Type:
Solution Manual
Resource:
Aaker Marketing Research
Edition:
12th Edition
Author(s):
David A. Aaker V. Kumar G.S Day R. Leone
Teaching Notes for Cases
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Case 1-1 PRE-TEEN MARKET – THE RIGHT PLACE TO BE IN FOR CELL PHONE PROVIDERS? This case presents a chance to discuss marketing opportunities and ethical dilemmas in marketing. Teaching objectives: 1. Allow students to see the need for marketing research, analyze marketing opportunities that arise, and make relevant business decisions. 2. Provide students the chance to consider ethical issues in marketing and incorporate ethical considerations into the decision making process. 3. Offer the instructor a springboard for a general discussion about marketing intelligence and ethics. Study questions: 1.
Do you think pre-teens offer good market potential for cell phone companies? Answering this question actually addresses the situation analysis mentioned in the chapter. Generally, three major issues should be analyzed during situation analysis, which include market environment, market characteristics, and consumer behavior. Some suggestions particularly relevant to this case are: Market environment: a. Technologies: Firefly’s product offers relatively simple features for use and safety, such as no numerical keypad, and incoming calls screening. Are these in sync with consumer demand and needs? b. Disposable income: It is important to determine whether the current offering package price of $199 is economically relevant to the target market. c. Social trends: Firefly should determine whether there is a growing need in the market for communication between parents and their pre-teen kids and among kids, and what drives this trend. d. Political and regulatory: It is necessary to identify regulations, if any, that govern the sale and use of cell phones by pre-teens as well as understand and appreciate the concern of stakeholders, such as schools and parents, about kids’ use of cell phones in order to incorporate relevant features into the product design. Market characteristics: a. Market size, potential and growth rate: These are very important issues that any company must consider before launching a new product. Details pertaining to these issues are not provided in this case, but the fact that food companies and retailers have targeted pre-teen market proves that this market is a potential one.
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b. Competition: Several companies were mentioned as Firefly’s competitors. Among them were wireless carriers who offer family plans, pre-teen phone specialist (Wherify), and well recognized names in the pre-teen market such as Mattel Inc. with Barbie products. c. Competitive products: Some products were believed to be offered at lower price, such as family plans offered at steep discounts, others were offered with special features, such as GPS locator which enables parents to track their kids. Consumer behavior: a. What and why customers buy a product: Obviously parents buy cell phones for their kids mostly to maintain regular communication with them. b. Who buys: Although ultimate customers are pre-teens, most often parents are the buyers. So the product should satisfy the different needs of both the pre-teens and their parents.
2. While designing products for this market, what are the issues faced by the service providers? The product in this case, cell phone, requires special attention in terms of ethics because it targets preteens who are usually not in a position to make their own decisions and also prone to misuse the service if not monitored in some way. The product thus comes under scrutiny by three different bodies: parents, schools and the government. During product design, the manufacturer has to consider concerns raised by all these three bodies including possible product misuse, unnecessary investment, kids’ tendency to lose their belongings, and even cell phone ban in classrooms. Manufacturers and service providers can familiarize themselves with all these issues through appropriate market research techniques like focus groups and surveys in order to address them adequately.
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Case 1-2 BEST BUY ON A SEGMENTATION SPREE This case illustrates the importance of marketing intelligence in making business decisions particularly with regard to market segmentation and marketing program development. The focus of this case is on Best Buy’s segmentation of customers into high value (“angels”) and low value customers (“devils”) in order to apply the best marketing strategy for each category. By treating customers differently based on their value and behavior, Best Buy could maximize high value customers’ contribution, avoid unprofitable ones, lower cost and improve profits. Teaching objectives 1. Allow the students to appreciate the business decisions behind optimal allocation of marketing resources among a company’s vast array of customers 2. Provide an insight into how companies make use of customer data for segmentation and profiling of customers, determining potential value of each segment, and how the companies tailor their marketing strategy based on marketing intelligence. Study Questions: 1
What benefits can Best Buy hope to gain from its customer segmentation tactics? Out of the million visitors each year to Best Buy Co.’s stores, nearly 20 percent are considered undesirable and therefore Best Buy wants to avoid these customers. Customer segmentation based on purchase behavior and thereby value to the company enables Best Buy Co. to work out appropriate marketing strategies to deal with each segment. Specifically, each store maintains stocks that fit with local demographics. It lures high spenders by stocking more merchandise, offers right products to the relevant segments (e.g. pricey home-theatre systems to upper income people), and offers more service options. To keep the undesirables away, the company cuts back on promotions, enforces re-stocking fee of 15 percent of the purchase price, resells returned items over the Internet, etc. These strategies help improve revenue, and thereby profit, while reducing costs. Early results indicate that pilot stores [those applying the stated segmentation scheme] performed far better than conventional ones, therefore Best Buy Co. intends to introduce the model in other stores. Question 2: Do you think Best Buy is making adequate use of marketing intelligence practices for its business decisions? Marketing intelligence is applied to various areas including product decisions, customer segmentation decisions, branding and pricing decisions, keeping shareholders happy, market estimation, competitive benchmarking, and distribution. The case mentions Best Buy Co.’s use of marketing intelligence for product decisions and customer segmentation purposes, with remarkable success. Best Buy Co. can further extend its use of marketing intelligence for optimizing marketing resource allocation through customer lifetime value calculations and marketing mix modeling.
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