The Information Edge

In our last Information Edge Newsletter Vol. 7 we discussed "Obtaining a Pervasive Marketplace Awareness". A key purpose for obtaining marketplace intelligence is the development of effective competitive marketing strategy. Those strategies can be based on two key elements, the perceived relative value of the competing products and their price. The marketing strategy then focuses on changing the perceived value of the offerings and its price.

The Value Map is a strategic positioning tool to examine the relationship between targeted price and average relative perceived value. Below is a typical Value Map including bubbles indicating the sales volume.

Estimating product value is always difficult and uncertain. There are multiple ways of measuring and estimating value. For the construction of these maps typically some relative estimate is made, usually based on the concept of utility, or the weighed average of the products comparative performance on a list of criteria.

Bradley T. Gale pioneered the use of an upward sloping trend line to provide a base for comparison of value and costs. This has been referred to as the "Fair Price Line", with the implication that prices should tend to that reference. However, there does not appear to be any justification for this assertion. Alternatively, John B. Frey has suggested a grid on the Value Map indicating five strategic regions:   

Jack Frey's proposal was based on the analysis of the PIMS database of 3,000 businesses and used a qualitative measure of value. The PIMS analysis also allowed computing the frequency and average performance of businesses in each of these regions as indicated below:

A detailed description of this work and much more based on the PIMS database is located on our website.

This strategic analysis, however, still doesn't provide the full picture regarding price. In Information Edge Newsletter Vol. 5, No. 2 we discussed computing the optimum price range based on research data. These price ranges are intended to delivery acceptable earnings and depend on costs, competitive prices but most importantly customer price sensitivity. These ranges are imposed on the Value Map for the firm's products. These are the green bars around products B and E, on the following map.

More details on how static and dynamic Value Maps are constructed and the alternative approaches can be found in the Value Methods section of our Advanced Business and Research Methods Notes.

As noted above, in our last Information Edge Newsletter we discussed the need for gaining a Prevalent Marketplace Awareness". That rests on the ability to obtain adequate and timely marketing research. Unfortunately marketing and survey research activities are often the last activity funded and the first activity cut from budgets. This is partially due to the perception that it is necessarily an expensive process.

For survey research to be readily available it must be affordable. The research process needs to be designed with cost control in mind. All marketing research design is a balance between costs, breadth and accuracy. Many analytical survey methods have focused on obtaining the most accurate information feasible. However, for the purposes of business development, particularly early in the process, accuracy is relative but costs are not. The balance must be toward making these activities affordable.

We have found that following eleven principles has allowed us to develop effective and affordable new business development quantitative survey tools. The objective of these principles is to obtain the maximum useable data from the reduced number of well-targeted respondents. However, following these principles requires careful selection of the methods, procedures and most importantly of respondents.

• Reduced Sample Size
• Use Only Complete Respondent Data
• Eliminate of Opportunities for Missing Data
• Use Minimum Length of the Questionnaire
• Integrated Studies to Minimize the Number of Surveys
• Reduced Internal Redundancy
• Reduced Complexity of Design and Execution
• Use Fault Tolerant Methods
• Standardize Analysis
• Avoid Field Interviews (use telephone and Internet executions) and
• Avoid Heroic Analyses Techniques

We have developed a number of highly effective analytical survey techniques targeted toward quantitative research. Most of the techniques have been used in combination to produce a broader picture of the market forces and help management teams develop effective marketing strategies. However, they need to be customized to the specific characteristics of the businesses and the markets. These techniques include: (1) Compositional Conjoint for measurement of perceived value of features and claims, (2) Choice Testing to capture competitive pricing, (3) Concept Testing, (4) Constant Sum Measurement of importance, and (5) Profiling to capture buyer behavior. Detailed discussion of these methods can be found in our Advanced Business and Research Methods Notes.

In the last newsletter we proposed that video was the new "Killer Application." What has happen over the past couple of years has only confirmed that belief. Video technology has become more affordable and powerful. Locally prepared business video is ready for prime time.

We suspect that in-house prepared video is likely to replace many business presentations particularly driven by globalization and the need for asynchronous meetings. The costs of in-house training and education should be greatly reduced with these technologies. And finally but not least, it should offer a new effective and compelling tool for customized sales and marketing.

New compression technologies have become widely available and have enabled effective Internet use of video. This is a major change since it offers an effective means to distribute in-house video through company Intranets as well as broader distribution to customers.. As an example, we have been using 20-minute videos as part of an on-line graduate course. The resulting compressed files are approximately 8 Mbytes. Yes, that is eight megabytes using the latest version of Microsoft's video editor. With this compression technology, Microsoft Media Player displays the video as a stream. That is, shortly after the file and application is initiated, it starts playing with little delay even using dial-up connections. This results in the total loading and viewing time is practically the same.

The costs for video software and equipment have been falling. The Microsoft video editor, Window Movie Maker 2 is available free from their web site. Though more capable editors are available and needed for advanced video preparation, the simpler editors are fully capable of producing in-house productions. These basic editors are intuitive and fairly easy to use. Digital camcorders have never been less expensive and have increased capabilities. They are smaller than ever and are also getting easier use.

The only missing elements today are the skills of potential users and their creativity to exploit the technology. The tools to develop truly professional looking video, as previously mentioned, are also available. Both Adobe Premier and Apple's Final Cut Pro are capable of producing truly professional quality video and can be run using available personal computers.

From our perspective, we believe strongly in the use of video and encourage our readers to explore its potential. In this case, the early adopters, we believe, will get a major competitive advantage from its application. This technology is likely to rapidly become the "industry standard" for communications and time is a "wasting."

http://www.lieb.com/Documents/BusinessBehavior.pdf.

Gene Lieb (Editor and President)