News You Can Use
Last Updated: May 21, 1997
Keep up to date with happennings that affect the marketing world by selecting an article below:
Article 25: Massages While You Wait
Source: Forbes 30 December 1996 p. 132
Hot Link:http://www.forbes.com/forbes/123096/5815132a.htm
Related Topics: Target Markets
Summary: Women's Health is a hot area for venture capitalists and entrepreneurs. Women spend two out of every three health care dollars. In 1994 the Spence Center for Women's Health opened with the idea of making visits to the doctor more patient friendly. A combination of both traditional medicine and spa therapies the three clinics provide everything from mammography to massage.
Class Application: Describe the target market? Considering the four I's, what should be the
Health Center's marketing strategy to differentiate it from its service competitors?
Article 26: "Overhead Can Kill You"
Source: Forbes 10 February 1997 p. 97
Hot Link: http://www.forbes.com/forbes/97/0210/5903097a.htm
Related Topics: Business unit strategies
Summary: Are you sure your best customer is making you money, or that your worst customer isn't? Activity based costing (ABC) is summarized to show how proper allocation of costs affects your pricing. It can also help answer strategic investment decisions. Some products that were breaking even are in fact losers and are going to be dumped. You can also use ABC to gain a marketing edge and increase revenue. Innovative companies are determining the profitability of individual products, individual customers and individual channels of distribution.
Class Application:
Four people go to lunch. What are all the different ways the bill can be divided? How do different allocations reward certain eating behaviors?
Article 27: "Are Flat Rates Good Business?"
Source: Business Week 17 February 1997 p.108
Hot Link: No link
Related Topics: Business strategy
Summary: Under the right circumstances flat rate pricing can please customers and plump profits. The trick is to figure out what those circumstances are. Principle #1 is to save flat rates for products or services for which there is a natural limit to demand like all you can eat salad bars. Or bus trips. Greyhound knows that there are few people who have the fortitude for a cross country bus trip to take advantage of their $59 one way trip to anywhere in the lower 48 states. Disney, ATT, Natural Gas and UPS are other companies in the article that are or have used flat rate pricing. America On Line is getting hammered because demand for keeping an online connection nailed up is close to inexhaustible.
Class Application: What other products or services should be candidates for flat rate pricing?
Article 28: "Are Your Prices Right?"
Source: Inc. Magazine Jan 1997 p. 88
Hot Link:http://www.inc.com/incmagazine/archives/01970881.htm
Related Topic: Consumer Purchasing Decision Process
Summary: Customers don't all value your product or service equally why charge them identically? Man companies would love to raise prices across the board, but fear losing business. Instituting revenue management assures that companies will sell the right product to the right consumer at the right time for the right price. The simplest form is off-peak pricing, common in the entertainment and travel industry. A checklist of when revenue management techniques might be appropriate.
Class Application: Discuss revenue management in the airline industry. Empty seats cannot be recovered, yet the industry discounts prices for early buyers, and raises prices for last minute reservations. Why does this work for the airline industry?
Article 29: "Peanut Butter and Pearl Jam"
Source: Forbes 10 Feb 1997 p. 152
Hot Link:http://forbes.com/forbes/97/0210/5903152a.htm
Related topics: Target markets
Summary: Fresh Picks is a company that plans to outfit supermarkets with CD racks, listening stations and more than 400 titles of popular music. The company will handle all the purchasing, distribution, inventory control. The supermarkets need only give him some space and collect their share of the gross. By having a store's music selections cater to local tastes, Fresh hoes to capture impulse buyers and ten gradually convince customers that supermarkets are the best place to buy tunes. In the last two year supermarket chains in the U.K. have captured 12% of the music business, and 50% in France.
Class Application: If the new distribution channel is successful, is it because it stole market share from the traditional music outlets, or is it going to develop new customers. If both distribution channels survive, describe the target markets for each.
Article 30: "The $9 Billion Company Nobody Knows"
Source: Business Week 3 March 1997 p. 88
Hot Link:http://www.businessweek.com/1997/09/b3516138.htm
Related Topic: margins
Summary: Cardinal Health is hardly a household name. Cardinal buys drugs in bulk ad sells them to pharmacies, hospitals, and HMOs. With almost $9billion in sales it is now challenging to be #1 in a competitive industry. Individual pharmacies and small regional chains have long been wholesalers most profitable customers, but as they have been swallowed up by national chains with more bargaining brawn, distributors have had to bulk up too. With many of the easy consolidations already done, Cardinal is now moving into higher-margin services.
Class Application: What are the
services that this wholesaler provides? Why can't the margins be maintained over time?
Article 31: "Suddenly, Detroit Stops Fighting
the Future"
Source: Business Week 27 Jan 1997 p. 34
Hot Link: No link
Related topics: Ch 3 marketing environment
Summary: Car dealers are mom and pop outfits across the country. This allows the car manufacturer to be the channel captain. Recently, AutoNation, a publicly owned company is acquiring dealerships. To manufacturers the trend is a mixed blessing. Retail expenses account for 20%-30% of a car's price. Megadealerships can use economies of scale to shrink those costs. But carmakers also fear that the super-retailers could one day become powerful enough to influence car pricing and other policies.
Class Application: What changes can you expect if the super-retailers become the channel captains, instead of
the car manufacturers?
Article 32: Breaking the $1000 Barrier
Source: Business Week 17 Feb 1997 p. 75
Hot Link:http://www.businessweek.com/1997/07/b3514101.htm
Related Topic: Price/Value
Summary: For years, PC makers have struggled to make their way into the 60% of US homes that still don't have computers. On the theory that price was the problem, they offered up bare bones machines that cost less than $1000. Recently Compaq introduced a loaded machine for $999. A chart shows the cost and pricing makeup of the machine including materials, assembly, royalties, warranty costs, shipping, vendor margins, reseller margins and street price.
Class Application: Use these numbers to calculate margins on your own.
The top | Home