Group 4:
Katy Neely
Matt Tevis
Hunter Pond
Andrew McDonald
Shelly Brown
The Sequence of Blue Ocean
Strategy
Testing for Exceptional Utility
 Phillips’ CD-I “Imagination Machine”
 Buyer Utility Map
6 Utility Levers
 Purchase, delivery, use, supplements, maintenance,
and disposal.
 Ford model T
Strategic Pricing
 Two reasons for change:
 Volume generates higher returns than in past
 To a buyer, value of a product/service may be closely tied
to the total number of people using it.
 Nonrival good
 Excludability
Price corridor of the mass: 2 Step
Process
Target Costing
 Three principle levers
 IBM
 Slice-share
 Pricing innovation
 Article: “Target Cost
Management” by Louise
Ross
Pricing Innovation?
 “Taking a cue from
Hellman's Mayonnaise,
who recently redefined the
quart as 30 ounces instead
of 32, the approach is
simple. Hours are now 54
minutes long instead of
60.”
 Goal: corporate profits
during economic
downturn
iPhone Pricing Strategy
 “The early adopters of Apple's iPhone
paid $599 for the privilege of being the
first to have the hot new consumer
product when it was launched in June of
2007. But by September, Apple
announced that it was slashing prices on
its most expensive iPhone by a third. As
the early adopters complained about the
$200 price cut, Apple shares fell 8.6
percent, losing almost $11 billion in
market value in the three days following
the announcement. The iPhone
illustrates both the challenges of getting
pricing right for new products and the
dynamic changes in pricing that are
needed as the market is developed.”
 "When you have something new about
the product, such as the sleeker design
and touch-screen technology for the
iPhone, it is a little harder to price it...
Apple may have mispriced the product
in the first place and then had to make
painful, costly adjustments."
—Z. John Zhang, Professor of
Marketing, The Wharton School
Profit Model of Blue Ocean
Strategy
Blue Ocean Idea (BOI) Index
Phillips Motorola DoCoMo iCD-i
Mode Japan
Utility
Price
Cost
Is there exceptional utility? Are there
compelling reasons to buy your
offering?
-
-
+
Is your price easily accessible to the
mass of buyers?
-
-
+
Does your cost structure meet the
target cost?
-
-
+
-
+/-
+
Adoption Have you addressed adoption hurdles
up front?