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BOSTON LONDON PARIS

The Markstrat Challenge II

The Markstrat Challenge II

SSTRATTRATX Licensing DivisionX Licensing Division

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BOSTON LONDON PARIS

Your success in Markstrat will greatly depend on your ability to manage the development and positioning of brands

Positioning

R&D

Strategy

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BOSTON LONDON PARIS

Customers make purchase decisions based on their perception of your brands

Their Perception of Brands

Your Perception of Brands

Technical quality

BrandA

BrandB

BrandC

BrandD

BrandC

BrandA

BrandBBrand

D

?

?

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BOSTON LONDON PARIS

The "Perceptual Map" is a valuable tool for visualizing brand positioning

Perceptual Mapbased on MDS Study

Key

Perceptual positioningof Brands

Segment ideal PointOt

Need 2

Need 1

+20

+20

-20

-20

SELF

PrHi

Bu

Si

Ot

SEMI

SONO

SOLD

SULI

SAMA

SUSI

SALT

SIBI

SIRO

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There are two key ways to re-position brands in Markstrat

R & D

Advertising

PerceivedEconomy

PerceivedPerformance

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Physical positioning involves matching brand characteristics to customer needs

Economy Performance Convenience

Customer Needs

SAMA

Pri

ce

Brand characteristics

Max

. F

req

.

Po

wer

Des

ign

Vo

lum

e

Wei

gh

t

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BOSTON LONDON PARIS

Positioning with advertising requires setting "Perceptual Objectives"

-20

PerceivedEconomy

Si10

0

20

-10

-20 -10 0 10 20

5

5

9

11

PerceivedPerformance

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BOSTON LONDON PARIS

Your success will greatly depend on your ability to manage the development and positioning of brands

Positioning

R&D

Strategy

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BOSTON LONDON PARIS

R&D success demands long-term thinking and the ability to identify evolving opportunities...

Changing segment

needs

Hi

New target

segments

Si

Pressure on

margins

Ot

Pr

Competitor entry

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BOSTON LONDON PARIS

. . . and also requires working effectively with your R&D department

Provide sufficient budgets Set realistic expected

unit costs

R&D = Profit CenterNumber

of Projects

Experience

Similarityof Projects

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When doing R&D, keep in mind both positioning and economic factors

CBase Cost

(at 100K units of production)

Target Margin Cost in other projects Project Budget Impact of physical characteristics

Most important physicalcharacteristics

Weight Design VolumeMax.Freq. Power

SONITE

Market Needs Competitive Brands Feasible Range Project Budget

Positioning Factors Economic Factors

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• Volume• Weight• Diameter

The HIGHER the requested

characteristicthe LOWER the

base cost

Basecost

Requested characteristic

Impact of physical characteristics on base cost

• Design• Max. Frequency• Power• Autonomy

The HIGHER the requested

characteristicthe HIGHER the

base cost

Basecost

Requested characteristic

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The budget required to complete an R&D project is a function of several factors

accuracy

speed

feasibilitystudy

on-linequery

vs

to find out more:

R&Dexperience

Requestedbasecost

physicalcharacteristics

R&Dbudget requiredfor completion

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There are two possible outcomes of any R&D project

Project submitted to R&D:

weight design volume max. freq. power

17 6 85 35 70

Minimum base cost is calculatedat an early stage in the project.

Minimum base cost = $110

Case ARequested Base Cost = $80

(requested base cost is below minimum, but the R&D will try to develop the project at the minimum base cost)

Budget required for completion = $ 800(at base cost = $ 110)

Case BRequested Base Cost = $130

Budget required for completion = $ 550(at base cost = $ 130)

Budget required for completion is also calculated at an early stage in the project

$ 1,000 $ 300 $ 1,000 $ 300

Project is available at base cost = 110

Project unsuccessfulProject is available at

base cost = 130Project unsuccessful

Case A2 Case B1 Case B2Case A1

Budget allocated by team for this period: Budget allocated by team for this period:

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BOSTON LONDON PARIS

A completed R&D project may be used to modify existing brands and/or introduce new brands

Performance

Economy

Bu

Ot

SiHi

Pr

Old SAMA

New SAMAmore performance

New Brand"SAMY"

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BOSTON LONDON PARIS

Bringing successful R&D projects onto the market may result in obsolete inventory

SAMA

SAMASAMA

SAMASAMA

Brandmodification(name kept)

Brandwithdrawal TRADING

COMPANY

TRADING COMPANY

I'll buy any product at a given % of its

transfer cost

Inventorydisposal

Obsolete inventory

SAMA

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BOSTON LONDON PARIS

Cost reduction projects should be weighed against experience curve effects

B

Transfer cost

Cumulative production

A1

A

Current product (initial experience curve)

cost reduced product(new experience curve)

100 KU 225 KU

Currenttransfer cost A1

Base cost A

Base cost B

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The MDS study measures brand perception along three composite dimensions...

SONITE marketInfluence of brand characteristics on MDS dimensions

in P0

Economy

Performance

Convenience

Weight

slight

slight

Design

slight

slight

Volume

slight

slight

Max. Freq.

slight

Power

slight

Price

slightmoderate strong moderate

strong strong

strongmoderatemoderate

moderate

Productcharac.

Compositedimensions

Perceived Economyincreases if Max. Freq. increases

Perceived Economy increases if Price decreases

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... which are more or less influenced by the various brand attributes

VODITE marketInfluence of brand characteristics on MDS dimensions

in P0

Efficacy

Flexibility

Economy

Autonomy

slight

strong

Max. Freq.

verystrong

slight

Diameter

slight

moderate

Design

slight

Weight

slight

Price

verystrongslight slight slight

slightmoderate

slightslightmoderate

slight

Productcharac.

Compositedimensions

Perceived Flexibility increases if Weight decreases

Perceived Efficacyincreases if Max. Freq. increases

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New decisions introduced in Period 2:

Brand portfolio

Perceptual objectives (on semantic scales or MDS)

R&D

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You can now extend your portfolio by introducing new brands ...

click here to display all completedR&D projects and their features

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... you can also modify existing brands

Keep the same name

select a new R&D project

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To convey the right message to the market, you can set perceptual objectives for each of your products

1Do you want to communicate on the semantic scales or on

the MDS composite dimensions?

2On which dimensions

do you want to communicate?

3Input the coordinates of the point that you

want to reach on the map

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You can initiate up to five R&D projects per period and per product type (five Sonite and five Vodite)

click here to obtain a safe estimate of the minimum base cost and budget required

for completion of this project

You now know everything.

From here on, it's down to your strategy...

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