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
Example issue decomposition
Primary Issues Sub Issues Alignment with P&L
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
Example issue decomposition
Primary Issues Sub Issues Alignment with P&L
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
Example issue decomposition
Primary Issues Sub Issues Alignment with P&L
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
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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
EnvironmentEnvironment
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
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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
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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
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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?
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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
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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
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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
Outputs to Written Marketing Plan
•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)
Outputs to Written Marketing Plan
• 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
Outputs to Written Marketing Plan
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
EnvironmentEnvironment
Evaluate Evaluate Industry Industry
EnvironmentEnvironment
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?
• 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
• 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
benefit to be provided?
Operating Strategy:
How should the client deliver the
benefit to be provided?
Operating Strategy:
How should the client deliver the
benefit to be provided?
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
• 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
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Final thoughts
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