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Professor of Marketing Director, Centre for Marketing Co-Director, Aditya V Birla India Centre
Marketing Transformations
Strategic, Cross-Functional, and Bottom Line Oriented 1. 2. 3. 4. 5. From market segments to strategic segments From selling products to providing solutions From declining to growing distribution channels From branded bulldozers to global distribution partners From brand acquisitions to brand rationalization
Value Proposition
How different will be our value curve
Value attributes Worldwide network Choice in distribution New airplanes Punctuality Seat selection Offer business class Seat spacing In-flight meals Frequent flyer miles Refunds if plane is late Flexibility to change flight Refund for missed flight Price attractiveness
Low Medium. High
-----easyJet
-----Flag carrier
Value Proposition
Which assumptions should be challenged?
Which of the factors which the industry takes for granted could be: Eliminated? Raised above industry standards? Reduced below industry standards? Which totally new factors the industry never considered could be introduced?
easyJet Response
Meals, Travel agents Punctuality Low-cost travel Flight change flexibility Seat selection Refunds if late plane Ticketless travel
Copyright Nirmalya Kumar Not to be used or reproduced without permission
easyJet
People who pay from their own pockets and some who dont fly One-way fares Refunds, if plane is late No seat choice No meals Low prices
Value Network Purchasing Operations Integrated Short and long-haul Multiple planes Worldwide network Segmented customers Varied meal services Frequent flyer program Travel agents Outsourced Short-haul routes Single type of plane Select destinations Treat all customers the same Focused Direct sales/Internet
Marketing
Distribution
Electrolux in 1996
1 INTERNATIONAL BRAND
OP II -1,3 %
1996 1996
Copyright Nirmalya Kumar Not to be used or reproduced without permission
Price Segmentation
Price High Middle Low Specs High Middle Low Brand Best Better Good
Why would Why would people people prefer or prefer or buy our buy our brands ? brands ?
Performance specialisation Context Produce large volumes Manage complicated menus Very special circumstances Very complicated logistics High performance / capacity Industrial reliability Customized kitchen layout Integrated systems
Basic solution fast ROI Auxiliary catering Easy and fast ROI Very basic environment Manage basic menus Conformity with legal and sanitary regulation Basic specs and features Very low price
Gastronomy partnership < 200 meals per day Little technical competence Normal environment
Prestige gourmet Celebrity chefs Gourmet restaurants A la carte cuisine signature dishes Prestigious working environment Status symbol Be part of a very exclusive elite Very reliable tailored stove
Needs
Modular & homogeneous catering solutions Close relationship with the supplier partner Proven technology suitable performance affordable Staff Canteens 3-4-Star Hotels Family Restaurants Schools Elderly Homes Complete range of functions Uniform aesthetics stylish Reliable standard components Full service : pre- & after-sales pre- after50 75 Proximity Partner-dealer PartnerCompetent service Best-in-class commercial Best- inorganization
Customer types
Gourmet Restaurants 5-Star Hotels (Private Homes) Overwhelming design Prestigious materials Everlasting construction
Product specifications
Best components & materials Modular engineering Top service : pre- & after-sales pre- after-
100 Direct sales selected partner consultants & opinion leaders! Very high commercial & technical competence
Target brand
Electrolux 1996-2001
OP II +8,1 %
3 BRANDS
OP II -1,3 %
1996 1996
1997 1997
1998 1998
1999 1999
2000 2000
2001 2001
Market Driven
Market driven firms target clusters of customers (segments)
Segment
Target
Position
Product
Service
Promotion
Place
Price
Differentiation
Win through
Examples:
Market Driving
Market driving firms change the basis of competition Win through Seeing differently Profits through leap in value
Continuous Improvement
Examples: Aravind Eye Hospital, Body Shop, CNN, Federal Express, IKEA, Microsoft, Southwest, Starbucks, Swatch, TetraPak, Walmart
Copyright Nirmalya Kumar Not to be used or reproduced without permission
Zara
6,000 5,000 4,000 3,000 2,000 1,000 0 1999 2000 2001 2002 2003
Copyright Nirmalya Kumar Not to be used or reproduced without permission
5,289 3,980
Inditex H&M
Value Proposition
How different will be our value curve
Value attributes
Price* Fashion content Assortment breadth Store experience Fresh items Celebrity advertising Central store locations Out of stock (traditional)** Durability of clothing Discounts / sales Out of stock (unique)**
H&M
Low
Low
Medium.
High
ZARA
Value to Customers
High
*High price means low value to customers **Traditional out of stock is poor service, in Zara customer is wearing unique product
Value Proposition
Which assumptions should be challenged?
Which of the factors which the industry takes for granted could be: Eliminated? Reduced below industry standards? Raised above industry standards? Which totally new factors the industry never considered could be introduced?
Zara Response
Advertising Clothing quality, out of stock (traditional), sales. Store atmosphere, Fashion content Out of stock (unique), Fashion freshness
Copyright Nirmalya Kumar Not to be used or reproduced without permission
Value Network Purchasing Manufacturing Logistics Marketing Finished Outsourced Long production cycle Long lead times Celebrity advertising Finished & raw materials Vertical integration Short product cycles Short lead times Storefront as advertisement
Sales Markdowns
Season
Sales Markdowns
Internal Manufacturing
Start of season
In-season
45-60%
80-100%
0-20%
30-40%
Advertising
Zara
15-25%
50-60%
40-50%
15-20%
Copyright Nirmalya Kumar Source: Inditex, 2004 Not to be used or reproduced without permission
10.67
Gap
10.6
7.18
12.3
6.84
Mahatma Gandhi