Student Handbook

The Alfred H. Heineken Chaired Professor of Marketing INSEAD

Jean-Claude Larréché

The Claude Janssen Chaired Professor of Business Administration and Professor of Marketing INSEAD

Hubert Gatignon

Partner, Director of R&D STRATX International

Rémi Triolet

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Publisher: STRATX International

Production: Coptech, Inc., Woburn, Massachusetts

Cover Design: Synergy Network, Waltham, Massachusetts

Marketing Team - Americas: Paul Ritmo, Andréa Hernandez Patricia Huber

Marketing Team - Europe, Middle-East, Asia, Africa Stéphanie Zanon, Development Team - Rémi Triolet, Aurélien Dauvergne, Annie Houde, Copyright ©2003 by Jean-Claude Larréché, Hubert Gatignon MARKSTRAT is a registered trademark of STRATX International ALL RIGHTS RESERVED Software © 2003 by STRATX International Christophe Pottier

No part of this book may be reproduced in any form, electronic or mechanical, without the prior permission of the publisher. PURCHASE OF USED BOOKS

Used books should not be purchased or sold. Each Student Handbook comes with a unique serial number that is to be used by the person who purchased the book only. If the registration card in the back of this book has been tampered with, return the book because you will not be able to use the serial number ISBN# 0-9743063-0-4

Edited 2009

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Contents
Introduction _________________________________________________________ vii Questions and Technical Support ______________________________________ ix About STRATX _________________________________________________________ xi

1. Registration and Software Setup _____________________ 1
1.1 1.2 1.3 The Registration Process _______________________________________ 1 Downloading and Installing the Team Software __________________ 3

The PRACTICE Industry _________________________________________ 5

2. The Interface Menu ________________________________ 7
2.1 2.2 2.3 Markstrat Online Overview ______________________________________ 8 Opening a Markstrat Online Session _____________________________ 9 Closing a Markstrat Online Session _____________________________ 13

3. Overview of the MARKSTRAT World _________________ 17
3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 Your Role _____________________________________________________ 17 Overview of the MARKSTRAT World ____________________________ 17 Sonite Products _______________________________________________ 18 Vodite Products _______________________________________________ 19 Naming Conventions __________________________________________ 21 Vodite Customers _____________________________________________ 23

Sonite Customers _____________________________________________ 21 Distribution Channels _________________________________________ 23

4. Managing Your Firm ______________________________ 27
4.1 4.2 4.3 4.4 4.5 4.6 Production ____________________________________________________ 28 Communication _______________________________________________ 30 Pricing ________________________________________________________ 29 Sales Force ____________________________________________________ 31 Research & Development ______________________________________ 32 iii

Ordering Market Research Studies _____________________________ 31

3 7.8 6.2 7.2 5.3 Newsletter ____________________________________________________ 88 Company Report ______________________________________________ 93 Market Research Studies ______________________________________ 102 10.5 6.3 6. Sample Annual Report ____________________________ 87 9.4.1 7.2 9. Frequently Asked Questions ________________________ 117 Administration ___________________________________ 118 iv . Understanding Your Annual Report _________________ 35 5.7 Marketing Budget _____________________________________________ 33 5.4 7.10 Validating your decisions with the Marketing Plan Tool__________ 59 7.2 6. Positioning and Research & Development ____________ 67 7.9 The Simulation Process ________________________________________ 45 Group Dynamics ______________________________________________ 45 Markstrat Online Main Screen __________________________________ 46 Brand Portfolio Decisions ______________________________________ 47 Production.3 Industry Newsletter ___________________________________________ 35 Company Report ______________________________________________ 36 Market Research Studies _______________________________________ 41 6.4 6.6 6. Making Decisions ________________________________ 45 6. Sample Decision Form ____________________________ 83 9. Price & Advertising ________________________________ 49 Market Research Studies _______________________________________ 52 Research & Development ______________________________________ 54 Sales Force and Distribution ___________________________________ 53 Checking your Decisions ______________________________________ 56 6.1 9.7 6.1 6.1 5.5 Semantic Scales & Multidimensional Scaling ____________________ 67 Positioning with Advertising ___________________________________ 74 Positioning through Research & Development __________________ 75 Research & Development ______________________________________ 77 Repositioning Strategies _______________________________________ 72 8.

Data Transfer ___________________________________ 120 Research & Development ___________________________ 123 Manufacturing __________________________________ 124 Errors and Warnings _____________________________ 124 Default Decisions _______________________________ 125 Technical ______________________________________ 125 v .

Table of Illustrations Figure 1 – Sample Markstrat Online ID card ____________________________________ 2 Figure 2 – Markstrat Online overview __________________________________________ 9 Figure 3 – Open session assistant – Source selection __________________________ 11 Figure 5 – Open session assistant – Industry and team selection _______________ 13 Figure 4 – Open session assistant – Authentication ____________________________ 12 Figure 6 – Close session assistant – Target selection __________________________ 14 Figure 7 – Sonite main physical characteristics ________________________________ 19 Figure 8 – A typical list of marketed brands ___________________________________ 20 Figure 10 – Inventory and production plan versus market demand _____________ 28 Figure 9 – Vodite main physical characteristics________________________________ 20 Figure 11 – From retail price to unit contribution _____________________________ 30 Figure 12 – Available market research studies ________________________________ 32 Figure 13 – Company results – Company performance ________________________ 38 Figure 14 – Brand results – Brand Contributions_______________________________ 39 Figure 15 – R&D – Project list ________________________________________________ 40 Figure 17 – Brand Portfolio decision screen ___________________________________ 48 Figure 19 – Market Research Study decision screen ___________________________ 52 Figure 16 – Markstrat Online Main Screen _____________________________________ 47 Figure 18 – Production. Price & Advertising decision screen ___________________ 50 Figure 20 – Sales Force and Distribution decision screen ______________________ 54 Figure 21 – Research & Development decision screen _________________________ 55 Figure 23 – Decisions – Brand management summary _________________________ 57 Figure 22 – Decisions – Overall marketing budget _____________________________ 57 Figure 24 – Decisions – Research and development summary __________________ 58 Figure 25 – Decisions – Errors & Warnings ____________________________________ 58 Figure 26 – Semantic scales study: Ideal values and brand perceptions _________ 69 Figure 27 – Relationship between attributes and semantic scales ______________ 70 Figure 28 – Perceptual map __________________________________________________ 72 Figure 29 – Relationship between attributes and MDS perceptions _____________ 72 Figure 30 – Interface with R&D department ___________________________________ 81 vi .

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and Hubert Administration and Professor of Marketing at INSEAD.Introduction Markstrat Online is the latest version of the MARKSTRAT simulation. you will run the risk of viii . Markstrat Online is a highly effective tool to learn strategic marketing concepts. If you do not read it carefully. Similar to a flight simulator. No previous computer experience is beginning your course. Heineken Professor of Marketing at INSEAD. The Claude Janssen Chaired Professor of Business traditional training methods such as conceptual sessions or case studies. this marketing simulation allows students and managers to practice new skills in an intensive time frame and in a risk-free environment before trying them out in their real business environment. and the underlying formulas have been number of students and executives from many universities and organizations. Used in combination with Gatignon. The mathematical model of MARKSTRAT. MARKSTRAT3 and Markstrat Online is based on solid theoretical foundations. as well as operational marketing. extensively tested. Alfred H. such as brand portfolio strategy or segmentation and positioning strategy. These simulations have been used to successfully train a large You and your team will be given a company and product portfolio to manage in a required but it is important to prepare by reading this handbook prior to putting your team at a competitive disadvantage! dynamic and interactive environment. The original MARKSTRAT simulation was developed more than twenty years ago by JeanClaude Larréché.

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finances or any other topic. instructor. Save time by checking the site first. Check the Online Help section of your Markstrat Online Team Software. For these subjects. you should only count on your brains (or those of your teammates …) and your experience. But the Markstrat Online simulation is fairly complex and we know by experience that some topics will require additional explanation. and a response may be available in the If you do not find the response to your question in the FAQs. management. Here are some examples of questions already addressed in the FAQs: • • • • • What is the formula for the Stock Price Index? How are default decisions calculated? Is Markstrat Online compatible with Windows Vista? Can you explain the position of circles on the growth-share matrix? Etc … x . If you have questions below. regarding this handbook or the simulation we suggest that you follow the steps order to research General Information or view the FAQ section. please contact your requests from thousands of students.Questions & Technical Support We have done our best to make this manual as clear and complete as possible. Do not contact STRATX directly as we are not equipped to handle Responses to frequently asked questions do not address specific team situations and do not provide advice or hints on strategy. marketing. in may have already asked a similar question. Other students FAQs.

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Pfizer. or e-Strat. Exxon. 500 business schools.About STRATX disciplines from leading business schools. Moreover. our R&D team has designed and developed a portfolio of world-class business simulations. Jean-Claude Larréché. North America and Asia. used in the L’Oréal E-Strat Challenge since With offices in Europe. team project work and a host of other traditional and online learning opportunities. our aim is to help managers boost performance by developing marketfocused strategies and turning them into action. interactive concept discussions. Founded by INSEAD Marketing Professor. xii . including MARKSTRAT3. our approach to achieve results. used in over 1999. Novartis and Boeing. Hewlett-Packard. Over the past sixteen years. STRATX offers training solutions that include advanced business simulations. STRATX consultants design and deliver market leadership seminars for clients such as General Electric. STRATX is a unique training and development group that brings together mobilizes a group of individuals behind a common goal with a common language Our methodology is based on our belief that new skills must be learned through action and experience rather than from books or lectures. management consultants and learning design specialists.

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1. • • • Purchasing your own copy of this handbook and registering on our web site. The tasks to perform are listed below and are explained in more detail in the following pages. Registration and Software Setup You will have to go through a number of administrative steps before you are able to make your first set of decisions with Markstrat Online. 1. The username and password that you have software. 1 . Testing your installation and discovering the Markstrat environment with the PRACTICE industry. process will allow you to be uniquely identified in the chosen at registration will authenticate you when using the Markstrat Online Registration is absolutely mandatory.1 The Registration Process Why register The usage of Markstrat Online is strictly reserved to registered students. Please read carefully the following pages as it is important that you perform these steps in the appropriate order and at the right time. for several reasons. The registration Markstrat Online remote database. Downloading and installing the Markstrat Online team software.

All data exchange will security reasons. take place over the Internet. through a remote database server. you will have to be fully authenticated before you are allowed to transfer data to or from the remote server. The original username and password are valid for 1 year. …).• As explained in chapter you will have to exchange data back and forth with your instructor during your Markstrat Online course. how the latest emails to all registered students. The hardcopy of this . how to better perform in the Vodite market. your professor can easily send news (when will the next decision round start or finish. dedicated to professors. The license is only valid for the course you already registered for and cannot be used for any other course.Passado 7264 A3225 SX-OBJC-AQHD-26MC-OXMI JUPITER A 3852 Figure 1 – Sample Markstrat Online ID card 2 . Front Back Antonio. handbook includes a sealed envelope with your personal Markstrat Online ID Card KEEP YOUR PERSONAL MARKSTRAT ONLINE ID CARD IN A SAFE PLACE. to keep you informed of the latest course results look like. For obvious • The Markstrat Online web site includes a Course Management facility. Using this facility. How to register The first step is to buy your own copy of this handbook. If you are not a registered user. you will not receive these emails and you might miss some important information.Example only (see Figure 1).

The license number printed on the front of the card is unique. It is required to register on the Markstrat Online web site. If you purchased an e-copy of this or via email. handbook you will receive the unique license number either from your professor The second step is to visit www.markstratonline.com, to select the Registration

section and follow the instructions carefully. You will be asked to choose a license number is printed on your ID Card and the Course ID should be given to you by your instructor. If you do not yet know your course ID, leave the cell blank and continue; you will be allowed to enter it later.

username, password and to enter your course ID and your license number. The

of this information is to write them down on the back of the ID Card, as shown on

A MARKSTRAT course will usually last several weeks, the best way to remember all

the sample card in Figure 1. The additional fields; Industry ID, Team ID and Team

Password will be explained in chapter 2.

1.2 Downloading and Installing the Team Software
How to download the setup file
type in your username and password in the Login section dedicated to registered manual, to download the setup file and to browse Frequently Asked Questions. To download the software, visit our web site at http://www.markstratonline.com, users, and select Downloads. You will find a series of hyperlinks to download the

Click one of these links to initiate the download. Your browser may ask you whether you want to execute the file transfer directly from the site or save it to disk. Select the save to disk option and save the file on your local hard drive.

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Computer Requirements
software is the following: • • • • • The minimum computer configuration required to operate the Markstrat Online

Pentium-based processor with 16 megabytes of memory; Hard disk with at least 20 megabytes of available storage; Internet connection (only during authentication and file transfers); Windows 95, 98, Millennium, 2000, NT4 or XP and Vista. Internet Explorer 6.0 and above.

Installing the Software
You should now have on your hard drive a self-installable setup file named

Markstrat-Online-Team-Setup-VXX.exe. Double-click on this file to start the setup procedure. A window entitled Welcome to the InstallShield Wizard for Markstrat Online pops up. Click on the Next button to continue the setup procedure.
A window pops up allowing you specify in Online should be installed. The default which folder Markstrat

folder is shown on the right. We

strongly advise you to use this default folder as it will make your life easier and reduce the risk of errors. For instance, reading the FAQs will be simplified as we Markstrat Online in another folder, click on the Browse… button. will always refer to the default installation folder. If you need to install The actual installation starts when you click on the Next > button. All files are copied into the folder which you specified. Two of these files are registered automatically in the Windows registry.

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The setup utility creates a shortcut called Markstrat Online Team on your desktop. Double-click on this shortcut to launch the application.

1.3 The PRACTICE Industry
environment. All registered users can download a sample data file called You can now test your installation as well as your knowledge of the MARKSTRAT PRACTICE. Refer to chapter 2.2 for these download instructions. The PRACTICE file is an actual data file, obtained during a past Markstrat Online course. You will However, you will not be able to check the results of your decisions as the PRACTICE file will not be run through the MARKSTRAT mathematical model. be allowed to browse through all charts and graphs and to make decisions.

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e.2. The Interface Menu The overall structure of the Markstrat Online team software is described in section to the administration of the course.3 of this manual. and it finishes when you submit a new set of decisions to the Instructor. Here are a number of questions that will help you find the best possible organization. During your course. to the communications that will take place between you. or depending on You and your teammates will have to decide on how to organize your work. • • • Will you work non-stop on your MARKSTRAT exercise for 3 hours from start to finish? Or will you spread your work over several days? geographically dispersed? Will all team members meet when they make decisions? Or are you Will all team members make decisions all together? Or will you assign making decisions on his or her own? responsibilities (R&D? Production. depending on the constraints set by your instructor. which is related time you are ready to devote to your MARKSTRAT exercise. your teammates and the Instructor. The typical duration of a decision round is from 2 to 4 hours. i. This chapter focuses on the Interface menu. Finances …) to team members. usually 6 to 12 rounds. 6. each • Will you always work on the same computer? Or will you share your time between a computer in the University lab and your home computer? 7 . you will go through a number of decision rounds. A decision round starts when you receive the latest simulation results. The Markstrat Online software includes features to handle many possible situations.

However. 2. For security reasons. All data called the Markstrat Online server. you will see that the team file can be duplicated on 8 .• Will you always have a good internet connection? Or will you have to work on your MARKSTRAT exercise while being on the road? In future sections. you will have to be fully authenticated before you are allowed to transfer data to or from the remote server. exchange will take place over the Internet. through a remote database server. All teams must exchange data back and forth with the instructor during the course. and we will then explain various organization strategies. There is only same decisions. one file per team as all members of the same team share the same results and the several computers if two or more teammates want to work in parallel.1 Markstrat Online Overview Figure 2 shows an overview of the Markstrat Online structure. we will explain how to handle these different situations. The data to be exchanged are the simulation results and the teams’ decisions. This data is located in a file called team data file or simply team file.

…) and duplicated on several computers. flash USB 2. disk. operation must be done just before running the simulation model. to produce a In between these two instructor’s operations. This new set of results.2 Opening a Markstrat Online Session A decision round is composed of one or several working sessions with the Markstrat Online software. You could make a detailed analysis of your results on 9 . drive.Figure 2 – Markstrat Online overview Your instructor is in charge of putting your team file onto the Markstrat Online server at the beginning each decision round. tape. so that you have access to the latest simulation results. The instructor is also responsible for taking your team file back from the Markstrat Online server. at the end of the decision round. You will see in the next section that the team file can be downloaded from or uploaded to the Markstrat Online server. saved on your hard drive. you and your teammates are in charge of your team file. on your LAN or on a removable storage (zip drive.

As this assistant is easy to use Which team file to use Select Open session in the Interface menu to initiate the session. at the end of a previous working session. The window shown in Figure 3 pops up. make R&D and brand portfolio decisions on day 2. made some decisions and uploaded the file back to the server.E. The file is located in the folder “My Open a team file located on your hard drive.I. provided by your instructor.day 1. on your LAN or on a removable storage. Download the PRACTICE file from the Markstrat Online server. you will not be able to check the results of your decisions as the PRACTICE file cannot be run through the MARKSTRAT mathematical model • Download your team file from the Markstrat Online server. All registered users can download a sample data file called PRACTICE. make marketing mix decisions on day 3 and finalize everything on the day 4. With this option. Indeed.O. Three choices are available. you will be able to open a team file when you close your session. Select However. You will be allowed to browse through all charts and graphs and to make decisions. You also need to download the file if you or one of your teammates has already downloaded the file. obtained during a past Markstrat Online course. . we only discuss the most important steps here.U or Y). through the beginning of your working session.zip where INDUSTRY is the Markstrat Online files” in your “My documents” main folder. • this option if you want to test your installation or to discover the MARKSTRAT environment. You need to download your team file from the Markstrat Online server at the beginning of each decision round. The Markstrat Online software includes an Open Session assistant to guide you and self-explainable. The file you will receive will contain the most recent simulation results. Your team file is named INDUSTRY-TEAMX. • name of your industry (A. your team file is saved automatically on your hard-drive but you also have the choice to upload it back to the Markstrat 10 that was saved locally.

markstratonline. The software will connect to the Markstrat Online remote database server and check your identification. a special page is T If you do not remember your password. devoted to lost usernames and/or passwords. you will be able to retrieve your personal data. note that you must be connected to internet before trying to authenticate. Enter the username and password that you choose upon registration and select Next.1 of this manual. either to download or to upload your team file. for example.com and in the Student Login section. you can go to our web site 11 . Please. with the license number printed on your Markstrat Online ID Card. please refer to section 1. LAN or removable storage. and/or to save a copy on another local resource. Figure 3 – Open session assistant – Source selection Authentication This step is required each time you connect to the Markstrat Online server. www. Markstrat Online server is reserved to registered students. access to the registered. If you are not yet The window shown in Figure 4 pops up. For security reasons.Online server.

Figure 4 – Open session assistant – Authentication If you are working on your own computer, you can check the option Remember

the password. Your password will be stored locally and you will no longer have to key it in. Beware; this option should not be used on shared computers.

Industry and Team Selection
This step is required to download your team file from the Markstrat Online server. You must indicate your industry ID, your team ID and, for confidentiality reasons, 5 and select Next. your team password. Type your ID’s and password in the window shown in Figure

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Figure 5 – Open session assistant – Industry and team selection These three pieces of information will be given to you by your instructor, most ID CARD, as shown on Figure 1.

likely during class or by email. Please, write them down on your Markstrat Online

2.3 Closing a Markstrat Online Session
through the end of your working session. As this assistant is easy to use and selfexplainable, we only discuss the most important steps here. The Markstrat Online software includes a Close Session assistant to guide you

Saving your team file
Your industry file is saved automatically each time you modify your decisions and click OK. Thus, you can interrupt your work at any time and restart it without Figure 3 and reopen your team file. being connected to the Internet. All you have to do is select the third option of

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Closing your session
Select Close session in the Interface menu to finish the session. The window at the same time. • shown in Figure 6 pops up. Two options are available; they can be both activated

upload your team file each time you modify your decisions so that your

Upload your team file to the Markstrat Online server. You should

teammates, your instructor or yourself can retrieve the file later. If you are not connected to internet, you can save a copy of the file locally, open it later and upload it when you have a connection. • Save a copy of your team file on your hard drive, on your LAN or on a instance, if you want to move your team file onto a computer not removable storage. This option is useful in several situations. For

connected to internet. In this case, you can save a copy of your team file use this storage on another computer.

on a removable storage (zip drive, disk, tape, flash USB drive …) and then

Figure 6 – Close session assistant – Target selection Note that if you select only the second option, your team file will not be saved on

the Markstrat Online server.

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upload your team file to the Markstrat Online server.e.Authentication The authentication step is mandatory only if you select the first option. Refer to page 11 for more 15 . i. if you info on the authentication step.

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3. Overview of the MARKSTRAT World
3.1 Your Role
You and the other members of your team have just been recruited by a large corporation to manage the marketing department of one of its divisions. Coming the coming years, you will compete with several other firms to market two types of durable goods to consumers. During this exercise, you will be responsible for In particular, you and your team members will have to: • • • • • • • from a different industry, your team has no experience of the MARKSTRAT world. In

formulating and implementing the long-term marketing strategy of your division.

target selected segments and position your products in a highly competitive market; interface with the R&D department to design and develop new products; prepare the launch of new products, improve, maintain or withdraw existing ones; interface with the Production department to specify production planning; make marketing mix decisions, such as pricing or advertising budget, for each brand in your portfolio; decide on the size and priorities of your sales force; order market research studies that provide up-to-date information for decision making.

3.2 Overview of the MARKSTRAT World
inhabitants whose monetary unit is the MARKSTRAT dollar ($). In this country both inflation and GNP growth are fairly stable, and no major political, social or 17 The MARKSTRAT world is a fictitious industrialized country of 250 million

economic event is anticipated in the near future. The MARKSTRAT world does not

intend to represent any particular country, market or industrial sector. However, marketing knowledge that you have acquired through business experience or formal education applies to this new world.

it roughly behaves like most markets, and the general management and

manufacture and market consumer durable goods. These goods are comparable as office equipment, cars, books, or any other consumer durable goods. With

In the MARKSTRAT world, there are a handful of competing companies that

to electronic products such as hi-fi systems, telephone sets or computers as well most scenarios, each firm starts in a different situation in terms of product specification, target customer groups, brand awareness levels, market share, distribution coverage, profitability, R&D expertise, etc. Consequently, the

marketing strategy of each firm should be adapted to its particular situation

within the industry. However, Markstrat Online includes a few scenarios where all scenario and your instructor will let you know if you are using them.

firms start in the exact same situation. These scenarios are called competition

Nevertheless, no firm has a relative advantage over the others and initially many characteristics are common to all firms. For instance, the initial brand portfolio of all companies is comprised of two brands. As mentioned before, each firm will have the opportunity to design and develop new R&D projects and to introduce

new products or upgrade existing ones. All R&D departments have the same capabilities to develop new projects, in their range of experience. Similarly, all sales forces are equally qualified to handle distributor relationships.

3.3 Sonite Products
Sonite products have existed for several years and the market has grown quite At the beginning of the simulation, all rival firms market two Sonite brands. consistently since the introduction of the first Sonite brand. It is now a wellwide range of needs. Analysts believe that the Sonite market will continue to grow over the next five years.

established market, with several strong brands at different price points covering a

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A Sonite is a complex piece of equipment made up of several components. primarily differentiated in terms of the five most important

Although they can be evaluated along more than fifty attributes, Sonite brands are characteristics listed in Figure 7. The base cost is also an important parameter; physical

this is the cost at which each unit will be produced, based on an initial production

batch of 100,000 units. The base cost is decided jointly by the Marketing R&D department –which is mainly concerned with product feasibility. Only the following characteristics will be considered during the course of the simulation:

department –which is mainly concerned by margin and profitability– and by the

Characteristic Unit Feasible range Weight Kilogram (kg) 10 – 20 Design Index 3 – 10 Volume Cubic decimeter (dm³) 20 – 100 Maximum frequency Kilohertz (kHz) 5 – 50 (refers to the band width) Power Watt (W) 5 – 100 Base cost $ 10 + Figure 7 – Sonite main physical characteristics Note that design is not related to the product esthetic but to the type of raw

materials used (wood, plastic, metal ...) or to the aspect of its various easier-to-use than one rated 4 on the same scale.

components. Therefore, a product rated 8 on the design scale is not better or

All brands marketed in a given period will be listed in the corresponding Newsletter, in a table similar to Figure 8.

3.4 Vodite Products
Recently, there has been industry speculation that a new type of electronic product might emerge, the Vodite. Although no Vodite brands are available at the start of the simulation, industry experts have a pretty good idea of what future Vodite products might resemble.

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all firms will have to engage substantial R&D resources in order to develop their first million dollars may be required for each Vodite. Furthermore. Although the Sonite and Vodite technologies are similar. your division and your competitors are the most likely is similar for both markets in terms of technology. recent calculations suggest that an investment of about 10 Figure 8 – A typical list of marketed brands Experts tend to agree that the main physical characteristics of a Vodite will be the ones described in Figure 9. marketing and suppliers of Vodites. Vodite product.Vodite products will satisfy entirely different needs from that of Sonite products so that demand for the two products will be completely independent. The expertise required of potential suppliers distribution. they will not be complementary in any way and there will not be any substitution from one to the other. Finally. manufacturing. Characteristics Unit Feasible range Autonomy Meter (m) 5 – 100 Maximum frequency Kilohertz (kHz) 5 – 20 Diameter Millimeter (mm) 10 – 100 Design Index 3 – 10 Weight Gram (g) 10 – 100 Base cost $ 10 + Figure 9 – Vodite main physical characteristics 20 . Therefore. it is anticipated that the Vodite market could be quite attractive if the right products were made available at the right price.

. The second letter identifies the firm marketing the brand and must be a vowel (A. they are quite price-sensitive. They are extremely knowledgeable about Sonite were probably among the first to use Sonite products. The selected name has no influence on the market response to the brand. I. Market research studies show that the Sonite market can be and purchasing behavior. Finally.6 Sonite Customers Sonite customers are adults who purchase the products for personal or professional use. the last two characters can be letters or numbers. since they use Sonite and other similar products. and must have different names.. E. I.5 Naming Conventions In Markstrat Online. and brand VAIN would be a Vodite marketed by company A. divided into five major groups of customers. 21 . brands SIBI and SIRO would be Sonites marketed by firm I.3. 3. E. However. Buffs performance products. freely chosen by each firm to generate different brand names. having similar needs • Buffs (Bu) – People in this segment show a high level of interest in Sonites technology and the different characteristics of the existing brands. or segments. and can be S ↑ I ↑ B ↑ I ↑ Product type S = Sonite V = Vodite Firm marketing the brand A. brand names are made up of four characters. Freely chosen letters or numbers For instance. . U or Y). All new brands must follow these conventions. O. but are less concerned by the convenience of the products. The first letter must be an 'S' for a Sonite or a 'V' for a Vodite. They demand high- products for their personal use and do not necessarily have high incomes. as shown in the figure below.

They demand average levels of both performance and convenience in and are quite price-sensitive. most customers have similar needs. This is explained in and by the intensity of marketing effort targeted at each segment. low-performance products with average composed of several sub-groups. which they can afford. high-performance and easy-to-use products. from one group to the other. they use Sonite products for personal purposes • Professionals (Pr) – Individuals in this segment may use Sonite products for both personal and professional reasons. They can afford expensive products and often view price as an indication of • High earners (Hi) – This group is characterized by their high incomes. Although this segment is the largest and is are looking for cheap. and that their using Sonite products on a private basis. As a consequence. they are looking for high quality. they demand performance and convenience from the products. high as the other segments. Sonite products. Experts believe that the penetration of this segment is not as exceed forecasts. quality. Market forecast studies show that the sizes and Awareness levels and purchase intentions vary significantly for existing products growth rates of the five segments are significantly different. Although they tend to use their Sonites less than the average consumer. Singles live alone. buy fairly expensive products. • Others (Ot) – This segment includes all consumers who do not belong to any of the above groups. 22 . Like Buffs. Studies show that they usually purchase is partially motivated by social status. by the varying product offerings. its future growth rate could Each segment has specific needs in terms of physical characteristics and price.• Singles (Si) – As the name of this segment indicates. As a consequence. They convenience. part by the development stage of each segment.

Their 3. Although this segment will probably be the largest one in the early days. They have an average income level.3. products as quickly as innovators but will certainly do so before a majority larger than the previous one. Because they perceive more risk in buying new products.These individuals represent the bulk of potential consumers. • Followers (Fo) . Early adopters tend to be opinion leaders and helpful in 'advertising' the new product to other potential buyers. However. and should not be neglected by marketers. tried it. People in this segment tend to be adventurous and are willing to try new ideas at some risk. Innovators and early adopters particularly influence followers. they adopt a product innovation only after a large number of consumers have income level is usually below average. three groups might be considered for Vodites. its influence on other consumers is fairly of people have accepted the new technology. a different segmentation scheme is likely to be valid for Vodites. but marketing experts believe that it will be more light.8 Distribution Channels Sonite consumers tend to shop in the following three distribution channels and the same is likely to hold for Vodites: 23 . Further studies need to be completed. it represents only a small percentage of the total potential consumers. As this group is usually much high.7 Vodite Customers While potential consumers for Vodites are the same individuals as those who buy Sonites. effective to group consumers according to how they adopt new products. They are critical to the adoption process. In this • Innovators (In) – These consumers will be the first users of Vodite products. they demonstrate both a high desire • Early adopters (Ad) – Consumers in this segment will not adopt Vodite and interest for Vodite products and their income levels are above average.

the level of service merchandisers carry many different product categories. the low level of service may well prevent them from distributing Vodites in As far as the Sonite market is concerned. Because of their high level of technological channel for Vodite products. While mass basis and try to minimize overheads. including the most expensive and/or highperformance products. They provide extensive customer service. market research studies show that all three distribution channels are important. These stores usually carry a broad product line for each category. As they do not organized chains. As a consequence. specialty stores are likely to be the preferred distribution • Department stores – Department stores are characterized by the wide product assortment they offer. There are approximately 30. Sonite products account for a large proportion of their sales. They usually have a department carrying Sonites. Their lack of technical expertise and the early years. 7.000 department stores belonging to 15 different chains. low-performance products. therefore each of them should be visited by the companies’ sales forces. the depth of each product line is usually restricted to a few units. Department stores are often • Mass Merchandisers – These stores operate on a low-price.• Specialty stores – These stores are usually small and do not belong to provide a high level of service and technical support. These margins are applied to retail prices and are approximately constant across brands 24 . high-volume offered is lower than that of the two other channels. They are geographically close to their customers and can distribute many different product categories. stores. They often distribute the cheaper. expertise. expertise is lower than that of specialty stores. but their technological organized in chains that have a degree of power in negotiating margins with manufacturers.000 Differences between margins obtained by the stores in each of the three channels are mainly due to differences in the level of service and volume sold.000 specialty mass merchandisers belonging to 8 different chains. and 10.

30% for department stores. and 30% for mass merchandisers.stores. for a given channel. In MARKSTRAT the distributor margins are: 40% for specialty 25 .

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You will have to decide the overall orientation of the company regarding: • the product portfolio strategy – which brands the company is going to develop and market. quality of R&D projects successfully completed. Managing Your Firm The Marketing department for which you and your team will be working is division. • the segmentation and positioning strategy – which market segments will be targeted and how products will be positioned. you should try to get a feel for the behavior of the 27 . the best measure of your above indicators into account. Before market. brand market shares. • the marketing mix strategy – the day-to-day operational marketing responsible for the design and implementation of the marketing strategy of your You will manage the Marketing department as a profit center. etc. To reach more robust situation and past competitive behavior. your ability to grow the firm revenues.4. Finally. a measure that takes all of the This chapter describes the decisions you will have to make each period. decisions such as pricing. use the information from market research studies to analyze your making dramatic changes. production. Do not jump hastily to conclusions and bear in mind that obvious solutions may be based upon an incomplete analysis. performance will be measured by the following indicators: net contribution company's success will be its stock price index. communication and distribution. and your generated. decisions.

the actual production level for each product is automatically of the production plan submitted by Marketing. without any penalty.4. adjusted in response to actual demand for that product. are not concerned about manufacturing investments. The units produced are charged to the Marketing department only when they are sold to distributors. and can thus be viewed as a highly flexible external supplier. 28 . you are completely free to increase or Production department will always manufacture the required quantities in the best possible conditions. within plus or minus 20% for varying situations of inventory. you are responsible for submitting a production plan for each of your marketed brands. As a consequence. In the case of a relatively unsuccessful brand you may also decide to decrease the inventory. Figure 10 gives a few examples numbers are in units).1 Production Each period. production plan and market demand (all A B C D 8 000 8 000 25 000 0 Beginning Inventory 100 000 120 000 100 000 80 000 Production Plan 112 000 154 000 95 000 54 000 Potential Sales 104 000 144 000 80 000 64 000 Actual Production 112 000 152 000 95 000 54 000 Actual Sales 0 2 000 0 0 Lost Sales 0 0 10 000 10 000 Ending Inventory Figure 10 – Inventory and production plan versus market demand The flexibility of the Production department goes beyond automatic adjustment of production plans. The price paid to production is called the transfer cost. The In a given period. you utilization. fixed costs or capacity decrease the production planning of a given product. From one period to the next. it incorporates all costs associated with this high level of flexibility. by selling all or part of it to a trading company. The Production department is working for several divisions of your company.

4.including depreciation and fixed costs. It varies by distribution channel since different margins hold in each of the three channels.2 Pricing marketed brand. on average. 29 . as explained in section 3. The transfer cost of a given product increases with inflation. However. On the other hand. applies to discounted prices. mass merchandisers' margins are lower than those of the other two channels because the percentage margin margins and discounts. you must set the recommended retail price for each selling price is the price at which you sell your product to distributors. it decreases over time because of experience effects and economies of scale. and inventory-holding costs are charged to the Marketing department. The retail price is the list price for consumers. As a rule of thumb. you can expect the transfer cost to be reduced by about 15% each time the cumulative production of a given product is doubled. The average In Markstrat Online.8. mass merchandisers use promotions or special offers to sell products that. Units produced in excess are kept in inventory. As a consequence. Figure 11 provides a summary of retail prices. are equivalent to a discount rate of 10% off the list price. Inventory costs per unit are calculated as a percentage of the transfer cost that can be found in the Newsletter. in absolute terms. Specialty and department stores tend to respect the recommended retail prices set by the firms.

companies have devoted on average 7% of their total communication expenditures to advertising research. an excessive price increase is usually not accepted by 30% in one period are highly discouraged as they often result in negative market consumers who may react strongly and stop purchasing the brand. media selection. A message will warn you when such decisions are made. the recommended retail price will be automatically adjusted up or down to stop such adverse reactions. therefore the recommended retail price must be set so that the lowest selling price of a product is higher than its transfer cost. This finances the creative work. or other activities conducted by advertising agencies which improve the quality of your message. On the other hand. If you ignore the warning. This budget will be used to purchase media space and time. First.Recommended Retail Price = $ 400 Specialty Department Mass Stores stores Merchandisers $ 400 400 360 Actual retail price % 40% 30% 30% Distribution $ 160 120 108 margin $ 240 280 252 Selling price $ 123 123 123 Transfer cost 117 157 129 Unit gross contribution $ Figure 11 – From retail price to unit contribution Dumping is strictly forbidden in the Markstrat Online world. you should determine the advertising budget allocated to each brand. In past years.3 Communication You must make several communication decisions each period. Finally. Second. and your salespeople may have a hard time finding distributors for the brand. 4. On one hand. Advertising research will usually make your advertising more effective. price increases or decreases greater than reactions. and is especially important when you introduce a new brand or when you want to reposition an 30 . you must specify the budget allocated to advertising research. an excessive price decrease will result in a proportional cut in the distributors’ margin.

the advertising agency will select the most appropriate media vehicle for the targeted segments. Salespeople may be reallocated from one distribution channel to another at no cost. for instance. Third. Hiring or firing costs will be increases or decreases. All studies are ordered at the beginning of a period and are conducted by a specialized research end of the period. you must instruct them on how to allocate their time and efforts across the various brands in your portfolio.3 is devoted to 4. firm during that period. However.5 Ordering Market Research Studies One of your decisions will be to order market research studies. The results are delivered with your annual report at the 31 . or how powerful another one is. weak a given brand is. higher percentages are recommended (in the range of 15 to 20%). 4. you must define perceptual advertising objectives for each brand. how brand positioning through advertising and explains how to set perceptual objectives. In these last two instances. each group is specialized to focus on the stores of a single distribution channel. This way. Section 7. The marketing department must specify the number of salespeople in each group. you are required to specify which segments should be targeted with your advertising.existing one.4 Sales Force Your sales force is organized in three groups. Finally. This enables you to convey a perceptual message and emphasize. automatically charged to your department when the total number of salespeople Each of your sales representatives carries the entire line of products marketed by your firm.

• Consumer survey • Consumer panel • Distribution panel • Semantic scales • Multidimensional scaling • Competitive sales force estimates • Industry benchmarking • Advertising experiment • Sales force experiment • Market forecast • Competitive advertising estimates • Conjoint analysis Figure 12 – Available market research studies All of the studies you purchase can be available on paper and/or on screen. Making R&D decisions is a crucial task because: (1) existing products When launching a new R&D project.3. projects.6 Research & Development The Marketing department is responsible for initiating research & development will probably have to be improved during their lifetime to suit the changing needs of consumers. including the target transfer cost. The list of available studies is given in Figure 12 and all studies are detailed further in section 5. You must also allocate a budget to each project. Vodite market.5 is devoted to the interface between the Marketing and Research 32 . The R&D department is responsible for conducting the actual research & development & Development departments. The information provided is relevant to the market situation during the analyzed period. (2) new products may have to be designed in order to target untapped segments in existing or new markets. Section 7. with the exception of the market-forecast study. a maximum of 23 different studies may be ordered 4. work. Consequently. All studies except Industry benchmarking apply specifically to either the Sonite or each period. the Marketing department must specify the desired characteristics for the new or improved product.

effectively subsidize your division if you are not generating sufficient contribution In general.000. being equal to maximum level above which resources are reallocated to other divisions of the 40% of the net contribution generated in the previous period.000 and $20. you should not necessarily spend your entire budget in every situation. Note that if your objective is to maximize your return on investment. you may be granted a large budget.000.000. However. expenses will be automatically cut. there is a minimum budget level for each period. exceeds the allocated budget for a period. You will have to work within this given budget! If total spending starting with advertising expenditures. the marketing department is allocated a budget to cover its expenses as shown in the table below: ADVERTISING • Advertising Media • Advertising Research SALES FORCE R&D MARKET RESEARCH • Study Costs • Operating Cost • Development Budgets • Hiring & Training Costs • Firing Costs Your marketing budget is linked to the success of the department. spending it completely might be a waste of money. whereby headquarters may internally so your division can continue operations. however. If you perform outstandingly. 33 . your budget for each period will be between $7.4. Similarly. there is a company to maximize the return on investment at the corporate level.7 Marketing Budget Each period.

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contributions. Various costs relative to the market research studies. all competing firms have access to the same Industry Newsletter. Newsletter.5.e. Economic variables and costs (page 90) – The evolution of economic variables 35 . Stock market and key performance indicators (page 89) – This section indicators such as: market shares.1 Industry Newsletter The Industry Newsletter provides general and financial data on the industry. you will be making decisions for period 5 based on the annual report of period 4. i. The annual report is composed of three separate documents: the Industry 5. we suggest that you refer to the sample annual report in chapter 9 of this manual. on the competing firms and on marketed brands. For instance. the Company Report and the Market Research Studies. This is publicly held information. stock price indices and such as the inflation rate and GNP growth rate are highlighted in this part of the Newsletter. depending on the availability of Vodite brands. All numbers are given in absolute values and shows the percentage change from the previous period. and inventory are also provided. The Newsletter consists of three or four sections. sales. salespeople. Understanding Your Annual Report You will receive your annual report at the beginning of each decision round. provides comparative charts with various financial and marketing performance return on investment ratios. While reading this chapter. This report provides you with the results of the period that just ended.

The company report is comprised of the following five sections. Company results (page 94) – The Company Scorecard is included in this investment ratios. sales. 36 Figure 13. with the exception of data given in the Industry Benchmarking study. the volume sold and the retail sales of all Sonite products. stock price index and return on change from the previous period and show the percentage change since period 0. All numbers are given in absolute values.2 Company Report The Company Report provides confidential company information. for any Vodite products on the market. and it indicates which brands have been recently improved upon or introduced. This chart is a simplified Profit and Loss statement for your company. Volume and retail sales are given in absolute values and shows the percentage change from the previous period. show the percentage This section also incorporates the Company Performance statement. . illustrated in the basic financial elements are explained next. • • • • • Company results Brand results Research & Development results Cumulative results Decision summary section. Information on Vodite market (page 92) – The same data as above is provided 5.Information on Sonite market (page 91) – This section details the physical characteristics and price of all marketed Sonite products. It also provides the market shares (in units and in dollar value). contributions. You and your team members are the only ones who have access to the information disclosed in your company report. It provides various financial and marketing performance indicators such as: market shares.

provides financial elements for each marketed brand.Brand results (page 96) – This section provides the Contribution by Brand chart. the number of stores carrying the brand. and its distribution coverage. detailed in Figure 14. Research & Development results (page 98) – This section provides the list of marketing are provided in this section. i.e. Cumulative results (page 99) – Cumulative results on sales. 37 . Company performance results are also provided in the same format as the one illustrated in Figure 13. In period 0. as explained in the table all R&D projects launched in the previous periods and provides the following details for each project. it below. production and for all of the brands introduced and marketed since that time. sales force management. Decision summary (page 100) – This section recalls the decisions that your team made at the beginning of the current period: brand management. the previous management team made these decisions. It includes cumulative data since period 0. R&D projects and the market research studies purchased. Figure 15 shows a list of R&D projects and additional explanations on how to read this chart. This section also shows the total market share of each brand. This chart is similar to the Company performance chart.

Average retail price – distributors' margins. Loss incurred when selling inventory to a trading company. Number of units manufactured by the Production department. minimum = M$ 7. Units in inventory x Unit transfer cost x Inventory holding cost in %. Revenues – COGS – inventory costs – inventory disposal loss. maximum = M$ 20. Figure 13 – Company results – Company performance 38 . CAM – (market research studies + R&D + interest + ECP). Number of units sold x Average selling price. Exceptional items such as brand withdrawal costs.Units sold Average retail price Average selling price Revenues Units produced Cost of goods sold (COGS) Inventory holding cost Inventory disposal loss Contribution before marketing (CBM) Contribution after marketing (CAM) Interest paid Exceptional cost or profit (ECP) Net contribution Next period budget Number of units purchased by consumers. Average price paid by consumers. CBM – (advertising + advertising research + sales force). Interest paid on loans granted in previous periods. Number of units sold x Average unit transfer cost. 40% of net contribution.

CBM – (advertising + advertising research + sales force).Units sold Average retail price Average selling price Revenues Unit transfer cost Cost of goods sold (COGS) Units in inventory Inventory holding cost Inventory disposal loss Contribution before marketing (CBM) Contribution after marketing (CAM) Number of units purchased by consumers. Number of units sold x Average selling price. Loss incurred when selling inventory to a trading company. Price paid by Marketing to Production for each unit sold. Number of units produced but not sold at end of a period. Number of units sold x Average unit transfer cost. Average retail price – distributors' margins. Figure 14 – Brand results – Brand Contributions 39 . Revenues – COGS – inventory holding costs – inventory disposal loss. Average price paid by consumers. Units in inventory x Unit transfer cost x Inventory holding cost in %.

It indicates the additional budget that must be invested to ensure that the project will be completed in the following period. This on the basis of an initial production batch of 100. The minimum realistic base cost is the cost below which it is impossible to manufacture the future product (at least the first batch of 100. Column 10 (project not completed) – The budget required to finish the project.000 units. This data is given in the relevant units for each characteristic: kilograms for weight. • Columns 7 and 8 – The current and the minimum realistic base cost. etc. Column 10 (project completed) – The period at which the project was completed. but its • successful completion is not guaranteed.000 units). The base cost is the transfer cost at which the future product will be manufactured. You may attempt to finish the project with a lower budget.• • Column 1 – Project name. Figure 15 – R&D – Project list 40 . production processes. the labor required to manufacture the product and the depreciation of investments to be made in • • Column 9 – The total cumulative budget invested so far in the project. and lower than the base cost if the cumulated production is above 100. watts for power. This information is only relevant if the project is not completed.000 units. Columns 2 to 6 – The physical characteristics of the future product. The actual transfer cost minimum cost takes into account the purchase of raw materials.000 units. It is calculated will be higher than the base cost if the cumulated production is below 100. Note that a project may be completed over several periods as explained in chapter 6.8.

e. based on units sold. Respondents are asked to rate each brand along each physical characteristic on a scale from 1 to 7 according to the way they perceive the brand. second chart provides the distribution coverage for each brand in each channel. The following list provides a brief summary of information within each study. the percentage of stores carrying a given brand. a brand rated 2. Industry benchmarking (page 103) – The benchmarking report compiles competitors. The same data is provided in a common format for all companies.3 on the Power scale is perceived as being less powerful than a brand rating 5. The data provided includes sales. (2) brand purchase total sales in units in each distribution channel. the relative size of each segment. in general information from annual reports about each of the MARKSTRAT such a way that would allow you to compare competitive performance. marketing expenditures and other expenses. the relative size of each channel. The study also provides the ideal ratings of each segment for each physical characteristic. For instance. and the market shares. A i. segment who can spontaneously recall a given brand name. 41 . for each brand in each channel. and the market shares. production costs. Consumer panel (page 105) – This study provides the total unit sales for each segment.5. (3) shopping habits – percentage of potential consumers in each segment who prefer to shop in a given distribution channel. based on units sold. (1) the level of brand awareness – the percentage of potential consumers in each Consumer survey (page 104) – The consumer survey provides information on: intentions – the percentage of potential consumers in each segment who intended to buy a given brand.5 on the same scale.3 Market Research Studies You may purchase up to 23 Market Research Studies each period. Distribution panel (page 106) – The distribution panel gives information on the Semantic scales (page 107) – Semantic scales describe how consumers perceive the marketed brands. for each brand in each segment.

or simulation. the estimates are Competitive advertising estimates (page 112) – This study estimates the total advertising expenditures for each competitive brand by segment. by distribution 42 . the weight each characteristic holds in the buying decision. these are less accurate and often turn out to be optimistic. These estimates are based on the current market situation and assume that or decreases will take place in the future. the resulting market based on interviews of potential consumers. It brands on three different dimensions. Additional charts and graphs are available in the simulation.Finally. Further information on Market forecast (page 111) – This study estimates the expected size in units and the growth rate of each segment for the next period as well as in five years time. For instance. Consequently. or significant price increases actions are actually taken by your firm and your competitors. provides the average advertising spending by brand and by firm. map are perceived as being similar. a graph representing the evolution of customer needs since the beginning of the Multidimensional scaling of brand similarities and preferences (page 108 to provides a map showing the similarities and differences between marketed 110) – This is one of the most important studies that may be purchased. depending on what no substantial changes such as brand introductions. two brands located in different perceived as less economical or as more convenient. you can obtain a graph representing the relationship between physical characteristics and perceptions. in total and for Competitive sales force estimates (page 113) – This study estimates the number of salespeople allocated to each competitive brand. one may be perceptual maps and their interpretation will be explained in chapter 7. Two brands close to one another on the quadrants are perceived as being significantly different. it provides the importance of each characteristic. for instance. For the new Vodite market. (This study also each segment). Inversely. size will either be higher or lower. in other words.

For example. if the of adding 10 more salespeople – assuming no change in other competitive increase in contribution for a given brand shows that you would have benefited from allocating more salespeople to this brand. It projects brand Advertising experiment (page 114) – This study estimates the effects of awareness and market share for each of your brands. The resulting change in contribution after marketing is also provided. If for example. An Conjoint analysis (page 115) – This study is rather complex and expensive and number between from 0 to 1 – of various levels for each of the four most is therefore not always made available to students. you may test the impact increased distribution coverage and market share for each of your brands. An increase in contribution for a given brand shows that you would have benefited from a higher level of advertising spending for this brand. advertising budget has been increased by 20% – assuming no change in other Sales force experiment (page 114) – The sales force experiment predicts the number of salespeople had been increased. High utilities.channel and in total. actions. T instance close to 1. the competitive actions. in total and for each channel). for corresponding physical levels. demonstrate high consumer preferences for the 43 . the resulting change in contribution after marketing is also provided. increasing your advertising budget by a given percentage. It provides the utilities – a real important physical characteristics and for each segment. (It also provides the average sales force size by brand and by firm.

44 .

Your team will then make to twelve simulated years. you will be given your firm’s annual software model will compile the data and generate the results of that period. you will make decisions for the next period. After examining this new set of information. the Industry Newsletter and the Market Research Studies that you ordered in the previous period. In the beginning it is important that each team member be involved in the discussion of all issues and that everyone develops a grasp of the business situation. a new Industry Newsletter and new Market Research Studies. The team should start by analyzing this information and agree on a strategy for the company. following this cycle of decisions and results for up 6. Later in the simulation. the market 45 . the team will review the objectives and decide whether to maintain or adapt the strategy. together with the decisions of your competitors. it is essential that you develop a good working relationship within your group. The Markstrat Online At the beginning of each decision round. decisions for the next period. At the end of the decision round. try to avoid the inclination that each member concentrates in his or her area of expertise. These results will be reflected in your next Company Report. Once you have determined your marketing objectives.1 The Simulation Process Company Report. Making Decisions 6. the R&D interface. For these reasons.6.2 Group Dynamics During the first set of decisions. At the same time. the management of the firm will become more complex in terms of the number of brands. everybody will have developed a common understanding of the strategic issues. you will submit your decisions to your instructor.

Newsletter. Each corresponding sub-menu. time for each individual to start concentrating on some specific area of 6. they are labeled: Decisions. In this way. Analysis tools. Finally. Market studies. the group will learn to work efficiently. Market Research Studies. Market studies. These menus provide a comprehensive set of 46 . Report. and the intensity of competition. Newsletter. Interface Decisions. Decision summary. and each of its members will benefit equally from the Markstrat Online experience. with a menu bar at The pop-up menus at the top give you access to the main Markstrat Online menus. Analysis charts. Price & Advertising. Analysis Tools. Errors & warnings and Past decisions. and a main area to display charts. plus a few additional graphs. Period 3 or 4 is usually a good responsibility. standard Microsoft Windows application like Word or Excel. These menus provide the same information graphs and tools to help you analyze the market and competitive offerings. The Marketing plan tool will help you calculate your company net loan. Production. Analysis charts. graphs or decision screens. and Research & Development. Loan schedule and Budget increase or decrease will let you interface with increases.3 Markstrat Online Main Screen The Markstrat Online main screen is shown in Figure 16. Additional summary charts are available to help you used to make decisions: Brand Portfolio. Markstrat Online is a the top. a tool bar just below. Report. This menu gives you access to the five main screens that should be Force & Distribution. contribution based on your current decisions and on sales estimates. New the Bank or with the Corporate finance department to get loans or budget as the printed your annual report.developments. Sales screen can be activated by first clicking on Decisions and by then selecting the make your decisions: Budget.

and backup or restore files locally. introduce new brands and to modify or withdraw existing ones. a decision screen appears that will help you bring a new Sonite and Vodite brand to market. The name of the 47 . The team may Introducing a new brand After clicking on the Introduce new brand button. You should your decisions to the instructor.4 Brand Portfolio Decisions The Brand portfolio decision screen is displayed in Figure 17. This menu is fully documented in chapter 2.Interface. It enables you to develop up to 5 Sonite brands and 5 Vodite brands per period. use this menu to retrieve the latest results from the instructor and to transfer Figure 16 – Markstrat Online Main Screen 6. With this menu you may upload or download files to and from the Markstrat Online remote server.

The R&D project name corresponding to the new product specification must be selected from the completed R&D projects. reference. or it can be selected directly in the list of available R&D projects. you subsequently decide not to launch. Naturally. Note that the specifications of each project can be obtained by clicking The Undo button can be used to remove a new brand added to the portfolio that Undo button to remove it from the Marketed brands list. otherwise. A decision screen appears.new brand must be entered using the naming conventions discussed in section 3.5. a brand introduction. the name of a modified brand does not change. The name of a completed R&D project –giving the technical specifications for producing the brand– must be entered in the column R&D project. click on the Modification button. it would be 48 . Select the new brand and click on the Figure 17 – Brand Portfolio decision screen Modifying an existing brand After selection of the brand to be modified. which is provided for on the View R&D report button.

If but in this case.Modification button. the brand moves to the Withdrawn brands list. Click on the tab of the brand to be displayed and enter your decisions for production. A brand that was marketed in the past and withdrawn from the market may not be reintroduced later in the simulation. withdrawn brand and then click on the Undo button. you are holding a high level of inventory. The brands that you have chosen to market next period are listed Production Enter a production plan based on your sales forecasts for the upcoming period. Select the The Withdraw option removes a brand that was marketed in the previous period. The Undo button can be used to cancel the change made to a brand using the Withdrawing a brand brand to be removed in the Marketed brands list and click on the Withdraw button. The brand will no longer be marketed or distributed to consumers. no automatic adjustment is possible. Vodite brands. you can set the production plan to 0. price. Price & Advertising The Production. and advertising. The production department will adjust your plan by plus or minus 20% to respond to the actual market demand. Select the modified brand and click on the Undo button to retrieve the project on which the brand was based in the previous period.5 Production. Price & Advertising decision screen is displayed in Figure 18. If inventories remain when a brand is withdrawn from the market. 49 . Clicking on the S or V drop-down (top left) switches between Sonite brands and on the tabs at the bottom of the screen. taking into account any units left in inventory. The Undo option enables you to cancel a brand withdrawal. they are sold to a trading company at a given percentage of the transfer cost and a loss is incurred. Select the name of the 6.

corresponds to the price usually paid by consumers. Then. Both budgets must be given in thousands of dollars. The exact percentage can be found in the Newsletter. usually 50 to 80% hence. to purchase media space. the list price of the brand. which will buy it at a given percentage of its value. and the . Price & Advertising decision screen Advertising Advertising research budget. the Price Enter the recommended retail price in dollars. except for shoppers using Figure 18 – Production. This mass merchandisers which practice a 10% discount. to improve the quality and the effectiveness of your advertising. you can decide to sell part of the inventory to a trading company loss incured for inventory disposal is usually between 20% and 50%. allocate 50 Enter the Advertising media budget.Alternatively.

to emphasize the light weight nature of the product). In this case. pick None in the list box of Dimension 2 to indicate that 51 . conceptual session with your Instructor.your advertising budget to the various market segments. You can skip this paragraph until you have reviewed the appropriate chapter 5. Finally. the range is from 1 to 7. the the scales based on the multidimensional scaling study. dimensions can be selected in boxes Dimension 1 and Dimension 2. proportion of the budget targeted to each segment. your chosen levels objective for each desired position on each dimension must be entered.3. Then. For the semantic scales. by indicating the 100%. these numbers should be These perceptual objectives convey primarily qualitative information for the design of the advertising platform and copy (for example. Just click on the scale of your choice: MDS dimensions or Semantic scales. The communication may also be focused on a single dimension (a unique selling the communication is on a single dimension indicated in the box of Dimension 1. with one decimal point. or until you have read and understood If the advertising objective is simply to raise brand awareness without changing the perception of the brand. as explained in section 7. This is a complex decision that you will not have to make in the first period. The percentages must add to Perceptual objectives When looking to reposition a brand with advertising. For between -20 and +20. Perceptual objectives may be chosen on any two communication dimensions. you need to inform the advertising agency of the desired perceptual objectives for the brand. proposition). The numeric representation of these perceptual objectives is used only for communication purposes. select the No objectives option. They may be provided either in terms of semantic scales or in terms of the composite dimensions given by the multidimensional scaling study.

Figure 19 – Market Research Study decision screen 6. The cost of these studies appear as the boxes are checked. the consumer panel for the Vodite market). simply check the boxes that correspond to the studies When you order a study. Some of the studies may apply only if there are brands marketed during the period (e. 52 .. Moreover.g. if you order these studies and if no brands were marketed in the period. You can use the Benchmarking study to anticipate whether competition will launch new brands. the research is performed during the next simulated period and the results are made available at the end of the period. To you would like. purchase market studies. This information is available for the following period's decisions.6 Market Research Studies The Market Research Studies decision screen is displayed in Figure 19. you will not be charged for them.

This decision is important since some brands are targeted to segments which are more likely to purchase goods in certain distribution channels.7 Sales Force and Distribution The Sales Force and Distribution decision form is displayed in Figure 20. You will have to make Number of salespeople Enter the number of salespeople assigned to each distribution channel. Changes distribution coverage of your brands. equal percentage of effort to each brand within a channel. company's sales force is organized by distribution channel. The Assistant button can help you allocate the sales force efforts automatically. Note that using this feature. are will need to enter some figures so that a certain amount of effort is devoted to Lastly. retail sales or contribution. The three other based on the previous period's results. 53 . Your two decisions: (1) how many salespeople to assign to each distribution channel. Since your sales force is knowledgeable distribution channels at no cost.6. the percentages must add up to 100%. you can modify the allocation of salespeople across Percentage of efforts Instruct your salespeople in a given channel on how to allocate their efforts between your firm's brands. You new brands. Equal allocation across all brands allocates an options. no sales effort will be allocated to new brands introduced during the current period. in the number of salespersons are expected to have an influence on the about all your products. and (2) how to allocate the sales force effort across brands. according to four predefined rules. Proportional to last period’s unit sales. the Normalize button automatically adjusts your data to total 100% in each channel. Entering percentages in the appropriate cells makes the allocation.

54 . You can skip this section until until you have read and understood chapter 5. or The Research & Development decision screen is displayed in Figure 21. you have attended the appropriate conceptual session with your Instructor. The projects that your R&D department will work on next period are listed on the tabs at the bottom of the screen. It is unlikely that these decisions will be necessary during your first period. Buttons at incomplete project.Figure 20 – Sales Force and Distribution decision screen 6. or continue a project that had been temporarily suspended. Clicking on the S or V drop-down at the top the bottom of the window are used to start new R&D projects. shelve an displays either Sonite or Vodite projects.8 Research & Development Research & Development decisions are quite complex.

The cumulative R&D budget is also indicated. A feasibility study takes one period. The requested base cost is the transfer cost that will be charged to the Marketing department for each unit of the future product.000 units. and the R&D budget required guaranteeing its completion at the currently requested base cost. the values of the five physical characteristics for the desired future product must be entered in the corresponding cells. The allocated budget corresponds to the budget devoted to the project over the next period. The range of technically feasible characteristics for each dimension is indicated in brackets. This study will tell you the minimum cost at which the product can realistically be manufactured. cost technically feasible by checking the box Develop project at minimum base Figure 21 – Research & Development decision screen You can order a feasibility study from the R&D department for $100.000. the information is provided in the next period within the R&D section of the company report. 55 . assuming a production batch of 100. You can ask the R&D department to seek the minimum transfer cost.For each project.

Three sets of charts will help you verify your decisions. The Summary button leads to team. it is suggested that you check that the program has not discovered any mistakes with your decisions.9 Checking your Decisions Before submitting your decisions to the Instructor. at no charge. At warning message will appear if the budget is exceeded. • five charts that provide a detailed description of all decisions made by your should be made because of inconsistent decisions. In these instances.Alternatively. the same information as the feasibility studies. The budget charts provide details on how you any time you can check your expenditures against your allocated budget. otherwise. This message expenditures. However. • Budget (see Figure 22). which will give immediate results are often over-estimated by as much as 50%. you can initiate up to five on-line queries per period. Errors indicate corrections that attention to possible problems. starting with advertising. • have decided to spend your marketing budget in the upcoming period. you should check your 56 . these 6. A should not be ignored. Errors and Warnings (see Figure 25). the simulation will arbitrarily cut your Summary (see Figure 23 and Figure 24). while warnings draw decisions carefully to make sure that all entries are correct.

Figure 22 – Decisions – Overall marketing budget Figure 23 – Decisions – Brand management summary 57 .

Figure 24 – Decisions – Research and development summary Figure 25 – Decisions – Errors & Warnings 58 .

Distribution mix. If this is not the case. The estimates for the variation of the segments’ side. Brand contribution. in thousands of units or in percentage change. sizes next period should be entered in one of the two columns on the right-hand Two automated estimation approaches are available. the “As in market forecast study” selection to input the segment size projections grayed.10 Validating your decisions with the Marketing Plan Tool After accessing the marketing plan section there are five distinct components which appear in the tabs at the bottom of the screen: Segment sizes. or click on from market research. The second alternative is available only if the corresponding study has been purchased. These two automated approaches provide a basis on which individual 59 . Click on the corresponding tab accesses each component of the marketing plan. The last two provide estimated results based on both your Marketing Plan . Click on the Segment sizes tab in each segment’s size last period. input into the plan. You can click on the “Same as last period” button to use segment's size from the previous period. The first three correspond to the different types of estimates that you have to decisions and your estimates. The chart at the center of the screen initially displays size (in thousands of units) of each segment.Segment Sizes The first estimates you must provide as inputs to the marketing plan concern the the Marketing Plan section. the selection is adjustments can be made. Brand shares/sales. and Company performance. One can shift from the Sonites screen to the Vodites screen with the selector drop down in the top lefthand corner of the dialog box.6. either in thousands of units or in percentage change.

the estimates of the segment sizes previously defined and the brand share inputs. Whenever a change is made in any updated. The estimates of brand sales can then be updated as targets or as 60 .Brand sales or brand share estimates by segment One of the most important aspects of marketing planning is the anticipation of the market response to a specific set of decisions or actions. They can be specified either in terms of brand shares or brand sales by selecting the appropriate tab selection at the bottom of the screen. brand introduction or upgrade should be examined closely so as to best estimate their impact on brand market shares. make sure to take into account your own portfolio decisions as well as the ones of your competitors. either as expected brand shares of the estimates. The total brand share estimates for the market as a whole are also changed for each brand/segment combination. The approach described above consists of: 1. In particular. the number for the other mode of entry is automatically updated in the right-hand column. The numbers for the previous period are displayed for each brand in each segment as well as for the as a change from the previous period. anticipated market reactions must be entered for each brand in each segment. An estimate for the next period can be entered either as a target or When making these estimates. Simultaneously. Starting with brand share estimates. Estimates can then be or as expected changes in brand share points. one easy way to start is to use the same brand shares as in the previous period. corresponding brand unit sales in each segment are calculated based on the screen. total market. In this screen. These numbers can be displayed by selecting the brand sales tab selection at the bottom of the changes from the previous period in the same way as for the brand shares. Assuming that brand share inputs are first selected.Marketing Plan .

It probably reflects the most logical process but it is also possible to directly set estimates of expected brand sales. Marketing Plan . Displaying the expected brand sales resulting from the segment size and market share estimates.Distribution Mix The price received by the firm for the sale of a product is equal to the retail price the average selling price of a brand will depend on the mix of its sales across the channels.2. or be calculated automatically based on the shopping habits study. As the distribution margin varies across channels. To calculate the financial contribution of a brand thus requires an estimate of its distribution mix. The purchased in the current period. In this case. In this case. Updating selected brand sales estimates. They can be set to the same values as in the last period. brand. One should. however. The sales of a brand in a given channel are obtained by total over the segments. For each habits data. and 3. Markstrat Online uses the brand sales projections entered in the previous steps of the marketing plan. by second alternative is available only if this market research study has been selecting the appropriate tab selection at the bottom center of the screen. percentages adds up to 100. The average distribution margin corresponding to a 61 . minus the distributor’s margin. the purchases of each segment are split by channel based on the shopping The distribution mix estimates can also be entered or updated manually one by one. be particularly careful that the vertical sum of the given mix is displayed on the bottom line and is updated any time a change is made in the chart. Selecting the corresponding tab in the marketing plan section can make the Distribution mix estimates. brand share estimates are calculated on the basis of the brand sales and the segment sizes.

the marketing plan section can make selecting the Brand contribution and Company performance tabs at the bottom of the screen. In the first case. the software also makes a number of consistency checks. Such errors and warnings will require corrections in either the appropriate tab and make the desired adjustments before returning to the clicking on the close selection at the bottom of the screen. make any needed marketing plan estimates or the decisions. or the problems are encountered. the distribution mix for a brand not adding up to 100%. you can go back to the decision menu by changes to the decisions. Common inconsistencies include forgetting to enter sales forecast for a brand exceeding the available inventory volume plus the production plan. and return to the marketing plan section. units sold. contribution after marketing. the inventory level is calculated on the basis of the previous inventory (factual data) plus the production plan (a decision) minus the sales estimates. financial projections for the next period. For instance.Marketing Plan . A separate the Sonite or Vodite drop-down at the top of the screen. When making financial projections. which will appear in the company report. brand shares. and the distribution mix. the distribution margin calculated from the distribution mix estimates. to a pro forma statement of brand contribution. From the top line of the software uses your decisions and estimates to produce a simulation of the brand contribution statement. The previous for financial projections unless modified. In the second case. the average selling price is obtained from the retail pricing decision and the average statement. an errors and warnings screen may be displayed if any some estimates. simply by selecting 62 . Similarly. just select the financial projections. estimates entered in this marketing plan section have been saved and will be used Selecting the Brand contribution tab gives access.Projections On the basis of the decisions and the estimates for segment sizes. to the bottom line. brand contribution report is available for Sonites and Vodites. allowing for upward or downward adjustments possible in the production process. if all consistency checks are passed. These projections can be displayed by brand sales.

For example. students often overlook the following issues: • the distribution mix estimates may not have taken into account the fact new shopping trends. no guarantee of achieving the projected results. if all consistency checks are passed. however. including consumer needs or competitive actions. total. or the cut in the advertising budget did not have such a negative impact on sales and that. Other expenses are then deducted to provide the net contribution.The Planning Process The MARKSTRAT marketing plan section is a useful tool to check the consistency of decisions and to easily anticipate their possible financial consequences. The actual be quite different from the pro forma projections obtained from the plan! brand contribution and company performance statements for the next period may Many facets of the environment may have changed unexpectedly. This replicates a page in the company report but allows you to go one step further by simulating results after marketing.Selecting the Company performance tab gives access. From the top line of units sold to the level of contribution contribution pro forma statement. or may have been overlooked. by 63 . a Marketing Plan . It provides. action. the brand has performed better than expected and is out of stock. that the deployment of the firm’s sales force no longer corresponds to the • • or the share estimates for a given brand did not anticipate negative consumer reactions to the price increase. Finally. The process of planning in Markstrat Online brings discipline to marketing thinking. as a result. separately for Sonites and Vodites as well as in budget for next period is estimated on the basis of these expected financial results. Other aspects directly controlled by the firm may not have been properly incorporated. and learning in at least three important ways: firstly. it is an aggregate of the information available in the brand based on estimates. to a pro forma statement of company performance.

sufficient funds to reach financial objectives. This financial Finally. decisions or the estimates. then the validity of some of the decisions or estimates should be questioned. This makes learn over time.demanding a focus on the tangible results of decisions at the brand level. Within the firm’s portfolio. it may be decided to invest heavily in a new brand and to accept a substantially negative contribution for this brand as long as other products generate interdependence between brands is sometimes difficult to apprehend but it is easy to investigate and analyze with the marketing plan section. brand performance (in shares or volume). It is easy to switch between the marketing plan section and the other components of the decision screen to adjust either the has confidence. observing an abnormally high projected contribution for a given brand may lead to checking if the share estimate is coherent with the competitive positioning. and distribution coverage. By modifying the estimates. Moreover. A systematic analysis of the sources of variance between 64 . and thirdly by providing support for a post-mortem analysis. and reach a situation in which the firm’s management The marketing plan section of the Markstrat Online software also allows you to easily check on the expected overall financial performance of the firm. The Brand Contribution and Company Performance statements in it easy to compare between the anticipated projections and the actual results when they are obtained. the marketing plan section helps to focus on the three key elements of market evolution (segment sizes). if the resulting projected brand contribution appears significantly higher or lower than expected. an important role of the marketing plan is to provide a tangible basis to the marketing plan are in the same format as in the company report. On the first aspect. secondly by making it easy to check the validity of the overall financial results. it is also relatively convenient to perform sensitivity analyses to better understand how they affect the brand contribution. Having to submit estimates for these components of the plan should solicit discussion and reflection about the variables affecting them. or the advertising support of the brand. For instance. the retail price.

the two documents will help you learn both about the market mechanisms and the most important contribution of the marketing planning process. about the planning process. this learning dimension is probably 65 . In the long-term.

66 .

Your department product positioning: • • • • and positioning strategies. the needs of customers will probably evolve over time. some segments may want more powerful brands while others may expect prices to fall). it is extremely important to adopt optimal segmentation market more than five brands in a given period in each market.1 Semantic Scales & Multidimensional Scaling Technical experts can easily classify the marketed brands based on objective data such as technical attributes and prices. the market environment will change during the course of the simulation. companies will have to introduce new Sonite or Vodite brands. The goal of this chapter is to describe the various approaches that can be used in 7. As marketing resources are limited.e. Positioning and Research & Development As you may expect. consumers who are about to make a purchase decision are influenced by their perceptions of the brands 67 . To respond to these changes. However. (I. For instance.7. especially because a MARKSTRAT company cannot will be faced with the following strategic issues on market segmentation and Which segments to target? How to design products satisfying the needs of these segments? How to position new brands effectively? How to reposition existing brands to better fit customers’ needs? MARKSTRAT to address these issues. and reposition or withdraw existing ones.

available on the market rather than by the actual features and properties of these brands.32 on the same scale. if this brand fits the needs of customers in that segment. A graphical interpolation on this graph will let you accurately calculate which physical level is required to reach a given perceived level. 68 . rated at 5. you can compare large the technical gap is. Perceptions are plotted against actual attributes for all marketed brands.. The Markstrat Online simulation provides two market research studies to assess consumers’ needs and to estimate how brands are perceived: the Semantic scales study and the Multidimensional scaling study.41 on the Power scale shown below because they perceive it as being less SAND Low Power 1 2 3 Average Power SILK High Power 4 5 6 7 The results of this study are shown in Figure 26. If not. price) for the targeted customer group. you need to extrapolate what may be the ideal physical attributes (power. 2. you can determine its physical characteristics with those of the most preferred brands. Semantic scales – This study describes how consumers perceive the marketed brands. In order to bridge a significant technical gap. ratings of your brand with the ideal ones for a given segment.. By comparing the perceived The study also provides the ideal rating for each characteristic and each segment. and see how need to launch a new R&D project. For instance. In this case. Respondents are asked to rate the physical characteristics of each brand on a scale from 1 to 7. The graph shown in Figure 27 is Semantic scales study. provided in the simulation for each physical attribute when you purchase the weight. Perceptions are by definition subjective and can therefore be distorted from reality. consumers have rated the brand SAND at powerful than brand SILK. you will Note that even the most preferred brand may not be ideally positioned.

Figure 26 – Semantic scales study: Ideal values and brand perceptions 69 .

star. and Ot on the graph represent the ideal points of the five segments. Si. complex mathematical formulas are applied to these ratings to build a three-dimensional map where the each other on the map– and large for dissimilar brands –brands that are far from each other on the map.) correspond to the positioning of the brands as they are perceived by the market at the time of the study. One specific color and shape is attributed to each firm (for example. distance between two brands is small for similar brands –brands that are close to The result of this long process is shown in Figure 28. Finally. Each circle only represents the center of gravity of the whole segment. table below. For the Sonite market. Note that only two dimensions out of the three can be represented simultaneously. similarities or differences between two brands.e. The map is a graphical representation of the respondents’ ratings. Each brand name is clearly labeled. The various geometric shapes (square. Hi. all brands marketed by firm A is represented by red stars). the best interpretation of the three axes is given in the Axis Composite Relative Dimension importance Weight 1 2 3 Economy Performance Convenience High Medium Low Slight Slight Influence of physical characteristics Design Volume Max Freq.Figure 27 – Relationship between attributes and semantic scales Multidimensional scaling of brands similarities and preferences – This study provides a three-dimensional map showing the similarities and differences respondents are asked to rate pairs of marketed brands according to the between marketed brands. Each axis is usually attached to a composite dimension like Convenience or respondents are asked to indicate what would be their ideal position on the map. Power Price Slight Slight Slight Slight Slight Slight Slight Slight Strong Slight Slight Moderate Strong Moderate Strong Moderate 70 . The circles Bu. This map is built through a complex process. i.. triangle. Pr.. Performance. First. Third. Second. a combination of several physical characteristics. experts provide an interpretation for each of the three axes.

For Experts have attempted to build the same table for the Vodite market and have brands are marketed yet. corresponding composite dimension and the attribute is an inverse function. Volume. the relationship between the instance the lower the weight. 71 . this complex task cannot be achieved unless a significant number of brands are marketed.Note that for Weight. Diameter and Price. come up with the following results. The MDS study is therefore not available for the Vodite market until a sufficient number of brands are marketed. which should be used with care since no Axis Composite Relative Influence of physical characteristics Dimension importance Autonomy Max Freq. Diameter Design Weight 1 2 3 Efficacy Flexibility Economy High Medium Low Slight Strong Slight Strong Slight Slight Slight Moderate Slight Moderate Slight Slight Slight Slight Price Slight Strong Moderate Slight Finally. the higher the perceived convenience or flexibility.

72 . For a given brand and a given segment. or the price that they are ready to pay to get a product that Ideal points on the perceptual map.2 Repositioning Strategies needs of consumers. However. a brand which was well positioned when it was introduced on the market may now be perceived as low- performance or as having an unnecessarily high frequency a few periods later. there are several reasons why brands are not always ideally positioned.Figure 28 – Perceptual map Figure 29 – Relationship between attributes and MDS perceptions 7. Consequently. the optimal position on the map is as close as possible to the ideal point of that segment. Changing segment needs Segment needs evolve over time. reflect the fits these needs. or on the semantic scales’ chart. This may be due to changes in the environment or in the consumers’ value and behavior.

the distance between the brand and the ideal New target segments For a new market in its early stages. Price pressure This situation is similar to the previous one. one firm may successful serve consumers with a product that is not exactly adapted to their needs. as these needs change. now be perceived as low-performance. the distance on the map between the brand and the ideal point becomes greater and greater. it may become necessary to position one brand closer to each ideal point. Then. a two or three year old brand may In this case. Again. brands must be repositioned to adapt to new environmental conditions. This situation may occur if the needs of two segments are fairly similar or if one segment is too small to allow the necessary increases. manufacturers should expect pressure from consumers to lower prices. through 73 . if brand point along the price or economy axis is likely to increase. but as having the right convenience level. if a competitor reposition the old brand closer to the ideal point. or as the segment size Competitor entry In the absence of competition. a good strategy may be to serve several segments with a single brand. it may become necessary to In all the above situations. especially in the low-end segments. prices are not adjusted accordingly. dimension. Repositioning can be achieved by changing the brand’s price. Then. economies of scale. As price is the most important dimension in the Sonite market. introduces a new brand that fits these needs better.Period after period. For instance. there is no reason to change the perception along the convenience advertising or via R&D. Note that a brand does not always need to be repositioned on all dimensions.

as explained in section 6. you must first try to estimate the future ideal positions of that segment on these two dimensions. by a better selection of media and a better design of the 3. Second. because a brand which consumers are extremely familiar with is longer be done by advertising alone. Using advertising to reposition a product is a four step process: 1. Although consumers' perceptions are linked to the brand’s physical characteristics. then you must select the two chosen dimensions and enter the coordinates of the point that you want to reach on the semantic scales’ chart. But the level is high. Price repositioning effect is limited. they can be slightly influenced by communication. Advertising can also be used to reposition a brand. Specify perceptual objectives for the brand when making Production. You can choose to set perceptual objectives either on semantic scales or on MDS dimensions. and an advertising research budget. brand repositioning can no complete an R&D project with physical characteristics matching consumers' & Advertising decisions. For example.3 Positioning with Advertising Advertising in Markstrat Online is mainly used to build brand awareness and to inform customers about its physical characteristics. this is especially true when the brand awareness more difficult to reposition. by looking at the chart Ideal value evolution in the semantic scales study.5. The effect of advertising research is two-fold. Beyond a certain level. and then to upgrade the brand. it makes your advertising campaign more effective. to reposition a brand closer to the Singles segment along dimensions Weight and Power. A maximum of two dimensions may be specified to keep the message simple and effective. Allocate an advertising media budget for the brand. the repositioning impact will be higher in terms 74 . to buy media space advertising copy.7. and time. First. and it therefore becomes necessary to needs. Identify the target position on the perceptual map or on the semantic scales’ chart. 2. R&D projects will take at least one period to complete. while repositioning through advertising has an immediate effect.

although there will naturally be a limit as to how far and how fast advertising can change perceptions. price) and semantic scales or coordinates on the perceptual map.. a brand must be repositioned through R&D when the distance on the perceptual map – or on the semantic scales’ chart – between the development must also be used to introduce new brands. since all marketed brands must be based on R&D projects. brand and the target segment’s ideal position is too large. Research and Using R&D to reposition a product or to introduce a new one is a four step process: 1. Obviously. this decision alone is not sufficient to reposition a brand. project – or when you increase or decrease its price significantly. appropriate media to communicate the message. Indicate the percentages allocated to the Targeted segments. to inform the 7.4 Positioning through Research & Development As explained before. Targeting specific segments is mainly done by selecting the most the content of the message. you will have to implement the same type of advertising program when you change the physical characteristics of a brand – by implementing a new R&D consumers about these new characteristics and price. Estimate the physical characteristics that correspond to this target position. the targeted segments must be coherent with the perceptual objectives. Identify the target position on the perceptual map or on the semantic scales’ chart..of reaching the perceptual objectives. but it has little effect on Finally. 2. − The best solution is to use one of the two charts plotting the relationships between physical attributes (power. This can be done in at least three different ways. weight. 4. These two 75 . However.

− These charts may not be available when only a few brands are marketed.charts are provided in the simulation.e. Your best option is to assume that there exists a linear relationship between autonomy in meters and semantic scales. − brand SODU appears to have the appropriate Performance level for the The perceptual map is not available when no brands are marketed. allows you to make approximations until more data becomes available over time. and LB and UB are the lower and upper limits of the physical corresponding to 5. For instance. and the other one with the MDS study (see Figure 29). i. This is likely to be true in the early stages of the Vodite market. you may still obtain information on segment needs from the semantic scales study.5 is: characteristic’s feasible range. However. and brand SAMA for Others segment. In this case. the best solution is to simply estimate the optimal physical characteristic for a given segment from the closest brand available in the market. highest autonomy (100 meters) would be rated 7. although imperfect. one with the semantic scales study (see Figure 27). Singles segment. rated 5. the conversion formulas are: that the lowest autonomy (5 meters) would be rated 1. In this case. Consumers may for instance indicate that they are looking for brands with a high autonomy. the autonomy [(5.5 on the 1 to 7 scale. and that the S = [(X-LB) / (UB-LB)] x 6+1 OR X = {[(S-1)/6] X (UB-LB)} + LB where S is the target semantic scale. X is the corresponding physical level. A simple graphical interpolation on the appropriate chart will let you calculate quite accurately which physical level is required to reach a given semantic scale or a given MDS position. on the map in Figure 28.5-1) / 6] x (100-5) + 5= 76 (rounded to the nearest whole number) This method. In the previous example. 76 .

For instance. the R&D project project. In the past. brands marketed in Period 0 are based. five Sonite projects and five Vodite projects. can also be used to introduce new brands. This is done in cooperation with the R&D department as explained below. the marketing department must specify the following information: • • • • project name. Over the course of the simulation. each firm has successfully completed two R&D projects on which the followed by the corresponding brand name. To order a new 77 . and operates as a profit center. inform consumers about these changes.5 Research & Development The marketing department (you) may ask the R&D department to develop specific projects in order to improve existing products or to introduce new ones. target manufacturing unit cost. a maximum of thirty Sonite and thirty Vodite projects can be developed.3. allocated development budget. a coherent 7. They advertising campaign will have to be implemented at the same time to Note that this process will take at least one period. Introduce a new brand or modifying an existing one. including yours. Completed R&D physical characteristics that are the basis of consumers’ perceptions. Develop an R&D project with the physical characteristics calculated above. The R&D department of the firm works for all the divisions. In both cases. technical specifications of the desired product. The project name starts with the letter P corresponding to the existing brand SAMA was called PSAMA. projects can be used to reposition existing brands by modifying the 4. Up to ten R&D projects may be ordered each period for the two markets.

Section 7. and the levels must be within the feasible range.4 explains how to estimate the physical characteristics for product Target manufacturing unit cost The Marketing department must also provide the target manufacturing unit cost of the desired product. The firm can freely choose the last three P ↑ Always a P S ↑ Product Type S = Sonite V = Vodite I B ↑ I Freely chosen letters or numbers The name of a completed project can never be reused for a new project. you initially need to specify the transfer cost of the first 100. S for Sonite and V for Vodite. Base costs have no upper limit. This cost is called the Base cost. For instance. If you indicate a high base cost. Volume. The first letter is always a P for project. Maximum Frequency and Power. Because this cost decreases over time with experience and volume of production.000 units of the new product. the R&D department will have more flexibility in finding the appropriate materials and 78 .Project name The names of R&D projects are made up of five characters. even if it is a minor modification of the older project. a Sonite project must include specifications for Weight. development. developed. Design. Each of the five attributes must be specified. Technical specifications The marketing department must provide the physical characteristics of the desired product. The second letter identifies the type of product being characters.

On-line queries and feasibility studies provide an $100. but may be more expensive overall since the development budget • A third procedure is to do an on-line query or a feasibility study. margins. This solution is highly attractive in terms of is likely to be much higher than the one required with the previous solution. On-line queries are free of charge and provide results instantaneously but they generally overestimate budget requirements. diameter. light and powerful the price that consumers in this segment are willing to pay for a product average distributors’ margin. High levels of design. The base cost is then obtained by subtracting the cost will be.manufacturing processes. and is less expensive in terms of the total development budget. this method provides the highest base cost economically achievable. 79 . Feasibility studies cost explained in section 6.e. This cost will be higher than the minimum one in many cases. • Another method is to request that the R&D department develop the project at the minimum base cost.000 and take one period to complete but give fairly accurate results. power and autonomy increase the base cost. As a consequence. The lower limit of the base cost for a given project depends on its technical specifications: the more sophisticated a product is. maximum frequency. This is understandable since a small. but at least.8. the project is easier to develop. • One solution is to start from the ideal price of the targeted segment. plus the minimum margin that will make the future product economically attractive for you to market. fitting their needs. the higher the minimum base increase the base cost. heavy and low power Sonite. There are many ways to estimate the base cost of a product. i. Similarly. and volume Sonite is more complex than a big. as estimate of the base cost and of the required development budget. low levels of weight.

on the number of previous section. Similarly.000 units. or in cases C and D. A typical report is shown in Figure 15. because it depends on the technical on the technical specifications. as explained in the and will not reimburse you if you allocate exceedingly high budgets.R&D expenditures An R&D project includes the research work necessary to develop a prototype of the desired product. Finally. assuming a first production batch of 100. When the project is completed. Responses from the R&D department All the R&D projects which the firm has worked on in the previous periods are listed in the R&D section of the company report. with identical physical characteristics but with four different requested levels of Note that the Minimum base cost is the same in all cases because it only depends same in case A and B.e. Note that the R&D department is managed as a profit center. The table in Figure 30 summarizes the responses for a new project base cost and allocated budget. uncompleted projects. Your department must allocate a budget to each project to cover these R&D expenses. at the transfer cost specified in the R&D report. The budget depends on the requested physical characteristics: the more sophisticated the future product. It also depends on projects completed in the past with similar characteristics. the production department is ready to produce the first units of the product. The project is completed only in 80 . the experience of the firm with comparable products. i. the development budget depends on the base cost requested. The report details completed and of the simulation. and the development work necessary to find potential suppliers and set up manufacturing processes. including the two projects which existed at the beginning Let’s use the following example to illustrate the possible responses from the R&D department. the Normal budget for completion is the specifications and on the requested base cost. The budget required for the completion of a project is a function of several parameters. the higher the budget.

so as to complete a new project with the same physical characteristics and a base cost of $110. Uncompleted R&D projects may be continued the following period. or may be suspended for one or several periods before being continued. However the base cost may be changed without having to start a new Unit Project specifications Weight Design Volume Max Freq. values. Power Requested base cost Allocated budget Normal budget for completion Minimum Base Cost Kg Index Dm3 KHz W $ K$ Case A 17 6 85 35 70 80 1 000 Case B 17 6 85 35 70 80 300 Case C 17 6 85 35 70 130 1 000 Case D 17 6 85 35 70 130 300 Parameters calculated by R&D at early stage of project K$ $ 800 110 800 110 550 110 550 110 Response from R&D at end of period Project successful Current base cost Minimum base cost Y/N $ $ Yes 110 110 No 110 110 Yes 130 110 No 130 110 250 K$ 500 Add. For the later one. If you choose to never continue the project. The technical characteristics of a continued project may not be changed from their original project or sacrificing the money invested in the first project. the budget allocated so far is lost. the Marketing department could decide to immediately launch a cost reduction project.cases A and C. budget for completion Figure 30 – Interface with R&D department 81 .

This brand name is completely independent of the code used for the R&D project. usually 80%. Using a new brand name will facilitate the product’s positioning. This company will then export the old products outside the Markstrat Online charged to the marketing department. the brand’s purchase intentions are likely to be higher than with a The same product can be marketed under different names. Obsolete inventories are sold by the Production producing the new version of the product. Brand portfolio decisions are summarized below and are detailed in section 6. Using an existing project. as the awareness level is new brand. For example. The same rule applies if inventories remain department decides to modify or withdraw brand SONO in Figure 14. but the brand name makes its repositioning more difficult. modification or withdrawal R&D projects may be used as soon as they are completed to launch new brands or to modify existing ones. An existing brand is modified by keeping its current name and using the physical characteristics corresponding to a new completed brand awareness will have to be completely built from scratch. A new brand is introduced on the market by entering a brand name which has not been used in the past. The presence of multiple brands targeted at the same segment is a good strategy to build barriers to entry of new brands by competitors. Lowering the cost of a brand is department to a trading company at a fixed percentage of their value. if the Marketing 82 . A company may also market multiple different prices while having similar technical needs. Consequently. maintained. since consumers are familiar with the brand at its previous position. However. the loss would be calculated as: 12 939 units x $146 x (100% – 80%) = K$ 377. the Production department will immediately start considered a brand modification.Brand introduction. brands based on the same project to different segments which are willing to pay When a brand is modified. a loss of x% (the given percentage) of the inventory value is when a brand is withdrawn from the market.4.8 world. They may also be shelved for future use.

However. Yes. As Markstrat Online includes a user-friendly windows-based decision support system. in decision forms during the course. having a quick look at these two The decisions you will have to key in are written in a script type like 115. 32 580. etc. you will not have to fill pages will allow you to anticipate the scope of all mandatory decisions.8. 83 . Sample Decision Form The following pages provide a sample decision form. Flexibility.

BRAND MANAGEMENT – SONITE BRANDS Sonite Brands Base R&D project Production planning Inventory sold to trading company Recommended retail price Advertising budget Advertising research budget SEAL SEXY SEFA PSPR2 PSBU1 PSHI2 150 200 200 38 0 0 350 450 400 500 2 250 2 250 50 500 50 100 0 5 0 0 5 80 0 5 5 0 95 5 0 0 Eco.7] or [-20.7] or [-20.7] or [-20.0 Conv. [1.0 4.+20] 1. 5.0 Targeted segments in % KU KU $ K$ K$ Buffs Singles Professionals High earners Others Perceptual Objectives Dimension 1 Objective 1 Dimension 2 Objective 2 Eco.0 Perf.0 84 .+20] Eff. 3.+20] BRAND MANAGEMENT – VODITE BRANDS Sonite Brands VETI Base R&D project PVETA Production planning KU 100 Inventory sold to trading company KU 142 Recommended retail price $ 1200 Advertising budget K$ 2000 Advertising research budget K$ 100 Innovators 0 Targeted segments in % Early adopters 100 Followers 0 Perceptual Objectives Dimension 1 Objective 1 Dimension 2 Objective 2 [1. 15. Conv.0 -5.+20] [1.7] or [-20. 1.0 [1.0 Felx. Perf.. -5.

Diameter Design Weight KHz Mm Index g 10 50 5 50 Base cost $ 10 PVET1 MARKET RESEARCH STUDIES Study Industry benchmarking Consumer survey Consumer panel Distribution panel Semantic scales Multidimensional scaling Market forecast Competitive advertising Competitive sales force Advertising experiment Sales force experiment Conjoint analysis Market covered by study All markets Sonite Yes Yes Yes Yes Yes Yes Yes Yes No No Yes No Vodite Yes Yes Yes Yes No Yes Yes Yes No Yes No 85 . 30 47 10 43 0 100 Sales force effort allocation by brand (%) SONITE R&D PROJECTS Project Allocated Budget K$ 100 350 Weight Kg 15 15 Product Characteristics Design Volume Max Freq.SALES FORCE MANAGEMENT Distribution Channels Number of salespeople SEAL SEXY SEFA VETI TOTAL Specialty stores 20 33 14 19 34 100 Depart. stores 25 45 8 27 20 100 Mass Merchants. Index Dm3 KHz 7 70 35 4 60 40 Power W 40 40 Base cost $ 10 10 PSHI3 PSPR3 VODITE R&D PROJECTS Project Allocated Budget K$ 500 Autonomy M 60 Product Characteristics Max Freq.

86 .

9. the Company Report and a few Market Research Studies. 87 . only Sonite The annual report that you will receive in period 0 will be simpler. your company will not have marketed any Vodite brands. Company Report and Market Research Studies. a studies have been included and the conjoint analysis results have not been given. In addition. making the report even shorter. Sample Annual Report The following pages provide a sample annual report. To keep things simple. It should not be used in making your decisions. It will only include the Newsletter. The data included in the following report is only for illustration purposes. composed of a Newsletter.

9.1 Newsletter 88 .

Newsletter – Stock market and KPIs 89 .

Newsletter – Economic variables and costs 90 .

Newsletter – Information on Sonite market 91 .

Newsletter – Information on Vodite market 92 .

2 Company Report 93 .9.

Company Report – Company results 94 .

Company Report – Instructor & simulation messages 95 .

Company Report – Brand results 96 .

Company Report – Brand results (cont’d) 97 .

Company Report – Research & development results 98 .

Company Report – Cumulative results 99 .

Company Report – Decisions summary 100 .

Company Report – Decisions summary (cont’d) 101 .

3 Market Research Studies 102 .9.

Market Research Studies – Industry benchmarking 103 .

Market Research Studies – Consumer survey 104 .

Market Research Studies – Consumer panel 105 .

Market Research Studies – Distribution panel 106 .

Market Research Studies – Semantic scales 107 .

Market Research Studies – Multidimensional Scaling 108 .

Market Research Studies – Perceptual map 109 .

Market Research Studies – Perceptual map (cont’d) 110 .

Market Research Studies – Market forecast 111 .

Market Research Studies – Competitive advertising 112 .

Market Research Studies – Competitive sales force 113 .

Market Research Studies –Experiment 114 .

Market Research Studies – Conjoint analysis (segment Buffs only) 115 .

Blank Example of the Markstrat Online ID Card Antonio.Passado 7264 A3225 SX-OBJC-AQHD-26MC-OXMI JUPITER A 3852 116 .

they can always.com/landingpage/dskd10/?gclid=CIykiayysJQCFQKcFQodNF http://www. What can I do? 117 . If you go to this link: http://www. the decisions screen is so big that I can’t see the other decision buttons on the left.emulators. http://www. Setup is simple and straightforward.apple.parallels. New MAC's have no compatibility issue with Markstrat Online (MAC OS X Leopard.com). there’s a PC application you need to use. The downloadable software is not compatible with MAC OS.com/student/discounts/theultimatesteal-us/default. If the students do continue to have issues. it even lets you run Windows if Boot Camp.10. from the Internet. You would also need to install the Windows Operating System.aspx I just opened the Markstrat Online software. ME and XP and Vista. now included with Leopard.com/macosx/features/bootcamp. Frequently Asked Questions System Configuration Which Operating Systems is Markstrat Online compatible with? Markstrat Online is compatible with Microsoft Windows 98/NT.apple. 2000. Just get a copy of Windows and start up http://www.html Udtw or Virtual PC.microsoft. Parallels. These 3 programs allow students to run windows based programs on their MAC's. Because you are a student you qualify for a substantial discount. So advanced. download either Emulator (www.html).com/downloads/macosx/system_disk_utilities/virtualpc. Leopard is the world’s most advanced operating system.

Selecting Start | Control Panel | Display -Then Settings tab and under “Advanced” Options change your dpi settings to normal size (96). . Another Alternative solution would be to change the display settings. You must modify your screen resolution within your computer’s display You can do this by: properties. where are they saved? The default location is C:/My Documents/My Markstrat Online Files I am getting an “Internal error 2728 Feature” error message when I start to install the Markstrat Online Team software. You will have to exchange data back and forth with your you need to be recognized by our database to make these transfers. Administration Why should I register? Using the Markstrat Online Simulation is strictly reserved for registered students. The registration process will allow you to be uniquely identified in the Markstrat Online database. What should I do? This is an issue when downloading to a computer using Microsoft Windows XP Home Edition. -Then you may have to restart the computer. We cannot fix this problem because it is has to do with Microsoft’s downloading features not Markstrat. however. When I save my files locally. please let your instructor know about this and we will send him/her a CD-ROM. Since all data exchange takes place over the internet Why do I have to Authenticate? 118 . instructor during your class.The Markstrat Online software is best viewed using 1024X768 screen resolution.

simply click on Interface/open markstrat session/Open the Student Handbook. therefore if you do not have an internet connection and want to use the Practice Industry. Click Submit. How do I go back and update my Profile information. Enter and re-enter your password 5. Once on the Markstrat Online Homepage. the Markstrat Online software comes with a Practice Industry that you can look through as a preparation for class. accessing the Markstrat Online Can I use the simulation before class? Yes.com and select the Markstrat Online logo 2. click submit screen) 3. 1. The students can do this themselves. Enter the Course id # in the field that has course id # 5. The Practice Industry is installed with the team software. click PROFILE (on the left side of the 4. such as my Course ID number? Students who do not input the course id # will not show up in the Instructors course list. Click the Student’s login link. a team file located on your hard drive/ click Next> For more details check 1.This is required each time you connect to the Markstrat Online Server to Server is reserved for registered users.3 in How many periods can be run in Markstrat Online? Up to 12 Periods (12 simulated years). 119 . For security reasons. Go to www.stratxsimulations. download or upload files. on the left side. and input your username/password.

We suggest that each team member downloads their decision files to their c drive and they work locally until the team decides to upload the final decisions to the web server for the Instructor to retrieve.exe and add an exception for the executable. Market capitalization is a good representation of the value of the company. it means that the team was able to create value. If market capitalization increases. My computer freezes when I try to upload my decisions to the instructor. Absolute company values are meaningless in Markstrat since companies start with 120 . Markstrat has to be specified as exceptions from Data Execution Protection. it prevents Markstrat from running.Data Transfer What happens when a team uploads their decisions to the Markstrat Online Web Server? The decisions that were there before have now been over written. If you enable Data Execution Protection (DEP). why? Try turning off your pop up or ad-blocker software When I authenticate and/or try to download my files. I get a message saying that I cannot connect to the Markstrat Online Server? ALL your firewalls. You will need to allow the Markstrat Online program to successfully pass through Finances What does Market Capitalization mean? Market capitalization is stock price multiplied by common stock outstanding. It can be done by right clicking My Computer | Properties | Advanced | Performance Settings| then browse to C:\programfiles\StratX\[Markstratonline]\Binaries\msol. The Teams need to be very organized about uploading their decisions.

while driving the In summary. This is usually achieved by increasing your market shares in growing segments of costs down. such a formula does not exist. which are both necessary to find out the professors to set up a "Loan Policy" prior to the beginning of the course. the main factors driving the Stock Price Index are: profitability. this cannot be done without a high level of R&D activities. as it is the case in the life. growth in revenues and market share. This is what is tracked by the Stock Price Index: SPI = Current Market Capitalization / Market Capitalization in Period 0. What is the formula for the Stock Price Index? It would be great to have a simple 'Stock Price Index' formula. existing markets or by investing successfully in new markets. A possible policy is: Maximum cumulated amount of loans during the course: M$ 10 Maximum amount for a single loan: M$ 5 Loan terms: 8% interest rate over 3 years balance sheet or a cash flow statement. Of course. level of R&D activities.different initial situations. We advise apply this policy to all teams. regardless of their financial situations. Growing the company and generating a high net contribution is the best way to increase your stock price. and to Could you please explain how Markstrat calculates ROI? ROI = Net contribution / Marketing expenditures Marketing expenditures = Advertising + Sales Force + Market Research + R&D 121 . Unfortunately. Only the evolution of market capitalization is important. Markstrat does not have a implications on the company of financing through long-term debt. What are the pros and cons of paying back a loan in a shorter amount of time versus a longer one? The Markstrat financial statements are quite simple.

Could you help? Horizontal axis.1 (your sales are ten times smaller than the ones of your top competitor) and coordinate 1 (your sales are equal to the ones of your top competitor) is the same as between ones of your top competitor). we have decided to simplify the financial aspect. For instance: biggest competitor in the same segment. A brand is not visible if its relative segment Vertical axis. Markstrat Online does not include a the current stock price are represented by the market capitalization.What is the total number of outstanding stocks for my firm? What is the current price for my stocks? Markstrat Online is a simulation focusing on Strategic marketing. Given by the relative segment share in value. balance sheet or a statement of cash flow.g. Given by the actual segment growth rate in value. sales in $ of brand SAMA in segment Others divided by sales in $ of SAMA's e. co-ordinate 1 and co-ordinate 10 (your sales are ten times bigger than the total sales in $ in segment Others at current period divided by total sales in $ at the previous period in the same segment. The number of outstanding stocks and Market Research Studies I don't understand the position of circles on the growth-share matrix.: the distance on the scale between co-ordinate 0. 122 .1. Thus. The scale is a logarithmic scale. For instance: share is below 0.

team can only store 20 projects in total. This is not a big issue as old projects are usually irrelevant to new customer expectations. the oldest ones will be lost and replaced by the newer ones. Base Cost. If a team launches more that 20 projects in a given market.Research & Development I read in the Markstrat Online Student Handbook that teams cannot launch more than 20 R&D projects in each market. one for Sonites and one for Vodites. completed. What does that mean? The R&D department of a Markstrat company cannot keep track in its records of more than 20 Sonite R&D projects plus 20 Vodite R&D projects. Imagine a cabinet with limited shelf space where the R&D cabinets. Once the project is completed. A Markstrat company has only two such When I do a cost reduction project. In the Markstrat World. How do I create a new brand? You will need to first start and R&D project and wait until that project is select the completed project to create your brand. existing inventory is sold off to a trading company! Why? Basically when you are reducing the cost of a product you are altering one of the characteristics. you can go to Brand Portfolio and 123 . when you change a product’s characteristic it is considered a new product therefore the existing inventory cannot be sold to your customers because essentially it is not the same product.

you must first create an R&D project reflecting the characteristics that you would like the brand to have. Errors and Warnings The errors and warnings link within the decisions menu is grayed out. if the plan is equal to 0. did I do something wrong? No. 124 . Thus. Click on ‘Modification’ Select the existing brand that you wanted to modify Change the Base R&D project to the one you just completed and click OK Manufacturing How does the automatic adjustment of production work in the case of production plan set to 0? The automatic adjustment of production is calculated as plus or minus 20% of the production plan set by the team (note that this percentage can be adjusted with the scenario customizer). that means you have successfully made all of your decisions. without any errors or warnings.Can a team modify an existing brand to have completely different characteristics? Yes. in fact you did something right! When the errors and warnings link is grayed out. Once the project is completed you must do the following: Open the Brand Portfolio decision. there is no automatic adjustment at all. To do this.

125 .Default Decisions How are default decisions calculated? Default decisions are equal to the decisions of the previous period with the following adjustments: no loan or budget increase. no new R&D projects are launched automatically. What should I do? You should contact your instructor and let him/her know what is happening. cost required by the R&D department. sales force size or advertising budgets are not increased in case of under Technical I am getting an “Incorrect Industry” error message when I try to download my file from the Markstrat Online server. even in case of excess in inventory. Note that: − − incomplete R&D projects are continued with the budget and the base unit advertising budgets and R&D budgets are decreased in case of over budget. budget. projects. production plans are not adjusted. He/She will have to re-transfer the files for your team. completed R&D projects are removed from R&D decisions. − − − brands are not automatically improved with recently completed R&D no new brands are introduced.

80. 30. 41. 2. brand contribution. 35. 29. 42 estimates. 42. 64 brand portfolio decisions. 36 budget. 82 brand performance. 43. 47 advertising. 36 competition. 29. 68. 80 5 SoniteBrands. 78. 50. 17. 87 Company Report. 4. 41 consumers. 50. 36 Company Scorecard. 37. 50. 21 Close session. 19. 81. 31. 63. 36. 45. 57. 74 Advertising research budget. Company Performance statement. 52. 56. 74. 18. 23. advertising research. 60 brand is introduced. 64. 43 Advertising media budget. 126 . 63 Advertising experiment. 81 base cost. 80. 73. 42 80 Competitive sales force completion of a project. 62. 43. 19. 35. 17. 49. 62. 55. 67. 87 annual report. 74. Competitive advertising estimates. 78. 79. 46. 32. 11 authentication. 23. 79. 29 37 Cumulative results. 37 contributions. 43 Consumer panel. 36 36. 59. 32. 33. 56. 50 46. 64 Brand Contribution. 63. 49. 30. 75. authenticate. 51. 82 brand is withdrawn. 51. 32. 31. 17. 8 Brand results. 41 Consumer survey. 55. 47 5 Vodite Brands. 22. 30. 50 30. 35. 1. 48. 63. data exchange. 82 brand is modified. 77. 73. 84 Buffs. 77. 64 Company Performance. 46. 74. 82 Contribution by Brand chart. 73 18 competition scenario. 14 Company performance. 85 advertising budget. 63 36. 72. 42. 30.INDEX 100. 49. 75. 36 cumulative production.000 units. 77. 62 79. 55. 15 average selling price. 33. 61. Conjoint analysis. 43. 64 brand introduction. 10 Company results.

30 Department Stores. 12. 24 depreciation. 62. 36. 79 23. 31. 37. x High earners. 43. 14 inventory. 23 InstallShield Wizard. 64 Market forecast. 17. 33. 67. 11. 2 Markstrat Online ID CARD. 13 Markstrat Online remote database. 51. 5. 41. 10 inflation. 12 INDUSTRY-TEAMX. 18. 12. marketing mix. 10 Dumping. 27. 79 Ideal value evolution. marketing plan. 68 market share. 35 Errors. 49. 35. 29 Followers. 58 FAQ section. 37. 30 durable goods. 64 feasibility study.. 46 Decision summary. 32. 47 Download the Practice file. 35. 45 37. 18. 61 market shares. 17. 8. 19. 11 Markstrat Online server. 74. 35 growth-share matrix. 15 Markstrat Online team software. 61. 27. 17. 78 27 27 marketing department. 41. 43. 22. 22 ideal point. 1. 60 marketed under different names. 24. 29. 25 download. 79 Download your team 127 . 29. 42 Market forecast studies. 24. 63. 55. 82 17. 79 fixed costs. 24. 74 Industry benchmarking. 8. 27. 17 Markstrat Online ID Card. distribution coverage. marketing mix strategy. 28. 29 design. 3 GNP. 23 economic variables. 35 Innovators. xii. 53. 14. 56. 7 Distribution panel. 9. 17. 11. 31. 53 distribution channels.decision round. 41 Industry Benchmarking study. 10.zip. 4 Department stores. 79 market evolution. 59. 64 MARKSTRAT dollar. 17. 10 file. 36 industry ID. 35. 62 long-term marketing strategy. 1. 46. 22 market research studies. 77. default folder. 41 distributor margins. 17. 18 Early adopters. 28. 4 internet. 36. 72. 18. 11. 3. 49 Frequently Asked Questions. 7. 10. 9. 2. 73 ideal price. 35. 10. 10. 29. x Feasibility studies. 17 margins. 11. 37. 23 forecasts.

76 Minimum base cost. 59. 18. 20. 32. 2. 82. 51. 7. 68. 47. 32. 50 Mass Merchandisers.exe. 32 Development. 76 perceptual objectives. 17. 73. 11 registered students. 64. 31. 43. 80 requested base cost. 5. 80 minimum computer configuration. 31. 78. 82 price. 37. xii. 35. 72. 33. 3. 45. perceptual advertising. 36. 85 sales force. 77. 79. xii. 36. 37. 75. 36. 29. 29. 20. 11. i. 24 MDS. 73. 70. 18. 19. 60. 53. 28. 45. 21. 68 Modification button. 81. 42. 17. 61. 18. 74. 35. 64. 30. 43.MARKSTRAT world. 46. 67. 53. 37. 35. 55. 84. 63. 28. 37. 75 55. 17. 72. 54. 42. 42. 71. 82 62 Professionals. 29. 53 on-line query. 32. 31. 24. 2. 35. 51. 42. 17. 27. 30. 17. 8. 43 128 . 51. 8. 84. 36. 79. 10 Others. 72. 47 reposition a brand. 61. 3 remote server. 85 Production department. 79. 18. 40. 71. 36 performance indicators. 77. 74. 28. 46. 52. 1. 9 password. 62 product portfolio strategy. 46. production plan. 87 Normalize. 27. 54. 55 24. 32 Newsletter. 74. 22 overview. 32. 9. 37. 31. 80 R&D. 24. 64. pricing. 63. 12 passwords. 75 35. 36 sales. 8. 50 2. recommended retail price. 75. 63. 10 23. 27. Registration. 27. results. 122 Research & My Markstrat Online new products. 68. 49. 63. 10. 45. personal data. 27. 62. 85 Sales force experiment. 74. 48. 80. 29. 7. 22 profit center. 25. 27 17. 1. 17 Markstrat-OnlineTeam-SetupVXX. 4 mass merchandisers. 49. 41. 39. 48. 53. 74. 68. 22. 11 positioning. 31 perceptual map. 4 49 Multidimensional scaling. research & development. 49. 35. 31. 50. 11 Perceptions. 1. 10. 79 Open a team file. 56. 75. 70 files. 59. 19. 87 return on investment. viii.

x. 75.salespeople. 73. 62. 71. 74. 87 Sonites. positioning strategy. 85. 56 suspended. 87 Vodites. 84 transfer cost. 32. 62. 19. 78. 36 stock price indices. 47. 20. 24. 53. 54. 62 129 . 82. 63 warnings. 56. 22 Sonite. 78. 20. x. 49. 49. 28. 49 units produced. 77. 67. 72. 24. 54. 78. 80 Undo button. 32. 85 Session assistant. 51. 24. 12 teammates. 13 shelve. 27. 9. 20. 63 Specialty stores. 24 stock price index. 30. 23. 10. 29. 42. 23. 54 Singles. 42. 22. 46. 22. 70. 21. 24. 47. 35. 35. 19. 2. 62. 21. 68. 52. 18. 59. 7. 32. 48. 84. 35 Summary. 49. 55. 11 30. 85. 23. 31. 84 segmentation and 27 semantic scales. 36. 75. 84 team ID. 43. 67. 36. 76. 79. 76. Vodite. 41. 28 usernames. 10. 5 trading company. 49. 77. 21. 23. 59. 28. 81 Targeted segments. 32. 14 The PRACTICE file. 62. 54. 8.

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