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Pricing Strategies Standard Standard Formula Price Adaptation Strategic Pricing

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Pricing Strategies Standard Standard Formula Price Adaptation Strategic Pricing Powered By Docstoc
					MBA 570
Workshop 1




        Sustainable Customer
            Relationships

                      Joseph Lewis Aguirre
         This Afternoon - The View
6:00 – 7:30   Administrative matters - PPS
7:30-7:45     Break

7:45 - 8:00   New product development and market potential
              and demand
8:00-8:15     Step 1 - Situational analysis related to scenario

8:15-8:30     Competitive landscape and customer purchase
              behavior
8:30-8:45     Step 2 - Frame the right problem

8:45-9:00     External trends and long term marketing
              objectives
9:00-9:30     Step 3 - End state and goals - SMART

9:30-10:00    WS2 Preview
MP-WS1
     How do You Spell Success
• Being successful in our occupation
  requires:
  – Lifelong Learning
  – Constant Personal and Professional Updating
  – Always working to improve to stay ahead of the
    competitors
  – Integrating Technology into personal and
    professional plans
  – Being multidimensional
  – Love what you do, do what you love!
  – Do you agree????????
             What I Must Do
• YOUR THOUGHTS?

• If Joseph were to help me with………
 in this class, I know I can complete THIS
   class and the program.
            Self Introduction

• Name
• Background
• Home location and Place
• Domain Expertise/Occupation/location
• One thing about me (something unique
  about yourself nobody would know you
  would feel comfortable sharing)
• Myers Briggs Tendency Indicator (MBTI)
• Write this information on your name tents,
  you will use it for choosing teams
  Personal Positioning Statement

Simulating a generalized communication
  system
WS1: New Product Development &
   Market Potential Demand
• New Product or Product Improvement?
• Target new products to existing customers or
  Target new group of customers?
               WS1: Markets
1. Forecast market potential and future demand
a) Organizational Markets
o Industrial
o Reseller
o Government
o Global
b) Online Buying
o E-marketplace
o Online auctions
             WS1: Customers

2. Identify your current and future customer and
  their needs
a) Consumer Purchase Decision process
o Perceiving a need
Problem Solving Model
WS1- Step 1: Describe the situation
Challenges, Opportunities, Probortunities

Ready, Fire, Aim

Data collection, TOB, Betsy the Cow
Tools
  What?
  Mind Mapping
    WS1: Competitive Landscape

3. Analyze competitive landscape and customer
  purchase behaviors
a) Consumer Purchase Decision process
o Seeking Value
o Assessing Value
o Buying Value
o Value in consumption or use
b) Psychological Influences
o Motivation and Personality
o Perception
STRATEGIC PLANNING

    Individualization   Interactivity
STRATEGIC PLANNING
STRATEGIC PLANNING
STRATEGIC PLANNING
STRATEGIC PLANNING
             STRATEGIC PLANNING




competitive advantage in relation to cost or differentiation advantage
STRATEGIC PLANNING


          Window of
          Opportunity when
          Solution remains
          Valid
WS1: Competitive Landscape - cont

o Perception
o Learning
o Values, beliefs, and attitudes
c) Sociocultural Influences
o Personal influence
o Reference groups
o Family influence
o Social class
o Culture and subculture
    WS1- Step 2: Frame the Right
              Problem
Probortunities

Is there a problem? What is the problem?

Problem statement
  - Leads to possibilities, not a single answer
  - Not a solution statement
  - Only the strong survive
  - Open to refinement
          WS1: External Trends

4. Identify key external trends (technology,
  economic, political, legal, etc.)
a) Environmental Scanning
o Social Forces
o Economic Forces
o Technological Forces
o Competitive forces
o Regulatory Forces
WS1: Long Term Marketing Objectives


 5. Establish long-term marketing objectives
 a) Building your marketing plan
 WS1- Step 3: Describe End State
              Goals
To create value, includes focus on the future

What is the ideal future
Specific goals to measure attainment of that future

Who are the stakeholders? Engage stakeholders

Tools
  Mind mapping
  Communications Plan
WS2- Product Development Agenda
WS2: Marketing Concepts

4Ps + 2Is
Strategy
Domain Name
Viral Marketing
Stickiness Index
Affinity Groups
            Stickiness Index
AltaVista
Alltheweb
Google
MSN
Infoseek
Hotbot
Fast
     The Marketing Concept


                      Customer
Profits               Satisfaction



            Company
            Effort
     eBusiness Planning Framework
Environment   Competition     Objective    Technology       Customers




 STRENGTHS, WEAKNESSES, OPPORTUNITIES, THREATS,
 TRENDS (SWOTT)


    SEGMENTATION            TARGETING             POSITIONING




    PRODUCT          PRICE            PROMOTION         PRICE
  Strategy: Growth Matrix

PRODUCT
              PRESENT       FUTURE
 MARKET
PRESENT     Market        Product
            Penetration   Develop.
FUTURE      Market        Diversify.
            Develop.


  Ansoff‘s Product Market Matrix
           The Vision Thing

“It’s all about VISION, because…
   In the absence of Vision we default to
     Organization...
   In the absence of Organization we default to
     Activity...
   In the absence of Activity we default to
     Meetings...
   In the absence of Meetings we default to
     reports…”
       Visions that work

–Coke: ―A coke within an arm‘s length of
 everyone on the planet‖
–Intel: ―It‘s what‘s inside that counts‖
–Nike: ―Just Do It!‖
– Disney: ―Can it wear ears?‖
Framework for Market Opportunity
    Leverage the Internet to Improve the      • MSN CarPoint identified an opportunity to leverage the
                                              Internet to deliver customer value in the car industry
      Consumer Car-Buying Process

                                              • The retail car-buying process was frustrating and
  Car Buyers Are Dissatisfied With Current    inefficient:
                                                   • Little information available to the consumer
        Retail Car-Buying Process
                                                   • Bargaining with salesperson viewed as an hassle
                                                   • Long process overall

  Shoppers Who Feel Intimidated by Sales      • MSN CarPoint selected two primary target
  People and Look for More Efficient Way      segments for its service:
                                                 • ―The intimidated by the process‖
                                                 • ―The information seekers‖

 Microsoft’s Software and Free Placement on   • MSN CarPoint could leverage Microsoft’s expertise
               All Its Websites               in software development, its brand name and its
                                              multitude of online properties

                                              • Competition was getting fierce with more and more
 How Big Is the Online Car-Buying Market?     online car services entering the market…
  Who Are CarPoint’s Main Competitors?        • But the financial opportunity was large: 66% of
                                              new car buyers were estimated to use online
                                              services in 2000

                                               • In 1996, the first version of CarPoint was shipped
      Make “Go / No-Go” Assessment             • By 1998, CarPoint was driving $5 million in car
                                               sales a day
       SEGMENTATION OPTIONS

 Segmentation Type                  Description                Examples of Variables

                         Divides market into geographical
Geographics                                                  Country, region, city
                         units
                         Divides market on the basis of      Age, gender, income,
Demographics
                         demographic values                  education
                         Divides market on the basis of      Number of employees,
Firmographics
                         company-specific variables          company size
                         Divides market based on how
                                                             Website loyalty, prior
Behavioral               customers actually buy and use
                                                             purchases
                         the product
                         Divides market based on the
                                                             Routine occasion, special
Occasion (Situational)   situation that leads to a product
                                                             occasion, part of day
                         need, purchase or use
                         Divides market based on lifestyle   Personality (laid-back, type
Psychographics
                         and/or personality                  A), lifestyle
                         Divides market based on benefits
                                                             Convenience, economy,
Benefits                 or qualities sought from the
                                                             quality
                         product
SEGMENTATION OBJECTIVES

                 Customers must demonstrate needs, aspirations or behavioral patterns that are similar
Meaningful        within a segment and different across segments
                   – A distinction between a price-sensitive and a quality-seeking segment is meaningful,
                      since the two segments demonstrate distinguishable sets of needs



                 A company must be able to reach customers within each segment through effective and
Actionable        targeted marketing programs
                    – A customer segment consisting of customers with blue eyes is not actionable, since
                      it is very hard to identify and reach only customers with blue eyes



                 Segments must be large and profitable enough to make the investment in serving them
Substantial       worthwhile
                   – MyCFO.com is targeted toward high-net-worth individuals, helping them manage
                      their portfolios; even though the number of those individuals is small, the dollar
                      amount managed is sizeable, thus constituting a substantial segment


                 Key characteristics of the segments (e.g., size and spending patterns) must be easy to
Measurable        measure
  Carli’s Strategy: HP Product Mix BC

              a more balanced revenue mix

    *All data based on estimated trailing four quarters. Source: SEC filings, press releases, and company estimates.




imaging & printing                            services                                 imaging & printing
                                                                      access
      41%                                       18%                                          22%
                              access                                   48%                                             access
                               21%                                                                                      33%



                   hp                                    compaq                                 combined

                                                                                  services
                             enterprise                                             19%                           enterprise
 services                      19%          enterprise
                                                                                                                    26%
   19%                                        34%
            total: $47 billion                      total: $40 billion                         total: $87 billion
    Post Carli’s : HP Beyond Ink Sales

              a more balanced revenue mix

    *All data based on estimated trailing four quarters. Source: SEC filings, press releases, and company estimates.




imaging & printing                            services                                 imaging & printing
                                                                      access
      41%                                       18%                                          22%
                              access                                   48%                                             access
                               21%                                                                                      33%



                   hp                                    compaq                                 combined

                                                                                  services
                             enterprise                                             19%                           enterprise
 services                      19%          enterprise
                                                                                                                    26%
   19%                                        34%
            total: $47 billion                      total: $40 billion                         total: $87 billion
DIGITAL CAMERA SEGMENTATION
            E-BOOKS SEGMENTATION
         Purchase         Self-Consumption                              Gift                            Institutional
         Occasion                                                                                                            By
                                                                 Hobby or
                    Business Education   Leisure       Leisure    Special Collection   Business   Corporate Education      Request
Reader                                                            Interest


             39

College
Education
                                             Hobby or Special
             40+
                                                 Interest
                                                                                        In-Depth Topical                    Comp-
                      Reference and
                                                                                          Insights and                     endium
                    Research Materials
                                                                                           Discussion                      by Topic
             39

Moderate                                                                                                        Required
                                                                     For Display
Education                                                                                                       Reading

             40+




             39                              Entertainment                                                                Advice
                                                                                                                             and
Limited                  How-To                                                             How-To
                                                                                                                           Recom-
Education              Information                                                        Information
                                                                                                                           mend-
             40+                                                                                                            ations
   POTENTIAL eBAY CUSTOMERS

               Promotional
                  Behavior                     History of Responding to Promotions

User                         Very High         High         Moderate           Limited          None
Demographics

                 39
 High
Income
                              Active Deal-Makers with
                 40+                  Means                                      Passive Collectors
                                                              Active
                                                             Frugal            Ease
                                                            Collectors
                 39                                                           Convenience
 Moderate
Income
                 40+          Active Frugal Collectors


                 39
 Limited                                                                       Limited Accessibility or
Income                                    Price-Sensitive
                                                                                      Options
                 40+
     Elements of Customer Experience
                                               A certain level of functionality must exist in order for
1.           The Objective Element              a site to work; basic standards and expectations
                                                must be met

                                               Relates to the individual’s unique perception of the
2.          The Perception Element              encounter with the firm


                                               More than just the economic transaction - the entire
3.          The Encounter Element               customer encounter experience includes both process
                                                and output measures of the shopping experience

                                               Includes a customer’s response to multiple
4.      The Reactions-to-Stimuli Element        variables, from the tactical layout of the store/site to
                                                high-level interpretations of the meaning of the brand

                                               To the extent that it is relevant, assessment of the
5.           The Sensory Element                customer experience needs to incorporate all five
                                                senses

                                               Cognitive responses are thoughtful and evaluative in
6.    The Cognitive and Emotional Element       nature; emotional responses tend to capture moods,
                                                attitudes and feelings of the customer

                                               Previous, separate experiences can affect a
7.           The Relative Element               consumer’s reaction to various stimuli during a
                                                shopping experience
    Stages of Customer Experience
                                                                    This Is What the Customer
                               If a Firm Gets This Right …
                                                                            Experiences
Stage One: Functionality   ? Design and information             ? Site is easy to use
                             architecture                       ? Quick downloads

                           ? Deep understanding of customer
                                                                ? Intuitive navigation
                             behavior
                                                                ? Site reliability
                           ? Platform independence


                           ? Efficient transactions

Stage Two: Intimacy        ? Warehousing and mining             ? Personalization
                           ? Tailoring of pages and offerings   ? Increasing trust


                           ? Overlay human interaction          ? Repeated experiences of

                           ? Integrated data
                                                                  exceptional value
                                                                ? A sense of ―being in the
                           ? Consistent performance over

                             time                                 know‖
                                                                ? Consistent experiences
                           ? Constant innovation and

                             upgrading (incremental or          ? Significant benefits relative to

                             significant)                         other offerings
Stage Three: Evangelism    ? Supports evangelists               ? Desire to make messages to

                           ? Acknowledgment of evangelists
                                                                  the market
                                                                ? Community benefits
          Strategy Decision Areas

Place           Product           Promotion           Price
• Objectives    • Physical        • Objectives        • Objectives
• Channels        Goods           • Blend             • Flexibility
• Logistics     • Service         • Sales People      • Geographic
                • Features        • Advertising         Terms
                • Quality         • Sales             • Discounts
                • Accessories       Promotion         • Sales
                • Installation    • Publicity           Promotion
                • Warranty                            • Publicity
                • Product Lines
                • Packaging
                • Branding


Individualization                     Interactivity
     Potential Markets

Element         Focus on
Money           Relative Buying Power
Growth          Rate of Growth
Concentration   Population Density
Literacy        Communication concerns
II & The Product Mix

            Interactivity



                  Branding


PLACE   PRODUCT     PROMOTION   PRICE




             Individual
              The II Through Stages

                            One Seamless Experience

                                                                              Personalized
                                                                                Website
 Banner Ad
                                                                               Permission e-
(to promote                              Website                                mails
awareness)                                                                     Individualized
                                                                                offerings

               User clicks on banner                 User can set up the webpage
               to find out more                      according to personal preferences,
                                                     register for e-mails, give feedback,
                                                     or make a purchase




Awareness                              Exploration                             Commitment
Impact of Internet Marketing

                                                     Marketing Resource Allocation
                                                          Offline       Online
   Location of Revenue Stream

                                Bricks-and- Mortar

                                                        Cell 4         Cell 2




                                                        Cell 3         Cell 1
     Brands through history

–   “Blackbeard”          – The Kennedy’s
–   “Nazi”                – Al Capone
–   Volkswagen            – Ted Turner
–   Believers             – CNN
–   Infidels/Gentiles
                          – Nickelodeon
–   IBM
                          – Marlboro
–   Amazon.com
–   Andersen Consulting   – Sports Illustrated
                            Swimsuit Edition
–   Route 66
–   Tom Clancy            – The New York Times
–   Mark Twain            – “Them”
–   Albert Einstein       – “The White House”
  Brands through history


– Brands               – NOT Brands
  •   Mercedes           •   General Motors
  •   The Beach Boys     •   The Beatles
  •   Kodak              •   Xerox
  •   Disney             •   Time-Warner
  •   Intel (Today)      •   Berkshire Hathaway
  •   Virgin
                 Why Brand

–   67% - There is no risk associated with buying
    brands with which you are not familiar
    •   Lack of substantive differentiation
–   72% - A well-known brand is an important
    factor on making buying decisions
    •   ―Selection shorthand‖
               Brand Types

–   Brand as Energy:
    •   Amazon.com
–   Brand as Security
    •   Stew Leonard‘s
–   Brand as Quality/Choice Editor
    •   Nordstrom
–   Anti-brand
    •   Audi
–   Evolving: Brand as known and reliable sub-
    contractor
    •   IT Opportunity
                 Brand Drivers

Brand matters because We all live in a Plan
  ―B‖ Universe
    – Limited Resources
      • Time
      • Money
      • Energy

    – Unlimited Options

    – Limited Consequences
            Brand POA Factor
• Brand determines the Purchase Ownership
  Association (POA) Factor
  – Terms of Engagement for 3 possible types of
    relationships
     • Purchase
     • Ownership
     • Association
  – Your Brand carves out the space you ‗own‘
                Brand POA Factor
                         Purchase    Ownership Association
Normal
(As bad as expected)      Neutral      Neutral     Neutral


Enjoyable
(Works as it SHOULD!)    Intrigued    Intrigued   Intrigued




Special
(better than expected)   Expectant    Expectant   Expectant


Rewarding
(measurably/tangibly     Committed   Committed    Committed
advantaged)
                   Brand POA Factor
                          Purchase         Ownership Association
Normal
                           BJ’s Club
(As bad as expected)
                           Warehouse


Enjoyable
                           Home Depot
(Works as it SHOULD!)



Special
                           Nordstrom
(better than expected)


Rewarding
                           Any airline’s
(measurably/tangibly
                         Mileage Rewards
advantaged)
                   Brand POA Factor
                         Purchase   Ownership Association
Normal
                                     McDonald’s
(As bad as expected)


Enjoyable
                                      Coca-Cola
(Works as it SHOULD!)



Special
                                      Outback
(better than expected)
                                     Steakhouse


Rewarding
                                        United
(measurably/tangibly
                                    Premiere Flyer
advantaged)
                  Brand POA Factor
                         Purchase   Ownership Association
Normal
                                              Planet Hollywood
(As bad as expected)


Enjoyable
                                                    Levi’s
(Works as it SHOULD!)



Special
                                                   Hilfiger
(better than expected)


                                              United Red Carpet
Rewarding
                                                     Club
(measurably/tangibly
advantaged)
               Brand Truisms


•   Every company has an ‗identity‘ – whether it
    chooses to control that image, or not
•   A Good Brand is an identify which is
    –   Recognition ―shorthand‖
    –   Consciously developed
    –   Purposeful
    –   Cultivated
•   A Bad Brand
    –   Is ‗what happens‘ to you
    –   The discrepancy between promise and delivery
            Brand Truisms


• A Brand is the difference between inherent
  worth and perceived value
• A Brand is a Unique Selling Proposition
  which translates into
  – Marketing Advantage
  – Profit Margin
  – Higher Multiples
              Brand Truisms


• A Brand has
  –   An ―aura‖
  –   Identity
  –   Personality
  –   Customer-‘stickiness‘
  –   Positive inertia
         Brand Examples


For Example:
 What is a brand worth?




Chicken
 Poop
             Haul it Away, Please!
  What is a brand worth?

Premium
 Natural
Fertilizer

               $ 10.00 per drum
   What is a brand worth?

Agricultural
 Chemicals


                   $25.00/c.wt.
What is a brand worth?

                 DUPONT
            Better Living through
                 Chemistry




           $50/bag
What is a brand worth?
Measuring Brand Value
 The Business and the Brand are Intertwined
  The Business                                    The Brand

    Customers                                     Customers
  (number/type)                                 (number/type)

                           Defines            Potential Markets
                             &                      Served
   Fees/Prices             Drives               (size/growth)
    (revenue)
                                                 Brand Share
                                                  Potential

                                             Brand Contribution
  Business Value                               Brand Value


 Today’s business is the DNA of the Brand and its potential to
  create value via strategic decisions, such as diversification
                      Brand Equity
                                          Brand Equity

Brand Loyalty       Brand Awareness           Perceived Quality      Brand Associations       Other Assets


   Reduced          Anchor to Which           Reason-to-Buy         Help Process /         Competitive
  Marketing          Other Associations                              Retrieve Information       Advantage
    Costs            Can be Attached          Differentiation /
    Trade                                         Position             Differentiate /
   Leverage            Familiarity -                                      Position
Attracting New           Liking                    Price
  Customers                                                             Reason-to-Buy
   Time to             Signal of             Channel Member
  Respond to            Substance /                Interest            Create Positive
  Competitive          Commitment                                     Attitudes / Feelings
    Threats                                      Extensions
                        Brand to be                                      Extensions
                         Considered




Provides Value To Customer By Enhancing               Provides Value To Firm By Enhancing :
Customer’s:                                                 Efficiency & Effectiveness of Marketing
                                                            Programs
       Interpretation / Processing of Info                 Price / Margins
       Confidence in the Purchase Decision                 Brand Extensions
       Use Satisfaction                                    Competitive Advantage
Measuring Brand Value
                   Brand
                  Awareness


                    Unique
                    Selling
                  Proposition
   Brand                           Brand
   DNA                           Experience

Brand Awareness is Only One element of Brand Equity
Measuring Brand Value- Brand
           Equity
   Brand Equity is the Premium that Consumers Pay
   for Your Products and Services...
            Demand Curve Shift With Brand Equity
               Quantity
                     Q2
               Volume
                Effect
                                           Brand
                    Q1                     Equity
                                          Leverage




                           P1     P2          Price
                            Price or
                          Margin Effect




   …And, the Premium that Investors Pay for Your
   Company.
Measuring Brand Value- Brand
        Equity Vs PE
                 How Brand Equity Impacts PE
   Financial-Centric Companies           Brand-Centric Companies
    Company             PE      MktCap    Company         PE        MktCap
   1. Bergen Brunswig   14       $2.1B   1. P&G           35.2      $133B
   2. Ingersol Rand     19.7     10.9B   2. Gillette      39.2        50B
   3. Dow Chemical      21.5     27.6B   3. Coca Cola     47.9       146B
   4. Conectiv          11.12    $2.0B   4. Disney        40.7      $61.4B


                                         Hot Market-Centric Companies
                                          Company         PE        MktCap
                                         1. AOL           253       $109.4B
                                         2. Yahoo         311        $39.6B
                                         3. Excite        491         $7.3B
                                         4. Amazon-119     $20.2B



 The Reason Brand-Centric Companies have (traditionally) higher
    PE’s stems from premiums in pricing and growth potential
                  Advertising

        How Much Advertising is Enough?


                 Brand-Centric Companies
 Company       U.S. Revenue    U.S. Ad Spending   Ad $ as % of Sales

1. P&G         $18,460M        $2,743M                 14.9
2. Gillette     3,682M            578M                 15.7
3. Coca Cola    6,443M            710M                 11.0
        Advertising Spending


Comparables          Brand $$

Conectiv      .6%
                     Kodak          5.7%
SBC           1.3%
BellSouth     1.5%
                     Cendant        5.4%
AT&T          1.5%   Sherwin-W.     6.3%
Bell A.       1.9%   Starwood     23.4%
MCI           3.9%
Sprint        3.5%
Advertising Spending


 Standards

 Disney      7.0%
 Amex        3.1%
 GE          .46%
Building a Brand Vs Brand Equity


  – Brand Awareness
    • People KNOW who you are
  – Brand Equity
    • People pay Premium
      – To do business with you
      – To own you
Brand Equity Dimensions


–Awareness
–DNA
–Experience
  Building Strong Brands


– Vision
– CEO as ‗Keeper of the Marque‘
– Consistency
– Commitment
– Patience
       Building Strong Brands


• Bases for Vision
  –   Promotability
  –   Operational Excellence
  –   Product Excellence
  –   USP
  –   Powerful Potential
      Building Strong Brands


• If it doesn‘t ‗line up‘ – it doesn‘t add up
   – What you SAY to the world
   – What you DO in the world
   – What you DO inside
      Branding Strategy

STATE              STRATEGY
Rejection          Change Position
Non Recognitions   Increase Awareness
Recognition        Continue Education
Preference         Maintain Availability
Insistence         Develop High Brand Equity
                Online Branding


• ―E-branding is more important [than e-commerce]. And it
  must come first. Because few people will buy your stuff –
  online or off – unless you are top-of-mind.‖ – Annette
  Hamilton, Executive Producer, ZDNet

• ―Brand is the price of entry [to the Internet], not the
  winning strategy.‖ – Dylan Tweney, infoNet

• ―By the time your potential customers log on, they already
  know what they‘re looking for, and they often know from
  whom they want to buy it. … They‘re just not listening to
  branding messages anymore.‖ – Michael Fischler,
  Principal, The Pubs Group
Selected Internet Brands
Successful Online Branding Examples


                                      Established as Traditional                   Established as Online
                                               Brand                                       Brand

                                        Branding          Branding and     Intermediary/
                                                                                             e-Commerce
                                         Online           Selling Online   Vertical Portal

                   Business-
                                                            American
                      to-                  Ragu                               Yahoo!           CDNow
                                                             Airlines
                   Consumer

                   Business-
                      to-                 Boeing          Cisco Systems        Avnet          NexPrise
                   Business




  Source: PricewaterhouseCoopers Moneytree Report 2000.
               Online Branding

• ―Brands stand as comfort anchors in the sea of
  confusion, fear, and doubt. In dynamic markets,
  strong brands have more value than ever, precisely
  because of the speed with which these markets
  move.‖ – Chuck Pettis, Technobranding

• ―It took more than 50 years for Coca-Cola to become
  a worldwide market leader, but only five years for
  online search engine Yahoo to gain market
  dominance. The role of the brand has changed
  dramatically and has created a vacuum between
  offline and online brands.‖ – Mark Lindstrom,
  Executive Director, ZIVO
         Brand Equity Conceptual Model

                                                                    . . . provides positive      . . . and benefits both
                   A good brand . . .                             consumer responses . . .     target customers and firm

        Product, Price, Community, Communication                        Brand Awareness            Customer Benefits
                 and Distribution Programs
                                                                             Depth                    Confidence
                      Wraparounds
                                                                             Breadth                  Loyalty
                                                                                                       Satisfaction
                                                                        Brand Associations
                      Core Product/                                          Strength             Firm Benefits
                        Service                                                – Relevant
                                                                                                       Reduced
                                                                               – Consistent             marketing costs
                                                                             Valence                  Increased
                                                                             Uniqueness                margins
                                                                               – Memorable             Opportunity for
                                                                               – Distinctive            brand extensions




Source: Keller (1996), Aaker (1996), Strategic Market Research Group, Marketspace Analysis
    Value of Online Brands

                                         Strength of Brand
    A Strong Brand Essential
                                       Is Not That Important
? A strong brand name provides     ? Alliances — not strong brands
  a clear presence in the market     — are the key to winning in
? Strong brands attract
                                     the marketplace
  customers                        ? Readily available third-party
? Strong brands carry positive
                                     evaluators will increasingly
  associations with consumers        influence online consumption
? Clear brands are associated      ? Speed to market is more

  with higher conversion rates       important than branding
? All current online ―winners‖     ? The trend toward

  have strong brands                 customization is leading to an
                                     environment where the
                                     meaning of a ―mega   -brand‖ is
                                     no longer relevant
                                   ? Current online winners may

                                     have strong brands, but so do
                                     a number of ―big losers‖
     Branding Process
Step 1   Clearly Define the Target Audience



Step 2   Understand the Target Customer



Step 3     Understand the Competition



Step 4    Design Compelling Brand Intent


          Identify Key Leverage Points in
Step 5         Customer Experience


Step 6    Execute the Branding Strategy



Step 7     Establish Feedback Systems
               Branding Type Comparison
     Branding
                                                 Offline                                                            Online
     Element
1. Clearly Define the   ?   Limited to manageable number of segments to               ?   Could include larger number of segments based on values or
   Brand Audience           prevent inconsistent messaging                                interests rather than demographics
2. Understand the       ?   Requires thorough understanding of environment,           ?   Requires thorough understanding of desired purchase and
   Customer                 desired purchase and usage experience                         usage experience in both the offline and online environment
3. Understand the       ?   Requires monitoring of competitor advertisements and      ?   Competitor advertisements and some activities can be directly
   Competition              activities                                                    observed online
4. Design Compelling    ?    Brand intent (desired positioning) designed to address   ?   Greater opportunity for customization of key messages
   Brand Intent             the needs and beliefs of target segm ents
5. Identify Key         ?   Buying process is typically a simplified representation   ?                               ore
                                                                                          Buying process tends to be m dynamic and flexible
   Leverage Points in       of customer segment behavior with static leverage
   Customer                 points
   Experience
6. Execute the          ?   Strong, positive brands are built up over time            ?                              i
                                                                                          Online interactions bring n added concerns of security and
   Branding Strategy        Image reinforced through variety of offline media             privacy
                        ?
                            Marketing strategy includes plan for sequenced            ?   Limited familiarity with online brands makes fostering trust more
                        ?
                            growth and adjustment of brand based on changing              difficult
                            customer needs                                            ?   With the ability to customize, one customer’s brand image may
                            Building brand awareness requires significant                 be different from another customer’s brand image
                        ?
                            investment                                                ?   Customization for multiple s  egments and opportunity for early
                            Building brand loyalty takes time offline, especially         recognition of the changing customer requires a corresponding
                        ?
                            because early customer receptivity to brands is               tailoring of brand intent
                            difficult to assess (and usually involves market          ?   Building brand awareness requires significant investment,
                            research)                                                     especially for those competitors who are not first in their
                                                                                          category online
                                                                                      ?   Brands have the potential to generate loyalty more quickly,
                                                                                          especially if customers are targeted effectively
7. Establish            ?   Collecting and analyzing customer feedback is more        ?                                                   ow
                                                                                          Sophisticated tools exist for tracking online; all for
   Feedback Systems         time-consuming                                                anonymous, interactive, quick feedback
                               Issues
• How do companies determine level of Ad or PR Spending
   – Industry Standards
   – Goal Standards
      • Higher if you are growing or protecting brand
      • Lower if you are in maintenance mode
   – Situational Standards
      • Go away in appropriate situation
          – eg - airlines in plane crash
      • Be VERY visible in appropriate situation
          – Smart utility in outage scenarios
                   Issues

• How do companies determine level of
  Ad/PR Spending
  – There are no ‗ideal‘ GPR levels of exposure
     • Message-dependent
     • Competitive environment-dependent
     • Goal-dependent
     • eg - introducing new products/brands/copy
       requires higher GRP‘s than does
       maintenance. Even maintenance GRP‘s go
       UP in competitive environment
                    Issues
• Should we trade off Brand Advertising for ‗feet
  on the street?‘
  – Good Branding builds sales AND equity
  – ‗Feet on the street‘ and product
    marketing builds sales and CAN
    diminish Brand Value over time
     • Automobile rebate example
     • Competitive computer advertising example
    Issues: Success Metrics


• A Good Brand initiative will yield tangible
  results
  – You can‘t react/adjust unless you know it‘s
    working/not working
  – You can‘t know if it‘s working/not working
    unless you measure it
     Issues: Success Metrics


• Need Regular evaluation:
   – Need to measure Brand Equity rather than simply
     Brand Awareness
   – Need a regular review of Advertising/Equity/Sales
     Impact charts
• Consider Exit Strategy as the objective
   – If you exit, you win
   – If you don‘t exit, you still win
   – Measure Equity at PPE (Presumed Point of Exit) which
     defines the growth or attrition in the presumed value of
     the company at a potential sale point
    Issues: Success Metrics


• Need Regular evaluation:
  – % of target population who ‗gets‘ our brand
    concept
  – # of new customers
  – Change in customer‗churn‘
  – Profitability increases
  – Open-ness to buy new prospects
            Brand Checklist


 Do WE know who we are?
 Do we know who we want to do business with?
 Do we know what the target market‘s preferred
  terms of engagement are?
 Do we understand the competitive marketplace?
 Have we Mapped-The-Gap in the competitive
  marketplace?
             Brand Checklist

 Are we willing to commit long-term resources for
  long-term gain?
 Do we have the ‗guts‘ to live by the promises we
  make in public?
 Do we understand the issues well enough to be
  brief? (Define the Vision)
 Do we understand who needs to do what to
    Create the Vision
    Maintain the Vision (e.g. –can it wear ears?)
    Expand the Vision (We can‘t know everything at the
     start)
                  Branding Summary
– Branding is fundamentally different from the other marketing
  activities — product, pricing, communication, community
  and distribution — in three ways:
  • Brands are reflections or outcomes of the firm‘s marketing activities
  • Unlike the other activities, branding is an integral part of every
    marketing activity and strategy
  • Strong brands can be used to enhance the effectiveness of all other
    marketing activities




- The presence of a strong brand enhances positive marketing
  activities such
  that awareness, exploration and commitment are more
  effectively established.
 Keys to Customer Relationship




            Exploration /
Awareness                   Commitment   Dissolution
             Expansion
Deadly Sins of Customer Experience
Customer Experience Over Time
Branding Vs Customer Experience


            Brand Awareness                            Customer Experience Is
          Is the Key to Success                          the Key to Success

Building brand awareness leads to traffic    Focusing on customer experience is the
Investors need to see site traffic and the     single most profitable thing a business
  likelihood of future profitability             can do
Offering a great customer experience         Customers   that have a positive
  when nobody knows about the site is a          experience with the site are more likely
  waste of resources as long as a baseline       to keep coming back and to tell their
  functional standard is being met               peers about it
                                               Positive customer experience leads to
                                                 purchases at commerce sites,
                                                 exploration at content sites and
                                                 participation at community sites
Goals for Creating Customer
         Experience
1.   Create a Rich Description of the Target Customer


2.     Develop Use-Case Scenarios for Each Target
                       Segment

3.      Effectively Integrate the Online and Offline
                         Experience

4.
      Articulate Clear Stages of Desired Experience


5.    Effectively Assess Relative Levels of Hierarchy


6.           Highly Leverage the Evangelists
       Customer Interface
                        Site’s layout and design
1.      Context

                        Text, pictures, sound and video that
2.      Content          webpages contain

                        The ways sites enable user-to-user
3.    Community          communication

                        Site’s ability to self-tailor to different users
4.   Customization       or to allow users to personalize the site

                        The ways sites enable site-to-user
5.   Communication       communication or two-way communication


6.                      Degree site is linked to other sites
      Connection

                        Site’s capabilities to enable commercial
7.    Commerce           transactions
Content


 Offering Mix



 Appeal Mix


Multimedia Mix



Content Type
 Community


  Community can create
    attractive content




   Community can make
certain activities possible or
   easier, thus satisfying
    needs not attainable
         individually
                     Customization

                            Personalization


                            Tailoring by Site



          Personalization                       Tailoring by Site

? Login Registration                 ? Tailoring based on past user
? Cookies
                                       behavior
                                     ? Tailoring based on behavior of other
? Personalized E-Mail Accounts


? Content and Layout Configuration
                                       users with similar preferences
? Storage


? Agents
Is– Land’s End
         Is– Mercury Mariner
http://www.mercuryvehicles.com/marinerhybrid/preorder.asp
Is – Luxury Retailer on the Web
      http://www.pearlparadise.com/
       Interactivity, Viral Marketing

Burger King‘s: http://www.subservientchicken.com/
GAP‘s: http://www.watchmechange.com/
Levi Jean Finder
http://www.us.levi.com/fal05a/levi/jeanfinder/l_jf_app.jsp?bmUID
=1138045809789

Mitsubishi: Thrill Ride Challenge
http://www.mitsubishicars.com/06eclipse/
Ford Supercar Challenge:
http://www.fordvehicles.com/supercarchallenge/err/index.asp
Sims: http://thesims.ea.com/index_flash.php,
http://simcity.ea.com/about/simcity4/flash.php
http://www.jamster.com/s/jiw/html/affiliate/om/us/buy_this_real_t
one/index.htm?tduid=58ebbda74fa9786e730de3c098bb54d9
           Interactivity, Individualization
Website        Jeans           Process           FIT                 Comment
                               Virtual           Women‘s: Size       Custom tester
Landsend.com   $45-54          model/custom      off Men‘s: Tight    found difficulty in
                                                                     selecting color
                                                                     onscreen
Levi.com                       Jeanfinder sort   Good fit - looked   Good, simple
               $40-44                            different online



Shopbop.com                    View pair on      Perfect             Expensive, click
               $185.00         model with                            out of guide to
                               selected body                         find
                               type
Tommy.com      $110.00         Photo changes     Not too good.       Impressive level
                                                                     of customization

Mejeans.com    Custom/$89.99   High level of     Close               Good videos,
                               customization                         difficult to use.
               Source: WSJ
               1/19/2006
                 Communication

                                 Broadcast


                                 Interactive


             Broadcast                             Interactive

? Mass Mailings                         ? E-Commerce Dialogue
? FAQs                                  ? Customer Service


? E-Mail Newsletters                    ? User Input


? Content Update Notifications


? Broadcast Events
  Connection

      Links to Sites



   Homesite Background



   Outsourced Content


Percent of Homesite Content



  Pathway of Connection
                       Commerce

   Registration
                                  Orders Through
                                     Affilates
   Shopping Cart
                                   Configuration
                                    Technology
      Security

                                  Order Tracking
Credit Card Approval

                                  Delivery Options
One-Click Shopping
EBAY
EBAY
Relationship Involvement

     High   Automobile
            35-mm Camera
            Expensive Watch
            Stereo Component
            Eyeglasses
            Scotch Whiskey
            Hair Coloring
            Wine for Dinner Party
            Washer/Dryer
            Face Soap
            Credit Card
            Salad Oil
            Deodorant Soap
            Insecticide
            Headache Remedy
            Liquid Bleach
            Insect Repellent
            Disposable Razor
            Potato Chips
            Soft Drink
            Paper Towels
     Low    Toilet Tissue
Customer Tenure and Profitability


                    High
    Profitability

                    Low




                           Short              Long

                              Customer Lifetime
           A Time and Place for II

                                    High Individualization,
          High Individualization,
Level                                 High Interactivity
            Low Interactivity
of                                  Example: Design Robot
         Example: bank statement
Indiv.
          Low Individualization,    Low Individualization,
            Low Interactivity         High Interactivity
          Example: news service       Example: library




                Level of Interactivity
A Framework for Building CR on the
              Web

                             Exploration/
                 Awareness                  Commitment   Dissolution
Marketing                     Expansion

 Levers

        Price
     Product
   Promotion
  Distribution




                                  Brand
                Product Definition

Target Market

  Product          Price         Place      Promotion
Product Idea       Brand        Package     Warranty

  Physical       Individual    Protection     None
Good/service       Family      Promotion       Full
  Features      Manufacturer     Both        Limited
   Quality         Dealer
Accessories
 Installation
Instructions
Product Line
    Product Value Ad


                                Diff
                            Extended       Meal
                             Warranty        Preparation
                            Trade In       Fitness Books
                                                               Augmented Product
                            Financing      Exercise Plan



                    Engine                     Daily Newsletter
                    Tires                      Advice                     Basic Product
                    Radio                      In-Depth Information




             Transportation                         Dieting Information           Core Benefit



    Traditional:                                       New Economy:
Sports Utility Vehicle                                  e-diets.com
           Internet Product Types


   Product Type     Primary Purpose        Internet Properties            Examples

                                         Is not used up in
                  Provides core benefit
                                         consumption; easily       Downloadable software,
Digitized Good    in digitized form
                                         reproducible;             music, newspapers
                  online
                                         transferable
                                         Standardizes service;
                                         allows producer and       Schwab.com,
                  Performs core servic e consumer to be            eDiets.com, Yahoo
Service
                  benefit online         separated in space and    Sports Fantasy Baseball
                                         time; adds vividness to   Plus
                                         intangibles
Retail or         Sells, brokers, or     Helps dispose of
                                                                   Amazon.com, priceline,
Distribution      distributes p roduct   perishable inventory;
                                                                   FreeMarkets
Service           delivered offline      aggregates demand
                  Adds extra services
Product                                  Differentiates at low
                  or benefits to a                                 FedEx, Fidelity
Augmentation                             incremental cost
                  service or product
                      Pricing Strategy Framework

                                                             Select Retail Pricing                                 Everyday Low
                Hi-Lo Pricing
                                                                  Strategy                                            Pricing




                                                    Select Pricing Strategy


       No Pricing                                                                                                                      Price as
                        Corporate Mandate           High Initial Demand        Correlated Demand          Dynamic Pricing
       Flexibility                                                                                                                 Marketing Strategy
   Price at market        Target return pricing      Fairness pricing          Bundling              English auction             Prestige
                           Target profit return       Bundling                  Volume discount       Reverse English             Sign of quality
                                                       Frenzy pricing             pricing                auction                     Promotional
                                                       Price discrimination      Two-part pricing      Dutch auction
                                                        over time                                         (regular and eBay
                                                                                                          type)
                                                                                                         First price sealed-bid
                                                                                                          auction (regular and
                                                                                                          Priceline type)
                                                                                                         Reverse first price
                                                                                                          sealed-bid auction
                                                                                                         Group buying
                                                                                                         Electronic exchange
Product Pricing and the Internet

    The Internet Will Lead to Price            The Internet Will Not
           Commoditization                     Commoditize Prices
? The Internet makes vast amounts of    ? Even if all else is equal, brand will
  information available to consumers.     still command a premium
  As a result, markets will become      ? Providers are able to differentiate
  more efficient, and differences in      their offerings by bundling
  products and pricing will decrease      products and services; consumers
? Consumers on the Internet are not       will place a premium on attractive
  restricted by geography when            "bundles"
  making their purchases, so they are   ? The Internet makes it possible for
  free to choose among a wider            consumers to create their own
  range of providers and may switch       products and bundles
  more frequently
                                        ? The Internet offers consumers a
? On the Internet, providers have         new convenient purchasing
  difficulty differentiating their        experience that they are willing to
  products; they find it hard to          pay for
  compete on anything but price
Pricing Sins
              Pricing Summary


– Firms have a wide variety of potential pricing strategies
  and price points to consider when deciding how to best
  implement profit-maximizing strategies.

– Firms face multiple pricing decisions including basic,
  dynamic, and advanced pricing strategies.

– There are a variety of pricing levers for firms to employ in
  their pricing strategies. Each stage of the customer
  relationship has a set of appropriate pricing levers that
  should be used.
             Online/Offline Promotion
             Outdoor                                                                            Sales
           Advertising                                                                       force/Face-
           (Billboards)                                                                        to-Face
                                       Radio                   Public
           Yellow                                             Relations
Offline




           Pages                      Televisio                                              Telemarketing
                                          n
                    Brochure
                       s                                                                            Direct
                                      Magazine                    Newsletter                       Mailings
          Newspapers                     s                           s


                                                                  Point-of-
           Sponsorship                                            Purchase                        Customer
                s                                                 Displays                         Service


                                                                                                       Wireless
           Banner Ads                                                                                  Devices
                                                                               Personal
                                                      Websites
Online




                                                                               Websites

                Rich                 Interstitial                                                       E-Mail
                Media                     s                                        Dynamic             Marketing
                                                                                     Ads
                                                    Classifieds
                          Search                    & Listings                 Interactiv
                          Engines                                                  e
                                                                               Television


                                    Mass                                              Personal
                        Types of Online Media
       Medium                               Advantages                                              Disadvantages
                        Communicate rich, detailed information that users
Websites/Personalized
                        can navigate at will; can track users and customize          Narrow reach
websites
                        site accordingly.
                        Link directly to buying opportunity; easy to me asure        Low attention and click -through rates; short life;
Banner ads              effectiveness; wide reach; potential for effective           limited ―pass -along‖ audience; very high clutter;
                        targeting                                                    fleeting exposure

Interstitials           Catch users’ attention; link to buying opportunity           Can annoy users; limited ―pass -along‖ audience


Rich media              Attention -getting; link to buying opportunity               Can annoy users without broadband access

                                                                                     Difficult to execute well; can annoy users, o ther
Dynamic ad placement    Serves up customized ads to users in real time
                                                                                     advertisers

                        Good credibility; high believability; guarantee of           High competition; information overload; limited
Search engines
                        position available; significant audience at major sites      ―pass-along‖

Classifieds and         Relatively inexpensive, poten tial for wide exposure;
                                                                                     Clutter
listings                qualified audience
                        High demographic selectivity; high credibility;
                                                                                     Requires substantial user base before effect ive;
Opt-in e-mail           significant flexibility; proven high click -through rates;
                                                                                     high clutter
                        absolutely inexpensive; some pass -along
                                                                                     Low attention and significant resentment (spam
Mass e -mail            High reach; inexpensive; flexible
                                                                                     image)

                        Interested parties asking for help, thus high targeting      Very expensive to provide comp rehensive
Customer service
                        value; generates loyal customers                             telephone, e -mail, and online support
              Selected Internet Ad Terms
   Ad Clicks          Aggregate number of user clicks on a banner ad


    Ad Views
                      Number of times a banner ad is downloaded to a user’s browser and presumably looked at
 (Impressions)


Click-Through         Percentage of ad views that are clicked upon; also ―Ad Click Rate‖


     CPC              Formula used to calculate what an advertiser will pay to an Internet publisher based on
(Cost-per-Click)       number of click-throughs a banner generates


                      Cost per thousand impressions of a banner ad; a publisher that charges $10,000 per
     CPM
                       banner and guarantees 500,000 impressions has a CPM of $20 ($10,000 divided by 500)

                      Measurement recorded in server log files that represent each file downloaded to a
      Hit              browser; since page design can include multiple files, hits are not a good guide for
                       measuring traffic at a website

                      Number of individuals who visit a website in a specified period of time; requires the use of
 Unique Users
                       registration or cookies to verify and identify unique users

                      A series of requests made by an individual at one site; if no information is requested for a
     Visits            certain period of time, a ―time-out‖ occurs and the next request made counts as a new visit
                       — a 30 minute time-out is now standard
                 Promotion Process

                                                                                 Tie Back to
     Communication       Media              Chose               Allocate
                                                                                   Overall
       Criteria          Criteria          Media Mix           Spending
                                                                                    Plan


   Behavioral      Ability to        Direct mail,       Allocation        Tie media plan
    objectives       further            Internet,           of spending        back to
                     behavioral         broadcast,          across             communications
   Available
                     objectives         print, point-       media mix          plan (e.g., make
    spending
                                        of-sale, etc.       elements           sure the media
                    CPM
   Customer                                                and time           plan will drive
    segments        Ability to                             periods            the trial or
                     reach target                           based on           awareness
                     segments                               relative           required)
                                                            priority
                         Community Levels
Level of Community   Nascent                            Formative                         Mature
People               ?   Small number of core           ?   Small number of core          ?   Increased number of core
Characteristics          members, small number of           members, higher number of         members, high number of
                         participants                       participants                      participants
                                                        ?   Users begin to build equity   ?   Users become
                                                                                              operationally entangled
Process              ?   Somewhat less defined and      ?   Small number of core          ?   Efficient processes of
Characteristics          focused processes of               members, higher number of         communication established
                         communication                      participants                  ?   Clear segmentation of
                     ?   Lack of segmentation of        ?   Users begin to build equity       topics and users
                         users/little segmentation of
                         discussion topics
Culture              ?   Momentum is kickstarted        ?   Gains more momentum           ?   Achieves critical mass
Characteristics          and driven by core group of    ?   Refinement of missions/       ?   Mission close to fully
                         founders                           goals (as defined by              defined according to
                     ?   High on energy, low on             members)                          members
                         focus                          ?   Community is building a       ?   Membership alignment in
                     ?   Community’s brand is               solidified brand                  shaping of the community
                         evolving                                                         ?   Leadership positions within
                                                                                              the community are
                                                                                              established
                                                                                          ?   Community establishes
                                                                                              brand
Technological        ?   Fewer technological            ?   More options for              ?   Preferred technology used
Characteristics          options for communications         communication technology          for communication is
                                                            explored                          established
        Community Building Options
                   Nascent                                Formative                                    Mature
General Strategy   ?   Aim for growth (in                 ?   Aim for change (in functionality and     ?   Aim for sustainability (in
and Operational        membership)                            mission)                                     solidifying branding and
Objectives             Attract users by creating              Leverage increasing size to create           presence)
                   ?                                      ?
                       administrator -user value,             user-to-user val ue and promote user -   ?   Leverage size to increase
                       promote administrator -                generated content                            user -administrator value (e.g.,
                       generated content                      Seek feedback to further refine              advertising)
                                                          ?
                   ?   Seek feedback to determine             community goals and mission              ?   Establish reliable feedback
                       where the community is going           according to members                         loops to ensure the recognition
                       Find and build upon one or a           Explore different processes of               of member needs
                   ?                                      ?
                       few well -used methods of              communication (asynchronous vs.          ?   Determine most appropriate
                       communication                          real time, or both)                          methods of community
                       Foment relationships and               Refine community facilitation                communication
                   ?                                      ?
                       vibrant discussion within only a       processes; establish rol es for which    ?   Further develop community
                       small number of community              members are chosen and can                   leaders/caretakers of the
                       groups                                 volunteer for (e.g., watchpeople,            community to create
                                                              guides)                                      sustainability
                                                          ?   Leverage CRM to tailor site and          ?   Incorporate offline events/
                                                              functionality to the member                  marketing to further solidify
                                                              Allow for further segmentation of            community relationships,
                                                          ?
                                                              discussion topics                            activities and community
                                                                                                           presence
                   ?   Leverage processes of offline community (e.g., rituals and tradition)
Marketing          ?   Increase member base               ?   Refine community vision (as defined      ?   Establish solid mission and
Objectives             Get the word out                       by members)                                  brand
                   ?
                       Use good content to attract        ?   Generate equity for members within       ?   Establish community presence
                   ?
                       members                                community                                    Expand possibilities for equity
                                                                                                       ?
                                                                                                           generation
Community Example - EBAY
      Community Effect Example - EBAY

                          30,000   29334
Monthly Unique Visitors




                          25,000
    (in thousands)




                          20,000

                          15,000

                          10,000

                           5,000              3153       2904         2778
                                                                                   905
                              0
                                   eBay    uBid.com    Yahoo     Andale Sites   Qool.com
                                                      Auctions
    Place Strategy

               Place Objectives



     Channel Type             Service Level


                                  Distribution
 Direct         Indirect
                                     Type

 Market
              Middlemen           Management
Exposure
Physical Distribution

                                         Total Costs
                                         Inventory Costs

                                         Lost Sales
Costs ($)




                                         Transportation Cost


            Customer Service Level (%)
Channel Efficiency and Intermediaries

             1
     M           2            C                 M                                 C
                                                       1                  4
             3
         4
             5                                         2                      5
     M       6
                              C                 M                 D               C
         7
                     8                                                    6
                                                           3
     M       9
                              C                 M                                 C

     (a) Number of contacts                            (b) Number of contacts
             MxC=3x3=9                                          M+C=3+3=6


                     M = Manufacturer   C = Customer           D = Distributor
                Distributor Value Add
Market Information        Monitoring sales trends, inventory
                          levels, competitive behavior
Promotional Effort        Banner ads, sales promotions, traditional
                          advertising support, personal selling
Transactional             Bargaining on price and terms, order
Activities                processing, credit, inventory and
                          assortments
Storage and               Warehousing, transportation to buyer,
Transportation            sorting and packaging into desired forms

Facilitation Activities Credit card processing, invoicing,
                          shipping confirmations
Installation and          Technical support, customer service
Service                   lines, warranty work, repair, spare parts,
                          etc.
        Distribution Summary


– The Internet is a distribution channel. It facilitates the
  exchange of goods and services between buyers and
  sellers.

– The Internet has become a driving force for
  disintermediation.

– The distribution levers include activities that affect
  buyer-seller relationships through the type of
  intermediary, number of intermediaries, intermediary
  functions and responsibilities, number of channels and
  degree of channel integration.
           Market Research

                                    Target Market

             Marketing Research
                                     Customer
                Identification

             Market Opportunities

Marketer          Definition           Public

               Market Problems

                   Action
                                     Consumer
Benefits of Internet Market Research


          Quickly gain crucial market intelligence


             Act upon first-mover advantages


          Stay afloat in a fast-paced environment


              Reduce market research costs


                       Many more…
            Market Research Uses
                                         How to
                                        segment
                                      the market?

                                                                           What is
        Who are my
                                                                          the price
        customers?                       Conjoint                        elasticity?
                                         Analysis
                       Customer                        Discrete Choice
                     Identification                       Modeling



                                      Marketing
              Buying-Habit            Research                    Environmental
  When          Studies                                              Studies        What are
 do they                                                                           the growth
purchase?                                                                            trends?
                               Opinion              Competitive
                              Research               Analysis




                   What do                                Who are my
                  they like?                              competitors?
          Market Research Types
      Decision Factor                  Offline Method                 Online Method
Cost                                         High                            Low
Turnaround Time                              Slow                           Quick
Effort                                 Labor-Intensive              Labor-Nonintensive
Data Quality*                              Medium                            High
Researcher Control                           High                            Low
Sampling                                   Accurate                      Inaccurate
Sample-selection Bias                    Controllable            High to Uncontrollable**
Delivery/Illustration                       Limited                       Unlimited
Interviewer Bias                             High                            Low
Geographical Coverage                       Limited                       Unlimited
Anonymity guarantee                    High to Medium                        Low
Ethical Issues (privacy)                      Low                            High
* Quality of data is defined here as ease and timeliness of data collection and entry.
** As the Internet becomes ubiquitous, this issue is becoming less important.
      Managers or MBAs?


―Trying to teach people who have never
practiced is worse than a waste of time – it
         demeans management‖.

         Dr. Henry Mintzberg
WS3: Facilitating Product
   Implementation
WS4: Customer Value
WS5: Alternatives
WS6: Implementation
     What Employers Want
          Skill              Percent of Employers
                               who rated this as
                             “important” or “very
                                 important”*
     Interpersonal &                 96%
   Communication Skills

Learning Aptitude & Desire           95%
         to Grow

Collaboration and Teamwork           93%


 Creative Problem Solving            92%
        Managers or MBAs?


Citation from the book Managers Not
  MBAs, by renown author Henry Mintzberg

Note: Dr. Mintzberg obtained his PhD and
 his MS in Management from MIT's Sloan
 School of Management and is well known
 for his studies of strategic development
 and of managerial practice.
               Decision Making Framework
                                                   Information
Decision Structure                                 Characteristics

                       Business Professionals      Pre specified
                                                   Scheduled
                                                   Detailed
                                                   Frequent
                                                   Historical
                             Operational           Internal
  Structured                                       Narrow Focus
                            Management
                       Efficient, do thing right

                        Tactical Management        Ad Hoc
  Semi Structured
                       Business Unit Managers      Unscheduled
                        -Effective, right thing    Summarized
                                                   Infrequent
                         Strategic Management
  Un Structured                                    Forward looking
                          Executives, Directors
                                                   External
                            -Transformation
                                                   Wide Scope
                        RELATIVE TIME SPAN
The Tip of the Iceberg


         Issues
The Tip of the Iceberg
The Tip of the Iceberg
         EXPERT ADVICE
      SOURCES OF CONFLICT

1.   Scarce resources
2.   Lack of information
3.   Conflicting values, interests, or belief systems
4.   Power imbalances
5.   Physiological (illness)
6.   Hidden agendas
         EXPERT ADVICETEAMS
    HEALTHY CONFLICT IN
•   Identification and discussion of issues by team
    members
•   Use of appropriate listening and questioning skills
•   Team members’ ability to manage strong feelings
•   Team members’ ability to separate interests from
    positions
•   Willingness to discuss issues and needs to mutual
    resolution (win-win)
•   Individual use of critical thinking skills
•   Allows for change to occur
          EXPERT ADVICE TEAMS
    UNHEALTHY CONFLICT IN
•    Individuals are identified as the problem(s) instead
     of issues
•    Distorted communication, rumors, gossip,
     innuendos, secrets, collusion etc.
•    Inappropriate displays of strong emotions; anger
     and frustration that could lead to violence.
•    Individuals are synonymous with positions;
     polarization
•    Team can fragment
•    Escalation of issues; higher authority, could lead
     to legal actions
       EXPERT ADVICE STYLES
CONFLICT MANAGEMENT

1. Avoidance
  a)   Low concern for results/assertiveness
  b)   Low concern for people/cooperation
  c)   Uncomfortable with conflict
  d)   May believe that agreement is not possible
  e)   (Lose-lose orientation)
       EXPERT ADVICE STYLES
CONFLICT MANAGEMENT

2. Accommodation
  a) Low concern for results/assertiveness
  b) High concern for people/cooperation,
  c) Uncomfortable with conflict
  d) May be willing to sacrifice own needs in order to
     meet the needs of another
  e) (Lose-win orientation)
3. Competition
4. Compromise
5. Collaboration
       EXPERT ADVICE STYLES
CONFLICT MANAGEMENT

3. Competition
a)   High concern for results/assertiveness
b)   Low concern for people/cooperation
c)   May      enjoy    conflict    and     sacrifice
   relationships with others in order to win
d)   (Win-lose orientation)
4. Compromise
5. Collaboration
       EXPERT ADVICE STYLES
CONFLICT MANAGEMENT

4. Compromise
a)   Moderate concern for results/assertiveness
b)   Moderate concern for people/cooperation
c)   May not see that a win-win is an option
d)   Will give up some interests for others-
   meets some needs
e) Win/lose: lose/win orientation)

5. Collaboration
       EXPERT ADVICE STYLES
CONFLICT MANAGEMENT

5.   Collaboration
•    High concern for results/assertiveness
•    High concern for people/cooperation
•    Strives to meet the needs of all parties
•    (Win/win orientation)
          Window on World of DP
     Intent              Need           Category
     Get it done right   Control        Ruler
     Get it done right   Accuracy       Analyzer
     Get Along           Approval       Relater Get
     Appreciated         Attention      Entertainer




 Analyzer                Ruler


 Relater                 Entertainer


Passive                              Aggressive
  Window Into Conflict Resolution


Non-
adversarial            A number                A number
attitude toward      value for your          value for your
                    Detachment
                      organization    Collaboration
                                              organization
other



Adversarial
attitude toward       Evasion           Coercion
other

                  Disengagement       Engagement
                  from other          with other
       Conflict Resolution Strategy
30% of a managers time is spent dealing with conflict
Fortune 500 company executives are involved in litigation related activity
20% of their time.


Step 1:     SWOT
Step 2:     Train - Establish the core competencies
Step 3:     Coach ~ Support the learning
Step 4:     Enable - Remove the obstacles – culture driven
Step 5:     Institutionalize ~ Train in-house experts
Establish a panel of skilled mediators to resolve disputes that are not
successfully resolved by the core competencies gained by Training (Step 2)
and supported by Coaching (Step 3).
Step 6: Feedback - Compare to benchmarks
                    ADVICE
             EXPERT ADVICE
             EXPERT
• "I think there is a world market for maybe
 five computers" - Thomas Watson, IBM president,
  1943.


• "Television won't last because people will
  soon get tired of staring at a plywood box
  every night" - producer Darryl Zanuck, Twentieth-
  Century Fox, 1946.
                EXPERT ADVICE
                EXPERT ADVICE
• "There is no need for any individual to have
  a computer in their home" - Ken Olson, president of
  Digital Equipment Corp., 1977.


• "640k ought to be enough for anybody" -
  Microsoft founder Bill Gates, 1981
WHERE DO I WANT TO GO TODAY?

   "Cheshire-Puss," she began, rather timidly, "Would
     you tell me, please, which way I ought to go from
                           here?"
   "That depends a great deal on where you want to get
                    to," said the cat.
         "I don't much care where -," said Alice.
     "Then it doesn't matter which way you go," said
                         the cat.


                                            -
                       --Lewis Carroll
                      Alice in Wonderland
      Creating a New System
“It must be remembered that there is nothing
   more difficult to plan, more doubtful of
 success, more dangerous to manage, than the
creation of a new system. For the initiator has
  the enmity of all who would profit by the
preservation of the old institutions and merely
lukewarm defenders in those who would gain
               by the new ones.

                  — Niccolo Machiavelli
     Information Age Paradox

"Despite the existence of more and
 better information than ever
 before, time pressure prevents
 decision makers from gathering all
 that they need and from sharing
 it,"
 -- Peter Tobia, author, "Decision Making in the
     Digital Age: Challenges and Responses,"
 Planning, Tools and Descriptions
It is not the plan that matters, It‘s
the planning.
        -General Dwight D. Eisenhower

Graphical Diagrams do not constitute a
specification….nothing replaces clear,
concise text.
             - David A. Ruble
  Planning, Tools and Descriptions
At a recent study, I commented at one point
in our deliberations that we had spent more
time on wordsmithing than we had on
considering the substance of our report.
   -- Robert W. Lucky, VP for Applied Research at Telecordia. NJ

It seems to me language by its very nature is
imprecise. I think of each word as
inhabiting a fuzzy ball of uncertain semantic
meaning….
                    – Robert W. Lucky
                     Decisions

My BASIC principle is that you don't make
 decisions because they are easy; you
 don't make them because they are
 cheap; you don't make them because
 they're popular; you make them because
 they're right

 -- Theodore Hesburgh, C.S.C. Former President of Notre Dame
Individual Vs Collective Intelligence

No one in this world, so far as I know, has ever
 lost money by underestimating the
 intelligence of the great masses of the plain
 people
                  -H. L. Mencken


  Large groups of people are smarter than an
   elite few, no matter how brilliant—better at
      solving problems, fostering innovation,
  coming to wise decisions, even predicting the
                      future.

                 -James Surowiecki
 Decision Making Preconditions
1. There must be an awareness of the
  existence of a gap

2. There must be a perceived need to solve
  the problem

3. There must be some way to measure the
  size of the gap

4. The skills and resources needed to solve
  the problem must be present or at least
  easily obtainable
       Decision Strategies

Optimization

Satisficing

Elimination by aspects –
eliminate all alternatives that fail
with respect to a particular aspect
        Decision Strategies
Instrumentalism – muddling through
– compare alternative courses of action
to the current one
Mixed scanning – search for,
collection, processing, evaluating and
weighing of information. The
importance of the decision determines
the degree of scanning
Analytical Hierarchical Process
        Generalized System
                Environment


                    Control




Input              Processing
                                            Output



                System


 Components, Relationships, Boundaries, Interfaces,
 Constraints
 Modem Communications System
    00100010101000110001111111000110001




  Message                                         Message
                           Control                Received



             Modem                                Destination
Info                                      Modem
Source


                             Noise
    Generalized Communications System

    00100010101000110001111111000110001




  Message                                            Message
                            Control                  Received



                          Transmission               Destination
Info        Transmitter
                             Channel      Receiver
Source


                               Noise
 Modem Communications System
    00100010101000110001111111000110001




  Message                                         Message
                           Control                Received



             Modem                                Destination
Info                                      Modem
Source


                             Noise
               Decision Structure
                                  Structure




            Collaborative                                Non-
                                                         collaborative



Consensus   Majority          Weighted        Committee             Individual



                            Consensus         Majority            Weighted
       Decision Making Process




           Decision   Problem      Implement
Stimulus
           Maker      Definition   ation
        Decision Making Process
Intelligent Phase   Design Phase         Choice
Objectives          Modeling             Solutions to the Model
Problem statement   Criteria             Sensitivity Analysis
Data Collection     Alternatives         Plan for implementation




                        Implementation
Decision Making: Intelligence


 Problem Identification
 Problem Classification
 Problem Ownership
Decision Making: Design


Modeling
Criteria
Alternatives
Decision Making: Choice


Search appropriate action
    - Blind
    - Heuristic
Decision Making: Evaluation


Multiple Goals
Sensitivity Analysis
What-If
Goal Seeking
Alternative Decision Making Models

•Paterson‘s 5-step
•Pounds‘ 8-step
•Kepner-Trego 3-step
•Hammond elements for smart choices
•Cougar‘s Creative Problem-Solving
•Pokras‘ 6-step
•Bazerman 6-step anatomy of a decision
•Beach‘s naturalistic decision theories
                Decision Making
Decision: Commitment to action

                                 4
                    1
      11                              12       5
                                      13
            3

                    8         14                   16
  2                                        6
           17       9                15

      10                 16
                                               7
    Decision Making Knowledge Based


                            4                                                    4
              1                                                    1
    11                                    5              11                                    5
                                 12                                                   12
                                 13                                                   13
          3                                                    3

              8        14
                                              F(h)                 8        14

2                                     6              2                                     6
         17   9                                               17   9
                                15                                                   15


    10            16                                     10            16
                                          7                                                    7




Knowledge0                                           Knowledge1
Decision Making Context



  Management   Organizational
  Level        Design



  Maturity     Concurrency
              Knowledge Base

                          4
                1
    11                         12       5
                               13
          3

                8        14                 16
2                                   6
         17     9             15

    10              16
                                        7
   Problem Solving



          Intelligence


Problem                  Problem
 Space      Design        Space


             Choice
                    Decision Styles
Intent                  Need                 Category
Get it done right       Control              Ruler
Get it done right       Accuracy             Analyzer
Get Along               Approval             Relater
Get Appreciated         Attention            Entertainer




                Analyzer            Ruler


                Relater             Entertainer


              Passive                       Aggressive
Managerial Decision Making and
             DSS

How are decisions made at work?
     Decision Making Drivers

Decision Making Drivers at Work:
Decision Making Drivers at Large :
Technology          Complexity
Competition
Globalization
Environmental/Regulatory
Change
DECISION SUPPORT DRIVERS

•Speed, Timeliness
•Accuracy
•Cost Reduction
•Increased Productivity
•Technical Support
•Quality Support
•Competitive Tool
•Overcome Cognitive Limits in Processing and Storage
           Organizational Culture
Individual Initiative – individual freedom, independence
Risk Tolerance – degree to which employee is encouraged
Directions – Clarify of objectives and performance
Integration
Management support – clear communication and support
Control – rules and regulations
Identity – Identity to corporate or group
Reward System
Conflict Tolerance
Communications pattern – hierarchical structure
         Organizational Resources

INPUTS           RESOURCES      OUTPUTS


Money            Money          Funds
Materials        Material       Products
People           Human          Services
Knowledge        Knowledge      Knowledge



                     Feedback
           Organizational Culture
Values – risk taking, ethics,
Goals: Clarity, Commitment, Consistency
Structure– reward system consistent with values and goals,
accountability, reporting (C3), decision making, walk the
talk, feedback
Climate - Enthusiasm, Competition (supporting goals),
Creativity. Collaboration. F;exibility, Involvement, Trust.
Creative stress/
Environment – Other Teams/organizations, marketplace,
Culture, Competition, Pressures
         Organizational Effectiveness
                                          ENVIRONMENT

                                              CLIMATE
Other Teams                                                        Enthusiasm       Marketplace
                Competition                   STRUCTURE
                                                              Accountability
                          Reward
                          System               GOALS
                                                                          Reporting
   Creativity                                                             Relationships
                                                Values
                                    Clarity     Mission      Commitment
                                                Philosophy
    Collaboration                                                                     Stress
                       Feedback
                       System
                                                                   Decision
                                                                   Making
                                               Behavior
                      Flexibility              Norm                 Trust

                                                                                    Competition
 Culture                                      Involvement

                                              Pressures
                Decision Strategies
Optimization

Satisficing

Elimination by aspects – eliminate all alternatives that fail with respect
to a particular aspect

Instrumentalism – muddling through – compare alternative courses of
action to the current one

Mixed scanning – search for, collection, processing, evaluating and
weighing of information. The importance of the decision determines the
degree of scanning

Analytical Hierarchical Process – decompose the overall decision
objective into a a hierarchic structure of criteria, sub-criteria and
alternatives
                   Information
  • Information– Qualified Data or Value
     – relevant
     – timely
  • Associated Symbolic Data

530-34-5880   Joseph L. Aguirre   123 Anywhere   459-2978
                    Knowledge
• Knowledge:
  – data get organized into information
  – information gets organized into: concepts,
    beliefs, ideas

                 Info           Info

                        concepts
          Info           beliefs
                          ideas
             Info                      Info
                         Info
       Knowledge - Bloom

Benjamin
Bloom‘s
              Knowledge
Taxonomy
Chart      Comprehension

            Application

              Analysis

             Synthesis

             Evaluation
Knowledge Hierarchy



       Meta

      knowledge

     Knowledge

     Information

      Data

      Noise
                      Knowledge




       Processed                              Relevant, actionable
                         Information
                                                           Knowledge
Data
                   Contextual, relevant, actionable
          Problem Solving

Any problem can be viewed as a
system that we are attempting to
analyze and develop an equivalent
to:
      Input               Output
              Black Box
          Problem Solving

Any problem can be viewed as a
system that we are attempting to
analyze and develop an equivalent
to:
      Input               Output
              Black Box
Problem Solving using Models


A model is an abstract representation of reality




   Present                                 Goal
    State                                  State
Problem Solving using Models

We can view a problem using a model




   Present                            Goal
    State                             State
        Decision Making Process
Intelligent Phase   Design Phase         Choice
Objectives          Modeling             Solutions to the Model
Problem statement   Criteria             Sensitivity Analysis
Data Collection     Alternatives         Plan for implementation




                        Implementation
                         Problem Solving

     Intelligent Phase       Design Phase            Choice
     Objectives              Modeling                Solutions to the Model
     Problem statement       Criteria                Sensitivity Analysis
     Data Collection         Alternatives            Plan for implementation




                                 Implementation




Framing the Problem         Making the decision     Evaluation
1.Identify the problem      4.Identify causes        8. Measure impact
2.Define criteria, goals    5.Alternatives           9. Implementation
3.Evaluate effect of the    6.Impact of alternatives
problem                     7. Make decision
       Critical Thinking Process
                              Developing
                              Person

                No
Customary                      New
Assumptions,    Question   Yes Assumptions,
Habits                         Habits

                               Relationship
                               Work Political
   Problem Solving



          Intelligence


Problem                  Problem
 Space      Design        Space


             Choice
     The Marketing Concept


                      Customer
Profits               Satisfaction



            Company
            Effort
Problem Solving Tools/Techniques
 Affinity Chart       Force Field Analysis      Pareto Chart
 Bar Chart            Group Think               Pie Chart
 Benchmarking         Histograms                Plan-Do-Check-Act
 Brainstorming        Imagining                 Provocation
 Cause-Effect         Importance Weighting      Run Chart
 Cause Screening      Influence Diagram         Requirements Analysis
 Check Sheets         Intuition                 Scatter Diagram
 Criteria Matrix      Line graph                Starbusting
 Control Chart        Metaphorical Thinking     Value Analysis
 Decision Tree        Mind Mapping              Visualizing
 Flow Chart           Multivoting
 Following the Rule   Nominal Group Technique
 WS5: Impact of Risk and Ethics on
        Decision Making
• Assess the risk of alternative action.
• Evaluate the probability and severity of risk
  factors.
• Describe ways to mitigate risk.
• Infer stakeholder values with limited information.
 WS6: Critical Analysis of Business
             Solutions
• Develop measures (metrics) for performance
  evaluation, the success of implementation, and the
  attainment of end-state goals.
      Forces of Influence

• Broad
  –Physiology, psychology,
    sociology
• Narrow
  –Gender, age, birth, order,
    culture, education, economic
    status, religion, etc.
               Forces of Influence
a.   Contextual factors
b.   Urgency
c.   Importance
d.   Biases
e.   Thinking styles
f.   Self-limiting choices.
     1.   Bounded rationality.
     2.   Paradigms.
g. Stakeholders and their interests.
h. Group dynamics factors.
     1.   Group-think.
     2.   Group composition.
     3.   Power.
   Forces of Influence


• Broad
  – Physiology, psychology, sociology
• Narrow
  – Gender, age, birth, order, culture,
    education, economic status,
    religion, etc.
                Values
Honesty       Customers      Hedonism
Respect       Employees      Risk
              Safety         Collaboration
Integrity
              Competitors    Centralization
Teamwork      Revenue
Work Ethics                  Creativity
              Ecology        Profits
Trust         Cutting Edge   Other
Patience      Image          Alliances
Justice       Fun            New Products
Courage       Growth         New Markets
Persistence   Family         Social Capital
Truth         Capital        Location
Loyalty       Quality
         Organizational Effectiveness
                                        ENVIRONMENT

                                            CLIMATE
Other Teams                                                      Enthusiasm       Marketplace
              Competition                   STRUCTURE
                                                            Accountability
                        Reward
                        System               GOALS
                                                                        Reporting
                                                                        Relationships
                                              Values
   Collaboration                  Clarity     Mission      Commitment
                                              Philosophy
                                                                                    Stress
                     Feedback
                     System
                                                                 Decision
                                                                 Making
                                             Behavior
                    Flexibility              Norm                 Trust

                                                                                  Competition
 Culture                                    Involvement

                                            Pressures
Defining the problem - Probortunity


   Problems or Opportunities -->
    Probortunities
         Problem or Solution



           Should convicted
 No        murderers be subject to   Yes
           death penalty?

Current situation
Desired Situation
Objective
               Problem Statement
Current situation
Desired Situation
Objective

             Accountability   Re-habilitation
                                  Once released they murder again


                                                             Why Should
                                                             convicted
                                                             murderers be
                                                             put to death?


Crime prevention Example      Religious
       Critical Thinking Process
                              Developing
                              Person

                No
Customary                      New
Assumptions,    Question   Yes Assumptions,
Habits                         Habits

                               Relationship
                               Work Political
        Decision Making Process
Intelligent Phase   Design Phase         Choice
Objectives          Modeling             Solutions to the Model
Problem statement   Criteria             Sensitivity Analysis
Data Collection     Alternatives         Plan for implementation




                        Implementation
Problem Solving Model
Problem Solving Model
Problem Solving Model
Optical Perception
Optical Perception
Optical Perception
Optical Perception
(PROJECT) RISK MANAGEMENT
    PROJECT RISK MANAGEMENT

•   User Involvement               19%
•   Exectuive Management Support   16%
•   Clear Requirements             15%
•   Proper Planning                11%
•   Realistic Expectations         10%
•   Smaller Project Milestones     9%
•   Competent Staff                 8%
•   Ownership                       6%
•   Clear Vision and Objectives     3%
•   Hardworking, Focus Staff        3%
   PROJECT RISK MANAGEMENT
  RISK TYPES
• Economic and regulatory risks. May prevent the project from
  delivering the expected benefits

• Product, market, and competitive risks. Related to the current or
  future issues that may arise in the marketplace.

• Technological risks. Include not achieving project goals because of
  technological failure, inadequacy, or lack of readiness.

• Organizational risks. When not present, minimize the return on
  investment of a project. These missing factors might include: a clear
  statement of requirements, realistic expectations, stakeholder
  commitment (lack of vendor or user support), executive sponsorship,
  project management skills and experience, communication planning
  and execution, rewards and recognition alignment, cultural alignment,
  training and education, organizational structure alignment, etc.
PROJECT RISK MANAGEMENT
IDENTIFICATION
• Qualitative
• Quantitative
PROJECT RISK ANALYSIS

Marketing               Technical
Risk                    Risk
                           Bleeding Edge




                                           Risk
                  ROI
                                           Analysis
            NPV



    Financial            Environmental
    Risk                 Risk
  PROJECT RISK MANAGEMENT

LIST                                          COST
• RATE PROBABILITY (1-5):                     5
  – insignificant, minor, moderate, likely,
  – almost certain.

• IMPACT OF RISK (1-5)                        3
  –   rare, unlikely, possible, major and
  – showstopper.

• PROJECT EXPOSURE:                           15
  – Probability X Impact
• LEARN
  PROJECT RISK MANAGEMENT
           DEMOS

http://www.crystalball.com/downloadform.html
http://www.crystalball.com/downloadform.html

http://www.decisioneering.com/download/downloads
  hock_cb.html
 PROJECT RISK MANAGEMENT-
         EXAMPLE
• New drug designed to cure near-
  sightedness.

• Recommendation to continue
  develoment, only if the product is
  prifitable
PROJECT RISK MANAGEMENT-
        EXAMPLE



            Cost, Revenue
            and Market Size
            have high degree
            of uncertainty.
PROJECT RISK MANAGEMENT-
        EXAMPLE




                Realistic outcome
                Is a combination
PROJECT RISK MANAGEMENT-
        EXAMPLE




                  Select Uncertain
                  Values and find
                  probability
PROJECT RISK MANAGEMENT-
        EXAMPLE
       Capability Maturity Model

•   Capability Maturity Models® (CMMs®):
       - 1. Initial: Few processes are defined, success a
       function of individual effort

       - 2. Repeatable: Basic processes in place to repeat
       earlier success

       - 3. Defined : Processes for engineering and
       management are documented.

       - 4. Managed: Detailed metrics for software process and
       quality

       - 5. Optimizing: Peak performance
       Capability Maturity Model

•   Project Management Maturity Model
      - 1. Ad-Hoc: Few processes are defined, success a
      function of individual effort

      - 2 Abbreviated: Basic processes in place to repeat
      earlier success

      - 3. Organized: Processes for engineering and
      management are documented.

      - 4. Managed: Detailed metrics for software process and
      quality

      - 5. Adaptive: Peak performance
Globalization

            Joseph Lewis Aguirre
            Globalization of Technology

"New information technologies are integrating the
world in global networks of instrumentality. …
The first historical steps of informational societies
seem to characterize them by the preeminence
of identity as their organizing principle."


Manuel Castells, The Rise of the Network Society (The Information Age:
Economy, Society and Culture, I) (Cambridge, MA; Oxford, UK: Blackwell,
1996)
         Globalization of Technology

•Global cities as points for flows of labor, capital,
information, and technology.

•Aren't we talking about networks of cities when
we talk about "globalization"? Where are non-
urban regions without an infrastructure in the
idea of the "global"?

Saskia Sassen, Globalization and its Discontents (New York: The New
                           Press, 1998)
        Globalization of Technology


Parallel view with Wriston's Law: "capital goes
where it's wanted and stays where it's well
treated".
All types of capital follow this law: financial,
intellectual, cultural.
Globalization is really the networked matrix of
capital concentrations in cities.
         Globalization of Technology

•The use of the Net to communicate local, ethnic,
religious, and national cultures to a worldwide and
international audience: optimistic multiculturalism,
where anyone with access can participate.

•The worldwide diffusion of dominant cultures
through the global marketplace .. as another case
of hegemony, cultural imperialism.
   Globalization of Technology (cont)

•The goals of global access and ubiquity of the Net
require dealing with two forces, one toward
technology development and diffusion, the other
toward governmental and institutional controls over
international interconnectivity.

•International business and worldwide Internet
ecommerce, promoted by transnational
corporations, for access to friction-free worldwide
markets.
    Globalization of Technology (cont)

•The general homogenization or
"internationalization" of culture, favoring Western
developed nations and their languages and values.

•In the political economy of communications, the
movement toward worldwide access to
communications technology and connectivity across
territorial boundaries.
                                                   InfoGlut
   Year       Internet   Web
(January)      Hosts     Hosts
             (million) (million)
      1993            1 0.00013
      1994            2   0.0006    400
      1995            5    0.020
                                    300                                               Internet Hosts
      1996           10    0.100
      1997           16    0.650
                                                                                      (million)
                                    200
      1998           30       1.8                                                     Web Hosts (million)
      1999           43         4   100
      2000           72        10
      2001          109        27     0
      2002          147        36
                                       93

                                              95

                                                     97

                                                            99

                                                                   01

                                                                          03

                                                                                 05
      2003          171        35
                                     19

                                            19

                                                   19

                                                          19

                                                                 20

                                                                        20

                                                                               20
      2004          233        46
      2005          317        57
      2006          360        75
Digital Divide


            Joseph Lewis Aguirre
             Digital Divide

• Between countries – the global digital
  divide

• Between groups of people within countries
  - the domestic digital divide
     Phones and Electricity

• 2 billion people lack access to reliable
  electricity
• As much as 80% of the world's population
  has never made a phone call
       Phones and Electricity

• More telephones in New York City than in
  all of rural Asia
• In the entire continent of Africa, there are a
  mere 14 million phone lines -- fewer than
  in either Manhattan or Tokyo.
 Internet Accounts and Hosts


• More Internet accounts in London than all
  of Africa
• One in two Americans is online, compared
  with only one in 250 Africans.
      Internet Accounts and Hosts
    http://www.riverdeep.net/current/2002/01/011402t_divide
    .jhtml




,
 Internet Accounts and Hosts


• Of all the Internet users worldwide, 60 per
  cent reside in North America, where a mere
  five per cent of the world's population
  reside
• Wealthy nations comprise some 16 per cent
  of the world's population, but command 90
  per cent of Internet host computers.
            Digital Divide: PCs

•   Developed states: 311.2 per 1,000
•   Globally:            70.6 PCs per 1,000
•   South Asia:          2.9 per 1,000
•   Sub-Saharan Africa: 0.75 per 1,000
          Digital Divide: BW

• The vast capacity of the Internet is distributed
  highly unevenly throughout the world.
• By late 2000 the bulk of Internet connectivity
  linked the US with Europe (56 Gbps) and, to a
  lesser extent, the US with the Asia-Pacific region
  (18 Gbps).
• Africa had extremely little bandwidth reaching
  Europe (0.2 Gbps) and the USA (0.5 Gbps)
        Digital Divide: Costs

• Internet access costs (as a percentage of
  average monthly income)
  – US: 1 to 2 percent
  – Uganda: over 100 percent
  – Bangladesh: 191 percent
       Digital Divide: Costs

• Access costs (ISP, and telephone call costs)
  are almost four times as expensive in the
  Czech Republic and Hungary as in the
  United States

• In Bangladesh a computer costs the
  equivalent of eight years average pay
Digital Divide: Technical Training

 • McConnell International "E-Business
   report”
   – Europe (including Eastern Europe) and Latin
     America rated well
   – Middle East and Africa needed to significantly
     develop their human capital
   – Asia had a mixed scorecard
                          Fact Sheet
•  Global Perspective
•  There are an estimated 429 million people online globally
•  429 million represents only 6% of the world’s entire population.
•  41% of the global online population is in the United States & Canada
•  27% of the online population lives in Europe, the Middle East and Africa
   (25% of European Homes are online)
• 20% of the online population logs on from Asia Pacific
   (33% of all Asian Homes are online)
• Only 4% of the world’s online population are in South America
• The United States has more computers than the rest of the world
   combined
(Source: First Quarter 2001 Global Internet Trends, Neilsen/Netratings)
                    Fact Sheet (Cont)
Among highly developed nations:
• 61% of Internet connections are in Sweden
• Spain trails the list with only 20% of its homes connected.
• The Pew Internet and American Life Project published in Who’s Not Online that
  57% of those not online have no intention of going online. 33% of those people
  have chosen to not go online. Among the biggest reasons were lack of need
  (40%); no computer (33%); no interest (25%); lack of knowledge for use (25%);
  and general cost involved (16%).
• U.S. Perspective
• In fall of 2000, the U.S. Department of Commerce found that
• 51% of all U.S. homes had a computer; 41.5% of all U.S. homes had Internet
  access
• White (46.1%) and Asian American & Pacific Islander (56.8%) households
  continued to have Internet access at levels more than double those of Black
  (23.5%) and Hispanic (23.6%) households.
• 86.3% of households earning $75,000 and above per year had Internet access
  compared to 12.7% of households earning less than $15,000 per year.
• Nearly 65% of college graduates have home Internet access; only 11.7% of
  households headed by persons with less than a high school education have
  Internet access.
• Rural areas, though still lagging behind urban areas, had surpassed inner-cities
  in Internet availability and use:
 International Institutional Responses

• infoDeV - Global program managed by the World Bank. Seeks to help
   developing economies fully benefit from modern information systems

• SDNP -        assist developing countries in acquiring the capacity to access and
   to contribute to solutions for sustainable development via the medium of
   information and communication technologies


• DOI – Digital Opportunity Initiative, a public/private partnership of
   Accenture

• DOT Force - Digital Opportunity Task” Force
drafted at the G-8s‘ Okinawa Summit. Published ―Digital Opportunities for All‖
   in May, 2001.
Personal Challenges in Knowledge Management

Application of technology to business functions requires critical personal
   development and adaptation.

Key concepts in this process are as follows:

•   Structure influences behavior.
•   Structure in human systems is subtle.
•   Leverage often comes from new ways of thinking.
             Digital Divide

• Between countries – the global digital
  divide

• Between groups of people within countries
  - the domestic digital divide
     Phones and Electricity

• 2 billion people lack access to reliable
  electricity
• As much as 80% of the world's population
  has never made a phone call
       Phones and Electricity

• More telephones in New York City than in
  all of rural Asia
• In the entire continent of Africa, there are a
  mere 14 million phone lines -- fewer than
  in either Manhattan or Tokyo.
 Internet Accounts and Hosts


• More Internet accounts in London than all
  of Africa
• One in two Americans is online, compared
  with only one in 250 Africans.
 Internet Accounts and Hosts


• Of all the Internet users worldwide, 60 per
  cent reside in North America, where a mere
  five per cent of the world's population
  reside
• Wealthy nations comprise some 16 per cent
  of the world's population, but command 90
  per cent of Internet host computers.
            Digital Divide: PCs

•   Developed states: 311.2 per 1,000
•   Globally:            70.6 PCs per 1,000
•   South Asia:          2.9 per 1,000
•   Sub-Saharan Africa: 0.75 per 1,000
          Digital Divide: BW

• The vast capacity of the Internet is distributed
  highly unevenly throughout the world.
• By late 2000 the bulk of Internet connectivity
  linked the US with Europe (56 Gbps) and, to a
  lesser extent, the US with the Asia-Pacific region
  (18 Gbps).
• Africa had extremely little bandwidth reaching
  Europe (0.2 Gbps) and the USA (0.5 Gbps)
        Digital Divide: Costs

• Internet access costs (as a percentage of
  average monthly income)
  – US: 1 to 2 percent
  – Uganda: over 100 percent
  – Bangladesh: 191 percent
       Digital Divide: Costs

• Access costs (ISP, and telephone call costs)
  are almost four times as expensive in the
  Czech Republic and Hungary as in the
  United States

• In Bangladesh a computer costs the
  equivalent of eight years average pay
Digital Divide: Technical Training

 • McConnell International "E-Business
   report”
   – Europe (including Eastern Europe) and Latin
     America rated well
   – Middle East and Africa needed to significantly
     develop their human capital
   – Asia had a mixed scorecard
                          Fact Sheet
•  Global Perspective
•  There are an estimated 429 million people online globally
•  429 million represents only 6% of the world’s entire population.
•  41% of the global online population is in the United States & Canada
•  27% of the online population lives in Europe, the Middle East and Africa
   (25% of European Homes are online)
• 20% of the online population logs on from Asia Pacific
   (33% of all Asian Homes are online)
• Only 4% of the world’s online population are in South America
• The United States has more computers than the rest of the world
   combined
(Source: First Quarter 2001 Global Internet Trends, Neilsen/Netratings)
                    Fact Sheet (Cont)
Among highly developed nations:
• 61% of Internet connections are in Sweden
• Spain trails the list with only 20% of its homes connected.
• The Pew Internet and American Life Project published in Who’s Not Online that
  57% of those not online have no intention of going online. 33% of those people
  have chosen to not go online. Among the biggest reasons were lack of need
  (40%); no computer (33%); no interest (25%); lack of knowledge for use (25%);
  and general cost involved (16%).
• U.S. Perspective
• In fall of 2000, the U.S. Department of Commerce found that
• 51% of all U.S. homes had a computer; 41.5% of all U.S. homes had Internet
  access
• White (46.1%) and Asian American & Pacific Islander (56.8%) households
  continued to have Internet access at levels more than double those of Black
  (23.5%) and Hispanic (23.6%) households.
• 86.3% of households earning $75,000 and above per year had Internet access
  compared to 12.7% of households earning less than $15,000 per year.
• Nearly 65% of college graduates have home Internet access; only 11.7% of
  households headed by persons with less than a high school education have
  Internet access.
• Rural areas, though still lagging behind urban areas, had surpassed inner-cities
  in Internet availability and use:
Continuous Improvement Process
Continuous Improvement Process
       Capability Maturity Model

•   Capability Maturity Models® (CMMs®):
       - 1. Initial: Few processes are defined, success a
       function of individual effort

       - 2. Repeatable: Basic processes in place to repeat
       earlier success

       - 3. Defined : Processes for engineering and
       management are documented.

       - 4. Managed: Detailed metrics for software process and
       quality

       - 5. Optimizing: Peak performance
       Capability Maturity Model

•   Project Management Maturity Model
      - 1. Ad-Hoc: Few processes are defined, success a
      function of individual effort

      - 2 Abbreviated: Basic processes in place to repeat
      earlier success

      - 3. Organized: Processes for engineering and
      management are documented.

      - 4. Managed: Detailed metrics for software process and
      quality

      - 5. Adaptive: Peak performance
                    ADVICE
           EXPERT and Goals
         Objectives
a. Guidelines for Goals

1) Relate to productivity
2) SMART goals

b. Guidelines for Objectives
1) Provide steps to reach goals
2) Hint at plausible strategy for completion
3) Built through consensus
4) Align with stated purpose
5) Provide focus
6) Realistic and manageable
  Problem Identification


•Clearly defined
•Ill Defined
•Problems Vs Opportunities
•Group Vs Individual
       Problem Identification


•Raw Information
                         •Select
•Sorting, Filtering
                         •Organize
•Meaning
                         •Interpret
•Problem Statement
       Conflict Resolution Strategy
30% of a managers time is spent dealing with conflict
Fortune 500 company executives are involved in litigation related activity
20% of their time.


Step 1:     SWOT
Step 2:     Train - Establish the core competencies
Step 3:     Coach ~ Support the learning
Step 4:     Enable - Remove the obstacles – culture driven
Step 5:     Institutionalize ~ Train in-house experts
Establish a panel of skilled mediators to resolve disputes that are not
successfully resolved by the core competencies gained by Training (Step 2)
and supported by Coaching (Step 3).
Step 6: Feedback - Compare to benchmarks
  Window Into Conflict Resolution


Non-
adversarial            A number                A number
attitude toward      value for your          value for your
                    Detachment
                      organization    Collaboration
                                              organization
other



Adversarial
attitude toward       Evasion           Coercion
other

                  Disengagement       Engagement
                  from other          with other

				
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