Drinking More and More Soda?

During the economic recession, sales on sodas increased while those of bottled water, juices, and other soft drinks went down. In 2009 soda sales went up by 2.5% while sales in drinkable dairy products went down by 15%. The most popular brands that have increased in consumption have been variations of Dr. Pepper and Coca Cola. The different flavors provided by each brand have satisfied the desires of consumers. A similar situation has occurred to the events I described in my previous post about the potato chips. The increase in sales has occurred due to the affordability of the sodas. Besides the affordability, just like with the potato chips, the variety of flavors contributes to the increase of popularity of different soda brands. It could also be assumed that the sales of potato chips and soda increasing can be related and the two could maybe be complements. The increase in the soda industry really isn’t a big surprise. Advertisement and pricing have contributed to its increase in consumption greatly.

Netflix Dwindles

Netflix has become one of the most popular online movie companies in the nation throughout the last few years. Up until July of this year (2011), Netflix had kept their customers happy relativelty complain-free. However, their recent changes have led to a spike in discontent among millions of Netflix users. A Twitter user named Steve Harrison expressed his concern: "Netflix does more flip-flopping than a fish on a hot dock." Their first mistake was discontinuing free streaming video services to households that paid for its DVD-by-mail service. This alone raised monthly prices for some customers by over 60%. At the same time as this increase of price, quality of service did not change or improve. Why would a customer be willing to pay more for the same service? Two months later in September, Netflix announced another major change. It would be splitting its DVD and streaming services into two companies: Netflix and Qwikster. Now customers would have to deal with two companies rather than one when managing queues and paying bills. Seeing how upset customers were with the new addition of Qwikster and watching as stocks dropped by over 60%, Netflix decided to revoke their original decision and break off ties with Qwikster. Some customers approved of the decision, while others were still irritated with how many new decisions Netflix has made and how much the company has changed.  Kyle Wegner, a 26-year-old in Fayetteville, Arkansas, said he was going to quit using the company until he heard about the 180-degree-turn. Another less satisfied investor stated: "They're being really reactionary at this point, and that's not very comforting." Netflix needs to make some descisions fast and stick with them or they could loose millions of customers in only weeks.

-Morgan C. 

In and Out New Decisions

One really successful business that has flourished recently is the well-known food chain "In and Out Burger." One reason for their success may include their decision to expand and increase their number of locations, but I see the main reason as their decision to keep prices low. A regular cheeseburger at In and Out costs $2.50, while many other popular restaurant chains price their burgers anywhere from six to eight dollars. Keeping the price low increases demand and decreases the competition with these other chains. Unfortunately, they may not ultimately decide they need to increases prices in order to reach equilibrium. As many know, In and Out has expanded to Midway Road and the grand opening was just a few days ago. If you have been in or around this location since the opening, you most likely have noticed the numbers of both workers and customers are excessive. Right now and for the next few weeks business will be better than ever because people have been anticipating and building up excitement for the opening. However, once the initial boom of business dies down In and Out will have some decisions to make. They will have to balance out the supply of workers with the demand of the customers.  They will have to begin calculating their marginal production of labor and marginal production per worker. In and Out still has some work to do, but they are doing a great job of satisfying their customers so far.
-Morgan C.

Cell Phones cause change

The use of cell phones in the recent years has been rapidly increasing. The big companies like AT&T and Verizon have had to make many different decisions on rates and plans to accommodate this change. The use of land lines and long distance calls is what first dropped in these companies so many thought they would enter a recession, but what countered this was the use of the wireless cell phone. The said in the article that it was a once elastic market, but now since the change really increased (now increases at same rate) that it could be considered inelastic for people. The amount of wireless calls jumped from 3 billion hours in 2000 to 36 billion hours in 2008. The past year the amount of calls has dropped throughout carriers, this raises a question will the companies rises their prices for phones and service, or can they compensate for them by their data prices. In the next couple of years we will see what their decisions seem to be.

http://tech.fortune.cnn.com/2011/11/04/telecoms-big-hang-up/?iid=HP_River.

The week Google really 'messed up'

A harsh report from CNN Tech this week announced that Google has once again produced "another disaster" with its releasing of the Gmail app for iOS. The company posted "The iOS app we launched today contained a bug with notifications. We have pulled the app to fix the problem. Sorry we messed up." This is not very comforting to see from one of the largest internet technology companies. The real problem is that this is just one of a long list of things that Google has failed to produce properly. Only two weeks prior, an update to Google Reader was produced and pulled within the same hour. These recent botches are digging at Google's image as an innovative company which brings into question the elasticity of its customers. If Google keeps releasing disappointing products, people may stop being excited about the company as a whole. How long will costumers trust Google and its products? MG Siegler, a tech pundit, wrote that "They release something, and I no longer have any faith that it's going to be any good." He went on to explain that Google does not have the reputation and consumer inelasticity as companies like Apple has because of the trustworthiness, or lack there of, in their products. Recently, Google has been marked by its attempt at Google+ and Google Latitude, which have both been seen as miserable efforts to compete with Facebook. Google is trying to create substitutes for popular products but it is backfiring on them because of the elasticity of their products. Customers don't care about the Google name on the product, if the price keeps going up on the products that don't work properly, consumers will look for other options. Siegler continued with, "When you release sub-par products, you look sub-par yourself. Customers don't care what platform it's on, and don't care what politics are going on behind the scenes at the company. If you release s---, you look like s---. It's much better to release nothing at all." At the moment, it is in one's self-interest to stay away from Google products until they can prove themselves to put out trustworthy products at reasonable prices, but until then, customers demand for Google products will remain very elastic.

Wal-Mart to leak its own Black Friday deals

According to a CNNMoney article, Wal-Mart is giving shoppers an early look at its Black Friday deals for the first time this year; giving them a head start on competitors. Wal-Mart will offer those customers who sign up at Walmart.com or Facebook.com/Walmart an early preview of its Black Friday deals on an assortment of electronics, toys, household items and clothing. This is a clever move to figure out who the retail giant's core customers are and to leap ahead of the competing stores like Target, Costco, and Dollar General. By knowing the prices of Black Friday deals first from Wal-Mart, some consumers might not even look anywhere else to buy. The retailer also said it would roll out "Super Saturday" sales at stores nationwide. On a specific Saturday in November, Wal-Mart will be offering their biggest sales of the year, except for one day: Black Friday. To further lure shoppers this season, the retailer announced a "Holiday Price Guarantee" last week. Wal-Mart will offer shoppers a refund on the difference if they find the same product they purchased at a Wal-Mart store advertised for a lower price elsewhere. Wal-Mart is doing all of this to increase demand for the holidays. Sales imply changes in price, which causes a movement along a demand curve therefore increasing the quantity demanded. Not only are they creating an increase in demand, they are creating incentive for customers to spend their Black Friday and shop for the holidays at Wal-Mart. Along with the sales, the retailer has promised layaway on purchases over $15, free shipping on most Walmart.com products, no interest on Wal-Mart credit card purchases if they are paid for in full within six months, and a 10-cent discount on each gallon of gas bought at participating Murphy USA or Wal-Mart stations. Wal-Mart is putting a lot of incentives out there for customers to feel like the store with the most benefits is Wal-Mart. Consumers will obviously have to look at the trade-offs while shopping around on Black Friday, but Wal-Mart, so far, has given the most desirable prices for their customers.

- Taylor E.

In this CNN article, the idea of extreme couponing is portrayed. It is said that on a good day Tiffany Ivanovsky walks out of the grocerystore with shopping bags full of food, having saved 80% to 90% of the bill. The mainstream of our society are oblivious that, If used in the correct way, coupons can save you a lot of money. Ivanovsky often gets food for free or even makes money on purchases. To do that, she uses multiple coupons or stacks manufacturer coupons on top of store coupons to get bigger discountsAnd when the coupons actually exceed the value of the item she is buying, she makes money. The total revenue for the company is actually in the negatives. The elasticity of demand for these goods are high due to the help of coupons. I know stores try to work at its most efficient level of production but with people like ivanovsky its makes the business operate inefficiently. The coupons were produced so the demand of consumers would raise producing profit, but it has seemed to back fire. Hopefully entrepreneur’s owners will notice what’s going on and gain human capital. They might need to put limits on how many coupons one person can use at a time. I personally think the coupons will still be ok though because it takes a lot of time and effort into figuring out how to save that much money on groceries but for business owners you can do a promotion that drives a lot of people into the store but at the end of it all that's not good for the company if a retailer goes out of business because they didn't manage their promotional money the right way --Tre Vance