Mindful Marketing
  • Home
  • About
    • Mission
    • Mindful Meter & Matrix
    • Leadership
  • Mindful Matters Blog
  • Engage Your Mind
    • Mindful Ads? Vote Your Mind!
  • Expand Your Mind
  • Contact

Pizza Protection

6/29/2019

7 Comments

 
Picture

by David Hagenbuch, founder of Mindful Marketing & author of Honorable Influence

Unfortunately, there are accidents in life.  Cars collide.  Homes flood.  People break bones.  Insurance lessens the impact of such events, but what about damage to pizza?  Well, Domino’s now offers protection for even that unexpected occurrence.
 
The nation’s pizza deliver leader is very good at getting its products from its stores to our doors, but it seems less confident about our ability to do the same.  For that reason, the company recently introduced “carryout insurance.”
 
Domino’s now promises: “If damage occurs to your carryout order after you leave the store, just bring it back and we’ll remake it for free.”  The firm lists a few reasonable provisos:  The order must be uneaten, with nothing missing, in its original packaging, and accompanied by a receipt. The firm also offers examples of accidents that qualify for a claim like slipping and falling, "my kid sat on it," and "a stranger sneezed on it."  In other words, it seems like the company will cover just about any claim consumers make.
 
How much does the pizza insurance cost?  According to Domino’s it’s “free for all customers.”  Some may be thinking, “But, there are no free [pizza] lunches,”—customers must be paying for the insurance indirectly.  That may be true; however, Domino’s doesn’t appear to have increased its prices.  The company needs to be careful that the costs of its pies stay in-line with those of Papa John’s and Pizza Hut in the highly competitive pizza market.
 
It’s also likely that pizza insurance claims haven’t taken a significant bite out of the firm’s bottom-line, which raises a key question, “Do people really need pizza insurance?”
 
Let’s say that someone spends $30 on a pizza pickup order, then drops it while taking it out of their car.  The accident may ruin their day, but it probably wouldn’t pose any significant financial hardship.  People who can afford to spend $30 on takeout food generally can afford to lose $30 worth of takeout food.
 
Contrast that loss to a serious car accident, a home fire, or the death of a family’s primary breadwinner.  Those events could prove financially devastating, if not insured.
 
Such scenarios remind me of advice my dad once gave me: Insure the big things that could break you; don’t bother to insure littler things like electronics and lawn mowers.  Even though they may be somewhat costly to replace, it’s worth the risk because replacement wouldn’t be financial catastrophic.  I also liked the line my Dad said to salespeople who tried to pressure him to insure small items: “All your talk of insurance is making me wonder about the quality of this product and whether I should be buying it.”
 
My father’s insurance advice is similar to that of Todd Erkis, a professor of finance and risk management at Saint Joseph’s University, who says that “Insurance is key to protecting yourself against financial ruin.”  Consistent with that view, Erkis suggests that new college graduates should buy just four types of insurance in order to hedge against possible financial hardship: health, long-term disability, renter’s, and car insurance.
 
Writing for Mint Life, Nicholas Pell adds just two other types of insurance to buy: home owner’s, which is analogous to renter’s, and life insurance.  New college graduates often don’t have dependents and, therefore, don’t really need life insurance, but those who do should use insurance to protect their survivors from poverty.
 
All this to say, people don’t need pizza insurance, even if it’s “free.”  So, what is Domino’s doing?  In the very crowded market for restaurant pizza, Domino’s is probably trying to gain a little bit of perceptual separation from its closest competitors.  Papa John’s and Pizza Hut don’t offer carryout insurance, which makes Domino’s distinct.
 
However, while Domino’s may have created a difference, the insurance doesn't deliver any real competitive advantage.  Again, people don’t need the insurance, so it probably won’t sway many purchase decisions.  Furthermore, who ever thinks they might drop their pizzas?  In sum, the insurance just doesn’t offer any measurable improvement to Domino ’s value proposition.
 
Still, Domino’s has savvy marketers.  The company wouldn’t be so successful if it didn’t.  The firm’s marketing team probably intends carryout insurance as more of a promotional strategy than a product enhancement.  In other words, it doesn’t matter if the insurance causes people to buy more pizzas, as long as publicity and word-of-mouth about the unusual offering helps keep Domino’s top-of-mind.  That added exposure, in turn, should lead to more pizza purchases.
 
But would the firm really go to such lengths just for promotion?  It's done so before.
 
Prior to carryout insurance, the company’s “Paving for Pizza” campaign represented a similar strategy.  Domino’s promised to patch potholes around the country so the road hazards wouldn’t wreck pizza deliveries.  Of course, a company as far-flung as Domino’s could never repair enough roads to actually make a significant delivery difference in most of its locations.  However, the notion of a pizza company patching roads was so novel it captured press attention, as well as created some community goodwill.  In short, the program seemed to be a very effective, albeit unconventional, means of pizza promotion.
 
Will carryout insurance, work as well for Domino’s?  I doubt it.  Despite the fact that I’m writing about it now and you’re reading about it, I don’t believe the company’s newest ploy will capture the interest or hearts of people like the paving program did.
 
There’s nothing wrong with Domino’s promising extra protection for pizzas; in fact, it’s a nice extra benefit, if anyone ever needs it.  However, that lack of real consumer value, teamed with minimal promotional impact, places carryout insurance in the box of “Simple-Minded Marketing.”


Picture
Subscribe to Mindful Matters blog.
Learn more about the Mindful Matrix and Mindful Meter.
Check out Mindful Marketing Ads
 and Vote your Mind!
7 Comments

Dynamic Pricing or Discrimination?

6/14/2019

0 Comments

 
Picture

by David Hagenbuch, founder of Mindful Marketing & author of Honorable Influence

Eric, a friend of mine who happens to be a CPA, realized he was running low on string for his grass trimmer, so he went shopping where he’d purchased the product before—Amazon.  Finding what seemed like a good price ($18.94) for the same 3-pack of spools he bought a few years earlier, he placed the item in his cart.  Then he discovered something that might make all of us question the prices we pay for products.
 
Eric decided to check the price for the same Amazon item, using a different web browser—one he had never used before to order from Amazon.  Entering the website, he navigated anonymously to the item page, where his suspicion was confirmed:  The price he saw was just $16.89, i.e., $2.05 lower than the price for the same item he had placed in his shopping cart minutes before.
 
Although most of us haven’t been so clever as to catch an ecommerce giant in apparent pricing hypocrisy, many of us probably have wondered whether Amazon and other online retailers were somehow taking advantage of us through increasingly-sophisticated pricing strategies.  Responses to Eric’s Facebook post about the incident confirmed such concerns:
 
“I wonder if the price is also because you're a logged in Prime user in one and they compensate for some of the free shipping.”
 
“I’ve worked with some sellers on Amazon. They are a beast to deal with and it can really wreck a small business. And there is nothing the business owner can really do to combat their practices. They are the 8 million pound gorilla in the room.”
 
“I read [your post] out loud to my daughters, I thought it was so significant.”
 
“The exact same thing happened to me just recently. I was going to protest the increase in price over a year's time. What can we do?”
 
Frustration over similar experiences may lead to accusations of “price discrimination,” i.e., when a seller changes the price of the same product for different consumers.  Generally speaking, it’s not fair to charge people different prices for the same item, but there are some seemingly legitimate exceptions, for example:
 
Quantity discounts:  Buying a 36-pack of bottled water should be cheaper per bottle than buying a single bottle of the same water.
 
Good credit ratings:  Individuals with better credit scores deserve lower interest rates on loans compared to those with weaker credit ratings.

New customers:  The risk of trying  a new business or products may warrant giving a discount to first-time buyers.
 
In reality, none of the preceding truly represents price discrimination because people can, if they choose, put themselves in the more favorable pricing position.  For instance, they could:  buy more bottles of water and store them, follow sound financial practices to improve their credit scores, or assume the risk of purchasing from a new company.
 
If Eric’s experience falls into any of these three categories, it might represent the last one.  Perhaps because of his lack of history with the second web browser, Amazon pegged his subsequent shopping visit as that of a new customer and wanted to offer him an extra incentive for making a first-time purchase.  
 
That explanation may be right, but it has some flaws, namely that companies tend to clearly communicate when they’re offering discounts for new customers; otherwise, loyal customers may locate the discrepancy, as Eric did, question the companies’ motives, and even become resentful:  “I’ve given them my business for all these years; if anyone deserves a discount, I do.”
 
Chances are, Amazon wasn’t practicing any form of price discrimination.  It’s more likely that Eric’s experience was a result of the strategy that many online retailers increasingly apply: dynamic pricing.
 
Dynamic pricing involves changing prices continually, based on prevailing market conditions, which includes factors such as consumer demand, purchase intent, and competitors’ prices, as well as company goals for customer acquisition, retention, and brand-switching.
 
If you’re thinking that dynamic pricing is a new phenomenon, you’re partially right.  Sellers have lowered and raised product prices on the spot for millennia, based on factors as simple as weather conditions and buyers’ apparent interest.   
 
Over the past 30 years or so, airlines probably have been the most common users of dynamic pricing, as they’ve perpetually adjusted prices to keep flights at or near capacity.  To a lesser extent, those selling hotel rooms and tickets to popular entertainment events have done the same.  Frequent historic fluctuations in gasoline prices also suggest dynamic pricing.
 
However, recent advances in digital technologies have really enabled dynamic pricing to thrive.  For instance, from 2008 to 2010, the average time between regular price changes was 6.7 months.  In the time period from 2014 to 2017, that average fell to 3.7 months.
 
Today, to implement far-reaching price change is no more difficult than a few computer key strokes, and it’s as easy as allowing a third-party software program, like an algorithmic repricer, determine when to make price adjustments and how big they should be.
 
Although Amazon, which reportedly makes millions of prices changes a day, is probably the greatest single user of dynamic pricing, it is far from the only retailer employing the strategy.  Walmart, the biggest retailer in the world, has taken a remarkable step away from its long-standing ‘everyday low pricing’ strategy and embraced repricing software for its online sales.
 
Most other e-tailers are following suit.  In fact, some predict that within 5-10 years, dynamic pricing will become so fine-tuned that “everything you buy will be based on personalized offers.”
 
So far this discussion has been about what has happened and will continue to happen with dynamic pricing.  However, at the core of Eric’s experience is an ethical question:  Should Amazon or anyone be pricing products this way?  Or, as Nick Saunders, director of GlobalData Retail has said, just because something is technologically feasible “doesn’t mean it’s socially desirable.”
 
On one hand, it does seem like dynamic pricing puts purchasers at an added disadvantage.  Companies already have a natural information-advantage over consumers since “knowledge is power” and every business knows more about its products and its industry than does the average consumer.
 
What’s more, sellers have always known more than buyers about when prices will change, so with dynamic pricing dramatically increasing the frequency of those deviations, consumers experience even more uncertainty while sellers gain greater leverage.
 
But, the digital age also has been a significant boon to consumers.  For much of human history, sellers only had to compete on price with competitors physically close to them.  Sears, Roebuck & Co. and other catalog retailers changed that situation somewhat.  The Internet and ecommerce have turned traditional retail on its head.
 
Now people sitting in their living rooms use shopping bots to search products from retailers around the world, while shoppers in brick-and-mortar stores pull out their smartphones and ask for price matches in checkout aisles.
 
In addition, dynamic pricing itself has produced some benefits for consumers.  As described above, the strategy does favor individual sellers in specific transactions; however, the fact that all sellers can easily alter their prices means they must compete more against each other on price.
 
In short, buyers and sellers both enjoy advantages in the digital age with dynamic pricing—a phenomenon that Eric recognizes, as he astutely reflects:
 
“This [experience] strikes me as another example of the free market and competition driving markets and pricing.  As much as I might not like it, in my opinion Amazon as the seller has every right to offer its goods to me, their customer, at whatever price point they desire.  And I, in turn, have every right to buy it or not!”
 
“Furthermore, there are times when I might willingly pay a higher price from Amazon because of other factors such as shipping speed or knowing that Amazon customer service is incredible for dealing with product issues or returns.  From Amazon’s perspective, if they do the hard work of building loyalty with me, their customer, then it’s their privilege to offer me goods at a price point which might, at times, be higher than necessary.”
 
“The risk they take is that if I conclude that Amazon is no longer competitively priced, they might experience a decline in my loyalty.  Which undoubtedly is another data point Amazon tracks about me!  If they sense my purchasing loyalty is deteriorating, I suspect their pricing algorithms will work to win back my loyalty!”

 
Although I haven’t asked Eric directly, I think we both agree that frequent price changes don’t necessarily mean price discrimination.  In fact, dynamic pricing can be an example of “Mindful Marketing.”
 
    Eric Wenger is managing partner at RKL, LLP in Lancaster, PA.


Picture
Subscribe to Mindful Matters blog.
Learn more about the Mindful Matrix and Mindful Meter.
Check out Mindful Marketing Ads
 and Vote your Mind!
0 Comments

What Does "Meat" Mean?

6/1/2019

0 Comments

 
Picture

by David Hagenbuch, founder of Mindful Marketing & author of Honorable Influence

Girl Scout: “Is this [lemonade] made from real lemons?”

Wednesday and Pugsley, seated at their lemonade stand:  “Yes.”

Girl Scout:  “I’ll buy a cup, if you buy a box of my delicious Girl Scout cookies.”

Wednesday:  “Are they made from real Girl Scouts?”
 
This dark humor from the 1991 comedy movie The Addams Family may scare up a few laughs, but it’s actually a good example of the product name debate that has many people asking, “Does a burger have to be meat?” and “What makes milk, milk?”
 
Hamburgers are to blame for the most recent round of debate.  A few weeks ago, Burger King started testing a “meatless Whopper,” a vegetable-based patty that contains heme, “a protein cultivated from soybean roots that mimics the texture of meat.”
 
Veggie burgers have been around for a long time, but thanks to business partner Impossible Foods, founded in 2011 by Stanford biochemistry professor Patrick Brown, the newest generation of vegetable patties not only taste much more like meat, they even bleed like beef.

Burger King isn’t the only fast food chain seeing potential in a plant-based future.  McDonald’s has started selling a McVegan burger and vegan McNuggets in Europe, Del Taco will begin to offer meatless tacos, and White Castle and Red Robin are already serving meatless burgers.
 
For years, nutritionists have been telling us to eat less meat and more vegetables, so what’s not to like about the growing selection of ‘plant food’?  The concern is that the new nomenclature, like the word meatless, confuses consumers.
 
For instance, Nebraska’s farm groups have lobbied for a more restrictive use of the word meat: “any edible portion of any livestock or poultry, carcass, or part thereof.”  As one of the nation’s leaders in commercial red meat production, the state has a real “steak” in ensuring that consumers do not migrate away from ‘real’ meat.
 
Last October, Missouri became the first state to legislate that anything that doesn’t come from “harvested production livestock or poultry” cannot be called meat.  That goes for lab-grown meat, like Finless Foods is creating by taking cells of dead fish, putting them in pretri dishes, and cultivating their division into edible protein.
 
The dairy industry has faced similar and even more far-reaching name-related challenges.  For about the last two decades, producers of traditional cow’s milk have witnessed a surge in competition from the likes of almond, cashew, hemp, oat, rice, and soy “milk.”  According to Mintel, dairy milk sales declined by 15% from 2012 to 2017, all while non-dairy milk sales increased by more than 60%, with almond milk grabbing a 64% share of the market.
 
It was in this context that the Food and Drug Administration (FDA) Commissioner Scott Gottlieb remarked that almond milk shouldn’t be called milk since “an almond does not lactate.”  Shortly thereafter, the FDA opened a public comment period, inviting consumers and industry members to share their opinions on the milk-naming debate.
 
The FDA is justified in asking whether there’s been slippage in the “standards of identity” that ensure consumers understand exactly what they’re purchasing.  That’s its job.  However, the agency would do well to look back much further than the last 20 years, for instance, to 1626 when Francis Bacon observed that certain plants “have milk in them when they are cut.”  Likewise, in the late 1700s, the Encyclopedia Britannica published that “the emulsive liquors of vegetables may be called vegetable milks.”
 
The fact is, people have been using the word milk to refer to similar-looking white liquids for centuries, if not much longer, from a wide variety of sources.  Consider, for instance, milk from coconuts, as well as milk from other animals like goats and camels.  Indeed,  “nondairy milks [have] abounded in many other cultures across the globe.”
 
Furthermore, meat and milk are far from the only names that have been extended to describe a broader range of products.  Take another common dairy product—butter.  Peanut butter is entirely plant-based (no dairy), yet the FDA carved out an exception because the product's creamy texture resembles butter and because few people would be eager to purchase “peanut paste.”
 
It’s not to say that anything goes, i.e., that industries and companies can feel free to call their products whatever they’d like.  However, names needn’t be limited to one narrow product category, provided that they serve at least one of the following legitimate functions:
  • Identify who makes or sells the product, e.g., Avocados from Mexico, Starbuck’s
  • State for whom the product is intended, e.g., Children’s Tylenol, Dove for Men
  • Describe what’s in the product, e.g., wheat bread, whole grain pasta
  • Identify key product features and/or benefits, e.g., fat-free yogurt, Sketcher’s Relaxed Fit
  • Describe the product’s consistency, e.g., chunky peanut butter; Silk Soy Milk
  • State the product’s intended use, e.g., Hamburger Helper; Liquid Plumber
 
Most importantly, neither the product category name nor the brand name should mislead a reasonable consumer.  The labels listed above probably aren’t confusing to you or the vast majority of people who read them because marketers and our culture in general have done good jobs educating us about the words’ meanings
 
So, most Americans know “meatless” means a product does not contain meat.  Likewise, as attorney Justin Person has said, “If a consumer is confused about the source of a product labeled ‘almond milk,’ then he has bigger problems than being confused about which milk to buy.”  Reasonable  people also know that Girl Scout cookies don’t contain Girl Scouts.
 
It’s not surprising that the beef and dairy industries want to preserve exclusivity for their product category names.  However, given that consumers aren’t confused by broader-based naming and may even be helped by it, it looks like the two industries are doing little more than protecting their own livelihoods, which makes their name-related lobbying “Single-Minded Marketing.”


Picture
Subscribe to Mindful Matters blog.
Learn more about the Mindful Matrix and Mindful Meter.
Check out Mindful Marketing Ads
 and Vote your Mind!
0 Comments
    Subscribe to receive this blog by email

    Editor

    David Hagenbuch,
    founder of
    Mindful Marketing    & author of Honorable Influence

    Archives

    March 2023
    February 2023
    January 2023
    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014

    Categories

    All
    + Decency
    + Fairness
    Honesty7883a9b09e
    * Mindful
    Mindless33703c5669
    > Place
    Price5d70aa2269
    > Product
    Promotion37eb4ea826
    Respect170bbeec51
    Simple Minded
    Single Minded2c3169a786
    + Stewardship

    RSS Feed

    Share this blog:

    Subscribe to
    Mindful Matters
    blog by email


    Illuminating
    ​Marketing Ethics ​

    Encouraging
    ​Ethical Marketing  ​


    Copyright 2020
    David Hagenbuch

Proudly powered by Weebly