Building your Business Market & the Customer of the Future Dr. Dawne Martin MKTG 241 February 23, 2012

Administration Things Tuesday, Feb. 28 – Quiz, Chapter 4 – 6 Learning Objectives ◦To determine your approach to strategy – customer or innovation ◦To build your business model

Rethink Tool #6 Develop a balance between science and art, logic and imagination using "whole- brain thinking" like Leonardo da Vinci. Question - To pursue a customer versus a product focus? Prentice Hall © 2009 Rethinking Marketing, 1st Edition6-3

Marketing and Innovation Innovative marketing ◦Product proceeds need ◦Create their own demand  Change way customers behave ◦Two components  Openness to innovation  Capacity to innovate ◦Potential to create markets and customers  Defining human needs Prentice Hall © 2009 Rethinking Marketing, 1st Edition6-4

◦Innovative marketing — cont.  Sources of innovative ideas ◦ Technology ◦ Engineering and production ◦ Inventions and patents ◦ Other firms ◦ Management and employees ◦ Customers First to market and continual innovation is key to survival in a turbulent business environment Prentice Hall © 2009 Rethinking Marketing, 1st Edition6-5

Competitive Advantage Achievements in recent past came from anticipating and creating customer wants ◦Competitors who survive more proficient ◦Dwindling opportunities to sustain competitive advantage Create and target future needs and wants ◦Managers perceive inherent risk ◦Accepting risk likely to become more central to competitive advantage Prentice Hall © 2009 Rethinking Marketing, 1st Edition6-6

Changing Needs and Environments ICON grid (innovation or customer orientation) ◦Framework to conceptualize and think about changes in market  Customer needs and wants change rapidly  Traditional firms will increasingly be aiming at moving targets  Flow of learning between customer and innovation goes in both directions Prentice Hall © 2009 Rethinking Marketing, 1st Edition6-7

Prentice Hall © 2009 Rethinking Marketing, 1st Edition6-8 Figure 6.1 The ICON Matrix

Degree of Focus on Innovation and/or the Customer Can Vary, Leading to Four Strategic Orientation Modes for the Firm Isolate ◦Low customer focus ◦Low innovation focus ◦Organization becomes focus of its own attention Follow ◦High customer focus ◦Low innovation focus ◦Customer drives innovation ◦Organization relies heavily on formal and informal market research Shape ◦Low customer focus ◦High innovation focus ◦Technology defines human needs ◦Two distinct forms  Defining  Influencing Interact ◦High customer focus ◦High innovation focus ◦True dialogue between customer and technology Prentice Hall © 2009 Rethinking Marketing, 1st Edition6-9

Choosing a Mode of Focus Review conditions before choosing one mode over another ◦Environmental factors  Specific business environment ◦ Very stable environment — isolate ◦ Complex rapidly evolving customer needs and wants — follow ◦ Rapidly evolving technology — shaping ◦ Customer needs and wants proliferate — interaction Prentice Hall © 2009 Rethinking Marketing, 1st Edition 6- 10

◦ Environmental factors —c ont. Economic power of existing customers ◦Bargaining power of customer higher than supplier — follow Competitive factors ◦Globalization and deregulation cause intensified competition — shape or interact Political factors ◦Sometimes firms have very established and embedded approaches in their cultures, making change hard ◦Very substantial change necessary to bring about mode change Prentice Hall © 2009 Rethinking Marketing, 1st Edition 6- 11

Understanding the Implications of Changes of Mode Three high-profile cases of mode transition ◦Boeing  Shaper to interact to follow, with appearance it is again shifting ◦AOL  Shaper to isolation to follow to isolate ◦Microsoft  Isolate to follower Prentice Hall © 2009 Rethinking Marketing, 1st Edition 6- 12

Build Your Business Model A Business Model Describes the rationale of how an organization creates, delivers and captures value ◦Customer Segment – What market segments should be served? ◦Value Proposition – What customer problems will be solved or needs to be satisfied?  Newness- Design  Performance - Brand/Status  Customization- Price  Getting the job done- Cost reductions  Risk reduction- Accessibility  Convenience/Usability

Build Your Business Model ◦Channels – What value propositions are delivered to customers through communications, distribution and sales channels? Awareness, Evaluation, Purchase, Delivery, After Sales  Sales Force- Web Sales  Own Stores- Partner Stores  Wholesalers ◦Customer Relationship – How will you establish and maintain relationships with each customer segment?  Personal assistance- Dedicated personal assistance  Self-service- Automated services  Communities- Co-creation

Build Your Business Model ◦Revenue Streams– How will revenue be generated from value propositions offered to customers?  Asset Sale- User fees  Subscription fees- Lending/renting  Licensing- Brokerage fees  Advertising ◦Key Resources – What assets are required to offer & delivery previous elements?  Physical- Intellectual  Human- Financial

Build Your Business Model ◦Key Activities – What activities are required to create previous elements?  Production- Problem solving  Platform/network ◦Key Partnerships – What activities should be outsourced or acquired from outside the enterprise?  Optimization & economies of scale  Reduction of risk & uncertainty  Acquisition of particular resources & activities ◦Cost Structure – What are the primary costs associated with your business model?  Cost driven- Value-driven  Fixed costs- Variable-costs  Economies of scale- Economies of scope

Key Partners The Business Model Canvas: Key Activities Key Resources Value Proposition Customer Relationship s Customer Segments Cost Structure Revenue Streams