Mental Models and Dominant Logic
Mental Models and Dominant Logic
Weekend consumer offers in Automobile Company:
Due to slowdown in market, marketing and sales managers started to think of ways to increase car bookings from customers. One of the ideas was to give weekend discounts, so that the weekend targets are achieved. It was implemented immediately in the forthcoming week. They spent a good amount of money in advertising and promotions. As a result, they received 1000 bookings during weekend, which usually is around 400 bookings. Buoyed by its success, they decided to do promotion in the next weekend as well. However, this time they got only 700 bookings. Now, they realized that though weekend promotions helped initially, but in the long run, it doesn’t help much. They just pre-pone the bookings and there is no incremental bookings at all. So, they decided not to do weekend promotions continuously and decided to only once in a month and for a longer period of time. This became their dominant logic
Example 2:
Production skewed towards month-end in Automobile company
Again, companies do billing to dealers predominantly during month-ends and not at the start. This is due to various factors like
1. Car loans disbursement happening during month-end only - hence customers get delivery only during month-end. As a result, dealers get money only during month-end and in turn give it to manufacturers for lifting new vehicles
2. Dealers don’t want to keep stock during the month
Now, looking at production perspective, it is advisable to keep uniform rate of production to maintain quality and maximizing efficiency. However, since billing of vehicles happen during month-end only, the inventory builds up during the month and hence inventory costs shoot up. Also, when vehicles like in stockyard, they tend to get damaged due to various reasons. As a result production managers keep a ramp-up kind of plan with more production during month-end to reduce inventory costs and to reduce damages and
Weekend consumer offers in Automobile Company:
Due to slowdown in market, marketing and sales managers started to think of ways to increase car bookings from customers. One of the ideas was to give weekend discounts, so that the weekend targets are achieved. It was implemented immediately in the forthcoming week. They spent a good amount of money in advertising and promotions. As a result, they received 1000 bookings during weekend, which usually is around 400 bookings. Buoyed by its success, they decided to do promotion in the next weekend as well. However, this time they got only 700 bookings. Now, they realized that though weekend promotions helped initially, but in the long run, it doesn’t help much. They just pre-pone the bookings and there is no incremental bookings at all. So, they decided not to do weekend promotions continuously and decided to only once in a month and for a longer period of time. This became their dominant logic
Example 2:
Production skewed towards month-end in Automobile company
Again, companies do billing to dealers predominantly during month-ends and not at the start. This is due to various factors like
1. Car loans disbursement happening during month-end only - hence customers get delivery only during month-end. As a result, dealers get money only during month-end and in turn give it to manufacturers for lifting new vehicles
2. Dealers don’t want to keep stock during the month
Now, looking at production perspective, it is advisable to keep uniform rate of production to maintain quality and maximizing efficiency. However, since billing of vehicles happen during month-end only, the inventory builds up during the month and hence inventory costs shoot up. Also, when vehicles like in stockyard, they tend to get damaged due to various reasons. As a result production managers keep a ramp-up kind of plan with more production during month-end to reduce inventory costs and to reduce damages and