Comcast's response to Newly Acquired Competitor Netflix

http://news.firedoglake.com/2010/11/30/comcast-shaking-down-netflix-for-streaming-fees-violating-principle-of-net-neutrality/

This article discusses one way Comcast has attempted to shut Netflix out as a competitor for its new Streampix service. Essentially Comcast has proposed a tollbooth on internet data packages similar to that of cell phone service providers. This is a direct response to Netflix increased promotion of its live streaming service signaling that DVD-by-mail is an outdated business model in the home entertainment marketplace. The increased amount of streaming videos on Comcast's network are putting a burden on its network that they feel should be a means of generating revenue.

While I believe this strategy could be very profitable for Comcast, I feel they may run into some government regulation concerning net neutrality. Additionally I would anticipate a large customer fall out if this proposed strategy passes. While this is a good attempt to shut out an industry leader and would give their new Streampix a strong market position I highly doubt this will be a viable strategy for Comcast in the future. However, if Comcast can get other cable and satellite providers to back this move we could see a huge shift in how bundle packages are priced. Another consideration Comcast needs to make is whether this would harm or hut Netflix competitive position. If Comcast installed such a data limit for their internet services they may push customers to purchase Netflix instead of their expensive cable and internet bundles.

Market research is the key to market entry

With the passing of the first round decisions for the simulation a wealth of information has been imparted upon Team 12's results in the form of Market Research. In the real world companies also attempt to leverage the information provided by their market research teams into new product innovations or in some cases attractive markets to enter. Upon reading up on some current events in the business world I found one such company, Comcast, was leveraging market research about consumer preferences to enter a new market.

Recently Comcast announced that it would provide a streaming media service similar to that of NetFlix called Streampix. Comcast used market research to reveal that there was significant demand for portable streaming media by consumers. To address this demand Comcast will use it's vast existing media library and newly negotiated contracts to enter the streaming media market and directly compete with the likes of NetFlix, Hulu, and other such services. Without the market research that showed consumers increasing preference to access their media libraries on the go over wireless networks Comcast would not have discovered the viability of entering such a market. By leveraging this market research Comcast is poised to nab a significant market share of the portable streaming media market in the near future.

I think this idea was genius on the part of Comcast as it utilizes it's huge library of past tv shows, movies, and other media and offers this on the go. In addition entering this market gives Comcast the ability to earn additional revenues from preexisting customers that desire such a service without cannibalizing their current sales.

The Sims: M510 Edition

This past week in marketing was fairly light in nature due to class being cancelled Tuesday. Thursday laid out the structure of the Marketing Simulation and the large amount of considerations that are necessary in creating a successful marketing strategy. 

The simulation is an all inclusive conglomerate of the ideas we've studied to this point in the course. The missteps of the Cleopatra entrance into the Quebec market should help guide my team to better understand the desires of the consumer and turn those desires into a developed competitive strategy to allow us market share. The Fashion channel case showed us that while a niche strategy is effective in the short term eventually competitors will imitate your efforts and a reevaluation of your target consumers is needed at a definite periodic interval to better ensure you keep your most loyal customers happy. In addition this case will help deter us from a short term strategy and instead invest in ideas that will come to fruition in the later rounds of the simulation. Finally the Culinarian Cookware case imparted upon me the importance of pricing promotion and how it effects the implications of your product's quality while simultaneously effecting projected demand. All these ideas will be considerations in the upcoming simulation and integral to our success against other groups.

I am quite excited for the upcoming simulation as it allows all of the ideas we've come up with for each case to be implemented to a real world scenario. I feel this is where most classes fail in that they don't give a good representation of real world implications of the topics discussed in the course. As I was once considering being a marketing major, I am intrigued to put the skills learned in this course to use and seeing how my team's decisions guide our company to success/failure over the course of the next month. 

Pricing Revisited

Throughout the week's discussion we examined Price from a variety of perspectives. This included the retailer selling the product to the consumer, the manufacturer, and in some cases the supplier or wholesaler. "walking in the shoes" of these perspectives provided me with a key take away in pricing considerations. Pricing is not a set decision, and an inflexible pricing system could result in drastic setbacks for companies attempting to enter the market. In addition when pricing one must consider the various mark ups that take place between their last interaction with the good and when the product eventually reaches the consumer. The True Religion Jeans example we discussed in class showed how a product can sometimes undergo a 300% markup from manufacturer to the end customer, causing one to ponder as to the true value of a brand, and how that brand factors into pricing. 

This idea leads into the Culinarian case where there seems to be an inverse relationship between offering price discounts and establishing the company's brand prestige. In this case it becomes apparent that not only does the pricing strategy have implications for projected revenues, but the perception of their brand's target market as a whole. If price discounts were offered it seems to lead to a slippery slope of pricing gimmicks to increase revenues as opposed to staying true to its mission of providing premium cookware to culinary aficionados. this case shed light on a key point I've discovered from our discussion of pricing strategies. The case revealed that while pricing strategies have direct influence on the margins and revenues your company accumulates throughout the fiscal year, it also has direct influence over perceived value of the brand as well as the strategic positioning of the firm. 

Price. Period.

 Price is one of the most abused marketing gimmicks in modern day advertisements, but who's to blame the companies when it has worked so well. But why do companies put some much emphasis on price? Is it because of the financial markets emphasis on Revenues? Is it because of ratio analysis? Or is it because price is a measure of the companies value offering? I'd say the latter. Often times companies wrongly emphasize the price of a product because they believe their profits to be equal to the gross margin*unit sales volume. This view fails to capture the value creation beyond that of the revenue dollar and fails to see the possibilities of informing their customers of the true objective value of their product. In addition this view puts the emphasis on price and accepts price as something dictated by the market instead of the products value offering.

Price is definitely over used as a promotion method. This is because it can be easily manipulated and the results are instantaneous. In addition in some industries where the true value and costs are not easily determined margins can be so high that a company can induce a price cut and increase cumulative profits simply by Additionally decreasing price by 1% causing a 5% increase in demand. While it cuts into margins, it also removes the need to make significant marketing expenditures to induce demand while instead lowering the price to a point which the consumers would serve to gain from the transaction.

Platinum is just as Light

So this week I saw an adoption curve in effect for a new product. The newest competitor in the light beer industry from Budweiser caught fire in my circle of friends. Bud Light Platinum had been exclusively seen at bars and a few early innovators had decided to test out the new trendy bottles with a bit more kick for the same calorie content. There was a relative advantage that was clearly apparent as for the same price they could increase their alcohol content 2%. Since it was just a different kind of drink it was already compatible with their existing values, in addition to making it simple and easy to use. All these things resulted in a group of innovators willing to break the norm. Soon to follow were the early adopters who created some demand for the product in quantities outside of the bars. Enter my friends who chose to test the new product during the week. Their reviews were superb and through peer networks the word of the new product innovation had taken over Bloomington. Then Came the Early majority, which is where I myself entered the adoption cycle hoping for the simplicity of the same price for better product. Then came Superbowl Sunday where the ads all but established Bud Light Platinum as an innovative advancement of a classic product. The use of superbowl adds and exclusive offerings in effect leveraged peer networks to increase the adoption rate of their reinvented product. If only Cleopatra would have had this much success.

CRM, CLV, and Hotel Living

Which came first, the chicken or the egg? The customer or the strategy? 

In marketing, the customers are arguably more important than the strategy, and as such are the true value of your business. With this methodology as their mantra many companies have leveraged new technologies to develop a Customer Relationship Management system. Not only has the technology to track this information changed but so has the methods each company uses to obtain it. Companies such as Kroger has initiated customer loyalty programs that offer price discounts for the exchange of information about their purchases. It seems companies finally discovered trends in their customer's purchases and utilized this information to effectively price their goods, offer discounts, and market to the most profitable customer segments. 

Enter CLV analysis, a tool used by a vast amount of companies to determine the presumed profitability of each consumer over their lifetime. While the benefits of this methodology are quite vast, the method itself caused me to question the validity of this analysis. How are the retaining probabilities determined? How are customers assessed a yearly level of business? What's the margin for error of each of the estimates present int he CLV equation? All these uncertainties culminated in a feeling that CLV is quite variable and volatile. While it may weed out some unprofitable customer segments I would be hesitant to rely upon this analysis to solely identify a profitable customer segment. I would assimilate the uncertainty in the assumptions made to predict future customer interaction to that of forecasting. While it is an educated guess, it is still a guess, and as such caution needs to be taken when relying upon CLV. 

I felt this point was missing in our analysis of Rosewood. While the individual profitability of each customer was not specifically addressed, CLV was still utilized to determine the best move for the resort chain. While the corporate branding strategy was the ultimate decision of my team, I believe that CLV for this case was arbitrary in that there are plenty of ways this branding strategy could be achieved without tarnishing the prestige of each property. These varieties of options within the branding strategy appeared to have no effect on CLV analysis. Herein lies my take away from the week, while the numbers hint that the branding strategy would increase CLV there is more than the numbers to consider in such a game changing decision.