The Marketing Game is Integrative

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(No Transcript)
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The Marketing Game is Integrative and Covers
All Aspects of the Marketing Strategy Planning
Process
Narrowing down to focused strategy with
quantitative and qualitative screening criteria
Customers Needs and other Segmenting Dimensions
Targeting Segmentation
Product
Price
S. W. O. T.
Target Market
Company Mission, Objectives, Resources
Positioning Differentiation
Promotion
Place
Competitors Current Prospective
External Market Environment
Technology Political Legal Social
Cultural Economic
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Overview

• 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.

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The Process
Analysis of market situation/opportunities Plannin
g and budgeting Make marketing plan
DECISIONS!!! Submit plan decisions The marketing
game! simulation Company reports returned to
firms
Next Decision period
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Industry Environment

• Market growth
• Technological environment
• No major innovations expected
• Yearly revision cycle
• Competitive environment
• Type of competition depends on firms decisions

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Six Key Product-Market Segments
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Past Sales By Market Segment
For Voice Recognition Device
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For Voice Recognition Device (UNIT SALES)
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Distribution Channels
Firm 1
Firm 2
Firm 3
Firm 4
Firms reach customers through full-service dealers
and Internet/mail-order discount dealers.
Channel 1 Traditional Dealers
Channel 2 Discount Dealers
Different segments have different shopping
preferences.
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Product 1 Voice Recognition Device (VRD)
Number of Special Commands (5-20)
Key Product Features
Error Protection (1-10)
Ability to Customize (1-10)
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RD 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) 3,000change 3,000(change)2
Example Example Example Example Example
Feature Last periods product This periods product Change Cost to Change
Special Commands 6 8 2 8,0002232,000
Error Protection 4 3 -1 0
Ease of Learning 3 5 2 3,0002212,000
Total modification costs Total modification costs Total modification costs Total modification costs 44,000
Note RD for product changes is more expensive
if you have to make big changes in a short
period of time
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Product 2 Digital Vocal Communicator (DVC)
Level 3
Number of Tasks (1-10)
Key Product Features
Similarity of Commands (1-10)
Ease of Learning (1-10)
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Types of Advertising

• Pioneeringworks to build PRIMARY demand for the
  product category (not a specific brand)
• Useful EARLY in the life cycle of a product when
  there is still opportunity to stimulate market
  growth
• Makes the most sense for a firm that has a large
  overall share of the market
• Will benefit most from any increase in the size
  of the potential market

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Types of Advertising

• Direct competitiveattempts to create immediate
  brand purchase
• Useful when facing immediate competition to
  attempt to win market share from competition
• Most effective when the product is, in fact,
  superior to the competitors for that target
  market

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Types of Advertising

• Indirect competitivetries to create brand
  purchases in the future
• Useful when management expects greater
  competition in the future and is willing to trade
  off some current advertising effect for future
  benefits
• Most useful when there is substantial future
  growth in the market

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Types of Advertising

• ReminderEfficient if the brand is well known
• Only useful once consumers are already familiar
  with the brand
• Usually seen in the mature stage of the product
  life cycle

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Types of Advertising

• Corporate (Institutional)Can be useful for firms
  with more than one product
• Promotes the overall firm rather than a specific
  product

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Marketing Responsibilities (Level 2)
PRODUCT Features (and RD for product
modifications) PRICE Wholesale price in each
channel PLACE Distribution intensity in each
channel PROMOTION -Advertising Spending AND
Type -Personal selling Number of sales reps in
each channel Percent non-selling
time Commission rate -Sales promotion
Spending per Channel CUSTOMER SERVICE
Spending MARKET RESEARCH 7 Reports May be
Purchased Demand Forecast/ Production
order Number of Units
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Forecasting Production Order - Total Market
Price
Supply
Demand
83,800
Quantity
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Forecasting Market

• DEMAND
• Tastes (Advertising)
• Price of Product
• Price of Other Products

• Supply
• Cost of Production
• Price of Product

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Forecasting Production Order - Total Market
New Supply
Price
Demand shifts up with good advertising
P2
P1
Demand
83,800 Q1
Quantity
? Q2
Result More product sold and at a higher price
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Results of Bad Forecasts

• Actual Production is automatically adjusted by up
  to 20 to meet higher or lower demand.
• Underestimate demand (and so request too little
  production) results in lost sales and profits
• Other firms may benefit

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Results of Bad Forecasts

• Overestimate demand (request too much production)
  you have excess inventory
• Excess is transferred to an overseas subsidiary
• Revenue received for transferred inventory is
  only 85 of the products UNIT COST.
• The 15 difference (loss) shows up as a Transfer
  Charge on your next financial summary.

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Expanded Marketing Responsibilities (Level 3)
2 PRODUCTs Features (and RD for product
modifications) PRICE Wholesale price in each
channel for each product PLACE Distribution
intensity by channel, product PROMOTION -Adver
tising Spending for each product Type for
each product -Personal selling Number of sales
reps in each channel Percent non-selling time
in each channel Commission rate -Sales
promotion Spending per channel,
product CUSTOMER SERVICE Spending MARKET
RESEARCH 7 reports may be purchased Demand
forecast/ production order Number of units for
each product
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Response Functions and Marketing Spending
Spending too little may have little effect, but
spending too much just increases costs and
reduces profit.
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Marketing Budget Items (Level 2 and 3)

• RD 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
• DO NOT ACCIDENTLY EXCEED YOUR BUDGET Check YOUR
  Pro Forma

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Discretionary Budget

• Initial discretionary budget of 1,000,000
• Unspent money carries to future periods and earns
  interest 6 interest.
• Spend it when you need it
• When its gone, its gone.

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BUDGET FOR NEXT PERIOD

• All firms start with a budget of 984,000
• The budget for the next period always depends on
  the firms net profit contribution
• Higher net profit results in a higher budget
• But not equal to your profits
• Firms with low profits or net losses still get a
  budget
• There is a minimum amount the president will
  provide to enable continued operation

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Computing Prices
Computing Retail Prices from Wholesale
Prices Expected Retail Price Wholesale
price/(1- Markup) Example Wholesale price
105 Channel 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
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Retail Prices Charged Final Consumers

• The retail price set by a dealer depends on
• The wholesale price in the dealers channel.
• The customary markup used in the channel.
• Channel 1 50, Channel 2 35
• The portion of any sales promotion deals that
  the dealer passes along to consumers as a price
  reduction.

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Setting A Good Wholesale Price

• Costs are a basic consideration
• Should cover the unit cost of the product (given
  its features).
• Must cover the production costs plus sales
  commissions
• Should leave enough to cover RD, Marketing
  Research, Advertising, Customer Service, and
  contribute to profit
• PAY ATTENTION TO YOUR PROFIT!!

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Setting A Good Wholesale Price

• Should result in a retail price that will appeal
  to target consumers.
• Retail price is wholesale price plus dealer
  markups
• Varies by Channel
• Sales promotions (especially in Channel 2) are
  often passed along to the consumer as a price
  discount
• DID I MENTION TO PAY ATTENTION TO YOUR PROFIT?!!

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Competitor Analysis

• Estimate competitors net contribution
• Analyze past strategies likely changes.
• Evaluate positioning and target segments.

Firms
1 2 3 4
1 2 3 4 5 6
X
?
X
X
Segments
?
X
?
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Industry Sales Report (Free)
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
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Product Features and Prices Report (Free)
Error protect- ion 3 3 3 3
Ease of learning 3 3 3 3
Retail price channel 1 190.00 190.00 190.00
190.00
Retail price channel 2 146.15 146.15 146.15 1
46.15
Brand of VRD Firm 1 Firm 2 Firm 3 Firm 4
Special commands 8 8 8 8
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Market Activity Report (Level 2)
Adv. Dollars Adv. Type Sales Promotion
Channel 1 Channel 2 No. Sales Reps Channel
1 Channel 2 Commission Customer Service
Firm 1 250,000 0 0 10 10 5 92,500
Firm 2 250,000 0 0 10 10 5 92,500
Firm 3 250,000 0 0 10 10 5 92,500
Firm 4 250,000 0 0 10 10 5 92,500
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Market Research Reports (Level 2)

• 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 In level 3 separate reports are available
for each product, except for the consumer
shopping habits study
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TMGPlan Software
Easy to use for preparing and evaluating plans,
managing reports
View, print, and manage password protected
reports
Select directory
Enter Plan Decisions
Evaluate spending and profit forecast
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Submitting Marketing Plans

• Submitting marketing plans decisions
• Policy on paper form
• Policy on electronic file
• Each firm has a distinct industry and firm
  identification
• Need to keep it straight!
• Passwords and the TMGPlan software
• Remember password used to create Plan
• It is case sensitive (upper and lower case make a
  difference)
• Best to stick to one password!

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Overview of Market Research Reports

• Market share by segment (all brands)
• Market share by channel (all brands)
• Consumer preference study
• Marketing effectiveness report
• Sales by segment by channel (own brand)
• Consumer shopping habits study
• Product positioning report (Level 2 3)

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Market Share by Segment Report (15,000)
Segment
4 0.250 0.250 0.250 0.250 10,240
Brand Firm 1 Firm 2 Firm 3 Firm 4 Total
Sales (units)
1 0.250 0.250 0.250 0.250 20,028
2 0.250 0.250 0.250 0.250 15,084
3 0.250 0.250 0.250 0.250 25,104
5 0.250 0.250 0.250 0.250 22,056
6 0.250 0.250 0.250 0.250 8,092
Whos selling to whom? Whos buying what? What
is each firm achieving? Which segments are buying?
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Market Share by Channel Report (12,000)
Brand Firm 1 Firm 2 Firm 3 Firm 4 Total
Sales (units)
Channel 1 0.250 0.250 0.250 0.250 56,296
Channel 2 0.250 0.250 0.250 0.250 44,308
Whats selling where? Whos buying what?
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Consumer Preference Study (30,000)
Price Range low low high high high low
Special Commands 10-13 7-10 10-13 12-15 13-16 5-8
Error Protection 2-4 2-4 6-8 2-4 6-8 2-4
Ease of Learning 1-3 6-8 6-8 4-6 2-4 7-9
Segment Students Home Assistants Creators Manage
rs Parents
What kind of product would a segment prefer? What
reference price seems typical for the
segment? How are segments similar and different?
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Marketing Effectiveness Report (25,000)
Competitors with lower Index 0 0 0 0 0
Competitors with equal or higher
Index 3 3 3 3 3
Brand Awareness Customer 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)
Index 0.550 100 100 100 1.00 .500 100 1.
00 .500
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Detailed Sales Analysis by Segment by Channel
(15,000)
Segment
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
Unit sales by segment and channel Are you
reaching your target?
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Customer Shopping Habits (7,000)
Segment Students Home Assistants Creators Manage
rs Parents
Percent of Shopping in Channel 2 ? ? ? ? ? ?
Percent of Shopping in Channel 1 ? ? ? ? ? ?
Who shops where? How do shopping patterns match
distribution focus?
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Product Positioning Report (30,000)
Segment
3 ? ? ? ?
5 ? ? ? ?
6 ? ? ? ?
Brand Firm 1 Firm 2 Firm 3 Firm 4
1 ? ? ? ?
2 ? ? ? ?
4 ? ? ? ?
Which brands are closest to which segments?
Which segments have no close brands?
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Recommendations

• Analyze the reports as you would analyze a case.
• Make intentional changes.
• Find a balance in marketing research spending
  NOT ALL reports are valuable every time
• Be integrative--think carefully about how each
  decision impacts each of the others.
• Have some fun!

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The End Result
Your Grade on the Simulation is based on PROFITS
in the LAST FOUR PERIODS of the simulation. Teams
within the following percentages of the winner's
TOTAL PROFITS will receive the grades shown.
Within ( of Total Profits of winning team) 10
A 20 A- 30 B 40 B 50 B- 60 C 70 C
71 to 100 C-