Beruflich Dokumente
Kultur Dokumente
and
managing markts
effectively,efficiently to be
successful
how to do this?
What are markets?
• Mrkts are prospects,customers and
consumers with unfulfilled needs,with a
desire to fulfill the same and
• An ability to buy and willingness to buy,
• An ability to pay& willingness to pay and a
willingness to be loyal as long as the
marketer’s offer is perceived to be of far
higher value than those of all substitute
and competitive offers
What is mrktng?
• Marktg is a continuous and proactive
process of creating,nurturing and retaining
a loyal customer base and helping them
perceive that the co’s offer is far superior
to those of all current and future substitute
and competitive offers
STANFORD UNIVERSITY
• Ninety-five percent of the people who
hear, understand and agree with a
principle do not have the ability to apply it
to their lives because they do not have the
necessary resources.
Mystery solved!-Zig Ziglar
• Why do so many people start on a project ,get
marvelous results for a brief period of time , and
then revert to their old, humdrum way of thinking
and living?
• Why does motivation change some people
permanently & others only temporarily?
• Why do we get roughly 200 times as many
letters , phone calls, and personal statements
from people who say my books and tapes
changed their lives as we do from people who
say my presentation changed their lives?
The answer is now clear!
They hear me speak & get excited .
• Then they encounter negative situations,
problems and people.Little by little, over a period
of time,they lose their enthusiasm, ant they are
back on squre one!
• The resource to implement & apply the
principles that change & enrich ur life is here.
• Make a plan to fulfill the promise!
• Discover why u should use the plan ,and even
more important, how u can.
• Keep hope alive & give u the inspiration,
conviction & know how to follow through.
Mystery solved---
• Motivation is not permanent. But neither is
bathing. However if we bathe every day,
we are ahead of the game.
• From a motivational point of view, if we
deliberately seek encouragement,
(motivation) on a daily basis, it will
become a habit & enable us get ahead&
stay ahead in life!
Mystery solved--
• CHALLENGE;
• Keep ur goals & plans highly visible
• Be inspired and be enthusiastic.
• See the connection & that will reignite the
sparks and get u excited again about what
is really important in life.
• Be reminded of ur goals/ plans so u will
receive the encouragement u need to
continue ur winning ways!
Purpose of any business-what is it?
• Because it’s purpose is to create a customer,a business
has two and only two basic functions; marktg and
innovation. Mrktg and innovation produce results; all the
rest are costs.
• Mrktng is too important to leave to a mrktng department.
Mrktng is so basic that it cannot be considered to be a
separate function.it is the whole business seen from the
point of view of its final result, that is ,from the
customer’s point of view,
• Peter F Drucker’
• 7.customer-focussed organisation
• Inverting and flattening the pyramid
• Prioritising service providers
• Lower costs-faster response—greater motivation
• 2.objectives
• Marketing
• Financial
• Human
• 3.positioning strategy
• A.tarjet market segment(s)
• B.differential advantage
Mrktng plan
• 4.marketing mix
• A.product
• B.price
• C.promotion
• D.place
• 5 action programs
Functional Product
Value Price
TMS DA
Availability Distribution
Service Servicing
• 1product
Product
• Quality-features—options—style—brand name—packaging—sizes
—services—warranties—returns
• 2price
• List price—discounts—allowances—payment period—credit terms
• 3place
• Channels—coverage—locations—inventory—transport
• 4.promotion
• Advertising—personal selling—sales promotion—public relations
• 7. Customer-focussed organisation
• Inverting and flattening the pyramid
• Prioritising service providers
• Discussion q’s
• 1List all benefits of segmentation to all stakeholders of the airlines
• 2Who all could be the beneficiaries
• 3Do u think any segment is subsidising for any other segment? If so who to whom? If
not,why not?What do u understand by absolute satisfaction and relative satisfaction?
Do u think that there is a possibility that any cass may feel relatively dissatisfied
although absolutely satisfied, When wd that happen? How wd mgmnt prevent it?
• 4When can segmentation go wrong?How to avoid segmentation from going wrong?
What precautions to take?
What is your position?are we
positioned correctly?
• A manufacturer of industrial cutting equipment
was concerned about its poor market share and
wondered whether its prices were the problem.
• It undertook a markt research study which
identified the product and service attributes most
desired by customers and evaluated how its
product “ X “ & its key competitors were rated in
tablebelow on a 1to 6 scale where 1 is lowest
and 6 is highest.
Table assessing price & value
competitiveness
Importa Quality Competi
nce wt dimensio tors
ns
abcx
35% Precision 6 5 4 6
25% reliability 6 6 3 4
15% durability 5 3 2 5
5% Delivery 2 5 5 5
weigh A B C X
tedsc
ore
5.5 4.6 3.7 4,3
Actual
prices
29 K 21 K 15 K 22 K
Mrkt
share 27 45 20 8
%
1.What is the problem of x In
marktng jargon?
• 2.how do you solve? What srategy do u
recommend? Why?
• 3. What alternates can be considered by
X? Why should they be dropped?
How to take positions? - 2 ways
based on Quality&price conscious
•
markets
QUALITY-CONSCIOUS MARKTS-steps
• 1.find out quality dimensions,relative importance
between them and assess performance of all current
players on each dimension
• 2.If there is a gap between expectations and
performance tae a position
• 3. fill the position by offering the highest value than the
average value provider as well as the best value provider
so that no one will find a gap in value to replace u in
future.
• 4 constantly monitor and defend this position thro
innovation.
Price conscious
customers/markts---how to take
positions
• 1.find out what price are the markets willing to
pay?
• 2.find out what quality are they willing to accept
for the price they are willing to pay
• 3.find put a gap if any where u can offer a higher
value for the price they are willing to pay –better
than the average value privider as well as the
highest value provider in the markt.
• 4defend and protect .
Concepts of
cost,price,revenue,value &
quality.how are they connected?
• Adi godrej said,when asked what is important,top line or
bottom line?
• REVENUE IS (read sales) vanity,PROFIT IS SANITY
and cash is reality.Cost is a fact & Value is a perception.
• Value is benefit divided by price
• Customer delivered value=total customer benefits(TCB)-
total customer costs(TCC).
• TCB=Product benefits+Service benefits+personnel
benefits +image benefits
• TCC=monetory cost+Time cost+energy cost+psychic
cost
Quality is 2 types –Quality of
conformance & quality of
performance
• QUALITY OF CONFORMANCE-consistently meeting specifications
laid down batch after batch/supply after supply.—at any agreed
level of quality
• Performance as per promise.supplier commits to buyer a certain
level of quality features,prices and performance and delivers in
practice what was promised.
• QUALITY OF PERFORMANCE-this has got to do with the level of
quality Certain products promise and perform at higher level of
quality and certain other products promise and perform at a lower
level of quality.
• EXAMPLE.Which product has a higher quality of
performance,Mercedes Benz? Or Maruti 800? Answer is the former.
• Which of the above 2 products has a higher quality of conformance/
Answer is both can have the same level or one can have a higher or
loer level than the other depending on the actual percetved
performance over a period of time.
Cdv=tcb-tcc
• Compare the customer deliverd value of
any 2 brands fighting with each other in
the same TMS/
• Compare cdv of kinetic Honda to ladies
with cdv of Hero Honda to male Youth.
Which one is greater?
Caterpiller VS komatsu how to
price caterpiller’s buldozer?
• Cost to make =$30k
• Perceived worth of customers=$100k
• Added value=$70k
• Pricing options—A.Share equally,P=$65k.
—B.take a higher share,P=$80k—C.Take
a smaller share,
• P=$50k.
• How to decide what strategy to follow.?
Caterpiller ‘s price strategy
depends on
• 1.the Co’s goals/ambitions
• 2.the competitive factors and
• 3. the customers value perceptions
• If the co wanta a short run high return,and
doesn’t mind losing competitive entry, price it
high.
• If the co’s interest is to gain a high markt share
quickly and protect it over a long term,go for a
low price but a longer pay-back.
Cdv concept of buyer decision
making and its use for seller
• 3ways
• 1.Caterpiller can increase total customer
value.By improving P,S,P,or I benefits
• 2,Caterpiller can reduce the buyers non-
mo0netary costs By lessening the buyer’s
time,energy and psychic costs.
• 3.Caterpiller can reduce buyer’s monetory
cost,by lowering its price,providing easier
terms,of sale,or in the longer term lowering its
bulldozer’s operating or maintenance costs.
Customer value assessment of
bulldozer
• Cost of prdn to Caterpiller-$140k
• Customer perception of its worth-$200k
• Total added value-$60k
• PRICING OPTIS
• <140k—costs not covered for Caterpiller.
• >200k—Customer value exceeded
• $160k-20k to
• $190k-50k to Caterpiller and 10k to customer.
• The lower the caqterpiller price,the highjer the delivered
value to customer.caterpiller and 40k to customer.
Total customer satisfaction concept
• Customer satisfaction depends on the product’s performance
relative to a buyers’ expectations-
• Short of expectations-dissatisfied
• Matches expectations-satisfied
• Exceeds expectations-highly satisfied or delighted.
• How are expectations formed?
• 1,past buying experiences
• 2.opinions of friends and associates
• 3.marketer and competitors’info and promises
• Marketers should set the right level of expectations. Holiday Inn
campaign of ‘NO SURPRISES”ran into hot weather and was
withdrawn.Consistent and trouble-free services.”if u aren’t satisfied
ur night’s stauy wd be free.Can u defend this ?How do u measure?
Can u argue with ur customer? And still maintain a good relation?
Implementing total quality
marketing
• PIMS-Correlation between Relative product
quality and profitability
• QUALITY-Fitness for use
• Conformance to requirements
• Freedom from variation
• The tottality of characteristics and features of a
product/service that bear on its ability to satisfy
stated or implied needs.Customer-centered def
of Q as per American soc for QC.
Performance q vs conformance Q
• Performance q-Refers to level at which a product
peforms its function.Ex Mercedes provides higher
performance Q than Volkswagen.Gives a smoother
ride,handles better and lasts longer.It is more expensive
and sells to upper segment.
• Conformance Q-Refers to freedom from defects and the
consistency with which a product delivers a specified
level of performance.
• A Mercedes and a Volkswagen offer equivalent
conformance Q (each delivers consistently what it
promises).
• A $ 50k car that meets all its requirements is a Q car. So
is a $15k car that meets all of its requirements.
Marketing’s role in total Q
• 2 roles-
• 1.Formulate strategies/policiesto win total Q excellence
• 2.Must deliver marketing Q as well as Production Q .Must perform
each mrktng activity –MR,sales training, advertising, customer
service and others to high standards.
• ROLES
• 1.Correctly identify customer needs & communicate correctly
product design dept.
• 2.Fill customer orders correctly on time and ensure customers
receive training in product application
• 3.stay in touch with customers after sales to ensure they remain
satisfied.
• 4,Gather and convey customer ideas for product and service
improvement to Co departments.
Ironic research study.
• Marketing people responsible for more customer complaints than
any other dept.(35%)
• Marketing mistakes;
• 1.Sales force orderd spl product features for customers but failed to
notify manufacturing of the same changes
• 2.Incorrect order processing resulted in wrong product being made
& shipped
• 3,.Customer complaints aren’t properly handled.
• Marketers must be
• 1. customers’ watch dogs complaining for the customer when
service is not right.
• 2.spend time and effort for both external and internal marketing
• 3,uphold the std of “giving the customer the best solution”
The malcolm balridge national
quality qward-Q principles applied
by MR firmCRI-custom researchinc
• 1.focus on building major customer relationships
• 2 organise into cross-functional client-centered
teams to get every one working toward customer
satisfaction.
• 3,Develop high Q processes& procedures to get
the work done ,then measure the results
• 4.Explicitly ask customers what they expect from
a partnering relationship.
• 5.seek customer feed back on individual projects
and overall relationship.
Malcolm---
• 6.Hire the best people and invest ti their
development
• 7.Stay flexible,agile fast moving-empower
every one in the Co to ‘just do it’
• 8.Have fun with hoopla and recognition
• 9.Build Q continuously
• 10.Never be satisfied.
Essentials for total Q marketing
strategy-W.Edward Deming
• 1.Q is the eyes of the customer.
• 2.Q must be reflected not just in the Co’s products but in every Co
activity.
• 3.Q requires total employee commitment.
• 4.Q requires high Q partners (suppliers)
• 5.A Q program can not save a poor product.
• 6.Q can always be improved.
• 7.Q improvement sometimes in quantum leaps.
• 8.Q does not cost more-’do things right the first time’-’Q is not
inspected in; it must be designed in’.These reduce the cost of
salvage ,repare and redesign,not to mention losses in customer
good will’
• 9.Q may be necessary but may not be sufficient.eg Singapore Air
lines-Competitors reduced the percieved Q gap ,so MS reduced for
SA.
Customer
loyalty,retention,relationship
marketing
• The case of lost customers
• Pay attention to ‘customer defection rate’-rate at which they lose
customers—and the steps to reduce it.
• 4 ways of doing this
• 1.Define and measure its retention rate. For a magazine renewal
rate is a good measure of retention .For a college it could be the 1st
to 2nd year retention rate.
• 2.Distinguish causes of customer attrition & identify those that can
be managed better .Do something about customers who leave due
to poor service ,shoddy products, high prices etc., while nothing
could be done about who leave the region or go out of business.
• 3.Estimate how much profit the Co loses when it loses customers. In
case of an individual customer, the lost profit is equal to the
customer’s life time value (CLTV)-that is the present value of the
profit stream if the customer hadn’t defected prematurely.
Cost of a lost customer
• For a group of lost customers ,one transportation carrier estimated
its profit loss as follows.
• 1.Co’s accounts-64k
• 2.Lost 5% due to poor service this year.
• 3.The average lost A/c represented a $40k in revenue per annum.
• 4. The Co’s profit margin is 10%.how much is the loss for the Co
this year? How much would it be if the average no. of loyal years is
5 and the inflation in prices is just same as discounting rate for NPV
calculation?
• 5.Fgure out how much would it cost to reduce the defectrion rate ?
As long as the cost is less than the lost profit the Co should spend
the amount to reduce the defection tate.
Lost custom---
• The cost of attracting a new customer is
estimated to be 5 times the cost of keeping a
current customer happy.Traditionally we all
make sales rather than build relationships,
selling and pre selling becoming more important
than after sales.
• Today, more Co’s recognise importance of
satisfying and retaining current customers . One
study indicates co’s can increase profits
between 25-85% by reducing customer attrition
by 5%.
Should this Co add new
customers?
• 1.cost of an average sales call-incuding
salary,commission,benefits,expenses,incentives etc.--$300
• 2.Av no. of sales calls to convert an average prospect into a customer-4. In
fact this doesn’t include advert,promoting,operations,planning etc.
• 3.Co’s estimate of Av customer life time value
• Annual customer revenue--$5k
• Av no. of loyal years—2
• Co profit margin-10%.
• Q.Is customer’s LTV higher or lower than the cost of attracting a new
customer?
• Q.How will u recommend this Co should do to add new customers?
• The Co is clearly spending more than they are worth to attract new
customers.Unless the Co is signing up costomers with (a) fewer calls,
(b)spend less per sales call,©stimulate higher new customer annual
spending,(d) retain customers longer,(e)sell them higher profit products,the
Co is headed for bankruptsy.
2 ways to strengthen customer
retention
• 1.To erect high switching barriers. Switching
involves high capital cost, high search cost, the
loss of loyal customer discounts and so on.
• 2.Better approach is to deliver high customer
satisfaction .Due to this, Lower prices/switching
inducements of competitors won’t be attractive
enough.
• The task of creating “strong customer loyalty”is
called “relationship marketing’—”To know and to
serve better” all valued customers.
The key of relationship marketing
• The customer development process
• SUSPECTS----PROSPECTS----DISQUALIFIED PROSPECTS
• PROSPECTS
• First time customers-may buy from competitors
• Repeat costomers-may buy from competitors
• Clients-buy only from Co.
• Advocates-word of mouth
• Partners-work actively together
• Every stage of customer can become inactive or EX customer due
to bakruptcy,moving out to other locations,dissatisfaction etc.
• Reactivation is a challenge thro customer win back strategies.
• It is easier to re attract ex customers than to win new ones.
Social actions affecting buyer-seller
relations-good things
• 1.Initiate +ve phone calls
• 2.Make recommendations
• 3.Candor in language
• 4.Use phone
• 5.Show appreciation
• 6.Make service suggessions
• 7.Use ‘we’ problem-solving language
• 8.Get to problems
• 9.Use jargon/shorthand
• 10.personality problems aired
• 11.Talk of our-future together
• 12.Routinise responses
• 13.Accept responsibility
• 14.Plan the future
Bad things-affecting buyer-seller
relation
• 1.Make only call-backs
• 2.Make justifications
• 3.Accommodative langusge
• 4.Use correspondence
• 5.Wait for misunderstandings
• 6.Wait for service requests
• 7.Use ‘owe-us’ legal language
• 8.Only respond to problems
• 9.Use long-winded comments
• 10.Personality problems hidden
• 11.Talk about making good on the past
• 12.Fire-drill/emergency responsiveness
• 13.Shift blame
• 14.rehash the past.
Retaining customers-CRM
• Only attract new customers? Don’t want to retain
existing ones? Look at the statistics.
• !.Competition increasing vand so cost of
attracting new customer is increasing.
• 2.5 times costlier to attract new customers
• 3.Offensive marketing costs more than
defensive marketing. Coaxing satisfied
customers away from competition is expensive.
• 4.By reducing customer defections by 5%,Co’s
can improve profits from 25-85%.
Relationship marketing
• The process of creating ,maintaining and
enhancing strong, value-laden relationships with
customers and other stake holders.
• All of Co’s departments work together with
marketing as a team to serve the customer.
• Involves building relationships at many levels-
economic,social,technical and legal-resulting in
high customer loyalty.
5 different levels of relationship as
a function of profit margin and no.
of customers
• 1.Basic. Sell but don’t follow up.H.J.Heinzdon’t call every ketch-up
buyer to thank.(large no. of customers and low margins)
• 2.Reactive; Sell and encourage to call if any question or problem.
• 3.Accountable;Check after sale if product meets expectations.Solicit
improvements, suggessions,and any specific disappointments
• 4.Proactive;Sales persons and others in the Co phone customer
often with info on improved product use or new products.
• 5.Partnership;Continuously work with customers to discover ways to
deliver better value.Boeing does partnership matng with United
airlines to work closely in design of aeroplanes and satisfying
customer requirements.
Profit margin vs no of customers-
relationship levels as a function of
profit margin & no of customers
• Proft- HIGH MEDIUM lOW
• No.of Customers
• Many Accountable Reactive Basic
• Service image
• Corporate image
• Channel image
Right Business orientation needed
for success?
• Production orientation
• Product orientation
• Selling orientation
• Marketing orientation
• Customer focus/orientation
• to company ?
• to society?
Purpose driven R&D-in commercial
firms
• What goals should we have?
• Market goals
• Financial goals
• People goals
Segmenting markts-how will we be
different & better?
• “all skills are subsidiary to the master skill of concentrated focus”
• FOCUS ON THE MARKT FOR SUCCESS
• 2 stages to undertake segmentation—Definition of potential
segments & selection of target segments
• DEFINITION-in a lot of different ways;
• FOR INDUSTRIAL MARKETS,
• Geographic; ,Industry,Type of application,Customer size,Markt
served,Channels of distribution,
• Demographic,Psychographic,Technographic, Behavioural etc.
• FOR CONSUMER
MARKTS;_GEO,DEMO.ECONOMIC,Psyco,Techno,Behavioural—
all can be used.
• When >2or3 variables are used, the process becomes complex.
• SELECTION—Is easier based on MA & DA.
A practical approach to segmenting
markts-cascade method
• Step1;what is our definable markt?
Questions to ASK;POTENTIAL
BENEFITS?—MAIN OVERALL NEED?—
KEY CUSTOMER PROBLEMS?—KEY
BUSINESS PROCESS?
• STEP2;BREAKING THE CASCADE OUT
THROUGH SUPPLEMENTARY
QUESTIONS
• EG:HARD COPY PRINTING
Cascade---
• 1.HOW MUCH?—v low—low—med—high
• 2.WHAT QUALITY?—
• LOW Q—LETTER QUALITY—DRAFT GRAPHICS—
BUSiness GRAPHICS
• 3.HOW OFTEN?—SPORADIC NON_URGENT—
SPORADIC URGENT—UNIFORM NON-URGENT—
UNIFORM URGENT
• 4.WHERE?—PERSONAL—WORK GROUP—
DEPARTMENT—SITE
• 5.WHAT PRICE?--<5k--5K-25K—25K-100K-->100k
Step3.Defining segments by
sentence
• EG.;DEPARTMENTS PRINTING LETTER
QUALITYOUTPUTS SPORADICALLY &URGENTLYIN
VOLUMES UPTO100K PAGES PER MONTH
• STEP4;make as many segment statements as possible.
• STEP5;FIND WHICH SEGMENTS ARE CURRENTLY
OCCUPIED BY WHOM?
• STEP6;FIND NICHE.
• STEP7;MEASURE ATTRACTIVENESS OF THE NICHE
& OUR CO’S CAPABILITY TO CREATE “DA”
Guidelines for cascading
• 1.AVOID TOO NARROW/BROAD DEFINITION AT STEP1
• 2.DON’T LET PRODUCTS APPEAR ON THE CASCADE.IT IS
NEED /SITUATION ANALYSIS
• 3.DEFINE “Q” TERMS WHEREVER POSSIBLE.
• 4.KEEP A MAX OF 5-6 LAYERS.
• 5.QUANTIFY ACROSS EACH LEVEL.RESEARCH IF
REQIUIRED DATA NOT AVAILABLE.
Cascade--
• 6.ANALYSE OBJECTIVELY.DON’T BE BIASED.
• 7.SEPARATE SEGMENTS FROM
SELECTION.SELECTION IS NEXT STEP.
• 8.ALTERNATE THE “Q”s.ELIMINATE NON_USEFUL
LREVELS.
• MYTHS OF SEGMENTATION
• “we segment our mrkts”
• ‘THERE IS ONE IDEAL SEGMENTATION VARIABLE”
• “segments are technologies or products”
• “Segments are forever”
• “WE want to be in all segments” ETC.
Assignment on cascade method of
segmenting markts
• Tke any markt u like and do follow the above
swtep by step process of cascade method,
• Divide into segments,
• Mention at least 3-4 segment statements,find out
if thjose sedgments were already occupied by
current players,if so who and if not check
attractiveness of the niche u have just
discovered.
• HOW DID U DISCOVER THENICHE?
Plc strategies. ch- fig--
Product strategies-Ansoff diagram
or directional policy matrix.
• 4 types of product strategies
• BCG matrix –ch fig
• GE or McKinsey matrix
Bcg-INDO GULF,BIRLA GLOBAL
to merge into IND RAYON-What
rationale?
• New entity called Aditya Birla Nuo(ABN)-sep 05
• Ind Ray IndGulf Bir Glo Comb
• Sales* 3209 678 43 3930
• Net Prof*58 57 12 127
• Promo hold%28.6 58.2% 74.8% 38%
• Net worth 1825 cr
• *FY05 RS CR financials of ind ray are
consolidated figs
Share holding pattern of indian
rayon
• Pre merger post merger
• Promoter 28.64 38
• FI’s/Banks/FII’s/GDR’s39.52 37
• Others 31.85 25
• All in %
• KM Birla’s past time-Mergers / acquisitions
• 04-Acquisition of L&T’s cement operation
• Now-major consolidation to create a
conglomerate with a projected turn over of rs
6000 cr for 05-06.-3 shares of indogulf & birla
global get 1 share of ind ray.
Recast history
• Sep 21, 1998-Ind Ray transfers cement
business to Grasim
• Jul, 22,02-Hindalco takes over Indo Gulf’s Cu
business-leavinf Indo gulf with fertilisers
• Aug,20,03-Grasim,Hindalco,Ind Ray sell
IndoGulf stake to TGS Investment & Trade
• July,24,04-Promoters consolidate holdings in
Birla global via TGS
• July,1, 05-Grasim sells Century Enka pie to TGS
• Sep 11, 05-Ind Ray to take over Birla global &
indogulfthro a share swap.
Post merger Ind Rayon—effective
31 May 05
• Will morph into a complex combination of brick
and mortar and New-Age businesses
• AB group will now have 4 major cos in India-
1,AB Nuo, 2, Grasim(the country’s largest
viscose rayon fiber,VSF, 3,its subsidiary Ultra
Tech,India’s largest cement producer, and 4,
Hindalco, India’s largest producer of non-ferrous
metals.mainly Cu & Al.
• Total group turnover is Rs 34,000crof which 70%
is from India.
The driver behind the
restructuring--
• Desire to deploy the steady stream of
cash thrown up by traditional business for
ramping up growth of New-Age
businesses.
• The group clearly sees limited scope for
investment in old businesses-even though
some of them generating cash –and
therefore marshall these funds in some of
faster growing new businesses.
Product strategies.HLL
• 1.product mix width strategy
• 2.product mix consistency satrategy
• 3.product line length strategy
• 4.product depth strategy
• PRODUCT MIX WIDTH measures the no of
individual(INDEPENDENT) lines of products the co
carries in its product portfolio.
• For ex,HLL has roughly 3 dozens of lines of products—
say,soaps,detergents,tooth
pstes,toiletries,cosmetics,personal care products,ice
creams,bread,shampoos,atta,salt,jams,jellies,tea,coffee
etc,
Product stra----
• Advantages;wide mix helps
• 1,growyth in bad times for some lines
• 2.good customer coverage
• 3.prevent competitor entry
• 4develop trade interest
• 5reduce overall cost
• 6synergy etc.
• DISADVANTAGES
• 1.resources scarcely distributed
• 2.lack of focus
• 3.Confusion if overlap
• 4.too much inventories.
What is optimum width?
• If mix is too narrow,vulnerability, competitors get
strong if they discover & enter into new niches,
and stake holders growth expectations not met,
• Optimum width depends on
• 1,co’s resource capability
• 2.co’s ambitions for growth with matching
capability
• 3.ability to start a new line when the existing
lines can survive & grow on their own merits,
2.Product mix consistency strategy
• This measures how well each line is related to every other line in
terms of
• 1,technical capability
• 2.manufacturing skill& capability,
• 3.distribution capability,4,employee talent and skills,5branding&
commncn skills
• 6,customer mix etc.
• Advantages of high mix consistency
• 1.lower costs
• 2.quicker growth
• 3higher profit
• Disadvantages;1inability to venture into unrelated but high
opportunity areas.ex reliance.
Product line length strategy
• Line length measures the no of
independent products in a line.
• For example,HLL’s soaps line has a
dozen different soaps
• Jay Lux Hamam
• Breeze Liril Dove
• Lifebuoy Fair&lovely
• Rexona Pears
Long lines-advantages
• 1different segments
• 2high sale,MS & profit
• 3.prevent competition
• 4.be first to open a swegment
• 5overal markt leadership
• 6.More satisfied customer
groups7.synergies in marktng costs
• 7.satisfied trade
Long line-disadvantages
• Too long –unnecessary-wasted inventory
• Slow non-moving stocks
• Low ROI
• Confuse customer choice if overlap.
• Lack of focus
• Resources too thinly distributed.
product depth-no. of variants of
same product-by
sige,packing,colors,styles etc.
• Lux is available in 2 formulations,3 siges,3
colors and 2 skin types
• Therefore lux’s product depth is 2.3.3.2=36
• Why product depth?
• To cater to subsegmental needs
• To retain customers
• To meet needc fragmentation in evolving
markts
Plc strategies. ch- fig--
Branding strategies
Pricing decisions-why is price p is
the most imp of all p’s of M.MIX?
Price
higher lower
• CP,PG,LEVER
• STRIPED-Beecham andcp,pg,lever
• Smoker’s TP---------- • Beecham beecham
• Topol topol
Identifying competitors---
• P&G with several versions of Crest & Gleam and
CP with Colgate occupy 9 of the segments
• Lever Bros with Aim occupy 3
segments,Beecham one(AquaFresh) and Topol
two.
• If Topol wants to enter other seg bments it must
estimate the market size of each segment,the
shares of current competitors,and their current
capabilities,objectives and strategies.
• Each product/Markt segment poses different
competitive problems and opportunities.
2.Determine competitors’ objectives
• What drives each competitor’s behaviour?
A,short term vs long term profits? B,satisfactory
profits or maximise profits?
• C what goals beyond profits?
• Know relative impotance of each competitor for
a,current profitability,b.MS growth c.cash
flow,d.tech leadership.f.service leadership and
other goals.
• Judge competitive actions-Likely to pursue Low-
cost production strategy?or Ad promotion
strategy?
3.Identify competitors’ sytrategies
• Strategic group-A group of firms in an industry following
same or similar strategy.Ex.GE,Whirlpool,Maytag in
home appliances industry form a strategic group offering
a full line of medium price appliances plus good sevices.
• Sub-Zero and Kitchen Aid belong to a different group-
offering a narrow line of higher quality at a higher
price.but with a higher level service.
• If a Co enters one of the groups, it becomes a member
of others key competitors,
• It can succeed conly if it develops some strategic
advantage over these competitors.GE now offers a
premium quality premium price line to compete with
Kitche Aid and Sub-Zero.
Look at all dimensions of
competitors’ strengths
• Know each competitors’
• Product quality
• Features & mix.
• Customer services
• Pricing policy,
• Distrbution coverage
• Sales force strategy,
• Ad &sales promo programs.Also study each
competitor’s
R&D,Manufacturing,Purchasing,Financial,Manpo
wer & other strategies.
4 assessing competitors’strengths
& weaknesses
• What can our competitors do? Find their
goals,strategies,& performance over last few
years
• Collect info from secondary data,personal
experience & hearsay.
• Bench mark compare vyr Co’s products
,services and processes to those of competitors
or leading firms in other industries to find ways
to improve Q and performance.
• BENCH MARKING iS A POWERFULTOOL FOR
INCREASING A CO’S COMPETITIVENESS.
5 estimating competitors’ reactions
• What will our competitors do? SWOT analysis can help
us know their recations or actions.
• Each has a philosophy,a culture,guiding principles and
beliefs
• Each competitor reacts differently
• Some don’t react quickly/strongly.Some react only to
price-cuts,others only to Ad promos!
• Some competitors don’t show any predictable reaction
pattern.
• P&G is a fierce reactor.No new competitor wd like to
fight directly with P&G,who doesn’t let a new comer into
the detergent mrkt.
6,selecting competitors to attack
and avoid.(A).Strong or weak
(B)Close or distant competitors
• 1.Strong or weak.Assess strength by “customer
value analysis”-what benefits target customers
value and how they rate the relative valueof
various competitors ‘offers.
• The key to gaining competitive adv is to take
each customer segment and examine how the
the Co’s offer compares with that of its major
competitor.If Co’s offer exceeds that of major
competitor,on all key attributes,Co can charge
higher prices and earn higher profits or charge
same prices and get higher share,
2.Close or distant competitors
• Most want to compete with competitors who
resemble them most.Eg.Chevrolet competes
more with Ford than Jaguar
• A Co may also want to avoid trying to destroy a
close competitor.Eg. Bausch7 Lomb attacked
othersoft lens manufacturers but these were
forced to sell out to larger ones such as Revlon
& Johnson& Johnson.B&L now faced larger
competitors like J&J and faced the
consequences.
Hypothetical market structure
• Mrkt leader-40%
• Challenger-30%
• Follower-20%
• Nicher-10%
• MARKET LEADER STRATEGIES
• Competitors focus on the leader as a Co to
challenge,imitate or avoid.
• Leaders keep
• A constant watch
Leaders’ strategies
• A product innovation may come along and hurt the
leader .Ex.Tylenol’s non-aspirin pain killer took the lead
from baeyer”s aspirin .
• The leading firm might grow fat & slow ,losing against
new & peppier rivals.Xerox’s share came down from
80% to 35%,when Japanese producers challenged with
cheaper & more reliable copiers.
• SOME BEST KNOWN LEADERS ARE
• GM in autos,Kodak in photography,IBM in
computers,COCA Cola in soft drinks,WaLL MART in
retailing,Mc Donald’s in fast food,And Gillette in razors
and blades.
3 actions for leader to remain no 1-
• 1.Expand total market
• 2.Protect MS thro defensive and offensive actions
• 3.Expand MS further even if mrkt size remains same or even
declines.
• 1.EXPANDING THE TOTAL MARKET
• A.Find new users.Some customers are still unaware and some
resist on price or features.Ex Revlon’s perfume.Opened virgin mrkt
by convincing women who don’t use perfumes, and also looked at
other demographics by producing cologne for men,and
geographically by selling perfumes in other countries.
• Johnson’s baby shampoo Ad campaign aimed at adults and it soon
became a leading brand total shampoo market.
Leader’s actions---
• B.Find new uses.Eg.Dupont’s Nylon
• Fiber for parachutes
• Womens’ stockings
• Major matl in shirts/blouses
• Automobile tyres
• Upholstery and carpeting
• ARM&HAMMER baking soda as refrigerator
deodorant-by heavily advertising to put an open
box of baking soda in Fridge,
Leader’s 3 actions
• C.more usage;Convince people to use more
often or more per occasion.Eg.Colgate tooth
paste.Head & Shoulders shampoo;more effective
with 2 applications instead of one per shampoo.
• Michelin began rating French restaurants on a 3
star system .Many of the best restaurants are in
south of France leading many Parisians to take
week end drives to South.It encouraged car
qwners to drive more miles per year.
Leader’s 3 actions---2,protecting
MS thro defensive & offensive
actions
• Coke against Pepsi,Gillette against Bic,Mc
Donald’s against Wendy’s,GM VS Ford.HOW?
• 1.Prevent weaknesses that provide opportunities
to competitors :keep costs down and price
proportional to value customers see in the
brand.
• 2.Plug holes so competitors don’t jump in.
• 3.The best defense is a good offense & the best
response is a continuous innovation.
• It takes the offensive and sets the pace and
exploits competitors’weaknesses
3 actions of leaders----6 defense
strastegies that mrkt leaders use
• 1.position defense.the most basic
defense-builds fortifications around its
current poszition.But it rarely works.You
must continuously improve and adapt to
changing customer needs –and develop
new brands.Coca-Cola,despite its
dominant 40 % MS in US,aggressively
extends its beverage lines and has
diversified into desalination equipment and
plastics.
Actions of leaders----2.flanking
defense
• Smart competitors attack
leaders’weaknesses-like the Japanese
entered the US small car mrkt.Since US
auto makers left a gaping hole in that sub
markt.
• Using a flanking defense,the Co carefully
checks its flanks and protects the weaker
ones.
• 3.pre emptive defense-By contrast, the leader
may employ a more aggressive preemptive
defense striking competitors before they can
move against the Co.
• Ex when threatened in mid 80’s,by the
impending entry of the Japanese into
US,Cummins slashed its prices by 1/3 rd to save
its No 1 position in the 2 bn $ heavy duty truck
engine mrkt.
• Ex cummins now has a 50% MS in North
America .Not a single Us built Tractor-trailer
Truck has a Japanese engine.
• 4.counter offensive defense.When a leader is
attacked despite its flanking or preemptive
efforts,it can launch a counter offensive defense.
• Ex.When Fuji attacked Kodak,in the Us film
makt,Kodak counteracted by greatly increasing
its promotion and introducing several innovative
film products.
• Ex.When Clorox’s detergent with bleach
attacked it,P&G responded with tide with bleach
which enabled it capture a 17% share of all Us
detergent sale!
Leader strategies---5.Mobile
defense
• Involves more than aggressively defending a
current mrkt position
• The leader stretches to new mrkts that can be
serving as future bases for defense and
offense.Ex Armstrong Cork redefined its focus
from “floor covering” to “decorative room
covering”(including walls and ceiling) and
expanded into related businesses that were
balanced for growty and defense.
• Ex Wall mart is mustling its way into grocery
business with new “Wall Mart Super Centres-
huge combo grocery &discount stores
Compttve ---6 contraction defense