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2 - 3 - (2-A) Strategic Marketing (11-39)

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  [MUSIC]So, in this section, what I want to focuson is an introduction of a, aframework that I think you'll find veryuseful for figuring outhow to think competitively to become aleader in your market.And what I'm going to go over is based ona, abook that was written by Tracy andWiersema it's called Market Leadership.And its based off of their framework,although I've adaptedit some.And, the framework or the, well I'm goingto think of it as kindof the graph or the strategic tool, isbased on a set of principles.These principles have to be true and youhave tobelieve in them in order for thisframework to work.And they're very strong principles.They're very strong assumptions.I don't think they're that controversial,but they'renot vague, they really are very strong,andin order for this technique to work, youreally need to abide by them.And the first one is; that you have toknow your markets.Now before I mentioned a lot of, mostbusinessesare now in customer fosed market, customerfocused marketing.That is the type of marketing mostbusinesses are doing.because most businesses are verycompetitive, they're global.There's a lot of competition out there andthe onlyway they're going to win in their marketplace is tofocus on the customer.So, that's a very important principal inthis framework, it says, in order touse this framework, we are going to assumethat you know what your customers want.And furthermore, you know how yourcompetitors are likely to react.And so what you are trying to dois what I mentioned that principle ofdifferentiation.You're trying to find a way toprovide customer value, better than thecompetition.And the only  way you can really deliver this.Is to know your market.So you.And you can't just guess.You have to do market research and youhave to reallyunderstand what your customers want andhow your competition's likely to react.So that's the first principle.The second principle and this is whereit's pretty, it's apretty defined and pretty It's a definiteassumption that's being made.And the assumption says andwhat I've written here is customers havethe final say.And what that means is the customers aregoing to choose what they want.But the assumption is a strong assumptionbecausewe assume the customers go through thisdecision process.They look at all the data and all thevaluesand all the attributes and all theproducts in the market.And, there's so much information outthere.That they can't consider everything.And, so what they do is theykind of chunk a bunch of different thingstogether into kind of three bundles.And the three bundles are.One is all sorts of operations factors.Which includes price and cost.But delivery, service, reliability, those,all ofthose kinds of things are consideredoperational things.The other bundle is product features ordesigns, so product attributes style,innovation, technology and they put thatin another bundle.And the third bundle is.Whether or not it meets my needs, so is itcustomized to meet my needs?And what the customers have the final saysays,is that customers look at these three,they kind of classifythe products into these three bundles andthey kind of givethem a score in each one of these threedimensions.And then they decide which oneof those dimensions is the most importantto them and they pick the productthat's the best on one of those dimensionsand good enough on the other two.So, it's says, you can't be pretty good in  all three of them.Because then the customer won't pick youbut the customers going topick something not that's kind, if theycare about price they'renot going to pick something that's kind ofa good price theygoing to go for the lowest price or ifthey care aboutdesign it's not going to be somethingthat's kind of good design, they'regoing to go for the very best design thatthey like the most.Or if they care about how much it meetstheir own needs, they're going to go forsomething that meetstheir needs the best, as long as theproductdelivers satisfactorily or good enough onthe other two dimensions.So, that's a very strong assumption.But if you think about it, itkind of approximates the way customersmake decisions.If you believe that assumption, that thecustomers have the finalsay and they choose the product thatdelivers the best on thebundle of attributes they care the mostabout, that suggests thatif you want to be the first in the marketsthat you serve.You better be the best at something andgood enough at the other two things.And that should be your market strategyand once you decide on whichtype of thing you going to be the best at,the market leaderat, then that have indications for the wayyou structure your business, the way youprioritize resources, the way you allocateresources, thetype of people you hire into your company.It has all sorts of implications for yourbusiness organization so that you candeliver total value and total quality andguarantee the customer satisfaction onthis dimension.So, those are the assumptions.Now, before I show you the framework Ihave to introduceone other concept and this concept is whatI'm going to call, fair value.And what I have on the screen here is avalue map.And you have on the vertical axis,relative costs to the customer.And on the horizontal axis, relativebenefits.And what the map says is that if you offer  more benefits, customers are willing topay a higher price.If you charge a lower price,customers will expect fewer benefits, aslong as what you offer appears to be fair.If you offer something inferior and it'snot fair value, then customers won't buythat.So it, you won't make it in the market.You'll be, it'll be cancelled out of themarket because you're not offering a fairvalue.And what the framework says is that youneed to offer fair valueon two of those bundles, but offersomething better than fair value on oneof the bundles, on the bundle you aregoing to be the leader on.So if you can imagine a marketplace whereeverybody is tryingto deliver fair value and somebody isdelivering something of superior value.Think about what's going to happen in thatmarketplace, in a very competitive market.Somebody comes out, let's say Apple comesout with a better design and so the iPadcomes out and it's a much better design.It, it fair price on these other axis, butthere are, their tablet is better thaneverything else.What happens in the marketplace?And what happens is everybody tries tocopy and mitigate the advantage.And so what happens is what's perceived tobe fairvalue, that fair value line is not astatic line.It's constantly moving up, moving to thelowerright as the market gets more and morecompetitive.So what's fair value is constantlychanging over time.So although I say what you need to doin this framework is to deliver the bestof somethingand state fair value on the other twobundles,the problem is fair value's not a staticconstant concept.It's constantly changing as a function ofcompetitive reaction.So, with that said as background, here'sthe framework.And here are the three bundles; one ofthem is operational excellence, theother's performance superiority, that'sthe bundlethat delivers on product design and style.And the third is customer intimacy, which
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