Lecturer:Ass. Professor Dr. Hj. Mohamad Md YusuffSubject: Marketing Management (YSP 503) Present by: 1) Noorazlin Ani 2) Zetty Rosela 3) Haniza Harun 4) Nadhirah
Professor of Innovation and Entrepreneurship at theWharton School, Executive Director of the Sol C.Snider Entrepreneurial Research Center. Formerly,Director of the Entrepreneurship center at NYU andtaught at Columbia and Northwestern Universitiesand the University of South Africa.Prior to joining the academic world, ProfessorMacMillan was a chemical engineer, and gainedexperience in gold and uranium mines, chemical andexplosives factories, oil refineries, soap and foodmanufacturers and the South African Atomic EnergyBoard.Director of several companies in the travel, import/export andpharmaceutical industries, and has extensive consulting experience, havingworked with many international companies throughout the U.S., Asia, andEurope.Professor MacMillans articles have appeared in several leading journals.His latest books, The Entrepreneurial Mindset and MarketBusters werewritten with Rita McGrath.
Professor Emeritus of Finance and Economics at Columbia University and the Founder and Managing Director of Selden & Associates, which has been advising the senior most management of companies on share price focused business performance improvement for more than 15 years in North and South America, Europe and Asia.Co-author the widely acclaimed book Angel Customers and DemonCustomers. A former foreign exchange trader, Selden has been an advisorto more than two hundred public and private companies across the globe.Selden has been a lecturer and conference leader in innumerableExecutive Programs sponsored by Columbia University as well as otherinstitutions and corporations, often receiving the very highest ratings fromattendees.
He is a frequent presenter to InvestmentProfessionals on Investment ManagementTechniques and Business Strategy and hasparticipated as a panelist and presenter forFortune’s Global CEO Forums, including apresentation shown on closed circuit TV to 88,000viewers worldwide. Business Week rated Selden asone of the top ten academic advisors to leadingcorporations. He has led or participated inbusiness (board) reviews for more than 150companies in 30 countries and is a frequentadvisor on CEO presentations to buy-side and sell-side investors.A frequent contributor to Fortune and Business 2.0, Professor Selden haspublished excerpts of his Angel Customers and Demon Customers inFortune, Harvard Business Review and American Banker and also appearedon Wall $treet Week, the most widely watched business television show.
INCUMBENT’S ADVANTAGEIn politic:An incumbent advantage is an advantage gainedby someone already in a position, as compared tonewcomers.In market:The advantages companies already established ina market have a new entrants.
Incumbent firms often face severe difficulties inadapting to radical technological change. Forexample, the Swiss watch making industry wasalmost entirely destroyed by one of its owninventions — the quartz. New entrants, such asSeiko and Timex, were extraordinarilysuccessful in commercializing this new energysource for clockworks (Glasmeier, 1991).
Radical innovations often initiate aSchumpeterian process of ‘creativedestruction’, frequently leading to thereplacement of incumbents by new entrants. Complementary assets, strategic alliances, and the incumbent’s advantage: an empirical study of industry and firm effects in the biopharmaceutical industry Frank T. Rothaermel∗
Incumbent firms often face severe difficultiesin adapting to radical technological change(Foster, 1986). INCUMBENT’S ADVANTAGE THROUGH EXPLOITING COMPLEMENTARY ASSETS VIA INTERFIRM COOPERATION FRANK T. ROTHAERMEL*
The advent of the personal computer (PC),for example, destroyed the demand for a widearray of products ranging from typewriters tofully dedicated word-processing systems, while atthe same time it created huge opportunities fornew PC manufacturers, their suppliers, and theproducers of complementary products likesoftware and printers
PROFITING FROM INITIAL CUSTOMER RESEARCH Needs to invest in research that exploits its unique access to its customer information. With customers teases out two main customer segments: Strength seekers, Workability seekers, who use ready mix concrete for support who pour cement for columns and other load- interior spaces such as walls and staircases. bearing applications.
Building Your Incumbent’s Advantage1) Fragmented structure of most market leading companies give ways to invaders.2) Invaders tend to target vulnerable customer segments; most likely the segment that cut across product groups.3) The invasion is hard to spot when too much concentration given on the strong accounts and neglecting the vulnerable one. When the sales for strong account keeps growing, the vulnerable ones are easy to disregard.
Fighting the Invaders 1. Exploits incumbent’s 2. Organize corporate existing internal structure around information to customer segments needs understand the by assigning teams to economics of the most quickly mend losses and and least profitable sustain the most customers. profitable customers.i. Help give powerful insights into the incumbents’ advantage.ii. Lay the foundation for customer-centric information base.iii. Enable tracking of performance of customer segment.
Techniques1. Begin with small pilot database and steadily add in more customer data from other sources.2. Begin with simple proof of concept . Discussion among key players across the organization toidentify the neglected customer segment, hencecreate product/service specially tailored to meet their needs .
Creating your Information Advantage1) DO NOT build a customer-segment database from scratch. Do a low-cost analyses of existing databases, which able to extract profits quickly.2) For a start, DO NOT obsess over accuracy of the database. Identify major customer segments – build segments using the characteristic and behavior that can be extracted from existing record. Constructing a relatively simple customer characteristic database will allow incumbent to rank customers according to their profitability, subsequently identify its Most and Least Profitable Customers.
Creating your Information Advantage3 ) Focus on specific segments, i.e. the top and bottom two deciles, following these steps:i. Use regression analysis to uncover statistically significant relationships among customers’ profitability; behavior vs demographic characteristics .ii. Perform a cluster analysis to group similar individuals into candidate customer segments.iii. Identify actions that can reduce losses from profit-eating customers and can prevent defections by the most profitable customers.
Creating your Information Advantageiv. Rank the above actions according to their most effective potential to improve incumbent’s profits.v. Do a more detailed research on what additional resources candidate segments consume other than the one found in the initial profit-contribution calculation.vi. Identify preliminary needs-based customer segments. Assign each candidate segment to a team who will be in charge of finding ways to increase the segment’s profit contribution.
Creating your Information Advantagevii. Start expand the customer-centric information system to include the middle deciles of customers.
Using Organizing to exploit your advantage.• Build corresponding business unit for the identified needs based segments.• Provide the team with budget and human resource for them to conduct experiments with customers in their segments.• The team to focus on growing the segments’ profitability.• Current product managers to support this new segment team.
Purpose of having the Information Base “To yield comprehensive customer profitability analysis by assembling the required inputs for revenue, costs and capital at the customer segment level”.It is an incumbent’s advantage because invaders does not have access to this type of information.
Source of Revenue SHIFT TO Accustomed Customer Product or Segments GeographyIt is CRITICAL TO SHIFT from thinking in terms of costallocation TO viewing costs strategically as customer investments.
CONCLUSION■ Market-leading companies get attacked when they focus on products and geographic locations rather than on what competitors and disrupters actually target – unmet customer needs.■ To fend off invaders, an incumbent should strategically analyze and reorganize its customer information base and align its corporate structures accordingly.■ Unrelenting attention to exploiting your incumbent’s advantage is the key to growing profits organically.