S's world

Our parents have taught us, all through our childhood, that there is no free lunch in the world. In a sense, that You have to pay for what you eat is regarded as rule that could never break. However, what about free coffee? During the last two week, McDonald’s offered free coffee of any size in most of its stores.

This campaign is, in a way, unique to other similar promotions, because it is truly, free. You don’t have to buy other things before ask for a big coffee. All you have to do is to line up in the store, and tell the staff, proudly, that I want a big coffee, and wait. In deed, free products are nothing new. People are quite  familiar with free cosmetic samples offered in department stores, TV campaign ascertaining that you may get a free car if buy the product, and those ads with the magic term” buy 2 get one free”. However, in most cases, these free products are only offered conditionally. If you want free samples from Clique, you purchase must exceed $30; if you want to get a free car, you would have to buy the product first; if you want to get one product for free, you have to purchase the other.  Therefore, the truly free coffee offered by the Macdonald’s could seem new and extremely attractive to most customers.

But we still have one question, why free? Why does a gigantic fast food chain company like the Macdonald’s started to offer something for free? Why are they willing to sacrifice their profit margin? What are they expecting from the campaign of free coffee?

One of the answer to the above questions could be the offering a learning experience. In many cases, we don’t go to Macdonald’s for coffee. Coffee, as most people might believe, are more associated with Starbucks or Tim Houtons  or Blenz Coffee  than fast food restaurant  Macdonald’s. Therefore, by offering free coffee, Macdonald’s is telling its potential customers that Macdonald’s could be their coffee place.

What’s more, there could be a psychological trick in this case. As studies have showed that products taste better or looks better when they are offered for free. People are just so pleased with the magic word ” free”, that the world suddenly looks better. Of course, when Macdonald’s offers free coffee, its coffee may taste better to most of its customers. This delightful experience could be left in their mind and remind them to buy a coffee next time they go to Macdonald’s, even though the coffee is no longer free.

In addition, free coffee could serve as bait to attract people to go into the store. Once you are in a longer, you are no longer satisfied with just one cup of free coffee. The great smell of fries and hamburger stimulate your appetite.  I went to the Macdonald’s five times last week and count for people who only bought coffee. Surprisingly, even though the store was crowded for nearly the whole last week ( it could have been more crowded, if there were no snow), only a very small fraction of people chose to “buy” coffee alone. Most people buy fries and hamburgers along with the coffee. There is no way to know if these people were intended to buy other products at first, but to me, the delightful smell of food  in the store, certainly drove me to buy more products than I originally planned.

Modern marketers have devoted incredible efforts to develop various strategies to gain market shares from their competitors. Whatever it is changing pricing strategy in the short-term,  issuing new products or enter into foreign market,  the ultimate goal may remain the same——to sell more products.  Nevertheless, have you heard any company which wants to gain market shares by threatening its customers? If not, now it’s time to learn about it.

On 3rd Nov, the world 3rd largest Internet technology company( right after Microsoft and Google) Tecent QQ (00700.HK) has announced, as they put i,t a hard decision; they will block its own software QQ ( a IM software like MSN)  if users have installed another anti-virus software called 360, a free anti-virus software based on cloud-technology with  over 30,000,000 users world-wide, on their computer. In other words, users will have to uninstall the 360 and get a new anti-virus software if they want to use QQ. Actually, the two companies have been arguing with (or, in a way, fighting with) each other for 2 months, as 360 accused Tecent has illegally obtain private information of QQ users by secretly scanning their hard disks, in September. Tecent fought back, stating that 360 vilified QQ because it wanted to launch its own IM software. The quarrel lasted for the following 2 months and   the hard decision, as Tecent put it , was just the result of the latest battle. However, this battle was very different from previous ones, because this time, not only 360 and Tecent are involved, tens of millions of users of both softwares suffered, and many of them have become casualties, as users are coerced to make their own “hard decision”. One “desperate” user twittered that the fight will not end unless Microsoft  purchase the 2 companies, merging them into one company  and name it ” 3Q” ( thank you).

Well, let’s temporarily put aside all the twisted truth of this absurd quarry between two IT giants and approach the issue from a pure marketing point of view.  Despite their accusation of each other, two companies share the same ultimate goal——–to gain market shares by offering new products. For Tecent, the new product could be anti-virus   software, while for 360, the new product is a new IM product. Wait, how to gain market shares? How about forcing my customer to uninstall competitor’s product?

There’s no way for me( and for most “normal people” ) to perceive how the CEO of Tecent actually came up with this crazy idea; nor could we know why  the rest of boarder members agreed with it, but what I have learned from COMM 296 told me this would never work.

To begin with, threatening your customers undermine the value of the company. Customers feel bad when you threaten them and this bad feeling could last for a long time and finally grow into bad impression on the brand of the company. The above case goes with this argument. The stock price of Tecent QQ plunged by 3.1% , which constitutes a total loss of about 1,060 million HK dollars right after this announcement .

What’s more, this crazy act actually goes against its very goal, for  threatening your customers may lead  to decrease in market shares. The consumers feel bad, and when they feel bad, they will no longer purchase any product.  According to Google trends, MSN installation became the most popular word after Tecent’s announcement, which proofed that customers are actually turning to other similar products.

Probably the most serious mistake Tecent has made in this case is that it failed to think from the users’ point of view, which prevails the modern marketing issues from the marketing mix to consumer behavior. If you are a user of QQ, would you be pleased when you open the software, eager to contact your friends, only to see a window popping out, telling you either to uninstall your anti-virus software right now or stop using QQ ? The normal answer is no. Therefore, what is the point in threatening your customers? It can do nothing but make things worse.

Want to taste it? You must huuuuury!

#mce_temp_url#

Yes! McRib is back! After a long absence, McRib finally made a successful return. The  McDonald’s McRib sandwich, made from ” boneless pork and topped with pickles, onions and tangy barbecue sauce” will be available in nationally in the US ( not sure when I can taste it in Vancouver though:-(  ) .

As the article pointed out, with more than 5 pages of facebook, a Rid-locator website, McRib returns as a “rock star”. In my opinion, the success of McRib may partially owe to its  special marketing strategy–Absence makes the heart grow fonder！

By offering in a limited time within a limited number of restaurants, the small sandwich has successfully hooked up the very desire of human beings–the desire for food, tasty food. The passionate Rib fans will not let go a singe piece of information about the McRib. They collected information, share it on the special website and talk about it  on facebook, which has attracted even more public attention. Probably nothing could be more convincing than the positive word of mouth, especially when a picture of thoroughly-baked boneless pork  is accompanied. Therefore, some of the people who viewed the website or the facebook may join the huge McRib searching force. In short, the limited  offerings have actually created a virtuous circle for the promotion of McRibs.  Well, this is not the end of the story, because you have to hurry to get it as the tasty sandwich will disappear again on mid-December. If you don’t want to miss it again this time, you would have to rush!

“You know what? It’s just 9 dollars! It’s less than half the price if I buy it in Shanghai!”

This is what I told my friends last month when I bought the L’oreal lash serum( made in US) in London drug store for 9 dollars. I felt so luck, even proud of myself, for I have managed to get the right good in the “right” place.  The same L’oreal lash serum would have cost me 20.45 dollars(about 135 RMB) after tax! So why is the price so different among different places in the world?

Well, at first, I thought it would be the difference in costs. If I bought it in Shanghai, the serum will be made in somewhere in China, where , in most cases,costs of  labor are far  cheaper than Canada or US. This means that in terms of costs, the serum should be far cheaper in Shanghai! So why would the real case be the oppiste?

In Canada, L’oreal is something you usually get in drug stores.  You get it, pay for it and go back. However, L’oreal owns counters in nearly all department stores in Shanghai. In many cases, these counters stand right between luxurious brand like Chanel and Dior. Even before you arrive at the counter, the modern-looking shop-assistant will greet you, with a beautiful smile on her face. She will present you as much products as possible and what’s more, try to put all these products on your face ( or hand, if your skin is sensitive). You pay for the products at the customer service center where another well-dressed girl is waiting for you, and get a chic paper bag along with receipt and samples of other products. Of course, you will never receive all these services for free(although you don’t need to tip!) . Most of these service fees like department store rent are already included in the price. Then, why did L’oreal choose to raise the price to provide all the extra service? Why not just sell it at the usual price ( like the price in US or Canada) in drug stores?

The answer might be the difference in targeting strategy.In china, L’oreal might target the segments where people want  the service, to some extent, for the “esteem” need. These people certainly want to get something like Chanel or Lancome, but they simply cannot afford it. Therefore, L’oreal provides them with thoughtful service to meet their need for esteem. They are respectfully addressed, well served and treated with reverence.

THESE PRODUCTS CAN BE PRODUCED IN THE SAME PRODUCTION LINE!!!

” Do different brands from the same company make that much difference? A difference that worth more than 40 or 50 bucks? ”

This is a question my friend asked me last week when she read an essay posted on Renren .com( Chinese Facebook) about the “secret” that  Maybelline NY and Giorgio Armani all belong to the Loreal group. This essay posted one month ago is  shared by more than 20,000 people on Renren and according to the comments( thousands, actually) below, most readers will now think twice before they ever purchase any Giorgio Armani product. For those used to purchase Maybelline and dreaming to switch to Armani once they have money, they may well change their mind simply because ” It can be produced in the same production line with Maybelline, so why should I pay 40 bucks more ?” . For those used to purchase Armani, the link between Maybelline, a cheap brand available in supermarkets, and Armani, a luxurious brand purchased only by customers of wealth and position  like themselves, can degrade the image of Armani.

Well,to a market professional, or one who is studying to become a market professional ( like us),  different brands can be viewed as a market segmentation strategy. Company segments the market according to demographic aspects like income and psychological aspects like self-concept and self-values. However, things could be different  when customers finally realized this ” trick” of market segmentation.

The first question customers face may be ” should I trust the brand, or the company?”  According to the comments made on the loreal case, at least, most customers value the company more than its brands.  If most customers trust the company,  Maybelline and Armani should not be that much  different, for they all belong to the same company which claims it provides various goods of best quality. Wait, if the products are all of good quality, where dose the huge price difference come from? Advertisement expense?   Well, though customers may reach different conclusions,  the fact that customers start to analyze a company’s marketing strategy itself can be troublesome, for they are now more rational, thus less likely to be affected by the powerful psychological factors. However, this just marks the prelude of a nightmare to marketers. If these rational and skeptic guys finally post their conclusion ( usually unfavorable to the marketers)  on the social websites, more and more customers, especially these potential ones, might be affected or even form a negative brand image. This is, of course, the last thing marketers want to see.

http://www.ted.com/talks/johan_rockstrom_let_the_environment_guide_our_development.html

Hey! I’m Xiaoli Zhang ( you may just call me Sabrina~) and here is my first post on marketing-related issues on my blog.

Well, I’m sort of tech challenged, so I just post the link of the video here:-)

Basically, it’s a speech about the environmental crisis people are facing. The speaker tried to attract public’s attention on environmental issue like climate change and ecological deterioration. However, as a business student, I want to review the speech from a marketing point of view. That is how this environment crisis may affect a company’s marketing strategy.

First, it’s about the marketing environment, typically the macro environment, specifically, political environment. Tougher rules and regulations on environment issues might be expected, bringing a series of changes. Extra tax may be charged for toxic chemicals or pollutants, which may affect the issues from research and development to pricing. Carbon-dioxide emission may become a crucial parameter,  both from the prospect of law and public’s feeling about the product, which may force the company to reconsider its promotion  strategy( say, less paper advertising), physical distribution as well as its product ( say, basic ingredients and the whole production process) and culture.

Well, that might not be the end of the story. With the changes of laws and regulations come the changes of people’s feeling or “social trends”. Customers may become more cautious and prefer greener products. They may turn over the package, check the ingredients list and put back onto the shelves those with unhealthy or environmental-unfriendly components  before they make any shopping decision.

Of course, eco-friendly products will not only be a responsible choice for the human beings but a economic choice for the customers themselves. With limited fossil fuels to be explored, it’s fairly reasonable to expect a long-term increase on almost all energy resources, which may affect the marketing strategy of industries like fine chemistry and car production. Large, luxurious cars might be cheaper, but they won’t remain as affordable as it seems with a soaring oil price.

That’s all on my mind. Comments on the video and my review are always welcome:-)

Welcome to UBC Blogs. This is your first post. Edit or delete it, then start blogging!