Semiconductor_product_marketing_101

Semiconductor Product Marketing 101 - 1 -

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Semiconductor Product marketing

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Chapter 1: Roles of sales and marketing in the design process

What are you about to learn in this module?

� You will get a clear picture of what are a design-in and its main categories

� You will see what the ultimate goal of sales & marketing is

� You will be introduced to business cycle

1.1 What is a design-in?

First of all, Design-in is the general term used to describe the set of design, engineering, marketing

and selling activities which result in a customer approving us to become part of his system design.

And then, what is a design-win? Design-win happens when we receive the actual order from the

customer: it is the result of a successful design-in process, and the consequence for us will be

more billings

1.2 From design-in to design-win

For sales & marketing people, a design-in often begins with a BOM (Bill of Material) analysis.

And in the following, you will be introduced to the business cycle.

Before that, what are the definitions of Billing, Booking, Backlog and BiBa?

The backlog is simply our order book, the booking is the firm orders entered into our order book.

Billing, in semiconductor industry, after the parts shipped, we send the customer an invoice. At

this stage the order is said to be billed, meaning that the customer owes us the money. So, billing

is a measure of the money due to vendor.

Biba means billing plus backlog, it is a projection of the total billings over a period of time

(general the full year). It comprises the billings already done, plus the orders to be delivered.

Let’s state a fundamental rule: the ultimate goal of sales & marketing is to get billing

After having seen the concept of design-in and design-win, let’s have a look at an important

concept: business cycle. The business cycle comprises 6 fundamental steps. There are:

prospecting/selecting, relating, discovering, create the solution, advocating& closing, support.

The first step is related to design-in process and the last one covers the design-in into a

design-win.

In these 6 steps, we will see what is a role of a buyer, a sales person and a marketer along with the

business cycle. As you will certainly notice, everybody is involved all along with this cycle, at

different levels.



1.3 Prospecting & selecting

Buyer’s side: definition of sourcing strategy, market research on potential supplier, pre-selection

Sale’s side: market research on potential customer, competitive intelligence, selection of target

applications and contacts

Marketer’s side: market research, competitive intelligence, definition of target markets/customers,

preparation of marketing plan, new product proposal

1.4 Relating

Buyer’ side: initial meetings, gets to know supplier, capabilities, trust

Sale’s side: initial meetings, gains trust, builds relationship, presentation of your company, its

competencies and products

Marketer’s side: prepares presentation material for his/her product line and targeted markets,

gains the trust with company and during customer visits, supports local sales & marketing

1.5 Discovering

Buyer’s side: discovers supplier’s competencies, clarifies nature of needs, agreement on next

steps to receive proposal from a short list of suppliers, send RFQ (request for quotation)

Sale’s side: detailed understanding of customer’s needs and personal motives, expectations and

competition. Formalization and sharing of customer’s needs within your company. Leads the

definition of the next step to prepare a proposal

Marketer’s side: understanding of the nature of the needs

1.6 Creating/Evaluating

Buyer’s side: updates specification and RFQs, informal progress meeting with some suppliers,

request for samples

Sale’s side: conductor to develop the solution, coordinates with various product division, keeps

communication with customer to get his informal feedback

Marketer’s side: create the offer, orchestrates all the resource involved in product division,

generate promotion materials, demo boards, competitive intelligence, provides samples

1.7 Advocating and closing

Buyer’s side: meets with supplier for a deep understanding of their proposal, negotiations,

purchasing decision, order/contract

Sale’s side: defines and organizes the presentation of company proposal to the customer, showing

benefits for the customer, in order to win the business, negotiation if necessary, and wins the sale.

Supports the customer in his decision phase

Marketer’s side: product qualification, supports sales in advocacy phase.



1.8 Supporting

Buyer’s side: requires commercial and technical support

Sale’s side: controls and facilitates implementation of project, organize regular communication

activities with the customer (such as tech days, visit, etc)

Marketer’s side: close follow-up of projects, planning and margins



Chapter 2: Company Organization


� You will review the matrix organization, by groups, regions, business units and product

units

� You will see what is the role of sales and marketing

� You will have a detailed picture on the regional and divisional sales and marketing job

structure, job description, objectives and mappings.

2.1 Matrix Organization

A company top level organization is always a matrix of product groups on one axis, regions on the

other.

Company matrix organization

Product group creates and manage products, based on core technology (memory, microcontroller,

analog, etc) and sometimes applications/market segments. They are “marketing” organized.

Regions look after customers in a specific region and are primary “sales” organized, although they

usually have both sales and local marketing.

So, now let’s look at closer to the product groups, we can also divide product groups into 2 kinds:

Standard products group: devices that any customer can use, there is a direct competition on each

order fro this kind of products (flash, STD liner)

Differentiated products group: category includes dedicated integrated circuits, customized ICs.

Product Group

Group 1 Group 2 Group 3 Group 4

Region

Europe

America

AsiaPac

Japan

Emerging

market



Differentiated products are characterized by stable demand and pricing. (Wireless, wire line, SOC)

2.2 Business unit and segment

Normally, we can see in one region, we also organized into business unit. For example, we may

have: Telecom BU, Consumer BU, Computer BU, Automotive BU, Industrial BU, EMS BU, and

Distribution BU. All of the above BU correspond to 6 (maybe even more as you may see) market

segment (telecom, consumer, computer, automotive, industrial), EMS and Distribution BU are

sales channels.

We must also mention the Competence Center, it is a team of marketers, application engineers,

eventually designers, dedicated to a market segment, and located in the region, close to customer.

Product 1

Pro

duct G

roup

B

(can

be

D

iffere

ntia

ted

pro

duct g

roup )

Product 2

Product 3

Product Groups

Product A

Pro

duct G

roup

A

(ca

n b

e S

tanda

rd

pro

duct g

roup )

Product C

Product B

Distribution BU

EMS BU

Industrial BU

Automotive BU

Computer BU

Consumer BU

Telecom BU

EuropeEmerging

MarketJapanAsiaPacAmerica

Regional Sales and

Marketing

support

feedback

Market

Nokia, Motorola

Philips, TCL

Dell,

Seagate

Foxconn

Arrow, Avnet,

Future

…Product 1

Pro

duct G

roup

B

(can

be

D

iffere

ntia

ted

pro

duct g

roup )

Product 2

Product 3

Product Groups

Product A

Pro

duct G

roup

A

(ca

n b

e S

tanda

rd

pro

duct g

roup )

Product C

Product B

Distribution BU

EMS BU

Industrial BU

Automotive BU

Computer BU

Consumer BU

Telecom BU

EuropeEmerging

MarketJapanAsiaPacAmerica

Regional Sales and

Marketing

support

feedback

Market

Nokia, Motorola

Philips, TCL

Dell,

Seagate

Foxconn

Arrow, Avnet,

Future

…

Product Group, Business Unit and Market

As we see from above chart, a product group deals with regional sales and marketing, the sales

force will work on one side with their regional marketing and on the other side with the customers.

The sale is the main interface between company and our customers, so we always call the sales

“customer owner”.

2.3 Sales and marketing roles in an organization

We can define marketing roles as below:

� Marketing people, no matter in region or product group, is responsible for finding profitable

new markets for the company

� Marketer selects which profitable market to target

� Marketer defines the optimum sales channel to satisfy the end customer

� Drives the creation of products and services which will serve the targeted markets and needs



� Communicates what our offer is, and its value, to the targeted markets

� Provides technical and training support to sales

Same, we can define sales’ roles:

� Sales take the markets which have been selected by marketing, and look for profitable

customers in these selected markets

� Sales are the prime point contact with the customers and are the primary people responsible

for developing relationship, trust, understanding, with them

� Develop a deep understanding of the customers’ needs and federate the resource necessary to

satisfy the clients’ needs

� Sales address the commercial concerns and take the order. Then, they serve and support the

customer through to repeat the purchase

2.4 Sales and marketing mapping

After having seen the sales and marketing fundamental roles, let’s try to understand what are sales

and marketing internal and external “mappings”. Yes, sales and marketing people are linked to a

dense network of people within and outside the company.

In order to read correctly following contents, you need to know some definitions:

� CS: customer service

� FAE: field application engineer

� FQS: field quality service

� FSE: field sales engineer

� KA: key account

� PME: product marketing engineer

Marketing person typical internal mapping:

Sales team:

FSE, KA Manager

Planning:

CS, Product group planning

dept

Other Marketers:

PMEs

Technical:

FAEs, Product group

engineering, Quality engineering,

design team

Legal dept for contracts

Sales team:

FSE, KA Manager

Planning:


dept

Other Marketers:

PMEs

Technical:

FAEs, Product group


design team


Sales team:

FSE, KA Manager

Planning:


dept

Other Marketers:

PMEs

Technical:

FAEs, Product group


design team




Salesperson typical internal mapping:

Marketing team:

Product group, field

Planning:

CS, Product group planning dept

Quality: FQS

Technical:

FAE, PME, Product group engineering


Marketing team:

Product group, field

Planning:

CS, Product group planning dept

Quality: FQS

Technical:

FAE, PME, Product group engineering


An important point is that, besides meeting people at the customer, we can also meet them while

attending seminar, conference, etc. actually every place is good to enlarge one’s network.



Chapter 3: Job Description

After having seen the matrix organization of a company, it is right time to have a

closer look at the job structure, job description and objectives.

3.1 Regional Sales & Marketing job structure

As we see clearly here, regional sales & marketing can be divided into 3 main activities:

marketing, sales and applications. Let’s see in details a description of each job.

Product marketing: responsible for a range of product lines (P&L)

� Identifies locally new markets and potential targeted customers and advise the product group

on the product required by the market

� Ensures the promotion of his/her products

� Organizes product trainings for regional sales and customers

� Supports sales team on his/her products, fully takes part to the design-in process

� Objective is to position company as a key player in terms of turnover, market share and

profitability

Technical marketing: responsible for applications within a market segment

� Defines, promote full function solutions at system level

� Coordinates technical support from various product group

� Works together with Field Sales Engineers and Field Application Engineers

� Objective is to succeed on design-ins

Marketing, Sales and

Applications

Marketing Sales Application

Product Marketing

Technical Marketing

Communication

Sales

Customer Service/

Supply Chain

Business Management

Field Application

Engineer



Communication: responsible for the local marketing communications

� Supports the sales team within his/her geographical territory with marketing communication

material produced by product group

� Maintain local customer mailing lists, conduct mailings

� Organize local conferences, seminars, trade shows, etc.

� Local advertising support for distributors

Sales: responsible for growing billing, and market share with their customers

� Defines and implements sales strategy at the customer

� Build and maintain relationship with customer, promotes company’s image and products

� Ensures customer’s satisfaction

� Makes TAM and SAM analysis

Customer service/supply chain management

� Ensures the order entry and the follow-up of the orders till the final delivery of the parts to

the customer

� Interface between the sales and product group planning

� Provides customer with delivery information, in case of delivery problems, gives early

warning to the customer

Business management

� Handles quote desk

� Manages ship and debit system

� Manages the quote and design-win programs

Field application engineer

� Promotes at customer company’s technical solutions

� Supports technically the customers and sales team

� Follows up the design-in in cooperation with the FSEs and product groups

3.2 Product group marketing job structure



Strategy and business development: responsible for mid and long-term marketing

� Generates marketing plan, including strategy, turnover, market share, etc

� Identifies and creates new opportunities (new markets, segments, products, customers,

applications)

� Initiates the New Product Requests

Product marketing: responsible worldwide for a range of products

� Defines and implements marketing strategy for products

� Manages the product portfolio

� Prioritizes the activities, optimizes the allocation of resources

� Follow up the product margin, defines price lists

� Promote and train of products

Program management: responsible for successful introduction of new products (time-to-market,

cost, quality, specification, etc)

� Federates and coordinates all the resources necessary to meet the program’s objectives

Communication and technical documentation: responsible for the promotion of products on the

market place

� Defines the communication plan and is responsible for carrying out

� Plans, develops and provides the communication and promotion tools

� Responsible for web marketing

� Manages advertising, shows, press releases, etc

Application technical support

� Provides detailed technical support to optimize our products’ utilization through an

Marketing and Applications

Marketing Applications

Strategy and Business

development

Product Marketing

Program management

Communication and

Technical documentation

Technical support

Hardware/Software

development

Hardware

Software



application by means of user manuals, application notes, presentations, data sheets, demo

board, cross reference, etc

� Trains marketing and sales in the application

� Supports sales and marketing to promote applications

� Supports marketing to define new products needed in applications

Hardware/Software development: is hardware or software specialist

� Resources for the customer, provides them with detailed technical support to implement

company’s solution, through assistance when necessary with tools and programs

� Trains marketing and sales on the application

� Support sales and marketing to promote application



Chapter 4: Marketing tools and processes


� You will review basic vocabulary of sales and marketing activity

� You will learn the processes and tools associated to the prospecting and selecting

� You will learn the processes and tools associated to the creation of a solution

� You will learn basics of planning, forecasting, order management

In this module, we are going to learn a certain number of processes and tools, it is important to

clearly define some usual marketing words and acronyms.

TAM (Total Available Market) corresponds to the sum of all semiconductor purchases. We also

can define a TAM per customer, segment or type of product.

SAM (Serviceable Available Market) is the part of the total market covered by your company’s

product range.

Market Share is company’s share of the market. We compute it by dividing the billings by the

TAM. A market share can also be defined per customer, segment or type of products.

Product Portfolio refers to the overall catalogue of devices offered by company.

Previously, we have talked about 6 fundamental steps in business cycle which are:

prospecting/selecting, relating, discovering, create the solution, advocating& closing, support.

Selecting is focusing on a target customer/segment/product etc… and is the fundamental

responsibility of positioning company on the market. Positioning is one of famous 5 P’s which we

will involve deeper later.

In the prospecting phase we must search for potential business opportunities and gather data about

these opportunities. We also have to select, prioritize, which opportunities we want to support. We

must know the environment in which we evolve. And here we conclude 3 C’s for the main actors:

the customers, our competitors, and ourselves (the company).

Now, let’s see what will happen if we are not aware of our environment:

“I think there is a world market for maybe 5 computers.”

Thomas Watson, 1934, Chairman of IBM

“There is no reason for any individual to have a computer in their home.”

Ken Olsen, 1977, Digital Equipment’s founder, president and chairman

4.1 The first C: The Customer

In our prospecting phase, we need to be well-informed about the customer’s situation, needs, and

environment, evolution and future trends. That is to say, we must know the marketplace.



Some company has market research group or team to be responsible for communicating our

environment trends and for anticipating the future trends of the market. They provide macro level

market research data, selected news from the semiconductor and electronic industry, presentations

on the semiconductor industrial trends, forecasts, economy, and market indicators updated on a

regular basis (monthly, quarterly) for global team.

In addition to the corporate market research, each of us must perform a market research on the

environment he/she is responsible for. One of our main roles is to dig out new business

opportunities. These new opportunities will broaden our knowledge of the TAM, SAM and our

market share.

4.2 The second C: The Competition

It is obviously that we are not alone in the marketplace. So we cannot evolve in the semiconductor

environment without knowing extremely well what are doing the other players in this market: their

offering, pricing strategy, strength and weakness.

The purpose of competitive intelligence is to gather, analyze and share information about the

competitor’s activities, in order to adapt accordingly our strategies. The competitive intelligence

team is also responsible for anticipating and analyzing the strategic moves of the various players

of our industry value chain. It also recommends strategic actions to company staff so as to be in

line with our objectives.

The competitive intelligence team optimizes the flow of available information from outside and

inside the company in order to make them available with the best cycle-time, through e-tools.

Raw data collected in many information sources (newspapers, contacts, customers, etc.) are

gathered and analyzed and finally transformed into intelligence. This intelligence can then be used

for decision making.

Intelligence can be used in strategic analysis tools such as SWOT which stands for Strengths,

Weaknesses, Opportunities and Threats.

SWOT

Build

Strength

Overcome

Weakness

Explore

Opportunity

Minimize

Threat

SWOT

Build

Strength

Overcome

Weakness

Explore

Opportunity

Minimize

Threat



A SWOT gathers in a 4-cell table a competitor’s major strengths and weaknesses (factors internal

to the company), and its major opportunities and threats (external factors from the business

environment).

4.3 The third C: The Company

In prospecting phase we cannot only know about our customers and about the competition! We

also have to know our own company. We need to be aware of what is our company (our

organization, who dose what, our mission, our strategy, our results, etc.) and what are our

capabilities (what we can offer, what are our new products, etc.)

In other words, at the customer you need to know your company to demonstrate competency.

Moreover, the quicker you answer your customer, the better you support him/her.

4.4 Company’s mission

What is a mission statement? It is a definition of what an organization is and what it does.

What is your company’s mission?

Besides a mission statement, company also will have vision which provides us with precise

objectives, leading to the effectiveness of our company.

Now, try to find below information to know better about your company and support your

customers:

� Corporate, product and segment presentations

� Advertising campaign

� Trade shows, conferences, seminars

� Up-to-date materials such as datasheets, application notes, PCN (product change notification),

PTN (product termination notification)

� Business information, figures, customer visit report…

4.5 4 P’s

Let’s have a look at another essential phase: creating the solution. The marketing concept

associated to this phase corresponds to so-called “4 P’s”: Product, Placement, Promotion, and

Pricing. (Positioning has talked previously)

Creating the solution is the process of building an offer that meets or exceeds the customer’s needs.

Our solution must be a solution to the customer’s problem rather than just the offer of supply of a

product.

4.6 The product



A product is not an unchanging and unique that we sell by itself:

� We have to manager the life of our products so as to take the most of them and know when to

start the next generation.

� A product belongs to a specific family and we have to optimize our portfolio to better address

the SAM.

� When we sell a product we must be as creative as possible in order to maximize the value of

our offer.

We can easily draw a parallel between our lives and a product’s life. You can try to match each

phase with the corresponding description:

During the conception phase sales & marketing analyze, define and position our new product

Then, during the birth phase we initiate the business around this product and launch it

The next phase, the growth allows us to expand this product’s market

During the maturity phase we increase the market share, by maximizing the sales, and we

already think of the next generation of products

During the decline phase marketing tries to maximize the profits, and to reduce the costs,

by means of shrink for instance

In the final phase: the death the product is terminated and a new generation takes its place

In different phases of a product’s life, we can code them by means of numbers from 0 to 90 called

maturities.

..

.

.

.

.New product proposal

New product request

Design approval certification

Product qualification

Product termination request

Obsolete

Concept

(Mat 0)

Design

(Mat 10)

Engineering

(Mat 20)

Production

(Mat 30)

Product

termination

(Mat 50)

End of

commitment

(Mat 60)

Obsolete

(Mat 90)

Maturity

..

.

.

.

.New product proposal

New product request

Design approval certification

Product qualification

Product termination request

Obsolete

Concept

(Mat 0)

Design

(Mat 10)

Engineering

(Mat 20)

Production

(Mat 30)

Product

termination

(Mat 50)

End of

commitment

(Mat 60)

Obsolete

(Mat 90)

Maturity



New product proposal: its purpose is to select new business opportunities that require a new

product development. It is managed by product group marketing.

New product request: it is prepared also by product group marketing, to approve the development

of a new product.

Product change notification: it is issued by group level when a process change occurs. The sales

are responsible for sending the document to the impacted customers and to collect their feedbacks.

Product termination request: it is initiated and managed by product group to get an internal

approval (both product group and regional level) on the termination of a product.

Product termination notification: once the PTR is approved internally, a PTN letter is issued by

product group marketing. The sales send this PTN to the impacted customers who have to approve

it within a time period, says like 30 days. The product is terminated and company accepts to enter

last orders during 6 months, or even longer.

A good management of product portfolio also means that when a product is no more strategic in

terms of profitability, growth, we can remove products, or we can add products at the most

appropriate time (time to market).

When a product is in its full maturity phase, we have to prepare the ramp up of the next generation

that will take over.

Another way of managing efficiency portfolio is to diversify it by means of:

� Alternatives to successful products existing on the marketplace (generally standard products)

� Complete families of products to cover most applications of the customers

� Products with high added value (generally dedicated products)

In order to maximize the value of our offer, we need to be creative and propose, besides the

product itself, a real solution to the customer’s problem that may combine the 3 following

elements:

Support Service Technology

�Local resources

�Technical support

�Qualification assistance

�Expertise

�…

�Logistic

�Delivery performance

�Quick feedback

�Training

�Hot lines, website

�…

�Software

�Evaluation kits

�Embedded software

�System on Chip

�Customer products

�…

Support Service Technology

�Local resources

�Technical support

�Qualification assistance

�Expertise

�…

�Logistic

�Delivery performance

�Quick feedback

�Training

�Hot lines, website

�…

�Software

�Evaluation kits

�Embedded software

�System on Chip

�Customer products

�…



4.7 The Placement

There are several ways of selling a product. It is essential to know well the different channels to

place our products in the most effective way.

In the following, we will talk about the main channels:

� Direct customers, OEMs (original equipment manufacture)

� Distribution

� EMS (electronic manufacturing service)

The products can be ultimately sold to OEMs but the routes may be via 3 main ways:

� Direct relationship

� Indirect relationship via distribution

� Direct and/or indirect via EMS

An OEM is a company that uses product components from one or more other companies to build a

product that it sells under its own company name and brand.

IBM is an example of a supplier to the OEM market, and is at the same time an OEM itself since it

uses other companies’ parts in some of its products.

Some other famous OEMs are Nokia, HP, Dell.

An OEM’s goal is to produce technology products which meet their customers’ needs

(functionality, benefit, and price)

More and more OEMs are giving up their manufacturing activities to the EMS, in order to

concentrate on development, marketing and services, therefore EMS are taking share from OEMs

and distribution, EMS deserves special attention.

Distributors play a vital role in the industry. Indeed, the industry uses the distributors to support

small and medium accounts. We therefore have to treat distributors as an extension to our sales

and support forces.

Some distributors are very big (Arrow and Avnet are much bigger than some vendors) and are

getting ever bigger due to the consolidation of the industry. The distribution channel has become a

key in the supply chain for marketing programs and small customers penetration. They provide

complete warehousing, procurement and payments, and have a strong experience in e-business.

So, what is exactly a distributor’s role?

� Can deliver small quantities

� Holds stocks of components (availability/ speed)

� Stocks a broad range of components

� Provides very flexible delivery arrangements.



Also,

� Has lots of sales representatives

� Is local, close to customers

� Does mass marketing

� Knows who the small customers are

� Supports these small customers

� Handles credit risk with unknown small customers

And, more technically,

� Has dedicated programming capabilities (micros, flash, etc.)

� Provides local technical support

� Can train larger number of people

The EMS is the suppliers of production and design services for subsystems and electronic

equipment. They are major companies that work above all for other industrials.

Just in Y2005, 35% of semiconductor products were bought by EMS (the figure was 21% in

Y2000, representing a business of >$43B). Big OEMs are handing over production to EMS to

concentrate on development, marketing and services.

The EMS represents nowadays a powerful and growing actor in the value chain, increasingly

owning the purchase decisions, and buying up their customers’ facilities. Huge EMS such as

Foxconn, Flextronics are growing fast, they have had already revenues exceeding $1B!

Why to use an EMS?

� An EMS means easy manufacturing and quick time-to-market for OEMs thanks to its

integrated design capabilities

� An EMS has state-of-art equipments that can drive costs down

� An EMS has worldwide factories and capabilities

� EMS are used by start-up OEMs to avoid manufacturing investments

EMS has a maximum focus on materials management to ensure quality and service, interfacing

with their customer and their suppliers.

It is therefore essential for us –as a supplier- to know that EMS is concerned about the component

suppliers’ ability to service them in terms of:

� Maximizing the use of global pricing strategy

� Sourcing obsolete components

� Purchasing through e-commerce

� Getting enough product in times of increasing lead times and product allocation

� Getting adequate technical support



4.8 Supply Chain Management

It is now time to mention an important concept: the supply chain management (SCM). In short, we

can say SCM is the oversight of materials, information and finances as they move in a process

from supplier to manufacture to wholesaler to retailer to consumer.

SCM is an answer to the ever increasing flexibility required from a production machine: rapid

changes in the final demand, quick evolution in the norms and features offered, shorter life of end

products, reluctance to have inventories, manufacturing location changes, etc.

The supply chain management implies a partnership between your company, the customer and the

chain actors. In particular, the customer and company are engaged in collaborative planning to

improve the time-to-market of products, reduce costs, and better manage current resources and

plans for the future needs.

� Be as early as possible in the design cycle

� Be an easier company to do business with

� Extending sales and marketing coverage

Indeed, electronics business (e-business) is becoming a new channel to place our products.

E-business is the conduct of business on the internet, not only buying and selling but also

servicing customers and collaborating with business partners.

“In future the big won’t beat the small. The fast will beat the slow”

- J.Chambers, Cisco

Thanks to business partners, we also share information with them; the users see only what they are

interested in and what they are allowed to access. We can broadcast B2B (business to business)

applications such as SVI (Supply chain visibility information) or E-ID (e-immediate delivery).

An extranet can be viewed as part of a company’s intranet that is extended to users outside the

company.

4.9 The Promotion

Having a promotion strategy is essential for all companies. As we are going to see, promotion can

be done in many ways: traditional supports, e-supports, audiences

It is very important for sales and marketing people to be proactive and to be aware of our

promotional activity.

The first promotional supports that we think about are the traditional ones that are in our case:

Advertizing

Press release



Literature

Annual reports

Ecological and social reports

The internet offers now a new way to promote our company, by means of the e-supports:

Banners

Web seminars

Website sponsorship

Key word purchasing

4.10 The Pricing

The price of a product is obviously a crucial point. Share negotiations between company and the

customer can take place before we get orders. It is therefore extremely important to know what is

behind the pricing of a product to better defend our margins.

We will see:

� Cost structure

� The bottom line effect

� The margin

� The pricing tactic and who does what inside company

Let’s see now what the basic cost structure is.

Sales This is the money we get from a sale…



Sales

Manufacture

cost

One part of this sale goes to the manufacturing

cost, that is the cost in Fab to produce the part

Manufacture

margin

=

Gross

margin

What remains is called manufacturing margin or gross margin

Sales

Manufacture cost

Manufacture

margin

=

Gross

margin

Manufacture cost

Product division cost

R&Dregions

G&A

Operating

profit

The manufacturing margin

includes the product division costs,

R&D, region and General &

Administration costs

What remains is the operating profit

Sales

Manufacture cost

Manufacture margin

=

Gross margin

Manufacture cost


R&Dregions

G&A

Operating profit

Manufacture cost


R&Dregions

G&AInterests

TaxesOnce removed the

interests and taxes

company must pay, we get our final net profit

Netprofit

The bottom line effect comes from a simple observation.

Let’s say that the selling price of a device is $1.0 and that the total cost of this device is $0.8. This

means that our profit on this part is $0.2



Now, let’s imagine that instead of selling this device $1.0, we sell it at $1.1, the total cost remains

the same, this is $0.8, and our profit is now… $0.3

The increase, in percentage, of our profit is ($0.3-$0.2)/$0.2=50%!

In our example we see that a 10% increase of our selling price means a 50% increase of our profit.

Likewise, if we decrease our selling price, we will dramatically reduce our profit.

Our company must remain profitable and since the influence of our selling price on the profit is

huge, we must be very careful when we negotiating pricing with the customers.

In terms of pricing strategies the first point we have to bear in mind is that the price target must be

market based, not cost based. This means that:

� Sales must define the marketing value of a device based on their experience of pricing at the

customer, on the customer’s target price and on the benchmark company/competition

� Product group marketing must define the market value of the device based on their

experience of market price and on the benchmark company/competition

Together they must find a consensus on the price target before negotiating to the customer.

The second pricing tactic is to control very carefully the profit versus the price.

Sales check the customer’s target price is compatible with the price list and are responsible for

negotiating with the customer.

Product group marketing defines the price list and lowest prices we can propose (low balls), based

on the product manufacturing cost and our targeted profit.



Chapter 5: Order Management

Once we have quoted a product, the order entry cycle hopefully begins. Let’s see now in details:

� What is this order entry cycle

� The difference types of customer orders

� The different kinds of stocks

Quoting PO Order entry Scheduling

TBA

Order

Acknowledgement

(with CD)

Firm Order

Frame Order

Backlo

g

Here is now a summarized orders entry cycle:

Hopefully, after quoting we get an order, ie a PO (purchasing order). From this PO we enter the

order (order entry). When EDI (electronic data interchange) is used between the customer and

company, the PO and order entry are simultaneous.

Then planning sees what deliveries are required and compares them with what is anticipated to be

available. That’s the scheduling. The RD is the Requested Date (by the customer).

The orders will be acknowledged and we will provide a CD (committed date), allocating to the

customer a precise product from a certain plant and store. In case we need to reschedule an order,

we will provide an LD (last date).

The orders can also be put on TBA (to be advised) if we have no availability or if for instance the

RD is outside our commitment window.

5.1 Firm and Frame order

Now that we have seen the order entry cycle, let’s try to define the different kinds of customer

orders that can happen.

Firm orders

The firm order is the most important order type. It is triggered by a customer’s PO, it will contain

general information (currency, carrier, payment terms…), mandatory information specific to each

order (customer ship to, commercial product, unit price, requested quantity and RD) and

sometimes additional information (customer part number…)

A number is generated automatically. It is called the SO number (sales order number)



Frame orders

An SFO (shippable frame order) is a capacity reservation in plants for key customers. The purpose

is to create virtual orders to forecast and anticipate customer’s future firm orders.

The capacity reservation means a certain investment of your company since we launch production

although we have no firm orders yet. That is why we must pay attention that frame orders are

accurate and correspond as well as possible to the future firm demand of the customer. This is a

key task of the sales organization.

Non product orders

They can be sample orders, literature orders, etc.

Sample orders are important for our business. They help us to penetrate into new markets, new

projects. Our goal is to respond as quickly as possible to customer’s sample requests.

5.2 Stocks

Stocks can be of different types:

� A dedicated buffer stock is normally physically located in the regional warehouse

� A consignment stock is a dedicated buffer stock which is physically on the customer’s site,

but which legally still belongs to your company

� A regional stock is under region’s responsibility

� A divisional stock is under product division’s responsibility, its availability is mainly used for

manual scheduling

Documents

Semiconductor_product_marketing_101