Thursday, June 27, 2013

Corporate Strategy by Ansoff

 Before the report of the project on the lost Twitter bird(our previous post-an experiment on how to go viral on Twitter),let's take a break and talk about Ansoff.
Ansoff’s 1965 classic, Corporate Strategy, contains one of business’s most important and enduring strategic formulations. Before becoming a distinguished academic, writer, and consultant in the mid-1960s,Ansoff progressed through a series of planning positions at the Rand Corporation and Lockheed, ending this phase of his career as vice president and general manager of the Industrial Technology Division at Lockheed Electronics. Experience with diversification planning helped him formulate key issues and tensions that firms face in choosing a growth strategy. The operating problem is akin to determining the best way to milk a cow. The strategic challenge is of a different order: “But if our basic interest is not the cow but in the most milk we can get for our investment, we must make sure that we have the best cow money can buy.”
 In strategic terms,this translates into product-market combinations that are most advantageous to the firm. The Product-Market matrix (sometimes called the Corporate Strategy matrix) defines the options for achieving this.The Two Dimensions and Their Extremes. The Product-Market matrix explores two key dimensions: Product and Market.

Product. Businesses are built around products and services that define their value offering. Most offerings are limited in at least two ways: time, in that their relevance diminishes and redesign or renewal is usually required, and transferability, in that they tend to work best under certain market conditions. Ansoff noted that modifying the core offering is a key strategic choice.
Market. Generally applied as Market options, this dimension distinguishes between customer markets that are well established and known to the firm versus all the rest that are not.

The Four Quadrants. In Ansoff’s terms, each of the four possible options defines a core strategic response to a different set of internal and external conditions. Careful assessment leads to better understanding and decision making:

• Upper left: Product Development. Marketers understand the enormous value of a positive customer relationship and the goodwill and trust that go with it. This relationship capital allows a company to make new product offers more effectively and inexpensively to existing customers than to new ones. The advantages of this must be weighed against the possible damage resulting from negative spillover from the new to the existing product experience should it not be entirely satisfactory. When Stihl, the maker of the world’s top chain saws began to sell augurs, hedge trimmers, and complementary items such as cut-retardant leg chaps, it was practicing Product Development. Heineken has achieved great success by introducing over eighty brands around the world.

• Lower left: Market Penetration. This is the de facto strategy: change nothing and sell more of the same to existing customers. When a business does not consciously select a growth or diversification strategy, it is doing this. When Stihl sells to the forestry industry, it is in this quadrant, as is Heineken when it supplies beer to European drinkers. This is the preferred strategy when a company’s product is performing well and there is room to increase market share.

• Lower right: Market Development. A well-developed product can be introduced into new markets to extend its value. This is ideal when little modification is required and room for growth in the original market is restricted.Products as diverse as food, pharmaceuticals, and automobiles fit this category.When Stihl reached out to recreational users and North American buyers, it was employing a Market Development strategy, as was Heineken when it began exporting its beer outside Europe, with great success.

Time for diversification?

• Upper right: Diversification. Diversification represents a near total strategic overhaul, simultaneously trading in both Product and Market. It is the most challenging, costly, and risky of the options. New skills and relationships need to be developed. Companies choose this strategy in conjunction with one or more of the others or when they have recognized a crisis. Ideally, there is a gradual migratory path leading from the known to the unknown. It would be easier for Stihl to evolve into a retail hardware supplier, say, than a candy manufacturer or entertainment company(The Power of the 
2 x 2 Matrix). The recent misfortunes of Seagram’s Distillers and Vivendi’s (historically a water and utility company) painful transformation into a communications, media, and entertainment company are a reminder of the riskiness of Diversification.

Wednesday, June 12, 2013

Viral Marketing-A myth?

That ideas can go viral is now a given in corporate marketing and the culture – it’s even part of the plot of the 2011 Pulitzer Prize-winning novel “A Visit from the Goon Squad.” But new research suggests the term “viral” marketing does not describe accurately what happens in the market.

The 5 Worst Viral Marketing Campaigns

Perhaps the biggest viral marketing blunders of the last decade.

5. eBay 'Windorphins'

Sunday, June 02, 2013

Behavioral marketing

Emotional cues that work magic for customers

 Marketers have long understood that emotions play an important role in consumer decision making. But, as the latest scientific evidence suggests, their influence is much more nuanced and complex than many are aware. Subtle, rather than intense, emotional reactions are often more persuasive. Short-lived emotions can have lasting effects. The experience and expression of negative emotions can sometimes be beneficial. Emotional experiences are often poorly predicted and remembered. In all these areas, a better understanding of emotions will help managers tailor their own act to give better prompts and get the desired response from consumers, in order to maximize customer satisfaction and loyalty at every stage of the encounter.

Customers tend to be quite aware of how intense emotions can affect their decisions: The overcrowding and long lines at the Ikea checkout may leave customers fuming. But as they march out of the store vowing never to shop there again, they may well indulge in an impulse buy on the way out, just to relieve the stress they’re feeling.

What just happened? We often focus on the influence of intense emotions, yet ignore how subtler feelings might also be affecting consumer actions and choices, perhaps on an unconscious level. Mild emotions, whether positive or negative, can trigger or inhibit consumer actions just as powerfully as intensely realized ones.This means that, in order to ensure that your customers feel happy and relaxed when dealing with your business, it is important to pay attention to small cues that can improve their mood or dispel potentially inhibiting negative emotional states.

It is possible to enhance the appeal of your business by exploring areas in which you can evoke positive emotions, which lead to favorable evaluations and increase purchasing intentions. A pleasant scent and music may lure a customer into a store. A smile from a flight attendant may encourage a passenger to buy from the duty-free cart.Simple improvements like this – to alleviate any mild discomfort, and to enhance a positive atmosphere – are easy to implement and can turn a passerby into a lifelong client.

 Creating a pleasant atmosphere with music, scent, lighting or other atmospherics has long been known to provoke positive emotional reactions. But certainly, customer service is always crucial: saying the right words at the right time, remaining calm when faced with an agitated customer or client, going the extra mile.If there are areas of your business that may contribute to a negative emotional state, evaluate how you can alter the emotion for a positive evaluation of the atmosphere. For example, convert frustration to pleasant anticipation during a long wait at a popular restaurant by offering a taste of what’s to come, such as free hors d’oeuvres or beverages.

The Lasting Impact of Short-Lived Emotions

 Many businesses have understood how they can use the mild and mundane emotional experiences of their consumers to influence decisions at that moment. But affecting emotions in the short term can have long-term consequences, as people may form an evaluation or commit to a course of action while experiencing the initial emotion, which will impact their future behavior.Using the classic social science ultimatum game, in one recent paper we explored and confirmed that, in fact, the impact of emotions on behavior can outlive the emotional experience itself.

 In this game, a “proposer” makes an offer to split a given amount of money with a “receiver.” If the person playing the “receiver” feels that the deal is unfair, then that person can reject the offer, and both participants end up with nothing.In our experiment, we began manipulating receivers’ mood by showing them movie clips that sparked either anger or happiness. Subsequently, they were asked to play two ultimatum games.

 In the first game, the proposer would offer the receiver an unfair division of the available amount of money: the proposer would get 75 percent and the receiver 25 percent. Angry receivers rejected these unfair offers at a much higher rate than happy receivers. Even if rejecting the offer meant being left with nothing, the angry participants held to their rationale that unfairness was the basis of their decision.The twist came in the latter round, once the initial emotional reaction had already dissipated. In the next ultimatum game, the once-angry receivers were asked to play the role of the proposer, the majority of whom chose to make fairer offers.

Because people tend to behave consistently with past actions, earlier choices triggered by an incidental emotion became the basis for future decisions.When angry participants made their decision to reject an unfair offer in the first instance, they acquired a self-image of being and acting as fair individuals. Exercising fairness – which resulted from the anger they felt earlier – carried over to a future scenario. Even though the initial anger that triggered the desire for fairness had disappeared, the once-angry proposer is instead guided by behavioral consistency.
Once an emotion has prompted us to choose a course of action, we run into internal and external pressures that continually push us into making similar choices in the future. The image that we have of ourselves – as fair individuals, generous or frugal, socially conscious, conservative or fun-loving – as well as the image that we hope others will have of us, compels us to act consistently in the future.
Another way in which the impact of emotions can outlive the emotional experience itself and influence consumers is through the recall of a previously biased evaluation of a product or service.

Perhaps a biased evaluation
To take a marketing example: A humorous ad can positively bias the evaluation of the product. Based on the positive emotion triggered by that ad, in the future the positive evaluation is recalled, not the current emotional state, and that once-happy moment experienced in the past guides a new decision. Thus, the key is to find ways of making the consumer spontaneously form an evaluation of the product or service while in a good mood, which will then affect subsequent recall and purchase intentions.

Applying the lesson

The phenomena described above lead to two clear suggestions: take advantage of behavioral consistency; and stimulate consumers to form evaluations while in a good mood.Businesses can harness the consistency of self-image in order to appeal to customers. One example of this is in stakeholder marketing. In many countries, retailers have replaced disposable plastic bags with reusable cloth bags. A consumer may initially be put off when they dis-cover they have to pay for a cloth bag. But they inevitably feel good about their contribution to the environment. Behavioral consistency will take over from there as they acquire the self-image of being conscientious about their role in reducing waste and pollution. In this case, the 1 euro they spend commits them to similar decisions in the future, a case in which the emotion triggered maximizes the benefit for all stakeholders (Andrade & Capizzani, Berkeley).

Coca-Cola has been famous for putting viewers of their ads in a good mood. Whether in the ’70s with “I’d like to teach the world to sing” jingle, or during the 2010 FIFA World Cup in South Africa, the adverts trigger a spontaneous, positive emotion. Yet the decision and action to buy Coke may come days or weeks after seeing the ad.