Sunday, February 28, 2010

Image Differentiation

A company can obtain competitive advantage by differentiating itself from the competition. Kotler states, “It can differentiate along the lines of product, services, channels, people or image” (186). Once a company identifies its points of differentiation, if it has more than one it must then decide which ones to use, how to use them and to what target market to direct them.

Because of the potential costs associated with the choice of differentiation the most effective difference or differences must be chosen carefully. Kotler lists several factors worth considering when making this choice. They ask: is it Important, Distinctive, Superior, Communicable, Preemptive, Affordable, and Profitable? (189).

If a company chooses to differentiate based on image, Kotler also says the following: “A company or brand image should convey the product’s distinctive benefit and positioning. Developing a strong and distinctive image calls for creativity and hard work” (188).

Well, creativity is exactly what dairy farmers in Washington State have called upon to differentiate themselves and their image. Recently, a radio ad by the dairy farmers of Washington State expressed that their milk was of higher quality because of the way they treat their cows. They expressed that the difference comes from how comfortable they make their cows by providing them with cow mattresses. Among others, this differentiation could certainly appeal to animal lovers and those moving toward organic products.

While the radio ad is not available to listen to, the following website of the Dairy Farmers of Washington contains verbage along the same lines. The other website listed is a post from another site regarding the benefits of cow mattresses and the production of cow’s milk.

Jenniffer Wellbrock
Mktg 301 Section E

Message Strategy

Message Strategy is the first step in creating an effective advertising message. It provides the foundation for the rest of the advertising campaign. According to Kotler the first step of developing a message strategy is "identifying customer benefits that can be used as advertising appeals" (Kotler 363). From past chapters and lectures we have learned that customers buy products based on their perceived value and benefits they offer rather than for the product in and of itself. An advertisement's success is rooted in its ability to communicate the products benefits and value to particular customers.

The next step of message strategy outlined in Kotler is the development of a creative concept. This is defined as "the compelling big idea that will bring the advertising message strategy to life in a distinctive and memorable way" (Kotler 363). This may manifest itself as a phrase, a visualization, or both.

Finally, the creative concept will provide guidelines for the construction of advertising appeals. These advertising appeals should have three characteristics: they should be meaningful, point out benefits that makes the product more desirable. They should be believable and thirdly they should be distinctive, meaning they should tell how the product is better than the competitor (Kotler 363). The hit television series Mad Men features a scene in which one of the main characters Don Draper makes a advertisement sales pitch that illustrates the important qualities in a message strategy (unfortunately the embedded feature on this youtube video is disabled, sorry for the inconvenience):

Don Draper illustrates the proposed message strategy for a lipstick. He does so by identifying a unique customer benefit, the benefit of having a unique kiss, the ability to mark a woman's territory, her man. The creative concept manifests itself in the form of the phrase "Mark Your Man". The advertising proposal is meaningful, believable, and distinctive.

Nick Unan

Section E

Saturday, February 27, 2010

Managing Marketing Channels

“Marketing channel is a set of independent organizations that help make product or service available for use or consumption by the customer or business user.”

Dell currently has over 30,000 partners which they believe add value to Dell’s product and expand Dell’s reach in marketplace. In 2007 Dell built PartnerDirect program to enhance their partner relationship management. This program is now available in 140 countries. Paul Shaffer, director of channel marketing, talks about this program on facebook

This program:
1) Enhance partner profitability
2) Minimize channel problems with help of Dell Direct teams
3) Leverage online capabilities for partners
4) Supports multiple partner business models
5) Provides improved partner service and support

Elizaveta Koval, Section G

Push Marketing

A push strategy involves "pushing" the product through the market channels to final consumers. The producer directs its marketing activities (primarily personal selling and trade promotion) toward channel members to introduce them to carry the product and promote it to final consumers (Kotler 356).

Here Vector Marketing Corporation is a multi-level company that appears to implement the pull strategy. Vector is part of Cutco Corporation, a New York based company. It employs salespeople who work on commission based pay. Many salesmen are college students and recent high school graduates. Vector uses personal selling to push their product through the channels to reach the consumer. The company mainly markets Cutco kitchen knives to customer through one-on-one demonstrations. The sales force scouts for potential customers by looking through their contacts and using other people's references. Salespeople become channels by purchasing their own set of knives, independently finding contacts, setting up appointments, and using their own techniques to interact with customers. This is a clear example of pull strategy because the customer is being not demanding the product but the salesperson is creating that demand for them. The chain of communication goes from the Vector (producer) to salesmen (channels) to the consumers.

Ekaterina Ogay
Section G

Thursday, February 25, 2010

Horizontal Marketing Systems

With the economy at a downturn, companies throughout many industries are finding it difficult to maintain the same profits that they experienced in the mid 2000’s; that is, before the subprime mortgage crisis. During tough economic times, rivalry between companies heavily increases; this means, companies need to work especially hard to remain competitive and visible in consumers’ eyes. In our Marketing textbook, Armstrong and Kotler reinforce the importance of developing channels. A very powerful way of working together to combine financial, production and marketing resources to accomplish more than any one company could alone is called horizontal marketing system.

Companies often join together to market an existing product, or create a new distribution venture to market a new product because they lack tangible and intangible resources, physical and capital resources, and an established brand name in order to reach customers effectively for ultimately a successful joint effort. A great example of horizontal marketing systems that I found is how Apple and Starbucks announced music partnership in 2007. The purpose of this partnership was to allow Starbucks customers to wirelessly browse, search for, preview, buy, and download music from iTunes Music Store onto their iPod touch, iPhone, or PC or Mac running iTunes. Apple’s leadership in digital music together with the unique Starbucks experience synergized a partnership to offer customers a world class digital music experience.

Apple benefits from this partnership with higher iTunes sales because Starbucks has a lot of loyal customers that take the time to visit, relax and enjoy the unique Starbucks experience. When Apple first introduced its iTunes music store, it hoped to sell one million songs in six months, but to its surprise, Apple sold over one million songs within the first six days of its iTunes music store opening. With such loyal online music consumers, Starbucks benefit’s from higher sales, increase in market share, and stronger customer loyalty. This example demonstrates how two companies can join forces to follow a new market opportunity. This opportunity allowed Starbucks and Apple to both gain something of greater, than otherwise would be possible if they somehow attempted this strategy independently.

Alex Brynza,
MKT 301 Section E

Wednesday, February 24, 2010

Product Line and Product Bundle Pricing

In today’s highly competitive business world, companies have to rely on multiple pricing strategies to conduct business. According to Armstrong and Kotler, product line pricing is a type of a pricing strategy that a company uses when it develops a line of products in the same family, rather than just one product (Kotler 271). Different products within a product line are priced differently. It is important that when using the product line pricing that a company establishes defined price steps between the different products to justify the difference in prices. For instance, a company has to convince or show to consumers that a more expensive product in its product line has more value than a product that is cheaper. Another type of a pricing strategy is product bundle pricing. Product bundling pricing involves a company combining several of its products and offering them together as a bundle at a reduced price (Kotler 274). A good example of a company that implements both of these pricing strategies is Microsoft Corporation. Microsoft has developed a program line that starts with the basic programs such as OneNote for $79.95 and ends with Outlook with Business Contact Management for $679.95 ( To promote the sales of its product or introduce customers to some of its new products that consumers otherwise would not buy separately or wouldn’t try at all because they are too expensive, Microsoft bundles up those programs with a more popular programs that everyone needs and sells them together at a reduced price. For instance, Microsoft’s Office Home and Student Suite includes Word, Excel, PowerPoint, and OneNote programs for $149.95. If someone were to buy all four of these programs they would spend $409.8 (OneNote 79.95+ 109.95Word + 109.95 Excel + 109.95PowerPoint).

Olga Fedorovskaya

MKTG 301 E

Price Elasticity of Demand

Price Elasticity of Demand (PEd), or the slope of the demand curve, is originally an economics term but has important implications in marketing as well. Simply defined, PEd tells us the responsiveness of demand (customers) to changes in price. Due to the nature of the demand curve, the slope is always negative: a decrease in price (P) will increase demand (D) and vice versa. For example, Figure 1 shows a slope of -1, and Figure 2 shows what would happen if the P fell by -25% (D will increase by 25% as a result). The negative property will be ignored when finding the quotients (D/P) to make things easier. If PEd is 0, then you have a perfectly inelastic demand: where the price does not affect the demand at all (there is a vertical line on the graph). If PEd is between 0 and 1 (.23, .47, etc.), then you have an inelastic demand: where the price and demand change, but demand does so in a smaller proportion. For example, if P changes 25%, then the D’s change will be smaller in comparison to P’s change, say only 20% (20/25= .8). Unitary elasticity occurs when the change in price is proportional to the change in demand, recall 25%/25%= 1 from above (ignoring negative signs). If PEd is between 1-∞, then label as elastic demand (D) where demand is greatly affected by any price (P) change e.g. 50%/25%= 2. On the extreme side, if PEd is ∞ (infinite), then we have a horizontal line where a price change receives no demand at all.

Now that the simple model of economics is over with, let’s move onto some examples. As of this day, a large 3-topping pizza from Pizza Hut costs only $10 ($1 extra for stuffed crust) as a promotional offer (I get coupons in the mail). Let’s assume the demand at this price is 10,000 in Seattle. With this information, we’ll examine changes happened with an inelastic demand curve and with an elastic demand curve.
First the inelastic demand curve. At a price of $10, there are 10,000 customers (10K). If the price increases by only $1 for the same pizza, the demand will fall only change by 1,000. The slope of the curve is P/D x ∆D/∆P= 10/10,000 x 1,000/1= 0.10.

The demand is much more price sensitive with elastic demand. For example, a $1 increase reduced the demand by 6,000 (unlike 1,000 in the previous example). The slope (sensitivity) of the demand is P/D x ∆D/∆P= 10/10,000 x 6,000/1= 6.

As you can see, the price changes can be the same in both situations, but demand varies greatly depending on the sensitivity (elasticity) of the demand. Demand in Figure 3 is not very price sensitive, while demand in Figure 4 is.
Some example of products with PEd of 0 may include necessities such as water and food. For these, everyone would try to get they’re hands on no matter what the price.
Price elasticity of demand has important implication for marketers because with these models and numbers, they can estimate their demand, price and overall profit. For example, imagine that Pizza Hut is in situation Figure 4. It has a demand of 10,000 at a price of $10 per pizza. Bob, an experienced manager at Pizza Hut, proposes that marketers increase the price of pizza to $11 to increase profit (assuming $11 x 10,000= $110,000). Even though you’re fresh out of college, you know that not everyone has the same perceived value at $11. So you sketch a graph to show Bob that with an elasticity of 6, demand will drop to only 4,000, leaving you with a profit of only $44,000 ($11 x 4,000).
With this information marketers can also predict market share at this price (everything else constant—such as pricing of competitors).

Viktor Brynza
MKT 301 Sec. E

Tuesday, February 23, 2010

Value-Added Pricing

Many company's are challenged to build its pricing power, which is "its power to escape price competition and to justify higher prices and margins without losing market share (page 262)." In order to increase the company's pricing power, company's adopt value-added pricing which is defined as "attaching value-added features and services to differentiate a market offering and support higher prices, rather than cutting prices to match competitors (page 262)." This primarily applies to commodity products simply because these types of products have little differentiation and extremely intense price competition.

Starbucks, founded and created in Seattle, never once compromised its price. Even with the economic downturn, Starbucks did not decrease its price, but instead increased its price. The company primarily focuses on people versus the products and offers the highest quality coffees. They believe that the connections they create with the communities around them is what has kept customers loyal.

Although many individuals find the $4.00 average price of Starbucks to be ridiculous, their financial statements prove that little will the increase in price effect their earnings. According to Hoover's, revenues for the company in 2007, 2008, 2009 were $9,774.6, $10,383.0, and $9,411.5 (in millions), respectively. Starbuck's financial statements prove that although the company increased its prices for a cup of coffee, the result did not effect its earnings.

In the end, Starbucks has stayed true to its name, still focused on the people versus the products and offering the highest quality coffee. In addition, the company implemented a rewards program in which customers accumulate points to receive a free coffee. The company has also created a blog site in which customer inputs can be seen and heard, and the company maintains close relations with all their customers through this website by responding to the individual requests. If the individual shares an idea, the company will note it, discuss why its probable or not and provide feedback. Starbucks is truly taking innovative measures in order to assure customers that the higher prices are supported.

Below is an image of a Starbucks Menu:

Sunday, February 21, 2010

Reference Pricing

Being comparative is a natural human instinct. Most rational shopper wants to buy a product or a service if its price first matches his or her perceived value. Then the rational buyers might compare its price that this store offers relatively to other stores. The buyers might also have a set price in mind. Sometimes buyers do not have all of the relevant information to know how much a certain product or a service is worth, and this is where marketers can come in and assist (or trick if you have a negative view on marketing) and help buyers make buying decisions. Marketers can convince the buyers to purchase their product or service by implementing reference pricing strategy, most prominently used in discount stores. Reference prices are prices that buyers carry in their minds and refer to when looking at a given product. Reference price is one component of psychological pricing, in which the sellers consider the psychology of prices and not simply the economics.

Nordstrom Rack is a great example of a store that utilizes reference pricing to sell its product. Nordstrom Rack is the discount/clearance store for Nordstrom and it typically carries overstocked inventory from Nordstrom and other big name brands, original Nordstrom Rack brand such as Evergreen and returned merchandise from Nordstrom. There are very few instances where there will be the same product being sold at the regular store and the Rack (ex. Burberry Weekend Cologne). All the products from Nordstrom Rack are in perfect conditions, Nordstrom would never sell a damaged product even if it’s at a clearance division. Therefore, products are never discounted for the lack of quality. Basically, every Nordstrom Rack products have a price tag that list the original price of the merchandize and the reduced price that the buyer would have to pay. This is a great example of reference price because it tells the buyer directly how much he or she is saving by buying the product (it does not say how much you save on the price tag but the buyer can just subtract the new price from the original price). Any rational buyers would feel like he or she is getting a bargain and this obviously would be a strong influence in buyer’s purchase decision. Many Nordstrom Rack products are still relatively expensive. For example, a Hugo Boss tie might cost $49.99, but it does not match up to the perceived value for a buyer since the very same product might cost as much as up to $129.99 at a Hugo Boss department store. Once again, a rational buyer would recognize that this price is a bargain and that might very well influence his decision to purchase the product. Other times, the buyers might not have a perceived value set in mind for a product (like I wouldn’t know how much a Calvin Klein dress would normally cost). In this case, the reference pricing strategy would assist the buyer by letting him or her know what the perceived value is from the original retailer’s perspective and how much of a bargain the buyer would gain.

nordstrom rack price tag Pictures, Images and Photos

Jason Lao, Section E

National Brands vs. Store Brands

Until recently, national brands have had a significant advantage over store brands, but today that is all changing. Today, store brand sales are increasing rapidly due to a number of reasons.

First off, Kotler describes a store brand (or private brand) as a brand created and owned by a reseller of a product of service (215). Store brands are also known as “generic” or “no-name” brands. Private brands have become successful in society because they offer a greater selection as well as providing higher quality than in the past. Selection and quality improvements have led to consumer confidence and acceptance. The majority of consumers feel that these generic products match the quality of their rival national brands. For example, as a college student I usually try to save money where I can. When I go to the grocery store to purchase some food I am almost always able to save a few bucks here and there by opting for the store brand products. Think of the cereal aisle in a grocery store. One entire aisle devoted to this product and there are literally hundreds of cereals to choose from. Often times, Tony the Tiger gets the best of me and has me flocking towards that delicious box of Kellogg’s Frosted Flakes, but when I see Kroger Frosted Flakes in a bigger box at nearly half the price how am I to say no? I feel that this doesn’t only apply to low-income college students, but rather everyone in society. During this recession, everyone is looking to pinch their pennies and store brands are a way for that to be accomplished.

Now, in order for national brands to compete with store brands they must invest valuable time and money into research and development to create new brands, features, and constantly improve the quality of their goods. They must also run strong advertisement campaigns to promote their product. With the world we live in today, it is becoming more difficult for these national brands to have an edge over store brands.

All in all, people have become more accepting of private brands because of the higher levels of quality and a vast variety of goods to choose from. Today, sales of store brand goods are growing much faster than the products of national brands. Store brands are a staple of the world we live in today, the world that is continually striving to satisfy customers by offering low prices and great products.

-Jon Honari, Section E

Value-added Pricing

Value-added Pricing is when companies attach features or services to their products to differentiate them from competing products and support having higher prices.

I was just browsing Yahoo News and I found this article about the "Safest House in the World." It's about a house in L.A. that is a modern-day fortress. I thought it was a good example because it lists a bunch of features that makes this particular house so much better than other houses with panic rooms. It's not only safe but luxurious too which helps account for it's selling price of $7.25 million.

Here are some examples of the features it includes:

"The heavily fortified and super secure residence occupies an easily defended promontory with 360-degree views. The well-defended dwelling stands five stories tall, measures almost 8,000 square feet and includes 32 rooms that all sit atop a virtually impenetrable batcave-like garage that will hold six, preferably armored, cars."

"deluxe creature comforts such as an elevator for whisking folks from the garage level to the living levels, a gourmet kitchen with granite counter tops and commercial grade appliances, two offices, a wine cellar and a home theater."

"The safe cores consist of entire sections of the residence that can be isolated from the rest of the home and where the homeowner can retreat in complete safety -- not to mention luxury -- from an outside threat that might include an intruder, a natural disaster or even a nuclear, biological or chemical attack."

"There is also a built-in barbecue center and a spa situated under the heliport designed for emergency evacuations in the event of a home intrusion or for fire emergencies."

These are all examples of value-added features that justify the house's price of $7.25 million. It incredibly safe and can keep it's residents safe from even nuclear attacks. With it's luxurious design and top of the line security system, I'm sure Al V. Corbi (the man who designed the home) could even have his share or market-skimming and get maximum revenues layer by layer.

see article here

Nikki Macgregor, Section G

Friday, February 19, 2010

Service Recovery

“Service recovery can turn angry customers into loyal ones. Companies should take steps not only to provide good service every time but also to recover from mistakes when they occur” (Kotler, 255)

Recently Toyota announced two safety recalls that cover some of its models. Both recall campaigns address conditions related to the accelerator pedal. Now Toyota is taking actions to recover and reassure its customers in company’s future service quality.

Though Toyota is a car manufacture, not technically “service” company, I think it is reasonable to assume that it not only makes car, but also provides services that result in safe driving experience.

In the commercial below Toyota reassures customers that their safety is still a top priority, it admits the mistakes, and promises to learn from them.

Elizaveta Koval
Section G

Value Added Pricing

Value-added pricing is attracting value-added features and services to differentiate a market offering and support higher prices, rather than cutting prices to match competitors (Kotler 260). Some companies do not have to enter into price wars yet still be profitable. We see this in high fashion market. A good example is Armani.

Some product can be very expensive, yet is very popular. An example is Armani clothing. Although the product of Armani is often very expensive, Armani has a solid brand and many people buy Armani products. For example, Armani suit here has a price tag of $1895.00 and Nordstrom offers to sell in its store. Rather than offering a low quality suit with a less price tag, Armani offers high quality designers suit with a high price tag. It uses high quality wool that makes the jacket comfortable. The contemporary design designed under the name of Armani lets the customer have the latest trend, justifying the high price tag. The fact that Nordstrom offers this suit and actually making sales illustrate how some customers are seeking values in the products they buy and they are willing to pay for it.

Nordstrom Armani page

Shogo Okuda
Section G

Wednesday, February 17, 2010

Consumer-Generated Marketing

As described on page 19 and 20 of the textbook, the term consumer-generated marketing describes marketing messages, ads, etc. that are created directly by consumers with or without the encouragement of the company whose product is depicted. This form of marketing can be an effective, low-cost method of spreading the word about a a market offering, but can sometimes backfire if consumers aren't pleased with the product or service.

A good example of a product that has resulted in a lot of negative consumer-generated marketing is Apple's new iPad. In this instance, many consumers were unimpressed with the product because it failed to provide many new features and hasn't effectively differentiated itself from other Apple products like the iPhone or Mackbook. The following link is to a video on mocking Apple's promotional video for the iPad. The video highlights a few of the reasons that consumers are unimpressed and tries to satirize the overdramatic nature of Apple's own ad campaign. I have also included a link to Apple's original video. The College Humor video is much more entertaining if you've seen Apple's video first.

College Humor video:

WARNING: There is some adult language in the video. There is some swearing, but it's beeped out for the most part. However, if that kind of thing may offend you, you may just want to skip this video. Otherwise, enjoy a good laugh.>

Apple's original promotional video:

Scott Hardy, Section E

Good-Value Pricing

This Mattress Depot USA commercial is a prime example of a form of good-value pricing. According to the textbook, good-value pricing strategies are "offering the right combination of quality and good service at a fair price" (Kotler 261). A type of good-value pricing for retail stores is everyday low pricing (EDLP). With this pricing strategy, stores charge a constant price with very minimal or no temporary price discounts. Other stores, such as Wal-Mart and Safeway, have also adopted this pricing strategy, which is in contrast to high-low pricing, in which retailers charge higher prices on a daily basis, but also has promotions and discounts on certain items quite often.

In this commercial, Mattress Depot USA promises that customers will not only be able to purchase a quality, comfortable mattress, but they will also have the convenience of being able to purchase the mattress whenever they want because they have low prices everyday. Through this commercial, it is clear that Mattress Depot USA is striving to provide a quality product at a fair price.

Karlyn Kurokawa, Section E

Tuesday, February 16, 2010

Psychological Pricing

Psychological pricing occurs when sellers consider the psychological factors of price not simply the economics (Kotler, 276). Examples of this strategy exist all through the market one of which is the pricing of UGG slippers. The UGG brand has swept through that fashion world in recent years attracting consumers around the world from many different demographics but competitors have offered similar products in the past without this same result. The price tag on a pair of moccasin UGG slippers is $100. The price on a pair that looks almost identical, sold at L.L. Bean is half that at $49.95. The difference in price is not due to a drastic difference in quality, both are made from sheepskin and both have indoor/outdoor soles, the difference in price is an example of psychological pricing. The UGG brand prices their product higher because consumers look to the brand as a higher quality option even if actual improvement in quality is minimal. The psychological pricing scheme is meant to keep consumers thinking that the UGG brand produces the highest quality sheepskin shoes, enticing buyers into buying their products.

The L.L. Bean Slipper: $49.95

The UGG Slipper: $100

Monday, February 15, 2010

Captive Product Pricing

Captive-Product Pricing is one pricing strategy used by manufacturers. Kotler defines captive-product pricing as, "setting a price for products that must be used along with a main product" (Kotler 272). Producers of captive products often price the main product low and then set high markups on the supplies or expendable products. According to Kotler many companies make very low margins on the main products but are able to make very high margins on the expendable secondary products.

The text mentions video game consoles, razor blades, printers, and theme parks as examples of companies that use captive product pricing. An excellent example of a company that employs captive product price strategies is Verizon Wireless, who sell the popular Motorolla DROID phone. In this case the pricing can be broken down into two part pricing. The price of the service is broken down into a fixed fee plus a variable usage rate (Kotler 273).

Verizon, as the exclusive carrier of the DROID, offers massive discounts on the actual phone to lure customers to sign up for a Verizon data plan. Extra minutes, internet, gps services, and applications all offer Verizon high margins of profits, while the resale of the DROID phone likely provides little gross profit. Wireless companies all employ captive product pricing strategies, Verizon is just one great example of the prolific price strategy.

Nick Unan
Marketing Section E

Sunday, February 14, 2010

Allowances - Trade-in Allowances

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According to the book, an allowance is “promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer’s products in some way” (Kotler 274). Trade-in allowances are “price reductions given for turning in an old item when buying a new one” (Kotler 274).

As the book mentioned, this is a prominent promotion in the automobile industry; however, it is also seen in retail industries. M-A-C Cosmetics does a “Back to MAC” allowance. This program rewards customers for bringing back 6 empty containers of their makeup products (eye shadows, mascara, eyeliner, etc.) in return for a new lipstick. The company then recycles the containers efficiently, and the customer has something to show for their effort.

This program has multiple benefits for customer and company. It promotes customer loyalty, by rewarding customers for purchasing and using multiple containers of their product. When the customers come in to return their old containers it also gets the customer into the store, where they are likely to buy more than just the free lipstick the promotion promises. On another note, it is positive marketing for the company because it shows their commitment to “going green”. Environmental responsibility is important to many people, and to some customers this may be enough to get them to purchase M-A-C products over their competitors (e.g. Sephora, Clinique, etc.).

Back to M-A-C

Sam Bowman, Section E

Brand Extension

According to the textbook, a brand extension is where a company extends its brand name to encompass new or modified products in a new category. (Kotler pg. 218)

I found an example of such brand extension when I went to the grocery store and tried to find chapstick. I never really realized until now how the familiar lip balm product known as Burt’s Bees® is a perfect example of brand extension. I first became familiar with the Burt’s Bees® brand when a friend suggested its original beeswax lip balm that leaves behind a minty and refreshing feeling. However, although Burt’s Bees® lip balm is the company’s most familiar and popular product, the company itself did not start with that in mind. In fact, when Burt’s Bees® first started in 1984, Roxanne Quimby and Burt Shavitz, its original founders, had begun the company by selling candles made from the by-product of Burt’s honey business. Later as Roxanne became familiar with personal-care recipes, Burt’s Bees® began branching out from just candles to items such as lip balm.

Now in the present day, the Burt’s Bees® brand has extended to cover all sorts of facial and skin product categories, from items such as soap, toothpaste, and sun lotion, to hand lotions and specialized goods, such as shaving crème, for men. So when I went to find my lip balm at the store, I was met instead with row after row of different Burt’s Bees® products. In fact, the brand has so many extensions that there is now permanently designated wall space for this company and its many different products. Who knew that a company could extend that much?

-Michelle Choe, Section G

Product bundle pricing

Product bundle pricing is defined as combining several products and offering the bundle at a reduced price. (Kotler p.274) For most of the telecommunications service companies, they use product bundle pricing by combining several of their products and offer the bundle at a reduced price.
For example, T-mobile offers lower price or even free cellphones if signing up a 2 year contract of their telecommunication service. Taking its HTC Mytouch 3G as an example, it is sold at instant discount at $149.99 in any T-mobile stores with 2 years contract required whereas it costs around $399.99 at the current market. Consumers can get a low combined price with this cellphone but they have to be bound with 2 year contract and a data service which is required in order to access this phone’s Web functionality and features (Internet access and e-mail) which costs $59.99 montly with T-mobile.
On the other hand, this HTC Mytouch 3G is only available at T-mobile in the video. As a result, people who want this phone with telecommunication service can save $$$ by purchasing at T-mobile with their product bundle pricing.

TunChun (Crystal) Pan, Section G

Promotional Pricing

Promotional Pricing is when companies temporarily price their products below list price, and sometimes even below cost, to increase short-run sales (Kotler Pg. 277).

That is exactly what Stuart Frankel did 6 years ago when he noticed that sales at his two Subway franchises in Florida were lagging. Little did he know, his idea of introducing a "$5 footlong" sandwich on weekends would erupt into a successful, nation-wide Subway campaign.

He said that he offered the usual sandwiches on the menu just a dollar below list price. He did not anticipate the long lines that would result from this slight decrease in price, or that fact that his profit margins weren't at all reduced! As it turns out, the product he was selling was very elastic.

Eventually, the top managers at Subway caught wind of this successful promotional pricing strategy, and decided to take it nation-wide. They advertised heavily and brought in around $4 billion within the first year of the promotion.

The success of the $5 footlong promotion has made Subway one of the Top Ten fast food franchises in America. It is also the perfect remedy for a satisfying meal during a recession when Americans are more cautious with their spending habits.

Kotler explains that promotional pricing tends to be short-term, but in the case of Subway, it has been long-lived. So will this campaign ever end? Due to the success of it, I personally think it will be around a long time. Which is a good thing for us frugal college students!!!! :)

Kylee Wible
Section E

Product Line Pricing

Product line pricing is when management must decide on the price steps to set between the various products in a line (pg. 272). In other words, it is when a company must decide the price differences between the upgrades of a product or service.

I found this example while reading articles on The article is What Your Gadget Really Costs by Arik Hesseldahl. The part of the article that I focused on was the Apple example.

This is a great example of product line pricing because it shows how Apple is going to have 6 different versions of the iPad and all will have different prices. The article states the range of the prices will be around $499 to $829. The article really emphasizes the differences in the costs to make the product between the $499 iPad and the $829 iPad. This is one component of product line pricing. It also mentions the customer perceptions of the iPad. Three of the versions will have 3G, which some customers may believe this will add value to the iPad. While, the other three do not have 3G. This is a great example of product line pricing because it includes the costs to make the versions, the different features included in each version, and how Apple is making several different versions of a similar product.

Trevor Power
Section E

Friday, February 12, 2010

Value-Added Pricing

Value-added pricing is a pricing strategy that attaches value-added features and services to differentiate a market offering and support higher prices, rather than cutting prices to match competitors. (Kotler p.262) To increase their pricing power, many companies adopt this strategy. Rather than cutting prices to match competitors, they attach value-added features and services to differentiate their offers and thus support higher prices. Their focus is not mainly based on the price to boost annual sales, rather, they keep customers loyal by providing service the customers can't find anywhere else.

An example would be The Whole Foods Market. As everyone might have known, The Whole Foods Market offers natural and organic foods with relatively expensive price compared to other foods retailers. Now that the economy is in recession (and actually is recovering), a lot of consumers are tightening their belt by cutting down on spending, including their purchase of foods and groceries. What makes The Whole Foods market survived within the economic downturn is because it has been able to adopt the value-added pricing strategy. Whole Foods was hit hard by the recession when shoppers cut back their spending. However, according to, the grocer said last quarter that the company is undergoing its emerging recovery. Here is what's special about The Whole Foods Market.

1. Firstly, they add siginificant value on the customers grocery shopping experience. The store's layout and appearance are different from other retailers or grocery stores such as QFC, and even their competitor, Trade Joe's. One of Whole Food Market's philosophy is providing a trip to Whole Foods Market is a place to explore. Its stores are spotless and the merchandising displays are beautiful to the eyes. Shoppers are encouraged to taste and touch almost everything in the store. What's more, Whole Foods Market also pampers the customers' sense of smell as te smell of bread, coffee, smoked meats, and fresh fruits permeate the air.

2. Secondly, The Whole Foods Market believes in its customers as their "evangelists". They offer extraordinary customer service and exceptional customer experience, because they beileve that their customers are going to "give back" to them by spreading the good words of the Whole Foods Market. So, instead of using traditional advertising vehicles, WFM uses the influential power of customers as the advertising vehicle.

There are may more values that the Whole Foods Market add onto their service and treatment to customers. Based on those values, Whole Foods Market is not afraid to sell their products at a higher price than their competitors', thus, applying the concept of value-added pricing strategy.

Clairine B. Runtung
Section G

Thursday, February 11, 2010

Promotional Pricing

This Sears ad is an excellent example of promotional pricing. According to Kotler, promotional pricing occurs when "companies will temporarily price their products below the list price and sometimes even below cost to create buying excitement and urgency" (p. 277). This particular Black Friday ad illustrates special-event pricing, which is intended to attract customers during a certain time (in this instance, during the holiday season).

The sense of urgency is apparent because the ad explicitly states that the doorbusters will only be going on from 4 AM to noon on the Friday after Thanksgiving. In addition, the ad shows a variety of sales that Sears planned to have, including $9.99 pair of jeans and $79.99 diamond bracelets. These low-priced items are intended to draw customers in to purchase the items as quickly as possible, and judging from the lines outside of Sears on Black Friday this past year, the company's marketing seemed to be quite effective.

Karlyn Kurokawa, Section E

Wednesday, February 10, 2010

Brand Development

According to Kotler, “a company has four choices when it comes to developing brands.” They are line extensions, brand extensions, multibrands, or new brands.

Kenichi’s Hershey’s posting reminded me of the funny image I recently saw online. This image illustrates a brand extension of Hershey’s. A brand extension extends a current brand product in a new category. (Kotler, 250)

The new line will include a USB drive that will range from 1GB to 4GB and features a plain Hershey bar (as shown above) or Mr. Goodbar, Krackel, Twizzlers or Bubble Yum. The USB drives will range in price from $14.99 to $29.99. You’ll also be able to pick up 2GB and 4GB drives in the shape of Hershey Kisses for $19.99 to $29.99. Besides USB drives, they will offer digital cameras featuring a Jolly Rancher design, Hershey’s miniatures and Bubble Yum for $24.99. More information is available on Gearlog (

On one hand the new product will be instantly recognized due to widely known Hershey’s brand name. On the other hand, as Kotler say, the brand may be not appropriate to the new product. Seriously, wouldn’t you expect this USB to melt?

Elizaveta Koval
Section G

Specialty Products, co-branding

Specialty products are consumer products and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort. Buyers normally do not compare specialty products and they have low price sensitivity (Kotler p.201). These products are valued for the prestige of the name and they have high brand recognition.

Here is an extremely high end phone made by Nokia. This a new high end line of phones. The phone prices range from $5000 to $32000. It is hard to find because it is only sold in several states of the US. People that purchase this phone obviously do not care much about the price, their man concern must be image.

Co-branding occurs when two established brand names of different companies are used on the same product (Kotler p.216). This Vertu phone is a great example of co-branding.

Nokia has came out with a Ferrari inspired line of Vertu phones. This shows a collaborative work between Nokia and Ferrari. These two companies operate in different categories but by creating this phone Ferrari is able to reach out to cell phone market and Nokia speaks to car fanatics. These two brand names are clearly helping each other through this collaboration. Vertu positioning as a luxuries phone fits perfectly with Ferrari's market image.

Ekaterina Ogay
Section G


Co-branding is the practice of using the established brand names of two different companies on the same product. (Definition found in Kotler's book)

An example of co-branding is Betty Crocker’s brownie mix with Hershey Chocolate. This is a prime example because both brands are joining together, by adding their respective company ingredients, to make one product. (Using Betty Crocker’s brownie mix with Hershey Chocolate) The Betty Crocker brand is a part of the General Mills Company while Hershey is its own company.

Betty Crocker’s Brownie Mix with Hershey Chocolate website link:

Kenichi Sato, Section G

Tuesday, February 9, 2010

Social Marketing

This commercial, which aired when Proposition 8 was to be voted on in California, is an example of social marketing. According to Kotler, social marketing is defined as "the use of commercial marketing concepts and tools in programs designed to influence individuals' behaviors to improve their well-being and that of society" (203). Thus, instead of using marketing to advertise or inform others of products or services, social marketing seeks to impact people's behaviors in order to benefit society.

The commercial is an example of social marketing because it is a campaign for equality of all human beings, regardless of sexual orientation. The women in this commercial calls for voters in California to vote "no" against Proposition 8 because they believe in "dignity, kindness, and compassion," but more importantly, "equality for all." As a result, they are urging other voters to vote against Proposition 8 in order to make sure that everyone's rights will be protected. Ultimately, they believe that voting no will be beneficial to society because it will ensure equality.

Karlyn Kurokawa, Section E

Sunday, February 7, 2010


Diversification is a strategy for company growth through starting up or acquiring businesses outside the company's current products and markets (p.44 Kotler) This means that a company is developing new markets and new products.

I first found about McCafe in Japan and was amazed by its different style from traditional McDonald store. I found more information online at McCafe's website.

McDonald's starting of McCafe is an excellent example of diversification. By starting McCafe, McDonald's is offering new products that were not available in traditional McDonald's stores. McCafe specializes in serving cafes, which attracts customers that usually don't come to McDonald's to eat fastfood. McCafe is also not only a product development. McCafe has its own section of the store and clearly distinguishes itself from the traditional McDonald store. The store has modern, yet relaxing mood. This is important to attract new market segments, probably customers that go to cafe not to satisfy hunger, but possibly to take a sip of coffee and chat in a relaxing environment. Thus, McDonald's McCafe serves as an example performing diversification by developing both new products and new markets.

Shogo Okuda
Section G

Friday, February 5, 2010


Packaging involves designing and producing the container or wrapper for a product (pg. 206). In other words, it is the outer part around the product that it meant to secure and hold the product, but it can also help sell and market a item. I believe that packaging should not only be for the company, but also be useful (or not an annoyance) to the consumer.

I found this example while reading some news articles on To get the video I went to The example is how Heinz has redesigned its ketchup containers (shown on the video below).

The new container is a perfect example of how packaging works and what packaging is. It is a continuing process of redesigning for a company that helps to sell and market the product. But, at the same time packaging should become more useful to the consumer. As the video shows, the packaging will keep the ketchup safe and will hold the ketchup effectively. At the same time, Heinz keeps their traditional labeling. I think this is also a great example of how packaging can evolve and become more useful to the consumer. Great idea Heinz!

Trevor Power , Section E