Markstrat Lessons LearnedTeam I (“The Incredibles”)

Agenda

• Philosophy, Guiding Principals and Organization• Product Portfolio• Research & Development• Advertising and Sales Force Decisions• Pricing Effects• Competitor Dynamics • New Product Launches• Production Planning and Inventory Management• Financial Focus• Conclusion

Our Goals

• Become the Stock Price and ROI Leader• Dominate the Vodite market• Moderate presence in the Sonite market• Be the first to innovate in every area

The Team I Secret Formula

• Data and Dollars• Build a better mouse trap and the world will

beat a path to your door• Number one or two• Show me the money• Repeat after me…. R & D• It’s all about the end-game

The Team I Process

Quick Data Aggregation

Component Analysis

Group Consensus

Smart Decisions

R&D Strategy

Production & Marketing

Competitive Intelligence

The Sonite Portfolio

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Vodite Portfolio

VIKIThe Game-Changer

1 Product – 2 Segments

VITOThe Godfather

6 Periods – 7 Projects

We thought we could SING

• Being a niche player is harder than you think• Target segment could not be convinced easily• Can’t match the marketing money of the

mass-market products• Avoid over-production

Taking Control with VIKI

• First mover advantage• Market entry with no precedent• Ability to charge a premium• Throw-off competition for two periods• Once-in-a-market opportunity

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The Keys To R&D Success

• T + 3• The Outcome Vs. Risk dilemma• What’s in the pipeline does matter• One Path or Multiple Paths• Keep the inputs simple• Incremental Vs. One-time • Patience is a virtue, wait for the end-game• Voice of the customer

Advertising Decisions

• No point having a perfect product if the target market does not know about it

• Balance of quantity and quality • Law of diminishing returns• Be opportunistic – increase advertising when

the competition is squeezed for money• Allocate the money to the products with the

most return

Sales Force

• Based on two factors:• Contribution• Shopping Habits

• Targeted sales force to increase presence in particular channel

• No firing• Consistent increase

The Dark Art Of Pricing

• Innovators can charge a premium• Risk-Taking or Risk-Averse• Economies of scale take time• Excess price-cutting reduces perception of

quality• How to price

o Ideal: Demand, Competition and Costo Markstrat: 80% Demand, 20% Cost

Competitor Dynamics

• Anticipating the competition's moves• R&D expenditures tell a rich story• Create barriers to entry

• Have multiple products (with the risk of cannibalization)

• Build the cost advantage• Seek the next Blue Ocean market

New Product Launches

• Product Roadmaps• Marketing Budget is a trade-off• Entering without a cash-cow• Initial demand and price• Be prepared to lose money• New Vs. Existing Markets• Invest in your Sales Force

Sonites Sales/Production

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Vodites Sales/Production

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Production Planning

• The accuracy of market size forecasts• Surveys of Purchase Intentions might not

always be right• Major mistakes

o SING over-productionoVIKI under-production

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Inventory Management

• Under-Produce or Over-Produce?• Best-Case Vs. Worst-Case Modeling

Financial Focus• Our key metrics - Net Contribution and ROI• R&D ROI > Net Contribution > Market Share >

Revenues• The choice to not enter the Singles market was

based on break-even analysis• Focus on Variable Costs vs. Fixed Costs• Keeping the Contribution as % of Sales at least

constant is important in justifying additional marketing budget

• Contribution Analysis vs. P&L

Conclusions• Sleep with financial analyses under your pillow• Be the best critic of your product and know your

competitors• Well-planned and controlled innovation =

Competitive Edge• “Strategic Focus” from the start to finish• “Tactical Prowess” along the way• The right balance is most important• Finally – Its not a one-man show

There is no “I” in Team I

• Lots of bloodshed but no mutinies• Three is not a crowd• Confront your issues upfront and early• Be open to new perspectives• Reward success

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