I just got back from Target and was surprised to see that Dawn Direct Foam has reduced the size of their bottle and kept the price the same. Instead of 250 pumps, you now only get 190 pumps. The price is roughly still the same $2.50. I went to Dawn's website and nothing addressed this issue. My first thought was, "I'm going to have to buy this product more often, so I should start looking around for a cheaper replacement."
In these tough economic times, Dawn made the decision to do a disservice to their customers by reducing the amount of the product it gives them in exchange for some cost savings. Cut costs when times are bad...sounds reasonable, right? Maybe, but will it help the company over the long term?
What else could have Dawn done to save or make more money? These lessons apply to many businesses. Let's look at what I'm teaching my students at Florida State College of Jacksonville. These notes come from Gary Armstrong and Philip Kotler in their text book titled Marketing, an Introduction.
First of all, Dawn is taking a cost based pricing approach instead of a value based pricing approach. They see the consumer pool as limited and shrinking instead of expanding. This product has the capability to expand their market rather than replace their current line of dawn dish soaps. We have a dishwasher in our house and try not to wash anything in the sink (because I'm lazy that way). However, we had a baby a year ago and I have to wash her bottles and sippy cups on a daily basis. We did not have dawn soap in the house before, but now we have the Dawn Direct Foam and love it (others do too). It is convenient and a real time saver. About a quarter of a squirt goes in the bottle and I can use the bottle brush to clean the bottle. So my advice to you and to Dawn - KNOW THE VALUE YOU BRING TO YOUR CUSTOMERS.
Second, they could have raised the price. Like I mentioned above, this is far superior to any dish soap on the market and we love it. We buy it about once a month and are not likely to buy anything else, because there is little that compares to it next to the shelves.
Third, if they were worried about price comparisons to products next to it on the shelves, they could work with Target to have it moved to another location in the store. Move it by the paper plates to position it as convenience. Move to to the baby isle to illustrate its worth to new parents.
Fourth, they could have expanded this line of the product. Sure, the Direct Foam expands their dish soap line, but why not deepen their Direct Foam line. Make it anti bacterial and put it next to the hand soap as a combination hand/dish soap. Put it in a stainless bottle and push the refills to be more environmentally friendly.
I hope you are starting to see you don't have to cut prices or disservice your customers when these economic times are bad. Take care of your customers and they will take care of you.
p.s. Follow the link to the Dawn Direct Foam website and they often have coupons.
I disagree with Dawn's pricing strategy for many reasons. I feel that Dawn is using a method called "Price Gouging." This happens when a company like Proctor and Gamble's Dawn Dishwashing Liquid, has control of the market. This is known as a Monopoly. Proctor and Gamble can price Dawn Dishwashing Liquid at a higher price, because they know that consumers would be willing to pay that price. Consumers would be overwhelmed by the pump on the bottle and the design. They will overlook the amount that's in the bottle because of the convenience of the foam and the pump. Consumers would not be paying for quantity, but they would be paying for quality. According to the 9th Edition of Marketing on page 263, it doesn't make since to use standard markups to set prices. This is because if any pricing method that ignores demand and competitor prices are not likely to lead to the bes price. Do consumers really want a foam pump. With these economic times, consumers are trying to save money. They are more likey to purchase a leading brand dishwashing liquid that does the same job. Also according to the 9th Edition of Marketing, page 260, states the consumers will use these same perceived valuses to evaluate a product's price.
ReplyDeleteI think that Proctor and Gamble sees the marketing pool as growing. Many consumers knows that Procotr and Gamble's Dawn Dishwashing Liquid "Takes greese right out of the way." Many consumers know when they want their dishes cleaned right, they choose dawn to cut out the greese on the dishes. I use Dawn for my dishwasher but not for handwashing. I use the cheapest dishwashing liquid because I know I will rarely use dishwashing liquid to was dishes by hand.