Houzz Marketing

PPT 1-1

Marketing Management

Week 5: Go-to-Market Strategy

CONFIDENTIAL

Fundamentals & Planning

Source: Prof. Puneet Manchanda

Kitchen Prep

● Setting the stage ○ Strong management ○ Products ○ Channels ○ Capitalization ○ Persistence ○ Innovation

● Aligned to Strategy ● STP & 4P locked

Rogers Five Factors in the Diffusion of Innovation

CONFIDENTIAL

Get ready for takeoff

Takeoff

Source: Prof. Puneet Manchanda

Source: Prof. Puneet Manchanda

Takeoff

Source: Prof. Puneet Manchanda

Getting in flight (Golder & Tellis 1997)

● New durables have a rapid takeoff in early sales (aka “takeoff”)

● Price & Market Penetration are the determinant factors

○ Other factors such as category specific and

● Common factors ○ At takeoff Price is 63% of introduction ○ Time to takeoff is 6 years (down from 18

years pre-WWII) ○ Market penetration at takeoff is 1.7%

● Implications ○ Heavy impact of price reduction ○ 7 years in, if takeoff isn’t happening - pause

and refactor

Source: Prof. Puneet Manchanda

Video Game Console Pricing

Source: Prof. Puneet Manchanda

DVD Player Pricing

Source: Prof. Puneet Manchanda

More Golder & Tellis

● Looked at additional categories ○ (CD Player, Color TV, Computer, Dishwasher, Dryer, Freezers,

● Microwave, Refrigerator, VCR, Washing Machine) ● Mean time to takeoff varies across product categories

○ Eight years for white goods (kitchen and laundry appliances) ○ Two years for brown goods (entertainment and information

products)

● Mean time to takeoff varies across countries ○ Four years for Scandinavian countries ○ Seven years for Mediterranean countries ○ Differences more due to cultural rather than economic factors

● The probability of takeoff of a new product in a target country increases with prior takeoffs in other countries

Source: Prof. Puneet Manchanda

CONFIDENTIAL

Having standards

The importance of having standards

● Standards typically emerge towards the end of the Growth stage (Tornado)

● How does a standard emerge? ○ Formal Standard ○ De Facto Standard ○ Role of network effects

■ Direct network effects ■ Indirect network effects

● Economic Impact of standards ○ Technologies with network effects ○ Consumer adoption ○ Competition and Co-opetition

● Pros/Cons of standards ○ Value to consumers ○ Value to complementors ○ Value to incumbents ○ Value to innovators ○ Opens lines to competitors, ○ Loss of control

Source: Prof. Puneet Manchanda

It’s as simple as Greek Yogurt

Wireless standards

Source: Prof. Puneet Manchanda

Wireless charging

Clothing standards

The importance of having standards ● First introduced as “Palm Touchstone” in 2009

in the Palm Pre ● Wireless Power Consortium (WPC) [250+

members in 2017] ○ Formed in 2008, specs developed in 2009 ○ Standard: Qi ○ Technology: Induction Charging ○ Players: Apple, LG Electronics, Energizer, Nokia,

Motorola, HTC, Sony

● Power Matters Alliance (PMA) [68 members by April 2015]

○ Announced in 2012 ○ Standard: PMA ○ Technology: Induction charging ○ Players: Duracell Powermat, Google, AT&T, Starbucks,

McDonald’s

● Alliance for Wireless Power (A4WP) [122 members by April 2015]

○ Announced in 2012 ○ Standard: Rezence ○ Technology: Magnetic Resonance ○ Players: Samsung, Qualcomm, Intel, Broadcomm

● PMA and A4MP announce merger wef June 1, 2015

Source: Prof. Puneet Manchanda

Effects to consider with standards

● Objective is to manage value of standard ○ Value of standard to owner ○ Total value added to industry ○ Share of industry ○ Value is impacted by breadth of standard ○ Open ○ Closed

● Open standard ○ Discontinuity ○ Open migration

● Control (closed) standard ○ Controlled Migration ○ Performance Play

Source: Prof. Puneet Manchanda

Open standards

● Creating an open standard ○ Formal standard setting (formal standard) ○ Building an alliance (de-facto standard)

● Formal standard ○ Set by committee ○ Challenges

● De-facto standard ○ Via alliances ○ Challenges

● Other issues with open standards ○ Who protects standard and manages evolution going

forward? ○ Potential for defection and/or hi-jacking of standard

Source: Prof. Puneet Manchanda

Closed Standards

● Types of standards wars ○ Rival evolutions ○ Evolution versus Revolution ○ Rival Revolutions

● Outcomes of these standards wars ○ Truce ○ Duopoly ○ Fight-to-the-death

● Sources of competitive advantage ○ Installed base ○ Intellectual property rights protection ○ Innovation ability ○ Brand strength ○ Strong complementors

Source: Prof. Puneet Manchanda

As growth phases come to an end ● New product categories reach growth stage

a considerable time after launch ○ Growth stage focus is mass adoption, hence managing

infrastructure is critical ○ Typically standard emerges at end of stage

● Qualitative factors that can help identify products that will move to growth stage

○ Relative Advantage, Compatibility, Complexity, Trialability, Observability

○ Strategy for growth stage can be developed using learning from takeoff analysis

● Time to takeoff ○ Time to takeoff variation across categories and markets ○ Role of marketing in inducing takeoff

● Tradeoffs in standard development and setting

○ Open versus closed ○ Market size versus market share ○ Go it alone or collaborate

Source: Prof. Puneet Manchanda

Wars over standards

Source: Prof. Puneet Manchanda

CONFIDENTIAL

Dipping your toes into the market

First to Market

● Data from 500 brands in 50 consumer product categories ○ Mean market share of pioneers is 10%, much lower than the 30%

previously reported

● Half this difference comes from sampling both survivors and non-survivors

○ The rest is due to identification of pioneers using historical data ○ 47% of market pioneers fail ○ 11% of pioneers are current market share leaders ○ Results not sensitive to the age of the categories.

● Pioneers tend to be share leaders for about 10-15 years. ○ Rewards to pioneering are greater in nondurable goods

● Early market leaders (usually enter market after pioneer) ○ Have a higher share (3x of pioneer) ○ Enjoy a higher success rate than pioneers ○ End up as market leaders more frequently than pioneers

● In tech Results are consistent ○ 13% of pioneers are current market leaders

■ Mean market share of pioneers is 9%

Source: Prof. Puneet Manchanda

The real advantage

● Being a pioneer is neither a necessary nor a sufficient condition for long term success and leadership

● Entering after the pioneer seems to carry bigger rewards

● Early leaders (as opposed to pioneers) seem to succeed because they have

○ A vision of the mass market ○ Managerial persistence ○ Financial commitment ○ Continuous and relentless innovation ○ Asset leverage (for category extensions)

Roadmap

Source: Prof. Puneet Manchanda

Framework Mapping the Customer Journey

Source: UX Collective

Sample maps

Source: Wondershare Edraw

Tornado your customer’s expectations

● Meet Points of Parity ● Understand segments ● Position for segments ● Be ready to deliver

○ MVP ○ Pass the chasm ○ Mass market product ready for takeoff ○ Ride the tornado

CONFIDENTIAL

Pricing

Pricing is a art & science… certainly not lazy

● Comparison is an option ○ Category norms

● Think deeper ● Understand price signals ● Value

○ Points of Parity ○ Increase WTP through brand

● Segment expectations

CONFIDENTIAL

Price elasticity

Deriving the numbers

Testing: Price surveys

Split tests (aka A/B tests)

Conjoint analysis

Price discrimination: Let’s talk degrees

Degrees of price discrimination

First degree First-degree price discrimination, alternatively known as perfect price discrimination, occurs when a firm charges a different price for every unit consumed.

The firm is able to charge the maximum possible price for each unit which enables the firm to capture all available consumer surplus for itself. In practice, first-degree discrimination is rare.

Second degree Second-degree price discrimination means charging a different price for different quantities, such as quantity discounts for bulk purchases.

Third degree Third-degree price discrimination means charging a different price to different consumer groups. For example, rail and tube travellers can be subdivided into commuter and casual travellers, and cinema goers can be subdivide into adults and children. Splitting the market into peak and off peak use is very common and occurs with gas, electricity, and telephone supply, as well as gym membership and parking charges. Third-degree discrimination is the commonest type.

Source: EconHub

CONFIDENTIAL

Forecasting

Revisit Product Lifecycle

Estimate time to market

Build a model

● Generate Awareness ● Estimate distribution ● Calculate trial appeal ● Calculate repeat purchase potential ● Estimate pricing & transaction size ● Estimate impact of promotions & discounts (aka sweetners)

Source: Prof. Puneet Manchanda

Measure audience

Source: Prof. Puneet Manchanda

Benchmark future sales

Source: Prof. Puneet Manchanda

BASES Computation Example

● Nielsen system (developed by Booz Allen)

Source: Prof. Puneet Manchanda

Option: Consultancy Pros & Cons