Week 4: Continuing to Obsess over the Consumer: What is STDP?

This week, my team and I have been busy giving final shape to the first section of our marketing plan on Alternative Fuel Vehicles. As part of this exercise, I have been able to increase my awareness about hybrid and electric vehicles. I have enjoyed learning about the marketing planning process. I can say I understand the first two steps of marketing planning,J, namely,

1.    Research and analyze the current situation, and,

2.    Understand markets and customers.

As for the Alternative Fuel Vehicle industry, it has potential to grow but has its share bit of challenges as well. If you would like to learn more on this topic, you are welcome to refer to our team’s marketing plan,J, in near future.

Other deliverables for this week,

1.    Read Chapter 4                                              Done

2.    Read the 2 HBR articles                                I have read the articles as of today but that’s about it.

                                                                               Our team plans to gain momentum on this 

                                                                               assignment, after we wrap up our marketing plan.

3.    View ‘My Camtasia Video’                            Done. I like the term USP, Unique Selling Position.

4.    Answer qs on blog site                                   In process of doing that now.

1.     How does segmentation facilitate consumer obsession?

I want to fulfill the needs of my customer base to the best I can. But the needs of my customers are not all alike, how can I do that? The process of fulfilling specific needs of specific customers is called Segmentation. I liked the segmentation definition and explanations in the second HBR article for this week. “Market Segmentation consists of dividing the market into groups of (potential) customers – called market segments – with distinct characteristics, behaviors, or needs. The aim is to cluster customers in groups that clearly differ from one another but show a great deal of homogeneity within the group. It is important that the segments are sufficiently different from one another.”

Given that this week-end is March Madness’s culmination (College basketball for those who do not follow sports in states), I am sharing an article I stumbled upon recently. It has an interesting view on segmentation. As fyi, the article is not very insightful to use for winning brackets :).

http://www.experian.com/blogs/marketing-forward/2011/03/16/bracket-science-meets-marketing-segmentation/

On a side note, my team (Michigan) did not make it past sweet 16, so I am left with either supporting my husband’s team (Buckeyes) that’s in the final four or having no loyalty towards any team. A hard choice still toying the idea which way to goJ!

2.     When a firm chooses a particular segment for targeting what are its primary considerations?

A firm needs to get a good understanding of its available resources and prime competencies when deciding which segments to target. Four key factors are used while evaluating segments for targeting,

a.    Market factors: Size, growth rate, life-cycle stage, predictability, price elasticity, bargaining power of buyers, cyclicality of demand.

b.    Economic and technological factors: Barriers to entry and exit, bargaining power of suppliers, technology utilization, investment required and margins.

c.    Competitive factors: Intensity, quality, threat of substitution, degree of differentiation.

d.    Business environment factors: Economic fluctuations, political and legal, regulation, social, physical environment.

Different firms employ different methods of targeting, concentrated, undifferentiated or differentiated marketing.

3.     What is positioning?  Where does a firm's position reside. 

A firm buckets customers in similar groups (segments) and decides to target specific segments, then what does the firm do? How does the firm separate its product from the rest or another way put how does the firm create brand advantage? Positioning is the effort to differentiate a product by a specific attribute that the customer finds value in. A firm’s position resides in its customer’s eyes. The environment is constantly changing, with new players entering and/or exiting the marketplace. For a firm to remain competitive, it requires to always have a differentiating factor or a competitive edge over its rivals.

4. Think about a couple of companies competing in the same space with different segment focuses.  Discuss these firms and their various approaches.  Why are they different?   

I decided to look at two companies in the food industry, namely, Whole Foods and Trade Joe’s. I have enjoyed shopping at both these stores. I admire the founders of their ability to identify a unique space to operate in. I have highlighted the key difference I find in the two companies in color blue. One charges high cost for high quality product, while the other advertises high-quality at low or rather not as high a cost.

Whole Foods: Whole Foods goal is to ‘sell highest quality natural and organic products available’. The company justifies its high cost by way of its delivery of the highest quality product in the most customer friendly manner. It focuses on the quality aspect of its products all the way down its supply chain reaching its supplier base, as it has used quality as one of the mantras’ to separate itself from the others in its space.

It is Whole Foods attention to detail that sets it apart from its competition. Be it the colorful display of products (fruits and vegetables) at the entrance to the way employees greet customers to the way cashier provides special attention to each billing customer at the counter, Whole Foods has mastered the art of customer attention. The company has a powerful mission statement, ‘Whole Foods – Whole People – Whole Planet’ that hits a chord with many loyal customers.

                                     

Trader Joe: A lot is not known about Trader Joe’s marketing plans, as the company and its parent ‘Aldi’ have been successful in keeping its strategies hidden. What is known is the Trader Joe’s goal, which is to focus on high-quality gourmet food at low cost in a fun environment. This simple yet powerful mantra that the grocery chain lives each day has helped to create a niche space that many rivals of Trader Joe’s envy. One may wonder how is Trader Joe’s able to get a high-quality product at a lower price when many of its competitors struggle to do just that. Trade Joe’s relationship with its suppliers is probably one of its key competitive advantages. Not a lot is known about the relationship, but what is known is the company works hard to keep its suppliers happy.

In the first image below on the left in the deli section, title requires attention, 'Baked Fresh Daily At Prices too low to pass up'.

                      

 Simple yet unique ideas have separated these two companies to allow them to target different  customer bases.

Week 3 – Reflection on Dr. Hans Hosling, Malcolm Gladwell videos and Market Research

We live in an information overload world. Gaining insights without getting lost in the details is becoming increasingly hard. I found Dr. Hans Rosling’s video very true. Making sense of the myriads of data in order to extract the right value is something that only few people have been able to master. I have been in many meetings where because the data is not accurately presented the aim of the meeting is lost in some topic outside the scope of the discussion. This is not to say that I am not guilty of having made the same mistake at times. Sometimes colleagues or leaders, who are honest enough to point out the mistake if they catch it, may point it out, but many times the mistake or misrepresentation gets caught after the damage is done.

I found Malcolm Gladwell’s video equally engaging. Several researchers had access to the same data that Howard Moskowitz had but no one stumbled upon the invention of variety in food choices such as spaghetti sauce. Not everyone looked at the data with the same keenness as Mr. Moskowitz did. I watched a video on 60 minutes (The Flavorists: Tweaking tastes and creating cravings, from Nov 2011) not too long ago, highlighting how the food industry continues to invest millions of dollars in identifying that one unique flavor in addition to the already 50 some flavors. The focus of the 60 minutes segment was to point out how cravings are created by means of developing a unique flavor, not exactly same as what Mr. Moskowitz’s work was all about, but still very much related. It may not be a stretch to say that if it was not for Mr. Moskowitz……there would not be much work for the flavor developers in the food industry. Food industry has a very common saying that, flavor is what makes customers return to their product.

Did we just discover the next big flavor?                                   

This week’s focus is on market research, an important piece of marketing function. For me the biggest take away from this week’s material including the slide deck presented at the Tuesday breeze session is, why do we need to do market research? What will be done with the data gathered?

1.     Does your company use research to understand it's customer's?  What type of research? 

I am aware that my company’s marketing division uses research to understand the customer base in the markets we do business in. I have never been part of the marketing function at CMI so I have gained understanding on the marketing aspects at my company via my own project experiences, interactions with cross functional colleagues and few friends who work in the marketing function. I do believe that the marketing folks do a good job J, as I have examples of some good projects where front end research was done to decide the respective path. At the same time I have to say, there is room for improvement. I have got doubts on some projects when there was not enough data and convincing arguments to explain why a certain supplier was picked say to provide engineering contractual services. The argument that this was the best supplier available does not chime well with the skills offered by the chosen supplier.

2.     What Insights does Dr. Rosling gain from the data collection and analysis he conducts in the video.  How important is the visual display of data in creating these insights? 

The global development analysis is critical to evaluate changes in the world, and preconceived ideas are hard to change. A good data representation can hit the point home very well. The visual display was the most insightful for me. Data not analyzed well can lead to some very different findings. The demographic shift in longevity of life with shorter family size and change in gap between the poor and rich over the years was interesting to me.

3.     Where will you go to collect data for your marketing plan?  How can you learn about the type of consumers in the market you have been assigned.  How will you convey and provide insights to your client using this information?

This is an apt question for my team (1) as we are tasked to submit the first part of our marketing plan in a week’s time. Data collection for a marketing plan entails looking at all resources one has at his or her disposal. In the internet age that we live in, net has made it relatively easy to gather data, but still the key is in finding accurate and right data. I am using my own experience, prior readings and of course internet searches to gather data for my team’s marketing plan. In order to understand the consumer needs and preferences in the market assigned to us, we need to review prior year purchases made by the consumers in the product space and industry we are interested in. Alongside, one needs to review the macro and micro environmental trends and marry those trends with the prior year data to identify upcoming trends that may favor the purchase of the product we are interesting in selling. As for explaining our findings and providing insights to our clients, that is how best to present our marketing plan, that is where we will need to remain aware of Dr. Hosling’s video. All work and data may be meaningless if not presented well.

Week 2: Examining Environmental Variables (Back in states, blogging from Columbus, IN)

I am glad to be back home and return to normal routine. It was hard managing school work in transit esp. without relevant books :).

Following are the key learning for me for this week. 

1. SWOT Analysis
2. Internal and external factors that directly/indirectly impact marketing decisions for a firm
3. What all is entailed in developing a marketing plan

I was formally introduced to SWOT analysis a year back at the first in-residence Kelley direct week in a strategy class. Since then, I have used the analysis in two important situations at work and several other situations outside work, as I find value in the concept.

No firm can survive for long, without being agile to its internal and external factors! There are several examples that come to mind of firms that understand this well and firms that have ceased to exist because either they remained in denial or were too late to accept this fact. Google, Apple, Bestbuy are a few firms that continue to utilize respective internal and external factors to their advantage. Circuitcity, Borders, Quiznos are few companies which failed to react in time to their external threats.

Questions to be answered this week

A.     I work for Cummins Inc. like many other members in this class. I saw that few of my Cummins colleagues have already posted their views on this question. Like any firm in the marketplace, Cummins Inc. is no different, in that it needs to be agile to its external environment at all times. Economic, political, geographical, environmental and social factors have a considerable bearing on our industry as well. One external factor that is critical to Cummins and other engine manufacturers is regulation passed by government agencies such as EPA (Environment Protection Agency) in US. Another factor that impacts our industry is price of heavy metals and price of fuel, both of which are outside our control.  These are just a few examples to highlight that it is critical to closely monitor and gain deep understanding of external factors when defining strategic plans for our line of businesses. The one difference I see for equipment manufacturing and/or industrial firms is that the product launch cycle is relatively longer than say apparel industry. Given the capital intensive nature of the product development work for a heavy equipment manufacturer, changing course is not easy and therefore, accuracy in strategic planning becomes even more important.

B.     Analysis on Mission statements

a.       Cummins Inc. is actively engaged in being consumer focused and not simply product focused. Our sales and marketing partners work hard to gauge consumer needs not only in developed markets but in new and emerging markets as well. The company is committed to releasing products that fit needs of all our customers as we understand one size does not fit all.

b.      In my opinion, consumer focus is a better approach. Consumer focus is sustainable in the long term. It forces the company to not sit on its past laurels as consumers are bound to change in their preferences overtime.

c.       I do believe the mission statement at Cummins helps to drive positive company culture. As another colleague has already posted, following is our mission statement(s).

·   Motivating people to act like owners working together.

·   Exceeding customer expectations by always being first to market with the best products.

·   Partnering with our customers to make sure that they succeed.

·   Demanding that everything we do leads to a cleaner, healthier, safer environment.

·   Creating wealth for all stakeholders.

C.     Changes in external environment (such as culture, technology, politics)

a.       For Cummins Inc., change in political environment can be a big driver or deterrent. For example, change in political climate can impact the governing bodies such as Emission Protection Agency (EPA) and its decisions can result in requiring Cummins Inc. to revisit its solution of next tier engine launch. Change in political climate can impact rules around outsourcing of work or it can impact trade agreements between countries causing issues in procuring parts from different parts of the world.

D.    What do consumers get when they buy Cummins engines?

a.       Power, reliability and satisfaction.

b.      When consumers buy and install Cummins engines in their truck, tractor, wheel-loader or Genset, they know they are getting a product that will do what it says it will do.

.

Marketing Myopia....I could finally get hold of the article

March 10: Summary on Marketing Myopia by Levitt


I could finally get a hold of the marketing myopia article sitting in India, without access to my text, as one does not need text book to access internet :(. Blame it on my vacation mode for being slow to understand this ....

Theodore Levitt, in 1960 understood and highlighted a key aspect that still many companies and executives fail to understand or rather accept.  Releasing products that satisfy sellers' needs and only to a certain extent maybe consumers needs, may be a good business preposition in the short run, but is not sustainable and cannot be profitable in the long run.

Hailing from India where majority population travels through rail transport, I always wondered why are railroads not a prime mode of transport in the US. I was never convinced that capital intensive nature of the rail industry and several other avenues (air, road) were the reason for the relatively stagnant rail industry. I enjoyed reading Levitt's views on the reasons behind the slow growth in the rail industry in US. Quoting Levitt, ' The rail industry is failing because those behind it assumed they were in the railroad business rather than the transportation business. The history of every dead and dying 'growth' industry shows a self-deceiving cycle of bountiful expansion and undetected decay.'

Marketing myopia is an apt term, as it does a good job in highlighting the flaw of focussing on products rather than customers. I always get reminded of what Steve Jobs (late Apple executive) was famously known to say, ' You can't just ask customers what they want and then try to give that to them. By the time you get it built, they'll want something new'. You need to innovate and give a product to the customer what they may want in future, and thats how you can separate yourself from rest of your competition and stay sustainable.

Blogging on March 6 from India!

I am all set to start my 12 weeks of Marketing journey....more appropriately from March 13!

Tasks completed this week (March 6-12)
- Setup my Blog site and finally started on my first blog.
- I am part of Team 1. Greetings members of team 1. I am looking forward to working with you. I shall
  email and introduce myself, won't just say virtual hi via my blog :).
- I continue to read 'Marketing' definitions posted by others in the class.

Now the not so funny revelation. I am in India till March 13th, came here for work for 2 weeks and now on 1 week vacation. I forgot to carry my Marketing book as left just after wrapping my last Kelley term. So I can't read the Marketing Myopia article or for that matter any other marketing text, until after March 13 as all my reading material is sitting at home in  Columbus, IN. I plan to rely on the Breeze Slide Deck and writeup posted by others in the class until I can catch up on the text/article readings starting March 13. Prof' Talbott, my apologies for this mixup of 1 week!