The Role of Marketing Mix (6P) in Business Models

Dr. Fereidoun Ghasemzadeh Sharif University of Technology School of Management and Economics

A Presentation for 2nd Intl Marketing Management Conference Winter 1386

6P Marketing Model
People: prospective customers - individuals or businesses Product: a good, service, or idea to satisfy customer needs Promotion: a means of communication between seller and Buyer Price: what customers are charged for the product Place: a means of getting the product into the customers hands Partner: an intermediary or outsourcing contractor

Business Plan Components

Business Concept Industry Analysis Mission Statement Business Goals Project Objectives Business Model Market Analysis Competitor Analysis Operations Financial Statements

Business Concept: Industry Analysis

An industry is a group of businesses that manufacture, distribute, or sell similar projects or services It defines the industry in which the business will operate (e.g., retail, information distribution, financial services) It uses reliable and objective data to show the future prospects of the industry and, by implication, the business Don't expect to find perfect information in the time you have to complete this analysis In analyzing your company's industry, be honest and don't exaggerate

Business Model A business model is a method of doing business by which a company can generate revenue to sustain itself. Today competition is not among products or services, but among business models Internet enables the creation of many new business models The business model spells out how a company makes money by specifying where it is positioned in the value chain.

History of Business Model

The term Business Model first used in 1970 in a computer science magazine In 90s BM was more commonly used due to the rapid growth of IT-Based businesses In 1995 BM was used in business magazines such as Business Week BM is now commonly used in all management and business journals and magazines

Business Model Vs. Strategy

(Magretta,2002)
Strategy Strategy Strategy Strategy A B Business Model Business Model C = Business Model E D Business Model Business Model Strategy

(Appligate,2003) (Weil and vitale,2001)

Source:Seddon,P.B.,Lewis,G.P.,2003 strategy and business models: whats the difference?

Business Model Vs. Strategy

Business Model Components

Customer Customer Model Model

Value Value Model Model

Business Model

Revenue Revenue Model Model

Source: Donna Hoffman, Internet Commerce Strategy, MGT 557 Owen Graduate School of Management April 19, 2002

Value Proposition

Value proposition describes the benefits that a company's products provide to customers and the consumer's need that is being fulfilled. Since the focus of the value proposition is on the customer, the proposition should be stated from the customer's perspective. In other words, why should a customer buy your product or service?

Value proposition: Lowest Cost Vs. Differentiation

Lowest Cost- Firms products are identical to benefits of competitors but are offered at a lower price Differentiation-Firms product are superior to benefits of competitors products.Sources of Differentiation are: Timing (first mover advantage, people are reluctance to change unless there is a dramatic advantage) Network Size (value increases as the number of customers or Network Size increases likemobile phone and Napster. Service (after sale services)

Differentiation through 6P

Product Features: car style, gas mileage, acceleration, ride smoothness, safety Mix: one-stop shopping,Amazon has 16 Million items in 1999 Promotion: brand-name reputation Place: customers value physical location: availability, ease of access, reputation) Pricing: Segment Pricing, Quantity-Bought, Bundling, Two-PartTariff Pricing, Skimming, Penetration Pricing

Customer Model (People)

This is the "first-best" opportunity to decide who are your customers. Complete information about target markets will be covered in this section, Here you should identify your primary, secondary, and, if necessary, tertiary target markets.

Targeting Customers

Individual Customers identifying each customers needs and preferences, one-toone marketing Mass Market standardized products, one-to-all marketing Market Segments

dividing the market into groups based on some homogeneous characteristic, one-to-segment marketing

Multidimensional Segmentation

Revenue model
Revenue model identifies how a business will generate review

Revenue Sources

Primary sources of revenue: Direct Product Sales After-Sales Service Indirect Content Sales Product Financing Collect-Early, Pay-Later financing Royalties on Intellectual Property Combinations

Revenue Sources and Associated Revenue Models

Direct Product Sales Production Model (product/service creators) Subscription Model (flat fee) Fee-for-Service Model Markup Model (wholesalers, retailers) Commission Model (stock brokers, auction Cos like eBay) After-Sales Service (In some cases more profitable than product sales) Fee for-Service Model Subscription Model

Revenue Sources and Associated Revenue Models

Indirect Content Sales (advertisers pay for the content in exchange for ads) Advertising Model Product Financing (some of the most profitable divisions in large firms-GE Capital earned 42% of GE revenue in 2002) Commission Model or Fee for Service

Revenue Sources and Associated Revenue Models

Collect-Early, Pay-Later financing

It is a source of revenue since firm can invest the collected money in other money making opportunities (bank interest, bond, etc.) Dell uses this model

Royalties on Intellectual Property

Fixed upfront fee Model Per unit fee Model Both Models Texas Instrument collected $1.9 B in Royalties when its other operational earnings was $1.3 B

Combinations

Revenue Sources and Associated Revenue Models

Revenue Model Sources of Revenues Direct product or service sales After-sales service Indirect content sales Product financing Collect-early, pay-later financing Royalties on intellectual property Fee-forAdvertising Commission Service Markup Production Subscription

Connected Activities for a Business Model (Partners) Outsourcing

Advantages Lower costs or more differentiation Freedom to concentrate on competitive advantage

Disadvantages Loss of control, may be held hostage by outsourcee May lose sight of the big picture Limits learning and innovation

Connected Activities for a Business Model (Partners) Alliances

Two or more firms combine their resources

Advantages Access to networks, markets, suppliers, raw materials, etc. Pooled resources Access to knowledge, technology, patents, etc.

Disadvantages Partner may not fully commit resources or people Clash of organizational cultures Risk of losing proprietary information

Porter 5-Forces Model

Googles Business Model

Customer Customer Models: Models: 1.B2B 2.B2C 2.B2C 1.B2B

Value Value Model: Model: 1.Search speed speed 1.Search 2. Relevance 2. Relevance 3.Community 3.Community

Revenue Revenue Model: Model: 1.SearchServices Services 1.Search 2.Advertising 2.Advertising

Business Model
Source: Donna Hoffman, Internet Commerce Strategy, MGT 557 Owen Graduate School of Management April 19, 2002

Number of Searches/month in US

Search Popularity Stats compared-Nov 2006

Popularity Trends: Search Share in US

Search Engine Market Share in US

Source: http://searchenginewatch.com/reports/article.php/2156461

Global Search Engine Market Share

Search Engine Market Share Q4 2007 Source: www.buildtelligence.com/s-e-market-share.htm

Source: http://searchenginewatch.com/reports/article.php/2156461

Google 5 Years Stock Price Trend

The Role of 6P in Business Models

END
Thank you for your attention