Moving Beyond Product and Price: Positioning to Win Through Intangible Assets Facilitated by Martin McLaughlin Mosai

1. 1 What do you think we are going to talk about today? Why is this important to you? What are you encountering? Who should we hear from � certainly not just me! I hope to provide a framework for discussion � not the only source of discussion.What do you think we are going to talk about today? Why is this important to you? What are you encountering? Who should we hear from � certainly not just me! I hope to provide a framework for discussion � not the only source of discussion.

2. 2 Where do the Big Boy and Big Girls have an unfair advantage? Well what can we do � devalue their investments and assets! Something must be changing � what is it? Buyers are getting it � they want problems solved � and are willing to use new models to solve. Big players are getting it and changing their model. Constraints might help us � anti spam, do not call list, etc.Where do the Big Boy and Big Girls have an unfair advantage? Well what can we do � devalue their investments and assets! Something must be changing � what is it? Buyers are getting it � they want problems solved � and are willing to use new models to solve. Big players are getting it and changing their model. Constraints might help us � anti spam, do not call list, etc.

3. 3 Repeat purchase loyalty (I will buy this brand again) Attitudinal loyalty (I am committed to this brand) What was valued�to what is valued. Look at Starbucks � even great companies have to migrate their value. Blend of tangible and intangible � real estate and experience.Repeat purchase loyalty (I will buy this brand again) Attitudinal loyalty (I am committed to this brand) What was valued�to what is valued. Look at Starbucks � even great companies have to migrate their value. Blend of tangible and intangible � real estate and experience.

4. 4 "More rapid commoditization of goods and services means the differentiation of a brand through customer experiences becomes ever more important.� "The Barista Principle -- Starbucks and the Rise of Relational Capital," R. Gulati, S. Huffman, Gary Neilson. What do you sell? How do you define it and what is your business model? What customers and what experience? What value?"More rapid commoditization of goods and services means the differentiation of a brand through customer experiences becomes ever more important.� "The Barista Principle -- Starbucks and the Rise of Relational Capital," R. Gulati, S. Huffman, Gary Neilson. What do you sell? How do you define it and what is your business model? What customers and what experience? What value?

5. 5 Starbucks aims to provide quality coffee in a relaxed atmosphere for those seeking a respite between home and work. The ambience and service is the same everywhere. This is the vaulted Starbucks Experience, an elusive halo that competitors desire, but have trouble duplicating. �It�s very easy to copy the superficiality of the brand; in other words, the look and feel of the store,� says Maslen. �The most important thing is how welcome people feel and the connection they make.� �It�s really a contradiction in terms � intimacy on a mass scale. But Starbucks is a very intimate brand.� What does Starbucks sell � coffee? Is Starbucks after the coffee drinker or someone else? Where does the product coffee fit into their overall experience? How does Starbucks mix tangible assets with intangible assets � 2 things that makes them great is / are real estate and the experience. What if only 30% of your customers use your tables and chairs � develop drive thru. How do they migrate their relationships with customers � Hear Music. Almost 0 marketing budget during the formative years of their brand. Value Shifting!What does Starbucks sell � coffee? Is Starbucks after the coffee drinker or someone else? Where does the product coffee fit into their overall experience? How does Starbucks mix tangible assets with intangible assets � 2 things that makes them great is / are real estate and the experience. What if only 30% of your customers use your tables and chairs � develop drive thru. How do they migrate their relationships with customers � Hear Music. Almost 0 marketing budget during the formative years of their brand. Value Shifting!

6. 6 Read It Closely: �We don�t sell insurance anymore. We sell speed.� Peter Lewis, Progressive Who has had a fender bender? How was the experience? Who is your carrier? After paying premiums for 20 years� What is the problem Progressive is solving � speed (get check in hand), getting car back, but fewer law suits, leverage technology, and lower prices!Who has had a fender bender? How was the experience? Who is your carrier? After paying premiums for 20 years� What is the problem Progressive is solving � speed (get check in hand), getting car back, but fewer law suits, leverage technology, and lower prices!

7. 7 �UPS wants to take over the sweet spot in the endless loop of goods, information and capital that all the packages [it moves] represent.�ecompany.com/06.01 (E.g., UPS Logistics manages the logistics of 4.5M Ford vehicles, from 21 mfg. sites to 6,000 NA dealers) When is the last time you�ve seen a UPS commercial? What was the message? What can Brown do for you? This has solutions written all over it. In the old days � UPS would talk about price, locations, efficiency, comparing against fed ex, etc. Now you barely here of this � why? They are migrating their customer relationships from working with your mail room to being your mail room and more! Same customers � different experience � different value � different business model � different revenue model. Value is shifting!!!When is the last time you�ve seen a UPS commercial? What was the message? What can Brown do for you? This has solutions written all over it. In the old days � UPS would talk about price, locations, efficiency, comparing against fed ex, etc. Now you barely here of this � why? They are migrating their customer relationships from working with your mail room to being your mail room and more! Same customers � different experience � different value � different business model � different revenue model. Value is shifting!!!

8. 8 Nardelli�s goal ($50B to $100B by 2005): �� move Home Depot beyond selling �goods� to selling �home services.� � He wants to capture home improvement dollars wherever and however they are spent.�  E.g.: �house calls� (At-Home Service: $10B by �05?) � �pros shops� (Pro Set) � �home project management� (Project Management System � �a deeper selling relationship�).Source: USA Today/06.14.2002 What is Home Depot�s experience? Based upon selling shovels in big box stores. How would this experience change based upon where they want to go? How would this impact the value they need to offer (investments in assets), their business model, their revenue model? Same customers � new experiences � new value � truly value is shifting. Why?????What is Home Depot�s experience? Based upon selling shovels in big box stores. How would this experience change based upon where they want to go? How would this impact the value they need to offer (investments in assets), their business model, their revenue model? Same customers � new experiences � new value � truly value is shifting. Why?????

9. 9 Mosaic Partners = 1 Guy with the Change in my Pocket How many people here are a marketing consultant? How many people know of a really good marketing consultant? Why would I go head to head with these providers? My products are no better? So what did I need to do � I was pretty short on tangible assets! Where are we going with this value is shifting theme? What are you selling based upon current customers? Where are you making investments? How are you defining your business? Should you be redefining your business � maybe, but you need a framework to focus your efforts!!!How many people here are a marketing consultant? How many people know of a really good marketing consultant? Why would I go head to head with these providers? My products are no better? So what did I need to do � I was pretty short on tangible assets! Where are we going with this value is shifting theme? What are you selling based upon current customers? Where are you making investments? How are you defining your business? Should you be redefining your business � maybe, but you need a framework to focus your efforts!!!

10. 10 Customer-based perceptions Price-to-value trade-off Two broad positions low cost differentiated Market Positioning at the Heart of Asset Investment Trade-offs to build over time Drives your activities: process & fit Same customers � but value must migrate why? What was new and different today is a chip to enter the game tomorrow? Customer�s perception of value change. Where are you and where do you need to go? Who are your competitors? 2 Great Positions � low cost or differentiated � don�t want to be stuck in the middleTrade-offs to build over time Drives your activities: process & fit Same customers � but value must migrate why? What was new and different today is a chip to enter the game tomorrow? Customer�s perception of value change. Where are you and where do you need to go? Who are your competitors? 2 Great Positions � low cost or differentiated � don�t want to be stuck in the middle

11. 11 USP against Competitors � Premium Quality for Less! Who should they react to and who should you react to? Who is shaping new value in your industry � Target? Where should we make investments?USP against Competitors � Premium Quality for Less! Who should they react to and who should you react to? Who is shaping new value in your industry � Target? Where should we make investments?

12. 12 Using tech to enable experiences! Not talking about technology! Not advertising features and functions!!! Microsoft!!! Every industry eventually segments � as it matures. Segment around customer needs!!Using tech to enable experiences! Not talking about technology! Not advertising features and functions!!! Microsoft!!! Every industry eventually segments � as it matures. Segment around customer needs!!

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14. 14 Unbundle Value � use the Rosemont example!Unbundle Value � use the Rosemont example!

15. 15 Physical and Financial Marketing Migration Plot your company � what is the impact of this? How are you deploying your customers, people and process assets to become a value creating business partner? How will this drive investment decisions? How about the impact on your measurement systems? Studies demonstrate that 70 � 90 percent of customer value is creating during company (people) and customer interactions � along various touch points. Not in product features and functions � more and more becoming table stakes to enter the game. Create meaning between the customer and the brand � from revenue generating or cost savings! Plot your company � what is the impact of this? How are you deploying your customers, people and process assets to become a value creating business partner? How will this drive investment decisions? How about the impact on your measurement systems? Studies demonstrate that 70 � 90 percent of customer value is creating during company (people) and customer interactions � along various touch points. Not in product features and functions � more and more becoming table stakes to enter the game. Create meaning between the customer and the brand � from revenue generating or cost savings!

16. 16 Migration Position MeasureSolutions & Success Experiences Quality Services SatisfactionQuality Products Six-sigma Loyalty will follow if you focus on the success of your customers! May require you to partner, build alliances, nurture a business ecosystem! This is a big transition for many of us who feel that if we don�t do it � it won�t get done right! But it is a given that solutions will force you move outside your product / service capabilities!!! Impact on your business model!!!!Loyalty will follow if you focus on the success of your customers! May require you to partner, build alliances, nurture a business ecosystem! This is a big transition for many of us who feel that if we don�t do it � it won�t get done right! But it is a given that solutions will force you move outside your product / service capabilities!!! Impact on your business model!!!!

17. 17 Slow to respond Functional vs. customer Push it out vs. pull it through Lose sight on the real customer Process serve other function departments vs the customer � doesn�t focus on making it easy for customer to do business with you.Slow to respond Functional vs. customer Push it out vs. pull it through Lose sight on the real customer Process serve other function departments vs the customer � doesn�t focus on making it easy for customer to do business with you.

18. 18 Marketing Migration Process Impact Physical and Financial How would this impact process associate with Communication, Branding, Customer Service � why? How would this impact process associate with Communication, Branding, Customer Service � why?

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21. 21 Impact of New Economy on Marketing � Richness and Reach

22. 22 CGE&Y (Paul Cole):�Pleasant Transaction� vs. �Systemic Opportunity.��Better job of what we do today� vs. �Re-think overall enterprise strategy.�

23. 23 A number of factors contribute to the increased profitability of loyal customers: Customer Acquisition Cost: The cost of acquiring new customers including advertising, cost of sales and administration of new accounts is many times that of maintaining an existing customer. The U.S. Office of Consumer Affairs estimates it costs five times more to attract new customers than to retain a old customers. Profit From Price Premium: Companies with satisfied customers demand a premium for enhanced service levels. A PIMS study found high customer satisfaction companies charge 9 percent more than poor customer satisfaction companies. Profit From Referrals: Satisfied customers serve as advocates for the company, helping to bring in new business, often at a lower cost of acquisition. One leading U.S. home builder found over 60% of its sales result from referrals. An insurance industry study found 81% of customers experiencing no problem would recommend the company to others. Conversely, a dissatisfied customer can be a company�s worst nightmare - significantly impairing the company�s efforts to acquire new business. A TARP study found that the average dissatisfied customer will tell 9 to 10 others about the experience and 13 percent of dissatisfied customers spread the word to more than 20 people. Profits From Reduces Operating Costs: A survey of 102 large corporations indicates that over half of withheld payments are due to customer dissatisfaction, causing decreased cash flow of up to 25%. In the insurance industry, a 5% increase in customer retention lowers the cost per policy by 18%. Profits From Increased Purchases: Satisfied customer tend to increase their share of business with the company. IDS financial services found that customers that satisfied customers typically invested six times the amount with the company that those who were dissatisfied. American Express found that 43% of highly satisfied customers would use their credit card more often based upon their positive experience. In one industrial company, net sales per account continue to rise into the nineteenth year of the relationship. A number of factors contribute to the increased profitability of loyal customers: Customer Acquisition Cost: The cost of acquiring new customers including advertising, cost of sales and administration of new accounts is many times that of maintaining an existing customer. The U.S. Office of Consumer Affairs estimates it costs five times more to attract new customers than to retain a old customers. Profit From Price Premium: Companies with satisfied customers demand a premium for enhanced service levels. A PIMS study found high customer satisfaction companies charge 9 percent more than poor customer satisfaction companies. Profit From Referrals: Satisfied customers serve as advocates for the company, helping to bring in new business, often at a lower cost of acquisition. One leading U.S. home builder found over 60% of its sales result from referrals. An insurance industry study found 81% of customers experiencing no problem would recommend the company to others. Conversely, a dissatisfied customer can be a company�s worst nightmare - significantly impairing the company�s efforts to acquire new business. A TARP study found that the average dissatisfied customer will tell 9 to 10 others about the experience and 13 percent of dissatisfied customers spread the word to more than 20 people. Profits From Reduces Operating Costs: A survey of 102 large corporations indicates that over half of withheld payments are due to customer dissatisfaction, causing decreased cash flow of up to 25%. In the insurance industry, a 5% increase in customer retention lowers the cost per policy by 18%. Profits From Increased Purchases: Satisfied customer tend to increase their share of business with the company. IDS financial services found that customers that satisfied customers typically invested six times the amount with the company that those who were dissatisfied. American Express found that 43% of highly satisfied customers would use their credit card more often based upon their positive experience. In one industrial company, net sales per account continue to rise into the nineteenth year of the relationship.

24. 24 How often are purchases made? The frequency of other kinds of interactions such as service calls. The emotional of financial importance of a purchase The degree of differentiation among competitors offerings Ease of switchingHow often are purchases made? The frequency of other kinds of interactions such as service calls. The emotional of financial importance of a purchase The degree of differentiation among competitors offerings Ease of switching

25. 25 Our Methodology. Value Equity � the customer�s objective assessment of the utility of a brand. This assessment is driven by the product�s quality, price and convenience. Brand Equity � customer�s subjective and intangible assessment of the brand built through image and meaning. This assessment is influenced by brand awareness, consumer�s attitude toward the brand, and the firm�s corporate citizenship. Retention equity � the tendency of the customer to �stick with� a brand above and beyond the objective and subjective assessments. Five drivers of retention equity � loyalty programs, special recognition programs, affinity programs, community programs, and knowledge-building programs.Value Equity � the customer�s objective assessment of the utility of a brand. This assessment is driven by the product�s quality, price and convenience. Brand Equity � customer�s subjective and intangible assessment of the brand built through image and meaning. This assessment is influenced by brand awareness, consumer�s attitude toward the brand, and the firm�s corporate citizenship. Retention equity � the tendency of the customer to �stick with� a brand above and beyond the objective and subjective assessments. Five drivers of retention equity � loyalty programs, special recognition programs, affinity programs, community programs, and knowledge-building programs.

26. 26 Our Process. Understand needs of your Best Customers � Think Solutions, NOT Products! Clearly Define Your Value Proposition within Your Defined Ecosystem! Un-bundle Your Value � both Tangible and Intangible! Re-bundle around the Personal / Intimate Needs of Your Customers, Business Partners, Channels, and Ecosystem! Monetize Your Intangible Assets! Decide where do you need to Invest to Strengthen the Intangible Side of Your Balance Sheet?

27. 27 Define the Solutions / Experience that You Want to Create for Your Customers? How can you help Your Customers Create an Experience for Their Customers? Understand that Solutions will require you to Partner with other solutions providers � Build and Nurture Your Business Ecosystem! Understand that Ecosystems Don�t Respond Well to Protectionism (within limits)! Challenge, Test, Push, Expand, Invade the Value of Your Ecosystem to Ensue Long-Term Health! Make it Easy for Your Customers to do Business with You and Your Business Partners! Welcome Your Customer to Your Ecosystems �Roach Motel!�

28. 28 Develop Your �Burger King� Story! What you advertise, what you sell, and how you make money are 3 different things! Focus on Internal Branding! You and Your People are the best Communication Vehicle! Can everyone clearly communicate who you are, what you do, and how you are different? Everything Communicates! Add Value in Every Conversation � It Will Come Back to You�Even If It Takes A Year! Don�t Make People Guess how they can Help You!

29. 29 Sustainable growth is not about products! Value is migrating from products to solutions and experience! Solutions and experiences are customer dependent! Value can�t be applied evenly across all customers! Value must be created for customers, business partners, ecosystem participants, etc. You can�t do it all, so partner (build ecosystem) to create value through solutions! Unbundle your value! Understand the personal/ intimate needs of your customers! Rebundle your value! Invest in your intangible value (assuming your product is good)! Focus on internal branding where all employees can communicate (with passion) who you are, what you do, and how you are different! Think about the relationship � even when closing on a transaction!