Tiger Airways today announced $9.95 one-way flights from Adelaide to Melbourne as part of their market-penetration strategy.

There has been much speculation of Tiger Airways’ introduction strategies into the Australian market but price-wars are nothing new in the aviation industry.

If I recall correctly Virgin Blue did it. Jetstar did it. What has been the product of this serious undercutting? Fierce competition!

To clarify for those spectators that sit there and wonder how this sort of behaviour is sustainable, I shall go over penetration-pricing.

Penetration-pricing means setting a low entry price to gain market-share and then increasing to a level that is realistic and within what the market is willing to pay. I see this as what Tiger Airways is doing.

I see them as wanting to gain market-share by creating an irresistible buzz which will ultimately lead to brand-loyalty.

They’re making their product accessible so people can see ‘what they’ve got’ and will hopefully choose them again when it comes to booking low-cost airfares.

Last week on the ABC show Difference of Opinion, the topic of discussion was Climate Change. Following the show the discussion forum was alive with varying opinions. Naturally there was the ‘left’ and ‘right’ discussions but the following really caught my eye and got me thinking as a marketing minded person:

User Builder wrote:

As a builder in the residential construction industry I see a massive potential for micro generation of power and water resources, ie all houses generating close to, if not more, than their needs. It is already being done to a very small extent. (currently very expensive) To me it seems the problem is marketing. We are currently being told you should do this, you must do that etc., but there is no real incentive for people to want to do it. It is a sad obsevation of our society but we need to appeal to peoples vanity. Over the last few years I have seen a large explosion in the Kitchen & bathroom design/renovation industry. Indeed there was no such seperate industry 10 years ago, it was a part of the construction industry. But some clever marketing has seen it become its own entity. The TV adds and the glossy magazines are all telling us we need to have such & such features in our kitchen/ bathrooms and because Joe Bloggs down the road has it so you need it too. I see this on a daily basis where people will spend $60 000+ on a kitchen but wont spend $1500 on a water tank unless they get a rebate from the govt. (sad but true) Get the people with extra disposable income to start requesting renewable technologies in their houses. This starts to drive the industry and investment/ research which then starts to make the technology cheaper and more people can afford it and so on. So my point is change the way the environment is marketed (make it cool and hip, not a moral crusade) and perhaps couple it with some tax breaks for those who do fit it to their houses and I think we will have a small part of the solution actually doing something relatively quickly. I hope this makes sense. Cheers.

User Naturalmiztic replied:

I agree, especially given the home renovation spending is so huge it makes sense to market more appropriately in order to channel this spending on more eco friendly products across all areas of home renovations. It seems the major aim of meeting baseload power needs is through centralised energy sources, but why not expand the diversity of energy sources and individualise, it’s totally in line with individualistic, independent, capitalist ecomony of Western society. It’s about the change in mind set about where people get their energy, and its inline with the current privatisation of the energy market. But its all about the marketing and advertising the rebates.

People could even make money from it, if they reduce their own power usage, and put power on the grid. That’s huge incentive.

Given that some home owners do home renovations to make their homes more comfortable for themselves to live in, most do it to improve their property values. So the market supply and demand can help with moving the trend and demand for more eco friendly housing to be worth more. Some real estate adverts are starting to show the energy ratings of properties. But consumers need to start asking and prefering eco friendly properties as well.

The technology and infrastructure is already there it’s just a matter of marketing, and consumers need to make their choices and preferences clear.

There’s little in mainstream renovation programs/marketing/magazine about the costs, what’s involved with installation etc.. It’s something you’d find in alternative or its a little special interest area one off within mainstream.

It’s sort of ironic though because when it comes to transport, there needs to be a shift in the opposite direction…from people using private modes to increasing uptake of shared modes and public transport. I think there’s little progress in increasing incentives and access to good public transport and reducing reliance on cars, eg grocery shops not delivering goods and groceries.

Enjoy!

Source: ABC

According to SMH (2007) “Toyota has reassured its 4,000 Melbourne workers their jobs are safe, for now, amid fears rising market pressures will force its Australian plant to close”.

The automotive industry of Australia is full of uncertainties so it’s certainly not fresh news to hear about the above speculation. With the strong Australian dollar, it’s cheap for us to import cars and even cheaper with the import tariffs at the level that they are currently. Add to this the high wages that are paid to the workforce in the Australian manufacturing industry and we have a situation that is hard to compare to the cheap, efficient Asian model.

As I recall, the tariff was introduced to encourage innovation and increased competition in the Australian industry. However, the Asian organisations have lead the way with quite a margin.

Commentators have suggested for Australia’s industry to survive, manufacturers have to get innovative and attract market segments away from the current, superior offerings. I suggest this is initiated by chipping away at the “green” segment.

Just found this interesting article whilst reading up on pricing strategy. Check it out:

The traditional product segmentation is to offer two versions: a high-end version and a low-end version. However, in some circumstances, it is preferable to offer three versions: low-end, mid-range and high-end. The rationale is that people tend to exhibit “extremeness aversion” and will tend to choose the mid-range offering. Consider the following experiment (from Hal Varian’s paper on Versioning Information Goods):

Simonson and Tversky [1992] describe a marketing experiment in which two groups of consumers were asked to choose microwave ovens. One group was offered a choice between two ovens, an Emerson priced at $109.99 and a Panasonic priced at $179.99. The second group was offered these ovens plus a high-end Panasonic priced at $199.99.By offering the high-end oven, Panasonic increased its market share from 43% to 73%. More remarkably, the sales of the mid-priced Panasonic oven increased from 43% to 60% apparently because it was now the “compromise” choice. According to Smith and Nagle [1995], “Adding a premium product to the product line may not necessarily result in overwhelming sales of the premium product itself. It does, however, enhance buyers’ perceptions of lower-priced products in the product line and influences low-end buyers to trade up to higher-priced models.”

In other words, adding a “premium” version to the product line actually boosts the sales of the mid-priced version. The newly-introduced premium version steals market share from the mid-range version, but this is more than offset by the market share that the mid-range version gains at the expense of the low-end version - this is the Goldilocks effect. Note that this is purely the result of a cognitive bias – there is no objective rationale for such trading-up.This may explain the tall/grande/venti segmentation: even though few will order the venti, its mere presence on the menu will induce some buyers to trade up from the tall to a grande. Similarly, it makes sense to add expensive wines to the wine-list that realistically no one is going order.

Source: VenChar

Back in “the day” (when ever that was) people met others and met potential partners in social, real life situations. Nowadays, the internet is playing a bigger part. This is especially the case with the introduction of “Web 2.0” -to use that term lightly. The Web 2.0 movement has produced such social-networking facilities as MySpace, Flickr and YouTube. Dating wise, a Google search reveals numerous sites of which you can sign-up to meet your potential life-partner.

To a point, I guess the web can be looked at as a 2nd world -hence Second Life. Thus, we intermingle online much as we do in the real world.

Take a look at Adrian Cooke’s article, A Lesson From the Online Dating Industry.

Pajago

Hi Readers,

I haven’t made a post for the past few days and it may be a few more before another juicy, information filled one. I have been head down in the uni text learning about value, satisfaction, demand management and the list of topics goes on.

Keep your eyes peeled for new stuff on here. I might share with you a nifty thing called “customer delivered value” which is, in basic terms, the totality of  cost vs. value. Or something like that…

Anyways, I am rabbiting on -as usual- bye for now.

Pajago

“BMW AG said it will conduct test drives of the world’s first mass-produced liquid hydrogen-fueled vehicles on public roads in Japan between July and December,” according to reports on ABC.

Currently there are 100 liquid hydrogen-fueled driving around the the streets of Europe and USA.

“The German carmaker will test two of the environmentally-friendly vehicles, which emit only vaporised water, in major Japanese cities. The company is aiming to appeal to consumers but problems such as the shortage of charging stations for hydrogen automobiles will need to be resolved if the vehicles are to become popular in Japan.”

BMW have done well in addressing this niche of green-transport currently dominated by Toyota. People in the position to buy a luxury vehicle will soon have at least one option. Soon I am sure we’ll see other prestige car brands offering their own green-models.

Boost Juice, founded by Janice Allis in 2000 became huge success with its beaut range of fruit smoothies and juices. When Boost hit the market, I always doubted it’s performance in the winter seasons. After all, who wants icey-cold smoothies amidst the cold of winter?

It was interesting to see Boost release a range of winter “hotties” as a reaction to the decline of sales in the winter months. I see this as a classic example of SWOT (Strengths, Weaknesses, Opportunity and Threat) analysis. Let’s take a look at what a SWOT analysis is and how it applies to the above case study.

Strengths and weaknesses are internal factors, so things that are directly controlled from the insides of a firm. Opportunity and threats, however, are external. According to Wikipedia, “A SWOT analysis, usually performed early in the project development process, helps organisations evaluate the environmental factors and internal situation facing a project.”

So now lets take a look at SWOT’s implication in the Boost story.

Strengths: Boost would have seen its customer base, and loyalty as a strength. The business already had a great supply of loyal customers repeat-buying it’s smoothies and juices, or what I will refer to as summer product-line. Boost also has a very strong, prominent brand. A brand that’s been molded to cater for it’s target market.

Boost’s product-line is also very healthy.

Weaknesses: The prime weakness in this case study is it’s lack of winter offering. Boost has a “chilled” product line that is most consumed during the warmer months.

Opportunity: The main opportunity for Boost in this scenario is to produce a healthy winter product-line to compete with the establish winter beverage market. A market that I see primarily catered for with caffine-based beverages.

Threats: Caffine-based, and other hot beverages dominate during the cooler months. People might not find a healthy option as desirable as the already established and dare I say trendy caffine products.

Boost’s answer to this SWOT analysis is its range of warm healthy drinks/s-meals (small meals), including: flavoured teas, oats, hot chocolate and soups.

I feel this range differentiates itself from the market by promoting health and by keeping with the Boost branding strategy. The range really plays on Boost’s existing customer base and is compelling enough to bring in new customers.

P.S -This article is written based on my own opinions.

Why do people think marketing is just advertising? Admittedly, marketing is often a misused term.

I just discovered this definition and I like it: “marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to satisfy customers.”

Also, to answer the age-old question of, “how should I promote my X?” -do your research as to who to promote it to before you ever think about an advertising campaign. What good is it asking such a general question when it could be easily answered yourself, by simply knowing your target markets eye-balls and purchasing behaviors?

Pajago

Tonight, I really secured value in a transaction I made.

Indian food was on the cards for dinner so a local placed was called as; 1) it’s only a 10-minute walk away, 2) the food is top-notch, 3) well-priced and 4) the service is extremely personal and friendly.

These variables play on the value-exchange-model theory of physical, psychological and economical contribution vs. outcome. I look at value-exchange as being a simple study of return-on-investment (ROI.)

What really cements value-achieved for me, is making a comparison to another Indian take-away in my area -this hits it home. This other take-away requires a longer walk, the food is comparable, as is the price, but the customer service is far inferior.

This shows that the end product and price really had little bearing on my decision. Instead, physical and psychological elements took precedence.

Now I think back on it, the physical aspect is quite immaterial as I’d go back solely on the customer service face.

Excuse this random post. Just had a moment of inspiration!

Pajago