978-0130387752 Chapter 6 Marketing Performance Tools and Application Exercises

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Marketing Performance Tools and Application Exercises

6.1 Cost Advantage:This marketing performance tool is used with Figure 6-6and Appendix 6.2 in addressing

items A to C below.

A. Estimate the experience curve coefficient for a cost curve with an initial unit cost of $100, an initial

cumulative volume of 50,000 units, a current unit cost of $70, and a cumulative volume of 300,000

units.

Teaching Note: With a unit cost of $100 at 50,000 units and $70 at 300,000 units, the product is on an

87 percent experience curve. This means every time the cumulative volume doubles, the unit cost

B. What is the estimated unit cost when the business hits a cumulative volume of 1 million units?

Teaching Note:As shown, when the cumulative volume reaches 1 million, the unit cost is estimated to

C. What cost advantage will the business have at a cumulative volume of 1 million units if we assume the

business’s closest competitor is on the same experience curve with a cumulative volume of 500,000

units?

Teaching Note:If both competitors are on an 87 percent experience curve, the business with 1 million

in cumulative production will have an estimated unit cost of $55. A competitor with a cumulative volume

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6.2 Differentiation Advantage:This marketing performance tool is used withFigure 6-9 in addressing items A

and B to C below.

A. Create three product attributes for an MP3 player and indicate the relative importance of each, with the

sum of the relative values equaling 100.

B. Use Apple’s iPod as the company product and specify three competing MP3 players. Then rate each

product attribute of Apple’s iPod and each attribute of the three competing products on a scale that

ranges from 0 (disastrous) to 10 (outstanding), where 5 is average.

C. What is Apple’s product advantage index and what does it imply with respect to customer value and

profitability?

Teaching Note:I used the Consumer Reportsweb site (ConsumerReports.org) to obtain the

performance attributes in the screen printout above. The next page has a discussion of these

performance attributes. I estimated the relative importance points for the performance attributes as 40,

In the starting data, I presented iPod with no competitive advantage relative to each competitor. This

In the analysis, I presented my perceptions of the ways in which the iPod compares to each competing

product. To gain an advantage (a plus relative advantage index), iPod had to have a distinct advantage.

If the difference in performance was minimal, I allocated no points. If the iPod had been significantly

Sometimes perceptions do not map to reality. It may be that one product actually performs much better

than another on a performance dimension, but consumers perceive this performance differently. In

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Information Concerning

Key Customer MP3 Benefits

(from ConsumerReports.org)

Weight, capacity, size. Consider a flash-memory model if a lower price, smaller size, lighter weight, and

long playback time are more important to you than a vast selection of tunes (a 4GB model can hold about

1,000 songs). Look for flash models that can accept external memory cards if you want expanded song

A hard-disk player, however, can be more complicated to manage than a flash-memory player. For some,

navigating through the menus or directories (folders) of songs also may take longer. Hard-disk players vary

Consider download choices. Be aware that for online music, copy-protected sources are limited with some

models. For example, some players work only with one online music store, while iPods are compatible with

iTunes and Real. Players that support the copy-protected WMA formats, like those from Archos, Creative,

A few players won’t play music purchased from certain online stores. Downloading “free” music from such

online sources at peer-to-peer web sites is another option. But you risk a copyright-infringement lawsuit by

Also note that with most players, you have choices when it comes to software for recording (ripping) music.

You can use the software that comes with your computer or player, such as Apple iTunes, Yahoo Music,

Ensure upgradability. Regardless of which player you choose, look for one with upgradable firmware for

adding or enhancing player features as well as accommodating newer encoding schemes or variations of

compression. This is particularly important for models with video playback due to the evolving nature of

6.3 Marketing Advantage: This marketing performance tool is used with Figures 6-12 to 6-14 in addressing items A

to C below.

A. How would the market share advantage change for the company that increased its market share from

20 to 23 percent while competitors each lost one share point? How would this affect profitability?

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B. This same company is in a growing market and is willing to invest in expanding its product line from an

average position to a broad product line position. How would this affect its marketing advantage and

profitability?

C. How would the company’s market share and profits change if it increased its distributor outlet share

from 25 to 30 percent?

Teaching Note

A. Improving market share from 20 to 23 percent improves the company’s relative market

B. Gains in market share do not just happen. Part of the company’s gain in share and

relative share could be attributed to an expanded product line (o/ering more choices to

more customers). The product line index improved from 100 (average) to 150 (above

C. Another way to build a marketing advantage and market share is through distributor

share. As shown in Figure 6-14, businesses with higher distributor shares have higher

market shares. Of course, this applies primarily to products sold through retailers,

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6.4 Industry Analysis: This marketing performance tool is used with Figure 6-23 in addressing items A to C

below.

A. Rate the industry attractiveness for the iPad and personal computer.

Teaching Note: Shown below are the author’s assessment of the industry attractiveness forces for the

B. How does the overall industry attractiveness differ for each?

Teaching Note: The tablet industry is much more favorable in most of the attractiveness factors, with

C. Which industry is likely to be more profitable?

Teaching Note:Industries with higher industry attractiveness

The tablet industry, represented by the blue orb, is well above

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