It is April, school is over and exams will start soon for me and all the other students here at UBC. In this post, I want to write about my experiences in my marketing course and my feelings about our most interesting project, the marketing mix analysis video.
First of all, I want to say that this course confirmed my previous assumption that my passions and academic strengths are all leading me to a career in marketing. Our last assignment, a demonstration of a marketing mix analysis in video-format, was the most interesting project I have done in business school since I came to UBC as it provided a great channel for research, creativity and profitability-analysis alike.
Only after all the cutting and uploading was done, I began reflecting on what it really taught me. It taught me many things alike:
1) That marketing can provide a unique combination of different disciplines of commerce.
First of all we started with research, tons of research. What does the company, Starbucks, do right now, what could be improved? Did they already try this in the past? Where can we get information? Are we allowed to shoot video in Starbucks?
2) There will be stress. Lots.
Yes, it was a group assignment and yes, group assignments are of the stressful kind. Hobby filmmakers know that every video is basically a puzzle with an infinite amount of pieces that finally comes together. This can be really hard to do if you depend on your team members and something just doesn’t work right from time to time, so the puzzle can not be continued until the problem is solved. We worked it out in the end, but the good old rule of filmmaking proved to be true once again: “Regardless of how long you think it takes, take that amount and multiply it by four”.
3) That’s what I want to do!
In my private life, I always loved to find ways to present hard facts in a visually pleasant and entertaining manner. Earlier in my life, I created video reviews of video games and electronic equipment and I always enjoyed presenting a problem in a simple yet effective way for enhanced understanding. This project showed me how I can turn my lifelong passion into a meaningful real life application.
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Conclusion
Being the creative director of our project, I was responsible for all creative aspects of the video such as concept, storyboards, sound, props and the cutting/editing process. Starting with nothing but researched facts, establishing an idea to solve a problem and then subsequently creating an effective way to visualize it was without doubt the most impressive project experience throughout my career at Sauder up to this point, and influenced me in choosing my future career path.
Music, movies, games – the way we enjoy either of those three mediums changed massively during the past 100 years. In this blog post, I want to elaborate on the opportunities and threats that come along with the distribution of video games online as both, profitability and complications are most noticable in this medium.
The changing distribution channels over time for music: From analogue all the way to optical and finally digical distribution.
Things did not change very much ever since video games started to be sold for home use in 1972 until the dawn of the internet. The format changed from cartridges to magnetic formats over to various forms of optical discs, but the idea was always the same: The game has to be manufactured, packaged, shipped and put up on display in a retail shop. The consumer will have to go to a shop that sells the favorite game and return home after purchasing the game.
I’m writing this as a response to the video game industry blog “NotEnoughShaders.com” who wrote a very well researched article about the rise of development costs in the industry and how it drives small companies out of business if they don’t find alternative distribution channels. The idea of downloadable game content that cuts out the traditional supply chain and is directly delivered to the customer was already introduced in the mid-90’s by Nintendo in Japan with their Satellite Download-Service, but only became common practice around 7 years ago when many major manufacturers introduced their own digital distribution methods such as the Xbox Live Marketplace (Microsoft), the PlayStation Network Store (Sony), WiiWare and Virtual Console (Nintendo) as well as the App-Store (Apple) and Steam (Valve). As technology advances and gamers expect more impressive graphics and diverse gaming experiences every year, development costs skyrocketed throughout the past decade (1).
The video game industry experienced a rapid increase in development costs over the past 10 years. This was mostly caused by the introduction of high definition technology and higher expectations in terms of storytelling and graphics.
For example, a one of the most successful games of the year 1998, Resident Evil 2 for PlayStation, had only 33 people working on it with a budget of approximately $3 million dollars (1). 2012’s Resident Evil 6 employed over 600 people and the budget most likely approached $100 million dollars – an increase of over 3300% in a bit more than 10 years.
With such increasing costs, many developers and publishers seek additional sources of income or try to optimize their supply chain. By using online distribution channels, companies such as Nintendo or Electronic Arts can not only safe all the money that was formerly spend on supplying games to retailers, but they also have better control about the distribution of their products and can aim advertisements more directly and customized to their customers tastes.
The advantages of online distribution are obvious: Download-traffic costs next to nothing to a company, therefore once the break-even is reached, variable costs are basically zero and the company earns pure profit for each additional sale. In addition, consumers can get access more directly and easier to the software they want, from everywhere in the world as long as there is internet access. This distribution method is heavily discussed in the gaming community, however, especially because of the increased empowerment of companies increases scepticism among gamers and users of this new service. A negative example of online distribution is the recent SimCity release in March this year, a game that can only be played with an established internet connection. Players were downloading the game for the full retail price, but overloaded servers prohibitied customers from using their product – and EA refused to give refunds and even threatened customers to ban their online accounts (3) (which would also delete all the customer’s previous purchases from the EA online store) if they cancel the purchase by contacting their credit card company (2).
SimCity’s technical problems caused a lot of disappointment among gamers and damaged the company’s reputation in the scene. Supposedly unrelated to this issue, EA’s CEO John Riccitiello resigned only days after the “always-online” debacle (4).
Some observers regard this recent development of increasing coercive power on paying customers as very negative, but companies will not refrain from using online distribution channels because it means almost zero variable cost for each sale. Still, the answer to the question whether companies will agree to loosen their grip on the customer with “always online software” and strict DRM or if they will continue to chain each consumer into a framework where they are exposed to the rules made by the company will remain open.
Sources
1) http://www.notenoughshaders.com/2012/07/02/the-rise-of-costs-the-fall-of-gaming/ , retrieved March 23rd
2) http://ca.news.yahoo.com/blogs/right-click/simcity-problems-bad-worse-always-online-servers-called-004720433.html , retrieved March 23rd
3) http://www.theverge.com/2013/3/7/4076104/amazon-stops-simcity-digital-orders-customer-complaints , retrieved March 23rd
4) http://business.financialpost.com/2013/03/18/electronic-arts-ceo-john-riccitiello-to-step-down-march-30/ , retrieved March 23rd
It is the seamless transition between a movie and a commercial, the subtle distraction of our thoughts away from the story line towards a brand name, the billboard next to the highway of the film reel.
When I read Melody Han’s post about Lamborghini’s relation to the Batman-movies, I felt challenged to write more about the topic of product placement. It is not new, it is actually older than one may think. Being introduced in the early 20th century in silent movies, definining cinema classics such as Fritz Lang’s “M” (1931) already featured a banner that advertised “Wrigley’s PK Chewing Gum” in the background for a continous 30 seconds (1). However, the ways of implementation and how much product placement could be found in big movie and TV productions changed a bit over time. The simple banners in the background had transformed into characters using products and mentioning their brand names such as in one of the most famous examples, the “Back to the Future” movies from the 1980s. While the use of a DeLorean DMC-12 is surprisingly not part of sponsored product placement (the company ceased to exist prior to the first movie’s release), the movies feature many other companies’ (sometimes fictional) products by e.g. Pizza Hut, Texaco, Pepsi and Mattel.
Marty McFly always orders Pepsi, regardless if he is in 1955, 1985 or 2015.
Other companies are even more aggressive in promoting their products by simply promoting the entire movie: “I, Robot” (2004) was supported by Audi who even developed their very own concept car “Audi RSQ” to be featured as Will Smith’s automobile in the movie set in 2035 Chicago. While a very futuristic concept, the car was still recognizable as Audi and increased brand awareness of the company and increased the hype for future Audi sportscars: 2 years after the release of “I, Robot”, Audi launched their R8-model, the first high-performance car in the company’s history, which highly resembles the RSQ from the movie. This is a prime example for how a movie was used to test a target market for its reaction and subsequently release a product to react to the determined demand.
The Audi RSQ (top) was exclusively developed to be used in the movie “I, Robot”. 2 years after the movie’s release, Audi launched the “R8” (bottom picture), which resembles the futuristic concept car in many design aspects.
In 2013, the methods of product placement are more diverse and full of opportunity, thanks to the internet and the possibility to change content simply by clicking a button. I want to raise awareness of the development of product placement in interactive content such as video games. Companies such as Electronic Arts have already introduced this technique as early as in 2004 (“Burnout 3” featured in-game graphics with advertisements for other games published by EA) and have since developed more subtle and effective methods to include brand names into the gaming experience: In SimCity (released March 2013), players can build so-called “Nissan Leaf Charging Stations” for electric vehicles (3), which increase happiness among nearby citizens and increases eco-friendliness . The implementation fulfils a gameplay-purpose as well as raising brand awareness.
Driving a Nissan will make your Sims happy. The player will proceed in the game and knows that Nissan was the reason.
But just like with all other marketing strategies, there is always a threat to it. EA’s latest implemenetation is smart, but the previously mentioned example of billboards in “Burnout 3” was disliked by many customers and further damaged EA’s reputation as a “money-making machine” who do not care about artistical coherence (4). The same can happen to movies, when product placement is not always as charming and memorable as when Mom McFly “hydrates” a Pizza Hut-branded pizza for 2 seconds in a Black & Decker “Hydrator”: In one episode of “Sex and the City”, a show that collaborated with Apple for almost a decade and always prominently featured their products in the spotlight, much of the episode’s airtime is spent on how the Apple store has a solution for a computer problem and how easy it can be avoided if she had followed their recommendations in backing up data.
Particularly intrusive product placement has the ability to backfire for the sponsor and can cause negative reactions among the target audience, who actually just want to watch their favorite show or play a well-designed game.
Even though over 80 years have passed since Fritz Lang’s “M” hit the theatres, the old recipe is still the same: Product placement can be entertaining, fun and even enhance the experience and authenticity of the medium that is consumed, but the paradox secret behind outstanding implementation is to make its appearance almost unnoticably subtle, like a hydrated pizza in 2015.
Mom McFly hydrates a pizza (wrapped in a Pizza Hut-branded wrapper) in a Back & Decker “Hydrator”. A great example for very obvious product placement, that is still funny and charming and is well embedded into the story of a movie rather than disrupting it.
Sources
1) http://www.businesspundit.com/wp-content/uploads/2011/12/M_Wrigleys-600×464.jpg , retrieved on March 10th
2) http://www.blogcdn.com/blog.moviefone.com/media/2009/09/bttfbottle-%282%29.jpg , retrieved on March 10th
3) http://productplacement.biz/201304045078/branded-entertainment/nissan-product-placement-in-sim-city.html , retrieved on March 10th
4) http://thumbbandits.com/index.php/2010/01/burnout-3-takedown-review/, retrieved on March 10th
5) https://www.youtube.com/watch?v=YWSZJXhOvBw , retrieved on March 10th
6) http://files.myopera.com/jdlien/blog/pizza_hydrated_comparison.jpg , retrieved on March 10th
Vancouver is the second-worst city in the world if you want to buy a house (1). The median home price of over $600,000 is 9.5 times the average gross annual household income, a multiple that is only exceeded by the Hong Kong housing market. Naturally, the extreme prices are inevitably destined to stabilize and fall once the boom is over. Facts such as that the average price for a detached home in West Vancouver peaked in May last year and has since declined by more than 11% (2) signalize an upcoming stabilization or even recession in the housing market.
Average Prices for Vancouver’s real estate market divisions until December 2011
But a profitable market is not easily given up and some people attempt drastic methods in order to keep the price high: A recent CTV news report showed Chinese women who claimed they were sisters looking for real estate, funded by their parents. As it turned out a few days later, those women were neither sisters nor were they intending a purchase: They were actually two Marketing associates who were assigned by “MAC Marketing” in order to deceive potential Chinese investors into thinking that demand from China is still as high as it had always been. The entire marketing lie backfired and MAC’s CEO Cameron McNeill resigned.
Linking back to my previous blog post about the credibility and honesty in modern marketing, this shows how important it is in nowadays world to be aware of the audience’s possibilities to check everything on credibility. As can be seen in the embedded video above, this bogus was found out after someone revealed the two women’s true identity by checking their LinkedIn profile (4). Such a substantial flaw in detail did cost the CEO his job and further damaged BC’s real estate industry’s reputation (2). When a marketing firm such as MAC Marketing tries to appeal to a target segment, in this case investors from Hong Kong and China, it is essential to keep in mind the risks they are facing. Credible statements that can be supported by facts is an essential foundation to customer loyalty and sustainable marketing relations. In this case, the news spread quickly over to their potential customers in Hong Kong and is likely to have damaged Vancouver’s real estate market’s reputation with an incalculatable financial impact on the market overall (3).
“[…]it will take time, we hope that we can earn back our good reputation and your trust. This situation has been difficult for everyone and as a company, we will learn from this[…]”, says McNeill when confronted with his company’s heavily criticized marketing bogus (3).
Once the trust is broken, it is almost impossible to win it back even if everything that follows is truthful. After all, they may as well just have gotten better at lying.
When I think of the past classroom discussion about marketing ethics, the most striking memory is about false advertisement on behalf of McDonald’s. In fact, I hear people complaining or making fun of McDonald’s all the time: For example, even though people like Chicken McNuggets, there are a lot of disgusting stories about their manufacturing process and about whether or not they are made out of real chickens at all.
Parts of the chicken used in the production of Chicken McNuggets, according to McDonald’s Canada
Now I stumbled over an interesting reaction by McDonald’s Canada: They answer questions. Not harmless, controlled questions in a staged promotion video, but real questions from real people. Their “Our Food. Your Questions.”-campaign from 2012 invites people on the internet to ask questions publicly and McDonald’s will respond to them. As of January 2013, more than 19,000 questions have been answered, including many of which that are rather uncomfortable for the company such as the ‘McNugget mystery’ (3).
This fresh approach to marketing is necessary in the opinion of Chuck Porter, co-chair of CP+P, who states that “You can’t lie anymore, because there’s the internet” (1). And yes, while the creation of social media, blogs and websites in general provided a great expansion ground for advertisements, it also enhanced discussion and credibility evaluation tools by an infinite amount. When McDonald’s said “100% Beef” in the 1980’s, it was very hard to verify and discuss with people outside the consumers direct social environment. Nowadays one can go online and investigate upon any marketing statement a company makes, leading to increased risks when deciding to exaggerate or make misleading marketing slogans in advertisements.
“Companies cannot hide stuff. If Nike is building their shoes in Southeast Asia in sweatshops, people are going to find out. You really can’t bullshit people anymore…And then you get credit for not trying to fool people.”, (1) says Porter.
In our era of information technology, it will become increasingly harder to trick people into thinking patterns to have them make a purchase. One way that companies like McDonald’s Canada discovered to conquer this problem is to create the asset of honesty in promotion and advertisement, to create an honest and credible interaction between the company and the customer. Of course McDonald’s is still not perfect and many of the answers still seem shady to critics, but this opening of a company who is aware of their many critics is definitely a promising step towards future marketing strategies that incorporate and accept the presence of the Internet’s capabilities.
Sources
1) http://www.marketingmag.ca/news/media-news/porter-tells-ad-week-audience-%E2%80%9Ctransparency-is-the-new-black%E2%80%9D-71038 , retrieved on 05/02/2013
2) http://www.marketingmag.ca/news/marketer-news/marketer-of-the-year-2012-mcdonalds-canada-70067 , retrieved on 04/02/2013
When marketeres come up with an advertising campaign, they have to take many aspects into consideration. Simply praising or trying to appeal to a certain target market is of not much use if, at the same time, the advertisement it openly criticized as offensive. The entire campaign will backfire and hurt the company’s reputation with the ultimate consequence of decreased profit or losses.
Sometimes, even big companies make the mistake of stepping over the line in favor of what they obviously considered a good marketing tactic: This advertisement by American Apparel was discussed when Hurricane Sandy hit the American Northeast in November last year. It is a perfect example of a campaign backfiring due to lack of ethical concern.
After this ad had been sent to all e-mail subscribers in the Northeast area, people affected by the Hurricane immediately started to express their disappointment in the company’s marketing methods. What was supposed to be an incentive to go shopping during the hurricane turned into a marketing desaster. American Apparel CEO Dov Charney responded to the criticism saying “We don’t think it was offensive” (1) and continued “It wasn’t that serious”. Maybe it was not to him or even from an objective point of view, but marketing is rarely treated like an objective science. Taking advantage of a current event for promotion can turn out well if the right tone is found.
For example, half a decade ago Coors Light beer gained 3% market share as a result of their marketing campaigns that focused on coldness and refreshment during the 2006 heat have.
In this case, however, American Apparel did not hit the right tone. “In case you’re bored during the storm” was not appropriate for a weather condition that caused 253 casulties in 7 countries and turned out to be the 2nd costliest hurricane in US history with approximately $65.6 billion in damage. American Apparel suffered, too, as their share price fell from $1.12 on the 29th of October (the day the email was sent) to $0.88 on November 16th, a low that could not be recovered until early January 2013.
In conclusion, I think that it is not necessary to completely avoid to take advantage of current events; but American Apparel should have chosen a different approach to marketing Hurricane Sandy. One of the comments under the article suggested that instead of offering 20% discount, American Apparel could have offered to donate 20% of their sales during a certain period to people who lost their homes. Not only would this have prevented people from having moral discomfort with their campaign, but it could have contributed positively to their reputation.
(1) Marketing Ethics, American Apparel & Hurricane Sandy, bostinno.com, November 5th 2012, written by Paul Watson
Responding to Nicola Lam’s blogpost (1) about the controversial GM advert, I do not concur with her concluding that GM should subsequently put their focus on sustainability as a reaction on their latest advertisement desaster.
The reason for the extremely negative response (3) to this ad was its degrading nature, not the praisal of pollution. The target audience being college students, who often happen to ride a bike, it is understandable why they pose an attractive target to gain new customers. GM’s strategy to reach this goal, however, was far from diplomatic: If you ride a bike, women look down on you, you’re ashamed, “life sucks”. Many college students prefer a bike to a car because of health aspects or convenience because they already live on campus.
Getting around on campus is often far more convenient by bike than by car
Given these points, the marketing method that was applied here becomes disastrous and could harm the company’s already damaged image even more. Before taking provocative advertisement such as this into account, a business should gain clarity about its target audience. College students often rely on bikes because of convenience rather than monetary reasons – GM should have considered if their slogans would still appeal given these conditions in order to advertise their cars to students.
Sources:
1) https://blogs.ubc.ca/nicolalam/2011/11/14/cycling-hot-or-not/ ; Nicola Lam, 14th of November 2011
2) http://abcnews.go.com/blogs/business/2011/10/gm-backpedals-on-anti-cycling-ad/ ; Kevin Dolak, 13th of October 2011
3) http://www.gelatobaby.com/2011/10/12/gm-backpedals-on-anti-bike-ad/ ; Alissa Walker, 12th of October 2011
With the release of the Kindle Fire on the 15th of November (1), Amazon launched a device that, priced at only $199 dollars, could pose a serious threat towards Apple’s $500 iPad 2.
Some journalists already suggest that the availability of a cheap, well-marketed alternative to the iPad 2 could mean that Apple’s domination in the tablet market could come to an end very soon, as the Kindle Fire could spread Google’s Android operating system into the user’s minds just like it happened on the cell phone market.
Similar to Volkswagen's Beetle in postwar Germany, the Kindle Fire could become a solid, reliable tablet that everyone can afford.
A product that satisties expectations as high as this, however, does not only require good marketing and a cheaper price than its competitors – it also needs to please customers and thus increase its popularity, just like the expensive yet uber-popular iPad 2. On ZDnet, the introduction of an innovative product that becomes widely successful is referred to as the “Volkswagen moment” (3). The Fire, however, does seem to be rather competing with “its own kind” than with the iPad (4). Time will show if the ambitious try to copy the iPad’s success with less than half its price and features will be thanked by customers.
Sources:
1) http://www.chicagotribune.com/video/breaking/chi-new-kindle-fire-released-20111115,0,6237502.htmlstory ; Chicago Tribune, 15th of November 2011
2) http://www.theregister.co.uk/2011/11/22/kindle_sparks_then_splutters/ ; Matt Asay; 22nd of November 2011
3) http://www.zdnet.com/blog/perlow/amazons-kindle-fire-the-tablets-volkswagen-moment/19312 ; Jason Perlow, 17th of November 2011
4) http://www.reghardware.com/2011/11/21/changewave_research_shows_kindle_fire_demand_hits_ipad_rivals_not_ipad/ ; Tony Smith, 21st of November 2011
5) http://news.cnet.com/8301-17938_105-57329834-1/kindle-fire-getting-shoppers-hotter-than-ipad/ ; Erick Mack, 22nd of November 2011
The Euro crisis became more and more serious over the last couple of weeks and even the future viability of the Euro currency was questioned. It is evident that problems of this scale demand for someone taking a leadership role to provide stability and reassurance in the EU community.
The blogpost Europe’s big two analyses the importance of Germany’s councellor Angela Merkel and France’s Premier Nicolas Sarkozy’s cooperation. Not only is France Germany’s biggest business partner to date, the countries are also tied together by their long history including several wars. One of the interesting facts the article brings up is that Germany focusses more and more on Asia in terms of exports and therefore establishes an economic safety that other countries, including France, are lacking as of yet. This economic foresight, eliminating geographical restraints, could be one reason for Germany to be currently considered an idol in the stricken Eurozone.
A comparison of deficits in Europe - Germany being the clear winner
France, however, faces the threat of its high debt and low R&D expenses which influences economic sustainability, leading to an increasing identification of both economy and public with the alledged “losers” of the Eurozone such as Greece. According to the article, France has maintain its self-confidence to remain an equal partner for Germany and stabilize the European community.
Sources:
1) http://www.economist.com/comment/1129830 ; Professional Business blog on The Economist.com; 21st Nov. 2011
Thinking of entrepreneurs, Ingvar Kamprad is probably one of those that influences our student life the most. Not by taking up our time with the unfortunate invention of facebook or a particular smartphone that can play games, but by selling stylish and, more than anything else, cheap furniture and accessories for all ages.
Many customers became desperate over the assembly of IKEA products - not affecting the company's success
The first store was opened in 1953 and within a little more than 20 years, the franchise had opened branches all over the world, in Europe, America and Asia. (2) The entrepreneurial aspect of the company made this rapid expansion possible: Low product prices, unique design and high customer identification (i.e. recognizable product names) resulted in high differentiation and made IKEA more than just another substitute on the furniture market landscape. The risk of this undertaking, however, was high prior to the opening of the first store because it was hard to predict if post-war Sweden was ready for such an innovative approach, and if customers really want to self-assemble their furniture.
The company focusses on cost control and continuous development of their production methods to increase efficiency (1). It is reported that founder Ingvar Kamprad lives a very humble and down-to-earth lifestyle (3) and so does IKEA as a company, as in many other companies’ organizational aspects that were inspired by its founders’ characteristics.
Sources
1) http://www.thomaswhite.com/explore-the-world/global-players/ingvar-kamprad.aspx ; Thomas White.com; 20th of September 2011
2) http://www.newyorker.com/reporting/2011/10/03/111003fa_fact_collins ; Lauren Collins; 3rd of October 2011
3) http://www.swissinfo.ch/eng/Home/Archive/Cheap_is_good,_says_furniture_magnate.html?cid=650688 ; swissinfo.ch; 26th of March 2006
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