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Strategic Movements March 2017

March 2017 Corporate, Pricing

$65 Transatlantic Flight?

Norwegian Air Shuttle has a June launch for $65 flights from Scotland to the East Coast U.S., which is great for budget travelers. How will British Airways, United Continental, Delta, and many other long leading airlines respond to this new competitive threat? Expect to see greater emphasis from established airlines on communicating their differential value proposition, and attracting higher-end customers while trying to balance low-end flyers with some rather odd offers. Will their message be clear? Will customers embrace the growth in flight classes? Personal Note:  I have.

HP Enterprise Caught in Legacy Business

HP Enterprise has reported flat earnings on sales of enterprise hardware, outsourcing services, and corporate data center hardware. Industry growth is in the cloud. Is Meg Whitman betting against the industry trend, or does she have something else up her sleeve?  Since she is also spinning our services to Computer Science Corporation, it looks like Meg is preparing to be the last company standing in an otherwise declining business. Is it time to milk the proverbial BCG cow, or is this preparation for a pivot?

Verizon and Price Wars

Verizon engages in a price war surrounding unlimited mobile data plans. Though it hurts to lose revenue as a business, it’s great to have competition as a customer. This is all a suspected response to T-Mobile and Sprint impact on market share, and pricing approach of AT&T. Verizon may slow downloads for heavy users, which are one-third of their customer base. Faster download ability for this segment could be a new revenue stream opportunity for Verizon.

Marathon Pharmaceuticals Sad—But Business Savvy—Move

Marathon Pharmaceuticals has priced deflazacort at $89,000 per year for U.S. Duchenne muscular dystrophy patients, 50 to 70 times the price they charge EU patients of the same disease. This is a similar pricing approach Valeant Pharmaceutical and Shkreli’s Turing Pharmaceutical implemented.  At some point, Americans have to acknowledge this isn’t a “bad actor” challenge, it is a FDA regulatory problem.

Healthier Hits Mainstream at Nestle’s

Nestle’s Nesquik saw share increases from 9.8% to 10.8% in U.S. chocolate-flavored powered drinks between 2013 and 2016 according to market researchers Euromonitor. Concurrently, Nesquik reduced surgar content. This, along with sales of reduced sugar Fruit Loops of Kellogg’s; indicate that even mainstream consumers are looking for healthier options.

Coca-Cola Variety Increase and Healthier Once Again

Coca-Cola’s sales of smaller packaged carbonated beverages grew 10% during the fourth quarter in the U.S.  Higher U.S. pricing and smaller packages drove revenue up 8% on volume growth of 1%. Coca-Cola also saw double-digit growth of Zero Sugar sales in Western Europe. These are good trends to be on: wider variety of packaging for wider variety of consumption use and sales. Healthier options for a western society that is trending towards “being your best self.” This indicates how innovation in an old company is not just possible it is required.

 



About the author

Tim J. Smith, PhD is the Managing Principal of Wiglaf Pricing, and an Adjunct Professor at DePaul University of Marketing and Economics. His most recent book is Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures.

Tim J. Smith, PhD
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