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Market Driving Strategies. Markstrat Introduction 2. Engineers’ View. Brand A. Brand B. Brand C. Brand D. Technical quality. ?. Brand B. Brand D. Brand C. ?. Brand A. Product Perceptions: Engineers vs. Customers. +20. SONO. SELF. Bu. SEMI. SULI. Pr. Hi. SOLD. -20. - PowerPoint PPT Presentation
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Market Driving StrategiesMarket Driving Strategies
Markstrat Introduction 2Markstrat Introduction 2
Prof. Markus ChristenProf. Markus Christen 22
Base CostBase Cost
$
min. 10
WeightWeight
10 - 20
Kg
Max. FrequencyMax. Frequency
5 - 50
kHz
DesignDesign
3 - 10
Index
PowerPower
5 - 100
W
VolumeVolume
20 - 100
dm3
Base CostBase Cost
$
min. 10
$
min. 10
WeightWeight
10 - 20
Kg
10 - 20
Kg
Max. FrequencyMax. Frequency
5 - 50
kHz
5 - 50
kHz
DesignDesign
3 - 10
Index
3 - 10
Index
PowerPower
5 - 100
W
5 - 100
W
VolumeVolume
20 - 100
dm3
20 - 100
dm3
Base CostBase Cost
$
min. 10
AutonomyAutonomy
5 - 100
mMax. FrequencyMax. Frequency
5 - 20
kHz
DiameterDiameter
10 - 100
mm
DesignDesign
3 - 10
Index
WeightWeight
10 - 100
g
Base CostBase Cost
$
min. 10
$
min. 10
AutonomyAutonomy
5 - 100
m
5 - 100
mMax. FrequencyMax. Frequency
5 - 20
kHz
5 - 20
kHz
DiameterDiameter
10 - 100
mm
10 - 100
mm
DesignDesign
3 - 10
Index
3 - 10
Index
WeightWeight
10 - 100
g
10 - 100
g
Engineers’ ViewEngineers’ View
Prof. Markus ChristenProf. Markus Christen 33
Product Perceptions:Product Perceptions:Engineers vs. CustomersEngineers vs. Customers
Technical quality
BrandBrandAA
BrandBrandBB
BrandBrandCC
BrandBrandDD
BrandBrandCC
BrandBrandAA
BrandBrandBBBrandBrand
DD
?
?
Prof. Markus ChristenProf. Markus Christen 44
Customer PerceptionsCustomer Perceptions
Perceptual mapbased on MDS study
Key
Perceptual positioningof brands
Segment ideal pointOt
Need 2Need 2
Need 1Need 1
+20
+20
-20
-20
SELF
PrHi
Bu
Si
Ot
SEMI
SONO
SOLD
SULI
SAMA
SUSI
SALT
SIBI
SIRO
Prof. Markus ChristenProf. Markus Christen 55
Two Ways to RepositionTwo Ways to Reposition
R & DR & D
AdvertisingAdvertising
PerceivedPerceivedEconomyEconomy
PerceivedPerceivedPerformancePerformance
Prof. Markus ChristenProf. Markus Christen 66
AdvertisingAdvertising
How do you do it?How do you do it?– Enter perceptual objectives with advertising Enter perceptual objectives with advertising
decisions, either in terms of MDS dimensions or decisions, either in terms of MDS dimensions or semantic scale dimensionssemantic scale dimensions(actual target, not a change)(actual target, not a change)
What is the effect?What is the effect?– Immediate effect on customer perceptions, Immediate effect on customer perceptions,
magnitude depends on advertising spending magnitude depends on advertising spending and strength of prior customer perceptionsand strength of prior customer perceptions
– There is a limit to changing customer There is a limit to changing customer perceptions with advertisingperceptions with advertising
Prof. Markus ChristenProf. Markus Christen 77
Marketing’s Problem For R&DMarketing’s Problem For R&D
EconomyEconomy PerformancePerformance ConvenienceConvenience
Customer NeedsCustomer NeedsCustomer NeedsCustomer Needs
SAMASAMA
Pri
cePri
ce
Pow
er
Pow
er
Max.
Freq
.M
ax.
Freq
.
Desi
gn
Desi
gn
Volu
me
Volu
me
Weig
ht
Weig
ht
Technical SpecificationsTechnical SpecificationsTechnical SpecificationsTechnical Specifications
Prof. Markus ChristenProf. Markus Christen 88
New Product DevelopmentNew Product Development
Give project a name (internal use only)Give project a name (internal use only)– all projects start with a Pall projects start with a P– then S for Sonite project or V for Vodite projectthen S for Sonite project or V for Vodite project– remaining 3 characters can be freely chosenremaining 3 characters can be freely chosen
Set product characteristics (5 technical attributes)Set product characteristics (5 technical attributes)– your call based on your objectives and interpretation of market your call based on your objectives and interpretation of market
research and market trendsresearch and market trends
Set base costSet base cost– based on your price/margin target and available R&D fundsbased on your price/margin target and available R&D funds
Provide R&D budgetProvide R&D budget– on-line query for immediate information (limited to 7 queries on-line query for immediate information (limited to 7 queries
per period)per period)– proceed with limited budget (100K) to obtain perfect feedback proceed with limited budget (100K) to obtain perfect feedback
from R&D department but takes 1 period to obtainfrom R&D department but takes 1 period to obtain
Prof. Markus ChristenProf. Markus Christen 99
R&D Budget Depends OnR&D Budget Depends On
Technical specificationsTechnical specifications– budget required increases with design, power, budget required increases with design, power,
frequency, autonomyfrequency, autonomy– budget required decreases with volume, weight, budget required decreases with volume, weight,
diameterdiameter
Base costBase cost– budget required increases with lower base costbudget required increases with lower base cost
Past experience of R&D departmentPast experience of R&D department– budget required decreases with number of budget required decreases with number of completedcompleted
projectsprojects– budget required decreases with similarity to budget required decreases with similarity to completedcompleted
projectsprojects
Prof. Markus ChristenProf. Markus Christen 1010
R&D Budget and Base CostR&D Budget and Base Cost
Do an ‘on-line query’ to obtain Do an ‘on-line query’ to obtain immediate feedbackimmediate feedback– R&D chief pads his estimatesR&D chief pads his estimates– limited to 7 queries per periodlimited to 7 queries per period
Submit project with limited R&D Submit project with limited R&D budget (minimum is $100K) to obtain budget (minimum is $100K) to obtain perfect feedbackperfect feedback– takes 1 year to obtaintakes 1 year to obtain
Prof. Markus ChristenProf. Markus Christen 1111
weight designvolume max. freq. power
17 6 85 35 70PSTOPPSTOP Minimum base cost: $110
Requested base cost = $80Requested base cost = $80– below minimum, R&D uses below minimum, R&D uses
the minimum feasible base the minimum feasible base cost of $110 as targetcost of $110 as target
– budget needed: $800Kbudget needed: $800K
Budget provided = $1,000KBudget provided = $1,000K– project available at base cost project available at base cost
of $110of $110
Budget provided = $300KBudget provided = $300K– project unsuccessful, R&D project unsuccessful, R&D
says it would need an says it would need an additional $500Kadditional $500K
Requested base cost = $130Requested base cost = $130– above minimum, so R&D above minimum, so R&D
works with this target costworks with this target cost
– budget needed: $550Kbudget needed: $550K
Budget provided = $1,000KBudget provided = $1,000K– project available at base cost project available at base cost
of $130of $130
Budget provided = $300KBudget provided = $300K– project unsuccessful, R&D project unsuccessful, R&D
says it would need an says it would need an additional $250Kadditional $250K
Outcomes of R&D ProjectsOutcomes of R&D Projects
Prof. Markus ChristenProf. Markus Christen 1212
Base CostBase Cost
Transfer costTransfer cost
Cumulative productionCumulative production
A
current product (initial experience curve)
cost reduced product(new experience curve)
100 KU
A1
225 KU
Currenttransfer cost A1
Base cost A
Prof. Markus ChristenProf. Markus Christen 1313
Transfer Costs & Base Cost Transfer Costs & Base Cost
Experience CurveExperience Curve
C = CC = C00(Q/Q(Q/Q00))bb, b = -.234 (85%), b = -.234 (85%)
– CC00: Base Cost: Base Cost
– QQ00: 100K units: 100K units
– Q: Cumulative Production VolumeQ: Cumulative Production Volume– C: Average Production (Transfer) CostC: Average Production (Transfer) Cost
Prof. Markus ChristenProf. Markus Christen 1414
Cost Reduction with R&DCost Reduction with R&D
Transfer costTransfer cost
Cumulative productionCumulative production
A
current product (initial experience curve)
cost reduced product(new experience curve)
100 KU
A1
225 KU
Currenttransfer cost A1
Base cost A
B
Base cost B
Prof. Markus ChristenProf. Markus Christen 1515
IMPORTANT NOTEIMPORTANT NOTE
When you enter the details of an When you enter the details of an R&D project, make sure that you R&D project, make sure that you click the box “Feasibility Study” only click the box “Feasibility Study” only when you just want to learn how when you just want to learn how much it costs to complete.much it costs to complete.
There is a beer on the line here!There is a beer on the line here!
Prof. Markus ChristenProf. Markus Christen 1616
Uses of an R&D ProjectUses of an R&D Project
Modify existing brand(s)Modify existing brand(s)– keep customer awareness and perceptions keep customer awareness and perceptions
associated with brand name but brand has associated with brand name but brand has features of new project features of new project
Launch new brandLaunch new brand– target new segment(s)target new segment(s)– replace old brandreplace old brand– introduce second brand in same segmentintroduce second brand in same segment– ……
Shelf it for potential future useShelf it for potential future use
Prof. Markus ChristenProf. Markus Christen 1717
IMPORTANT NOTEIMPORTANT NOTE
Whenever you change the project Whenever you change the project name associated with a particular name associated with a particular brand, two things will happen: brand, two things will happen: – the production experience effect will be the production experience effect will be
lost and changed to the new project lost and changed to the new project – existing inventory becomes obsolete – existing inventory becomes obsolete –
even in the case of cost reduction R&Deven in the case of cost reduction R&D
Prof. Markus ChristenProf. Markus Christen 1818
Obsolete InventoryObsolete Inventory
SAMA
SAMASAMA
SAMASAMA
SAMA
brandbrandmodificationmodification(name kept)(name kept)
brandbrandwithdrawalwithdrawal TRADING TRADING
COMPANYCOMPANY
I'll buy any product at 75% of itstransfer cost
inventoryinventorydisposaldisposal
obsolete obsolete inventoryinventory
Prof. Markus ChristenProf. Markus Christen 1919
New product development requires timeNew product development requires time– think aheadthink ahead– an R&D project cannot be changed once it is partially an R&D project cannot be changed once it is partially
completed, but you do not have to complete it if it has completed, but you do not have to complete it if it has no longer any useno longer any use
Brand nameBrand name– advertising helps build brand awareness and imageadvertising helps build brand awareness and image– brand image may change slowlybrand image may change slowly– there is no overall corporate imagethere is no overall corporate image
Multiple brandsMultiple brands– same R&D project can be used to launch multiple brandssame R&D project can be used to launch multiple brands– these brands share production, but not inventorythese brands share production, but not inventory
Things To RememberThings To Remember
Prof. Markus ChristenProf. Markus Christen 2020
Good Luck!Good Luck!