Things to Know

1. Data relevant for S-T-P decision (Pg 207) Getting maximum value to the company and the customer Gain market share Process minimized potential to waster resources

Segmentation Grouping potential customers who are similar in terms of how they behave and why they behave that way Identify customer behavior, needs, or other attributes Create cluster of potential customers that represent the range of these attributes Breaking down the market into groups that have similar profile Five Criteria for favorable segmentation 1. Measureable 2. Substantial 3. Accessible 4. Differentiable 5. Actionable Targeting Going after some, but not all of the segments Go after those that are reachable compared to the competition Identify most important stages of customer decision making Define the biz model that takes advantage of these drivers Find the optimum match for that target Positioning How to reach that target customer How company is perceived by the target customer Identifying the value proposition, that is unique Developing a position strategy that maximized the potential benefit Validity vs. Reliability Validity (Generally on the mark) o Correct concepts being presented correctly o Response is articulated correctly o Correct response is correctly recorded Reliability (Acceptable precision) o Clarity or certainty of the presentation of the concept o Granularity or detail to which a response can be expressed

o Granularity or detail to which a response can be recorded 2. Using data for product design or service design decisions (Pg 317) Conjoint Analysis (See slides from this class) Helps to design products appropriately Points of differences (POD) o Selling points o Capturing market share o Strategy Points of parody (POP) o Essentially minimum requirements for customer Things to consider when determining product mix o Cannibalization o Brand o Do customers want it o Cost of acquiring the customer o Economies of scope o Price o Product line o # of product lines 3. Pricing analysis data for designing various parts of the marketing program such channel member selection or assessment of segments (Pg 375) Setting the Price (Pg 383) 1. Selecting the price objective 2. Determining demand 3. Estimating costs 4. Analyzing competitors costs, prices and offers 5. Selecting a pricing method To capture value must assess value Value to target customer Value to the firm Value required by the firm Pricing strategy High level. Takes into account customer, company, competitors, collaborators, and context Effectiveness of offering: Value-based pricing

Product features Quality, services mix and quality

Efficiency Doing more with less Effectiveness Attaining growth/revenue goals Product Mix Pricing 1. Product line pricing: Suits example 2. Option feature pricing: Car sunroof, a/c upgrades 3. Captive product pricing: razor and baldes 4. Two-part pricing: fixed fee and variable charge 5. By-product pricing: chemicals 6. Product bundling pricing- lower price if taken in bundle 4. Issues in the design of a channel strategy (Pg 409) Channel decisions o Customer o Reach o Product o Cost of distribution Push Marketing o Use strategy when there is low brand loyalty o Use sales force, trade promotion, induce intermediaries to carry, promote, and sell the product to end users Pull Marketing o Use this strategy when there is high brand awareness o Advertising, promotion, and other forms of communication to persuade customers they should demand product from intermediary

5. Issues in the design of a communication strategy (Pg 497) Building a sustainable brand 1. Loyalty 2. Usage 3. Trial 4. Relevance 5. Unaided awareness Integrated marketing communications

o A plan of synchronized actions to moved targeted prospects and users through customer activity cycle to purchase, advocate, recognize brand, and increase loyalty Communications Strategy 1. Coverage: Reach all stakeholders for message delivery 2. Relevance: Message content to stakeholders 3. Credibility: Stakeholders believe and accept message

Value Defining Triad Customer: Key customer needs Product: Key product advantages Applications: Key Benefits Combined, the put together a compelling reason to buy

Starbucks: Delivering Customer Service

SITUATION Starbucks proud of its performance 11 year of consecutive growth of 5% o higher Recession proof product Recent Market Research Not meeting customers expectations in customer satisfaction Proposed Plan Invest $40 million annually in the 4,500 stores (equivalent to 7 cents of EPS) Add 20 hours of labor a week per store Improve speed-of-service and increase customer satisfaction VALUE PROPOSITION To create an experience around the consumption of coffee, an experience that people would weave into their lives To create an uplifting experience in Customer intimacy To create an ambience based on human spirit, sense of community, and the need for people to come together STARBUCKS SUCCESS EXPERIENTIAL BRANDING STRATEGY: coffee, service, atmosphere elements and attributes memorable By-product of branding: HABIT EARLY: first to see, first to move Set the attributes and set the levels (i.e. specialty coffee, atmosphere) SKU: innovation with new products Atmosphere: environment THE 5 Cs Customers: Demographics of a typical Starbucks customer have changed drastically in the recent years Exhibit 8: customers are younger, less well-educated, low income, less frequent visited to the coffeehouse and had very different perceptions The overall attitude of Starbucks is very low on 25% by new customers where as the regular customers stood in 44% Factors that influence customer satisfaction: overall service and speed of service (Exhibit 10 & Exhibit 11) Exhibit 9: greater customer satisfaction directly results in higher potential sales

In fact, it can be made known that by transforming unhappy customers to satisfied ones, or moving the satisfied and unhappy customer to a highly satisfied customer the Starbuckss revenues can be increased between 361% and 1478%, respectively. Please refer the Appendix Exhibit A. Competition: Ahead of competitors: size of operations and profitability In the US, its main competitors are small-scale specialty coffee chains, and independent specialty coffee shops Starbucks holds a leading edge Company: Establish itself as the most recognizable and respected brand, focusing on retail expansion and product innovation Minimum advertising expense Employee friendly organization: partners (hard & soft skills training) Investing in new product innovation to drive sales and growth Context Collaborators

ASSIGNMENT Starbucks management is facing some tension between the technical objectives of service quality (timeliness of service) and customer intimacy (Starbucks term). The addition of special coffees has extended the preparation time and is causing some customers to be dissatisfied with service but rushing may lead to poor quality. Recent customer survey results have been less than positive and are of concern to Starbucks management. 1. Christine Day has asked for your advice on her proposal to add an additional 20 hours of labor to each store. Specifically, how will this impact store operations (both positively and negatively) and how might this additional labor be utilized to lessen the tension between quality and customer intimacy? Additional labor impact on store operations: POSITIVE Increase the number of employees available Not considering location of the store and/or per store situation NEGATIVE Not just a one time investment Continuous investment would be required to maintain/improve customer satisfaction Too many people working in a small space might result in inefficiencies

2. Starbucks founder Howard Schultz and CEO Orin Smith are concerned about the impact of Christine Days proposal on earnings-per-share (about 7 cents per share). What operational alternatives should the Starbucks management team consider before committing to the $40 million plan? $40 million investment in labor for its 4,500 stores, investment of about $8,890 for each store $8,890 per store divided by 360 days its approximately $25 per store per day SG&A expense would increase by $40 million to $242,161,000 The investment should improve customers satisfaction Strong and positive relationship between customer satisfaction and future potential sales, achieving high customer satisfaction is a key factor to Starbuckss sales growth. In order to break even each store should increase either: average daily customer count increase from 570 to 577 average ticket from $3.85 to $3.90

ZipCar
1.Based on your understanding of the 5Cs framework discussed in the document entitled, Identifying and Exploring Opportunity, identify the source(s) of a market opportunity that Zipcar wants to pursue. Customers .Urban dwellers, college educated, limited need to drive (not driving to work). Drive less than 6,000 miles a year. Average Customer: - 4 trips a month. - 4 hour per trip. - 22 miles per trip. Context .Urban or city environment, expensive parking, good public transportation. Competitors. NO direct competitors, but Company Main Country or # of Cars city Swiss Switzerland 1,400 CarSharing Drive Stadtauto Germany 300 Car Sharing Inc Portland Flex Car Seattle Common Auto Montreal Indirect Competitors Taxis, car rentals, car dealerships, carpoolers. Collaborators. - No collaborators at the time Company ._ 2 founders: Robin Chase MIT MBA, 13 years of experience in Healthcare and education management. Management and business plan Antje Danielson MIT PHD, environment committee at Harvard. Car relations, Car buying etc. Boston First City Marketing 30% to 40% marketing impact was word of mouth, 25% free media coverage. Rest guerrilla marketing efforts ( postcards on zip car parking, website)

# of Members 30,000 7,500

# Locations 700 110

No Advertising, Cars Have a sticker on the passenger side.

2. Has Robin Chase and her partner created value? If so, for whom? 3. Who would use Zipcar? What is the value for customers to use the Zipcar Companys service? Value Proposition: Deliver convenience, ease of use, freedom to travel and hassle free "ownership" of a car. Naming The name should communicate the concept and value clearly and simple. The name should have a domain name available. The logo reflect friendliness, convenience, ease of use and social value. Everything throw the website 4. What is the business model of Zipcar? Which elements of Zipcars business model are most important in achieving its profit goals? How has the business model actually played out in practice? (Hint: compare the revised financial plan for May 2000 given in Exhibit 5 with the actual operating data for September 2000 provided in Exhibit 8b) NOTE: Values from Exhibits contained in Excel file named "Zipcar Exhibits Data_for Class.xlsx"; see below. Pricing First Idea didn't work: 1. Sing up fee $25 2. Deposit $300 refundable 3. Annual Fee $300 4. $1.5 per hour 5. $0.4 per mile 6. $20 late return fine Second pricing 1. $75 Annual fee 2. $4.5 to $7.5 per hour 3. Max $44 a day Costs 1. 2. 3. 4.

Parking $600 average Attrition rate 15% Lease cost $4,400 per vehicle per year Access equipment $500 per vehicle per year

Hasbro Games POX (A) & POX (B)

Overview - POX game Industry Overview - Considered mature by the 2000s, very competitive industry, need of highly successful products. - Highly irregular (toy that one year produced major revenues did not surpass them in the following year) - Highly seasonal (70% of sales done on the 4th quarter) - Need for more sales (volumes) as toy prices continue to decrease over time - age compression factor kids becoming adults faster- stop using toys at younger age. - Tweens growing market of kids ages between 8 and 14. Problem to address => come up with a game targeted for boys in the tween ages that utilized technologies to share information without t having to connect devices. (infra red). Solution - Came up with POX. - Game allowed individual game play, collection of body parts (like pokemon), and use of infra red technology to send information without connecting devices. Product Launch - 2 Proposals. 1) to launch a 1.4 million dollar launch consisting of television and gamer magazines advertising and 2) to take over a city in a storyline event that would create buzz in national media. 1 million dollar campaign.