Introduction
“I hear and I forget. I see and I remember. I do
and I understand.”
Confucius
1
Decisions
You make decisions given competitor past,
current and future decisions
You are responsible for the firm’s decisions
Decisions should be an adventure, not a
chore
2
Firm Operation
Keep a record of all decisions made and
results. This record will come in handy when
you prepare your marketing and advertising
plans in a few weeks. It will help you prepare
your Director Memo at the end of the
semester. A hardcover lab notebook works
great for this purpose.
3
Budgeting
Each firm must submit budget using Excel
to reproduce the information contained on
the Financial Summary/Pro Forma form in
the appendix of The Marketing Game
4
The Role of the Marketing Game
 The Game offers unique learning advantages, compared to other
learning approaches (like reading texts and articles, lectures, guest
speakers, case analysis and presentation, projects) because it:
 Is dynamic, like most business situations.
 Brings the competitive aspects of marketing to life.
 Highlights the need for integrative planning based on qualitative and
quantitative analysis of the market environment.
5
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.
6
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
7
Industry Environment
Market growth
Technological environment
 No major innovations expected
 Yearly revision cycle
Competitive environment
 Type of competition depends on firms’ decisions
8
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
9
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
10
Product 1: Voice Recognition Device (VRD)
Number of Special Commands (5-20)
Key
Product
Features
Error Protection (1-10)
Ability to Customize (1-10)
11
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…
12
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)
13
Types of Advertising
Pioneering
Direct competitive
Indirect competitive
Reminder
Corporate (Institutional)
14
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
15
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.
16
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
17
Discretionary Budget
Policy on initial discretionary budget.
Unspent money carries to future periods and
earns interest.
“When it’s gone, it’s gone.”
Policy on special budget requests.
18
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
19
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.
20
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.
21
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
?
22
Industry Sales Report
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
23
Product Features and Prices Report
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
24
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
25
Market Research Reports (Level 3)
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
26
Market Share by Segment Report
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?
27
Market Share by Channel Report
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?
28
Consumer Preference Study
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?
29
Marketing Effectiveness Report
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
30
Detailed Sales Analysis
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?
31
Customer Shopping Habits
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?
32
Product Positioning Report
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?
33
The Marketing Game
34