Additional Current Events
Related by Chapter
Last Updated: June 10, 1997
Keep up to date with happennings that affect the marketing world by selecting a chapter below:
Go to chapters 8-14
Go to chapters 15-22
[Relates to Ch. 2 or 3]
Quaker Oats has sold the Snapple juice and iced-tea business for $300 million to Triarc, the owner of RC Cola.
That may seem like a lot of money until you realize that just 3 years ago, Quaker bought Snapple for $1.7 billion.
For Quaker, the deal represents a loss of over a $1 million a day in the sale price alone for every day it owned Snapple.
That doesn't include a last-ditch $25 million promotion in which bottles of Snapple were given away in an attempt to
breathe life into the brand. What went wrong?
- The demand for "New Age" drinks, mostly uncarbonated beverages, plateaued about the time Quaker bought Snapple.
- Quaker tried to mass distribute Snapple the same way it sells its highly successful Gatorade, but Snapple appeals to a niche market. Much of its attraction was its limited availability.
- Pepsi and Coca-Cola decided to compete more directly with new products like Frutopia and more aggressive marketing for established brands such as Liptons and Nestea.
- The cola makers used lower cost production methods for iced-tea that allowed them to undercut the price of Snapple tea. What lessons can be learned from Quaker's experience?
- Consumer behavior is not easy to predict. Consumers can be fickle.
- Products have distinct images and positions in consumers' minds. Success is marketing one product, even a closely related one, does not necessarily transfer to another product.
- Financial resources and marketing muscle are not necessarily enough to make a product successful.
Can Beef Become the "Premium" Meat?
What could McDonald's have done differently?
Who Does the Most Research?
Will Brides Register for Down Payments?
Is There a Target Market for the Hummer?
[Relates to Ch. 3]
The marketing challenge facing beef producers is described in the "You Make the Decision" box. Beef consumption has been declining steadily, due in part to health-related concerns about red meat and perhaps also due to inadequate marketing.
Retaining market share, much less regaining lost share, will require beef and pork producers to do more than simply spend more on advertising. A research director at Virginia Tech University believes chicken producers and processors have been particularly effective in developing new products, most recently marinated and flavored chicken. To avoid a differential disadvantage, beef and pork producers need to be creative in adapting their products to meet consumers' desires.
A group of ranchers in seven Northern Plains states and two Canadian provinces intends to seek an advantage by creating its own brand of beef. The ranchers are trying to form a cooperative to construct a meat-packing plant and, in turn, to market a premium brand of beef that might induce consumers to pay slightly higher prices. If the effort fails, many of the ranchers may be forced out of business. However, they are cautiously optimistic because research has shown that "cowboy beef" would be appealing to many grocery retailers and consumers and also because premium beef brands have met with some success in other parts of the U.S.
Sources: Scott Kilman, "Hard-Pressed Ranchers Dream of Marketing Own Brand of
Beef," The Wall Street Journal, March 26, 1997, pp. A1, A9; and Anne
Fitzgerald, "Call to Beef up Meat Marketing," USA Today, March 25, 1997, p. 5B.
[Relates to Ch. 4]
In April McDonald's reduced the price of an Egg McMuffin to 55 cents when accompanied by the purchase of a
hash-brown patty and a drink. By the end of April this promotional price, dubbed "Campaign 55," was expanded
to Big Mac and Quarter Pounder sandwiches (when purchased with fries and a drink).
Described as the biggest price cuts in the history of the fast-food industry, these moves were in response to a
continuing decline in same store sales and competitive gains by rivals Burger King and Wendy's. The figure 55
cents was selected because 1955 was the year McDonald's was founded. It was also chosen because the reduction, nearly 75% from the regular price,
was expected to attract a lot of consumer attention.
Franchises were less enthusiastic about the cuts potential for increasing business, and raised prices for drinks
and french fries. The media was a quick to point out these price increases as they were to report the initial price promotion.
Despite initial plans to run the promotion through the summer, on June 3, McDonald's announced the promotion was
ending. Sales had not increased significantly and franchisees were not supporting the program.
For a company as big and successful as McDonald's this appears to be a serious blunder. Interestingly, it follows
on the heels of the disappointing performance of the Arch Deluxe sandwich, launched just a year ago with considerable
fanfare. Based on the description of marketing research in Chapter 4, is there any advice you would give McDonald's
that might have prevented these problems?
Sources: Richard Gibson, "Prices Tumble on Big Macs, But Fries Rise," The
Wall Street Journal, April 25, 1997, p. B1+, Dottie Enrico and Melanie
Wells, "McDonald's withdrawing 55-cent deal," U.S. Today, June 4, 1997, p.1A.
[Relates to Ch. 4]
Annually Marketing News, a publication of the American Marketing Association, reports "The Honomichl 50" - a list of
the 50 research organizations with the greatest amount of revenue. Topping the list for 1996 is ACNielsen with sales
of $1.3 billion. Other leading firms are Cognizant Corp., Information Resources, Inc. (IRI), and Arbitron.
Interestingly, an increasing portion of the revenue that these firms receive is coming from research done outside the U.S.
The top 50 research firms generated a little over $5 billion in sales. With the top 3 accounting for $3 billion, it is
clear that the industry is made up of a few giants and many, much smaller firms. The 50 top firms are profiled in the
article, which may be of particular interest to students considering employment in the research industry.
Source: Jack Honomichl, "1997 Business Report on the Marketing Research
Industry," Marketing News, June 9, 1997, pp. H1-H43.
[Relates to Ch. 5]
Bride's magazine reports that 88% of its readers either had or were planning to register their bridal gift choices.
The most common place to register remains department stores, where an engaged couple can make decisions easier for
gift buyers by indicating which china or silver pattern they have chosen.
The list of firms offering a registry service has grown in recent years and now includes such non-traditional retailers
as Ace Hardware and Tower Records.
The latest addition is a bridal registry for a down payment on a house. The U.S. Department of Housing and Urban
Development (HUD) has introduced a bridal registry that can be offered by mortgage companies that allows engaged
couples to request that gift-givers make a deposit to an account that will be used for a home down payment.
Amassing a down payment is the largest barrier to home purchases, so some view this as the ideal gift, much more
practical than another crystal bowl or mixer. Others, including the editor in chief of Bride's magazine, see it as
a breech of etiquette and likely to be offensive to many. What's your reaction? Is this simply a reflection of the
times or an example of marketing in bad taste?
Source: Cyndee Miller, "Nix the Knick-Knacks; Send Cash," Marketing News,
May 26, 1997, pp. 1+.
[Relates to Ch. 7]
AM General produces an all-terrain vehicle for the military called the Humvee to replace the venerable jeep.
The tank-like truck, able to ford streams and even climb low fences, is well suited to its purpose, but military
spending cutbacks have resulted in a steep drop in demand. The manufacturer is exploring several alternative markets.
One is sales to foreign governments. Another is fleet sales to business users such as mining companies and oil
exploration firms, and government agencies such as the U.S. Forest Service and drug enforcement agencies. However,
a price tag nearly 30% above a four-wheel drive pickup is a problem for many would-be buyers.
Another option is consumer sales. Converting a Humvee into a Hummer - the civilian version - means adding safety
features and amenities that raise the price to $52,000 for the pickup Hummer to $90,000 for the fully size vehicle.
At 6,800 pounds and 7-feet-wide, the rugged looking Hummer is certainly noticeable, and that is what AM General is
counting on. Wealthy baby-boomers in search of a new toy may be the primary market segment.
In 1996 Am General sold only 1,400 Hummers commercially. That's about one-half of one percent of the full-size sports
utility market sales (including vehicles such as Suburban, Land Rover, Range Rover, and the Hummer). General Motors
predicts this market will grow from its present size of 250,000 units per year to 450,000 by the year 2000. To
breakeven, AM general needs of sales of about 3,500 units. Is there a niche market for the Hummer? What impediments
are there to selling the vehicle to consumers?
Sources: Ralph Kisiel, "Full-Sized Fantasies," Automotive News, Oct., 14,
1996, pp. 1i+, Edward A. Robinson, "The Plight of the Hummer," Fortune,
Apr. 28, 1997, p. 58.
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