MARKETNG 2503 Marketing Communications : Financial Products

Questions:

1.Product bundle pricing has the potential to bring in a lot of additional revenue. Think of three different products that rely on product bundle pricing and explain why the company has used these strategy.

2.Market-skimming pricing is used many times when companies invent new products and first introduce them to the market. Think of 3 “new” products that you believe are employing a price skimming strategy. Back up your answers.

3.What is a franchise organization? Discuss the different types of franchise organizations and give local examples of each of the franchise examples. www.franchise.org maybe useful. Explain why the company has chosen these franchise arrangement.

4.Identify an international company that has launched a new product recently. Identify the following:

1. a) What is the target audience?
2. b) What are the communication objectives?
3. c) What kind of message has been designed? (content/appeal, structure, format).
4. d) Which media is being used to reach the target?


e) Which method do you think has been used to set the promotional budget?

5.Conduct and illustrate a customer value analysis for three local restaurants (or other businesses that you prefer to analyze).Who are the strong and weak competitors? For the strong competitors, what are their vulnerabilities?

6Discuss the advantages of being a market follower and factors to consider when pursuing this strategy, identify a company that uses this strategy well.

Answers:

1.Product bundling refers to combining several products and selling them to consumers as a single product. Financial products, FMCG products and software products are usually sold by bundling strategy to generate more revenue. Beauty products like L’Oreal are bundled together and offered at lower prices (Nykaa.com 2017). The banks like Bank of America combine mobile banking, internet banking, credit cards and various other financial products with savings accounts (America and America 2017). Thomas Cook the British tourism multinational company offers holiday packages which combine flight charges and hotels at special rates (Thomascook.com 2017).

The companies nowadays are choosing product bundling for the following benefits:

Benefits to customers:

Customers today want products which satisfies their needs more specifically and at affordable prices. For example, a savings account accompanied by mobile banking, credit cards, debit cards and a deposit is more useful to consumers. Such bundling strategies which benefit customers more are likely to help companies retain those customers.

Business benefits to the companies:

Bundling means combining several products into one product offered at a discounted price. Thus, such a strategy increases the value of purchase to the buyers and the companies earn more revenue. Companies often align low selling products or less beneficial products with popular products. Thus, it helps the companies to sell their less demanded products and earn revenue on them as well. A large number of consumers prefer bundling as they feel bundling add value to their expenditure. Thus, companies can create a huge consumer base and earn more revenue by selling bundles of products to them (HomeCare Magazine 2017).

2.Toptal and Cetinkaya in their work stated that when companies introduce new and expensive products in the market, they usually target the rich who can afford to pay high price for the product. This is done to recover the huge sunk cost the companies incur to make the products. These companies then gradually reduce the prices to target a broader consumer base and gain deeper market penetration (Toptal and Çetinkaya 2015).

Companies manufacturing expensive beauty products use price skimming and promote their products to be of professional standard, thus charging high price for them. When Unilever launched Tresemme they promoted that the product was being released in the market for the first time and charged high price for it. Then, gradually, the released smaller and cheaper packages of the shampoo to gain deeper market penetration (TRESemmé 2017).

Mobile phone manufacturing companies use skimming pricing to sell their new products which usually have several new attributes and upgraded applications. An article suggests that Walton smart phone, headquartered in Bangladesh should adopt skimming pricing to capture a strong market position (Tarannum and Hassan 2016). Samsung, the Korean electronics giant uses skimming pricing for its products. For example, when Samsung released Note 3+ gear, it used skimming pricing to recover most of the sunk costs before the competitors like Micromax and LG stepped in with their new products. The mobile companies like Apple and HTC have started to apply the same strategy (Spann, Fischer and Tellis 2014).

Banks often use skimming to make their products more beneficial to investors. Citi Bank has a new saving account called Citibanking Savings Account which comes with  a debit card with free ATM withdrawal, mobile banking, insurance coverage and netbanking (Citigroup.com 2017).

3.International Franchise Association define franchise a method of business expansion strategy when  a person or company refers to as franchisor,  allows s smaller business firm to use the resources, business models, brand names and all other business attributes in return of fees. The business firm who use these attributes is called a franchisee and is under a contract to use the business operations within the geographical regions specified in the contract (Franchise.org 2017).

An article mentions that the franchisor and the franchisee participate in a mutually beneficial relationship of franchising organisation. The parties play a great role in the pricing strategy and  determining the profitability of the business venture(Justis, Chan and Kedia 2015). The following are the types of franchising:

Business format franchises:

The business format franchises are the most common form of franchisee business where a franchisor allows a franchisee to use its brand name to conduct business on its behalf.  Franchisors usually chose established business men who have a sizeable capital to invest in assets and raw material acquisition. The franchisee buys the raw materials, uses the attributes of the products and receives training from the franchisors.

Examples of business format franchises include international fast food restaurants like McDonalds and KFC. Kacker and many other authors in their work stated that franchisors enter franchising business in order to explore new markets ( Kacker et al. 2016). McDonalds and Pizza Hut are world famous names of restaurant chains those are under continuous need to expand their markets to increase their competitive advantage. Franchising allows these chains to enter emerging markets of India and South America without having to invest directly and yet explore them. They prefer franchising to expand because it is less expensive as the initial capital is invested by the franchisee while they, the franchisors only lend their attributes like products and brand name.

Products franchisee:

The franchisors in this category allow the franchisee to sell their products on their behalf using their names and trademarks. The franchisees have to pay fees, acquire minimum stocks of goods or do both according to the contract to acquire franchisee relationship with the franchisors.

The supermarket and departmental store chains like Marks and Spencer use this format to expand their business. M&S is working the UK through its WH Smith, Moto,Compass, SSP and BP who help the brand to showcase its products in important locations like transport joints and city junctions. Thus, franchisees help M&S to cater to a large number of people and earn huge revenue (Corporate.marksandspencer.com 2017).

Manufacturing franchises:

Manufacturing franchises is the mode of expansion used by multinational food and beverage companies who allows the firms in the host countries to manufacture and sell the products using its brand name. Coca cola and Pepsi sell the concentrated syrup to hundreds to bottling plants across the world who mix the ingredients and produces the drinks in names of the franchisors. This allows these two soft drink giant to sell their products at cheap prices all over the world, thus earning immense revenue.

4.The Finish telecommunication giant Nokia has entered the Android market through its Nokia 6 and is launching its better version Nokia P1. The new phone is available in two storage variants 128 GB and 256 GB.

a.The target customers of both the variants are the upper class of the society who prefers gadgets from global companies with several features which comes at good prices.

b.The communication objective of Nokia is to communication to the loyal customers that the company is set to enter the Android market. The Finish company also intended to communicate to its stakeholders that has recovered from the losses it incurred by operating through Microsoft.

c.An article described Nokia 6 and its better version as the pioneers among the smart phone carrying the brand name Nokia on them. This message clearly points out to the high market expectation and acceptability those are associated with the brand (Hmdglobal.com 2017).

d.Nokia used digital, visual and written media to promote its flagship product. The information about the Nokia smart phone were also published on online business magazines like The Guardian.

e.Nokia used several media to promote its new android product and spent a huge amount of money to reach out to and recover the international consumer base which it had lost to its competitors like Samsung.

5.Three local restaurants are Cafe Clock, Nomad and Chez Mado. These restaurants provide excellent local cuisine at affordable prices and provide superb dining experience and ambience.

According to Morocco World News, the main strong competitors of the afore mentioned eating houses are McDonalds, KFC and Pizza Hut. The other smaller restaurants are weak competitors of the stated eating houses (News 2017).

The multinational food chains like Pizza Hut are often unable to provide products having local essence. They also have to spend a huge amount of amount towards their overseas operations and face competition from each other.

6.The advantages of following a market following strategies are as follows:

High profitability:

A following company can follow successful trends or strategies laid down by their predecessors and does not have to invest in innovation. Yet the company can market high quality products and earn high revenue and profits. The local companies often design their products based on the products of multinational companies and offer them at cheaper prices. CIH Bank of Morocco allows investors to open savings bank accounts and budles them with additional products like credit cards, further investment opportunities and so on. The bank is followed the business strategies already applied by several global banks like HSBC.

New Product Concepts:

When a company enters a new market, it usually chooses to follow the strategies of the big players in the market. This helps when the company does not have adequate knowhow about the market. This helps the new companies to gain a good position in the new markets and offer better products as they gain expertise in those markets. The CIH bank provides digital banking products like its international counterparts.

Factors:

The stiff international competitions in the local and global market lead one company to adopt the successful strategies of another company to earn high profits and competitive advantage.  

Some consumers prefer cheap products identical to the expensive products of the big companies. This has led the local companies to follow the business patterns of the global manufacturers and cater to the local markets.

References:

America, R. and America, B. 2017. Rewards Money Market Savings Account from Bank of America. [online] Bank of America. Available at: https://www.bankofamerica.com/deposits/savings/rewards-money-market-savings-account/ [Accessed 20 Mar. 2017].

Citigroup.com. 2017. Citi | Responsible Finance - Financial Ingenuity - Global Bank. [online] Available at: https://www.citigroup.com/citi/ [Accessed 23 Mar. 2017].

Corporate.marksandspencer.com. 2017. Our Partners. [online] Available at: https://corporate.marksandspencer.com/aboutus/mands-today/our-partners#b8a5de96d13c4ce8a6eddc5c58f7df64 [Accessed 20 Mar. 2017].

Franchise.org. 2017. What is a Franchise | International Franchise Association. [online] Available at: https://www.franchise.org/what-is-a-franchise [Accessed 20 Mar. 2017].

Hmdglobal.com. 2017. The Home of Nokia phones. [online] Available at: https://www.hmdglobal.com/press/2017-01-08-nokia-6/ [Accessed 23 Mar. 2017].

HomeCare Magazine. 2017. Advantages of Product Bundle Sales. [online] Available at: https://www.homecaremag.com/operations-marketing/april-2016/advantages-product-bundle-sales [Accessed 20 Mar. 2017].

Justis, R.T., Chan, P.S. and Kedia, B.L., 2015. Pricing Strategies and Fee Structures in Franchising Organizations. Journal of Small Business Strategy, 2(1), pp.25-34.

Kacker, M., Dant, R.P., Emerson, J. and Coughlan, A.T., 2016. How Firm Strategies Impact Size of Partner?Based Retail Networks: Evidence From Franchising. Journal of Small Business Management, 54(2), pp.506-531.

News, M. 2017. Fast Food Restaurants Booming in Morocco. [online] Morocco World News. Available at: https://www.moroccoworldnews.com/2015/03/153321/fast-food-restaurants-booming-in-morocco/ [Accessed 20 Mar. 2017].

Nykaa.com. 2017. L'Oreal Paris - Buy L'Oreal Paris products online from Nykaa | Nykaa. [online] Available at: https://www.nykaa.com/brands/loreal-paris.html [Accessed 20 Mar. 2017].

Spann, M., Fischer, M. and Tellis, G.J., 2014. Skimming or penetration? Strategic dynamic pricing for new products. Marketing Science, 34(2), pp.235-249. 

Tarannum, M.I. and Hassan, S.R., 2016. A Marketing Analysis of Walton Smartphone.

Thomascook.com. 2017. Flight and Hotel Special Offers 2017 / 2018 | Thomas Cook. [online] Available at: https://www.thomascook.com/holidays/flight-hotel/special-offers/#intcmp=FlightHotel_SpecialOffers [Accessed 20 Mar. 2017].

Toptal, A. and Çetinkaya, S., 2015. The impact of price skimming on supply and exit decisions. Applied Stochastic Models in Business and Industry, 31(4), pp.551-574.

TRESemmé, H. 2017. Home. [online] Tresemme US. Available at: https://www.tresemme.com/us/en/home.html?stay=1 [Accessed 23 Mar. 2017].