Transcript Channel 2 - Personal.kent.edu

3rd edition
Charlotte H. Mason • William D. Perreault, Jr.
1
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
Company
Mission, Objectives,
& Resources
S.
W.
O.
T.
Targeting &
Segmentation
Positioning &
Differentiation
Product Price
Target
Market
Promotion
Place
Competitors
Current &
Prospective
External Market Environment
Technology
Political & Legal
Social & Cultural
Economic
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.
3
The Process
Analysis of market situation/opportunities
Planning and budgeting
Make marketing plan DECISIONS!!!
Next
Decision
period
Submit plan decisions
The marketing game! simulation
Company reports returned to firms
4
Industry Environment
Market growth
Technological environment
 No major innovations expected
 Yearly revision cycle
Competitive environment
 Type of competition depends on firms’ decisions
5
Six Key Product-Market Segments
Concerned
Parents
High-tech Modern
Managers Students Professional
Creators
Harried
Assistants
Segments have different needs, preferences,
situations, sizes, growth rates.
Home
Users
6
Past Sales By Market Segment
For Voice Recognition Device
25000
Assistants
20000
Managers
Students
15000
Home
10000
Creators
Parents
5000
0
0
1
2
3
Year
7
For Voice Recognition Device (UNIT SALES)
Total Sales by Year
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
1
2
3
8
Distribution Channels
Firm 1
Firm 2
Firm 3
Channel 1
Traditional
Dealers
Firm 4
Channel 2
Discount
Dealers
Firms reach customers
through full-service
dealers and
Internet/mail-order
discount dealers.
Concerned
Parents
High-tech
Managers
Modern
Students
Harried
Assistants
Professional
Creators
Different segments
have different shopping
preferences.
Home
Users
9
Product 1: Voice Recognition Device (VRD)
Number of Special Commands (5-20)
Key
Product
Features
Error Protection (1-10)
Ability to Customize (1-10)
10
R&D 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)
$3,000*change
$3,000*(change)2
Example
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
Feature
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…
11
Level 3
Product 2: Digital Vocal Communicator (DVC)
Number of Tasks (1-10)
Key
Product
Features
Similarity of Commands (1-10)
Ease of Learning (1-10)
12
Types of Advertising
Pioneering—works 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
13
Types of Advertising
Direct competitive—attempts 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 competitor’s for that target market
14
Types of Advertising
Indirect competitive—tries 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
15
Types of Advertising
Reminder—Efficient 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
16
Types of Advertising
Corporate (Institutional)—Can be useful for
firms with more than one product
 Promotes the overall firm rather than a specific
product
17
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
-Personal selling
-Sales promotion
$ Spending AND Type
Number of sales reps in each channel
Percent non-selling time
Commission rate
$ Spending per Channel
CUSTOMER SERVICE
$ Spending
MARKET RESEARCH
Demand Forecast/
Production order
7 Reports May be Purchased
Number of Units
18
Forecasting Production Order - Total Market
Price
Supply
Demand
83,800
Quantity
19
Forecasting Market
 DEMAND
 Tastes (Advertising)
 Price of Product
 Price of Other Products
 Supply
 Cost of Production
 Price of Product
20
Forecasting Production Order - Total Market
New
Supply
Price
Demand
shifts up
with ”good
advertising”
P2
P1
Demand
83,800
= Q1
Result: More product sold and at
a higher price
? = Quantity
Q2
21
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
22
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 product’s UNIT COST.
 The 15% difference (loss) shows up as a “Transfer
Charge” on your next financial summary.
23
Expanded Marketing Responsibilities
(Level 3)
2 PRODUCTs
Features (and R&D for product modifications)
PRICE
Wholesale price in each channel
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, product
CUSTOMER SERVICE
$ Spending
MARKET RESEARCH
7 reports may be purchased
Demand forecast/
production order
Number of units for each product
24
Response Functions and Marketing Spending
Sales
Saturation
Level
Threshold
Level
Marketing Spending
Spending too little may have little effect, but
spending too much just increases costs
and reduces profit.
25
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
DO NOT ACCIDENTLY EXCEED YOUR
BUDGET— Check YOUR Pro Forma
26
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 it’s gone, it’s gone.”
27
BUDGET FOR NEXT PERIOD
All firms start with a budget of $984,000
The budget for the next period always
depends on the firm’s 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
28
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
29
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.
 Channel 1 = 50%, Channel 2 = 35%
 The portion of any sales promotion “deals” that the
dealer passes along to consumers as a price
reduction.
30
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 R&D, Marketing
Research, Advertising, Customer Service, and contribute
to profit
 PAY ATTENTION TO YOUR PROFIT!!
31
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?!!
32
Competitor Analysis
Estimate competitor’s net contribution
Analyze past strategies & likely changes.
Evaluate positioning and target segments.
Firms
Segments
1
1
X
2
?
3
4
5
6
2
3
4
X
X
?
X
?
33
Industry Sales Report (Free)
Brand
Firm 1
Unit Sales Share (units) $ Sales (retail)
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
Channel
1
2
$17,171,854
Unit Sales Dollars Sales
56,296 $10,696.240
44,308
$6,475,614
34
Product Features and Prices Report (Free)
Brand
of
VRD
Firm 1
Firm 2
Firm 3
Firm 4
Retail
Retail
Error Ease
price
price
of
channel channel
Special protect1
2
commands ion learning
8
8
8
8
3
3
3
3
3
3
3
3
$190.00
$190.00
$190.00
$190.00
$146.15
$146.15
$146.15
$146.15
35
Market Activity Report (Level 2)
Firm 1
Firm 2
Firm 3
Firm 4
$250,000
$250,000
$250,000
$250,000
Sales Promotion
Channel 1
Channel 2
$0
$0
$0
$0
$0
$0
$0
$0
No. Sales Reps
Channel 1
Channel 2
Commission
Customer Service
10
10
5%
$92,500
10
10
5%
$92,500
10
10
5%
$92,500
10
10
5%
$92,500
Adv. Dollars
Adv. Type
36
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
37
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
38
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!
39
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)
40
Market Share by Segment Report ($15,000)
Segment
Brand
1
2
3
4
5
6
Firm 1
Firm 2
Firm 3
Firm 4
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
Total
Sales
(units)
20,028
15,084
25,104
10,240
22,056
8,092
Who’s selling to whom?
Who’s buying what?
What is each firm achieving?
Which segments are buying?
41
Market Share by Channel Report ($12,000)
Brand
Channel 1 Channel 2
Firm 1
Firm 2
Firm 3
Firm 4
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
Total Sales
(units)
56,296
44,308
What’s selling where?
Who’s buying what?
42
Consumer Preference Study ($30,000)
Segment
Students
Home
Assistants
Creators
Managers
Parents
Price
Range
Special
Error
Ease of
Commands Protection Learning
10-13
7-10
10-13
12-15
13-16
5-8
2-4
2-4
6-8
2-4
6-8
2-4
low
low
high
high
high
low
1-3
6-8
6-8
4-6
2-4
7-9
What kind of product would a segment prefer?
What reference price seems typical for the segment?
How are segments similar and different?
43
Marketing Effectiveness
Report ($25,000)
Index
Brand Awareness
Customer Service
Consumer Group Rating
Industry Average Rating
0.550
Competitors Competitors
with lower
with equal or
Index
higher Index
0
3
100%
100%
Channel 1:
Sales Rep Workload
Dealer Satisfaction
Channel Strength
(“Push”)
100%
1.00
.500
0
0
3
3
Channel 2:
Sales Rep Workload
Dealer Satisfaction
Channel Strength
(“Push”)
100%
1.00
.500
0
0
3
3
44
Detailed Sales
Analysis by Segment
by Channel ($15,000)
Segment
1
2
3
4
5
6
Channel 1
896
1,109
5,602
1,808
4,363
1,086
Channel 2
5,269
3,337
1,396
1,196
1,865
1,074
Firm
Unit sales by segment and channel
Are you reaching your target?
45
Customer Shopping Habits ($7,000)
Segment
Students
Home
Assistants
Creators
Managers
Parents
Percent of Shopping
Percent of Shopping
in Channel 1
in Channel 2
?
?
?
?
?
?
?
?
?
?
?
?
Who shops where?
How do shopping patterns match distribution focus?
46
Product Positioning Report ($30,000)
Segment
Brand
1
2
3
4
5
6
Firm 1
Firm 2
Firm 3
Firm 4
?
?
?
?
?
?
?
?
?
?
?
?
?
?
?
?
?
?
?
?
?
?
?
?
Which brands are closest to which segments?
Which segments have no close brands?
47
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!
48
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% A30% B+
40% B
50% B60% C+
70% C
71% to 100% C49