Enter the Consumer
By Sebastiaan Zwanenburg
Enter the Consumer
Auteur: Sebastiaan Zwanenburg Studentnummer: 1017454
Rijksuniversiteit Groningen Faculteit Bedrijfskunde Cluster Marketing
Eerste begeleider: Mr. Drs. H.A. Ritsema Tweede begeleider: Drs. H.C. Stek Den Haag, Augustus 2003
De auteur is verantwoordelijk voor de inhoud van het afstudeerverslag
het auteursrecht van het afstudeerverslag berust bij de auteur.
Foreword
The document before you is the result of research performed to finalize my education at the faculty of Bedrijfskunde (Management and Organization) at the Rijksuniversiteit Groningen. This is why, at this point, I would like to thank those people around me that have made my education a success and, more importantly, a lot more fun. I will not name individuals as there are so many of you, that I fear I might forget to mention someone.
You know who you are.
For their help during this research project I would like to thank my supervisors at the marketing cluster of the faculty and at Philips. I would like to thank mister Ritsema for his comments on my documents, but I am even more grateful for his advice that helped me to steer away from possible bumps in the academic road and to avoid getting caught in red tape. A lot of thanks goes out to John van den Braak, Ron Schiffelers and Dieter Therssen of the management team of the MST Sound Enhancement. Not only did they review my work, they also allowed me to be part of their marketing effort outside this project. It made my internship extra valuable and enjoyable. Together with the other
“colleagues” in building BX, they quickly made me feel like part of the team.
The title of this document Enter the Consumer hints at what I believe to be the challenge for every marketeer: To look at the consumer and see what “makes him tick”. To understand what it is that the consumer is trying to accomplish by making a certain purchase and using this understanding to create value. It is this very psychological element of marketing that makes it so different from sales and advertising which are all too often inappropriately used as synonyms. To illustrate this underestimation of marketing I would like to quote something I overheard someone say in the hallway during my internship: “We should stop making such a fuss about marketing. If we just make a good product, then the marketeers can go around and sell it.”
The assignment at Philips Sound Enhancement came into being, as the result of the ambition to become more market oriented. This is something completely new for the B2B-focused Semiconductors department of Philips. This is why the title has a second meaning: not only does the marketeer “enter the consumer”, it is also a different way of looking at the efforts made by the organization. No longer is “making it better” merely fine-tuning a product to technological superiority, it now is making the consumer experience better by understanding the consumer and transforming product specifications into consumer value. To do this we must look carefully at the consumer. It is time for Philips to bring the consumer onto the center stage.
Curtains up, lights on!
Scene one, act one!
Enter the consumer…
Sebastiaan Zwanenburg
Den Haag, August 2003
Summary
This research was performed within a new business venture within Philips Semiconductors. That business is focused on selling software to enhance the audio output of Consumer Electronics (CE) or mobile phones. Although Philips has already manufactured these audio algorithms for many decades, in the past they were seen as accessories to the hardware, i.e. semiconductors or chips that were sold.
The Market Sector Team (MST) Sound Enhancement that is responsible for the new business idea has officially started its operations in January 2003. The team wants to make an ambitious effort to market their products. This research aims to find out how their effort to create a demand-pull from the consumers for their products might be established. The objective was thus formulated: To find out for the Market Sector Team
Sound Enhancement, how they should direct their communications through the supply chain of audio enhancing algorithms to stimulate the demand pull emanating from the market for these products.The research question to fulfill the objective is this: Through which channels and with
what message can communication with the end-consumer best be organized by the MST Sound Enhancement and help to create a market pull?Translating technical specifications into information that is comprehensible for the end- consumer was one of most important challenges of this research. Chapter four discusses this translation. By combining the seven algorithms three value propositions were distinguished that described consumer experiences.
There is a strong influence of supply chain management in this research. To get an idea of the environment of the MST a map identifying the tires and influencers of the supply chain was first made. Then information flows and pull forces were inserted in the map.
This can be found in chapter five. The research made clear which channels could be used to communicate with the consumer. It also showed that there is a lack in the MST’s knowledge about supply chain members beyond the consumer product manufacturers, due to the fact that Philips Semiconductors has been focused on business customers and not on end-consumers. It is partially because of this that it is recommended to the MST to ally with organizations that have experience in communicating with consumers.
A large part of the external analysis described in chapters six through eight is focused on identifying Strategic Consumer Groups. This consumer analysis made clear that the more innovative groups are most likely to be attracted to the value propositions that the MST offers. They are also likely to advocate their experience to others, making them extra attractive to approach. For every value proposition the two most important competitors were identified and discussed. Insight in their strengths and weaknesses also made it easier to make the strengths and weaknesses of the MST explicit in the internal analysis.
Continuous R&D and making the LifeVibes product portfolio tangible and recognizable were identified as important challenges for the MST in trying to invoke a market pull.
The study of market pull creation that was part of this research showed that there are
three important steps to create a market pull. The first is listening and catering to the
needs of the consumer. The second is involving the industry’s supply chain. The third is
confronting the consumer with the product experience. These steps were implemented in
the structure of the recommendations for the consumer marketing strategy. Chapter
eleven describes the recommendations for the long term and chapter twelve goes into
detail at the level of the value propositions. These recommendations represent the answer
to the research question as they propose how to direct communications and attention to
the consumer and hopefully, in the long run, create a market pull for the products offered
by the MST Sound Enhancement.
Index
FOREWORD 3
SUMMARY 4
INDEX 6
PART ONE: THE SETUP 9
1 RESEARCH BACKGROUND 10
1.1 CURRENT SITUATION 10
1.2 FIELD OF RESEARCH 11
2 PROBLEM STATEMENT AND RESEARCH PLAN 12 2.1 OBJECTIVES OF THIS RESEARCH 12
2.2 PROBLEM STATEMENT 12
2.3 SIX ITEMS 12
2.4 DEFINING CONSUMER EXPERIENCES 14
3 THE THEORETICAL FRAME 15
3.1 APPLYING THE SIX ITEMS 15
3.1.1 Mapping the Supply Chain 15
3.1.2 Identifying Strategic Consumer Groups 16 3.1.3 Defining Motivations and unmet Needs 16 3.1.4 Positioning the current Product Portfolio 16 3.1.5 Research on Market Pull Creation 16 3.1.6 Formulating a Consumer Marketing Strategy for the organization 16 3.2 DIFFERENCES BETWEEN THE RESEARCH PATH AND THE RESEARCH REPORT 17 3.3 DATA COLLECTION METHODS 17 PART TWO: THE ANALYSES 18
4 VALUE PROPOSITIONS 19
4.1 THE FIRST VALUE PROPOSITION 19 4.2 THE SECOND VALUE PROPOSITION 19 4.3 THE THIRD VALUE PROPOSITION 19 4.4 USE OF THE VALUE PROPOSITIONS 20
5 MAPPING THE SUPPLY CHAIN 21
5.1 THE BASIC SUPPLY CHAIN 21
5.1.1 The Technology development Tire 21 5.1.2 The Software Solution Tire 21 5.1.3 The Semiconductor/Processor Tire 21 5.1.4 The primary distribution Tire 21 5.1.5 The Consumer Product Manufacturers Tire 22
5.1.6 The Retailer Tire 22
5.1.7 The Consumer Tire 22
5.2 THE CONDENSED SUPPLY CHAIN 24
6 THE MARKET ANALYSIS 26
7 THE CONSUMER ANALYSIS 28
7.1 IDENTIFYING STRATEGIC CONSUMER GROUPS 28 7.2 BETTER INTELLIGIBILITY IN PHONE CONVERSATIONS 28
7.2.1 The Phone Funtastics 29
7.2.2 The Phone Pros 29
7.2.3 The Indifferent Dialers 29
7.3 IMPROVED AUDIO EXPERIENCE 30 7.3.1 The Entertainment Enthusiasts 30
7.3.2 The Trendy Traveler 30
7.3.3 The Considering Consumer 31
7.4 UNIQUE AUDIO EXCELLENCE 31
7.4.1 The Absolute Audiophiles 31
7.4.2 The Smart Spenders 32
7.4.3 The Considering Consumer 32
7.5 VALUE PROPOSITIONS AND THE FOUR PS 32 7.5.1 Improved Speech Intelligibility 32
7.5.2 Improved Audio Experience 33
7.5.3 Unique Audio Excellence 34
7.6 SELECTING THE BEST STRATEGIC CONSUMER GROUPS 35
8 THE COMPETITOR ANALYSIS 37
9 THE INTERNAL ANALYSIS 39
10 HOW TO INVOKE A MARKET PULL 41
10.1 STAGE ONE: LISTENING AND CATERING TO THE NEEDS OF THE CONSUMER 41 10.2 STAGE TWO: INVOLVING THE INDUSTRY’S SUPPLY CHAIN 41 10.3 STAGE THREE: CONFRONTING THE CONSUMER WITH THE PRODUCT EXPERIENCE 41 PART THREE: RECOMMENDATIONS 42
11 RECOMMENDATIONS FOR THE LONG-TERM MARKETING PLAN 43 11.1 PROPOSED LONG-TERM MARKETING PLAN 43 11.1.1 Phase one: Listening and catering to the Needs of the Consumer 44 11.1.2 Phase two: Involving the Industry’s Supply Chain 44 11.1.3 Phase three: Confronting the Consumer with the Product Experience 45
11.2 STRATEGY FORMULATION 46
11.2.1 Mission Statement 46
11.2.2 Challenges 47
11.2.3 Organizational Elements 47
12 RECOMMENDATIONS FOR THE SHORT-TERM 49
12.1 RECOMMENDATIONS FOR THE IMPROVED SPEECH INTELLIGIBILITY PROPOSITION 49 12.1.1 Opportunities and Threats 49
12.1.2 Strengths and Weaknesses 49
12.1.3 Presenting the four P’s to touch the Consumer 50 12.2 RECOMMENDATIONS FOR THE IMPROVED AUDIO EXPERIENCE PROPOSITION 51 12.2.1 Opportunities and Threats 51
12.2.2 Strengths and Weaknesses 51
12.2.3 Presenting the four P’s to touch the Consumer 52 12.3 RECOMMENDATIONS FOR THE UNIQUE AUDIO EXCELLENCE PROPOSITION 53 12.3.1 Opportunities and Threats 53
12.3.2 Strengths and Weaknesses 53
12.3.3 Presenting the four P’s to touch the Consumer 53 12.4 FROM A MARKETING STRATEGY TO AN OPERATIONAL MARKETING PLAN 55 12.4.1 How to target the Consumer 55 12.4.2 Approaching the Supply Chain Members 55
12.4.3 Getting in touch with the Consumers 56
12.4.4 Recommended Actions 58
13 IN RETROSPECT 59
13.1 THE RESEARCH QUESTION AND THE RESEARCH GOAL 59
13.2 VALUE OF THIS RESEARCH 59
13.3 THE RESEARCH PROCESS IN RETROSPECT 61
Part one: The Setup
1 Research Background
This chapter serves to present an idea of the background of the research project. It should give the reader an idea of the reasons for performing this research. It will also shortly set out where this research is taking place and what products it is about. The product names will be used a lot in this report and it is good to know what the products actually do.
Philips has been known as developer of state of the art products for years, but has not been able to capitalize fully on this from a marketing perspective: It seems that Philips has had some problems in creating a ‘cutting edge’ image. One problem that has been identified is the lagging attention for knowledge creation about consumer expectations and needs. This resulted in a lack of integration of these needs and expectations in product applications and communication through marketing plans, compared to competitors. All too often Philips has lost its advantage of being the entrepreneur and developer of new technologies, because of a competitor that offered a product with less quality, but with a more comprehensive marketing focus. Another problem from the past can be found in the lack of attention for the influence of other players in the supply chain, such as distributors and retailers. A well-known example of this is the defeat of the superior V2000 video system by the VHS video system.
1.1 Current Situation
Philips Semiconductors B.V. has done much research on audio enhancing algorithms.
The belief has grown over the years that the current portfolio represents a technological innovation standard in sound enhancement algorithms that is good enough to be sold separately to the market, where it previously was given away as an accessory. The products are launched under the family name “Philips LifeVibes”. These algorithms are mathematical formulas that “translate” original input into superior quality output. The algorithms work inside consumer products (such as CD-players and mobile phones) on their processors or chips. Philips Semiconductors B.V. can now actively pursue a new segment. For this segment a strategic marketing plan has to be created.
Aware of the problems described above, there has been a shift in focus towards the
identification of the consumer’s true motivations for purchase. The emotional process and
physical route the consumer follows in making a decision should be understood. By
mapping the supply chain and abstracting information about the consumer from it, it may
be possible to understand what the consumer wants. The information that would have to
be gathered concerns the motivations of the end-consumers for purchasing products. With
this information the required and existing competencies of the organization and its
products can be positioned to appeal to the end-consumer. By doing this the consumer
marketing plan will start to take shape. The challenge is to get the consumer so
enthusiastic that an added value for the LifeVibes products comes into existence. This
should help in creating a pull from the market for the new products, now and in the
future. In the case of a product that is very much business-to-business oriented trying to
create a market pull is especially challenging!
1.2 Field of Research
The research is to take place for the Market Sector Team (MST) Sound Enhancement. This MST is part of the Business Line (BL) Audio Solutions, which is part of the Business Unit (BU) Audio/Video. The BU is part of Philips Semiconductors (PS), one of the subdivisions of Royal Philips. The hierarchical structure is graphically presented on the right.
The MST sells audio enhancing algorithms that work on the processors of devices such as MP3-players, DVD-players, Home theatre systems and mobile phones. Algorithms are mathematical formulas that transform input into desired output. In this case the input consists of an audio stream, the transformation takes place on an IC or chip and the output is the improved audio stream that is perceived by the consumer.
At this point in time the product portfolio under the product family heading LifeVibes consists of seven products, which will now be briefly discussed:
•
Noise Void: eliminates background noise in mobile phone conversations, from the side of the person that is speaking.
•
Voice Clarity: singles out and enhances the speech string.
•
Hands Free: removes echo and stationary noise in hands free phone calls
•
Intelligent Surround: automatically sets the speaker configuration for the most natural/realistic sound rendering.
•
Speed Dump: allows more rapid encoding and compressing of music.
•
Pure Studio: improves the reproduction of compressed audio.
•
Concert Sound: renders the music to the consumer in almost the same way it was recorded.
Audio enhancement software works on processors. Often these processors are sold as systems, including the software (i.e. algorithms), to the manufacturer, who in turn sells his products to the consumer. By appealing to the consumer and making its added value tangible, Philips LifeVibes hopes to push its direct (B2B-)customers to ask for LifeVibes software. This dominance of pull of the demand side over push of the supply side is what is meant by a market pull. This research will be limited to consumer marketing. More specifically, the mobile phone market and the consumer audio market will be discussed.
The terms (end-)consumer and end-user will be used to indicate the individuals who might buy the end-products. The term (business-)customer is used to distinguish the organizations that buy semi-manufactured products from other organizations or buy products to resell them.
Philips Semiconductors
BU Audio/Video
BL Audio Solutions Philips
MST Sound Enhancement
2 Problem Statement and Research Plan
In this chapter the setup of this research will be discussed to make clear what line of thought the researcher followed. It should also make clear what objectives are to be fulfilled.
2.1 Objectives of this Research
This research aims to find out how to present technical innovations to the end-consumer in a commercial way, such that this consumer is tempted to ask for the product. The consumer should be inclined to trust LifeVibes and associate its products with a quality standard. An important focus should be on the translation and communication of consumer needs and motivations into technical specifications and vice versa. A supply chain investigation and external analysis will play an important role in this analysis, as it should help in identifying how, where and by whom value is added and/or communicated. The supply chain perspective assumes that value can be added for the end-consumer, through upstream and downstream integration and through co-operation between the participants in the supply chain. In this particular case, the perspective will be used to find out where information can be found and how members of the supply chain might even cooperate with Philips. Consequently information will be gathered and strategic end-consumer groups will be identified and their purchasing motivations will be made explicit. For this a consumer analysis will be performed. This permits identification of “pressure points”. By pressure points, the points where demand for a product originates and that set a pull in motion are meant. This should provide very significant information about the end-consumer for the strategic marketing plan for the product family LifeVibes. A short-term SWOT-analysis on product level and a long-term SWOT- analysis on MST-level can make explicit how interaction with the consumer can best be established.
2.2 Problem Statement
This research has the following objective:
To find out for the Market Sector Team Sound Enhancement, how they should direct their communications through the supply chain of audio enhancing algorithms to stimulate the demand pull emanating from the market for these products.
The question that needs to be answered in order to fulfill the objective is this:
Through which channels and with what message can communication with the end- consumer best be organized by the MST Sound Enhancement and can it help to create a market pull?
2.3 Six Items
In order to get an answer to the research question, information about the consumer and on
how the consumer gets his information has to be collected. This is why the supply chain
will first be mapped. This should indicate how communication with the consumer takes
place and allows specific information gathering. Then strategic groups can be identified
and their motivations defined. Based on the consumer preferences a SWOT analysis can
be made serving as input for a short term marketing plan for the product portfolio. The
same will be done on organizational level, with some desk research on market pull creation in mind. The analysis should then make clear how to get the consumer involved in such a way that a market pull is generated. The emphasis will be on purchasing motivations, therefore on the consumer analysis. The document that the research should lead to, will contribute to the strategic and tactical marketing plan for the new product family.
Prior to the process a research path of six items was set up. Finding an answer to the research question will become possible if the six items are covered. A physical representation of the research path is shown below. The boxes represent the six items.
The boxes that represent the main goals for Philips Sound Enhancement have been colored blue. The gray arrows represent iterative steps.
Enables Enables
Enables
Determines
Determines Determines
demands for demands for
Reconsiders Reconsiders
Is input for Is input for
Is input for Is input for
Contributes to (continuous) insight in Contributes to (continuous) insight in
Is input for
Figure one: A model of the research path
By covering the six items, a document will be created that should increase Philips LifeVibes’ understanding of the end-consumer and the supply chain and thus add to the marketing insight. The theme that is at the centre of this research is how to communicate effectively as well as efficiently with the consumer. The first item should make clear what information is exchanged in the supply chain. Insight in the supply chain can be used as a tool in communicating the message that the MST wants to send to the end- consumer. It should show where information about the consumer can be found and where the consumer looks for information. It should also put in perspective what role the MST
1.Mapping the supply chain
2.Identification and description of strategic end- consumer groups
3.Definition of motivations and
unmet needs
5.Research -of market pull creation
4. Short-term marketing analysis
for the current product-portfolio
6.Strategic consumer marketing analysis for the MST Sound
Enhancement
Sound Enhancement could play in the supply chain. It is linked to the research question because it should make clear what channels to use for communication with the consumer.
The second and third item serves to segment the consumer according to their purchasing motivations. In other words it should make clear what information the end-consumer is sensitive for in the selecting and buying process. The fourth item looks at the motivations of the consumers, at the competitors and at other environmental elements to find out what message the MST should send out with its products and how to voice it for the short term.
The second, third and fourth item generate insight in what message the consumer is looking for and whether the MST has the competencies that can serve as the essence of a powerful message. The fifth item focuses on the market pull and how it may be invoked.
Its aim is to find out whether there is a structured approach to the market that facilitates generating a market pull. If this is so, it can be used as a structure for the long term marketing plan. The sixth item examines the fit between the MST’s environment and its organizational strengths and weaknesses. It serves to find the long term strategic options for the MST in connecting with the consumer and becoming truly market oriented. It may also help to show how the market pull structure, if it exists, can be applied to a marketing strategy. The steps will be discussed in more detail in the following chapter.
2.4 Defining Consumer Experiences
In this investigation there was a second goal: Showing the members of the MST a consumer focus. This is reflected in this report, as will now be explained. When an end- consumer purchases a product, it is the end result that he is interested in. Convincing this consumer of the added value of something that he cannot see is a challenging task. These intangible assets of products or parts of products are based on such variables as user experience, trust and associations. Examples of products that have been successfully promoted are Intel, Dolby and Yakult. All these products or parts of products have been transformed from something physical in an experience. The products are not so much seen as what they really are, but as a label that guarantees a quality standard. Intel and Dolby are seen as an attribute of a larger product that increases quality in some way.
Yakult is seen as something special that guarantees a healthy start of the day. Although the end-user does not really understand the true function of the product, the perception is positive enough to warrant a premium price. Making the consumer understand the added value for the experience of the total product is more important than educating him on what the specific function of an algorithms is. This adjustment should cause a focus shift from the product focused view to the consumer focused view.
To make this focus shift possible the product propositions must be reconsidered to fit the
consumer’s expectations and way of thinking. The determining factor for this is whether
the consumer sees a certain motivation fulfilled and what this motivation is. Here the
translation of the technical B2B-specifications in consumer expectations is initiated, as
we are transforming a definition of the function of the algorithm in a definition of the
expectations of the consumer, fitting his way of thinking. This will set up a first
indication of what value is delivered to the consumer. To attract attention of the consumer
the “message” needs to be simple. In order to make the message simple the products have
to be pulled together into consumer experiences. These consumer experiences are put into
value propositions. The value propositions will be discussed in chapter four.
3 The theoretical Frame
In this chapter the six items will be discussed in detail to make clear what the purpose of going through these items is and what each phase should accomplish. Also, the diversion of this report from the research path is discussed and data collection methods that have been used are mentioned.
3.1 Applying the six Items
The basis for this report is formed by three value propositions. For these propositions the Strategic Consumer Groups are based on the way these groups experience the value proposition. The descriptions of the profiles of the groups are structured according to the four Ps. In paragraph 3.1 the purpose and goals of the six items that are part of the research path will be amplified on.
3.1.1 Mapping the Supply Chain
Making a map of the supply chain serves several objectives. First of all, it is important for an organization that is venturing into a new segment, to understand which parties participate and influence the supply chain. Not only should this create a better understanding of the requirements for, and potential value of the end-product, it also provides insight in the environment of the consumer and the information flows that accompany the products. For a product such as software that is not visible to the consumer it is often the experience and the available information rather than the product specifications that determine whether or not that product has an added value for the consumer. The insight will therefore serve to find out which parties should be approached to help communicate the experience and information to the consumer and as such it will play a vital role for the chances of success for these products.
Theoretical movements that emphasize the importance of knowing and establishing relationships with supply chain members are supply chain management and relationship management. Both movements emphasize the benefits of collaboration within the network, which is opposed to a transaction-focused approach. Wayland and Cole (1997) put it like this: “the value of a firm is ultimately equal to the sum of the values of its customer relationships, and this sum can only grow through the acquisition, development and retention of profitable customer relationships.” They mention four characteristics of organizations that they believe to effectively pursue customer-connected strategies:
1. Such companies have a clear idea of who their customers, especially their best customers, are and what the company is trying to do for them;
2. have moved beyond collecting and analyzing data toward seeking and using customer knowledge;
3. have sought to engage customers at many points and in many venues, not constrained by traditional channels or boundaries and
4. are disciplined and focused in deploying resources both to create customer value and to capture a share of that value for shareholders.
This explains once again why insight in the supply chain is so important for the MST
Sound Enhancement: It will force the MST to evaluate critically how and where value is
added for supply chain members and what the end result of the MST’s efforts will be.
This insight should allow it to become more market and less product focused.
3.1.2 Identifying Strategic Consumer Groups
Identifying Strategic Consumer Groups serves to find out what groups can be distinguished in the market. In effect it is an iterative process with discovering the motivations and unmet needs of the consumers. The more easily noticeable differences can lead to insight that makes it possible to define differences in purchasing motivations.
3.1.3 Defining Motivations and unmet Needs
Understanding the motivations and unmet needs of consumers can lead to the identification of the key success factors for the end-products (i.e. the products as sold in stores). Understanding the key success factors of the end-product makes clear where value is created and how the organization can contribute to that. Knowing this and combining it with the knowledge of the SCGs should focus the marketing and strategic activities of the organization in a value creating way. Aaker (1998) put it like this: “If there is a most useful segmentation variable, it would be benefit sought from a product, because the selection of benefits can determine a total business strategy.”
As said before the identification of SCGs and the definition of their motivations is an iterative process. This is due to the fact that the motivations are partly based on the differences between the groups, but sometimes the motivations also determine the groups.
As a result they are hardly separable.
3.1.4 Positioning the current Product Portfolio
A comparison of the external environment, including the consumers and their motivations, with the value propositions offered by the MST is performed by means of a SWOT analysis. The existing opportunities and threats are compared to the strengths and weaknesses of the MST. The main question is where the value is created and how the MST can become one of the creators of that value. This SWOT is aimed at the short-term and serves as input for the short-term marketing plan. In normal practice, the strategic marketing plan would be formulated before the operational marketing plan. In this case, the order was reversed. The insight in the current situation and the possibilities of the current product portfolio serves as input for positioning and marketing of the product portfolio. It also generates insight in the long term opportunities for the organization.
3.1.5 Research on Market Pull Creation
To see whether there is a series of steps that are common among organizations that are or have been successful in creating enormous consumer enthusiasm or even a market pull, a study performed. Besides examining success stories, professional literature concerning invoking a market pull will be researched. The goal of this part of the research is to find out whether there is a series of steps that are present in all these instances. If so, these steps will be used in the strategic marketing plan.
3.1.6 Formulating a Consumer Marketing Strategy for the organization
A SWOT-analysis for the entire organization will be performed to discover the
opportunities and inviting developments which are available to the MST. The analysis
should also lead to an isolation of the core competencies that will allow the MST Sound Enhancement to distinguish itself from its competitors. This knowledge will be used to make some recommendations concerning the strategic marketing plan.
3.2 Differences between the Research Path and the Research Report
Although the research plan and work breakdown had strict assignments, the research process diverged somewhat from those lines and original views. This is due to the fact that new insight led to new ideas and perspectives and a refocus of attention.
Furthermore, some information overlapped and had to be combined. This is mentioned here because, as a result, the structure of the report does not follow the structure of the research path. The chosen report structure makes is easier to get the complete picture across to the reader. The report structure that is used still includes all elements of the research path, but not in the previously discussed order and not always under that same name.
Figure two: graphical representation of the influence of the research process on the report structure
Mapping the supply chain remained an item, but the other items were combined into an external and internal analysis and recommendations for the long-term and short-term marketing plan. The structure that has been chosen for the report should make it easier for the reader to understand the situation of the MST Sound Enhancement. This will be discussed in more detail in the chapter concerning the reflection on this research.
3.3 Data Collection Methods
Two types of information gathering techniques were used. One was desk research, the other was the informal interview. The informal interviews were open conversations and discussions, rather than interviews. Some internal sources were contacted via e-mail and the Philips intranet knowledge exchange portal “yellow pages”. One flow of information was gathered from data from information gatherers around the consumer: The marketeers and market researchers. A lot of reports came from these sources, as well as some expert insights. Information was also derived from desk research that was already done by Philips departments and external market research organizations. This is very cost- efficient, but less reliable, because it may be less applicable to the specific situation. As a result a translation was necessary, as the reports were often either too detailed or not detailed enough. The Internet was also useful to gather some general information.
This desk research covered a large part of this analysis, as it is inexpensive and most easily accessible: The information that was gathered from these sources covered the global market when added up, but first had to be aggregated to transcend cultural and regional biases, because too much detail would neither serve the purpose nor suit the timeframe of this research.
Research Process
Research Path
Structure
Research Report Structure Information
New insight
Part two: The
Analyses
4 Value Propositions
This chapter serves to translate the product specifications in value propositions. The products of the LifeVibes family are combined and transformed to generate a complete solution for the end-consumer. The end-consumer should not be “bothered” with the technical facts behind this solution.
4.1 The first Value Proposition
The first value proposition focuses on the core function of the (mobile) phone and concerns Voice Clarity, Noise Void and Hands Free. Any combination of these products offers the consumer better intelligibility in phone conversations, in the most adverse circumstances. On the one hand the consumer is understood better, thanks to the Noise Void background eliminator. On the other hand his understanding of the conversation partner is increased thanks to the Voice Clarity speech enhancer. Hands Free echo canceller erases echo and background noise from hands free conversations. The consumer is likely to see these features as complementary offerings: The exchange of information is freed of background noise.
4.2 The second Value Proposition
The second value proposition offers the end-consumer an improved audio experience. It focuses on quality enhancement of otherwise compromised audio. Some products that typically have a restricted audio playback quality get a better quality-to-storage ratio for compressed sound. For other products the increased audio enjoyment is the central issue.
Possible applications are portable audio devices, but also home theatre systems and portable DVD-players. For this value proposition three or four LifeVibes solutions can be used. These solutions are Speed Dump, Pure Studio, Concert Sound and Voice Clarity.
Speed Dump allows for faster audio encoding/compressing. Pure Studio restores the quality that is typically spilled during audio compression. Concert Sound can generate a more “three-dimensional” sound stream over headphones. Voice Clarity emphasizes the voice pattern in a sound stream.
4.3 The third Value Proposition
The third value proposition is unique audio excellence. On the one hand sound can be
made deeper and more three-dimensional, thanks to the Concert Sound feature. On the
other hand speech can be made more intelligible, real and clear thanks to the Voice
Clarity feature. This is especially useful for portable DVD-players and other devices
where the consumer’s sound experience plays an important role. The second part of the
natural sound quality proposition uses the Concert Sound feature and/or the Intelligent
Surround feature. This software solution generates a deeper and more realistic three-
dimensional sound: The surround experience comes across as it would in real-life. Music
surrounds the consumer, but speech output is presented as a mono output.
4.4 Use of the Value Propositions
These value propositions should make it easier for consumers to understand and recognize the added value of the algorithms. Those market focused propositions will be used for the rest of the research regarding the short term, because lifting the products to a higher aggregation level makes it easier to move beyond the business customer and a product focus. It becomes possible to talk about experiences instead of product specifications. Reconsideration of the product names for the end-consumer may be wise (‘LifeVibes’ or ‘LifeVibes communication’ instead of LifeVibes Voice Clarity, LifeVibes Hands Free and LifeVibes Noise Void) to simplify the message. Instead of presenting a product, the MST can now present a solution. Using these value propositions will also make it easier to compare the MST’s products to those of its competitors.
Furthermore, because the value propositions are product focused (e.g. on mobile phones).
This will prove useful in the rest of this research.
5 Mapping the Supply Chain
This document serves to analyze the supply chain of Philips LifeVibes. The supply chain for sound enhancement software for the entire product family will first be described.
Doing this should give a basic understanding of the setup of the supply chain and the participants per tire. The basic supply chain is presented in the flow schematic on the next page. A condensed version of the supply chain should take out those factors in the supply chain that seem unimportant in a communication strategy for the end-user, whilst emphasizing the bottlenecks and facilitators in the supply chain for that purpose. This condensed supply chain will be the starting point for further research.
5.1 The basic Supply Chain
The supply chain participants and their roles will be discussed now to clarify why and how they can influence the MST Sound Enhancement’s chances of success and performance.
5.1.1 The Technology development Tire
The first tire of the chain can be seen as the development tire. For many organizations this is done “semi-external”, i.e. by a part of the organization that is almost independent.
For Philips this is the case with Philips Digital Signal Labs (PDSL) and Philips research, which offer their services on the internal market. Other supply sources can be universities and independent technology developers, such as Fraunhofer. A possible future influence on this tire may come from “open source technology development”.
5.1.2 The Software Solution Tire
In this tire Philips LifeVibes and its competitors can be placed. They present the software as solutions to their business-to-business (B2B) customers. In the basic supply chain all relevant competitors are shown. Dolby has the largest turnover and is, in that sense, the biggest competitor. SRS is a competitor that is active in most of LifeVibes’ targeted (consumer) market segments and seems most similar in that respect. The other competitors are smaller and more focused on specific features.
5.1.3 The Semiconductor/Processor Tire
Philips Semiconductors is one of the organizations in this segment. Sony, Samsung, Motorola, Siemens and similar organizations also have their own semiconductors departments. They are more similar to Philips semiconductors. All of these should however be seen as potential B2B-customers, although they may not be pursued actively.
Other big players here are SGS Thomson and Texas Instruments.
5.1.4 The primary distribution Tire
In this part of the supply chain the products are distributed to organizations that
implement them in consumer products, such as mobile phones, home theatre systems, and
portable audio etcetera. For LifeVibes the Philips Semiconductors’ regional sales offices
will be used for distribution of the products. In some countries it is more attractive to use
external distribution offices for financial reasons or local restriction regulations. For Organizations such as Sony, Samsung and Motorola will use similar methods for distribution of their products, where Dolby and SRS may use their own distribution offices to approach either set makers or consumer product.
5.1.5 The Consumer Product Manufacturers Tire
Organizations in this column implement the software and semiconductors in products that are ready-to-be-consumed. The list of organizations that can be placed in this column seems endless and that is why only a selection of the “most popular” organizations is shown. These organizations are the most direct B2B-customers for Philips LifeVibes.
They may also request LifeVibes to make their products available to be placed on semiconductors of other organizations.
5.1.6 The Retailer Tire
The organizations in this column can best be divided into several types of retailers. Wal- Mart is a very important organization here, because of the quantity of end-consumers they can reach. Because it is a discount retailer the relationship with the sound enhancement products will not be easily started up. The interests and competencies of Wal-Mart lie in prize fighting, not in quality and information distribution. The same goes for Kmart and similar retailers, albeit to a lesser extent. The second retailer group is that of the specialist retailers. This group consists of organizations such as Phonehouse and Belcompany for mobile phones and Fry’s, Best buy and Dixons for consumer electronics in general. A third retailer group is that of the Internet retailer, such as E-Bay and Bizrate.com. The last retailer group is not really a separate group. This group is in fact the Internet version of the specialist retailer. Just as all the groups that were already mentioned above, this group has been distinguished because it appeals to a specific group of end-consumers.
5.1.7 The Consumer Tire
The final column represents the end-consumers. The letters in the shape that represents the end-consumers are disorganized to show an existing lack of understanding of subdivisions in and distinctions between end-consumer groups. The crisscross of lines is meant to show the unclear relationships between the retailers and the end-consumers groups.
A general idea of the participants in the supply chain has now been given. In appendix 1
details for every value proposition are discussed.
S
Temic Dolby
Cortologic Philips LifeVibes
SRS
Compandent Universities
Wavemakers Qsound Company R&D
dpt’s (e.g. PDSL/
Philips research)
Independent technology developers
Coding Technologies
Philips Semiconductors
Sony SC Texas Instruments
Samsung SC Motorola SC
SGS Thomson Sony
Panasonic Nokia
Ericsson
Samsung
Siemens
Toshiba Apple
Fujitsu Compaq Distribution
offices Company’s Marketing and
Sales Offices Walmart, Kmart,
Ahold and similar
Internet retailers (e.g. Bizrate.com) Specialist Retailers (e.g. Fry’s, Best Buy and Phonehouse)
End-consumers
Dolby
Others Philips CE
What influence will the software have on their product requirements and product value? Why would they need it? Why do they prefer one software package offer to the other?
Who are these people? What do they expect from a sound solution?
How can the MST deliver?
Should/Could anyone be approached here to start an alliance? Who might be a good “advocate“ for Motorola
Lake technology
Others others
Logic 7 (Harman) VIA Licensing
(Dolby)
Creative
Others
Reference Design houses
What about open source software development?
Will that be a threat or competitor in the future?
Or maybe it offers an opportunity!
Design houses sometimes serve as interme- diaries here to simplify adaptation to specific processors Technology development
tire
Semiconductor tire Primary distribution tire Consumer product Retailer tire
manufacturert tire
Software solution tire End-consumer tire
Clarity
5.2 The condensed supply chain
The next step is identifying the most important participants and relationships. There are three important factors that decide the importance of the relationship for this particular investigation.
First of all it is important to get an idea of which participants hold information concerning the consumer. They can be great information sources for the MST Sound Enhancement and for this research in particular. Furthermore they will help in identifying and translating consumer motivations and unmet needs in features.
Secondly, it is important to identify the participants that can deliver information towards the consumer. They will allow the MST to communicate the added value of the products and the organization to the consumer in a way the consumer understands.
Thirdly it is important to identify the supply chain participants that influence the performance of the MST and the product family, either directly or indirectly. These three elements will be presented graphically on the next page.
Issues that stand out in the graphical representation will now be discussed. First of all it is important to notice that the consumer doesn’t come in the picture until the CE and mobile phone manufacturers get involved. Because of this they have a lot of power. Controlling the information flow gives a manipulation option to the organizations: they can choose which information to pass on. Realizing this is the first step to overcoming it. There are several options open to deal with this information sluice. First of all there is the possibility of persuading these organizations to promote one’s features. Another option is to circumvent the organization and go for the institutions behind the manufacturers and create a pull for one’s product. Important possibilities are collaborating with the retailer tire. Not only can these parties pass on information; they may also generate a pull. These organizations can be approached directly or indirectly through journals and conferences.
The indirect influence of complementary products is also important to recognize. As MP3 and DVD become more easily accessible, the benefits of the algorithms become more apparent as well. Better compression formats than MP3 can, on the other hand, endanger the MST’s operations. Other important factors to take into account are other consumer demands, such as battery life and the struggle between 3G and EDGE. The first technology-standard for mobile phones offers more quality, but is more expensive. The outcome of these kinds of struggles could influence product requirements and consumer motivations.
The condensed version of the supply chain allows focus on the issues that matter. While
realizing an interactive interface with the consumer, it still bears in mind the influence of
competitors and business contacts in the supply chain. It makes clear where information can
be found about the consumer and which other participants can add or decrease the value of the
LifeVibes supply chain. It has also made the possible consequences more explicit and
tangible. The picture forces the reader and the researcher to think about relationships and
possible partnerships.
Figure four: The condensed Supply Chain