Fall+2008+Section+07-SS+Week+3

=Class Discussion For Week 3=

Key Topics Discussed:
I. Total Customer Experience II. Mass Collaboration III. Life-cycle Cost and Customer Value IV. Perceived Benefits
 * The Customer Experience and Value Creation**

I. Market Definition II. Tapping Market Potential III. Market Development Index IV. Managing Market Growth V. Product-market vs. Product Life-cycle
 * Market Potential, Market Demand, and Market Share**


 * The Brita Case**

THE TOTAL CUSTOMER EXPERIENCE
The total customer experience consists of a long string of touchpoints, each of which has been called a "moment of truth" in which the brand either lives up to its brand promise to the customer or it doesn't. Needless to say, each touchpoint is important and can be critical to the customer continuing the relationship. One severely "off-brand" experience can be jarring, causing the customer to question whether what they know about the brand is true. Below are the primary parts of the total customer experience. __Purchase Experiences__ //Information Gathering//: The total customer experience begins when the customer starts its search process for information. At this point the firm has the opportunity to make that information gathering experience a good one or a bad one. Reducing search costs for the customer can be a major competitive advantage.

//Prioritizing Needs//: The customer is motivated by a need that is not being fulfilled. The firm can communicate to the customer how the firm's product or service is the customer's best option for meeting the need. Part of the communication from the firm can be to increase awareness that the firm's product can meet the customer's needs more completely, or to spark awareness that they have unmet needs.

//Understanding Alternatives//: What is the customers' full set of options for fulfilling their needs, including possibly doing nothing, performing the service for themselves, etc. (For example,alternatives to filtered water could be boiling water, drinking only coffee - I know someone who did this, or not drinking at home.) Marketers add a lot of value to the customer experience when they develop a consideration set for the customer. The consideration set is composed of identifying alternatives and comparing the alternatives based on relative benefit fullfillment. Different value propositions must be developed to speak to distinct segments the market that the firm is targeting. One of the underlying factors affecting the value proposition is the set of alternatives.

//Order Placement and Paymen//t: Dependent on ease of transaction and distribution. Comparative Advantage can be claimed by channel of distribution. Making it easier for the customer to purchase, to lower their "cost".

The following flow chart maps the customer's purchase experience. This chart was created by Jona Hightower.

__Usage Experiences__ Whatever you are doing as a marketer during the purchase experiences sets up customer expectation for usage experience. If purchase experience was easy, customers' expect usage experience to be easy as well. Consistency of experience and expectations is a major driver of customer satisfaction. If purchase and usage experience is done well this makes replacement much easier. //Delivery & Installation Product Usage Product Maintenance Product Repair//

__Replacement Experiences__ If the purchase and usage experiences are easy and fulfilling to the customer more difficulty in the replacement experience will be tolerated. //Product Upgrades Returns and Warranty Product Replacement Product Disposal//


 * Whatever the firm makes salient is what the customer expects. The product or service benefits promised by the firm are a major factor that will be put through the customer's filter. Marketers must understand their company’s value proposition in the market and what they promise their customers or what they tell customers to care about regarding their product or service.**

__Leveraging Lead User Experience__ //Lead Users//: Word of mouth can come from lead users, so it is important that the firm identifies lead users and makes the product available to these customers.

//Customer Experience//:

//New Benefits//: Once you set up something (the price thing: "price leader in everyday low prices") and you deliver on the price thing, the customer expects the price thing. The firm cannot add a second customer benefit by itself. Anytime the firm introduces a new value proposition that is //consistent but different// from its old value proposition, the firm must employ lead users to help spread the benefits through word of mouth.

//Product Development//:

__Reverse Innovation – Invent to Order__ Clearly better for innovation, where customers can understand the benefits; used successfully for lead users to test out inventions.

//Listen Identify Choose Develop Launch//

The following flow chart maps the portable music player market. This chart was created by Jona Hightower.

MASS COLLABORATION AND VALUE CREATION
The firm needs an effective analytical process (data-mining tool). The firm must allow customers to insult and complain about products.

The following flow chart shows the process of **Mass Collaboration and Value Creation** Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

DEFINING LIFE-CYCLE COST AND CUSTOMER VALUE
Life-Cycle Cost = Price Paid + Acquiring Cost + Ownership Cost + Disposal Cost

Economic Value = Competing Product’s Life-Cycle Cost – Our Product’s Life-Cycle Cost

If there is economic value to the customer of our product then their is competitive advantage.

PERCEIVED BENEFITS AND VALUE CREATION
A. Product benefits are the most tangible benefits, are attribute-based, and are the easiest to communicate.

B. Service benefits are less tangible; it asks the question, “How much better is the service compared to my competition?” The challenge is to link “really nice experience” with something tangible that can be quantified (atmosphere, furniture).

C. Brand/Company benefits are tied up over time in customers’ long-term memory. Customers are able to quickly identify brand with quality service and benefits.

PRODUCT LIFE-CYCLE
A market is defined as a set of customer needs, not the benefits, being fulfilled.
 * Market Definition**

The following chart shows **Customer Entry and Market Development**. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

Characteristics of Innovators: They want to be first, are willing to pay to be first, and they are risk takers who are willing to try something new that has not been tested by others.

Characteristics of Early Adopters: hear from the innovators, want/need the innovation and want to take advantage of it, but tend not to be as big of risk takers as the innovators. They need to see that their tangible benefits are going to be more then their tangible costs. This is the most important group of customers as they are the ones who may create the conditions for the tipping point. This is also the time when a firm can stake out a significant differentiating position.

Characteristics of Early Majority:do NOT talk to innovators or early adopters, Marketers add their value to this group, they pull from what the early adopters learned. This group is more more price sensitive and need to be shown that the bang for their buck is there. This is the group of customers where significant amounts of profit are available if the firm is still a serious competitor.

Characteristics of Late Majority: Even more risk averse and very price sensitive than early majority. Will adopt only after the previous alternative is clearly not economical anymore.

Characteristics of Laggards: Intensely brand and product loyal. Will continue to use previous product even when everyone else see's it as clearly inferior. Think of typewriter users.

A. Once a firm cross the chasm and is profitable, additional entrants into the market will lower the firm's profits. It is vital that the firm ensures it has a new product ready for release.
 * Benefits of a Broad Market Definition**

B. If a firm does not cannibalize its own profits with a new product, then another firm will cannibalize the profits for it.

C. Firms don't win as a one-product company. IBM and Microsoft are known for their classic second-in strategy.

D. Use the firm's brand equity.

E. Many innovating companies will focus on the innovator market, which has a different benefit profile then where the firm makes its profit.


 * Focus - identify the problem and focus in like a laser beam on the problem, then find more problems and the next piece and the next piece**

BRANDING
__What is branding?__ A. A Brand is a set of associations that has become an attitude that has been embedded in a **long term memory**. It is owning a piece of real estate in the customer's mind around which to form associations, for example, safe car, consistently fast, cheap food, easy-to-use computers.

B. The reason people brand things is to create a long-term asset that has long-term competitive advantage.

C. Branding creates competitive advantage by building relationship with the Buyer.

D. Branding creates competitive advantage by building relationship with the Distributor.

E. Most brands are being created and developed as “strategic platforms”.

F. You know your product life-cycle. Think in first, third, and fifths. Maybe third is a brand extension and the fifth is a segment extension.

G. Firms must consider how flexible the brand is going to be. The more flexible the brand is the more options for growth. Flexible brands are typically built on more intangible associations. Thus, they are more difficult and often more expensive to manage.

__Customer Associations: Leading Indicators of Brand Value__ A. The “brand” might include the name, the logo, the trade dress (packaging), and various other elements.

B. Brand meaning includes many different types of associations: //Salience//: Top of mind. Dominant association. //Uniqueness//: Says that "I am the one" //Favorability//: Projects that it is the right thing

__Brand Meaning in Managerial Issues__

A. Brand meaning is not always what managers believe it to be, because it depends on customers’ perceptions.

B. Brand meanings can and do change over time (not dramatically), so firms must measure brand perception and meanings, because a brand is a long-term asset that must be managed. The brand meaning is often measured on at a longer time space, yearly for instance

C. Brand dominance is the strength of the brand within customers’ mind. This can be measured by naming methods and latency methods.

D. Sequential Brand Extensions allow product extensions to increase brand flexibility within brand boundaries. Brands can not move in large leaps and bounds, instead they must move in extensions. An example would be Haagen Dazs Ice cream. The company would have difficulties moving straight from ice cream to frozen entrees. Instead it must take steps from ice cream to frozen desserts to frozen entrees.

BRITA CASE
Brita's Market = Water market Positioning Statement: Brita is the leading water filtration device in the home market for tasty water because of our brand.

What is table stakes in this market? At least the perception of clean water. Tasty water is also clean water. Purified water is not the same as tasty water.

New competition is PUR. The company has developed a new device, positioned on health, leader in the faucet device, and just bought by P&G. Brita began their development of the brand inside the health food market. PUR is taking the health market mainstream.

Brita does not have the distribution channels of P&G, though it does have a large distribution channel of its own, the entrance of Proctor and Gamble takes away the previous distribution advantage that Brita had.

People associate taste with health

Cannibalization: When I want to enter and what is my long-term profitability? Brita is at the early stage of the market life cycle for faucets and for this reason they should enter now and take advantage of the profitability window ahead, also, they can really affect PUR at this market lifecycle stage if they hit them hard with advertising dollars and incentives. PUR doesn't have the profit from pitchers and filters to assist them in a head to head battle They are nearing a maturing of the pitcher market but could benefit from some product extensions like flavored filters or some direct mail sales to loyal customers. If competition heats up they should seek to lower their per unit cogs by renegotiating with suppliers and channel partners so that they can take a lower price to the market and still preserve their profitability. What price do I enter at? Brita should enter the faucet market at $39.95 and they should raise the price of their filters to make profitable the product package. What market segment should I be targeting, water taste or water purification? Both? Brita should enter the faucet market now using a focus on both taste and purification, and they should target their effort to their own broad base to take advantage of brand recognition and loyalty. Do I enter now to prevent competition from taking market share from me? Do I enter later?

As always, there is no "correct answer" to the case. If they enter now it will be costly in the short term and risk cannibalization of their existing product. If they enter later they may allow PUR to become the standard and dominate.