BRAND MANAGEMENT AND NEW PRODUCT DEVELOPMENT SECTION 7C Brand Management and the Firm Market Research - 3 Consumer Market Segmentation ALAN L. WHITEBREAD

BRAND MANAGEMENT AND NEW PRODUCT DEVELOPMENT

SECTION 7CBrand 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

MARKETS / SEGMENTS

CHANNELS OF DISTRIBUTION

PRODUCTS

SERVICES

APPLICATIONS

13

2

4

TARGET MARKET

[SEGMENT]S

http://www.census.gov/econ/census02/guide/

http://www.census.gov/econ/census02/guide/

MARKET SEGMENTATION

1-Identify the bases for selection

[Why are you splitting it this way?]

2-Develop detailed market segment profiles

[Clearly identify each segment.]

MARKET TARGETING 3-Select and develop measures of attractiveness

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- A SIX- NO SEVEN-STEP PROCESS -

MARKET SEGMENTATION- TARGET MARKET SEGMENT PROFILE -

UNIVERSE OF PROSPECTS

1+ CHILDRENHISPANIC

AGES 25-34 HOUSEHOLD INCOME

OVER $50,000

TARGET

SELECTING TARGET MARKETS

MARKET

ATTRACTIVENESS

TARGETMARKET

SELECTION

MARKET

DEFINITION

MARKET

POSITIONING

MARKET

SEGMENTATION

MARKET SEGMENTATION- DEVELOP ATTRACTIVENESS MEASURES -

• WHY IS IT WORTH DOING?– TARGETED COMMUNICATIONS– FULFILLS NEEDS AND WANTS– RESPONDS TO CHANGING MARKETS– TARGETED AND EFFICIENT

•

• 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- SELECTING TARGET MARKET SEGMENTS -

MARKET SEGMENTATION:Market Coverage Strategies

UNDIFFERENTIATED [MASS] MARKETINGThe firm decides to ignore market segment differences.

One marketing mixSame 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


DIFFERENTIATED [SEGMENTED] MARKETINGThe firm decides to target several [large] market segments

Each segment has a marketing mixDifferent products for each market segment

Proctor & Gamble detergents Current auto manufacturers

Previously, Marriott International

Consumer market segmentsMarriott Suites……….....Permanent vacationersFairfield Inn…………………...Economy Lodging

Business market segmentsResidence Inn………………….....Extended StayCourtyard By Marriott……….Business Travelers


CONCENTRATED [NICHE] MARKETINGThe firm decides to pursue a larger market share of

selected [smaller] segments, sub-segments, or nichesDifferent products to the [sub-]segments

Different marketing mix for each segment or sub-segmentSUV’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


MICROMARKETINGSpecialized products for individuals and locations

LOCAL MARKETING INDIVIDUAL MARKETING

[Brands, promotions] [1:1 marketing]Local chain grocery stores Amazon, Dell

CONSUMER SEGMENTATION SUMMARY

Geography Demographics Psychographics Benefits Usage Rate

• Region• Market size• Market

density• Climate

• Age• Gender• Income• Race /

ethnicity• Household /

family life cycle

• Personality• Motives• Lifestyle• Geodemo-

graphics• Reference

groups

• BenefitsToothpaste

-low price -prevention -whiteness -taste

• 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

INCOME

MARITAL STATUSGENDER

AGE 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

OCCUPATION

EDUCATION Some high school, high school graduate, some college, college graduate, postgraduate

Professional, blue-collar, white-collar, agricultural, military

SUBCULTURES/RACE or ETHNICITY

RELIGION

CULTURES American, Italian, Chinese, Mexican, …

Catholic, Protestant, Jewish, Moslem, otherAfrican-American, Caucasian, Asian, Hispanic

FAMILY LIFE CYCLE Bachelors, young married, empty nesters, …

MARKET SEGMENTATION METHODS

• PSYCHOGRAPHIC

LEARNING-INVOLVEMENT

PERCEPTION

PERSONALITY

NEEDS-MOTIVATION Shelter, safety, security, affection, sense of self-worthExtroverts, novelty seeker, aggressives, low dogmaticsLow-risk, moderate-risk, high-risk

Low-involvement, high-involvement

ATTITUDES Positive attitude, negative attitude

SOCIAL CLASS Lower, middle, upper, …


• 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 cynicalPositive: 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 technologyAssume rapid technology

change / “plugged-in”

Work ethic = job success Fame Distinctive


• Behavioral– Usage, loyalty, innovativeness

• Frequent flyer, Discover Card, …

– Occasion • Hallmark

VALS CONSUMER MODELhttp://www.sric-bi.com/VALS/types.shtml

ACTUALIZERS11.7%

PRINCIPLE STATUS ACTION

FULFILLEDS

10.5%

ACHIEVERS

14.7%

BELIEVERS

17.0%

STRIVERS

11.8%

MAKERS

12.0%

EXPERIENCERS

12.9%

STRUGGLERS9.5%

$$$

$

I

N

C

O

M

E

http://www.sric-bi.com/VALS/types.shtml

PRIZM CONSUMER MODEL

• PRIZM– 500,000 neighborhoods– 62 clusters– Claritas

• http://www.claritas.com/Segmentation.htm

http://www.claritas.com/Segmentation.htm

MARKET SEGMENTATION:UNIQUE

Market segment A

MARKET SEGMENTATION:

A

H G

B

F

E

C D

MARKET SEGMENTATION:

B

C

A

MARKET SEGMENTATION;

B

C

A

If large enough, attack with

• special products and

• specific advertising

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

Tide Triple Action

Crest

Oil of Olay

[urban]

Large washing machines in the

[urban]

Epica Sedan

~$19,000

[Young urbanites]

Large refrigerators in the south

[Guangdong]

Tiny washing machines

[rural]

Aveo Hatchback

$10,000-12,000

[Young urbanites]

Spark Minicar

~$5,000

[Young urbanites]

Bargain priced:

Tide Clean White

Crest version

Oil of Olay version

[rural]Wuling Minivan

$4,000-6,500 [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


SECTION 8ABrand 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

Start

Learn System 1

Learn System 2

Learn System 3

Learn System 4

Design Product

Design Features

Create Engineering Production

Specifications1 week

Create Basic User

Manual1 week

Create Technical

User Manual1 week

Test and Approve

Production System 1 week

Start Production

2 weeks 2 weeks

CPM EXAMPLE

Start

Learn System 1

Learn System 2

Learn System 3

Learn System 4

Design Product

Design Features

Create Engineering Production

Specifications1 week

Create Basic User

Manual1 week

Create Technical

User Manual1 week

Test and Approve

Production System 1 week

Start Production

2 weeks 2 weeks

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]

Week Number 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 LAUNCHADVERTISING: PRINTCreate Media Plan (Print and Online)Buy Print MediaDesignPhotography and/or illustrationProductionCopywriting and ReviewFinal Negatives, Insertion OrdersShip Negatives and Orders to Publications

ADVERTISING: ONLINEBuy SpaceDesignCopywriting and ReviewProduce Send to Site

PRINTED COLLATERALDesignPhotography and/or IllustrationProductionCopywriting and ReviewFinal ArtworkFinal NegativesPrinting Distribution to Sales Force, Prospects

CAMPAIGN TIMELINE: SMALLER COMPANY

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.


• Design for product usability–

• Easy to use• Intuitive• Safe• Comfortable• Ergonomic • …


• 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


• Design for product usability– Consumer Satisfaction Areas

• • Assembly• Disassembly• Reuse• • …


• Design for product usability

• Design for manufacturing efficiency– – – Long-term process optimization– Minimize total production cost [initial through future]



• Design for manufacturing [DFM] efficiency

• Design for purchasing–

• Design for logistics–

• Design for the environment [DFE]– Minimize environmental impact



• 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.



• 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.


SECTION 8BBrand Management and the Firm

NPD Process: From Concept to LaunchStandards, 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 LISTSSeven Management

and Planning [MPC] Tools

1. Affinity diagram2. Interrelationship

digraph3. Tree diagram4. Prioritization

matrices5. Matrix diagram6. Process decision

program chart [PDPC]

7. Activity network diagram

Seven Major TQM tools.

1. Histogram

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

Seven Major SPC Tools [The Magnificent Seven]

1. Histogram or stem-and-leaf plot

2. Check sheet

3. Pareto chart

4. Cause and effect diagram

5. Defect concentration diagram

6. Scatter diagram

7. Control chart

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.

http://lean2.mit.edu/

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 - ISOhttp://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.

http://www.iso.org/iso/en/ISOOnline.frontpage

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 managementstandards 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 WORKSHEETID Potential

Hazard

Cause[s] S[Severity]

O[Occurrence]

RI[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/ .

http://www.fmeainfocentre.com/

FAILURE MODE AND EFFECTS ANALYSIS [FMEA]

• PROVIDES BENEFITS BY REDUCING– – Marketing campaign changes– – –

PACKAGING AND LABELING

PromotesPromotesIdentifiesIdentifies

UsesCompetitive Advantages

UsesCompetitive Advantages

Describes[Marketing information]

Describes[Marketing information]

PerformsSales Tasks

PerformsSales Tasks

InsuresProduct Safety

[Protection, use & storage]

InsuresProduct Safety

[Protection, use & storage]

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

http://www.lansmont.com/Testing/package/HazMat.htm

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


• 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


• 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.


• 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


• 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?


• 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


SECTION 8CBrand 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

PRODUCTS, SERVICES, & TECHNOLOGIES

APPLICA-TIONSCHANNELS

MARKET[S]

SEGMENT[S]

MARKET SEGMENTATION:FILLING THE GAPS

MARKETS / SEGMENTS

PRODUCTS

SERVICES

APPLICATIONS

13

2

4

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

Close interpersonal relationships

Long-term focus

May be very dependent on each other

Amateur

Impersonal

Immediate / Short-term

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 CLASSIFICATIONFor 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 / INSTITUTIONS

Purchase finished goods and services for resale, rental, or leasing for a profit

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

Investment banking

Research

Education

…

Project related

Technical industrial

On-going

Education & training

Installation

Maintenance

…

Engineering

Quality

Product testing

…

Maintenance contracts

Field upgrades

…

SUPPLY CHAIN MANAGEMENT

MARKETSConsumers:CustomersProspectsSuspects

SUPPLIER’SSUPPLIERS

FOCAL FIRM

CUSTOMERS

FOCAL FIRMNEW PRODUCT DEVELOPMENT

CUSTOMER’SCUSTOMERS

VENDORSor

SUPPLIERS

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: DECISION-MAKING

• 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

GatekeepersCONTROL FLOW

Initiators /Info seekers

STARTERS

Buyers /Purchasing

FORMS

Influencers/ Advocates

SUPPORT

DecidersAUTHORITY

UsersMANDATORY

ApproversNECESSARY

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

Semi-finished / component products Finished products

STEEL

COMPANY

3RD TIER

STEEL

UPSTREAM

SUPPLIER

2ND TIER

FASTENERS

DIRECT

SUPPLIER

1ST TIER

RESPONSIBLE

RADIATORS

FORD, GM

CHRYSLER

OEM

VEHICLES

DEALERS

RENTAL

AGENCIES

FLEETS

SPECIAL

VEHICLES

CONSUMERS

SUPPLY CHAIN MANAGEMENT

MARKETS

Consumers:CustomersProspectsSuspects

CUSTOMERS

FOCAL FIRMNEW PRODUCT DEVELOPMENT

FOCAL FIRM

FOCAL FIRMSUPPLIERS and

SUPPLIER’S SUPPLIERS

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

Organizational /Company Demographics

Product / Process /Technology

Product / Process /Technology

Buying ApproachBuying ApproachApplication of the

Products / Services

Application of theProducts / Services

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 BUSINESSES

LA – Long Beach 686,222

New York 598,093

Philadelphia - NJ 405,082

Chicago 399,511

Source: D&B Sales and Marketing Catalog

BUSINESS MARKET SEGMENTATION

• DEMOGRAPHIC

EMPLOYEES BUSINESSES

1,000+ 18,864

500-999 16,270

100-499 126,466

<100 1,803,535

Source: D&B Sales and Marketing Catalog

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

http://plastics.dow.com/plastics/na/application/

http://www.ibm.com/solutions/us/?trac=L2

BUSINESS PRODUCT-APPLICATION-MARKET SEGMENTATION

INDUSTRY / INDUSTRY / INDUSTRY / INDUSTRY /SEGMENT NAME SEGMENT NAME SEGMENT NAME SEGMENT NAME

DESCRIPTION DESCRIPTION DESCRIPTION DESCRIPTIONNAIC(S) NAIC(S) NAIC(S) NAIC(S)

PRODUCT 1 APPLICATION 1 APPLICATION 2

APPLICATION 1 PRODUCT 1 PRODUCT 2 PRODUCT 3

Brief verbal descriptionMARKET (SEGMENT) NAME

PRODUCT – MARKET MATRIX

OrlonOrlon

RayonRayon

Pro

du

ct M

anag

ers

AcetateAcetate

NylonNylon

DacronDacron

Market Managers

Men’sMen’swearwear

Women’sWomen’swearwear

IndustrialIndustrialmarketsmarkets

HomeHomefurnishingsfurnishings

Example is DuPont, see also Dow, GE, …

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

http://www.census.gov/epcd/www/naicstab.htm

THE ECONOMY AND NAICS

Agriculture

Mining

Utilities

Construction

Manufacturing Wholesale

Retail

Transportation

Information Finance

Real Estate Professional

Management Administration

Entertainment Health

Education Accommodation

Other

Public Administration

SELLGROW OR MAKE SERVICE GOV’T

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. Demographic characteristics

2. Geographic characteristics

3. Economic factors

4. Technological factors

5. Sociocultural factors

6. 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– …

Documents

BRAND MANAGEMENT AND NEW PRODUCT DEVELOPMENT SECTION 7C Brand Management and the Firm Market Research - 3 Consumer Market Segmentation ALAN L. WHITEBREAD