MB 572 Differentiation and Marketing Innovation Key instructors: ดร. สุทธาวรรณ จีระพันธุ ดร. โรจนศักดิ์ โฉมวิไลลักษณ์ E-mail: suthawan.chi@gmail.com rojanasak@gmail.com

Course Description แนวคิดหนึ่งที่มีความสำคัญต่อการแข่งขันทางการตลาดในปัจจุบัน คือ การสร้างความแตกต่าง และการสร้างนวัตกรรม ดังนั้น การศึกษาวิชานี้ นักศึกษาควรได้รับความรู้ ความเข้าใจ และมีโอกาสประยุกต์ความรู้ เพื่อให้ทักษะเกี่ยวกับกระบวนการและวิธีการพัฒนานวัตกรรม (Innovation process) การสร้างความแตกต่าง (Differentiation) การก่อกำเนิดแนวคิด (Creativity) การพัฒนาแนวคิดต่างๆดังกล่าวไปสู่เชิงพาณิชย์ (Commercialization) และเพื่อสร้างความได้เปรียบเชิงแข่งขัน (Competitive advantages)

Objectives เพื่อทราบและเข้าใจแนวคิด และทฤษฎีพื้นฐานที่สำคัญเกี่ยวกับกระบวนการและวิธีการพัฒนานวัตกรรม (Innovation process) การสร้างความแตกต่าง (Differentiation) การก่อกำเนิดแนวคิด (Creativity) เพื่อศึกษาและฝึกทักษะ โดยการประยุกต์ความรู้ความเข้าใจแนวคิด และทฤษฎีพื้นฐานดังกล่าว โดยการวิเคราะห์และสังเคราะห์ สร้างหรือออกแบบ แบบจำลองงานนวัตกรรมของส่วนประสมการตลาดเชิงพาณิชย์และเพื่อการสร้างความได้เปรียบเชิงแข่งขัน

Guest speaker: คุณมิ่งมงคล ทวีกุลวัฒน์ Week Date Topics and instructor Assignment 1 30 Oct. 2008 Core marketing strategies: cost leaderships, differentiation, and focus Differentiation and competitive advantage Differentiation and Blue ocean concept Session facilitator:ดร.สุทธาวรรณ และ ดร.โรจนศักดิ์ • Read Chapter 1 and case study for discussion in the next session • ทำข้อตกลงร่วมกัน ในการกำหนดหัวข้อศึกษา และรายงาน Term paper 2 6 Nov. 2008 Innovation management introduction Innovation process Creativity Commercialization and innovation Session facilitator:ดร.สุทธาวรรณ • Read Chapters 3 and 4 and case studies for discussion in the next session • Case study presentation 3 13 Nov. 2008 Managing innovation within firm Innovation and operations management • Read Chapters 6 and 7 and case studies for discussion in the next session • Case studies presentation 4 27 Nov. 2008 Managing organizational knowledge Strategic alliance and networks • Read Chapter 9 and case study for discussion in the next session Case studies presentation Submit progress report of term paper to 2 instructors’ e-mails 5 4 Dec. 2008 Managing R&D projects • Revise Chapters 1,3,4,6,7 and 9 for mid-term examination 6 11 Dec. 2008 Guest speaker: คุณมิ่งมงคล ทวีกุลวัฒน์ Senior account director, Spa advertising Co., Ltd. 7 18 Dec. 2008 Guest speaker: คุณมิสสพล มิตรเวโรจน์ Managing Director, Inthaco Co., Ltd. • Read Chapters 11, 12 13 and 14 for discussion in the next session 8 ตรวจสอบข้อมูลจา บัณฑิตวิทยาลัย Mid-term examination

(กำหนดโดยผู้สอน) ดร.สุทธาวรรณ Topics and instructor Assignment Week Date Topics and instructor Assignment 9 8 Jan. 2009 Product and brand strategy New product development New 8 P’s development Packaging and product development New service innovation Session facilitator:ดร.โรจนศักดิ์ • quiz 1 • Read Chapter 10, 15 and 16 for discussion in the next session • Assignment 1: Term report proposal development 10 15 Jan. 2009 Market research and new 8 P’s development Managing new 8 P’s development • quiz 2 • Present and discuss Assignment 1 (submission) 11 22 Jan. 2009 Presentation & Discussion the progress of term report Discussion the scope and details of selected 8 P’s innovation development as the term paper report • quiz 3 • Assignment 2 (กำหนดโดยผู้สอน) 12 29 Jan. 2008 การประเมินผล ผลงานนวัตกรรมของนักศึกษาครั้งที่ 1 (10% ของคะแนนรวมทั้งภาคการศึกษา) 13 5 Feb. 2008 การประเมินผล ผลงานนวัตกรรมของนักศึกษาครั้งที่ 2 (10% ของคะแนนรวมทั้งภาคการศึกษา) 14 12 Feb. 2008 การประเมินผล ผลงานนวัตกรรมของนักศึกษาครั้งที่ 3 (10% ของคะแนนรวมทั้งภาคการศึกษา) 15 19 Feb. 2008 Session facilitator & Evaluation: ดร.โรจนศักดิ์ และ ดร.สุทธาวรรณ การประเมินผล ผลงานนวัตกรรมของนักศึกษาครั้งที่ 4 (20% ของคะแนนรวมทั้งภาคการศึกษา) 16 ตรวจสอบข้อมูลจากบัณฑิตวิทยาลัย Final examination ***ไม่มีการสอบปลายภาค***

Course Evaluation Case studies presentation 10% Quiz, assignments, and class attention 10% Term paper 50% Mid-term Examination 30% Final Examination - %

Main text Trott, Paul (2008) Innovation Management and New Product Development, 4th Edition, Pearson Education Limited, Essex, England.

The World’s Most Innovative Companies Apple Google Toyota Motor General Electric Microsoft Tata group Nintendo P&G Sony Nokia Amazon IBM Research in Motion BMW Source: Jena McGregor, ‘Most innovative companies’, Business Week, 2008

The World’s Most Innovative Companies Hewlett-Packard Honda Walt Disney General Motors Reliance Industries Boeing Goldman Sachs group 3M Wal-Mart stores Target Facebook Source: Jena McGregor, ‘Most innovative companies’, Business Week, 2008

Topics Core marketing strategies: cost leaderships, differentiation, and focus Differentiation and competitive advantage Differentiation and Blue ocean concept

Competitive Advantage The key superior performance is to gain and hold a competitive advantage through differentiation of product offering, which provides superior customer value or by managing for lowest delivered cost.

Competitive Advantage Competitive advantage is the advantage over competitors gained by offering greater value either through lower prices or by providing more benefits that justify higher prices.

Sources of Competitive Advantage Superior skills Superior resources Core competences Value chain

Core Marketing Strategies Competitive strategies Cost leadership Differentiation Cost focus and Differentiation focus

Cost leadership To become the low cost producer in the industry A cost leader must achieve parity or at least proximity in the bases of differentiation Often achieve by economies of scale

Achieving Cost Leadership Economies of scale Experience Capacity utilization Linkages Integration Timing Inter-relationships Location

Differentiation To be unique in the industry along some dimensions that are widely valued by buyers Premium price for product; but cannot ignore cost position (still should decrease cost) Differentiation: product/ distribution/ sales/ marketing/ service/ image, etc.

Focus To be best in a segment or group of segments Two variants: cost focus & differentiation focus

Achieving Differentiation Uniqueness drivers Product and/or Service differentiation Quality/ packaging/ branding/ service Pricing differentiation Price war vs. Premium pricing Promotional differentiation Promotional tools/ message Distribution differentiation Shopping by phone through TV-based catalogues/ the Internet Brand differentiation Unique emotional proposition

How to Differentiate A three- step process Defining the customer value model Building the customer value hierarchy (i.e. a fine restaurant) Basic –food is edible and delivered Expected – good china/ tableware/ tablecloth/ napkin/ flowers/ service/ well-prepared food Desired – pleasant/ quiet/ interesting & great food Unanticipated – complementary sorbet Deciding on the customer value package

Sustaining Competitive Advantage Unique and valued products Clear, tight definition of market targets Enhanced customer linkages Established brand and company creditability

STP Marketing Segmentation Target market Positioning size, growth, attractiveness, company objectives and resources Positioning Product position/ positioning map Competitive differentiation

Competitive Positioning Strategy Advantage-creating resources;- Contribute to providing value for customers Are unique to the firm Are hard for competitors to acquire or imitate

Competing through the New Marketing Mix 4Ps Product Price Promotion Place 4Cs Customer needs/ wants Cost to satisfy Communication Convenience to buy

The Market Offer Key product/service concepts Product/service choice criteria: rational/ emotional/ lifestyle/ assurance brand Product/service differentiation Diffusion of innovation Managing the product over its life cycle The impact of the Internet on market offering

Marketing Mix: Product Differential Advantage Value to Customer Product performance Lower cost; higher revenue; safety; pleasure; status Durability Longer life; lower costs Reliability Lower maintenance and production cost; higher revenue; fewer problems

Marketing Mix: Product Differential Advantage Value to Customer Style Good looks; status Upgradability Lower costs; prestige Technical assistance Better-quality products; closer supplier-buyer relationships Installation Fewer problems

Pricing Strategies Pricing consideration Production costs Economic value to the customer Competitor price levels Desired competitive positioning Corporate objectives Price elasticity of demand Assessing value to the customer The effect of the Internet on pricing decisions

Pricing Strategies Pricing methods Promotional pricing Cost plus pricing Going rate pricing, based on prevalent market price Perceived value pricing Promotional pricing Special events Cash rebates Low interest finance Psychological pricing

Marketing Mix: Price Differential Advantage Value to Customer Lower price Lower cost of purchase Credit facilities Lower costs; better cash flow Low-interest loans Higher price Price-quality match

Communication Strategies The communications process A basic communications model Awareness Interest Desire Action

Communication Strategies Communications decisions What message to convey What communications tools to use How to translate the message in copy Which media to use How much to spend on communications

Communication Strategies Communications tools Advertising Public relations Sales promotions Personal selling Direct marketing Sponsorship

Communication Strategies The use of the Internet for marketing communications Banner advertising and pay-per-click Viral marketing Pre-launch promotion Advertising audience measurement

Marketing Mix: Promotion Differential Advantage Value to Customer Creative/ more advertising Superior brand personality Creative/ more sales promotion Direct added value Co-operative promotions Lower costs Well-trained salesforce Superior problem-solving

Marketing Mix: Promotion Differential Advantage Value to Customer Dual selling Sales assistance; higher sales Fast, accurate quotes Lower costs; fewer problems Free demonstrations Lower risk of purchase Free or low cost trial Fast complaint handling Fewer problems; lower costs

Some Aspects of Marketing Innovation Viral Marketing Word of Mouth Marketing Digital Marketing Innovation

Viral Marketing Viral Marketing is the key to success. marketing techniques that use social networks to produce increases in brand awareness or to achieve other marketing objectives (such as product sales) through self-replicating viral processes, analogous to the spread of computer viruses. It can be word-of-mouth delivered or enhanced by the network effects of the Internet. Viral promotions may take the form of video clips, advergames, text messages.

Word of Mouth Marketing Different possibilities to create a big effect with small budget: Word of mouth marketing is a highly valued marketing tool for advertisers The receiver of word-of-mouth referrals tends to believe that the communicator is speaking honestly. The receiver relies on the information. A very successful word-of-mouth promotion creates BUZZ.

Word of Mouth Marketing Four different rules to produce good word of mouth marketing; Be interesting Smart idea: is always a key successful business Find a megaphone: via Blogs, YouTube, email Build trust: through emotional and excellent service & CRM

Digital Marketing Innovations One way to maintain competitive edge Online communications Search gets local (i.e. Google Maps) Doing more with banners In-game advertising (esp. FMCG) Pay-per-text E-mails with personality Corporate blogging (more personal and informal) Opening conversations among managers, staffs, teams, suppliers and customers. Owning PR message Promote CSR through Blogs

Examples of Marketing Innovation Axe Fantasy

Examples of Marketing Innovation Stop & Grow

Examples of Marketing Innovation Fiat Ducato

World Water Day

Bergmann Funeral Services

Distribution Strategies Channels of distribution Effects of the Internet on distribution strategies

Marketing Mix: Distribution Differential Advantage Value to Customer Location Convenience; lower costs Quick/ reliable delivery Lower cost; fewer problems Distributor support More effective selling/ marketing; close buyer-seller relationships Delivery guarantees Peace of mind Computerized reordering Less work; lower costs

Extended Marketing Mix- 8Ps People Job design/ job description Selection Training appraisal Processes Customer relationship management Physical evidence Partners

Zappos Online: Shoes, Bags, Accessories, etc Deeply engage with customers and employees Started in San Francisco (IT)  move to Las Vegas (Hospitality) Now current employees is 1,600 Pay employees to quit $1,000 (starting from $100  $500 and now $1,000) Company is bigger & bigger keep quality 10% of new recruits quit 4- week: company culture/ value/ stress/ commitment/ customer service training One more week in Kentucky for warehouse and shipping If not the right fit, company pays $1,000 bonus to quit Extraordinary customer service

Zappos Grow successfully because of **Frontline** Lots responsibilities No scripts No time limit Authorized from company to make customers satisfy

Zappos Viral Marketing: customer service One customer bought 15 pairs of shoes for her mothers, 2 weeks return/refund policy. Customer service sent e-mail to remind. Found out that her mom was sick, and no time to send them back (UPS). Customer service sent UPS to pick up with flowers and card for her mom The customer post her appreciation on internet blog, within a week viral Brilliant PR

Blue Ocean Strategy The reason of the appearance of the Blue Ocean Strategy Increasing numbers of industries and supply exceeds demand globalization accelerated commoditization of products and services increasing price wars shrinking profit margins brands are becoming more similar select based on price

Red Ocean VS. Blue Ocean Red Ocean Strategy Blue Ocean Strategy Compete in existing market space. Create uncontested market space. Beat the competition. Make the competition irrelevant. Exploit existing demand. Create and capture new demand. Make the value-cost trade-off. Break the value-cost trade-off. Align the whole system of a strategic firm's activities with its choice of differentiation or low cost. Align the whole system of a firm's activities in pursuit of differentiation and low cost. VALUE INNOVATION

BOS Logic: Reconstruct market boundaries Boundaries of Competition BOS Logic: Reconstruct market boundaries Head-to-Head Competition Creating New Market Space Industry Focuses on rivals within its industry Strategic Group Focuses on competitive position within strategic group Buyer Group Focuses on better serving the buyer group Scope of Product and Service Offerings Focuses on maximizing the value of product and service offerings within the bounds of its industry Functional-emotional Orientation of an Industry Focuses on improving price-performance with the functional-emotional orientation of this industry Time/Trends Focuses on adapting to external trends as they occur Looks across alternative industries Looks across strategic groups within its industry Redefines the buyer group of the industry Looks across to complementary product and service offerings that go beyond the bounds of its industry Rethinks the functional-emotional orientation of its industry Participation in shaping external trends over time There are a clear pattern for creating blue oceans, with six basics approaches to remarking market boundaries: The six paths framework In the first path companies in the red ocean define their industry similarly and focus on being the best within it. But to create new market space companies must look across alternative industries because a company competes not only with the other firms in its own industry, but also with companies in those other industries that produce alternative products and services. The second path: The next boundary is the strategic group. A strategic group is companies within an industry that pursue a similar strategy. The key in creating new market space is to understand what factors determine buyers´ decision to switch from one strategic group to another. The third path: In most industries, competitors converge on the definition of the target buyer. In the reality, though, there is a chain of buyer who directly or indirectly involved in the buying decision: the purchaser, the user, for example. But by looking across buyer groups, companies can gain new insights into how to redesign their value curves to focus on a previously overlooked set of buyers. The fourth path: In the red ocean: few products and services are used in a vacuum. In most cases, other products and services affect their value. But companies can create new market space by focusing on the complements that detract from the value of their product or service. The fifth path: Competition in an industry tends to converge around two bases of appeal: -Some industries compete principally on price and function, their appeal is rational. Other industries compete largely on feelings, their appeal is emotional. Companies can find new market spaces when they are willing to challenge the functional-emotional orientation of their industry. The sixth path: All industries are subject to external trends that affect their business over time. Firms tend to pace their own thinking to keep up with the development of the trends they are tracking. By finding insights trends that are observable today, firms can unlock innovation that creates new market spaces.

Value innovation It is a new way of thinking about and executing strategy that results in the creation of a blue ocean and a break from the competition. The value-cost trade-off: either create greater value to the customers at higher cost or create reasonable value at a lower cost. BOS pursues differentiation and low cost simultaneously.

Value Innovation Four elements Eliminate Reduce Raise Create