BRAND MANAGEMENT AND
NEW PRODUCT DEVELOPMENT
SECTION 7C
Brand Management and the Firm
Market Research - 3
Consumer Market Segmentation
ALAN L. WHITEBREAD
WHAT IS MARKET SEGMENTATION?
• A MULTI-STEP PROCESS
• GROUP PEOPLE OR ORGANIZATIONS
BY ATTRIBUTES
• A PROCESS FOR DETERMINING
ATTRACTIVE TARGET MARKET
SEGMENTS
MARKET SEGMENTATION:
FILLING THE GAPS
CHANNELS OF DISTRIBUTION
1
3
PRODUCTS
4
SERVICES
APPLICATIONS
2
MARKETS / SEGMENTS
TARGET MARKET
[SEGMENT]S
http://www.census.gov/econ/census02/guide/
MARKET SEGMENTATION
- A SIX- NO SEVEN-STEP PROCESS MARKET
SEGMENTATION
1-Identify the bases for selection
[Why are you splitting it this way?]
MARKET TARGETING
3-Select and develop measures of
attractiveness
2-Develop detailed market segment
profiles
[Clearly identify each segment.]
4-Select target markets or market
segments
MARKET
POSITIONING
5-Develop a market position for every
market segment
6-Develop the marketing mix for every
market segment
MARKET SEGMENTATION
- TARGET MARKET SEGMENT PROFILE UNIVERSE OF PROSPECTS
1+ CHILDREN
HISPANIC
TARGET
AGES 25-34
HOUSEHOLD
INCOME
OVER $50,000
SELECTING TARGET MARKETS
MARKET
DEFINITION
MARKET
SEGMENTATION
TARGET
MARKET
SELECTION
MARKET
ATTRACTIVENESS
MARKET
POSITIONING
MARKET SEGMENTATION
- DEVELOP ATTRACTIVENESS MEASURES • WHY IS IT WORTH DOING?
– TARGETED COMMUNICATIONS
– FULFILLS NEEDS AND WANTS
– RESPONDS TO CHANGING MARKETS
– TARGETED AND EFFICIENT
•
MARKET SEGMENTATION
- SELECTING TARGET MARKET SEGMENTS -
• KOTLER’S FIVE TESTS
– 1. MEASURABLE
• Can I quantify the size of the market [segment]?
– 2.
• Can I get to the market [segment] with my channels of
distribution?
– 3.
• Is the market [segment] large enough to be worthwhile?
– 4. DIFFERENTIABLE
• Can our products be clearly differentiated?
– 5.
• Does my company have the necessary staying power?
MARKET SEGMENTATION:
Market Coverage Strategies
UNDIFFERENTIATED [MASS] MARKETING
The firm decides to ignore market segment differences.
One marketing mix
Same product to all segments
Coca Cola
Early Ford
•
•
•
•
1 Pricing strategy
1 Promotional program aimed at everybody
1 Type of product with little/no variation
1 Distribution system for the entire market
– Staple foods-sugar and salt and farm produce, Henry Ford
Model T – standard model, no options
MARKET SEGMENTATION:
Market Coverage Strategies
DIFFERENTIATED [SEGMENTED] MARKETING
The firm decides to target several [large] market segments
Each segment has a marketing mix
Different products for each market segment
Proctor & Gamble detergents Current auto manufacturers
Previously, Marriott International
Consumer market segments
Marriott Suites……….....Permanent vacationers
Fairfield Inn…………………...Economy Lodging
Business market segments
Residence Inn………………….....Extended Stay
Courtyard By Marriott……….Business Travelers
MARKET SEGMENTATION:
Market Coverage Strategies
CONCENTRATED [NICHE] MARKETING
The firm decides to pursue a larger market share of
selected [smaller] segments, sub-segments, or niches
Different products to the [sub-]segments
Different marketing mix for each segment or sub-segment
SUV’s standard to family to luxury
CONCENTRATED [NICHE] MARKETING:
MARRIOT BRAND DIFFERENTIATION
•
1990’s – 4 segments
– Marriott Suites
– Fairfield Inn
– Residence Inn
– Courtyard by Marriott
•
2007 – 13 segments
– Marriott Hotels & Resorts
– JW Marriott Hotels &
Resorts
– Renaissance Hotels &
Resorts
– Courtyard
– Residence Inn
– Fairfield Inn
– Marriott Conference Centers
– TownePlace Suites
– SpringHill Suites
– Marriott Vacation Club
International
– The Ritz-Carlton
– Marriott ExecuStay
– Marriott Executive
Apartments
MARKET SEGMENTATION:
Market Coverage Strategies
MICROMARKETING
Specialized products for individuals and locations
LOCAL MARKETING
[Brands, promotions]
Local chain grocery stores
INDIVIDUAL MARKETING
[1:1 marketing]
Amazon, Dell
CONSUMER SEGMENTATION
SUMMARY
Geography
• Region
• Market size
• Market
density
• Climate
Demographics
•
•
•
•
Age
Gender
Income
Race /
ethnicity
• Household /
family life
cycle
Psychographics
•
•
•
•
Personality
Motives
Lifestyle
Geodemographics
• Reference
groups
Benefits
• Benefits
Toothpaste
-low price
-prevention
-whiteness
-taste
Usage Rate
•
•
•
•
Former
Potential
1st time
Light or
irregular
• Medium
• Heavy
CONSUMER BUYER
CHARACTERISTICS
CULTURAL
- Culture
- Subculture
- Social class
SOCIAL
- Family
- Reference groups
- Roles
- Status
PERSONAL
- Age
- Economic situation
- Lifecycle stage
- Lifestyle
- Occupation
- Personality
- Self-concept
PSYCHOLOGICAL
- Attitudes
- Beliefs
- Education
- Motivation
- Perception
CONSUMER MARKET
SEGMENTATION METHODS
GEOGRAPHIC
AREA
World region
North America, Europe, EU,
Region
Southwest, Mountain States,
Alaska, Hawaii
Population
SMSAs or SCAs, small cities,
towns
Population density
Urban, suburban, exurban, rural
Climate
Temperate, hot, humid, rainy
“Lubbock’s leading radio station”
CONSUMER MARKET
SEGMENTATION METHODS
• DEMOGRAPHIC
CULTURES
RELIGION
SUBCULTURES/
RACE or ETHNICITY
FAMILY LIFE CYCLE
AGE
GENDER
MARITAL STATUS
INCOME
EDUCATION
OCCUPATION
American, Italian, Chinese, Mexican, …
Catholic, Protestant, Jewish, Moslem, other
African-American, Caucasian, Asian, Hispanic
Bachelors, young married, empty nesters, …
Under 11, 12-17, 18-34, 35-49, 50-64, 65-74, 75-99, 100+
Male, female
Single, married, divorced, living together, widowed
Under $25,000, $25,000-$34,999, $35,000-$49,999, $50,000$74,999, $75,000-$99,000, $100,000 and over
Some high school, high school graduate, some college,
college graduate, postgraduate
Professional, blue-collar, white-collar, agricultural, military
MARKET SEGMENTATION
METHODS
• PSYCHOGRAPHIC
NEEDS-MOTIVATION
PERSONALITY
PERCEPTION
Shelter, safety, security, affection, sense of selfworth
Extroverts, novelty seeker, aggressives, low
dogmatics
Low-risk, moderate-risk, high-risk
LEARNINGINVOLVEMENT
ATTITUDES
Low-involvement, high-involvement
SOCIAL CLASS
Lower, middle, upper, …
Positive attitude, negative attitude
MARKET SEGMENTATION
METHODS
• PSYCHOGRAPHIC
(LIFESTYLE)
SEGMENTATION
Economy-minded, couch potatoes, outdoors enthusiasts,
status seekers
ATTITUDES, INTERESTS, & OPINIONS (AIO)
Spends 1+ hours per day on the Internet, heavy e-mail user
Buys on the Internet, goes to stores only as required
Professional, income above $75,000 per year
Belongs to multiple frequent traveler programs
TTU DELOITTE PROJECT, FALL 2008
BABY BOOMERS
GENERATION X
GENERATION Y
Diversity was a cause
Accept diversity
Diversity is a given
Idealistic
Pragmatic to cynical
Positive: optimistic to
realistic
Part of the crowd
Self-reliant / Individualistic
Inventive / Individualistic
Key focus: job
Key focus: life
Key focus: lifestyle
Became institutions
Mistrust institutions
Institutions are irrelevant
Watch TV
Use a PC
Connected
Have technology
Use technology
Assume rapid technology
change / “plugged-in”
Work ethic = job success
Fame
Distinctive
MARKET SEGMENTATION
METHODS
• Behavioral
– Usage, loyalty, innovativeness
• Frequent flyer, Discover Card, …
– Occasion
• Hallmark
VALS CONSUMER MODEL
http://www.sric-bi.com/VALS/types.shtml
$$$
ACTUALIZERS
11.7%
I
PRINCIPLE
STATUS
ACTION
N
FULFILLEDS
ACHIEVERS
EXPERIENCERS
C
10.5%
14.7%
12.9%
O
BELIEVERS
STRIVERS
MAKERS
M
17.0%
11.8%
12.0%
E
$
STRUGGLERS
9.5%
PRIZM CONSUMER MODEL
• PRIZM
– 500,000 neighborhoods
– 62 clusters
– Claritas
• http://www.claritas.com/Segmentation.htm
MARKET SEGMENTATION:
UNIQUE
Market segment A
MARKET SEGMENTATION:
D
C
B
E
A
H

G
F
MARKET SEGMENTATION:
A
B
C
MARKET SEGMENTATION;
If large enough, attack with
• special products and
A
• specific advertising
B
C
COMMUNICATIONS MARKET SEGMENT
DESCRIPTIONS [Abbreviated-2005]
•
•
•
•
•
Older low communicator / income
Social young middle class family
Middle-aged higher income empty nester talker
Progressive young higher income family
Technology interested well educated high discretionary
income
• Techno Elite younger higher income high interest in
technology
• What words would you use to describe the positioning of
Tide, Cheer, Bold, Oxydol?
BEST BUY CUSTOMER SEGMENTS
[JAN ’06]
SEGMENT
VALUE PROPOSITIONS
Home theatre enthusiast
Magnolia Home Theatre, Geek
Squad
Busy mom
Personal shopping assistant,
Geek Squad
Business owner
Business pros, Geek Squad
Young technology
enthusiast
Interactive displays, tailored
market assortments, Geek Squad
Family man seeking good
value
Geek Squad, special offers
MARKET SEGMENTATION IN CHINA
General
Motors
Samsung
Procter &
Gamble
Haier
Cadillac SRX, CTS
Buick
[Execs, managers]
Small refrigerators in
the north
Large washing
machines in the
[urban]
Epica Sedan
~$19,000
[Young urbanites]
Large refrigerators in
the south
[Guangdong]
Tide Triple Action
Crest
Oil of Olay
[urban]
Aveo Hatchback
$10,000-12,000
[Young urbanites]
Spark Minicar
~$5,000
[Young urbanites]
Wuling Minivan
$4,000-6,500 [rural]
Bargain priced:
Tide Clean White
Crest version
Oil of Olay version
[rural]
Tiny washing
machines
[rural]
MARKET SEGMENTATION
• Firms tend to have three to eight market
segments. But there is nothing special
about the number of segments as long as
you do not cannibalize one or more of
them.
-P&G detergent retrenching due to cannibalization
from 12 brands down to 7 brands
ESTIMATING MARKET POTENTIAL
• Estimating market potential can be done
using a variety of methods. It can be
improved once you have defined market
segments.
– Primary research
– Secondary research including consulting
reports
– Jury of executive opinion
BRAND MANAGEMENT AND
NEW PRODUCT DEVELOPMENT
SECTION 8A
Brand Management and the Firm
NPD Process: From Concept to Launch
ALAN L. WHITEBREAD
CHANGE
• Are you ready?
• Can you adapt?
• The issues
CHANGE
• SPEED
–
–
–
– ...
• KNOWLEDGE
– RATE OF INCREASE
– AMOUNT OF INCREASE
– EVER INCREASING SPECIALIZATION
NPD
• NPD begins with the recognition of
–
– a potential market [segment] that is of a size to justify
exploration, and
–
• NPD uses a sequential or concurrent method.
– Sequential [completing one step before proceeding to
the next] NPD is the traditional method.
• It is time consuming.
• The lack of speed to market results in either [1] not as much
of a lead over competitors or [2] it trails competitors further in
the market. Either way, the firm does not realize as much
profit from NPD as it could.
NEW PRODUCT DESCRIPTION
• Includes
– Detailed description of the product
• Design requirements
• Key and optional features required
– Performance tests and minimums
– Quality tests
– Quality standards
– Quality system
– Risk analysis
• U.S. - What can some fool do with the product?
CONCURRENT NPD
• Used by most large firms
• Cross-functional teams are used to develop new
products with targeted costs and features.
– Teams usually include managers from marketing,
R&D, engineering, production, materials management
[purchasing], key suppliers, and service providers.
– Key customers are sometimes included in the team
for general products. They are almost always
included if the new product is specifically developed
for them.
•
ELEMENTS OF A TARGET PRICE
• Market research information
• Product positioning
• Competitive environment and expected
response
• Anticipated price elasticity
• Expected market conditions
•
– If they can, they proceed.
– If they can not, either more work is done on the new
product or the concept is dropped.
DEVELOPING A TARGET COST
• Market data and desired profitability drive
the development of the new product.
• This may impact many aspects of the new
product.
– For instance, the need for a higher rate of
production may lead to changes in
•
•
•
•
Design
Materials
Processes
…
ELEMENTS OF TARGET COST
•
•
•
•
Amount of capital required
Planned rate of production
Materials and / or components used
Processes involved
– You could have a product that required component
manufacturing, assembly, and finishing
•
•
•
•
•
•
Capital and Labor
Features
Packaging
Logistics
Marketing and sales expenses
…
DETAILED TARGET COST
• When target cost is determined, component costs will be
calculated based on marketing forecasts and expected
production run [lot] sizes.
• Every component, operation, and process must be
analyzed in detail to arrive at a target standard cost.
• You should be comfortable with the mix of elements
–
• You should also become comfortable with the amount
and timing of projected cost reductions.
KEY NPD CHECKPOINTS
• Are teams meeting their timetables?
• Is the manufacturing roadmap complete
and done on-time?
• Are we dealing with the key suppliers?
• Are we comfortable with all the risks?
• Do we have a comprehensive launch
schedule?
• Do we have a good pre-buy estimate?
• Do we have approval from senior
management?
MANAGING PRODUCT
DEVELOPMENT TEAMS
• The team is hand-picked and involved very early
in the project.
• Defined NPD processes and structure exist in
firms with high NPD success rates.
• There is clear communication of organization
and project goals and objectives.
•
MANAGING PRODUCT
DEVELOPMENT TEAMS
• Continually build project / team excitement
• Create proper reward systems
• Provide strong senior management
support
• Increase team commitment
• Minimize conflicts and issues
• Remove roadblocks
• Provide respected leadership
SOME KEY CHALLENGES OF
PROJECT TEAM LEADERS
•
• Coordinate and integrate efforts
• Maintain team focus and unity without
stifling creativity and innovation
• Successfully manage intra-organizational
and supplier affairs
•
KEY PROJECT QUESTIONS
•
•
•
•
•
•
•
•
What?
Why?
How?
Who?
How many?
When?
Where?
?
PROJECT MANAGEMENT
• Project management is a systematic
approach to delivering a project
• Project management requires
understanding of interdependencies
among activities, their times, the resources
necessary to complete every activity, and
leadership skills.
TOOLS AND TECHNIQUES
• PERT CHARTS [NETWORK DIAGRAMS]
– Program Evaluation and Review Technique
• Developed for the Polaris in the late 1950’s.
• Task, duration [may include best, worst, and most likely
cases], dependency, and team [leader]
• Boxes [nodes] and lines show the flow tasks and how
they interrelate.
• CPM
– Critical Path Method
• Developed by DuPont and Remington Rand during the
1950s.
• GANTT CHARTS
• Task, time period, actual/budget, team [leader]
PERT CHART EXAMPLE
2 weeks
2 weeks
Learn
System 1
Design
Product
Learn
System 2
Create
Engineering
Production
Specifications
1 week
Start
Learn
System 3
Design
Features
Learn
System 4
Test and
Approve
Production
System
1 week
Create
Technical
User
Manual
1 week
Start
Production
Create
Basic User
Manual
1 week
CPM EXAMPLE
2 weeks
2 weeks
Learn
System 1
Design
Product
Learn
System 2
Create
Engineering
Production
Specifications
1 week
Start
Learn
System 3
Test and
Approve
Production
System
1 week
Design
Features
Learn
System 4
Create
Technical
User
Manual
1 week
Start
Production
Create
Basic User
Manual
1 week
SLACK TIME
GANTT CHARTS
• Gant charts were developed by Henry L. Gantt
in 1910.
• A Gantt chart is a graphical depiction of a
project’s activities over time.
• It always shows the task and the time period associated with
the task.
• It may also show additional items like actual to budget, team
[leader / responsibility] and other items and be used as a
management tool.
• The disadvantage of Gantt charts is that they do
not show precedence relationships between
various activities.
GANTT CHART: FROM IDEA TO LAUNCH
[PRINT ADVERTISING ONLY]
CAMPAIGN TIMELINE: SMALLER COMPANY
Week Number
ADVERTISING: PRINT
Create Media Plan (Print and Online)
Buy Print Media
Design
Photography and/or illustration
Production
Copywriting and Review
Final Negatives, Insertion Orders
Ship Negatives and Orders to Publications
ADVERTISING: ONLINE
Buy Space
Design
Copywriting and Review
Produce
Send to Site
PRINTED COLLATERAL
Design
Photography and/or Illustration
Production
Copywriting and Review
Final Artwork
Final Negatives
Printing
Distribution to Sales Force, Prospects
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
LAUNCH
DESIGN PRINCIPLES
•
•
•
•
•
Design for
Design for
Design for ASSEMBLY
Design for
Design for
ENGINEERING REQUIREMENTS:
DESIGN STRATEGIES
• RENOVATIVE
– Update or overhaul existing item
– Very little risk
• ADAPTIVE
– Use improved technology to significantly change the
item
• EVOLUTIONARY
– The next step in the development of the item
• DISCONTINUOUS
– Technology; commercial [new need]; or a
combination of both
– Can be very high risk
ENGINEERING REQUIREMENTS:
ITERATIVE CONCEPT & PRODUCT DESIGN
• Concept generation
• Rapid visualization
– Sketches
– Photorealistic rendering
– Rapid prototyping
RAPID PROTOTYPING METHODS
• A computer-assisted technology that
allows the fabrication of actual size models
through the use of CAD [computer-aided
design] programs.
– CNC 3-D
– stereolithography [SLA] [liquid]
– selective laser sintering ]SLS] [powder] or
– fused deposition [FDM] [ABS layers]
RAPID PROTOTYPING METHODS
• Stereolithography [SLA]
– A laser beam solidifies a photo-reactive resin in layers until
the relatively weak prototype is built with an excellent
surface finish.
• Selective Laser Sintering [SLS]
– A laser beam solidifies a powder until the very strong
prototype is built with a coarse surface.
• Fused Deposition Modeling [FDM]
– Similar to a hot-melt glue gun, this deposits usually ABS in
layers until the fairly strong prototype is built with a good
surface finish.
ENGINEERING REQUIREMENTS:
ITERATIVE CONCEPT & PRODUCT DESIGN
• Design for product usability
–
•
•
•
•
•
•
Easy to use
Intuitive
Safe
Comfortable
Ergonomic
…
ENGINEERING REQUIREMENTS:
ITERATIVE CONCEPT & PRODUCT DESIGN
• Design for product usability
– Consumer Satisfaction Areas
•
•
•
•
•
•
Ease of use
Assembly
Disassembly
Reuse
Recycling
…
ENGINEERING REQUIREMENTS:
ITERATIVE CONCEPT & PRODUCT DESIGN
• The modular concept allows different products to
be manufactured by assembling different
components and standard processes.
• Modularity is driven by the need for
standardization to keep the number of
component parts to a minimum. It
– reduces the risk of supplier dependency, and
– increases customer choice [options].
• This is a good strategy for niche competitors but
can be used by nearly all firms.
– Dell
ENGINEERING REQUIREMENTS:
ITERATIVE CONCEPT & PRODUCT DESIGN
• Design for product usability
– Consumer Satisfaction Areas
•
•
•
•
•
•
Assembly
Disassembly
Reuse
…
ENGINEERING REQUIREMENTS:
ITERATIVE CONCEPT & PRODUCT DESIGN
• Design for product usability
• Design for manufacturing efficiency
–
–
– Long-term process optimization
– Minimize total production cost [initial through future]
ENGINEERING REQUIREMENTS:
ITERATIVE CONCEPT & PRODUCT DESIGN
• Design for product usability
• Design for manufacturing [DFM] efficiency
• Design for purchasing
–
• Design for logistics
–
• Design for the environment [DFE]
– Minimize environmental impact
ENGINEERING REQUIREMENTS:
ITERATIVE CONCEPT & PRODUCT DESIGN
•
•
•
•
•
•
Design for product usability
Design for manufacturing efficiency [DFM]
Design for purchasing
Design for logistics
Design for the environment [DFE]
Design for modularity
ENGINEERING REQUIREMENTS:
ITERATIVE CONCEPT & PRODUCT DESIGN
• The modular concept allows different products to
be manufactured by assembling different
components and standard processes.
• Modularity is driven by the need for
standardization to keep the number of
component parts to a minimum. It
– reduces the risk of supplier dependency, and
– increases customer choice [options].
• This is a good strategy for niche competitors but
can be used by nearly all firms.
ENGINEERING REQUIREMENTS:
ITERATIVE CONCEPT & PRODUCT DESIGN
•
•
•
•
•
•
•
•
Design for product usability
Design for manufacturing [DFM] efficiency
Design for purchasing
Design for logistics
Design for the environment [DFE]
Design for modularity
Design for maintainability [DFMt]
Design for excellence [DFX]
CROSS-LICENSING
• The licensing of your
IP/products/technologies in return for
licensing the IP/products/technologies of
another firm.
BRAND MANAGEMENT AND
NEW PRODUCT DEVELOPMENT
SECTION 8B
Brand Management and the Firm
NPD Process: From Concept to Launch
Standards, Quality, and Product Liability
ALAN L. WHITEBREAD
STANDARDS
• US Commercial
• US Government
• Numerous industry standards groups
• ISO and other international standards
US COMMERCIAL STANDARDS
• ASTM International [formerly American
Society for Testing and Materials] –
• Underwriters Labs –
[1000+ different tests]
• ANSI – American National Standards
Institute –
US GOVERNMENT STANDARDS
• FIPS – Federal Information Processing
Standards
• MilSpec – Federal military procurement
– Link to NATO
• NIST – National Institute of Standards & Testing
• DOD – Department of Defense
PRODUCT SPECIFICATIONS
•
•
•
•
•
•
•
•
•
Model number
Features and benefits
Pictures and/or drawings
Performance specifications and safety factors
Serial number & location for tracking
Lot or batch number and location for tracking
Product quality tests to be performed
PRODUCT TESTING
•
•
•
•
Usability testing
Functional Testing
Specification Verification
Performance Testing
– Impact, drop, expected average life
•
•
•
•
Margin Testing and Analysis
Exception Testing
Regression Testing
Competitive Testing
GOVERNMENT PRODUCT TESTING
• A typical three-group performance testing
procedure may include
– test 50 parts from a batch, and
– test 250 parts from a batch, and
– destructive testing where 50 samples will be
destroyed to examine construction and quality
of the device.
QUALITY CONCEPTS
• Total Quality Management [TQM]
•
•
• Quality Function Deployment [QFD]
TOTAL QUALITY MANAGEMENT
• "TQM is a management approach for an organization, centered on
quality, based on the participation of all its members and aiming at
long-term success through customer satisfaction, and benefits to all
members of the organization and to society." ISO 8402:1994
• A management philosophy that aligns the culture, attitude and all
organizational functions of a company to focus on providing
customers with products and services that meet their needs and
organizational objectives.
• TQM sees an organization as a collection of processes that need
continuous improvement by incorporating the knowledge and
experiences the firm’s employees.
•
• See also: Armand Feigenbaum, Quality Control: Principles, Practice,
and Administration, 1951. Followed by W. Edwards Deming 14
Points.
TQM PRINCIPLES
• Management Commitment
–
• Employee Empowerment
– Training - Suggestion scheme - Measurement and
recognition - Excellence teams
• Fact Based Decision Making
– Statistical process control [SPC] – Design of
experiments [DOE], Failure modes and effects
analysis [FMEA] - The 7 statistical tools [sampling,
data collection, process indicators, and quality] Team oriented problem solving [TOPS]
TQM PRINCIPLES
•
– Systematic measurement and focus on cost of
non-quality [CONQ] - excellence teams cross-functional process management attain, maintain, improve standards
• Customer Focus
– Supplier partnership - service relationship with
internal customers - never compromise quality
- customer driven standards
TQM TOOLS LISTS
Seven Management
and Planning
[MPC] Tools
Seven Major SPC Tools
[The Magnificent
Seven]
Seven Major TQM
tools.
1. Histogram
1.
2.
3.
4.
5.
6.
7.
Affinity diagram
Interrelationship
digraph
Tree diagram
Prioritization
matrices
Matrix diagram
Process decision
program chart
[PDPC]
Activity network
diagram
1.
2.
3.
4.
5.
6.
7.
Histogram or
stem-and-leaf plot
Check sheet
Pareto chart
Cause and effect
diagram
Defect
concentration
diagram
Scatter diagram
Control chart
2. Flowchart
3. Pareto chart
4. Cause and effect
diagram
5. Run charts and
graphs
6. Scatter diagram
7. X-bar and R
control charts
CONTINUOUS IMPROVEMENT
• The ongoing efforts to improve products, services or
processes either through improvement in incremental
stages over time or a single breakthrough.
•
– Focus on "Continuous Process Improvement" making
processes visible, repeatable and measurable.
•
• Other methods using continuous improvement include
Lean Manufacturing [or Production], Six Sigma, and
TQM.
LEAN PRODUCTION
• The Production System Design Laboratory [PSD] at MIT
http://lean2.mit.edu/
– “Lean production is aimed at the elimination of waste in every
area of production including customer relations, product
design, supplier networks and factory management. Its goal is
to incorporate less human effort, less inventory, less time to
develop products, and less space to become highly
responsive to customer demand while producing top quality
products in the most efficient and economical manner
possible.”
• There is high risk if something goes wrong.
• Toyota was a pioneer and realized a $10B cost savings.
LEAN PRODUCTION: THE 5 S’s
Basic Principle
Eliminate clutter by removing everything [supplies,
materials, tools, and paperwork] not required in the
operation.
Organize the work area so you can find everything quickly
and easily. Items are always in the same place.
Make the entire work area [aisles, walls, meeting, and
storage places] shine. You should be proud to show it to
visitors.
Use policies, procedures, and practices to insure the first
three of the 5S activities are performed regularly.
Create a 5S culture by utilizing mechanisms that support,
enhance, and extend 5S practices, monitor performance,
involve and recognize people.
LEAN PRODUCTION
• Managerial Responsibility
– Managers must be teachers, team facilitators, and
motivators.
• Process Development
– Line workers are trained to
• Improve processes, and
• Solve problems
–
• Network Orientation
– Lean should be practiced by critical suppliers
LEAN PRODUCTION
• Synchronization
– Coordination of material movement is
accomplished with a kanban system.
•
was developed by Toyota Corporation to
signal when parts needed to be withdrawn from
inventory or a feeding operation [like a supply bin]
and leave a visible record of its withdrawal.
• Continuous Improvement
–
– continuous improvement through
productivity gains and innovation
BENCHMARKING
• The process of improving performance by continuously
identifying, understanding, comparing, and measuring
their policies, practices, philosophies, and performance
against those of high-performing organizations, then
adapting outstanding practices and processes in the
world and monitoring metrics.
• Focuses on improving any business process by
exploiting the world’s best practices not by merely
measuring the best performance.
• Promotes the continual evolution of a learning culture in
the firm - a key to continuous improvement, quality, and
long-term competitiveness.
Quality Function Deployment [QFD]
FASTER
BETTER
CHEAPER
COMPANY
DELIVERS
Availability
Convenience
Aesthetics
Conformance
Features / Reliability
Perceived Quality
Performance
Serviceability
High volume
production
CUSTOMER
GAINS
Responsiveness
Access
Communications
Competence
Credibility / Empathy
Reliability / Security
Style
Affordability
QUALITY SYSTEMS - ISO
http://www.iso.org/iso/en/ISOOnline.frontpage
• ~150 countries working in partnership with
– International standards organizations
– Government entities and standards
– Industry associations
• including national standards organizations
– Business and consumer representatives.
QUALITY SYSTEMS
• ISO-9000 Series for Manufacturers
– This is the roadmap for all standards included in the series though
ISO-9004.
• ISO-9001
– The most comprehensive set of standards including design,
development, installation, production, and servicing.
• ISO-9002
– A smaller set of standards including installation, production, and
servicing.
• ISO-9003
– A set of standards for quality assurance for firms only involved in the
final testing of products [in place of their customers doing for
themselves].
• ISO-9004
– A set of standards for executive management to develop and
implement an effective quality management system.
QUALITY SYSTEMS
• ISO-14000 Series
Environmental management
standards family
• QS9000 (ISO / TS-16949)
Automotive
• ISO-17779
Information Security
• SIX SIGMA
Motorola, GE, …
• Malcom Baldridge
Cadillac
QUALITY SYSTEMS - SIX SIGMA
• Applies to operations, technical areas, customer services,
marketing, finance, services, engineering, …
• It is a measurement of total quality allowing a company to
quantify effectiveness in eliminating defects [improved quality]
and variations [more consistent quality] from their processes.
• A Six Sigma company will operate at a maximum 3.4 defects
per million opportunities. Another way of saying this is
99.9997% defect free.
– Motorola, General Electric, and TI are leaders in Six Sigma
implementation
QUALITY & PRODUCT LIFE:
PRODUCT RELIABILITY TESTING
• How is the product likely to be used?
•
• How should we protect the product …
–
–
• Hazard Analysis / Failure Mode & Effects
Analysis [FMEA]
HAZARD ANALYSIS WORKSHEET
ID
Potential
Hazard
Cause[s]
S
O
RI
[Severity]
[Occurrence]
[Risk index = S * O]
Mitigation
S [severity] – 5=death 4=serious 3=moderate 2=minor 1=annoyance
O [occurrence] – 5=occasional 4=unlikely 3=remote 2= improbable
1=almost unbelievable
FAILURE MODE AND EFFECTS
ANALYSIS [FMEA]
ID
Name/
Function
Potential
Failure
Mode
Potential
Effects
Severity
Potential
Cause[s]
Occurrence
Current Controls
Prevention
Detection
D
RPN
Recommended
Corrective
Action
D [detectability] 5=only by user in the field 4=final inspection
3=assembly 2=part production 1=design
RPN [Risk Priority Number] the equivalent of the risk index [RI]. RPN = S * O * D
For more information go to http://www.fmeainfocentre.com/ .
FAILURE MODE AND EFFECTS
ANALYSIS [FMEA]
• PROVIDES BENEFITS BY REDUCING
–
– Marketing campaign changes
–
–
–
PACKAGING AND LABELING
Uses
Competitive
Advantages
Insures
Product Safety
Performs
Sales Tasks
[Protection, use & storage]
Promotes
Identifies
Describes
[Marketing information]
PACKAGING IS CRITICAL
THE PACKAGE SHOULD ALWAYS
• Communication to the consumer
–
• Differentiation
–
• Labeling and identification
–
• Protection
– in-transit, use, and storage
• Recognition of the company & brand image
– logo, colors
• Value perception – additional utility [reuse]
–
PACKAGING IS CRITICAL
THE PACKAGE MAY ALSO PROVIDE
• Consumer security
–
• Environmentally friendly
–
• Sales promotion
– [special offer]
• Storability
– shelf-life
• Opportunity for innovation
–
Packaging may be an expensive cost element
PACKAGING FUNCTIONS
• PACKAGE DESIGN[S]
– Functional
– For reuse
• MATERIALS
–
– Spoilage and other damage
• PROMOTIONAL VALUE
INNOVATIONS IN PACKAGING
• Reusable containers
• Multiple break-down sizes
• Protective
PACKAGING ISSUES:
INTERMODAL STRESS POINTS
PACKAGE TESTING
•
•
•
•
•
•
•
•
Fiberboard Boxes
Plastic & Metal Drums and Pails
Plastic & Glass Bottles and Jars
Paper, Plastic, and Fabric Bags
Infectious Substance Shippers
Radioactive Materials Shippers
Pallet & Bulk Load Systems
Metal, Plastic, and Fiberboard
Intermediate Bulk Containers
• Any other type of packaging
PACKAGE TESTING
• Product testing inside
the package
• Temperature / Humidity
testing
•
• Shock testing
• Incline-impact testing
• Compression testing
•
• Vibration testing
REASONS FOR A CONSIDERING A
PACKAGING CHANGE
•
•
•
•
•
•
Competitive packaging
Promotion
Product improvement / repositioning
Entering a new market or channel
Legal requirements
Excessive package and/or product
damage
U.S. PACKAGING & LABELING LAWS
• Federal Trade Commission Act [1914]
– False, misleading, or deceptive advertising [including
labels] constitute unfair competition
• Fair Labeling and Packaging Act of 1966
– Set mandatory labeling requirements
– Encourages voluntary industry packaging standards
– Allows federal agencies to establish packaging
regulations for specific industries
U.S. PACKAGING & LABELING LAWS
• Child Protection and Toy Safety Act [1969]
– Sets standards for child-resistant packaging
• Federal Food, Drug, and Cosmetic Act
– Administered by the U.S. Food and Drug
Administration [FDA]
– For many foods, all prescription / controlled drugs,
cosmetics and perfumes
– regulates the use of health-related terms
• low-fat, …
• Plus individual state laws
U.S. PACKAGING & LABELING LAWS
• Nutritional Labeling and Educational Act of
1990
– Requires detailed nutritional information on food
products
• Federal Cigarette Labeling and Advertising
Act [1967]
– “Warning: The Surgeon General Has Determined
That Cigarette Smoking Is Dangerous to Your
Health.”
• Plus individual state laws
LABELING ISSUES
• Meet government requirements
– Major international issue
•
•
ASSESSING PRODUCT LIABILITY
• Negligence
– The focus is on
– The plaintiff will claim a design defect, a
manufacturing defect, or a failure to warn.
– The plaintiff must prove that there is
•
•
•
•
a duty owed on the part of the manufacturer,
a breach of that duty,
that the breach caused the plaintiff's injury, and
an injury.
ASSESSING PRODUCT LIABILITY
• STRICT LIABILITY
– The focus is on
– The plaintiff must prove the product is
defective or unreasonably dangerous. Like
negligence claims, these claims may attack
the design, manufacture, or warning[s] about
the product
ASSESSING PRODUCT LIABILITY
• STRICT LIABILITY TESTS
– Consumer Expectations Test
• There is reasonable safe use.
– Risk-Utility Test
• There is a reasonable balance .
– Open and Obvious Danger Rule
• The product danger is readily apparent.
– Feasible/Reasonable Design Alternative
• Is there a safer design alternative?
– Sophisticated User Doctrine
• One does not have to provide as many warnings to a sophisticated
user.
– Learned Intermediary Doctrine
• Do knowledgeable intermediaries exist?
ASSESSING PRODUCT LIABILITY
• Breach of warranty
– Generally requires
• an express warranty, or
• a breach of an implied warranty of merchantability,
or
• a breach of an implied warranty of fitness for a
particular purpose.
U.S. SAFETY LAWS
• Child Protection Act [1966]
– Bans dangerous products used by children
• Consumer Product Safety Act [1972]
– Established the Consumer Product Safety
Commission
– Commission can set safety standards and
assess penalties
BRAND MANAGEMENT AND
NEW PRODUCT DEVELOPMENT
SECTION 8C
Brand Management and the Firm
NPD Process: From Concept to Launch: Advanced Topics
Business Market Segmentation
ALAN L. WHITEBREAD
MARKET SEGMENTATION
- DEVELOP ATTRACTIVENESS MEASURES • WHY IS IT WORTH DOING?
– TARGETED COMMUNICATIONS
–
– RESPONDS TO CHANGING MARKETS
–
• IF THE SEGMENTATION IS WRONG,
LITTLE SEEMS TO WORK WELL
AFTERWARD
MARKET[S]
SEGMENT[S]
PRODUCTS, SERVICES, &
TECHNOLOGIES
APPLICATIONS
CHANNELS
MARKET SEGMENTATION:
FILLING THE GAPS
1
3
PRODUCTS
4
SERVICES
APPLICATIONS
2
MARKETS / SEGMENTS
TARGET MARKET
[SEGMENT]S
CHARACTERISTICS OF BUSINESS
MARKETS
BUSINESS MARKETS
CONSUMER MARKETS
Market
Structure
Geographically concentrated
Many types of markets [segments]
Fewer very-high volume buyers
Fluctuating, derived demand
Geographically dispersed
Mass markets
Small volumes
Primary demand
Products
Standard / complex / custom
Service etc. are critical
Business applications
Engineering / Quality / Testing
involvement
Standard
Service etc. of some note
Personal use
Buyer
Behavior
Professionally trained
Multiple levels involved
Performance hurdles
Individuals purchasing
Some family influence
Social / psychological drives
Buyer-Seller
Relationships
Technical expertise
Amateur
Close interpersonal relationships
Impersonal
Long-term focus
Immediate / Short-term
May be very dependent on each other
CHARACTERISTICS OF BUSINESS
MARKETS
BUSINESS MARKETS
CONSUMER MARKETS
Supply Chains
/ Channels of
distribution
Predominant
Often shorter [more direct]
Not seen by consumer
Usually indirect
Promotion
Often technical
Personal selling
Often involves resellers
Simple
Advertising
Price
Professional negotiating / purchasing
Volume sensitive
Complex formalized process
Competitive bid / Many strategies
Individuals limited purchasing skill
Little, if any, leverage
Simple process
N/A
Demand
Derived
Inelastic in the short-run
Volatile and discontinuous
Direct
Elastic
Limited volatility
BUSINESS PRODUCTS CLASSIFICATION
For an Auto Plant
INSTALLATIONS
Factories, support buildings, large machines,
large material handling equipment
RAW MATERIALS
Rolled steel, rubber, plastic resins
COMPONENTS
Spark plugs, radiators, steering wheels
ACCESSORY
EQUIPMENT
Drill presses, assembly lines, small material
handling equipment
MRO SUPPLIES
Cleaning supplies, office supplies, toilet
tissue, …
BUSINESS
SERVICES
Grounds maintenance, cleaning service,
office equipment servicing
BUSINESS BUYER CLASSIFICATION
PRODUCERS
[OEM or Private Label]
Purchase products for producing other goods
and services [can be either a finished good or a
component]
RESELLERS
Purchase finished goods or components for
resale, rental, or leasing for a profit
GOVERNMENTS
Federal, state, and local governments [all
different buyer behaviors]
ORGANIZATIONS Purchase finished goods and services for
resale, rental, or leasing for a profit
/ INSTITUTIONS
THE B2B MARKET: STRUCTURE
•
•
There are limited qualified buyers.
•
There are potentially limited qualified
competitors.
•
B2B is frequently geographically concentrated
by industry.
DEMAND
• It is critical one understands the all the
components of the total demand schedule
[Dt]!
•
– Where Dn are the individual demand
schedules. For instance, the demand for
manufacturing, wholesalers, and retailers.
• The problem is at the channel level.
BUSINESS DEMAND
• Elastic and Inelastic demand
• Fluctuating demand due to
– Seasonality
– Erratic based on their customers demands from
their customers and/or new programs/products
– Their demand is the total of the demand of multiple
segments—which are frequently not in concert with
each other.
THE B2B MARKET
•
•
The frequently high volume purchase is
for a company.
•
The target audience is a group of
•
Decision-making varies from simple to
complex and is hard to define.
B2B MARKETS
•
– Numerous NAICS codes [usually employ a
differentiation or low-cost strategy]
• B2C – Inexpensive pens, pencils, pads of paper, …
• B2B – floor sweeping compound
•
– One or a few NAICS codes
– May be very profitable [usually employ a
differentiation or niche strategy]
• B2C – $1,000 fountain pen
• B2B – CT scanner
BUSINESS MARKET COMPLEXITY
BUSINESS SERVICES
Professional
Services
Industrial
Services
Consulting
Technical
industrial
Investment banking
Research
Project
related
On-going
Education
…
Engineering
Education & training
Maintenance contracts
Quality
Installation
Field upgrades
Product testing
Maintenance
…
…
…
SUPPLY CHAIN MANAGEMENT
MARKETS
Consumers:
Customers
Prospects
Suspects
CUSTOMER’S
CUSTOMERS
SUPPLIER’S
SUPPLIERS
VENDORS
or
SUPPLIERS
FOCAL
FIRM
FOCAL FIRM
NEW PRODUCT
DEVELOPMENT
CUSTOMERS
THE B2B MARKET: BUYER
BEHAVIOR
•
The frequently high volume purchase is for a company
for
– [1] Consumption or to
– Incorporate in their products [derived demand]
•
•
•
[2] Component and/or
[3] Finished product [OEM or P/L]
The target audience is a group of knowledgeable
buyers with professional backgrounds.
•
•
Selling involves a much more complex buying process
with many involved parties.
THE B2B MARKET: DECISIONMAKING
•
A process with identifiable stages.
•
Decision-making varies from simple to complex, from
firm-to-firm, and is hard to define.
•
You sell to knowledgeable buyers with professional
backgrounds generally with agreement from other
professional areas throughout the firm.
•
Purchasing large amounts and being accountable for
them are significant responsibilities. There are career
implications throughout the organization.
BUYING PARTICIPANTS
Users
Initiators /
Info seekers
STARTERS
Buyers /
Purchasing
FORMS
MANDATORY
Gatekeepers
Influencers
/ Advocates
SUPPORT
CONTROL FLOW
Deciders
AUTHORITY
Approvers
NECESSARY
THE B2B MARKET: PRODUCTS
•
Products are often specified by the customer and the
supplier has numerous requirements to meet to prove
they are in compliance
–
–
–
–
…
THE B2B MARKET: CHANNELS
•
Tend to have fewer responsible levels / steps
•
•
Promotion is important throughout the channels of
distribution.
•
Responsibility is often delegated down to or through
the channel of distribution.
•
Buyers generally have a thorough understanding of
their supply chains.
THE SUPPLY CHAIN AT WORK
DEALERS
STEEL
UPSTREAM
COMPANY
SUPPLIER
3RD
TIER
2ND
TIER
DIRECT
SUPPLIER
1ST TIER
FORD, GM
CHRYSLER
OEM
FASTENERS
RADIATORS
CONSUMERS
AGENCIES
FLEETS
SPECIAL
RESPONSIBLE
STEEL
RENTAL
VEHICLES
Semi-finished / component products
VEHICLES
Finished products
SUPPLY CHAIN MANAGEMENT
FOCAL FIRM
NEW PRODUCT
DEVELOPMENT
MARKETS
Consumers:
Customers
Prospects
Suspects
FOCAL
FIRM
FOCAL FIRM
SUPPLIERS and
SUPPLIER’S
SUPPLIERS
CUSTOMERS
THE B2B MARKET: PROMOTION
•
Personal selling involves a much more complex
buying process with many interested parties.
•
Sales personnel must understand
–
–
–
negotiation strategies and tactics,
all forms of communication, and
their latitude in negotiating an agreement.
THE B2B MARKET: PRICE
•
Competitive bidding
•
Complex negotiations
•
Total system cost
–
–
–
–
–
–
Delivery
Serviceability
Dependability
Net unit price
…
BUSINESS SEGMENTATION
VARIABLES
Organizational /
Company Demographics
Product / Process /
Technology
Application of the
Products / Services
Buying Approach
BUSINESS SEGMENTATION:
Organizational / Demographic [FIRMOGRAPHICS]
• Industry
• Geography / Location
– Some industries are concentrated in a few areas
• Size
– Company [sales, employees, …]
– Account
– Usage rate
• Channel of distribution
– and possibly customer type
• Operating characteristics
BUSINESS MARKET
SEGMENTATION
• GEOGRAPHIC
AREA
LA – Long Beach
New York
Philadelphia - NJ
Chicago
Source: D&B Sales and Marketing Catalog
BUSINESSES
686,222
598,093
405,082
399,511
BUSINESS MARKET
SEGMENTATION
• DEMOGRAPHIC
EMPLOYEES
1,000+
500-999
100-499
<100
Source: D&B Sales and Marketing Catalog
BUSINESSES
18,864
16,270
126,466
1,803,535
BUSINESS SEGMENTATION:
Product / Process / Technology
• Technological factors
– Technologies employed
• See plastics industry in NAICS
• Level of technology
– Industries
• some industries are tied to a specific technology
– Accompanying technologies
•
•
• …
BUSINESS SEGMENTATION:
Applications of the Products / Services
• Finished products for consumption
• Finished products for private label
• Component products
•
•
Product Application http://plastics.dow.com/plastics/na/application/
Industry or solution [application] http://www.ibm.com/solutions/us/?trac=L2
BUSINESS PRODUCT-APPLICATIONMARKET SEGMENTATION
MARKET (SEGMENT) NAME
Brief verbal description
INDUSTRY /
INDUSTRY /
INDUSTRY /
INDUSTRY /
SEGMENT NAME SEGMENT NAME SEGMENT NAME SEGMENT NAME
DESCRIPTION
DESCRIPTION
DESCRIPTION
DESCRIPTION
NAIC(S)
NAIC(S)
NAIC(S)
NAIC(S)
PRODUCT 1
APPLICATION 1
APPLICATION 2
APPLICATION 1
PRODUCT 1
PRODUCT 2
PRODUCT 3
PRODUCT – MARKET MATRIX
Market Managers
Product Managers
Men’s
wear
Women’s
wear
Home
furnishings
Rayon
Acetate
Nylon
Orlon
Dacron
Example is DuPont, see also Dow, GE, …
Industrial
markets
BUYING ORGANIZATION
SEGMENTATION
• Characteristics
– Structure
• Centralized
• Decentralized
– Purchase decision process
– Service levels
BUSINESS CLASSIFICATION
• NORTH AMERICAN INDUSTRIAL
CLASSFICATION SYSTEM [NAICS 2007]
–
–
–
–
Supply-oriented system
20 sectors: 1,174 industries [and growing]
NAFTA: 5 digits + 6TH for country coding
Compatible with ISIC Rev. 3 [UN]
• NAICS SEARCH AND INDUSTRY
DEFINITIONS
– http://www.census.gov/epcd/www/naicstab.htm
THE ECONOMY AND NAICS
GROW OR MAKE
Agriculture
GOV’T
SERVICE
Wholesale
Information
Finance
Mining
Retail
Real Estate
Professional
Utilities
Transportation
Construction
Manufacturing
SELL
Management
Administration
Entertainment
Education
Health
Accommodation
Other
Public
Administration
READING NAICS TABLES - PAGERS
• 51
Economic sector
» Information
• 511
Economic sub-sector
» Broadcasting and Telecommunications
• 5111
Industry group
» Telecommunications
• 51111 Industry group
» Wireless Telecommunications Carriers
• 511111 U. S. Industry [specialized id – optional]
» Paging
ESTIMATING MARKET SEGMENT
SIZE / POTENTIAL
• Numerous excellent general sources
• Specific details may sometimes be
purchased in industry studies
• Custom market research is expensive
ESTIMATING MARKET SEGMENT
SIZE / POTENTIAL
1.
2.
3.
4.
5.
6.
Demographic characteristics
Geographic characteristics
Economic factors
Technological factors
Sociocultural factors
National goals and plans
MARKET ATTRACTIVENESS
• What makes a market attractive?
• Quantifying some or all of the following.
–
–
–
–
–
–
–
–
–
Value equation
Size / growth rate
Channel of distribution access
Differentiability
Available positioning
Readiness to accept a new solution
Strategic fit
Competitive risk
…