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 Newsletter ____________________________________________________ 88 Company Report ______________________________________________ 93 Market Research Studies ______________________________________ 102 10.9 The Simulation Process ________________________________________ 45 Group Dynamics ______________________________________________ 45 Markstrat Online Main Screen __________________________________ 46 Brand Portfolio Decisions ______________________________________ 47 Production.4.1 5.5 Semantic Scales & Multidimensional Scaling ____________________ 67 Positioning with Advertising ___________________________________ 74 Positioning through Research & Development __________________ 75 Research & Development ______________________________________ 77 Repositioning Strategies _______________________________________ 72 8.10 Validating your decisions with the Marketing Plan Tool__________ 59 7.3 Industry Newsletter ___________________________________________ 35 Company Report ______________________________________________ 36 Market Research Studies _______________________________________ 41 6. Positioning and Research & Development ____________ 67 7.2 5. Understanding Your Annual Report _________________ 35 5.7 Marketing Budget _____________________________________________ 33 5.5 6. Sample Annual Report ____________________________ 87 9.8 6. Sample Decision Form ____________________________ 83 9.7 6. Price & Advertising ________________________________ 49 Market Research Studies _______________________________________ 52 Research & Development ______________________________________ 54 Sales Force and Distribution ___________________________________ 53 Checking your Decisions ______________________________________ 56 6.3 7.1 7.2 9. Making Decisions ________________________________ 45 6.2 6.1 9.6 6.3 6. Frequently Asked Questions ________________________ 117 Administration ___________________________________ 118 iv .1 6.4 7.2 7.4 6.

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

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 .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.

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extensively tested. and the underlying formulas have been number of students and executives from many universities and organizations. 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. Similar to a flight simulator. 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. and Hubert Administration and Professor of Marketing at INSEAD. you will run the risk of viii .Introduction Markstrat Online is the latest version of the MARKSTRAT simulation. The mathematical model of MARKSTRAT. Used in combination with Gatignon. MARKSTRAT3 and Markstrat Online is based on solid theoretical foundations. The Claude Janssen Chaired Professor of Business traditional training methods such as conceptual sessions or case studies. Alfred H. The original MARKSTRAT simulation was developed more than twenty years ago by JeanClaude Larréché. If you do not read it carefully. such as brand portfolio strategy or segmentation and positioning strategy. as well as operational marketing. Markstrat Online is a highly effective tool to learn strategic marketing concepts. Heineken Professor of Marketing at INSEAD. No previous computer experience is beginning your course.

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Save time by checking the site first. marketing. Check the Online Help section of your Markstrat Online Team Software. 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 . Other students FAQs. management. If you have questions below. But the Markstrat Online simulation is fairly complex and we know by experience that some topics will require additional explanation.Questions & Technical Support We have done our best to make this manual as clear and complete as possible. instructor. For these subjects. please contact your requests from thousands of students. in may have already asked a similar question. 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. you should only count on your brains (or those of your teammates …) and your experience. finances or any other topic. regarding this handbook or the simulation we suggest that you follow the steps order to research General Information or view the FAQ section. and a response may be available in the If you do not find the response to your question in the FAQs.

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

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The registration Markstrat Online remote database. • • • 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. The username and password that you have software. 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. Please read carefully the following pages as it is important that you perform these steps in the appropriate order and at the right time. Downloading and installing the Markstrat Online team software. 1.1 The Registration Process Why register The usage of Markstrat Online is strictly reserved to registered students. 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. for several reasons.1. 1 . Testing your installation and discovering the Markstrat environment with the PRACTICE industry.

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

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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• • • 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. The Interface Menu The overall structure of the Markstrat Online team software is described in section to the administration of the course. A decision round starts when you receive the latest simulation results. 6. which is related time you are ready to devote to your MARKSTRAT exercise. The Markstrat Online software includes features to handle many possible situations. 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 . and it finishes when you submit a new set of decisions to the Instructor. i. Here are a number of questions that will help you find the best possible organization. The typical duration of a decision round is from 2 to 4 hours. During your course.2.e. your teammates and the Instructor. or depending on You and your teammates will have to decide on how to organize your work. usually 6 to 12 rounds. you will go through a number of decision rounds. Finances …) to team members. depending on the constraints set by your instructor. This chapter focuses on the Interface menu.3 of this manual. to the communications that will take place between you.

exchange will take place over the Internet. you will see that the team file can be duplicated on 8 . For security reasons. The data to be exchanged are the simulation results and the teams’ decisions. 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.• 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. All teams must exchange data back and forth with the instructor during the course. through a remote database server. All data called the Markstrat Online server. and we will then explain various organization strategies. However. 2.1 Markstrat Online Overview Figure 2 shows an overview of the Markstrat Online structure. we will explain how to handle these different situations. This data is located in a file called team data file or simply team file. you will have to be fully authenticated before you are allowed to transfer data to or from the remote server.

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

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. You also need to download the file if you or one of your teammates has already downloaded the file.I. All registered users can download a sample data file called PRACTICE. 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. obtained during a past Markstrat Online course.day 1. The Markstrat Online software includes an Open Session assistant to guide you and self-explainable. through the beginning of your working session. Download the PRACTICE file from the Markstrat Online server.zip where INDUSTRY is the Markstrat Online files” in your “My documents” main folder. As this assistant is easy to use Which team file to use Select Open session in the Interface menu to initiate the session. made some decisions and uploaded the file back to the server. The window shown in Figure 3 pops up. Your team file is named INDUSTRY-TEAMX.O.U or Y). make R&D and brand portfolio decisions on day 2. The file you will receive will contain the most recent simulation results. make marketing mix decisions on day 3 and finalize everything on the day 4. The file is located in the folder “My Open a team file located on your hard drive. on your LAN or on a removable storage. With this option. Indeed. You need to download your team file from the Markstrat Online server at the beginning of each decision round. . provided by your instructor. You will be allowed to browse through all charts and graphs and to make decisions. Three choices are available. at the end of a previous working session. you will be able to open a team file when you close your session.E. • name of your industry (A. Select However. we only discuss the most important steps here. • this option if you want to test your installation or to discover the MARKSTRAT environment.

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

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. Refer to page 11 for more 15 .e. if you info on the authentication step. i.Authentication The authentication step is mandatory only if you select the first option.

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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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Furthermore. it is anticipated that the Vodite market could be quite attractive if the right products were made available at the right price. marketing and suppliers of Vodites. Vodite product. Finally. 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. they will not be complementary in any way and there will not be any substitution from one to the other. manufacturing.Vodite products will satisfy entirely different needs from that of Sonite products so that demand for the two products will be completely independent. your division and your competitors are the most likely is similar for both markets in terms of technology. Therefore. 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 . The expertise required of potential suppliers distribution. all firms will have to engage substantial R&D resources in order to develop their first million dollars may be required for each Vodite. Although the Sonite and Vodite technologies are similar.

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

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

• Followers (Fo) . they adopt a product innovation only after a large number of consumers have income level is usually below average. Further studies need to be completed. Because they perceive more risk in buying new products. They are critical to the adoption process. it represents only a small percentage of the total potential consumers. However. three groups might be considered for Vodites. 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. effective to group consumers according to how they adopt new products.7 Vodite Customers While potential consumers for Vodites are the same individuals as those who buy Sonites. and should not be neglected by marketers. In this • Innovators (In) – These consumers will be the first users of Vodite products. Their 3. but marketing experts believe that it will be more light. Innovators and early adopters particularly influence followers.These individuals represent the bulk of potential consumers. As this group is usually much high. products as quickly as innovators but will certainly do so before a majority larger than the previous one. They have an average income level. Although this segment will probably be the largest one in the early days. tried it. a different segmentation scheme is likely to be valid for Vodites. its influence on other consumers is fairly of people have accepted the new technology. People in this segment tend to be adventurous and are willing to try new ideas at some risk. Early adopters tend to be opinion leaders and helpful in 'advertising' the new product to other potential buyers.3.8 Distribution Channels Sonite consumers tend to shop in the following three distribution channels and the same is likely to hold for Vodites: 23 .

000 department stores belonging to 15 different chains. therefore each of them should be visited by the companies’ sales forces. and 10. the low level of service may well prevent them from distributing Vodites in As far as the Sonite market is concerned. While mass basis and try to minimize overheads. As a consequence. There are approximately 30. specialty stores are likely to be the preferred distribution • Department stores – Department stores are characterized by the wide product assortment they offer. the depth of each product line is usually restricted to a few units. As they do not organized chains.000 specialty mass merchandisers belonging to 8 different chains. including the most expensive and/or highperformance products. Sonite products account for a large proportion of their sales. high-volume offered is lower than that of the two other channels. but their technological organized in chains that have a degree of power in negotiating margins with manufacturers. They provide extensive customer service.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. Because of their high level of technological channel for Vodite products. Department stores are often • Mass Merchandisers – These stores operate on a low-price. They often distribute the cheaper.• Specialty stores – These stores are usually small and do not belong to provide a high level of service and technical support. the level of service merchandisers carry many different product categories. These margins are applied to retail prices and are approximately constant across brands 24 . stores. low-performance products. They usually have a department carrying Sonites. 7. They are geographically close to their customers and can distribute many different product categories. expertise is lower than that of specialty stores. expertise. These stores usually carry a broad product line for each category. Their lack of technical expertise and the early years. market research studies show that all three distribution channels are important.

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

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

it incorporates all costs associated with this high level of flexibility.1 Production Each period. and can thus be viewed as a highly flexible external supplier. From one period to the next. you are responsible for submitting a production plan for each of your marketed brands. The price paid to production is called the transfer cost. adjusted in response to actual demand for that product. 28 . the actual production level for each product is automatically of the production plan submitted by Marketing. by selling all or part of it to a trading company. you utilization.4. you are completely free to increase or Production department will always manufacture the required quantities in the best possible conditions. The Production department is working for several divisions of your company. without any penalty. are not concerned about manufacturing investments. 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 In a given period. within plus or minus 20% for varying situations of inventory. The units produced are charged to the Marketing department only when they are sold to distributors. Figure 10 gives a few examples numbers are in units). As a consequence. In the case of a relatively unsuccessful brand you may also decide to decrease the inventory. fixed costs or capacity decrease the production planning of a given product.

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

First. price increases or decreases greater than reactions. Finally. On one hand. On the other hand. the recommended retail price will be automatically adjusted up or down to stop such adverse reactions. or other activities conducted by advertising agencies which improve the quality of your message. If you ignore the warning. This budget will be used to purchase media space and time. 4. you must specify the budget allocated to advertising research.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.3 Communication You must make several communication decisions each period. you should determine the advertising budget allocated to each brand. therefore the recommended retail price must be set so that the lowest selling price of a product is higher than its transfer cost. an excessive price decrease will result in a proportional cut in the distributors’ margin. and your salespeople may have a hard time finding distributors for the brand. Advertising research will usually make your advertising more effective. and is especially important when you introduce a new brand or when you want to reposition an 30 . A message will warn you when such decisions are made. media selection. In past years. 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. Second. companies have devoted on average 7% of their total communication expenditures to advertising research. This finances the creative work.

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

You must also allocate a budget to each project. with the exception of the market-forecast study. Making R&D decisions is a crucial task because: (1) existing products When launching a new R&D project. Consequently. the Marketing department must specify the desired characteristics for the new or improved product. Section 7.3.6 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. All studies except Industry benchmarking apply specifically to either the Sonite or each period. projects.5 is devoted to the interface between the Marketing and Research 32 . work. The list of available studies is given in Figure 12 and all studies are detailed further in section 5. (2) new products may have to be designed in order to target untapped segments in existing or new markets. The R&D department is responsible for conducting the actual research & development & Development departments. Vodite market.• 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. The information provided is relevant to the market situation during the analyzed period. including the target transfer cost. a maximum of 23 different studies may be ordered 4.

33 . there is a minimum budget level for each period.000. you may be granted a large budget. You will have to work within this given budget! If total spending starting with advertising expenditures. there is a company to maximize the return on investment at the corporate level.7 Marketing Budget Each period. 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.000.000. exceeds the allocated budget for a period. however. your budget for each period will be between $7. If you perform outstandingly. However. 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. expenses will be automatically cut. you should not necessarily spend your entire budget in every situation. Similarly. Note that if your objective is to maximize your return on investment. effectively subsidize your division if you are not generating sufficient contribution In general. spending it completely might be a waste of money.4. whereby headquarters may internally so your division can continue operations.000 and $20.

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

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

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

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

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

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

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

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

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. It provides the utilities – a real important physical characteristics and for each segment. An increase in contribution for a given brand shows that you would have benefited from a higher level of advertising spending for this brand. (It also provides the average sales force size by brand and by firm. actions. T instance close to 1. 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. for corresponding physical levels. If for example. the competitive actions. you may test the impact increased distribution coverage and market share for each of your brands. 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. the resulting change in contribution after marketing is also provided. increasing your advertising budget by a given percentage. High utilities. 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. For example. demonstrate high consumer preferences for the 43 .channel and in total. in total and for each channel).

44 .

together with the decisions of your competitors.2 Group Dynamics During the first set of decisions. For these reasons. The team should start by analyzing this information and agree on a strategy for the company. At the same time. everybody will have developed a common understanding of the strategic issues. the management of the firm will become more complex in terms of the number of brands. try to avoid the inclination that each member concentrates in his or her area of expertise. The Markstrat Online At the beginning of each decision round. Making Decisions 6. following this cycle of decisions and results for up 6. the team will review the objectives and decide whether to maintain or adapt the strategy. After examining this new set of information. decisions for the next period. the market 45 . you will be given your firm’s annual software model will compile the data and generate the results of that period. At the end of the decision round. the Industry Newsletter and the Market Research Studies that you ordered in the previous period. you will submit your decisions to your instructor.6. 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.1 The Simulation Process Company Report. Once you have determined your marketing objectives. Later in the simulation. Your team will then make to twelve simulated years. you will make decisions for the next period. a new Industry Newsletter and new Market Research Studies. it is essential that you develop a good working relationship within your group. the R&D interface. These results will be reflected in your next Company Report.

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

and backup or restore files locally. a decision screen appears that will help you bring a new Sonite and Vodite brand to market. It enables you to develop up to 5 Sonite brands and 5 Vodite brands per period. You should your decisions to the instructor. This menu is fully documented in chapter 2.4 Brand Portfolio Decisions The Brand portfolio decision screen is displayed in Figure 17. 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 team may Introducing a new brand After clicking on the Introduce new brand button.Interface. The name of the 47 . introduce new brands and to modify or withdraw existing ones.

Naturally. or it can be selected directly in the list of available R&D projects. The R&D project name corresponding to the new product specification must be selected from the completed R&D projects. reference. otherwise. which is provided for on the View R&D report button.new brand must be entered using the naming conventions discussed in section 3. 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. 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. a brand introduction.5. the name of a modified brand does not change. you subsequently decide not to launch. A decision screen appears. it would be 48 . click on the Modification button. 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.

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

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

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

g. The cost of these studies appear as the boxes are checked. Some of the studies may apply only if there are brands marketed during the period (e. you will not be charged for them. the consumer panel for the Vodite market). the research is performed during the next simulated period and the results are made available at the end of the period.6 Market Research Studies The Market Research Studies decision screen is displayed in Figure 19. purchase market studies. Moreover. This information is available for the following period's decisions. 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. 52 . simply check the boxes that correspond to the studies When you order a study. To you would like.Figure 19 – Market Research Study decision screen 6..

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

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

For each project. assuming a production batch of 100. 55 . The cumulative R&D budget is also indicated.000. the information is provided in the next period within the R&D section of the company report. The allocated budget corresponds to the budget devoted to the project over the next period. the values of the five physical characteristics for the desired future product must be entered in the corresponding cells. A feasibility study takes one period.000 units. 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. You can ask the R&D department to seek the minimum transfer cost. 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. The requested base cost is the transfer cost that will be charged to the Marketing department for each unit of the future product. and the R&D budget required guaranteeing its completion at the currently requested base cost.

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

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 .

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

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

The purchased in the current period. The average distribution margin corresponding to a 61 . Displaying the expected brand sales resulting from the segment size and market share estimates. Updating selected brand sales estimates. 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. and 3. or be calculated automatically based on the shopping habits study. One should. minus the distributor’s margin.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. As the distribution margin varies across channels. They can be set to the same values as in the last period. percentages adds up to 100. For each habits data. In this case. brand. In this case.2. The sales of a brand in a given channel are obtained by total over the segments. To calculate the financial contribution of a brand thus requires an estimate of its distribution mix. Selecting the corresponding tab in the marketing plan section can make the Distribution mix estimates. It probably reflects the most logical process but it is also possible to directly set estimates of expected brand sales. however. 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. Marketing Plan . brand share estimates are calculated on the basis of the brand sales and the segment sizes. 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.

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

if all consistency checks are passed. 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. or the cut in the advertising budget did not have such a negative impact on sales and that. For example. separately for Sonites and Vodites as well as in budget for next period is estimated on the basis of these expected financial results. the brand has performed better than expected and is out of stock. Other aspects directly controlled by the firm may not have been properly incorporated. From the top line of units sold to the level of contribution contribution pro forma statement. however. or may have been overlooked. by 63 . total. no guarantee of achieving the projected results. This replicates a page in the company report but allows you to go one step further by simulating results after marketing. Other expenses are then deducted to provide the net contribution. it is an aggregate of the information available in the brand based on estimates. action. and learning in at least three important ways: firstly. It provides. The process of planning in Markstrat Online brings discipline to marketing thinking.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. to a pro forma statement of company performance. students often overlook the following issues: • the distribution mix estimates may not have taken into account the fact new shopping trends.Selecting the Company performance tab gives access. as a result. including consumer needs or competitive actions. a Marketing Plan . Finally. 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.

brand performance (in shares or volume). then the validity of some of the decisions or estimates should be questioned. Within the firm’s portfolio. A systematic analysis of the sources of variance between 64 . Moreover. it is also relatively convenient to perform sensitivity analyses to better understand how they affect the brand contribution. secondly by making it easy to check the validity of the overall financial results. This financial Finally. sufficient funds to reach financial objectives. This makes learn over time. the retail price. 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. Having to submit estimates for these components of the plan should solicit discussion and reflection about the variables affecting them. if the resulting projected brand contribution appears significantly higher or lower than expected. or the advertising support of the brand. 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. By modifying the estimates. For instance. The Brand Contribution and Company Performance statements in it easy to compare between the anticipated projections and the actual results when they are obtained. 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. the marketing plan section helps to focus on the three key elements of market evolution (segment sizes). and distribution coverage. 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.demanding a focus on the tangible results of decisions at the brand level. On the first aspect. and thirdly by providing support for a post-mortem analysis. decisions or the estimates.

In the long-term. this learning dimension is probably 65 .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.

66 .

(I. companies will have to introduce new Sonite or Vodite brands. the needs of customers will probably evolve over time. some segments may want more powerful brands while others may expect prices to fall). Positioning and Research & Development As you may expect. Your department product positioning: • • • • and positioning strategies. As marketing resources are limited. To respond to these changes. For instance. 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. 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. However. the market environment will change during the course of the simulation. The goal of this chapter is to describe the various approaches that can be used in 7.7.e. consumers who are about to make a purchase decision are influenced by their perceptions of the brands 67 .

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

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

experts provide an interpretation for each of the three axes. 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. Performance. The map is a graphical representation of the respondents’ ratings. 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. The various geometric shapes (square.) 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. 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. Each brand name is clearly labeled. Pr. Each circle only represents the center of gravity of the whole segment. similarities or differences between two brands. Hi. and Ot on the graph represent the ideal points of the five segments.. First. triangle. Second. table below.. Third. i. Note that only two dimensions out of the three can be represented simultaneously. Si. Finally. The circles Bu.e. star. Power Price Slight Slight Slight Slight Slight Slight Slight Slight Strong Slight Slight Moderate Strong Moderate Strong Moderate 70 . This map is built through a complex process.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. a combination of several physical characteristics. For the Sonite market. all brands marketed by firm A is represented by red stars). 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.

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. 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. 71 .Note that for Weight. Volume. this complex task cannot be achieved unless a significant number of brands are marketed. the higher the perceived convenience or flexibility. the relationship between the instance the lower the weight. 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. Diameter and Price. which should be used with care since no Axis Composite Relative Influence of physical characteristics Dimension importance Autonomy Max Freq.

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

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

to buy media space advertising copy. Allocate an advertising media budget for the brand. they can be slightly influenced by communication. Using advertising to reposition a product is a four step process: 1. But the level is high. Beyond a certain level. and then to upgrade the brand. R&D projects will take at least one period to complete. brand repositioning can no complete an R&D project with physical characteristics matching consumers' & Advertising decisions. to reposition a brand closer to the Singles segment along dimensions Weight and Power. Price repositioning effect is limited. while repositioning through advertising has an immediate effect. by looking at the chart Ideal value evolution in the semantic scales study. First. Identify the target position on the perceptual map or on the semantic scales’ chart. The effect of advertising research is two-fold. this is especially true when the brand awareness more difficult to reposition. by a better selection of media and a better design of the 3. as explained in section 6. Specify perceptual objectives for the brand when making Production. 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. and it therefore becomes necessary to needs. and an advertising research budget. A maximum of two dimensions may be specified to keep the message simple and effective. the repositioning impact will be higher in terms 74 . For example. Second. because a brand which consumers are extremely familiar with is longer be done by advertising alone. Advertising can also be used to reposition a brand. Although consumers' perceptions are linked to the brand’s physical characteristics. 2.3 Positioning with Advertising Advertising in Markstrat Online is mainly used to build brand awareness and to inform customers about its physical characteristics.5. you must first try to estimate the future ideal positions of that segment on these two dimensions. and time. it makes your advertising campaign more effective.7. You can choose to set perceptual objectives either on semantic scales or on MDS dimensions.

These two 75 . 4. This can be done in at least three different ways. Identify the target position on the perceptual map or on the semantic scales’ chart.4 Positioning through Research & Development As explained before. brand and the target segment’s ideal position is too large. although there will naturally be a limit as to how far and how fast advertising can change perceptions. − The best solution is to use one of the two charts plotting the relationships between physical attributes (power.of reaching the perceptual objectives. to inform the 7.. weight. the targeted segments must be coherent with the perceptual objectives. Estimate the physical characteristics that correspond to this target position. appropriate media to communicate the message. However. this decision alone is not sufficient to reposition a brand. 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.. 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. Research and Using R&D to reposition a product or to introduce a new one is a four step process: 1. 2. Obviously. but it has little effect on Finally. price) and semantic scales or coordinates on the perceptual map. project – or when you increase or decrease its price significantly. since all marketed brands must be based on R&D projects. Targeting specific segments is mainly done by selecting the most the content of the message. Indicate the percentages allocated to the Targeted segments.

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. In this case. you may still obtain information on segment needs from the semantic scales study. one with the semantic scales study (see Figure 27). In this case. and brand SAMA for Others segment. X is the corresponding physical level. 76 . However. 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 5.5 on the 1 to 7 scale.charts are provided in the simulation. 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. For instance. This is likely to be true in the early stages of the Vodite market. rated 5. Your best option is to assume that there exists a linear relationship between autonomy in meters and semantic scales. and the other one with the MDS study (see Figure 29). 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. although imperfect.e.5-1) / 6] x (100-5) + 5= 76 (rounded to the nearest whole number) This method. Singles segment. Consumers may for instance indicate that they are looking for brands with a high autonomy. In the previous example. on the map in Figure 28.5 is: characteristic’s feasible range. the autonomy [(5. − These charts may not be available when only a few brands are marketed. the conversion formulas are: that the lowest autonomy (5 meters) would be rated 1. i. − brand SODU appears to have the appropriate Performance level for the The perceptual map is not available when no brands are marketed.

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

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. the R&D department will have more flexibility in finding the appropriate materials and 78 . Each of the five attributes must be specified. Because this cost decreases over time with experience and volume of production. a Sonite project must include specifications for Weight. development. developed. Section 7.Project name The names of R&D projects are made up of five characters. Maximum Frequency and Power. Volume. If you indicate a high base cost. even if it is a minor modification of the older project. The first letter is always a P for project. Base costs have no upper limit. This cost is called the Base cost. and the levels must be within the feasible range. For instance. you initially need to specify the transfer cost of the first 100. The second letter identifies the type of product being characters. Design. S for Sonite and V for Vodite. Technical specifications The marketing department must provide the physical characteristics of the desired product.000 units of the new product.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.

e. and volume Sonite is more complex than a big.manufacturing processes. The base cost is then obtained by subtracting the cost will be. As a consequence. • Another method is to request that the R&D department develop the project at the minimum base cost. light and powerful the price that consumers in this segment are willing to pay for a product average distributors’ margin. High levels of design.000 and take one period to complete but give fairly accurate results. as estimate of the base cost and of the required development budget. On-line queries and feasibility studies provide an $100.8. margins. On-line queries are free of charge and provide results instantaneously but they generally overestimate budget requirements. low levels of weight. 79 . fitting their needs. maximum frequency. Similarly. but at least. plus the minimum margin that will make the future product economically attractive for you to market. diameter. and is less expensive in terms of the total development budget. This cost will be higher than the minimum one in many cases. Feasibility studies cost explained in section 6. power and autonomy increase the base cost. the higher the minimum base increase the base cost. This is understandable since a small. There are many ways to estimate the base cost of a product. this method provides the highest base cost economically achievable. • One solution is to start from the ideal price of the targeted segment. i. but may be more expensive overall since the development budget • A third procedure is to do an on-line query or a feasibility study. This solution is highly attractive in terms of is likely to be much higher than the one required with the previous solution. The lower limit of the base cost for a given project depends on its technical specifications: the more sophisticated a product is. heavy and low power Sonite. the project is easier to develop.

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

For the later one. the Marketing department could decide to immediately launch a cost reduction project. values. Uncompleted R&D projects may be continued the following period. The technical characteristics of a continued project may not be changed from their original project or sacrificing the money invested in the first project.cases A and C. the budget allocated so far is lost. However the base cost may be changed without having to start a new Unit Project specifications Weight Design Volume Max Freq. If you choose to never continue the project. budget for completion Figure 30 – Interface with R&D department 81 . so as to complete a new project with the same physical characteristics and a base cost of $110. 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. or may be suspended for one or several periods before being continued.

since consumers are familiar with the brand at its previous position. usually 80%. if the Marketing 82 . but the brand name makes its repositioning more difficult. This company will then export the old products outside the Markstrat Online charged to the marketing department. modification or withdrawal R&D projects may be used as soon as they are completed to launch new brands or to modify existing ones. A company may also market multiple different prices while having similar technical needs. Obsolete inventories are sold by the Production producing the new version of the product. Lowering the cost of a brand is department to a trading company at a fixed percentage of their value. brands based on the same project to different segments which are willing to pay When a brand is modified. the brand’s purchase intentions are likely to be higher than with a The same product can be marketed under different names. maintained. a loss of x% (the given percentage) of the inventory value is when a brand is withdrawn from the market. the loss would be calculated as: 12 939 units x $146 x (100% – 80%) = K$ 377. The presence of multiple brands targeted at the same segment is a good strategy to build barriers to entry of new brands by competitors. Using an existing project. For example.Brand introduction. However.4. 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. as the awareness level is new brand.8 world. This brand name is completely independent of the code used for the R&D project. Consequently. Brand portfolio decisions are summarized below and are detailed in section 6. The same rule applies if inventories remain department decides to modify or withdraw brand SONO in Figure 14. Using a new brand name will facilitate the product’s positioning. They may also be shelved for future use. the Production department will immediately start considered a brand modification. A new brand is introduced on the market by entering a brand name which has not been used in the past.

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

7] or [-20.7] or [-20.0 Felx. 3.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. Perf.0 4..0 Conv.7] or [-20. 15. 1.0 84 . 5.0 -5.0 [1.7] or [-20.0 Targeted segments in % KU KU $ K$ K$ Buffs Singles Professionals High earners Others Perceptual Objectives Dimension 1 Objective 1 Dimension 2 Objective 2 Eco. -5.+20] Eff. [1.+20] 1.0 Perf.+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.+20] [1. Conv.

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. 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. stores 25 45 8 27 20 100 Mass Merchants.

86 .

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

1 Newsletter 88 .9.

Newsletter – Stock market and KPIs 89 .

Newsletter – Economic variables and costs 90 .

Newsletter – Information on Sonite market 91 .

Newsletter – Information on Vodite market 92 .

9.2 Company Report 93 .

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 .

9.3 Market Research Studies 102 .

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 .

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

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

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

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

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. 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. why? Try turning off your pop up or ad-blocker software When I authenticate and/or try to download my files. If you enable Data Execution Protection (DEP). I get a message saying that I cannot connect to the Markstrat Online Server? ALL your firewalls. Absolute company values are meaningless in Markstrat since companies start with 120 . The Teams need to be very organized about uploading their decisions. Markstrat has to be specified as exceptions from Data Execution Protection. If market capitalization increases. Market capitalization is a good representation of the value of the company. it prevents Markstrat from running. it means that the team was able to create value.exe and add an exception for the executable. My computer freezes when I try to upload my decisions to the instructor. It can be done by right clicking My Computer | Properties | Advanced | Performance Settings| then browse to C:\programfiles\StratX\[Markstratonline]\Binaries\msol.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.

Markstrat does not have a implications on the company of financing through long-term debt. 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. We advise apply this policy to all teams. 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. which are both necessary to find out the professors to set up a "Loan Policy" prior to the beginning of the course. 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 . the main factors driving the Stock Price Index are: profitability. such a formula does not exist. while driving the In summary. Only the evolution of market capitalization is important. existing markets or by investing successfully in new markets. level of R&D activities. Growing the company and generating a high net contribution is the best way to increase your stock price. Of course. This is usually achieved by increasing your market shares in growing segments of costs down. as it is the case in the life. growth in revenues and market share. this cannot be done without a high level of R&D activities.different initial situations. This is what is tracked by the Stock Price Index: SPI = Current Market Capitalization / Market Capitalization in Period 0. regardless of their financial situations. What is the formula for the Stock Price Index? It would be great to have a simple 'Stock Price Index' formula. Unfortunately.

Given by the relative segment share in value.g. The number of outstanding stocks and Market Research Studies I don't understand the position of circles on the growth-share matrix.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). Thus. For instance: biggest competitor in the same segment. 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. Given by the actual segment growth rate in value. we have decided to simplify the financial aspect. Could you help? Horizontal axis. Markstrat Online does not include a the current stock price are represented by the market capitalization. balance sheet or a statement of cash flow.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. 122 . The scale is a logarithmic scale.: the distance on the scale between co-ordinate 0. A brand is not visible if its relative segment Vertical axis.1. For instance: share is below 0.

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. completed. In the Markstrat World. team can only store 20 projects in total. A Markstrat company has only two such When I do a cost reduction project. Base Cost. 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. you can go to Brand Portfolio and 123 . 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. the oldest ones will be lost and replaced by the newer ones. Imagine a cabinet with limited shelf space where the R&D cabinets. 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. Once the project is 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. This is not a big issue as old projects are usually irrelevant to new customer expectations. one for Sonites and one for Vodites.

Once the project is completed you must do the following: Open the Brand Portfolio decision. 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). without any errors or warnings. 124 . if the plan is equal to 0. that means you have successfully made all of your decisions. To do this. did I do something wrong? No. Errors and Warnings The errors and warnings link within the decisions menu is grayed out.Can a team modify an existing brand to have completely different characteristics? Yes. Thus. in fact you did something right! When the errors and warnings link is grayed out. you must first create an R&D project reflecting the characteristics that you would like the brand to have. there is no automatic adjustment at all.

125 . cost required by the R&D department. even in case of excess in inventory. budget. 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. What should I do? You should contact your instructor and let him/her know what is happening. production plans are not adjusted. completed R&D projects are removed from R&D decisions. projects. 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. − − − brands are not automatically improved with recently completed R&D no new brands are introduced. He/She will have to re-transfer the files for your team. no new R&D projects are launched automatically.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.

51. 75. 64 brand portfolio decisions. authenticate. 29. 87 Company Report. 82 brand performance. 4. 82 brand is modified. 29. 73. 36 36. 1. Company Performance statement. advertising research. 59. 77. 36 budget. 56. 32. 46. 36 cumulative production. 49. 78. 63. 31. 22. 46. 8 Brand results. 82 brand is withdrawn. 10 Company results. 60 brand is introduced.INDEX 100. 64. 62. 81 base cost. 64 Brand Contribution. 36 competition. 43. 31. 67. 43. 21 Close session. 45. 17. 50. 47 advertising. 82 Contribution by Brand chart. 50. 48. 55. 74 Advertising research budget. 50 46. 37. 50. 63 Advertising experiment. 81. 35. 77. 32. 61. 80. 17. 55. 23. 33. data exchange. 18. 41 Consumer survey. 63 36. 37 contributions. 15 average selling price. 41 consumers. 74. 42 80 Competitive sales force completion of a project. 62. 29 37 Cumulative results. 19. 50 30. 87 annual report. 41. 30. 126 . 84 Buffs. 43 Consumer panel. 36. Competitive advertising estimates. 80. 52. 14 Company performance. 72. 2. 73 18 competition scenario. 64 Company Performance. 62 79. 80 5 SoniteBrands. 74. 43 Advertising media budget. 78. 63. 33. 79. 35. 74. 35. 42. Conjoint analysis. 63. 32. 64 brand introduction. 57. 49. 17. 51. 55. brand contribution. 49. 36 Company Scorecard. 19. 75. 68. 85 advertising budget. 77. 73. 42. 23. 30. 43. 11 authentication. 30. 47 5 Vodite Brands. 79. 30. 42 estimates. 56.000 units.

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

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

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

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