Marketing and Economy, Essay Example

Q1. What are the implications of Pizza Hut’s big price cuts for its brand image?

A1. Pizza Hut’s big price cuts will change its brand perception from a premium pizza national chain to that of value pizza chain. But the new image may actually be better because it will portray Pizza Hut as offering better quality pizza than competitors at similar prices. This will help improve revenue as the consumers are increasingly becoming value conscious due to greater choices available in the market.

Q2. Can customer loyalty be generated through low prices?

A2. Customer loyalty can be generated through low prices if the customer perceives the quality of the product to be higher than the similarly-priced products or the value of the product to be higher than the price of the product. In this case, Pizza Hut already has a reputation for good-tasting pizzas and now it’s lower prices have further increased the value the customers expect to derive from their purchases.

Q3. Can Pizza Hut sustain such dramatically lower prices and still remain profitable?

A3. Pizza Hut can sustain such dramatically lower prices and still remain profitable because the company has traditionally charged premium prices for its products as compared to the competition. Thus, the company had a bigger room to lower prices before its profit margins are hurt. In addition, Pizza Hut has huge scale and it can obtain cost savings through economies of scale as well as introducing more efficient operation tasks.

Q4. As an intermediary, does Expedia have power to spur demand when the travel industry suffers?

A4. As an intermediary, Expedia has power to spur demand when the travel industry suffers because Expedia is in touch with both the customers and the service providers such as airlines and hotels etc. By better understanding the changing needs of the customers as well as the business operations of the service providers, Expedia can take steps to modify its operations so as to reflect the changing nature of the travel industry. Expedia can also guide service providers in order to attract more business because it has valuable data on customers’ buying habits.

Q5. Is Expedia taking the right approach with its branding and promotional strategy?

A5. Instead of competing on price like Priceline, Expedia is differentiating itself on the basis of service. It is trying to become one stop shop for all travel needs of customers such as travel, accommodation, and car rental etc. Expedia is trying to justify its business model by convincing customers that its prices reflect the additional value it provides which its competitors don’t. Expedia’s strategy is more suitable in normal economic times but may take a hit when customers scale back such as during recessions. Ultimately, the success of Expedia’s strategy depends upon the travels habits of the targeted market and the value perceived by customers of Expedia’s services against its prices.

Q6. If the economy doesn’t recover as quickly as hoped, will Expedia be in good shape?

A6. If the economy doesn’t recover fully, Expedia may still be in good shape even if some sectors of the economy recover. Economic recovery is uneven sometimes and white collar jobs usually recover faster. Even if only white collar jobs recover, Expedia’s business may go up because business travelers usually require more travel services instead of just airfare as compared to recreational travelers.

Q7. Are there any other options for Walmart other than waiting out the recovering economy?

A7. Wal-Mart may improve its image by introducing more upscale products so that it can compete more effectively with Target which is usually seen as a trendy retailer. Wal-Mart can also branch out into more product categories which may have higher profit margins.

Q8. What needs to change in the external environment before Walmart sees strong growth?

A8. Wal-Mart’s core customers come from lower-income groups. Thus, the blue-collar unemployment rate needs to drop. In addition, customers’ buying habits are also affected by their confidence in the government as well as optimism about the future of the economy. Once the general public becomes optimistic that economy is going to recover soon, they become more generous with their spending.

Q9. In your opinion, which factor has had the biggest impact on Miller Lite’s sagging sales?

A9. Miller Lite’s customers saw the company as providing great value at economical prices. But when the company started focusing only on quality, it sent the message that its focus is now solely on quality rather than quality versus price. This turned away the price-sensitive customers who also were aware of greater choices in the market. Because Miller Lite betrayed the image it had established in its customers’ mind over the years, the customers turned away once they felt that the brand has changed.

Q10. Is a single product benefit enough reason to buy in a weak economy?

A10. A single product benefit is only enough reason to buy in a weak economy if the customers perceive the benefit to offer greater value than the additional price being charged. If the benefit is not valued by the customers, it gives little pricing power to the manufacturer.

Q11. If MillerCoors had retained Miller Lite’s previous brand message, would it have suffered a sales decline?

A11. Retaining previous brand image alone would not have been enough if the company’s actions still betrayed the message such as eliminating discounts and promotions. Sooner or later, the customers would have found out about the tricks being played by the company. For the message to be effective, it has to be consistent with company’s actions. Previously, not only the message focused on price but the company also engaged in discounts and promotions.

Q12. What was McDonald’s advertising objective with this promotion campaign?

A12. McDonald’s advertising objective with this promotion campaign was to remind customers that it is not only a value chain but also has more tastier alternatives to full scale restaurants, though still at relatively economical prices. McDonald’s tried to target multiple income groups with this campaign.

Q13. In communicating value during hard times, what elements of McDonald’s advertising strategy contributed to its success?

A13. McDonald’s reminded the customers that it also offers tastier options that are still quite economical as compared to upscale eateries. Moreover, it has a wide choice of products that are certain to satisfy everyone’s cravings.

Q14. What can a P&G sales rep do, apart from product and pricing strategies, to boost sales?

A14. P&G sales rep can run promotional campaigns such as free samples or information booths to convince customers that P&G offers quality products that are worth their cost as compared with the competitors’ offerings.

Q15.  What should P&G do to boost profits in these and future economic times?

A15. P&G may introduce more product lines so that it covers all price points. This way it will do well in both booming and struggling economies. It won’t have to lower the prices of main brands during recession as it will already have lower-priced product lines.

Q16. What is wrong with Dell’s strategy to increase PC sales?

A16. Dell is overly focused on price aspects of its products and not taking steps to understand the needs of its customers. Its closest competitor HP is striving not due to lower prices but by better understanding the needs of the businesses that were Dell’s major customers. Even if economy improves, the competitors will not be sitting idle thus, Dell should investigate why it lost market share and what its customers desire.

Q17. How can Dell overcome this problem, particularly as customer frugality persists? What would you recommend?

A17. Dell has a reputation for quality and is one of the premium brands. Dell doesn’t have to compete on price alone. It should communicate more with its customers, study industry trends and increase its research and investment budget. Profit margins in PC sales may continue to fall thus, Dell should investigate other high-margin options to return to its past glory.

Q18. How should British Airways handle a decline in premium air travel?

A18. British Airways should identify services that are highly valued by first-class and business class travelers and eliminate those that are not a priority for its customers. This will help British Airways lower costs as well as improve customer satisfaction because it will enable British Airways to lower prices as well. Customers are not comfortable in paying high prices if they perceive the extra services to be unnecessary.

Q19. After such an extended economic downturn, when the economy does recover, will air travelers fully return to their prerecession travel spending habits?

A19. An extended economic downturn may induce some permanent changes in travelling habits such as higher demand for low prices or more services at the same price. It is possible that if more airline companies exit the luxury travel market segment, the remaining ones may have enough demand for their luxury services.

Q20. Should British Airways be content with signs that the airline industry is recovering? What could it do to better position itself for similar cycles in the future? 

A20. The recovery may not necessarily mean the recovery of luxury travel as well. In addition, there is no guarantee that the customers will resume their demand for luxury travel at the pre-recession levels. British Airways should focus more on low-priced travel because air travel is becoming a commodity and profit margins are going down. Thus, the key to maintain or increase profits is scale and customer loyalty.