contemporary management tools

8/13/2019 Contemporary Management Tools

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CONTEMPORARY MANAGEMENT TOOLS


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Topics

Greiners growth model

Market driven organisation

Value Disciplines of Treacy and Wiersema Currys pyramid

MABA Analysis

QRM


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Branding Pentagram

Value stream mapping

Balanced score card Metricsshare of heart, mind, market

MetricsCustomer profitability

Metrics- advt and web


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BOOKS

Marketing MetricsPaul Ferris

Mgmt models : Marcel ven.


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Key Points in Management

Efficient : using resources wisely and in a cost effective manner.

Effective : making the right decisions and successfully implementing them.

Planning:The management function concerned with defining goals forfuture organizational performance and deciding on the tasks and use ofresources needed to attain them.

Organizing : The management function concerned with assigning tasks ,grouping tasks into departments and allocating resources to departments.

Leading : The management function that involves the use of influence tomotivate employees to achieve organizational goals.

Controlling : the management function concerned with monitoring

employees activities , keeping the organization on track toward its goalsand making corrections if needed.


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Old Paradigm New Paradigm

Vertical Organization Learning Organization

Forces on Organization

Markets Local, Domestic Global

Workforce Homogeneous Diverse

Technology Mechanical Electronic (Digital)

Values Stability, Efficiency Change, Chaos


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Old Paradigm New Paradigm

Management Competencies

Focus Profits Customers,

Employees

Leadership Autocratic Dispersed,

empowering

Doing work By individuals By Teams

RelationshipsConflict, Competition

Collaboration


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Strategies

comes from the Greek word Strategos meaning Art ofthe general

Military used the word strategy to mean grand plans madein the light of what it is believed an adversary might or might

not do.

Defn of strategy :

1) General program of action and deployment of resources toattain comprehensive objectives

Alfred Chandler :

Determination of the basic long termobjectives of an enterprise and the adoption of course

of action and allocation of resources necessary to achievethese goals.


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Corporate level

Division level

Business level Functional level


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Colour TV

Business

VCD/DVD

business

Consumer electronics

Division

Washing Machine Refrigerator A/C

Home Appliances

Division

FMCG

Division

LG

Corporate team


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Different levels of strategy

CORPORATE LEVEL

Business Level

Functional

level

StrategyLevels

Corporate

SBU

functional

SBU

Operations Marketing Personnel Finance

SBU SBU

Corporate office/head office


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Five Concepts

Production concept

Product concept

Selling concept Marketing concept

Societal marketing concept

Special focus on marketing myopia


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Definitions of MARKETING

The performance of business activities that direct the flow ofgoods and services from producer to consumer.

Getting the right goods , to the right people in the right place

, at the right time , at the right price , with the right level ofcommunication profitably.

Identifying the needs, wants , desires of consumers and

fulfilling them in such a way that the customer is delightedand the company objectives are met profitably.

Solving customer problems profitably.


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STP

Segmentation: -- is essentially the identification of subsets ofbuyers within market who share similar needs and whodemonstrate similar buyer behavior.T he world is made up frombillions of buyers with their own sets of needs and behavior.Segmentation aims to match groups of purchasers with the

same set of needs and buyer behaviors.

Targetting -- After the market has been separated intosegments, the marketer will select a segment or series ofsegments and target them.

Positioning: is the act of designing the companys offer andimage so that it occupies a distinct and valued place in thetarget customers mind.


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SEGMENTATION

C) Demographic

Age

Gender

Family Size

Education

Occupation

Income

Religion

0-11,12-19,20-34 etc.

Male, Female

1-2,3-4,5+

school, Graduate, PG

Farmer, Professional,

Housewife, Retired


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SEGMENTATION

D) Behavioral Benefit

Use Related

1) Usage Rate:

2) Awareness Status

3) Brand Loyalty

Use-Situational

Time/Objective

Quality, Service, Economy, Speed,Prestige.

Heavy, Medium , Light users

Unaware, aware, interested

enthusiastic.

Strong, Medium , None

Leisure, work, Morning, Night

Gift, Fun , Achievement


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Patterns of target Market Selection

Selective Specialisation

M1 M2 M3

P1

P2

P3

P2M1

P3M2

P2M3


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Product Specialisation

M1 M2 M3

P1

P2

P3

P2M1 P2M2 P2M3


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Full Coverage

M1 M2 M3

P1

P2

P3


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Positioning

Positioning starts with the product. But Positioning is not

what you do to a product. Positioning is what you do to the

mind of the prospect.

Easiest way to get into the mind -Be First

KODAK- Photography

Xerox -- Copier

Hertz --- Rent-acar


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Positioning Strategies

Attribute Positioning

Benefit Positioning

Use /Application Positioning User Positioning

Competitor Positioning

Quality / Price Positioning

Product category Positioning


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Market Driven Organization


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Market-Driven Strategy

Becoming Market Oriented

Distinctive Capabilities

Creating Value for Customers

Becoming Market Driven

Challenges of a New Era for

Strategic Marketing

MARKET DRIVEN STRATEGY


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MARKET-DRIVEN STRATEGY

All business strategy decisions shouldstart with a clear understanding of

markets, customers, and competitors.

The market and the customers that form

the market should be the starting pint in

shaping business strategy.


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Achieving Superior

Performance

Determining

Distinctive

Capabilities

Customer

Value/

Capabilities

Match

Becoming Market-Orientation

Characteristics of a Market-Driven Strategy


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Why Pursue a Market-Driven Strategy?

Strong supporting logic

Achievements of companies displayingmarket-driven characteristics are impressive

Examples include:

Dell Inc.

Louis Vuitton

Southwest Airlines

TescoTiffany & Co.

Wal-Mart

Zara


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BECOMING MARKET ORIENTED

Customer is the focal point of theorganization

Commitment to continuous creation ofsuperior customer value

Superior skills in understanding and satisfyingcustomers

Requires involvement and support of the

entire workforce Monitor rapidly changing customer needs

and wants


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Determine the impact of changes on

customer satisfaction Increase the rate of product innovation

Pursue strategies to create competitive

advantage


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Characteristics of Market Orientation

Customer Focus

What are the customers value requirements? Competition Intelligence

Importance ofunderstanding thecompetition as well as thecustomer

Cross-Functional CoordinationRemove the walls betweenbusiness functions

Performance ConsequencesMarket orientation leads tosuperior organizationalperformances

Becom ng a Mar et-Or ente


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Information Acquisition

Cross-Functional

Analysis of Information

Shared Diagnosis

and Coordinated

Action

Delivery of

Superior Customer

Value

Becom ng a Mar et-Or enteOrganization


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Market Orientation Information Acquisition

Gather relevant information on customers, competition,and markets

Involve all business functions

Intuits Quicken

Inter-functional Assessment Share information and develop

innovative products withpeople from different functions

Zara Shared diagnosis and action

Deliver superior customer value


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DISTINCTIVE CAPABILITIES

Capabilities are complex bundles of

skills and accumulated knowledge,

exercised through organizational

processes, that enable firms to

coordinate activities and make use of

their assets.

S h Ai li Di i i C bili i


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Southwest Airlines Distinctive Capabilities

Organizational Processes

Southwest uses a point-to-point route system rather than the hub-and-spoke design used

by many airlines. The airline offers services to 57 cities in 29 states, with an average tripabout 500 miles. The carriers value proposition consists of low fares and limited services(no meals). Nonetheless, major emphasis throughout the organization is placed onbuilding a loyal customer base. Operating costs are kept low by using only Boeing 737aircraft, minimizing the time span from landing to departure, and developing strongcustomer loyalty. The company continues to grow by expanding its point-to-point routenetwork.

Skills and Accumulated KnowledgeThe airline has developed impressive skills in operating its business model at very lowcost levels. Accumulated knowledge has guided management in improving the businessdesign over time.

Coordination of Activities

Coordination of activities across business functions is facilitated by the point-to-pointbusiness model. The high aircraft utilization, simplification of functions, and limited

passenger services enable the airline to manage the activities very efficiently and toprovide on-time point-to-point services offered on a frequent basis.

Assets

Southwests key assets are very low operating costs, loyal customer base, and highemployee esprit de corps

C


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Capabilities

DesirableCapabilities

Applicable to Multiple

Competition Situations

Difficult to

Duplicate

Superior to the

Competition


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Value Requirements

Distinctive

Capabilities

Matching Customer Value and Distinctive

Capabilities

CREATING VALUE FOR CUSTOMERS


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CREATING VALUE FOR CUSTOMERS

Customer Value: Value for buyers consists of the benefits less the

costs resulting from the purchase of products.

Superior value: positive net benefits

Creating Value:

Customer value is the

outcome of a process thatbegins with a businessstrategy anchored in a deep

understanding of customer

C i V l f C


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Creating Value for Customers

Benefits Costs

Customer

Value


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BECOMING MARKET DRIVEN

Market SensingCapabilities

Customer LinkingCapabilities

MARKET-DRIVENSTRATEGIES

M k t D i I iti ti


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Market Driven Initiatives

Market Sensing Capabilities Effective processes for learning about markets

Sensing:

Collected information needs to be sharedacross functions and interpreted to

determine proper actions.

Customer Linking Capabilities Create and maintain close customer

relationships


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Aligning Structure and Processes

Potential change of organizational design

Improve existing processes

Process redesign

Cross-functional coordination and involvement

Primary targets for reengineering: Sales and marketing, customer relations,

order fulfillment, and distribution

CHALLENGES OF A NEW ERA FOR


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CHALLENGES OF A NEW ERA FOR

STRATEGIC MARKETING

Strategic marketing faces unprecedentedchallenges and opportunities:

Turbulent markets

Intense competition

Disruptive innovations

Escalating customer demands

Ethical Challenges

Societal and Global Change

Social Responsiveness of Organizations


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Escalating Globalization

It is important to understand the differences (andsimilarities) between the developed economiesand the new world beyond.

Market opportunities

Competitive threats

Partnering opportunities

Outsourcing initiatives

The worlds poor


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Ethical Behavior and Social

Responsiveness

Increasingly demanding ethical

challenges

Corporate responsibility

Responsibilities to stakeholders


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CONSIDERATIONS

IN ORGANIZATION

DESIGN

Extent of need to

alter vertical

structures

Extent of

partnering with

other organizations

Extent of process-type organizational

design

Considerations in Marketing Organization

Matching structureto strategic goals

Impact of Internet on

organizational processes

Need to integrate

value-creating activities

around customers


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Alternative Organizational Structures

TraditionalHierarchy

Functional

Structure

Process

Overlay

Functional

Overlay

Process

Structure

Horizontal

Structure


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The Challenge of Integration

Integration problems

Marketings links to other functional units

Additional approaches to effective

integration relocation/design of facilities

personnel movement

reward systems

formal procedures social orientation

project budgeting


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Illustrative Example: GEs Philosophy

One clear message in our approach

is the value of the borderless culture

which breaks down the horizontal

barriers between functions and the

vertical barriers between organizational

levels. This means that employees areencouraged to collaborate with others

and given considerable freedom to

turn their creativity into productivity.


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Impact of the Internet on Organizations

New managerial roles and practices are

mandated by the Web fast access to information from any location and remotely

accelerated trend towards flatter organizations

virtual team-working across geographical and organizational

boundaries new approaches to supplier relationship management (SRM) and

customer relationship management (CRM)

managing and controlling outsourcing of more business processes

and activities to specialist suppliers


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Organizational Design Options

Traditional designs

Marketings corporate role

New forms of marketing organizations


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TRADITIONALDESIGNS

Functional

Matrix Product-Focused

Market-

Focused

Traditional Marketing Organization Designs


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Product-Focused Structure

Marketing Organization Based on a Combination of


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Marketing Organization Based on a Combination of

Functions and Products


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Organizational Transformation

Hybrid organization forms

Designs linked to value strategy and

core capabilities

Vital role of data networks

Shared information and decision making


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New Forms of Marketing Organization

New marketing roles Chief relationship officer, chief knowledge office, chief customer

officer

Transforming vertical organizationsthrough managing processes

New organizational forms networked organizations

the marketing coalition company venture marketing organizations


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Selecting an Organization Design

Organizing concepts

Organizing the sales force

Organi ing Concepts


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TRANSACTIONALBUREAUCRATIC

ORGANIC RELATIONAL

Centralized

Formalized

Nonspecialized

Internal

(hierarchical)

Organization

of Activity

External

(market)

Organization

of Activity

Decentralized

Nonformalized

Specialized

Organizing Concepts


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Organizing the Sales Force

Organizing multiple sales channels personal selling

Internet-based channels

telesales

direct marketing

Coordinating major account

responsibilities Key account management

Global account management


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Marketing Organization Plan Combining Product,

Geographic, and Functional Features


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GLOBAL

ORGANIZING

ISSUES

Standardized

Versus

Customized

Strategies Alternative

Organization

Forms

Executive

Qualifications

Strategic

AlliancesCoordination

andCommunication

Global Marketing Organization


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Eight Stages of New Product Development

Idea Generation

Idea Screening

Concept Development & Testing

Marketing Strategy

Business Analysis

Product Development

Market Testing

Commercialization


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Eight Stages

1)Idea Generation :Source of New Product Ideas:-

Customers , Employees, Competitors Products and services ,

sales team

Idea Generating Techniques :

Brain Storming , Need/Problem Identification , Problem /Need

Identification

2) Idea Screening:

Drop Error

Go Error


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3) Concept Development & Testing:A product concept is an elaborated version of the idea

expressed in meaningful consumer terms.

4) Marketing Strategy Development :

a) Describes the size , structure of the target market, Positioning,sales, Market share in the first few years.

b) Product, Price, Place, Distribution strategy.

c) Long run sales and profit goals.

5) Business Analysis:

Actual costs to R&D, MFG. ,Marketing cost and Profit Projection


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6) Product Development:

1)Develop Prototype2) Functional & Consumer Tests

7) Market Testing :

Testing in select outlets with actual brand name and

packaging

8) Commercialization :

When to enter the marketHow to enter the market


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BRANDING

Brand Strategy

Line Extension

Brand Extension

Multi Brand

New Brands


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Brand Strategies

New BrandsMulti brands

Brand ExtensionLine Extension

NewExisting

Product Category

New

Existing

Brand

Name

BrandName


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Brand Strategies

Line Extensions : occur when a company introducesadditional items in the same product category under the same

brand name such as new flavors, forms, colors, added

ingredients, package sizes . e.g :

ZEN LXI,ZEN VXI, SURF,SURF EXCEL, SURF EXCEL BLUE Splendour ,

Splendour Plus Coke, Diet Coke,

Vanilla Coke Clinic AllClear,

Clinic Plus


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Brand Extensions : Using an existing brand name to launch aproduct in a new category e.g --- Honda

automobiles, motorcycles, lawnmowers etc. Sony

(Handycams, Colour TV, Digital camera etc.) AMUL,

Videocon,LG


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Multibrands : additional brands in the same categorye.g ---

Rejoice, Pantene, Head & Shoulders

WagonR, Zen , Alto

Electrolux, Kelviantor, AllwynVideocon, Sansui, Akai, Toshiba


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E.g -- Paras PharmaceuticalsLivon,Krack, Itchguard, RingGuard, Lipguard, Numis, DCold

B di P t


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Branding Pentagram

IGOR ANSOFFS PRODUCT/MARKET EXPANSION


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GRID

Current Product New Product

Current

Market

New

Market

Market

Penetration

Market

Development

Product Development

Diversification

IGOR ANSOFFS PRODUCT/MARKET EXPANSION GRID


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IGOR ANSOFF S PRODUCT/MARKET EXPANSION GRID

Current MarketCurrent Product

Market Penetration:

Encourage current customers to buy more.

Attract competitors customers to switch to its brandConvince non users who resemble current users to start

using the companys product.

e.g --- Pepsodent, Colgate


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IGOR ANSOFFS PRODUCT/MARKET EXPANSION GRID


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IGOR ANSOFF S PRODUCT/MARKET EXPANSION GRID

Product development Strategy :

Introduce products with new features

Introduce different quality versions

Alternative product forms

e.gLG in colour TVsFlat TVs, Plasma TVs, LCD TVs,

Projection TVs.

Diversification Strategy

G i G th d l


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Greiners Growth model

G i th d l


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Grienersgrowth model


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Greiner's Growth Model describes phases thatorganizations go through as they grow.

All kinds of organizations from design shops tomanufacturers, construction companies to

professional service firms experience these. Each growth phase is made up of a period of

relatively stable growth, followed by a "crisis"when major organizational change is needed if

the company is to carry on growing.


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Dictionaries define the word "crisis" as a "turningpoint", but for many of us it has a negativemeaning to do with panic. While companiescertainly have to change at each of these points,

if they properly plan for there is no need for panicand so we will call them "transitions".

Larry E. Greiner originally proposed this model in1972 with five phases of growth. Later, he addeda sixth phase (Harvard Business Review, May1998). The six growth phases are described


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Phase 1: Growth Through Creativity

Here, the entrepreneurs who founded the firm are busy creatingproducts and opening up markets.

There aren't many staff, so informal communication works fine, andrewards for long hours are probably through profit share or stockoptions. However, as more staff join, production expands andcapital is injected, there's a need for more formal communication.

This phase ends with a Leadership Crisis, where professionalmanagement is needed. The founders may change their style andtake on this role, but often someone new will be brought in.


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Phase 2: Growth Through Direction Growth continues in an environment of more formal

communications, budgets and focus on separate activitieslike marketing and production. Incentive schemes replacestock as a financial reward.

However, there comes a point when the products andprocesses become so numerous that there are not enoughhours in the day for one person to manage them all, and heor she can't possibly know as much about all theseproducts or services as those lower down the hierarchy.

This phase ends with an Autonomy Crisis:New structuresbased on delegation are called for.


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Phase 3: Growth Through Delegation With mid-level managers freed up to react fast to

opportunities for new products or in new markets, theorganization continues to grow, with top management justmonitoring and dealing with the big issues (perhaps

starting to look at merger or acquisition opportunities). Many businesses flounder at this stage, as the manager

whose directive approach solved the problems at the endof Phase 1 finds it hard to let go, yet the mid-levelmanagers struggle with their new roles as leaders.

This phase ends with a Control Crisis:A much moresophisticated head office function is required, and theseparate parts of the business need to work together.


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Phase 4: Growth Through Coordination and Monitoring Growth continues with the previously isolated business

units re-organized into product groups or service practices.Investment finance is allocated centrally and managedaccording to Return on Investment (ROI) and not just

profits. Incentives are shared through company-wide profit share

schemes aligned to corporate goals. Eventually, though,work becomes submerged under increasing amounts ofbureaucracy, and growth may become stifled.

This phase ends on a Red-Tape Crisis:A new culture andstructure must be introduced.


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Phase 5: Growth Through Collaboration The formal controls of phases 2-4 are replaced by

professional good sense as staff group and re-groupflexibly in teams to deliver projects in a matrix

structure supported by sophisticated informationsystems and team-based financial rewards.

This phase ends with a crisis of InternalGrowth:Further growth can only come by developing

partnerships with complementary organizations.


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Phase 6: Growth Through Extra-Organizational Solutions

Greiner's recently added sixth phase suggests that growthmay continue through merger, outsourcing, networks andother solutions involving other companies.

Growth rates will vary between and even within phases.The duration of each phase depends almost totally on therate of growth of the market in which the organizationoperates. The longer a phase lasts, though, the harder itwill be to implement a transition.

BCG matrix Growth/share matrix


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BCG matrix- Growth/share matrix

STARS QuestionMarks

DogsCash cow

Relative Market share

x0.1 x10x

Market

Growth

Rate (%)

0

10

20

Porters 5 Forces- Determining Segment


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Structural Attractiveness

Industry

Competitors

Buyers

(Buyer Power)

Suppliers

(Supplier Power)

Substitutes

(Threat of substitutes)

Potential Entrants

Three Generic Strategies


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Three Generic Strategies

DifferentiationOverall cost

leadership

Focus

Strategic AdvantageLow cost positionUniqueness perceived

by customer

Industrywide

Particular

segment


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Overall Cost Leadership

Requires construction of efficient scale facilities

Cost minimization in areas like R&D, ADVERTISING,SERVICE, SALES FORCE ETC.


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To achieve cost leadership --- upfront capital investment instate-of-theart equipment/plant is required.

e.g --- Texas instruments, DU PONT, Black & Decker, Bic,

Kodak etc.

Timex has specialised in manufacturing simple low cost

watches for the mass market.


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Differentiation ---- creating something that is perceived industrywideas unique.

Differentiation can take many forms ----

Design / brand image--- Mercedes

Technology--- Bose -- speakers and sound system

Service--- Maruti

Dealer Networkcaterpilar, Videocon

Quality-- Maytag

Rolex watches are handmade of gold and stainless steel and

are subjected to strenuous tests of quality and reliability

Nikon , HP, Cross


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Focus--- Focusing on a particular buyer group , segment of the product

line,, or geographic market

The strategy rests on the premise that the firm is able to servethe narrow strategic target very well, more effectively and

efficiently then competitors who are competing more broadly.


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Competitive Strategies

Michael Treacy and Fred Wiersema suggest companiescan gain leadership positions by delivering superior

value to their customers in three strategies orvalue disciplines

Operational excellence

Customer intimacy

Product leadership

18-27


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Basic Competi ti ve Strategies

Operational excellencerefers to a company providing

value by leading its industry in price andconvenience by reducing costs and creating a lean

and efficient value delivery system

e.G WALMART

18-28



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Customer intimacyrefers to a company providing

superior value by segmenting markets and tailoringproducts or services to match the needs of the

targeted customers

E.G IBM

18-29

i i i


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Product leadershiprefers to a company providing

superior value by offering a continuous stream ofleading-edge products or services. Product leaders

are open to new ideas and solutions and bring

them quickly to the market.

E.G APPLE

18-30



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Product leadershiprefers to a company providing

superior value by offering a continuous stream ofleading edge products or services. Product leaders

are open to new ideas and solutions and bring

them quickly to the market.

18-31

BRAND EQUITY


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BRAND EQUITY : is a set of brand assets and

liabilities linked to a brand , its name and symbol ,that add to or subtract from the value provided

by a product or service to a firm and /or to that

firms customers.

For assets or liabilities to underlie brand equity

they must be linked to the name and/or symbol

of the brand.

BRAND EQUITY


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BRAND EQUITY

The assets and liabilities on which brand equity isbased can be grouped into 5 categories

1) Brand Loyalty

2) Name awareness

3) Perceived quality

4)Brand associations in addition

to perceived quality

5)other proprietary assets : patents,

trademarks,channel relationship etc.

BRAND EQUITY


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BRAND EQUITY

Brand Equity Provides value to firm by

enhancing:-

Efficiency and effectiveness

of marketing programs

Prices/Margins

Brand ExtensionsTrade Leverage

Competitive advantage

Provides value to customer by

enhancing customers

Interpretation /Processing of

information.Confidence in the purchase decision.

Use satisfaction/delight

Brand Loyalty

Name Awareness Perceived quality

Brand Associations

Other proprietary

brand assets

Brand Loyalty


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Brand Loyalty

Brand Loyalty pyramid

Committed

buyer

Likes the brand, considers

brand as a friend

Satisfied buyer with switching

costsHabitual buyer- no reason to change

Switchers /price sensitive- indifferent- no brand loyalty

Measuring Brand Loyalty


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Measuring Brand Loyalty

Behavior Measures:

Repurchase rates: What % of Maruti Zen owners purchase Maruti

on their next purchase

% of Purchases: of the last five purchases made by a customer, what

% went to each brand purchased?

Number of Brands Purchased: What % of coffee buyers bought only a

single brand?, two brands?

Switching costs: If it is expensive or risky for a firm or consumer to changesuppliers, then the brand loyalty is on the higher side. E.g :

Investment in computer system or software like SAP

Strategic value of Brand Loyalty


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Strategic value of Brand Loyalty

Reduced Marketing Costs: It is much less costly to retaincustomers then to attract new one ( COST RATIO IS 1:4)

Trade leverage: Strong pull (brand loyalty) from consumers

will ensure preferred shelf space because stores know that

customers will have such brands on their shopping list. Attracting new customers:

Time to respond to competitive threats:If a competitor

develops a superior product , a loyal following will allow the

firm time needed for the product improvements to bematched and neutralized.

Creating & Maintaining Brand Loyalty


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g g y y

Treat the customer Right Stay close to customer

Measure/Manage Customer Satisfaction

Create switching cost

Provide extras

Brand Awareness


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Ability of a potential buyer to recognize or recall that a brandis a member of a certain product category.

Unaware of brand

Brand Recognition

Brand recall

Top ofMind

The awareness Pyramid

How to achieve Awareness


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How to achieve Awareness

Be different , Memorable:

Involve a slogan or jingle: e.g Lifebuoy hai jahan , tandorostihai wahan.

Symbol exposure: colonel sanders --KFC, golden arches-Mcdonalds---> symbol should closely associate with thebrand.

Publicity--- advertisement.

Event Sponsorship --- Femina Miss India, Manikchand Filmfare

awards. Consider brand Extensions : one way to gain brand recall is to

put the name on other products.

Recognition v/s Recall- The Graveyard Model


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g / y

Low Recall High

Niche Brands

Graveyard Brand

Low

High

Recognition

BRAND RECOGNITION

Brand Recognition: Familiarity and Liking :


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Brand Recognition: Familiarity and Liking :

Recognition reflects familiarity gained from past exposure .

Recognition doesn't necessarily involve remembering where the

brand was encountered before, why it differs from other brands ,

or even what the brands product class is.

It is simply remembering that there was a past exposure to the

brand.

When consumers see a brand and remember that they have seen

it before (perhaps even several times) , they realize that the

company is spending money to support the brand.

Since it is generally believed that companies will not spendmoney on bad products , consumers take their recognition as a

signal that the brand is good.

Brand Recall


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A brand (for e.g. HDFC Bank) is said to have recall if it comesto consumers minds when its product class (for e.g. , banking

companies ) is mentioned.

Whether or not a customer recalls your brand can be the

deciding factor in getting on a shopping list or receiving achance to bid on a contract.

The graveyard model was developed by Young and Rubicam

Europe under the guidance of Jim Williams.

In this model , brands in a product class are plotted on arecognition v/s recall graph.

The Graveyard Model


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y

For e.g , the recall and recognition of each of the brands in theautomobile category could be measured and thesemeasurements could be used to position each brand on thegraph.

One finding consistent across dozens of product classes is that

brands tend to follow the curved line shown in the figure. There are two exceptions , each of which reveals the

importance of recall.

One exception is healthy niche brands , which fall below the

line because they are not known to a substantial group ofconsumers , and therefore have relatively low overallrecognition.

The Graveyard Model


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But because they do have high recall among their respectiveloyal customer groups , their low recognition is not necessarilyan indication of poor performance.

And healthy niche players sometimes have the potential toexpand recognition and thus the scope of their customer

base. The second exception is the graveyard , an area in the upper

left hand corner populated by brands with high recognitionbut low recall.

Being in the graveyard can be deadly. Customers know about the brand , but it will not come to

mind when considering a purchase .

The Graveyard Model


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One point of the graveyard model is that high recognition isnot necessarily the mark of a strong brandit is associated

with weak ones as well.

Movement towards the graveyard is associated with sliding

sales and market share. If however , the brand is moving away from the graveyard ,

sales and market share can be expected to increase.

Thus the graveyard model provides evidence that recall is as

important as recognition.


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Currys Pyramid

CURRYS Pyramid


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80% of the revenue comes from 20% of the customers.Some customers in the bottom 80% of customer basecan even lose you money to service.

By analyzing customers in this way we help build andmaintain a customer driven culture within the

organization. The first step in putting Currys Pyramid into practice is

obviously to determine the different segments weregoing to have, and then finding which customers

belong to which segments. Then create different packages/incentive programs for

each of the different segments.


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Suppose we have an airline company calledEmirates Airlines which decides to segment

its customers according to how long they

have been customers, and how much revenuethey generate each month.

We could plot this in the following matrix:


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As you can see, in the grid above were plottingmonthly spend against length of time as acustomer.

Based on Currys Pyramid, Emirates Airlines

decide to segment their customers so that the top 1% are considered gold,

the next 4% are silver,

the next 15% are bronze,

and the remaining 80% are white. Our matrix might now look like this


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Now that the customers are classified into gold, silver,and bronze, Emirates Airlines needs to work out whatpackages to offer each segment to increase its value tothe airline.

What packages the airline offers will of course depend

on what the airline is aiming to achieve, but lets take alook at a few obvious example packages:

For gold customers we might want to ensure we dontlose them as customers, so we might offer free flightsanywhere in the world for themselves and theirimmediate family once per year, when they keep goldstatus for an entire year.


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If the research revealed that gold customers arenot so price conscious then the above offer mightnot be appropriate, our big spenders might notbe interested in free economy flights.

Instead gold customers may continue to be loyalif Emirates offer great service. In this case it maybe more appropriate for the airline to offer goldmembers free chauffeur driven transportation toand from the airport, taking some of the stressout of travel for the customer.


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For silver members we might want to encouragethem to become gold members so we can realisemore revenue from them, for example, we mightoffer a one month taster of some of the benefits

they could be getting from gold membership,such as chauffeur driven transport to and fromthe airport.

Book: Jay and Adam CurryThe customerMarketing Method

contemporary management tools

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