Moving Beyond Product and Price:
Positioning to Win Through Intangible
Assets
Facilitated by Martin McLaughlin
Mosaic Partners llc
mmclaughlin@mosaicpartners.com
610.918.9171
October 1, 2004
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Biggest Challenge?
Competing against the Big Guys…
But Growth of the Economy is on
Our Shoulders
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•Who is doing this well today? How are they doing this?
•Who is responsible for creating and managing value in your
organization? Why is this important?
•Once you have a customer relationship, how can you migrate and
expand these relationships?
– Well, it all depends on how you define what you do.
•What is the impact on your business and revenue model?
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What does Starbucks sell?
What does Progressive Insurance sell?
What does UPS sell?
What does Home Depot sell?
What does Mosaic Partners sell?
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Starbucks aims to provide quality coffee in a relaxed
atmosphere for those seeking a respite between home and
work.
The ambience and service is the same everywhere. This is the vaulted Starbucks
Experience, an elusive halo that competitors desire, but have trouble duplicating.
“It’s very easy to copy the superficiality of the brand; in other words, the look and
feel of the store,” says Maslen.
“The most important thing is how welcome people feel
and the connection they make.” “It’s really a contradiction
in terms – intimacy on a mass scale. But Starbucks is a very
intimate brand.”
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Read It Closely: “We
don’t sell
We sell
speed.”
insurance anymore.
Peter Lewis, Progressive
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“UPS wants to take over the sweet
spot in the endless loop of goods,
information and capital that all the
packages
[it moves] represent.”
ecompany.com/06.01 (E.g., UPS Logistics manages the
logistics of 4.5M Ford vehicles, from 21 mfg. sites to 6,000
NA dealers)
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Nardelli’s goal ($50B to $100B by 2005):
“… move Home Depot beyond selling
‘goods’ to selling ‘home services.’ … He
wants to capture home improvement dollars
wherever and however they are spent.”
E.g.: “house calls” (At-Home Service: $10B by ’05?) … “pros
shops” (Pro Set) … “home project management” (Project
Management System … “a deeper selling relationship”).
Source: USA Today/06.14.2002
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Mosaic Partners = 1 Guy with the Change in my Pocket
SEI INVESTMENTS
HPCII
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Market Positioning at the Heart of Asset Investment
• Customer-based perceptions
• Price-to-value trade-off
• Two broad positions
low cost
differentiated
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Positioning Analysis: Retail
“Customer’s Eyes” View
Nordstrom
4x
Price
1x
Differentiated
x
Low
Cost
x Wal Mart
Brand
Service
Atmosphere
Quality
Selection
Price
Value
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Positioning Analysis: Internet Connectivity
Nokia
$46
$23
2004
Cable, Broadband
We live in constantly
AOL
changing and intensely
competitive markets
Price
NetZero
Erols
< $9
We must constantly innovate
and make tradeoffs
Access
Content
Community
Experiences
Value
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Positioning Analysis: Internet Connectivity
Understanding consumers' gradual move
towards collecting and storing experiences
instead of goods (especially in mature
economies), is crucial, whether you sell
luxury handbags or manufacture cars.
So how are you enabling your
customers to make the
experience last?
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Positioning Analysis: Marketing Consulting
Price
“Customer’s Eyes” View
Mosaic Partners
x
4x
Differentiated
Low
Cost
x
1x
Value
Marketing
Exchange
Existing
Customers
Rosemont
Opinion
Series
Focus on
Needs of
CMO
Andersen
Network
ExAndersen
Good
Offerings
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Marketing Migration
Physical and Financial
Commodity
Product / Service
Quality
Products
Customers, People, Brand, Processes,
Relationships & Intellectual Property
Quality
Services
Customer
Focused
Solutions
Unique
Customer
Experience
Mosaic Partners LLC TM
Increases
Decreases
Number of Competitors
Price Pressure and Margin Erosion
Reliance on Market Data
Make and Deliver Mindset
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Marketing Migration Measures
Migration Position
Measure
Solutions &
Experiences
Success
Quality Services
Satisfaction
Quality Products
Six-sigma
Source: Tom Peters
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Marketing Migration Outside-In View
Traditional Physical Process Sequence
(Product-centric vs Relationship-centric)
Operational
Functions
Marketing
Functions
Make the product
Sell the product
Design Procure Make
product
Price Sell Advertise/
promote Distribute Service
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Marketing Migration Process Impact
Market Migration
Physical and Financial
Customers, People, Brand, Processes,
Relationships & Intellectual Property
• Communication
- functional
- efficient and formal
- guarded and one way
- set expectations
- cross functional
- effective and informal
- open and two way
- understand expectations
• Branding
- external and static
- corporate and products
- one to many
- marketing shapes
- internal and dynamic
- corporate and people
- one to one
- everyone shapes
• Customer Service
- eliminate variation
- transactional
- reactive and compromise
- orchestrate variation
- relational
- proactive and surprise
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Intangible Value is Real Value
Q: What is the value creation dynamic that is propelling the need for creative
offerings in experiential marketing services?
Cost of coffee bean when harvested = $0.50/lb.
Value realized by Starbucks from selling cup of coffee = $230/lb.
- AN INCREASE OF VALUE OF +46,000%.
A: Because of their mastery of the experience economy and creating a
holistic experiential marketing program....
Source: Pine and Gilmore
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Intangible Value is Real Value
Q: Why should retailers create theme-park like environments in their stores?
Source: Pine and Gilmore
A: Toys 'R Us knows. Their 110,000 sq. ft. flagship store in Time Square has become the destination
for thrill seekers, make-believe princesses and Jurassic fans of all ages. The store boasts a working
60-ft. Ferris wheel, a two-story Barbie doll house, and a five-ton, 20 ft. high, 34-ft. long animatronic
T-Rex dinosaur. John Eyler, Chairman of Toys 'R Us, said:
"How do you compete with something like Wal-Mart? Our strategy is to make a store that is visually
exciting, one that sells concepts and ideas instead of just boxes on a shelf. For years people have
talked about the idea of retailment, which is about bringing theater and drama to retailing, but there
are hardly any examples." - New York Times 2-17-02
OVER 30,000,0000 PEOPLE HAVE VISITED THIS STORE IN ITS FIRST YEAR!
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Impact of New Economy on Marketing – Richness and Reach
• Years to reach 50 million users:
–
–
–
–
–
–
Radio, 38 years
TV, 13 years
Cable, 10 years
Internet, 5 years
Hotmail, 1 year
iTunes
• First 25 million downloads in 8 months
• Next 25 million downloads in 4 months
• Continuing 2.5 million downloads per week
• Why is this important in migrating from product and price?
• Impact on the building/destroying brand and relationships?
• Impact on the customer experience?
– Markets as conversations!!!!
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Marketing Migration End Game
CGE&Y (Paul Cole):
“Systemic
Opportunity.”
“Pleasant Transaction” vs.
“Re-think
overall enterprise strategy.”
“Better job of what we do today” vs.
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Marketing Migration Measures
“The Loyalty Effect” Example: Why is Customer Retention so Important?
Customer Experience Cycle
Referrals:
Over 60% of sales may result from
referrals. Conversely, the average
dissatisfied customer will tell 10
others about their bad experience.
Increased Purchases:
Loyalty Effect = Acquisition Cost - Price Premium Reduced Cost to Serve - Referrals - Increased Purchases
Over 40% of highly satisfied
customers increase their purchases
based upon their positive
experience.
Acquisition Cost:
Price Premium:
Reduced Cost to Serve:
It costs five times more to
attract a new customer
than to retain an old
customer.
High customer satisfaction
companies charge 9 percent
more than poor customer
satisfaction companies.
In the insurance industry, a
5% increase in customer
retention lowers the cost per
policy by 18%.
First Time
Repeat
Advocate
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Marketing Migration Measures
Understanding Your Customers on Multiple Levels
Internal
Statistics
External
Sources
Customer
Feedback
Measure at or immediately after customer contact
Events
•Defects or Rejects
•On-time Delivery
•Error Free Orders
•Benchmarking?
•Customer Complaints
•Customer Compliments
Measure relationship across a series of contacts
Relationship
•Length of Relations
•Repeat Purchases
•Share of Wallet?
•Acquisition /
Defection Matrix?
•Attribute Performance
•Attribute Importance
(interviews/surveys)
Measure value added to customer’s activities
Value-In-Use
•Competitive Value
Exchange
•Structured Observation
or Site Visits
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Our Methodology.
Create
Value
Delivering Solutions
That Matter
to Your Customers
Communicate
Value
Mosaic Partners LLC TM
Deliver
Value
Align the Organization and
Processes Around Customers
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Our Process.
Focus on the customers’ problems, not
your current offerings!
Create
Value
1. Understand needs of your Best Customers – Think Solutions, NOT
Products!
2. Clearly Define Your Value Proposition within Your Defined Ecosystem!
3. Un-bundle Your Value – both Tangible and Intangible!
4. Re-bundle around the Personal / Intimate Needs of Your Customers,
Business Partners, Channels, and Ecosystem!
5. Monetize Your Intangible Assets! Decide where do you need to Invest to
Strengthen the Intangible Side of Your Balance Sheet?
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Our Process.
Develop processes that make it easy
for customers to do business with
you!
Deliver
Value
1. Define the Solutions / Experience that You Want to Create for Your Customers?
How can you help Your Customers Create an Experience for Their Customers?
2. Understand that Solutions will require you to Partner with other solutions
providers – Build and Nurture Your Business Ecosystem!
3. Understand that Ecosystems Don’t Respond Well to Protectionism (within
limits)! Challenge, Test, Push, Expand, Invade the Value of Your Ecosystem to
Ensue Long-Term Health!
4. Make it Easy for Your Customers to do Business with You and Your Business
Partners! Welcome Your Customer to Your Ecosystems “Roach Motel!”
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Our Process.
Develop a brand strategy that clearly
defines who you are, what you do and
how you are different!
Communicate
Value
1. Develop Your “Burger King” Story! What you advertise, what you sell,
and how you make money are 3 different things!
2. Focus on Internal Branding! You and Your People are the best
Communication Vehicle! Can everyone clearly communicate who you
are, what you do, and how you are different?
3. Everything Communicates! Add Value in Every Conversation – It Will
Come Back to You…Even If It Takes A Year!
4. Don’t Make People Guess how they can Help You!
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In Summary.
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Sustainable growth is not about products!
Value is migrating from products to solutions and experience!
Solutions and experiences are customer dependent!
Value can’t be applied evenly across all customers!
Value must be created for customers, business partners, ecosystem participants, etc.
You can’t do it all, so partner (build ecosystem) to create value through solutions!
Unbundle your value!
Understand the personal/ intimate needs of your customers!
Rebundle your value!
Invest in your intangible value (assuming your product is good)!
Focus on internal branding where all employees can communicate (with passion)
who you are, what you do, and how you are different!
• Think about the relationship – even when closing on a transaction!
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