CONTEMPORARY MANAGEMENT TOOLS

Topics
Greiners growth model Market driven organisation Value Disciplines of Treacy and Wiersema Currys pyramid MABA Analysis QRM

Branding Pentagram Value stream mapping Balanced score card Metrics share of heart, mind, market Metrics Customer profitability Metrics- advt and web

 BOOKS Marketing Metrics Paul Ferris Mgmt models : Marcel ven.

MANAGEMENT
IS THE PROCESS OF DESIGNING AND MAINTAINING AN ENVIRONMENT IN WHICH INDIVIDUALS , WORKING TOGETHER IN GROUPS , EFFICIENTLY ACCOMPLISH SELECTED AIMS

FUNCTIONS OF MANAGEMENT : )PLANNING )ORGANIZING )STAFFING )LEADING )CONTROLLING

Definitions Of Management
)Mary Follett :-- The art of getting things done through people. )Peter Drucker :--- Managers give direction to their organizations, provide leadership and decide how to use organizational resources to accomplish goals )Richard daft :;;-- Management is the attainment of organizational goals in an effective and efficient manner through planning, organizing , leading and controlling organizational resources. )Griffin : Management is a set of functions directed at the efficient and effective utilization of resources in the pursuit of organizational goals.

Key Points in Management

Efficient : using resources wisely and in a cost effective manner. Effective : making the right decisions and successfully implementing them. Planning:The management function concerned with defining goals for future organizational performance and deciding on the tasks and use of resources needed to attain them. Organizing : The management function concerned with assigning tasks , grouping tasks into departments and allocating resources to departments. Leading : The management function that involves the use of influence to motivate employees to achieve organizational goals. Controlling : the management function concerned with monitoring employees activities , keeping the organization on track toward its goals and making corrections if needed.

Old Paradigm Vertical Organization

New Paradigm Learning Organization

Forces on Organization
Markets Workforce Technology Values Local, Domestic Homogeneous Mechanical Stability, Efficiency Global Diverse Electronic (Digital) Change, Chaos

Old Paradigm Management Competencies

New Paradigm

Focus Leadership Doing work Relationships

Profits Autocratic By individuals

Customers, Employees Dispersed, empowering By Teams

Conflict, Competition
Collaboration

Strategies
comes from the Greek word Strategos meaning Art of the general Military used the word strategy to mean grand plans made in the light of what it is believed an adversary might or might not do. Defn of strategy : 1) General program of action and deployment of resources to attain comprehensive objectives Alfred Chandler : Determination of the basic long term objectives of an enterprise and the adoption of course of action and allocation of resources necessary to achieve these goals.

 Glueck : A unified , comprehensive and integrated plan designed to assure that the basic objectives of the enterprise are achieved

Michael Porter : : Developing and communicating the companys unique position, making trade-offs and forging fit among activities.

Corporate level Division level Business level Functional level

LG Corporate team

Consumer electronics Division

Home Appliances Division

FMCG Division

Colour TV Business

VCD/DVD business

Washing Machine

Refrigerator

A/C

Different levels of strategy

Levels Corporate
Corporate office /head office

Strategy CORPORATE LEVEL

SBU

SBU

SBU

SBU

Business Level

functional

Operations

Marketing

Personnel

Finance

Functional level

Five Concepts
Production concept Product concept Selling concept Marketing concept Societal marketing concept

Special focus on marketing myopia

Definitions of MARKETING
The performance of business activities that direct the flow of goods and services from producer to consumer. Getting the right goods , to the right people in the right place , at the right time , at the right price , with the right level of communication profitably. Identifying the needs, wants , desires of consumers and fulfilling them in such a way that the customer is delighted and the company objectives are met profitably. Solving customer problems profitably.

STP
Segmentation: -- is essentially the identification of subsets of buyers within market who share similar needs and who demonstrate similar buyer behavior.T he world is made up from billions of buyers with their own sets of needs and behavior. Segmentation aims to match groups of purchasers with the same set of needs and buyer behaviors. Targetting -- After the market has been separated into segments, the marketer will select a segment or series of segments and target them.

Positioning: is the act of designing the companys offer and image so that it occupies a distinct and valued place in the target customers mind.

SEGMENTATION Variables
North South, East, West Major Metros, Sub Metros, Town Hot, cold, humid

Segmentation Base Geographic

Region City Size Climate

Psychographic
Lifestyle
Personality

Conservative, Status Seekers Extrovert, Introvert, Aggressive

SEGMENTATION

C) Demographic Age Gender Family Size Education Occupation Income Religion

0-11,12-19,20-34 etc. Male, Female 1-2,3-4,5+ school, Graduate, PG Farmer, Professional, Housewife, Retired <15k,16-25k,26-35k etc. Hindu, Muslim, Sikhs, Christians

SEGMENTATION

D) Behavioral
Benefit Use Related 1) Usage Rate: 2) Awareness Status 3) Brand Loyalty Use-Situational Time/Objective

Quality, Service, Economy, Speed, Prestige.

Heavy, Medium , Light users Unaware, aware, interested enthusiastic. Strong, Medium , None

Leisure, work, Morning, Night Gift, Fun , Achievement

Patterns of target Market Selection Single Market Concentration

P1

P2

P2M1
P3

M1

M2

M3

Patterns of target Market Selection Selective Specialisation

P1

P2

P2M1
P3 P3M2

P2M3

M1

M2

M3

Patterns of target Market Selection Market Specialization

P1

P1M1

P2

P2M1
P3 P3M1

M1

M2

M3

Patterns of target Market Selection Product Specialisation

P1

P2

P2M1
P3

P2M2

P2M3

M1

M2

M3

Patterns of target Market Selection Full Coverage

P1

P2

P3

M1

M2

M3

Full Market Coverage

Undifferentiated Marketing -- Coca-cola Differentiated Marketing-- IBM, G.M, Ford,

Positioning
Positioning starts with the product. But Positioning is not what you do to a product. Positioning is what you do to the mind of the prospect. Easiest way to get into the mind - Be First KODAK- Photography Xerox -- Copier Hertz --- Rent-a car

Positioning

6 STEPS IN POSITIONING PROGRAM What position do you own What position do you want to own? Whom must you outgun Do you have enough money. Can you sustain . Do you match your position.

Positioning Strategies
Attribute Positioning Benefit Positioning Use /Application Positioning User Positioning Competitor Positioning Quality / Price Positioning Product category Positioning

Market Driven Organization

MARKET-DRIVEN STRATEGY
Market-Driven Strategy Becoming Market Oriented Distinctive Capabilities Creating Value for Customers Becoming Market Driven Challenges of a New Era for Strategic Marketing

MARKET-DRIVEN STRATEGY
All business strategy decisions should start with a clear understanding of markets, customers, and competitors.
The market and the customers that form the market should be the starting pint in shaping business strategy.

Characteristics of a Market-Driven Strategy

Becoming MarketOrientation

Achieving Superior Performance

Determining Distinctive Capabilities

Customer Value/ Capabilities Match

Why Pursue a Market-Driven Strategy?

Strong supporting logic Achievements of companies displaying market-driven characteristics are impressive
Examples include: Dell Inc. Louis Vuitton Southwest Airlines Tesco Tiffany & Co. Wal-Mart Zara

BECOMING MARKET ORIENTED

Customer is the focal point of the organization Commitment to continuous creation of superior customer value Superior skills in understanding and satisfying customers Requires involvement and support of the entire workforce Monitor rapidly changing customer needs and wants

 Determine the impact of changes on customer satisfaction Increase the rate of product innovation Pursue strategies to create competitive advantage

Characteristics of Market Orientation

Customer Focus What are the customers value requirements? Competition Intelligence Importance of understanding the competition as well as the customer Cross-Functional Coordination Remove the walls between business functions Performance Consequences Market orientation leads to superior organizational performances

Becoming a Market-Oriented Organization

Information Acquisition

Cross-Functional Analysis of Information

Shared Diagnosis and Coordinated Action

Delivery of Superior Customer Value

Market Orientation
Information Acquisition
Gather relevant information on customers, competition, and markets Involve all business functions

Intuits Quicken

Share information and develop innovative products with people from different functions Zaradiagnosis and Shared action

Inter-functional Assessment

Deliver superior customer

value

DISTINCTIVE CAPABILITIES
Capabilities are complex bundles of skills and accumulated knowledge, exercised through organizational processes, that enable firms to coordinate activities and make use of their assets.

Southwest Airlines Distinctive Capabilities

Organizational Processes Southwest uses a point-to-point route system rather than the hub-and-spoke design used by many airlines. The airline offers services to 57 cities in 29 states, with an average trip about 500 miles. The carriers value proposition consists of low fares and limited services (no meals). Nonetheless, major emphasis throughout the organization is placed on building a loyal customer base. Operating costs are kept low by using only Boeing 737 aircraft, minimizing the time span from landing to departure, and developing strong customer loyalty. The company continues to grow by expanding its point-to-point route network. Skills and Accumulated Knowledge The airline has developed impressive skills in operating its business model at very low cost levels. Accumulated knowledge has guided management in improving the business design over time. Coordination of Activities Coordination of activities across business functions is facilitated by the point-to-point business model. The high aircraft utilization, simplification of functions, and limited passenger services enable the airline to manage the activities very efficiently and to provide on-time point-to-point services offered on a frequent basis. Assets Southwests key assets are very low operating costs, loyal customer base, and high employee esprit de corps

Capabilities
Desirable Capabilities

Applicable to Multiple Competition Situations

Superior to the Competition

Difficult to Duplicate

Organizations Process
EXTERNAL EMPHASIS Outside-In Processes INTERNAL EMPHASIS Inside-Out Processes

Spanning Processes
Customer order fulfillment Pricing Purchasing

Market sensing Customer linking Channel bonding Technology monitoring

Financial management Cost control Technology development Integrated logistics Manufacturing/ transformation processes Human resources management Environment health and safety

Customer service delivery New product/service development Strategy development

Matching Customer Value and Distinctive Capabilities

Value Requirements

Distinctive Capabilities

CREATING VALUE FOR CUSTOMERS

Customer Value:
Value for buyers consists of the benefits less the costs resulting from the purchase of products.
Superior value: positive net benefits

Creating Value:
Customer value is the outcome of a process that begins with a business strategy anchored in a deep understanding of customer

Creating Value for Customers

Customer Value

Benefits

Costs

Value Composition
Product Services
Employees
Benefits

Image Monetary costs Time

Psychic and physic costs

Value (gain/loss)

Costs (sacrifices)

BECOMING MARKET DRIVEN

Market Sensing Capabilities

MARKET-DRIVEN STRATEGIES

Customer Linking Capabilities

Market Driven Initiatives

Market Sensing Capabilities Effective processes for learning about markets Sensing: Collected information needs to be shared across functions and interpreted to determine proper actions. Customer Linking Capabilities Create and maintain close customer relationships

Aligning Structure and Processes

Potential change of organizational design Improve existing processes Process redesign Cross-functional coordination and involvement Primary targets for reengineering: Sales and marketing, customer relations, order fulfillment, and distribution

CHALLENGES OF A NEW ERA FOR STRATEGIC MARKETING

Strategic marketing faces unprecedented challenges and opportunities:
Turbulent markets Intense competition Disruptive innovations Escalating customer demands

Ethical Challenges Societal and Global Change Social Responsiveness of Organizations

Escalating Globalization
It is important to understand the differences (and similarities) between the developed economies and the new world beyond. Market opportunities Competitive threats Partnering opportunities Outsourcing initiatives

The worlds poor

Ethical Behavior and Social Responsiveness

Increasingly demanding ethical challenges Corporate responsibility

Responsibilities to stakeholders

Designing Market-Driven Organizations

Considerations in organizational design Organizational design options Selecting an organizational design Global dimensions of organizations

Considerations in Marketing Organization

Matching structure to strategic goals Extent of need to alter vertical structures Extent of processtype organizational design Extent of partnering with other organizations Need to integrate value-creating activities around customers Impact of Internet on organizational processes

CONSIDERATIONS IN ORGANIZATION DESIGN

Alternative Organizational Structures

Traditional Hierarchy

Process Overlay Functional Structure

Process Structure Functional Overlay

Horizontal Structure

The Challenge of Integration

Integration problems Marketings links to other functional units Additional approaches to effective
integration

relocation/design of facilities personnel movement reward systems formal procedures social orientation project budgeting

Illustrative Example: GEs Philosophy

One clear message in our approach is the value of the borderless culture which breaks down the horizontal barriers between functions and the vertical barriers between organizational levels. This means that employees are encouraged to collaborate with others and given considerable freedom to turn their creativity into productivity.

Impact of the Internet on Organizations

New managerial roles and practices are
mandated by the Web

fast access to information from any location and remotely accelerated trend towards flatter organizations virtual team-working across geographical and organizational boundaries new approaches to supplier relationship management (SRM) and customer relationship management (CRM) managing and controlling outsourcing of more business processes and activities to specialist suppliers

Organizational Design Options

Traditional designs Marketings corporate role New forms of marketing organizations

Traditional Marketing Organization Designs

Functional

Matrix

TRADITIONAL DESIGNS
MarketFocused

ProductFocused

Product-Focused Structure

Marketing Organization Based on a Combination of Functions and Products

Organizational Transformation
Hybrid organization forms Designs linked to value strategy and
core capabilities

Vital role of data networks Shared information and decision making

New Forms of Marketing Organization

New marketing roles

Chief relationship officer, chief knowledge office, chief customer officer

Transforming vertical organizations

through managing processes New organizational forms

networked organizations the marketing coalition company venture marketing organizations

Selecting an Organization Design

Organizing concepts Organizing the sales force

Organizing Concepts
Centralized Formalized Nonspecialized

BUREAUCRATIC
Internal (hierarchical) Organization of Activity

TRANSACTIONAL
External (market) Organization of Activity

ORGANIC

RELATIONAL

Decentralized Nonformalized Specialized

Organizing the Sales Force

Organizing multiple sales channels

personal selling Internet-based channels telesales direct marketing

Coordinating major account

responsibilities

Key account management Global account management

Global Dimensions of Organizations

Issues in organizing global marketing strategies
Variations in business functions Organizational considerations

Coordination and communication

Strategic alliances Executive qualifications

Marketing Organization Plan Combining Product, Geographic, and Functional Features

Global Marketing Organization

Standardized Versus Customized Strategies
GLOBAL ORGANIZING ISSUES

Executive Qualifications

Alternative Organization Forms

Strategic Alliances

Coordination and Communication

Eight Stages of New Product Development

Idea Generation Idea Screening Concept Development & Testing Marketing Strategy Business Analysis Product Development Market Testing Commercialization

Eight Stages
1) Idea Generation :
Source of New Product Ideas:Customers , Employees, Competitors Products and services , sales team Idea Generating Techniques : Brain Storming , Need/Problem Identification , Problem /Need Identification
2) Idea Screening: Drop Error Go Error

 3) Concept Development & Testing:

A product concept is an elaborated version of the idea expressed in meaningful consumer terms. 4) Marketing Strategy Development : a) Describes the size , structure of the target market, Positioning, sales, Market share in the first few years. b) Product, Price, Place, Distribution strategy. c) Long run sales and profit goals. 5) Business Analysis:
Actual costs to R&D, MFG. ,Marketing cost and Profit Projection

 6) Product Development: 1) Develop Prototype 2) Functional & Consumer Tests 7) Market Testing : Testing in select outlets with actual brand name and packaging 8) Commercialization : When to enter the market How to enter the market

BRANDING
Defn:- A name ,symbol, design which is intended to identify the goods ,services of one company and to differentiate the goods from those of competitors. BRAND NAME DECISION
Individual Brand Name : P & G :- Ariel, Pantene A Blanket Family Name : Philips Company Name combined with individual product names:Britannia 50-50 Videocon Bazoomba

BRANDING
Brand Strategy Line Extension Brand Extension Multi Brand New Brands

Brand Strategies
Existing
Existing Brand Name
New

New

Line Extension Brand Extension Multi brands

Product Category

Brand

New Brands

Name

Brand Strategies
Line Extensions : occur when a company introduces additional items in the same product category under the same brand name such as new flavors, forms, colors, added ingredients, package sizes . e.g : ZEN LXI,ZEN VXI, SURF, SURF EXCEL, SURF EXCEL BLUE Splendour , Splendour Plus Coke, Diet Coke, Vanilla Coke Clinic AllClear, Clinic Plus

 Brand Extensions : Using an existing brand name to launch a product in a new category e.g --- Honda automobiles, motorcycles, lawnmowers etc. Sony (Handycams, Colour TV, Digital camera etc.) AMUL, Videocon,LG

 Multibrands : additional brands in the same category

e.g --Rejoice, Pantene, Head & Shoulders WagonR, Zen , Alto Electrolux, Kelviantor, Allwyn Videocon, Sansui, Akai, Toshiba

 New brands : When a company launches products in a new category , a new name is given In deciding whether to give new name , the company should consider the following1) Is the venture large enough 2) Will it last long enough 3) Does the new product require the boost power of existing powerful brand name 4) Is it best to avoid existing brand name in case the new product fails. 5) Will the cost of establishing a new brand name be covered by the probable sales and profits.

 E.g -- Paras Pharmaceuticals Livon,Krack, Itchguard, RingGuard, Lipguard, Numis, DCold

Branding Pentagram

IGOR ANSOFFS PRODUCT/MARKET EXPANSION GRID

Current Product New Product

Current Market Market Penetration Product Development

New Market

Market Development

Diversification

IGOR ANSOFFS PRODUCT/MARKET EXPANSION GRID

Current Market Current Product
Market Penetration: Encourage current customers to buy more. Attract competitors customers to switch to its brand Convince non users who resemble current users to start using the companys product. e.g --- Pepsodent, Colgate

 Market Development Geographical expansion: Opening retail outlets in other areas. e.g --- Mc-Donalds, Shoppers Stop Channel expansion : If only present in consumer market, then look at institutional sales also.

IGOR ANSOFFS PRODUCT/MARKET EXPANSION GRID

Product development Strategy : Introduce products with new features Introduce different quality versions Alternative product forms e.g LG in colour TVs Flat TVs, Plasma TVs, LCD TVs, Projection TVs. Diversification Strategy

Greiners Growth model

Grieners growth model

 Greiner's Growth Model describes phases that organizations go through as they grow. All kinds of organizations from design shops to manufacturers, construction companies to professional service firms experience these. Each growth phase is made up of a period of relatively stable growth, followed by a "crisis" when major organizational change is needed if the company is to carry on growing.

 Dictionaries define the word "crisis" as a "turning point", but for many of us it has a negative meaning to do with panic. While companies certainly have to change at each of these points, if they properly plan for there is no need for panic and so we will call them "transitions". Larry E. Greiner originally proposed this model in 1972 with five phases of growth. Later, he added a sixth phase (Harvard Business Review, May 1998). The six growth phases are described

 Phase 1: Growth Through Creativity Here, the entrepreneurs who founded the firm are busy creating products and opening up markets. There aren't many staff, so informal communication works fine, and rewards for long hours are probably through profit share or stock options. However, as more staff join, production expands and capital is injected, there's a need for more formal communication. This phase ends with a Leadership Crisis, where professional management is needed. The founders may change their style and take on this role, but often someone new will be brought in.

 Phase 2: Growth Through Direction Growth continues in an environment of more formal communications, budgets and focus on separate activities like marketing and production. Incentive schemes replace stock as a financial reward. However, there comes a point when the products and processes become so numerous that there are not enough hours in the day for one person to manage them all, and he or she can't possibly know as much about all these products or services as those lower down the hierarchy. This phase ends with an Autonomy Crisis: New structures based on delegation are called for.

 Phase 3: Growth Through Delegation With mid-level managers freed up to react fast to opportunities for new products or in new markets, the organization continues to grow, with top management just monitoring and dealing with the big issues (perhaps starting to look at merger or acquisition opportunities). Many businesses flounder at this stage, as the manager whose directive approach solved the problems at the end of Phase 1 finds it hard to let go, yet the mid-level managers struggle with their new roles as leaders. This phase ends with a Control Crisis: A much more sophisticated head office function is required, and the separate parts of the business need to work together.

 Phase 4: Growth Through Coordination and Monitoring Growth continues with the previously isolated business units re-organized into product groups or service practices. Investment finance is allocated centrally and managed according to Return on Investment (ROI) and not just profits. Incentives are shared through company-wide profit share schemes aligned to corporate goals. Eventually, though, work becomes submerged under increasing amounts of bureaucracy, and growth may become stifled. This phase ends on a Red-Tape Crisis: A new culture and structure must be introduced.

 Phase 5: Growth Through Collaboration The formal controls of phases 2-4 are replaced by professional good sense as staff group and re-group flexibly in teams to deliver projects in a matrix structure supported by sophisticated information systems and team-based financial rewards. This phase ends with a crisis of Internal Growth: Further growth can only come by developing partnerships with complementary organizations.

 Phase 6: Growth Through Extra-Organizational Solutions Greiner's recently added sixth phase suggests that growth may continue through merger, outsourcing, networks and other solutions involving other companies. Growth rates will vary between and even within phases. The duration of each phase depends almost totally on the rate of growth of the market in which the organization operates. The longer a phase lasts, though, the harder it will be to implement a transition.

BCG matrix- Growth/share matrix

20 Market STARS Question Marks

Growth
Rate (%) 10

Dogs Cash cow 0

10x

Relative Market share

0.1 x

Porters 5 Forces- Determining Segment Structural Attractiveness

Potential Entrants

Suppliers (Supplier Power)

Industry Competitors
Substitutes (Threat of substitutes)

Buyers (Buyer Power)

Three Generic Strategies

Strategic Advantage Uniqueness perceived Low cost position by customer

Industrywid e

Differentiation

Overall cost leadership

Focus Particular segment

Overall Cost Leadership Requires construction of efficient scale facilities Cost minimization in areas like R&D, ADVERTISING, SERVICE, SALES FORCE ETC.

 To achieve cost leadership --- upfront capital investment in state-of-the art equipment/plant is required. e.g --- Texas instruments, DU PONT, Black & Decker, Bic, Kodak etc. Timex has specialised in manufacturing simple low cost watches for the mass market.

 Differentiation ---- creating something that is perceived industrywide as unique. Differentiation can take many forms --- Design / brand image--- Mercedes Technology--- Bose -- speakers and sound system Service--- Maruti Dealer Network caterpilar, Videocon Quality-- Maytag Rolex watches are handmade of gold and stainless steel and are subjected to strenuous tests of quality and reliability Nikon , HP, Cross

 Focus-- Focusing on a particular buyer group , segment of the product line,, or geographic market The strategy rests on the premise that the firm is able to serve the narrow strategic target very well, more effectively and efficiently then competitors who are competing more broadly.

Competitive Strategies

Michael Treacy and Fred Wiersema suggest companies can gain leadership positions by delivering superior value to their customers in three strategies or value disciplines Operational excellence Customer intimacy Product leadership

18-27

Competitive Strategies
Basic Competitive Strategies Operational excellence refers to a company providing value by leading its industry in price and convenience by reducing costs and creating a lean and efficient value delivery system e.G WALMART

18-28

Competitive Strategies
Basic Competitive Strategies Customer intimacy refers to a company providing superior value by segmenting markets and tailoring products or services to match the needs of the targeted customers E.G IBM

18-29

Competitive Strategies
Basic Competitive Strategies Product leadership refers to a company providing superior value by offering a continuous stream of leading-edge products or services. Product leaders are open to new ideas and solutions and bring them quickly to the market. E.G APPLE

18-30

Competitive Strategies
Basic Competitive Strategies Product leadership refers to a company providing superior value by offering a continuous stream of leading edge products or services. Product leaders are open to new ideas and solutions and bring them quickly to the market.

18-31

BRAND EQUITY
BRAND EQUITY : is a set of brand assets and liabilities linked to a brand , its name and symbol , that add to or subtract from the value provided by a product or service to a firm and /or to that firms customers. For assets or liabilities to underlie brand equity they must be linked to the name and/or symbol of the brand.

BRAND EQUITY
The assets and liabilities on which brand equity is based can be grouped into 5 categories 1) Brand Loyalty 2) Name awareness 3) Perceived quality 4)Brand associations in addition to perceived quality 5)other proprietary assets : patents, trademarks,channel relationship etc.

BRAND EQUITY
Name Awareness Brand Loyalty Brand Equity Provides value to customer by enhancing customers Interpretation /Processing of information. Confidence in the purchase decision. Use satisfaction/delight Perceived quality Brand Associations Other proprietary brand assets

Provides value to firm by enhancing:Efficiency and effectiveness of marketing programs Prices/Margins Brand Extensions Trade Leverage Competitive advantage

Brand Loyalty
Brand Loyalty pyramid
Committed buyer

Likes the brand, considers brand as a friend

Satisfied buyer with switching costs Habitual buyer- no reason to change Switchers /price sensitive- indifferent- no brand loyalty

Measuring Brand Loyalty

Behavior Measures: Repurchase rates: What % of Maruti Zen owners purchase Maruti on their next purchase % of Purchases: of the last five purchases made by a customer, what % went to each brand purchased? Number of Brands Purchased: What % of coffee buyers bought only a single brand?, two brands? Switching costs: If it is expensive or risky for a firm or consumer to change suppliers, then the brand loyalty is on the higher side. E.g : Investment in computer system or software like SAP

Strategic value of Brand Loyalty

Reduced Marketing Costs: It is much less costly to retain customers then to attract new one ( COST RATIO IS 1:4) Trade leverage: Strong pull (brand loyalty) from consumers will ensure preferred shelf space because stores know that customers will have such brands on their shopping list. Attracting new customers: Time to respond to competitive threats:If a competitor develops a superior product , a loyal following will allow the firm time needed for the product improvements to be matched and neutralized.

Creating & Maintaining Brand Loyalty

Treat the customer Right Stay close to customer Measure/Manage Customer Satisfaction Create switching cost Provide extras

Brand Awareness
Ability of a potential buyer to recognize or recall that a brand is a member of a certain product category.

Top of Mind Brand recall Brand Recognition Unaware of brand The awareness Pyramid

How to achieve Awareness

Be different , Memorable: Involve a slogan or jingle: e.g Lifebuoy hai jahan , tandorosti hai wahan. Symbol exposure: colonel sanders --KFC, golden archesMcdonalds---> symbol should closely associate with the brand. Publicity--- advertisement. Event Sponsorship --- Femina Miss India, Manikchand Filmfare awards. Consider brand Extensions : one way to gain brand recall is to put the name on other products.

Recognition v/s Recall- The Graveyard Model

High

Graveyard Recognition

Brand

Niche Brands

Low

Low

Recall

High

BRAND RECOGNITION
Brand Recognition: Familiarity and Liking : Recognition reflects familiarity gained from past exposure . Recognition doesn't necessarily involve remembering where the brand was encountered before, why it differs from other brands , or even what the brands product class is. It is simply remembering that there was a past exposure to the brand. When consumers see a brand and remember that they have seen it before (perhaps even several times) , they realize that the company is spending money to support the brand. Since it is generally believed that companies will not spend money on bad products , consumers take their recognition as a signal that the brand is good.

Brand Recall
A brand (for e.g. HDFC Bank) is said to have recall if it comes to consumers minds when its product class (for e.g. , banking companies ) is mentioned. Whether or not a customer recalls your brand can be the deciding factor in getting on a shopping list or receiving a chance to bid on a contract. The graveyard model was developed by Young and Rubicam Europe under the guidance of Jim Williams. In this model , brands in a product class are plotted on a recognition v/s recall graph.

The Graveyard Model

For e.g , the recall and recognition of each of the brands in the automobile category could be measured and these measurements could be used to position each brand on the graph. One finding consistent across dozens of product classes is that brands tend to follow the curved line shown in the figure. There are two exceptions , each of which reveals the importance of recall. One exception is healthy niche brands , which fall below the line because they are not known to a substantial group of consumers , and therefore have relatively low overall recognition.

The Graveyard Model

But because they do have high recall among their respective loyal customer groups , their low recognition is not necessarily an indication of poor performance. And healthy niche players sometimes have the potential to expand recognition and thus the scope of their customer base. The second exception is the graveyard , an area in the upper left hand corner populated by brands with high recognition but low recall. Being in the graveyard can be deadly. Customers know about the brand , but it will not come to mind when considering a purchase .

The Graveyard Model

One point of the graveyard model is that high recognition is not necessarily the mark of a strong brand it is associated with weak ones as well. Movement towards the graveyard is associated with sliding sales and market share. If however , the brand is moving away from the graveyard , sales and market share can be expected to increase. Thus the graveyard model provides evidence that recall is as important as recognition.

Currys Pyramid

CURRYS Pyramid
80% of the revenue comes from 20% of the customers. Some customers in the bottom 80% of customer base can even lose you money to service. By analyzing customers in this way we help build and maintain a customer driven culture within the organization. The first step in putting Currys Pyramid into practice is obviously to determine the different segments were going to have, and then finding which customers belong to which segments. Then create different packages/incentive programs for each of the different segments.

 Suppose we have an airline company called Emirates Airlines which decides to segment its customers according to how long they have been customers, and how much revenue they generate each month. We could plot this in the following matrix:

 As you can see, in the grid above were plotting monthly spend against length of time as a customer. Based on Currys Pyramid, Emirates Airlines decide to segment their customers so that the top 1% are considered gold, the next 4% are silver, the next 15% are bronze, and the remaining 80% are white. Our matrix might now look like this

 Now that the customers are classified into gold, silver, and bronze, Emirates Airlines needs to work out what packages to offer each segment to increase its value to the airline. What packages the airline offers will of course depend on what the airline is aiming to achieve, but lets take a look at a few obvious example packages: For gold customers we might want to ensure we dont lose them as customers, so we might offer free flights anywhere in the world for themselves and their immediate family once per year, when they keep gold status for an entire year.

 If the research revealed that gold customers are not so price conscious then the above offer might not be appropriate, our big spenders might not be interested in free economy flights. Instead gold customers may continue to be loyal if Emirates offer great service. In this case it may be more appropriate for the airline to offer gold members free chauffeur driven transportation to and from the airport, taking some of the stress out of travel for the customer.

 For silver members we might want to encourage them to become gold members so we can realise more revenue from them, for example, we might offer a one month taster of some of the benefits they could be getting from gold membership, such as chauffeur driven transport to and from the airport.

Book: Jay and Adam Curry The customer Marketing Method