Managerial Economics - Core Concepts

JWI 515 Managerial Economics, Week11 Wrap Up, 12/21/12


Great class. Helped me with a foundation in economics literacy.

(1) Which managerial economics topics have you mastered ?
None. There is a saying in India that what one knows the size of the fist and what one does not know is the size of the world. This helps me to keep a humble perspective - that humanity is always operating within the field of ignorance. I do however feel much more aware and literate in economics with the training received in this class.

(2) Which managerial economics topics do you now understand but may want to learn more about?
(i) Mathematical underpinnings of Profitability
(ii) Control costs before they control you: fixed, variable, total, average
(iii) Economy of scale
(iv) Regulation
(v) Risk & uncertainty
(vi) Factors of production
(vii) Supply & Demand & Market Equilibrium
(viii) Market structure - Perfect competition, Monopoly, Oligopoly
(ix) Measuring consumer and producer surpluses
(x) Utility maximization
(xi) How to mitigate dis-economy of scale
(xii) Price-output decision models: Cournot, Sweezy, Stackelberg, Bertrand
Cournot: a firm will make independent decisions to maximize its profit
Stackelberg: firm acts according to Cournot + first mover advantage
Bertrand: Homogeneous oligopolists; consumer goes after lowest price; price wars ensue to capture market share
Sweezy: firms will follow rivals' price decrease but ignore price increase
(xiii) Global market conditions
(xiv) Porter's 5 forces - Barriers to entry
(xv) SWOT - new entrant to market
(xvi) Corporate Social Responsibility
(xvii) Role of government in free markets - Externalities, Deregulation
society needs government regulation and public policy to balance public and private interests and promote economic growth. Government must also fund things that are in society's best interest overall.
(xviii) Analyze 5 types of risks and mitigate with 14 options for risk take downs
(xix) Private goods vs Public goods
(xx) Market failure - when one or more perfect competition criteria are violated

(3) What questions do you still have about managerial economics?
(a) How does one arrive at the demand curve - price vs quantity function - in the first place ?
(b) Is it possible to scale firms to reach sizes never seen before ? eg. can JWMI be scaled to enroll a million students at once?
(c) How to estimate dollar values of Positive and Negative externalities? As true cost = economic cost + social cost + environmental cost, knowing how to estimate externalities will help attach real costs to products and services.

Dr DP

Connect Marketing to Business Strategy

JWI 518 Marketing in a Global Environment, Week 11 Wrap up, 12/21/12

This class gave a great foundation to the discipline of marketing and marketing strategy. This course is designed to help students connect business strategy to marketing, think like a CEO, create superior value for customers and build something new.

We began with product strategy and examined ways to understand the broader market through market surveys. Market segmentation techniques help to analyze markets and identify the most attractive segments. Finally, we learned to create a marketing plan, figuring out how to strategically market the product or service using brand positioning, brand equity, pricing, elements of marketing communication and state-of-art social media tools.

I now understand the role and importance of marketing - an art and a science - in the firm, and balance costs and benefits to customers.

Takeaways include:
(i) Role of marketing in a firm
Identify needs, wants, interests of target customers
satisfy more effectively and efficiently than competitors
while preserving or enhancing consumers' and society's long-term well-being
(ii) 4 key marketing dimensions - Performance (&quality), People, Planet, Price
While competing on product performance and price metrics, seek also to balance people (social cost) and planet (environmental cost) needs.
(iii) marketing begins with understanding the customer - research the market and offer superior customer value
(iv) marketing is an art and a science
(v) It is not just about parading the features in front of the customer. To persuade:
Know the firm's own market offering + next best alternative + how the offering delivers superior value to customers vs next best alternative
(vi) There are 4 ways to conduct a survey but beware the limitations. Don't just go by what people say but by what they do - check if they will put the money where their mouth is eg. GE green bulb fiasco
(vii) Know the buyer's motivations and understand how to motivate them (this is the foundation for any marketing strategy). People buy anticipated satisfactions, not just the products. The primary underlying thought in buyers’ minds is this: “What’s in it for me?” Remind buyers of some key satisfactions they want to achieve. Promise you can make it happen. Then Highlight the key features of the product or service
(viii) Generate demand through marketing - convey a compelling reason why people should buy a product or service from the firm
(ix) Segment the market - Broad segments typically are geographic, demographic, psychographic (Values, Attitudes, Lifestyles) and behavioral. Then decide firm's market focus: Niche within a segment, segment, multiple segments or mass market.
(x) Market positioning - create an image in the market that your product is the best and grab market share
(xi) Brand Equity is the added value a brand image gives to a product or service
(xii) To set prices effectively, follows these steps: (1) know the firm's strategic market objective, (2) determine demand, (3) estimate costs, (4) analyze competitor's costs, prices and offers, and (5) pick a compelling pricing strategy - including pricing method and final price.
(xiii) Lower perceived cost; Increase perceived value
(xiv) Bear in mind the Product's Life Cycle and Buyer Readiness & Adoption process
(xv) Integrated marketing communication: AIDA - Attention, Interest, Desire to own, Action to Buy
(xvi) Use Net Promoter Score (NPS) - 'how likely are you to recommend the brand to your friend?" - to drive growth
(xvii) Beware social media wild fires but experiment with them
(xvii) Optimize marketing mix for B2B and B2C
(xviii) Earn customer loyalty through transfer of intellectual capital that positions the customer to win
(xix) 5 Ms of advertising - Mission, Money, Media, Message, Measurement
(xx) Cause related marketing can help local firms differentiate their offering and win

Dr DP

Role of Government in Market Economy

JWI 515 Managerial Economics, week10 summary, 12/15

The role of government in business and life became clearer to me from this week's learning. Due to externalities, society needs government regulation and public policy to balance public and private interests and promote economic growth. Government must also fund things that are in society's best interest overall.

Dr DP

JWI 515 Managerial Economics, Week10 Summary, 12/15
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(1) Externalities - unintended effect on third party that is not directly involved in a transaction.
Positive externality: education => Pigovian subsidies or grants paid
Negative externality: Oil spill => Pigovian Sin Taxes used to correct it; encourage main actors to find less harmful ways to operate
Key question: How to measure the full social cost associated with an economic activity ?
Governments make externality a part of the decision making process.

(2) Private goods are exclusionary - when you use them, other people cannot eg. food, clothing
Public goods are non-exclusionary - everyone can use them whether or not they paid for them eg. national defense, police, fire protection, public TV & radio
Free rider problem - consumers avoid paying full share of cost of public good.

(3) If at least one person is better off and no one is worse off - such public projects are Pareto satisfactory.
When all such projects are done, it is Pareto optimal.

(4) Marginal social cost - cost of production + marginal external costs not directly borne by producers or consumers.
Marginal social benefits - sum of marginal private benefits + marginal external benefits.
Social benefits maximized when MSBs across all programs equals MSCs across all programs.
For production of public goods and services, Marginal social benefit must exceed Marginal social cost.

(5) Market failure - one or more criteria for perfect market is violated.
- Not enough buyers and sellers
- product heterogeniety
- entry and exit of market not free
- imperfect information sharing:cost, price, product quality information not known by all buyers and all sellers
- inadequate competition leading to deadweight loss

(6) Corporate Social Responsibility (CSR) is an alternative to government action that could also be profitable for firms.

Mass Communications with game changing Social Media

JWI 518 Marketing in a Global Environment, Week10 Summary, 12/15/12

We learned a lot this week beginning with the goal of mass communications which is to grow the business and create millions of satisfied customers (JWI 518, week10 Lecture1). With Jack Welch's urging in the videos, and with the DQ, we probed the use of game changing social media in achieving marketing objectives. It is all about making customers win. Customer loyalty can be earned by constantly delivering intellectual capital that positions the customer with a unique competitive advantage over the rivals. With 4Ps of marketing and 5Ms of advertising decision making, any product that we come across in our lives can be analyzed to understand target customers and how they are being persuaded to make the purchase.

this training transforms me to think in new ways
Dr DP

JWI 518 Marketing in a Global Environment, Week10 Summary
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I. Mass communication (Kotler):
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Advertising - mission, money, message, media, measurement
Sales Promotion - short term incentive tools to stimulate demand, motivate sales reps
Events & Experiences - become a part of special and personal moments of customers in target market
PR & Publicity - public awareness of brand and image

II. Case study: Molson Canada Social Media Marketing, Qureshi
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Social media marketing campaign of Molson beer company was path breaking but ran into trouble. Stakeholders had different views, raised diverse concerns and Molson faced bad publicity.

III. Kaplan et al: Social Media
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Mobile social media will drive the internet going forward.
Businesses should recognize this trend and not miss this train.

IV. Welch video - Toyota
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How did Toyota handle their marketing and PR during the crisis?
Toyota dropped the ball in PR aspect
 - not forthright in comments - did not come clean
 - not clear about what happened
 - did a lousy job: lost some of the feeling of trust in brand
But after hearings, MEA Culpas, marketing of product around trust, response to consumers has been nothing but sensational. In March Toyota up 35% as a result of terrific candid consumer focused marketing building on the trust built over years

Lesson:
There are no secrets in business or anything.
Define yourself before other define you.
Put yourself out there; make the case - what happened, why it happened, what you are doing about it to fix it.
This is the role of every leader in a major corporation who gets into trouble

V. Welch video - Internet marketing
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Facebook, Twitter etc - Try them; get wet in them; experiment in new technologies; don't get behind the 8 ball. Book tour; when advertised on twitter, friends came; people followed us. So succeeded in a very small marketing expt.
In corporations there are all kinds of new techniques to be tried. New technology has changed the marketing game - can't stay out of it. Test the new technologies - where they will work and where they won't. Stay fresh with the new technologies.

VI. Welch & Welch - Is customer loyalty dead?
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It is not dead but is hell of a lot different than in the old days. Winning through tickets to ball game, nice dinner, disney world tickets - those days are gone. Cost, quality and service needs are typical way of dealing with customer demand.
But these are a given in the internet transparent world and not sufficient with internet transparent pricing and global competition. Your job - make yourself intellectually indispensable; be a real partner driving his success. Deliver intellectual capital. It is all about making customers win. Improve productivity through-put, new product ideas, and
give constant intellectual stimulation.Think about the customers competitors and drive the customer constantly into winning position eg. a new idea, transfer sales people. Give competitive advantage to customers no one else can.
Think: How do I make them win ? Enter into a relationship with the customer.

VII. JWI 518 Week10 Lecture1 - Mass Communications
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Goal: Grow the business and create millions of satisfied customers

5Ms of advertising decision making
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(1) Mission
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What is the Goal of advertising campaign? What is the target market ? what stage is the product in the life cycle?
Introduce a new product ? Remind viewers of brand image? Reassure customers of great choice ? Support other marketing channels ? Just sell the product ?

(2) Money
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Marketing capital ie advertising budget; mix of media; ad frequency to result in successful sales.

(3) Media
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Target market; budget per media; creative balance of needs and resources; deliver greatest impression for least amount of money. TV can deliver high impact emotional message. Internet reaches younger demographics better (although Tim's post suggests social network users are typically middle aged)

(4) Message
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- base it on specific logical and emotional satisfactions customers want
- people want hope; hope that they can change their lives for the better. You can get their attention by appealing to their hopes and dreams
- remind buyers of the satisfactions they want, promise to satisfy them, then use product features to prove you can deliver
- Sell the sizzle along with the steak
  Don't just parade the product features.
  Focus on "perceived value": more the customer will receive more is the perceived value eg: 2 for price of 1
  Influence Perception of value through quantity, quality, price, additional value, guarantees, social value
- Repeat, Repeat, Repeat: Repetition is critical
- medium and message are interrelated

(5) Measurement
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Measure advertising effectiveness - frequency, reach, circulation, eyeballs.
Know where advertising budget is getting wasted.
Figure out where you have the greatest ability to measure success of ad.

VIII. DQ1: Toyota Social Media campaign - Facebook and Twitter analysis
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Toyota's social media presence allows it to get closer to customers, communicate brand image and be ready for rapid crisis communications.

IX. Assignment - Marketing Plan
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Great drill to bring all elements of marketing together

Use right Marketing Mix, drive growth with NPS, manage Social Media wildfires

JWI 518 Marketing in a Global Environment, Week9 Summary, 12/10/12

(1) Social Media wildfire control

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This week's learning has changed my view on social media completely. I used to think that the value and impact of social media is overblown but now stand educated about how social media is a fundamental shift in the way business will be done going forward. Those firms that embrace this new phenomenon will see it as wind behind their backs while those that ignore it will see damage from wildfires. We learned the importance for firms of having a social media strategy along with a Chief Social Media Officer (CSMO) to continuously monitor social media, recognize positive comments posted by the community, react quickly to customer concerns and address fires before they become wild fires raging without control. 

(2) Use NPS to drive growth

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The rationale behind the effectiveness of Net promoter score (NPS) was revealing - promoters have less complaints and are more loyal; detractors complain more and, with less loyalty to the firm, are likely to defect when new opportunity arises.

(3) Optimize marketing mix for B2B & B2C

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The lecture materials  and Jack Welch video further explained the fundamental differences between B2B and B2C spaces and how to optimize the marketing mix for each. The bottom line is firms need to continually monitor where, when and how to influence those who have the power to make the purchasing decision.

I now understand why "Intel Inside" marketing campaign will work for Intel but not for IBM, though both make semiconductor products that are found everywhere. Intel is a B2C company primarily and so such a campaign matters. IBM on the other hand is focused on B2B and the campaign is rightly tuned to the few decision makers that truly decide the purchase behaviors.

this is great stuff

Dr DP

Social media platforms allow consumers to share their perspectives on brands. However, marketers may experience social media "wildfires" of inaccurate, false, or misleading information about their brand. What steps can marketers integrate to control these wildfires?

Great post by my class mate AJ:

• Make the resolution apart of the social media strategy. 
• Continue to monitor social media sites on a frequent basis. 
• Be prepared for common points of view that may arise. 
• Respond with correct information and manage conflict. 
• Don't ignore negative feedback and answer immediately.
• Show the entire social media site and your customers that you care. 
• Direct the complaining customer to an email address or phone contact.
• Find out if it is possible to remove any negative comments.

 http://mashable.com/2010/02/21/deal-with-negative-feedback/

"The first step to dealing with negative feedback is determining what type of feedback you've received," straight problems, constructive criticism, merited attack, and trolling/spam. The next step is to determine the necessary response. "The number one rule when responding to all criticism, even the negative type, is to stay positive." 

For straight problems, steps to be taken to fix it and customers should be notified of them. Even if there is not actually a problem, but a customer doesn't agree with something, you should explain why something is done the way it is. For constructive criticism, you will build loyalty and trust with consumers by responding with a positive and thankful message. For merited attacks, you should respond promptly and positively to assure the consumer that steps are being taken to correct their problem. Lastly, for trolling/spam, you should not respond and you should ignore this type of negative feedback.

My own approach to dealing with social media wild fires:

Learn from the truth to make the firm strong

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First, I will look for elements of truth in the social media "wildfire" and learn from them to make the firm stronger.  In JWI 510, Business Ethics & Communication class, we learned how to handle whistle blowers, deal with a crisis maturely and communicate a path to resolution effectively by leading from the front. The steps I learned are shown below. I would use these same steps to correct mis-steps, if any, by the firm.

Deal quickly and firmly with slander

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Second, with the help of the corporate Chief Social Media Officer (CSMO), as you had suggested, I will be on the lookout for wildfires to react quickly, round up the list of inaccurate, false or misleading statements, and have the CSMO ***quickly*** send the disgruntled individuals clarifications along with a thinly veiled warning that this kind of behavior needs to stop. If damage to the brand is imminent, I will define the problem statement and offer an explanation in the corporate website to communicate to stake holders the firm's position on the matter - in a thoughtful, researched, considered way. If the wildfire still does not stop, I will have the legal team send a "cease and desist" warning to those who are propagating them. If no choice is left, I will initiate legal action against the offending individuals to set an example for the future and preserve brand image and brand equity. Even in this scenario, the crisis management framework we learned in JWI 510 gives a list of actions that can be taken step by step  to take control rather than be defined and controlled by those outside the firm.

1. Jack Welch's Five Principles of Crisis Management
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(i) Assume the problem is much bigger than first - get out up front; don't let others define you
(ii) Assume there are no secrets - don't hide and dribble information out
(iii) Media will portray the situation in worst possible flight - it's their job
(iv) There will be blood on the floor - leaders, employees will be hurt
(v) Company will be stronger than ever - think not just of this crisis, but think around the corner of other things that could go wrong; put safeguards in place now

2. Anticipate Potential issues (Leader's job is to anticipate change; JWI 510, Lecture1)
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Anticipate & Plan for the unexpected (Jimmy Cagle, pg23)
Establish Crisis Management Team (Weiner, Rule5)
Issue Manual - critical issues; company's position on each; forecast consequences; detailed communication responses

Issue Audit - prioritize list of critical issues that make company vulnerable (Wiener, pg2)
Communication Audit - ensure communication plan is current; responsible people & contacts list; list criteria to make decisions
Communication Plan - standardized format; plan information flow; care for the team (Jimmy Cagle, pg 23)

Test the plan - simulate crisis
  
3. Define Problem Statement 

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Threat to organization's brand crediibility, reputation, finance, operations, ability to recruit talent.

Define the problem before others in media define it for you.
Go out in front of the crisis.

4. Understand nature, extent, root cause of the problem
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Assume it is bigger in magnitude than first reported (Jack Welch Crisis Communication Step 1)
Research - Find facts, check, analyze  - beware of confirmation bias; take balanced unbiased view
Focus Team on finding root cause - no blame game
How did this crisis come about ?
Assume no secrets (Jack Welch Crisis Communication Step 2) 

   - If there are multiple sides to the story, which facts to be made public ?
Open lines of communication 2-way communication channels to get feedback (Michael Epstein, pg30)
Be open to listening - Go beyond good intentions, announcements & action plans 

Develop sense of momentum & scale of the problem

5. React with an effective response & crisis communication plan
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Communicate, Communicate, Communicate - to Internal employees, Affiliate stake holders, External Audience
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Dispel fear of unknown with clear, concise, calculated communication
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Crisp messaging 

- what you know? what are you doing ? why you are doing it? what is coming next; Get everyone on board (Jack Welch video)
- In First Response, Keep perspective (Weiner, pg3)
- Acknowledge what happened; "Yes I am aware of the problem; Here is our initial assessment; We are actively working on a remedy"

- Take Swift and timely actions - give frequent hourly/daily/weekly updates as needed
- Use Multiple channels and all communication tools - create website, blogs, twitter, articles
- Repeat relentlessly
- Empathize & Take responsibility (Wiener, Rule3) - if appropriate, Acknowledge wrongdoing with legal counsel
    Explain extenuating circumstances
    Apologize & Express Remorse
    Share the bad news with the good news (Michael Epstein, pg 32)
    Express Resolve to protect those who rely on you & trust your brand
    Expect to be portrayed by media in worst possible light (Jack Welch crisis communication, principle 3)
    Make suitable/Dramatic changes in organization as needed (there will be changes- Jack Welch crisis communication principle 4)
    Maintain regular communications throughout the recovery & turn around (Michael Espstein, pg 34)

6. Make your company stronger than ever (Jack Welch crisis communication principle 5)
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    Become a better company through crisis - Prevention is best strategy; prevent recurrence
    Importantly, Think around the corner about new crisis that could come (Jack Welch video)
    Put safeguards in place to protect the company
    Take every whistleblowers complaint seriously
    Encourage a trusting and candid culture - allow employees to bring up right cases through right channels to clean up quickly

Analyze and Mitigate Risks

JWI 515 Managerial Economics, Week9 Summary, 12/10/12

This week we learned about the many types of risks firms can face and what a CEO can do to prepare and come out on top. This is one of the most exciting weeks of learning for me as the insights are worth their weight in pure gold. The lessons learned here will help me guide my organization and firm to safe waters through careful research and considered judgment. I can apply these principles practically every day as I take high stakes decisions all the time in technology development. By going through the checklist below, I can immunize myself from making careless errors in risk evaluation and judgment.

Special thanks to Lemma for connecting risk analysis with the Art of War. This is brilliant !

The discussions with classmates have helped me grow and widen my mind set.

Dr DP

JWI 515 Managerial Economics, Week9 Summary, 12/10/12

Types of Risk

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(1) Economic Risk - chance of loss when all possible outcomes and their probabilities are not known

(2) Managerial Risk - chance of loss stemming from a managerial decision

(3) Market Risk - a portfolio of investments could lose money due to financial market swings, interest rate hike

(4) Inflation Risk - general rise of prices lower the value of investments

(5) Currency Risk - changes in domestic currency value of foreign profits

(6) Expropriation Risk - government abroad can seize firm's property

Risk Take Down options for a firm include:

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(1) Anticipate change in marketplace and guide the firm to adapt - lower business risk

(2) Use decision tree with risk probabilities - lower economic risk

(3) Beware the mind-traps (HBR, 1998) in decision making, estimating, forecasting from anchoring, over confidence, confirming evidence, status quo, sunk cost, framing, prudence, recallability - lower business risk

(4) Beware in-built biases from the DiSC types of the CEO, the leadership and the organization - lower business risk

(5) Train employees with business conduct guidelines (BCG) - lower business risk

(6) Tighten internal controls and compliance - lower business risk

(7) Insurance - lower market risk, credit risk

(8) Diversification - lower market risk, liquidity risk

(9) Speed (Sense and respond to changing environment quickly) - lower market risk through agility

(10) Know the strengths and weaknesses of rivals and also the firm - lower business risk

(11) Beware of 6 sins of M&A (Welch, 2005) - lower cultural risk

(12) Keep up with national and global trends - lower inflation risk, currency risk, derivative risk

(13) Watch influential people and government policies closely - lower government risk, expropriation risk

(14) Learn from thought leaders such as Sun Tzu (Art of War)

Develop an Integrated Marketing Strategy

JWI 518 Marketing in a Global Environment, week8 summary, 12/2/12

This was a challenging week with numerous core marketing concepts to learn and think about. We learned how to come up with a marketing strategy to target key customer segments, taking into account stages in a product life cycle and consumer adoption process. I recognize that the role of an integrated marketing communications plan, inclusive of social media tools, is to take key and consistent messages to customers such that their brand perception, preferences and purchase decisions can be influenced positively.

These principles work for me at multiple levels. I can apply them in my current role within my organization to market new ideas and influence adoption. As I take on broader leadership roles, I believe these principles will help me work with the marketing experts more effectively.

Dr DP

JWI 518 Marketing in a Global Environment, Week8, Summary, 12/2/12

(I) Kotler, Chapter 10: Setting Product Strategy and Marketing the Life Cycle
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When planning market offering, think through 5 levels of the product
core benefit, basic product, expected product, augmented product, potential product

(II) Kotler, Chapter 15: Designing and Managing Integrated Marketing Channels
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Effective marketing communications requires 8 steps:
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Identify target audience, Determine objectives, Design the communications, Select the communication channels, establish total communications budget, decide on communications mix, measure results, manage integrated marketing communications process

There are 5 Stages of buyer readiness
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Awareness, Comprehension, Conviction, Order, Reorder
Tools to influence purchase decision are:
Advertising & publicity - decreases with time
Sales promotion; Personal selling - increase with time

(III) Chang, Obama and the Power of Social Media and Technology
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Technology is a transformative force. Get people engaged in the process on a large scale by focusing on:
Message, Mobile, Money; Respect, empower, inclusivity. Internet allows openness,inclusiveness, self-organizing, grassroots leadership.

(IV) Week 8 | Lecture 1: Product Strategy: Marketing Across the Adoption Process and Life Cycle
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Goal: Devise a product strategy for marketing across all the stages of a product lifetime
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Challenge: Marketing challenged by constant changes in product life cycle, customers, technologies
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Cost, tools, messages:
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Balance cost vs expected results at every stage of the game
Select tools that offer best chance of reaching consumers
Select messages that will create the greatest persuasive impact

(i) Product Adoption Process:
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Awareness - that brand exists; word-of-mouth
Interest - find out more; offers a physical, mental, emotional satisfaction
Evaluation - features, benefits, costs vs alternatives
Trial - sample, test drive, store visit
Adoption - customer buys product; speed of adoption depends on relative advantage, much lower cost, cool, budget, public opinion

(ii) Customer innovativeness categories
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Innovators (2.5%)
Early adopters (13.5%)
    Emotion driven motivations & messages - desire to be first; exclusive
    Logical motivations & messages - leg up from competitive advantage at cutting-edge
Early majority (34%)
Late majority (34%)
Laggards(16%)

(iii) Marketing messages must fit with the key motivators that drive someone to buy
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eg. Early adopters
    Emotional messages - use TV & internet advertising with images of color, sound, music to arouse desire; laugh & look cool
    Logical messages - explain product's advantages from features eg. business success & life success
    Brand positioning -eg. Blackberry: indispensable tool that lets you live life with greatest flexibility; emblem of professional success; good value

(iv) Product Life Cycle
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Bell Shaped: Introduction, Growth, Maturity, Decline, Withdrawal
Growth Slump Maturity eg. coffee makers
Cycle Recycle Pattern eg. drugs
Scalloped Return eg. baking soda

(V) Week 8 | Lecture 2: Integrated Marketing Communication: Optimizing the Marketing Mix
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Know how, when and where to market products in order to make the greatest impact.

Marketing Communications (MarCom) campaign Goal: increase sales; drive brand awareness etc
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Deliver Marketing messages & Create brand image
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    => deliver through effective marketing campaign - different sources of integrated marketing communications
    => create the ideas and feelings customers have about a brand - brand image
Move buyers through four AIDA stages of decision making
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    => Attention: Broad awareness with mass media like TV, radio, magazines, internet
    => Interest: features, benefits, endorsements, ratings, price eg. print, mail, personal contact with influencers
    => Desire to own: Transformational appeals to emphasize strong human emotions eg. love, pride, joy, humor, fear, coolness
    => Action to buy: Logical & emotional motivators; coupons, samples, personal selling, specials; time pressure; expiration dates, limited time offers

(VI) When to Market
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Buyer Readiness:
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StageI (Product introduction) - ramp up brand awareness through mass media eg. TV, internet, print
StageII (AIDA)  - Additional information, emotional seduction eg. direct mail, personal sellings, sales promos, reminder advertising such as "got milk?"

Life Cycle of Product:
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Introduction - Brand awareness
Growth - heavy advertising to build brand loyalty
Maturity - less advertising; more sales promos
Decline - advertising and promos decreased to low maintenance levels

Where to Market
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Advertising: TV, radio, magazines, newspapers, billboards, packaging, brochures, posters, fliers, inserts, online, search engines
Sales promos: contests, samples, exhibits, coupons, rebates, gifts, premiums, trade shows, demsos, special offers
Events: Sponsorships, entertainment and sports events, festivals, cause-related events, factory tours, trips.
Public Relations and Publicity: Press kits and releases, media stories or mentions, speeches, seminars, charitable donations, community events, lobbying, annual reports, in-house publications, articles in the media by company executives.
Direct and Interactive Marketing: Catalogs, direct mail, telemarketing, shopping channels and sites, online.
Word-of-Mouth Marketing: Person-to-person communications, chat rooms, consumer reviews, and recommendations.
Personal Selling: Sales presentations and meetings, in-store samples, contact from company representatives, fairs and tradeshows, door-to-door, online.

(VII) Integrated Marketing Mix example - Subway
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Customer receives same basic message and brand promise - healthy, delicious sandwich vs less healthy McDonalds or KFC
Advertise: TV, radio, billboards, fliers to drive people to its website which features videos and health information
Sales promos: newspaper inserts with coupons & specials; in store promos and specials
Events: NASCAR racing sponsor, Little League baseball, AHA heart walk
PR: emphasize relative healthiness of sandwiches eg Jared ad
Word-of-Mouth marketing: Oprah, Larry King Live; online chat rooms, blogs

Narrower marketing mix - Chipotle
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Advertise: word of mouth primarily; online, print, billboards to promote contest
Sales Promos: $10K promo contest for customer with best idea for TV ad

(VIII) Net Promote Score (NPS)
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 The concept of NET promoter score (NPS) is insightful. The question "how likely are you to recommend this brand to your friend", and asking customers to rate on a scale of 1-10, is simple but insightful and brilliant. By looking at the difference between the fraction of "promoter" customers who are scoring favorably 9-10 and the "detractors" who score 0-6, the NPS is calculated. Progressive leaders should drive not only profits but also NPS score to ensure the profits are "good" and sustainable. "Bad profits" are those that come at the expense of bad NPS ratings and they can kill a firm in the long run.

Win through service & pricing strategy

 JWI 515 Managerial Economics Week8 Summary, 12/2/12
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This was one of the most important weeks of learning for me as I recognize that the financial impact of following these principles can be huge for the firm. I will apply these concepts gainfully especially as I move through broader leadership roles.

Key economic concepts and practices in pricing strategy were discussed this week. Through the Jack Welch videos we learned the down side of price regulation and the importance of competing on true value proposition. We also learned how small companies can survive price wars by differentiating through value added service. Mark up pricing and price discrimination scenarios to maximize profits were explored.

I learned how important it is to watch for and guard against stupid pricing and financial decisions. Through the training in this class, I understand what I can do to guide a firm to profits with right pricing models.

The way I fill gas will never be the same again for me. The DQ helped me understand the market structure and various factors affecting gas prices.

Dr DP

JWI 515 Managerial Economics Week8 Summary, 12/2/12
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I. Price Regulation  (Jack Welch video, week8)
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Pricing controls on the down side are outrageously crazy. They do not give consumers or citizens the benefits of latest technology, goods at a value price. The idea of putting phony prices in place is plain wrong. It is not free market behavior. It stifles innovation.
It protects people. A price umbrella over a product for a sloppy provider charging too much with low productivity does not make sense. You don't want that to happen. You want people competing all the time on price to win your business. Get a value, a buy, exciting to get something that is a true value proposition - that is exactly what companies have to offer.

II. Price wars  (Jack Welch video, week8)
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Price wars are something you don't like to be in business eg book business.There are Price wars in any market segments with new entrants, people that have fallen behind offer lower price to keep up with market share. The idea here is you have to find something else ***different*** to offer eg. Service !

Small independent drug stores can compete with big chains through innovative service. They hold on through innovative service - they are open 24x7, and know the customers intimately ! Independent book sellers work this way - when new releases come, the owners call customer base over phone, knowing what customers will like - they got an intimacy that is so different. You gotta offer a value added service that is ***different** than price tag at outside of the book or toothbrush. Small independents do this to stay alive.
It is a tougher game to stay alive. Some people ignore the service. When done correctly, small independents can own the customer by treasuring the customer relationships; they won't give it up to the big bullies with the price wars.

III. Pricing Practices, Week8 Lecture1
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(1) Profit maximization:
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Competitive markets: P = MR = MC
Imperfect markets: Downward facing demand curve; P>MR; Maximum profit achieved at Price Pmax = MC/(1+1/Ep)
(2) Markup pricing done to achieve profit maximization
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(3a) Price discrimination
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Price discrimination occurs when consumers who purchase and consume the product under different circumstances pay different prices (Dhewar, 2000). Different customers are charged different markups for the same product with the objective to capture consumer surplus for the seller.

(3b) For successful price discrimination to be successful
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(i) company must be able to segment the market
(ii) different segments must have different price elasticities
(iii) markets must be kept separate by time, distance or nature of use
(iv) there must be no leakage between two markets - consumers cannot resell at a higher price
(v) then assign markups to each segment
(vi) not violate antitrust laws (http://www.ftc.gov/bc/antitrust/price_discrimination.shtm)

(3c) First degree price discrimination: seller's market
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charge highest price buyers are willing to pay; seller attempts to capture all consumer surplus
(3d) Second degree price discrimination: quantity discounts
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(3e)Third degree price discrimination: charge different prices for different groups of consumers
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(3f) Various products are differentiated by their
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- physical, functional or performance characteristics
- place and/or time of purchase, duration between purchase and consumption, quantity purchased, restrictions on consumption

(4) Ways to charge different prices
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(4a) depending on store
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Super market vs mom & pop:                   
Costs: Qty discount from suppliers;lower unit variable costs; efficient operations; lower spoilage; inventory-carrying costs; overheads;cheaper land
Convenience: Location; Time savings; lower risk from shorter travel

(4b) depending on location
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Spatial price discrimination: Charge a different price depending on Location
Business Environment factors: exchange rates, transportation costs, rents, qty discounts, overhead costs, competition
Demand variation: consumers in different geo markets have different preferences, needs, incomes, budgets, willingness to pay

(4c) Bundling
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series ticket concerts,sports,theater,suits vs pair of trousers and a jacket,airfare + hotel travel packages,fully loaded cars,fully applianced kitchens
special deals for camera with lenses, computer with monitor and software

(4d) Vary price over time - skimming
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experience curve - Price drops with Higher cum volume
competitive pressures
some will wait while some will pay premium for immediate consumption

(4e) Peak load pricing
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customer segments - residential, commercial, industrial
somewhat elastic, inelastic, elastic
charge more for peak demand
Demand curves are different
Demand is higher during peak times; higher number of consumers with willingness to pay

(4f)Two part pricing - charge upfront + the charge usage fee
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(4g) Bundle pricing - get customer to buy more with added value offerings
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(5) Price based on Quantity consumed
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Change charges based on total number of customers serviced; Volume of product consumed