final project chap 18 – american girl brands

1 UNIVERSITY OF ECONOMICS HO CHI MINH CITY INTERNATIONAL BUSINESS-MARKETING …•••… Subject: Consumer Behavior FINAL PROJECT CHAP 18 – AMERICAN GIRL BRANDS Instructor: Minh Tien DINH, Ph.D Class: DH43IBC03 Group: 05 Ho Chi Minh City, May 17th, 2020 TABLE OF CONTENTS Overview Summary of main points 1.1 Background of American Girl Brands .3 1.2 The story of the American Girl Brands 1.3 The American Girls Collection .5 1.4 The strategy of the American Girl Brands .7 1.5 Some success of American Girl Brands Basic theories related to the case 2.1 The Wheel of Consumer Analysis: Pricing Strategy Issues .9 2.2 Conceptual Issues in Pricing 11 Question 14 Question 18 Question 24 Question 33 Conclusion .42 Question and Answer .43 References 45 Overview American Girl Brands, which is a wholly owned subsidiary of the world’s leading toy company- Mattel Inc., was originally the Pleasant Company before being purchased by Mattel In 2008, its product line included different character dolls or doll combinations and accessories which are sold online and in company-owned stores in Chicago, New York, Los Angeles, Atlanta, Dallas, Boston, and Minneapolis Among these product lines, the most prominent is a line of historical dolls pertained to plucky heroines such as Samantha Parkington or Addy Walker Such dolls were the darlings of 7- to 12-year-olds and each represents an era of American history as well as deals with real world problems For the pricing strategy, American Girl Brands set relatively high price for each doll and its accessories compared to others sold in the mass market because of its educational values about American historical figures apart from enjoyable purposes In this essay, our group starts with the summary of the case’s main points and build a critical theory framework related to this case with aim to answer main questions As a result, our group draw salutary lessons in some important relationships among consumer affect, cognition, behavior, and the environment as they relate to the price variable of the marketing mix These lessons can aid marketers in devising effective pricing strategy for each consumer segment Summary of main points 1.1 Background of American Girl Brands American Girl Brands is a wholly owned subsidiary of Mattel Inc., the world’s leading toy company Before being purchased by Mattel in 1998, it had been the Pleasant Company which is headquartered in Middleton, Wisconsin In early 2004, Pleasant Company decided to highlight its brand by officially changing name to American Girl, Inc Its product line in 2008 included different character dolls Their products are sold by two main channels including online and through stores in Chicago, New York, Los Angeles, Atlanta, Dallas, Boston and Minneapolis Today, there are currently 18 American Girl stores in US, two in Canada and two in United Arab Emirates ❖ Company Perspectives: "We give girls chocolate cake with vitamins Our books are exciting, our magazine is fun, and the dolls and accessories are pretty But more important, they give young girls a sense of self and an understanding of where they came from and who they are today." Pleasant T Rowland Their products are sold online at website: https://www.americangirl.com/ .and in company-owned stores 1.2 The story of the American Girl Brands The story of the American Girl started in 1986 by Pleasant Rowland who was inspired to create her own brand after her trip to Colonial Williamsburg to buy for her two kids lovely new dolls However, all the Barbies had the same image of wearing spiked heels, driving pink Corvettes and looking as if they belonged in strip joints which brought her uncreative perceptions towards this industry Rowland was advised not to sell a mass market doll for over $40 as some of them was even sold less than $10 Believing boomer parents would pay more for educational products which a metoo doll could not satisfy this condition, Rowland came up with an idea to create a doll emphasizing traditional American values that children could both play and learn 1.3 The American Girls Collection At the starting point, the company’s main product was historical fiction series books and high quality 18-inch dolls representing each of the three heroines in the series book Specifically, The American Girls Collection is a line of historical dolls that are the darlings of 7- to 12-year-olds, which includes some plucky heroines such as: Samantha Parkington fights for women’s suffrage; Addy Walker escapes from slavery; Kirsten Larson builds a life on the frontier; and so on Through the time, American Girl expanded its collection over time, adding characters from different eras and walk of life The table below shows some outstanding years of American Girl Brand 1986 Launch historical line of 18-inch dolls with books and accessories 11 characters and stories that had spanned over 200 years, from 1764 to 1974 Bringing lessons about America's history and the role of women and girls in country shaping 1992 American Girl magazine was introduced Be the very first comapny to offer contemporary that affirms self-esteem, celebrates achievements and fosters creativity in today's girls The award-winning magazine ranks among the top ten children’s magazines in the nation and is the largest magazine dedicated exclusively to girls 1995 The company debuted a contemporary 18-inch doll line that has since evolved into Truly Me™ The line encourages a girl to express, explore, and discover who she is and to find the confidence to be her true self Introduce Bitty Baby™ - a line of huggable baby dolls to teach younger girls with age range from 3-6 imporatant life skills like caring and nurturing 2001 Introduced Girl of the Year™, that gave voice to a diverse range of personalities and backgrounds through inspiring characters that offered girls a broader worldview and helped teach acceptance 2016 Launch WellieWishers™, a line of 14 ½-inch character dolls, early chapter books, and accessories for girls with age range from 5-7 teaching kindness and empathy TheAmerican WellieWishers stories are further brought an original Most recently, Girl has launched its 2020 "Girltooflife thevia Year," Joss Kendrick, animated series a surfer, cheerleader, and environmental activist who wears a hearing aid 1.4 The strategy of the American Girl Brands Rowland’s strategy at that time hit on online platform with order form through email selling via catalogue believing word of mouth would be enough in terms of sales In 1998, the company built the first American Girl Place in Chicago, dolls can get beauty treatment and look for new outfit through America Girl Collection and it also offers space for children and parents joining and spending time together Rowland also took care of her customers by some ways such as opening a “hospital” for broken dolls Here, they are dressed in hospital gowns and wristbands, then toy owners can view x-rays, eye charts and other medical equipment Each of the dolls represents an era of American history which parents could buy historically accurate accessories, clothing outfits and furniture for the dolls along with outfits for their children The 18-inch dolls with a book cost $90 and with accessories, including $65 dresses for the doll’s owner, the total can exceed $1,000 1.5 Some success of American Girl Brands On the first Christmas season, Pleasant Company sold $1.7 million worth of products Christmas orders piled up so fast one year that company vice presidents had to pack boxes in the warehouse to get products shipped in time In the second year, sales reached $7.5 million A Time magazine complemented company's success: "The genius behind American Girl's high-end products is that moms feel good about dropping a lot of cash on low-tech, wholesome American." By 1991, sales had grown to $77 million thanks to word of mouth In 1993 Pleasant Company was listed among Advertising Age's Marketing 100, the "'best and brightest' marketers in America." demonstrating the company's early and impressive success thanks to Rowland and her creative and brand new vision Working Woman put Rowland on its list of the top 50 women business owners for six years in a row, from 1993 to 1998 Obviously, the advent of play and learn products have attracted pleasant attentions of parents helping American Girl Brand’s operating income increase 2% to $98.5 million in 2007 Basic theories related to the case 2.1 The Wheel of Consumer Analysis: Pricing Strategy Issues In this case, we will concentrate on some important relationships among consumer affect and cognitive, consumer behavior and consumer environment because they involve in the price factor in marketing mix As you can see from the figure below, these three factors have a reciprocal system which illustrates the relationship between them By analyzing these factors and their relationship, we can get the final result of pricing strategy 10 Exhibit 2.1 The wheel of consumer analysis: Pricing Strategy Issues Exhibit 2.2 Conceptual Model of Cognitive Processing of Price information  Price Environment In the environment, price is usually a sign, a tag, a few symbols on a package or a few words spoken on TV, radio or by a salesperson in a store or on the phone The price variable may also include an external reference price An external reference price is an explicit comparison of the stated price with another price in ads, catalog listings, price guides, shopping tags and store displays or sales presentations External reference price is used to enhance the attractiveness of the stated price In this case, a stated price of an American doll at $90 may be compared with a stated price of a doll at retail stores at less than $40 (through industry sources) 35 offering its unique operating system, which is similar to the historical values that American Girls Brand has created for its dolls Another similarity between iPhone and American doll lies in product promotion strategy Both types of products are not heavily invested in marketing, mainly through word of mouth In other words, customers will realize that they receive a lot of value when experiencing these products and will recommend them to their friends, relatives or even children as their top priority Apple’s background Based on Rivas (2018), Apple Inc (formerly Apple Computer, Inc.) is an American multinational technology company headquartered in Cupertino, California, USA It was founded by Steve Jobs, Steve Wozniak, and Ronald Wayne in April 1976 The company specializes in designs, develops, and sells consumer electronics, computer software, and online services Apple was also the first successful personal computer company and the popularizer of the graphical user interface It is considered one of the Big Four technology companies, alongside Amazon, Google, and Facebook The product lines The company's hardware products include the iPhone smartphone, the iPad tablet computer, the Mac personal computer, the iPod portable media player, the Apple Watch smartwatch, the Apple TV digital media player, the AirPods wireless earbuds and the HomePod smart speaker Apple's software includes macOS, iOS, iPadOS, watchOS, and tvOS operating systems, the iTunes media player, the Safari web browser, the Shazam acoustic fingerprint utility, and the iLife and iWork creativity and productivity suites, as well as professional applications like Final Cut Pro, Logic Pro, and Xcode Its online services include the iTunes Store, the iOS App Store, Mac App Store, Apple Music, Apple TV+, iMessage, and iCloud Other services include Apple Store, Genius Bar, AppleCare, Apple Pay, Apple Pay Cash, and Apple Card iPhone line 2007: iPhone 2G 36 2008: iPhone 3G 2009: iPhone 3GS 2010: iPhone 2011: iPhone 4s 2012: iPhone 2013: iPhone 5s and 5c 2014: iPhone 6/6 Plus 2015: iPhone 6s/ 6s Plus 2016: iPhone SE, iPhone 7/7 Plus 2017: iPhone 8/8 Plus, iPhone X 2018: iPhone Xs/ Xs Max/ Xr 2019: iPhone 11 Vietnam market In Vietnam – a country with GPD per capital (2018) is just less than US $2000, it seems to be quite odd that Apple, along with other technology companies are registering double digit growth for many years Nowadays, purchasing Apple’s products (especially iPhones and iPads) are getting more and more familiar with Vietnamese consumers However, Apple has not officially entered in Vietnam market They have made partnerships with some typical distributors such as FPT and Mobile World Specifically, FPT and Mobile World became the authorized distributors of Apple in 2013 and 2014 respectively In this example, our group will only focus on analyzing iPhone products to clarify the relevant information An iPhone product, which costs more than twice average monthly Vietnamese salary, used to be thought to be very difficult to get competitive advantage in Vietnam’s smartphone market However, through the time, iPhone has gradually demonstrated their status as a “must-have” item for Vietnamese 37 people, which can be used as an indicator of confidence, wealth and ultimacy with friends and colleagues Marketing 4P of iPhone  iPhone Product Strategy iPhones are unveiled on a annual basis, which supersedes the previous ones Currently it has iPhone 11 and iPhone SE (available in Vietnam on April 23), which was preceded by iPhone X, iPhone XS and other trailing versions Although each year new products, which means that customers have to pay a larger amount of money for new lines of iPhone, but the lesser price of older product attracts a different segment of customers than the newer ones, focus more on technical specifications  The IOS operating system The first quality which iPhone brings to users is a unique operating system – IOS It is the most popular operating system platform in the world of mobile application development IOS provides users with a lot of advantages such as easy access to use interface, more security, innovation and lasted technology globally used,…  Processing speed It is running at better speed than any of its present competitors, promising a flexible working environment and light speed multitasking  Innovative apps Innovative apps in the Apple store, are mostly the first movers, copied afterwards by other brands, according to both the apple techies and consumers Moreover, the Apple store has also a number of apps than the Google play store which is considered as a compliment for the large developer network which Iphone has Many apps that are available can be linked with a MacBook, and hence, with this strategy, Apple acts as a hook for its all other products 38 Compared to the iPhone XS, the iPhone 11 is powered by an A13 Bionic chip, which speeds up the processing of artificial intelligence-related tasks  iPhone Price/Pricing Strategy  Premium price In terms of its uniqueness, quality and status, Apple iPhones follow price premium price strategy A premium pricing strategy can be understood as setting the price of a product higher than similar products Premium price strategy also has another name which is called “skimming price” As a result of premium price strategy, iPhone set a relatively high price when launching a new model and cut a little bit amount for prices for these products if they prepare to launch a new following model This price is gladly accepted by the target segment (premium target), as these are very loyal consumers  iPhone Place/ Distribution Strategy iPhone has a strong distribution and place strategy as a part of its marketing mix In Vietnam, some of them are as below:  Distributors/ Retailers Few high-class stores such as the Mobile World, FPT Shop or CellphoneS also place iPhones with other mobile phones These stores are distributed the iPhone through a carrying or forwarding agents Buying from these stores is equally good, as these are premium stores in themselves They purchase from distributors rather than company itself  Online iPhone as well as other Apple products are available, on many sites, like Tiki On the other hand, Vietnamese customers can buy iPhone through foreign website 39 such as Amazon Company’s website also provides the service of fining nearest locator  Second Hand Market A huge market is present for Apple’s iPhone second hand mobile sets, for their durability and the status symbol attached to it Lazada, Shopee or even Facebook are the sites dealing largely in this second-hand segment iPhone 11 is on sale at The gioi di dong  iPhone Promotion/ Advertising Strategy iPhone has created a unique position in the market, with its innumerous differentiating factors Its new models always have a new slogan iPhone 11 said ‘Just the right amount of everything’ Such position itself, promotes the brand Its ads never compete with the competitors, but show how the world is changing with each of iPhone for its tech savvy customers In other words, through experiencing iPhones, customers themselves pass these values to others Launch events are very dramatic for iPhones The newly launched wireless charging feature, and all such technologies, get people in the awe Social media, youtube etc are some platforms highly utilized by the iPhone, to talk about uniqueness of features, also used by tech gurus for spec comparisons, etc Biggest ones are second hand sales offer Other being knowledgeable sales staff and point of sale advertisements Thus, with its unique value proposition, iPhone, it sets a standard in the product and has no close competitor as of now, reason being a vast loyal customer base Hence this concludes the iPhone marketing mix 40 An Apple launch event  No discounts Apple does not offer discounts on any of its product since it will lead to either brand dilution or loss of focus from premium category Although selling stores and online stores such as Thegioididong or FPT Shop keep coming with discounted price, they only this once a new line of iPhone is introduced Also, Apple iPhone follows similar pricing policy across all markets Despite the stiff competition in smartphone industry in the market, Apple iPhone mostly compete with its rivals by following a cost-effective operation strategy, with minimal cost spent on manufacturing and maximum on R&D In addition, smartphone shops also enable customers to experience iPhones directly at sites before making purchase decisions iPhone Net Revenue 41 Currently, a new model of iPhone – iPhone 11 was released in the market Statistics released by Google on 9/9/2019 showed that iPhone 11 was most sought in the world by Vietnamese internet users According to data from Google Trends, the number of Google searches for iPhone 11 by Vietnamese netizens exceeded 100,000 on Monday 9/9/2019 - the day iphone 11 announced released It became the second most-searched keyword in Vietnam at that time Moreover, the most popular searched keywords were "the price of iPhone 11", "iPhone 11 Pro", "iPhone 11 launch event," in Vietnamese Apple saw the biggest decline among all brands from July in 2018 Currently, Data from the electronics chain FPT shows that customers have deposited 12,300 iPhone 11 models, 2.5 times higher than last year's iPhone XR, XS and XS Max According to the Mobile World, customers have deposited 6,000 new iPhone 11 models, triple the amount of last year's iPhone X Orders Iphone 11 officially reached a new peak in Vietnam, with the total of these three major chains surpassing 20,000 devices, higher than 2018 Despite being an official distributor of Apple products in Vietnam, Apple Vietnam accounts for only about 50-60% of total Apple product consumption in this country due to the unofficial accession of Apple products Apple bring Apple's market share in Vietnam dropped to 5.6% in September, the lowest level in 2018, with buyers 42 seemingly waiting for new iPhone 11 models, according to market research company reports GfK3 Figure: Market share for smartphones with price from 10 to 15 million VND at Vietnam Others Source: Zing News In segment 10-15 million VND, with just the iPhone Plus 32GB, the company already has a 54.3% market share This is a number only an iPhone can Read more at: https://english.vov.vn/economy/iphone-11-orders-double-that-of-iphone-x-in- vietnam-405647.vov 43 Source: Statista.com In terms of global revenue, starting from late 2007, IPhone’s revenue has gradually increased year after year Considering the beginning of the year – quarter till the end of the year – quarter 4, IPhone’s revenue seems to reach its peak in the first quarter and then starts to show the decrease in the following months which belonged to the second and third quarter and then reversely gain increase in the last quarter In general, IPhone’s revenue has significantly increased since its launch of the first product in the end of 2007 However, due to the influence of CoV-19 outbreak in 2020, the revenue has sharply decreased compared to previous years in the same quarter In short, Apple iPhone is relatively more expensive than other smartphones from other brands, such as Samsung or Huawei for a couple of reasons First, Apple made considerable investment on research and development of their smartphones Particularly, apart from its unique operating system, Apple designers and engineers also focus on other software and hardware to control the entire user experience with extremely useful features such as Siri On the other hand, some people would like to seek new experiences such as a new search engine or a new music application, they 44 have come to the iPhone to satisfy their desires In addition, owning an iPhone also helps improve their individuality in the eyes of the people around them This contributes greatly to high price structure Another reason why Apple iPhone is still gaining popularity among people despite its expensive price is that there are dozens of metals that must be sourced from every corner of the globe, manufactured at scale by hand, such as gyroscopes, accelerometers, multitouch sensors This helps the iPhone receive a great deal of endorsements in many countries across the globe because they think that they made a small contribution to the formation of those iPhones Conclusion Overall, American Girls Brand is a famous and long-standing doll brand It is the historical values and useful lessons in the modern world that help dolls make differences as opposed to other brands However, American dolls' sales have plummeted in recent years due to the popularity of Barbie dolls among female teenagers With many forms of advertising and sales with eye-catching design, Barbie dolls have gradually attracted young people more than American dolls Our team started with a summary of the main points of the case study and addressed the theories that were applied to case study These theories include the explanations of The Pivotal Role of Price in Marketing Exchanges, Conceptual Model of Cognitive Processing of Price Information for customers to make purchase decisions and steps model for pricing process We then explain why the price structure of American dolls is relatively high compared to other brands and propose some solutions to increase sales and profits for such items Our group ended the article by referring to Apple iPhone as a similar example for American Girls Brand Question and Answer Question 1: Do you think premium pricing strategy of American Girl Brand can apply now when more and more people change from playing dolls into internet game, If yes, give us some reasons Our group thinks the current premium pricing strategy of AGB is still reasonable because of some following reasons Firstly, American Girl Brand's customer segment is focused on boomer parents who really want to bring their kids 45 high-value and educational toys, help them explore and discover new things Meanwhile, the switch to playing games is a subjective hobby of a child, and certainly no parents want their children to so Therefore, parents are still willing to pay a high price in accordance with American Girl Brand's premium price strategy to buy their children the best toys to replace electronic games if their children are really addictive to game To deeply clarify, the pricing strategy of AGB focuses on parents who are the objective customers to pay for products, not children The increase in internet usage is not involved in parents’ purchase as it costs nothing and children can easily get access to the internet so parents not have to think of the premium pricing strategy here, once they determine to buy tangible products, then their price affect and cognition would be influenced Secondly, according to Sex Differences in the Brain: From Genes to Behavior (2007), the girls prefer playing dolls and kitchen sets and to have fantasy play which maintain the relationships factor and tend to play games less than boys Therefore, the change from playing dolls into internet game will have more significant impacts on boys than girls Meanwhile, American Girl Brand’s customer segment is focusing on girls whose age from to 12 As a result, this pricing strategy is still good and still applicable According to our discussion, American Girl Brand’s sales are now decreasing because of some reasons such as American Girl Brand has not invested in marketing costs and currently there are quite good newbies on the market so we think American Girl Brand needs to change its marketing strategy and products rather than price strategy Question 2: Based on your analysis about costs, which one you think that customers prefer, American dolls or dolls purchased at retail stores? And why? Based on the theory of Consumer Costs shown in exhibit 2.3 and the analysis of question 2, we can recognize that when paired one of the costs with whatever value or utility the products offer, theses cost are a convenient way to consider the meaning of price to the consumer It is also understood as the price which consumers are willing to pay Therefore, based on these costs, it is quite hard for consumers to choose which one is better because we not consider value of each doll 46 Based on our analysis, money and time costs are more expensive when buying American dolls than regular dolls Therefore, if customers are price sensitive and have limited time, dolls at retail stores are their top priority In contrast, cognitive and behavior costs are more expensive if customers buy dolls at retail stores instead of American dolls Therefore, if customers who have little shopping skill, find it difficult to make shopping decisions or not want to spend a lot of energy on buying dolls, then the option to buy an American doll is the best Finally, depending on the customer group and the consumer costs they concern, each can have their own suitable choices References  Website: American Girl’s website Read more at: Americangirl.com Insider Read more at: https://www.insider.com/ MBA Skool Read more at: https://www.mbaskool.com/ Reference for Business Read more at: https://www.referenceforbusiness.com/  Documents: "Apple Announces The iPhone" MacRumors January 9, 2007 Retrieved May 24, 2017 47 "Apple passes Microsoft to be biggest tech company" BBC News May 27, 2010 Archived from the original on May 29, 2010 Retrieved May 29, 2010 Borghini, S., Diamond, N., Kozinets, R V., McGrath, M A., Muniz Jr, A M., & Sherry Jr, J F (2009) Why are themed brandstores so powerful? Retail brand ideology at American Girl Place Journal of Retailing, 85(3), 363-375 Diamond, N., Sherry Jr, J F., Muñiz Jr, A M., McGrath, M A., Kozinets, R V., & Borghini, S (2009) American Girl and the brand gestalt: Closing the loop on sociocultural branding research Journal of Marketing, 73(3), 118-134 Dudley-Nicholson, Jennifer (October 24, 2012) "Apple unveils new iPad Mini, updated iPad and new Macs" Herald Sun Etherington, Darrell (January 27, 2014) "Apple's 51M iPhones, 26M iPads And 4.8M Macs In Q1 2014 Set A Record, But Growth Slows" TechCrunch AOL Retrieved June 30, 2017 Indvik, Lauren (May 9, 2011) "Apple Now World's Most Valuable Brand" Mashable Retrieved October 7, 2011 Kozinets, R V., Jr Sherry, J F., Borghini, S., Mcgrath, M A., Diamond, N., & Muniz, A J (2005) American Girl: the family brand In Association for Consumer Research Conference Association for Consumer Research Olson, J C (2005) Consumer behavior and marketing strategy: J Paul Peter, Jerry C Olson McGraw-Hill Phelan, David "Clips, The Coolest, Most Fun Thing Apple Has Done In A Long While" Forbes Retrieved April 7, 2017 Quart, A (2003) Branding: The Buying and Selling of Teenagers Rivas, Teresa "Ranking The Big Four Tech Stocks: Google Is No 1, Apple Comes In Last" www.barrons.com Archived from the original on December 28, 2018 Retrieved December 27, 2018 Schor, J (2004) Born to buy: The commercialized child and the new consumer culture Simon and Schuster 48 Rivas, Teresa "Ranking The Big Four Tech Stocks: Google Is No 1, Apple Comes In Last" www.barrons.com Archived from the original on December 28, 2018 Retrieved December 27, 2018 Ritholtz, Barry (October 31, 2017) "The Big Four of Technology" Bloomberg L.P Archived from the original on June 26, 2019 Retrieved December 27, 2018 "What is GAFA (the Big Four)? - Definition from WhatIs.com" WhatIs.com Retrieved March 5, 2020 Becker, J B., Berkley, K J., Geary, N., Hampson, E., Herman, J P., & Young, E (Eds.) (2007) Sex differences in the brain: from genes to behavior Oxford university press, 275 – 276 LIST OF STUDENTS – Group 05 No Full Name ID student Class Batch Phương Đoàn Xuân Ái 31171022222 IBC03 K43 Nguyễn Mai Phương 31161022533 IBC01 K42 49 Phạm Hoàng Tuấn 31171023634 IBC03 K43 Nguyễn Thành Danh 31171020955 IBC03 K43 Thái Đại Phúc 31171021354 IBC03 K43 ... Background of American Girl Brands .3 1.2 The story of the American Girl Brands 1.3 The American Girls Collection .5 1.4 The strategy of the American Girl Brands ... lots of dolls from different brands, so customers may be confused between options This gives American Girl Brands an advantage over retail stores because American Girl Brands opens a separate store... manufactured by American Girl Brands Besides, customers also not have to think of suitable dresses for dolls if they decide to buy an American doll Accordingly, American Girl Brands solved the