Learning from the Class

Learning from the Cases – Marketing

Zara

· Merchandizing strategy: wide range and shallow(few) units

· Not lead but follow fashion.

· Tangibilize the service and intangibles the product business.

· Bamboo shoot strategy: Remain low for some time and then grow big.

· Load time = 1 / (1 – capacity utilization). Ideal capacity to be ready for on demand.

· Trend-spotting

· Vertical Integration

· Bullwhip effect

· Differential price strategy

· Oil Stain technique: Flagship store

· Decentralized

Ikea

· Product-Price matrix

· Reverse positioning- no sales consultant and take home yourself concept

· Laddering technique- probing to know preference of a customer

Worthington

Model:

· Awareness, Interest, Desire, Adoption

· Awareness, Interest, Evaluation, Trial and Adoption

· Concurrent engineering

· Product development and feedback go along. Reduces cycle time.

· Benefits segmentation: Psychographic and Demographic

· ROMI – return on marketing investment

Signode Industries

· Never compete only on price

· Distribution model vs direct selling model

Price Flex at Signode Industries

Pricing decision has to take into account the inherent conflict between

· Need to win customers

· The need to halt market share erosion

· And to provide cash for the corporation

· Bolster the morale of the sales force.

Solution

We believe that the company has to raise the prices of the product by 6.8% and give the facility of price flex to its sales force. Price Flex would give the sales person the authority to cut prices and give discount of about 7% over and above the normal discounts. Maintaining the current book prices would not be viable as it would eat into the market share of the company and the competitors would also keep on undercutting by providing increasing discounts thereby keeping prices constant.

Boosting the morale of the sales personnel is a major objective that needs to be achieved. The Sales force has had a tough time in the market competing with other companies in terms of pricing. The new policy of price flex would bolster their confidence in competing with other competitors, such as Alpha and Bentley, and also bolster them to keep the greatest margin possible for the company.

The implementation of the Price Flex would have to change the way the remuneration for each sales personnel is calculated. Instead of giving bonus on the net value of sales done, the new remuneration would be calculated based on the gross margin of profit generated by the sales person. That will drive the sales personnel to get the highest margin from each customer and minimize the discount that he can offer.

Maintaining profitability:Previous experience shows that Increasing prices of the goods have resulted in loss of market share by 10%. Still with a price increase of 6.8% and a [price flex policy, bigger and national account would be retained and increased prices from other buyers would result in greater cash flow.

Increase value added services: This gives a competitive advantage, by providing services suchg as custom sizes, grades, machines and tools. Signode would score over others since no one else provides them.

Maintaining Loyalty of existing Customers: It is important for Signode to distinguish itself from Alpha and Bentley. Both of them do not support customers in customized machines and toolswhereasSignode does. Thus Signode has to differentiate itself in the market by maintaining its advantage in customization.

Stimulating further volumes: To increase the volume of sales of the company by taking action to convert its existing non users (services) into users and increase the frequency among current users, and to expand into under developed markets.

Golden Hybrids

· Slimming the innovation pipeline- focussing on products in demand

· Improper R&D

· Debtor and Inventory days should be considered.

· Value added proposition

BMW

· FAB model- features, advantages and benefits

· Internal and external branding

· Corpus Callosum:

· Product integrity: coherence and FIT- give what is promised.

· Geometric Functionality adoption: design, benefits, cost acceptance

Cofidis

Market segmentation based on attitude

· Enthusiast

· Specialist

· Receptive

· Adverse

MBNA

· Viral marketing: word of mouth

· Affinity marketing: get the right customer and retain them

· Lifetime value of customers:

· Profit and Growth = Employee Satisfaction = Service Value = Customer Satisfaction

· No correlation between market share and profit. Quality of market share is important.

Push and Pull strategy

· Push – reaching customers directly through wholesalers and retailers

· Pull – wherein you generate demand for product thru advertisement and then consumers will be curious to know about the product

· BRE- business re-engineering: Am I do right things?

· BPR- business process re-engineering: Am I do things rightly?

ü To improve cost, quality and delivery time

Building Brand Equity

· Last fool syndrome – people hope price will rise and the guy who buys last falls in this trap. He is fucked.

· Value = Benefits offered/ price

· Generally you should offer more benefit and increase value

· Brand weight

ü High awareness

· Brand Length

ü Stretch into new products/services

· Brand breadth

ü Displays demand of brand in International market

· Brand depth

ü Brand segments the consumers on higher values. Eg: Apple

Financial indicators

ü Churn rate: % of customers leaving

ü CLV: present value of all future cash flows expected from customers

ü Factors considered: total revenue (value of purchase, repurchase rate, quantity of purchase, buying for how many years, profit obtained) and cost of acquisition (including marketing costs)

ü CAV- Customer’s asset value:

ü No. of customers * CLV

ü More powerful the brand more the CAV

Net promoter score

ü X = % of people recommending

ü Y = % of people not recommending

ü NPS = X – Y

ü Non-moving inventory biggest drawback in marketing and retail.

ü Cross margin is return on inventory investment.

ü Acquisition cost = total cost/ response rate

3 frameworks for propagating Value Based Management

1) Balance Scorecard

2) EVA

3) Activity Based cost eg: Godrej

BSC

· Financial health

· Customer satisfaction

· Internal business processes

· Learning/growth/innovation

ABC

· Identify activities

· Identify variance on those activities

· Identify standards on these activities