1 BOSTON LONDON PARIS The Markstrat Challenge II S TRAT X Licensing Division S TRAT X Licensing Division

2 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

3 BOSTON LONDON PARIS Customers make purchase decisions based on their perception of your brands Their Perception of Brands Your Perception of Brands Technical quality Brand A Brand B Brand C Brand D Brand C Brand A Brand B Brand D ? ?

4 BOSTON LONDON PARIS The "Perceptual Map" is a valuable tool for visualizing brand positioning Perceptual Map based on MDS Study Key Perceptual positioning of Brands Segment ideal Point Ot Need 2 Need SELF Pr Hi Bu Si Ot SEMI SONO SOLD SUL I SAMA SUSI SALT SIBI SIRO

5 BOSTON LONDON PARIS There are two key ways to re-position brands in Markstrat R & D Advertising Perceived Economy Perceived Performance

6 BOSTON LONDON PARIS Physical positioning involves matching brand characteristics to customer needs EconomyPerformanceConvenience Customer Needs SAMA Price Brand characteristics Max. Freq.Power DesignVolume Weight

7 BOSTON LONDON PARIS Positioning with advertising requires setting "Perceptual Objectives" -20 Perceived Economy Si Perceived Performance

8 BOSTON LONDON PARIS Your success will greatly depend on your ability to manage the development and positioning of brands Positioning R&D Strategy

9 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

10 BOSTON LONDON PARIS... and also requires working effectively with your R&D department  Provide sufficient budgets  Set realistic expected unit costs R&D = Profit Center Number of Projects Experience Similarity of Projects

11 BOSTON LONDON PARIS When doing R&D, keep in mind both positioning and economic factors C Base Cost (at 100K units of production)  Target Margin  Cost in other projects  Project Budget  Impact of physical characteristics Most important physical characteristics WeightDesignVolume Max. Freq. Power S ONITE  Market Needs  Competitive Brands  Feasible Range  Project Budget Positioning Factors Economic Factors

12 BOSTON LONDON PARIS Volume Weight Diameter The HIGHER the requested characteristic the LOWER the base cost Base cost Requested characteristic Impact of physical characteristics on base cost Design Max. Frequency Power Autonomy The HIGHER the requested characteristic the HIGHER the base cost Base cost Requested characteristic

13 BOSTON LONDON PARIS The budget required to complete an R&D project is a function of several factors accuracy speed feasibility study on-line query vs to find out more: R&D experience Requested base cost physical characteristics R&D budget required for completion

14 BOSTON LONDON PARIS There are two possible outcomes of any R&D project Project submitted to R&D: weightdesignvolume max. freq. power Minimum base cost is calculated at an early stage in the project. Minimum base cost = $110 Case A Requested 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 B Requested 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 unsuccessful Project is available at base cost = 130 Project unsuccessful Case A2Case B1Case B2Case A1 Budget allocated by team for this period:

15 BOSTON LONDON PARIS A completed R&D project may be used to modify existing brands and/or introduce new brands Performance Economy Bu Ot Si Hi Pr Old SAMA New SAMA more performance New Brand "SAMY"

16 BOSTON LONDON PARIS Bringing successful R&D projects onto the market may result in obsolete inventory SAMA Brand modification (name kept) Brand withdrawal TRADING COMPANY I'll buy any product at a given % of its transfer cost Inventory disposal Obsolete inventory SAMA

17 BOSTON LONDON PARIS Cost reduction projects should be weighed against experience curve effects B Transfer cost Cumulative production A1A1 A Current product (initial experience curve) cost reduced product (new experience curve) 100 KU 225 KU Current transfer cost A1 Base cost A Base cost B

18 BOSTON LONDON PARIS The MDS study measures brand perception along three composite dimensions... SONITE market Influence of brand characteristics on MDS dimensions in P0 Economy Performance Convenience Weight slight Design slight Volume slight Max. Freq. slight Power slight Price slight moderatestrongmoderate strong moderate Product charac. Composite dimensions Perceived Economy increases if Max. Freq. increases Perceived Economy increases if Price decreases

19 BOSTON LONDON PARIS... which are more or less influenced by the various brand attributes VODITE market Influence of brand characteristics on MDS dimensions in P0 Efficacy Flexibility Economy Autonomy slight strong Max. Freq. very strong slight Diameter slight moderate Design slight Weight slight Price very strong slight moderate slight moderate slight Product charac. Composite dimensions Perceived Flexibility increases if Weight decreases Perceived Efficacy increases if Max. Freq. increases

20 BOSTON LONDON PARIS New decisions introduced in Period 2:  Brand portfolio  Perceptual objectives (on semantic scales or MDS)  R&D

21 BOSTON LONDON PARIS You can now extend your portfolio by introducing new brands... click here to display all completed R&D projects and their features

22 BOSTON LONDON PARIS... you can also modify existing brands Keep the same name select a new R&D project

23 BOSTON LONDON PARIS To convey the right message to the market, you can set perceptual objectives for each of your products 1 Do you want to communicate on the semantic scales or on the MDS composite dimensions? 2 On which dimensions do you want to communicate? 3 Input the coordinates of the point that you want to reach on the map

24 BOSTON LONDON PARIS 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...

26 BOSTON LONDON PARIS Don't delete this page: Company Report in 'note page'

27 BOSTON LONDON PARIS Don't delete this page: Company Report in 'note page'

28 BOSTON LONDON PARIS Don't delete this page: Company Report in 'note page'