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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
Market-Based Management Copyright © 2012
Sixth Edition –39– Pearson Education, Inc.
Instructor’s Manual– Chapter 4 Publishing as Prentice Hall
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
Market-Based Management Copyright © 2012
Sixth Edition –40– Pearson Education, Inc.
Instructor’s Manual– Chapter 4 Publishing as Prentice Hall
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?
Market-Based Management Copyright © 2012
Sixth Edition –41– Pearson Education, Inc.
Instructor’s Manual– Chapter 4 Publishing as Prentice Hall
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,
Market-Based Management Copyright © 2012
Sixth Edition –42– Pearson Education, Inc.
Instructor’s Manual– Chapter 4 Publishing as Prentice Hall
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
Market-Based Management Copyright © 2012
Sixth Edition –43– Pearson Education, Inc.
Instructor’s Manual– Chapter 4 Publishing as Prentice Hall
Market-Based Management Copyright © 2012
Sixth Edition –44– Pearson Education, Inc.
Instructor’s Manual– Chapter 4 Publishing as Prentice Hall
