c3 shedding commodity mindset edit

7/30/2019 c3 Shedding Commodity Mindset Edit

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1) What does it say?

Buyers care not only about the price of a product but also the way it is sold to them. The non

functional features of their products the services that accompany it, the nature of their relationship

with the seller matter as well and the customers might be willing to pay more to get these value added

services.

Conjoint analysis: determines how people value different features that make up an individual product

or service

answers the question why do consumers buy the products they do?

How? By asking customers to make forced choicesamongst many different scenarios.

Weighing each product or service attribute according to its importance in a particular customers

decision-making basis

Determine the relative importance of each attribute as well as which levels of each attribute are

most preferred

Conclusion: marketers can use conjoint to determine which features a new product should have

and how it should be priced. Therefore, segmenting customers on the basis of these weightings.

2) What do we think of it (how do we judge the author's message?)

Customers will not look at a product simply as a commodity but look beyond that and servicelike

features such as consulting services, maintenance, and condition of sale will value add to the product

as well

Benefits of conjoint analysis:

Understanding market preferences:

1. Use of needs based segmentation by focusing on the most important attributes it was best at

providing and focusing on buyers that valued them the most

2. Obtain the effective costs the products are to its customers by varying the price against the other

decision variables. As a result, it can tell us how important each product or service attribute is to the

customer, and how much the addition of particular product features or improvements are worth to

the consumer.

3. The extent to which consumers are willing to trade off among different attributes is quantified

4. As all the attribute levels have been translated into a common utility scale, the differences between

levels or options on one attribute with differences on another can be equalized. this comparative

analysis illuminates the trade offs consumers are willing to make.

4.. Determine how sensitive in relative terms its customers were to price the products in terms of its

quality.

3. Allow businesses and customers to discover information that they hadnt focus on previously. Allow

them to improve the features of their product and subsequently raise prices for it

4. Assess its vulnerability by removing features that customers do not really care but add to costs of

manufacturing the product.

Predicting market choices:


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The additive model (i.e. the assumption that the utility a consumer has for a whole product is

the sum of the component utility values for all the attribute) gives conjoint analysis a powerful

predictive capability.

The first choice model is the model that applies well in many situations

An individual can be expected to select the product for which he or she has the highest utility

value for, offering a prediction for how the individual will decide in this situation Any number of alternative competitive scenarios can be hypothesized in like manner and

predictions made.

When the results of these individual-level predictions are tabulated across a representative

sample of individuals, a picture of the total market is completed.

Developing market strategies

Conjoing analysis simulation can be used to isolate marketing strategies that achieve some

measurable goal, i.e. maximum share or revenue

Allows a search for product concepts that are extremely attractive from the consumers

perspective, elimiate technically or financially unfeasible production of produts and fine-tune

product or services attributes to achieve the overall objective. Conjoint analysis can also incorporate the likely impacts of competition and cannibalization

Segmenting the market

5. After analysing the needs of the customers, view customers strategically by working on the

segments that are profitable and increase share or choose to let those customers go because

they are not profitable and are vulnerable to offers from competitors

Consumers can be segmented on the basis of their utility values or attribute importance

scores

6. Improve products service attributes by appealing to the few large segments whose needs

are not served.

Others

7. Estimates psychological tradeoffs that consumers make when evaluating several attributes

together.

8. Far less expensive and time consuming that concept testing.

Disadvantages

1. Mapping out a conjoint analysis process can be complex

2. Consumers might ironically resort to simplification strategies with too many choices available,

instead of choosing the combination of products or service attributes that they value the most.

3. Forces consumers to think about products or services that they would otherwise not give

much thought to; questions the accuracy of the conjoint analysis process

4. Disorganized analyses may over-value emotional soft variables and undervalue hard

variables about the product.

3) What's in it for us, professionally (what take-aways we can draw from it?)?

1. Price is not the sole determining factor.

Example: In a survey undertook by one industrial-resin manufacturer, full needs analysis showed that

1/5 of customers valued technical support and the ability to get hold of a sales rep quickly. 1/3

focused on product range and product development strength. Less than half cared about price and on

time delivery.


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Therefore, it is essential to find out what other benefits do customers value and focus on the

additional benefits when making their sales pitch other than price.

2. Obtain insights via interview with customers

There are features other than price that a company could work on in order to improve its competitive

advantage.

Example: Printing Company won new orders by offering price discounts. However, they found out

through interviews they could have charged a premium by improving its existing 15-day cycle time.

Ask customers what features they value the most. In addition, ask questions about their experiences

with the product and turn the information into insights. Buyers might not be aware of the service that

they actually need and sellers might not know what feature to improve on.

3. Remove features that customers do not value as highly

Example: The conjoint analysis showed that some features of the products the customers do not

need/ value and thus it increases the effective costs to the customers and place the resin company ata competitive disadvantage.

Hence, it is important to remove these features that add costs to the product and yet does not value

add to it.

4. Focus on segments that place a high value on the service that the company is good at

It is strategically wise to work on the competitive advantage that customers value so as to increase

share with the clients who are profitable and let go of customers that are vulnerable to offers from

competition and yet are not profitable.

5. Improve products service attributes by offering intangible benefits

Example: When Dow Chemical standardised its computer workstations all over the world, its

engineers were available 24 hours a day. The transformation of a transaction oriented sales force into

a technically skilled and consultative sales force improves Dow competitive advantage.

By working on features that customers want and offering value added services, these will heightened

customers satisfaction and place customers at ease that help will always be readily available for the

products that they have purchased.

c3 shedding commodity mindset edit

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