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CASE ASSIGNMENT: COKE ZERO Chapter # 8) Do Real Men Drink Diet Coke? When a couple of marketing managers for Coca-Cola told attorney Elizabeth Finn Johnson that they wanted to sue their Coke Zero colleagues for “taste infringement,” she was baffled. She tried to talk them out of it, but they were determined. They argued that Coca-Cola Classic should be protected from the age discrimination it would suffer with the introduction of a newer, younger soft drink that tasted exactly the same as the original.
Frustrated, Finn Johnson held up the Coke can and shouted, “It’s not a person! Title VII doesn’t cover these things! ” What she didn’t know was that the marketing managers were actors. Hidden cameras had been planted around the meeting room to capture the reactions of several unsuspecting attorneys who had been asked to consider the case, including an immigration lawyer who was asked if he could get the Coke Zero marketing head deported back to Canada. The short videos were strategically placed on websites like YouTube. om to promote Coke Zero as the hip, new alternative to Diet Coke for men. The Coca-Cola Company knows it has to be creative if it’s going to sell more soda after sales dropped two years in a row in 2005 and 2006. Morgan Stanley analyst Bill Pecoriello explains, “Consumers are becoming ever more health-conscious, and the image of regular carbonated soft drinks is deteriorating rapidly. ” In an attempt to appeal to consumers concerned with nutrition, Coke introduced Diet Coke Plus in 2007, a sweeter version of Diet Coke fortified with vitamins and minerals.
But what they really needed was a way to reach young male consumers, and Diet Coke Plus, marketed with tag lines like “Your Best Friend Just Got Friendlier! ” wasn’t going to do it. A few new products appealed to certain male demographics, such as Coca-Cola Blak, a cola with coffee essence created for older, more sophisticated consumers who are willing to pay more, and Full Throttle Blue Demon, an energy drink with an agave azule flavor (think margaritas) designed to appeal to Hispanic men.
However, research showed that there was still a big demographic hole to fill as young men between the ages of 18 and 34 were abandoning the Coca-Cola brand altogether. They didn’t want all the calories of regular Coke, but they weren’t willing to make the move to Diet Coke, either, which has traditionally been marketed to women who want to lose weight. Katie Bayne, chief marketing officer for Coca-Cola North America, says that the men who weren’t put off by the “feminine stigma” of Diet Coke often rejected it anyway because of its aspartame-sweetened aftertaste. What we were seeing before Zero launched was that more and more younger people were interested in no-calorie beverages but weren’t going to sacrifice taste,” Bayne said. “So when they got interested in no-calorie, they were like, ‘Forget it, I’m not going to Diet Coke. ‘” Testing showed that the name “Coke Zero” would be an effective way to sell a low-calorie cola to men without using the word “diet. ” And advances in artificial sweeteners made it possible for Coke to finally create a product that tasted more like the “Real Thing. So expectations were high when Coke Zero was introduced in 2005 with a big marketing push, including a commercial that remade the famous 1971 “Hilltop/I’d Like to Teach the World to Sing” ad—this time with rapper G-Love on a rooftop singing that he’d like to teach the world to “chill. ” Unfortunately, the commercial didn’t catch on, and neither did the product it was selling. Despite disappointing sales in the U. S. , however, Coke Zero was an immediate hit in Australia, selling more than three times the number of cases expected during its first year on the market.
In the U. S. , the packaging was white and silver, making it difficult for consumers to see the difference between Coke Zero and Diet Coke. In Australia, the bottles and cans were black, making the product stand out on the shelves and look more like the “bloke’s Coke” it was intended to be. The U. S. marketing team took notice and reintroduced Coke Zero with a black and silver label in 2007. Coca-Cola is now investing more money in Coke Zero than any other brand its size, hoping it will someday be a megabrand for the company alongside Coca-Cola Classic and Diet Coke.
Chief Marketing Officer Bayne is enthusiastic about the impact it may have on the company. “We do see this as potentially a bit of a white knight. There’s huge opportunity to grow here. ” SOURCES: Jerry Adler, “Attack of the Diet Cokes,” Newsweek, May 14, 2007; “Coke’s New ‘Coke Zero’ Faces Tough Going, UPI NewsTrack, June 13, 2005; Duane D. Stanford, “0: That’s Zero. As in No Calories,” The Atlanta Journal-Constitution, March 20, 2007; “Coca-Cola Co. ,” MMR, October 30, 2006; http://www. cocacolazero. com. Open-ended questions 1.
Describe the specific type of consumer that the Coca-Cola Company is targeting with each of the following products: Diet Coke, Coke Zero, Diet Coke Plus, Coca-Cola Blak, and Full Throttle Blue Demon. What types of demographic segmentation is each product’s marketing most likely to include? 2. Some industry analysts think soft-drink companies should develop products that will bring new customers into the market rather than just creating variants on the old. They warn that products like Coke Zero will cannibalize lost market share from other soft drink categories instead of increasing the number of consumers overall.
Which Coca-Cola products are most likely to lose customers to Coke Zero? 3. Why do you think that the hidden-camera videos used to promote Coke Zero were an effective way to reach its target market? Do you think a similar strategy with a viral marketing campaign on the Internet would appeal to the target market for Diet Coke Plus? 4. Do you think Diet Coke could have been repositioned to change consumers’ perceptions of it enough to be considered a drink equally appealing to men? Why or why not? CASE ASSIGNMENT: Terracycle (Chapter # 10)
Turning Worm Poop into a Product Environmentally friendly products have never been as hot as they are now, and the number of brands touting their “green” credentials has never been higher, but TerraCycle Plant Food may be the ultimate organic product to ever hit the market. A college student named Tom Szaky founded TerraCycle in 2003 after buddies from Canada, “where they have more liberal rules about growing certain plants,” he says, taught him how to use worm droppings as cheap and eco-friendly fertilizer.
Szaky based his business model on recycling, starting with the trash that TerraCycle turns into compost and feeds to millions of red worms. The worm castings are then liquefied and put into previously used plastic water and soda bottles. Even the company’s shipping cartons come from recycled materials. TerraCycle’s organic plant food hit the shelves in 2004 with labels boasting that it “Contains Liquefied Worm Poop! ” It didn’t take long for the products to take off. By 2006, the company had been named “The Coolest Little Start-Up in America” by Inc. agazine and had passed the $1 million mark in sales, growing as much as 300% from the previous year. They snagged shelf space in retail giants such as Target, Walmart, and Home Depot. Founder and president Tom Szaky liked to refer to his company as “the anti-Miracle-Gro. ” But the industry giant disagreed. It turns out that Scotts Miracle-Gro thought that, if anything, TerraCycle was encroaching too closely on the industry giant’s territory. In March of 2007, Scotts sued Szaky’s fledgling company for trademark infringement and for making “false claims” that its organic products are superior to synthetic versions.
Small companies can easily fold under the weight of such a lawsuit. Even if they win, the legal costs can cripple them. So TerraCycle took their case to the Internet with the blog www. suedbyscotts. com, hoping to stir public support and raise contributions for its legal fees. “I knew there was no way I could out-lawyer Scotts,” Tom Szaky says. “So as I thought about it, I wondered what core competency our company had that we could exploit. Guerrilla marketing seemed to be the obvious answer. He adds that they hope to get so much public support for their cause that Scotts will drop their suit. The blog offers a comparison chart titled “David vs. Goliath” that illustrates the differences between the two companies. A photo of TerraCycle’s modest headquarters behind a chain-link fence in New Jersey is contrasted with Scotts’s grand, pillared entryway in Ohio. It lists TerraCycle’s “CEO major perquisite” as “unlimited free worm poop,” whereas Scotts’s CEO enjoys “personal use of company-owned aircraft. The blog also counters Scotts’s claims that consumers might be confused by its “overly similar yellow and green packaging” by posting photographs of TerraCycle’s wacky and unusual bottles in their variety of shapes and sizes beside Miracle-Gro’s uniform and professional looking ones. Scotts is insisting that they change their labels, but TerraCycle’s general counsel, Richard Ober Jr. , says that changing packaging now would hurt their sales momentum. “There’s the loss of customer recognition. ” Su Lok, a Scotts spokesperson, argues that the blog is just one of TerraCycle’s PR “tactics” nd insists that none of their arguments has merit. “We’ve spent a lot of time building up brands that consumers trust,” she says, “and we are going to protect those brands. ” So far www. suedbyscotts. com has gained massive media attention, leading major newspapers and magazines to cover the story and hundreds of bloggers to defend TerraCycle’s cause. Although online donations have totaled less than $1,000 to date, overall company sales surged 122% within weeks of the blog’s launch. And TerraCycle’s main Web site, which averages about 1,000 visitors a day, spiked to as high as 13,000.
They expect to bring in revenue highs approaching $5 million by the end of 2007. Ira J. Levy, an intellectual property lawyer, warns that Scotts may have more to lose by pursuing TerraCycle than it’s worth. “By pursuing a trade dress case,” Levy says, “they can allow a small player to promote itself on the national stage. When word gets out that the mega-conglomerate is suing the little guy, you risk having bloggers launching boycotts, and the plaintiff ends up injuring his own business. ” Which is precisely what Tom Szaky hopes will happen.
The lawsuit isn’t something he would have wanted to fight, he says, but it’s a chance to generate buzz. “It’s like The Art of War,” he says. “You need to have a villain to be up against, and for us, that’s Scotts. ” SOURCES: Jack Neff, “When the Worm Poop Hits the Fan, Market It,” Advertising Age, April 23, 2007; Adam Aston, “Now That’s Really a Turf War,” BusinessWeek, April 23, 2007; Gwendolyn Bounds, “A Growing Dispute: Fertilizer Start-Up Uses Web as Defense,” Wall Street Journal, May 22, 2007; Mike Hofman, “Legal Lemons, PR Lemonade,” Inc. June 2007; Rob Walker, “The Worm Turns,” New York Times Magazine, May 20, 2007; www. terracycle. net; www. suedbyscotts. com. Open-ended questions 1. What type of consumer product is TerraCycle’s plant food: convenience, shopping, specialty, or unsought? Why? 2. Go to www. terracycle. net and look at the types of products the company sells. Describe their product mix. How wide is it? Which basic product lines does it sell? How long are they? 3. Do you think that product line extension or product line contraction would make more sense for TerraCycle at this stage of the company’s growth?
Why? 4. How well do TerraCycle’s bottles perform the four packaging functions discussed in this chapter? Go to www. suedbyscotts. com to see what TerraCycle’s products look like compared to the Miracle-Gro line. Do you think TerraCycle’s package design distinguishes their products well enough from those of the industry giant, or are they similar enough to cause customer confusion? CASE ASSIGNMENT: Nordstrom’s (Chapter # 15) How to Succeed by Selling Just One Shoe Upscale retailer Nordstrom has been famous for superior customer service for over 100 years.
Robert Spector, coauthor of The Nordstrom Way, says his favorite story is of a woman with one leg who jokingly bet a Nordstrom salesperson that he wouldn’t sell her just one shoe. He was more than happy to split up the pair, though, to her surprise, and Nordstrom gained a life-long customer in the process. “Who knows how many times she’s told that story? ” Spector asks. “Do you think that that’s worth the price of a shoe? I do. ” This kind of word-of-mouth publicity means that Nordstrom spends much less on traditional advertising than its competitors do.
And the stories told by satisfied customers are much more persuasive than an ad in the Sunday paper. Patrick McCarthy, who was the first salesperson to generate $1 million, cites an example of a customer who was traveling and accidentally left his plane tickets in the store. An employee who found them paid for a cab to the airport with her own money so that the customer wouldn’t miss his plane. This, McCarthy says, is an example of “heroic service,” and at Nordstrom they expect nothing less.
Industry observer Lior Arussy calls Nordstrom’s business strategy “greed through love. ” They have perfected the art of focusing on the right customers and giving them undivided attention. A salesperson will often continue the relationship with a customer for years. They may exchange business cards, set future shopping dates, and call customers when new merchandise comes in. “It’s a heart experience,” says McCarthy, who kept handwritten notes on all 12,000 of his personal customers over the years. Most companies are head experiences—bean counters are running them. When the heart is running them, it becomes exciting. ” Nordstrom is also known for its generous exchange policy. In a familiar story that has been forwarded around the Internet for years, a man claims he was allowed to return snow tires, even though the store never sold auto parts. It may be an urban myth, but it reinforces the company’s reputation for putting customers first. Even though the company loses some money on returns, they believe it’s worth it to keep customers coming back.
Nordstrom has 157 stores in 27 states, but they plan to open 19 more by 2010, expanding into Boston, Ohio, and other untapped U. S. markets. Eric Nordstrom, the company’s president, visits each potential location himself before signing off on it. He says his gut instinct about a location is almost as important as the demographics and statistics they analyze. “Plenty of places look good on paper and we say no. ” Even though Nordstrom values the traditions that come with its long history, Nordstrom direct president Jamie Nordstrom says that they’re not afraid to evolve with the times. We see the way people shop changing very dramatically,” he says. The company analyzed barriers between its sales channels and realized that it was limiting sales opportunities. Customers who purchased Nordstrom merchandise online couldn’t return it in the retail stores, for example, and customers who shopped in the stores couldn’t always find the same products online. The company now aims for a “seamless” shopping experience across all sales channels, whether mail order, online, or in-store.
The company has also benefited from a new computerized inventory system that gives buyers and salespeople the necessary data to make smarter decisions about what is needed in the stores—and what isn’t. Choosing the right handbags to stock, for example, in the right styles, quantities, and colors, enabled them to sell more items at full price, which in turn improved the bottom line. Eric Nordstrom says that they want a customer’s experience to be “aspirational and upscale, so people feel they are treating themselves. Therefore, he says, the company refuses to hop on the price-promoting bandwagon. “We don’t rely on promotions, be it one-day sales, coupons, or ‘friends of friends’ sales. We think our regular pricing has to have integrity. ” In 2006 when many retailers were struggling, Nordstrom thrived, posting $8. 6 billion in sales, a 10. 8 percent increase from the year before. “We have momentum,” Eric Nordstrom says, “but it’s not easy sustaining it. Retailing is not for everybody. It’s a competitive, high-energy business. Every day, you’ve got to open your doors and sell something. Even if it’s just one shoe. SOURCES: Monica Soto Ouchi, “Sharper Focus Helps Nordstrom,” Seattle Times, February 27, 2007; “Sticking with the Family Formula,” WWD, May 22, 2006; Dave DeWitte, “Nordstrom Leader Says Retail Business Is Changing,” Gazette, October 12, 2006; Monica Soto Ouchi, “Nordstrom Sees a Fashion-Forward Future,” Seattle Times, May 23, 2007; Alexandra DeFelice, “A Century of Customer Love,” CRM Magazine, June 1, 2005. Open-ended questions 1. What type of retailer is Nordstrom? Describe the characteristics it shares with other retailers of this type. . How would you describe Nordstrom’s level of service on the continuum from full service to self-service? Why? Give an example of a store that would be on the opposite end of the continuum and explain their differences. 3. Which of the six components of Nordstrom’s retailing mix do you think have been the most important to the company’s success? Why? 4. What are the primary challenges Nordstrom faces in the current retail climate? How has the competition changed in recent years, along with consumer expectations?
CASE ASSIGNMENT: HBO (Chapter # 16) HBO’s Blood Virus When prominent occult film bloggers and fans began receiving strange letters written in dead languages and mailed in wax-sealed black envelopes, a shockwave of curiosity and excitement rippled through the horror-film fandom. A legion of bloggers and message-board posters set to work translating the letters from languages like Babylonian and Ugaritic into English, discovering that the missives led them to a mysterious and macabre Web site featuring an image of a seductive lady vampire.
The site advertised a beverage called TruBlood—a synthetic blood developed by the Japanese, which vampires could drink as an alternative to feeding on humans. As visitors explored the site, they discovered short webisodes for the then-upcoming HBO television series that incorporates the TruBlood beverage into its storyline. The letters and Web site were developed as part of a viral marketing campaign by HBO and Campfire Media, an independent agency founded by two of the creators of the successful 1999 film The Blair Witch Project.
Viral marketing is the propagation of brand or product awareness through pre-existing social networks, using unconventional media, with the hope that the campaign spreads as a cultural phenomenon. In addition to the letters, Campfire established a fictional blog and MySpace pages written by characters from the show, launched a human–vampire dating service, advertised TruBlood on vending machines, and strategically leaked tidbits of information and multimedia about the show.
Campfire employees closely monitored popular horror blogs and message boards in order to gauge and encourage public interest, as well as orchestrate the release of new materials. The campaign was an incredible, if somewhat subversive success—not only did Campfire generate momentous interest in the show, but a number of individuals actually tried to locate a TruBlood distributor. “We didn’t mean to dupe people,” said Zach Enterlin, HBO’s vice president of advertising and promotions. “We just wanted a campaign that breaks through and resonates a little bit.
It’s a testament to how true to form the ads are. Some people aren’t paying close attention. ” Viral marketing campaigns are ideal for shows like True Blood, whose fans fervently share and discuss ideas within Internet communities. In addition, as it’s based on the popular Sookie Stackhouse series of books by Charlaine Harris, True Blood came with an avid built-in fan base of those already familiar with the story. Viral marketing has been a successful part of many advertising campaigns, such as those of 2008 films Cloverfield and The Dark Knight.
Cloverfield, a film in which gargantuan monsters rampage through New York City, is captured on handheld video cameras. It was introduced to viewers through an untitled, unexplained teaser trailer that played before 2007’s Transformers movie. As speculation mounted, Cloverfield marketers unveiled a number of enigmatic Web sites, as well as a tie-in campaign for the fictional Slusho! beverage and a Japanese drilling company, both of which play a part in Cloverfield’s mythology. In May of 2007, 42 Entertainment began a viral campaign for The Dark Knight, a sequel to 2005’s Batman Begins.
The campaign focused on the film’s antagonists: a Web site titled “I believe in Harvey Dent” was created as an advertisement for district attorney candidate Harvey Dent (played by Aaron Eckhart), as was a site titled “I Believe in Harvey Dent Too,” a defiled version of the former which slowly revealed the first image of The Joker (played by Heath Ledger) as visitors sent e-mails through the site. The Joker’s catchphrase “Why so serious? ” spread virally on the Internet, and was used as the URL of a Web site that sent visitors on a Joker-themed scavenger hunt.
As True Blood’s premier drew near, HBO and Campfire turned to less obtuse, if still unorthodox, methods of advertisement. A prequel comic book about an elder vampire and the development of the show was handed out for free at 2008’s San Diego Comic-Con, the largest pop cultural convention in the world. The first episode of True Blood was distributed on DVD for free to thousands of moviegoers at the 2008 Toronto International Film Festival, and was made available for rental from Blockbuster Video several days before it aired on television.
True Blood premiered on HBO on September 7, 2008—six months after Campfire’s subtle marketing campaign began. According to Nielsen Co. , the first three-quarters of 2008 saw HBO’s viewership drop by nearly 23 percent compared to the previous year. However, thanks to interest in new shows such as True Blood, HBO saw a 2. 4 percent increase in fourth-quarter viewership compared to 2007. Without question, the success of True Blood is due in part to the novel marketing developed by Campfire Media.
SOURCES: Sam Schechner, “Winfrey Firm to Produce HBO Shows,” Wall Street Journal, December 17, 2008; Guy Brighton, “Campfire’s True Blood Campaign,” New York Times, February 19, 2009; Lynette Rice, “Ad Campaign for HBO’s True Blood Confuses Thirsty Consumers,” Entertainment Weekly, July 22, 2008, www. ew. com (accessed February 23, 2009); www. bloodcopy. com; www. hbo. com/events/trueblood/; Douglas Quenqua, “The Vampires Are Coming, but Only After Months of Warnings,” New York Times, July 15, 2008; Jeff Beer, “Campfire Sinks Its Creative Teeth into True Blood,” ttp://creativity-online. com/? action=news:article=130134=behind_the_work (accessed February 19, 2009). Open -ended questions 1. What is the communication process for viral marketing? Is it different from conventional marketing? How so? . 2. What was the initial promotional mix of the True Blood campaign, and how might it suggest an observance of IMC? 2. Did Cloverfield use a push or pull promotional strategy? What about The Dark Knight? Explain. CASE ASSIGNMENT: Walmart (Chapter 20) How Low Can Drug Prices Go?
When Walmart rolled out its new prescription-drug plan in 2006, lowering the prices on 331 commonly prescribed medications to a flat $4, Frank Ganci’s doctor told him to check it out. He has no health insurance and his prescriptions were costing him $110 a month at his local pharmacy, so switching to Walmart meant that he could get the same three medications for $12. Now he says he’s a loyal Walmart customer: “If they don’t make up the money on prescriptions, they’re going to make it up on my clothes and food purchases. Industry analysts speculate that Walmart is counting on customers like Ganci to spend the money they saved at the pharmacy on other products in the store. Walmart insists that it can earn a profit on the $4 prescriptions alone, however, since more expensive medications are not discounted. “It can only be in our program if it is profitable,” says Bill Simon, a Walmart CEO. It’s true that pharmacies can buy some types of generics from manufacturers for less than $4. For example, a month’s supply of fluoxetine, the generic version of Prozac, can be obtained for 75 cents.
But store overhead and pharmacists’ salaries bring the true cost closer to $15. It would be difficult for smaller pharmacies to match the $4 price point, which has some of Walmart’s competitors complaining that it violates predatory pricing laws. “You can’t just sell something below your cost to drive out the small guy,” says Rick Sain, co-owner of a drugstore in Tennessee. “You have to at least set a fair price. That’s what all the states that have fair trade laws in place are looking into it—because you cannot dispense a prescription for $4.
They are saying you can. ” Walmart later increased the price of certain generic drugs from $4 to $9 in order to bring the company into compliance with all “low-cost laws,” according to a company statement. John Rector of the National Community Pharmacists Association says, “We don’t know for certain whether it can make a profit on the $4 drugs so they don’t violate these laws. But we strongly doubt it, and the fact is [raising some prices] gives us insight into what its business practices are. Stores like Target and Kmart quickly lowered their own prices to match Walmart’s, but Walgreens and CVS both announced that their prices would remain the same. Tony Civello, CEO of Kerr Drug, insists, “We will not treat your prescription like t-shirts and blue jeans. Walmart may choose to use some limited prescription drugs as a loss leader. But our patients’ healthcare is not a loss leader. We will not compromise that. ” Bill Vaughan, a policy analyst for Consumers Union, argues that the price slashing is actually step in the right direction. It’s the beginning of better competition in a sector where it’s literally pennies per pill,” he said. When a generic drug is introduced, pharmacies can charge as much as they like for it. One study found that markups were often as high as 4,000 percent. Few people compare drug prices from one pharmacy to the next, so pharmacies are able to mark up prices substantially. Walmart’s prescription program seems to be raising consumer awareness as it demonstrates how low the prices of the drugs can go. The discounts are especially welcome among uninsured Americans and seniors living on fixed incomes.
Legislators have listened to constituents who rely on the $4 plan and efforts are under way in states like Colorado and Minnesota to either repeal predatory-pricing laws or exempt prescription drugs from them. The prescriptions in Walmart’s $4 program now make up more than 35 percent of all prescriptions they fill, and the company boasts that the program has saved consumers more than $340 million in drug costs already. Walmart executive H. Lee Scott is enthusiastic about its future, saying, “The $4 prescription program is absolutely one of the coolest things that we have done in a long time. SOURCES: Martin Sipkoff , “Walmart, Other Discounters Facing Predatory-Pricing Concerns,” Drug Topics, April 2, 2007; Sue Stock, “Walmart Drug Plan in N. C. ,” News & Observer, October 20, 2006; Jessie Male, “Generic Concern: Will Walmart’s $4 Prescriptions Do Much to Change Consumers’ Pharmacy Habits? ” Grocery Headquarters, November 1, 2006; Pallavi Gogoi, “Drug Wars at the Big-Box Stores,” BusinessWeek, May 24, 2007; Milt Freudenheim, “Side Effects at the Pharmacy,” New York Times, November 30, 2006.
Chapter 20 Open-ended questions 1. Do you believe Walmart is engaging in predatory pricing with its $4 generic drug program? Why or why not? 2. Do you think that predatory pricing laws should be amended to exclude prescription drugs? Explain. 3. If you owned a pharmacy next door to a Walmart store, what strategies could you try in order to compete? Would you match their prices if possible, or would you find other ways to add value? What could a small pharmacy like yours offer customers that Walmart’s might not?