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Markstrat Lessons LearnedTeam I (“The Incredibles”)
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Agenda
• Philosophy, Guiding Principals and Organization• Product Portfolio• Research & Development• Advertising and Sales Force Decisions• Pricing Effects• Competitor Dynamics • New Product Launches• Production Planning and Inventory Management• Financial Focus• Conclusion
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Our Goals
• Become the Stock Price and ROI Leader• Dominate the Vodite market• Moderate presence in the Sonite market• Be the first to innovate in every area
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The Team I Secret Formula
• Data and Dollars• Build a better mouse trap and the world will
beat a path to your door• Number one or two• Show me the money• Repeat after me…. R & D• It’s all about the end-game
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The Team I Process
Quick Data Aggregation
Component Analysis
Group Consensus
Smart Decisions
R&D Strategy
Production & Marketing
Competitive Intelligence
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The Sonite Portfolio
SIROQuantity
SIBIQuality
0
50
100
150
200
250
300
0 1 2 3 4 5 6 7 8 9 10 11
SAMA Price
SEMI Price
SIRO Price
SIBI
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
0 1 2 3 4 5 6 7 8 9 10 11
SIBI
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Vodite Portfolio
VIKIThe Game-Changer
1 Product – 2 Segments
VITOThe Godfather
6 Periods – 7 Projects
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We thought we could SING
• Being a niche player is harder than you think• Target segment could not be convinced easily• Can’t match the marketing money of the
mass-market products• Avoid over-production
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Taking Control with VIKI
• First mover advantage• Market entry with no precedent• Ability to charge a premium• Throw-off competition for two periods• Once-in-a-market opportunity
-50000
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
0 1 2 3 4 5 6 7 8 9 10 11
VITO
VIKI
SIBI
SIRO
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The Keys To R&D Success
• T + 3• The Outcome Vs. Risk dilemma• What’s in the pipeline does matter• One Path or Multiple Paths• Keep the inputs simple• Incremental Vs. One-time • Patience is a virtue, wait for the end-game• Voice of the customer
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Advertising Decisions
• No point having a perfect product if the target market does not know about it
• Balance of quantity and quality • Law of diminishing returns• Be opportunistic – increase advertising when
the competition is squeezed for money• Allocate the money to the products with the
most return
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Sales Force
• Based on two factors:• Contribution• Shopping Habits
• Targeted sales force to increase presence in particular channel
• No firing• Consistent increase
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The Dark Art Of Pricing
• Innovators can charge a premium• Risk-Taking or Risk-Averse• Economies of scale take time• Excess price-cutting reduces perception of
quality• How to price
o Ideal: Demand, Competition and Costo Markstrat: 80% Demand, 20% Cost
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Competitor Dynamics
• Anticipating the competition's moves• R&D expenditures tell a rich story• Create barriers to entry
• Have multiple products (with the risk of cannibalization)
• Build the cost advantage• Seek the next Blue Ocean market
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New Product Launches
• Product Roadmaps• Marketing Budget is a trade-off• Entering without a cash-cow• Initial demand and price• Be prepared to lose money• New Vs. Existing Markets• Invest in your Sales Force
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Sonites Sales/Production
0%
20%
40%
60%
80%
100%
120%
140%
0 1 2 3 4 5 6 7 8 9 10 11
SIRO
SIBI
SING
Vodites Sales/Production
0%
20%
40%
60%
80%
100%
120%
140%
0 1 2 3 4 5 6 7 8 9 10 11
VIKI
VITO
Production Planning
• The accuracy of market size forecasts• Surveys of Purchase Intentions might not
always be right• Major mistakes
o SING over-productionoVIKI under-production
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Net Contrib
$-
$50,000,000.00
$100,000,000.00
$150,000,000.00
$200,000,000.00
$250,000,000.00
$300,000,000.00
$350,000,000.00
-50
%
-40
%
-30
%
-20
%
-10
%
0%
10
%
20
%
30
%
40
%
50
%
60
%
70
%
80
%
90
%
650000
750000
850000
Inventory Management
• Under-Produce or Over-Produce?• Best-Case Vs. Worst-Case Modeling
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Financial Focus• Our key metrics - Net Contribution and ROI• R&D ROI > Net Contribution > Market Share >
Revenues• The choice to not enter the Singles market was
based on break-even analysis• Focus on Variable Costs vs. Fixed Costs• Keeping the Contribution as % of Sales at least
constant is important in justifying additional marketing budget
• Contribution Analysis vs. P&L
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Conclusions• Sleep with financial analyses under your pillow• Be the best critic of your product and know your
competitors• Well-planned and controlled innovation =
Competitive Edge• “Strategic Focus” from the start to finish• “Tactical Prowess” along the way• The right balance is most important• Finally – Its not a one-man show
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There is no “I” in Team I
• Lots of bloodshed but no mutinies• Three is not a crowd• Confront your issues upfront and early• Be open to new perspectives• Reward success
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Fini