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The Markstrat Challenge II PARIS – BOSTON www. stratxsimulations. com The Markstrat Challenge II PARIS – BOSTON www. stratxsimulations. com

Your success will depend on your ability to manage the development & positioning of Your success will depend on your ability to manage the development & positioning of brands Positioning Strategy R&D 2

Customers make purchase decisions based on their perception of your brands Your perception of Customers make purchase decisions based on their perception of your brands Your perception of brands Brand A Brand B Brand C Brand D Technical quality Their perception of brands ? Brand C Brand BBrand D Brand A ? 3

The The "Perceptual Map" is a valuable tool for visualizing brand positioning Perceptual Map based on MDS Study Need 2 +20 Bu SONO SELF SEMI SUL I SOLD Pr Hi -20 +20 Si Need 1 SALT SUSI SIBI Ot SAMA -20 SIRO Key Ot Segment ideal point Perceptual positioning of brands 4

There are two key ways to re-position brands in Markstrat Perceived Performance Advertising Perceived There are two key ways to re-position brands in Markstrat Perceived Performance Advertising Perceived Economy R&D 5

Physical positioning involves matching brand characteristics to customer needs CUSTOMER NEEDS Weight Volume Convenience Physical positioning involves matching brand characteristics to customer needs CUSTOMER NEEDS Weight Volume Convenience Design Max. Freq. Performance Power S MA A Price Economy BRAND CHARACTERISTICS 6

Positioning with advertising requires setting Positioning with advertising requires setting "Perceptual Objectives" Perceived Performance 20 10 Si 9 5 0 5 Perceived Economy 11 -10 -20 -10 0 10 20 7

Your success will depend on your ability to manage the development & positioning of Your success will depend on your ability to manage the development & positioning of brands Positioning Strategy R&D 8

R&D success demands long-term thinking and the ability to identify evolving opportunities Si Hi R&D success demands long-term thinking and the ability to identify evolving opportunities Si Hi New target segments Changing segment needs Pressure on margins Pr Competitor entry Ot 9

. . . and also requires working effectively with your R&D department R&D = . . . and also requires working effectively with your R&D department R&D = Profit Center Number of Projects Experience • Provide sufficient budgets • Set realistic expected unit costs Similarity of Projects 10

When doing R&D, keep in mind both positioning and economic factors C SONITE Base When doing R&D, keep in mind both positioning and economic factors C SONITE Base Cost (at 100 K units of production) Most important physical characteristics • • Market needs Competitive brands Feasible range • • Target margin Cost in other projects Project budget Impact of physical characteristics Project budget POSITIONING FACTORS ECONOMIC FACTORS 11

Impact of physical characteristics on base cost The HIGHER the requested characteristic the HIGHER Impact of physical characteristics on base cost The HIGHER the requested characteristic the HIGHER the base cost The HIGHER the requested characteristic the LOWER the base cost Base cost • • Design Max. Frequency Power Autonomy Requested characteristic Base cost • Volume • Weight • Diameter Requested characteristic 12

The budget required to complete an R&D project is a function of several factors The budget required to complete an R&D project is a function of several factors Physical characteristics R&D Experience Requested base cost to find out more: R& D Budget required for completion accuracy feasibility study vs. speed on-line query 13

There are two possible outcomes of any R&D project Project submitted to R&D: 17 There are two possible outcomes of any R&D project Project submitted to R&D: 17 6 85 power 35 weight design volume max. freq. 70 Minimum base cost is calculated at an early stage in the project. Minimum base cost = $110 Case A Case B Requested Base Cost = $80 Requested Base Cost = $130 (requested base cost is below minimum, but the R&D will try to develop the project at the minimum base cost) Budget required for completion is also calculated at an early stage in the project Budget required for completion = $ 800 (at base cost = $ 110) Case A 1 Case A 2 $ 1, 000 $ 300 Project is available at base cost = 110 Project unsuccessful Budget required for completion = $ 550 (at base cost = $ 130) Case B 1 Case B 2 $ 1, 000 $ 300 Project is available at base cost = 130 Project unsuccessful 14

A completed R&D project may be used to modify existing brands and/or introduce new A completed R&D project may be used to modify existing brands and/or introduce new brands Performance Bu Pr Si Hi Economy New Brand "SAMY" Ot New SAMA more performance Old SAMA 15

Bringing successful R&D projects onto the market may result in obsolete inventory Brand modification Bringing successful R&D projects onto the market may result in obsolete inventory Brand modification (name kept) SA MA I'll buy any product at a given % of its transfer cost Inventory disposal Obsolete inventory Brand withdrawal TRADING COMPANY 16

Cost reduction projects should be weighed against experience curve effects Transfer cost A Base Cost reduction projects should be weighed against experience curve effects Transfer cost A Base cost A Current product (initial experience curve) Base cost B B A 1 Current transfer cost A 1 Cost reduced product (new experience curve) 100 KU 225 KU Cumulative production 17

The MDS study measures brand perception along three composite dimensions. . . SONITE market The MDS study measures brand perception along three composite dimensions. . . SONITE market Influence of brand characteristics on MDS dimensions in P 0 Perceived Economy increases if Max. Freq. increases Product charac. Perceived Economy increases if Price decreases Weight Design Volume Max. Freq. Power Price slight moderate strong slight strong moderate Composite dimensions strong moderate slight Economy Performance Convenience 18

. . . which are more or less influenced by the various brand attributes . . . which are more or less influenced by the various brand attributes VODITE market Influence of brand characteristics on MDS dimensions in P 0 Perceived Efficacy increases if Max. Freq. increases Product charac. Composite dimensions Efficacy Flexibility Economy Perceived Flexibility increases if Weight decreases Autonomy Max. Freq. Diameter Design Weight Price slight very strong slight moderate slight slight very strong 19

New decisions introduced in Period 2 1. Brand portfolio 2. Perceptual objectives (on semantic New decisions introduced in Period 2 1. Brand portfolio 2. Perceptual objectives (on semantic scales or MDS) 3. R&D 20

You can now extend your portfolio by introducing new brands. . . When you You can now extend your portfolio by introducing new brands. . . When you click Introduce new brand, you will see the list of completed R&D projects and their features 21

. . . you can also modify existing brands Keep the same name Select . . . you can also modify existing brands Keep the same name Select a new R&D project 22

To convey the right message to the market, set perceptual objectives for each of To convey the right message to the market, set perceptual objectives for each of your products 1 Do you want to communicate on the semantic scales or on the MDS composite dimensions? 2 On which dimensions do you want to communicate? 3 Input the coordinates of the point that you want to reach on the map 23

You can initiate up to five R&D projects period and per product type (five You can initiate up to five R&D projects period and per product type (five Sonite and five Vodite) Click here to obtain an estimate of the minimum base cost and budget required for completion of this project 24

You now know everything. From here on, it's down to your strategy. . . You now know everything. From here on, it's down to your strategy. . . 25

Don't delete this page: Company Report in 'note page' 26 Don't delete this page: Company Report in 'note page' 26

Don't delete this page: Company Report in 'note page' 27 Don't delete this page: Company Report in 'note page' 27

Don't delete this page: Company Report in 'note page' 28 Don't delete this page: Company Report in 'note page' 28