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Companies often crimp profits by using discounts to attract price-sensitive customers and by failing to give high-end customers reasons to spend more. A multitiered offering can use a stripped-down product (the "Good" option) to attract new customers, the existing product ("Better") to keep current customers happy, and a feature-laden premium version ("Best") to increase spending by customers who want more. There's nothing new about this concept, of course--think of the different grades of fuel at any gas station and the varying packages marketed by cable TV providers, to name just two examples--yet many companies and industries have failed to embrace it. The author, a consultant who has helped many organizations adopt G-B-B pricing, presents a step-by-step guide to devising, testing, and launching the strategy. Key steps include identifying "fence" attributes that will prevent current customers from trading down from the existing offering; carefully choosing features and names to create clear differentiation and value; and setting prices using feedback from in-house experts and, when possible, drawing on conjoint analysis and other market research.

In the fall of 2016, the Pleasant Ridge Habitat for Humanity Second Chance Home Supply (SCHS) store added an assistant manager in order to expand the hours the store was open and increase the store's presence on social media. The store, which sold donated building materials and some household items, was operated to generate funds for the organization's core mission of building homes for those in need in the local area. The case is set in July of 2017. The organization's executive director and the store's manager and assistant manager have reviewed the store's financial performance and discovered that both the store's sales and contribution to the organization have declined over the past year despite being open significantly longer hours. Students are placed in the shoes of the store's managers and must wrestle with why sales and contribution have declined and what they should do in response.

Student spreadsheet for case NA0554

In August 2016, Aron West, owner and creative director of board game publisher Elzra, was deciding whether or not to part ways with Impressions, his distributor. West had a hit product with his game Catacombs and its spinoff games and had recently concluded a very successful crowdfunding campaign. West was starting to believe that he was able to move on from Impressions, which specialized in small publishers with few products. Impressions acted as an extra layer of distribution between major distributors and small companies that may not have been worth the larger distributors' time. For their services, Impressions took 18% of the end price of the product, roughly equal to Elzra's share. The decision was also relevant because Elzra and Aron West had experienced some difficulty with which ales Impressions had a legitimate claim to, and the lack of flexibility exhibited by Impressions' president, Aldo Ghiozzi. West had been preparing for life after Impressions by training his operations manager to handle some of the distribution tasks, forging relationships with larger distributors, and developing company infrastructure. On one hand, Impressions was demanding, expensive, and Elzra may have outgrown it. On the other hand, working with Impressions, according to West, made everything easy.

The case highlights a digital advertising campaign of a mobile app in India named "Highway Delite" using Google AdWords. The case provides the results of a 3-week AdWords campaign with 4-sub-campaigns (Brand Awareness, Enroute Conveniences, Highway Safety, and Offbeat Attractions). CPC and CTR computations are examined to gauge the effectiveness of the campaign in achieving Highway Delite's campaign goals. The case also emphasizes the challenges of brand building that extends beyond a short-term ad campaign.

Purveyors of high-end goods who want to increase sales to men probably should start hiring more Tom Bradys. New research from Europe shows that male shoppers' spending more than doubled when a tall, athletic-looking male employee was present in the store. Why? It may have something to do with jockeying for status.

Serial social entrepreneur Andreas Souvaliotis is looking at new ways to achieve his lifelong mission: to improve the health and wellness of his Canadian compatriots. His previous venture, Green Rewards, demonstrated the power of loyalty rewards to promote environmentally-conscious purchases. Andreas is now looking to impact non-commercial habits like walking more, eating less, as well as education. The health and wellness market is growing but hyper competitive, with more than 150,000 apps available on Google Play or on the App Store. B2B or B2C? Fitness, nutrition or mindfulness? Fee, freemium or free? Stand-alone or in collaboration? These are the key questions students must address to help Andreas and his team achieve their goal - and make a profit.

In January 2018, the Philippine cement industry changed forever with the entry of the 100-per-cent Filipino-owned cement manufacturing company Big Boss Cement Inc. (BBCI). When the company decided to set up shop with a cheaper, eco-friendly manufacturing process that promised less carbon emission, competition became fierce. BBCI planned to expand its capacity to take advantage of a growth in both infrastructure projects and local demand for cement, but it had to analyze the macro-environmental and competitive forces relevant in the context of its entry in the cement industry. It had to ascertain whether it could differentiate its product based solely on ecological appeal. BBCI also had to ensure that its environmentally-friendly brand promise would work, and anticipate potential obstacles to its success and determine how to counter these hurdles.

One job of product managers, marketers, strategic planners, and other corporate executives is to predict what the demand will be for a new product. This task is easier for certain classes of new products than for others. For new consumer package goods, for instance, one can look at past product rollouts, one can look at similar products currently in the marketplace, or one can do test markets-selling the product in a small section of the country to assess consumer acceptance. Quite often, for new products that represent incremental variations or improvements over existing products, marketers do a pretty good job of understanding how that product will be adopted in the marketplace. This is not to say that managers always get it right, as has been made evidently clear in the case of New Coke, dry beers, and the Edsel. However, more often than not, managers of incremental new products predict demand within the right order of magnitude.

By late 2017, Brazilian retailer Magazine Luiza's CEO was convinced that the company could significantly grow sales and accomplish its aspirations of digital transformation. What was unclear in his mind was whether he should act as a tech company and grow as fast as possible (e.g., high double digits) or be more conservative and grow sales at a financially healthy rate, like traditional retailers did (e.g., single digits). The primary way e-retailing companies achieved these abnormally high rates of growth was through lowering prices and foregoing profitability. Historically, mass retailing had razor-thin margins. It was thus unlikely that he could have it both ways: grow fast and be profitable. Should Trajano opt for more aggressive growth or proceed more conservatively?

LendingClub was founded in 2006 as an alternative, peer-to-eer lending model to connect individual borrowers to individual investor-lenders through an online platform. Since 2014 the company has worked with institutional investors at scale. While the company assigns grades and sub-grades to each application using its own risk evaluation model, it also makes detailed data on each loan applications available to both kinds of investors for their own analyses. The case follows MBA graduate Emily Figel as she researches LendingClub as a potential investment vehicle for the small wealth management firm she will join in the fall. Using LendingClub's historical data, she learns the fundamentals of predictive analytics to see whether she can build models to predict whether a borrower will repay or, ultimately, default on the obligation. This first case (A) presents students will relevant, detailed data about how the LendingClub model works. This includes LendingClub's business model, the grading of loans, the unique opportunities and risks. It also follows Figel as she dives into the data to use it to build a model. In the B and C cases, Figel explores several specific techniques for training models. Technical topics include: understanding the data, data preparation, balanced and unbalanced data sets, constructing training-validation-holdout sets, cross-validation, predictions and target leakage.

This case builds directly on the case LendingClub (A). In this case students follow Emily Figel as she builds two tree-based models using historical LendingClub data to predict, with some probability, whether borrower will repay or default on his loan. Technical topics include: (1) Decision trees as a modelling technique, overfitting and induction bias, model validation; (2) Random forest as an ensemble-style modelling technique, bootstrapping, random feature selection; and (3) Log loss as a metric for evaluating and comparing models, feature impact.

This case builds directly on the cases LendingClub (A) and (B). In this case students follow Emily Figel as she builds an even more sophisticated model using the gradient boosted tree method to predict, with some probability, whether a borrower would repay or default on his loan. Having now built three models, Figel compares them to determine which model is most effective at classifying borrowers correctly then uses that model to determine how to invest in a portfolio of loans. Students explore the relationship between her model's confusion matrix, which organizes the model's correct and incorrect classifications, the cutoff point on the curve that matches true positives and true negatives, and the payoff matrix Figel constructs. Students can then follow the link directly from the model Figel builds to her specific investment decisions. Technical topics include: (1) Gradient boosted trees as a modelling technique; hyperparameters and learning rate; model validation; and (2) Evaluating model output; ROC curve, cutoff point, confusion matrix; payoff matrix as a framework for utilizing the model to compare investment opportunities.

RONA Inc. (RONA), a Canadian giant in home improvement retail, received an unsolicited offer of CA$1.76 billion from Lowe’s Companies, Inc., (Lowe’s) in 2012. Lowe’s, a U.S. company, was already operating in the Canadian market through a subsidiary, and its goal in acquiring RONA was to rapidly upscale its operations. RONA’s board of directors declined the offer. Lowe’s came back in February 2016 with a second offer worth $3.2 billion. Negotiations followed, the deal was completed in March 2016, and RONA officially became part of Lowe’s Canada in May 2016. One year later, the debate re-ignited. In October 2017, Lowe’s Canada’s president stated that he hoped to demonstrate within five years that this was the best option for RONA. Was it?

In March 2017, Inderjit Baboota, head of Sales and Marketing at Genspec Lifesciences, was preparing to meet with his team to craft the brand launch strategy of the company’s product CQ Max. Although natural therapy was recognized in India for various ailments, few scientific formulations were available. Turmeric was used in various forms in India for the treatment and prevention of a variety of conditions due to its main active ingredient, curcumin, but there was no curcumin-based formulation readily available in the Indian market. In response to this opportunity, CQ Max, the first nanocurcumin product in India, was developed and pilot tested. Though the product played a role in the treatment of a variety of conditions, it primary target market was cancer patients. Now Baboota had to determine whether to position CQ Max as a prescription-based product or an over-the-counter product. He also faced the challenge of an underdeveloped market for cancer wellness products in India.

RONA Inc. (RONA), a Canadian giant in home improvement retail, received an unsolicited offer of CA$1.76 billion from Lowe's Companies, Inc., (Lowe's) in 2012. Lowe's, a U.S. company, was already operating in the Canadian market through a subsidiary, and its goal in acquiring RONA was to rapidly upscale its operations. RONA's board of directors declined the offer. Lowe's came back in February 2016 with a second offer worth $3.2 billion. Negotiations followed, the deal was completed in March 2016, and RONA officially became part of Lowe's Canada in May 2016. One year later, the debate re-ignited. In October 2017, Lowe's Canada's president stated that he hoped to demonstrate within five years that this was the best option for RONA. Was it?

In the summer of 2018 in the United States, Wendy's faced an important decision related to its international markets. The company had a small international presence; of its 6,537 restaurants worldwide, only 637 restaurants were located in international markets. The company was faced with a saturated and stagnating U.S. market and fierce competition from a number of fast food rivals, including McDonald's Corporation, Burger King Corporation, and Carl's Jr. Restaurants LLC, and the surest path to growth seemed to be an expansion into foreign markets, where fast food was still growing. Wendy's chief executive officer needed to determine which international market(s) to target and how many restaurants to open in each international market.

In March 2017, Inderjit Baboota, head of Sales and Marketing at Genspec Lifesciences, was preparing to meet with his team to craft the brand launch strategy of the company's product CQ Max. Although natural therapy was recognized in India for various ailments, few scientific formulations were available. Turmeric was used in various forms in India for the treatment and prevention of a variety of conditions due to its main active ingredient, curcumin, but there was no curcumin-based formulation readily available in the Indian market. In response to this opportunity, CQ Max, the first nanocurcumin product in India, was developed and pilot tested. Though the product played a role in the treatment of a variety of conditions, it primary target market was cancer patients. Now Baboota had to determine whether to position CQ Max as a prescription-based product or an over-the-counter product. He also faced the challenge of an underdeveloped market for cancer wellness products in India.

In the summer of 2018 in the United States, Wendy’s faced an important decision related to its international markets. The company had a small international presence; of its 6,537 restaurants worldwide, only 637 restaurants were located in international markets. The company was faced with a saturated and stagnating U.S. market and fierce competition from a number of fast food rivals, including McDonald’s Corporation, Burger King Corporation, and Carl’s Jr. Restaurants LLC, and the surest path to growth seemed to be an expansion into foreign markets, where fast food was still growing. Wendy’s chief executive officer needed to determine which international market(s) to target and how many restaurants to open in each international market.