Practice of Marketing

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Practice of Marketing

• Week 10 (Period 8 of Simulation)
• This weeks Results and the Next Two Results
  Count Towards the Final Assessment (Averaged)

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Economic Climate 100
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Economic Environment 100
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Getting it all together
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Analysis and Situation Review

• It is like a Spot the Ball Competition
• We get clues from the environment the positions
  of players feet, where they are looking, where
  the spectators are looking
• In Marketing we get clues from our financial
  reports, and from the recorded activities of our
  competitors
• We put this information together to compile a
  Situation Report or Marketing Audit

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Spot the Ball 2

• But - amazingly - even when the ball is visible,
  some firms dont seem to have a clue what is
  happening!

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Points to Ponder

• Some firms are still exceeding their budget and
  having their advertising cut back a disaster!
• Keep focused on what you as a Marketing Manager
  are here for
• Keeping customers happy, selling product,
  employing sales reps and other staff, making a
  product that customers want these are all
  secondary to
• MAKING A PROFIT ! ! !

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More Points to Ponder

• If a competitor has the same Product Features as
  you
• The more things are the same, then the more the
  things that are different will make a difference

If you dont have a competitive advantage, dont
compete. Jack Welch when CEO, General Electric
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Even More Points to Ponder!

• Many decisions have TWO effects, and you have to
  use your experience, judgement, intuition, flair
  and common sense to determine whether the overall
  effect is positive or negative.
• For example increasing commission brings in
  more sales, but increases variable costs.
• Increasing Non-Selling Time will cost in
  additional Sales Reps, but each call will be more
  effective and therefore fruitful.
• You cannot quantify the positive or negative
  effects, but do not just concentrate on one
  aspect.

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And yet more points to ponder!

• Transfer Charges and Being Capped are the
  consequences of getting the Production Quantity
  wrong (like George did in Per Una!).
• But the Marketing Manager of experience
  appreciates that these are risks that may be
  worth taking. If you are making 3,000,000
  contribution, you can afford to lose 100,000 in
  transfer charges through speculative setting of
  an optimistic quantity.
• Is the downside of a wrong decision justified
  by the upside?

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The Planning Process SOSTACE

• Situation
• Objective
• Strategy
• Tactics
• Action
• Control

Marketing Communication, P R Smith
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Situation

• Use your reports to analyse where your firm is
  and the estimated position of other firms
• Carry out a SWOT analysis
• Strengths
• Weaknesses
• Opportunities
• Threats

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Objectives

• Improve your Mark by
• Improving your Profit share
• Improving your Market Share
• Product 1
• By Value, By Volume, By Penetration
• Product 2
• By Value, By Volume, By Penetration

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Strategy

• Broad plan for extended period
• Short and succinct
• Firm but flexible

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Tactics

• The detail of how you will implement your
  Strategy
• This week (and following weeks)
• In verbal terms

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Action

• Compile your Plan
• Submit it

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Control

• Repeat the process
• Using your reports to analyse the success
  (or..) of your tactics
• Start again

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Exam hints
The attached reports relate to firm B4 in week 5,
immediately prior to the availability to launch a
second product in week 6. You should take over as
Marketing Manager and make preparations for
inputting the data for week 6.

• QUESTIONS
• Using the Financial Summary for Period 5, draw a
  Break-even analysis (use an average of Channel 1
  and Channel 2 selling prices).
• (25 marks)
• Write an overview of the firms position at this
  stage, in terms of their performance to date,
  their position in relation to their competitors
  and their strengths and weaknesses.
• (25 marks)

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Q.1 Using the Financial Summary for Period 5,
draw a Break-even analysis (use an average of
Channel 1 and Channel 2 selling prices).
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INDUSTRY A FIRM 1 Period 5 Results
Financial Summary
letix
Channel 1 Channel 2 Total
----- Units Sold 13508
34731 48239 Wholesale Price
120.00 110.00 Unit Cost
60.00 60.00 Gross Sales
1,620,960 3,820,410 5,441,370 Cost
of Goods Sold 810,480 2,083,860
2,894,340 Transfer Charges
0 Gross Margin
2,547,030
Expenses Advertising
420,000 Sales Force-Salary
240,000 360,000 600,000
-Firing Costs
0 -Commission 129,677
305,633 435,310 Customer Service
110,000 Sales
Promotion 20,000 25,000
45,000 RD for Product Modifications
0 Marketing Research
7,000 Total
Expenses
1,617,310 Interest Income
4,020 Net Contribution
(Loss) 933,740

• Average selling price 115
• Commission 8, Unit Cost 60.00
• 115 - 8 105.80
• 105.80 - 60.0045.80
• Expenses 1,617,310
• Commission of 435,310 1,182,000 fixed
  costs
• ? Breakeven point 1,182,000/45.80 25,808
  units sold x 115 2,967,920 Gross Sales

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Break -even Analysis
Revenue

Costs
2,967,920
1,182,000
25,808
Volume
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Q.2 Write an overview of the firms position at
this stage, in terms of their performance to
date, their position in relation to their
competitors and their strengths and weaknesses.

• Financial Position
• Reserve Fund, Profitability
• Marketing
• Product, Place, Price, Promotion
• Competition
• Activity, Comparisons

Budget for Next Period 1,105,000 ( 25
of Industry Total) Remaining Reserve Funds
67,000
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Industry Sales Report
  VRD Unit
Market Share Sales Market Share Brand
Sales (Units) (Retail)
( Sales) ----- ----- -------
-------- --------- letix
48,239 0.289 9,096,621
0.241 KRYARMES 53,879 0.323
13,325,653 0.354 Oscar 28,755
0.172 9,300,229 0.247 VRDFLEX
36,001 0.216 5,944,906
0.158   Total 166,874
37,667,408   Unit
Channel Sales Sales
------- ----- ----- 1
78,997 20,611,718 2
87,877 17,055,691   
Product Features Prices Report  

Average Average VRD Special
Error Ease of Retail Price Retail
Price Brand Commands Protection
Learning Channel 1 Channel 2 -----
-------- ---------- -------- ---------
--------- letix 10 4
4 239.75 168.67 KRYARMES
11 6 8 247.82
246.00 Oscar 16 3
4 330.00 307.69 VRDFLEX
10 4 4 160.00
166.15   
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Marketing Activity Report
(Data
Reported Is from Period 5)   VRD
letix KRYARMES Oscar
VRDFLEX -----
-------- -----
------- Advertising Dollars 420,000
370,000 330,000 397,000 Advertising
Type Direct Indirect
Direct Direct   Sales Promotion Channel
1 20,000 26,000
0 0 Channel 2
25,000 3,000 0
0   Number of Sales Reps Channel 1
12 26 24
5 Channel 2 18
10 10 20 Commission
8 8
7 8 Customer Service
110,000 115,000 90,000
95,000 Report 1 Market
Share By Segment   VRD Brand
Students Home Users Assistants Creators
Managers Parents ----- --------
---------- ---------- -------- --------
------- letix 0.448 0.345
0.133 0.237 0.230 0.280 KRYARMES
0.051 0.294 0.690 0.247
0.299 0.423 Oscar 0.029 0.130
0.123 0.408 0.367
0.173 VRDFLEX 0.472 0.232 0.053
0.108 0.103 0.125  Total Sales
47,000 24,143 39,308 16,666
29,620 10,137 (in units)  
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Report 2 Market Share By
Channel VRD
Brand Channel 1 Channel 2
----- --------- ---------
letix 0.171 0.395
KRYARMES 0.497 0.167
Oscar 0.257 0.096
VRDFLEX 0.075 0.342
Total Sales 78,997
87,877 (in units)
Unit Sales By Segment and Channel
VRD Brand Students Home Users
Assistants Creators Managers Parents
----- -------- ---------- ----------
-------- -------- ------- Channel 1 letix
620 1,369 3,932 2,098
4,336 1,153 KRYARMES 681
2,465 23,508 2,927 7,021
2,639 Oscar 389 1,130 4,249
4,660 8,752 1,107 VRDFLEX
2,639 422 1,041 488 1,120
251 Channel 2 letix 20,456
6,954 1,304 1,850 2,484
1,683 KRYARMES 1,700 4,623 3,633
1,194 1,842 1,646 Oscar
954 2,005 593 2,139 2,132
645 VRDFLEX 19,561 5,175
1,048 1,310 1,933 1,013 TotalSales
47,000 24,143 39,308 16,666
29,620 10,137 (in units)
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TRUE Customer
Preferences Product VRD
Special Error Ease of
Approximate Segment Commands
Protection Learning Price Range
------- -------- ---------- --------
----------- Students 10.0
4.0 4.0 155.00 Home Users
9.0 5.0 8.0
165.00 Assistants 12.0 7.0
8.0 240.00 Creators 15.5
2.0 4.0 275.00
Managers 16.0 6.0 4.5
290.00 Parents 6.0
3.5 8.5 180.00
Report 7 Product
Positioning Report "Distances"
(excluding price) to Segment Ideal or Preferred
Product (Lower numbers are closer
to ideal than higher numbers) VRD Brand
Students Home Users Assistants Creators
Managers Parents ----- --------
---------- ---------- -------- --------
------- letix 0.0 12.3 24.3
10.7 17.0 20.0 KRYARMES
2.1 1.2 1.1 9.2
10.7 2.5 Oscar 1.7
14.8 29.8 1.5 6.4 20.1
VRDFLEX 0.0 12.3 24.3
10.7 17.0 20.0
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Next Week Week 11

• Some points on profitability and fine tuning
• Reminder check your uploaded plan very
  carefully from now on OR ELSE!!!