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About Leo Lingham
Expertise
In Managing a business, I can cover all aspects of running a business--business planning, business development, business auditing, business communication, operation management, human resources management , training, etc.

Experience
18 years of working management experience covering such areas
as business planning, business development, strategic planning,
marketing, management services, personnel administration.

PLUS

24 years of management consulting which includes business planning, strategic planning, marketing, product management, training, business coaching etc.

Organizations
BESTBUSICON Pty Ltd--PRINCIPAL

Education/Credentials
MASTERS IN SCIENCE

MASTERS IN BUSINESS ADMINSTRATION

You are here: Experts > Business > Small Business: Canada > Managing a Business > marketimg mangment

Managing a Business - marketimg mangment

Expert: Leo Lingham - 10/17/2009

Question
. Case Study

Study the case given below and answer the questions given at the end. Office Needs, is a small chain of distributors of good-quality office furniture, carpets, safes and filing cabinets. Within each category, the company offers a wide variety of products with a great many variations of each product being offered. For instance, the company currently offers around 42 different designs of chairs and 23 varieties of office desks, The company keeps In touch with advances made in the office furniture field worldwide and introduces those products which are in keeping with the needs of the market in terms of design. Workmanship, value for money and technical specifications.

Office Needs trades only in quality furniture, which is sturdily constructed. Differences between its products and cheaper, lower quality ones are well known to those who have several years of experience in the business.

   An important feature, the company feels, is the availability of a complete list of components of the furniture system. This enables the customer to add bits and pieces of matching designs and color in the future. Such components are available for sale separately, Systems are maintained in stock by the company for a number of years, and spare parts for chairs and other furniture are always available.

The trade is currently witnessing a downtrend due to recession and players from local unorganized sector. Office Needs has also experienced the same over the last two years. In addition, it had to trim the profit margins. Last year, it barely broke even and this year it is heading for a small loss for the first time in the company's ten-year history.

Questions:
(a) Explain the term Product item, Product line and Product mix in the
context of the above situation.
(b) Advise the company in relation to its Product mix decisions and its
effects on the company's image.
(c) What strategy would you recommend to counter competition from the
unorganized sector?

Answer
MARIA,
HERE IS SOME USEFUL MATERIAL.
REGARDS
LEO LINGHAM
==================================
(a) Explain the term Product item, Product line and Product mix in the
context of the above situation.

1.PRODUCT ITEM
-one   type of chair is   a product item.

==============================
Product line
A product line is "a group of products that are closely related, either because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges.
-42 different designs of chairs is called the product line.
====================================
PRODUCT MIX
the variety of product lines that a company produces, or that a retailer stocks. Product mix usually refers to the length (the number of products in the product line), breadth (the number of product lines that a company offers), depth (the different varieties of product in the product line), and consistency (the relationship between products in their final destination) of product lines. Product mix is sometimes called product assortment.
THE PRODUCT MIX INCLUDES
-different types of chairs.
-different varieties of office desks.
-carpets.
-safes.
-filing cabinets
etc
==================================
@@@@@@@@@@@@@@@@@@@@@@@
(b) Advise the company in relation to its Product mix decisions and its
effects on the company's image.
THE COMPANY SHOULD RATIONALIZE THE PRODUCT MIX,
IN ORDER TO
-reduce the range.
-reduce the stock level.
-reduce the stockholding cost.
-reduce the inventory cost.
-reduce the warehousing cost.
-reduce the interest payment on borrowings.

THE COMPANY SHOULD MAINTAIN THE TOP
SELLING   PRODUCT MIX,

-different types of chairs.[ TOP 25 VARIETIES, WHICH
PRODUCES 85% SALES ]

-different varieties of office desks..[ TOP 12 VARIETIES, WHICH
PRODUCES 85% SALES ]

-carpets..[ TOP 6 VARIETIES, WHICH
PRODUCES 85% SALES ]

-safes..[ TOP 5 VARIETIES, WHICH
PRODUCES 85% SALES ]

-filing cabinets.[ TOP 8 VARIETIES, WHICH
PRODUCES 85% SALES ]
@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@
(c) What strategy would you recommend to counter competition from the
unorganized sector?

THIS SCENE IS NOT NEW.
THIS TAKES PLACE IN EVERY TYPE   OF BUSINESS.
WHAT YOU NEED TO DO,
-is add value to your business STRATEGY..
=========================================
FIRST,
-REVIEW YOUR CORPORATE   LEVEL   STRATEGY.
SECOND,
-REVIEW   YOUR BUSINESS LEVEL STRATEGY.
THIRD,
-REVIEW YOUR MARKETING/SALES.
AND ADD VALUE.
============================================
Corporate Level Strategy- Employs a range of strategies
Market Penetration- Seeking increased market share for present products through greater marketing efforts
Market Development- Introducing present products in new markets
Product Development- Seeking increased sales by improving present products
Diversification
Concentric- Adding new or related product lines
Conglomerate- Adding new, but unrelated product lines

=========================================================================
Business Level Strategy- Competitive strategies involve determining the basis of costumer o decision making. Generally, they are based on some combination of quality, service, cost, time, and quality of the experience.

Differentiation Strategies- Differentiation strategies rely on some basis of product differentiation such as flexibility, specific features, service, time and availability, low maintenance, etc. as the basis for competition. Product development and market research are generally necessary components of a differentiation strategy. Generally, a successful differentiation strategy allows a firm to charge a higher price for its product. Organizations generally need strong R & D departments with strong coordination between R & D and marketing departments. Human Resource strategies must place emphasis maintaining a competitive skill base and motivating employees toward the basis for differentiation.
Focus or Niche Strategies- A successful focus strategy depends upon an industry segment that is of sufficient size, has good growth potential, and it not crucial to the success of other major competitors. Focus strategies are pursued in limited markets in conjunction with cost leadership and/or differentiation strategies. Focus strategies are the most effective when consumers have distinctive preferences or requirements and when rival firs are not attempting to specialize in the same target segment.
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ADD Value Selling

What is value?

Value could be defined as "the satisfaction of customer
requirement at the lowest total cost in use

This definition addresses both dimensions of value customer
perceptions of it and costs involved in satisfying those
perceptions.

Value ‑ what it means to the customer.

Customer requirementso may reflect perceptions of value that are those of value in
exchange (price).,value in use, or esteem value. But in all cases the satisfaction of those
"requirements" entails cost.

When value is seen only as value in exchange, price is the only cost the customer
acknowledges.

When value is seen only as esteem value, not even price will be given much weight in
the buying decision.

In commercial selling, you have to deal with customer perceptions of value in use as well
as value in exchange.

The commercial demand is a derived demand, which is affected mostly by external
factors. The prime objective in buying to satisfy that demand is to acquire the perceived
values in use at the lowest possible cost.

Value Selling Opportunities

What specifically can you do to promote a sale?

What are the opportunities for you to influence that process?

First thing you should do is stop focusing attention on the characteristics or details of
the product you are selling. You should redefine them in terms of the customer. What are
the customer's perceptions of value and what contributions to that value can your product
make ‑ does it reduce cost or avoid cost or offset cost?

To be successful in this effort, you must be able to answer questions like the following:

Do I know and understand the demands imposed on the customer that in turn shape and
define the purchase requirements?

Do I know who the buying influences are ‑ their names and functions, their titles and their
responsibilities and authority within the customer organisation?

Do I know how the customer's quantity and time requirements are determined?

Where are the customer's costs concentrated?
========================================================
Value Strategy

Remember

Value is the added competitive advantage you bring to your customers.

You can sell on value no matter what business you are in. You have only two
questions to answer:

I.What critical success factors do we affect in our customers' business
functions or lines of business that are crucial to their competitive
advantage?

2.How do we affect them most significantly: by displacing or constraining
  some of their costs or enhancing their revenues, earnings, or market
  shares?

The answers you come up with will determine the three most important
decisions you can make about your business:

1.What you want to be compared against: your competitors' prices or your
  customers' current values.

2.Where you want to attach your price: to your products or to the added
  values you represent to your customers.

3.Who you want to make your buying decisions: customer purchasing
  managers who buy on price or business managers who live or die on
  value.
======================================================================VALUES ‑ WHAT IS IN FOR
THE CUSTOMERS?

There are four broad types of value impacts on the customers:
1.    Financial Values
    Sales Revenue
    Profit Contribution
2.    Performance Values
    Quality
  Inventory
  Schedule
  Reduce Rejections
  Reduce Downtime
  Retail Sales
3.    Time Values
   Time Saved
  Information
    New Product Introduction
4.    Opportunity Values
    Productivity
    Capability
  Motivation
  Communication

========================================================
KNOW YOUR VALUE

When you compete on value, you must know each major customer's cost
problems and revenue opportunities. Cost problems represent negative values.
They need to be avoided, reduced, or eliminated altogether. Revenue
opportunities represent positive values. The need to be taken advantage of
faster, less expensively, more successfully, and at higher margins. You need to
know three things about them:

1.Know the customer's critical cost factors and critical revenue‑expansion or
margin factors.
2.Know the current negative values of each cost factor and the current
positive values of each revenue and margin factor.
3.Know the customer's objective to reduce each cost factor and expand each
revenue and margin factor.

In this context, knowing your own business takes on new meanings:

•Knowing your norms for reducing the customer's negative values and
expanding his positive values.

•Knowing how much value you can bring to each negative value to reduce it
and how much value you can add to each positive value to expand it. these
values will become your "product line".

If, for example, your competitive position is going to be based on adding value to
reseller businesses, you must help them add to one or more of their valuebased
objectives:

  Meet volume goals
  Meet margin targets
  Achieve market share
  Make payback for new products on plan
  Maximise the conversion rate of first‑time triers to repeat purchasers
  Maximise the return on promotional investments
  Maximise the number of orders filled on time
0 Minimise per‑unit sales costs
If your competitive position is going to be based on adding value to builder
businesses, you must help them add value to a different set of objectives:

*Maximise uptime and minimise downtime.
0Maximise on‑spec production as close as possible to zero defects to
minimise reject rates and scrap

:Minimise the cost contributions of Labor, materials, and energy. Minimise
changeover cycles

================================================
Establishing credibility in
value selling

Credibility as a value supplier is a function of your performance. You are the person
who sells the promise of value to begin with. It is you who represents and commits the
supplier. Hence, it is understandable that it is you the customer looks to when value is
not supplied.

Credibility is simply believability. It is the faculty to command confidence or inspire
trust and this has a personal and emotional dimension.

What are the factors that affect the credibility of a sales person?

1.Lack of product (service) knowledge.

2.Knowledge of the customer's applications.

3.Lack of understanding of the customer's business.

4.Lack of attention to details.

5.Failure to provide meaningful and timely information.

6.Failure to follow through after the sale is made.

7.Failure to honour commitments or keep their word.

8.Failure to recognise or comply with customer policies, procedures and protocol.

9.Failure to recognise changing customer priorities.

10.Failure to report about customer requirement to the supply company.

======================================================================
Value selling presentation

To be effective, the value selling presentation must do the following:

Identify and be responsive to the customer's requirements as they are
defined or specified by buying influences. In some cases requirements
may not be described by formal specification. And in a few cases, they
may not even be acknowledged. But the value selling presentation must
proceed from a recognition of customer requirements as they are
perceived or might be perceived by relevant buying influences.

Demonstrate how product and service features satisfy expressly defined
requirements. Where appropriate, it must demonstrate how supplier
capabilities (technical production, financial, and management) satisfy
customer‑ implied requirements.

Establish result effectiveness to the customer. If price is not competitive
because your product or service warrants a premium, the presentation
must show why that premium is warranted through cost‑effectiveness.
The bottom‑line consideration to the customer should be satisfaction of
his requirements at the lowest total cost.

For you, these question of value selling pose a particularly difficult problem.
You often have to act as a catalyst, fusing the requirement of the customer with
the supplier's product and service capabilities. And you fuse them so that the
value is supplied to the customer for value in exchange. Given the potential for
conflicts, you must be a proficient negotiation ‑ seller.
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