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					Kotler Marketing Training




                            1
2001-05-17




             2
Day One
Building Marketing Power: Achieving
Customer Focus


• World Class Marketing Today
• Marketing for Growth and Profit
• Customer Focused Marketing
• Competitive Differentiation


                                      3
World Class Marketing Today




                              4
What’s Marketing?
The Marketing Mission:
To focus on the customer’s
needs and wants
To understand CustomerValue,
create Customer Value, and
capture a profitable exchange for
the value you create for the
customer
                                    5
What’s Marketing?
A Definition:
“Marketing is not the art of finding
clever ways to dispose of what you
make, marketing is the art of
creating genuine Customer value”
                      Dr. Philip Kotler

                                          6
Attributes of a Marketing Driven
Company
• All departments work to build value to all customers in the
  value-chain (Ritz Carlton)
• The company partners with its channel customers to help
  them win in the market place (Caterpillar; Kraft)
• The company markets to segments based on real people
  and specialized use situations, not just price points
  (Neutrogena)
• The company anticipates customer needs and gets a real
  return on added value (Dupont)
• The company finds strategic allies to lead market trends
  and to be a preferred supplier (National Bicycle and
  Panasonic)
• The company continuously researches the needs and wants
  of customers (Disney; Sony)
• The Strategic marketing Plan builds a portfolio of loyal
  customers and focuses effort on customer retention
  (Walmart)                                                     7
Today’s Winning Marketing
Approaches
• Mass Customization based on IT solutions
  (Amazon; Land’s End;National Bicycle; Pairs
  Miki)
• Raising customer expectations and fulfilling
  them (Sony Playstation;Nokia design; Viagra;
  Goretex)
• Increase share of customer’s business
  (Safeway)
• Quality is always improving in response to
  customers’ needs (Motorola Six Sigma)
                                           8
Today’s Winning Marketing
Approaches

• From transactional selling to value-based
selling (international Paper – Wireless Bales
  and
laser printer paper)
• Brand Management as the core company
competency and outsourcing functions not
essential to creating customer value (Nike;
  Sara Lee)
                                          9
Today’s Winning Marketing
Approaches
• Customer Loyalty and Lifetime Value (Harrah’s
   Casinos)
• Direct Marketing (Heinz food)
• Strategic Public Relations (Swatch)
• Customization: Paris Miki uses the proprietary
Mikisinnes Design System to fit customer facial
traits and design preferences to a frame design that
is right for them


                                                   10
Today’s Winning Marketing
Approaches
Lessons from the New Economy:
• Brands are NOT built on advertising, they are built
  on trust in the brand’s promise of value (Amazon)
• Demonstrate value: SciQuest
• Defend your price: AOL
• Build bridges to the Old Economy
   – Leverage synergies: AOL-Time Warner
   – Click-and-Mortar: Toy’R’Us



                                                   11
Today’s Winning Marketing
Approaches
Lessons from the 2000 Holiday Season:
• Growth in orders from pure internet
  sites averaged 25%
• Growth on clicks-and-mortar sites
  averaged 135%



                                    12
The Marketing Environment in
China
• Increasing openness
• Industry and distribution fragmentation
• Fewer marketing resources than foreign brands (P&G
  commits 25% of gross sales)
• Price Wars
• Channel Transformation
   – More convenience stores (7-11, Lawson, Kedi)
   – More hypermarkets (Carrefour, Metro, Sam’s)
   – More factory stores (Kodak Express, Motolora Town)
• Increased pressure from foreign brands (return of
  Whirlpool; Agfa and Konica may enter roll film market)

                                                           13
Keys for Success
•   Customer Segment Focus
•   Brand Positioning
•   Value-Based Pricing
•   Channel Entry Strategies
•   Low Cost Product Innovation
    Strategies

                                  14
How Do I Rate My Company’s Marketing
Management Skills?
                                   Weak   Moderate   Strong
Research – Do We monitor:
• Customer segments?               ____    _____     _____
• Customer satisfaction?           ____    _____     _____
• Customer retention?              ____    _____     _____
Strategic Planning – Strategy is
Aligned to customer needs and
Wants in:
• Product line planning            ____    _____     _____
• Brand management                 ____    _____     _____
• Communications and promotions    ____    _____     _____
• Distribution decisions           ____    _____     _____
• Pricing                          ____    _____     _____


                                                         15
Priorities for Marketing
Improvement
• In what areas of marketing
  management would you most like your
  company to improve?
     Top Priority:____________




                                        16
Marketing for Growth and
Profit




                           17
What Marketing Model is Right for
Your Company?
  Your chosen marketing model must support the
  company’s gross profit and marginal profit goals.
• There are 14 different profit models
• Leadership role is to assess high-level competitive
  advantages and disadvantage, to position the
  company in the marketplace, and …
• Commit the resources appropriate for your chosen
  focus



                                                    18
Profit Models
1.Win through customer retention and loyalty:
    knowing the customer, creating a solution, and
    deepening the relationship (Marlboro; KFC)
2.Win through differentiating a marketing product
    line: building silver, gold and platinum versions of
    the product (Bank of China, Great Wall Cards)
3.Win through making profits on different
    components (Gillette; Kodak)
4.Win through innovation (3M)
5.Win through copying the innovator (Avis; Canon)
                                                       19
Profit Models
6. Win through developing and proliferating
    blockbusters (Disney; Dupont; Pfizer)
7. Win through niche specialization and niche
    innovation (Wrigley gum)
8. Win through developing the largest
    installed based and becoming the
    standard (Microsoft)
9. Win through transforming your position in
    the value chain (Intel)

                                            20
Profit Models
10. Win through earning the largest marketing share
   or mass brand (McDonalds)
11. Win through channel proliferation and ubiquity
   (Coca Cola)
12. Win through leveraging the longest learning and
   experience in your industry (Texas Instruments)
13. Win through price or value leadership (WalMart-
   brands for less money; Lexus – luxury for less
   money than a Mercedes Benz)
14. Win through channel leadership (Kraft)
                                                  21
8 Ways to Control Profitability
Control points of Profitability are rated 0-10 (10 is
the highest)
• Owning the standard (10) (Microsoft)
• Managing the value chain (9) (Intel)
• Creating a string of superdominant positions (8) (Coke and
  Sprite)
• Owning the customer relationship (7) (GE)
• Branding and copyrighting features (6) (GM Mr. Goodwrench)
• Two-year product development lead (5)
• One-year product development lead (4)
• Commodity with 10 to 20% cost advantage (3) (SW Air)

                                                          22
Choosing a Marketing Focus (1)
• Many Chinese companies are struggling to
  compete with foreign brands backed by
  superior financial resources and perceived
  quality (Budweiser)
• At the same time, local market knowledge
  and distribution networks can be an
  advantage to Chinese companies, provided
  they invest in using this knowledge wisely
  (Tsingtao)
                                               23
Choosing a Marketing Focus (2)

                            Market
           High             Knowledge          Low
                     Channel leader
 Resource            Niche Brand leader
 Constraints                    Copy the innovator
                            Value Leader

                     Mass Branding        Price Leader
                          Product innovation leader
               Low                                    24
Choosing a Marketing Focus

What are the key marketing models for
Chinese companies to learn and follow?
1. _________________
2. _________________




                                     25
Customer Focused Marketing




                         26
Principles of Marketing
• Know your target customer (Nike)
• Orient organizational processes and R&D
  investment towards delivering superior
  value to the target customer (Gillette)
• Focus marketing resources on building
  segment dominant brands (Pepsi – for the
  younger generation)
• Price the offering to both deliver and
  capture value (Absolut Vodka)

                                             27
The Marketing Planning Process
• Review Vision and Goal (Intel)
• Use SWOT analysis to find the key
  marketing issues and opportunities (iMac)
• Research the customer and position the
  company to deliver superior value to the
  target – STP (Harrah’s Casinos)
• Design a winning Marketing Mix
• Annual Action Plan – Win sales and channel
  member support for the marketing
  strategy
                                               28
Building a Marketing Culture

It starts with a vision…
  –   Andy Grove – “Intel Inside”
  –   Jack Welch – never be #3
  –   Richard Branson – brand excitement
  –   Jeff Bezos – market share
  –   Jan Carisson – distinctive service
  –   Zhang Ruimin – quality

                                           29
Keeping a Customer Scorecard

• Marketing culture is also supported
  by the company’s systems and
  methods of self-evaluation…
  – Most companies keep a financial
    scorecard to track their market success
  – Marketing companies are turning to
    evaluation based on success in attracting
    and retaining customers

                                            30
    Financial Scorecard
Performance($Million) Base Year   1     2       3       4        5
Sales Revenue           $254      $293 $318    $387     $431 $454
– Cost of Goods Sold     135      152   167     201      224 236
Gross Contribution      $119      $141 $151    $186     $207 $218
– Manufacturing Overhead 48         58   63      82       90     95
– Marketing and Sales      18       23   24      26        27     28
– Research and Development 22       23    23      25       24     24
– Administrative Overhead 15        15    15      16       16      16
Net Profit               $16      $22   $26    $37       $50 $55
Return on Sales(%)        6.3       7.5  8.5     9.6      11.6 12.1
Assets                   $160     $162 $167    $194     $205 $206
Assets(% of Sales)         56        55  53      50       48   45
Return on Assets(%)        11.3    13.6 15.6     19.1    24.4 26.7
                                                               31
                  Marketing Scorecard
Market-Based Performance Base Year 1           2         3        4         5
Market Growth(Unit)        18.3%   23.4% 17.6% 34.4% 24.0% 17.9%
Comm Tech Sales Growth     12.8%   17.8% 13.3% 24.9% 18.2% 7.7%
Market Share               20.3%   19.1% 18.4% 17.1% 16.3% 14.9%

Customer Retention         88.2% 87.1% 85.0% 82.2% 80.9% 80.0%
New Customers              11.7% 12.9% 14.9% 24.1% 22.5% 29.2%
Dissatisfied Customers     13.6% 14.3% 16.1% 17.3% 18.9% 19.6%

Relative Product Quality   +19     +20   +17       +12       +9        +7
Relative Service Quality    +0      +0   -2        -3        -5        -8
Relative New Product Sales +8      +8    +7    +5            +1        -4

                                                                  32
Focusing on Customer Lifetime
Value
• Successful companies build relationships
  and loyalty with their customers.
• Consistent focus on relationships and
  loyalty requires a focus on the lifetime
  value of customers
• Transactions do not build relationships
  (Sewell Cadillac)


                                             33
How to Estimate Customer
Lifetime Value
• Estimate the number of purchase occasions by the
  customer over a given time horizon.
• Estimate the average amount spent per purchase.
• Subtract the costs of maintaining the account
  over the given time horizon.
• Add the value of the new referrals by the
  customer.
• Take the present value of this income stream with
  an appropriate discount rate.


                                                  34
Estimates of Customer Lifetime
Value
• SAS:                    Cadillac: Marlboro:
• 20 year business traveler 30 years,      30 year smoker,
• $480,000                  $332,000       $25,000

• Domino’ Pizza:           Ritz Hotel:
• 20 year eater,           20 years,
• $4,000                   $144,000

• Coca-cola:               AT&T:
• 50 year drinker,         30 year user,
• $11,000                  $72,000

                                                             35
What’s the Most Customer
Focused Company in China?
Your Opinion Please!
The most customer focused state enterprise is:
__________

Why?
The most customer focused private enterprise is:
__________
Why?
The most customer focused foreign enterprise is:
__________
                                                   36
Why?
Competitive Differentiation




                              37
Achieving Real Competitive
Differentiation
First Steps:
  – Marketing Objectives
  – Identity and size the geographic market
  – Identity your key marketing issues (SWOT
    analysis)
  – Segment the customer market
  – Target a customer segment
  – Position the company’s offering to be in the top
    5 with the target segment

                                                   38
Marketing Objectives
Market Goals:
  – Segment dominance
  – Market entry
  – Market creation or transformation
Product or Brand Goals:
  – Product expansion: bring new products to current
    markets
  – Market expansion: bring current products to new
    markets
  – Penetration: increase current product sales potential in
    current markets
  – Diversification: bring new products to new markets
                                                               39
SWOT Analysis

Identifying the Key Marketing Issues
  – Where can we compete? (Japanese
    Autos in the ‘70s; electronics in the ‘80s)
  – Where can we create new markets that
    utilize our unique strengths? (Pepsi in
    the snack market – Frito Lay)



                                             40
The iMac Opportunity - Apple
• Slowed growth and disappearing profits in a
  commoditizing PC industry
• Turned back to fundamentals: the Apple customer
   – Young, artistic, design conscious, loyal
• Rejuvenated the mid-high end of the PC market
  with a design-based strategy that reinforced
  Apple’s traditional association with multi-media
  applications
• Restored profitability in ’98-99, but what is next
  for Apple?

                                                       41
The Roll Film Market in China (1)

• What’s are the key marketing issues for China’s
  Lekai?
Market
   – Shares:
      • Kodak – 40%
      • Fuji – 27%
      • Lekai - 25%




                                                    42
The Roll Film Market in China (2)

• Developing Market
  – China could be the #1 or #2 roll film
    market by 2010
  – Current per capita consumption of film is
    one-third of the US
• Prices
  – Normal price for Kodak and Fuji is in the
    $2.1-2.5 range
  – Lekai is priced below $2
                                            43
The Roll Film Market in China (3)

• SWOT Analysis
  – Lekai’s Strengths:
    • State financial support
    • Owns express film development chain
      (1000+stores)
    • Access to inexpensive printing paper
    • More local branch sales offices than
      competitors


                                             44
The Roll Film Market in China (4)

• Weaknesses:
  – Late entry into digital market
  – Reliant on price to defend market share.
    Vulnerable in current price wars
  – Kodak Express has more stores (5000)




                                               45
The Roll Film Market in China (5)

• Threats:
  – Kodak “localizing” in both manufacturing
    and sales: new plants, sales offices(18),
    and aggressively growing Express retail
    outlets
  – Additional global brand competitors may
    enter the market: Agfa and Konica


                                            46
The Roll Film Market in China (6)

• Opportunities:
  – Fuji and others need greater local
    market sales and distribution presence
  – Industry sales growth has been strong:
    26% last year for Lekai




                                             47
The Roll Film Market in China (7)

• Marketing Objectives:
  – 33% market share in 5 years




                                    48
     3 Steps to Identifying the Key
     Marketing Issues (1)
· Choose two strategic dimensions of your
  marketing environment.For Lekai:
–    Quality/technology and price:
                      Price
     High                            Low

                                       Goal:33%
               Kodak
Quality
                Fuji
                             Lekai
               (67%)
                             (25%)
     Low

                                                  49
3 Steps to Identifying the Key
Marketing Issues (2)
• Assess the capability of the company to reach its
  marketing objective, paying close attention to
  controllable factors (like your strengths and
  weaknesses)
   –   Quality
   –   Brand Equity
   –   Distribution
   –   Size and growth potential of the current customer base
• Dose Lekai have the right capabilities? Or does
  Lekai need to re-focus its marketing objectives?

                                                                50
3 Steps to Identifying the Key
Marketing Issues (3)
• Does the company need to re-assess
  marketing objectives?
  –   Create new markets?
  –   Transform current markets?
  –   Penetrate current markets?
  –   Diversify?
  –   Expand product offering?
  –   Expand its markets?

                                       51
Redefining Markets: Tsingtao (1)
• Old Market:
                           Price
           High                           Low
               Budweiser
Quality                   Yanking
                                  Tsingtao

           Low
                                       New Market(?):
Marketing Problem:
1.How to participate in the Premium segment?
                                                        52
Redefining Markets: Tsingtao (2)
New Market:
               Price
                                         Quality:      Price:
                                         · Import · Income
Quality        Budweiser                · Premium ·(Gender)
                                          domestic ·(Age)
                     yanjing             · Mass
             Tsingtao:                   domestic
           Flavored and
            Nutritional
                          Tsingtao:      · (Flavors)
                        Mass Brands
                                         ·(Nutrition content)

Tsingtao moves towards the premium segment not by offering
   “more” quality,but by offering “different”qualities to different
   segments:they transformed the market
                                                               53
    Why Segmentation?
• Marriott uses a customer segmentation of travelers to
   identify key needs and wants in different segments and
   design a distinctive offering for each:
                 Quality
                    Premium Good         Standar Economy
         High      Ritz Carlton
         Above                 Marriott
 Price Average
        Average                         Courtyard
          Low                                     Fairfield Inn



                                                         54
Examples and Issues from China
 Examples:
 • Hui on Property Group:”modern living”
   apartments for young,single,white-
   collar workers
 • Tsingtao flavored beers for women
 • Tsingtao nutritional beers for older
   people


                                       55
 Examples and Issues from China
• Generational differences:Leo Burnett’s Consumer
  Quest Survey for McDonalds
- The Open Generation(18-34)wants a sense of
  accomplishment,more free time,and wants to be
  “modern”
- Older Generation wants to set a good example for
  children,work for the good of the country,and has a
  great deal of national pride
- Result:McDonalds ended an advertisement featuring a
  US-style mother-daughter relationship in favor of a
  more realistic portrayal of the generations:for
  example,a grandfather eating french fries with
  chopsticks
                                                    56
Examples and Issues from China
Issue
• Celular phones:
-   Does the customer want design OR technology?
-   Does the customer want design AND technology?
-   What is more important,and for which customer segments?
-   Motorola features its high end phones in glass cases and a
    Mercedes Benz display at Motorola Town:What is the
    message here?




                                                         57
What is a Segment?
• A Segment is a Group of Consumers that Share a
  Unique Set of Needs, Wants and Purchase
  Behaviors
• Segmentation Is the Process of Subdividing a
  Market into Distinct Sets of Consumers that
  Behave in the Same Way or Have Similar Needs
  and Wants




                                                   58
Levels of Segmentation
• Mass: a very large group in which diverse needs
  and wants can be served by the same product
• Segment: Large groups of people with distinctive
  needs and wants
• Niche: small groups of people with distinctive
  needs and wants that can be profitably served
• Individual: customization




                                                     59
What is Value to a Consumer?

• Segmentation seeks to discover how
  customers Value products and
  services
• Value is perceived value: the ability of
  the offering to satisfy a need or a
  want


                                         60
Bases of Consumer Segmentation
• Demographic    Behavioral    Psycho graphic
   Age           Occasions     Lifestyle
   Family Size   Benefits      Personality
   Gender        Usage Rate    Geographic
   Income        Loyalty       Region
   Occupation    Readiness     Size of City
   Education     Attitude
                 Application



                                            61
  What is Value in Business Markets?
Value in business markets is the worth,in
  monetary terms,of the
  technical,economic,service and social
  benefits the customer receives in
  exchange for the cost of acquiring the
  offering
The Value Equation:
(Valuex-Pricex)>(Valuey-PriceY)

                                            62
    Bases of Business Market
    Segmentation
Conventional              Progressive
Industry                   Application:OEM vs. MRO;
Customer Size             Lightweight Coated Paper
Customer Behavior   Customer Capabilities:Anystream
Geography                 Usage Situation:Emergency
                            situation pricing
                         Contribution to Profitability
                         (US West)


                                                    63
Identifying Segments
• Workable
Consumer Groups Are Differentiable:Physically and Behaviorally
  Distinct
Consumer Groups Are Measurable:Size,purchasing Power,etc
Consumer Groups Are Accessible:The customer can be reached
  with some (or all)element of the Marketing Mix

• Attractive
Consumer Groups Are Substantial:Large Enough to Meet the
  Business’Profit Goals
Consumer Groups Are Profitable:Traits Other Than Size May
  Justify targeting Them



                                                            64
  Identifying Segments
• Differentiability
Shui On has targeted young,urban,”modern” customers for “e-
  living” apartments and “loft” apartments
They recognize that this group has a different lifestyle than
  earlier generations of single,white-collar workers
• Measurability
There are 73 million teens in China with weekly incomes of 60-70
  RMB
Studies like Consumer Quest have shown that they have different
  attitudes than the older generations.They are more brand
  aware
VW gained strength in China by focusing its marketing on the
  commercial(rather than personal) car market

                                                                65
Identifying Segments

• Accessible
Tsingtao identified the women’s market for beer as a flavor
   market

• Substantial
Li-ning has become a recognized value brand with the huge teen
   market

• Profitable
Financial services companies focus on affluent investor
   segments representing as title as 2-5% of population


                                                              66
Identifying Segments

• A word on workability:
Many segments that appear attractive may not be
  workable in the company’s marketing environment
Psycho graphic segments do not work unless they can be
   reliably be related to identifiable traits(like age,gender,etc)
Psychographic and lifestyle segments can work well for brands
   that rely on “pull”(Coke and Pepsi)
Lifestyle segments can work well for brands that are sold in
   distinctive channels that “lifestyle cohorts” are likely to
   select for purchases in the brand’s product category
Lifestyle segments can work well when there are distinctive
   media through which they can be reached

                                                                67
Choosing a Base of Segmentation
• New Product or Technology
Consumer:behavioral profile of early adopters customers for
  cutting edge PC performance are gamers and multi-media
  users
Business:profile by importance of the application to the
  customer’s core business objectives –Anystream’s(streaming
  media management software) early-adoption customers are
  focused on building brands with innovative media channels




                                                         68
    Choosing a Base of Segmentation
• Mature Product
Consumer:profile by psychographics(lifestyle) and behavior
  to understand opportunities for image differentiation,
  brand extension, channel proliferation, and increased
  consumption per capita
Pepsi is for the younger generation (psycho graphic)
Arm and Hammer baking soda was used as tooth cleaner, then Arm and
  Hammer got into the toothpaste business(behavioral)
Many people think of buying a mattress,but few shop for them
  (behavioral segment).Mattresses are increasingly sold through mass
  retailers to provide these customers with a convenient opportunity
  to purchase.
25% of beer drinkers consume 75% of beer (behavioral segment:”heavy
  users”)


                                                                69
    Choosing a Base of Segmentation

• Mature Product
 Business customers:use the progressive bases of
  segmentation to understand what customers receive
  the greatest ROI from the product and its associated
  services




                                                         70
Consumer Segment Research
• Segmentation Methods
Clustering,factor,and conjoint techniques
  rely on large-scale consumer surveys to
  generate clusters of mutually-associated
  consumer characteristics.
Usually    these     are   associated    with
  demographic         and/or       geographic
  characteristics to permit accurate sizing
  and action ability
PRIZM Lifestyle Clusters are organized around geographic
  location    and   household    income:”money&brains,””rural
  industrial,”etc…
VALS: Actualizers, experiencers,etc…

                                                           71
Business Segment Research

All segments are based on Value:
• Internal engineering assessments
• Field value-in-use assessment
• Focus groups
• Survey:compositional or tradeoff analysis




                                              72
Selecting Customer Targets

•   3 Key to Effective Targeting:
•   Target segment needs and wants
•   Target segment attractiveness
•   Company SWOTs
S:Strengths
W:Weaknesses
O:Opportunities
T:Threats
All with respect to each segment
                                     73
Selecting Customer Targets

A Segment is Attractive if it Exhibits Some
  or All of the following Characteristics:
Large
Growing
Marginal Profitability
Few Competitors for its Purchases




                                         74
Selecting Customer Targets
Targeting Tradeoffs and Opportunities
• Volume versus Profitability
Are targeting decisions driven by production efficiencies?

• Segment     Attractiveness   versus
  Company Strengths and Weaknesses
Are targeting decisions driven by segment attractiveness, but
  without reference to real capability to deliver value to that
  segment?
Can key capabilities be outsourced?



                                                             75
 Selecting Customer Targets
Brand Value versus Segment Value
• Does the targeting decision reflect company priorities
  for the product/brand?
Products introduced to improve company image and drive sales in
   other products must attract the customers who will buy those
   products?
Chrysler PT has creased a sensation based on its innovative design.
   But does it bring Chrysler’s typical customers to Chrysler
   dealers?(also:Dodge Viper?)
• Is there a plan for extracting equitable value from
  the target segment?
VW used the “Beetle” to attract young people to its practical
  cars(Jetta and Passat),sold at a higher margin

                                                              76
The Targeting Decision
• You are the #1 Chinese maker of cell phones, and #4 in the
  Chinese market.You have just developed a new phone that is
  lighter than any phone on the market.
• The customer market is divided into two broad
  segments.Technophiles value advanced features first,
  convenience features second, and design third. Mainstream
  customers value design third.Mainstream customers value
  design, prestige and convenience .They think of technology
  only in terms of convenience and prestige.
• The technophiles are 10% of the population and contain 40%
  of the affluent market.Mainstream customers are 90% of
  population.But…




                                                           77
The Targeting Decision

• The mainstream market is further divided into two
  sub-segments:
Design-focused:These are 70% of the segment.In the design
  segment you have 40% of the affluent market
Convenience-focused:They are 30% of the segment and 20% of
  the affluent customers
• The Price-only segment is excluded from analysis

Who are the best customers for your                  new
 offering?(turn to next slide for worksheet)

                                                        78
             The Targeting Decision:worksheet
Segment     Need/Want     Attractiveness       SWOTs                             Target?
            s

Technoph    Most          •10% of population   •No brand equity with this
ile         advanced      •40% of affluent     segment
            technology    population           •No long-term competitive
                                               advantage in R&D

Design      Superior      •63% of population   •10% of your current customers
focused     design        •40% of affluent     are design-focused
                          population           •Moderate brand equity with the
                                               segment
                                               •Design adds 10% to cost of
                                               production

Convenien   Useful and    •27% of population   •40% of your current customers
ce-         fun           •20% of affluent     are convenience-focused
focused     features      population           •Good brand equity with the
            that are                           segment
            easy to use                        •Segment pays 15% less than
                                               “design” segment and 50% less
                                               than “technophile”
                                                                                  79
Positioning
• Positioning is the Act of Clearly
  Differentiating One’s Brands. Products,
  and Services (the Offering) So that They
  Occupy a Differentiated and Meaningful
  Position in the Target Customer’s Mind
  – Differentiated Position:The Brand, Product,or Service Is
    different from Others on some Dimension(Swatch:a mass
    market fashion watch)
  – Meaningful Position : The Points of Differentiation of the
    Offering Will Motivate Consumers to Buy (Customers can
    buy multiple watches to fit their clothes)



                                                             80
Foundations of Value Differentiation
 • Unique Benefit: Satisfies a felt need or want
   better than some alternative (Swatch watches fit
   the customer’s clothing)
 • Consumer problem: How the customer will benefit
   from using the product/service/brand(Luxury
   fashion watches are too expensive)
 • Target    Consumer:      A   well-described    and
   understood segment of the population (Young,
   fashion conscious people)
 • Benefit Support: The reason to believe the Unique
   Benefit(Innovative design,colors and advertising)



                                                    81
Foundations of Value
Differentiation
• Brand personality: The Perception of the Product as
  Influenced         by        Symbols,Media,Events:The
  Psychological Character of the Offering( Innovative
  advertising)
• Business Context: The Competitor with Whom You
  Intend to Compete for Market/Segment Share
  (Traditional low-cost watches,like Timex)
• Price: The Price must Support both the Value
  Positioning and the Plan to Source Volume from
  Competitors(Price must support multiple purchases)
                                                  82
Positioning Strategies

•   Feature Positioning (Cruise Lines)
•   Benefit Positioning (Soy Dream soy milk)
•   User/Application Positioning (Castrol GTX)
•   User Positioning (Dupont pillows)
•   Competitor Positioning (Lexus)
•   Product Category Positioning (Xerox)
•   Quality/Price Positioning (Haier)
•   Channel Positioning (Duxiana)


                                             83
Value Proposition
The core value consumers will receive from
using the product…how the company will solve
a consumer problem
• Perdue: More tender chicken at a moderate price
  premium
  – Target: quality conscious consumers of chicken
  – Benefit: Tenderness
  – Price: 10% premium

• Domino’s: A good pizza delivered hot to
  your door within 30 minutes of ordering


                                                     84
Major Value Propositions

•   Best quality(Ford)
•   Best performance (Castrol GTX)
•   Most reliable( IBM;Samsonite)
•   Best value for the money (Lexus)
•   Least expensive (Cooper tires)
•   Most prestigious( Bang & Olafson)
•   Best design (iMac)
•   Easiest to use (AOL)
•   Safest (Michelin; Volvo)

                                        85
Positioning Statement

• Positioning Statement: A Summary
  Statement Explaining Why the
  Positioning Strategy Will Succeed in
  the Targeted Segment




                                         86
Positioning Statement
            Positioning Template-Swatch
Target Customer:Young,fashion conscious people who want a
watch for every outfit.
Business Context:A traditional market low-cost watches that
offers very little innovation in design.
Value Proposition(1) Unique Benefit:The customer can buy
multiple watches to suit their clothing.
Value Proposition(2) Benefit Support:Innovative advertising
and a price point at which people can afford 2 or more watches.
Value Proposition(3) Brand Personality:Innovative and
fashionable
Positioning Statement:With Swatch,fashionable young people
can have a stylish watch for every outfit at a reasonable price.87
Positioning Statement
• How would you position the Haier-CCT
  cell phone?
 Positioning Template-Haier –CCT “Ultra-light”
 celular
 Target Customer:
 Business Context:
 Value Proposition (1) Unique Benefit:
 Value Proposition (2) Benefit Support:
 Value Proposition (3) Brand Personality:
 Positioning Statement:
                                                 88
Winning Positioning Strategies

Neutrogena Soap
• Mild residue-free soap formulated for PH balance
  (Benefits)
• Eleven ingredient formula that minimizes skin
  irritants (Attributes)
• Slow, Simple molding process to ensure quality
  (Quality/Process)
• Distribution primarily through drugstores (Channel)
• Few price promotions
• “Detailing” to medical community

                                                   89
A Common Error

• Empty positioning: unrealistic or irrelevant
  claims (Sometimes these work though:
  what secret need makes the Marlboro Man
  effective? Why do people believe beer will
  make them sexy ?)
• Positioning on a need rather than a
  want(Intelligent Cuisine)
• Positioning on an indefensible or unproved
  benefit/ attribute: common in high tech
  business marketing-“better return on
  investment,” “more scalable,” etc…         90
Communicating Value in Business
Markets
Building a Customer Value Model
• Put together a Value Research Team
• Select the customer segment with the best
  chance of success
• Gain customer cooperation




                                         91
Communicating Value in Business Markets

  Preparing for and conducting Field Research
  • The Value Research Team generates a
    comprehensive list of all the benefits and costs
    the customer will acquire from the offering
  • Gather data at the customer’s site
  • Calculate the complete ROI for the customer’s
    investment in your offering relative to the next
    best alternative
  • Build a database from a variety of customers


                                                       92
A Customer Value Model (1)

• Weldwood of Canada produced paper pulp. Buyers saw paper
  pulp as a commodity although paper pulp varied in tensile and
  tear strength, brightness,opacity, and cleanliness.
• Weldwood delivered the paper pulp tied with heavy gauge
  steel wire had to be cut either with expensive equipment or
  manually, sometimes resulting in worker eye injuries or
  carpal tunnel syndrome, resulting in loss work days.
• Weldwood decided to offer a wireless bale accomplished by
  gluing down flaps on the side of each bale,although mills
  worried that the flaps would burst upon shipment or the
  chemical glue would contaminate the paper.



                                                             93
A Customer Value Model (2)

• Weldwood assembled a Value Research Team(VRT)
  to build a Customer Value Model(CVM). They
  collected data from an early sample of users.
  Customers reported savings from improved
  safety,reduced manpower needs, reduced machine
  maintenance, and better worker morale.
• They sorted potential customers into four groups
  depending on the de-writing process used,etc.
  They found the savings to be:A:$3/ton B:$5/ton
  C:$10/ton D:$16/ton.
• Question: How should the glued bales be priced?

                                                 94
Final Thoughts

Customer…customer…customer!!!!
Make customers the center of your business
•   Understand the customer
•   Create value for the customer
•   Communicate value to the customer
•   Capture the value you create
Today we have taken the first step-
Understanding – with Research, Segmentation,
Targeting and Positioning
• For the next two days we concentrate on creating and
  capturing value through branding, pricing, distribution and
  communications
                                                                95

				
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