BA 162: Marketing Strategy

Fall 2000

Lisa Cain

What is MARKSTRAT 3?

• Marketing Strategy Simulation

• 2 Industries, 5 firms per industry– different “starting” positions so you will not be

graded on firm performance– we will be able to compare the 2 “similar”

firms across industries however

The MARKSTRAT World

• Each firm starts with 2 “Sonite” products• A sonite is a consumer durable good

comparable to an electronic entertainment product (think CD, DVD, etc.)

• You will be able to modify the characteristics of these products and introduce new ones.

• You will also be able to enter a new product market for “Vodites”

Market Segments for Sonites

• The Buffs (30%)

• The Singles (15%)

• The Professionals (20%)

• The High Earners (16%)

• Others(19%)

• Sonite Market has grown at an average rate of 35% over the last 3 years

Distribution

• Specialty Stores (30,000)

• Department Stores (15 chains, 6,000 POS)

• Mass Merchandiser (8 chains, 10,000 stores)

Pricing

• List price is the price at Specialty Stores and Department Stores

• Mass merchandisers charge 10% less than list• Price increases of 30% or more have not been

received well by consumers- even if the brand has been significantly changed

• Average price increases over the last 3 years: 3%

Sales Force

• Sales representatives are allocated by channel and by brand

• The same representatives can be reallocated quite easily across brands and channel

• The number of representatives can be increased or decreased for a cost associated with hiring, firing, training and salary

Advertising

• Advertising is allocated by brand and there is no “company identity” advertising

• Average advertising expenditures as a percentage of sales over the last 3 years: 6%

• Average advertising research expenditures as a percentage of total advertising expenditures over the last 3 years: 5%

Market Research

• 12 different studies are available

• Costs are listed in the newsletter each period

• Let’s take a minute and go through what’s available

• Make sure you think about how you will use the research that you choose

Consumer Survey

• Brand awareness for each brand

• Purchase intentions by segment for each brand

• Shopping habits by channel for each segment

Consumer panel

• market shares based on unit sales, total and by segment, for each brand

• Industry sales by segment

Distribution Panel

• Market shares based on unit sales, total and by channel, for each brand

• Industry sales by channel

• Distribution coverage by channel

Semantic Scales

• Brand map• Average evaluation of each brand on

perceived product characteristics• Ideal values of each segment on the three

most important product characteristics• Evolution of ideal values• Relationship between product characteristics

and perceptions

MDS of brand similarities and preferences

• Perceptual map

• Average position of each brand on MD perceptual space

• Ideal values of each segment on MD space

• Evolution of ideal values

• Influence of characteristics

• Relationships between product characteristics and perceptions

Competitive Advertising Estimates

• Estimated total advertising expenditures for each brand

Competitive Sales Force Estimates

• Estimated number of salespeople, by channel, by firm

Industry Benchmarking

• Performance and cost structure of competitors

• Overall performance of firms

• Performance of firms by market

Advertising Experiment

• What happens to expected awareness and market share, by segment and brand if the advertising budget had been increased by a certain percentage

Sales Force Experiment

• What happens to the number of distributors and market share, by channel and brand if the sales force had been increased in each channel by the specified number

Market Forecast

• Expected market size, by segment, for the next period for the product category as a whole

• Expected market growth, by segment, for the next period for the product category as a whole

Conjoint Analysis

• Utility graphs for each segment in each product category

• Utilities associated with levels of product characteristics

• Relative importance of product characteristics

Research & Development

• Existing brands can be improved

• New brands can be developed

• Team decides – project name, budget, values of the physical

characteristics, targeted base cost

• Up to 5 projects for each market at one time

• Use feasibility studies to your advantage

Naming Conventions

• Brand names (4 characters):– 1st letter S for Sonite or V for Vodite– 2nd letter identifies the company (A, E, I, O or

U)– 3rd and 4th- chosen by the team as long as they

all have different names

Naming Conventions

• R&D Project names (5 characters):– 1st character is always the letter P – 2nd character is either an S or a V– 3rd, 4th, and 5th are chosen by the team and

need not have any relationship to the brand name

So, now we need 10 teams!

• Most teams should have 5 members (a few may have 4 or 6)

• If you’re not sure if you’re going to remain in this class- let your group know- try to keep “undecideds” to 2 or less per team- so each team will end up with at least 3 or 4 people by the end of the semester

Once you’ve gotten your team together-

• let me know and I’ll give you the password

• and the form that I need back with your team member info

Next week,

• Wednesday- more Markstrat- please prepare with your group; we’ll spend part of the class time in S300T making sure everyone is competent with the Markstrat software

• Friday- a regular lecture :-)