Management and Strategy

Segmentation is one of the key functions of marketing. Company’s profitability depends on customer segmentation. Value based segmentation techniques talks about defining segmentation based on value placed by customers on the product. Following are 6 steps in defining Value based segementation

1. Determine basic segmentation criteria that create “natural fences” between customer groups
2. Identify discriminating value drivers
3. Determine your operational constraints and advantages with regard to those value drivers
4. Create primary segments based on overlap of customer needs and your internal constraints, and secondary segments based on most important needs
5. Create detailed segment descriptions for easier identification in the field
6. Develop metrics and fences to operationally separate conceptual segments

Good value based segmentation has following characteristics:

• Based on the segment’s profit potential — i.e., the value the segment receives relative to your operational ability to service the segment
• Needs between segments are different enough that you can design different offerings at different price points
• Able to facilitate the creation of product/service offerings
• Based on identifiable criteria that easily separate one segment from another
• Helps managers to make better marketing and pricing decisions (statistical significance is a nice-to-have, not a necessity)

Actionable in the field, i.e. easily enabling customers to make trade-offs between offerings and willingness to pay

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The Strategy and Tactics of Pricing

Economic value estimation is a framework to determine pricing for products and services. EVE framework helps to gain maximum price for your products and hence not leave money on the table. According to the framework the total economic value of your product is equal to the sum of competitive reference value(competitors price) plus positive differentiation value minus the negative differentiation value.

Three Steps for Economic Value Estimation

1. Understand Customer Economics: this step centers on the discovery process used to understand customer business models and to establish the main value drivers and develop hypotheses about which drivers are most important for product offering.
2. Quantify Value Drivers: this step centers quantifying the financial worth of the hypothesized value drivers in order to test the hypotheses and provide a key input to the EVE^®

Estimate Differential Value: this step centers on developing the algorithms for calculating quantifying value and combining customer economics, competitive reference, and differential performance data to develop quantified value estimate

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The Strategy and Tactics of Pricing

In many cases people try to simplify pricing by providing single price to all customers or provide bundles pricing for multiple products and services. This can turn out to be a big mistake. There maybe cases where bundling may make sense but that is very rare.

Following slide shows why bundling can be a mistake. If you set just a single price for whole market like in this case there will be customers in A and B category who will not buy the products as they feel the price is high and C & D customers will pay far less than what they value the product or service. In both cases we lose.

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The Strategy and Tactics of Pricing

Pricing is key to the successful organization. Following is a strategic pricing pyramid which provides a model to define pricing of any product or server.

Source:
The Strategy and Tactics of Pricing

6 W’s can help you define your organization…

• Who are we? – Vision and Value structure
• Where are we going? – Strategic intend
• How will we get there? – Tactical action plan
• When will it happen? Time Line
• Why are we doing it? – Legitimizes
• What’s my role? – Personalizes the activities

To be a great leader …

• Get good people
• Create positive work environment
• Give tools to do work
• Have courage to let your employees fail
• Celebrate successes of your employees

   
   

Step 1: Write assumptions used to make decisions

Step 2: Identify Killer assumptions

-> Perform what if analysis.

Step 3: Find a blockage strategy for competitors

-> Based on Killer assumptions

Following are few lessons we can learn from Unsuccessful Leaders:

• Ignored to a notable flaw
• Untested areas emerge
• Fail at relationship/transition
• Over reliance on particular skills
• Lazy learners
• Narrow leadership perspective

Following are few key lessons learnt from successful leaders.

• Seek & receive more feedback
• Manage a high variety of “On the job” Challenges
• Experience a zigzag career
• Many firsts and occasional failures
• Learn new skills and ways of thinking

The size of leader can be determined by the length of their ambitions, the breath of their vision, the depth of their conviction and the reach of their love.

—D. N. Jackson