Strategy Performance 07 December, 2010

After strategies have been created and a direction has been set, a company must perform well to see the desired results. One popular way to measure strategy performance is by using a Balanced Scorecard (BSC).

The BSC was popularized by Robert Kaplan and David Nortan in 1992. It is similar to a dashboard, but with a focus on company and consumer trade-offs. Stress is placed on an informing purpose rather than a controlling one. It can be thought of as a way to measure strategy because it links a company's actions to its mission and vision.

Balanced Scorecards are created based on four quadrants:

• Internal Processes (how efficient are you at satisfying customers?)
• Customers (how do customers see you?)
• Finances (how do shareholders see you?)
• Internal Learning and Innovation (how can you create more value?)

Each of these quadrants are further broken down into:

• Goals
• Measurements

Goals should be specific, but cover many parts of each quadrant such as:

• Short/Long Term
• Financial/Non-Financial
• Leading/Lagging Indicators
• Internal/External Indicators

The following flow shows how the BSC connects strategy to action.

There are many benefits to the BSC which include:

• Showing the impact one change has on other quadrants
• The ability to measure intangible assets
• People are pulled towards the company mission and vision
• Areas that seem disjoint, but are linked, are identified
• Everyone in the company is involved
• Cause and effect relationships between BSC goals and outcomes are identified
• It shows which changes are reflected in the bottom line

Although there are many benefits to the BSC and the framework is fairly straightforward, there are several pitfalls that should be avoided:

• Goals should always be linked to the strategy
• Cause and effect relationships between goals and outcomes should be validated
• Measurements must be valid and statistically significant
• The goals should be communicated throughout the entire company
• Time should be taken to understand how quadrants and quadrant goals are related

The BSC can be a valuable tool to any company. This being said, there are three critical ideas that companies must practice when using a balanced scorecard. First, goals must be reviewed regularly. Second, goals and measurements should not be changed unless the company mission and strategy change, or unless faulty cause and effect relationships in current goals are found. Third, the balanced scorecard is not about completing the goals, it is about continuously improving strategy performance.

Outlining the Marketing Plan 26 August, 2010

Here's an outline for a marketing plan.

Some parts will be longer, others may only be a sentence or even be non-existent.
It's better to avoid 'I', 'we', and 'you', but if you find yourself frustrated or stumbling on these aspects, drop them in favor of smoothness. The meat of the plan and the part that will be of interest to most people will be that of section 'I', which may be the majority of the summary in section 'A'. The rest of the plan is backing, justification, and proof that section 'I' will succeed. Section 'I' explains the actual product, as well as the major assumptions.

A - Executive Summary
    1 - State the product, it’s name, the company name, and who your market is
    2 - Give a brief overview of the whole plan
        a - Summarize assessments
        b - Summarize goals
        c - Summarize recommendations
B - Introduction
C - Customer Analysis
    1 - Customer identification/definition
    2 - Customer demographics, needs assessment, and decision-making
        a - Detail the market vs general target segments
        b - Describe Industry worth
        c - How many potential customers are there?
        d - How is the potential customer base changing?
        e - Explain the target customers’ demographics
        f - Detail the target customers’ psychographics
        g - Detail the target customers’ geographics
        h - Detail the needs of the target customers
        i - Detail the drivers of the customers’ decision-making
        j - What will make consumers choose this product
        k - Are the target market’s decisions influenced by others
        l - What impact will the product have on the target market
        m - How much education & change will need to take place
        n - Detail customers’ price and augmented product’s preferences
        o - Detail service required
    3 - Comprehensive profiles of a company’s target customers
    4 - Detail any partners and partner’s decision making process or show there are none
D - Current marketing Situation Analysis
    1 - Market overview/brief description & the company’s place in the market
    2 - Product line overview
        a - What other products does the company have?
        b - Where does the new product fit into the existing line?
    3 - External Analysis (SLEPT/Partial Porters)
        a - Social (trends & their effects)
        b - Legal (regulations, labor unions)
        c - Economic
            i - supply, demand, equilibrium
            ii - vulnerability to preference changes
            iii - fiscal, monetary, inflation, unemployment
        d - Political (federal, local, favor of political party to industry, political changes)
        e - Technological
            i - evolution, choices available
            ii - technological leads, innovation, can we keep up?
        f - Industry
            i - Show the leader in the market
            ii - Show recent changes in power/trends in competition
        g - Customers
            i - How are demands changing over time?
            ii - Is the company or consumer in power?
        h - Suppliers
            i - Show partners/value adding groups
            ii - Is the company or supplier in power?
        i - New industry entrants
            i - How are the barriers to entry?
            ii - Are there many new entrants?
    4 - Internal Analysis
        a - Resourced based view
        b - Functional view
        c - Value-chain
        d - Competency matrix
        e - Building blocks of competitive advantage
E - SWOT
F - Competitive Analysis
    1 - Define what kinds of competition exist
        a - Substitutes (direct)
        b - In house or other (indirect)
    2 - Describe competitors and show competitive advantage
        a - Define each direct competitor individually
            i - Strengths
            ii - Weaknesses
            iii - How do they satisfy the target market’s needs?
        b - Group and categorize each major competitor
        c - Describe the company’s competitive advantages
            i - Efficiency
            ii - Quality
            iii - Innovation
            iv - Responsiveness to customers
            v - Providing incentives
            vi - Access to limited or exclusive resources
G - Distribution overview
    1 - Describe existing distribution channels and their effectiveness
    2 - Describe trends in sales of similar products
    3 - Overview of if the product will be sold in similar fashion to others
    4 - Ordering
H - Place in the market
    1 - Overview of company strategy
    2 - List goals
    3 - Issues affecting goal accomplishment
I - Marketing Strategy (What do to based on what was already stated/How to do it)
    1 - Value Proposition/Product
        a - Describe the core product
        b - Describe the augmented product
        c - What need will it satisfy
        d - Why will a consumer choose this product?
        e - Evolution of the product/it's successors
    2 - Segmentation
        a - Describe your market and detail how you will segment it
        b - Justify why the market will be segmented in this way
        c - Describe the segmentation variables and the segment’s differences
        d - Describe why other segments are not being targeted
    3 - The Rest of the Marketing mix
        a - Price
            i - Value of new offering
            ii - Difference between new offering and what exists
            iii - Pricing strategy
        b - Place/distribution
            i - Sales plan
            ii - Sales forecast
        c - Promotion
            i - Acquiring customers
            ii - Retaining customers
            iii - Education
            iv - Facts
    4 - Marketing research needed
    5 - Time Lines
J - Action & Control
    1 - Action Program
        a - List the first year’s initiatives
        b - Estimate at what time each will be done in relation to other things
        c - Estimate how long they will take
    2 - Controls
        a - What checkpoints are necessary to make sure everything is on track?
        b - How will changes in the environment be handled?
        c - What will be measured?
K - Conclusion

Brand: It's All In Your Head 16 July, 2010

A company's brand is simply what a consumer thinks of a company and it's products. It represents a set of promises that a company makes to a consumer.

Brand equity consists of assets and liabilities linked to a brand that change the value of a product. It can also be thought of as the value of the company if the firm's total asset value was subtracted from the firms estimated value.

Building a brand can trump everything else in marketing, for better or for worse. Brands have the ability to create customer loyalty, lower competition, create larger margins, lower price sensitivity of products, create greater trade, create better communication effectiveness, and create brand extension opportunities.

The key to branding: The power of a brand is in the mind of the consumer

From a practical standpoint, consumers will rate a brand based on three things:
1 - The expertise of the company
2 - The similarity of products produced
3 - The absence of brand extension exploitation

Many characteristics and features that augment a product, such as warranty time, can affect branding. Popular culture, influencers, customers, and the firm can influence the culture or story behind a brand.

The value of a brand can be measured in four parts:
1 - Reputation
2 - Relationship
3 - Experience
4 - Symbolism

The Young and Rubicam Group have four ideas that when measured, can determine the health of a brand:
1 - Differentiation
2 - Relevance
3 - Esteem
4 - Knowledge

When differentiation is greater than relevance, the brand can grow. Otherwise, it cannot. When esteem is greater than knowledge, the customer will want a closer relationship. Otherwise, it will not. Brand strength is the combination of differentiation and relevance. Brand stature is the combination of esteem and knowledge.


Kevin Keller developed a model called the Customer Based Brand Equity (CBBE) Pyramid. It has the goal of allowing a company to:
1 - Decide what the brand should mean
2 - Develop a link between the brand and the product
3 - Get positive reactions
4 - Build lasting customer relationships

Figure 1 - CBBE Pyramid

The definitions that follow describe the CBBE pyramid, and can be though of in terms of understanding nomenclature. To communicate an idea, sometimes certain words or phrases are used, and in the beginning, synonyms are the only way a person has of understanding what the initial words or phrases mean. The following definitions will be defined by their synonyms because it seems this is the most effective way to talk about these brand ideas.

Brand Salience - Identity & awareness. It shows what basic functions the brand provides. It also allows the consumer to see new usage situations that were previously ignored or forgotten.

Brand Performance & Imagery - Meaning & associations. Performance is all about functional needs. This includes quality, utility, asthetics, and economic needs. It includes primary and secondary functions as well as reliability, servicability (effectiveness, efficiency, and empathy), and durability. It also includes style, design, and price.
Imagery is all about psychological and social needs. It is about user profiles, purchase scenarios, usage scenarios, personality, values, history, heritage, and experiences.
Both Performance and imagery can be profiled by looking at three main categories: Strength, Favorability, and Uniquness in that order.

Consumer Judgements & Feelings - The effects that the knowledge and product a company publicizes has on consumers. Quality, credibility, consideration, and superiority are judgement attributes. Warmth, fun, excitement, security, social approval, and self-respect are feeling attributes.

Consumer Brand Resonance - Brand loyalty. This means behavior loyalty, bonding attitudes, a sense of community, and active engagement.

A consumer cannot have brand loyalty to all the brands they come in contact with. This is due to both conflicting allegiances and personal differences and preferences. This links nicely with Jennifer Aaker's theory on brand personality. The theory states that if people choose friends based on personality, they should be able to choose products and services based on some similar personality. Doing this generally involves surveys that ask questions falling into the following categories (thus showing a product's personality) :
1 - Sincerity
2 - Excitement
3 - Competence
4 - Sophistication
5 - Ruggedness

Another method used in gaining consumer insights is the ZMET (Zaltman Metaphor Elicitation Technique). This method has a consumer gather images about a brand or product, and then use those images to tell a story. Missed images, sensory images, and image groups are also discussed. This method's main benefit is removing the constraints on voice/language and the asking of specific questions in gaining insights. It helps consumers say what they want to without putting their ideas into words.

The Link Between Consumers and Brands - A brand should help a consumer remember and understand the differences between a competitors brand and your brand.

Brands should:

• Suggest something about the product's benefits and qualities
• Be easy to pronounce recognize and remember
• Be distinctive
• Be extensible
• Translate into foreign languages
• Be capable of registration and legal protection

Brands must continually be built even if they are already strong. Competitive and consumer shifts can occur, and change everything. The time it takes to build a brand will be proportional to the time it takes to create enough awareness and understanding with consumers. In the end, it's what the consumer thinks that makes or breaks a firm.

Marketing and the Yardstick 15 July, 2010

Why should anyone measure marketing? The 'why measure' answer is pretty obvious, but the fact that marketing is being measured is interesting. Marketing costs a lot. Brand health + marketing = the company's reputation. Finally, the customer is usually the source of all cash for the company.

It's important to ask how the customer's needs are changing, how the firm can be loyal to the customer, and how marketing effectiveness can be measured in terms of the bottom line.

One way to create and understand measurements is by using a dashboard. A dashboard is simply a set of indicators that can be glanced at and absorbed quickly. There are several points to be made when talking about dashboards. Not a lot of explanation is needed. Use the following list as a dashboard creation guide, and the result will be above average.

• Don't overload it with too much information.
• Include operational, financial, customer, and quality metrics.
• Include driver, pipeline, resource, and talent information.
• Include innovation information.
• Show how the entire company as a whole is doing.
• Visualizations should be simple and easy to digest.
• Use a combination of historical data and leading indicators.
• Focus on leading indicators.
• Metrics should be as real time as possible.
• Only show controllable metrics.
• Use baselines to allow the flagging of extraordinary results.
• Echo corporate strategy in the metrics.
• Measure short and long term goal metrics.
• Create standard definitions for metrics.
• Verify metrics are absolutely correct.
• Allow for an audit trail to see the details.
• Casual (cause and effect) measurements should be used.
• Verify that the metrics matter.
• Measurement methods must be consistent across the company.
• Results should be shared.
• Results should be acted upon.
• Metrics should expose inadequacies.

There's the list.

A Smattering Description of 'Promotion' (IMC)

Marketing promotion/communications (often called Integrated Marketing Communications or IMC) can have several forms. Advertising, PR, value chain discounts, sales promotions, personal selling, in store displays and kiosks, direct marketing, and samples are some examples of IMC. This is really where marketing affecting consumers. Consumers must know about a product before they decide to purchase it. Push strategies attempt to keep contacting a consumer in hopes that they will buy the product. Pull strategies are focused on creating enough demand that consumers purchase a product with out being reminded to do so.

Public relations (PR) includes marketing communications and promotion by means of press releases, speeches, and service activities. While this can be a great and cheap way of gaining publicity, there is no guarantee that the publicity will be good. News agencies are entitled to interpret and show PR as they deem fit.

It is important to remember that when thinking about marketing communications, advertising should usually win out over promotions. Promotions will create a lift over the usual baseline profits, but this is generally short lived. Given price fluctuations that promotions create, the price sensitivity of a product goes up and the price premium that a brand can command will decrease.

While promotions can bring in extra money, they are usually thought of as short term solutions. Advertising products or a brand is thought of as a long term solution. The profits from advertising may not be as evident as in promotions, but it does lead a firm down the path of long term success.

The biggest hurdles to cross when advertising are identifying the target audience. After this has been done it is necessary to inform them, give them a trial experience, or get them to repurchase a product. The final step is creating the advertisement. This is usually done with one of the following goals:

• Educating consumers (product purpose and differentiation)
• Appealing to humor
• Appealing to fears
• Adding a belief to a consumer's mindset
• Conditioning
• Repetition
• Endorsements

Adding beliefs are important because it can be counter productive to attempt to change a person's beliefs.

It's also important to not forget the power of buzz and communities. They can alter the perception and hype of a product immensely.

Although IMC is one of the original 4 parts of the marketing mix and can sometimes include both promotion and placement, many companies will outsource it to avoid becoming an advertising agency themselves.

A Smattering Description of 'Price'

Price is some compensation that is exchanged by two parties. In internal business, it's all about the price.

Aside from price being a factor of purchase, there are several other functions it serves. Determining profits, sales, market share, and store traffic are a few. It creates a perception of quality or exclusiveness. It can encourage trials, and discourage competition.

There are several pricing strategies that should be considered when pricing products. These will be given in a list form because there are so many.

Cost-Plus Pricing: The cost of a product + a percent markup. This strategy ignores many environmental factors, but guarantees profits if sales are made.

Price Skimming: The price is initially set high to gain extra profits from early adopters, but set lower as more competition enters. This can work, but invites competition.

Penetration Pricing: The start cost is lower to help enter the market. Most profits are made by not raising the price, but by cutting costs.

Prestige Pricing: Creating a perception in the consumer's mind that quality is high, and they must pay a higher price for the product.

Bait and Hook: The initial price of the main product is low, but replacement parts and other materials or services consumed in the process have higher prices. This works unless a competitor can create low priced replacement parts and materials.

Price Promotions: This can be used to introduce new products or prevent consumers from defecting. It is also effective in selling older products when newer ones are available. Too many price promotions can cause consumers to wait and only purchase when there is a promotion, or switch between brands, cycling through promotions.

According to Robert Dolan's true economic value (TEV) theory, consumers are only willing to pay the cost of the best alternative + the value of the performance difference. This can be useful in setting an initial price for a product based on what consumers are currently buying. When setting initial prices, it is important to be clear on what market segment is being targeted.

Companies must revisit pricing strategies often and make sure they correspond to where the product is in the product life-cycle.

The Strategic Pricing Group created a pyramid that can be used as a framework to not only set a price for a product, but to have resources and a company capable of backing that price up.

Figure 1 - The Strategic Pricing Pyramid

1 - Value Creation: A product must be created and priced so a customer will pay for it, not simply be satisfied by it.

2 - Price Structure: Pricing should be based on the value received instead of the product delivered. Price for a customer segment rather than a product.

3 - Price and Value Communication: When value is not communicated, the doors to price sensitivity and price negotiations open. This becomes problematic. Having a communications strategy that uses both performance facts as well as psychological benefits will help solidify a value to a consumer.

4 - Pricing Policy: A stance must be taken on the frequency of discounts and promotions given. If this is not done, the customer base will drive profits down faster than the general efficient market.

5 - Price Level: Actual prices must be set and periodically reviewed in the same way throughout the company. This can take the form of a planned decision model that uses relevant data about how the market will respond to changes. Many times the best model is simply a fixed price/variable offering one.

These 5 steps should be consistently known throughout the organization.

What has been stated up until now has largely been academic in nature. It is now necessary to turn attention to a customer's view of their willingness to buy.

Consumers will buy a product based on:
1 - When its perceived value exceeds its price.
2 - Fairness compared to another consumer's purchase or a producer's cost.
3 - Incentives relative to the price.
4 - Reference prices such as the last known sale or purchase price.
5 - Perceived exploitation of the consumer.

Consumers will remain customers if they know there is value in the product. Remembering that a product has value includes:
1 - Actually using a previously purchased product.
2 - Understanding per line item if there are parts, what the cost is.
3 - Paying for the product close to the time of use, which enforces the product's value.

Pricing can make or break a product line even if the products are great. These steps will help act as a guide, making sure the price matches not only the product, but the market.

A Smattering Description of 'Product' 14 July, 2010

Products can often be though of as bundles of consumer benefits. The core benefit is really what the consumer is buying. Products can be end results. They can be services or physical objects. According to Michael Solomon, they can even be people, places, and ideas.

Products are an interesting part of the marketing mix (product, price, promotion, and sometimes placement) because products are the most difficult to change after they have been planned and manufactured.

Products have elements of convenience, shopping, specialty, low & high involvement, function, and emotion. It is important to market these factors correctly because by default, not everyone will place a product in the same categories.

Brand, delivery, installation, customer service, warranties, and payment methods are some examples of how a product can be augmented. As a product becomes more mainstream, augmentation will become more important as a differentiator.

The Product Mix

A product mix is made up of all product lines. A product line is a number of products that have a similar function, style, manufacturing process, distribution process, consumption method, or market segment. These exist so a firm can satisfy multiple market segments at once.

The speed of adoption is critical when computing the time at which a product's/product mix's income will have passed development costs and surface as profit. Rogers created the ACCORD acronym to show influencers of adoption:

A - Advantage (superiority)
C - Compatibility (with the consumer)
C - Complexity (understandability and use)
O - Observability (of adoption by others)
R - Riskiness (consequences of adoption)
D - Divisibility (gradual adoption)

There are several attributes used to describe a product line. These attributes can help a marketer decide how to communicate differences from one product to another:

Breadth: Number of product lines.
Depth, Length: Number of products within a line.
Horizontal dimension: Differentiation by consumer taste.
Vertical dimension: Differentiation by performance and price.
Continuous innovation: An improvement to how something is currently done.
Discontinuous innovation: A new way of doing something.

New Product Development

New product development should always be taking place. Although many innovations become apparent after consumers are exposed to them, innovations and products alone cannot create demand. Consumers must want or need a product once it exists.

First you generate ideas. After amassing a number of ideas, those ideas are screened. The ideas that remain are fleshed out into concepts. When you have screened concepts, it is a good time to start getting market feedback. With that feedback in mind, a marketing strategy is defined and a business case is built for a rough idea of whether or not the concept is profitable. Product development then begins. Depending on the cost of product development, an amount of test marketing takes place during the product development. Finally, commercialization occurs and the product is released.

A process for product development:

1. Observe the situations of consumers
2. Generate ideas
3. Screen concepts
4. Research concept components
5. Create go/no-go decision points
6. Analyze the product's business model
7. Prototype
8. Test the market
9. Promote/Distribute

Two parts to the above list may not be obvious at first:
Go/No-Go decisions must not be based on passing simple hurdles, some metrics may be needed.
Also, the product must fit the company and it's mission.

Consumers will compare products to competing products. If no competition for a product exists, consumers will compare the new product to the current way of doing things without the new product.

In theory, product life-cycles generally follow a development, introduction, growth, maturity, and decline stage.


In practice they fluctuate based on fads, urgent needs, competition, education about the product, and abstract or paradigm shifting products. In fact, Frank Bass created an abstract model that can give an idea of product demand and sales to interested parties:

a	=	Consumers making up their minds independently
b	=	Consumers who act on word of mouth
Bt	=	Consumers to date who purchased the product
M	=	All consumers in the Product's market

At the end of the day, some products may have little demand. Even those products with little demand should be maintained as long as they bring in enough to cover their costs. This is done to placate consumers who have already purchased older products and may feel like they have been abandoned or that what they have is obsolete if the product is discontinued. Then again, maybe that's the marketing spin you want.