7-S Framework McKinsey

Definition: 7-S Framework McKinsey

The McKinsey 7- S framework is a popular model used in organizations to analyse the environment to investigate if the company is achieving its intended objectives.

The name of the model can be explained by the fact that the model was developed by Tom Peters & Robert Waterman, consultants at the McKinsey & Company consulting firm.

The model proposes 7 interdependent factors – 3 hard ‘S’ i.e. strategy, structure, systems; and 4 soft ‘S’ i.e. shared values, skills, style and staff.

The hard ‘S’ are more tangible, easily to define and easy to influence than the soft ‘S’.

Strategy – It refers to the intended sequence of actions taken by a company to achieve its goals and objectives. It deals with resource allocation and includes competition, customers and the environment.
Structure – It refers to how the various business units are structured and how they communicate with each other. A company’s structure may be centralized or decentralized or may take many other forms depending on the company’s culture and values.

Systems – This includes a host of systems within an organization that define its processes and routines. It includes performance appraisal system, financial systems, IT systems etc.

Shared values – These are the core values of the company that connect all the other 6 factors. These are the fundamental ideas or guiding principles that lay the foundation of businesses.

Skills – These define the core competencies of the employees.

Style – This spans the core beliefs, norms and management style in the organization.

Staff – It refers to the number and type of employees in the organization. It is very important for an organization to manage its human capital to create competitive advantage.

Marketing: Brand Portfolio: Defination

Definition: Brand Portfolio

The brand portfolio of a company is the complete range of all brands and brand lines it offers for sale in a particular category or market segment. A brand portfolio is said to be optimal when each brand in it has the ability to maximize equity in combination with all the other brands.

The basic principle of a brand portfolio is to maximize market coverage and to offer enough brands so that no potential customers feel left out, but at the same time to minimize overlap so that no two brands cannibalize each other. A good brand portfolio is marked by the clear differentiation of the component brands ad economy (Marketing and production costs are justified by the size of the end customer segment).

Brand portfolios must be continuously pruned, so as to identify weak brands, reenergize them or to kill off the unprofitable ones.

Within a portfolio, brands can play the following roles:

• Flankers (or fighters): Positioned with respect to the competitors’ brands so that the flagship or more important brands are protected. Care should be taken so as not to cannibalize the flagship brand.

• Cash cows: these may be showing falling sales but still command decent profits despite less marketing support.

• Low-end entry level: Relatively low-priced brands designed to attract the first-time consumer to the brand franchise. These customers can later be “traded up’ to higher-priced brands.

• High-end prestige: Higher-priced brands to add prestige and credibility to the entire portfolio

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EFFECT OF CELEBRITY ENDORSEMENT ON CONSUMER BEHAVIOUR

The buying process which any consumer goes through before making a purchase can be broadly classified into two categories- thought situations and feel situations. Whereas in the first case, consumers process information and arrive at outcomes using facts and logic, in the second case, he tends to reach a decision based on his subjective likes or dislikes. As per the Elaboration Likelihood model, for the first scenario, marketers follow the central route to persuasion and the buying process is said to be a high involvement one. For the second scenario, peripheral routes of persuasion are used and the process is characterized as a low involvement one.

Figure 1

According to the FCB Grid developed by Richard Vaughn in 1980, for high involvement purchases, a consumer typically feels/ learns about the product first and then buys it. While for low involvement items, the ‘do’ portion precedes the learning/ feeling.

Figure 2

Motivation for the study

The variation in the hierarchies of effects for these two categories has a lot of relevance for a marketer since it gives him direction on how to best portray his offering to the consumer so that he purchases it. Using an endorser to promote the product has been a tried and tested formula for many companies. Through a number of studies it has been established that endorsers in an advertisement influence the buying behaviour of a consumer. (Biswas, Biswas and Das, 2006) Many studies have also been conducted to demonstrate the influence of endorsers on various marketing variables such as attitude towards product, purchase intention etc. (Petty, Cacioppo, & Schumann, 1983; Block & Atkin, 1983)

The aim of this paper would be to analyze and compare the effect of celebrity and expert endorsers on high and low involvement products to see whether it is different for the two product classes.

Experimental Methodology

For a high involvement purchase, a mobile phone was taken as the experimental product, while a biscuit packet was taken as a low involvement purchase. For each of these two products, two print ads of a fictional brand was designed, one endorsed by a celebrity and the other by an expert, were shown to two sets of 30 respondents each. Care was taken to ensure that the two groups were heterogeneous within but homogeneous across. Both the ads had the same celebrity endorsing the product, mobile in one, biscuit in the other. The 120 respondents rated the ads on the parameter of Claim Believability, the scale for which was adapted from Beltramini and Evans (1985). It is a 10 item 7 point Likert scale. The scale item is listed below.

Figure 3

The parameters in red were reverse coded to ensure that respondents do not blindly mark all the questions.

Initial Hypothesis

Obermiller and Spangenberg (2005) examined the relationship between ad skepticism and informational versus emotional appeal. Their studies showed that high skeptics are less responsive to emotional appeals. This result was consistent with Friestad and Wright (1994) who proposed that emotional appeals are developed by marketers specifically to circumvent consumers’ skeptical resistance to informational arguments. In a related study, Lord and Putrevu (2009) concluded that for products appealing to informational motivations, (high involvement) credibility was influenced by the expertise of the endorser while for products appealing to transformational motivations, attractiveness of the endorser has maximum impact on credibility.

Based on these studies, the following hypothesis was developed.

H1: Celebrity endorsement has a more positive effect on Claim believability of a low involvement product compared to a high involvement one.

H2: Expert endorsement has a more positive effect on Claim believability of a high involvement product compared to a low involvement one.

The posters of the four advertisements shown to the students are given below. The 1st one was for a High Involvement product- Smart Phone while the other was for a Low involvement one- glucose biscuit. Both ads had the exact same layout and colour scheme, with only the content differing in each. The celebrity chosen was also same for both the sets. This was done to remove any bias created due to the quality of the ad. For the brands, fictional names were chosen so as to eliminate pre-conceived notions in the minds of the respondents.

Figure 4
Expected Outcome

Since it is theorized that celebrities appeal more to the emotional senses, it is expected that the claim believability of consumers will be more for the low involvement product. For a high involvement product, a consumer is typically expected to gather further information before deciding to buy.

Experiment Results

The responses to the questionnaire were tabulated.. The mean scores for each of the parameters were calculated to arrive at the final rating given by the respondents to the ad. Refer to the excel sheet attached for further details.

It was observed that the mean score for the High Involvement product, mobile phone was 5.64 while that for the low involvement (biscuit) was 3.53. This showed that contrary to our initial hypothesis, claim believability of consumers was more for the mobile than the biscuit.

Statistical Analysis

H1: Celebrity endorsement has a more positive effect on Claim believability of a low involvement product compared to a high involvement one.

The ANOVA test for the dependent variable ‘Endorser’ with respect to the independent variable ‘Claim Believability’ for Celebrities showed the following result.

Figure 5

Given that the mean of claim believability for the consumers who were shown the print ad of the high involvement product, mobile, is considerably higher, and the difference in means is statistically significant, celebrity endorsement considerably increase the believability for the high involvement product

H2: Expert endorsement has a more positive effect on Claim believability of a high involvement product compared to a low involvement one.

The ANOVA test for the dependent variable ‘Endorser’ with respect to the independent variable ‘Claim Believability’ for Experts showed the following result.

Figure 6

Conclusion

This research experiment showed that experts have the highest influence in brand promotions of low involvement products. As the consumers have not invested their time to research about the product, expert opinion reinforces the consumer belief in the product and brand leading to higher claim believability.

However in case of high involvement products, celebrity endorsers are highly valued. Their impact on the brand promotions is more because consumers have invested sufficient time and have taken opinion from experts already. Celebrity endorsers help them achieve the aspirational value of owning that product. Thus the claim believability is more.

References

1.Ahmed, Azmat, & Farooq. (2012). Effect of celebrity endorsement on customer's buying behavior; A perspective from Pakistan. Interdisciplinary Journal of Contemporary Research in Business, 4(5), 584-592.

2.Biswas, Biswas, & Das. (2006). The differential effects of celebrity and expert endorsements on consumer risk perceptions. Journal of Adveritsing, 35(2), 17-31.

3.Block, & Atkin. (1983). Effectiveness of Celebrity Endorsers. Journal of Advertising Research, 23(1), 57-61

4.Petty, Cacioppo, & Schumann. (1983). Central and Peripheral Routes to Advertising Effectiveness: The Moderating Role of Involvement. Journal of Consumer Research, 10(2), 135-146.
5. Pooja Punjabi (2014) ,IIM Kozhikode, MBASkool.com

What is Product Concept?

Definition: Product Concept

Before marketing any product marketers study the product concept to give the best product to the customer. It says that consumers will prefer a product which is high on quality, performance and features against a normal product.

Innovation helps to get new product concepts

Example: - Apple is one company which works highly on product concept to get the best products to their consumers.

What is selling concept?

The selling concept essentially mirrors the thought that consumers will not purchase enough of the company’s products unless large-scale promotional and selling efforts are carried out by it.

This concept is used for goods which customers don’t buy normally, unsought goods like insurance etc. These goods are aggressively sold by tracking down the target segment and sold on the virtue of the product benefits.

The focus here is more on selling the products of the company to consumers without comprehending the market needs and increasing sales transactions rather than building and enhancing relationships with customers.

This concept works under poor assumptions that if customers are coaxed into buying a product then they will necessarily like it. Even if they don’t like it, they’ll forget their dissatisfaction over a period of time and buy the product again later.