PRODUCT creating value PRICE transacting value

THE CASE ANALYSIS FRAMEWORK

Marketable products are services / goods that Prices = value that consumers see in a firm's offerings. Thus,
are perceived as valuable to consumers. 4 types: we can influence perceived value by manipulating those prices.
1. Specialty Oferings: customers show a strong There are a handful of pricing strategies that we can use:
1 THE BIG PICTURE
preference for these, with a lot of searching 1. Cost-Based Pricing: product cost + determined margin
Problem or Opportunity – what are the main issues, done to find the best suppliers. = selling price of product. Keep retailer margins in mind!
their relative importance, and underlying drivers? 2. Shopping Oferings: consumers spend a fair 2. Competitive-Based Pricing: pricing below or above
Stakeholders – what are their needs & objectives? amount of time comparing these (furniture, competitor prices. Works well for shopping products.
Remember to align decision to the primary dec. maker. apparel, fragrances, appliances, travel services).
3. Value-Based Pricing: interviewing customers to find the
3. Convenience Oferings: consumers are not
perceived value of an offering, from their perspective.
willing to spend any effort evaluating (frequent).
2 THE ANALYSIS 4. Unsought Oferings: consumers don't think of
buying them initially / don't know about them. PLACE delivering value PROMO. communicating value
Internal Analysis – lay down the firm's strengths,
weaknesses, resources, skills, and also the current: This style of product requires heavy marketing. How accessible are the We can improve perceived
firm's offerings, relative to value with promotions:
Financial position: including revenue, costs, profits, market? Considerations:
and breakeven volume / sales. Product Life Cycle useful if launching new offerings Digital Media (new)
1. Stores vs. E-Commerce Pers. Selling / Samples
Marketing strategy: segment + positioning During 'Maturity', either enter a new market / Radio / Print (traditional)
2. Push vs. Pull Strategy
Marketing mix: price, promo, place, product segment, OR develop an entirely new product. TV (still a relevant channel)
The key consideration is to Attention, Interest, Desire,
intro growth maturity decline
use a channel that is very Action. Remember, we want to
External Analysis – given the firm's S/W, how can it Sales low rising peak falling accessible by your chosen inform, persuade, and remind
leverage any O's, and mitigate T's? Also, analyze the: Profits negative rising fast peak / fall falling target market. potential buyers of our offerings.

External Environment (PEST): how have forces Cust. innovators early / maj. late maj. laggards
external of the firm's market affected it? Segmentation: grouping consumers by similar traits (DGPB)
Comp. 1 or few few / rising many low
Market or Industry Traits & Trends: how has the Targeting: evaluation of segment attractiveness, pick market.
market been, and where is it heading? Positioning: (statement) defines 4P's, to contrast w/ comp.
Product Development (analyze results post-launch)
For (target customers), who need (statement of need). The (product
idea concept product market product name) is a (product category) that (list how ofering fulfills needs).
Consumer Analysis – what customer segment is the gen. testing dev. testing launch Unlike (competitor), our product (statement of diferentiation).
firm targeting? What are their needs & unique traits?
(1) Demographic: age, gender, income, education, job, etc.
Ideas from: brainstorming, licensing, internal (2) Geographic: country, region, climate
Market Segmentation: group consumers based on
R&D, or reverse engineering competitor products. (3) Psychographic: self values / life goals, image, lifestyle
geo-demographic segmentation, and behaviours.
Alpha Test (in R&D) Beta Test (focus group) (4) Behavioural: benefits sought, convenience, etc.
Psychographic Needs & Behaviours: consider familial,
cultural, or situational factors affecting sales. Pre-market tests in limited area, then craft 4P's ideal seg. = identifiable, accessible, profitable, & responsive.

Competitive Analysis – who are the competitors, and
how strong are they relative to the firm at hand?
Strengths, Weaknesses, & Strategy: identify their
strong & weak points, and the strategies they use.
“Extra” Analysis – (optional, but worth considering) Are
there any different / special factors in this case that might
deserve their own seperate analysis? Some ideas:
Service Businesses (can use 4 Service Gaps model)
B2B Marketing (can use B2B buying process)
CSR / Ethics (can use the CSR framework)
(if B2C) Consumer Buying Process
need info. eval. buy &
recog. search options consume
Consumers have functional (performance-based)
and psychological (personal gratification) needs.
Consumers use internal (memory) and external
(social groups) sources to weigh cost / benefits,
the risk of acquiring a product, and product type.
Consumer Decision Criteria based on tradeoffs,
or heuristics (shortcuts) like price comparisons,
branding, or in-store product presentations.
SEGMENTATION STRATEGIES: based on segment needs
Mass: undifferentiated positioning, aiming for all consumers
post
buy Diferentiated: narrower positioning, for a defined segment
Niche: concentrated positioning, for small / growing segments
Micro-Marketing: “customized” positioning, tailored to needs
Value: mainly price positioning, extolling “more for less!” value
Competition: going head-to-head with roughly equal position
Market Leader: emphasis on superiority, to gain cust. trust.
Benefits & Symbolism: focus on the brand “feel” (i.e fashion)
If repositioning a product, make sure it stays aligned to the
firm's overall brand identify & company ethos! (important)

Remember to derive IMPLICATIONS from analysis! B2C Buying Behaviour: psych + situation + social (if B2B) Institutional Buying Process

Complex Variety Seeking proposal eval,

need product RFP product product
3 vendor negot.,
THE ALTERNATIVES High involvement Low involvement recog. spec. sent
supplier select.
spec. spec.
Significant differences Significant differences
Decision Criteria – identify the firm's decision criteria between brand perceptions between brand perceptions
Factors afecting the B2B Buying Process: 3 considerations
used to evaluate alternatives. What assumptions,
constraints, or preferences does management hold? The Buying Centre: initiator, influencer, decider, buyer, user,
Dissonance Reduction Habitual and gatekeeper roles to be considered when pitching to clients.
List Alternatives – now, lay down all possible paths the High involvement Low involvement
firm can head down. Remember, each alternative should
Few differences Few differences Org. Culture: democracy / autocracy / consult. / consensus
between brand perceptions between brand perceptions
still be a viable / mutually exc. solution to the problem. Situation: new buy / modified re-buy / straight re-buy.

4 THE RECOMMENDATION
Decision – list the reasons for pursuing your strategy,
and note how the firm can overcome its disadvantages.
4 Strategic Stances – to develop sustainable
competitive advantages (weave into main strategy)
(if B2C or B2B) Service / Intangible Oferings
intangible nature: inseperable production & consumption,
variable quality, and no inventory. GAPS Framework below:
Knowledge: firm vs. consumer perceptions
Standards: firm vs. consumer standards
Delivery: firm's standards vs. actual service
Communication: actual service vs. promoted
B2B areas: Firms / Governments / Manufacturers / Resellers.
Product: more complex & custom, inelastic demand,
regulations and industry standards are powerful here.
Price: negotiated, based on unique project requirements.
Place: fewer customers, urban areas. Delivery time is a big deal
Promo: technical advertising focus, with heavy direct selling

Customer Excellence
retaining loyal customers
great customer service
Operational Excellence Current New 4 IMPLIMENTATION The 4P's –– Product: product classification,
efficient operations Ofering Ofering
good supply chain mgmt. lines, mix, and life cycle stage.
Marketing Strategy: explain the overall Price: strategy, suggested
Markets Markets

acquiring niche brands healthy supplier relations

Current

Product Excellence
Highly perceived products
Market Product strategy, target market, and positioning. prices, or any mark-up's.
Penetration Development Expected Results: can do the following Place: strategy, channel levels,
Locational Excellence
Breakeven Analysis (volume or sales) distribution intensity.
easily accessible location
Opt. / Pess. Scenarios (sales or costs) Promotion: strategy, goals for
New

effective branding heavy internet presence Market

advertising, sales promo's,
Diversification Changes in Market Share
effective positioning easy user-experience Development
Projected Fin. Statement + Timeline personal sales, PR, IMC, & costs.
 DISTRIBUTION & RETAIL CONCEPTS
Wholesalers: buy from manufacturers, resell to retail
Retailers: sell products directly to consumers.
DISTRIBUTION INTENSITIES:
(1) Intensive: distribute to as many outlets as possible
(2) Exclusive: distribute to a few choice retailers
(3) Selective: balance in between intensive & extensive
CHANNEL STRUCTURES:
(1) Direct Distribution Channel: firm deals directly
with consumers + large-scale B2B clients.
(2) Indirect Distribution Channel: firm deals with
intermediaries (retail), either a network or singular.
Push Strategy: firm focuses promotions on channel
members, to convince them to carry their products
Pull Strategy: firm focuses promotions on consumers,
to build demand, making retailers carry their products.
(3) Multi-Channel (Hybrid) Distribution: firm uses a
mix of both direct and indirect channels.
RETAIL PARTNERSHIPS:
(1) Choosing a Retail Partner: how likely is it for
certain retailers to carry products. Analyze channel
structure, customer expectations, and member traits.
(2) Identifying Retailer Types: does the retail partner
align toward the product's target customers?
(3) Creating a Retail Strategy: (place in 4P's)
(4) Exploring multi-channels: explore selling in more
than one channel for ultimate consumer convenience.
FINANCIAL ANALYSIS FRAMEWORKS
SEGMENT PROFITABILITY = (segment size) x
(segment adoption rate %) x (purchase behaviour)
[(total contribution margin) – (fixed costs)]
Segment Size = no. of people in the segment.
Adoption Rate % = realistic proportion in the segment
likely to adopt (buy) the product.
Purchase Behaviour = (purchase price) x (no. of
purchases per customer at a given time)
Profit Margin = (selling price) – (variable costs)
(selling prices)
Fixed Costs = advertising, rent, insurance, etc.
income statement derive pessimistic / neutral / optimistic scenarios
Sales Revenue (Gross Sales) = (No. of Units Sold) x (Selling Price)
Net Sales = (Gross Sales) – (Returns & Allowances)
COGS = (Beginning Inventory + Purchased Goods) – Ending Inv.
COGS = (Variable Cost per unit) x (no. of units)
GROSS MARGIN = Net Sales – COGS
Typical Expenses:
Advertising
Employee Salaries
Administrative Exp. + etc.
NET PROFIT = Net Sales – COGS – (expenses)
The fnancials, while daunting, are actually as subjective as the qualitative portion in a way.
Manipulate ratios / projection patterns to tell a story and support your strategy.
Social Media – 4E (Word-of-Mouth)
excite
educate engage customers
experience
PROMOTIONAL & BRAND CONCEPTS
Integrated Marketing Comm (IMC): promotional mix
using various communications to provide clarity,
consistency, and maximum communicative impact.
(1) Identify Target Audience: find their used channels!
(2) Set Objectives: should it be a pull (consumer-
facing) or push (channel-facing) objective?
(3) Determine Budget: 5 methods to use in total...
Objective-&-Task: firm budgets based on cost of IMC
Rule-of-Thumb: firm benchmarks budget based on
prior sales results from prior IMC campaigns (easy).
Other variations = set to match competitor, market, etc.
(4) Convey The Message: 2 primary methods
Rational Appeals: factual info. & strong arguments
linked to relevant issues, to influence customers to buy.
Emotional Appeals: satisfy emotional desires by
creating a bond w/ brand (fear, humour, sex, nostalgia)
(5) Evaluate & Select Media
(6) Craft the Communication
(7) Assess the Impact w/ Marketing Metrics
Print / Digital Advertising: a paid, relatively generic
standard in most consumer markets.
Personal Selling / Sales Promo: sales staff, along
with coupons, can help spur sales w/ relevant info.
Direct Response Marketing: e-mail, catalogues,
informercials, kiosks, or social media – requires
customer input for an indirect interaction. Cost-efficient,
but lacks the finesse of traditional media advertisement
BREAKEVEN ANALYSIS RATIOS – expected results
x Breakeven Units = Fixed Costs
Cont. Margin
Breakeven Target Return = Fixed Costs + Profit
Cont. Margin
Breakeven (in $'s) = Fixed Costs
1 – (Var. Cost / Total Cost)
Cont. Margin = Fixed Costs – Variable Costs
Generic Gameplan for Financials
1 Read through case first, to
form preliminary strategy idea.
2 Identify segment and what
actions (costs) it will take to
target them.
3 Analyze current finances
with the ratios. Will give a
“before-&-after” comparison.
4 Utilize the segment size &
adoption % to derive sales
projections (income scenarios)
5 End-of by noting B/E,
profit, gains in fin. strength
(ratios), and implications.
Ethics / CSR Planning Global Marketing Strategies (Safe ––> Risky)
1 Identify imminent issues Culture is key to consider when expanding on
a global scale. Differences in power distance,
2 Gather info & stakeholders risk avoidance, individualism, and gender roles.
Exporting: shipping = low risk, but minor return
3 Brainstorm, view options
Franchising: can operate w/ foreign franchisees
Strategic Alliances ––> Joint Venture (50/50)
4 Choose a course of action Direct Inv.: 100% owns overseas plant & offices
PRICING CONCEPTS
THE 5 C's of PRICING:
(1) Company Objectives: 4 orientations / implications:
Profit Orientation: firm focuses on making a profit:
(a) Target Profit Pricing
(b) Maximizing Profit Strategy (Min. Costs)
(c) Target Return Pricing
Sales Orientation: firm focuses on sales will help the
firm more than increasing profits.
Competitor Orientation: firm focuses on staying
ahead of competitors in both pricing and position.
Customer Orientation: firm focuses on value &
customer satisfaction – prices to match expectations.
(2) Customers: customers may be partial to the
elasticity of demand, and other goods may affect price.
(3) Costs
(4) Competition + (5) Channel Members
Cost-Based Pricing: start with the cost of the item,
and determine a price with a target margin.
Competitor-Based Pricing: set prices to reflect what
the firm wants its consumers to see, relative to comp.
Value-Based Pricing: pricing based on the “overall
value” of the offering, as perceived by the consumer.
For new products: either use Price Skimming (sell
high, then slowly skim) or Market Penetration (sell
low, for market share – signals low quality though).
Psychological: everyday low prices, odd prices, etc.
For B2B: seasonal discounts, bulk discounts, cash dis.
GENERAL PURPOSE RATIOS – financial position
Market Share Required = Breakeven Units
Total Market Share
Variable Cont. Per Unit = (Price) – (VC)
Net Profit = [(Total Market Share) x (CM per u)] – FC
Gross Profit Margin = [ net sales – COGS ]
[ net sales x 100% ]
Gross Margin (%) = Gross Margin ($)
Net Sales ($)
Net Profit (%) = Net Profit ($)
Net Sales ($)
Op. Expenses (%) = Total Expenses ($)
Net Sales ($)
Inv. Turnover = COGS = Unit Sales (#)
Avg. Inv. Cost Avg. Inv. In Units
ROI (%) = Net Profit x Sales
Sales ($) Total Investment
RETAIL MARKUP RATIOS – good for finding price
Price Markup (%) = (markup margin in $) / (price)
Cost Markup (%) = (markup margin in $) / (cost)
Cost Markdown (%) = (markup margin in $) / net sales
Selling Price ($) = (unit cost in $) / (1 – markup %)
CDSTEP (demo. cohorts) Seniors: 63 and above
$$ + attention
Culture: adherence to local cultures Baby Boomers: 44-62
$ + leisure + individualistic
Societal: greener, time-poor, privacy,
and health-focused consumers. Gen-X: 32-43
cynical, decent spending
Technological: efficiency + new tech.
Gen-Y: 13-31
Economy: shifting, globalized market. digital-savvy, convenience
Political: free trade + more regulations Tween: 8-12 (food/games)