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The Marketing Game Introduction

The Marketing Game Introduction. Dr. Gerald Smith MK-719. 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.

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The Marketing Game Introduction

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  1. The Marketing Game Introduction Dr. Gerald Smith MK-719 1

  2. 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. 2

  3. 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 Next Decision period 3

  4. Industry Environment • Market growth • Technological environment • No major innovations expected • Yearly revision cycle • Competitive environment • Type of competition depends on firms’ decisions 4

  5. High-tech Managers Modern Students Concerned Parents Professional Creators Harried Assistants Home Users 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. 5

  6. Past Sales By Market Segment For Voice Recognition Device 6

  7. Competitor Analysis • Estimate competitor’s 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 ? 7

  8. Expanded Marketing Responsibilities (Level 2) PRODUCT Features (and R&D for product modifications) PRICE Wholesale price in each channel PLACE Distribution intensity in each channel PROMOTION -Advertising $ Spending 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 8

  9. Sales Saturation Level Threshold Level Marketing Spending Response Functions and Marketing Spending Spending too little may have little effect, but spending too much just increases costs and reduces profit. 9

  10. Marketing Budget Items (Level 2 and 3) • R&D 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 10

  11. 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. 11

  12. 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 12

  13. 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. 13

  14. R&D for Product Modifications: Computing Costs Note: R&D for product changes is more expensive if you have to make big changes in a short period of time… 14

  15. Industry Sales Report 15

  16. Product Features and Prices Report 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 $146.15 Brand of VRD Firm 1 Firm 2 Firm 3 Firm 4 Special commands 8 8 8 8 16

  17. 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 17

  18. 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 18

  19. Easy to use for preparing and evaluating plans, managing reports TMGPlan Software View, print, and manage password protected reports Select directory Enter Plan Decisions Evaluate spending and profit forecast 19

  20. Market Share by Segment Report 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 Who’s selling to whom? Who’s buying what? What is each firm achieving? Which segments are buying? 20

  21. Market Share by Channel Report 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 What’s selling where? Who’s buying what? 21

  22. Consumer Preference Study 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 Managers Parents What kind of product would a segment prefer? What reference price seems typical for the segment? How are segments similar and different? 22

  23. Competitors with lower Index 0 0 0 0 0 Competitors with equal or higher Index 3 3 3 3 3 Marketing Effectiveness Report 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 23

  24. Detailed Sales Analysis 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? 24

  25. Detailed Sales Analysis 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? 25

  26. Customer Shopping Habits Segment Students Home Assistants Creators Managers Parents Percent of Shopping in Channel 2 ? ? ? ? ? ? Percent of Shopping in Channel 1 ? ? ? ? ? ? Who shops where? How do shopping patterns match distribution focus? 26

  27. Product Positioning Report 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? 27

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