Ask the average adult to open up their wallet and take a look at the number of loyalty cards that spill out. Loyalty programs have been growing in popularity since the early to mid twentieth century which saw the introduction of ‘gold bond stamps’ as mentioned in a CBS article by Kevin Hechtkopf. As Kevin describes, these methods have been around for awhile and have helped contribute to customer loyalty. It was once believed that cash/store credit was the most powerful means with which to reward customers, but some retailers have found that consumers value the ability to collect points, save them up, and trade them in for special items. There are a combination of rewards used today such as coupons, gift cards, early bird specials, etc that all go to ‘loyal customers,’ but retailers are not offering up these lucrative deals without some benefit to them.
On top of gaining loyalty through their programs, retailers are learning critical information from their customers from each swipe of the loyalty card. Catalina Marketing Corporation, has led the way with innovations that help to collect consumer insights and guide retailers in their additional marketing efforts. The benefit that the company receives from their customer loyalty programs and information technologies may not be something that can adequately be represented on a balance sheet, but it is an asset that continues to translate into growth and sales for those who have come to understand and master analyzing the data put forth.
This blog post was written by Katie Tretter, Cassie Wolcott, and Mack O’Connell
The soft drink industry battle between Coke and Pepsi has been around for ages. Most consumers of soft drinks almost always take a side between the two behemoths of the industry. While Coke markets itself as a traditional, family-oriented drink, Pepsi targets younger consumers through its branding, slogans, and the people that they often choose to endorse their brand. In the soft drink industry, there seems to be a clear divide between Coke fans and Pepsi fans, but there it no clear reason why that is the case.
Brand loyalty often occurs when a consumer perceives a brand to have benefits that competitors do not. As a result, a consumer will pick the better perceived brand when they have the choice. In the case of Coke and Pepsi, most people have strong preferences for one of the two brands, so the two brands engage in combative advertising in an attempt to shift consumer preference. Some people argue that Pepsi is sweeter and prefer Coke while others prefer Pepsi for that very same reason.
In a 2004 study published in Neuron magazine, scientists tested whether consumers had a change in taste and preferences when they associated tasting a soda with a particular brand. Scientists concluded that there was “a dramatic effect of the Coke label on behavioral preference (EurekAlert, 2004)” while Pepsi did not influence preference.If a subject had been exposed to “anonymous” cues such as an image of a Coke, MRI scans revealed increased preference in areas of the brain that “are implicated in modifying behavior based on emotion and affect. (EurekAlert, 2004)”What this demonstrates is that taste is almost irrelevant and that perceptions and brand positioning are what truly impacts brand loyalty.
In 2008, Beverage Digest reported that the market share for Pepsi and Coke was 30.8 percent and 42.7 percent respectively within the United States. Pepsi began the Pepsi Challenge in 1975 that blind taste-tested customers, and resulted in an increase in sales for the company. While challenges such as these have continued overtime, many have retained their preferences for either Coke or Pepsi. The marketing schemes have effectively differentiated Coke and Pepsi despite few chemical or physical differences between the two soft drinks. This strong differentiation has created brand loyalty that might not ordinarily exist otherwise.
This blog post was written by Freddie Joyner, Ben Lee, and Tracy Liang
Monday, March 15, 2010
Search engine advertising is an industry that has exploded over the past decade, and is the main reason why a company like Google is worth so much money. According to internetstats.com, 80% of all Internet user sessions begin at a search engine, and 55% of all online purchases are made from sites found on search engines. In the first quarter of 2008 alone, Google generated $5.19 billion worth of revenue, the majority of which was from search engine advertising.
The question is, how valuable is search engine advertising to companies, and is it worth all the money they must spend on it? The answer is: very important. As a test, the CEO of a Bingo Card Creator website ranked fifth in a Google search for “bingo cards.” That ranking generated 6,000 unique visitors to his site per month. According to leaked search engine data from AOL, a #1 ranking would increase traffic to his site by 8.5 times, meaning the Bingo Card Creator site would generate roughly 50,000 unique visitors a month.
Search engine advertising is also appealing to companies because it is easy to track and measure how effective their advertising is; every click of the mouse is measured and often times companies advertising through search engines only pay per click. Unlike traditional forms of advertising where it is difficult to hit targeted consumers, with search engine advertising it is guaranteed that you are only appealing to people interested in your product.
There roughly 1.7 billion Internet users worldwide; the vast majority of whom regularly use search engines. It is a vital advertising battleground for industries across the world and will only become more competitive.
This blog post was written by Ware Cady, Stephanie Cohen, Jeanette Elliot and Woody Peek
Recalling more than 6 million cars after defects of their automobiles led to the deaths of 52 individuals, a person would naturally assume that Toyota has lost its competitive edge and that its customers would all flee to its competitors. This could not be further from the truth. The article notes that 93% of Toyota owners who were aware of the Toyota recall did not believe American automakers were catching up to Japanese automakers with respect to safety and reliability. When customers are highly satisfied with a brand’s offerings, they are “prone to see occasional performance lapse as an anomaly,” which is known as the “brand insulation effect.” Because Toyota has such a broad base of loyal consumers, it is naturally “insulated” from the impacts of this lapse.
Toyota has developed high levels of brand equity, stemming primarily from its perceived quality and consumer loyalty. As noted in class, Toyota has consistently been ranked in Business Week’s Top 10 Brand Equity as number six in 2007 and 2008. It is this equity that has decreased their vulnerability to the performance crisis and that has increased their elasticity of consumer response to price. Investors and consumers are standing by Toyota, praising the drastic recall as a sign of the company’s commitment to quality. Toyota is here for the long run and will continue to prevail as a result of its highly established brand equity.
This blog post was written by Stephanie Evans, Camille Pereda, Jim Flanagan, and John Haywood
The online advertising realm has seen a significant amount of innovation, especially when it comes to application advertising and social media advertising. Application advertising centers upon companies that build their own applications as an advertising mechanism. It is a simple way for companies to build their brands into the games that people play each and every day. It increases brand recognition and helps personify the brand in the minds of consumers, thus contributing to sales for a wide variety of products. Not surprisingly, Facebook has taken a lead role in facilitating this new means of advertising. According to the expert column at ClickZ, a website specializing in news and expert advice in digital marketing,“People are interacting and they're doing it virally. Take for instance Facebook applications, which are built to interact with the social network's platforms unique core features, which include inviting friends, news feeds, mini feeds notifications, and profile view.
In addition to the enormous reach Facebook has to offer, the intricate tale of real-time alerts creates a platform that generates viral distribution and growth of applications at rapid speeds.” Beyond the application role, Facebook has taken the lead in initiating the ‘create your own banner platform’ which allows consumers and businesses alike to gain exposure for their respective causes or products. The self serve social media advertising market saw significant growth in 2009 and is expected to continue to thrive throughout the course of this year. As a result, companies such as Global Market Exposure, are building parts of their business around the success of Facebook and the associated growth in banner ads. According to the company website, “Facebook's market penetration is approaching 70% in the U.S. Reaching Facebook's 300+ Million users can be extremely cost effective if done correctly. The wealth of information users provide about themselves and their interests allows us to target your specific market and demographic.” Global Market Exposure is one of several companies that help streamline the process of creating the ads and get them up and running on social networking sites. There is a lot of potential with this new technology, and it will be interesting to see what innovations emerge within the category as time goes on.
This blog post was written by Katie Tretter, Cassie Wolcott, and Mack O’Connell
AT&T and Verizon are the top two wireless network providers in the United States. Each firm hopes to expand its coverage in order to maximize revenue. However, the cell phone market within the U.S. is mature, meaning that most potential consumers already own a cell phone. In this situation, the only way for firms to increase their sales is to compete with each other through combative advertising. In recent years, these two firms have pursued an “Ad War” in which each tries to convince consumers that their brand is superior. In order to differentiate its current offerings and grasp more market share, Verizon focused on utilizing combative advertising and claimed that it is the best provider of 3G coverage in the nation. The classic example of this type of advertisement is one in which Verizon uses maps of the United States to demonstrate the lack of coverage of AT&T. AT&T did not take light of this situation and responded with a series of television advertisement that stated facts about its service and down played that of Verizon Wireless.
These combative advertisements are economically irresponsible for both providers as the cost associated with these marketing efforts continue to rise. Furthermore, Verizon slashed prices for its unlimited phone plan services, and AT&T responded with the same price reduction. In the end both companies are losing when it comes to profitability, because the costs of these ad campaigns are likely higher than the revenues generated from the transfers of market shares.
This blog post was written by Stephanie Evans, Camille Pereda, John Haywood and Jim Flanagan
In their recent “tiny hands” ad campaign, Burger King uses combative advertising against their main competitor: McDonald’s. Combative Advertising is a strategy that shifts consumer preferences towards a different brand within an industry. In class, we discussed that it does not increase overall demand in the industry; it simply moves consumer demand from one firm to another. In their advertising campaign, Burger King compares the size of their cheeseburger to that of a McDonald’s cheeseburger through the use of an actor that is afraid the large size of a Burger King cheeseburger will make his small hands look even smaller. The point of the ad is to convey to consumers that if he eats a small McDonald’s cheeseburger, his hands will not look smaller. At the end of the ad, Burger King introduces the statistic that their double cheeseburger contains 30% more meat than the McDonald’s double cheeseburger.
According to Ken Zasky, President of Starlink Worldwide, in an article written in 2006, combative advertising is necessary to differentiate your product from the competition. In the case of this Burger King campaign, they are differentiating the size of their double cheeseburger from McDonald’s. Zasky also comments that companies can create a niche in the media marketplace through combative advertising. Through their new television commercials, Burger King is creating a niche among those who want more “bang for their buck” in a larger double cheeseburger. In this industry, combative advertising is important because there are so many choices for similar products. Therefore, Burger King is attempting to gain market share through this advertising campaign.
This blog post was written by Elizabeth Johnson, Laura Heslop and Lauren Bariexca
If you are an avid television watcher, you cannot avoid being a spectator in the advertising battle between Verizon Wireless and AT&T, the #1 and #2 wireless carriers respectively (Hoovers). Since the middle of 2009, the two wireless providers have declared war on each other through the use of coverage maps and their respective 3G networks. Both companies are vying for market share in an already competitive industry and have really gone head-to-head over the past year.
The problem first arose with an ad attacking AT&T by Verizon promoting the fact that Verizon’s wireless 3G service coverage happened to be 5 times more than that of AT&T. Verizon depicted this fact in visual form by utilizing two maps: one representing its own coverage (in red), the other representing AT&T’s 3g coverage (in blue). Mid-November of last year, AT&T sued Verizon over the ad campaign, arguing that Verizon’s ads were creating the perception that AT&T had no coverage at all in these areas, resulting in a significant loss of customers (PC World, 2009). The courts disagreed with AT&T, and allowed Verizon to continue running their ads on television.
AT&T responded to these ads by emphasizing the fact that only AT&T’s 3G network allows you to talk and surf the web at the same time. The combative advertising technique present in this case dictates that “an increase of advertising in one firm may reduce the sales of rival firms, and rivals may then react with a reciprocal increase in their own advertising efforts.” Combative advertising does not increase the size of the wireless industry, instead it leads to customers shifting from one wireless provider to another. This causes a prisoner’s dilemma because both companies would be more profitable if they did not advertise, however due to dominated strategies both companies choose to advertise. Both companies in this situation incur more costs than benefits. It is yet to be seen if and when this combative advertising will cease between these two giants in the telecommunication industry.
This blog post is written by Freddie Joyner, Ben Lee and Tracy Liang
Given the state of the economy, it is important that retailers look to incorporate stand out practices into their stores as a means of differentiation. In the past there has always been an emphasis on price, the degree of assortment, types of services offered, etc. Green retailing has become as a differentiating measure that is helping to capture demand from eco-friendly customers. Charged with the desire to differentiate their brands and find a significant increase in their ROIs, retailers are looking to a variety of methods by which they can ‘go green.’ Some retailers have adopted the cause by promoting recycling of plastic bags, selling reusable bags, and educating their customers on the importance of protecting the environment. Other retailers such as McQuade’s Marketplace have stepped out to the forefront as a green innovator and have taken ‘going green’ to an entirely new level.
According to the article, “McQuade’s puts ‘green’ in green grocer,” the independent retailer took measures this past year that allowed it to open the largest solar electric system in all of Rhode Island. “The new system will generate about 168, 200 kilowatt hours of clean energy each year which is roughly the power needed to for 10 average-sized New England homes.” Green innovations are wise to incorporate into one’s stores, for the government (along with other green advocacy groups) provides financial backing that can supplement the costs associated with the major projects. “The solar installation atop the Mystic store received a grant of more than $641,000 from the Connecticut Clean Energy Fund. The fund was created by the Connecticut legislature -- and is funded by electric ratepayers -- to promote, develop and invest in clean energy sources.” Retailers can differentiate their stores and earn new business with financial backing and the knowledge that they are aiding their environment. It’s a win win situation.
This blog was written by Katie Tretter, Cassie Wolcott, and Daniel Lee
The consumer cable services industry is homogenous by nature, yet a handful of national giants command a large portion of market share. The difference in quality and speed between services is negligible to the average consumer of Cable Television and Internet, however market leaders have managed to separate themselves from competition through the use of advertising to create perceived product differentiation. According to Comcast, Verizon Battle it out for Market Share, an article written for boston.com, Comcast Corp. and Verizon Communications Inc. have become incredibly effective in convincing the nieve consumer that they have “the best deals, the most amazing TV pictures, and Internet speeds to dazzle the cyber gods.” The two firms have managed to avoid simple comparisons to each other by offering a motley assortment of cable movie channels and questionably unique pricing packages. Currently, Comcast possesses a stronghold in Massachusetts with 1.6 million subscribers compared to Verizon FiOS’ 226,000, however this gap is rapidly disappearing as FiOS continues to rewire community after community.
In their commercials, both Verizon and Comcast boast superior service speed. Although both firms argue their service is more advanced than any other, industry analysts state that the technical differences between Verizon’s and Comcast’s systems are trivial. According to Bruce Leichtman, president of cable industry tracking firm Leichtman Research Group, “They’re almost identical. If people think they’re missing out on a humongous product differentiation, that’s not true.” As explained by independent telecom analyst Jeffrey Kagan, Verizon entered the TV industry with superior technology to that of traditional cable companies like Comcast, however “that forced the cable companies to upgrade.”
Since Verizon’s major competition has followed their move toward fiber optics, market shares of industry giants remain very competitive, differing only due to minor differences and a perceived competitive advantage from advertising.
This blog post was written by Stephanie Cohen, Carleton Cady, Jeanette Elliot and Walter Peek
Anyone who has ever watched a sporting event can recall an ad on television where high profile athletes are consuming Gatorade. Whether it be Michael Jordan, Tiger Woods, or Derek Jeter, all of these high profile athletes have one thing in common, they all drink Gatorade to perform at their best(or at least that is what Gatorade wants you to think!). Since being introduced in the United States in 1965, Gatorade has become the official sports drink of a number of sports including the National Football League, Major League Baseball, the National Basketball Association, and the National Hockey League just to name a few.
Gatorade’s message over the years has been that it restores electrolytes, helping athletes stay on top of their game by refueling them with nutrients they have lost through sweat. Memory jamming is a technique used to influence the way consumers encode and recall their consumption experiences. Gatorade uses memory jamming by engraining the benefits of their products into the mind of the consumers, and by using a variety of athletes who help to advertise Gatorade’s brand.
In recent years, Gatorade’s ad campaigns have moved away from the technical benefits of the drink, focusing more on elite athletes consuming their product. Powerade, Coca-Cola’s sports drink, launched attack ads on Gatorade in 2009, which led to a significant loss in market share from 80.0% in 2008 to 73.7% in 2009, a decrease of 6.3% (BusinessWeek). In one of the ads, Powerade claims that Gatorade is missing two electrolytes, magnesium and calcium in their sports drinks, and instead markets Powerade as the complete sports drink (Brandweek) . Some experts felt as if the decline in market share was in part due to Gatorade’s new ad campaign that proved to be more indirect and abstract than past years. The consistency that Gatorade had in their advertising for years was compromised with their new ad campaign, and as a result, it affected their market share in a negative way.
This blog post was written by Ben Lee, Tracy Liang and Freddie Joyner
Only on Valentine’s Day would cash-broke Cornell students spend their entire weekly living allowance to purchase over priced flowers. Why? Perhaps as a result of passionate intimate feelings only someone experiencing “true love” could understand. Or, said by the heartbroken naïve underclassman whose only companionship is Ben & Jerry’s, “persuasive advertising”. Society has been influenced by movies, commercials, and almost every other form of mass media to believe an illustration of love equates to either chocolate or flowers, sometimes even both.
Bob Sullivan, MSNBC’s detective on internet scams and consumer fraud, wrote a story detailing the outrageous flower prices charged in the days leading up to Valentine’s Day. His findings compared three online flower companies who each advertised the most affordable prices on the internet. FTD.com, Proflowers.com, and 1800Flowers.com sold roses at the price of 38.49, $35.28, and $34.99, respectively.
For the Cornell students who didn’t think to pre-order flowers via the internet, they could still express their love; of course, for an even higher premium. On the small strip of College Avenue, what Cornell students refer to as “Collegetown”, flowers could be purchased virtually anywhere, as seen by the pictures below. The fundamental principles of persuasive advertising force even intelligent Ivy League students to fall victim to flower sales on Valentine’s Day.
Valentine’s Day is advertised as the one day a year to illustrate your love for someone. If you fail to acknowledge how much you love your companion on Valentine’s Day you’ll probably be single very quickly. A student’s (or consumer) demand curve becomes progressively more inelastic because more consumer are in the market, there are essentially no substitutions, and the preference for flowers on Valentine’s Day compared to any other day throughout the year has increased. The result as Sullivan states, “the price of an item (flowers) is routinely more than double the advertised price. Who said love was free?
This blog post was written by Amyn Bandali, Meghan Holleran, Stephanie Menke, and Philip Nachbar
The Superbowl attracts thousands of viewers each year, most of whom are looking to put their critic hat on and judge the effectiveness of the million dollar commercials that air on primetime. But what is it that determines one commercial a success and another a failure? For many, it’s the degree of humor but for Sands Research, a company specializing in neuromarketing services, it’s the physiological response elicited and degree of brand recall that deems one superior to another. In an article entitled, “Sands Research Conducts Real Time Brand Imaging of Viewers Exposed to Superbowl Commercials,” a Sands’ reasearcher was quoted saying, “We found that brand recall improved significantly if a company had two or more commercial spots throughout the course of the game." Sands’ findings parallel concepts discussed in class, in that consumers respond to specific forms of advertising, usually taking the shape of persuasive, informative, complimentary, or memory jamming. Superbowl commercials revolve around the memory jamming concept, in that some repeat in frequency throughout the game to reinforce a given message. In addition, the persuasive view could be applied to the commercial phenomenon, because they invariably trigger specific brain activity that establishes a subjective opinion in the minds of the consumer and help to differentiate the good/brand. As seen in the picture below, certain commercials elicit specific brain activity which indicates the degree of viewer engagement. Bridgestone was considered the big winner last year, in that it stimulated the most brain activity among viewers. This brain activity proved to have positive correlation for company growth, for in an article entitled, Bridgestone Readies Ads for Superbowl, Michael Fluck, a representative from Bridgestone Firestone North American Tire is quoted saying, “while the overall tire business in the U.S. was down double-digits last year, Bridgestone saw a double-digit increase in market share.”
Clearly, there are underlying factors that go into the commercials you will see during the game. Though comedy may be a large part of what stimulates the human mind, there are other triggering components that will influence your memory and the way you differentiate products.
This blog post was written by Katie Tretter, Cassie Wolcott and Daniel Lee
Through product differentiation, a firm plans to attract more consumers. One such example of product differentiation in today’s market is the Ipad, from Apple. Though many question the difference between this product and its recent ancestor, the Ipod, Apple hopes that the unique features will capture a whole new line of customers. This video presentation from Apple describes all of the features unique to the Ipad.
Though Apple has formulated many explanations as to how the Ipad is different from an Ipod, the following are three of its most widely advertised features [1]:
Safari: The 9.7” multi-touch display allows for easier viewing while browsing.
App Store: The Ipad is compatible with nearly 140,000 pre-existing apps from the current Apple store.
Ibooks store: This feature, unique to the Ipad, allows for readers to download and read magazines instantly.
Apple has positioned the Ipad as a new genre of technology between that of a smart phone and a laptop. The intent is that the Ipad will attract gamers, readers, Ipod owners, and personal computer owners. With Mac products, people are looking for quality, high value, in a top-of-the-range product. Because Apple differentiates through innovation, consumers feel they are “in” and that they are buying the new, high-fashion product.
As for our personal analysis, we feel the Ipad is merely an overpriced, oversized Ipod with little potential to succeed. Though Apple has taken marginal steps to differentiate the Ipad, we do not feel these differences will be widely realized or appreciated by consumers.
We have all seen the Apple ads featuring Justin Long as a Mac and John Hodgmen as a PC, but have we really thought about their impact on the computer market? Through the ads, Apple is conveying that Macs are better than PCs for many different reasons including ease of use, design, reliability, and security. It is also necessary to look at the characters in the ads; they are Mac and PC users personified. Mac is young and trendy while PC is stodgy and nerdy. Both the arguments in the commercials and the characteristics of Mac and PC work together to influence a consumer’s perception of the two biggest players in the computer market.
Apple has spent millions attempting to make consumers think their products are superior to PCs. As a result of Apple’s product differentiation, they have made consumers much less price sensitive when buying Macs. According to Betanews.com, the average selling price for a PC was $475 compared to $1361 for a Mac over Q4 2009. There are two interesting things to take from those figures, the average Mac is sold at a premium of nearly $900 and Apple’s cheapest computer at $600 is still 26% more than the average PC. When looking at the overall computer market, Microsoft has a 90% market share compared to Apple’s, which is nearly 6%. However, take the premium computer market ($1000+) and Apple commands a 90% market share to Microsoft’s 9%.
Even though both Macs and PCs perform the same basic tasks, one has positioned itself as a product that exudes style, sophistication, status, and intelligence. As a result, Apple has taken advantage of consumer’s perceptions and is able to charge almost 3 times as much for a product that is essentially the same.
This blog post was written by Freddie Joyner, Benjamin J. Lee and Tracey Liang
On top of gaining loyalty through their programs, retailers are learning critical information from their customers from each swipe of the loyalty card. Catalina Marketing Corporation, has led the way with innovations that help to collect consumer insights and guide retailers in their additional marketing efforts. The benefit that the company receives from their customer loyalty programs and information technologies may not be something that can adequately be represented on a balance sheet, but it is an asset that continues to translate into growth and sales for those who have come to understand and master analyzing the data put forth.
