Marketing fundas…

The 3C’s model of Kenichi Ohmae, a famous Japanese strategy guru, stresses that a strategist should focus on three key factors for success. In the construction of any business strategy, three main players must be taken into account:

1. The corporation itself.
2. The customer.
3. The competition.

THE STRATEGIC TRIANGLE

Only by integrating the three C’s (Customer, Corporate, and Competitor) in a strategic triangle, a sustained competitive advantage can exist. Ohmae refers to these key factors as the three C’s or the strategic triangle.

1: CORPORATE-BASED STRATEGIES

These strategies aim to maximize the corporation’s strengths relative to the competition in the functional areas that are critical to achieve success in the industry:

• Selectivity and sequencing. The corporation does not have to lead in every function to win. If it can gain a decisive edge in one key function, it will eventually be able to improve its other functions which are now mediocre.
• A case of make or buy. In case of rapidly rising wage costs, it becomes a critical decision for a company to subcontract a major share of its assembly operations. If its competitors are unable to shift production so rapidly to subcontractors and vendors, the resulting difference in cost structure and/or in the company’s ability to cope with demand fluctuations may have significant strategic implications.
• Improving cost-effectiveness. This can be done in three basic ways:
  1. Reducing basic costs much more effectively than the competition.
  2. Simply to exercise greater selectivity in terms of:
     • The orders that are accepted.
     • The products that are offered.
     • The functions that are performed.

This means cherry-picking operations with a high impact, so that when other operations are eliminated, functional costs will drop faster than sales revenues.

• 1. To share a certain key function with the corporation’s other businesses or even with other companies. Experience indicates that there are many situations in which sharing resources in one or more basic sub-functions of marketing can be advantageous.

2: CUSTOMER-BASED STRATEGIES

Clients are the basis of any strategy according to Ohmae. There is no doubt that a corporation’s foremost concern ought to be the interests of its customers rather than that of its stockholders and other parties. In the long run, the corporation that is genuinely interested in its customers will be interesting for its investors.

Segmentation is advisable:

• Segmenting by objectives. Here, the differentiation is done in terms of the different ways that different customers use the product. Take coffee, for example. Some people drink it for waking up or staying alert, while others view coffee as a way to relax or socialize (coffee breaks).
• Segmenting by customer coverage. This type of strategic segmentation normally emerges from a trade-off study of marketing costs versus market coverage. There appears always to be a point of diminishing returns in the cost-versus-coverage relationship. The corporation’s task, therefore, is to optimize its range of market coverage. Be it geographical or channel. So that its cost of marketing will be advantageous relative to the competition.
• Segmenting the market once more. In a fiercely competitive market, the corporation and its head-on competitors are likely to be dissecting the market in similar ways. Over an extended period of time, therefore the effectiveness of a given initial strategic segmentation will tend to decline. In such a situation it is useful to pick a small group of key customers and reexamine what it is that they are really looking for.

Changes in customer mix: 
Such a market segment change occurs where the market forces are altering the distribution of the user-mix over time by influencing demography, distribution channels, customer size, etc. This kind of change means that the allocation of corporate resources must be shifted and/or the absolute level of resources committed in the business must be changed.

3: COMPETITOR-BASED STRATEGIES

According to Kenichi Ohmae, these strategies can be constructed by looking at possible sources of differentiation in functions such as: purchasing, design, engineering, sales and servicing. Ways to do this:

• The power of an image. Both Sony and Honda sell more than their competitors as they invested more heavily in public relations and advertising. And they managed these functions more carefully than did their competitors. When product performance and mode of distribution are very difficult to differentiate, image may be the only source of positive differentiation. But the case of the Swiss watch industry shows that a strategy built on image can be risky and must be monitored constantly.
• Capitalizing on profit- and cost-structure differences. Firstly, the difference in source of profit might be exploited. For profit from new product sales, profit from services etcetera. Secondly, a difference in the ratio of fixed cost and variable cost might also be exploited strategically. Because a company with a lower fixed cost ratio can lower prices in a sluggish market. In this way it can win market share. This hurts the company with a higher fixed cost ratio. The market price is too low to justify its high fixed cost and low volume operation.
• Tactics for flyweights. If such a company chooses to compete in mass-media advertising or massive R&D efforts, the additional fixed costs will absorb a large portion of its revenue. Its giant competitors will inevitably win. It could however calculate its incentives on a gradual percentage basis, rather than on absolute volume, thus making the incentives variable by guaranteeing the dealer a larger percentage of each extra unit sold. Of course, the big three market playerscannot afford to offer such high percentages across the board to their respective franchised shops; their profitability would soon be eroded.
• Hito-Kane-Mono. A favorite phrase of Japanese business planners is hito-kane-mono, or people, money, and things (fixed assets). They believe that streamlined corporate management is achieved when these three critical resources are in balance without any surplus or waste. For example: cash over and beyond what competent people can intelligently expend is wasted. Too many managers without enough money will exhaust their energies and involve their colleagues in a time-wasting warfare over the allocation of the limited funds. Of the three critical resources, funds should be allocated last. The corporation should first allocate management talent, based on the available mono: plant, machinery, technology, process know-how, and functional strengths. Once these hito have developed creative and imaginative ideas to capture the business’s upward potential, the kane, or money, should be allocated to the specific ideas and programs generated by individual managers.

Description of 4 P’s of Persuasion. Explanation.

DEFINITION 4 P’S OF PERSUASION. DESCRIPTION.

4 P’s of Persuasion is a framework to formulate persuasive written messages.

The 4 P’s of Persuasion consist of a framework designed for written communication typically used by journalists although also applied in marketing, advertising and corporatecommunication. It might be used also in oral communication such as video or audio messages. The 4 P’s of Persuasion are a persuasive technique that suggests to stress some critical points, the 4P’s, to generate convincing, forceful, powerful, seductive and strong messages. See also: Persuasion Theory and Persuasion Principles.

The 4P’s stand for Promise, Picture, Proof, and Push:

• Promise: the first part or phase of a text has to grasp the attention of target receivers. The promise should be contained in the headline and then continued in the aperture of a message. The promise, and thus the headline of a written message, is the most important part because it is the first chance to bring a reader to read your message. The promise should contain the most important reasons why a reader should read your text.
• Picture: in this stage the promise and its benefits are explained in more detail with a descriptive language that should stimulate visual memorization: a reader starts imagining pictures representing the content of the message. An effective way is to describe benefits and let the reader imagine them in his specific context; for example, if the text is promoting an armchair, the reader imagines himself sitting in a comfortable armchair. In the Picture phase a writer leverages images description to keep a reader emotionally interested in the content.
• Proof: here the reasoning is supported with proof, using statistics, research, graphs, charts, testimonials or any other supporting tool. Preferably provided by third parties. Here it is fundamental to demonstrate that the benefits that were  promised will be truly delivered. In the reader’s mind the focus shifts from an emotional to a rational interest needed to achieve a full acceptance of the message . The acceptance could be the purchase of a product, the endorsement of an attitude or a behavior, etc… Many commercial messages fail at this stage because they lack credible proof that can support the first two phases of the message.
• Push: this phase should deliver an exceptional offer, and then ask in a direct way for a purchase or action by the reader. The push is obviously a key part of any persuasive written message. In this final part of the message the reader should realize the business sense of your proposal as it has been meant by the writer. Any persuasive message must take the push-ending into consideration from the beginning. And when it is time to push, at the closing, it is needed to draw connection lines between your promise, its benefits, glowing pictures, strong supporting evidence and the concrete actions required to start enjoying the benefits. The push phase is aimed at explaining once again and, in a more explicit way, why the reader should do what your asking. The key of persuasion is understanding: so make sure your target has really understood what you are trying to tell. If a text is delivered to the right target and the arguments supporting the message are strong and understood, the acceptance is likely to follow. A common mistake of many sales and marketing people is to assume their prospect have understood.

Generating the optimal response in the market. Explanation of Marketing Mix of E. Jerome McCarthy.

WHAT IS THE MARKETING MIX? DESCRIPTION

The Marketing Mix model (also known as the 4 P’s) can be used by marketers as a tool to assist in defining the marketing strategy. Marketing managers use this method to attempt to generate the optimal response in the target market by blending 4 (or 5, or 7) variables in an optimal way. It is important to understand that the Marketing Mix principles are controllable variables. The Marketing Mix can be adjusted on a frequent basis to meet the changing needs of the target group and the other dynamics of the marketing environment.

The function of the Marketing Mix is to help develop a package (mix) that will not only satisfy the needs of the customers within the target markets, but simultaneously to maximize the performance of the organization. There have been many attempts to increase the number of P’s from 4 to 5P’s in the Marketing Mix model. The most frequently mentioned one being People or Personnel. Booms and Bitner have suggested a 7-Ps approach for services-oriented companies.

Book: Nirmalya Kumar – Marketing As Strategy: Understanding the CEO’s Agenda.. – 

Book: David A. Aaker – Strategic Marketing Management – 

Measuring Brand Value. Explanation of Brand Asset Valuator of Young & Rubicam.

The Brand Asset Valuator of advertising agency Young & Rubicam measures brand value by applying four broad factors.

FOUR FACTORS FOR DETERMINING BRAND VALUE

1. Differentiation. Differentiation is the ability for a brand to be distinguished from its competitors. A brand should be as unique as possible. Brand health is built, and maintained, by offering a set of differentiating promises to consumers. And by delivering those promises to leverage value.
2. Relevance. Relevance is the actual and perceived importance of the brand to a large consumer market segment. This gauges the personal appropriateness of a brand to consumers and is strongly tied to household penetration (the percentage of households that purchase the brand).
3. Esteem. Esteem is the perceived quality and consumer perceptions about the growing or declining popularity of a brand. Does the brand keep its promises? The consumer’s response to a marketer’s brand-building activity is driven by his perception of two factors: quality and popularity. Both vary by country and culture.
4. Knowledge. Knowledge is the extent of the consumer’s awareness of the brand and understanding of its identity.  The awareness levels about the brand, and what it means, shows the intimacy that consumers share with the brand. True knowledge of the brand comes through building of the brand.

Differentiation and Relevance taken together say a lot about its growth potential ("Brand Vitality"), while Esteem and Knowledge determine the current power of a brand ("Brand Stature").

BRAND ASSET VALUATOR SURVEY

A Survey, based on the Brand Asset Valuator, is conducted annually containing data about 20.000 brands. It is based on the opinion of over 230.000 respondents in 44 countries.

A supply chain practice where one or more logistic functions of a firm are outsourced. Explanation of 3rd Party Logistics (3PL). (’80)

Contributed by: Eric Goh See Khai

WHAT IS 3RD PARTY LOGISTICS (3PL)? DESCRIPTION

3rd Party Logistics (3PL) is the supply chain practice where one or more logistics functions of a firm are outsourced to a 3PL provider. Typical outsourced logistics functions are: inbound freight, customs and freight consolidation, public warehousing, contract warehousing, order fulfillment, distribution, and management of outbound freight to the client’s customers.

On top of this, also Value Added Services can be provided, such as: repackaging, assembling and return logistics. The 3PL Provider manages and executes these particular logistics functions using its own assets and resources, on behalf of the client company.

The thoughts behind this are to keep the firm competitive by keeping it lean without owning much assets, allowing it to focus on niche areas and to reduce operational costs. Third Party Logistics is also referred to as Contract Logistics.

3PL is evolving from predominately transactional-based to more strategic in nature. At the same time 3PL is gradually evolving into 4PL. A Fourth Party Logistics provider is a supply chain services provider that searches the best logistical solutions for its client, typically without using own assets and resources. Relatively new is the term 5PL or even 7PL, indicating Total Supply Chain Management Outsourcing.

ORIGIN OF 3RD PARTY LOGISTICS (3PL). HISTORY

In the 80s, there was increased globalization and an increased use of IT. These trends resulted in increased demands on firms and possibilities for companies to operate more competitive and lean. Some successful 3PL companies emerged, such as DHL/Exel, Kuehne + Nagel, Schenker , UPS, Panalpina, C.H. Robinson, TNT Logistics, Schneider, and NYK Logistics.

USAGE OF 3RD PARTY LOGISTICS (3PL). APPLICATIONS

• Firms with a wide and/or complex distribution network. Example: IBM.
• Firms that do not focus on logistics as one of their core competencies. Example: Chevron Corp or British Petroleum.
• In strategic discussions on Core Competence.
• In the case of the creation of a new product group.
• When a company is integrating activities of a takeover. Compare Acquisition Integration Approaches

STEPS IN 3RD PARTY LOGISTICS (3PL). PROCESS

The application of 3PL is normally done in a number of phases:

1. Awareness. Investigate possibilities, inform employees, SWOT Analysis.
2. Market Research. Investigate market trends, in particular service demands. See: SERVQUAL, Customer Satisfaction Model, and Quality Function Deployment.
3. Strategy. Develop and compare logistics concepts.
4. Make or Buy. Build own competence or outsource. Outsource completely or partly.
5. Business Plan. Costs, benefits. Phasing. Timing. Risks. Communication and motivation.
6. Selection. Selecting partner based on market coverage, competency, integrity, vision, etc.
7. Agreement. Agreeing on mutual expectations using a set of performance metrics.
8. Evaluation and Renewal. Sustain partnership via mutual financial costs and benefits, joined planning, multi-level contacts, open information exchange.

STRENGTHS OF 3RD PARTY LOGISTICS (3PL). BENEFITS

3PL allows a firm to gain competitive advantage via:

• Allowing firms to focus on developing their Core Competences.
• Cost competitiveness.
• Freeing up resources (money).
• Benefit from the logistics know-how and international distribution networks of specialized 3PL Logistics providers, allowing for superior customer service levels.

LIMITATIONS OF 3RD PARTY LOGISTICS (3PL). DISADVANTAGES AND RISKS

To implement 3PL successfully, one may need to bear in mind some possible pitfalls:

• Loss of control over the logistics function (especially for critical parts).
• More distance from clients. Loss of human touch.
• Discontinuity of services of 3PL provider.
• Differences of opinion or perception of the service level of the third party provider.

ASSUMPTIONS OF 3RD PARTY LOGISTICS (3PL). CONDITIONS

It can be inferred that the firm engaging this practice is likely:

1. A firm that does not focus on logistics as one of its core competencies.
2. At least a mid-sized corporation such that the logistics cost is substantial enough to justify the engagement of the outsourcing services.

Book: Edward A Silver – Inventory Management and Production Planning and Scheduling  – 

Book: David Simchi-Levi – Designing and Managing the Supply Chain  –