Yanjie(Jessica), He's Blog

In Adam’s blog (https://blogs.ubc.ca/adamspottiswood/2011/09/26/loyalty-rewards/), he commented on Shoppers Drug Mart’s Optimum program. He thinks that Shopper’s loyalty program benefits the company since consumers like him feel like they should be loyal to the brand to receive additional benefits. Also, business collects valuable data about transactions that could be used to analyze consumers’ shopping habits. I think loyalty program does give business long term benefit since it helps to better satisfy and retain their consumers. Researches suggest that loyal buyers spend more than causal customers, and visit stores more frequently. And I believe it works much better than merely price discounts which bring in large amount of sales temporarily.

Many companies use loyalty program in their marketing strategy to achieve the objective of developing long term consumer relationship, and we see businesses use it everywhere in our real lives. My purse is filled with all sorts of loyal/membership cards, however, they work in different ways. For example, Safeway club card allows members to buy selected products in stores at lower club price, giving shoppers incentive to use the card frequently through price discounts. The Body Shop membership card allows cardholders to get 10% discount on purchases and an additional $10 off benefit on consumer’s birth month. With Costco’s membership card, you can buy various high quality merchandises at low prices. Though cardholders have to pay a fee to obtain Costco’s member card, people feel it is worth the money. The one I engage most frequently with is Sephora’s beauty insider card. You earn on beauty bank point on every dollar you spend in Sephora. You could redeem various great samples with your points. Beauty insiders always receive emails from Sephora about upcoming special store event and new products. Another great thing is that cardholder receives coupons (up to 20% off) on special dates. Combined with its online shopping website, forum and in store professional sale reps, Sephora is able to integrate several promotion mix tools such as sales promotion and personal selling together to create more satisfying shopping experience for its customers. I think many Sephora’s beauty insiders are like me, feeling rewarded, encouraged to shop there and surprised to find great new products and deals.

In a word, I think loyalty program is an excellent marketing component that is effective in building meaning long term relationships with consumers since based on collected consumer information, business is able to better target and serve individuals. We can see loyalty program as a cost of learning about customers, and it brings additional customer profits is much greater than the sum of investment in loyalty program and loyal promotion costs.

As a worldwide famous brand, Starbucks has been using market-skimming pricing strategy for a long time, which means that Starbucks charges high price for premium products. However, in 2009, during the economic downturn, Starbucks announced a new pricing strategy: it lowers prices of its lower-end products such as brewed coffee and charges more on specialty drinks like Frappuccinos.

The first part of the new pricing strategy, which is cutting prices on lower-end drinks, makes sense. It can be categorized as promotional pricing strategy. In recession, Starbucks was facing a weakened economy and strong price competition. Therefore, offering customers discounts makes its products more affordable and helps to maintain its market share and prevent price sensitive consumers from switching to competitors such as McDonald, who just launched a new line of lower-priced espresso drinks.

The second part of this pricing strategy, which is raising prices of its high-end products, might seems odd. Why did Starbucks choose to raise prices in recession when consumers’ budgets are tight? I think there are two major reasons. First, as blogger Rafi Mohammed argued in his blog “Starbucks’ New Pricing Strategy: The Beginning of the End?” (http://www.pricingforprofit.com/pricing-strategy-blog/starbucks-new-pricing-strategy-beginning.htm), Starbucks differentiates itself from competitors through its high quality specialty drinks, which are “in the cash cow phase of the Growth Share Matrix”.  There is less competition in high-end products comparing to that of the crowed low-end coffee drinks market. Second, Starbucks is confident in its brand. It believes their products are delivering higher value to consumers through premium drinks, relaxing environment and so on. High price justifies high value.  Starbucks tries to remain a premium brand by charging high prices since many buyers perceive brand image and prices as negatively correlated. Of course, different buyers reacted to the raise in price differently. Some consumers might think they are ripped off, whereas other loyal buyers, who value Starbucks’ premium drinks and enjoy the experience/atmosphere, are willing to pay more. For them, it is not simply buying a product; Starbucks becomes part of their lifestyle.

The new pricing strategy suggests that Starbucks is trying to take two roles; it wants to become both a premium brand and an affordable brand in its consumers’ eyes. I think it is not quite realistic. Price-conscious consumers are easily turned to other brands that offer similar products at lower price.  Although Starbucks tried to retain these consumers by lowing prices of lower-end drinks and introducing a line of instant coffee in grocery stores, it still might not beat MacDonald’s free small premium coffee campaign. I think it should not be so greedy trying to make all consumers happy. Instead, it should focus on segmenting its consumer markets based on user rates and loyalty status, providing high value to their loyal, heavy users who are profitable to the company in the long run.

Groupon is a fast growing group buying discount site that offer coupons in more than 250 markets with over 35 million registered users (http://en.wikipedia.org/wiki/Groupon). The majority business that provide deals to customers with Groupon are customer sales businesses, for instance, restaurants and hair salons. How does Groupon work? It categorise daily deals into cities, and registered users will receive an email from Groupon about today’s deal in his/her city every day. When the number of buyers reach the minimum number specified by a particular deal, the deal on. Groupon makes money by keeping a relatively large portion of discount, usually 1/3 to 1/2, on each deal.

Why is Groupon so popular? My classmate Brian claims that “ the website is able to localize its offers to its users”, and through “ word-of-mouth” and  the large mailing list, Groupon is able to reach large amount of customers (https://blogs.ubc.ca/briancheung/

). I agree with him, and as a Groupon user I myself, I think from customer perspective, attractive (cheap) price and the sense of urgency due to the limited time offer play important part.

So far, customers and Groupon are benefit, how about businesses who offer those deals? Well, it depends. First, Groupon is a good marketing tool since businesses are not charged for advertising unless deals they offered are on. Unless businesses obtain guaranteed sales, there is no upfront cost. In other words, Groupon is risk free. Another good thing is that business’s deal attracts lots of new customers. However, they are downsides. Businesses have to offer large discount, and on the top of that, Groupon will ask for a large portion of the businesses’ profits, so profit margins are small and some are actually losing money. So why many businesses do this? They hope to gain repeat customers. Unfortunately, according to Groupon’s research, there are only 22 percent customers visit the business again. It makes sense because lots of  customers are bargain hunters.

I think Groupon is good for new business that have high quality product but does not have large customer database. In addition, it should know how to manage its profit margin so it won’t loss much on the deal.

According to Wikipedia, cause-related marketing is defined as “a type of marketing involving the cooperative efforts of a “for profit” business and a non-profit organization for mutual benefit.” Simply speaking, it means that companies link their products or services with non-profit organizations, especially charitable organizations, and when their customers purchase particular products or services, these companies will make donations.

Cause- related marketing has been a popular marketing strategy, and it is widely used in many industries. The first thing comes to my mind is a pink ribbon. We can find many products with pink ribbon printed on it such as pens and mugs, which means that by buying these products, you are supporting breast cancer research.  Another good example would be McDonald’s marketing campaign –MacDonald will donate $1 to Ronald McDonald House Charities with each sale of Big Mac.

Not everyone applauses for cause-related marketing, some criticize that companies use this strategy as an efficient way of increasing sales, and their claim of doing good to the world or giving to the charity is mainly used to attract more customers.

In my opinion, case-related marketing is a smart marketing strategy that brings these companies (sellers) and charitable organizations to a win-win situation. Companies could build positive public image, gain reputation and obtain increased sales. Charitable organizations would gain more funding and exposure. Also, customers could benefit since many want to make their contribution to the society by helping people in need but cannot access to those people. With CRM, they can do good simply by purchasing products or services they need in daily life.

Hello everyone! Welcome to my blog.

My name is Yanjie (Jessica), He.  I immigrated from China, and the header is a photo of my hometown, Qingdao (Nice hah?). Currently, I am a third year student, and my specialization is Finance. I just transferred from Langara College.  For me, being here, at Sauder means more challenges as well as opportunities.

I’m taking Comm296 for two reasons. First, it is a required course.  Second, though marketing is not my specialization, I believe it’s important to master some basic marketing knowledge and skills. Any successful business cannot go without a brilliant marketing team.

I myself haven’t had marketing experience at my job; however I have been marketed by my employer on the company’s web site. (http://www.govantutor.com/).

My favorite ad would be a Thai commercial shown below. It tells a touching story about a deaf girl who is chasing her “impossible” dream –learn to play violin. I absolutely love the idea this commercial is passing on to everyone. “You can shine.” Yes, we all can. Besides, Canon has always been one of my favorites. I was surprised when I found out it is Pantene’s commercial.

Something personal to share with you guys about myself. Well, my hobbies are photography, cooking, hanging out with my friends and karaoke.

I hope I could learn useful skills  and make some good friends in this class 🙂