Product/Market Strategies – Growth Opportunity Assessment Download the entire document at: www.gazhoo.com

Agenda Basic Frameworks and Challenges Approach to Growth/Opportunity Assessment Case Examples Client Experiences and References Download the entire document at: www.gazhoo.com

Basic Frameworks and Challenges

Approach to Growth/Opportunity Assessment

Case Examples

Client Experiences and References

We have compiled examples to illustrate the application of these frameworks. — Approach to Growth/Opportunity Assessments — High-Level Opportunity High-Level Screening Strategic Alternatives Detailed-Level Screening Prioritization Identify high-level growth opportunities Evaluate attractiveness of opportunities at high level Identify viable strategic alternatives Validate against specific business requirements/hurdles Prioritize and select growth opportunity Market Options Strategic Game Board Business/Market Profile Understand business/market Download the entire document at: www.gazhoo.com New Current New Product Alternatives I II III IV VII VIII III VI IV Expanded Existing Improved 1. Demand Market size Trends 2. Supply Competitive structure Capacity Substitutes Barriers to entry 3. Basis of competition Trade strength Product strength 4. Profitability INDUSTRY ATTACTIVENESS High High Low Low “ FIT” WITH LEVERAGEABLE SKILLS Allocate Strategic Funds Funds Available for Strategic Opportunity Fund Strategic Opportunity Develop Metrics to Monitor Allocate Strategic Funds Based on priority Based change in financial structure Rank Opportunities Contribution to strategy Cost vs. benefit Risk - Return Determine Programs Funding Requirements Formulate Goal/ Objectives Identify Strategic Programs/SBUS Fund Strategic Opportunity Fund Strategic Opportunity Technology Marketing Distribution Skills Assessment “ Capture Value of Customer Intentions” Leverage Skills/Capabilities Leverage Assets/Activities Existing Business (“Core”)

Understand business/market

1. Demand

Market size

Trends

2. Supply

Competitive structure

Capacity

Substitutes

Barriers to entry

3. Basis of competition

Trade strength

Product strength

4. Profitability

Allocate Strategic Funds

Based on priority

Based change in financial structure

Rank Opportunities

Contribution to strategy

Cost vs. benefit

Risk - Return

One emerging alternative is to expand beyond the core by creating innovative value propositions around a consumer Intention. — High-Level Potential Opportunities — — Growing — Markets Products/Services Current New New Current “ Capture Value of Customer Intentions” Leverage Skills/Capabilities Leverage Assets/Activities Existing Business (“Core”) Download the entire document at: www.gazhoo.com

We then evaluate initial opportunities using a set of high-level screening tools. Evaluate Industry Attractiveness… To Identify a Portfolio of Possible Opportunities… … IN ORDER TO ASSESS RELATIONSHIP BETWEEN OPPORTUNITY AND SKILLS*… — High-Level Screening Tools — * Note: Key is to determine which skills are required for success in new business, and ensure that they are all either in place or acquired (e.g., through acquisition or outsourcing) as part of entry strategy INDUSTRY ATTRACTIVENESS High High Low Low “ FIT” WITH LEVERAGEABLE SKILLS Increasing Attractiveness Determine “Fit” with Leverageable Skills … Download the entire document at: www.gazhoo.com 1. Demand Market size Trends 2. Supply Competitive structure Capacity Substitutes Barriers to entry 3. Basis of competition Trade strength Product strength 4. Profitability Technology Marketing Distribution O

1. Demand

Market size

Trends

2. Supply

Competitive structure

Capacity

Substitutes

Barriers to entry

3. Basis of competition

Trade strength

Product strength

4. Profitability

Buyer Value Modeling can be used as a screening tool to measure growth opportunities by quantifying buyers’ preferences and simulating switching behavior. — Buyer Value Modeling — Conduct conjoint tradeoff survey Quantify values Segment consumers based on values Determine segment attractiveness Simulate buyer behavior to optimize profit Buyer Value Analysis Value-based Segmentation Market Testing Economic Evaluations Product Features Product Distribution Processes to Create Product/ Operations Interrelationship with Other SBU’s Service Level Marketing Channel Mass Direct Advertising Message Price Launch Successful Strategies Buyer values Cost structure Competitor offerings Value propositions Impact on preferences Switching % Market share Revenue/profit Confirm buyer value research with market tests Test additional elements Calculates segment NPV: Statistically forecast cash flows Activity-based cost projection Conduct competitor/industry scenario analysis Input Output Components of Segment Level Value Proposition Download the entire document at: www.gazhoo.com O

Conduct conjoint tradeoff survey

Quantify values

Segment consumers based on values

Determine segment attractiveness

Simulate buyer behavior to optimize profit

Marketing

Channel

Mass

Direct

Buyer values

Cost structure

Competitor offerings

Value propositions

Impact on preferences

Switching %

Market share

Revenue/profit

Confirm buyer value research with market tests

Test additional elements

Calculates segment NPV:

Statistically forecast cash flows

Activity-based cost projection

Conduct competitor/industry scenario analysis

Selective Consumer Buyer Values analysis could immediately address a critical issue related to a leading bank’s existing profit segments. Profit Segments Demographic Channel Usage Tenure Appended Consumer Data Share of Wallet 60 40 20 15 5 10 50 Relationship Price 5 5 20 20 50 20 Channel Speed Diamond Platinum Gold Silver Bronze . . . Buyer Values Segments % of customer base — Issue: How do we increase the percentage of Diamond and Platinum customers? — How widely distributed are the profitability segments within a buyer values-based segment? Can we de-emphasize some buyer values and related value propositions because they tend to attract less profitable customers (e.g., channel in the above illustration) without jeopardizing the most profitable customer segments? Which other customer profit segments share the same buyer values as our best customer segments (i.e., Diamond and Platinum)? Using appended consumer data, which of these other customer segments have the potential to also become best segments? How widely distributed are the buyer values of the bank’s most profitable customers? Is the size of each buyer values-based segment that exists across Diamond and Platinum customers large enough to warrant attention (i.e., to emphasize or change the value propositions or the associated processes)? 2 12 19 47 20 Download the entire document at: www.gazhoo.com Illustrative 1 2 2 3 3 1

How widely distributed are the profitability segments within a buyer values-based segment?

Can we de-emphasize some buyer values and related value propositions because they tend to attract less profitable customers (e.g., channel in the above illustration) without jeopardizing the most profitable customer segments?

Which other customer profit segments share the same buyer values as our best customer segments (i.e., Diamond and Platinum)?

Using appended consumer data, which of these other customer segments have the potential to also become best segments?

How widely distributed are the buyer values of the bank’s most profitable customers?

Is the size of each buyer values-based segment that exists across Diamond and Platinum customers large enough to warrant attention (i.e., to emphasize or change the value propositions or the associated processes)?