222 Third Street Cambridge, MA 02142

Tel: (617) 494-8282 Fax: (617) 494-1421

The Markstrat Challenge I

2

Markstrat is a simulation designed to focus on strategic marketing issues

Understanding customer needs

Long-term perspective

Marketing as a profit center

Competitive environment

Marketing strategy is based on segmentation, positioning, and resource allocation... marketing mix decisions are secondary

3

Getting started

Managing your firm

The MarkstratWorld

4

The Markstrat World: A large territory with a highly developed economy

The Markstrat World

Population: 250 million

Currency: Markstrat Dollar ($)

5

The basic scenario begins with firms starting in different positions

6

Each firm can compete in TWO product markets

Maximum: 5 brands/firms marketed at a time

independent

not substitutes

not complements

VODITESSONITES

7

PowerPower Base CostBase CostMax. FrequencyMax. Frequency

DesignDesign VolumeVolumeWeightWeight

The Sonite market is already developed, each product having 6 determining product characteristics

10 - 20

$

3 - 10 20 - 100

5 - 50 5 - 100 min. 10

Kg

kHz

Index

W

dm3

8

Base CostBase CostWeightWeightDesignDesign

DiameterDiameterMax. FrequencyMax. FrequencyAutonomyAutonomy

Vodites will likely also have 6 main physical characteristics, but the market is as yet untapped

$

5 -100 5 -20 10 -100

3 -10 10 -100 min. 10

m kHz mm

Index Kg

9

It is easy to recognize the origin of the brands from their names

Product Type:

S=Sonite

V=Vodite

Company marketing the brand:

A, E, I, ...

Freely chosen letters or numbers

S I B I

10

Sonite customers have traditionally been classified into 5 segments……

Singles / Si

High Earners / Hi

Buffs / BfProfessionals / Pr

Others / Oi

11

...whereas initial studies for Vodites have pointed to a different segmentation scheme

time

sales

Followers

Early adopters

Innovators

Typical segment size evolution over time

12

Sonite & Vodite customers have the choice of purchasing through 3 distinct distribution channels

13

Summary of the Markstrat World Environment

Economic EnvironmentEconomic Environment

MarketMarket Growth Growth

TechnologyTechnology

14

Getting started

The MarkstratWorld

Managing your firm

15

Your objective in managing your company is to maximize your Share Price Index

To do that, you will have to optimize:

Market share

Sales growth

Net contribution

Cumulative net contribution

R & D investments

….but the main objective is to LEARN!

16

You will need to do a certain amount of analysis, before setting a strategic direction for your firm

DataData InformationInformation StrategicOptions

StrategicOptions

A B CP0 457 856 745P1 542 596 789P2 650 587 824P3 745 900 1203

17

Market research studies provide market data… it is up to you to prioritize, digest, and interpret them

Consumer survey

Consumer panel

Distribution panel

Semantic scales

Multi-dimensional scaling (MDS)

Industry benchmarking

Market forecast

Competitive advertising

Competitive sales force

Advertising experiment

Sales force experiment

Conjoint analysis

18

Once your strategy is clear, you should proceed to make a number of tactical decisions each year

1) Production planning

2) Inventory disposal

3) Pricing

4) Mass communication

5) Sales force & distribution

6) Market research

19

MarketdemandMarket

demand

ProductionProduction

Inventory build-up

Lostsales

Number ofUnits

QP(1-20%) QPQP

Requested production

level

Requested production

level

(assuming zero inventory level)

QP(1+20%)

Your production department will automatically adjust production levels up to 20% (+ or -) against your plan

20

?

Competitors

“Order-book”

Lost to industry

Comparison of purchase intent with market share can give you a feel for the size of "lost sales."

MarketShare

MarketShare

PurchaseIntent

PurchaseIntent

LostSalesLostSales-

21

Pricing in Markstrat is fixed once a year

Specialty Stores

Department Stores

Mass Merchandisers

Average Retail Price $100 $100 $90

Distrib. Margin$40 $ 30 $ 27

Average Selling Price $ 60 $ 70 $ 63

Recommended Retail Price = $100

22

Each firm receives a marketing budget for the coming period, based on the previous period’s performance

Bu

dg

et Operating costOperating cost

Hiring & training costHiring & training cost

Firing costFiring cost

Sales force

Advertising expendituresAdvertising expenditures

Advertising researchexpenditures

Advertising researchexpenditures

Advertising for eachbrand

for eachbrand

R & D Development budgetDevelopment budget for eachproject

for eachproject

Market Research

Sonite and Voditestudy costs

Sonite and Voditestudy costs

23

Brand results

24

Company performance

25

The simulation starts at the end of the initial period, the new management (you!) making decisions for the next period

START

MSPH

26

Organize yourselves and manage the group process

Timepressure

Conflictingopinions

Informationoverload

27

The MarkstratWorld

Managing your firm

Getting started

28

When you return to your team room, the Main Menu will be on your screen

Click here to open a session & access the

decisions screen

29

Within the Decision Screen, you will start making decisions for the coming period

Click here to make Production,

Price & Advertising decisions

The decisions you will make

30

Decisions on production, price and advertising should be entered for each brand

You are making

decisions for the brand

SAMA

Switch from Sonites to

Vodites

Switch from one brand to

the other

31

The sales force is organized by channel type to better meet the specific needs of the channels

Click on the assistant to help you allocate to

sales forces automatically

32

Buying market research studies will help you make sound decisions

The cost of each study appears as

you make your selections

33

You can monitor the status of your decisions at any time

34

Don't forget to transfer your decisions to your instructor by closing the session

You can close your session by

clicking on Interface/Close

Markstrat Session

35

Good luck!Good luck!Good luck!Good luck!

On your marks, get set, GO!

Give a name to your company if you like

Respect the deadlines