Week 3 - Building SCA via Offering and Innovation Strategy

Week 3 – Building SCA via offering and innovation strategy. Three key marketing-based sources of SCA: Brands, Offerings and Relationships. Offering are effective due to their potential to disrupt virtually any market. - These include R&D (new products and services, technologies etc) or patents, trade secrets, switching costs, scale, location, first mover… Customer Equity – a measure of a firm’s most important assets. Customers are considered a financial asset that should be measured, managed, and maximised. Customer-centric accounting is a primary driver of many firms’ profits and sales. Customer/BOR Equity Stack: - - Relationship Equity – a set of relational assets and liabilities linked to boundary-spanning employees and the social network associated with the offering or experience that add to or subtract from the value provided by a firm’s offering. Brand Equity – a set of brand assets and liabilities linked to a brand, its name and symbols that add to or subtract from the value provided by a firm’s offering. Offering Equity – the core benefits relative to costs of an offering, stripped of brands or relationships. Example: Disney. R – individuals playing the characters in the theme park, B – Disney movies, snacks, souvenirs etc, O – special experience rides. By building offering equity, an innovative firm can: - Make it more difficult for competitors. Firms can charge higher prices/premium. Motivates customers to switch from competitors. Firms can enjoy long-term positive effects on firm value. What are the key considerations for companies that want to be competitive with their offerings? - Customer needs and organisational resources Positioning Timing Market position Sustainability of offering success. Companies attempt to add value to their core offering through services (servitisation). Services are typically distinctive, longlived and easier to defend from competition. Innovation – creation of substantial new value for customers and the firm by creatively changing one or more dimensions of the business. Imitation is a perfectly viable and acceptable innovation strategy. Sawhney, Wolcott and Arroniz (2006) – The Innovation Radar Using Insights for managing Offering and Innovation activities: - Need to keep in mind customers, competitors, and company. Case Study Example: Adidas. o Conversations with female athletes led to new priorities: supportive and fashionable – putting the consumer in the driving seat. Conjoint Analysis – Palmatier & Sridhar (2017) - - Marketers can design and develop new products by thinking of products as bundles of attributes, then determining which combination of attributes is best suited to meet the preferences of customers. When to use it? To identify product attribute trade-offs, to predict the market share and impact of a proposed new product and to determine the amount of customers that are willing to pay for it. Its basic assumption is that a product consists of multiple attributes that together provide benefits to a customer e.g. call quality, operating system, screen size and camera quality for a smartphone. Conjoint analysis helps develop successful new offerings, only choose attributes that you think influence the respondents’ preference most, but ensure you include all meaningful attributes in analysis. The highest number value means it’s the most desirable – but it may not be feasible to produce a product with those particular features. When entering a market, a firm can decide if they’re going first or if they want to follow, but being first is not a guarantee of success. Tellis and Golder (1993) – failure rate of pioneers is 47%, and pioneers are ultimate leaders in only 11% of categories (10 years later). Crossing the chasm – new product launchers fail if the firm has not prepared to sell to early majority customers by the time it runs out of early adopters. Blue ocean initiatives are used by firms - they don’t use competitors as the benchmark, they reject trade off of value vs cost, and often the first mover develops a barrier to imitation. Kumar, Sheer and Kotler (2000) – market-driven (IKEA) vs. market-driving (Dyson). - In market driven, we’re very interested in consumer segments and how to meet the needs of those consumers. Looks at the current market. Market-driving involves forecasting current trends and see how the market will change in the future. Market Behaviour Disruptive technology – with its very different price and performance characteristics this technology often improves very quickly. They bring to market a different value proposition. Sustaining technology – this well-understood technology will lead to continuous, incremental improvements overtime. They improve performance of established products along dimensions valued by mainstream customers in majority markets. The best firms are ambidextrous – those that generate cash in the short-term but also growth/cash in the long term. They can exploit the current market and explore new trends when they arrive. Potential solution for market leaders to avoid innovators dilemma: set up an autonomous organisation tasked with building an independent business around the disruptive innovation. Nagji and Tuff (2012) – they argue that it is best to allocate resources by spending 70% on core (optimising existing products for existing customers), 20% on adjacent (expanding from existing business into “new to the company” business) and 10% on transformational (developing breakthroughs and inventing things for markets that don’t exist yet). Successful firms also engage their employees – they are, therefore, engaged and by default more productive. Meta-analytical study into innovation in firms – Vincent et al (2004).