Eventually Drucker is correct...

Peter Drucker purported "The purpose of a business is to create a customer".  He outlined five deadly business sins that corporations should avoid in order to be successful. 

1. Seeking high profit margins and premium pricing
2. Charging what the market will bear
3. Using cost-driven pricing
4. Focusing on past winners
5. Giving problems priority over opportunities

One quick glance at Apple's Iphone strategy seems to defy Drucker's number one deadly sin.  The notion that big margins absolutely lead to maximum profit is problematic.  Apple charges high premiums for a device that offers comparable features to other smart phones in the market.  Additionally, the continuous iPhone releases with marginal new features appears to align with deadly sin number two.  As a marketing student, I know high price and charging what the market will bear will afford lower risk to competitors and an invitation to enter a market segment.  Apple's iPhone has been wildly successful and appears to be immune to Drucker's warnings. 

In a recent Business Insider article, iPhone's pricing was the center of attention.  Should Apple consider lowering product prices to increase market share?  According the article's author, yes.  Jay Yarow states that Apple is perfectly happy with it marketing strategy but lower prices would increase market share. 

"One strange criticism that pops up is people saying that if Apple lowered prices it would hurt the company since it's currently positioned as a high-value, premium company."

Yes, a business can charge premium prices for a premium product but the iPhone is not as upscale as its price suggests.  Yarow calls out the elephant in Apple's boardroom... "The important thing here to keep in mind is that Apple managed to be a premium company selling a less-than-premium product."  Apple has had great success with various price points on their other products.  However, it seems that Apple is happy with a small piece of the market as long as the margins are grossly profitable. 

I think that Apple's iPhone is beginning to show signs of weakening.  With each iteration, consumers still line up over night but the product's value is questioned more often.  The iPhone 5C, c is for color, was not as successful as Apple forecasted.  Apparently adding a simple colorful cover on the same product and changing its name doesn't work... even for Apple.  Another issue that I find Apple will face is the increasing amount of new competitors.  Motorola has been innovating good phones lately and the newest Moto G should provide good competition at less than half the price...

 Only time will tell, but I find eventually Drucker will be proven correct.

 

 

Peter Ferdinand Drucker, 1909-2005

 

 

Yarow, J.  (2013). Business Insider.  To All the People Who Say Apple Can't Lower Prices Because It Would Destroy The Brand.  Retrieved from  http://www.businessinsider.com/apple-pricing-2013-11#ixzz2lPw6ERwb

 

PharmaSim

This week in Pharmasim the team progressed to period six. We followed our marketing strategy plan and it appears to be working well for us. Since our PharmaSim is a team competition, I cannot reveal too much infomation in this blog. (If you came here to find why we are so successful... begin at the first chalk talk and then proceed through week eight). What I can say is this... Our team is having a lot of fun in this simulation. We are enjoying the challenge of managing advertising, promotion, MSRP, special decisions and sales force. We began with a stock price of $11.14 and are current trading at $43.85. While this metric demostrates good progress it is the end result of many more important metrics.    

For example, the below chart shows mfr sales.  As the team continues to meet and exceed the customers needs and product values... our OTC products will continue to move off the shelves.

Additionally,  "free" market research is available through social media.  It can require some translation but a good amount of customer value can be found.

A quick skim shows that we have work to do on Allround+.  "Can be hard to find" indicates our shelf presence is weak and POP could be a quick solution.  "More coupons, please!" indicates we are not enticing the customer base.  The team will need to review our inputs and try to adjust to exceed the customer needs.

As I previously stated, I cannot go in to Allround strategy but I think the product volume is about to explode!  C/S is chart busting and the value is one of the highest I have seen in my experience with PharmaSim.  

There is another aspect that I find works well with PharmaSim-  teamwork.  Our team has a good blend of thristy greed and what Drucker calls "customer attention".  Satisfying the customer's wants are the number one goal and profits are the results of fulfilling this goal.

Onward and Upward...

On second thought...

The current Pharmasim comparative results measure manufacturer sales $, cumulative manufacturer sales $, net income $, cumulative net income $, share of manufacturer sales $ and stock price.  I find these measurements are enough to gauge the competition.  For example, I can see that team one made a drastic change in period one that enabled manufacture sales to increase from $212M to $239M in period 2.  This change also increased the team's share of Mfr sales 12.3% to 13% respectively.  However their cumulative net income is lower than other teams.  The current measurements indicate team one most likely dropped the MSRP on their product or offered promotional discounts. 

 

 

 

When looking at share of manufacturer sales % graph we can see that team 3 and 4 have unhappy customers.  Both team's sale percentages are declining.  The first graph shows their sales dollars are increasing but the volume is going down.  This is mostly likely attributed to price or changes in promotion.  They are getting more money in and have less of a market %. 

 

 

 

 

Perhaps the one measurement that could be added to the dashboard is the net marketing contribution.  We know the formula is NMC=market demand x market share x selling price.   The NMC measures how much the marketing strategy accounts for marketing and sales to cover expenses.  As brand managers our goals  include increasing marketing and sales to remain competitive in market shares and penetration. We know these goals include expenses with each given unit price and these expenses must be less that gross profit to ensure the NMC remains in the black.  There is a down side to adding NMC to the dashboard.  It will afford all teams a method to back into each other's selling price.  We can figure out the market demand and use the other metric for market share.  By adding the NMC, the selling price could become a very simple equation.  While I wouldn't mind researching the competition more closely, I don't think I want them researching my team.  On second thought... let's leave the current metrics as they are.