Blue Ocean StrategyGet the Strategic Sequence Right

Group 4:

Katy NeelyMatt Tevis

Hunter PondAndrew McDonald

Shelly Brown

The Sequence of Blue Ocean Strategy

Testing for Exceptional UtilityPhillips’ CD-I “Imagination Machine”Buyer Utility Map

6 Utility LeversPurchase, delivery, use, supplements,

maintenance, and disposal. Ford model T

Strategic PricingTwo reasons for change:

Volume generates higher returns than in pastTo a buyer, value of a product/service may be

closely tied to the total number of people using it.

Nonrival goodExcludability

Price corridor of the mass: 2 Step Process

Target CostingThree principle

leversIBMSlice-sharePricing innovationArticle: “Target

Cost Management” by Louise Ross

Pricing Innovation?

“Taking a cue from Hellman's Mayonnaise, who recently redefined the quart as 30 ounces instead of 32, the approach is simple. Hours are now 54 minutes long instead of 60.”

Goal: corporate profits during economic downturn

iPhone Pricing Strategy “The early adopters of Apple's iPhone paid

$599 for the privilege of being the first to have the hot new consumer product when it was launched in June of 2007. But by September, Apple announced that it was slashing prices on its most expensive iPhone by a third. As the early adopters complained about the $200 price cut, Apple shares fell 8.6 percent, losing almost $11 billion in market value in the three days following the announcement. The iPhone illustrates both the challenges of getting pricing right for new products and the dynamic changes in pricing that are needed as the market is developed.”

"When you have something new about the product, such as the sleeker design and touch-screen technology for the iPhone, it is a little harder to price it... Apple may have mispriced the product in the first place and then had to make painful, costly adjustments."—Z. John Zhang, Professor of Marketing, The Wharton School

Profit Model of Blue Ocean Strategy

Blue Ocean Idea (BOI) IndexPhillips CD-i

Motorola

DoCoMo i-Mode Japan

Utility Is there exceptional utility? Are there compelling reasons to buy your offering?

- - +

Price Is your price easily accessible to the mass of buyers? - - +

Cost Does your cost structure meet the target cost? - - +

Adoption

Have you addressed adoption hurdles up front? - +/- +