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Understanding buyer values helps prove or
disprove current hypotheses as well as generate
strategy solutions.
Identify Buyer Value Segments
Approach
Instrument Design and
Testing
Data Coding and Utility Calculation
Sample Quota Design and List Pull
Hypothesis List Development
Survey Collection
Situation Assessment
Data Analysis
32
Organizational beliefs and strategy alternatives
identified in the situation assessment are
translated into hypotheses for testing.
Hypothesis Development
Instrument Design and
Testing
Data Coding and Utility Calculation
Sample Quota Design and List Pull
Hypothesis List Development
Survey Collection
Situation Assessment
Data Analysis
Field Administration Preparation
33
Identifying Buyer Value-Based segments creates
the foundation for creating the distribution
channel strategy and design.
Summary Identify Buyer Value Segments
Customer Migration Strategy
Plan Implementation
Develop Detailed Strategy Design
Develop Conceptual Strategy Design
Understand Value Propositions

• Identify Buyer
• Value Segments
• What do consumers value?
• How can we segment consumers based on these
  values?

• Develop
• Conceptual Strategy Design
• Based on what consumers value, what is our
  strategic direction?
• Conceptually, what types of products do we want
  to offer?
• Conceptually, what channels do we want consumers
  to use?

• Develop
• Migration
• Strategy
• How do we communicate these changes to our key
  stakeholders?
• How do we prepare our consumers and employees for
  these changes?
• How do we actually get to where we want to be?
• Pilot Plan
• Roll-Out Plan

• Develop Product/Pricing Strategy
• What products should we offer?
• How should they be priced?

• Estimate Anticipated
• Customer Behavior
• To which channels will customers migrate?

iterative

• Determine Distribution Network
• How do we change our branch and ATM networks?
• How many?
• Where should they be located?

• Minimize Business Decision Risk
• How will consumers react? How will this affect
  our bottom line?

• Develop Data Mining Opportunities
• How do we exploit buyer value insights to better
  target market segments?

34
Value based segment strategies can produce
incremental revenues of 700 million and reduce
costs up to 150 million.
Identify Buyer Value Segments
Benefits Quantitative
- Quantifiable Benefits -
These cost savings will be offset by the 52
million increase in central delivery unit costs...
Branch and City Administration annual operating
costs will be reduced by nearly 200 million . . .
MM
By 1999, even after absorbing significant
implementation/infrastructure costs, project can
contribute over 700 million pre-tax annually . .
.
The shareholder value effect can be significant.
670
493
309
Year
35
Its critical to define what factors or
attributes are important when consumers decide
to purchase from one provider versus another.
Instrument Design
Automotive Example A Product is the Sum of
its Attributes

• Reliability
• Air bags
• Steel construction
• Roll bar

• Comfort
• Leather interior
• Stereo system
• Leg room

• Speed
• Horsepower
• Acceleration

• Style
• Body style
• Color
• Image

• Price
• Purchase price
• Maintenance costs
• Insurance

36
With traditional research, when you ask how
important any particular feature is individually,
consumers tend to say each is very important.
Instrument Design
Styling
Reliability
Not at all important
Very important
1 2 3 4 5 6 7 8 9 10
Price
Speed
37
Based on answers to the tradeoff questions, buyer
values are calculated and respondents are grouped
by like values to help identify target segments.
Case Study
Buyer Value Segments
ILLUSTRATIVE
High
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Channelists
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Liquidity / Access
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Rate / Speed
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Low
Low
Performance
High
Note 1) Each dot represents thousands of
consumers 2) Analyses were run for all possible
combinations to identify the best grouping of
consumers and their values
38
These groups or segments of consumers not only
have different profit potentials...
Case Study
Investment Buyer Value Segments of Market
(Consumers)
Investment Buyer Value Segments of Market
()
Speed
Rate / Speed
Channelists
Liquidity / Access Sensitive
Liquidity / Access
34
Channel
16
Rate / Speed Sensitive
Speed
Average Investment Balance Per Value Segment
Value Segment
Avg.. Investment Balance
Channel
77,725
Rate / Speed
92,264
Liquidity / Access Sensitive
96,335
Speed
68,212
Source Andersen Consulting National Buyer
Values Study for Retail Financial Services
Consumers
39
In summary, using value based segmentation is a
powerful tool to improve a clients bottom line.
Creates Revenue Opportunities
Identifies Substantial Cost Reduction
Better Positions Relative to Clients Competition

• Retain most profitable customers
• Improve profitability of other customers by
  fulfilling their values with lower cost
  structures
• Generate new business
• Identify revenue enhancement opportunities
• Simplify and increase effectiveness of clients
  target market activities

• Better manage utilization of clients delivery
  network
• Focus on delivery on required service thresholds
• Strip costs from non-value added processes
• Dont have to build one delivery option that fits
  all

• Increased customer satisfaction due to fulfilled
  value sets
• Organization clearly understands goals and
  delivery expectations
• Sets stage for adaptable organization better able
  to respond to competitive change

40
Based on Andersen Consultings investigation of
the target markets, there is identifiable change
in buyer preferences from window to split and
cabinet air conditioners.
Market Overview
-- Product --
Yesterday
Today
Future trends

• Cabinet air conditioners will continue to grow
• cabinet air conditioners show strong growth due
  to increasing size of homes and price cuts.
  Future sales growth will continue with
  improvements in residential power
• Some customer segments (especially rural) regard
  air conditioners as a type of high-end furniture
  (whose secondary purpose is to cool). Cabinets,
  best meet this type of customers buyer value and
  will grow with this segment.
• Split will remain stable, and even decline in
  some areas
• Splits will keep the same market share
• Compared to the cabinets, it will decline
  slightly in some areas because of installation
  difficulties
• Generally, window air conditioners will decrease
  dramatically,
• but still account for a certain proportion acting
  as a transition product for price conscious
  buyers in hot areas
• Because of this income limitation, window air
  conditioners will still account for a large
  proportion of sales in economically developing
  markets (i.e. Changsha and Chongqing)
• Windows will continue to sell well in markets
  such as Hangzhou as transition products for
  people who are waiting to move into new housing
• Growth in Mini Central and Ceiling air
  conditioners
• Mini-central or residential used ceiling ones
  will gain in popularity amongst people in large
  apartments and houses (especially as market
  awareness of product availability grows).

Breakdown of different types of air conditioners
(Before 1996)
Current purchase preferences (1996-1998)
Cabinet 21
Cabinet 9
Window 26
Window 48
Split 48
Split 53
Window and split account for the majority of the
air conditioners possession before 1996.
Split air conditioners account for the majority
of sales. Cabinets sales begin to increase and
windows share of the market begin to decline
(From distributors perspective)
41
Market Overview
Over the last three to four years, local air
conditioner manufacturers have been able to
reposition themselves successfully through
combined advances in quality and marketing
-- Today --
-- Yesterday --
High
High
National
Gree
Chunlan
National
Kelon
Mitsubishi
Meidi
Mitsubishi
Hitachi
Perceived Added Value
Perceived Added Value
Hitachi
Sharp
Gree
Chunlan
Low
Low
Low
High
Low
High
Price
Price

• Competition Today
• Local Chinese manufacturers upgrade production
  technology to offer quality levels on par with
  JV operations
• Local Chinese manufacturers develop marketing
  capability/expertise
• JV operations, crippled by ability to understand
  market and operate within local business
  cultures drop in position
• JVs begin to compete more on price as perception
  of added value differentiation disappears.

• Competition Yesterday
• Local and JV manufacturers target two different
  market segments separated by price/quality trade
  off
• JV operations target quality conscious upper end
  of market while local manufacturers target bottom
  end
• Local manufacturers limited in terms of
  production quality capability and marketing
  experience

42
Market Overview
Consolidated results for the markets - from a
market attractiveness perspective. - i.e. looking
at market size, growth, competition, market entry
(i.e. distribution opportunity) from a current
and future perspective.
Market Size
Market Growth
Competition
Strategic View
Distribution Opportunity
Entry Priority
High
Medium-High
Medium
Low
Medium - Low
Source AC market investigations
43
Market Overview
From the sales offices and warehouses established
in these several markets, strategic nodes can be
established to allow access to nearby markets.
Source AC market investigations
44
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