marketing game
TRANSCRIPT
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A Brief History of Marketing Strategy
James E. Coleman
CPA, CFP®, PhD
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What this course is about:
Address 3 common expectations of employers of recent MBA’s Ability to work/manage teams Ability to evaluate and solve problems Ability to communicate solutions persuasively
Learn basic tools and techniques for analyzing markets & industries
Understand how to apply the marketing strategy development process across various settings
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Marketing Strategy Development Process: The Search for Opportunities
External Market Environment
FOUR P’s
FOUR
C‘s
(Context)
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Provides Marketing Strategy Development Practice
3rd edition
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Overview
You take over marketing management responsibilities for your firm. Must satisfy customers to sell product 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
Planning and budgeting
Make marketing plan DECISIONS!!!
Submit plan decisions
The marketing game! simulation
Company reports returned to firms
NextDecision
period
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Industry Environment
Market growth
Traditional PLC applies, but subsidiary to strategy
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
HarriedAssistants
HomeUsers
High-techManagers
ModernStudents Professional
Creators
ConcernedParents
Segments have different needs, preferences, situations, sizes, growth rates.
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Past Sales By Market Segment
0
5000
10000
15000
20000
25000
0 1 2 3
Year
Assist ant s
Managers
St udent s
Home
Creat ors
Parent s
For Voice Recognition Device
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Distribution 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.
Different segments have different shopping preferences.
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Product 1: Voice Recognition Device (VRD)
Key ProductFeatures
Error Protection (1-10)
Number of Special Commands (5-20)
Ability to Customize (1-10)
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R&D for Product Modifications: Computing Costs
Feature (Product 1) 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…
Product 2 R&D costs follow the same pattern as Product 1 (shown above)
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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
Not necessarily cannibalistic of Product 1, but additional sales support is needed.
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Types of Advertising
Pioneering Best for expanding market demand early in PLC
Direct competitive Best for stimulating current sales (reduced carryover)
Indirect competitive Best for building brand awareness & improves carryover
Reminder Improves ad effectiveness if brand awareness is high
Corporate (Institutional) Creates ‘halo’ effect for the other product (not useful for
single product situations)
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Marketing Responsibilities (Level 3)
2 PRODUCTs Features (and R&D for product modifications) PRICE Wholesale price may differ in each channel
and 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 channel Commission rate
-Sales promotion $ Spending per channel, productCUSTOMER SERVICE $ SpendingMARKET RESEARCH 7 reports may be purchasedDemand forecast/production order Number of units for each product
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Production Economies of Scale
Unit production costs will decline as cumulative production increases, but this is not reflected in the pro forma estimates
72
75
78
81
84
87
90
93
96
99
102
0 100,000 200,000 300,000 400,000 500,000
Cumulative Units Produced
Pe
rce
nt
of
Ba
se
Un
it C
os
t
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Response 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.
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Marketing Budget Items (Level 2 and 3)
R&D product modification costs Sales force salaries and severance pay
NOT commissions (which come out of profits)
Advertising expense Customer service expense Sales Promotion Expense Market research reports expense
BUDGET FOR FIRST PERIOD: $984k
Use it or lose it!
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Discretionary Budget
If you overspend your regular budget it is automatically deducted from this amount.
“When it’s gone, it’s gone.” If you overspend after it’s gone, it comes out
of your advertising budget. Unspent money carries to future periods and
earns interest.
$1,500,000
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Computing 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
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Retail 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.
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A “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.
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Competitor Analysis
Review posted reports of industry results. Analyze past strategies & likely changes. Evaluate positioning and target segments.
? XX
X?
?X
1 2 3 4Firms
123456
Seg
men
ts
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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)
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
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Market Activity Report (Free)
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
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Additional Market Research Reports (NOT Free)
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 study
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Market Share by Segment Report ($15,000)
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?
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Market Share by Channel Report ($12,000)
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
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Consumer Preference Study ($30,000)
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?
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Marketing Effectiveness Report ($25,000 or $30,000 for both prod.)
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
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Detailed Sales Analysis ($15,000)
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?
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Customer Shopping Habits ($7,000)
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
?
?
?
?
?
?
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Product Positioning Report ($30,000)
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?
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Submitting Marketing Plans
Submitting marketing plans decisions Submit your decision plan files via email
no later than the due date and time per class calendar.
Each firm has a distinct industry and firm identification (e.g., A1, B3, etc.) 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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Recommendations
Analyze the reports as you would analyze a case.
Make intentional changes. Find a balance in marketing research
spending. Be integrative--think carefully about how each
decision impacts each of the others. Have some fun!