
reintroduce the product um for a hundred
dollars less
and then three months after that they're
going to reduce the price 10
and 6 months after that they're going to
reduce the price 10 again
so all of that is planned
if you're truly following a skimming
pricing strategy
that's something that the company has
mapped out for
several years in advance
but i want to come back to
to your point about
the
um
the cost
because what's going to happen as we
move through this adoption curve model
as we move through this adoption curve
model
is we're going to achieve economies of
scale i think that's what you were
alluding to is that
as we produce
a greater number of units
in most production environments
the course per unit is going to decline
so after a year or two years or three
years four years we would expect to see
a reduction in the course per unit as we
achieve efficiencies possibly we're
getting component parts for
a smaller amount
that's gonna
enable us to
follow through on our skimming strategy
so it's not um
it's not that we just lower the price
we'd like to think that we're still
going to be profitable
when we lower the price
and we need to go through that analysis
to understand but what happens if we
lower the price 10 percent
our total revenues gonna increase
as a result and is it going to increase
by an amount
greater than the decrease in price
so
all of that because you wanted to talk
about focus groups
right qualitative research then there's
quantitative research
so right now we're still talking about
identifying the unmet need just a little
bit of an overview
quantitative research
quantitative research a good example
would be a survey
survey
through the mail
telephone
internet
all of those are examples of surveys
mall intercept
now the difference um as you pointed out
is that with focus groups basically we
have 10 or 12 people in the room
and we have some
key takeaways
that are very insightful
that are very meaningful to us
but the difference is that with
qualitative research
we can't say
87
said that
blue is their favorite color
because we only spoke to what let's say
about 48 people so about four dozen
people
now the fact that we've identified some
of the favorite colors is very helpful
because what we do is we do qualitative
research first
and that is the basis for our
quantitative research
because when we do the quantitative
research
we're going to focus on testing
the colors for example
or the product attributes
that came out of
the qualitative research
because otherwise how would we know what
to ask on the survey unless we had
qualitative research done beforehand
and that research could either be
primary research or secondary research
primary research is research that
we conduct
secondary research is research that
somebody else has conducted
not necessarily for this right
absolutely so it could be um a research
report prepared by a consultant that
maybe we bought online that's very
common you find a lot of market research
reports online
some of them are actually only about
fifteen hundred dollars
some are more expensive than that
but
remember fifteen hundred dollars
although it might sound like a lot even
five thousand dollars might sound like a
lot but remember to do the four focus
groups
it cost us fifty thousand dollars
now
some companies might be willing to do it
for less
i'm just giving you uh an insight into
um
the typical course for a company to do
focus group research
because
you have to hire a facilitator
you have to rent the space
so there's an entire industry built
around
market research
what makes these facilities unique when
we're doing focus groups
is that
there's
a
mirror
behind the facilitator
where
the client
and other members of the research team
whether it be the product manager or the
marketing director
where they sit and could observe what's
going on
during the focus group
and
the focus group is videotaped
but still
people from the brand management team
and the product development team usually
attend
those focus groups because they want to
hear for themselves
and importantly it's not what i think is
a great idea or what daniel thinks is a
great idea
but what the customer
says is a good idea
so it's what our target market
says
they are willing to purchase
it doesn't matter if i like it or you
like it it's the fact that the target
market says that they like it and the
product is useful to them and that
importantly
they would buy it so we have to when we
do research we need to prove and
understand purchase intent
which is really critical
because that's ultimately an indicator
of our success
so customers vote with their dollar
if they purchase the product
and we generate millions of dollars in
sales
then we have to determine whether or not
we've reached
the hurdle for profitability in our
organization
so it doesn't matter if people in the
sales organization laugh at you i've had
people um laugh at me
because they thought the idea was
ridiculous until walmart placed a 10
million order
then they stopped laughing so
remember it's about
what
customers
think of
the product or service and their
willingness to buy
the product or service
so let's just quickly recap because
right now we just talked about one
marketing activity identifying the unmet
need which we said the way that we do
that
is through market research
we said that there's
qualitative research that can be done
and quantitative research
we do the qualitative research first
and from that
we gather the information needed to
design our survey instrument
to design our questionnaire which is an
example of quantitative research
and when we do
quantitative research
then we have something that
statistically significant
so if we have 48 people and i say 25
said
they would buy
a
wireless phone
that
takes pictures
but
what are we gonna do what are we gonna
do with that that's something that we
could test in quantitative research but
what do i do what do i go back and tell
the vice president of marketing 12
people said they would buy it
so we need to do quantitative research
now quantitative research
we need to get a representative sample
and in order to have something that's
statistically significant
we should try in most markets
so in general in the united states
1500 in most categories 1500 respondents
is considered to be statistically
significant
if it's a representative
random sample
so out of 300 million people
we don't need to ask anybody if we ask
everybody what is that
that's a census
who only the government could afford to
do that we can't ask why are you gonna
ask 300 million people
to find out if they would buy this
laptop
no
we need to have a
representative sample
so we're going to ask men and women
different ages
different ethnicities different
religions god jason you can also do test
marketing
yes
you know just launch it in one place and
see how it pairs there yeah a test
market is is um could be uh very
compelling
quantitative research and daniel raised
a question he said well
how do we get 1500 so 1500 what i'm
sharing with you in my experience
is
a good rule of thumb to get something
that's statistically significant now
1500 to get 1500 respondents
um
for example is part of uh wall intercept
research who knows what we mean when we
talk about moral intercept okay tell us
daniel so it's basically uh surveyors
who wait in the mall and then intercept
people as they go through to ask them a
couple of questions right so
what we need to do though to get a
representative sample
is to be in numerous locations
let's say so for example united states
we need to be in numerous malls
different cities
throughout the country
to be able to get something
um
that's representative now i mentioned
that a few times what does that mean
what does that mean to have a
representative sample
because remember we said we're not doing
a census
we're doing a sample which means that
we're going to
get feedback from a relatively small
percentage
of our target market
so importantly when we do the research
we're not even trying to get a sample of
everybody in the united states only
for example
men
only those people that buy
flowers
or only those people
that buy or eat
yogurt
see so it becomes a little bit
challenging it's not just asking we have
to have some screening questions so
when we approach people one of the
things that we need to find out is for
example
do you eat yogurt
do you buy yogurt
um in some cases we might want to get
some people to respond
to find out
why they don't buy yogurt so even though
they're um they're not a current
customer we still would want to find out
why they don't
eat yogurt that would be of value to us
but
we're going to um
get a sample and somebody was going to
tell us what that means to get a
representative sample
i think well
isn't it to get a sample that represents
the people you're stamping with people
who you'd
yes absolutely you want to add to that
daniel um it's probably a representative
sample is a group of people that you can
statistically infer something with like
a certain degree of
reliance upon to the larger population
that you're aiming to target to at a
hole right so everybody got what daniel
said
we have a general population we're going
to get
we're going to sample that population
so in this case we're going to say that
the population is our target market
those people we want to buy our product
or service is that reasonable
so we define what the population is it's
not just oh we're going to sell the
product in um
in japan for example
but we're going to sell the product in
israel that our population automatically
is everybody in the country no it's
reasonable to say that the population
is
the target market
and then we're going to sample
that population so we're not going to
ask all men and i can ask everybody that
buys flowers we're not going to ask
everybody that eats yogurt
just a percentage of those people
so the people that we ask have got to be
representative
their demographics have got to be
a match
with
the demographics of our target market
so we want to get the typical
let's say consumer of
yogurt in israel
we said we're not going to ask everybody
so we need to ask when we say
representative sample
a proportional number of
men
women
in and different age groups
different income levels
so
to do
moral intercept research if we're going
to do 1500
how much do you think that causes
so
you're actually correct um
to sample
1500 people through moral intercept
research is about 150 000
just to give you a sense of magnitude
doesn't mean that some market research
firm wouldn't do it for 125 000
or 135 000 but it's certainly not five
thousand dollars
so when we talk about identifying the
unmet need what do we talk about we're
doing four groups of focus groups so far
and quantitative research we've already
spent two hundred thousand dollars
so this is
serious
right we're talking about spending a
quarter of a million dollars and usually
we don't just do four sets of focus
groups
we usually do
at least
three
sets of four focus groups because each
round
right each group of four focus groups
we learn something
and then based on that input if we're
testing a particular concept
so before we even have a prototype
what we're gonna um tests right right
now we're talking about identifying an
unmet need
the next step is
to develop a concept
so we're going to have focus groups to
identify the unmet need which could be
that what
that
your wireless
communication device
also known as a cell phone
doesn't have internet access
all right but could you imagine
you know when i was your age we didn't
have cell phones does that blow your
mind no it's unfortunately crazy crazy
it blows it
this was like i'm talking about like
caveman years right this is
your mouth
yeah i did i had a pet dinosaur
isn't that unbelievable
even myself i think back like wow like
my iphone is literally
um
an appendage
so
the uh
the uh there was a time when um
cell phones didn't exist then there was
also a time when you couldn't access the
internet from your cell phone so
identifying that unmet need is something
that we could understand through focus
group research and brainstorming
which
we could do internal and external so we
could do market research internal to the
organization
very often
it's done external to the organization
so
um
it's quite common that we'll tap into
the input from people that work in the
organization
but what we need to be sensitive to
is
two mentalities
one is
the marketing orientation and the other
is the production orientation
the production orientation
suggests that
a company
will try to sell
what it could make
so what we try to do is
sell what we could make that suggests
that we have a certain production
capability and so we're going to try and
make
people buy that product now that's
different from the marketing orientation
so let me contrast those to you the
marketing orientation says
that we will make what we can sell
so you see the difference the marketing
orientation says we will make what we
can sell we're going to find out what it
is that people want and we're going to
develop the production capability and
make that the production orientation
says well
we know how to make
let's say um
what would be a good example
we know how to make um landline phones
so we're just going to keep making them
and we're going to try and convince
people
to buy them
isn't that like a huge gamble
uh
depending on
the industry of course but isn't it a
huge gamble
based on technology and whether or not
people are going to buy or
i agree i don't recommend the production
oriented um approach but
try and try and understand the
perspective of how somebody would get
there why would somebody find themselves
in that position well if you have 50
billion dollars tied up in manufacturing
capability
that could make with like like you're
saying fax machines or something like
that then you're gonna just try and keep
making those
and try to sell them but really
the goal of advertising
is not
to persuade people to buy your product
or service
if we've done our research
if we've identified the unmet need if we
develop the product that's going to meet
those needs really
the goal of advertising is just to make
people aware
that
our product and service now exists
and of course you want to create brand
awareness and a favorable brand attitude
but it's not to try and convince people
that you need this product
we know this already if we did our
research we know what they need
we know what their unmet needs are again
jason that seems to be true for market
orientation if you're talking about
production orientation
i mean the goal just seems to be
creating demand because you don't know
that people want it but you have the
capability to do it so as an advertiser
your goal is to create demand
well
for a production um orientation that's
absolutely right what you're trying to
do is create demand for a product
whether or not it's needed or not
simply
simply because
we have the capability
now that's different about
than if we were to say that
everybody is not um aware
that
they need this product per se
because remember we're always
looking ahead of the curve so it may not
even be a lot of people like for example
with the ipod
what's so impressive about the ipod
is
that apple
didn't create or invent the mp3 player
that's really impressive
they didn't create that product what
they did
was
very effectively brand
the mp3 player
using
the ipod
brand architecture
so what they did is they wrapped the mp3
player
in the ipod brand name
and then make people aware of the
features and benefits of the product
um if what you were saying is true in
regards to it you know if you're doing
marketing right and only then you're not
you have no need to create a need i mean
there's an entire system no not i didn't
say not to create a need of course you
want to create category need whether
it's for milk or orange juice
right josh
um of course you want to create category
need but that's different from saying
you're trying to
persuade people
and even in some cases trying to force
them to buy a product that they don't
need simply
because we have that manufacturing
capability so it's those two elements
together it's not just that you're
trying to persuade i'm not saying that
there's not elements of
um advertising that's persuasive but i'm
saying from the manufacturer's
standpoint that their um
motivation is based on the fact that
they have the production capability
right but there's like an entire subset
of advertising of like you know uh you
can think of a lot of different products
for the advertising itself creates the
need
whereas somebody wouldn't normally think
that oh this is a problem but until they
see the advertisement then they think
like oh that is a problem i do need that
product so i would say that's building
awareness of um of either the product or
the category
right so i'm not saying that we don't
want to certainly um
one of the objectives of advertising can
frequently be
to create category need so now you're
forcing me to explain
the orange juice example so
you ready josh here we go all right so
this is the
this is a good example
like for um
as you're mentioning category need are
you familiar with the got milk campaign
so the purpose of the got milk campaign
is about creating category need
to make people aware of the benefits of
drinking milk
and it doesn't focus on a particular
brand what it does is it focuses on a
product type which is to try and create
demand for milk
not for
the xyz brand of milk or the abc brand
of milk
but
for milk as a category is what daniel is
referring to so often we do have
um advertising that will focus on
creating
category need which is also sometimes
referred to as
primary demand
now one of the things that
the manufacturers of orange juice
realize through their research
is
why it is that people purchase milk
this was very insightful
and something that had a significant
impact on their business strategy
they started to um
research
to understand who
is in their competitive set
they want to know who are their direct
competitors and who are their indirect
competitors
and why
so you might think that their direct
competitors let's say from minute maid
for minute made orange juice one of
their direct competitors is
tropicana
because if people
are in a grocery store
they're going to choose
between
minute maid orange juice
tropicana what are some other brands of
ours
florida's natural simply orange simply
orange
but
they didn't just stop there
they wanted to find out
who were their indirect competitors and
who maybe
are indirect competitors but can be
classified as direct competitors so i
wanted to find out why people drink milk
and they found out
that
people
drink milk because
they want calcium
vitamin d
for example
and so what did that
cause the orange juice companies to do
is to
start promoting
the fact that orange juice
is
high in
potassium high in vitamin c
contains calcium
contains vitamin a
vitamin d
and they realize that
in some cases
milk
was a substitute for orange juice or
depending on whose perspective you could
say
that
orange juice is a substitute for milk
so the gut built campaign
which is um
somewhat unusual why because competitors
are working together
because they're saying you know what
this dairy farmer is
he's not really my competitor
and this dairy farmer is really not my
competitor maybe at some level but why
don't we all put our resources together
and
promote as daniel was suggesting the
category to get people to drink more
milk
overall
because you know who our competitor is
not abc
dairy company or xyz dairy company but
the competitors for milk
is
orange juice
so
this is something that they learned
through their research
which is
very
compelling
because they understood
the motivation
for purchasing the product
so it's not just enough to understand
that people purchase your product but
why
why do they purchase your product or why
do they not purchase your product is
important
questions
we talked about the first uh identifying
you know unmet knees we're gonna get to
the
yes the other four yes so i told you
there could be 30 or 50 components and
we just looked at some for under
identifying an unmet need
just to review make sure you have this
on your notes quantitative research
qualitative research primary research
secondary research
we talked about
um
direct competitors and indirect
competitors
from there the next step
is
to develop a concept
determine a price that customers are
willing to pay
create awareness
so create awareness
for our brand
and then
and the order matters in this case
and then
gain distribution
so
we're going to identify an unmet need
develop a concept and that's why when we
developed a concept why we're going to
do so many rounds of uh
qualitative research
because first we have um we're
soliciting
input from the target market then we're
going to develop that into a concept
and then
we're going to take those concepts or
concept boards to research
and then based on that we're going to
develop prototypes so prototypes can be
very expensive
so you want to
take concept boards
to research first
then once you get enough input and you
could fine-tune those concepts then you
could develop
prototypes
then
we're going to determine a price that
the customer is willing to pay
and then i think i did
misspeak
the next step four would be
to gain distribution and then build
awareness
so i fell into the trap that i wanted to
call to your attention which is
before you start advertising you need to
make sure
that your product is available
so the fourth step is to gain
distribution and then start to build
awareness because what we don't want to
happen
except in
rare situations and in some unique
categories
what we don't want to happen is to spend
a lot of money on advertising and then
have people let's say go into the store
like walmart or target a best buy and
find that the product isn't on the shelf
well apple does that all the time yes
they do so there's a question we have to
ask ourselves do they do that on purpose
or
do they have trouble forecasting because
forecasting demand is very difficult to
do
to properly and accurately forecast
demand is very challenging
if you could do that with a high level
of precision you should see me after
class
all right because
100 billion dollar companies struggle
doing that and they have dozens of
people
working as part of a team to try and
anticipate and forecast demand
it's something that's very difficult to
do sometimes companies guess wrong and
that's why they have a shortage
now in some categories
there's a belief that
they're creating
built up
demand that they're creating this
pent-up demand where they're creating
some level of hype for a particular
product
now if the product is a high involvement
product
you could play that game
because
um people will
continue to go back to the store
and
look for let's say a new release of
a dvd
or a new release of video game
but that's for a high involvement
product
do you think those are high involvement
something that people
will spend a lot of time
researching
cars
well cars would also be a good example
usually products that are
expensive
are considered to be
high involvement but what's expensive to
some
is not expensive to others but certainly
cars could be considered high
involvement what do you think josh why
are video games considered by
involvement i thought involvement really
is like you spend like you read the
details about it
on that product
yeah you don't think that um gaming in
general is sort of um
i guess i hate to use the word like
cult-like i don't know maybe it's like
i mean that's phenomenon of like uh this
sort of uh
category of i mean gamers in general
there's
a very high level of involvement in
purchasing the product but it's
something a product that once you
purchase that you use
and you're intimately
involved in
i'm not a gamer um i have a playstation
i think it's probably the original one
but um
what do you guys think do you think like
gaming like that's a phenomenon that's
people are very
involved in or you think
you think so oh yeah right that's kind
of uh
where is like um
buying uh
soda
oh you get people sometimes people feel
very strongly about coke versus pepsi
but
if they don't have the product
um depending on the level of brand
loyalty very often people buy a
different brand
well maybe they'll buy orange juice
instead
right but
um
i wouldn't think that um
milk or orange juice is a high
involvement product but gaming
that's quite a a phenomenon in our um
in our culture today
also um
yeah i think that's a good example of a
cultural phenomenon but
other
um other products not so much
even um
music
there's definitely
a group of people that feel this
affinity to a particular
musician or a singer
if you go into the store and they don't
have the product they don't have it you
know it's supposed to drop
on january
15th
and it's not in the store well if that's
one of your favorite singers then you're
going to go back again
and they're counting on that
so they take advantage of that then from
a consumer behavior standpoint they
understand that
so i agree that in some category it does
create a level of hype
right a level of anticipation you went
to the store they didn't have the
product
so what does it do make it less
desirable or more desirable
right in many cases it makes it more
desirable now you want it even more but
not in all categories though
so that's the thing is we have to as
executives we have to know how to apply
um these concepts and understand when
they're relevant and not relevant
but in terms of adoption let's um
let's get to this before we go
and talk about what's called the
diffusion of innovation
sometimes referred to as the adoption
curve model
this model suggests that
adoption occurs
at different rates
now
there's certain percentages associated
with the model it's conceptual for us
the key takeaway is
is that it's relevant and it's
applicable
doesn't mean exactly to that percentage
but the idea is that there's a certain
group of people that will purchase a
product when it first comes out
and then our challenge is
to modify the marketing mix
to get the next group the next segment
to adopt the product
and that's why um this is very relevant
to what we talked about in terms of the
skimming pricing strategy which is you
introduce the product at a high price
so that group the ones that are the
first to buy
we call the innovators
then we have the early adopters
we have the early majority
and then the non-adopters this is in
chapter 12.
yeah sometimes the term used is laggards
but i think the more user-friendly term
is non-adopters right
so non-adopters are those people that
are not going to purchase um the product
so we have a certain percentage about
two and a half percent
that are going to purchase the product
when it first comes out those are the
people that are going to purchase the
iphone at 600 when it first comes out
so after the first two and a half
percent and it could be three and a half
percent it could be five percent the
idea is that a small percentage of the
target market is going to purchase the
product at six hundred dollars
so then after they purchased that
and hopefully we thought about this long
before
the question is
how do we get
the early adopters to purchase
how do we get the next 13 and a half
percent
to purchase
how do we get the early majority
to purchase
how do we get the late majority to
purchase and these well basically
you don't really expect that they're
going to purchase the product
but one of the things we want to find
out in research
is why we should understand why
there's non-adopters
because maybe these not adopters we
could convert to adopters we need to
understand maybe the product is too
complex that's one of the
challenges of advertising technology
products is we have to spend a lot of
time
communicating how to use the product
and its features and benefits
so technology companies they spend a lot
of time and also promote
that their product is
easy to use somebody said you know very
simple
um
this kind of plug and play
approach to design
that basically
you just um
take let's say like the desktop computer
out of the box plug it in and you could
use it
and they've tried very hard to make that
a reality
you know now they color code the wires
when i got my first computer the wires
wearing color code it was tricky
to
to set it up now you're like oh you take
the purple wire that's the keyboard and
right it's simple
and that's intentional because they
understand that people figure when i get
home how am i going to put this thing
together
do the companies try to encourage us
and convince us that no it's simple take
it off the box plug it in and you can
use it
so what's one of the ways
that we could
accelerate the rate of adoption
because what we're looking at here is
this is time
so this could be one year two years
three years four years five years etc
and this is we can say the number of
units or the dollar sales
as we move through time
how can we accelerate
the rate of adoption
that's our challenge
we need to understand that key takeaway
for us is that
there is an adoption curve model
that everybody doesn't go out and buy
the product when it's first released 200
million people just go out and buy the
product
what we need to understand is that this
model is something that we're
responsible for managing
as global marketers we need to manage
the rate of adoption
it's our responsibility so how are we
going to get
the early adopters to purchase our
product
what some of our options
because remember our biggest
weapon if you will is the marketing mix
those are
the controllable
factors there's controllable factors and
factors that are not controllable like
just quickly an uncontrollable factor
would be like the economy we have no
control over it if it's a recession
if there's a recession bummer that's
that's a problem we can't control that
but what can we do gonna reduce the
price right in an elastic market we
could lower the price and our
expectation is that the number of units
that we're going to sell is going to
increase
what else could we do
way or you can potentially give it a
different usage so absolutely so
promotion is one of the four p's and
promotion
also includes advertising but
advertising does not begin with p
right so promotion is all-inclusive
including sales promotions trade
promotions and also advertising so we
could advertise and build awareness
create as uh daniel said category need
for let's say mp3 players but also
secondary demand
for a particular
brand
so when we're advertising for a
particular product
we're creating very often we are
creating primary demand
and you say wow but doesn't that benefit
everybody yes
so when tropicana advertises
they're building awareness and trying to
create a favorable brand attitude for
the tropicana brand
but they're also creating demand for
orange juice right
that's that's unavoidable so does minute
maid benefit from that yes the simply
orange benefit from that yes
all the brands in the category benefit
from that
what else
can you increase the distribution
channels absolutely so one of the four
p's is place so you could expand
distribution
and not today
but we'll talk about intensive
distribution
selective distribution exclusive
distribution
which has to do with
how much distribution there is of our
particular product
what else
what else could we do
well you guys really need to mention
promotions which could be um a contest
or a sweepstake or a coupon
or
um daniel alluded to this guy's
essential marketing yes absolutely
which would be what you're thinking of
like a sample or a trial or i mean i was
going to say uh tayden
i mean i know they do this uh turning
the subway car into
oh yeah yeah outdoor advertising right
absolutely yeah that's what you want to
do um is to saturate a particular market
to create a strong brand presence but
also
um we could add features
we could add features to the product
so like think back to the ipod
right there was no um
lcd screen
right
it wasn't video capability then they
added the lcd screen but of course it
was black and white
then they added it in color
and so as they added more features and
more functionality and more benefits
then
we moved through the adoption current
model so what did we do
we modified the marketing mix
and accelerated
ideally
the
rate of adoption
through
this model right
the different generations
the different generations have their own
curve
yeah well i would look at it in terms of
the product life cycle which is also a
um a bell-shaped curve so i mean you
could look at it that way what was the
rate of adoption for a particular model
for example
so absolutely you could you could do
that um
generally uh you would look at it in
terms of the entire category or your
entire product line but certainly the
same um concept is relevant
so we'll continue um we'll talk about
this a little bit more next time
all right
have a good night do good things
yeah
see you later