Transcript elc310day18 - Tony Gauvin`s Web Site

ELC 310 Day 18
A New Start
® Tony Gauvin, UMFK , 2007
Agenda
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Marketing Plans are corrected
– 1 A, 1 B, 1 C and 1 partial submission
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Quiz 3 Corrected
– 1 A, 1 B and 2 C’s
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Grades left (37%)
– 1 quiz @ 8%
– 2 Case Study presentations @ 13% (6.5% each)
– 1 Written Case Study and presentation @ 16%
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Today
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©2006 Prentice Hall
Introduction
How to present Case study
Guidance for written case study
MotherNature.com
Understand Customer Needs and Behaviors
Rest of Schedule
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Today
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Introduction
MotherNature.com
How to present Case study
Guidance for written case
study
– Understand Customer Needs
and Behaviors
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Nov 11 Veteran’s Day – No
class
Nov 14
– Dell Online (Owen)
– Formulate a strategy to fill
needs
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Nov 21
Nov 25
– MarketSoft Corporation
(Emlyn)
– Communication and Selling
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Dec 2
– OSRAM Sylvania (Owen)
– Pricing and Distribution
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Dec 5
– Logistics.com A & B (Steve)
– Build a Trusting Relationship
with Customers
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Dec 9
– Travelocity (Randy)
– The Future of Digital
Marketing
Nov 18
– Insite Marketing Technologies
(Steve)
– Segmentation and Positioning
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Dec 12
– Citibank Online (Emlyn)
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Dec 17 @ 1 PM
– Quiz #4
– Terra Lycos (Randy)
– Written Case Study &
– New Products
® Tony Gauvin, UMFK , 2007 Presentations Due
Introduction
• Some broad assumptions
– While the Internet and computer has changed
how marketing is done, the underlying principles
of marketing remain the same.
– The digital age brought
• Efficiency and effectiveness
• Change in consumer behaviors and increased
consumer power
• Threats to existing practices
• New opportunities
– CRM
– Trust based marketing
® Tony Gauvin, UMFK , 2007
marketing
• “Recognizing customer needs and
fulfilling them”
• “Satisfy Customer needs without
overspending company resources”
• “Great matchmaker between the
company and it customer, matching
needs with products and services”
® Tony Gauvin, UMFK , 2007
Digital Marketing
• Digital marketing includes
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CRM & ERP
Sales force automation
Wireless technologies
Marketing automation software
Decision support systems
• Digital Marketing Drivers
– Fast computers
– Databases
– Networks
® Tony Gauvin, UMFK , 2007
Why is digital marketing important
1. Introduces an entirely new channel to sell
and market products
2. Allows new pricing options and individual
promotions to customer
3. Enable hot media communications
4. Offers opportunities to find new product
needs and launch new products
5. Supports improved distribution and service
6. Changed the balance of power
® Tony Gauvin, UMFK , 2007
Lessons from the bubble
• 1st generation digital marketing
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High hopes
Land grabs
Infatuation with the Internet technologies
Disruptive technologies fueled stock prices
GO Fast & BE first
Bottomless wells of equity
• 2nd generation
– Real benefits and real returns to existing
companies
– A transformation of existing marketing practices
– Strategic
® Tony Gauvin, UMFK , 2007
What works
• Large Volume
branded sites
– Amazon
• Transaction fee
models
– EBay
What doesn’t
• Pure-Play B@C
– CAC too high
• Advertising models
– Revenue too low
• Exchanges
• Clicks and Mortar
– Barnes & noble
• Infrastructure
– Dell, Cisco, Intel
® Tony Gauvin, UMFK , 2007
– Insufficient value
proposition
– Chicken and egg
problem
Lessons learned
1. Deliver Fundamental value
Value = benefits - costs
2. Create operational excellence
Customer orientation
3. Build financial sustainability
Revenues must exceed costs and
deliver acceptable returns to investors
® Tony Gauvin, UMFK , 2007
Objectives
Understanding customer needs and behavior
Formulate a strategy to fill needs
Implement effectively and efficiently
Build trusting relationship with customers
® Tony Gauvin, UMFK , 2007
Structure of Text book
• Concept  Case illustrating concept
– Chap 1 (intro)  MotherNature.com
• How customers make decisions
– Chap 3  Dell
• Formulating a strategy
– Chap 5  Insite Marketing technology
• Target and positioning
– Chap 7  TerraLycos
® Tony Gauvin, UMFK , 2007
Structure of Text book
• New product development
– Chap 9  Market Soft
• Communications
– Chap 11  OSRAM SYLVANIA
• Pricing and distribution
– Chap 13  Logistics.com
• CRM
– Chap 15  Travelocity
• The future of digital marketing
– Chap 17  Citibank
® Tony Gauvin, UMFK , 2007
What is a case study?
• Describes a firms situation at some point in
time
– Most of these case studies are taken from the
time period following the burst of the Internet
Bubble (2000-2001)
– Analysis must reflect the correct time period
– You have the benefit of hindsight
• Contains mostly fact with some opinion
• Puts the reader on the scene
– Allows learning by doing
Case Study Analysis
• Deliverables
– 30 min oral presentation in front of class
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Overview of Company
Facts of the case
Discussion of e-marketing goal or strategy
Analysis of case based on the previous chapter’s topic
Discussion of perceived success or failure of e-Marketing goal
or strategy
– 5 min question and answer period with classmates and
Instructor
• As a minimum the student should be able to answer the
Questions at the end of each case study
– A PowerPoint presentation corresponding to the Oral
Presentation
Expectations
• Student should be able to demonstrate a mastery
of the material covered in odd numbered
chapters of the Urban text and understand how
the Case Study under analysis fits into the
framework established in previous chapters.
• Students should have read the case studies
being presented by the other students and be
able to ask intelligent questions of the presenter
of the case study.
• Every case study should prompt a class
discussion of the issues raised in the Case Study
Preparing Case Analysis
• Need for Practicality
– Cases are incomplete
– Make reasonable assumptions and DOCUMENT your
assumptions
• Need for Justification
– Support your decisions
• Need for Realism
– Be realistic
• Need for Specificity
– What, why, when, how, where and who
– Business people (and business professors) dislike generalities
and vagueness
• Need for Originality
– Be original…there is no perfect answer
– If it were that easy everyone could do it!
Class Discussion
• Read the case
– Take notes
• Perform Analysis
• Make recommendations
• Conduct Research
– The better you are at research the easier the analysis
goes
• Prepare PowerPoint and presentation
• Get ready for Cross-Examination
– Peers
• Everyone should read all the cases!
– Instructor
Making the presentation
• Organize with PowerPoints and graphics
– Give overview
– Inform the audience if it is a team presentation
• Who does what
• Control your voice
• Manage Body language
• Do not read your notes or the power points-be
fluid
• Use lots of visuals
• Be enthusiastic!
• Answer questions at the end
Research Tips
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Your best resources are the UMFK Digital Databases
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Other resources
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Business and company resource center
Business source premier
Newspapers (proquest)
Value Line research center
Wall Street Journal
Academic Search Premier
Census gateway
Econlite
Fed in print
http://www.sec.gov/edgar.shtml
http://finance.yahoo.com/
http://money.cnn.com/
http://moneycentral.msn.com/home.asp
Investor relations web site of the company
http://www.isc.hbs.edu/
Bad resources
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Web searches
Friends and colleagues
Tonyg.umfk.maine.edu
Writing a case study
• You are being asked to prepare a case study on a company or firm
that has undergone a marketing challenge and has answered that
challenge using web based technologies.
• There are two methods to conducting research for a case study. The
first is often called secondary research, in which the researcher (in
this case you ) researches printed documentation in magazines,
books, texts, other case study and company documentation in order
to derive the information required to create the case studies.
• The second and preferred method is to conduct primary research.
Primary research requires a dialogue with personnel in the company
being researched to discover the facts for the case study.
Unfortunately there is insufficient time in the course to conduct
primary research so the expectation is that secondary research will be
conducted to create these case studies.
Format of written Case
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Company Overview
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Marketing Challenges faced by company
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Technologies employed
Determination of relative success
Correlation of response with the marketing model employed
Evaluation of the company response using the Four-Step Flow Diagram on page 7 of
the Urban text.
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If possible try to determine the research methodology used by the company to identify
challenge
If possible try to determine the Marketing model used by the company
Response to market challenges
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Description of the Industry or market segment
Relative placement within the industry
Management Structure
Chief Competitors
etc
Identify actions taken to fulfill each of the four steps
Identify technologies and methodologies used for each step
Identify missed opportunities
Identify failed implementations
A short (3-6) list of thought provoking questions that would help the reader of the case
study understand the issues involved in the case study
Writing A case study Hints
• Pick the right company
– Big success or big failure is easier
– Make sure there is enough creditable information to
write the case
• If the company stills exists contact them for more
information or ask questions of senior members
via e-mail
• Case study are about facts
– Leave your opinion out of the study
– You can always “slant” the case by choosing which
facts to include or exclude.
Case Study Writing Tips
1. Keep your audience in mind: Remember that you are writing for students or
discussants who may not be familiar with the back- ground, details, and terminology of
the situation. Keep jargon to a minimum.
2. Use short-story-writing techniques: A case has flesh-and-blood characters who should
be intriguing. Each story element should move the narrative forward.
3. Openings: Grab the reader with a character facing his or her biggest problem: set the
scene for the confrontations, the frustrations, and the main conflicts.
4. Present situations and scenes without any attempt at analysis: Scenes must follow a
logical order and should illustrate a point, concept, or issue that relates to the problems
that the writer wants to have analyzed. Do not give any signals that one solution might
be preferred.
5. Provide relevant details: After an opening that sets up the situation, provide relevant
details about goals, strategies, dilemmas, issues, conflicts, roadblocks, appropriate
research, relevant financial information, people, and relationships. Be stingy with
numbers; they must help solve the problems, not confuse readers or send them off on
unproductive analytic tangents.
6. Use as much dialogue as possible: Make the characters come alive with dialogue.
Straight narrative is boring.
7. Endings: Leave the reader with a clear picture of the major problems--either ask or
imply "what is to be done now?"
http://www.northwestern.edu/african-studies/ugandaresearch/submit/howtowrite.pdf
Case study resources
• http://college.hmco.com/business/resource
s/casestudies/students/writing.htm
• http://businessmajors.about.com/od/casest
udies/ht/HowToCaseStudy.htm
• http://tlt.its.psu.edu/suggestions/cases/write
.html
• http://casestudies.lead.org/index.php?id=19
Case Study
® Tony Gauvin, UMFK , 2007
Overview
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Introduction
Company Overview
History
The opportunity
Strategy
Marketing issues
Prior efforts
End results
Questions
® Tony Gauvin, UMFK , 2007
Introduction
• 1999 Christmas retail ecommerce
experienced exponential sales growth
• New CMO (since Feb. 1999) sets 3 goals
for MotherNature.com, one of the first
online ventures for health market
– Attract and retain customers
– Develop high ROMI (return on marketing
investment)
– Quantify CLTC (customer life time value
calculation)
® Tony Gauvin, UMFK , 2007
Company Overview
• Leading retail and information site for
VSM (vitamins, supplements and
minerals)
• Head quartered in Concord, MA with
distribution center in Springfield, MA
® Tony Gauvin, UMFK , 2007
History
• Founded Dec 1995 as Mother Nature’s General
Store as online
• 1998 focus on growth and desire to be market
leader
– Raised $6.5 millions in VC funds
– Hires CEO Michael Brach (HBS and HLS)
– Changes name to MotherNature.com
• 1999 raised $42 million from other VC’s
– Hires CMO Steinberg
• End of 1999 goes public
– Raises $53 million at IPO
• Poised for large growth
® Tony Gauvin, UMFK , 2007
Key Issues
• Core benefit proposition
– The core benefit proposition of
MotherNature.com is one source for healthrelated needs, convenience, privacy,
information, advice and easy searchability.
Compared to traditional retail outlets,
MotherNature.com allowed customers to search
their site for any product in the privacy of their
own home. The site catered to environmentally
conscious consumers who were interested in
obtaining organic products
® Tony Gauvin, UMFK , 2007
Key Issues
• Good
– Market is growing at a rate of 13% per year;
– Vitamin supplement market is growing at a rate of 52% per
year;
– Expected number of people online by 2003 is 1.76 million;
– Low shipping costs for health-related products;
– Customers would be frequent, repeat purchasers;
– Brand awareness matters to customers in this market.
• Bad
– Need for advertising campaign to increase awareness and
trust in the MotherNature.com brand
– Customer Acquisition costs are (too) high
® Tony Gauvin, UMFK , 2007
Strategy
• Advertising
– Promote brand….national TV campaign
• Brand
– Trusted authority in VSM
• Repeat Customers
– Inherent
• Affiliates
• Service
• Global Growth
® Tony Gauvin, UMFK , 2007
Marketing issues
• Attract, convert and retain on-line
customers
– On-line and off-line approaches
• Achieve high ROMI
– Use CLTV
• Qualify CLTV
– CLTV spread sheet
® Tony Gauvin, UMFK , 2007
Prior marketing efforts
• Dec 1999
– Traditional media campaign in targeted
cities
– Online through SEO, permission
marketing, e-mails from incentive
programs
– Public relations events
– Data mining
® Tony Gauvin, UMFK , 2007
Marketing results
• Building Brand cost big $$$
– 13 million spent mostly on TV ADS
• Take on a condescending tone with the consumer.
MotherNature is condescending to the people that she interacts with
in the commercials – model with foot fungus, men with sexual
disorders, people in an office with memory problems. These
commercials, though funny, undermine one of MotherNature.com’s
core benefits – no embarrassment. Because the protagonist in the
commercials is making fun of various ailments, it makes customers
feel less comfortable about going online to purchase products;
• Makes customers appear dumb. This is a variation of the problem
mentioned above. For example, in the commercial with the model, it
is obvious that MotherNature feels that the model is not very smart.
No customer wants to associate him/herself with a dumb consumer;
• Doesn’t explicitly say what they’re selling. Though the
commercials may be humorous, they are unclear about what product
is being sold. After watching several commercials, it is likely that
people would not know what MotherNature.com sells. Though very
reminiscent of the flashy and attention-grabbing commercials of the
dot.com era, these advertisements do not send clear messages.
® Tony Gauvin, UMFK , 2007
Other ways (less $) to brand
• Banner ads on other sites;
• Direct Marketing – this is less
expensive in Cost Per Customer
Attracted;
• Promotions – coupons, free samples;
• Advertisements at sporting events
® Tony Gauvin, UMFK , 2007
Financial analysis
• March 31, 2000 Balance Sheet: MotherNature.com
has $34.7M in cash, but is burning through it
quickly. In the quarter ending March 31, 2000,
there was an operating loss of $16.5M;
• March 31, 2000 Quarterly Income Statement:
MotherNature.com has increased its selling and
marketing expense from $2.56M in 1999 to
$13.64M in 2000. This is a huge increase;
• Gross Margin is 28%, (calculated as (SalesCOGS)/Sales), but this is before the $13.64M in
marketing costs.
® Tony Gauvin, UMFK , 2007
Other possibilities
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Slower Growth – If MotherNature.com did not make such aggressive growth
targets, then they could decrease their marketing spend and plan for slower
growth;
Loyalty Programs – Loyalty programs could be created to attract and retain
customers. Loyalty is a perpetual problem for online companies, where
search costs are low and switching costs are low for consumers. If
MotherNature.com were to find a way to attract their customers to return to
their site, then they could improve their return on investment;
Partners – Perhaps, partnering with another more well-known company could
increase traffic to their site and increase their brand awareness, without the
huge marketing investment;
Catalogues – Currently, MotherNature.com products are only available
through their online store. Perhaps, by introducing catalogues as a way to
increase sales, they may capture additional customers;
Determine target market numbers – MotherNature.com clearly was focused
on capturing the “green” customer segment. Before entering this space, they
should be aware of what the customer segment looks like, how many
potential customers there are, what those customers’ needs are and how best
to reach them;
® Tony Gauvin, UMFK , 2007
Other possibilities
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Increase word-of-mouth exposure – By giving current customers incentives
for referring friends to shop online, perhaps MotherNature.com could increase
their customer base;
Satisfaction guaranteed/Money Back Guarantee – Buying health products
online does not appeal to some. Because these products will be used on
your body or ingested, the products take on a large amount of significance.
Trust is key. By offering a money back guarantee, you are signaling to the
customer that you believe in your product. And it may give the customer that
extra push that’s needed to make the sale.
Increase conversion rate – People may browse the MotherNature.com site,
but then not purchase anything. Why not? Perhaps, by including trust seals
on the website, you will motivate more customers to try your products.
Make recommendations – Try to increase the relationship between you and
the online customer. If a customer is browsing the website, you could include
a question box, where customers can input the type of problem they’re
experiencing or the type of product that they’re looking for. Then by offering
personal advice, you can build a relationship with the customer and increase
conversion rates.
® Tony Gauvin, UMFK , 2007
Big problems
• The main problems that MotherNature.com
faces are:
– It is selling a trust based product. Selling a trust
based product requires building a relationship
which is difficult online. Selling such a product
through traditional channels can inspire more
confidence in a customer because the customer
can interact with salespeople, ask questions etc.
Selling vitamins and health products online is
much more impersonal and could be perceived
as risky by customers.
– MotherNature.com needs to build a strong
brand. But building a brand requires lots of
dollars.
® Tony Gauvin, UMFK , 2007
End result
• MotherNature.com converted to B2B, but was
unsuccessful. Value of the firm was less than the
cash balance remaining of $20 million. In May
2000, MotherNature.com returned the residual cash
balance to stockholders. As of 2003, Mother
Nature operates as a separate site and is reputably
profitable (with no advertising and only word of
mouth and some direct mail promotion). The
current company bought the software rights for a
“very small price” after Mother Nature closed up
shop and disposed of its assets.
® Tony Gauvin, UMFK , 2007
Questions
 In the battle of Green($) vs. Green (environmentally
friendly), how can MotherNature.com strike a
balance that will maintain its image as a trusted
brand while actively seeking customers and
strategic partners to help it grow? What must the
company NOT do? In this context, what kinds of
marketing programs would help MotherNature.com
beat its competitors? What innovative strategies
(promotions, alliances, web site modifications,
segmentation, product expansion) could the
company develop that would help it make a profit
while not breaking the marketing budget?
® Tony Gauvin, UMFK , 2007
Questions
 Imagine that you are a member of
MotherNature.com’s Board of
Directors at the board meeting on April
7, 2000. You understand the
challenges facing the company and
must now evaluate the options. Your
money and the fate of the company
are on the line. What options will you
support?
® Tony Gauvin, UMFK , 2007
Understand Customer
Needs and Behavior
Chapter 3
Two parts
• Understand the customer decision process
– Pricing
– Distribution
– Service
– Advertising
• Understand consumer needs
– Design new products and services
Decision making model
• Process by which the customer reaches a
purchase decision
– Information processing model
• Input  decide  output
– How do consumers
• Obtain information?
• Interpret and consolidate information to reach a
decision?
• Learn from the experience?
• Influence others?
Information Processing
Model
Input
Make consumer aware and get their attention
Create desire to purchase and reduce search costs
Decision Making
Process Input both from short and long-term memory
Use heuristics to eliminate (or include) choices
Choose (or not) from remaining choices
Output
Consumers gain more information from usage
update memory
change heuristics
Vendor should capture post purchase experience
Customer Decision Flow
Chart
What starts process?
Role of past experience?
Friends make input?
Sources of Input?
Ads/catalogs/e-mail?
Sources of Information: friends/media/web/store?
Active search? How much time?
Where to shop?
What to learn?
Compare products?
Need to touch and feel?
Role of price/quality evaluation?
Impact of brand and trust?
How do buyers gain confidence?
Security/privacy assurance needed?
Push to action?
Special Offers?
Guarantees/refund policies?
Word of mouth to friends/community?
Relationship contract?
Lifetime service?
Delivers promised value
Multi-person industrial
buying
• Specifying
– Define need
– specify attributes and performance requirements
• Gatekeeping
– Qualify suppliers
• Budgeting
– Allocate funds
• Generating Alternatives
– Identify solutions, products and qualified bidders
• Evaluating
– Consider proposals and bids bases on specifications
• Selecting
– Pick best
• Approving
– Ok to buy
How to identify consumer needs
(market research)
1. Talk to your customers
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Focus groups, surveys
Works better with industrial clients
2. Concept tests
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Consumer evaluate prototypes
3. Lead Users
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Customers that know their needs and have already created
solutions
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Avon skin-so-soft
4. Idea generation techniques
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See next slide
5. Formal marketing research
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Conjoint analysis
Listening–in (chapter 9)
Idea generation flow
Problem
Definition
Itemized
response
Analysis
Build on
ideas
Goals/wishes
Idea
Creation
Paraphrase
Possible
Solutions(s)
And
Next Steps