Profit Centric Business design

1. Profit Centric Business design • To truly understand customers and thus formulate and execute business strategy that can accelerate profitable growth, managers must design each of their businesses around a disciplined choice of a winning value proposition

2. THE VALUE DELIVERY SYSTEM (VDS)STRATEGY FRAMEWORK Create, redesign, manage businesses as VDS’s CHOOSE THE VALUE PROPOSITION PROVIDE IT COMMUNICATE IT Analyze the market space Decide how for each resulting experience in the VP, how you will provide customers with the actual experience, how they will understand it and believe it Choose a complete Value Proposition Capabilities you therefore need TOTAL REVENUE minus COST = BUSINESS PROFIT

3. CHECKLIST FOR A WINNING BUSINESS/Value Delivery System (VDS) WOULD THIS VDS DELIVER A SUPERIOR VALUE PROPOSITION? If delivered as designed, do we believe intended customers would conclude that the value proposition is superior to their competing alternatives? • HOW MUCH REVENUE would we expect ?

4. DO WE BELIEVE WE CAN BUILD THE CAPABILITIES NEEDED to implement this VDS? This includes improving existing, and creating new capabilities to provide and communicate the proposition WHAT TOTAL COST would we incur? This includes on-going operating costs plus those of building new capabilities, and the cost of capital

5. HOW MUCH PROFIT would this business/VDS generate, ignoring other businesses or later timeframes? WHAT IMPACT ON OUR OTHER BUSINESSES, if any, would this VDS have? To what extent would conflicts or synergies from this VDS reduce/increase profitability of our other businesses?

6. WHAT IMPACT ON LATER TIMEFRAMES would this VDS have? Does it facilitate a longer-term, more profitable VDS, or compromise later ones? WHAT DISCONTINUITIES may impact its success and sustainability? What changes in the environment could change the outcome of this VDS? HOW DOES THIS VDS COMPARE TO OUR OTHER OPTIONS?

7. IN NET: IS THIS A GOOD VDS? Do we believe it will, long term, generate more wealth for the firm than not implementing it?

8. A name, sign or symbol used to identify items or services of the seller(s) and to differentiate them from goods or services of competitors. Brand. 8

9. GOOGLE. SEARCH. BMW. DRIVING. INDIA. DIVERSITY. 1/5/2020 9

10. Value Proposition • The Value proposition consists of the whole cluster of benefits the company promises to deliver. It is more than the core positioning of the offering. • Eg Volvo’s core positioning has been safety, but the buyer is promised more than just a safe car. Other benefits include along – lasting car, good service and along warranty period.

11. The value proposition is a statement about the experience the customer will gain from the company’s market offering and from their relationship with the supplier.

12. A “COMPLETE” VALUE PROPOSITION Explicitly decides, for this proposition: • I. Who are the intended customers? • II. What is this proposition’s time horizon? • III. What do we want these intended customers to do? • IV. What competing alternative(s) do they have? • V. What resulting experiences will they derive, vs. alternative(s), if they do as we propose

13. Value Proposition A Brand’s Value Proposition is a statement of the functional, emotional and self – expressive benefits delivered by the brand that provide value to the customer. An effective value proposition should lead to a brand – customer relationship and drive purchase decisions

14. Functional benefits Volvo –safe and durable because of its weight and design Quaker Oats provides a hot, nutritious breakfast cereal A BMW handles well, even on ice Huggies deliver comfort and fit, so leaks are avoided Gatorade helps replace fluids when one is playing

15. Emotional benefits Safe in a Volvo Excited in a BMW or watching MTV In control of aging with Oil of Olay strong and rugged while wearing A Levi’s

16. Self - expressive benefits Hip by buying fashion from GAP Sophisticated using Ralph Lauren Successful , elegant, rich wearing a Rolex Sporty wearing a Tag Heuer Watch

17. Table 11.1: Examples of Value PropositionsDemand States and Marketing Tasks

18. Definition. “Positioning is not what you do to a product. Positioning is what you do to the mind of the prospect.” “Positioning is ,how you differentiate yourself in the mind of your prospect”. e.g. Mysore Sandal -Purity and natural fragrance. Margo- Herbal(neem). Lifebuoy-Hygiene. 1/5/2020 18

19. Positioning attracted attention when in 1972 Jack Trout and Al Ries wrote a series of articles entitled “The Positioning Era” for the trade paper Advertising Age. Today positioning has become the buzzword of advertising and marketing, all over the world. Positioning starts with a product .A piece of merchandise ,a service ,a company ,an institution or a person. Perhaps yourself. But it is not what you do to a product. Positioning is what you do to the mind of the prospect. That is ,you position the product in the mind of the prospect.

20. Why positioning? There are two kinds of products – commodities and brands. A commodity is a product that is same as those made by every other company. As a result the only way to sell a commodity is by selling it cheaper than your competitor. A brand on the other hand, is a product that is unique and different. A customer can buy A Tata Indica for a lot less money than a Mercedes Benz, but most Mercedes customer won’t buying tata or any other vehicle simply because “it’s not a Mercedes-Benz.” You need unique brands to make money. 1/5/2020 20

21. Why positioning? Starbucks narrowed its focus to high-end coffee and became the world's largest coffee chain.Dell Computer narrowed its focus to personal computers "sold direct" and became the world's largest PC manufacturer.BMW narrowed its focus to "driving" and became the largest-selling European luxury carin the U.S.Focus is the key to successful brand building in today's ultra-competitive marketplace You narrow the focus 1/5/2020 21

22. Some famous positioning statements • Titan Quartz, the international watch you can pay for in rupees • Four Square…Live life king size. • Hero Honda…Fill it, shut it, forget it. • Savlon…Yeh jale ga nahin • Avis…We are No.2, so we try harder • Maggi Noodles…bus do minute • ESSO petrol…..put a tiger in your tank.

23. Developing and Communicatinga Positioning Strategy • Communicating the Company’s Positioning • Positioning statement • More car per car……….TATA Indica V2 • Spoil yourself…………..TATA Indigo • Lets make things better……Philips • For a special journey called life…..Chevrolet • The difference is German engineering….Corsa • Express yourself……Airtel • For Managing Tomorrow…..Business Today

24. The Competitive Position may be different in another (geographic) market: Honda in Japan Youthful Sporty Hi-tech engineering Honda in USA Economical Good enough for everyday “Import”

25. We achieve positioning byAttributes and Associations How does the Marketing Mix fit here? Positioning Attributes Associations Features Channel Performance Advertising Price Other Promotion

26. How these companies positioned themselves Mercedes-Benz ………………… prestige. BMW …………………………… driving. Volvo…………………………….. Safety. Starbucks………………………… high-end coffee.. Rolex……………………………… high-end watches. Google ……….……………………Search. Red bull ………………………… energy drink. FedEx…………………………… overnight (delivery) 1/5/2020 26

27. Volvo owns a single word in the minds. Volvo. Safety. Volvo has successfully simplified and Communicated this message. 1/5/2020 27

28. You differentiate or die Advertising has entered a new era where creativity is no longer the key to success, today a company must create a position in the prospect’s mind. A position which is unique and based on company’s strengths and on realities. You don’t lie you only exaggerate. Camlin (marker)-Permanent. 1/5/2020 28

29. Heidelberg - the working man’s beer. Bud - the athletic beer Bud Lite - the party beer Coors - the environment beer Beers 1/5/2020 29

30. Marlboro - the rugged male Virginia slims - the independent female Camel - cool and sophisticated Benson & hedges - “intellectual” Cigarettes 1/5/2020 30

31. So is positioning always beneficial? Xerox first made photo copy machine & sold them world wide, as the time passed Xerox become synonymous to photocopy. When it launched it’s “Xerox data system", fax machine, and PC all were disastrous and Xerox lost billions of dollar since it could not change or reconstructed minds of prospects. Xerox. Photocopy. Same happened with IBM & Dalda 1/5/2020 31

32. Repositioning :Reconstruction of perceptions. Companies like IBM, Bajaj and Xerox did it. 1/5/2020 32

33. Saturn Value Proposition • Functional Benefits : A quality economy car; a pleasant buying experience, excellent , friendly service back up • Emotional benefits : Pride in a US made car, friend relationship with Saturn and dealers • Self - expressive benefits : owning a Saturn identifies a person as frugal, down to earth, fun and young at heart

34. McDonald’s Value Proposition • Functional benefits : Good tasting hamburgers, fries, and drinks that provide value: extras such as playgrounds, prizes, premiums and games • Emotional benefits: Kids- fun via excitement of birthday parties, relationship with Ronald Mc Donald and other characters, and feeling of special family times Adults -warmth via link to family events and experiences reinforced by the McDonald’s emotional advertising

35. Nike Value proposition • Functional benefits : High – technology shoe that will improve performance and provide comfort. • Emotional benefit : The exhilaration of athletic performance excellence: feeling engaged, active, healthy. • Self – expressive symbolic befits: self - expression is generated by using a shoe with a strong personality associated with a visible athlete

36. What is Brand Equity and Why Does It Matter?(From Berry, “Cultivating Brand Equity”) Definition: A set of assets and liabilities linked to a brand’s name and symbol that adds to (or subtracts from) the perceived value of the product Insights • Brand equity can be positive or negative • Positive brand equity creates marketing advantage for firm plus value for customer • Perceived value generates preference and loyalty • Management of brand equity involves investment to create and enhance assets, remove liabilities

37. A Service Branding Model: How Communications + Experience Create Brand Equity Marketer-controlled communications Firm’s Presented Brand (Sales, Advertising, PR) Awareness of Firm’s Brand Uncontrolled brand communications Firm’s Brand Equity What Media, Intermediaries, Word-of-Mouth Say re: Firm Meaning Attached To Firm’s Brand Customer’s Experience with Firm Source: Adapted from L. L. Berry ( Fig. 1)

38. Millward Brown's annual BrandZTop™ 100 Most Valuable Global Brands study • The BrandZ Top 100 Most Valuable Global Brands study is the only valuation in the world that takes into account what people think about the brands they buy alongside rigorous analysis of financial data, market valuations, analyst reports and risk profiles. 

39. Millard Brown Brand Values 2014 According to the firm's estimates, Google's brand value jumped 40 percent over the past year to $158.84 billion, or 115 billion euros. By comparison, Apple dropped in brand value by 20 percent to $147.88 billion after leading the BrandZ list since 2011. In 2013's list, Apple's growth slowed down to one percent year-over-year, but ended up having a huge $71.4 billion gap over then second-place Google. Following Google and Apple this year were : IBM at $107.54 billion, Microsoft at $90.19 billion McDonald's at $85.71 billion. Coca Cola Visa, AT&T Marlboro Amazon.com rounded out the top-ten.

40. Apple since long has ruled the Tech-World as a brand that is both leading in terms of value and customer loyalty.  • But seems the reign has seen its demise. • Global Market research agency Millward Brown stated in its 2014 Top 100 BrandZ report that Google’s brand value has shot up 40% in a year to $US 158.84 Billion. • "Google has been extremely innovative this year with Google Glass, investments in artificial intelligence and a range of partnerships," said Benoit Tranzer, the head of Millward Brown France.

41. Recently Google tied up with Luxottica, a glasses giant behind Ray-Ban and Oakley, to sell their new product Google Glass in the United States. The glasses shall be according to a customer’s preference and no more make one look like some space age being. (Though that’s cool enough) • Also propelling Google’s brand value was the takeover and selling off of Motorola Mobility from which it acquired some 8000 patents all from Moto’s Kit. 

42. Google’s policy of targeting all of the market with their well-priced products and almost lifeline services has definitely paid of well. •  Apple on the other hand, has maintained their tradition in every front with similar devices and policies, the only new being their OS update. The new Mac Pro too hasn’t yet made that much of an impact as expected though it is a brilliant workstation. • Apple, which dominated the top position for 3 straight years, saw its brand value fall by 20 percent to $US147.88 billion. 

43. The top 10 of the 100 slots were dominated by US companies. IBM was in third place at $US107.54 billion ($116.35 billion), a fall of 4 per cent, followed by Microsoft at $US90.19 billion ($97.58 billion) – a 29 per cent rise.

44. The good news on the block being that Google and Apple declared a cease-fire in their intellectual-property wars, saying they will work together in some areas of patent reform. This makes us expect lot more great products from the two Technology giants.