Price Bundling: Added Value vs. Added Burden

My family recently enjoyed a vacation in Canada. A great time was had by all as we took in tourist attractions in Montreal and Toronto as well as visited relatives near Montreal. Being ever-observant of marketing practice as I am, I couldn’t escape noticing the marketing activity going on all around us. In particular, I was struck by the pricing practices of two tourist attractions and how one used price bundling effectively while another’s use of price bundling may actually hurt rather than help.

While in Toronto, we purchased a City Pass to take in six different attractions. City Pass bundles multiple attractions together for a single price. The price of the bundle is substantially less than purchasing tickets for each of the six attractions. Besides being a good deal for consumers, the tourist attractions that participate in City Pass benefit because they are likely to gain revenues from visitors who might opt to not visit an attraction when unbundled. In our case, we visited all six attractions in the bundle: Casa Loma, CN Tower, Hockey Hall of Fame, Ontario Science Centre, Royal Ontario Museum, and Toronto Zoo. We likely would have only visited 3 or 4 of these attractions if the bundle hadn’t been available. Our vacation experience was enhanced because of the added value the City Pass provided.

I wish I could say the same for another attraction I had hoped we could visit on our trip. The Granby Zoo, located about an hour’s drive from Montreal, is outstanding. I have fond memories of visiting the Zoo as a child and wanted to share that experience with my three sons. My enthusiasm was tempered, however, when I discovered that the only ticket the Zoo sold was a combination ticket for the Zoo and a water park. The price itself ($26.95, Canadian) is not the issue. The issue is I want a choice of purchasing a bundle or buying each attraction separately. We did not have time nor the desire to visit the water park, but we could not buy a ticket just for the Zoo. So, we opted not to go.

Price bundling is great because it can be used to deliver greater value on a cost-per-item basis when compared to buying items unbundled. However, price bundling should not be offered as a take-it-or-leave-it proposition, making consumers feel burdened if they buy a bundle of items that they cannot or do not want to use.

Are You Ready for some iPhone?

I think I now understand how football “experts” feel the week of the Super Bowl. All of them weigh in with their opinions about which team will win the big game, keys to success, and other observations that could impact the outcome of the game. For marketing experts, the launch of Apple’s iPhone this week has a similar atmosphere surrounding it.

Depending on which experts you wish to believe, the iPhone will revolutionize the wireless industry and add $10 billion in reveunes for Apple, or it will serve as a humbling experience for the same company that gave us the Newton. I believe conditions are favorable for the iPhone to succeed, but there are three keys to success that must be met:

1.The user experience must be positive. One of the reasons iPod has been a smash is it is easy to use. If users can learn to perform the multiple tasks of the iPhone with ease, they are much likely to sing the iPhone’s praises to others and serve as unofficial buzz agents by giving demos to people in their network. The multiple uses of the iPhone are irrelevant if owners perceive it’s too hard to use.

2.Behavior modification is necessary. Consumers must go from thinking in terms of specialized devices to generalized devices. We have been conditioned to shop for separate devices to serve our needs for wireless phone, camera, music player, and mobile email. Now, we’re being told that a single device can do all of these things. Accepting a generalized device involves making trade-offs in performance as you can buy specialized devices that do each of the tasks better than an iPhone. The iPhone’s promise is one of simplifying our electronic gadget needs!

3.Customer support will be crucial. Service at point-of-sale and post-purchase will be influential in determining whether the iPhone succeeds. This key has a twist in that this is not up to Apple alone. AT&T will be a key partner in educating consumers about the iPhone and keeping them satisfied when product or service failure occurs. Conumers want a seemless experience; they don’t care which partner’s part of the offering is at fault. If they purchase an iPhone at an AT&T store, they will expect support there. If they contact Apple with a problem that is technically a phone service issue, they’re going to expect Apple to provide assistance.

So, for all of the hype surrounding the Apple iPhone the bottom line is that if consumers see value in the iPhone, that it adds to their quality of life in some way (e.g., adds enjoyment, creates convenience, or enhances image),the iPhone will likely succeed.

The Power of Community: Nothing Rivals It

Yahoo’s acquisition of Rivals.com, a site dedicated to college and high school sports, is a clear acknowledgement of the Web’s prowess as a gathering place for communities of people with shared interests. Yahoo is a destination portal already, and its acquisition of Rivals.com is a sign that it seeks to bond with one of the most passionate consumer communities in existence: college sports fans. Adding Rivals.com content gives Yahoo an advantage over sports-only sites such as ESPN.com. Tapping into the devotion of college and high school sports fans is a way to attract users to Yahoo and keep them on the site to meet their content needs in other aspects of their lives. This move gives Yahoo an opportunity to enhance the brand experience it offers and become more relevant to Rivals.com users.

NASCAR Dialing Wrong Number with AT&T Lawsuit

NASCAR has enjoyed tremendous growth in popularity, television audiences, and sponsorship revenues over the past decade. The growth seems to have hit a bump in the road (make that track) as a combination of higher prices for race tickets and gasoline are negatively impacting attendance and leading many race fans to stay home and watch on TV. Check that, they’re not watching on TV either, as ratings for NASCAR Nextel Cup races have been down from 2006 for almost every race so far this season.

If NASCAR didn’t have enough worries with fan interest, it finds itself entangled in a major sponsorship controversy. NASCAR is fighting to keep AT&T from being a sponsor of driver Jeff Burton and Richard Childress Racing. Burton was sponsored by Cingular Wireless, but when the brand was replaced with the AT&T name the company naturally wanted to shift its association with Burton and RCR to the AT&T brand. NASCAR has 700 million reasons to keep out AT&T as a team sponsor, as in the $700 million, 10-year deal NASCAR has with AT&T rival Nextel. Sport properties should take steps to protect their sponsors from having to fight for the audience’s attention. After all, breaking away from media clutter is one of the attractions of sponsorship as a marketing communications vehicle.

It is admirable that NASCAR is vigorously defending the value of its property and seeking to protect category exclusivity for Nextel. However, preoccupation with this issue could be more harmful than helpful. Despite Nextel’s established association with NASCAR, the fact remains that many NASCAR fans are AT&T customers. Taking aggressive measures to shut out fans’ wireless provider may be received negatively. Management focus would seem to be better utilized by examining how to rekindle fan interest in attending NASCAR races and watching races on TV. Otherwise, NASCAR will continue to lose a point of difference it has enjoyed over other professional sports: its intimate relationship with the everyday fan. Other major leagues are viewed as having “sold out” to the interests of corporate sponsors and media partners. While NASCAR may still have an advantage when it comes to fan access to the sport, it could easily lose that advantage if becomes too distracted with sponsorship issues. Link

Scientific Breakthrough in Cause Marketing?

Results of a study published recently in the Journal of Science may have significant implications for marketers of philanthropic causes or charities as well as companies that align themselves with nonprofits via cause-related marketing campaigns. In the study, subjects participating in an experiment experienced activation of “pleasure centers” in the brain when they learned that money had been transferred from their bank account to a local food bank. The response elicited is similar to experiences such as eating sweets, engaging in social interactions, and sex.

So, what does this mean for marketers? For marketers of philanthropic causes or charities, it could have significant impact on how their organizations should be positioned and the design of advertising messages intended to influence giving. Strategies that seek to link philanthropic support to the benefits of support enjoyed by the giver may be used rather than a more traditional approach of emphasizing benefits received by the cause or charity. Likewise, companies that create cause-linked promotions for their brands can create marketing messages that paint a picture of consumers feeling good (self-image impact) in tandem with the knowledge that they are helping support a company’s social responsibility initiatives. Turns out that cause marketing is not only good, it is also good for you! Link

Demarketing of Kellogg’s Breakfast Products

The Kellogg Co. announced it would drastically change its marketing tactics to children under 12. Kellogg has set certain nutrional criteria for its kid-targeted breakfast products and has pledged to discontinue product placement and advertising in schools. In addition, the company will place place summary nutrition information on the upper right corner of each package. This strategy appears to be a form of “demarketing,” or taking steps to encourage responsible consumption. While consumers bear part of the responsibility to make good choices for themselves, marketers share in the responsibility to serve customers’ best interest by producing products that do not cause harm.

It can be debated whether Kellogg is being proactive in taking a stand to make a better product for children or reacting to pressures from advocacy groups to change its ways. Regardless of the motivation for this initiative, Kellogg is taking action that could to be very beneficial in creating long-lasting brand relationships with its customers. Sure, short-term pain may be felt as the company moves away from a dependence (perhaps overdependence) on advertising and marketing tactics to stimulate sales. However, the long-term impact on consumer trust and the potential impact on perceived quality of Kellogg’s products would seem to outweigh the effects of heavy advertising investments on moving the sales needle. Link