Welcome to the Marketing Simulation Game Class!

1. Welcome to the Marketing Simulation Game Class! Dr. Satyendra Singh

2. Overview • Long-term Perspective • Focus on Marketing Planning • Focus on Strategic Issues • Competitive Environment • Rapid Feedback

3. The Process • Analysis of Company Results • Planning and Budgeting • Marketing Plan DECISIONS!!! • Turn in Decision Forms • THE MARKETING GAME SIMULATION • Company Reports Returned to Firms

4. Industry Environment • Market Growth • Competitive Environment • Type of Competition Depends on Firms’ Decision • Technical Environment • No Major Innovations Expected • Yearly Revision Cycle

5. The Market Segments • There are Six Product-Market Segments • High-tech Managers • Modern Students • Concerned Parents • Commercial Artists • Harried Assistants • Home Producers

6. Channel 1 Traditional Dealers 50% Margin Channel 2 Discount Dealers 35% Margin Distribution Channels

7. Product Features - Multimedia • Number of Special Commands (5-20) • Error Protection (1-10) • Ease of Learning (1-10)

8. Types of Advertising • Pioneering • Direct Competitive • Indirect Competitive • Reminder • Corporate (Institutional)

9. Marketing Responsibilities… • Product Features Modify  Do Not! • Price  Wholesale Price in Each Channel? • Place Distribution Intensity in Each Channel? • Production  How many units? • Customer Service  $ How much?

10. Marketing Responsibilities… • Promotion • Advertising • $ Spending  How much? • Type  P, D, I, R, or C ? • Selling • # of Sales Reps in Each Channel. • % Non-Selling Time • Sales Promotion • $ Spending  How much?

11. Marketing Responsibilities • Market Research - 7 Reports Which? #1 Mkt. Share by Segment (all brands) $15,000 #2 Mkt. Share by Channel (all brands) $12,000 #3 Consumer Preference Study $30,000 #4 Marketing Effectiveness Report $25,000 #5 Detailed Sales Analysis (own brand) $15,000 #6 Customer Shopping Habits $7,000 #7 Product Positioning Report $30,000

12. Budget Items • R & D Product Modification Costs • Sales Force Salaries and Severance pay • Advertising Expense • Customer Service Expense • Sales Promotion Expense • Market Research Reports Expenses

13. Computing Prices • Retail Prices from Wholesale Prices: • Expected Retail Price = (Wholesale price/1-% Margin) • Example: Wholesale price = $105 • Channel1 Retail Price = ($105/1-.50) = $ 210.00 • Channel 2 Retail Price = ($105/1-.35) = $ 161.54 • Wholesale Prices from Desired retail Price: • Wholesale Price = Retail price (1-% Margin) • Example: Desired Retail price = $ 190 • Channel 1 Wholesale Price = $190 (1-.50) = $95.00 • Channel 2 Wholesale Price = $190 (1-.35) = $123.50

14. Retail Prices Charged Final Consumers • The retail price set by a dealer depends on: • The wholesale price in the dealer’s channel • The customary margin used in the channel • The portion of any sales promotion “deals” that the dealer passes along to consumers as a price reduction.

15. A “Good” Wholesale Price • Should cover the unit cost of the product (given its features). • Results in a profit margin that will contribute to other expenses and profit. • Result in a retail price that will appeal to target customers.

16. Computing Costs of R & D for Product Modifications • FeatureCost to DecreaseCost to Increase • Special Commands (5-20) $0 $8,000 x (change)2 • Error Protection (1-10) $0 $5,000 x (change)2 • Ease of Learning (1-10) $3,000 x change $3,000 x (change)2 • Example: • Old Brand New Brand Change Cost • 6 8 +2 $8,000 x 2 x 2 = $32,000 • 4 3 -1 = $ 0 • 3 5 +2 $3,000 x 2 x 2 = $12,000 • Total Costs = $ 44,000

17. And finally…. • Looking forward to receiving your quality decisions!