Tracking Competitors Strategies

Industrial Products Product sales literature The companys own sales force Trade advertising Consumer Products Tracking Ads

Comparing Value Chains

Firms Infrastructure Support Activities Human Resources Management Technology Development M A R G I N

Procurement
Primary Inbound Operations Outbound Marketing Activities Logistics Logistics And Sales Service

Product Entry Decisions

Decision First To Market Second To Market Next to Market R&D Marketing State-of-the- Stimulating art Primary Demand Advanced, Responsive Ability in Applications Differentiating the Product Market Segmentation Timing Early-entry in the PLC Entry Early in PLC Growth Entry During PLC Growth

Late To Market Growth

Skill in Process Minimizing Selling Development and Distribution Cost

Entry Late in PLC

Competitive Product Analysis Matrix

Marketing Mix Competitor A Brand A Product 1 Competitor B Brand B Product 2

1. Product Targeted Segment 2. Price 3. Promotion Advertising 4. Place 5. Technology Strategy

Differential Advantage Analysis Capabilities Matrix

Ability To Conceive/Design Produce Market Finance Manage Firm/Product A B C Own Product

Differential Advantage Analysis Success Matrix

Critical Success Firm/Product Factors A B C 1 2 3 4 5 Overall Rating Own Product

Assessing A Competitors Will

A strong competitor can be overcome A weak competitor can cause damage

Assess: How crucial is this product to the firm? How visible is the commitment to the market? How aggressive are the managers?

Predicting Future Strategies

Competitor signals with an announcement Use historical information to forecast: Competitors Strategy dependent variable Capabilities and Resource independent variable Extrapolate that the trend may continue Link Capabilities/Resources with Strategy Simulate by Role-Play

3. Customer Analysis
What we need to know about current and potential customers: 1. Who buys and uses the product? 2. What customers buy and how they use it? 3. Where customers buy? 4. When customers buy? 5. How customers choose? 6. Why customers prefer a product? 7. How customers respond to marketing programs? 8. Will customers buy it (again)?

Segmentation Variables for Consumer Markets

1. Who buys and uses the product? Demographics Age, gender, geographic location Socio-graphics Income, education, occupation, social class Personality traits ambitious, extrovert Psychographics and Value lifestyle activities, interests, opinions

Lifestyle Topology
Who buys and uses it? Strivers Achievers Pressured Adapters Traditionalists

Value Topology
Who buys and uses it?
Self-respect Security Warm relationship with others Sense of accomplishment Self-fulfillment Sense of belonging Respect for others Fun and enjoyment Excitement

Segmentation Variables for Business Markets

Who buys and uses it?
Demographics Industry, company size, location Operating Variables Customer technology, use status, service Purchasing Approaches Structure, power, purchasing criteria Situational Factors Size of order, just-in-time delivery Personal Characteristics Attitude to risk, loyalty to supplier

Benefits
2. What customers buy and use? The Firm Produces Features The Customer Purchases Benefits Technology Firms User friendly Drill Manufacturer Sells holes, not drills Product Manager Understand the benefits customers are seeking in the market segment

Purchase Pattern
Database Marketers use three criteria for evaluating and segmenting customers in their databases Recency how recently has the customer bought brand? Frequency How many different products does the customer buy, and what are the time intervals? Monetary Value What is the value of the customers purchases in terms of profits?

What customers buy and use ?

Potential Customers
What customers buy and use ? Continuum Relating to the Product Unaware Aware Accepting Willing to use the product Attracted Positive towards the product Active Buy and/or plan to buy Advocates - Encourage others to buy

Product Assortment
What customers buy and use ? Different Brands Purchased by the Customers for the category in the Segments Create Switching Tables Different Vendors used by Businesses Industrial products

Use
What customers buy and use? Sweets Festivals Rainwear Rainy season Sunscreen Summer Customer Suggestions Baking soda to deodorize drains Lime juice to clean cooking range

Channels of Distribution
3. Where customers buy? Customers Migrate to Other Channels Specialty retailer to Discount Discount to Department Store Neighborhood to Superstore Small Retailer to Large-Volume retailer Brick-and-Mortar to Internet

Timing Issue
4. When customers buy? Sales or Price Breaks and Rebates Fast-Food Breakfast, lunch, snack, dinner Woolens Winter Capital Equipment Near fiscal year end Cold Remedies Before and during winter

Customers Compare Alternatives

5. How customers choose? Information Media Advertisements In-store personnel Word-of-Mouth Internet Decision Process Emotional Impulse Rational

Multi-attribute Model
How customers choose?

The process of how customers make decisions Attributes used by customer to define the product Perceptions amount of attributes possessed by each brand or product in the category Importance Weights weights given by customer for each attribute

Attributes
How customers choose?

Identifying the relevant set is not easy Managerial judgment alone can cause misestimates Collect information: Focus-Groups Survey/Questionnaire Open-ended or close-ended

Perceptual or Positioning Map Bank

Courteous Personnel F A D

Inconvenient Convenient
C B Un-courteous ATM Locations

Importance Weights
Direct Questioning On a scale of 1-to-7 with 7 being very important and 1 not important, how important is the attribute .. in your purchase decision

Decision Making by Manager for Each Brand

Segment 1 Attribute A Attribute B Attribute C Attribute D Segment Score Segment2

Weight x Rating =Score

Rules Available to the Product Manager

Compensatory Rule Multivariate Model All attributes are considered and weakness in one can be compensated for by strength in another

 Lexicographic Rule Compares the products on the most important attributes alone and eliminates those which are not at the top

 Conjunctive Rule Assumes the customer sets minimum cutoffs on each dimension and rejects a product if it has any attributes below the cutoff

Conjoint Analysis
An alternative to weights, conjoint analysis permits the product manager to infer the importance of different product attributes in terms of importance

Conjoint Analysis Laptops Computers

Three Attributes Weight 1 kg or 2 kg Battery Life 2 hr or 4 hr Brand HP or LG Task: Rank in order the following combinations from 1 = most preferred to 8 = least preferred

Customer Response Laptop Computers

Combination 1 kg, 2 hr, HP 1 kg, 2 hr, LG 1 kg, 4 hr, HP 1 kg, 4 hr, LG 2 kg, 2 hr, HP 2 kg, 2 hr, LG 2 kg, 4 hr, HP 2 kg, 4 hr, LG Rank 4 2 3 1 8 6 7 5

Analysis Laptop Computers

Preference 1 kg, 4 hr, LG with rank 1 most 2 kg, 2 hr, HP with rank 8 least Average Ranking: 1 kg option = 2.5 = (1 + 2 + 3 + 4)/4 2 kg option = 6.5 = (5 + 6 + 7 + 8)/4 2 hr option = 5.0 4 hr option = 4.0 HP = 5.5 LG = 3.5

 Difference in the Average Ranks: Weight = 4.0 (6.5 2.5) Battery Life = 1.0 (5 4) Brand = 2.0 = (5.5 3.5) The most important attributes to this customer is weight, followed by brand, and then battery life

Customer as Problem Solver

Extensive Problem Solving First-time buyers or high-technology products Limited Problem Solving Customer understands functioning and competitors, evaluates on small number of attributes Routine Response Behavior routine purchases with low or high price tag

Customer Value
6. Why customers prefer a product? Critical Component of Customer Analysis Benefit Customers perspective Cost price, maintenance Sources of Customer Value Economic Functional Psychological

Manifestation of Customer Value

Price firms assessment of the products value Price Sensitivity sales change with price Satisfaction Indicated in surveys used as standard practice Complaints and Compliments Number Word-of-Mouth Difficult to track

 Margin/Profit Contribution Higher margins Sales Value assessed by the market Competitive Activity New-product introductions Repeat Purchase Rate High loyalty indicates high brand value

Assessing Value of the Product Category

Determine the uses of the product Estimate the importance of the uses List competing products for the uses Determine the relative effectiveness of the product category in each usage situation

Assessing the Value of he Brand/Product/Service

Assessing the total value of a brand can be done indirectly A high-value brand has: High Market Share High Repeat Purchase Rate Low Elasticity with respect to Price Limited Competitive Brand Shopping

 Using customer responses to estimate the value of a brand directly: Ratings for competing products Constant sum ratings across brands Graded paired comparisons Conjoint analysis

Customer Response
7. How customers respond to marketing programs
Sensitivity and Preference Varies by Customer: To Price and to means of payment Distribution and Availability including the effect of direct marketing Advertising Promotion Service

Assessing Sensitivity
Expert Judgment using knowledge of managers, sales-force Customer Survey including both direct questioning and more subtle approaches as conjoint analysis Experiments both controlled settings and actual market segments Analyses of Past Data across market segments or individual customer records

Decision to Purchase
8. Why customers buy it again? Critical Issue whether new or current customer will purchase the product in the future Quality Program satisfy and retain customers Relationship Marketing long-term, lifetime, value of a customer

Quality - Satisfaction
Quality is ultimately measure in terms of customer satisfaction Satisfaction has a strong relative component to quality Are customers of the product category more or less satisfied than those of a different but potentially substitutable one? Are customers of the companys product more or less satisfied than customers of a competitors?

Measurement of Satisfaction
Three Key Aspects Expectations of Performance/Quality Perceived Performance/Quality The Gap between Expectations and Performance

 Indirect Measures Word-of-Mouth Comments Complaints Compliments Repeat purchase or lack thereof

Why Satisfaction?
Leads to Loyalty Customer Retention Intention to Purchase

 Satisfied but No Repurchase Due to Poor Product Supply Variety Seeking or Multiple Sourcing Large Promotional Deals Unsatisfied but Continue to Purchase Monopoly Convenience

Segmentation
Each Customer is Unique Mass Marketing is Generic Each Customer Strategy Time-Consuming Not Very Profitable Group Customers into Segments A Compromise

 Insights into Different Kinds of Customer Behavior Makes Marketing Programs more Efficient With IT one-to-one Marketing is Viable But Segmentation is the Norm

Criteria for Segmentation

Sizeable Identifiable Reachable Respond Differently Coherent Stable

Methods for Market Segmentation

Simple to Apply, Easy-to-Use software, and require Descriptive and Behavioral Data Cluster Analysis Tabular Analysis Regression Analysis
Latent Class Analysis

Cluster Analysis
Examines the values of the variables for each respondent , from a sample of customers, and then groups the respondents with similar values Cluster Cluster A Purchase C Quantity Cluster
B

Age

 Phone company employed Cluster Analysis to understand its regional customers Six segments based on clustering households Low Income/Blue Collar Fledglings Frugal/Retired Thrifties Contended Middle Class Contenteds Aspiring M-C Status Seekers Climbers Technology Driven Strivers Techies Contended Upper Middle-Class Executives

 Industrial-products company segmented its national accounts based on trade-offs between price and service to form four segments Programmed Buyers small customer, routine purchases Relationship Buyers small buyers, loyal, pay low prices and obtain high service levels Transaction Buyers large buyers, obtain price discounts, expect high service levels, switch suppliers Bargain Hunters large buyers, lowest prices, highest service levels

Tabular Analysis
This analysis uses categorical variables based on customer responses Descriptor Variables related to attitude, independent variables Convenience Oriented Enthusiastic Disinterested Behavioral Variables dependent variables Small/Light, Medium, Large/Heavy

Regression Analysis
Is used when the product manager can specify an explicit relationship between behavioral, dependent variable, and one or more descriptor, independent variable However, unlike tabular analysis it assumes a continuously measured dependent variable, quantity rather than category of usage

 Usage = f (price, convenience oriented, enthusiastic, disinterested, low, medium, high income) Regression performed using regression coefficients to represent the regression model in an equation form U = aP + bC + cE + eD + fL + gM + hH

 Results may suggest: Price sensitivity depends on various service characteristics quality, support Price responsiveness exists across counties and continents segmentation based n responsiveness rather than country boundaries are useful for global marketing

Latent Class Segmentation

Begins with the market as a whole and then determines what segmentation pattern best trades off few segments and the ability to explain behavior The previous methods begin with individuals and then aggregate them Is recent, intriguing, requires sophistication not widely used

Judgment-Based Segmentation
Useful because segments are readily identifiable and reachable Heavy, Light, Non-Users Can be used as a basis for comparison with results of computer-based analysis Segments based on intuition may exist only in the mind of a manager and not in the market