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1、Authors: Ruma Sanyal, Vijay Vishwanath,Contributor: Margaret Boasberg,Low Road,High Road/,March 1998,Reviewer: John Blasberg,2,*Also known as the High Road/Low Road Matrix,Consumer products profitability The Portfolio Deployment Matrix* concept and usage Quadrant strategies Applications High Road st
2、rategy category pricing achieving full potential low road to high road Issues pricing for premium brands Hitchhiker pricing vulnerability private label strategy dynamics of categories global applicability Client example Key takeaways,Agenda,3,In many industries, Bain has found RMS to be a significan
3、t driver of profitability.,Normative band (Predicted potential profitability),RMS,Furniture and Fixtures Industry ROS/RMS,RMS and Profitability,4,Predicted Profitability (Return on Sales) based on Nature of Category and Relative Market Share,R = 0.68,In consumer products, two primary predictors of b
4、rand profitability have been identified:,1) the nature of the category (premium vs. value) and 2) the relative market share (RMS) within the category.,Profitability Predictors for Consumer Products,5,Premiumness of category,Relative Market Share,Bain has developed a tool called the Portfolio Deploym
5、ent Matrix to understand consumer products profitability. The two quadrants of the matrix correspond to the two drivers of profitability for consumer products.,*Also known as the High Road/Low Road Matrix,Portfolio Deployment Matrix*,6,Brand equity,Customer loyalty,Premium categories are those with
6、the majority of their volume from brands with high brand equity. This high brand equity translates into higher prices for premium brands.,Willingness to pay higher prices,Brand awareness, image, and value,Brands in premium categories are able to earn price premiums,Premium Categories and Profitabili
7、ty,7,*Also known as the High Road/Low Road Matrix,Consumer products profitability The Portfolio Deployment Matrix* concept and usage Quadrant strategies Applications High Road strategy category pricing achieving full potential low road to high road Issues pricing for premium brands Hitchhiker pricin
8、g vulnerability private label strategy dynamics of categories global applicability Client example Key takeaways,Agenda,8,*The predicted profitability of each quadrant has been determined empirically *Typically RMS is drawn using a log scale,“Premium” percent of category,Avg. ROS: 15-20% Avg. ROS: 20
9、% Avg. ROS: 0-5% Avg. ROS: 5-10%,1) map the position of a portfolio of brands based on their relative market shares and the nature of the categories they play in;,A category comprised largely of premium brands should be quite profitable. In a category comprised largely of value brands, even brands w
10、ith high RMS are unlikely to earn attractive returns,High,Low,Low,High,Relative Market Share*,The Portfolio Deployment Matrix allows us to:,2) compare their actual to their predicted profitability; and,3) use this information to actively manage brands and portfolios of brands.,60%,Portfolio Deployme
11、nt Matrix*,9,Premium brand Brand which commands at least a 20%-30% higher price* than its value brand or private label counterparts Premium category Category for which more than 60% of the volume* is comprised of premium brands Example: Breakfast cereal,Value brand Brand which commands less than a 2
12、0%-30% higher price than its private label counterparts Value category Category for which more than 60% of the volume* is comprised of value brands Example: Dishwashing detergent,The first step in High Road/Low Road analysis is to determine the nature of the category. Does the majority of the catego
13、ry volume come from premium brands or value brands?,We use the “premium percent of category” (the percent of the category volume coming from premium brands) to determine the nature of the category,*Consumer are typically more loyal to premium brands that are only somewhat more expensive than value b
14、rands. Refer to Vijay Vishwanaths HBR article from May-June 1997, Reprint #97311 *Judgment is required for categories where the volume is close to 50% premium and 50% value.,Nature of Category,10,Premium categories have different characteristics than value categories.,High brand equity High customer
15、 loyalty Reasonably high price gap between branded and non-branded products,Low brand equity Low customer loyalty Small price gap between branded and non-branded products,Example: Skin care products. Customers will buy recognized brands of skin care products. Customer brand loyalty is high.,Example:
16、 Toilet paper. Customers do not pay price premiums.,High profitability for branded competitors,Low profitability for most competitors,Premium category,Value category,Premium vs. Value Categories,11,RMS: The RMS for the market leader is its market share relative to that of the #2 player. The RMS for any other player is its market share relative to that of the leader. Leaders RMS: Market leaders units sold #2 play
