Fall+2008+Section+07-PS+Week+3

=Class Discussion For Week 3= //** In an effort to keep the Wiki page organized, please input your comments under the appropriate heading. If there is a topic you'd like to debate, discuss, or get input on; please use the text color red. **// From Class Reading (Market-Based Management Book): __**
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**__Brita Case:__** Link to Brita explanation and spreadsheet __**
 * __[[file:BritaExplanation.pdf]]

Charlie Couric proved that a good idea backed by a well formulated plan (and unwavering determination) can be a powerful force. This is validated by the way his team took "Novelty item" and converted it into a mainstream consumer product. This business model of getting consumers to purchase a "main product" at a discount (and hooking them on required consumable components), became widely used. Look for example at "SoniCare" toothbrushes (where heads must be replaced) or "Mach3" Shavers (were blades must be routinely purchased). Finally, Brita had it’s head in the clouds with respect to “Faucet mounted filter” products (can you say Sony Walkman…).

When we look at the strategy of Brita, and their decision not to go head to head with PUR's faucet water purification system we can also see a missed opportunity.The opportunity to market themselves as a more "Green" company. As stated in this case and many other cases we have read the marketing strategy for non-carbonated beverages, water in this case, has been a huge success. But at what expense. Take for instant the "Great Pacific Garbage Patch".

The Great Garbage Patch is twice the size of Texas. One of the largest components in this is plastic bottles. One of the first things put in front of you when you visit PUR's web page they make it a point to illistrate how much their products help the environment. With a continuous move toward business need to be more socially responsible, that responsibility can inturn be used as a marketing strategy.

This is incredibly interesting to find out; I just had to do more digging. Here are some sites which go into more detail and offer video and audio about it.

http://www.npr.org/templates/story/story.php?storyId=15713260 -- Audio with a captain which has to navigate the rubbish patch

http://science.howstuffworks.com/great-pacific-garbage-patch.htm -- the How Stuff Works page about it (I love this site in general)

http://www.aidg.org/component/option,com_jd-wp/Itemid,34/p,1110/ -- Documentary about it (has some language).

http://en.wikipedia.org/wiki/Gyre -- and the Wiki of why/how it happens

The more we look at the impact of disposable items, use to make the most revenue, such as when Clorox sells a Toilet wand, Bathtub cleaning handle and the Mop n Go more plastic rubbish is added to our land fills.

This movement of "Reduce, Reuse, Recycle" is one thing these items are not taking into consideration. This is one thing PUR is and would appear could greatly impact sales revenue in the future.

WOW....great post on the environmental impacts of consumable products. I had not idea that these huge garbage masses existed (of course one could easily assume they do exist, but never had seen pictures). By the way....I own a PUR water purifier for my camping trips (simply love it).  I agree that the 3 R’s, and ‘going green’ are popular and may improve sales for some products. However, Brita and Pur may hurt themselves if they focus too much on the environment. Brita and Pur are not selling a product that is necessary for water consumption in the US. With a few exceptions, most water that comes out of the tap is safe to drink. Consumers are buying a filter that makes water taste ‘better’. Pur and Brita filters are not currently recyclable in the US, so they end up in landfills (or sink to the bottom of ocean). Many believe that TAP water (in the US) is clearly the way to go to be "green". See below links. Many filters actually filter out those things that are added to the water (like fluoride) which we need, or are useful to us. Earth2O, for example, it bottled off the Deschutes Water district. Bull Run water is now bottled by HotLips Pizza. I guess they just fill the bottles up in the back of the store. Another reason to drink tap water: PUR water per gallon: $0.24 Home Delivery per gallon: $1.50 Tap water per gallon: $0.005

http://idealistdc.wordpress.com/2007/09/04/bottle-vs-tap-vs-filter-sustainable-hydration/

There are three sources of competitive advantage: - Cost Advantage - Differentiation Advantage - Marketing Advantage. In the mid-90s many Las Vegas hotels and casinos were using the differentiation advantage by creating themed environments. For example, the Mirage had live Tigers, the MGM had a theme park, and Treasure Island had a pirate fight each night. Harrah's felt too "old" and thought too expensive to take the differentiation route. Instead, Harrah's took the marketing advantage by building customer relationship databases and offering customers a Total Gold program. The Total Gold program allowed customers to play for rewards at various hotels along the strip, and Harrah's built data to predict CLV.
 * __Harrah's case:__**

Harrah's was able to develop a brand that targeted the demographics it intended to. Research showed the most profound emotion of gaming was the feeling of anticipation and exuberance. With this research, Harrah's management spent up to $20 million a year marketing and advertising the feeling of anticipation.

It was interesting to me the technique Harrah took with their Customer Relationship Management system. They took it to another level. The casino industry had determined customer worth or CLV based on past play. Quantitative models allowed Harrah's to accurately predict "customer worth." This ability capitalized on an advantage to what their customers were worth to them in the future.

This formula from the article was interesting to me:

Theoretical Win

Theoretical Win from a Customer per day = A * B * N * H A = the house advantage on a game B = the average bet N= the number of bets per hour H= the number of hours played per day

One thing I found interesting form this case is that Harrah's actually has it's roots (i.e. began) in Reno, not Las Vegas. Personally, I have always associated Harrah's with Vegas. Started as a bingo hall by a 26yr old, this I also find fascinating...Old William Fisk Harrah hit the jackpot with that one...I mean BINGO!!! Harrah's website illustrates some highly marketed insight into the company. http://www.harrahs.com/?source=bkv4100014175

__ **Ariely’s “The Customers’ Revenge:"** The expectations within 'customer service' are rapidly changing. Technological developments allow individuals within the global market to spread information faster than ever before, creating an open venue to publicize praises or critiques of a specific company or service. Because of this ability to send effective messaging, with an unlimited potential for content, customer service is vital to a company's branding and marketing effort. Customer service must evolve to the expectations of their customers, using a measurement of solutions created, rather than complaints documented.

__ //The Customer's Revenge: What is technologies impact on customer service?// The internet and customer review sites have changed the liability of customer service. Just as the six degrees of separation has lowered to four, the connection between an angry customer and his audience has also decreased. Sites such as Yelp and CitySearch give customers a venue to vent their frustrations. Furthermore, when a customer is not receiving the attention she believes is necessary, these public sites give her the audience she seeks. This instant public audience creates a real liability even for customer friendly organizations. One poor review can now be viewed by thousands of visitors.

Here is an interesting blog about the customer comment site Yelp and its ramification for customer care: http://blogs.techrepublic.com.com/tech-manager/?p=322

__ **Ofek’s “Customer Profitability and Lifetime Value:”** __ Marketing is rapidly becoming " the science and art of finding, retaining, and growing profitable customers." - Philip Kotler and Gary Armstrong At what point does a company cross the line by gathering too much data on any given customer? Anil Batra's blogging site (link below) describes how Google is using behavioral targeting to gather information from third party sites like hp.com and then uses the information to provide search result on their own site, regardless if you did the search through google.com. [|Google collecting data on 3rd party sites to target ads on Google.com] From the company's perspective, it would be difficult to have "too much" information about a client, unless you didn't have the resources to property analyze that information. And continuing from that perspective, clients should be happy that the companies are so interested in their preferences and this information can help companies deliver a product that fulfills a need that may have otherwise not been.

__ **From Class Discussion and Lecture:** __

Customer Satisfaction (Operational Marketing) Based segmentation on behavior = 1. What is the value of the business to us and 2. can we satisfy the segment we are targeting. Yankelovich's number 2 is "ID the most popular customer". Through both the company and customer perspective ask "are we satisfied with each other?"

GAP Theory: Word of mouth sets the expectation and the 5 P's provide the experiences that meet the expectation.

Customer lifetime value: CLVi = [Contribution] – [Marketing & Support Cost]

TI = predicted number of purchases by customer i N = number of years to forecast C = cost of each contact X = number of contacts R = discount rate Frequency = predicted purchase frequency
 * Sales minus variable costs – to address fixed cost
 * Valuing a customer segment based on purchase
 * Compare campaigns AND compare business plans that assume behavior
 * Good customer versus bad customer (using Net Present Value)

Real Options If we know we have a bad customer, why keep him/her for another year and continue loosing money. Exercise your ‘real option’ by identifying bad customer and helping them self select out of the relationship. Changing the incentives, dynamic pricing, removing features and changing options are all ways to exercise your 'real option' (209 words)

Another way to think about it is Pareto principle or the 80/20 rule. 20% of your clients produce 80% of your income. Etc. for more on the Pareto visit another wiki site http://en.wikipedia.org/wiki/80-20_rule


 * __ From Miscellaneous (news, internet sites, articles, etc) :__

See** [|**http://www.zwire.com/site/news.cfm?newsid=20143846&BRD=1817&PAG=461&dept_id=222087&rfi=6**] **for an article dated September 30, 2008, on how Harrah's has expanded its program "**Now, the program has expanded to offer customers rewards without gambling, giving the company new data to mine about its patrons away from the black jack tables and slot machines. Harrah's will reward customers for spending on entertainment, restaurants and other services at the same level it rewards betting on slots." "For example, a concertgoer who sees a country show at the Whiskey Roadhouse at the Horseshoe Hotel-Casino in Council Bluffs, Iowa, might get free tickets to see Tim McGraw the next time she visits Las Vegas. Golfers in Biloxi, Miss., who frequent the company's Jack Nicklaus-designed course there could get free green fees if they go to Atlantic City" "Norton said nongambling revenue already has outpaced gambling revenue the past few months and is the area where the company sees the most potential for more revenue, even as casinos struggle to maintain visitors and grow in a rough U.S. economy." "Norton said Harrah's is hoping to increase its share of nongambling revenue by learning all it can about how people spend their money, whether they gamble or not."