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Slide 1: Market Based Management... 100 Slides Potential product Augmented product Expected product Generic product Core benefit Powered by www.drawpack.com. All rights reserved.
Slide 2: Key Words... Customer Value – Shareholder Value – Market-basedStrategies – Market Potential – Value Creation – Economic Benefits – Market Segmentation – Targeting – Competitive Advantage – Industry Analysis – Prisoners Dilemma – Switch Cost – Pricing – Skimming – Penetration – Channel Management – Push-Pull – Portfolio Analysis – Life Cycle Analysis – Market Performance – Sales Forecast – Four P’s – Competitor Analysis – Transaction Marketing – Consumer Behavior – Mass Customization – Cluster Theory – Value Chain – Marketing Information – Brand Management – AIDA – Marketing Plan – SWOT – New Age Pricing – Producer/Customer Gap – Mass Production
Slide 3: How to Underwhelm Customers and Shareholders Poor Understanding of Customers and Competition Pressure for ShortRun Results Unfocused Competitive Position Stagnant Shareholder Value Me-Too Customer Value Accounting Maneuvers Drive Financial Results Excessive Customer Turnover Sporadic Business Unit Profit Market Share Instability High Cost of Customer Retention and Acquisition
Slide 4: Marketing Knowledge and Market Orientation 100 Market Orientation Score (0-100) Business Profitability Customer Retention Market Orientation Marketing Knowledge 90 80 70 60 50 Bottom Middle High Marketing Knowledge
Slide 5: Fundamental Market-Based Strategies and Profitable Growth Strategies to Grow Market Demand Strategies to Increase Market Share Strategies to Grow Customer Purchases Net Marketing Contribution = Market Demand X Market Share X Revenue per - Variable Cost Customer per Customer - Marketing Expenses Strategies to Enter or Exit Markets Strategies to Lower Variable Cost per Customer Strategies to Increase Marketing Efficiency
Slide 6: Sales-Based vs. Market-Based Organizational Structure Sales-Based Structure Market-Based Structure Earthmoving Equipment Division Earthmoving Equipment Division Sales Organization Mining Marketing Unit Construction Marketing Unit Dealer Sales Mining Dealers Mining Dealers Direct Sales Construction Dealers End-User Market Mining and Construction End-User Market Mining End-User Market Construction
Slide 7: Maximum Market Potential and Current Market Demand Maximum Number of Potential Customers Not Affordable Lack Benefits Unable to Use Not Available Not Aware Untapped Market Opportunity Current Market Demand Developed Market
Slide 8: Customer Adoption and Market Development 100 % 80% Full Market Development 60% 40% Market Development Gap 20% Early Market Mainstream Market 0% Innovators Early Adopters Early Majority Late Majority Laggards
Slide 9: Economic Benefits and Value Creation Price Paid Acquisition Total Cost of Purchase Costs Usage Costs Maintenance Costs Ownership Costs Disposal Costs Amazon.com lowers purchase price with the on-line purchase of books. American Hospital Supply reduces a hospital’s cost with a computerized customer order program. Sealed Air reduces labor cost in packaging with AirCap. Saturn lowers the cost of repair and insurance through module product design. GE Capital works with customers to create affordable ownership. Rohm-Haas’s Kathon MWX cuts cost of disposal of machine fluid waste in half.
Slide 10: Fundamental Forces That Shape Differences in Customer Needs Consumer Market Customer Needs Demographic Forces - Age - Income - Marital Status - Education - Occupation Lifestyle Forces - Attitudes - Values - Activities - Interests - Political View Usage Behaviors - Quantity - Time of Use - Personal - Social - Frequency of Use
Slide 11: Fundamental Forces That Drive Differences in Business-to-Business Customer Needs Business-to-Business Customer Needs Firmographic Forces - Number of Employees - Sales Volume - Number of Locations - Years in Business - Financial Situation Business Culture - Business Sophistication - Growth Orientation - Innovativeness - Technology - Decision Making Usage Behaviors - Application - Quantity - Time of Purchase - Frequency of Purchase - Users
Slide 12: Market Segmentation of the Small Business Market Growth-Oriented Entrepreneurs Core Business Need Ways to invest and grow Firmographics Medium size More sophisticated Higher in education Ongoing financial plan Purchase Behavior Products that enhance productivity High revenue per customer Willing to buy value-added solutions Value Proposition Solutions that help you grow your business Cost-Focused Sustainers Core Business Need Ways to continue and save Firmographics Small in sales / employees Less sophisticated Lower in education Limited or no financial plan Purchase Behavior Products that lower cost Low revenue per customer Confused by value-added solutions Value Proposition Solutions that saves your business money GrowthOriented CostFocused
Slide 13: Forces That Shape Segment Attractiveness Segment Attractiveness Market Growth - Market Size - Growth Rate - Market Potential Competitive Intensity - Number Of Companies - Ease of Entry - Substitutes Market Access - Customer Familiarity - Channel Access - Company Fit
Slide 14: Segmentation Hierarchy: Mass Market to Mass Customization Strategies Mass Market Approach Large Segment Strategy Adjacent Segment Strategy Multisegment Strategy Small Segment Strategy Niche Segment Strategy Mass Customization Strategy Segment A1 Segment A2 Segment A Segment A Segment A Segment A3 Segment A4 Segment A5 Segment B1 Segment B Segment B Segment B2 Segment B3 Segment C1 Segment C Segment C Segment C2 Segment C2
Slide 15: Competitive Forces That Shape Competitive Position and Profitability Competitive Position and Profitability Industry Forces - Market Entry/Exit - Buyer/Supplier Power - Substitutes/Rivalry Competitor Benchmarking Competitive Advantage - Competitor Intelligence - Cost Advantage - Competitor Analysis - Quality Advantage - Competitive Benchmarking - Marketing Advantage
Slide 16: Industry Analysis: Industry Forces and Profit Potential Competitive Environment Industry Forces Barriers to Entry Barriers to Exit Buyer Power Supplier Power Substitutes Competitive Rivalry Unfavorable Low High High High Many Intense Favorable High Low Low Low None None The more favorable the forces that shape a market’s competitive environment, the greater a business’s profit potential More favorable competitive environment Less favorable competitive environment Favorable Unfavorable Competitive Environment Profit Potential
Slide 17: Performance Impact of Price Rivalry and Prisoner‘s Dilemma Competitor’s Marketing Strategy Business’s Marketing Strategy Hold Price Market Share = 10% Volume = 1 million units Price = $100 per unit Margin = $40 per unit Total Cont. = $40 million Market Share = 12% Volume = 1.2 million units Price = $95 per unit Margin = $35 per unit Total Cont. = $42 million Cut Price 5% Market Share = 8% Volume = 800’000 units Price = $100 per unit Margin = $40 per unit Total Cont. = $32 million Market Share = 10% Volume = 1 million units Price = $95 per unit Margin = $35 per unit Total Cont. = $35 million Hold Price Cut Price 5%
Slide 18: Major Sources of Competitive Advantage Competitive Advantage Cost Advantage - Variable Costs - Marketing Expenses - Operating Expenses Differentiation Advantage - Product Differentiation - Service Quality - Brand Reputation Marketing Advantage - Distribution - Sales Effort - Brand Awareness
Slide 19: Ignition Switch Cost Advantage Due to Scale and Scope Effects Scale Effect Scope Effect Cost per Unit Cost per Unit Auto- Motormobiles cycles C1 C2 Lawn- Snow mowers Blowers Pumps Production Capacity Product Breadth
Slide 20: Product-Price Position, Marketing Effort, and Market Share Product Differentiation Product Breadth Sales Force Physical Distribution Price Retailing & Merchandising Market Share = Product Position X Marketing Effort Customer Support New Products Service Quality Brand Image Media Advertising Sales Promotion
Slide 21: Core Elements of Product Management Strategy Product Management Strategies Product Positioning and Differentiation Product Line Positioning and Extension Strategies New Product Development - New Product Sales - New Product Innovation - Development Process - Low Price/Cost of Purchase - Product Line Positioning - Product Differentiation - Product Line Extensions - Service/Brand - Product Bundling
Slide 22: Differentiation and Customer Value I Product Differentiation Customer Value Service Differentiation Customer Value Brand Differentiation Customer Value Product Benefits Product Benefits Product Benefits Price Service Benefits Brand Benefits Total Benefits Nonprice Costs Total Cost Service Benefits Brand Benefits Total Benefits Price Service Benefits Brand Benefits Total Benefits Price Nonprice Costs Total Cost Nonprice Costs Total Cost
Slide 23: Differentiation and Customer Value II Product Differentiation Product Benefits Customer Value Service Differentiation Brand Differentiation Service Benefits Brand Benefits Total Benefits Derived from Product Position Price Low-Price Position Lower Transaction Costs Transaction Costs Total Cost of Obtaining These Benefits
Slide 24: Pricing Differentiation and Customer Value Customers •Need / Benefits •Price Sensitivity •Demand / Growth Competitors •Number / Entry •Positioning •Objectives Positioning •Market Share •Differentiation •Cost / Supply Market-Based Pricing •Economic Value Pricing •Perceived Value Pricing •Segment Pricing Impacts •Customer Value •Market Share •Profitability Cost-Based Pricing •Commodity Pricing •Cost Leader Pricing •Competitive Bid Pricing Market Situation
Slide 25: Market-Based Value Pricing Total Cost of Ownership Perceived Value vs. Costs Price Economic Value Product Benefits Perception Perceived Value Maintenance Cost Price Service Benefits Price Use Maintenance Use Acquisition Competitor’s Product Acquisition Business’s Product Brand Benefits Relative Benefits Nonprice Costs Relative Cost
Slide 26: Price Elasticity and Performance Unit Volume Raise Price Inelastic (<-1) Lower Price Increase Decrease Decrease Decrease Decrease Sales Revenue Increase Unit Margin Increase Unit Contribution Increase Price Elasticity Unity (=-1) Hold Price No change Maximum No change No change Raise Price Elastic (>-1) Lower Price Decrease Decrease Increase Inc/Dec* Increase Increase Decrease Inc/Dec* * The total contribution could increase or decrease, depending on the level of elasticity and unit margin.
Slide 27: Skim Pricing Skim Pricing Price Dollars per Unit Favorable Conditions Considerable Differentiation Quality-Sensitive Customers Sustainable Advantage Few Competitors Few Substitutes Difficult Competitor Entry Cost Time
Slide 28: Penetration Pricing Penetration Pricing Dollars per Unit Price Favorable Conditions No/Limited Differentiation Price-Sensitive Customers No Sustainable Advantage Many Competitors Many Substitutes Easy Competitor Entry Cost Time
Slide 29: Break-Even Volume for a Given Price Strategy 35 30 25 $ Millions 20 15 10 5 0 Total Revenue Total Costs Fixed Expenses* 50 Profit Loss * Fixed Expenses = Marketing Expenses and Other Direct Expenses 100 Break-Even Volume (90,000) 150 200 Units Sold (‘000)
Slide 30: Alternative Channel Systems Alternative Channel Systems Direct Channel Systems Mixed Channel System Indirect Channel Systems Channel Intermediaries Target Market Customers • Direct Channel Systems: Provide alternative direct channel and sales systems that require the business to retain ownership (title) of products sold and responsibility for delivery to customers and value-added functions desired by customers. • Indirect Channel Systems: Provide varying degrees of sales and value-added functions while taking ownership and responsibility for delivery to target customers or other intermediaries. • Mixed Channel Systems: Provide direct sales contact and technical support while the actual purchase is made at a channel intermediary who has taken title (ownership) of the products being sold.
Slide 31: Alternative Customer Channel Systems Manufacturers Direct Channel Systems Direct Sales On-Line Direct TeleMarketing Marketing marketing Reps/ Agents Indirect Channel Systems Reps/Agents Wholesalers Retailers Customer Markets
Slide 32: Message Reinforcement Strategies Pulsing 250 Gross Rating Points 200 150 100 50 01 5 9 13 17 21 25 29 Gross Rating Points 250 200 150 100 50 01 5 9 13 17 21 25 29 Heavy-Up Weeks Weeks 100% Ad Awareness 1 5 9 13 17 21 25 29 Ad Awareness 80% 60% 40% 20% 0% 100% 80% 60% 40% 20% 0% 1 5 9 13 17 21 25 29 Weeks Weeks
Slide 33: Push-Pull Communications and Customer Response Customer Response Customer Pull Customer Push •Awareness •Attraction Customer Preference • Commitment • Search Effectiveness Customer Loyalty •Availability •Stockouts Market Coverage •Merchandising •Marketing Effort Distributor Push Customer Pull Communications Communications Mix Advertising Sales Promotions Catalogs Direct Marketing Telemarketing Electronic Marketing Public Relations Customer Push Communications
Slide 34: Strategic Market Planning Process Tactical Marketing Strategy and Performance Plan Portfolio Analysis and Strategic Market Plan Business Performance - Share Position - Sales Growth - Profitability Market Attractiveness - Market Forces - Competitive Intensity - Market Access Competitive Advantage - Differentiation - Cost - Marketing
Slide 35: Factors That Shape Market Attractiveness Market Attractiveness Market Forces - Market Size - Growth Rate - Buyer Power - Customer Loyalty Competitive Intensity - Number of Competitors - Price Rivalry - Ease of Entry - Substitutes Market Access - Customer Familiarity - Channel Access - Sales Requirements - Company Fit
Slide 36: Portfolio Analysis and Strategic Market Plans Very Attractive Offensive (Entry) Offensive (Grow) Offensive (Grow) Defensive (Protect / Harvest) Defensive (Divest or Harvest) Very Weak Offensive (Grow) Defensive (Protect) Offensive (Grow) Defensive (Protect / Focus) Defensive (Divest or Harvest) Defensive (Protect) Offensive (Grow) Defensive (Protect / Focus) Defensive (Protect or Harvest) Very Strong Market Attractiveness Very Unattractive Competitive Advantage Protect Grow Focus Harvest Entry Divest Invest to protect or hold a competitive advantage. Businesses often fail to invest in hold strategies, and the result is an erosion of competitive advantage. Invest to improve or grow competitive advantage. In an underdeveloped or emerging market, this can also mean to invest in order to grow the market, and hence, its attractiveness. Selectively narrow market focus to profitable segments or niches within a segment in order to capture profits while limiting the resources committed to this market. Adjust prices and marketing expenses to gradually exit the market while attempting to maximize profits during this gradual exit. Invest to enter an attractive market to establish a desired competitive advantage. This strategy could also require investment to accelerate the growth of a new or underdeveloped market. Quick divestment from a market. When there are no short-term profits to be gained with a harvest strategy, an immediate exit strategy is appropriate.
Slide 37: Offensive and Defensive Strategic Market Plans Business Performance Share Position Sales Revenue Growth Profit Performance Offensive Strategic Market Plans - Penetrate or Grow Existing Markets - Enter or Develop New Markets Defensive Strategic Market Plans - Protect or Reduce Focus within Existing Markets - Harvest or Divest Existing Markets
Slide 38: Product Life Cycle and Offensive and Defensive Marketing Strategies Offensive/ Defensive Sales Revenue Offensive/ Defensive Offensive Offensive Offensive Emerging Market Early Growth Rapid Growth Late Growth Maturing Market Defensive Defensive Mature Market Declining Market
Slide 39: Offensive Strategic Market Plans Offensive Strategic Market Plans Market Penetration Strategies - Grow Market Share - Grow Customer Purchases - Enter New Market Segment - Grow Market Demand New Market Entry Strategies - Related New Market Entry - Diversified New Market Entry - Enter New Emerging Market - Develop New Market Potential
Slide 40: Defensive Strategic Market Plans Defensive Strategic Market Plans Protect Market Position - Protect Market Share - Build Customer Retention - Reduced Focus Exit Market Position - Harvest Price Strategy - Harvest Resource Strategy - Divest Market Position
Slide 41: Portfolio Positions and Defensive Strategic Market Plans Very Attractive Protect Market Attractiveness Protect Protect or Harvest Protect or Focus Protect or Focus Harvest or Divest Very Unattractive Very Weak Harvest or Divest Protect or Harvest Competitive Advantage Very Strong
Slide 42: Major Components of a Situation Analysis Situation Analysis Market Demand - Size and Growth - Potential - Environment Market Demand - End Users - Intermediaries - Nonconsumers Market Demand - Structure - Gap Analysis - Substitutes Market Demand - Market Share - Price / Quality - Cost / Value Market Demand - Sales - Customer satisfaction - Margins/Profit
Slide 43: A Customer-Based Model of Net Profits Market Demand (Customers) Market Share (Percent) Revenue per Customer Variable Cost per Customer Marketing Expenses Operating Expenses Net Profits (before taxes) Customer Volume Total Contribution Margin per Customer Net Marketing Contribution
Slide 44: A Customer-Based Model of Return on Assets Market Demand (Customers) Market Share (Percent) Revenue per Customer Variable Cost per Customer Marketing Expenses Operating Expenses Accounts Receivable Inventory Total Assets Cash Fixed Expenses Plant and Equipment Return on Assets Customer Volume Total Contribution Margin per Customer Net Marketing Contribution Net Profits (before taxes) Current Assets
Slide 45: Market, Operational and Profit Performance Market Performance Operational Performance Operational Merits • Margin (% of sales) • Overhead (% of sales) X • Inventory Turnover • Accts. Rec. (days outstanding) • Capacity Utilization = Profit Performance Market Metrics •Market Share •Customer Satisfaction •Customer Retention •Product Awareness •Service Quality Profitability Merits •Return on Assets •Return on Equity •Earnings per Share •Economic Value Added •Price-Earnings Ratio
Slide 46: GE / McKinsey Multifactor Portfolio Matrix INDUSTRY ATTRACTIVENESS Invest BUSINESS STRENGTH Invest Manage Selectively for Earnings Invest Manage Selectively for Earnings Harvest or Divest Manage Selectively for Earnings Harvest or Divest Harvest or Divest
Slide 47: Market Potential, Sales Potential, and Sales Forecast Sales Forecast Sales Potential Market Potential Total Population
Slide 48: The R&D Effort Portfolio HIGH SELECTIVE EMPHASIS HEAVY EMPHASIS HEAVY EMPHASIS MARKET OPPORTUNITY MODERATE LIMITED SUPPORT SELECTIVE EMPHASIS HEAVY EMPHASIS LOW LIMITED SUPPORT LIMITED SUPPORT SELECTIVE EMPHASIS LOW MODERATE MARKET OPPORTUNITY HIGH
Slide 49: When to Use a Penetration or Skimming Strategy for Pricing New Products Dimension Low Similar Penetration Strategy Important Easy Gradual Level of Desire in Market Distinctiveness from Competitive Products Importance of Price to Market Ease of Duplicating Product Return on Investment Objective High Distinctive Not Important Not Easy Fast Skimming Strategy
Slide 50: Strategy Decision Areas Organized by the Four Ps Product •Physical good •Service •Features •Quality level •Accessories •Installation •Instructions •Warranty •Product lines •Packaging •Branding Place • Objectives • Channel type • Market exposure • Kinds of middlemen • Kinds and locations of stores • How to handle transporting and storing • Service levels • Recruiting middleman • Managing channels Promotion • Objectives • Promotion blend • Sales people, Kind, Number Selection, Training, Motivation • Advertising Targets, Kinds of ads, Copy thrust, Prepared by whom • Sales promotion • Publicity Price • Objectives • Flexibility • Level over product life cycle • Geographic terms • Discounts • Allowances
Slide 51: Strategy Planning for Product Target market Product Place Promotion Price Product idea Package Brand Physical good / service Features Quality level Accessories Installation Instructions Warranty Product line Protection Promotion (or both) Type of brand Individual or family Manufacturer or dealer
Slide 52: Product Classes Products Consumer products Staples Impulse products Emergency products Homogeneous Heterogeneous Industrial products Installations Accessories Raw materials Components Professional services Supplies Staples Impulse products Emergency products Farm products Natural products Component parts Component materials Convenience products Shopping products Specialty products Unsought products New unsought Regularly unsought
Slide 53: New-Product Development Process Idea generation Screening Rough ROI estimate Idea evaluation Concept testing Rough ROI verification Development R&D Build model Test in market ROI estimate Revise product Idea evaluation Finalize product Finalize marketing plan Final ROI estimate Start production and marketing plan
Slide 54: International Marketing Opportunities Product Same Same needs and use conditions (McDonald’s usual strategy) Adaptation Basically same needs and use conditions (McDonald’s strategy with beer in Germany) Different needs and use conditions (clothing) New Basically same needs, but different incomes and / or applications (street vendor with lowcost hamburgers) Different needs and different incomes and / or applications (hand-powered washing machines) Promotion Same Adaptation Different needs but same use conditions (bicycles)
Slide 55: Customer and Competitor Orientations Competitor emphasis Minor Major Minor Self-centered Competitorcentered Competitor emphasis Major Customeroriented Marketdriven
Slide 56: Efficiency vs. Effectiveness Strategic management Effective Ineffective 1 Efficient 2 Die slowly Thrive Operational management Inefficient 3 Survive Die quickly 4
Slide 57: Approaches to Competitor Analysis Industry Analysis Building Competitive Advantage Desk Research Benchmarking Market Research Internal Information Databases Industry Mapping Critical Success Factors Value Chain Analysis Special Competitor Studies Competitor Profiling
Slide 58: Developing the Organization‘s Core Competences Extending the base What core competences do we need to be developed so that the organization’s current position is best protected and/or extended? Good housekeeping Existing How can better use be made of the organization’s current core competences? Uncharted waters What core competences need to be developed in order to compete in the new and developing markets which offer the greatest future potential? Moving into new areas What new products or services can be developed by rethinking or reallocating the existing core competences? Core Competences New Existing New Markets
Slide 59: The Nine Price / Quality Strategies Price Low Medium High 1 Low 2 Cheap-value strategy Out-of-step strategy 5 Middle-of-theroad strategy 8 Superb value strategy High-value strategy 3 Exploitative strategy 6 Overcharging strategy 9 Premium strategy 4 Product quality Medium Above average value strategy 7 High
Slide 60: Relationship Between Service Levels and Costs $ Total costs Transportation, order processing and inventory carrying costs Cost Cost of lost sales 0 Level of customer service 100%
Slide 61: Setting Customer Service Levels $ Increase in costs, sales revenue or profit Revenue from service Maximum profit contribution Distribution costs Profit curve 0 Service level 93 99 %
Slide 62: Marketing Excellence Framework Marketing Strategy Branding Manufacturing Supply Chain Product Innovation Customer Development Quality Strategy Business Performance
Slide 63: Consequences of Strategic and Tactical Implementation Strategy / tactic Appropriate Inappropriate Marketing implementation Excellent Success Possible shortterm success – but ultimately failure Proof Trouble or failure Failure
Slide 64: The Transition to RM Emphasis on all six market domains Relationship marketing Emphasis on customer market domain Transaction marketing Functionally based marketing Cross-functionally based marketing
Slide 65: The RM Multiple Markets Model Internal Markets Supplier & Alliance Markets Customer Markets Referral Markets Recruitment Markets Influencer Markets
Slide 66: Types of Consumer Buyer Behavior Involvement Many Complex buyer behaviour Variety-seeking buyer behaviour Differences between brands Few Dissonancereducing buyer behaviour Habitual buyer behaviour
Slide 67: Appropriate Pricing Strategies Opportunity for value enhancement High Skimming strategy Price leadership Low ‘Follow my leader’ Penetration strategy Low High Opportunity for cost reduction
Slide 68: The Expanded Marketing Mix Product Promotion Price Customer Service Place People Processes
Slide 69: The Paradigm of Mass Production as a Dynamic System of Reinforcing Factors New Products Long Product Development Cycles Mass Production Processes R Long Product Life Cycles Low-Cost, Consistent Quality, Standardized Products Stable Demand Homogeneous Market
Slide 70: The New Paradigm of Mass Customization as a Dynamic System Feedback Loop Product Technology New Products Process Technology R Short Product Development Cycles Mass Customization Processes R R Short Product Life Cycles Low-Cost, High Quality, Customized Products Demand Fragmentation Heterogeneous Markets
Slide 71: Six Types of Modularity for the Mass Customization of Products and Services Component – Sharing Modularity Component-Swapping Modularity Cut-to-Fit Modularity Mix Modularity Bus Modularity Sectional Modularity
Slide 72: Product-Process Change Matrix DYNAMIC MASS CUSTOMIZATION INVENTION PRODUCT CHANGE STABLE MASS PRODUCTION CONTINUOUS IMPROVEMENT STABLE PROCESS CHANGE DYNAMIC
Slide 73: Product-Process Change Matrix: The Mass Production Axis DYNAMIC MASS CUSTOMIZATION INVENTION PRODUCT CHANGE STABLE MASS PRODUCTION CONTINUOUS IMPROVEMENT STABLE PROCESS CHANGE DYNAMIC
Slide 74: Mass-Customized Products: Stable Processes Producing Dynamic Flow of Products PROCESS CAPABILITIES PROCESS CAPABILITIES PRODUCT 1 VOLUMES PRODUCT VOLUMES PRODUCT 2 VOLUMES PRODUCT 3 VOLUMES TIME
Slide 75: Mass-Customized Products: Shortening Process Life Cycles ENTERPRISE ENTERPRISE CAPABILITIES AND RESOURCES PROCESS 1 CAPABILITIE S PROCESS CAPABILITIES PROCESS 2 CAPABILITIE S PROCESS 3 CAPABILITIE S PRODUCT N VOLUMES PRODUCT VOLUMES TIME
Slide 76: Product-Process Change Matrix: Virtual Enterprise Flow DYNAMIC MASS CUSTOMIZATION INVENTION PRODUCT CHANGE STABLE MASS PRODUCTION CONTINUOUS IMPROVEMENT STABLE PROCESS CHANGE DYNAMIC
Slide 77: Four Stages of National Competitive Development FACTOR DRIVEN INVESTMENT DRIVEN INNOVATION DRIVEN WEALTH DRIVEN • Existing basic factors • Abundant, cheap and unqualified labour • Low investments • Building general factors • Cheap and qualified labour • Heavy basic investments • Building advanced factors • Costly and highly qualified labour • Productivity and innovation investments • Acquired advantages • Stagnant rate of innovation DECLINE? Relaunched by the stimulation of innovation
Slide 78: Cluster Theory Context for Firm Strategy and Rivalry • A local context that encourages appropriate forms of investment and sustained upgrading • Vigorous competition among locally-based rivals Factor (Input) Conditions •Factor (input) quantity and cost – natural resources – human resources – capital resources – physical infrastructure – information infrastructure – scientific and technological infrastructure • Factor quality • Factor specialization Demand Conditions Related and Supporting Industries • Presence of capable, locally-based suppliers • Presence of competitive related industries • Sophisticated and demanding local customer(s) • Customer needs that anticipate those elsewhere • Unusual local demand in specialized segments that can be served globally
Slide 79: Management of Industrial Customer‘s Portfolios I For a continuous supply case Existing customer Structural Attractiveness Customers to be kept without over investing Customers justifying an overinvestment Prospect Structural Attractiveness Prospects to be cultivated with tenacity while expecting an opening Prospects not to be worked on intensively “hot” prospects justifying a strong investment Customers to be kept with minimum investment Customers to be examined in a selective way “hot” prospects justifying only a limited investment Development possibilities Penetration possibilities
Slide 80: Management of Industrial Customer‘s Portfolios II Case of discontinued supply Structural Attractiveness To follow up on a major customer if the deal is not too unfavourable Major opportunity justifying a major investment To decline and not to be followed To grasp an excellent deal if the customer is acceptable Transaction attractiveness
Slide 81: The Marketing Exchange Process I Middlemen -Wholesalers -Retailers Many individual Suppliers (heterogeneous supply) Perform universal marketing functions of buying, selling, transporting, storing, marketing, information, standardization and grading, financing, and risk taking To overcome discrepancies of quantity and assortment, and to overcome separation of space, time, information, values and ownership To create form, time, place, and possession utility and direct the flow of need – satisfying goods and services Too many individual Customers (heterogeneous demand) Facilitators -Ad agencies -Marketing research firms -Product testing labs -Public warehouses -Transportation specialists -Financial institutions
Slide 82: The Marketing Exchange Process II Raw materials Components Finished product Upstream exchange Supplier Customer Wholesaler Downstream exchange Retailer End user
Slide 83: The Producer – Customer Gap PRODUCTION SECTOR Specialization and division of labour result in heterogeneous supply capabilities PRODUCERS SPACE TIME INFORMATION Marketing needed to overcome gaps VALUES OWNERSHIP QUANTITY ASSORTMENT Clustered Few locations Time required to bring goods to market Don’t know who needs what, where, when, what price Value goods and services in terms of costs and competitive prices Hold title to goods which they don’t consume Prefer to produce and sell in large quantities Produce a narrow assortment CUSTOMERS Scattered Many locations Consumption usually not at time of production (exception: services) Don’t know what is available from whom, where, when, what price Value goods and services in terms of economic utility and ability to pay Want to consume goods which they don’t own Prefer to buy and consume in small quantities Purchase a broad assortment CONSUMPTION SECTOR Heterogeneous demand for form, time, place, possession utility to satisfy needs /wants
Slide 84: The Value Chain Value chain of a computer manufacturer Component suppliers Computer manufacturer End users: Individuals, Companies Retail outlets Component Purchasing R&D Manufacturing Product Design Marketing Make or buy?
Slide 85: Make or Buy High Advantages of Making • Low costs • Better quality • Unique characteristics • Better time management • Control of proprietary information • Etc… Strong control needed Moderate control needed Weak control needed Low Low Make Partnership Buy High Risks tied to Outsourcing • Size, power of producer • Technical capacity of buyer • Number of transactions involved • Etc...
Slide 86: Market Structure: Actual / Potential Market Total population (100%) Potential market (100%) Accessible market (80%) Potential market (100%) Actual market (2%) Qualified market (50%) Serviced market (20%)
Slide 87: Market Segmentation Strategies Need Analysis Program A FIRM Program B Program C a) Product variety: no segmentation MARKET Need Analysis Segment A FIRM Program for Segment B Segment B Segment C b) Concentrated marketing Need Analysis Program for Segment A FIRM Program for Segment B Program for Segment C Segment A Segment B Segment C c) Multi-segment marketing
Slide 88: Factors Affecting the Choice of Target Markets Needs / wants of end-users Market size / structure Firm / brand market share, sales projections Decisionmaker preferences and corporate culture Choice of target markets Competitive activity Political pressures and lobbying Resources / capabilities of the firm Production / marketing, scale economies
Slide 89: The Use of Marketing Information I Marketing Information System Data M. I. S. / M. D. S. S. Accounting system Market studies and research system Information Environment Marketing Manager Target markets Distribution channels Competitors People Macro-environment Accounting system Analysis Planning Execution Control Marketing models system
Slide 90: The Use of Marketing Information II Evolution of information needs 1960 Product orientation 1970 General information Mass marketing Mass media advertising 1980 Customer orientation 1990 Customized marketing Personalized target communication Specific information Customer equity
Slide 91: The Use of Marketing Information III The Marketing Information Value Chain Data collection and transmission Customer files Diary panels POS scanner Data management DB2 Oracle DB3 Paradox Data interpretation = Information Expert systems: Marketing-related models Salespartner Decision Support Systems Coverstory Conjoint E.I.S. (choice) MDS (position) Collect Organise Describe Promoter, ADCAD Represent Explain Recommend
Slide 92: Approaches to the Study of Customer Behavior HOMO ECONOMICUS Rationality: revenue determines consumption level price determines consumption allocation Subjective Product symbolism Degree of involvement Perfect knowledge of needs and of products to satisfy them Deterministic choice Product functionality Objective Imperfect knowledge, stochastic choice Limited needs: satisfiers Irrational action: needs / wants / hopes, dreams,… Feelings, emotions / unconscious motivations Unlimited needs: utility and satisfaction maximization HOMO PSYCHOLOGICUS
Slide 93: Group Influence on Buyer Appraisal of Product and Brand Group influence on product category Strong Weak automobiles Strong clothes furniture watches detergent canned food garbage bags cigarettes beer,wine cellular phones Group influence on product brand Weak instant coffee color TV
Slide 94: Attitude Based Decision Process: AIDA (Attention, Interest, Desire, Action) Cognitive Attention Awareness, perception Interest Affective Desire Preference, choice Action Conative Purchase Yes / No Post-purchase reaction (cognitive dissonance)
Slide 95: The 6 – Step Marketing Plan 1 Situation (SWOT) firm market industry competition environment Action plan 4 budget allocation: product promotion price distribution 2 Objectives sales market share market expansion leadership satisfaction Strategy segment – target price / quality product positioning differentiation diversification Marketing Plan Forecasts quantify: costs sales profits market share Control 5 3 6 organization structure measurement tools check frequency => Corrective actions
Slide 96: SWOT Analysis I STRENGTHS / WEAKNESSES Firm, Organization • Market share • Key account share • Growth rate • Supply diversity • Influence • On market • Purchasing / selling deadline • New products cycles • Negotiation power - firm suppliers - customers • Firm competitivity - Product, service - Profitability, H.R., … • Segments invested in • Firm’s integration level • High-tech vulnerability OPPORTUNITIES / THREATS Environment, Market, Industry MARKET • Market size • Key account size • Annual growth rate • Market diversity • Price sensitivity • Seasonality • Cycles • Negotiation power - suppliers - consumers COMPETITION • Competitor types • Concentration level • Intrants / extrants • Market share evolution • Vertical / horizontal integration • Technology substitution
Slide 97: SWOT Analysis II STRENGTHS / WEAKNESSES Firm, Organization • Firm margins • Economies of scale • Barriers • Production capacity level OPPORTUNITIES / THREATS Environment, Market, Industry FINANCE / BUSINESS • Global benefits • Economies of scale • Barriers • Production capacity level • Adaptability to change • Expertise / Know-How • Patent ownership • Production technology TECHNOLOGY • Maturity / volatility • Complexity • Differentiation • Patents and copyrights • Production technology • Reactivity / Flexibility level • Adaptability • Agressiveness • Working relationships SOCIO - POLITICAL • Attitudes / Social trends • Laws and regulations • Pressure groups • Trade union activities
Slide 98: Sources of Market Uncertainty What needs might be met by the new technology? How large is the potential market? How will needs Market Uncertainty change in the future? How fast will the innovation spread? Will the market adopt industry standards?
Slide 99: Sources of Technological Uncertainty Will the new product function as promised? Will new technology make ours obsolete? Will the delivery Technological Uncertainty timetable be met? Will there be side effects of the product or service? Will the vendor give high-quality service?
Slide 100: A Taxonomy of Marketing Situations Based on Technological and Market Uncertainty High Better Mousetrap Marketing High-Tech Marketing Technological Uncertainty Low Low-Tech Marketing High-Fashion Marketing Low High Market Uncertainty
Slide 101: New Age Pricing Average Unit Customer Value $ Amount of Pricing Discretion Average Unit Cost Unit Volume
Slide 102: Performance – Based Pricing Customer Value Customer Value P-BP provides more customer value through: 1. 2. 3. Goal alignment Overpay Insurance Clearer information on customer needs & objectives. Cost P-BP provides lower vendor cost through: 1. Goal alignment Under payment insurance Less wasted effort for things the customer doesn’t value. 2. 3. Cost Without Performance – Based Pricing With Performance – Based Pricing
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