BIRLA INSTITUTE OF MANAGEMENT TECHNOLOGY

Management Tools Assignment

Take Away from Class Sessions
Nataraj K
09 DM 069
8/31/2010
Segmentation:
Learning from Class Discussion:
Segmentation divides customers into groups based on the underlying needs or characteristics
driving their purchase decisions. Almost all companies have used segmentation as the marketing
tool, but very few of them are really benefited from this segmentation. Hence it can be said that
this tool is underutilized. When properly used, segmentation helps to allocate resources
throughout all levels of organization to create a value proposition that uniquely serves target
customer groups.
This emphasizes the concept of strategic segmentation.
Through the session on segmentation also came to know about the 3 V’s, “Valued Customers,
Value Proposition and Value network” and how these can be used to creat sustainable
differentiation, how unique the marketing concept is etc. Also understood about the two
important variables “Identifier Variables (Who the customers are)” and “Response Variables
(What they want)”. The former variable helps to focus separately on consumer markets and
business markets and their characteristics. The later one helps to know about what the company
should offer them according to the benefits they desire, situation, how sensitive they are and also
on their buying behavior.
The case of Easy Jet helps to conceptualize the above mentioned factors and also the Value
Network, i.e. How the company should offer/serve? How the company’s ensure 3 V framework.
Valued Customer: To investigate upon few questions like Are the customers unhappy with all the
current offerings of the industry? Are there customers who have a need but are not being
currently served by the industry? What is the growth rate of the target segment? Etc. Similarly
got to know about the certain questions that the companies should question themselves for other
2 Vs as well.

Learning from case study:

From the case study of Tanishq, came to know about various dilemmas that any companies
might face when planning to focus on new target segment. How those dilemmas must be tackled
and to arrive at an apt decision.

Self Learning:
How to use segmentation as a strategic tool:
(Source: Strategic Segmentation: Vijay Vishwanathan -Bain Company)
1. Involve senior management:
The CEO should define the key strategic questions to be addressed and then champion the
segmentation process.
 2. Segment only on what truly drives purchase behavior:
Separate customers based on their needs and purchase criteria: sensitivity to price, requirements
for durability and quality, the value they place on style and fashion, and so on.
3. Think Profit, Not revenues:
A common pitfall of companies defining target segments is to focus on revenue potential instead
of bottom-line profit potential. Improved profits (not just revenues) should be the goal of
customer segmentation.
4. Play to your strengths:
As the right customer segments is chosen to pursue, companies must first defend and reinforce
their core customer franchise. Moving beyond their current core customer franchise can also
yield high returns, but only if their existing organizational capabilities mesh with their new
customers’ needs.
**********
 Innovation:
Learning from Class Discussion:
Business Innovation & Innovation radar:

By creatively changing the one or more dimensions of the business system, substantial new
values are created to the customers. This concept is known as business innovation. In order to
reinforce this concept Innovation radar is developed which consists of 4 major dimensions:

• Offerings/ What (Brand, Platform)

• Customers/ Who

• Process/ How (Value capture, Process, Organization)

• Point of Presence/Where (supply chain, presence, networking)

Collaborative Innovation:

Collaborative innovation requires companies to:

• Focus resources on core innovation advantages

• Improve innovation circulation

• Increase innovation imports

• Increase innovation exports

Learning from Case Study:

The case study on Lego discussed how innovation is important for business to exists and grow.
The company which was profitable initially could not sustain that growth in later stages. With
the change in the management who insisted on innovation and change management the company
formulated new business strategy which was planned in three phases. This again brought them
back into the business. In order to ensure that the company is up to date in innovation, innovation
matrix was used.

Self Learning:
Source: Business Model Innovation- Zhenya Lindgardt et al.- BCG
Business Model innovation:
The two essential elements are Value Proposition and Operating model.
Value Proposition: “What are we offering to whom”? The 3 dimensions are:
• Target Segments: Which customer do we choose to serve?
• Product or Service offering: What are we offering to satisfy their needs?
• Revenue model: How are we compensated for the offering?
Operating Model: “How do we profitably deliver the offering?” The 3 critical areas are:
• Value Chain: What we do in in-house? What we outsource?
• Cost Model: How do we configure our assets and costs?
• Organization: How do we deploy and develop our people?
In this report they have done a survey and found that the Business model innovators outperform
the traditional innovators over time.
The report also provides way to provides to establish capabilities for business model innovation
Uncovering opportunities: Firms should carefully diagnose each element of the business model
and analyze how the choice matches with the industry trends, customer preference and also that
of the competitors.
*******
Online communities and social media:
Learning from Class Discussion:
This session taught me about what is social media, categories of social media and also the
growth of Social media and online communities and its impact on today’s business. The
framework for using social media effectively; i.e. Immerse, Reflect, Define, Engage and
Evaluate.
Social media is very important because, majority of consumers believe what other consumers say
based on their experience with the product or firm. Social media is a strong medium through
which this word of mouth spreads. Hence if this medium is properly utilized the firms can reap
huge benefits with minimum investment and this may also lead any firm in the opposite direction
too.
Got a brief about various methods to participate in the social media and about the tradeoff
between control and engagement. It is not possible to know the incremental revenue because of
the use of social media, most of the companies are hesitant to put their resources in social media.
How companies like Nike engages with their customers through this medium. How companies
like Sunsilk uses this medium for reaching their target customers.

Learning from Case Study:

Case study: plenty of fish discusses virtual community as a business model for generating huge
profits with minimal amount of investment.
Case study: united breaks guitar discusses the power of the social media and how companies and
customers are interacting through this media.

Self Learning:
Viral Marketing: Source: www.forentrepreneurs.com “Lessons Learned – Viral Marketing”
Viral Cycle Time and its impact on the growth
Insights about Viral Marketing
• Unless Viral Coefficient is greater than 1, there will not be true viral growth.
• Viral Cycle Time (ct) should be made as short as possible, which will have
a dramatic effect on growth.
The aim of viral marketing is to spread awareness about a product offering, service or concept
using word-of-mouth behaviors. This is different from spam which is based on a massive
distribution of unsolicited emails; viral emails use social networking aspects to ensure their goals
of wide propagation.
*******
Customer Loyalty & CRM:
Learning from Class Discussion:
How valuable is Word of Mouth?
The firm should identify the best marketers. For this any firms should know two important tools:
Customer life time value: What is the value of the customer’s interaction with the firm
in terms of his/her purchases throughout he is engaged with the firm.
Customer Referral Value: The value of their referrals.
This idea enables to segment customers into:
• Affluent
• Advocates
• Champions
• Misers
The firms should focus on converting all the customers into Champions category by offering
purchasing incentives
The One Number You Need to Grow
Instead of spending huge amount of resources in conducting surveys and researches firms can
easily measure the loyalty by one question. i.e. “How likely is it that you would recommend to a
friend or a colleague?”
By doing so that particular customer becomes the brand manager of the company.

Learning from Case Study:

This case discusses how the Hilton Hotel’s CRM strategy after it has been taken private. This
also explains the usage of IT in developing the CRM. They share their customers preference with
all of subsidiaries through the use of information sharing software which makes the customers
the next time they interact with them and make them loyal.

Self Learning:
Source: Management Tools 2009: Management Guide- Darell K. Rigby- Bain & Company
Methodology of CRM:
• Start by defining problems that have a large impact on customer satisfaction and loyalty
• Evaluate whether—and what kind of—CRM data can fix those problems
• Select the appropriate technology platform, and calculate the cost of implementing it
 • Design incentive programs to ensure that personnel are encouraged to participate in the
CRM program.
• Measure CRM progress and impact.

Common Uses of CRM:

• Improve customer retention
• Increase sales by systematically identifying and managing sales leads
• Accurately gauge the return on individual promotional programs and the effect of
integrated marketing activities
*******