Target's release of the Lilly Pulitzer fashion line has been at the forefront of the retail news this week. We asked our CORe bloggers what they might have done differently if they were in Target's shoes prior to the launch. 

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This past week, Target planned on introducing a limited supply of the popular brand Lilly Pulitzer at discount prices online and in stores. What they didn’t plan on was the circus that would follow, as Black Friday-like lines started forming outside of stores the night before and their site nearly crashed before the items became available, delaying the start time. 

#LillyforTarget West Coast Head for home stuff not the clothes, racks were empty in 5 min. #LillyforTargetForHyenas pic.twitter.com/kI1eefciqR

— Loren Boyce (@amzbls) April 19, 2015

Based on my learnings of these concepts in CORe, if I were in Target’s shoes I would have tried to estimate demand better. Target should have known that when you lower the price of items, the quantity demanded increases because more people are willing to pay for the items at those prices.

When you lower the price of a $200 dress to $30, this is akin to adding lighter fluid to an already growing fire, with this collaboration. Now you include many more people whose (WTP was between $30-200), that now want to purchase the product.

Target wielded many classic strategies used to increase demand, such as advertising and decreasing prices of complements (clothing accessories) while increasing their availability. Because the alternatives (like the actual Lilly Pulitzer line) were more expensive, there was an increased demand for Target’s lower cost line of Lilly Pulitzer.

If I was Target, I would have done more than monitor social media to estimate demand. I would have sent an email survey to Target customers, Lilly Pulitzer customers, and other general consumers. This would have been a cost-effective way to gather a large scale data of consumer preferences. In Target’s defense, it’s difficult to assess demand since those items have never been sold before. In addition to the surveys, Target could have run a very small pre-promotion to the offering, to get some sort of sense of demand.

Target also could have raised the prices of the line, trying to find the revenue maximizing price, although this would be inconsistent with their brand of bringing shoppers “national-brand (or better!) quality for less (usually a lot less!)”.  

On a graph it would look like a low price, high quantity demanded, and low quantity supplied. Thus, producer surplus would be low and consumer surplus would be high. 

Further exacerbating the issue, some customers who bought items later put them for sale on Ebay.

Ebay auctions are a cross between an open outcry auction format and a Vickrey auction format, and by introducing competition among buyers this effectively reveals customer’s true willingness to pay for the items.

On Ebay, the items ended up selling for 3x the amount Target originally sold them for. This not only infuriates customers who just want to buy the items at the prices Target set, but also makes Target look bad as some customers take advantage of the situation and profit off Target’s low-priced offering. Surely this was not Target’s intent.

While many say the promotion was still successful for Target because so many people were talking about the brand, if Target had simply put more thought and time into assessing demand, they could have avoided the backlash by adding a few more items to the line to ensure items were available for a bit longer.

That way, people like my girlfriend who waited up until 2 AM ET and then went to bed and got up at 6 AM ET to looking to shop wouldn’t have been disappointed, met with only the dreaded “out of stock” sign on every page and no one to answer the customer service line, inundated with many other callers.

 

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There has been a lot of buzz in both the business world, and the general world, about Target’s new Lilly Pulitzer summer wear collection that sold out in minutes – if you want some entertainment watch videos of it on YouTube, people were going nuts cramming clothing into shopping carts as they pushed others out of the way.  

To me, it looked kind of like a scene from the Lion King…Circle of Life anyone?  (Pun intended).

      (source: http://a.dilcdn.com/bl/wp-content/uploads/sites/2/2013/06/SCAR-GIF.gif)

For those of you who haven't seen the movie, this is Scar singing his famous ditty, “Be Prepared”.

One of the most interesting things to me about this whole debacle is that there are so many concepts that I have learnt from all of the modules in CORe that are directly applicable to this Target scenario. 

I can now think through the post-fiasco reactions and the pre-“success” thinking and have insight, suggestions and understanding and that is cool!

Supply and Demand.  This is the underlying driver in the Economics for Managers course. CORe dives into additional concepts like consumer Willingness To Pay, supplier Willingness To Sell, optimised pricing and more, but the tenant that all of these rest on is supply and demand. 

Target claims to have been very closely tracking social media for interest surrounding their Lilly Pulitzer launch; they did their research, they ran the numbers, and they got it seriously wrong. 

What didn’t they take into account during this initial sizing of the demand market that could have made a difference for them?  Did they look at historical examples of other specialty line launches that Target had run?  Did they look at competitor scenarios?  Did they take into account what competitors were or were not launching in a similar time window?  Did they research Lilly Pulitzer’s sales and the market affinity towards Lilly Pultizer?  

The interesting thing is, I bet that Target did research all of those things, they just didn’t end up with the right conclusion. 

One of the things that CORe will teach you is that each discipline has a great deal that needs to be accounted for and that a lot goes into it.  There are so many factors and relationships between these factors that play into every outcome and it is hard to get it right. That being said, it is possible to get it right if the correct mix of people, education and work is put together.

There are many other CORe teachings that factor in this story, secondary markets, optimised pricing, focus groups, the demand curve, elasticity of price, I could go on, but I will spare you. My real point is, if the Target team had just gone through CORe would they have made the same choices?  I like to think maybe not.

We often get questions about the concepts taught in CORe and what a sample assignment looks like, so we thought it would be fun to share some of our bloggers' weekly assignment submissions to give additional insight into the program. 

These assignments seek to find real-world examples of the concepts taught in the course. This week, we asked students to share an example of an important "fixed cost" incurred by businesses and tell us whether this type of fixed cost would scale well as the business grows.  Elizabeth, Conor, Dan, Michael, Sam, and Chelsea share their examples below!

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A boat manufacturing business has high fixed costs as it not only needs a large factory in which to produce the boats and to store them until they are shipped out, but it also needs several $1M+ pieces of equipment to make the boats and casings, etc.

Many factories like this will tend to run triple shifts because if the facility has purchased the expensive machinery it can't afford to not have it running. Due to these high fixed costs, the barrier to entry is higher and so there are fewer competitors in the space.

As a result, if a company can get to a point where they are manufacturing above the costs of operating and owning/renting their plants the boat manufacturing business can prove to be a very lucrative one.

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The company that I work for is a private English language school in Vilnius, Lithuania. While the main building containing classrooms is owned by the company, there are additional classrooms across the street which are rented. This is a local fixed cost, incurred regardless of whether or not they are currently being used.

In the summer months when people are usually on vacation or taking a break, rent is still paid even though they remain empty. It is worth it to pay the rent as the company knows there will be plenty of use once the school year resumes in September. Were the business to expand, this would be an important fixed cost to consider.

That is, the question of renting or buying classroom space would have large implications.

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Novartis is a Swiss multinational pharmaceutical company with approximately $60 billion in sales annually. In the 2014 Annual Report, the Swiss company indicated $9.94 billion dedicated to research and development (R&D). Moreover, the pharmaceutical company spent $14.19 billion in marketing and sales in 2014.

R&D and marketing expenses represent a large portion of their total fixed costs with more than $24 billion! With this amount injected, Novartis creates a barrier to entry for other firms that are considering whether to enter the pharmaceutical market or not.

It is only by going global through a large distribution network will Novartis be able to benefit from economies of scale. By going global, Novartis will target more customers and spread theirs fixed costs better. This also explains why the multinational company has such high marketing costs.

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Pfizer, a pharmaceutical company that applies science and resources to discover, develops and manufactures healthcare products like Advil and Centrum. Pfizer is a giant in the pharmaceutical industry and one important fixed cost incurred by their business is research and development.

When producing a drug, the investment in research and development is incurred upfront. The cost remains the same whether Pfizer sells the drug to 1 person or 1 million people.

This fixed cost resides on a global scale, and it scales very well as a pharmaceutical company expands: as a pharmaceutical continues to grow, it doesn't incur more research and development costs on the original drug, and thus it can easily spread these fixed costs across a global scale. 

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Zipcar maintains a fleet of over 10,000 vehicles in 27 different metropolitan areas worldwide. Car sharing has become an increasingly popular way for urbanites to access a car when they need one without having to deal with the headaches of parking, maintenance, and insurance/ registration fees.

Each individual Zipcar has a "home" parking spot that it must be returned to after every use, and these parking stations are broadly distributed so that no Zipcar member is ever too far from a car. Zipcar's fixed costs reside at the local level: for every new parking station they open, they need to pay the up front fixed cost to buy a car and rent a parking spot in that neighborhood.

Zipcar members benefit from network effects, because as Zipcar expands there are more and more cities and campuses where Zipcar members can access vehicles.

However, Zipcar's fixed costs will expand proportionally to the number of rental locations that they offer. Zipcar can expand effectively, but their fixed costs are not easy to scale. 

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Elizabeth, Conor, Dan, Michael, and Sam share their favorite locations to work on CORe and explain a little about they've chosen that spot as their "classroom." 

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I have found that so far I have an ebbing and flowing relationship with the CORe material.  There are times where I feel confident and like I am making good headway, and at those times I like to go study at my favourite local bookshop that doubles as a café, Trident (for anyone in the Boston area Trident is a gem that should be used for all studying, working or thinking activities). Weeknights and weekends at Trident tend to look something like this:

There are also times where I find myself using the peer help tool repeatedly as I connect with my fellow CORe members around the world to try to unearth some of the more complex and detailed learning points in the different modules.  

During these times, I tend to study from a more quiet and secluded location, i.e. my living room table, so that I can not lose an ounce of my focus to anything other than CORe – this also allows for more creative study breaks, think dance party of one to, “I’m Walking on Sunshine”. Days and nights at home tend to look a little more like this:

 

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This is the interior of a French bakery in the city center of Vilnius, Lithuania.  Every Tuesday and Thursday morning from 8:30 to 10:00 I teach at a public relations company nearby.  

I usually duck in here right after to work on CORe for about an hour or so.  I grab a coffee and croissant and get to it.  At this mid morning time there aren't a lot of people so I'm able to concentrate.  While I do most of my work at home I find this place to be my favorite location to work on CORe.

 

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Sunday 12:26 AM.

Here is the view from my apartment. What you see is probably the last tramway for tonight. I have just finished the module 3 called "Suppliers and Cost" in Economics for Managers, and in the morning I will take the quiz for this Econ module.  

I have learned many things throughout this module: fixed versus variable costs, relative costs analysis, supply curves, and scale economies. Unfortunately, at 2:00 AM, it will be 3:00 AM. Tonight we switch to daylight saving time. Time to go to bed.

 

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Typically you can find me working on coursework from my desk at home, but my personal favorite place to work on CORe is at Starbucks, just down the street from my place.

Starbucks, with its familiar aroma of coffee and warm atmosphere, allows me to get a cup of coffee to enjoy while studying, to get out of the distractions of the house, to take a walk to clear my mind of anything else going on, and then plug in my headphones and go to work!

 

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I do some sections of CORe work from coffee shops, but I primarily work on modules in my basement. It's a quiet part of the house with a nice view out the window, and I feel more productive when I have one spot where I focus on learning.  

My study buddy is Marley the cat.  

 

This week Conor, Michael, Dan, and Elizabeth share the ways in which they've already applied CORe concepts to their daily lives. 

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As an ESL teacher, I encounter a wide variety of students and therefore a wide variety of student needs.  One area that has often been a challenge to teach is business English.

My students are typically adults who have vast real world experience in business-related fields. They completely understand concepts but lack the language skills to express them in English. It is sometimes difficult because although I can help them with their vocabulary, my limited knowledge on the subject minimizes just how much help I can provide.

Last week, one of my students, an accountant, came to me with questions directly related to her work.  I had just finished the second module of the financial accounting course.

I realized mid-lesson that because my understanding of the material has increased, I can better articulate how the material is expressed in the English language to a non-native speaker.   I walked out thinking that, had I not just been exposed to and engaged in these ideas, I would not have been as helpful to my student.

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Learning these accounting concepts directly relates to my goal of starting my own business one day. This exact scenario was depicted in one of the videos: investing money in a new business, which starts with no assets, no liabilities, and no owners’ equity. That investment raises the company’s assets, as well as its equity, thus signifying the beginning of every company.

Fast forward to our current lesson, financial statements. The Balance Sheet is something my company works with on a daily basis. Currency risk comes to the surface for a breath of fresh air on every international company’s Balance Sheet. In fact, foreign exchange fluctuations can sometimes mean the difference between a company having a profitable and unprofitable quarter. When I was an undergraduate, without the context of real world business examples, I couldn’t see the connection.

When companies transact in multiple currencies, they have risks in translation, transaction, and economic exposure. Previously, I was unable to decipher where companies recorded this exposure on the Balance Sheet.

After progressing through the module, I can now pinpoint where exactly companies show their currency exposure (usually under “other assets” and “other liabilities”). This will help tremendously going forward in quickly being able to comprehend and analyze a company’s foreign exchange picture, and will pay huge dividends in the future of my professional life, and my company.

Dan Grünstein

Elizabeth Malkin

I believe that the basic problem with online education is that of constantly capturing a student’s attention. Care is crucial if the learner is to become involved in the task he has set himself: learning.

Normally the student’s incentive and the attention he brings to the courses, which strike his 15-inch screen so monotonously in the form of not engaging videos, tend to decrease exponentially.

The form of the online education platform is, therefore, a vital factor in the transmission of the teaching material. Here, I must say that Harvard’s made-to-measure HBX method presses all the buttons of successful distance learning.

The courses themselves, alternating between carefully explained videos, interactive 

schemes, stressful cold calls, and other exercises are the good recipe for virtual teaching, which becomes real and attractive.

Each of the subjects – Financial Accounting, Economics for Managers, and Business Analytics – is taught purposefully, as the teaching method allows me to engage effortlessly. The concepts I am learning follow naturally from each other, based on the way the brain learns, making me constantly experiment with what I have just learned.

For example - a typical lesson flow:

1.        We are shown a video describing a concept called “Willingness to Pay”,
2.        are next asked to complete an exercise testing our knowledge,
3.        then posed a difficult open-ended question,
4.        finally, are shown another video explaining the correct way of thinking about the question.

This learning structure transverses the three different subjects (Financial Accounting, Economics for Managers, and Business Analytics). I, therefore, make natural connections between the statistical tools in Business Analytics and the conjoint analysis that in Economics for Managers.

I believe that as a participant in the HBX CORe, I am taking part in a revolutionary and extremely rewarding learning experiment.

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My experience of the CORe platform has been influenced by my undergraduate college experience, and I find myself drawing comparisons between “live” and “virtual” classrooms.  My alma mater is a small liberal arts college governed by an honor code, which allowed the school to cultivate an intentionally respectful intellectual community. 

As a proponent of liberal arts education, I was dubious that CORe could replicate the seminar classroom experience.  I’m extremely impressed with how immersive CORe is, and I like the way that the platform manages to teach standardized material and be interactive. 

The cold calls, knowledge checks, and discussion sidebar help hold my attention, and it’s fascinating to see the way my peers respond to the material I’m covering.  The software is slick and seamless.  When I pose a question in the discussion forum I typically get an answer within minutes, and I learn a lot by seeing how my colleagues’ responses to cold calls differ from my own. 

The fact that I engage in this online program from my basement and can interact with live classmates is a revelation to me.

I’ve taken online text-only courses with knowledge checks interspersed, but what sets CORe apart are the brief videos embedded in the modules. The graphics on screen sync up with the concepts that the professors explain and typically alternate between explanations by professors, interviews with business managers, and graphics clarifying principles of economics or accounting.

The videos make it easier to understand concepts that had previously seemed abstract, like the relationship between a frequency distribution and a demand curve.  The program is strictly linear—it’s impossible to skip over sections at will—which has led me to revisit and gain new insight into subjects that I already felt comfortable with. 

After completing a knowledge check or cold call, the program displays responses from other cohort members, allowing me to see where our answers align and how other people came up with different responses to the same prompt.  The transitions between videos and sections are smooth, which gives a sense of fluidity to the material.  

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This week Conor, Elizabeth, and Michael offer advice on how to effectively balance CORe with jobs, travel, and big life events! 

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My CORe experience so far has been overwhelmingly positive.  I won’t lie, though; it has been challenging.  That said, I feel I have already learned more about the material than I have thus far in my life.  Terminology that I had previously heard or read, but never fully understood, has now become a clear and useful part of my lexicon. 

My biggest concern in the weeks leading up to the start was this:  How will I be able balance the CORe material with my full time teaching schedule?

I owe my capacity to do so to the accessibility of the CORe platform.  That is, it is not necessary to devote 2 or 3 or even 4 hour chunks of time in a day to do the work. 

Even if you only have 45 minutes free, you can log in from anywhere (home, coffee shop, library, etc.), make some progress through a module, then get back to your daily tasks feeling like you’ve made some headway. 

A single lesson usually consists of a short video (3 or 4 minutes), some further written explanations or diagrams, followed by some ‘knowledge check’ questions or a short written reflection. The platform does not allow you to continue to the next concept until after you’ve completed the current questions or reflection, which ensures that you are actively participating as opposed to simply reading or listening passively. 

The compact nature of each lesson can really drive home a point without taking up too much time.   Logging in a couple of times a day not only allows me to pace myself, but also keeps the material fresh in my mind without feeling overworked.  This routine fits my schedule well as I teach in the evenings and am not able to designate that time for CORe.

Also, my advice is to take pen to paper notes while going through the modules.  It has helped me thus far on the quizzes which can be a little nerve racking :)

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The February 2015 cohort of CORe has started, and the race to learn the material and to complete the assignments due is most definitely on.  The HBX team is right when they let the applicants know that CORe is not for the faint hearted (especially if one has a full time job). 

It is fascinating, the technology behind the platform is breath-taking and getting to knowledge bomb your team at work is great fun, but it is a true commitment of time, energy and mind. 

So what happens when you are doing CORe and have a full time job and simultaneously your sister is getting married…?

For those of you avidly following my blog posts you will know that I have three sisters (I’m about as lucky as they come).  One is getting married this week which immediately raises the question, “How do I complete my CORe work and celebrate with my sister?”.

The CORe team does a great job of pacing the modules and assignments which helps to keep the panic levels down but also means that it is more difficult to “get ahead”.

Good news, there is room for manoeuvring for those willing to work hard. It is absolutely possible to ramp up on CORe ahead of a big event or a holiday.

You have to be willing to devote a significant portion of your time leading up to the event to working on CORe to obtain this mobility, but in my mind, if the trade-off is a couple of late nights to be able to enjoy your sister’s wedding, then the choice is clear.

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