October 23, 2009

15) Cemex

CEMEX logo

危 wēi  danger

Cement is a classic commodity – it’s the essential ingredient in concrete and the second most consumed substance in the world after water.  Building contractors have historically made their purchase decisions solely on price – a hugely rational decision that led to painful pricing pressure. The Mexican market has been no different.

机 jī opportunity

Cemex, the third largest producer in the world, realized there was significant opportunity for growth in a segment that had largely been ignored in its home country – Mexico’s poor.  Mexico’s lower classes live in cramped conditions but used any disposable income to contribute to community or family events rather than for ‘rational’ building works.  In 1998 Cemex launched ‘Patrimonio Hoy’ in which it positioned cement as a gift to enable communities and individuals to fulfill their dreams.  It even leveraged a traditional community savings scheme to allow communities to jointly save for cement.  Its competitors were selling cement while Cemex was selling hopes and dreams – as a result of the scheme 20% more Mexican families began building extra rooms with Cemex cement.

how about…

  • adding emotional benefit to a rational proposition
  • leveraging community purchasing
October 9, 2009

13) Starbucks

starbucks logo

危 wēi  danger

When Howard Schultz bought Starbucks, a small coffee house chain in 1992, he promised huge expansion.  Many commentators predicted his failure since coffee was often free in offices, was refilled for free in restaurants and was around a dollar in the popular Dunkin’ Donuts.  Starbucks aimed to charge more than double this for the bulk of its drinks – many commentators predicted that the market wouldn’t stand it.

机 jī opportunity

Howard Schultz saw the market differently.  He realized that the consumer would pay a premium for a sophisticated ‘experience’ but in order to establish this he had to dissociate Starbucks from the coffee category as it existed. Dropping the established category codes was a key part to achieving this – Schultz didn’t want the consumer to be comparing his prices to those in Dunkin’ Donuts.  To this end small, medium and large became tall, grande and venti and the drinks were given new, sophisticated names.  Starbucks carved itself a super-premium position having shaken off the established coffee norms.

how about…

  • recognizing any negative category codes and dropping them – particularly when developing a ‘premium’ offer
  • using category codes to ensure that the consumer benchmarks you versus the competition – particularly when developing the ‘value’ offer
September 11, 2009

8) Novartis

novartis logo

危 wēi  danger

Governments in the developing and developed world are all jumping on the bandwagon and pressuring pharmaceutical companies to drop the prices of their patented drugs.  Often this is exacerbated by the promise of ‘generic’ firms offering drugs at a fraction of the price as soon as the patent expires (or occasionally even prior to that with government changes in regulation, e.g. South Africa)

机 jī opportunity

Novartis has recognized that the ‘generics’ businesses might just strengthen its position.  It has even acquired Sandoz, a large generics firm. Firstly, Sandoz gives it access to growing markets, principally in the developing world (Sandoz reported its sales in the 6 biggest developing markets were 14% higher in the first half than they were a year ago, sales in Europe were only up 3% in the same period).  Secondly, Sandoz enables Novartis to leverage its patented drug brands by selling them as ‘branded generics’ once the patent has lapsed – this is surprisingly viable because of the huge brand loyalty and inertia of doctors.

How about…

  • partnering with your ‘threatening’ low-end disruptors for expertise and access to new markets
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