1 introduction “i hear and i forget. i see and i remember. i do and i understand.” confucius
TRANSCRIPT
1
IntroductionIntroduction
“I hear and I forget. I see and I remember. I do and I understand.”
Confucius
2
DecisionsDecisions
You make decisions given competitor past, current and future decisions
You are responsible for the firm’s decisions Decisions should be an adventure, not a
chore
3
Firm Operation Firm Operation
Keep a record of all decisions made and results. This record will come in handy when you prepare your marketing and advertising plans in a few weeks. It will help you prepare your Director Memo at the end of the semester. A hardcover lab notebook works great for this purpose.
4
BudgetingBudgeting
Each firm must submit budget using Excel to reproduce the information contained on the Financial Summary/Pro Forma form in the appendix of The Marketing Game
5
The Role of the Marketing Game The Role of the Marketing Game
The Game offers unique learning advantages, compared to other learning approaches (like reading texts and articles, lectures, guest speakers, case analysis and presentation, projects) because it:
Is dynamic, like most business situations.
Brings the competitive aspects of marketing to life.
Highlights the need for integrative planning based on qualitative and quantitative analysis of the market environment.
6
OverviewOverview
You take over marketing management responsibilities for your firm. Must satisfy customers and earn profits
Focus is on marketing strategy planning. Requires integration of all strategy decisions. Requires attention to competitive environment. Considers short term and long term perspectives. Features ongoing, rapid feedback.
7
The ProcessThe Process
Analysis of market situation/opportunities Planning and budgeting Make marketing plan DECISIONS!!! Submit plan decisions The marketing game! simulation Company reports returned to firms
8
Industry EnvironmentIndustry Environment
Market growth
Technological environmentNo major innovations expectedYearly revision cycle
Competitive environmentType of competition depends on firms’ decisions
9
Six Key Product-Market SegmentsSix Key Product-Market Segments
HarriedAssistants
HomeUsers
High-techManagers
ModernStudents Professional
Creators
ConcernedParents
Segments have different needs, preferences, situations, sizes, growth rates.Segments have different needs, preferences, situations, sizes, growth rates.
10
Distribution ChannelsDistribution Channels
HarriedAssistants
HomeUsers
High-techManagers
ModernStudents Professional
Creators
ConcernedParents
Firm 1 Firm 2 Firm 3
Channel 1Traditional
Dealers
Channel 2DiscountDealers
Firm 4
Firms reach customersthrough full-servicedealers and Internet/mail-order discount dealers.
Firms reach customersthrough full-servicedealers and Internet/mail-order discount dealers.
Different segments have different shopping preferences.
Different segments have different shopping preferences.
11
Product 1: Voice Recognition Device (VRD)Product 1: Voice Recognition Device (VRD)
Key ProductFeatures
Error Protection (1-10)
Number of Special Commands (5-20)
Ability to Customize (1-10)
12
R&D for Product Modifications: Computing CostsR&D for Product Modifications: Computing Costs
Feature Cost to Decrease Cost to Increase
Special Commands (5-20) $0 $8,000*(change)2
Error Protection (1-10) $0 $5,000*(change)2
Ease of Learning (1-10) $3,000*change $3,000*(change)2
Example
Feature
Last period’s product
This period’s product Change Cost to Change
Special Commands 6 8 +2 $8,000*2*2=$32,000
Error Protection 4 3 -1 $0
Ease of Learning 3 5 +2 $3,000*2*2=$12,000
Total modification costs: $44,000
Note: R&D for product changes is more expensive if you have to make big changes in a short period of time…
13
Product 2: Digital Vocal Communicator (DVC)Product 2: Digital Vocal Communicator (DVC)
Key ProductFeatures
Similarity of Commands (1-10)
Number of Tasks (1-10)
Ease of Learning (1-10)
Level 3
14
Types of AdvertisingTypes of Advertising
Pioneering Direct competitive Indirect competitive Reminder Corporate (Institutional)
15
Expanded Marketing Responsibilities (Level 3)Expanded Marketing Responsibilities (Level 3)
2 PRODUCTs Features (and R&D for product modifications) PRICE Wholesale price in each channel
for each product
PLACE Distribution intensity by channel, product
PROMOTION-Advertising $ Spending for each product
Type for each product-Personal selling Number of sales reps in each channel
Percent non-selling time in each channelCommission rate
-Sales promotion $ Spending per channel, productCUSTOMER SERVICE $ SpendingMARKET RESEARCH 7 reports may be purchasedDemand forecast/production order Number of units for each product
16
Response Functions and Marketing SpendingResponse Functions and Marketing Spending
Sales
Marketing Spending
ThresholdLevel
SaturationLevel
Spending too little may have little effect, but spending too much just increases costs and reduces profit.
17
Marketing Budget Items (Level 2 and 3)Marketing Budget Items (Level 2 and 3)
R&D product modification costs Sales force salaries and severance pay Advertising expense Customer service expense Sales Promotion Expense Market research reports expense
BUDGET FOR FIRST PERIOD: $984k
18
Discretionary BudgetDiscretionary Budget
Policy on initial discretionary budget. Unspent money carries to future periods and
earns interest. “When it’s gone, it’s gone.” Policy on special budget requests.
19
Computing PricesComputing Prices
Computing Retail Prices from Wholesale Prices:Expected Retail Price = Wholesale price/(1-% Markup)
Example: Wholesale price = $105Channel 1 Retail Price = ($105/(1-.50)) = $210
Channel 2 Retail Price = ($105)/(1-.35) = $161.54
Computing Wholesale Prices from Desired Retail
Prices:Wholesale Price = Retail Price (1 - % Markup)
Example: Desired Retail Price = $190 Channel 1 Wholesale Price = $190/(1-.50) = $95.00
Channel 2 Wholesale Price = $190/(1-.35) = $123.50
20
Retail Prices Charged Final ConsumersRetail Prices Charged Final Consumers
The retail price set by a dealer depends on:
The wholesale price in the dealer’s channel.
The customary markup used in the channel.
The portion of any sales promotion “deals” that the dealer passes along to consumers as a price reduction.
21
A “Good” Wholesale PriceA “Good” Wholesale Price
Should cover the unit cost of the product (given its features).
Should result in a retail price that will appeal to target consumers.
Should result in a profit margin that will contribute to other expenses and profit.
22
Competitor AnalysisCompetitor Analysis
Estimate competitor’s net contribution Analyze past strategies & likely changes. Evaluate positioning and target segments.
? XX
X
?
?X
1 2 3 4
Firms
1
2
3
4
5
6
Seg
men
ts
23
Industry Sales ReportIndustry Sales Report
Brand Unit Sales Share (units) $ Sales (retail)
Firm 1 25,151 .250 $4,292,964
Firm 2 25,151 .250 $4,292,964
Firm 3 25,151 .250 $4,292,964
Firm 4 25,151 .250 $4,292,964
Total 100,604 $17,171,854
Channel Unit Sales Dollars Sales
1 56,296 $10,696.240
2 44,308 $6,475,614
24
Product Features and Prices ReportProduct Features and Prices Report
Brandof
VRD
Firm 1Firm 2Firm 3Firm 4
Specialcommands
8888
Errorprotect-
ion
3333
Ease of
learning
3333
Retailprice
channel 1
$190.00$190.00$190.00$190.00
Retailprice
channel2
$146.15$146.15$146.15$146.15
25
Market Activity Report (Level 2)Market Activity Report (Level 2)
Adv. DollarsAdv. Type
Sales Promotion Channel 1 Channel 2
No. Sales Reps Channel 1 Channel 2CommissionCustomer Service
Firm 1
$250,000
$0$0
10105%$92,500
Firm 2
$250,000
$0$0
10105%$92,500
Firm 3
$250,000
$0$0
10105%$92,500
Firm 4
$250,000
$0$0
10105%$92,500
26
Market Research Reports (Level 3)Market Research Reports (Level 3)
1. Market share by segment (all brands) 2. Market share by channel (all brands) 3. Consumer preference study 4. Marketing effectiveness report 5. Sales by segment by channel (own brand) 6. Consumer shopping habits study 7. Product positioning report
Note: separate reports are available for each product,Except for the consumer shopping habits studyNote: separate reports are available for each product,Except for the consumer shopping habits study
27
Market Share by Segment ReportMarket Share by Segment Report
Brand
Firm 1Firm 2Firm 3Firm 4
Total Sales(units)
1
0.2500.2500.2500.250
20,028
2
0.2500.2500.2500.250
15,084
3
0.2500.2500.2500.250
25,104
4
0.2500.2500.2500.250
10,240
5
0.2500.2500.2500.250
22,056
6
0.2500.2500.2500.250
8,092
Segment
Who’s selling to whom?Who’s buying what? What is each firm achieving?Which segments are buying?
28
Market Share by Channel ReportMarket Share by Channel Report
Brand
Firm 1Firm 2Firm 3Firm 4
Total Sales(units)
Channel 1
0.2500.2500.2500.250
56,296
What’s selling where?Who’s buying what?
Channel 2
0.2500.2500.2500.250
44,308
29
Consumer Preference StudyConsumer Preference Study
Segment
Students
Home
Assistants
Creators
Managers
Parents
SpecialCommands
10-13
7-10
10-13
12-15
13-16
5-8
ErrorProtection
2-4
2-4
6-8
2-4
6-8
2-4
Ease ofLearning
1-3
6-8
6-8
4-6
2-4
7-9
PriceRange
low
low
high
high
high
low
What kind of product would a segment prefer?What reference price seems typical for the segment?How are segments similar and different?
What kind of product would a segment prefer?What reference price seems typical for the segment?How are segments similar and different?
30
Marketing Effectiveness ReportMarketing Effectiveness Report
Brand AwarenessCustomer Service Consumer Group Rating Industry Average Rating
Channel 1: Sales Rep Workload Dealer Satisfaction Channel Strength (“Push”)
Channel 2: Sales Rep Workload Dealer Satisfaction Channel Strength (“Push”)
Index0.550
100%100%
100%1.00.500
100%1.00.500
Competitorswith lower
Index0
00
00
Competitorswith equal orhigher Index
3
33
33
31
Detailed Sales AnalysisDetailed Sales Analysis
Firm
Channel 1
Channel 2
1
896
5,269
2
1,109
3,337
3
5,602
1,396
4
1,808
1,196
5
4,363
1,865
6
1,086
1,074
Segment
Unit sales by segment and channelAre you reaching your target?
32
Customer Shopping HabitsCustomer Shopping Habits
Segment
Students
Home
Assistants
Creators
Managers
Parents
Percent of Shopping
in Channel 1
?
?
?
?
?
?
Who shops where?How do shopping patterns match distribution focus?
Percent of Shopping
in Channel 2
?
?
?
?
?
?
33
Product Positioning ReportProduct Positioning Report
Brand
Firm 1Firm 2Firm 3Firm 4
1
????
2
????
3
???
?
4
????
5
????
6
????
Segment
Which brands are closest to which segments?Which segments have no close brands?
34
The Marketing Game