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MR+2011+useful+tools - IMM Tools Taewon Suh PhD Developing...

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Unformatted text preview: IMM Tools Taewon Suh, PhD Developing a customer-oriented strategy External Environment Analysis Segment the market Understand Customer needs Define Value proposition Deliver The value Retain Customer loyalty Internal Capabilities Analysis Value Proposition A clear statement of product/service benefits and price that can be provided to a target customer group Target customers Clearly identified Benefits and price explicitly stated Viable in light of competitors' value proposition Achievable with current resources and capabilities Evidence of adequate demand and returns Examples of Value Propositions Company Target Customers Convenienceseeking mass consumers Benefits Price McDonald Speed of service Consistent quality Clean, friendly environment 25% lower than full-service restaurants Volvo Station Wagon SafetySuperior safety conscious and durability upscale families 20% premium over U.S. Wagon scenario planning intro Single-point forecast vs. Description of alternative plausible futures Scenarios attempts to capture the richness and range of possibilities, generating decisions that are more robust under a variety of alternative futures. Scenarios can be used to challenge the prevailing mind-set, stimulating decision-makers to consider changes they would otherwise ignore. Scenarios are effective communication tools for developing a shared understanding of the new realities to all parts of the organization. Building blocks of scenario planning Drivers of Change Basic Trends Key Uncertainties Patterns of Interaction Multiple Scenarios The process for developing scenarios 1. Define the scope To set the time frame and scope of analysis (in terms of products, markets, geographic areas, and technologies) 2. Identify the major stakeholders 3. Identify basic trends To briefly explain each trend, including how and why it exerts its influence on you On PEST & industry factors To list each trend on a chart to identify its impact on your present strategy as positive, negative, or uncertain 4. Identify key uncertainties What events, whose outcomes are uncertain, will significantly affect the issues you are concerned with? To identify relationships among the uncertainties (since not all combinations may occur) 5. Construct initial scenario themes To identify extreme worlds (all positive vs. all negative) Clusters of the various strings of possible outcomes (jointly defining a scenario) To select the top two uncertainties and cross them 6. Check for consistency and plausibility Dealing with the trends, the outcome combinations, and the reactions of major stakeholders 7. Develop learning scenarios 8. Identify research needs 9. Develop quantitative models 10. Evolve toward decision scenarios Developing scenario for the ad industry Key Uncertainties 1. 2. 3. 4. 5. Will the evolution toward a global, borderless world continue? Can mega-agencies compete with "boutiques" in creating ads? Will advertisers remain very sensitive to potential agency account conflict? Is the fragmentation of media conducive to global, integrated marketing? Will agencies supply more than just ads, such as integrated marketing? Scenario A Total Globalization The global mega-shops Dominate the world market. Scenario B Polarization is hot Global mega-shops and local, specialized boutiques flourish side by side Scenario C Mega-shop dinosaur Global mega-shops lose competitive advantage to small, creative boutiques Starting Scenario Planning... For instance, focus on the outside world, without the complications of internal strategy and competitive issues. 1. Untangle the external issues into underlying trends and uncertainties 2. Repackage them into broad-ranging scenarios 3. Recombining of the basic elements (trends, outcomes, rules, and stakeholders) can be done in at least three different ways (refer to next slide). Recombining the basic elements Intuitively: find some major themes and story lines around which to organize all the elements Heuristically: select the two most important uncertainties to get some starting points Statistically: systematically combine the outcomes of all the key uncertainties into internally consistent strings "Heuristically" Example: 1984... global uncertainties 1. 2. 3. 4. 5. 6. 7. 8. Uncertainties Trade conflict between the US and Japan Arms negotiations between the US and the USSR Proliferation of nuclear weapons Spread of AIDS Rise or fall of Islamic fundamentalism Impact of Europe 1992 Deterioration of ozone layer Middle East war (or third world war) Two Uncertainties Combined (the US with the USSR and Japan) Trade Accommodation Trade Conflict X Arms Race Detente Imperial Twilight Industrial Renaissance Protracted Transition forecasting market Market Definition Narrow vs. Broad Market Focus 3-17 Market Potential Market Penetration vs. Market Demand Market Development Index (MDI) Current Market Demand Maximum Market Demand = 3-18 Five Forces of Market Potential 1. Awareness 2. Availability 3. Affordability 4. Ability to Use 5. Benefit Deficiency 3-19 Market Development vs. Market Share 3-20 building and sustaining loyalty Key Customer Performance Measures Market Share reflects the proportion of business in a given market that a business unit sells. Customer Acquisition measures, in absolute or relative terns, the rate at which a business unit attracts or wins new customers or business Customer Satisfaction assesses the satisfaction level of customers along specific performance criteria within the value proposition. Customer Profitability measures the net profit of a customer, or a segment, after allowing for the unique expenses required to support that customer. Satisfaction = a function of the product's perceived performance and the customers' expectations Depends on quality, the totality of features and characteristics of a product or service that bear on its ability to satisfy state or implied needs. Customers = value maximizers Customer-delivered value = total customer value total customer cost CLV = the net present value of the stream of future profits expected over the customer's lifetime purchases Building and sustaining loyalty How a customer possessing an attitude towards the store transacts with the company through purchase behavior 1. Building behavioral loyalty 2. Cultivating attitudinal loyalty 3. Linking loyalty to profitability Building behavioral loyalty Purchase behavior measure may vary by industry (frequency, degree of cross-buying, etc.) low purchase behavior measure spend/frequency High purchase behavior measure attitudinal loyalty encourage cultivate Imperative to analyze the underlying purchase behavior against the profitability of the customer Loyalty Measures Share of purchase (SOP): the relative share of a customer's purchase as compared to the total number of purchases Share of visits (SOV): the number of visits to the store as compared to the total number of visits Share of wallet (SOW): expenditure at a specific store as a fraction of total category expenditures = share of purchase (SOP) Past customer value (PCV): the past profit contribution of the customer Recency, frequency and monetary value (RFM): measure of how recently, how frequently and the amount of spending exhibited by a customer Cultivating attitudinal loyalty Linking loyalty to profitability The ultimate goal of any corporate initiative Cost > Benefit? Integration of behavioral and emotional aspects: short term vs. long term Two-tiered rewards strategy Key challenge the ability to discriminate between customers based on differences in their purchase behavior, attitude, profile and profitability potential without running the risk of alienating the customers Tier 1 rewards A standard uni-dimentional rewards strategy where customers' are given rewards or points on the basis of their total spending, thereby serving as a means for instant gratification. 1) Provide a simple, explicit and fair baseline reward mechanism to reward all customers for their present and past purchases. 2) Provide a means for the firm to capture customer transaction data. 3) Ensure scalability of the loyalty program by rewarding customers in proportion to their spending. Tier 2 rewards Aimed at influencing customer behavior or attitude in future Customer selection process: using CLV Represent highly differentiated rewards, awarded selectively at individual customer level to only those customers that the company is interested in sustaining loyalty Not explicitly divulged to the customers; invisible to competition market segmentation: the CRM approach NeedsNeeds-Based Market Segmentation 5-34 NeedsNeeds-Based Segmentation and Segment Identification Why Should Segments be Identified? 5-35 Segment Attractiveness What Makes a Segment Attractive? 5-36 Segment Profitability NMC = [ Segment Demand X Segment Share X ( per Cust Rev Variable Cost per Cust )] - Marketing Expenses ROS = NMC/Segment Sales Revenues ROI = NMC/Segment M&S Expenses 5-37 Segment Positioning How does positioning simplify promotional efforts? How does a firm determine if its segmentation strategy is meaningful? What is meant by Segment Strategy Acid Test? What is the importance of the marketing mix in the segmentation strategy? 5-38 Segmentation Strategies 5-39 Customer Relationship Marketing 5-40 Customer Relationship Management How does a firm justify the use of CRM? CRM vs. Needs-Based Market Segmentation 4 Critical Steps in Developing CRM Programs 5-41 Marketing Performance Tools Profit Impact of Segment Strategy Marketing Strategy Market Demand Market Share Unit Volume Average Price Sales Revenues Percent Margin Gross Profit Marketing & Sales (% sales) Marketing & Sales Expenses Net Marketing Contribution Marketing ROS Marketing ROI Mass Market Strategy 3,000,000 5.0% 150000 $1,350.00 $202,500,000 25.9% $52,447,500 10.0% $20,250,000 $32,197,500 15.9% 159% Segm ent Strategy Quality Segm ent Price Segm ent 1,000,000 5.0% 50000 $2,500.00 $125,000,000 40.0% $50,000,000 15.0% $18,750,000 $31,250,000 25.0% 167% 2,000,000 5.0% 100000 $1,250.00 $125,000,000 20.0% $25,000,000 5.0% $6,250,000 $18,750,000 15.0% 300% Segm ent Strategy 3,000,000 5.0% 150,000 $1,666.67 $250,000,000 30.0% $75,000,000 10.0% $25,000,000 $50,000,000 20.0% 200% Marketing Performance Tools Profit Impact of Customer Relationship Management Annual Cus tom er Perform ance Revenue per Customer Percent Margin Gross Profit per Customer Acquistion Cost Retention Cost Customer Prof its Customer Retention Customer Lif e (years) Discount Rate Cus tom er Cash Flow Year 0 1 2 3 4 5 6 7 8 9 10 Lifetim e Value $45.14 $26.62 $535.49 $1,443.90 Cash Flow -$500 $300 $300 $150 Cash Flow -$500 $250 $250 $250 Cash Flow -$500 $400 $400 $400 $400 Cash Flow -$500 $650 $650 $650 $650 $650 Segm ent Average $1,000 40% $400 $500 $100 $300 0.60 2.5 20% Mass Pe rs onalization $1,000 40% $400 $500 $150 $250 0.67 3.0 20% Mass Custom ization $1,200 50% $600 $500 $200 $400 0.75 4.0 20% Custom er Relationship Mgm t $1,500 60% $900 $500 $250 $650 0.80 5.0 20% ...
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  • Spring '09
  • staff
  • Marketing, 2. 3. 4. 5. 6. 7. 8, Purchase behavior, Marketing & Sales Expenses Net Marketing Contribution Marketing ROS Marketing ROI Mass Market Strategy, key uncertainties

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