ICMIND ANSWER SHEETS - The middle class of India, a virtual nonexistent entity on Independence, has gradually become more sensible, educated and demanding
ICMIND ANSWER SHEETS - The middle class of India, a virtual nonexistent entity on Independence, has gradually become more sensible, educated and demanding
ICMIND ANSWER SHEETS - The middle class of India, a virtual nonexistent entity on Independence, has gradually become more sensible, educated and demanding
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Consumer Behaviour
CASE-I:
MAKING MAGIC THE MULTIPLEX WAY
The middle class of India, a
virtual nonexistent entity on Independence, has gradually become more sensible,
educated and demanding. The overall growth of the economy has given a
tremendous thrust to the middle class, expected to grow by 5 to 10 percent
annually. It has grown over 57 million by 2001-02 and is expected to cross 153
million by 2009-10.
The average household income
in urban India has grown at a CAGR of 5 per cent over the last decade, not only
is this, but the age profile of the INDIAN spenders is also undergoing a sea of
changes. NCAER has identified five categories of household on basis of income
which is summarised in Table 1 below:
Table
1 Classification of Indian
Households on the Basis of Income
Number Of
Households [in millions]
1994-95 1999-2000 2006-07
Very rich
1 3 6
Consuming 29 55 91
Climbers 48 66 74
Aspirants 48 32 15
Destitute 35 24 13
Table1 reveals the paradigm
shift in Indian households over the last decade. The number of effective
consumers is expected to exceed 600 millions by 2010.This big bang in consumers
in Indian is being seen as the driving force in emergence of various new
business, which aim at high consumer tide. Availability of easy financing
schemes is another aspect of the story: owinga house, or buying a car or going
abroad on a pleasure trip is no more a distant dream to the average Indian
consumer. With the consumers’ gradually get skewed towards the young, there is
a greater tendency towards increased spending on consumption. A very
interesting piece of information is that average Indian household has increased
its spending on movies and theatres from 1 to 4.6 per cent of its disposable
income. This amazing spurt in spending on entertainment has affected the
quality and delivery of films as an industry. The single screen theatres with
poor maintenance and inadequate infrastructure are gradually paving way for
high tech multiplexes with three to as many as eleven screens, digitalized
films and Dolby surround audio system. The industry is undergoing a sawing,
driven by consumer behaviour.
Reports indicate that
multiplexes account for 0.6 per cent of the total cinemas, 2.3 per cent of the
total screens and have a total capacity of more than two lakh seats. The
average gross collection per multiplex is around Rs. 5.72 crore fetching about
29 to 35 per cent of the revenue for the film industry.
India’s multiplex bandwagon
has spread its tentacles beyond the metros to redefine entertainment in B and C
class towns. While the first phase of the growth of multiplexes was in metros,
now this is spreading to tier two and three cities like Lucknow, Nashik,
Aurangabad, and Kanpur. Top multiplexes players like PVR, Adlabs Films, Inox
Leisures, Shringar Cinemas (Fame Multiplexes), Fun Multiplex and Cinemax India
are venturing to small towns across the country and redefining entertainment to
the vast Indian Masses.
The multiplex business has
rightly tapped the growth of consumerism in India as it has understood the
pulse of the Indian Consumer’s preference towards superior ambience,
comfortable seating, air-conditioning and good quality snacks, even at the cost
of paying higher price. The average price of ticket in a conventional theatre
is Rs. 15-35, while a multiplex charges on an average of Rs. 75-350 and
consumer is willing to dish out this extra amount to enjoy the “complete” movie
experience, which most of the traditional theatres could not render and are
thus facing the fate of near extinction. It thus promises to take the
moviegoers’ experience to a whole new level and giving a new dimension to
watching movies at theatres.
Posers
1.
What lessons can you draw from
the above case regarding consumer behavior?
2.
Do you think change in
consumer perception in middle class has been instrumental in emergence of
multiplexes? What can be other reasons?
3.
Observe Table 1. Which of the
groups, according to you, would have demand for multiplexes?
4.
Would law of diminishing
marginal utility apply to movie watching? Will this affect the growth rate of
multiplexes? Or can it be seen a cause for establishment of multiplexes?
Give argument in support for your contention.
5.
Can multiplexes use the
concept of consumer surplus for attracting more consumers? How?
CASE II: SUNDER SINGH
Sunder
Singh had studied only up to high school. He was 32-years of age, lived alone
in a rented room, and worked eight-hour shift at one petrol pump, then went to
the other one for another eight-hour shift. He had a girl friend and was
planning to marry.
One
day when he returned from work, he got a note from his girl friend that she was
getting married to someone else and he need not bother her. This was a terrible
shock to Sunder Singh and he fell apart. He stopped going to work, spent
sleepless nights, and was very depressed. After a month, he was running Iowan
his savings and approached his earlier employers to get back his job, but they
would not give him a second chance. He had to quit his rented room, and sold
few things that he had. He would do some odd jobs at the railway station or the
bus terminal.
One
day, nearly two years ago, he was very hungry and did not have any money and saw
a young man selling newspapers. He asked him what he was selling and he told
him about Guzara (an independent, non-profit, independent newspaper sold by the
homeless, and economically disadvantaged men and women of this metro city).
Sunder Singh approached the office and started selling the newspaper. He did
not make a lot of money, but was good at saving it. He started saving money for
a warm jacket for next winter.
He
was reasonably happy; he had money to buy food, and no longer homeless and
shared a room with two others. One day, with his savings he bought a pair of
second-hand Nike shoes from flea market.
Sunder
Singh is not unique among low-income consumers, especially in large cities, in
wanting and buying Nike shoes. Some experts believe that low-income consumers
too want the same products and service that other consumers want.
The
working poor are forced to spend a disproportionate percent of their income on
food, housing, utilities, and healthcare. They solely rely on public
transportation, spend very little on entertainment of any kind, and have no
security of any kind. Their fight is mainly day-to-day survival.
QUESTIONS:
1.
What does the purchase of a
product like Nike mean to Sunder Singh?
2.
What does the story say about
our society and the impact of marketing on consumer behavior?
CASE-III: TOYOTA
Of all the slogans kicked
around Toyota, the key one is kaizen, which
means “continuous improvement” in Japanese. While many other companies strive
for dramatic breakthrough, Toyota overtook Ford Motor Company to become the
second largest automaker in the world. Ford had been the second largest since
1931.
Toyota simply is tops in
quality, production, and efficiency. From its factories pour a wide range of
cars, built with unequaled precision.
Toyota turns out luxury sedans with Mercedes-Benz-like quality using one-sixth
the labor Mercedes does. The company originated just-in-time production and
remains its leading practitioner. It has close relationships with its suppliers
and rigid engineering specifications for the products it purchases
Toyota’s worldwide leadership
in the automotive industry was built on its competitive advantage across the
supply chain. Between 1990 and 1996, Toyota reduced part defects by 84 percent,
compared to 47 percent for the Big 3. It also reduced the ratio of inventories
to sales by 35 percent versus 6 percent. These reduction advantages occurred
despite the fact the Big 3 relied on identical suppliers. A study by Jeff Dyer
of The Wharton School of the University of Pennsylvania and Kentaro Nobeoka of
Kobe University attributed Toyota’s success partly to its implementation of
bilateral and multilateral, knowledge-sharing routines with suppliers that
result in superior Interorganizational or network learning. Toyota uses six
approaches to facilitate knowledge sharing: (1)a supplier association;(2) teams
of consultants;(3)voluntary study groups;(4)problem-solving teams;(5)interfirm
employee transfers; and (6)performance feedback and monitoring processes. This
effort also involves intense levels of personal contact between Toyota and its
suppliers.
Toyota pioneered quality
circles, which involve workers in discussions of ways to improve their tasks
and avoid what it calls the three Ds: the dangerous, dirty, and demanding
aspects of factory work. The company has invested $770 million to improve
worker housing, add dining halls, and build new recreational facilities. On the
assembly line, quality is defined not as zero defects but, as another slogan
puts it, “building the very best and giving the customer what she/he wants.”
Because each worker serves as the customer for the process just before hers,
she becomes a quality control inspector. If a piece isn’t installed properly
when it reaches her, she won’t accept it.
Toyota’s engineering system
allows it to take a new car design from concept to showroom in less than four
years versus more than five years for U.S. companies and seven years for
Mercedes. This cuts costs, allows quicker correction of mistakes and keeps
Toyota better abreast of market trends. Gains from speed feed on themselves.
Toyota can get its advanced engineering and design done sooner because, as one
manager puts it, “We are closer to the customer and thus have shorter concept
time.” New products are assigned to a chief engineer who has complete
responsibility and authority for the product from design and manufacturing
through marketing and has direct contacts with both dealers and consumers.
New-model bosses for U.S. companies seldom have such control and almost never
have direct contact with dealers or consumers.
The 1999 Harbour Report, a
study of automaker competencies in assembly, stamping, and powertrain
operations, stated that the top assembly facility in North America (based on
assembly hours per vehicle) is Toyota’s plant in Cambridge, Ontario. In this
plant, a Corolla is produced in 17.66 hours. Toyota was also rated number one
in engine assembly, taking just 2.97 hours to produce an engine.
In Toyota’s manufacturing
system, parts and cars don’t get build until orders come from dealers
requesting them. In placing orders, dealers essentially reserve a portion of
factory capacity. The system is so effective that rather than waiting several
months for a new car, the customer can get a built-to-order car in a week to 10
days.
Toyota is the best carmaker in
the world because it stays close to its customers. “We have learned that
universal mass production is not enough,” said the head of Toyota’s Tokyo Design
Center. “In the 21st century, you personalize things more to make
them more reflective of individual needs.”
In 1999, Toyota committed to a
$13 billion investment through 2000 to become a genuinely global corporation
without boundaries. In this way, it will be able to create worldwide
manufacturing facilities that produce cars according to local demand. Its goal is
to achieve a 10 to 15 percent global market share by 2010.
Why the drive towards
customization of vehicles? Part of this is due to fierce competition that
provides consumer with a multitude of choices. The Internet enables consumers
to be more demanding and less compromising. They now have access to the lowest
prices available for specific models of vehicles with all of the bells and
whistles they design. From the comfort of their homes, they are able to bypass
dealers and still find the vehicle of their dreams.
Senior management at Toyota
believes that kaizen is no longer
enough. The senior vice president at the Toyota USA division, Douglas West,
states that his division is committed to both creating and executing a new
information system to drive the fastest, most efficient order-to-delivery
system in the North American market. Toyota management has come to realize Kaizen alone can no longer predict
business success. The sweeping changes taking place in the business environment
can no longer rely on the kaizen
philosophy of small, sustained improvements. In fact, one expert in the
industry believes that “pursuing incremental improvements while rivals reinvent
the industry is like fiddling while Rome burns.” Competitive vitality can no
longer be defined by continuous improvement alone.
 |
| ICMIND ANSWER SHEETS - The middle class of India, a virtual nonexistent entity on Independence, has gradually become more sensible, educated and demanding |
Questions:
1.
In what ways is Toyota’s
new-product development system designed to serve customers?
2.
In what ways is Toyota’s
manufacturing system designed to serve customers?
3.
How does Toyota personalize
its cars and trucks to meet individual consumer needs?
CASE-IV: EXPOSURE, ATTENTION, AND COMPREHENSION ON THE
INTERNET
The Internet universe
literally grows more cluttered by the minute. According to Network Solutions,
Inc., which registers the vast majority of Web addresses around the world,
about 10,000 new addresses are registered each day. That means by the time you
finish reading this case, about 60 new domain names will have been gobbled up.
With all the clutter on the Web, how have some firms been able to stand out and
attract millions of customers?
First, there are some basics
to which online firms must attend. These cost little more than some time and a
little creativity. The first is creating
a good site name. The name should be memorable (yahoo.com), easy to spell
(ebay.com), and/or descriptive (wine.com—a wine retailer). And, yes, ideally it
will have a .com extension. This is the most popular extension for e-commerce,
and browsers, as a default, will automatically add a .com onto any address that
is typed without extension.
The second priority is to make
sure the site comes up near the top of the list on any Web searches. If you use
Lycos.com to perform a search for “used books,” you get a list of more than 2.6
million websites. Studies have shown that most people will look only at the top
30 sites on the list, at most. If you are a used-book retailer and you show up
as website #1,865,404 on the search list, there is a very good chance you will
not attract a lot of business. A 1999 Jupiter Research study reveals that
“searching on the Internet” is the most important activity, and Internet users
find the information they are looking for by using search engines and Web
directories. A good Web designer can write code that matches up well with
search engine algorithms and results in a site that ranks high on search lists.
Virtually all popular websites
have those basics down pat. So the third step is to reach out proactively to
potential customers and bring them to your site. Many companies have turned to
traditional advertising to gain exposure. Television advertising can be an
effective option—albeit an expensive one. In late January 1999, hotjobs.com
spent $2 million—half of its 1998 revenues—on one 30-second ad during the Super
Bowl. According to CEO Richard Johnson, so many people tried to visit the site
that the company’s servers jammed. Johnson says the number of site hits was six
times greater than in the month before. A quirky ad campaign may or may not
help. Pets.com, now de-func, built its image around a wise-guy sock puppet.
CNET, a hardware and software retailer, ran a series of television ads
featuring cheesy music, low-budget sets, and unattractive actors. One such ad
featured two men—one in a T-shirt that said ”you,” another in a T-shirt labeled
“the right computer” – coming together and joining hands thanks to the efforts
of another guy in a CNET T-shirt. The production quality was rudimentary enough
that any sophomore film student could have produced it. The spots were so bad
that they stood out from the slick, expensive commercials to which viewers were
accustomed. Critics ripped the campaign to shreds, but CNET called it a
success.
Other Internet firms have used
sports sponsorships to increase visibility. CarsDirect.com, a highly rated site
that allows consumers to purchase automobiles online, once purchased the naming
rights to NASCAR auto race (the CarsDirect.com400). Lycos also has tried to
make the most of NASCAR’s increasing popularity. It spent hundreds of thousands
of dollars to have its name and logo plastered all over the car of popular
driver Johnny Benson. Meanwhile, online computer retailer Insight and furniture
seller galleryfurniture.com each targeted football fans by purchasing the
naming rights to college bowl games.
Of course, if you can reach
consumers while they are in front of their computers rather than their
television sets, you may stand an even better chance of getting them to your
site. However, typical banner ads are inefficient, averaging click-through
rates of only about 0.5 per cent (only one of every 200 people exposed to the
ad actually clicked on the ad). Too often, banner ads are just wallpaper; consumers
may see them but they usually are not sufficiently stimulated to click-through.
However, Michele Slack of the online advertising group Jupiter Communications
believes banner ads can be useful if used correctly. “The novelty factor is
wearing off,” she says. But “when an ad is targeted well and the creative is
good, click-through rates are much higher.”
An alternative way to reach
people who are already online is through partnerships. One of the most visible
examples of such an alliance is the one between Yahoo! And Amazon.com. Let’s
say you’re working on a project on the Great Depression and you want to see
what kind of information is available online. If you go to Yahoo! And type in
“Great Depression,” you will not only be presented with a list of websites, but
you will also see a link that will allow you to click to see a list of books on
the Great Depression that are available through Amazon. Another example of a
successful partnership was forged in 1998 between Rollingstone.com and the
website building and hosting service Tripod. Every one of the 3,000 artist
pages on Rollingstone.com contained a link to Tripod. The goal was to encourage
fans to use Tripod’s tools to build webpages dedicated their favorite singers
or bands. According to the research company Media Metrix, during the course of
the alliance Tripod jumped from the Web’s fourteenth most popular website to
number eight. Alliances with nonvirtual companies are another options. In 2003,
the Internet classified firm CareerBuilder kicked off a cross-promotional
campaign with major Internet firms, including AOL and MSN.
A less subtle but nonetheless
effective way to build traffic is to more or less pay people visit your site.
One study showed more than half of Internet consumers would be more likely to
purchase from a site if they could participate in some sort of loyalty program.
Hundreds of online merchants in more than 20 categories have signed up with a
network program called ClickRewards. Customers making purchases at ClickRewards
member sites receive frequent-flier miles or other types of benefits.
Mypoints.com offers a similar incentive program in which customers are rewarded
with air travel, gift certificates and discounts for shopping at member
merchants. The search engine iwon.com was even more direct. It rewards one
lucky visitor each weekday with a $10,000 prize. According to Forrester
Research, companies in 2002 spent about $6 billion annually on online
incentives and promotions.
Finally, some firms rely on
e-mail to thoroughly mine their existing customer databases. The auction site
On sale (later merged with Egghead.com) proved just how successful e-mail can
be. It sent out targeted e-mails to its customers based on their past bidding
activities and previously stated interests. Click-through rates on these
targeted e-mails averaged a remarkable 30 percent. E-mail marketing also holds
promise for business-to-business firms. The Peppers and Rogers Group is a
marketing firm that gives presentations around the United States. At the end of
the presentations, people are invited to go to the company’s website and sign
up for their e-mail newsletter, Inside 1 to 1. The newsletter invites readers
to visit the Peppers and Rogers website to learn more about various articles,
promote their products and services, and participate in forums. Inside 1 to 1
now boasts a subscriber base of 45,000, but the company estimates that about
200,000 people actually see it because subscribers forward it to their friends
and colleagues. About 14,000 people visit the Peppers and Rogers site each
week, with traffic often peaking immediately after the newsletter is sent.
As you can see, there is no
one effective method for generating interest in a website. The same methods
that have worked for some firms have failed for others. One certainty is that
as the Internet grows and more people do business online, Internet firms will
have to find ever more creative ways to expose customers to their sites and
keep their attention once there.
Question:
1.
Consider the e-mail campaigns
discussed in the case. Why do you think these campaigns were successful?
Discuss the attention processes that were at work. Do you see any potential
drawbacks to this type of marketing?
2.
During the 2000 Super Bowl,
ABC invited viewers to visit its Enhanced TV website. Fans could play trivia,
see replays, participate in polls and chat rooms, and view player statistics.
The site received an estimated 1 million hits. Why? Frame your answer in terms
of exposure, attention, and comprehension.
3.
Think about your own Web
surfing patterns. Write down the reasons you visit sites. Which of the
marketing strategies discussed in the case do you find most (and least)
influential?
CASE:
V PEAPOD ONLINE GROCERY—2003
The online grocery turned out
to be a lot tougher than analysts thought a few years ago. Many of the early
online grocers, including Webvan, ShopLink, StreamLine, Kosmom, Homeruns, and
PDQuick, went bankrupt and out of business. At one time, Webvan had 46 percent
of the online grocery business, but it still wasn’t profitable enough to
survive. The new business model for online grocers is to be part of an existing
brick-and-mortar chain. Large grocery chains, like Safeway and Albertson’s, are
experiencing sales growth in their online business but have yet to turn a
profit. Jupiter Research estimates that online grocery sales will be over $5
billion by 2007, about 1 percent of all grocery sales, while it expects more
than 5 percent of all retail sales to be online by then. A few years ago,
optimistic analysts estimated online grocery sales would be 10 to 20 times that
by 2005, but it didn’t work out that way.
One of the few online grocers
to survive in 2003 is Peapod, the first online grocer, started by brothers
Andrew and Thomas Parkinson in 1990. However, even Peapod was failing until
2001 when Dutch grocery giant Royal Ahold purchased controlling interest in the
company for $73 million. Peapod operates in five markets, mainly by closely
affiliating itself with Ahold-owned grocery chains. Peapod by Giant is in the
Washington, DC, area, while Peapod by Stop and Shop runs in Boston, New York,
and Connecticut. The exception is Chicago, where Peapod operates without an
affiliation with a local grocery chain. Peapod executives claim the company is
growing by 25 percent annually and has 130,000 customers, and all of its
markets except Connecticut are profitable. Average order size is up to $143
from $106 three years earlier.
The online grocery business
seemed like a sure winner in the 1990s. Dual-income families strapped for time
could simply go online to do their grocery shopping. They has about the same
choices of products that they would have had if they went to a brick-and-mortar
grocery, about 20,000 SKUs (stockkeeping units). They could browse the “aisles”
on their home computers and place orders via computer, fax or telephone. The
orders were filled at affiliated stores and delivered to their homes in a
90-minute window, saving them time and effort and simplifying their daily
lives. For all this convenience, consumers were willing to pay a monthly fee
and a fee per order for packaging, shipping, and delivery. Since most of the
products purchased were well-known branded items, consumer faced little risk in
buying their traditional foodstuffs. Even perishables like produce and meat
could be counted on to be high quality, and if consumers were concerned, they
could make a quick trip to a brick-and-mortar grocery for these selections.
However, while all of this sounded good, most consumers didn’t change their grocery
shopping habits to take advantage of the online alternative.
Currently analysts do not
expect the online grocery industry to take off in the near future, if ever.
Miles Cook of Bain & Company estimates that only 8 to 10 percent of U.S.
consumers will find ordering groceries online appealing, but only about 1
percent will ever do so. He concludes: “This is going to remain a niche
offering in a few markets. It’s not going to be a national mainstream
offering.” Jupiter Media Metrix analyst Ken Cassar concludes that “The moral of
the story is that the ability to build a better mousetrap must be measured
against consumers’ willingness to buy it.”
Question:
1.
What behaviors are involved in
online grocery shopping? How does online shopping compare with traditional
shopping in terms of behavioral effort?
2.
What types of consumers are
likely to value online grocery shopping from Peapod?
3.
Overall, what do you think
about the idea of online grocery shopping? How does it compare with simply
eating in restaurants and avoiding grocery shopping and cooking altogether?
CASE:
VI SONY
In just over half-century,
Sony Corporation has from a 10-person engineering research group operating out
of a bombed-out department store to one of the largest, most complex, and
best-known companies in the world. Sony co-founders Masaru Ibuka and Akio
Morita met while serving on Japan’s Wartime Research Committee during World War
II. After the war, in 1946, the pair got back together and formed Tokyo
Telecommunications Engineering Corporation to repair radios and build shortwave
radio adapters. The first breakthrough product came in 1950, when the company
produced Japan’s first tape recorder, which proved very popular in music
schools and in courtrooms as a replacement for stenographers.
In 1953, Morita came to the
United States and signed an agreement to gain access to Western Electric’s
patent for the transistor. Although Western Electric (Bell Laboratory’s parent
company) suggested Morita and Ibuka use the transistor to make hearing aids,
they decided instead to use it in radios. In 1955, Tokyo Telecommunications
Engineering Corporation marketed the TR-55, Japan’s first transistor radio, and
the rest, as they say, is history. Soon thereafter, Morita rechristened the
company as Sony, a name he felt conveyed youthful energy and could be easily
recognized outside Japan.
Today Sony is almost
everywhere. Its businesses include electronics, computer equipment, music,
movies, games, and even life insurance. It employs 190,000 people worldwide and
does business on six continents. In 1999, Sony racked up sales of $63 billion;
31 percent of those came from Japan, 30 percent from the United States, and 22
percent from Europe. (To visit some of Sony’s country-specific websites, go to
www.sony.com and click on “Global Sites.”)
Perhaps Sony’s most famous
product is the Walkman. Created in 1979, the Walkman capitalized on what some
perceived as the start of a global trend towards individualism. From a
technological standpoint, the Walkman, was fairly unspectacular, even by 1979
standards, but Sony’s marketing efforts successfully focused on the freedom and
independence the Walkman provided. One ad depicted three pairs of shoes sitting
next to a Walkman with the tag line “Why man learned to walk.” By 2000 more
than 250 million Walkmans had been sold worldwide, but Sony was concerned.
Studies had shown that Generation Y (ages 14 to 24) viewed the Walkman as
stodgy and outdated. So Sony launched a $30 million advertising and marketing
campaign to reposition the product in the United States. The star of the new
ads was Plato, a cool, Walkman-wearing space creature. The choice of a nonhuman
character was no accident according to Ron Boire, head of Sony’s U.S.
personal-mobile group. He wanted a character that would appeal to the broadest
possible range of ethnic groups—thus, the space creature. Boire explains, “An
alien is no one, so an alien is everyone.”
Sony’s current vision,
however, extends far beyond the Walkman: to become a leader in broadband
technologies. Sony looks forward to a day when all of its products—televisions,
DVDs, telephones, game machines, computers, and so on—can communicate with one
another and connect with the Web on a persona network. A Sony executive
provides an example of such technology in action: “Say you are watching TV in
the den, and your kids are playing their music way too loud upstairs,” he says.
“You could use your TV remote to call up an onscreen control panel that would
let you turn down your kids’ stereo, all without having to get up from your
recliner.”
Sony sees its new PlayStation2
filling a major role in the Internet of the future. In March 2000, Sony
introduced the PlayStation2 in Japan and sold 1 million units within a week. Newsweek featured the PlayStation2 on
its cover that spring, even though it wasn’t offered in the United States until
later in the year. Most consumers probably bought PlayStation2 to play video
games, but its potential goes far beyond that. It is actually powerful enough
to be adapted to guide a ballistic missile. Sony envisions consumers turning to
the PlayStation2 for not only games but also movies, music, online shopping,
and any other kind of digital entertainment currently imaginable. Ken Kutaragi,
president of Sony Computer Entertainment, predicts the PlayStation2 will
someday become as valuable as the PC is today: “A lot of people always assumed
the PC would be the machine to control your home network. But the PC is a narrowband
device that… has been retrofitted to play videogames and interactive 3-D
graphics. The PlayStation2 is designed from the ground up to be a broadband
device.”
The PlayStation2 also reflects
a changing attitude within Sony regarding partnerships with other companies.
Toshiba helped Sony design the Emotion Engine, which powers the PlayStation2.
In previous years, these kinds of alliances were the exception rather than the
rule with the Sony. Sony was perceived as arrogant because it rarely cooperated
with other companies, preferring to develop and popularize new technologies on
its own. Recently, however, that has changed. Sony has worked with U.S. based
Palm to develop a new hand-held organizer with multimedia capabilities,
cooperated with Intel to create a set of standards for home networks, and
launched a joint venture with Cablevision to build a broadband network in the
New York metropolitan area. Nevertheless, some critics believe Sony remains too
insular, looking on from the sidelines while other companies join forces to
create entertainment powerhouses. Sony has no alliances with U.S. cable or
television networks, raising some doubts about its ability to fully develop its
home Internet services. Sony has talked with other music companies about possible
joint venture, but nothing has come to fruition.
Unlike many U.S.-based
multinationals, Tokyo-based Sony traditionally has marketed itself on a
regional rather than a global basis. For example, Sony has almost 50 different
country-specific websites from which consumers can order products. However,
there are signs that strategy may be changing, at least to some degree. Sony
launched www.Sonystyle.com, a website that is the company’s primary online
outlet for selling movies, music, and electronic products. Sony also plans to
provide product service and support on the site, and eventually software
upgrades as well. The current main website (www.sony.com) is mainly a source
for corporate and investor information. Also, in 1997 Sony embarked on a
worldwide ad campaign to make itself and its products more relevant in the eyes
of younger consumers. Ironically, much of Sony’s future growth may come from
its own backyard. The primary buyers of electronic and digital products are
ages 15 to 40. It is estimated that by 2010, two-thirds of the people in the
world in that age bracket will live in Asia. Tokyo is already a powerful
influence on Asian culture. Asia’s most popular youth magazines are published
in Tokyo, and most of the music Asian young people listen to comes form Tokyo.
So part of Sony’s challenge is to continue to grow on a global scale while
paying close attention to the burgeoning market at home.
Immediately following World
War II and for some years thereafter, the label “Made in Japan” connoted cheap,
shoddy, imitation products. Today, for many people, that same label stands for
excellence and innovation. Certainly Sony can take much of the credit that
transformation. Now the question is whether Sony’s products and marketing
efforts can keep pace (or set the pace) in the upcoming age of digital
convergence.
Question:
1.
Identify and discuss some of
the cultural meanings for Sony possessed by consumers in your country. Discuss
how these cultural meaning were developed and how they influence consumers’ behaviors
(and affect and cognition). What is the role of marketing strategies in
creating and maintaining (or modifying) these cultural meanings?
2.
It is often stated that the
world is becoming smaller because today people communicate relatively easily
across time and distance. Discuss whether that has been beneficial for Sony.
What are some marketing challenges it presents?
3.
What do you think about Sony’s
tradition of region-specific or nation-specific marketing? Would Sony be better
served by working to create a more uniform global image?
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