Impact of the Internet on Pricing<\/h3>\r\n
The internet, corporate networks, and wireless setups are linking people, machines, and companies around the globe\u2014and connecting sellers and buyers as never before. This link is enabling buyers to quickly and easily compare products and prices, putting them in a better bargaining position. At the same time, the technology enables sellers to collect detailed data about customers\u2019 buying habits, preferences, and even spending limits so that they can tailor their products and prices. Amazon, as well as online businesses from traditional retailers such as Walmart, have drastically changed the retail landscape. Amazon<\/span>\u2019s Prime membership, which offers free shipping and other amenities for an annual fee, has also taken market share from traditional low-cost warehouse clubs such as Costco<\/span> and Sam\u2019s Club<\/span>.[footnote]Eugene Kim, \u201cAmazon\u2019s Prime Membership Is Eating into Costco and Sam\u2019s Club\u2019s Territory,\u201d Business Insider,<\/em> http:\/\/www.businessinsider.com, September 26, 2016.[\/footnote]<\/p>\r\n Online price-comparison engines, known as shopbots, are continuing to add new features. ShopSmarter.com now includes coupons and additional retailer discounts in its price results. In the past, consumers had to click deep into a retailer\u2019s site to find out about these additional savings. Vendio eCommerce introduced a toolbar that people can download. If a person is on the web page of a particular product\u2014whether it\u2019s an iPhone or a Canon digital camera\u2014the toolbar flashes a blinking alert when it finds a lower price for that same item somewhere else. The person can then open a window on the side of the site to learn details of the cheaper price\u2014or simply ignore the alert. BuySAFE introduced a website that lets consumers search among about 1.5 million products that are backed by antifraud guarantees. If a buyer purchases one of the items and the seller fails to deliver, the buyer can get reimbursed for the full cost up to $25,000. Merchants on the site include those that sell on eBay<\/span> and Overstock.com<\/span>.<\/p>\r\n Use of these sites has boomed in the past few years as people have become more reliant on the web both as a research tool and as a place to shop. According to a recent survey, more than 90 percent of consumers have used a smartphone when comparison-shopping in stores.[footnote]Glenn Taylor, \u201cMore than 90% of Consumers Use Smartphones While Shopping in Stores,\u201d Retail Touch Points,<\/em> https:\/\/www.retailtouchpoints.com, August 20, 2015.[\/footnote]\u00a0Much of the growth has come from the more-established sites such as Shopify<\/span>, Bizrate, and NexTag, as well as the shopping sections of Amazon<\/span>, Microsoft<\/span>\u2019s MSN, and Google<\/span>. The big attraction with shopping comparison services, of course, is the hunt for a better bargain. Merchants like the sites because they help drive consumer spending. Consumers who use comparison-shopping sites for product information or in-store discount coupons spend more than those who don\u2019t.\u00a0[footnote]Daniel Boffey, \u201cGoogle Price Comparison Site to Compete with Rivals for Top Search Slot,\u201d The Guardian<\/em>, https:\/\/www.theguardian.com, September 27, 2017.[\/footnote]<\/p>\r\n\r\n<\/div>\r\n In the 1960s, network television enabled advertisers to \u201cget the same message to everyone simultaneously.\u201d Database marketing can get a customized, individual message to everyone simultaneously through direct mail or through the internet. This is why database marketing is sometimes called micromarketing.<\/em> Database marketing can create a computerized form of the old-fashioned relationship that people used to have with the corner grocer, butcher, or baker. \u201cA database is sort of a collective memory,\u201d says Richard G. Barlow, president of Frequency Marketing, Inc., a Cincinnati-based consulting firm. \u201cIt deals with you in the same personalized way as a mom-and-pop grocery store, where they knew customers by name and stocked what they wanted.\u201d<\/p>\r\nYou have also probably heard the term big data. Companies such as Facebook and Google can process information and then tailor information to provide marketers with higher-probability targets. For instance, imagine that you and some friends are discussing a spring break vacation and you are searching for possible locations on the Florida gulf coast. That data, along with the social group considering the vacation, can be sold to companies that provide travel services, airline flights, hotel rentals, and the like. Suddenly, you and your friends see travel offers and alternate destinations on your Facebook page. Likewise, imagine you are looking for a mystery novel to read on a long flight. Let\u2019s say that you are also searching for ways to remove a rust stain on a favorite sweater. When you go to your Amazon page, you see several new mystery novels as well as cleaning solutions highlighted on your page. All of this was done through the use of big data and analytics to provide consumers solutions they are looking for as well as products that they don\u2019t even know that they want. (Figure)<\/a><\/strong> contrasts the differences in approaches in traditional advertising versus targeted marketing using big data.\r\n The size of some databases is impressive: Ford<\/span> Motor Company\u2019s is about 50 million names; Kraft<\/span> General Foods, 30 million; Citicorp<\/span>, 30 million; and Kimberly Clark<\/span>, maker of Huggies diapers, 10 million new parents. American Express<\/span> can pull from its database all cardholders who made purchases at golf pro shops in the past six months, who attended symphony concerts, or who traveled to Europe more than once in the past year, as well as the very few people who did all three.<\/p>\r\nCompanies are using their marketing databases to implement one-to-one marketing. For example, Novartis Seeds<\/span>, Inc., a Minneapolis-based agriculture business, produces individually customized, full-color brochures for 7,000 farmers. Each piece features products selected by Novartis dealers specifically for the farmer based on information collected about the farm operation and the types of crops grown. Instead of the 30-page catalog Novartis traditionally sent, these customers get a one-page brochure with only the five or six products they need, plus other complementary products dealers feel they should consider.\r\n The internet has given pricing power to both buyers and sellers. A second trend is that many firms are using databases to create one-to-one marketing. Also, the large amount of information that is available to marketers is being mined and analyzed to target specific customers with personalized messages rather than creating one message that is aimed at a broad audience.<\/p>\r\n\r\n<\/div>\r\n As cosmetics companies roll out line after line of products to satisfy consumers\u2019 quest for youth, the shelves are getting crowded. How can a company stand out? Products such as the Cosmedicine and Rodan+Fields lines promote their affiliation with research institutions and medical doctors to distinguish them from their competition.<\/p>\r\n Shortly after Johns Hopkins University began consulting with the then-owner of the company that produced Cosmedicine products, medical ethicists criticized Johns Hopkins for this arrangement. Hopkins initially defended its position, claiming that its consulting work does not imply any endorsement of Cosmedicine. \u201cWe have been pretty clear about our role,\u201d said Hopkins CEO Edward Miller. \u201cWe are reporting on the scientific validity of studies that were done by outside testing agencies.\u201d Cosmedicine packaging includes a disclaimer that discloses the nature of the research and financial relationship between Hopkins and the cosmetics company. Similarly, Rodan+Fields was established as a cosmetics company by two medical doctors. They began their company by starting out as a multi-level marketing company. The practice of multi-level marketing by companies like Herbalife, Rodan+Fields, Beachbody, and Plexus also is controversial to some. Basically, multi-level marketing enlists a new salesperson by making the individual purchase training and inventory of the company product at a discount and begin selling the product at retail prices, while also recruiting new salespeople as their \u201cdownline\u201d salespeople. The idea is that eventually you will make most of your income via the results of your downline salespeople\u2014the people you brought into the business.<\/p>\r\n There are numerous critiques of multi-level marketing, the most notable being investor Bill Ackman\u2019s accusation that weight loss company Herbalife was engaging in a pyramid scheme. A pyramid scheme is an arrangement whose entire whole purpose is the enrichment of the top of the pyramid at the expense of new recruits. Herbalife was able to refute Ackman\u2019s accusations in a lawsuit brought against them by showing that their results were based on product sales rather than recruitment and that they offered money-back guarantees if the recruits were unable to sell the product.<\/p>\r\n Ethical Dilemma<\/strong>: Is it ethical for research institutions like Johns Hopkins and medical doctors to endorse products such as skin care? Is the practice of multi-level marketing ethical? Does the money-back guarantee provided by Herbalife provide evidence that they are not engaged in a pyramid scheme?<\/p>\r\nSources: \u201cMulti-Level Marketing,\u201d Investopedia,<\/em> http:\/\/www.investopedia.com, accessed October 1, 2017; Alissa Fleck, \u201cHow Women Making Men Rich Has Been Misbranded as Feminism,\u201d Huffington Post,<\/em> http:\/\/www.huffingtonpost.com, August 28, 2017; Kristen Calderaro, \u201cWhy Are Doctors Becoming Rodan+Fields Consultants?\u201d LinkedIn<\/em>, https:\/\/www.linkedin.com, October 29, 2015; Rhonda L. Rundle, \u201cA New Name in Skin Care: Johns Hopkins,\u201d The Wall Street Journal,<\/em> April 11, 2006, p. B1.\r\n\r\n<\/div>\r\n Coca-Cola is promoting its new Full Throttle energy drink, PepsiCo Inc. is marketing energy drinks under its SoBe and Mountain Dew brands, and smaller companies are challenging the soft drink giants with products such as Powerade, Rockstar, and FUZE Mega Energy. With concerns about the amount of sugar in soft drinks and the negative health effects that can cause, brands such as Vitaminwater and Bai have garnered significant market share and have been acquired by soft drink giants such as Coca-Cola and Dr Pepper.<\/p>\r\n The person behind the success of Powerade, Vitaminwater, and Bai is Rohan Oza. After graduating from the University of Michigan\u2019s business school, Oza began working at Coca Cola, where he worked on brands such as Sprite and Powerade. After Oza left Coca Cola for more entrepreneurial challenges, he scored a coup with Smartwater, where he was able to approach Jennifer Aniston to become the endorser of the product. He also was able to attract rapper 50 Cent as an endorser of Vitaminwater. On the arrangement with 50 Cent, he took no fees for the endorsement, instead opting for equity in the company. It looks like this was a sound strategy, since Vitaminwater parent Glaceau sold to Oza\u2019s former employer, Coca Cola, for $4.2 billion in 2007.<\/p>\r\nOza did not stop after the Vitaminwater success. He started Bai and partnered with Justin Timberlake to establish that brand. Just as he did with Jennifer Aniston and Smartwater, and with 50 Cent and Vitaminwater, Oza works on making sure that he has the correct strategy to match the features and benefits of the brand with just the right celebrity endorser. With Bai, a sparkling drink that features antioxidants as a product benefit, Oza was able to convince Timberlake, an entrepreneur in his own right, to invest in Bai. So Timberlake was not only an endorser but a part owner, and he has been intimately involved in the brand strategy. This partnership worked as well, because Bai was sold to the Dr Pepper Snapple Group for $1.7 billion in 2016.\r\n Sources: John Lynch, \u201cHollywood\u2019s \u2018Brandfather\u2019 Talks About His New Role on \u2018Shark Tank,\u2019 Working with 50 Cent and Justin Timberlake,\u201d Business Insider<\/em>, http:\/\/www.businessinsider.com, October 1, 2017; Heidi Parker, \u201cShe Has Great Ideas and Is Savvy,\u201d The Daily Mail,<\/em> http:\/\/www.dailymail.co.uk, September 17, 2017; Katie Benner, \u201cHe\u2019s Like to Buy the World Something Other Than a Coke,\u201d The New York Times<\/em>, https:\/\/www.nytimes.com, January 6, 2017.<\/p>\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n 10. What trends are occurring in products and pricing?<\/p>\n As customer expectations increase and competition becomes fiercer, perceptive managers will find innovative strategies to satisfy demanding consumers and establish unique products in the market. Satisfying customers requires the right prices. The internet has delivered pricing power to both buyers and sellers. Another significant trend is the use of one-to-one marketing to create a customized marketing mix for each consumer.<\/p>\n The internet, corporate networks, and wireless setups are linking people, machines, and companies around the globe\u2014and connecting sellers and buyers as never before. This link is enabling buyers to quickly and easily compare products and prices, putting them in a better bargaining position. At the same time, the technology enables sellers to collect detailed data about customers\u2019 buying habits, preferences, and even spending limits so that they can tailor their products and prices. Amazon, as well as online businesses from traditional retailers such as Walmart, have drastically changed the retail landscape. Amazon<\/span>\u2019s Prime membership, which offers free shipping and other amenities for an annual fee, has also taken market share from traditional low-cost warehouse clubs such as Costco<\/span> and Sam\u2019s Club<\/span>.[1]<\/sup><\/a><\/p>\n Online price-comparison engines, known as shopbots, are continuing to add new features. ShopSmarter.com now includes coupons and additional retailer discounts in its price results. In the past, consumers had to click deep into a retailer\u2019s site to find out about these additional savings. Vendio eCommerce introduced a toolbar that people can download. If a person is on the web page of a particular product\u2014whether it\u2019s an iPhone or a Canon digital camera\u2014the toolbar flashes a blinking alert when it finds a lower price for that same item somewhere else. The person can then open a window on the side of the site to learn details of the cheaper price\u2014or simply ignore the alert. BuySAFE introduced a website that lets consumers search among about 1.5 million products that are backed by antifraud guarantees. If a buyer purchases one of the items and the seller fails to deliver, the buyer can get reimbursed for the full cost up to $25,000. Merchants on the site include those that sell on eBay<\/span> and Overstock.com<\/span>.<\/p>\n Use of these sites has boomed in the past few years as people have become more reliant on the web both as a research tool and as a place to shop. According to a recent survey, more than 90 percent of consumers have used a smartphone when comparison-shopping in stores.[2]<\/sup><\/a>\u00a0Much of the growth has come from the more-established sites such as Shopify<\/span>, Bizrate, and NexTag, as well as the shopping sections of Amazon<\/span>, Microsoft<\/span>\u2019s MSN, and Google<\/span>. The big attraction with shopping comparison services, of course, is the hunt for a better bargain. Merchants like the sites because they help drive consumer spending. Consumers who use comparison-shopping sites for product information or in-store discount coupons spend more than those who don\u2019t.\u00a0[3]<\/sup><\/a><\/p>\n<\/div>\n One-to-one marketing is creating a unique marketing mix for every consumer. The key to creating one-to-one marketing is a good marketing database. The information contained in a marketing database helps managers know and understand customers, and potential customers, on an individual basis. A marketing database is a computerized file of customers\u2019 and potential customers\u2019 profiles and purchase patterns.<\/p>\n In the 1960s, network television enabled advertisers to \u201cget the same message to everyone simultaneously.\u201d Database marketing can get a customized, individual message to everyone simultaneously through direct mail or through the internet. This is why database marketing is sometimes called micromarketing.<\/em> Database marketing can create a computerized form of the old-fashioned relationship that people used to have with the corner grocer, butcher, or baker. \u201cA database is sort of a collective memory,\u201d says Richard G. Barlow, president of Frequency Marketing, Inc., a Cincinnati-based consulting firm. \u201cIt deals with you in the same personalized way as a mom-and-pop grocery store, where they knew customers by name and stocked what they wanted.\u201d<\/p>\n You have also probably heard the term big data. Companies such as Facebook and Google can process information and then tailor information to provide marketers with higher-probability targets. For instance, imagine that you and some friends are discussing a spring break vacation and you are searching for possible locations on the Florida gulf coast. That data, along with the social group considering the vacation, can be sold to companies that provide travel services, airline flights, hotel rentals, and the like. Suddenly, you and your friends see travel offers and alternate destinations on your Facebook page. Likewise, imagine you are looking for a mystery novel to read on a long flight. Let\u2019s say that you are also searching for ways to remove a rust stain on a favorite sweater. When you go to your Amazon page, you see several new mystery novels as well as cleaning solutions highlighted on your page. All of this was done through the use of big data and analytics to provide consumers solutions they are looking for as well as products that they don\u2019t even know that they want. (Figure)<\/a><\/strong> contrasts the differences in approaches in traditional advertising versus targeted marketing using big data.<\/p>\n Traditional Advertising and Targeted Marketing Using Big Data (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)<\/p>\n<\/div>\n<\/div>\n The size of some databases is impressive: Ford<\/span> Motor Company\u2019s is about 50 million names; Kraft<\/span> General Foods, 30 million; Citicorp<\/span>, 30 million; and Kimberly Clark<\/span>, maker of Huggies diapers, 10 million new parents. American Express<\/span> can pull from its database all cardholders who made purchases at golf pro shops in the past six months, who attended symphony concerts, or who traveled to Europe more than once in the past year, as well as the very few people who did all three.<\/p>\n Companies are using their marketing databases to implement one-to-one marketing. For example, Novartis Seeds<\/span>, Inc., a Minneapolis-based agriculture business, produces individually customized, full-color brochures for 7,000 farmers. Each piece features products selected by Novartis dealers specifically for the farmer based on information collected about the farm operation and the types of crops grown. Instead of the 30-page catalog Novartis traditionally sent, these customers get a one-page brochure with only the five or six products they need, plus other complementary products dealers feel they should consider.<\/p>\n The internet has given pricing power to both buyers and sellers. A second trend is that many firms are using databases to create one-to-one marketing. Also, the large amount of information that is available to marketers is being mined and analyzed to target specific customers with personalized messages rather than creating one message that is aimed at a broad audience.<\/p>\n<\/div>\n As cosmetics companies roll out line after line of products to satisfy consumers\u2019 quest for youth, the shelves are getting crowded. How can a company stand out? Products such as the Cosmedicine and Rodan+Fields lines promote their affiliation with research institutions and medical doctors to distinguish them from their competition.<\/p>\n Shortly after Johns Hopkins University began consulting with the then-owner of the company that produced Cosmedicine products, medical ethicists criticized Johns Hopkins for this arrangement. Hopkins initially defended its position, claiming that its consulting work does not imply any endorsement of Cosmedicine. \u201cWe have been pretty clear about our role,\u201d said Hopkins CEO Edward Miller. \u201cWe are reporting on the scientific validity of studies that were done by outside testing agencies.\u201d Cosmedicine packaging includes a disclaimer that discloses the nature of the research and financial relationship between Hopkins and the cosmetics company. Similarly, Rodan+Fields was established as a cosmetics company by two medical doctors. They began their company by starting out as a multi-level marketing company. The practice of multi-level marketing by companies like Herbalife, Rodan+Fields, Beachbody, and Plexus also is controversial to some. Basically, multi-level marketing enlists a new salesperson by making the individual purchase training and inventory of the company product at a discount and begin selling the product at retail prices, while also recruiting new salespeople as their \u201cdownline\u201d salespeople. The idea is that eventually you will make most of your income via the results of your downline salespeople\u2014the people you brought into the business.<\/p>\n There are numerous critiques of multi-level marketing, the most notable being investor Bill Ackman\u2019s accusation that weight loss company Herbalife was engaging in a pyramid scheme. A pyramid scheme is an arrangement whose entire whole purpose is the enrichment of the top of the pyramid at the expense of new recruits. Herbalife was able to refute Ackman\u2019s accusations in a lawsuit brought against them by showing that their results were based on product sales rather than recruitment and that they offered money-back guarantees if the recruits were unable to sell the product.<\/p>\n Ethical Dilemma<\/strong>: Is it ethical for research institutions like Johns Hopkins and medical doctors to endorse products such as skin care? Is the practice of multi-level marketing ethical? Does the money-back guarantee provided by Herbalife provide evidence that they are not engaged in a pyramid scheme?<\/p>\n Sources: \u201cMulti-Level Marketing,\u201d Investopedia,<\/em> http:\/\/www.investopedia.com, accessed October 1, 2017; Alissa Fleck, \u201cHow Women Making Men Rich Has Been Misbranded as Feminism,\u201d Huffington Post,<\/em> http:\/\/www.huffingtonpost.com, August 28, 2017; Kristen Calderaro, \u201cWhy Are Doctors Becoming Rodan+Fields Consultants?\u201d LinkedIn<\/em>, https:\/\/www.linkedin.com, October 29, 2015; Rhonda L. Rundle, \u201cA New Name in Skin Care: Johns Hopkins,\u201d The Wall Street Journal,<\/em> April 11, 2006, p. B1.<\/p>\n<\/div>\n Coca-Cola is promoting its new Full Throttle energy drink, PepsiCo Inc. is marketing energy drinks under its SoBe and Mountain Dew brands, and smaller companies are challenging the soft drink giants with products such as Powerade, Rockstar, and FUZE Mega Energy. With concerns about the amount of sugar in soft drinks and the negative health effects that can cause, brands such as Vitaminwater and Bai have garnered significant market share and have been acquired by soft drink giants such as Coca-Cola and Dr Pepper.<\/p>\n The person behind the success of Powerade, Vitaminwater, and Bai is Rohan Oza. After graduating from the University of Michigan\u2019s business school, Oza began working at Coca Cola, where he worked on brands such as Sprite and Powerade. After Oza left Coca Cola for more entrepreneurial challenges, he scored a coup with Smartwater, where he was able to approach Jennifer Aniston to become the endorser of the product. He also was able to attract rapper 50 Cent as an endorser of Vitaminwater. On the arrangement with 50 Cent, he took no fees for the endorsement, instead opting for equity in the company. It looks like this was a sound strategy, since Vitaminwater parent Glaceau sold to Oza\u2019s former employer, Coca Cola, for $4.2 billion in 2007.<\/p>\n Oza did not stop after the Vitaminwater success. He started Bai and partnered with Justin Timberlake to establish that brand. Just as he did with Jennifer Aniston and Smartwater, and with 50 Cent and Vitaminwater, Oza works on making sure that he has the correct strategy to match the features and benefits of the brand with just the right celebrity endorser. With Bai, a sparkling drink that features antioxidants as a product benefit, Oza was able to convince Timberlake, an entrepreneur in his own right, to invest in Bai. So Timberlake was not only an endorser but a part owner, and he has been intimately involved in the brand strategy. This partnership worked as well, because Bai was sold to the Dr Pepper Snapple Group for $1.7 billion in 2016.<\/p>\n Sources: John Lynch, \u201cHollywood\u2019s \u2018Brandfather\u2019 Talks About His New Role on \u2018Shark Tank,\u2019 Working with 50 Cent and Justin Timberlake,\u201d Business Insider<\/em>, http:\/\/www.businessinsider.com, October 1, 2017; Heidi Parker, \u201cShe Has Great Ideas and Is Savvy,\u201d The Daily Mail,<\/em> http:\/\/www.dailymail.co.uk, September 17, 2017; Katie Benner, \u201cHe\u2019s Like to Buy the World Something Other Than a Coke,\u201d The New York Times<\/em>, https:\/\/www.nytimes.com, January 6, 2017.<\/p>\n<\/div>\n<\/div>\n<\/div>\nOne-to-One Marketing<\/h3>\r\nOne-to-one marketing is creating a unique marketing mix for every consumer. The key to creating one-to-one marketing is a good marketing database. The information contained in a marketing database helps managers know and understand customers, and potential customers, on an individual basis. A marketing database is a computerized file of customers\u2019 and potential customers\u2019 profiles and purchase patterns.\r\n
![\"Two](\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/3654\/2018\/09\/24150037\/IntroBus-C11-M11-010.png\")
Traditional Advertising and Targeted Marketing Using Big Data (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)[\/caption]\r\n\r\n<\/div>\r\nKey Takeaways<\/h3>\r\n
\r\n \t
Summary of Learning Outcomes<\/h3>\r\n
\r\n \t
Preparing for Tomorrow\u2019s Workplace Skills<\/h3>\r\n
\r\n \t
\r\n \t
Ethics Activity<\/h3>\r\n
Working the Net<\/h3>\r\n
\r\n \t
Creative Thinking Case<\/h3>\r\n
The Brandfather Strikes Gold<\/h4>\r\n
\r\n \t
Hot Links Address Book<\/h3>\r\n
\r\n \t
Glossary<\/h3>\r\n
\r\n \t
\r\n \t
\r\n \t
Impact of the Internet on Pricing<\/h3>\n
One-to-One Marketing<\/h3>\n
<\/p>\nKey Takeaways<\/h3>\n
\n
Summary of Learning Outcomes<\/h3>\n
\n
Preparing for Tomorrow\u2019s Workplace Skills<\/h3>\n
\n
\n
Ethics Activity<\/h3>\n
Working the Net<\/h3>\n
\n
Creative Thinking Case<\/h3>\n
The Brandfather Strikes Gold<\/h4>\n
\n
Hot Links Address Book<\/h3>\n
\n
Glossary<\/h3>\n
\n
\n
\n
Candela Citations<\/h3>\n\t\t\t\t\t