Week 8 - Marketing Stategy

This week we read about Drucker's ideas on marketing strategy. One of his ideas about strategy was that it is the customer who ultimately determines marketing decisions and what a business is because they are the ones who pay for the goods or services. I agree with Drucker's suggestion because a business needs to understand their customers to be successful. If a business understands their customers to will adjust their marketing strategy and pricing strategy to fit their customers needs. A business that does not make decisions based on their customer's needs has less of a chance of being successful. Working in the construction industry I come across different customers with different needs. We do a variety of work and based on the customers needs we adjust out strategy. We have superintendents with different experiences and knowledge of the industry who might be better suited for one project of the other. We adjust our strategy based on the customers needs just as Drucker suggested.

Another one of Drucker's suggestions was about predicting the future. He said that the purpose of a strategic analysis was not to predict the future. If the strategic analysis, an analysis of historical data, is not used to predict the future what is it for? Drucker said that its purpose was to give direction to determine the strategy to reach their goals. Past purchasing habits can be used in conjunction with know economical information to help predict the future. There are 5 certainties that can help a strategist predict the future. Those are:

1) The birthrate in the developing world
2) Shifts in the distribution of disposable income
3) New definition of performance in an organization
4) Global competitiveness
5) The growing incongruence between economic globalization and political splintering.

Theses certainties, which are events that have already occurred and are know in the future, will not tell businesses what they need to do but can help them predict their future markets.

Pharmasim
This past week we finished making the decision for the first three periods of Pharmasim. We then developed our own strategic analysis of Allstar Brands. Completing the strategic analysis has been helpful to understand how our past decision affect our sales, market share, net income, etc. We have been asked to evaluate our performance against the performance of other teams in class. Pharmasim has various reports to complete the evaluation. Some of the reports that should be used include sales revenue, market share and profitability and unit sales.

Other Blogs
The firs blog I read was Alexis'. Her blog was interesting because she covers everything we do in class plus has other posts about marketing. One post that I really like was the two ads in one. I had not seen that advertisement before and its quite interesting. The ad shows 2 different images, one that kids can see and one that adults see based on your height. This is an interesting way of advertising to 2 different markets at once. Anther aspect of Alexis' blog that I enjoyed was her answering her own questions for the week. Its a great way to help yourself understand the material.

The next blog that I read was David's. I like David use of the Dilbert comic and its connection to the class and marketing. David has his weekly blog posts broken into separate posts. It was really easy to follow and read. David goes into great detail about each of the topic from class and talks a lot about the Pharmasim simulation. He also incorporate pictures into his blog to relate to his posts. One post that I like was the ranch dressing with the new formula. It interesting how something like that might not catch your attention everyday but when your learning about it in class is right there. It show that the decision we are making in Pharmasim are made by companies everyday.

The last blog I read was Christine's. I how Christine goes into great detail about Pharmasim, the first trail period and how they came to make their decisions in the first 3 periods of team work. Her team set their goals from the beginning and worked toward them. She also noted that the goals were flexible and might need to change after a couple of periods. Christine used interesting titles for each weeks posts instead of just titling it the week number. I liked in the pricing strategies post she related the strategies that we had been talking about to real life situations.

Its always interesting to read the blogs of other classmates to see how they are understanding the information from class and how they have worked on Pharmasim.

Week 7

Marketing Communication in Construction

This past week we talked about marketing communications.We reviewed different advertising and promotion strategies, customer relations and public relations. One item that caught my attention in the educational portal video was the relationship selling video. This also related to the lecture when we were talking about long term customer relations. Having good long term customer relationships in the construction industry is very important. Most of our work is repeat business, we would not receive these jobs if we did not have a good relationship with the customer. If we were to use a traditional sales model, we would not have any repeat business. We would price the job, get the job and complete the work. We would not help them through the process and offer additional services to help as they move in. We use a relationship selling strategy. It starts when a client, architect or engineer first contact us to budget a job. Once the budget is complete they might as for was to cut costs or proceed to finalized drawings. Once drawings have been completed we can proceed with estimating the job and propose a hard final price. After pricing is accepted we schedule to start the job. We use weekly meeting to stay in touch with the custom and keep on top of any changes that might come up. Once the job is completed we check on the customer once in a while to make sure they are satisfied. Many times there is additional work requested, things that they didn't know they needed until they moved in. Keeping a good long term relationship with our customers is very important.

Another topic we reviewed this week and it was our Try This! for the week was a push-pull strategy. This strategy relates to the products path down the supply chain from manufacturing to the consumer. A push strategy is when the company uses advertising/promotions to push the product through the supply chain. A pull strategy is when the company is filling a consumer need. Basically, the consumer requests the product and pulls it through the delivery channel. Working in the construction industry we do not use any push strategies. If we were to use a push strategy it would not help us get much work. We can not push ourselves onto potential customers like a company could do with an actual product. However, we do use a pull strategy. When a customer notices a need for improvements to their office space that requires some construction they would contact us. The customer has a need and pulls us in to fill it. For example, Company A has decided to lease and additional 3,000 sq.ft. to use as conference space. They would contact us to build the additional space to their specifications. As a construction company we use a pull strategy.

Working in the construction industry had made it hard to relate this class to my current job. We operate much differently then a company selling a product. I have noticed that there are theories or strategies in which we do follow. They are not strategies that we have laid out in a marketing plan like some companies but we do use them. It has been very interesting to learn about the strategies and relate them to my job.  

Week 6

There is always something interesting happening in the marketing world, whether its a new advertisement, product or store-wide sale or a new promotion. Since today is mothers day I noticed a lot of related items. There were sales at almost all of the department stores, people selling flowers at the gas station and I noticed many sales in my email. The emails were what caught my attention. There were sales from various companies adverting for discounts ranging from 10% off to 35% off. These emails show how companies use holidays to run sales and promotions to attract customers.

This week we read in Cohen's book. The chapter was all about pricing and the different theories Drucker has about pricing. One of Drucker's theories is the myth of the irrational customers. This theory states that "if something fails to respond to what the theory predicts, it is not a demonstration if irrationality. Rather, something is wrong with the theory and has to be changed." I think that customers can be irrational, overpaying for products or making decisions based on price not quality. There is more to a decision making then just the price. The product or service needs to meet the customer's needs. In the construction industry pricing is very important. If our estimators can price a job lower than our competitors we usually get the job. But, in other instances we have priced a job $100,000 less than a competitor and did not get the job. We do not know why the customer made this decision but there must have been factors other then price involved. Drucker had his own views on how a product should be priced. He did not say that a product should be sold at X to make a profit of Y.  Instead, he believes that companies should price a product based on what the customer would pay. The cost of the product should be adjusted based on the price customers will pay.

Net marketing contribution is a measure of contribution to company profits after marketing and sales expenses are accounted for.The net marketing contribution formula is NMC = Market demand * Market share * Selling price * Consumer demand  * Margin% - Marketing expenses. Different pricing strategies will affect how a company views their NMC. Companies using a pricing strategy of profit oriented will analyze the entire NMC and look for higher contributions. Sales oriented companies will look for a high market share. Companies that are customer oriented will look at market demand and market share while competitor oriented companies will look at market share and selling price. Based on the company's pricing strategy the NMC will be different. The NMC is used to determine if the marketing strategy can cover the total costs associated with marketing, advertising and sales. 

This week we also talked about four different pricing strategies, everyday low pricing (the Walmart strategy), high/low pricing (department store strategy), new product (skimming and penetration) and status quo. Everyday low pricing is the strategy of Walmart and similar stores. They price products low every day, they do not offer too many sales. I do not think this strategy would work in Pharmasim. Price is not one of top factors customers look at when purchasing cold medicine. Next, high low pricing is the strategy is used by companies like Macy's or Lord and Taylor's. They have a variety of products in their stores, some priced high and some low. They usually base the price on the popularity and timing of the product. For example, a new line of shirts is released for the spring season, these items are priced high. When summer comes along and new products are in the store they offer sales and discounts on the spring line. Again, this strategy would not work in Pharmasim as customers purchase cold medicine as needed.

When bringing new products to the market there are two useful strategies. First is the skimming strategy. Second is the penetration strategy. Skimming is the process of pricing a new product high when it first enters the market and then lower the price overtime. This strategy could work in Pharmasim when bringing a new product to market. For example, if we introduced a new 4-hour cold medicine we could price it high at first and then lower the price in the next period. We could gain back some of the original expenses in the first period and then hopefully increase sales in the second period with a lower price. Next is the penetration strategy.  This strategy is the process of bringing a new product to the market where a competitors product is very similar. Using this strategy we would try to steal customers from our competition. I think this would be the best strategy to implement into Pharmasim. We could introduce a new product like a 4-hour cold medicine into the market. There is already competition for this product but we are trying to take customers from our competitors. Customers would be attracted to this new product because of the Allround brand name. Pricing can be a complicated process in any business and we be very important while playing Pharmasim.

Week 5 - PharmaSim

This week we were asked to look at 3 different possible brand extensions for Allround. The options were a children's 4 hour liquid, a 12 hour milti capsule and a 4 hour cough liquid. To determine which brand extension would be best for Allround I analyzed each of the three potetial markets and where Allround stood in those markets. First, the children's 4 hour liquid would only have 2 competitors. The cold market is expected to grow about 3.5% this period. Allround already has 37% share of this market. When looking at the cross section of young families and cold medicine Allround has 20.6% of the market. Only Coldcure, a 4 hour childen's liquid has a higher market share. I do not this a 4 hour children's liquid is the right product for us. Next, the 12 hour multi capsule would not have any competitors offering the same product. This cold medicine would compete direly with the 4 hour multi liquid and 4 hour cold capsule. Allround is currently the market leader in cold medicine with 23.3% of the market share. The brand formulation of the 12 hour multi capsule and Allround are very similar. I think this product would create too much cannibalization of Allround. Last, the 4 hour cough liquid would be competing with 2 other brands. Allround is already the leader in the cough market wit 35% share of the market. Allround is beating the specific cough medicine in their own category. The cough market does not look to be growing in the next period. Allround should not expand into the cough market. In period 4 I did not pick one of the line extensions. Allround had a good percentage of the market share in each category. Also, the products were all too closely related to the Allround product. Based on market growth and current competitors I think it would be better of invest in a allergy medicine.

Week 5 - Product Strategy

Product strategy is important to a business as it helps keep each product in line. The product strategy forms the basis for executing a product roadmap. It allows the company to focus on a specific target market and feature set. "The Slipper Slope of Brand Expansion" article really caught my attention this week. I am a fan of a couple "luxury" brands although I can not always afford them. For example there are a few clothing companies I prefer like 7 for All Mankind jeans, Polo Ralph Lauren and Under Armour. I only have a couple items from 7 for All Mankind and Polo Ralph Lauren as I can not justify paying $200 for a pair of jeans or $80+ on a shirt. Under Armour may not seem like a luxury brand to everyone but when you are paying $60 for sweat pants, $30 for gym shorts and $70 for a sweat shirt it is luxury. 7 For All Mankind and Under Armour do not have any Brand Extensions. Their strategy is to focus on their current customers in their current market. Ralph Lauren has a different strategy. They are similar to Armani which was explained in the article. Ralph Lauren has different brands like the extremely expensive Purple Label, the Black Label, the most popular Polo, their sports/golf, a line of perfumes and cologne and a home products line. Ralph Lauren uses brand expansions to attract a variety of customers throughout various markets.

Target and Neiman Marcus teamed up last fall/winter to bring luxury brands into Target stores. Target and Neiman Marcus are both department stores but target 2 completely different markets. Target sell less expensive stylish clothing while Neiman Marcus sells expensive clothing. Designers that sell a Neiman Marcus were to have a product line directed toward Target's customers and priced accordingly. The problem is that the companies that sell at Nieman Marcus have expensive clothing and a feel of exclusivity to their brands. If they were to sell the same clothes for less at Target then they might lose out in the luxury clothing market. The companies knew this created off brand items to sell. Some luxury clothing companies sold yoga mats, thermoses, shot glasses and dog bowls. And clothing items that did come out were expensive for Target and not a quality product. The collaboration between Target and Neiman Marcus was a failure.

One of the five deadly sins of Drucker was that seeking high profit margins through premium pricing would cause a company to fail.  Premium pricing the practice of selling a product at a higher price then competitors to give it the appeal of luxury or exclusivity  Drucker explained that high pricing is good when the products are worth it, like Polo Ralph Lauren mentioned before. Their clothing is expensive but it is high quality. The problem occurs when companies do not offer a high quality product and price it high. Drucker used the example of the American auto industry. Some auto companies were making bigger cars and adding more gadgets. They would then use premium pricing. This was not because these cars were a better product but because they had more gadgets. This strategy hurt the American car companies.