A step in the right direction...

Although it would appear that Michelin is taking steps to recover, it remains to be seen what will happen with Formula 1 racing in the United States.

Product Report (2 of 2, MTMU): Harley's VROD

Until Harley-Davidson introduced the VROD, their motorcycles weren’t typically known for high performance. Harley-Davidson has strong brand equity (Pg. 249*) and customers typically purchase a name, a look and that classic sound. With that said, Harley’s have also been known to be a bit cantankerous and require more maintenance than many of the competitive European and Asian bikes. It is important to note that they are trying to improve this perception.

The VROD was a departure from the existing product line making it a line stretch (Pg. 247*) for Harley-Davidson. The product line at the time ran from the Sportster (street) to the Ultra Classic Electra Glide (touring). All used traditional welded tube frames, air cooled engines to name just a few of the model similarities. A “clean sheet” of paper was used for the design and development of the VROD…the engine is liquid cooled and horsepower was increased to 115 (other models were less than 100), the frame was hydroformed and the list goes on…

Brian Day’s Road Test article in the Minnesota Motorcycle Monthly summarizes the existing motorcycle market when the VROD was introduced. Because there were so many motorcycles available at a variety of prices, a new bike would be risky. Furthermore, the money needed for product development (Pg. 283*) was substantial. However, as they enter the 2006 model year with three bikes in the VROD line (VRSCA, VRSCB VRSCR), it’s safe to say that they’re entering the growth period of the product life cycle (Pg. 290*). With growth, come sales and profits.

As a Harley-Owner (Fatboy) myself, I was skeptical when I first saw the VROD, but I was pleased that Harley-Davidson engineered the bike. In some way it proved that they were capable of producing a performance motorcycle...and it's growing on me too. Great marketing by Harley-Davidson.

*Principles of Marketing, Kotler & Armstrong, 11th Edition

Some "wireless" legislation...

Some legislation related to Monday's conversation on the issue of marketing to mobile phone users...

Team Post (2 of 2): The Marketing Mix at P&G

As we finish up with our Introduction to Marketing class, the P&G team would like to offer this brief summary of the marketing mix currently being utilized by the real P&G team.

Thanks very much to Annamarie, Linda, Rambo and Xinkai for your hard work and enthusiasm.

An aviation passage to India

During our class discussion following Raj’s presentation, I briefly mentioned a rapidly growing aviation market in India. In reviewing the news this morning, I found an article (Indian aviation comes of age) that provides some of the details supporting the enormous aviation growth that is occurring in India and another (Now Boeing, Airbus fight over engineering centre) that speaks to the development of engineering (maintenance), pilot training and other educational facilities in the country to support this rapid growth.

Searching for...

my two cents on Google, Technorati and Feedster

A Marketing Student’s Observations of the 2005 US Grand Prix

I had the opportunity to travel to Indianapolis, Indiana this past weekend to see the Formula One (F1) cars race in the US Grand Prix at the Indianapolis Motor Speedway. Other than the race itself (or lack thereof), I was particularly interested in observing the marketing and promotion activities. So here are some notables:

1. Ad placement (signs, turf painting, banners, etc.) were positioned for the TV cameras…not for the fans at the race. While the cars were at other locations around the track not visible from our seats, we watched the large television screen positioned in the in-field and all views included advertising behind the car.


2. With companies like Allianz, RBS and Orange advertising in Indianapolis, clearly Americans were not the target market.


3. Promotional…Foster’s sold beer cans with an F1 logo; Miller beer cans had an Indianapolis Motor Speedway logo. I observed that the average consumer was probably not in a condition to even recognize the presence of this logo.


4. Merchandise…I needed to purchase a Red Bull hat, but I wasn’t prepared to pay $45 for one. After shopping around (booths in an area less than an acre), I was also quoted $30 and $35 for the same hat…$30 bucks for a hat?! With the number of middle-aged men lined up to see the Red Bull girls at the kiosk, I suspect they could’ve charged quite a bit more…and still sold plenty of hats.


5. Parking…one entrepreneur living in a home across the street from the track charged $10 for parking on Friday…$50 on Saturday…and $100 on Sunday.


6. F1 cars do not seem to have the same amount of advertising that a NASCAR car does, as a percentage of surface area.

The race was extremely disappointing due to the fact that only six of twenty cars participated. At this point, the details are still unfolding, but it has no doubt done damage to the sport of Formula One racing. Besides Formula One, the FIA, Michelin and the Indianapolis Motor Speedway will be scrambling to recover from this disaster. As an example, on the way out of the track I heard numerous people saying that they would never purchase a Michelin product again.

Unfortunately, I would not be surprised to hear that F1 will not be returning to Indianapolis next year…or even America for that matter.

Price Post (3 of 3): Interesting break-even pricing analysis…

If you have been following commercial aviation during the past couple of years, no doubt you are familiar with the two big players…Boeing and Airbus. Boeing is currently developing the 787, previously called the 7E7 Dreamliner, and Airbus has recently entered flight test with their A380. These airplanes represent two very different philosophies toward the future of airline travel.

Boeing believes that customers want point to point (P2P) travel and the 787 is being designed with that concept in mind. P2P eliminates the hub connection. Airbus claims that larger passenger airplanes that fly between hubs will be the future of commercial air travel.

Airbus believes they can sell between 1,250 and 1,650 A380s over the next twenty years. Boeing sees the market for a large airplane like the A380 near 270. Needless to say, the contrast between each company’s assessment of the future marketplace and consumer needs (Pg. 6*) is extreme.

How do you work a pricing strategy for a program that will run more than twenty years and is extremely expensive? One approach is break-even pricing or target profit pricing. Our book (Pg. 321*) defines this as setting price to break even on the costs of making and marketing a product; or setting price to make a target profit.

Initially Airbus announced that 250 A380s would be the break-even point for the $10.7 billion program. Cost overruns have pushed the total over $12 billion and the new break-even point has been set at 300 airplanes. To compound matters further, Airbus has received almost $4 billion dollars in launch aid from various governments. These subsidies stipulate that the loans do not need to be repaid until the program reaches 40% of the total projected sales. Not a bad deal…if you’re Airbus. Boeing is seeking to resolve this discrepancy, but that’s for another blog post.

While the break-even concept is simple, subtract variable costs (engines, aluminum, avionics, etc.) from the selling price (airplane cost to the customer) and divide that number into the fixed costs (manufacturing facilities, engineering, management, etc.) and you will have the number of, in this case, A380s that Airbus must sell to break-even on the investment.

With cost overruns (almost $2 billion) and the fact that most new airplanes are discounted to facilitate initial sales, the 50 additional A380s sales required to get to the break-even point is not surprising…I wonder if it’s not more than that. Perhaps Airbus knows something that Boeing (and many of us) don’t know, but it certainly doesn’t appear that way…especially given the fact that they’ve only sold 144 A380s to date and they’re continuing to push new customer deliveries back.

Take a look a look at Randy Baseler's blog for more information.

*Principles of Marketing, Kotler & Armstrong, 11th Edition

A New Blog at Boeing

Here's the Boeing 777-200LR Flight Test Journal...

Product Report (1 of 2, MTMU): EP Henry

As part of our ongoing home improvement projects, we’ve decided to enhance our yard area with some landscaping and walkways. Last year I took some time to build an ipé deck, but with this class (and a couple of more scheduled through the end of the year) and other activities requiring quite a bit of my time, we’ve decided to have this work done by a professional.

Because I enjoy working around the yard, I’m actually somewhat disappointed that I won’t be able to tackle this project myself. However, I did take the opportunity to do some research into materials, techniques, tools, etc. that go into such an effort. As I learned more, EP Henry Hardscaping Products kept coming up in all of my conversations and internet searches. EP Henry actually takes credit for coining the term “hardscape” which describes the interlocking pavers used to line residential and commercial walkways, driveways, patios, steps, and retaining walls. Brand equity (Pg. 249*) maybe?

Armed with an awareness of their products (and enough marketing knowledge from my Introduction to Marketing class to be dangerous), I’ve been amazed to see their products used at a variety of locations that I visit during the course of a week. Perhaps it is because EP Henry is a local company, but I think that it goes a bit deeper than that…do a Google search for hardscaping and you’ll find them listed third (Home & Garden TV is #1 and Hoy Landscaping is #2…incidentally, Dan Norton from Hoy is a blogger too). Furthermore, with more than 10 consecutive years of double-digit revenue growth, EP Henry must be doing something right. Sound like solid branding (Pg. 243*) to you?

In reviewing the basic concepts that can be applied to EP Henry, I believe that they truly have a large market. For example, you can make the case that their pavers are a consumer product, specialty product and even an industrial product (Pgs. 235, 236*). In looking through their 2005 Idea Catalog, you get a real sense of the extent of their product line (Pg. 247*). I counted 15 different paving stone styles and 11 different wall systems. Different prices, colors and shapes increase the each product line length.

It’s no surprise that Mark Fuss, vice president for sales and marketing at EP Henry told Daniele Cruz of the Gloucester County Times, “We strive to be the Kleenex of the hardscaping industry.” With that kind of enthusiasm, it’s no wonder they’re doing so well.

*Principles of Marketing, Kotler & Armstrong, 11th Edition

Be Careful

Here's an article that discusses some of the ramifications of blogging. No doubt this will become a difficult (and perhaps explosive) topic in the very near future. Regardless of your opinion on the future of blogging, business leaders would be wise to develop and establish a corporate policy to address blogging about work outside of the office. The article mentions that IBM recently created guidelines for blogging, while Microsoft does not have a formal set of rules and seems to be encouraging it from the highest levels.

Anyway, maybe it's better stated...be smart.

Team Post (1 of 2): New Price Strategy At P&G?

As a Crest SpinBrush owner, I was surprised to read about my new electric toothbrush in Chapter 10* (Pricing Products: Pricing Considerations and Approaches 304) a couple of weeks ago. What is most interesting is the fact that I initially purchased the product because of its extremely low price when compared to some of the other competing brands.

While the book discussed how P&G used target costing to set the ideal selling price (Pg. 311*), I recently learned that this was a departure from P&G’s traditional pricing strategy. In Robert Berner’s BusinessWeek article, he pointed out that P&G usually prices new products higher to recover the cost of development. Recently, however, competitors have been able to introduce new products quicker which has taken the advantage away from P&G sooner.

Because SpinBrush was designed to be sold for no more than $5.00 and the designers of the brush were leading the product team, they pushed to sell the SpinBrush at the price they initially conceived and ultimately they prevailed. It seems obvious that P&G used market-penetration pricing (Pg. 333*) when the price for SpinBrush was established. With more than $200 million in global sales for the 2001 fiscal year, it would appear that this deviation paid off well for them.

*Principles of Marketing, Kotler & Armstrong, 11th Edition

Unique Public Relation Tool?

While preparing for class over the weekend, I read Chapter 12* (Marketing Channels and Supply Chain Management 358) which opened with a summary of how Caterpillar has “dominated the world’s heavy construction, mining, and logging equipment” industry by utilizing the various concepts that were covered in the chapter.

As I was reading, I recalled a recent Orange County Chopper (OCC) episode that featured a motorcycle that was custom built for Caterpillar. While the motorcycle has nothing to do with marketing channels and supply chain management utilized by Caterpillar, I thought it would be an interesting transition to the concepts that are coming up in Chapter 15* (Advertising, Sales Promotion, and Public Relations 452).

*Principles of Marketing, Kotler & Armstrong, 11th Edition

Someone else's two cents...

Here we have different perspective on the future of blogging in the marketing arena...I liked Steve Rubel's advice to FedEx...

New and Improved Technorati?

Read about Technorati's new site that is in development on Lee Odden's blog...thought some of my classmates might enjoy checking it out.

Title: Price Post (2 of 3): Less for the Same?

As airlines continue to search for ways to reduce costs and increase revenues while trying to maintain some level of positive customer satisfaction, Northwest Airlines is testing a program that charges passengers to check their luggage in curbside. As I read Liz Fedor’s article, several concepts that are covered in our reading and discussed in class came to mind.

It is interesting to observe that Northwest is testing this service in the Seattle market first rather than rolling it out to all of their customers at the same time. Hopefully this is part of their bigger marketing strategy (Principles of Marketing, Kotler & Armstrong, 11th Edition, Pg. 276, Figure 9.1) which has “Test Marketing” as a key step in the overall introduction of a new product or service. If the analysis of the data collected indicates a successful test, as defined by their research objectives, a decision will be made at the end of this summer concerning expansion of the program to other locations that they serve.

I think that it’s safe to say that Northwest isn’t rolling this program out as a new business unit; however, because the industry as a whole is paying particular attention to spending as both competition and fuel costs increase, this is another avenue to increase income without increasing spending. You can make the case that the customer is getting “less for the same.” (Principles of Marketing, Kotler & Armstrong, 11th Edition, Pg. 221) Previously, curbside check-in was part of the service and the cost to the passenger was the amount that he tipped the skycap. Now, ticket prices remain the same (relatively speaking) and an additional fee of the $2 per bag is added for a service that was previously included…definitely not a desirable attribute.

On that note, Northwest needs to be cognizant of the potential impact that initiating a price change (Principles of Marketing, Kotler & Armstrong, 11th Edition, Pg. 345) may bring. Because United Airlines is already charging for skycap service, Northwest may have been able to gather data on customer reaction to the new charge prior to moving ahead with their test…although it’s unlikely that we’ll see an increasing price war centered around skycap fees similar to the one that Jenny discusses in her blog.

In conclusion, I see the rationale for charging for the skycap service, but it’s seems like a band-aid fix.

Talk about using what you're learning...

Check out David's project in the news...

Picking up momentum...

While the information in this article is not necessarily new to me now (after three weeks of class), it does seem to support the case that corporate blogging will be here for a while. It will be interesting to see how blogging takes shape in the years to come and how business leaders choose to use (or ignore) this tool.

Marketing Connexion...

Here's a quick article from the Connexion website that touches on Alex's comment concerning customer acceptance as well as some of the concepts that we'll probably cover in Chapter 19 (The Global Marketplace).

Price Presentation Post: Making the Connexion

In May 2004, Boeing introduced Connexion to the aviation industry. Connexion allows passengers access to high speed data transfer for internet, intranet and e-mail services at “ground based pricing” while cruising at 35,000 feet. Even though there are other services available offering digital in-flight communication, Connexion is clearly the best solution.

Bob Brewin’s March 25, 2004 article reported the service at “$29.95 for unlimited use on long-haul flights of six hours or more. And it will charge $19.95 for flights lasting between three and six hours.” An alternative pricing option started at “$9.95 for 30 minutes and 20 cents a minute thereafter.” A quick visit to the Connexion pricing page confirmed that these prices are still current even today.

I believe that Boeing faced an interesting challenge when they developed the pricing for this service. Development and certification costs were no doubt costly; however, if a “Market Skimming Pricing” strategy (Principles of Marketing, Kotler & Armstrong, 11th Edition, Pg. 333) was selected because of the high technology and premium service that is offered, it is possible that passenger subscription would be lower than necessary to recover the costs associated with development. However, it seems that “Value-Based Pricing” (Pg. 322) was ultimately utilized. I was pleasantly surprised at the pricing; it’s an excellent value for the service that is being provided.

Also worth mentioning is that Boeing has two separate customer groups in this endeavor…the airline that equips their aircraft with the Connexion hardware and the passengers that use the in-flight service. Two different customers (airlines and passengers), two different products (Connexion hardware and Connexion service)…two different price strategies.

Because of the airline’s integral role in providing the service and the fact Boeing has developed a superior product, it will be difficult for competitors to emerge and challenge the Connexion market share in the near term; furthermore, they certainly seem to be fairly priced for the future as well.

Attention to detail needed...

In my last post (Two more cents...), I introduced Lee Odden's article "Does your business really need a blog?" In my effort to learn more, I decided to post a comment on his blog. Unfortunately, what I meant to say and what I typed were two VERY different things.

I wrote, "I think that you're correct Lee, blogging isn't going anywhere." In this case, "anywhere" was supposed to be "away." Lee was very gracious, but it reminded me that it's important to pay attention to the details because once you speak...it's out there for the world to see.