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Identifying Risk in Marketing Projects

Instructor: David Whitsett

David has taught computer applications, computer fundamentals, computer networking, and marketing at the college level. He has a MBA in marketing.

As with any other aspect of business, a marketing campaign can fall flat on its face for a variety of reasons. In this lesson, we'll examine potential marketing risks in the areas of pricing, target markets, research & development and promotions.

A Marketing Belly Flop

One of the world's most successful companies, Coca-Cola, committed one of the biggest marketing blunders ever; it's still used as a business case in marketing schools. Coke had been going strong for about one hundred years in 1985 when they introduced New Coke, a flavor they intended to replace the original recipe because New Coke was cheaper to make. Problem was, people liked the original version. Sales dropped like crazy and Coke reversed course three months later.

If a giant like Coke can shoot itself in the foot from a marketing standpoint, imagine what a similar blunder might do to a small-to-medium sized business; it could be fatal. Let's look at some areas where a potential misstep might occur in developing a marketing project plan.

Pricing

Price an item too low and it may be perceived as being poor quality or having little-to-no value, even if that's not the case. Price an item too high and scare off potential buyers who want to feel they're getting a good value. Being in the middle is no picnic either because you've really got to emphasize your mix of features and value, and as with most things in life, the middle is crowded. A simplistic answer is cost-plus pricing where you take the base cost of an item and add a percentage markup to cover overhead, but sometimes true overhead is tough to determine.

Target Markets

Imagine spending a lot of time, effort and money marketing your product to the wrong target segment. Not knowing the target demographics (population characteristics) of your audience can be a fatal flaw. If you mistakenly try to market your product to the wrong segment, you could end up overspending, targeting too broad an audience or using ineffective calls to action. Microsoft's efforts with the Windows phone fall into this category; Microsoft took a swing at a market that didn't really exist because iPhones and Android devices were too well-entrenched.

Research & Development

Back to the New Coke example. Market researchers asked the wrong questions and underestimated the emotional value people associated with the original Coke product. They never told consumers that one day they'd have to choose between drinking New Coke and Original Coke.

Another example of bad use of research is Kodak, which was the dominant provider of camera film for many decades. Their own research into digital camera technology in the 1980s told them it was a feasible product and could be an emerging trend. However, they ignored the research because they feared the impact on their film business. They failed to embrace a disruptive trend at their own peril.

Kodak ignored their own research about digital cameras - oops...
Kodak film

The moral of these two stories is that blunders in marketing research and development can lead to waste and missed opportunities.

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