1-1-11

Open FloorOpen Floor

Look at the Chevron Ad from Yesterday’s NY Times... There is a Clear Inaccuracy in the Ad, What is

it? What Impact Might the Inaccuracy have on

have on Chevron? What Would You do If You Were the Chevron

Person Responsible for This?

1-1-22

Open FloorOpen Floor

Hand In Midterm III With Group Evaluations (from Website)

Extra Copies Available in Front

Hard Copy to Me E-mail me copy to Me with Group name and

Section (i.e., KEY-001)

1-1-33

Open FloorOpen Floor

Midterm III… General Comments…

What Went Well? Where is there Room for Improvement?

What Did You Learn? What Was the Element that You Didn’t

Have that You Needed the Most? What Was the Most Helpful Element?

1-1-44

PreviewPreview

Lecture… Finish Lecture on “Industry Analysis” from Last Time Lecture on…

Competitor Analysis Customer Analysis Sales Forecasting Marketing Strategy

Discussion on “Presentation” Overview and Comments Questions

Comments on John Jolliff Guest Speaker Simon Luthi and Peter Reugger Next Week

1-1-55

PreviewPreview

Remember… This is an “Overview” Book Covers This Quite Well

Resource for Marketing Plan Resource for Future

Exceptions and Differences in Categories and Products

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BA 590BA 590

Industry Analysis(Continued)

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Projected Change in U.S. Population 1995-2005Projected Change in U.S. Population 1995-2005

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U.S. Income InequalityU.S. Income Inequality

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Category Factors: Energy Bars (Attractiveness Summary)Category Factors: Energy Bars (Attractiveness Summary)

Aggregate Market Analysis

Category Growth

•Average annual growth rate of 57% between 1997 and 2001

Attractiveness++

U.S. energy bar category sales forecasted at $750 mm in 2003 for a continued expected growth of 22%•IIndustry reports suggest current annual growth for the energy bar market 25%-30%

•CCategory expanding: new competitors are entering, existing brands are expanding with new products and flavors, market penetration and usage occasion is increasing

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Energy Bars: Attractiveness SummaryEnergy Bars: Attractiveness Summary

Aggregate Market Analysis

Product Life Cycle

•Both the category and Odwalla Bars specifically are both securely in early stages of growth phase

Attractiveness++

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Energy Bars: Attractiveness SummaryEnergy Bars: Attractiveness Summary

Category Analysis

Threat of New Entrants/Exits

•Strong potential for new competitors given that the category is profitable, fairly easy to enter, and increasingly relevant to consumers.

Attractiveness-

•Further, with the “big three” brands strongly in place [PowerBar, Clif (including Luna), and Balance], it is most likely that small competitors will enter through the natural foods channel, creating more direct competition with Odwalla bars.

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PDA: Category Attractiveness AnalysisPDA: Category Attractiveness Analysis

Aggregate Market Factors Attractivenes

s

Market Size $2.3 billion

Market Growth

Product Life Cycle

0%-40% +

+

+Growth

Profits

Sales CyclicityGood

one

Sales Seasonality

one

+/0

+

+

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PDA: Category Attractiveness AnalysisPDA: Category Attractiveness AnalysisCategory Factors Attractivenes

sThreat of New Entrants

•Moderate; R&D required, distribution

Bargaining Power of BuyersBargaining Power of Suppliers

Low, high switching costs +

0

0Moderate; PCs use similar components

Category Rivalry

Pressure from Substitutes

Intense

High

Category Capacity

Not a problem for now

-

-

+

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PDA: Category Attractiveness AnalysisPDA: Category Attractiveness Analysis

Environmental Factors: Attractivenes

s

Technological •Very sensitive

Political/ Regulatory

Economic

Telecommunications deregulation

+

-

+Relatively inexpensive

Social More work done on the road

+

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BA 590BA 590

Competitive Analysis

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Competitor Analysis SystemCompetitor Analysis System

What are they going to do?

Differential competitor advantage analysis i.e. Who has the competitive product advantage?

Key questions: - Who are they?- What are the

competing product features?

- What do they want?

- What is their current strategy?

Primary dataSecondary data

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Primary Sources of Competitor InformationPrimary Sources of Competitor Information

Sales Force

Investment Bankers

Suppliers

Customers

Employees

Consultants/ Specialized

Firms

PrimaryPrimaryDataData

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Secondary Sources of Competitor InformationSecondary Sources of Competitor Information

InternalSources Local

Newspapers

Annual Reports

PatentFilings

10Ks

BusinessPress

GovernmentElectronicDatabases

NewsReleases

TradeAssociations

PromotionalLiterature

Internet

Trade Press

Consultants

CustomerCommuni

cations

Secondary dataSecondary data

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Other Sources of Competitor InformationOther Sources of Competitor Information

Trade Shows

Help-Wanted Advertisements

Plant Tours

Reverse Engineering

Monitoring Test Markets

Hiring KeyEmployees

PrimaryData

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Sources with Ethical ConsiderationsSources with Ethical Considerations

Aerial reconnaissance Buying/stealing trash Bribing printers Running phony want ads Snooping on airplanes

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Assessing Competitors’ StrategiesAssessing Competitors’ Strategies

Marketing strategy Comparing value chains Marketing mix

Pricing Promotion Distribution Product/Service capabilities

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Value Chain Value Chain

ServiceService

Firm InfrastructureFirm Infrastructure

Human Resource ManagementHuman Resource Management

Technology DevelopmentTechnology Development

Procurement Procurement

Marketing Marketing and Salesand Sales

OperationsOperations Outbound Outbound LogisticsLogistics

Inbound Inbound LogisticsLogistics

Margin

Margin

Support Activities

Primary Activities

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Criteria to Assess Technological StrategyCriteria to Assess Technological Strategy

1. Technology selection or specialization

2. Level of competence

3. Sources of capability: internal versus external

4. R&D investment level

5. Competitive timing: initiate versus respond

6. R&D organization and policies

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Competitor Information to CollectCompetitor Information to Collect

Ability to conceive and design Ability to produce Ability to market Ability to finance Ability to manage

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A Competitive Conjecture ProcessA Competitive Conjecture Process

Customer response

We lower our price

Our unit sales

Their expected price

Our profit

Their price reaction

Customer response

Our unit sales Our profit

Our total

outcome

Second period

First period

Should we cut price?

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Energy Bars: Competitor Feature/Strategy MatrixEnergy Bars: Competitor Feature/Strategy Matrix

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Energy Bars: Current & Future Strategy MatrixEnergy Bars: Current & Future Strategy Matrix

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BA 590BA 590

Customer Analysis

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What We Need to Know What We Need to Know about Current and Potential Customersabout Current and Potential Customers

Who buys and uses the product What customers buy and how they use it Where customers buy When customers buy How customers choose Why they prefer a product How they respond to marketing programs Will they buy it (again)?

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Who Buys and Uses the ProductsWho Buys and Uses the Products

Initiator -who identifies the need for product

Influencer -who has informational or preference input to the decision

Decider –who makes the final decision through budget authorization

Purchaser –who makes the actual purchase User

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Buying Roles and Needs/Benefits SoughtBuying Roles and Needs/Benefits Sought

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Categories for Describing ConsumersCategories for Describing Consumers

1. Demographic

2. Socioeconomic

3. Personality

4. Psychographics and values

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Major Segmentation Variables for Consumer MarketsMajor Segmentation Variables for Consumer Markets

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Major Segmentation Variables for Consumer Markets Major Segmentation Variables for Consumer Markets (cont.)(cont.)

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Major Segmentation Variables for Consumer Markets Major Segmentation Variables for Consumer Markets (cont.)(cont.)

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Lifestyle TypologiesLifestyle Typologies

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List of ValuesList of Values

1. Self-respect2. Security3. Warm relationship with others4. Sense of Accomplishment5. Self-fulfillment6. Sense of belonging7. Respect from others8. Fun and enjoyment9. Excitement

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Major Segmentation Variables for Business MarketsMajor Segmentation Variables for Business Markets

Demographic Operating variables Purchasing approaches Situational factors Personal characteristics

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Multiattribute Model QuestionsMultiattribute Model Questions

1. Which attributes do customers use to define a product?

2. How do customers determine how much of each attribute a brand possesses?

3. How are the importance weights determined?

4. What decision rule is used to combine the information?

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Bank Perceptual MapBank Perceptual Map

Courteous personnel

Convenient ATM locations

A•

D•

B•

C•

E•

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Sources of Customer ValueSources of Customer Value

Economic: The economic benefit a customer derives from using a

product Functional:

Those aspects of a product that provide functional or utilitarian benefits to customers

Psychological: The image of the product, including how the product

“feels” and whether that feeling matches the image the customer wants to project

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Measuring Brand EquityMeasuring Brand Equity

1. Awareness: Being aware of a brand is usually a requirement for its purchase and tends to lead to more favorable opinions by reducing the risk associated with a familiar option.

2. Associations: Images related to overall quality as well as specific product attributes and user characteristics affect the reaction to a brand.

3. Attitude: Overall favorability toward a brand is a critical part of brand equity.

4. Attachment: Loyalty to a brand is the strongest type of equity, and most beneficial for sellers.

5. Activity: The strongest fans of a brand become advocates.

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Manifestations of Customer ValueManifestations of Customer Value

Price. Price is the company’s assessment of the product’s value.

Price sensitivity. A product with constant sales when prices increase generally is of greater

value than one for which demand slumps.

Satisfaction. Survey-based satisfaction measures are standard practice in my business.

Complaints and compliments. The number of complaints or compliments the company receives indicates the

product’s value.

Word-of-mouth. Although often difficult to track, spoken and written comments provide a

useful subjective assessment of a product’s value.

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Manifestations of Customer Value cont.Manifestations of Customer Value cont.

Margin/profit contribution. Generally, higher margins indicates partially monopolistic positions due

to greater communicated value.

Dollar sales. Total dollar sales provide an aggregate measure of the value of a product

as assessed by the market.

Competitive activity. Competitive activity such as new-product introductions indicates that

the total gap between customer value and company costs is sufficiently large to allow for profits even when more companies divide the market.

Repeat purchase rate. High loyalty indicates high brand value.

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Assessing the Value of the Product CategoryAssessing the Value of the Product Category

1. Determine the uses of the product

2. Estimate the importance of the uses

3. List competing products for the uses

4. Determine the relative effectiveness of the product category in each usage situation

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Desirable Criteria for SegmentsDesirable Criteria for Segments

Sizeable Identifiable Reachable Respond differently Coherent Stable

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Cluster Analysis IllustrationCluster Analysis Illustration

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Customer Analysis Illustration: PDAsCustomer Analysis Illustration: PDAs

Who the Customers Are: Primarily upscale mobile professionals Predominately male Analytical and quantitative in nature Well educated Over 21 years of age

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PDA Market SegmentsPDA Market SegmentsSegment Size Characteristics Distinctive AttributeWide Area Travelers:

Globetrotters 10% Age 45-54; mostly male; employed in senior positions

Innovators, have modems installed in their portable PCs

Road Warriors 20% Mostly in corporate management and sales, property management and real estate

High cellular phone usage

Overall computer usage lower than for other mobile pros

Corporate Wanderers

12% Travel less than Globetrotters or Road Warriors; spend most time visiting employees within their own companies

Employ portable PCs least

Heaviest fax users (on PCs)

High e-mail users

Longest owners of cellular phones

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PDA Market SegmentsPDA Market SegmentsSegment Size Characteristics Distinctive Attribute

Local Area Travelers

Collaborators 8% Age 25-44

Well educated young professionals, tend to hold advanced degrees

Team leaders, project managers

Innovators

High use of pagers (20% of segment)

Not very mobile but need mobile products

Corridor Cruisers 15% Similar profile to Collaborators Not as likely to adopt new products as Collaborators

Hermits 8% Least mobile;

Youngest segment (many under 35)

Seldom work with others

Mostly finance and telemarketing

Heavy e-mail users

Virtually all are PC users but not portable users

Solo Practitioners 16% Like Hermits but older

Diverse collection of technical professionals in small to medium-size companies

Typically connect to corporate network when traveling

Highest connect times of any group

Small-Site Bosses 11% Run small business Highest portable PC purchase intention in next 12 months; shifting to portable PC as primary computer

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Customer Analysis Illustration: PDAs Customer Analysis Illustration: PDAs (cont)(cont)

What They Buy: Small size/light weight PC connectivity E-mail communications capability Phone/address book Appointment book/calendar/alarm One-way paging

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Important PDA FunctionsImportant PDA Functions

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Customer Analysis Illustration: PDAs Customer Analysis Illustration: PDAs (cont)(cont)

Where They Buy: Buy lower-priced, low feature devices from

consumer electronics stores and office supply superstores

Higher-end PDAs are purchased from computer stores, through mail order, or via the Internet

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Three Minute Drill…Three Minute Drill…

How Would We Improve Our Customer Analysis for Our Project? Demographic Socioeconomic Personality Psychographics and values

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BA 590BA 590

Forecasting and Planning

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Forecasts vs. PotentialForecasts vs. Potential

Expectations Possibilities

Firm/Brand Sales Forecast Sales Potential

Category Market Forecast Market Potential

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Major Uses of Potential EstimatesMajor Uses of Potential Estimates

1. To make entry / exit decisions

2. To make resource level decisions

3. To make location and other resource allocation decisions

4. To set objectives and evaluate performance

5. As an input to forecasts

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Deriving Potential EstimatesDeriving Potential Estimates

Potential estimatePast sales data

Secondary data

Surveys/ Primary data

Model/Statistical method

Judgment

Secondary sources

Data

Calculations Result

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How Are Sales Forecasts Used?How Are Sales Forecasts Used?

1. To answer “what if” questions

2. To help set budgets

3. To provide a basis for a monitoring system

4. To aid in production planning

5. By financial analysts to value a company

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Judgment-based Forecasting MethodsJudgment-based Forecasting Methods

Naïve extrapolation Sales force composite Jury of expert opinion Delphi method

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Graphical Eyeball ForecastingGraphical Eyeball Forecasting

Time

Sales

• ••

••

•

•• • •

Range ƍForecast

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Customer-Based Forecasting MethodsCustomer-Based Forecasting Methods

Market testing Situations in which potential customers are

asked to respond to a product concept Mall Intercept Surveys Focus Groups

Market surveys A form of primary market research in which

potential customers are asked to give some indication of their likelihood of purchasing a product

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Time-Series Forecasting MethodsTime-Series Forecasting Methods

Moving Averages Exponential Smoothing Regression Analysis

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Potential Customers by Industry and SizePotential Customers by Industry and Size

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Model-Based MethodsModel-Based Methods

Regression analysis Leading indicators Econometric models

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Developing Regression ModelsDeveloping Regression Models

Plot Sales Over Time Consider the Variables that Are Relevant to

Predicting Sales Collect Data Analyze the Data

Examine the correlations among the independent variables

Run the regression Determine the significant predictors

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Bass Model: PDA Actual vs. PredictedBass Model: PDA Actual vs. Predicted

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Sample Format for Summarizing ForecastsSample Format for Summarizing Forecasts

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BA 590BA 590

Marketing Strategy

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A Successful Strategy:A Successful Strategy:

Helps achieve coordination among functional areas of the organization.

Defines how resources are to be allocated.

Leads to a superior market position.

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Elements of a Product StrategyElements of a Product Strategy

1. Statement of the objective(s) the product should attain

2. Selection of strategic alternative(s)

3. Selection of customer targets

4. Choice of competitor targets

5. Statement of the core strategy

6. Description of supporting marketing mix.

7. Description of supporting functional programs

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Hierarchy of ObjectivesHierarchy of ObjectivesCompany Mission/Vision

Corporate objectives

Corporate strategies

Divisional objectives

Divisional strategies

Product/brand objectives

Brand strategies

Program objectives

Tactics

Level I

Level 0

Level III

Level II

Level IV

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Strategic AlternativesStrategic Alternatives

Growth in sales or market share

New segments

Market development

Convert nonusers

New product development

Competitors’ customers

Efficiency, short-run

profits

Reduce costs

Decrease inputs

Improve asset

utilization

Increase price

Increase outputs

Improve sales mix

Existing customers

Market penetration

Long-term

profits

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Criteria for Evaluating Strategic Alternative OptionsCriteria for Evaluating Strategic Alternative Options

Size/growth of the segment Opportunities for obtaining

competitive advantage Resources available to penetrate the

segment

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Total Product ConceptTotal Product Concept

Generic product

Expected product

Augmented product

Potential product

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Five Areas for DifferentiationFive Areas for Differentiation

1. Quality

2. Status and Image

3. Branding

4. Convenience and Service

5. Distribution

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Joint Space for ColasJoint Space for Colas

Diet

Noncola

•Fresca

Diet Pepsi

•

•Tab

Segment 3 •

Pepsi •

RC Cola

•

Segment 2 •

Nondiet

Cola

•Dr

Pepper

•7-Up

•Segment

1

• Coke

Diet Rite •

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Brand EquityBrand Equity

Reduced marketing costs

Trade leverage

Attracting new customers• Create awareness• Reassurance

Time to respond to competitive threats

Anchor to which other associations can be attached

Familiarity-liking

Signal of substance/ commitment

Brand to be considered

Provides value to customer by enhancing customer’s:

• Interpretation/ processing of information

• Confidence in the purchase decision

• Use satisfaction

Brand loyalty

Brand loyalty

Brand loyalty

Brand awareness

Brand loyalty

Brand equity

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Brand Equity cont.Brand Equity cont.

Reason-to-buy

Differentiate/position

Price

Channel member interest

Extensions

Help process/ retrieve information

Reason-to-buy

Create positive attitude/feelings

Extensions

Provides value to firm by enhancing:

• Efficiency and effectiveness of marketing programs

• Brand loyalty

• Prices/margins

• Brand extensions

• Trade leverage

• Competitive advantage

Brand loyaltyPerceived quality

Brand loyaltyBrand associations

Brand loyaltyBrand equity

Competitive advantageBrand loyalty

Other proprietary brand assets

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Some Brand Attribute and Image DimensionsSome Brand Attribute and Image Dimensions

Attributes

•Color•Style•Comfort•Freshness•Construction material

•Availability•Serviceability•Compatibility •Energy efficiency

•Instructions•Automation•Ease of Use

•Flavor/taste•Caffeine content

•Price•Packaging•Size•Calories•Brand name•Sweetness•Weight•Warranty•Durability•Convenience

Image DimensionsReliable—unreliableOld—youngTechnical—nontechnicalSensible—rashInteresting—boringCreative—noncreativeSentimental—nonsentimentalImpulsive—deliberateTrustworthy—untrustworthyConforming—rebelliousDaring—cautiousForceful—submissiveBold—timidSociable-unsociable

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Ten Guidelines for Building Strong BrandsTen Guidelines for Building Strong Brands

1. Brand Identity Each brand should have an identity, a personality. It can be

modified for different segments.

2. Value Proposition Each brand should have a unique value proposition.

3. Brand Position The brand’s position should provide clear guidance to those

implementing a communications program.

4. Execution The communications program needs to implement the identity

and position, and it should be durable as well.

5. Consistency Over Time Product managers should have a goal of maintaining a consistent

identity, position, and execution over time. Changes should be resisted.

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Ten Guidelines for Building Strong Brands Ten Guidelines for Building Strong Brands (cont.)(cont.)

6. Brand System The brands in the portfolio should be consistent and synergistic.

7. Brand Leverage Extend brands and develop co-branding opportunities only if the

brand identity will be both used and reinforced

8. Tracking The brand’s equity should be tracked over time, including

awareness, perceived quality, brand loyalty, and brand associations.

9. Brand Responsibility Someone should be in charge of the brand who will create the

identity and positions and coordinate the execution.

10. Invest Continue investing in brands even when the financial goals are

not being met.

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Basic Customer StrategiesBasic Customer Strategies

1. Customer acquisition

2. Customer retention

3. Customer expansion

4. Customer deletion

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Review of Guest SpeakerReview of Guest Speaker

John Jolliff – Country Insurance and Financial Things to Continue… Additional Requests…

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PresentationPresentation

See Folder for Guidelines… Feedback from Both Class and From Me… “Presentation” Element

100 Points Group

“Marketing Plan” Element (Written) 100 Points Group

Individual Element 50 Points

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PresentationPresentation

Comments Back to First Group by Thursday

Comments Back to Second Group by Next Tuesday

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Next Week…Next Week…

Simon Luthi and Peter Reugger Next Week First Groups Present…