Profit Centric Business design

• To truly understand customers and thus

formulate and execute business strategy
that can accelerate profitable growth,
managers must design each of their
businesses around a disciplined choice of
a winning value proposition
 THE VALUE DELIVERY SYSTEM (VDS)
STRATEGY FRAMEWORK
Create, redesign, manage businesses as VDS’s

CHOOSE THE VALUE PROPOSITION PROVIDE IT COMMUNICATE IT

Analyze the market space Decide how for each resulting experience

in the VP, how you will provide customers

with the actual experience, how they will

understand it and believe it

Choose a complete Value Proposition Capabilities you therefore need

TOTAL REVENUE minus COST = BUSINESS PROFIT

 CHECKLIST FOR A WINNING
BUSINESS/Value Delivery System
(VDS)

WOULD THIS VDS DELIVER A SUPERIOR

VALUE PROPOSITION?

If delivered as designed, do we believe

intended customers would conclude that
the value proposition is superior to their
competing alternatives?

• HOW MUCH REVENUE would we expect ?

DO WE BELIEVE WE CAN BUILD THE
CAPABILITIES NEEDED to implement
this VDS? This includes improving existing,
and creating new capabilities to provide and
communicate the proposition

WHAT TOTAL COST would we incur?

This includes on-going operating costs plus
those of building new capabilities, and the
cost of capital
HOW MUCH PROFIT would this
business/VDS generate, ignoring
other businesses or later timeframes?

WHAT IMPACT ON OUR OTHER BUSINESSES,

if any, would this VDS have? To what extent
would conflicts or synergies from this VDS
reduce/increase profitability of our other
businesses?
WHAT IMPACT ON LATER TIMEFRAMES
would this VDS have? Does it facilitate a
longer-term, more profitable VDS, or
compromise later ones?

WHAT DISCONTINUITIES may impact its

success and sustainability? What changes in
the environment could change the outcome of this
VDS?

HOW DOES THIS VDS COMPARE TO OUR

OTHER OPTIONS?
IN NET: IS THIS A GOOD VDS? Do we
believe it will, long term, generate more
wealth for the firm than not implementing it?
Brand.

A name, sign or symbol used to identify

items or services of the seller(s) and to
differentiate them from goods or services
of competitors.

8
 GOOGLE. BMW. INDIA.
SEARCH. DRIVING. DIVERSITY.

08/27/22 9
 Value Proposition
• The Value proposition consists of the
whole cluster of benefits the company
promises to deliver. It is more than the
core positioning of the offering.

• Eg Volvo’s core positioning has been

safety, but the buyer is promised more
than just a safe car. Other benefits include
along – lasting car, good service and
along warranty period.
The value proposition is a statement about
the experience the customer will gain from
the company’s market offering and from
their relationship with the supplier.
 A “COMPLETE” VALUE
PROPOSITION
Explicitly decides, for this proposition:

• I. Who are the intended customers?

• II. What is this proposition’s time horizon?
• III. What do we want these intended customers
to do?
• IV. What competing alternative(s) do they have?
• V. What resulting experiences will they derive,
vs. alternative(s), if they do as we propose
 Value Proposition

A Brand’s Value Proposition is a statement

of the functional, emotional and self –
expressive benefits delivered by the brand
that provide value to the customer. An
effective value proposition should lead to a
brand – customer relationship and drive
purchase decisions
 Functional benefits
Volvo –safe and durable because of its
weight and design
Quaker Oats provides a hot, nutritious
breakfast cereal
A BMW handles well, even on ice
Huggies deliver comfort and fit, so leaks
are avoided
Gatorade helps replace fluids when one
is playing
 Emotional benefits

Safe in a Volvo
Excited in a BMW or watching MTV
In control of aging with Oil of Olay
strong and rugged while wearing A Levi’s
 Self - expressive benefits

Hip by buying fashion from GAP

Sophisticated using Ralph Lauren
Successful , elegant, rich wearing a Rolex
Sporty wearing a Tag Heuer Watch
Table 11.1: Examples of Value Propositions
Demand States and Marketing Tasks
Company
and Target Value
Product Customers Benefits Price Proposition
Perdue Quality- Tenderness 10% More tender
(chicken) conscious premium golden chicken at
consumers of a moderate
chicken premium price
Volvo Safety- Durability 20% The safest, most
(station conscious and safety premium durable wagon in
wagon) “upscale” which your family
families can ride
Domino’s Convenience- Delivery 15% A good hot pizza,
(pizza) minded pizza speed and premium delivered to your
lovers good quality door door within
30 minutes of
ordering, at a
moderate price
 Definition.
“Positioning is not what you do to a product.
Positioning is what you do to the mind of the
prospect.”
“Positioning is ,how you differentiate yourself in
the mind of your prospect”.
e.g.
Mysore Sandal -Purity and natural fragrance.
Margo- Herbal(neem).
Lifebuoy-Hygiene.
08/27/22 18
Positioning attracted attention when in 1972 Jack Trout
and Al Ries wrote a series of articles entitled “The
Positioning Era” for the trade paper Advertising Age.

Today positioning has become the buzzword of

advertising and marketing, all over the world.

Positioning starts with a product .A piece of merchandise

,a service ,a company ,an institution or a person.
Perhaps yourself.

But it is not what you do to a product.

Positioning is what you do to the mind of the prospect.

That is ,you position the product in the mind of the

prospect.
 Why positioning?
There are two kinds of products – commodities and
brands. A commodity is a product that is same as those
made by every other company. As a result the only way
to sell a commodity is by selling it cheaper than your
competitor.

A brand on the other hand, is a product that is unique

and different. A customer can buy A Tata Indica for a lot
less money than a Mercedes Benz, but most Mercedes
customer won’t buying tata or any other vehicle simply
because “it’s not a Mercedes-Benz.”

You need unique brands to make money.

08/27/22 20
 Why positioning?
You narrow the focus
Starbucks narrowed its focus to high-end coffee and
became the world's largest coffee chain.

Dell Computer narrowed its focus to personal computers

"sold direct" and became the world's largest PC
manufacturer.

BMW narrowed its focus to "driving" and became the

largest-selling European luxury car
in the U.S.

Focus is the key to successful brand building in today's

ultra-competitive marketplace
08/27/22 21
 Some famous positioning statements
• Titan Quartz, the international watch you can pay for in rupees

• Four Square…Live life king size.

• Hero Honda…Fill it, shut it, forget it.

• Savlon…Yeh jale ga nahin

• Avis…We are No.2, so we try harder

• Maggi Noodles…bus do minute

• ESSO petrol…..put a tiger in your tank.

 Developing and Communicating
a Positioning Strategy

• Communicating the Company’s Positioning

– Positioning statement
• More car per car……….TATA Indica V2
• Spoil yourself…………..TATA Indigo
• Lets make things better……Philips
• For a special journey called life…..Chevrolet
• The difference is German engineering….Corsa
• Express yourself……Airtel
• For Managing Tomorrow…..Business Today
 The Competitive Position may be
different in another (geographic)
market:
Honda in Japan Honda in USA
• Youthful • Economical
• Sporty • Good enough for
• Hi-tech engineering everyday
• “Import”
 We achieve positioning by
Attributes and Associations

How does Positioning

the
Marketing
Mix fit here? Attributes Associations

Features Channel

Performance Advertising

Price Other Promotion

 How these companies positioned
themselves
• Mercedes-Benz ………………… prestige.
• BMW …………………………… driving.
• Volvo…………………………….. Safety.
• Starbucks………………………… high-end coffee..
• Rolex……………………………… high-end watches.
• Google ……….……………………Search.
• Red bull ………………………… energy drink.
• FedEx…………………………… overnight (delivery)

08/27/22 26
 Volvo owns a single word in the
minds.

Volvo.
Safety.

Volvo has successfully simplified and

Communicated this message.

08/27/22 27
 You differentiate or die
• Advertising has entered a new era where
creativity is no longer the key to success,
today a company must create a position in
the prospect’s mind. A position which is
unique and based on company’s strengths
and on realities. You don’t lie you only
exaggerate.

Camlin (marker)-Permanent.
08/27/22 28
• Heidelberg - the working man’s
beer.
• Bud - the athletic beer
• Bud Lite - the party beer
• Coors - the environment beer

08/27/22 29
• Marlboro - the rugged male
• Virginia slims - the independent
female
• Camel - cool and
sophisticated
• Benson & hedges - “intellectual”

08/27/22 30
So is positioning always beneficial?
• Xerox first made photo copy machine & sold
them world wide, as the time passed Xerox
become synonymous to photocopy.
Xerox.
When it launched it’s Photocopy.
“Xerox data system", fax machine,
and PC all were disastrous and
Xerox lost billions of dollar
since it could not change or
reconstructed minds of prospects.
08/27/22
Same happened with IBM & Dalda 31
 Repositioning :Reconstruction of
perceptions.
• Companies like IBM, Bajaj and Xerox did it.

Compan Traditional Repositioned image

y image
IBM Computer Services & hardware
hardware
Xerox copier Hardware & software
Bajaj Scooters motorcycles
08/27/22 32
 Saturn Value Proposition
• Functional Benefits : A quality economy car; a
pleasant buying experience, excellent , friendly
service back up

• Emotional benefits : Pride in a US made car,

friend relationship with Saturn and dealers

• Self - expressive benefits : owning a Saturn

identifies a person as frugal, down to earth, fun
and young at heart
 McDonald’s Value Proposition
• Functional benefits : Good tasting hamburgers, fries,
and drinks that provide value: extras such as
playgrounds, prizes, premiums and games

• Emotional benefits:

Kids- fun via excitement of birthday parties,

relationship with Ronald Mc Donald and other
characters, and feeling of special family times

Adults -warmth via link to family events and

experiences reinforced by the McDonald’s emotional
advertising
 Nike Value proposition

• Functional benefits : High – technology shoe that

will improve performance and provide comfort.

• Emotional benefit : The exhilaration of athletic

performance excellence: feeling engaged, active,
healthy.

• Self – expressive symbolic befits: self - expression

is generated by using a shoe with a strong
personality associated with a visible athlete
 What is Brand Equity and Why Does It Matter?
(From Berry, “Cultivating Brand Equity”)

Definition: A set of assets and liabilities linked to a brand’s

name and symbol that adds to (or subtracts from) the
perceived value of the product
Insights
• Brand equity can be positive or negative
• Positive brand equity creates marketing advantage for
firm plus value for customer
• Perceived value generates preference and loyalty
• Management of brand equity involves investment to
create and enhance assets, remove liabilities
 A Service Branding Model:
How Communications + Experience Create Brand Equity

Marketer-controlled communications

Firm’s Presented Brand Awareness of

(Sales, Advertising, PR) Firm’s Brand

Uncontrolled brand communications

Firm’s
What Media, Intermediaries,
Brand Equity
Word-of-Mouth Say re: Firm

Customer’s Experience Meaning Attached

with Firm To Firm’s Brand

Source: Adapted from L. L. Berry ( Fig. 1)