mgt 4335 Ch 5

Strategist often used 2 tools to discover differentiation opportunities. What are they?

Customer segmentation and mapping the consumption chain

Customer segmentation

Grouping customers based on similar needs Customer segmentation is a process used to segment the market into customer groups who share similar needs.

Mapping the consumption chain

Identifying all the steps through which customers pass, from the time they first become aware of your product at the time when they finally have to dispose of it or discontinuing it The consumption chain is the set of activities a customer goes through in the process of realizing a need and then acting on it to purchase a product or service. Each step in the chain can present ways to differentiate a product or service

Product differentiation is a strategy whereby companies attempt to gain competitive advantage by offering what?

Offering value that is not available in other products or services.

What is net promoter score?

The net promoter score is a tool that can be used to assess how well a differentiation strategy is working to what? To turn customers into promoters of a companies offering

Describe as many stages of the conception chain as you can

1) how do consumers become aware of a need for your product/service? 2) how do consumers find your offering? 3) how do consumers make their final selection (priority of attributes)? 4) How do consumers order and purchase your product? 5) how was your product/service delivered? 6) how is your product/service paid for? 7) how was your product stored/moved around? 8) what do consumers need help with when they use the product? 9) what if customers are not satisfied and need to return or exchange? 10) how was your product repaired, serviced, disposed of?

Discovering sources of differentiation is just 1/2 of the equation. In order for a differentiation strategy to be successful, and company must what?

A company must then develop or acquire the resources and capabilities to deliver that unique value better than competitors

Product differentiation

A strategy whereby companies attempt to gain competitive advantage by offering value that is not available and other products or services or that other products do not do as well

Customer segments

Groups of people who share similar needs and thoughts are likely to desire the same features in a product

Identify a true statement about the net promoter scale

It is a useful tool for assisting customers satisfaction

In this chapter, we examine differentiation as an alternative to low cost as a way to offer what to a customer?

Unique value

Mass customization

When a company mass produces the various models of the product and then allows the customer to select which models will be combined together

Brand image

When products are differentiated through marketing, via advertisements, promotion, and other marketing activities

Prestige brands

When products are differentiated through marketing, via advertisements, promotion, and other marketing activities

Network effects

When some products or services are more convenient to use because there is a large network of other users

Companies have four main options for creating product differentiation. What are they?

1) Different features. The product does a better job on features available in other products, does More "jobs" than other products, or does a "unique job" not done by any other product 2) Quality or reliability. The product is the same job as other products, but does it for longer 3) convenience. The product is easily available when the customer needs or wants it 4) Brand image. The product gives customers Certain feeling or idea

Describe three different ways that customer segmentation can be done

1) based on various attributes of the product 2) based on attributes of the individuals or companies who are customers, including demographics or psychographics 3) based on attributes of the customers circumstance, or what is called the job to be done view, and alternative way of segmenting customers that has emerged recently.

How do you calculate the net promoter score? Why is the net promoter score a useful indicator of how successful company is that differentiating its product

The net promoter score is a tool that can be used to assess how well the differentiation strategy is working to turn customers into promoters of the companies offering. In numerous survey questions, with consumers across multiple industries, to see which questions were best correlated with customer loyalty (repeat purchases) and company growth. The following question was the best indicator of whether a customer was loyal and enthusiastic about a company or a product. Q: " how likely is it that you would recommend company X, product Y to a friend or colleague?" Respondents answer on a 10 points scale, with one meaning " not at all likely" 5= neutral 10 = extremely likely Classifying customers who respond. If they answer nine or 10 in the question above they are a promoter. Anyone who score 6 or below is the tractor. These people are likely to steer others away from your company or product. Scoring seven or 8 are passive. To calculate the net promoter score, subtract the percentage of the tractors from the percentage of promoters Net promoter score = percentage of customers who answer 9 or 10 minus percentage Who answers 6 or below Products (companies) with high and PS consistently grow much faster than competitors. Generally speaking products (companies) with NPS scores above 70 like iPhone are excellent differentiators. Products with NPS between 50 to 70 or good differentiators. Products with net promoter scores between 30 and 50 or average differentiators. And those with NPS below 30 are struggling to get customers to promote their product