Getting Started with OSBI Consulting

2

Team expectations

“To establish OSBI as a premier consulting organization managed by students, to deliver high quality solutions to client problems and to nurture future consultants for the business world.”

Mission of OSBI

Problem Solving

Team Building

Consulting Experience

Leadership

Del

iver

Hig

h Q

ualit

y S

olut

ions

to C

lient

Pro

blem

sD

evelop Future Consultants for the B

usiness World

OSBI Value

3

The context of your project

These are “live” projects with “real” clients

The organization is getting paid for almost all of the projects

There are no “right” answers, but some answers are better than others

You represent not only OSBI Consulting but the College of Business and the University of Illinois

4

Typical project timeline

1 2 3 4 5 6 7 8 9 10 11 12Weeks

• Engagement proposal• Workplan

Deliverable reviews

Final presentation

• Client feedback• Engagement

reviews

• Confirm scope and team roles

• Identify potential information sources/ collection methods

• Conduct initial information gathering

• Summarize findings and key implications

• Determine additional information needs

• Collect, analyze and synthesize additional information

• Develop recommendations and draft deliverables

• Create final deliverable(s)

• Develop project workplan

Status reports

Team reviews with Stig

Action Steps Approximate Timing

Client kickoff meeting

Summary of key findings and implications

5

Where you should be now

Setting up and having first team meetings – all team members must attend all team meetings

All paperwork should be in – Non-disclosure and non-compete forms must be in

to your Engagement Managers at your next team meeting.

Engagement Proposal and Work Plan should be in the works

6

Logistics of the project

Weekly video conferences with the client

Weekly team meetings

All deliverables “approved” by Stig

Realistic goals set on a weekly basis

COMMUNICATION!!! First Class folders

Team and client meetings

7

When the Project is Over

Team and Manager Evaluations will be done

Promotion possibilities will be decided

Feedback to EM on the project to help improve the program

Team members assigned to a new project in their new roles

8

What should you expect- the challenges

Things will NOT go as originally planned

You will NOT be able to find the information that you are looking for in the form you need it in

Your client, at times, may NOT be as responsive as you would like

Team members will NOT contribute at times

You need to be comfortable with being uncomfortable!!

9

What should you expect- the rewards

You WILL get out of the experience what you put into

You WILL better appreciate the concepts learned in class

You WILL understand that cases presented in class are contrived and only partially prepare you for what you will do in the work place

You WILL have a good story to tell to future employers

You WILL have actual consulting experience to reference

You STILL need to be comfortable with being uncomfortable!!

10

Issue decomposition (question pyramids)

Purpose: To define the key questions to answer to solve the company’s business issue

Question

Question Question

? ? ? ? ?

? ? ?? ?

Presenting problem

MutuallyExclusiveCollectivelyExhaustive

11

How to create a question pyramid

Start by defining the presenting problem in the form of a question Brainstorm the categories of questions that stem from the

presenting problem Within each issue category ask the following questions to create

additional layers:– Why?

– How?

– What?

– When?

– Where? Regroup questions, as required, into the appropriate categories

12

Presenting problem

Should our company launch a new retail concept aimed at enabling elderly and the disabled to stay in

their home?

13

Identify issue categories

Is retail concept viable?

Target customers?

Characteristics of target markets?

Market penetration required?

Product/ service mix?

Appropriate delivery

channels?

Sources of supply?

Competition?

Market positioning?

Organizational infrastructure?

14

Add additional layers

Who is the target customer(s)?– What are the demographics/ key characteristics of the target

customers?

– What segments of the target customers exist? (e.g., buy for themselves, buy for others, etc.)

– What are the buying behaviors of the target customers (e.g., where do they buy, how much do they buy, how often, etc.)

– How do the buying behaviors differ by customer segment?

15

Example issue decomposition

Primary Issues Sub Issues Alignment with P&L

Who is the target customer(s)? * What are the demographics/ key characteristics of the target customers?

* What segments of the target customers exist? (e.g., buy for themselves, buy for others, etc.)?

* What are the buying behaviors of the target customers (e.g., where do they buy, how much do they buy, how often, etc.)?

* How do the buying behaviors differ by customer segment?

Net Sales

What are the characteristics of the target market(s)?

* How does the number of target customers differ by market?

* How does the market vary by region/ area of the country?

* What market-specific factors make some markets more attractive than others?

* How do these market differences affect potential sales?

Net Sales

What level of market penetration and/ or market share is required to support profitability goals?

* What options for market penetration will support profitability goals? (e.g., deep penetration in a few markets, shallow penetration in multiple markets)

* What are the key factors that will drive/ hinder market penetration?

* What are the anticipated sources of market share (e.g., steal from competitors, create new demand, etc.)?

Net Sales

16



What mix of products/ services will best meet/exceed the needs of the target customer(s) and market(s)?

* What are the product/ service that will best meet/ exceed the target customers’ needs?

* How should the mix of products/ services vary by customer segment?

* How should the mix of products/ services vary by market?

* What level of quality of products/ services will best align with target customers/ markets?

Net SalesCost of Sales

What is the most appropriate delivery channel(s) for products/ services to best meet/exceed the needs of the target customers?

* What are the pros/ cons of alternate delivery formats/ channels (e.g., retail store, service program, direct sales, catalog, Home Shopping Network, etc.)

* What are the pros/ cons of various combination(s) of the above alternate delivery channels?

Net SalesCost of SalesOperating Expenses

What level of investment is required to support selected delivery channel(s)?

* What is the required investment for each combination of the selected delivery channels?

* What is the projected ROI for selected delivery channels and/or combinations?

Operating Expenses

Who are the most appropriate sources of supply for these products/ services?

* What are the key factors to evaluate suppliers?

* How many suppliers exist for each product/ service?

* How does this vary by market/ region?* How can supplier relationships that already

exist with other Centex businesses be leveraged?

Cost of Sales

17



Who is the competition? * How does the competition vary by market (e.g., number of competitors, market share, number of delivery channels, etc.)?

* How does the competition vary by delivery channel?

* What is the current market position of each competitor?

* What trends relating to competition exist (e.g., change in number of competitors, number/ types of delivery channels, market positioning, etc.)?

Net Sales

How should the concept(s) be positioned in the market?

* What are the appropriate dimensions (e.g., price, service, quality, etc.) of positioning to consider?

* What are the potential benefits/ costs of alternate market positions?

* What is the desired image to attract target customers?

* How should this concept be positioned to the different customer segments?

* What are the unintended pros/cons of alternate market positions?

* How should the Centex Corporation’s image/ reputation be leveraged, if at all?

Net SalesOperating ExpensesOther Expenses

18



What organization infrastructure is required to support the concept(s) and their associated operations?

* What type of organization structure is required?

* What are the marketing requirements for this program/ concept?

* What Human Resource issues need to be addressed (e.g., training, etc.)

* What management measures and reporting implications need to be defined and/ or addressed?

* What existing organizational structures/ infrastructure from other Centex businesses can be leveraged?

Operating ExpensesOther Expenses

19

Workplan example

20

Exercise

Presenting problem:

How can OSBI increase repeat participation of students?

21

How to create a question pyramid

Start by defining the presenting problem in the form of a question Brainstorm the categories of questions that stem from the

presenting problem Within each issue category ask the following questions to create

additional layers:– Why?

– How?

– What?

– When?

– Where? Regroup questions, as required, into the appropriate categories

22

Resources available to you

First Class project folder

I- Find (www.osbi.uiuc.edu)

Methodologies

Tools and templates

Past deliverables

23

Phase 2Objectives StatementWhere does the client want to be?

Phase 3Execution & ImplementationHow should the client get there?

Phase 4Performance EvaluationHas the client reached her/his goals?

Phase 1Situation ReportWhere is the client now?

The Creation of a Marketing PlanThe Creation of a Marketing Plan

Assess Assess Market Market

EnvironmentEnvironment

Assess Assess Market Market


1.Structure Structure Evaluative Evaluative ProcessProcess

Structure Structure Evaluative Evaluative ProcessProcess

4.

Consistent Client Interaction & InputConsistent Client Interaction & Input

Executive Summary

Corporate Strategy

Situation Report

Formulate Formulate Strategies & Strategies &

Set ObjectivesSet Objectives

Formulate Formulate Strategies & Strategies &

Set ObjectivesSet Objectives

2. 3.

Creative/ Analytical Process

Creative/ Analytical Process

Written Outputs to Marketing Plan

Written Outputs to Marketing Plan Key

Assumptions

Marketing Strategies & Objectives

Marketing Tactics

Short & Long Term Measures & Goals

Develop Develop Marketing Marketing

TacticsTactics

Develop Develop Marketing Marketing

TacticsTactics

Promotion

PricePrice Product

PlacePlace

Marketing Marketing MixMix

Communication

Distribution

24

1.0 Assess the Market Environment

• Develop the foundation from which marketing strategies, objectives, and tactics are to be developed

• Recognize for implementation the consumer orientation for targeted marketing communications

• Define necessary assumptions, both internal & external, upon which further planning can be meaningfully based

Objective

EXTERNAL• Porter’s Five Forces• PESTLE Framework• Structure-Conduct-

Performance Articulation• Segmentation Scheme• Competitive Positioning

Articulation• Value Mapping• Perceptual Mapping

Sub-Process

Tools

•Understand overarching

business strategy•Determine the

client’s strengths & weaknesses

•Earmark areas to be improved for

later action

•Understand overarching

business strategy•Determine the

client’s strengths & weaknesses

•Earmark areas to be improved for

later action

•Evaluate past performance in light of internal goals/ objectives & competitor’s

performance where possible

•Evaluate past performance in light of internal goals/ objectives & competitor’s

performance where possible

•Evaluate past and current

positioning for coherence with

overarching business strategy

•Evaluate past and current

positioning for coherence with

overarching business strategy

• Is the industry growing? Is it stable? Does technology play a dominant role?

• Are the client’s existing/ potential resources & capabilities coincidental with key industry success factors?

• How has the client performed? Is the client well-positioned relative to competitors?

Tips & Key ?s

•Identify existing/ potential voids

within the market for possible exploitation

•Identify existing/ potential voids

within the market for possible exploitation

• A summary of all the external factors which will likely affect the client’s marketing performance in the present & future

• A statement of the client’s strengths & weaknesses with relevance to its competition

• An exhaustive list of necessary assumptions essential to current & future marketing decisions

Outputs to Written Marketing Plan

•Determine chief economic traits•Identify drivers

of change•Identify key

success factors

•Determine chief economic traits•Identify drivers

of change•Identify key

success factors

•Gather all historical data and secondary/

primary research when appropriate

and possible

•Gather all historical data and secondary/

primary research when appropriate

and possible

•Define internal & external

assumptions (ie growth rates,

advent of regulation, speed

of innovation, etc.) using

historical data and secondary/

primary research

•Define internal & external

assumptions (ie growth rates,

advent of regulation, speed

of innovation, etc.) using

historical data and secondary/

primary research

Conduct

External

Analysis

Conduct

External

Analysis

Conduct

Internal Analysi

s

Conduct

Internal Analysi

s

•Determine the impact of

external entities upon the industry

(government regulation, social

goodwill, etc.)

•Determine the impact of

external entities upon the industry

(government regulation, social

goodwill, etc.)

•Identify the relative strengths & weaknesses of existing industry

players

•Identify the relative strengths & weaknesses of existing industry

players

INTERNAL• SWOT Analysis• Activity Coherence

Mapping

ASSUMPTIONS• Historical Trend

Analysis• Pareto Affect

25

1.01 Porter’s Five Forces Model

•Assess strength of each of the five competitive forces (Strong? Moderate? Weak? )

•Explain how each force acts to create competitive pressure. What are the factors that cause each force to be strong or weak?

•Decide whether overall competition (the combined effect of all five competitive forces) is fierce, strong, normal/moderate, or weak

Process

• Key questions to better understand the ferocity of competition within the industry: Is price competition vigorous? Active efforts to improve quality? Are rivals competing on customer service? Lots of advertising/sales promotions? Active product innovation? Active use of other weapons (strategic, operational, marketing-related)?

Tool

Notes/ Implications

Substitutes: Low to Moderate Increasing competition from hand held/ portable computing devices

Supplier Power: Very High

Intel and Microsoft extract all industry

profits.

Buyer Power: High and RisingLow switching

costs, Less brand loyalty.

Resellers and retailers

have grip on end users

Threat of Entry: Moderate to HighLow capital costs of manufacturing

Relatively easy to assemble PCsSome brand recognition and loyalty

Rivalry: Very HighIntense price competition

Excess capacity and saturation. Some brand

recognition, but PCs thought of as commodities

Personal Computer Industry

26

1.02 PESTLE Analysis

Process

Tool

Notes/ Implications

Scan of the External Macro-Environment

Political

Tax policy

Environmental regulations

Trade restrictions & tariffs

Political stability

Deregulation

Privatization

Economic

Economic growth

Exchange rates

Interest rates

Inflation rates

Business cyclesUnemployment

Social

Population demographics

Income distribution

Attitudes towards work & leisure

Social mobility

Health consciousness

Population growth rate

Emphasis on safety

Technological

Automation

Government spending on technology

Information technology development

Speed of technology transfer

Research & Development

Technology incentives

Rate of change

Technological maturity

Legal

Health & safety laws

Employment regulations

Monopolies legislation

Environmental

Pollution control

Noise levels

Waste disposal

Additional requirements on manufacturing processes

• What influences have been particularly important to the client in the past? • Are any of these more or less significant in the future for the client and her/his competitors? • Which of these are the most important at the present time? In the next few years?

•Gather information relevant to client’s external environment and analyze for relevance to the client’s strategies

•Implications for the client, customers, intermediaries, the market/ industry, competitors, and stakeholders must be considered

•Arrange this information into the categories at left for use during both the internal analysis phase and the strategy & objective development phases

27

1.03 Structure-Conduct-Performance Articulation

• To identify the structure of the industry, the dominant conduct of existing players, and the resulting performance of newer firms

• To define the relationships illustrated at right, the following industry conditions must first be considered:

ConsumerElasticity of demandSubstitutesSeasonalityRate of growthLocationLumpiness of ordersMethod of purchase

ProductionTechnologyRaw materialsUnionizationProduct durabilityLocationScale economiesScope economies

Process

• Threat of entry is stronger when…entry barriers are low, a sizable pool of entry candidates exists, incumbents are unwilling or unable to contest a newcomer’s entry efforts, and/or newcomers can expect to earn attractive profits

Tool

Notes/ Implications

Structure•Numbers of buyers•Numbers of sellers

•Barriers to entry facing new firms•Product differentiation

•Vertical integration•Diversification

Conduct•Advertising and marketing•Research and development

•Pricing behavior•Plant investment

•Legal tactics•Product choice

•CollusionPerformance

•Profits•Product quality

•Production efficiency•Technical progress/ progressiveness

•Allocative efficiency•Equity

28

1.04 Segmentation Scheme

•Define distinct customer groups that have problems/ needs which can be solved/ serviced in one or more ways

• Establish segment variables that yield mutually exclusive and exhaustive segments

• Develop Segment Profiles

• Evaluate Segments for their viability and “attractiveness”

Process

• Segmentation scheming defines potential markets and serves as an essential component of the client’s ultimate marketing mix decisions

Tool

Notes/ Implications

Determine Which Segmentation Variables to UseDetermine Which Segmentation Variables to Use

Develop Market Segment ProfilesDevelop Market Segment Profiles

Evaluate Relevant Market SegmentsEvaluate Relevant Market Segments

Segmentation VariablesUser-Related•Demographics: Age, Gender, Race, Ethnicity, Income, Education, Occupation, Family Size, Family Life Cycle, Religion•Social Class•Geographic: Region, Urban, Rural, City Size, County Size, State Size, Market Density, Climate, Terrain•Lifestyles & Psychographics

Behavioral•Benefits•Usage•Price•Brand•Situational

Measurable• Size, purchasing power, profiles of segments can be measured

Actionable•Must be able to attract and serve the segments

Substantial •Segments must be large or profitable enough to serve

Differential •Segments must respond differently to different marketing mix elements & actions

Accessible •Segments must be effectively reached and served

Are acquired segments viable?

29

1.05 Positioning Articulation

•Determine current competitive positioning within the marketplace

•Identify holes, potentially representative of untapped markets, for further exploration

•Formulate strategies to seize advantage, whether by challenging competitors’ positioning or by seeking “vacant” space

Process

• With positioning articulated, unfulfilled customer groups or needs can be more readily identified and targeted

• Should current positioning prove incoherent with the client’s business strategy, this articulation becomes essential to developing new marketing strategies

Tool

Notes/ Implications

High Student Participation

Low Student Participation

Primarily Fortune 500

Primarily Start-up Companies

Quality Management Consortium

Austin Power

Center for Experiential Learning

The MBA Consulting

Project

Business Consulting Network

Freeman Consulting Group

Darden Business Projects

OSBI

Community Consulting

Carlson

MBA Consulting Program

Student-Staffed Consulting

30

1.06 Value Mapping

•Determine the current value-price orientation prevalent in the industry

•Define the customer groups to which major competitors cater (price-sensitive or quality-focused)

•Identify areas of the existing value orientation scheme within which client could capture value

•Formulate strategies to combat competitors or to seize “vacant” space

Process

• Use the acquired value map to identify holes in the market’s current pricing scheme; where large gaps exist between products on the value line, there is opportunity for new product introduction

Tool

Notes/ Implications

Pepsodent Regular

$1.00

$1.20

$1.40

$1.60

$1.80

$2.00

$2.20

$2.40

$2.60

$2.80

$3.00

Perceived Benefits

Pri

ce

Colgate Classic

Colgate PlusPepsodent

ProfessionalReach Regular

Aquafresh Flex

Oral-B Regular Oral-B

Indicator

Reach Advanced

Perceived Performance

Pri

ce

Price Value Map of the Toothpaste Industry, 1992

31

1.07 Perceptual Mapping

•Evaluate the current players and their respective abilities in light of all-important consumer perceptions

•Formulate strategies to exploit the weaknesses and nullify the strengths of competitors in terms of consumer perception

Process

• By mapping perceptions, the relative strengths & weaknesses of competitors become more clear and actionable

• What are the respective foci of competitors, and how do consumers perceive them in the marketplace?

Tool

Notes/ Implications

Mildness

Overall Cleaning

Cutting Grease

Removing baked-on foods

Leaves dishes shiny

Best Value for money

Long-lasting suds

Most pleasant fragrance

Competitor#1#2#3

50%

100%

Liquid Detergent Market

32

1.08 SWOT Analysis

• Gather relevant information and list all issues, external & internal, that have or will likely have impact upon the client’s activities

• Use this information in conjunction with the findings of the external analysis (specifically the PESTLE) to develop a thorough understanding of the client’s reality

Process

• Compiled strengths should be considered potential points of competitive advantage for the client and her/his activities

• This information is useful in the immediate to better understand the current environment, and will again prove essential during the strategy formulation & recommendation stages of the plan

Tool

Notes/ Implications

StrengthsList internal strengths

•Brand awareness

•Patents/ trademarks

•Cost advantages

•Proprietary knowledge

•Exclusivity of resources

•Preferential distributive access

WeaknessesList internal weaknesses

•Converse of suggested strengths (ie lack of brand awareness, lack of access to resources)

•May sometimes be the “flip-side” of a strength (ie large manufacturing capacity, while generating low per-unit costs, might also inhibit flexibility/ adaptability)

OpportunitiesList external opportunities

•An unfulfilled customer need

•Arrival of new technologies

•Relaxation of regulations

•Dissolution of pre-existing trade barriers

ThreatsList external threats

•Emergence of substitutes

•Tightening of applicable regulations

•Institution of new trade barriers

•Shifts in consumer preferences away from client’s offerings

33

1.09 Activities Map

• Evaluate the existing strategic coherence of the client’s current activities

• Identify the higher-level activities and then list those actions undertaken and policies adopted to support main actions/ initiatives

Process

• The more relationships/ linkages that exist among current activities, the more coherent and integrated is the client’s strategy

• Planned activities for the future can herewith be evaluated prior to adoption/ implementation for coherence with existing activities

Tool

Notes/ Implications

Low prices

Frequent Departures

Lean and

productive crew

Point-to-Point flights

Limited Passenger Amenities

High aircraft utilization

No meals

No assigned seats

No transfers

No connections

Standard fleets

Limited use of travel agents

Automatic Ticketing machines

High employee compensation Employee Stock

ownership

Flexible Union contracts

15 min.turnaround

Southwest Airlines

34

• Acquire historical data and establish relevant time periods for examination (ie similar in duration, behavior, conditions, etc)

• Examine data for statistical relevance and significance, being careful to adjust for seasonality where appropriate

• Extrapolate forward into the future for periods of appropriate relevance to the client

Process

• While long-term trends are often beneficial in establishing the broad perspective, it is often more insightful to limit trend analysis to a more current term given that influential factors/ conditions can change dramatically over time. Examining the past for periods of similar observable behavior to that of the current period can prove useful in predicting upcoming movements.

Tool

Notes/ Implications

1.10 Historical Trend Analysis

Trends in US GDP Growth

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

1929 1939 1949 1959 1969 1979 1989 1999

Bill

ion

s o

f '9

6 $

s

Long-term: Trending

positively with annual

increases of $118B

Most Recent 10-Years:

Increasing Annually at $256B

35

Observed Pareto

Effect in the Capital

Industrial Goods Market

• To quickly estimate with demonstrated accuracy the importance of existing customer segments

• This “effect” is generally applicable across industries and basically states that approximately 80% of a firm’s sales are attributable to only 20% of same firm’s customers

• With this tool, marketing efforts can be better focused/ targeted to generate maximum impact with respect to stated goals

Process

• While this tool is useful in a general sense, it is static and therefore must be used carefully. Customers with the greatest potential may well be within the 80 percent, or within a heretofore untapped segment of the market.

Tool

Notes/ Implications

% of client’s existing customer base

% of client’s current sales

1.11 The Pareto Effect (80/20 Rule)

Customer

Group A accounts

for 75% of sales and

represents only 25%

of total customer

base

Customer Group B accounts for 20% of

sales while comprising 55% of

customer base

Customer

Group C accounts

for 5% of sales and

represents 20% of

the total customer

base

36

2.0 Formulate Strategies & Set Objectives

• Develop marketing strategies and associated objectives based upon the environmental assessment

• Translate into concrete form the needs, hopes, & desires of the client with respect to her/his business performance

Objective

• Ansoff Matrix

• TWOS Matrix

Sub-Process

Tools

•Establish broad objectives applicable

to these marketing strategies and to the client’s overarching

wants/ needs (ie target ROI, improved

image, social responsibility)

•Establish broad objectives applicable

to these marketing strategies and to the client’s overarching

wants/ needs (ie target ROI, improved

image, social responsibility)

•Translate the broad objectives into key

result areas (ie market penetration, sales growth rate)

commensurate with key industry success

factors

•Translate the broad objectives into key

result areas (ie market penetration, sales growth rate)

commensurate with key industry success

factors

•Create sub-objectives necessary

for the accomplishment of the broad objectives

(ie sales volume goals, geographical expansion, product

line extension)

•Create sub-objectives necessary

for the accomplishment of the broad objectives

(ie sales volume goals, geographical expansion, product

line extension)

• This process must be one of continuous review, as the strategies and associated objectives need to be evaluated forwards and backwards for coherence.

Tips & Key ?s

• A set of overarching marketing strategies relevant to the client’s environment

• A definitive statement of the client’s objectives replete with associated complementary sub-objectives


•Develop cohesive marketing strategies to best approach the client’s environment

now and into the future

•Develop cohesive marketing strategies to best approach the client’s environment

now and into the future

37

• Conceptualize the client’s competitive situation within two dimensions only: products and markets (ie what is offered and to whom it is offered)

• Develop marketing strategies for which specific objectives can be defined and later measured

Process

• This tool is useful as it allows for the simplification of even the most complicated industry. By reducing complexities along two dimensions, the client has only to consider four broad growth strategies.

Notes/ Implications

2.1 Ansoff’s Matrix of Growth Strategies

Existing Products New Products

Existing Markets

Market PenetrationLeast risky of the four as it leverages the client’s existing resources and capabilities

In a growing market, maintaining the status quo will result in growth; there may also exist opportunities to increase market share if competitors reach capacity limits

As the market approaches saturation/ maturity another strategy must be pursued if further growth is desired

Product Development

Mitigates risk by basing operations within an established customer base

May be appropriate if the client’s strengths are related to specific customers rather than products

New Markets

Market Development

Mitigates risk by basing market expansion on existing products

Can include entering new geographical areas, promoting new uses for an existing product and entering new market segments

May be appropriate when the client’s distinct competence rests with the product rather than the market

DiversificationMost risky of the four growth strategies since it requires both product and market development ─also know as the “suicide cell” of this matrix

Horizontal: development of activities which are complementary to or competitive with the client's existing activities

Vertical: development of activities which involve the preceding or succeeding stages in the client’s production process (upstream/backward or downstream/forward)

Conglomerate: refers to the situation where at face value the new activity of the client seems to bear little or no relation to it's existing products or markets

38

2.2 TWOS Matrix

• Analyze most relevant information from SWOT in an attempt to maximize strengths and minimize weaknesses

• Complete the matrix as shown, with careful focus upon the actionable recommendations arising from the analysis

Process

• This model, while seemingly academic in nature, is one of the essential elements of strategy formulation and the written Marketing Plan.

Tool

Notes/ Implications

Strengths (S) List internal strengths

Weaknesses (W) List internal weaknesses

Opportunities (O) List external opportunities

SO Strategies

Generate strategies here that use strengths to take advantage of

opportunities

WO Strategies

Generate strategies here that take advantage of opportunities to

overcome weaknesses

Threats (T) List external threats

ST Strategies

Generate strategies here that use strengths to avoid threats

WT Strategies

Generate strategies here that minimize weaknesses and avoid

threats

39

• Any and all Marketing Mix decisions (especially those to do with product & pricing) must be made with due consideration for competitive positioning

• Communication means & messages are largely dependent upon the complexity of client’s offering

• Each aspect of the MM should correspond to definite, measurable, and attainable objectives

3.0 Develop Marketing Tactics

• Develop the overall route to be followed for the achievement of stated objectives

• Determine the appropriate Marketing Mix, with special emphasis upon relevant & coherent Communications

Objective

Sub-Process: Use of Marketing Tactics to Attain Objectives

•Determine where within the Product Life Cycle the client’s offering is

currently, as the maturity

of the offering will

determine much of the

MM

•Determine where within the Product Life Cycle the client’s offering is

currently, as the maturity

of the offering will

determine much of the

MM

Tips & Key ?s

•Refine objectives as necessary and adjust strategies accordingly; this process is one for continuous review

& modification

•Refine objectives as necessary and adjust strategies accordingly; this process is one for continuous review

& modification

•Revisit marketing strategies to

ensure coherence with defined

objectives and associated tactics

•Revisit marketing strategies to

ensure coherence with defined

objectives and associated tactics

• Definite marketing tactics formulated specifically to attain established objectives

• Associated expenditure requirements and estimated results of each strategy relevant to stated objectives (to be coordinated with Evaluation Phase)


• Product Life Cycle Articulation

• Elements of Environmental Assessment

Product•Policies & decisions related to client’s offerings: line extensions/ retractions, feature modifications, branding, etc.

Product•Policies & decisions related to client’s offerings: line extensions/ retractions, feature modifications, branding, etc.

Price•Skimming & penetration

policies•Cost & value

approaches

Price•Skimming & penetration

policies•Cost & value

approaches

Place (Distribution)•Agent, retailer, wholesaler, direct, etc.

•Issues associated with the physical movement of goods

Place (Distribution)•Agent, retailer, wholesaler, direct, etc.

•Issues associated with the physical movement of goods

Promotion (Communication)

•Impersonal: advertising, POS displays, public

relations•Personal: face-

to-face selling on- & off-site

Promotion (Communication)

•Impersonal: advertising, POS displays, public

relations•Personal: face-

to-face selling on- & off-site

Adjust the Marketing Mix as appropriate

to pursue objectives

Tools

40

3.1 Product Life Cycle Articulation

• Determine where within the life cycle the client’s offering is currently

• Formulate marketing mix strategies using the accepted PLC as a guide

Process

• The appropriate Marketing Mix is heavily dependent upon where within the life cycle the product/ service currently is. As the product/ service matures and demonstrates profit potential, competitors are likely to enter and influence the client’s tactics, objectives, & strategies.

Tool

Notes/ Implications

Time

Pro

du

ct S

ales

Introduction Product: establishment of branding & quality level; acquisition of trademarks/ patents

Price: low penetration pricing to build share or high skim pricing to recover development costs

Place: selective distribution until demonstrated acceptance

Promotion: targeting innovators/ early adopters; message is education & awareness

Growth

Product: maintenance of quality; addition of functionality/ support

Price: static pricing

Place: addition of channels to serve growing customer base

Promotion: broad message to widening audience

Maturity

Product: enhancement of features to pursue differentiation

Price: decreased price due to competition

Place: “incentivize” existing channels to gain preference over competitors

Promotion: strong emphasis on differentiation

Decline

Maintain: continue operations with a desire to retain competitive position

Improve: rejuvenate product with additional features, new issues, or alternative customers

Harvest: reduce costs and target loyal/ niche customers

Exit: discontinue offering and liquidate inventory to end-users or competitors

Enter: develop new products/ services (usually for a new customer group or market)

41

4.0 Structure Evaluative Process

• Predict the outcomes associated with each defined tactic and the marketing plan as a whole to better align stated objectives with reality

• Evaluate in progress and in retrospect the successes/ failures of the marketing plan

Objective

• Sales Trend Analysis (with & without control markets)

• Growth Rate of Improvement Analysis

Sub-Process

Tools

Complete projections

associated with each tactic and

evaluate against

budgeted expenditures

Complete projections

associated with each tactic and

evaluate against

budgeted expenditures

Evaluate observed

successes/ failures against

stated objectives (ie

did advertising expenditures create desired

awareness levels?)

Evaluate observed

successes/ failures against

stated objectives (ie

did advertising expenditures create desired

awareness levels?)

Examine the external

environment for events that

may have contributed positively/

negatively to observed outcomes

Examine the external

environment for events that

may have contributed positively/

negatively to observed outcomes

Employ test markets when

appropriate and where possible to evaluate the paper plan in

the “real world” prior to

full-scale implementation

Employ test markets when

appropriate and where possible to evaluate the paper plan in

the “real world” prior to

full-scale implementation

• Where will the client be if she/he adopts the recommended actions?

• In retrospect, has the client reached her/his stated objectives within the parameters established? If not, why not?

• Did the marketing efforts have the desired effect or even cause the observed effect?

• Evaluate all phases of the planning process for validity and improvement

Tips & Key ?s

• Structured process for predicting success in the “pre-period,” analyzing progress in the “test period,” and measuring success in the “post period”

• List of measures (ie sales growth, brand awareness, penetration rate, market share, etc.) and associated goals for each


42

The Written Marketing Plan

Objective

Marketing Plan Inclusive of Defined Analyses

• Develop for articulation a coordinated plan that translates stated marketing strategies into actionable objectives and associated tactics, replete with a process for evaluation

• Answer with the Marketing Plan these four questions: Where is the client now?; Where does the client want to be?; How should the client get there?; Did the client reach stated goals?

• Be concise and keep in mind the end-audience for this marketing plan

• Obtain “buy-in” from all levels of management, while maintaining overarching strategies & objectives and rejecting biased, individualistic goals

Executive Summary

Corporate Strategy

Situation Report

Key Assumptions

Marketing Strategies & Objectives

Marketing Tactics

Short & Long Term Measures & Goals

Conclusion

1.2.

3.

7.

4.

5.

8.9.

Tips & Key ?s

43

Phase 1Target Market Identification

Phase 2Prospective Positioning

Phase 3Implementation Planning

Market Feasibility StudyMarket Feasibility Study

Define Define Customer Customer

NeedsNeeds

Define Define Customer Customer

NeedsNeeds

Conduct Conduct Internal Internal AnalysisAnalysis

Conduct Conduct Internal Internal AnalysisAnalysis

Conduct Conduct Competitive Competitive

AnalysisAnalysis

Conduct Conduct Competitive Competitive

AnalysisAnalysis Determine Determine Target Target MarketMarket

Determine Determine Target Target MarketMarket

Evaluate Evaluate Financial Financial ViabilityViability

Evaluate Evaluate Financial Financial ViabilityViability

Plan Value Plan Value OptimizationOptimizationPlan Value Plan Value

OptimizationOptimizationEvaluate Evaluate Industry Industry


Evaluate Evaluate Industry Industry


Define Define Potential Potential MarketsMarkets

Define Define Potential Potential MarketsMarkets

Data GatheringData Gathering Analysis & EvaluationAnalysis & Evaluation

Consistent Client Interaction & InputConsistent Client Interaction & Input

1.

2.3.

5.

4.

6.

7. 8.

44

1. Define Customer Needs

• Evaluate alignment of provided benefit with the needs of customers

Objective

• Interest/ Needs Survey

• Laddering Interviews

• Prototyping

Sub-Process

Tools

Define the benefit to be provided or

the void to be filled with the new

alternative

Define the benefit to be provided or

the void to be filled with the new

alternative

Translate perceived benefit

into necessary features & attributes

Translate perceived benefit

into necessary features & attributes

Rank the measurable

attributes by their respective

importance to customer

Rank the measurable

attributes by their respective

importance to customer

Evaluate client’s product

performance in terms of weighted

attributes

Evaluate client’s product

performance in terms of weighted

attributes

• Approach this objectively—avoid a “client bias”

• Is this a B2B or B2C situation?

• What do customers want? Does this new product give it to them?

• Does this new alternative better serve their needs?

Tips & Key ?s

Briefly examine the level of customer

satisfaction provided by

existing alternatives

Briefly examine the level of customer

satisfaction provided by

existing alternatives

Consider the relative customer risks and costs of switching from existing benefit-

provisionary source, if any, to new alternative

Consider the relative customer risks and costs of switching from existing benefit-

provisionary source, if any, to new alternative

Make preliminary judgments as to

the product’s overall

attractiveness in light of existing

alternatives

Make preliminary judgments as to

the product’s overall

attractiveness in light of existing

alternatives

• Perceived benefit desired/ required by customer

• Product attributes associated with said benefit & relative importance to customer

• Early determination of client product’s marketability (attractiveness to customer)

Outputs

45

1.1 Interest/ Needs Survey

• Develop for distribution and reclamation a survey targeted for the informational needs of the team

• Assign appropriate and meaningful metrics for ready compilation

• Accumulate and interpret acquired data without bias

Process

• Be careful during survey creation not to inadvertently formulate or include questions that may contain a bias

• Collecting data is important, but the analytical interpretation is essential to the engagement

Tool

Notes/ Implications

1. Please rate the importance of the following attributes in your selection of a retail store by circling the appropriate number. Not At Extremely All Important ImportantPrice 1 2 3 4 5 6 7Product selection 1 2 3 4 5 6 7Operating hours 1 2 3 4 5 6 7Payment methods 1 2 3 4 5 6 7Merchandise quality 1 2 3 4 5 6 7Product Refundability 1 2 3 4 5 6 7Customer service 1 2 3 4 5 6 7Location 1 2 3 4 5 6 716. The following is a list of items that can be purchased from a Target vending machine. Please rate the likelihood that you would purchase these products from the vending machine by circling the appropriate number. Not at All Extremely Likely to Purchase Likely to PurchaseSun block 1 2 3 4 5 6 7Aspirin 1 2 3 4 5 6 7Lip balm 1 2 3 4 5 6 7Hand Lotion 1 2 3 4 5 6 7Mouthwash 1 2 3 4 5 6 7Toothpaste 1 2 3 4 5 6 7Toothbrush 1 2 3 4 5 6 7Soap bar 1 2 3 4 5 6 7Music CD 1 2 3 4 5 6 7CD carrier 1 2 3 4 5 6 7Notebook 1 2 3 4 5 6 7Disposable Camera 1 2 3 4 5 6 7Camera Film 1 2 3 4 5 6 7

Representative questions from a recent survey pertaining to Target vending machines

The Objective: to determine a target market need for vending machines of this nature, as well as consumer receptiveness to vending machines of this nature

46

1.2 Laddering Interviews

• 1-on-1 interviewing technique capable of establishing key consumer associations between product attributes and meaningful values

• By repeatedly asking probing questions of consumers, a value map specific to the relevant provided benefit can be developed that associates attributes to consequences, and consequences to values

• This probing allows greater understanding of consumer behaviors, wants, and needs

• The resulting ladder of perceptual orientations is useful for distinguishing between products in a given product class

Process

• Key Questions: “Why do people not buy my product?” & “Why do people buy my product?”

• It is most beneficial to conduct multiple interviews, with both non-users and product champions to acquire the most valuable insights into consumer motivations and behaviors

Tool

Notes/ Implications

No Caloric Content

Desire to be athletic and attractive

Gain respect of others through

physical appearance

Weight is key determinate of

social acceptance for women

Self-evaluation determined by appearance

SELF ESTEEM SOCIAL ACCEPTANCE

Society values youthful

appearances

Bright, energetic, youthful

appearance

Bottle

Ready-to-transport

containers

Available almost

anywhere

Immediate fulfillment of

need

Reward / Compensation

ACCOMPLISHMENT

•Interviewer elicits as many product attributes from the respondent as possible and then probes further…

•Interviewer: You indicated that you enjoy Diet Coke because it doesn’t have calories. Why is this important to you?

•Respondent: I like to stay fit.

•Staying fit is important to you?

•Sure, I like to look good.

•Why is looking good important to you?

•I want to look good; people are judged by their appearance. I care what others think o f me.

•Do you feel that you are being judged?

•Of course! People are constantly judging me; and as a woman it is all about appearance.

•What specifically about appearance do you think is important?

•For women? Weight is the biggest issue.

Hierarchical Value Map: Diet Coke (1 champion/ 2 attributes)Representative interview questions (posed to Diet Coke champion)

47

1.3 Customer Prototypes

• Imagine and define people within specific target segments in an attempt 1) to gain a multi-dimensional view of the customer for whom the client will provide benefit and 2) to gain insight into the unarticulated needs of said customer

• Base profile on certain key ?s: Why does she/he use require this benefit? How does this person see her/himself? What is important to her/him? What are her/his ambitions? Who does she/he want to impress? What is her/his idea of the perfect vacation?

• Repeat this process until customer profiles begin to overlap, and then compile common characteristics/ goals/ values for client’s marketing mix

Process

• The results of this profile-layering have significant importance to the client’s ultimate marketing strategy

Tool

Notes/ Implications

Horacio Castro has just entered the United States illegally at the age of seventeen. Crossing the border with the aid of an established smuggling organization, Mr. Castro is eager to recover his US$3,500 cost of entry into America. Mr. Castro has settled in Chicago to reap the benefits of the city’s large labor market, and to utilize his existing familial ties within the city. Mr. Castro is here primarily to earn money, the vast majority of which will be sent to his rural home in the Durango Province of Mexico. In Mexico, his mother and five younger siblings will use the money to improve the drainage of their small field and purchase those necessities which they cannot provide for themselves. Horacio’s motivations are clear: earn as much money as possible to facilitate a quick return to his Mexican homeland. He has chosen this path as opportunities in Mexico are limited for a man lacking formal education and familial influence. Learning the meat-packing trade from his uncle, Horacio has secured a position in the same plant in which his uncle has labored for twelve years. While his expenses are low (he lives with his uncle’s family free of charge), Horacio recognizes the economic advantages associated with English abilities. His supervisor is a bilingual immigrant from Mexico City, valued for his ability to understand and communicate the motivations of both laborers and management. Horacio wants to emulate this successful supervisor and not his uncle, who having never learned English is still a laborer. In his mind, Horacio struggles with the barriers: he has little educational training, no English-speaking acquaintances, little disposable income with which to procure an education, no knowledge of the available educational opportunities, and little available time with which to take any classes. Horacio is discouraged by the barriers, but he feels there must be a way to learn English.

Not-For-Profit Adult English-Language Education--segment-specific customer

48

2. Evaluate Industry Environment

• Determine the client’s ability to enter and compete within the industry

• Identify potential opportunities for further exploration

Objective

• Structure-Conduct-Performance Articulation

• Porter’s Five Forces Model

• Externalities Mapping

Sub-Process

Tools

Determine chief economic traits of

the industry (growth rates,

trends)

Determine chief economic traits of

the industry (growth rates,

trends)

Identify the drivers of change

within the industry

Identify the drivers of change

within the industry

Determine the impact of external entities upon the

industry (government

regulation, social goodwill, etc.)

Determine the impact of external entities upon the

industry (government

regulation, social goodwill, etc.)

Identify barriers to entry, if any, &

evaluate them with respect to client’s

strengths/ weaknesses

Identify barriers to entry, if any, &

evaluate them with respect to client’s

strengths/ weaknesses

• Do existing industry players actively discourage new entrants?

• Is the industry growing? Has the industry been stable? Is growth likely to continue?

• Is technology an issue? If so, where along the curve are current alternatives?

Tips & Key ?s

Identify the relative strengths & weaknesses of existing industry

players

Identify the relative strengths & weaknesses of existing industry

players

Identify key success factors within industry

Identify key success factors within industry

Make a judgment as to overall

industry attractiveness

Make a judgment as to overall

industry attractiveness

• List of industry players ranked according to strength/ position

• Clear understanding of resources & capabilities required for industry success

Outputs

49

2.1 Structure-Conduct-Performance Articulation

• To identify the structure of the industry, the dominant conduct of incumbents, and the resulting performance of firms

• To define the relationships illustrated at right, the following industry conditions must first be considered:

ConsumerElasticity of demandSubstitutesSeasonalityRate of growthLocationLumpiness of ordersMethod of purchase

ProductionTechnologyRaw materialsUnionizationProduct durabilityLocationScale economiesScope economies

Process

• Threat of entry is stronger when…entry barriers are low, a sizable pool of entry candidates exists, incumbents are unwilling or unable to contest a newcomer’s entry efforts, and/or newcomers can expect to earn attractive profits

Tool

Notes/ Implications

Structure•Numbers of buyers•Numbers of sellers

•Barriers to entry facing new firms•Product differentiation

•Vertical integration•Diversification

Conduct•Advertising and marketing•Research and development

•Pricing behavior•Plant investment

•Legal tactics•Product choice

•CollusionPerformance

•Profits•Product quality

•Production efficiency•Technical progress/ progressiveness

•Allocative efficiency•Equity

50

2.2 Porter’s Five Forces Model

•Assess strength of each of the five competitive forces (Strong? Moderate? Weak? )

•Explain how each force acts to create competitive pressure. What are the factors that cause each force to be strong or weak?

•Decide whether overall competition (the combined effect of all five competitive forces) is brutal, fierce, strong, normal/moderate, or weak

Process

• Key questions to better understand the ferocity of competition within the industry: Is price competition vigorous? Active efforts to improve quality? Are rivals racing to offer better customer service? Lots of advertising/sales promotions? Active product innovation? Active use of other weapons of rivalry?

Tool

Notes/ Implications

Substitutes: Low to Moderate Increasing competition from hand held/ portable computing devices

Supplier Power: Very High

Intel and Microsoft extract all industry

profits.

Buyer Power: High and RisingLow switching

costs, Less brand loyalty.

Resellers and retailers

have grip on end users

Threat of Entry: Moderate to HighLow capital costs of manufacturing

Relatively easy to assemble PCsSome brand recognition and loyalty

Rivalry: Very HighIntense price competition

Excess capacity and saturation. Some brand

recognition, but PCs thought of as commodities

Personal Computer Industry

51

2.3 Externalities Mapping

• Define and evaluate the impact of existing and potential forces outside of the industry that may impact the industry and/ or the industry

• With externalities more clearly defined, threats and opportunities can be more easily identified and anticipated

Process

• It is important to evaluate external forces in both the near and far terms, as the client’s survivability and sustainability are key foci for analysis

Tool

Notes/ Implications

Legislation and

Regulation

Societal Values

and LifestylesPopulatio

n

Demographics

Technology

The Economy at Large

CLIENT

Suppliers Substitutes

Buyers

PotentialEntrants

Rival Firms

IMMEDIATE

INDUSTRY AND COMPETITIVE

ENVIRONMENT

52

3. Define Potential Markets

• Define markets within which the client’s product is appropriate and potentially well-received

• Divide the large market into smaller ‘pieces’, or customer groups with similar needs and/or desires

Objective

• Segmentation Scheme

• Product Sector Articulation

Sub-Process

Tools

Define the markets available to client in terms

of size, age, maturity,

technology, etc.

Define the markets available to client in terms

of size, age, maturity,

technology, etc.

Specify the characteristics of each market and

their overall alignment with the

client’s product and goals

Specify the characteristics of each market and

their overall alignment with the

client’s product and goals

Identify the key players in each

potential market and their

respective positions within

said market

Identify the key players in each

potential market and their

respective positions within

said market

Rank the available markets by

attractiveness/ receptiveness to client’s product

Rank the available markets by

attractiveness/ receptiveness to client’s product

• Where can we play, and who is playing already? Against whom will we compete most successfully?

• Is this a B2B or B2C situation?• Quick calculations with realistic

assumptions often prove useful:To estimate market size for new garage

storage devices we have the following…•65M garages, 68% of which are ≥2 car; given 1.5% of available population invests $1K; potential for $1B sales

Tips & Key ?s• List of markets by potential receptiveness

• Ranked list of existing competitors within identified markets

Outputs

53

3.1 Segmentation Scheme

•Define distinct customer groups with that have one or more problems/ needs which could be solved/ serviced in one or more ways

1.Establish segment variables that yield mutually exclusive and exhaustive segments2.Develop Segment Profiles3.Evaluate Segments for their viability and preliminary “attractiveness”

Process

• Segmentation scheming not only defines potential markets, but also serves as an essential component of the client’s ultimate marketing mix decision

Tool

Notes/ Implications

Determine Which Segmentation Variables to UseDetermine Which Segmentation Variables to Use

Develop Market Segment ProfilesDevelop Market Segment Profiles

Evaluate Relevant Market SegmentsEvaluate Relevant Market Segments

Segmentation VariablesUser-Related•Demographics: Age, Gender, Race, Ethnicity, Income, Education, Occupation, Family Size, Family Life Cycle, Religion•Social Class•Geographic: Region, Urban, Rural, City Size, County Size, State Size, Market Density, Climate, Terrain•Lifestyles & Psychographics

Behavioral•Benefits•Usage•Price•Brand•Situational

Measurable• Size, purchasing power, profiles of segments can be measured

Actionable•Must be able to attract and serve the segments

Substantial •Segments must be large or profitable enough to serve

Differential •Segments must respond differently to different marketing mix elements & actions

Accessible •Segments must be effectively reached and served

Are acquired segments viable?

54

3.2 Market Sectoring Analysis

•Establish current market make-up in hopes of identifying sectors within which client could best position for success

Process

• Sectoring provides a nice snapshot of customer groups as defined by the existing market; it can also be used to identify “holes” in structure representative of unfulfilled customer groups

Tool

Notes/ Implications

Toy Market Sectors 13%

9%

7%

6%

9%9%

19%

5%

2%8%

9%

4%

Dolls/Figures

Activity/ ConstructionGames

Indoor Games

Infant/Pre-School Toys

Model-Wheeled Vehicles

Soft/Plush Toys

Outdoor Games

Other Toys and Games

Intelligent Toys

Consoles

Console Games

Computer Games

55

4. Conduct Competitive Analysis

• Determine the conditions upon client’s industry entrance

• With conditions established, threats and opportunities can be better evaluated and anticipated

• Identify opportunities for client introduction

Objective

• Positioning Articulation

• Perceptual Mapping

• Value Mapping

Sub-Process

Tools

Determine the strengths/

weaknesses of each competitor

within each available market

Determine the strengths/

weaknesses of each competitor

within each available market

Understand the characteristics of each competitor

that grants survivability in short and long

terms

Understand the characteristics of each competitor

that grants survivability in short and long

terms

Identify voids within the market

for possible exploitation by

client

Identify voids within the market

for possible exploitation by

client

Determine the ability of

competition to counter client's

introduction

Determine the ability of

competition to counter client's

introduction

• Will competitors have the ability to react? How quickly?

• Will customers make the switch? What are their costs of switching?

• Do not underestimate the speed and ferocity of competitive reaction

Tips & Key ?s• List of those factors which dictate and indicate success within

the industry

• Clear understanding of which existing players will move/ be able to counter client’s actions

Outputs

56

4.1 Positioning Articulation

•Determine the competitive positioning within the marketplace•Identify holes, potentially representative of untapped markets, for further exploration

Process

• With positioning articulated, unfulfilled customer groups or needs can more readily be identified

Tool

Notes/ Implications

High Student Participation

Low Student Participation

Primarily Fortune 500

Primarily Start-up Companies

Quality Management Consortium

Austin Power

Center for Experiential Learning

The MBA Consulting

Project

Business Consulting Network

Freeman Consulting Group

Darden Business Projects

OSBI

Community Consulting

Carlson

MBA Consulting Program

Student-Staffed Consulting

57

4.2 Perceptual Mapping

•Evaluate the current players and their respective abilities in light of all-important consumer perceptions

Process

• By mapping perceptions, the relative strengths & weaknesses of competitors becomes clear

• What are the respective foci of competitors, and how do consumers perceive them in the marketplace?

Tool

Notes/ Implications

Mildness

Overall Cleaning

Cutting Grease

Removing baked-on foods

Leaves dishes shiny

Best Value for money

Long-lasting suds

Most pleasant fragrance

Competitor#1#2#3

50%

100%

Liquid Detergent Market

58

4.3 Value Mapping

•Determine the current value-price orientation prevalent in the industry•Define the customer groups to which major competitors cater (price-sensitive or quality-focused)•Identify areas of the existing value orientation scheme within which client could capture value

Process

• Use the acquired value map to identify holes in the market’s current pricing scheme; where large gaps exist between products on the value line, there exists opportunity for new product introduction

Tool

Notes/ Implications

Pepsodent Regular

$1.00

$1.20

$1.40

$1.60

$1.80

$2.00

$2.20

$2.40

$2.60

$2.80

$3.00

Perceived Benefits

Pri

ce

Colgate Classic

Colgate PlusPepsodent

ProfessionalReach Regular

Aquafresh Flex

Oral-B Regular Oral-B

Indicator

Reach Advanced

Perceived Performance

Pri

ce

Price Value Map of the Toothpaste Industry, 1992

59

5. Conduct Internal Analysis

• Determine the client’s ability to successfully launch her/his provided benefit

Objective

• Activity Map• SWOT Matrix

Sub-Process

Tools

Determine internal strengths &

weaknesses of client

Determine internal strengths &

weaknesses of client

Identify areas to be improved in

both the short and long terms and

prescribe methods to effect stated improvements

Identify areas to be improved in

both the short and long terms and

prescribe methods to effect stated improvements

Evaluate the client’s existing

and likely resources and

capabilities with respect to key

success factors of industry and

available markets

Evaluate the client’s existing

and likely resources and

capabilities with respect to key

success factors of industry and

available markets

Make judgments as to the viability of client’s success (begin formulating

likely scenarios representative of

varying degrees of success)

Make judgments as to the viability of client’s success (begin formulating

likely scenarios representative of

varying degrees of success)

• Take care to avoid the “client-bias;” all analysis should be realistic and not overly-optimistic

• Is now the time? Does the client have in place what is necessary to be successful?

Tips & Key ?s• Understanding of client’s ability to effect a successful product

launch

• Realistic view of existing resources & capabilities, and the relative strength or weakness of each

Outputs

60

5.1 Activity Map

• Evaluate the existing strategic coherence of the client’s current and planned activities

• Identify the higher-level activities and then list those actions undertaken and policies adopted to support main actions/ initiatives

Process

• The more relationships/ linkages that exist among current activities, the more coherent and integrated is the firm’s strategy

• Planned activities can and should be evaluated for cohesion with existing activities

Tool

Notes/ Implications

Low prices

Frequent Departures

Lean and

productive crew

Point-to-Point flights

Limited Passenger Amenities

High aircraft utilization

No meals

No assigned seats

No transfers

No connections

Standard fleets

Limited use of travel agents

Automatic Ticketing machines

High employee compensation Employee Stock

ownership

Flexible Union contracts

15 min.turnaround

Southwest Airlines

61

5.2 SWOT Analysis

• Complete the matrix as shown, with careful focus upon recommendations arising from the analysis

Process

• This model can at times seem academic in nature, but the recommendations that can be created as a result of completing are often of use; however, avoid specific references to SWOT analysis in client communications and deliverables

Tool

Notes/ Implications

Strengths (S)

List internal strengths

Weaknesses (W)

List internal weaknesses

Opportunities (O)

List external opportunities

SO Strategies

Generate strategies here that use strengths to take

advantage of opportunities

WO Strategies

Generate strategies here that take advantage of opportunities

to overcome weaknesses

Threats (T)

List external threats

ST Strategies

Generate strategies here that use strengths to avoid

threats

WT Strategies

Generate strategies here that minimize weaknesses and avoid

threats

62

6. Determine Target Market

• Select the appropriate target customer group by evaluating alignment of the client’s provided benefit and resources/ capabilities with the needs of customers

Objective

• Use sound judgment and offer recommendation based in previous analytical outcomes

Sub-Process

Tools

Match the clients

resources & capabilities

with those of the available

markets

Match the clients

resources & capabilities

with those of the available

markets

Best align the benefit to be

provided with the needs of

customer comprising

each available market

Best align the benefit to be

provided with the needs of

customer comprising

each available market

Identify key aspects of

target market above, on, and

below the surface (size,

income levels, complementary

preferences, etc.)

Identify key aspects of

target market above, on, and

below the surface (size,

income levels, complementary

preferences, etc.)

Select given analysis the

necessary and appropriate

target to maximize impact for

client

Select given analysis the

necessary and appropriate

target to maximize impact for

client

• What benefit is the client providing, and to whom can she/he best provide it?

• Who is the client selling to? Who is the end-consumer?

• Refine judgments as to the market’s receptiveness

Tips & Key ?s• Final determination of target market replete with

major/ minor characteristics

Outputs

63

7. Evaluate Financial Viability

Objective

• Pro Forma Financials w/ Scenario Analysis

• Sensitivity Analysis• Monte Carlo Simulation

Sub-Process

Tools

Define all investments necessary to

launch and beyond

Define all investments necessary to

launch and beyond

Establish likely scenarios for analysis by

defining key variables (customer

reception, pricing issues, distributor

acceptance market

penetration)

Establish likely scenarios for analysis by

defining key variables (customer

reception, pricing issues, distributor

acceptance market

penetration)

Assess the financial viability

of launch with respect to each

scenario and with due consideration to client’s stated

objectives

Assess the financial viability

of launch with respect to each

scenario and with due consideration to client’s stated

objectives

Assign probabilities

where possible and calculate a

range for client’s return on

investment

Assign probabilities

where possible and calculate a

range for client’s return on

investment

• Be careful to include for analysis all costs, immediate and future, actual and opportunity

• What do customers want? Does this new product give it to them?

• Does this new alternative better serve their needs?

• Make informed assumptions as necessary

Tips & Key ?s

Make final judgment: Should the client go ahead with this project?Make final judgment: Should the client go ahead with this project?




Outputs

• Define likely scenarios and determine immediate and long-term survivability given each

• This is the “go” or “no go” stage, in which the team must make final judgments as to overall feasibility

64

7.1 Pro Forma Financials

• Establish the available facts and allow for the necessary variables

• Devise a form which accounts for these considerations at different variable values

• Employ facts/ fixed numbers wherever possible, constraints whenever applicable, and various revenue states dependent upon penetration scenarios

• Assign probabilities where possible to allow for final determinations

• Make assumptions when necessary to further the analysis (oftentimes the number of assumptions far outweigh hard facts)

Process

• Fixed costs and per-unit variable costs can usually be treated as facts, while revenues are entirely dependent upon the degree of market penetration

• Projects that do not meet established objectives (profit %, break-even, positive NPV, risk mitigation, etc.) should not be pursued further

Tool

Notes/ Implications

Pro Forma Statement (Monthly)

Constraint: Average Dinner Price* $46.07

Revenue $138,660.12

Variable Costs $42,012.38

Fixed Salaries $38,000.00

Materials and Supplies $4,500.00

Depreciation (Equipment) $4,000.00

Advertising $15,000.00

General Overhead $30,000.00

Fixed Costs $60,046.88

Total Direct Costs $102,059.25

Contribution/ Profit $36,600.87

New Restaurant…Yes or No?

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7.2 Sensitivity Analysis

• Identify the variables to be used and establish ranges for their likely values

• Use these ranges to calculate the multiple outcomes dependent upon variable levels

• Eliminate those variable combinations, if any, that are unlikely are immaterial

• Use the remaining outcomes to calculate a representative final figure

Process

• Dependent upon the values assigned to each variable, NPV results are positive or negative; in the above example the outcomes are most often positive

• Eliminating unlikely scenarios often helps to clarify the resultant outcomes (ie those values close to zero for each variable are unlikely given P&G’s dominance, and can therefore be eliminated from actual consideration)

Tool

Notes/ Implications

NPV Analysis using 2 variables to evaluate the introduction of a new brand

P&G Liquid Detergent Market

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8. Plan Value Optimization

• Develop key recommendations to capture value

• Dependent upon project scope, this may be only preliminary in nature while still reflecting the wealth of accumulated analysis

Objective

• Strategic planning cumulative of all acquired information and completed analysis

Sub-Process

Tools

Business Strategy:How will the

client extract value by providing

benefit?(Differentiation or

Cost Strategy?)

Business Strategy:How will the

client extract value by providing

benefit?(Differentiation or

Cost Strategy?)

Marketing Strategy:

How can the client best position the

benefit to be provided?

Marketing Strategy:

How can the client best position the


Operating Strategy:

How should the client deliver the


Operating Strategy:

How should the client deliver the


Risk Strategy:Identify the

elements of risk and account/

prescribe for their mitigation as

possible

Risk Strategy:Identify the

elements of risk and account/

prescribe for their mitigation as

possible

• What benefit is the client providing and to whom, and how will he/she extract value (ie make money)?

• Is now the time for an “all-in” commitment? Or is the client better-positioned by waiting for market forces and/or additional capabilities?

Tips & Key ?s

Exit Strategy: Provide for the

client options for abandonment if/

when exit becomes

appropriate

Exit Strategy: Provide for the

client options for abandonment if/

when exit becomes

appropriate

Determine the efficacy of staged

involvement to minimize overall

risk exposure during pre-launch

Determine the efficacy of staged

involvement to minimize overall

risk exposure during pre-launch

Develop for application a

means of monitoring success on

relevant measures to facilitate continuous

improvement

Develop for application a

means of monitoring success on

relevant measures to facilitate continuous

improvement




Outputs

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Final thoughts

Have fun and learn!!

Take this seriously- your client and all OSBI Consulting Leadership and the College of Business Administration

This is a relationship business

There are many resources available to you

You can contribute to the success of OSBI Consulting

Continually look for ways to leverage your experience with OSBI Consulting

Remember that we are a “real” consulting firm

Getting Started with OSBI Consulting

Documents

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