Question

What are the factors that are key for establishing product differentiation in the new post-recession consumer environment especially as it relates to economic indicators? What is a luxury good and should marketers of luxury goods abandon their efforts to establish premium pricing? How do changes in societal attitudes toward companies and products affect the way marketers of consumer goods think about the customer value chain? Provide examples of companies that have changed their approach to marketing in response to a shift in consumers’ value in changing economic times.

Answer 1

What are the factors that are key for establishing product differentiation in the new post-recession consumer environment especially as it relates to economic indicators?

Ans : We can anticipate the behaviour of consumer post-recession by understanding three things : (i) how previous downturns have altered consumer psychology and activity; (ii) how this recession have affected as compare to previous ones; (iii) and the journey - consumers have taken to the present. Besides making the product survive in the market, product differentiation is important, However the factors that are key for establishing product differentiation (i) Price (ii) Features (iii) Performance Quality (iv) Marketing (v) Availability (vi) Reliability (vii) Looks (viii) Channel of distribution (ix) Durability (x) After Sales services.

What is a luxury good and should marketers of luxury goods abandon their efforts to establish premium pricing?

Ans : Luxury goods are sensitive to changes in consumer income because they have a high income elasticity of demand. This means that the demand for these products fluctuates directly with the level of consumer income. Luxury goods, also called superior goods, are products with a demand that is directly related to consumer income exponentially.

" You sell one thing to the king, but everyone in court need to have a lesser " - Luxury customers always need a comparative product in order to feel like smart shoppers. Luxury consumers are attracted to exclusivity hence marketers should should continue to establish the premium pricing where in the luxury brands maintain exclusivity while driving a higher volume of sales. While exclusivity remains important, today’s luxury marketing doesn’t dishearten.

How do changes in societal attitudes toward companies and products affect the way marketers of consumer goods think about the customer value chain?

Understanding consumer behaviour is one of the important task for all companies, especially before the launch of a product or service. If the company fails to read the customer’s mind, it may end up in losses. There’s constant change in living standards, technology, fashion and trends, hence customer attitude towards a product or service may change frequently. Business managers spend a lot of money and time to discover what compels customers to take such on-spot decisions. Personality traits are also imperative for establishing how customers meet their needs. Pragmatic people would purchase what is useful and practical. Their purchases are mostly guided by durability and practicality of a product. An aesthetically inclined customer will be drawn to items that forge a symmetry, beauty, and harmony. An intellectual will be more inclined to obtain more knowledge about a product or service and likely to be critical. The politically motivated people would seek products and services to give them an “edge” regarding social power and position. More social people can be motivated if the company appeals to the humane angle and promotion that suggests kindness and empathy. Customers buy  to meet their own demands or do they give importance to others’ opinions for determining the products and services for their uses? It helps the company to understand whether they will purchase a product simply because it’s new and the most popular product available, or because it’s truly something they need. Customer behaviour influences the way business managers brand their products.  

Social and cultural values play a major role to determine which product or service would be successful in the target market. If value is attached on a product’s characteristics like hard work, materialism, and activities, then the manufacturing company would suggest these values because they are likely to be more successful. Equally important are social values. If the company suggests that its products would make a buyer more competitive or romantic in places where these values are held in high regard, chances of customers responding will be more.

Provide examples of companies that have changed their approach to marketing in response to a shift in consumers’ value in changing economic times.

Ans : (i) Google : Earlier Google had no business model to speak of. As Wired co-founding editor John Battelle explains in his book The Search, Google was once a maddeningly unprofitable company, fumbling left and right for a stable revenue source.

In 2003, the company launched its AdWords program which allowed businesses to advertise to people searching for things on Google.com. Almost overnight, Google took the leap from popular search tool to advertising juggernaut. In 2008, Google reported to the SEC that it had generated $21 billion in advertising-driven revenue alone. To this day, AdWords comprises the lion’s share of Google’s total revenue and profits. AdWords also paved the way for other search engines, such as Yahoo’s Search Marketing service and MSN’s Bing platform among others.

(ii) Facebook : Earlier, Facebook consisted entirely of college students. Unlike contemporaries Friendster and MySpace, which exhausted themselves to acquire as many users as possible from all ends of the Earth, Facebook operated more like a “secret society”, going so far as to require .edu e-mail addresses in order to join.

The problem was that Facebook could only expand so much by catering to only college students. So despite much protest and uproar, Facebook founder Mark Zuckerberg decided to open Facebook to high school students in 2005. By 2006, the service had opened to anyone 13 years or older with a valid e-mail address. By and large, the strategy change has worked. A 2009 study by Compete.com found Facebook to be the most popular social network in terms if unique views and monthly visits.

(iii) YouTube : In the beginning, YouTube was the textbook example of a startup taking the “we’ll worry about that later” approach to business models. When Google acquired the popular online video service for $1.65 billion in 2006, Shepard Smith of Fox News famously noted that “YouTube has yet to make even one black cent” in profit. Nor was it enough to passively run ads on the service, as a 2008 Forbes article predicted YouTube would generate just $200 million in ad revenue that year. But by March 2010, Mashable reported that YouTube’s revenue was now approaching $1 billion per year. What changed in the interim was a considerable shift in business models and overall strategy.

First, YouTube embarked on an aggressive campaign to ink partnership deals with premium content providers including NBC, ABC and CBS. YouTube also launched a Partner Program that allows popular users to share in the ad revenue generated by their videos. The result, as Mashable reveals, is that Google CEO Eric Schmidt now believes YouTube could turn its first profit in 2010.