THE MARKSTRAT CHALLENGE - INTRODUCTION II

B2C – DURABLE GOODS

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YOUR SUCCESS WILL DEPEND ON YOUR ABILITY TO DEVELOP &
POSITION BRANDS

POSITIONING MODIFYING NEW

PERCEPTUAL POSITIONING
THROUGH AND DECISIONS
MAP THROUGH
ADVERTISING LAUNCHING PERIOD 2
R&D
BRANDS

Introduction to the Markstrat Challenge - Part II 2

CONSUMERS MAKE PURCHASE DECISIONS BASED ON THEIR
PERCEPTION OF YOUR BRANDS
Firms’ perception of brands Brand Brand Brand Brand
A B C D Attribute 1
Brand Brand Brand Brand
A D C B
Attribute 2
Brand Brand Brand Brand
C A B D
Attribute N
Consumers’ perception of brands ?
Brand
D
Brand Brand
C B ?

Brand
A
Introduction to the Markstrat Challenge - Part II 3
 THE PERCEPTUAL MAP IS A VALUABLE TOOL FOR VISUALIZING
BRAND POSITIONING

Perceived position of TOPS

NEED 1

Segment ideal point

NEED 2
NEEDS: Economy, Performance, Convenience, Flexibility …
Introduction to the Markstrat Challenge - Part II 4
THE BRAND MAP PLOTS PERCEIVED PHYSICAL
CHARACTERISTICS RATHER THAN CONSUMER NEEDS

Perceived price and features of TOPS

Segment ideal point

Introduction to the Markstrat Challenge - Part II 5

SUCCESSFUL POSITIONING DEMANDS LONG-TERM THINKING
AND THE ABILITY TO IDENTIFY EVOLVING OPPORTUNITIES

Changing New target

segment needs Hi segment
Sh

Competitor Pressure on
entry margins
Pr

Sa

Introduction to the Markstrat Challenge - Part II 6

THERE ARE TWO KEY WAYS TO RE-POSITION BRANDS IN
MARKSTRAT
Perceived
Performance

Advertising

Perceived
Economy
R&D

Introduction to the Markstrat Challenge - Part II 7

YOUR SUCCESS WILL DEPEND ON YOUR ABILITY TO DEVELOP &
POSITION BRANDS

POSITIONING MODIFYING NEW

PERCEPTUAL POSITIONING
THROUGH AND DECISIONS
MAP THROUGH
ADVERTISING LAUNCHING PERIOD 2
R&D
BRANDS

Introduction to the Markstrat Challenge - Part II 8

POSITIONING WITH ADVERTISING REQUIRES SETTING
"PERCEPTUAL OBJECTIVES"
Perceived
Performance
20

Sh
11
Target 10
Position
5
Current Perceived
0
Position Economy

-10

-20
-20 -10 0 5 10 12 20
Introduction to the Markstrat Challenge - Part II 9
 SETTING PERCEPTUAL OBJECTIVES IN MARKSTRAT
1
Enter a significant
advertising budget and
spend 10% to 15% in 1
advertising research

2
Decide which scales
(semantic or MDS) you
want to communicate on

3
Select the dimensions 2
which you want to
communicate on

4
4 4
Input the coordinates 3 3
of the point that you
want to reach on the map
Introduction to the Markstrat Challenge - Part II 10
YOUR SUCCESS WILL DEPEND ON YOUR ABILITY TO DEVELOP &
POSITION BRANDS

POSITIONING MODIFYING NEW

PERCEPTUAL POSITIONING
THROUGH AND DECISIONS
MAP THROUGH
ADVERTISING LAUNCHING PERIOD 2
R&D
BRANDS

Introduction to the Markstrat Challenge - Part II 11

HOW TO MATCH BRAND CHARACTERISTICS TO CONSUMER NEEDS

CONSUMER NEEDS
Economy Performance Convenience

Processing Power

No. of Features
Display Size

Battery Life
Design
Price

SOLO

BRAND CHARACTERISTICS

Introduction to the Markstrat Challenge - Part II 12

WHY AND WHEN INTERFACE WITH R&D ?
R&D IS REQUIRED IN SEVERAL CASES:

• To develop and launch a brand in a

new market (eg: Vodite)

• To develop and launch a brand in a

new segment (eg: Shoppers)

• To develop and launch a brand in a

segment where you are not yet
present

• To modify a brand if its characteristics

do not match consumers’ expectations

• To reduce the manufacturing unit cost

of an existing product.
Introduction to the Markstrat Challenge - Part II 13
 HOW TO INTERFACE WITH R&D

1. Choose a
meaningful name and
enter a description

2. Enter the desired

physical
characteristics of the
future brand

3. Enter the desired

Base Cost of the
future brand

4. Allocate a budget
so that R&D can
allocate resources
and complete the
project
Introduction to the Markstrat Challenge - Part II 14
STEP 1 - HOW TO TRANSLATE CONSUMER NEEDS INTO PHYSICAL
CHARACTERISTICS ?
OPTION 1 – COPY THE LEADER
• Adjust dimensions if the leader is not perfectly
positioned
• In this example, you can copy TOLD to target
High Earners as this brand is very well positioned
in Performance (Display Size & Proc. Power)

Introduction to the Markstrat Challenge - Part II 15

STEP 1 - HOW TO TRANSLATE CONSUMER NEEDS INTO PHYSICAL
CHARACTERISTICS ?
OPTION 2 - INTERPOLATE

This graph is available in the Semantic

Scales study.

This example suggests that around 56

gigaflops would match the need of
Shoppers in term of Processing Power.

Learn more about this graph in the

handbook.

Introduction to the Markstrat Challenge - Part II 16

STEP 1 - HOW TO TRANSLATE CONSUMER NEEDS INTO PHYSICAL
CHARACTERISTICS ?
• In the case of the Vodite market, no competitive offerings are available to copy and/or
interpolate
• For each physical attribute, the available information includes:
• In the Semantic Scale study: the expected ideal value : I
o In the handbook: the minimum and maximum level : CMin and Cmax
• Use the formula below to calculate the “ideal” attribute
(I – 1)
C = CMin + (CMax – CMin) x
(7 – 1)
7

1
CMin C CMax
Introduction to the Markstrat Challenge - Part II 17
STEP 2 - HOW TO DECIDE ON THE DESIRED BASE COST?
Option 1 – Choose a Base Cost that:
• Is in line with the base cost of comparable competitive products; see the market report
• Provides you with a good Unit Margin:
Unit Margin = Retail Price – Distribution Margin – Base Cost

Option 2 – Ask R&D to “Develop this project at the lowest possible base
cost”
• You will get the required product at the lowest possible unit cost
• The project will be more expensive to develop.

Introduction to the Markstrat Challenge - Part II 18

STEP 3 - DETERMINE HOW MUCH BUDGET IS NEEDED TO DEVELOP
THE PROJECT
Option 1 – Run an online query
• R&D will tell you the budget needed to develop the project
• R&D will also provide you with the project Minimum Base Cost
• You do not have to allocate the entire budget in 1 year: you may complete the project
in 1, 2 or even 3 years
• Beware: budgets given by online queries are usually overestimated

Option 2 – Run a Feasibility Study

• The budget needed is $100,000
• The project will not be completed
• After one year, R&D will tell you: (1) the budget needed to develop the project; (2)
what the project Minimum Base Cost is
• Quite useful to investigate various options for the new Vodite market

Introduction to the Markstrat Challenge - Part II 19

YOUR SUCCESS WILL DEPEND ON YOUR ABILITY TO DEVELOP &
POSITION BRANDS

POSITIONING MODIFYING NEW

PERCEPTUAL POSITIONING
THROUGH AND DECISIONS
MAP THROUGH
ADVERTISING LAUNCHING PERIOD 2
R&D
BRANDS

Introduction to the Markstrat Challenge - Part II 20

A COMPLETED R&D PROJECT MAY BE USED TO MODIFY
EXISTING BRANDS OR INTRODUCE NEW ONES

Introduce new brand SOCCER

Increase performance of SOLO

Introduction to the Markstrat Challenge - Part II 21

HOW TO INTRODUCE NEW BRANDS

2. Choose a name

3. Enter the role of the new brand …

4. Choose the base R&D project

1. Click here to launch a new brand

Introduction to the Markstrat Challenge - Part II 22

HOW TO MODIFY AN EXISTING BRAND

1. Click here to modify a brand

2. Keep the same name

3. Enter a new role

4. Select MODIFY

5. Choose the new R&D

project for this Brand

Introduction to the Markstrat Challenge - Part II 23

BRINGING SUCCESSFUL R&D PROJECTS ONTO THE MARKET MAY
RESULT IN OBSOLETE INVENTORY
I'll buy any inventory
at a given % of its
cost
Brand
modification

Obsolete
inventory

Brand
withdrawal TRADING COMPANY

Introduction to the Markstrat Challenge - Part II 24

COST REDUCTION PROJECTS SHOULD BE WEIGHED AGAINST
EXPERIENCE CURVE EFFECTS
Transfer cost

Introduction to the Markstrat Challenge - Part II

Cumulative production 25
YOUR SUCCESS WILL DEPEND ON YOUR ABILITY TO DEVELOP &
POSITION BRANDS

POSITIONING MODIFYING NEW

PERCEPTUAL POSITIONING
THROUGH AND DECISIONS
MAP THROUGH
ADVERTISING LAUNCHING PERIOD 2
R&D
BRANDS

Introduction to the Markstrat Challenge - Part II 26

 NEW DECISIONS INTRODUCED IN PERIOD 2

BRAND MARKETING COMMERCIAL MARKET

R&D PORTFOLIO MIX TEAM RESEARCH

• Initiating new • Production • Ordering industry-

• Launching new
projects planning & • Size of wide market
brands studies
Pricing commercial team
• Continuing or • Upgrading or
shelving • Advertising & • Allocation across • Ordering market-
withdrawing specific market
uncompleted segmentation distribution
existing brands studies
projects strategy channels

• Setting • Allocation across

perceptual marketed brands
objectives
Introduction to the Markstrat Challenge - Part II 27
FROM HERE ON, IT'S DOWN TO YOUR STRATEGY...

Introduction to the Markstrat Challenge - Part II 28