Market Based Management... 100 Slides
Potential product Augmented product Expected product Generic product Core benefit
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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
How to Underwhelm Customers and Shareholders Poor Understanding of Customers and Competition
Pressure for ShortRun Results
Unfocused Competitive Position
Me-Too Customer Value
Stagnant Shareholder Value
Accounting Maneuvers Drive Financial Results
Excessive Customer Turnover
Sporadic Business Unit Profit
Market Share Instability
High Cost of Customer Retention and Acquisition
Marketing Knowledge and Market Orientation
Business Profitability Customer Retention Market Orientation Marketing Knowledge
Market Orientation Score (0-100)
100
90
80
70
60
50 Bottom
Middle
Marketing Knowledge
High
Fundamental Market-Based Strategies and Profitable Growth Strategies to Grow Market Demand
Net Marketing Contribution
=
Market Demand
Strategies to Enter or Exit Markets
Strategies to Increase Market Share
X Market Share X
Strategies to Grow Customer Purchases
Revenue per - Variable Cost Customer per Customer
Strategies to Lower Variable Cost per Customer
-
Marketing Expenses
Strategies to Increase Marketing Efficiency
Sales-Based vs. Market-Based Organizational Structure Sales-Based Structure
Market-Based Structure
Earthmoving Equipment Division
Earthmoving Equipment Division
Sales Organization
Dealer Sales
Mining Dealers
Mining Marketing Unit
Mining Dealers
Direct Sales
Construction Marketing Unit
Construction Dealers
End-User Market
End-User Market
End-User Market
Mining and Construction
Mining
Construction
Maximum Market Potential and Current Market Demand Maximum Number of Potential Customers
Not Affordable Lack Benefits Unable to Use Not Available
Untapped Market Opportunity
Not Aware
Current Market Demand
Developed Market
Customer Adoption and Market Development 100 %
Full Market Development
80%
60%
Market Development Gap
40%
20%
Mainstream Market
Early Market
0%
Innovators
Early Adopters
Early Majority
Late Majority
Laggards
Economic Benefits and Value Creation
Price Paid
Total Cost of Purchase
Acquisition
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.
Usage Costs
Sealed Air reduces labor cost in packaging with AirCap.
Maintenance
Saturn lowers the cost of repair and insurance through module product design.
Costs Ownership Costs Disposal Costs
GE Capital works with customers to create affordable ownership. Rohm-Haas’s Kathon MWX cuts cost of disposal of machine fluid waste in half.
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
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
Market Segmentation of the Small Business Market Growth-Oriented Entrepreneurs Core Business Need Ways to invest and grow
Cost-Focused Sustainers Core Business Need Ways to continue and save
Firmographics Medium size More sophisticated Higher in education Ongoing financial plan
Firmographics Small in sales / employees Less sophisticated Lower in education Limited or no financial plan
GrowthOriented
CostFocused
Purchase Behavior Products that enhance productivity High revenue per customer Willing to buy value-added solutions
Purchase Behavior Products that lower cost Low revenue per customer Confused by value-added solutions
Value Proposition
Value Proposition
Solutions that help you grow your business
Solutions that saves your business money
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
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 A3
Segment A
Segment A4 Segment A5 Segment B1 Segment B
Segment B2
Segment B
Segment B3 Segment C1 Segment C
Segment C Segment C2
Segment C2
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
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
Profit Potential
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
Performance Impact of Price Rivalry and Prisoner‘s Dilemma
Competitor’s Marketing Strategy Business’s Marketing Strategy
Hold Price
Cut Price 5%
Hold Price
Cut Price 5%
Market Share = 10% Volume = 1 million units Price = $100 per unit Margin = $40 per unit Total Cont. = $40 million
Market Share = 8% Volume = 800’000 units Price = $100 per unit Margin = $40 per unit Total Cont. = $32 million
Market Share = 12% Volume = 1.2 million units Price = $95 per unit Margin = $35 per unit Total Cont. = $42 million
Market Share = 10% Volume = 1 million units Price = $95 per unit Margin = $35 per unit Total Cont. = $35 million
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
Ignition Switch Cost Advantage Due to Scale and Scope Effects Scale Effect
Cost per Unit
Cost per Unit
Scope Effect
C1
C2
Production Capacity
Auto- Motormobiles cycles
Lawn- Snow mowers Blowers Pumps
Product Breadth
Product-Price Position, Marketing Effort, and Market Share Product Differentiation
Price
Product Breadth
Sales Force
Physical Distribution
Retailing & Merchandising
Market Share
=
Product Position
X
Marketing Effort Customer Support
New Products
Service Quality
Brand Image
Media Advertising
Sales Promotion
Core Elements of Product Management Strategy
Product Management Strategies
Product Positioning and Differentiation
Product Line Positioning and Extension Strategies
- Low Price/Cost of Purchase - Product Line Positioning - Product Differentiation - Product Line Extensions - Service/Brand - Product Bundling
New Product Development
- New Product Sales - New Product Innovation - Development Process
Differentiation and Customer Value I Product Differentiation
Product Benefits
Customer Value
Total Benefits
Product Benefits
Brand Differentiation
Customer Value
Product Benefits
Customer Value
Price
Service Benefits
Price
Service Benefits
Price
Nonprice Costs
Brand Benefits
Nonprice Costs
Brand Benefits
Nonprice Costs
Service Benefits Brand Benefits
Service Differentiation
Total Cost
Total Benefits
Total Cost
Total Benefits
Total Cost
Differentiation and Customer Value II
Product Differentiation
Service Differentiation
Brand Differentiation
Product Benefits
Service Benefits
Brand Benefits Total Benefits Derived from Product Position
Customer Value
Price
Transaction Costs Total Cost of Obtaining These Benefits
Low-Price Position Lower Transaction Costs
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
Market Situation
Cost-Based Pricing •Commodity Pricing •Cost Leader Pricing •Competitive Bid Pricing
Market-Based Value Pricing Perceived Value vs. Costs
Total Cost of Ownership
Maintenance Cost
Price
Use
Maintenance
Product Benefits
Perception
Price
Economic Value
Perceived Value
Service Benefits
Price
Nonprice Costs Relative Cost
Use Acquisition
Acquisition
Brand Benefits
Competitor’s Product
Business’s Product
Relative Benefits
Price Elasticity and Performance Unit Volume
Sales Revenue
Unit Margin
Unit Contribution
Raise Price
Decrease
Increase
Increase
Increase
Lower Price
Increase
Decrease
Decrease
Decrease
Hold Price
No change
Maximum
No change
No change
Raise Price
Decrease
Decrease
Increase
Inc/Dec*
Lower Price
Increase
Increase
Decrease
Inc/Dec*
Inelastic (<-1)
Price Elasticity
Unity (=-1)
Elastic (>-1)
* The total contribution could increase or decrease, depending on the level of elasticity and unit margin.
Skim Pricing Skim Pricing
Dollars per Unit
Price
Cost
Time
Favorable Conditions Considerable Differentiation Quality-Sensitive Customers Sustainable Advantage Few Competitors Few Substitutes Difficult Competitor Entry
Penetration Pricing
Dollars per Unit
Penetration Pricing
Price
Cost
Time
Favorable Conditions No/Limited Differentiation Price-Sensitive Customers No Sustainable Advantage Many Competitors Many Substitutes Easy Competitor Entry
Break-Even Volume for a Given Price Strategy 35
Total Revenue
30
$ Millions
25
Total Costs
20 15
Fixed Expenses*
10
5 0 50
Profit
Loss
100 Break-Even Volume (90,000)
* Fixed Expenses = Marketing Expenses and Other Direct Expenses
150
200 Units Sold (â&#x20AC;&#x2DC;000)
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.
Alternative Customer Channel Systems Manufacturers
Direct Channel Systems Direct Sales
On-Line Direct TeleMarketing Marketing marketing
Indirect Channel Systems Reps/ Agents
Reps/Agents
Wholesalers
Retailers
Customer Markets
Message Reinforcement Strategies Pulsing
Heavy-Up 250 Gross Rating Points
Gross Rating Points
250 200 150 100 50 0 1
5
9
13
17
21
25
200 150 100 50 0 1
29
5
9
100%
100%
80%
80%
60% 40%
20% 0%
1
5
9
13
17
Weeks
17
21
25
29
21
25
29
Weeks
Ad Awareness
Ad Awareness
Weeks
13
21
25
29
60% 40%
20% 0%
1
5
9
13
17
Weeks
Push-Pull Communications and Customer Response Customer Response
Customer Pull
Customer Preference •Awareness •Attraction
Customer Push
Customer Loyalty
Market Coverage
• Commitment • Search Effectiveness
•Availability •Stockouts
Customer Pull Communications
Distributor Push •Merchandising •Marketing Effort
Customer Push Communications Communications Mix Advertising Sales Promotions Catalogs Direct Marketing Telemarketing Electronic Marketing Public Relations
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
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
Portfolio Analysis and Strategic Market Plans Market Attractiveness
Very Attractive Offensive (Entry)
Offensive (Grow)
Offensive (Grow) Defensive (Protect)
Defensive (Protect)
Offensive (Grow) Defensive (Protect / Harvest)
Offensive (Grow) Defensive (Protect / Focus)
Offensive (Grow) Defensive (Protect / Focus)
Defensive (Divest or Harvest)
Defensive (Divest or Harvest)
Defensive (Protect or Harvest)
Very Unattractive Very Weak Competitive Advantage
Protect Grow Focus Harvest Entry
Divest
Very Strong
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.
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
Product Life Cycle and Offensive and Defensive Marketing Strategies
Sales Revenue
Offensive/ Defensive
Defensive Defensive
Offensive/ Defensive
Offensive Offensive Offensive Emerging Market
Early Growth
Rapid Growth
Late Growth
Maturing Market
Mature Market
Declining Market
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
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
Portfolio Positions and Defensive Strategic Market Plans Very Attractive
Market Attractiveness
Protect
Protect or Harvest
Harvest or Divest
Protect or Focus
Harvest or Divest
Protect
Protect or Focus
Protect or Harvest
Very Unattractive Very Weak Competitive Advantage
Very Strong
Major Components of a Situation Analysis
Situation Analysis
Market Demand
- Size and Growth - Potential - Environment
Market Demand
Market Demand
Market Demand
Market Demand
- End Users - Intermediaries - Nonconsumers
- Structure - Gap Analysis - Substitutes
- Market Share - Price / Quality - Cost / Value
- Sales - Customer satisfaction - Margins/Profit
A Customer-Based Model of Net Profits Market Demand (Customers)
Customer Volume
Market Share (Percent)
Total Contribution
Revenue per Customer Margin per Customer
Net Marketing Contribution
Variable Cost per Customer Marketing Expenses Operating Expenses
Net Profits (before taxes)
A Customer-Based Model of Return on Assets Market Demand (Customers) Market Share (Percent) Revenue per Customer Variable Cost per Customer
Customer Volume
Total Contribution Net Marketing Contribution
Margin per Customer
Net Profits (before taxes)
Marketing Expenses Operating Expenses Accounts Receivable
Return on Assets
Current Assets Inventory Total Assets Cash Fixed Expenses
Plant and Equipment
Market, Operational and Profit Performance Market Performance
Operational Performance
Operational Merits
Market Metrics
•Customer Retention •Product Awareness •Service Quality
Profitability Merits
• Margin (% of sales)
•Market Share •Customer Satisfaction
Profit Performance
•Return on Assets
• Overhead (% of sales) X
• Inventory Turnover • Accts. Rec. (days outstanding) • Capacity Utilization
=
•Return on Equity
•Earnings per Share •Economic Value Added •Price-Earnings Ratio
GE / McKinsey Multifactor Portfolio Matrix
BUSINESS STRENGTH
INDUSTRY ATTRACTIVENESS
Invest
Invest
Manage Selectively for Earnings
Invest
Manage Selectively for Earnings
Harvest or Divest
Manage Selectively for Earnings
Harvest or Divest
Harvest or Divest
Market Potential, Sales Potential, and Sales Forecast
Sales Forecast Sales Potential
Market Potential
Total Population
HIGH
SELECTIVE EMPHASIS
HEAVY EMPHASIS
HEAVY EMPHASIS
MODERATE
LIMITED SUPPORT
SELECTIVE EMPHASIS
HEAVY EMPHASIS
LOW
MARKET OPPORTUNITY
The R&D Effort Portfolio
LIMITED SUPPORT
LIMITED SUPPORT
SELECTIVE EMPHASIS
LOW
MODERATE
HIGH
MARKET OPPORTUNITY
When to Use a Penetration or Skimming Strategy for Pricing New Products Dimension
Penetration Strategy
Low
Level of Desire in Market
High
Similar
Distinctiveness from Competitive Products
Distinctive
Important
Importance of Price to Market
Not Important
Easy
Ease of Duplicating Product
Not Easy
Gradual
Return on Investment Objective
Fast
Skimming Strategy
Strategy Decision Areas Organized by the Four Ps Product
Place
Promotion
Price
• Physical good • Service • Features • Quality level • Accessories • Installation • Instructions • Warranty • Product lines • Packaging • Branding
• 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
• Objectives • Promotion blend • Sales people, Kind, Number Selection, Training, Motivation • Advertising Targets, Kinds of ads, Copy thrust, Prepared by whom • Sales promotion • Publicity
• Objectives • Flexibility • Level over product life cycle • Geographic terms • Discounts • Allowances
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
Product Classes Products
Consumer products
Industrial products
Convenience products
Staples Impulse products Emergency products
Shopping products
Homogeneous Heterogeneous
Specialty products Unsought products
New unsought Regularly unsought
Installations Accessories Raw materials
Farm products Natural products
Components
Component parts Component materials
Professional services Supplies
Staples Impulse products Emergency products
New-Product Development Process
Idea generation
Screening Rough ROI estimate
Development R&D Build model Test in market ROI estimate Revise product
Idea evaluation Concept testing Rough ROI verification
Idea evaluation Finalize product Finalize marketing plan Final ROI estimate Start production and marketing plan
International Marketing Opportunities Product
Adaptation
Promotion
Same
Same
Adaptation
New
Same needs and use conditions (McDonaldâ&#x20AC;&#x2122;s usual strategy)
Basically same needs and use conditions (McDonaldâ&#x20AC;&#x2122;s strategy with beer in Germany)
Basically same needs, but different incomes and / or applications (street vendor with lowcost hamburgers)
Different needs but same use conditions (bicycles)
Different needs and use conditions (clothing)
Different needs and different incomes and / or applications (hand-powered washing machines)
Customer and Competitor Orientations Competitor emphasis Minor
Major
Minor
Self-centered
Competitorcentered
Major
Customeroriented
Marketdriven
Competitor emphasis
Efficiency vs. Effectiveness Strategic management Effective
Ineffective
1 Efficient
Thrive
Operational management
2 Die slowly
3 Inefficient
Survive
4
Die quickly
Approaches to Competitor Analysis Industry Analysis
Building Competitive Advantage
Industry Mapping
Desk Research
Databases Critical Success Factors
Benchmarking Market Research
Internal Information
Value Chain Analysis
Competitor Profiling Special Competitor Studies
New Existing
Core Competences
Developing the Organizationâ&#x20AC;&#x2DC;s Core Competences Extending the base
Uncharted waters
What core competences do we need to be developed so that the organizationâ&#x20AC;&#x2122;s current position is best protected and/or extended?
What core competences need to be developed in order to compete in the new and developing markets which offer the greatest future potential?
Good housekeeping
Moving into new areas
How can better use be made of the organizationâ&#x20AC;&#x2122;s current core competences?
What new products or services can be developed by rethinking or reallocating the existing core competences?
Existing
New
Markets
The Nine Price / Quality Strategies Price Low
1
2 Cheap-value strategy
Low
4 Product quality
Medium
Above average value strategy
7 High
Medium
3 Out-of-step strategy
Exploitative strategy 6
5 Middle-of-theroad strategy 8
Superb value strategy
High
Overcharging strategy 9
High-value strategy
Premium strategy
Relationship Between Service Levels and Costs $
Total costs
Cost
Transportation, order processing and inventory carrying costs
Cost of lost sales 0 Level of customer service
100%
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
%
Marketing Excellence Framework Marketing Strategy
Product Innovation Customer Development Quality Strategy
Manufacturing
Supply Chain
Branding
Business Performance
Consequences of Strategic and Tactical Implementation
Excellent Proof
Marketing implementation
Strategy / tactic Appropriate
Inappropriate
Success
Possible shortterm success â&#x20AC;&#x201C; but ultimately failure
Trouble or failure
Failure
The Transition to RM
Emphasis on all six market domains
Emphasis on customer market domain
Relationship marketing
Transaction marketing
Functionally based marketing
Cross-functionally based marketing
The RM Multiple Markets Model
Internal Markets
Supplier & Alliance Markets
Customer Markets
Recruitment Markets
Referral Markets
Influencer Markets
Types of Consumer Buyer Behavior Involvement
Many
Differences between brands Few
Complex buyer behaviour
Dissonancereducing buyer behaviour
Variety-seeking buyer behaviour
Habitual buyer behaviour
Opportunity for value enhancement
Appropriate Pricing Strategies
High
Skimming strategy
Price leadership
Low
â&#x20AC;&#x2DC;Follow my leaderâ&#x20AC;&#x2122;
Penetration strategy
Low
High
Opportunity for cost reduction
The Expanded Marketing Mix
Product
Price
Promotion
Customer Service People
Place
Processes
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
Stable Demand
Low-Cost, Consistent Quality, Standardized Products
Homogeneous Market
The New Paradigm of Mass Customization as a Dynamic System Feedback Loop Product Technology
New Products
Process Technology
R
R Short Product Development Cycles
Mass Customization Processes
R Short Product Life Cycles
Demand Fragmentation
Low-Cost, High Quality, Customized Products
Heterogeneous Markets
Six Types of Modularity for the Mass Customization of Products and Services
Component â&#x20AC;&#x201C; Sharing Modularity
Cut-to-Fit Modularity
Bus Modularity
Component-Swapping Modularity
Mix Modularity
Sectional Modularity
DYNAMIC
MASS CUSTOMIZATION
INVENTION
STABLE
Product-Process Change Matrix
MASS PRODUCTION
CONTINUOUS IMPROVEMENT
PRODUCT CHANGE
DYNAMIC
STABLE PROCESS CHANGE
DYNAMIC
MASS CUSTOMIZATION
INVENTION
STABLE
Product-Process Change Matrix: The Mass Production Axis
MASS PRODUCTION
CONTINUOUS IMPROVEMENT
PRODUCT CHANGE
DYNAMIC
STABLE PROCESS CHANGE
Mass-Customized Products: Stable Processes Producing Dynamic Flow of Products PROCESS CAPABILITIES
PROCESS CAPABILITIES PRODUCT 1 VOLUMES
PRODUCT 2 VOLUMES
PRODUCT VOLUMES
TIME
PRODUCT 3 VOLUMES
Mass-Customized Products: Shortening Process Life Cycles ENTERPRISE ENTERPRISE CAPABILITIES AND RESOURCES
PROCESS CAPABILITIES
PROCESS 1 CAPABILITIE S
PROCESS 2 CAPABILITIE S
PROCESS 3 CAPABILITIE S
PRODUCT N VOLUMES
PRODUCT VOLUMES
TIME
DYNAMIC
MASS CUSTOMIZATION
INVENTION
STABLE
Product-Process Change Matrix: Virtual Enterprise Flow
MASS PRODUCTION
CONTINUOUS IMPROVEMENT
PRODUCT CHANGE
DYNAMIC
STABLE PROCESS CHANGE
Four Stages of National Competitive Development FACTOR DRIVEN
INVESTMENT DRIVEN
• Existing basic factors
• Building general factors
• Abundant, cheap and unqualified labour
• Cheap and qualified labour
• Low investments
• Heavy basic investments
INNOVATION DRIVEN
• Building advanced factors • Costly and highly qualified labour
• Productivity and innovation investments
WEALTH DRIVEN
• Acquired advantages • Stagnant rate of innovation
DECLINE?
Relaunched by the stimulation of innovation
Cluster Theory Context for Firm Strategy and Rivalry 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
• A local context that encourages appropriate forms of investment and sustained upgrading • Vigorous competition among locally-based rivals
Related and Supporting Industries • Presence of capable, locally-based suppliers • Presence of competitive related industries
Demand Conditions
• Sophisticated and demanding local customer(s) • Customer needs that anticipate those elsewhere • Unusual local demand in specialized segments that can be served globally
Management of Industrial Customer‘s Portfolios I For a continuous supply case Existing customer Structural Attractiveness
Prospect Structural Attractiveness
Customers to be kept without over investing
Customers justifying an overinvestment
Customers to be kept with minimum investment
Customers to be examined in a selective way
Development possibilities
Prospects to be cultivated with tenacity while expecting an opening Prospects not to be worked on intensively
“hot” prospects justifying a strong investment
“hot” prospects justifying only a limited investment
Penetration possibilities
Management of Industrial Customerâ&#x20AC;&#x2DC;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
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
Facilitators -Ad agencies -Marketing research firms -Product testing labs -Public warehouses -Transportation specialists -Financial institutions
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 â&#x20AC;&#x201C; satisfying goods and services
Too many individual Customers (heterogeneous demand)
The Marketing Exchange Process II Raw materials Components Finished product
Downstream exchange
Supplier Upstream exchange
Customer Wholesaler Retailer End user
The Producer – Customer Gap PRODUCTION SECTOR
Marketing needed to overcome gaps
Specialization and division of labour result in heterogeneous supply capabilities
PRODUCERS
CUSTOMERS
SPACE
Clustered Few locations
Scattered Many locations
TIME
Time required to bring goods to market
Consumption usually not at time of production (exception: services)
INFORMATION
Don’t know who needs what, where, when, what price
Don’t know what is available from whom, where, when, what price
VALUES
Value goods and services in terms of costs and competitive prices
Value goods and services in terms of economic utility and ability to pay
OWNERSHIP
Hold title to goods which they don’t consume
Want to consume goods which they don’t own
QUANTITY
Prefer to produce and sell in large quantities
Prefer to buy and consume in small quantities
ASSORTMENT
Produce a narrow assortment
Purchase a broad assortment
CONSUMPTION SECTOR Heterogeneous demand for form, time, place, possession utility to satisfy needs /wants
The Value Chain Value chain of a computer manufacturer Component suppliers
Component Purchasing
Computer manufacturer
R&D
Retail outlets
Manufacturing
Make or buy?
Product Design
End users: Individuals, Companies
Marketing
Make or Buy High
Strong control needed
Advantages of Making • Low costs • Better quality • Unique characteristics • Better time management • Control of proprietary information • Etc…
Moderate control needed Weak control needed
Make
Partnership
Buy
Low Low
High
Risks tied to Outsourcing • Size, power of producer • Technical capacity of buyer • Number of transactions involved • Etc...
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%)
Market Segmentation Strategies Need Analysis
Program A FIRM
Program B
MARKET
Program C a) Product variety: no segmentation
Need Analysis Segment A FIRM
Program for Segment B
Segment B Segment C
b) Concentrated marketing
Need Analysis
FIRM
c) Multi-segment marketing
Program for Segment A
Segment A
Program for Segment B
Segment B
Program for Segment C
Segment C
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
Political pressures and lobbying
Competitive activity
Production / marketing, scale economies
Resources / capabilities of the firm
The Use of Marketing Information I Marketing Information System Data
M. I. S. / M. D. S. S.
Environment Accounting system
Market studies and research system
Target markets Distribution channels Competitors People Macro-environment
Information
Marketing Manager
Analysis Planning Execution Control Accounting system
Marketing models system
The Use of Marketing Information II Evolution of information needs 1960
Mass marketing Mass media advertising
Product orientation 1970
1980
General information
Customized marketing
Customer orientation
Personalized target communication 1990
Specific information
Customer equity
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
Approaches to the Study of Customer Behavior HOMO ECONOMICUS Rationality: revenue determines consumption level price determines consumption allocation
Subjective
Product symbolism
Unlimited needs: utility and satisfaction maximization
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,â&#x20AC;Ś
Feelings, emotions / unconscious motivations
HOMO PSYCHOLOGICUS
Group Influence on Buyer Appraisal of Product and Brand Group influence on product category
Strong
Group influence on
Strong
Weak
automobiles
clothes
cigarettes
furniture
beer,wine
watches
cellular phones
detergent
instant coffee
canned food
color TV
garbage bags
product brand Weak
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)
The 6 â&#x20AC;&#x201C; Step Marketing Plan 1
Situation (SWOT)
Action plan
firm market industry competition environment
2
Objectives sales market share market expansion leadership satisfaction
3
Strategy
segment â&#x20AC;&#x201C; target price / quality product positioning differentiation diversification
4
budget allocation: product promotion price distribution
Marketing Plan
Forecasts
5
quantify: costs sales profits market share Control
6
organization structure measurement tools check frequency => Corrective actions
SWOT Analysis I STRENGTHS / WEAKNESSES
OPPORTUNITIES / THREATS
Firm, Organization
Environment, Market, Industry
• Market share • Key account share • Growth rate • Supply diversity • Influence • On market • Purchasing / selling deadline • New products cycles • Negotiation power - firm suppliers - customers
MARKET
• Market size • Key account size • Annual growth rate • Market diversity • Price sensitivity • Seasonality • Cycles • Negotiation power - suppliers - consumers
COMPETITION • Firm competitivity - Product, service - Profitability, H.R., … • Segments invested in • Firm’s integration level • High-tech vulnerability
• Competitor types • Concentration level • Intrants / extrants • Market share evolution • Vertical / horizontal integration • Technology substitution
SWOT Analysis II STRENGTHS / WEAKNESSES
OPPORTUNITIES / THREATS
Firm, Organization
Environment, Market, Industry
• Firm margins • Economies of scale • Barriers • Production capacity level
• Adaptability to change • Expertise / Know-How • Patent ownership • Production technology
• Reactivity / Flexibility level • Adaptability • Agressiveness • Working relationships
FINANCE / BUSINESS
TECHNOLOGY
SOCIO - POLITICAL
• Global benefits • Economies of scale • Barriers • Production capacity level
• Maturity / volatility • Complexity • Differentiation • Patents and copyrights • Production technology
• Attitudes / Social trends • Laws and regulations • Pressure groups • Trade union activities
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
Will the market
innovation
adopt industry
spread?
standards?
Sources of Technological Uncertainty Will the new product function as promised?
Will new technology make ours obsolete?
Will there be side effects of the product or service?
Will the delivery
Technological Uncertainty
timetable be met?
Will the vendor
give high-quality service?
A Taxonomy of Marketing Situations Based on Technological and Market Uncertainty
High
Better Mousetrap Marketing
High-Tech Marketing
Low
Low-Tech Marketing
High-Fashion Marketing
Technological Uncertainty
Low
High
Market Uncertainty
New Age Pricing
Average Unit Customer Value
Amount of Pricing Discretion
$
Average Unit Cost
Unit Volume
Performance – Based Pricing Customer Value P-BP provides more customer value through:
Customer Value
1.
Goal alignment
2.
Overpay Insurance
3.
Clearer information on customer needs & objectives.
Cost P-BP provides lower vendor cost through:
Without Performance – Based Pricing
1.
Goal alignment
2.
Under payment insurance
3.
Less wasted effort for things the customer doesn’t value.
Cost
With Performance – Based Pricing
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