Essay Instructions: Marketing- Consumer behavior
approx 100 words per question.
Discussion Post
1. Identify the three types of needs that products can fulfill and give an example of each.
2. Identify the various relationships that consumers can have with a brand.
3. What is the difference between surface-level processing and meaning-level processing? Why are marketers concerned with these types of processing?
Case Study
approx 80 - 100 words per question Case Outline
. M-1 The Company
. M-2 Nextel?s Competitive Advantage
and they started refocusing on corporate customers. It will take time for the competition to catch up with Nextel. Nextel?s decade-old Direct Connect phone, made by Motorola (http://www.motorola. com), links users within a second at the push of a button. That?s a convenience construction workers, salespeople, and many others will
M-3 Boost Mobile pay a premium for. Today, competing technologies involve at least a
. M-4 The Company?s Financial Position
. M-5 Recent Developments
. M-5a New Spectrum
. M-5b New Technologies
. M-5c Mergers and Acquisitions
. M-5d The Aftermath
. M-5e A New Twist
Discussion Questions Notes
4-second delay to set up a call. On May 4, 2004, Nextel began offering push-to-talk nationally and internationally (instead of just regionally), and other new services are on the way domestically. Late in 2004, Nextel launched several new handsets featuring popular built-in cameras and sleek, small designs. And it continues to expand popular premium wireless-data applications, such as the @Road service, which helps truck-fleet operators locate vehicles through a global positioning satellite system.
Although only 20 percent of its 10.6 million subscribers use wireless data today, they pay more than $90 in revenues a month on average and defect at half the rate of other customers. Analysts predict that by 2010, 5.5 percent of Nextel?s revenues per user could
M-1 The Company come from wireless data, up from 1 percent in 2004.
Nextel is going after new users among the white-collar work- force, government employees, and even young consumers. Govern- ment workers?including first responders on the frontline in home- land security?are one of its fastest-growing sectors. And Nextel is deciding whether to pursue the 18- to 24-year-old market. By sell- ing Nextel phones via surfer shops and music stores, such as Bill- abong (http://www.billabong.com) and Wherehouse (http:// www.wherehouse.com), Nextel is testing whether it is worth risking its business-oriented brand image to capture the potentially high- margin youth market.
As the competition chased the booming consumer market over the?past few years, Nextel stuck to selling its unique walkie-talkie?like?service to business users in industries such as trucking, plumbing,?home repair, and construction. This strategy has paid off. It has?proved to be a remarkably popular mode of communication and?Nextel?s main differentiator. Indeed, many analysts credit it with?allowing the fifth-largest wireless carrier in the United States to?enjoy the industry?s lowest customer turnover and an average?revenue per user of at least $10 more than the other players. Indeed,?Nextel grabbed the coveted top spot in the 2004?s BusinessWeek Info?Tech 100 ranking. During one of telecom?s toughest years, Nextel scored $1.66 billion
Nextel?s competitive advantage may soon evaporate. AT&T in profit in 2002. It collects an average of $71 in revenues per Wireless (http://www.at&twireless.com), Verizon Wireless (http:// subscriber per month, compared with $50 at other carriers?and
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Nextel, a FORTUNE 200 company based in Reston, Virginia, is a leading provider of fully integrated wireless communications serv- ices. It has built the largest guaranteed all-digital wireless network in the country, covering thousands of communities across the United States. Today 95 percent of FORTUNE 500 companies are Nextel customers. Nextel and Nextel Partners Inc. currently serve 297 of the top 300 U.S. markets where approximately 259 million people live or work. Nextel is the nation?s fifth-largest wireless company.
M-2 Nextel?s Competitive Advantage
7364, Shopper, Buyer, and Consumer Behavior: Theory, Marketing Applications and Public Policy Implications, Jay D. Lindquist - ? Cengage Learning
M-3 Boost Mobile
Boost Mobile (http://www.boostmobile.com), a division of Nextel aimed at young subscribers and ethnic groups, is ramping up. Boost Mobile, a prepaid service, added 132,000 customers in the first quarter of 2004, on top of 385,000 in all of 2003. In May of 2004, Nextel reported that it has 13 million subscribers.
M-4 The Company?s Financial Position
704 Case M Nextel (http://www.nextel.com)
its 2.1 percent monthly customer-defection rate is the lowest in an industry that averages a 2.6 percent monthly churn.
Operating performance remains impressive. In 2004?s first quarter, Nextel added 474,000 subscribers?about 15 percent of the overall industry?s total gains in that period. Nextel is gaining market share. Despite the vicious price-cutting that the industry is witnessing, Nextel?s income jumped 184 percent, to $591 million, on revenues that were up 31 percent, to $3.1 billion, in the quarter.
M-5 Recent Developments
M-5a New Spectrum
Because Nextel uses the same frequencies as police and fire depart- ments, all parties suffer from interference. The Federal Communi- cations Commission (FCC) has been trying for several years to relocate part of Nextel?s service to a different wireless spectrum. Doing so should allow Nextel to build a superfast network similar to those being constructed by rivals like Verizon Wireless, the number one U.S. wireless company. On July 8, 2004, the FCC made a decision to allot Nextel valuable new spectrum space (in the 1.9- gigahertz band) to carry its cell phone service. Under this agree- ment, Nextel will get the frequency in return for relinquishing some of its existing spectrum to police and fire departments and helping them relocate to the spectrum it is giving up. This upgrade will cost Nextel three times what it had originally offered for relocation. The deal ultimately is expected to cost $3.2 billion. On the bright side, having the new spectrum should allow Nextel to handle more voice calls, provide more advanced data services, and keep up with its rivals in the long run. Without the spectrum swap Nextel is likely to be at a competitive disadvantage because of its spectrum limita- tions?its existing spectrum did not have enough capacity to sup- port more voice calls and advanced services. Analysts agree that the company?s long-term survival now looks to be more ensured. Earn- ings should grow 45 percent this year, to $2.07 per share, on revenues of $12.9 billion.
M-5b New Technologies
Analysts say that the new technology, PPT, is likely to create waves in the cellular phone market. With PTT, the user can connect to another party simply by holding down a special button when talk- ing. The feature connects users within a few seconds, as opposed to 20 to 25 seconds with conventional cell phone dialing.
Verizon Wireless is charging $20 a month for the service. That price is likely to drop when other carriers enter the market. Building out a PTT service is not that expensive, costing well under $100 million for most carriers compared with the tens of billions they spent on networks allowing for more voice calls and other data services, such as interactive mobile games, which add only about $2 in extra revenue per user each month.
A May 2003 Yankee Group (http://www.yankeegroup.com) survey of 2,490 business users and consumers showed that 24 percent of them want the PTT function. That?s why Cingular (http://www.cingular.com), AT&T Wireless, and T-Mobile (http:// www.t-mobile.com) have partnered with equipment vendors Erics- son (http://www.ericsson.com), Nokia (http://www.nokia.com), and privately held Sonim Technologies to standardize the PTT technology. The standard would ensure that different carriers? cus- tomers can call each other using PTT. To counter this thrust, Nextel is working with Motorola, the creator of the unique iDen technol- ogy its network is based on, and wireless technology powerhouse
Qualcomm (http://www.qualcomm.com) on interoperability with technology used by Sprint PCS.
Nextel has another reason to worry. It has not paired up its walkie-talkie service with an IM-like screen, showing which of the users are available at a given time, as Verizon has done. And analysts say that is what will make the improved PTT service the next wireless killer application.
Nextel has some key advantages. Its service is easy and con- nections are fast. In contrast, a caller on the Verizon network has to wait 3 to 5 seconds to connect to the recipient. Then, a delay of several seconds occurs in between each person speaking and the voice actually coming through on the phone. Sonim says its PPT connection times will eventually be virtually instantaneous, con- necting in under a second like Nextel?s. Another barrier that Nex- tel?s rivals have to overcome is the dearth of PTT-enabled phones, which have a special button and better speaker quality. These rivals will have to find a way to get their customers to upgrade to new phones that cost, in the case of Verizon Wireless, $149.99 a unit for a Motorola V60p phone on a 2-year contract.
M-5c Mergers and Acquisitions
Sprint Corp. (http://www.sprint.com) and Nextel announced on December 15, 2004, a $35 billion deal to merge into the third- largest wireless powerhouse. With a market capitalization of $70 billion, the new Reston (Va.)-based Sprint Nextel hopes to gain the competitive advantage it needs to fight the two leading Bell-owned wireless giants?Cingular and Verizon Wireless. Cingular grabbed the number one spot in the wireless market with 47 million sub- scribers after its October acquisition of AT&T Wireless. And Ver- izon Wireless, the number two player, reached its 42 million users mark. Sprint, a distant third with 20 million customers, and num- ber five Nextel, with 14.5 million, need each other to hold their own. While Sprint has local and long-distance businesses in addi- tion to wireless, it does not have the scale to compete over the long haul with the Bells. And although Nextel has the wireless industry?s highest margins, its focus on a unique niche?PTT service to busi- ness users?is too narrow to sustain an independent company as the industry consolidates.
The long-term goals may be twofold. First, the deal allows Sprint Nextel to play a pivotal role in the coming convergence between traditional and wireless phones, web access, and video services. As the Bells race against the cable operators to sell con- sumers everything from voice to data to video, both sides need wireless phone services to sweeten their bundle of offerings. The Bells already own their own wireless companies, but the cable companies do not. Sprint Nextel can provide a ready-made wireless offering for cable companies. Second, the merger can compete against the Bells and cable operators in the market for converged services. The two wireless carriers together own enough airwaves, stretching coast-to-coast, to offer voice, data, and even video over next-generation wireless broadband technology, the WiMax standard.
The two companies seem to complement each other well. Nextel needs Sprint?s innovative know-how in creating new wireless data applications in mobile music, video, and games to go after the youth consumer market with its Boost Mobile brand. Sprint can expand in the business market by helping to bolster Nextel?s attempt to equip corporate campuses with communications serv- ices. Sprint?s long-distance networks, along with Nextel?s wireless offerings, give companies a more complete offering. Nextel uses a special wireless technology that no other carrier uses. Without Sprint, Nextel would have to build an entirely new network to offer customers email and video services that zip along at speeds of up to 300 kilobits per second. By using Sprint?s digital network, Nextel can save much of the $2 to $3 billion it would otherwise spend to build its own next-generation infrastructure.
M-5d The Aftermath
There were problems in the aftermath of the merger. For example, Sprint Nextel embarked on a marketing campaign that prompted an exodus of Nextel?s customers. The brand Nextel is trying to reinvent its image around a new slogan,??Sprint ahead,?? which does not mention Nextel at all. Also, rumors indicate that plans were made to eliminate the Nextel name from the sponsorship of the main NASCAR racing series, one of Nextel?s most successful brand- ing campaigns before the merger. The plan was to call it the NASCAR Sprint Cup. Of course, this plan did not materialze. Thank goodness! Analysts have criticized this move because cus- tomers are confused by the combined company?s brand. If you click on www.nextel.com, the browser takes you to the Sprint home page, and there is no mention of Nextel on Sprint?s home page. Nextel did not disappear, but seems to be taking a backseat in Sprint?s large conglomeration.
The slogan of the new Cingular/AT&T Wireless is ??raising the bar.?? Verizon Wireless?s advertising stressed its reputation for good service, and now Sprint Nextel settled on ??Sprint, together with Nextel.??
M-5e A New Twist
this is a cultural trend? If so, why and to what extent is it associated with other cultural trends? Tip: Use culture concepts (Chapter 11 and 12) to formulate your answer.
Sprint Nextel Corp. has started its own virtual community for wireless fans and foes?buzzaboutwireless.com. Many of the members so far seem to be Sprint Nextel subscribers, but you don?t have to be a subscriber to join. Members share their stories about their experiences with the carrier. Of course, not all stories are good. As a matter of fact, there are more bad than good stories. However, Sprint Nextel is using this virtual community to ??listen to the customer.?? The forum is also used to ask questions and get help on solving problems.
Discussion Questions
1. What is the target market that Nextel has focused on since its inception? Describe this market segment in demographic and psychographic terms. Tip: Use the demographic concepts found in Chapter 14 and the psychographic concepts found in Chapter 6 to formulate your answer.
2. What is the image associated with Nextel? Nextel is contemplating targeting young adult consumers. Do you think this is a wise strategy? Explain. Tip: Use the concepts of brand user image and consumer self-concept (Chapter 5) in formulating your answer.
3. How is Nextel perceived versus its major competitors in the minds of the young adult population? Can you predict brand preferences based on these perceptions? Explain. Tip: Use any of the multiattribute attitude models in Chapter 9 to formulate your answer.
4. One can hypothesize that more young adult consumers are cutting the cord (i.e., using cellular phones exclusively without having a wired phone in their homes). Do you think
5. Have you seen any of Nextel?s ads? How about ads related to any of Nextel?s competitors: Cingular, T-Mobile, Verizon Wireless, and so on? Can you evaluate the effectiveness of their ads? Tip: Use concepts and models from the communication and persuasion (Chapter 10) in formulating your answer.
6. Consider a typical family involving a father, mother, and two teenage kids?a market segment described as in the middle of the family life cycle. Suppose the family is now considering the purchase of a cell phone, possibly a family package. Who in the family is most likely to recognize the need for a cell phone? How can Nextel appeal to that segment of the consumer population? Who in the family is most likely to gather information about the various cellular carriers in the local area? How can Nextel appeal to that segment? Who in the family is most likely to evaluate the various carriers and recommend a carrier? How can Nextel appeal to that segment? Who in the family is most likely to make the purchase? How can Nextel appeal to that segment? Tip: Use concepts described in the household and family influences (Chapter 15) to formulate your answer.
7. Nextel and all of its competitors conduct satisfaction studies. Propose a study that can help Nextel assess the various sources of satisfaction and dissatisfaction with the purchase, use, maintenance, and disposal of cellular phones. Tip: Use concepts described in the consumption and postpurchase behavior (Chapter 4) to formulate your answer.
