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Federica Merli Valentina Salvini Filippo Vescovo Khader Alsadi
University Of Pavia
Our decisions for the second part has affected our results which led to a huge decrease both in market share and net contribution.it Filippo Vescovo filippo. Brand Portfolio and Market research studies. thanks to better marketing decisions.com 1 . Stéphane Ganassali provided us with the opportunity to participate in Markstrat Simulations.it Valentina Salvini persemprevale@hotmail.Team A Introduction Advanced Marketing course taught by Prof. Birgit Hagen and Prof.com Khader Alsadi khader. marketing mix. R&D decisions and Financial decisions.vescovo@gmail. In November 2011. Research and Development. sales force. We decided to divide our report in this way because we think this is the best way to describe our track during this enjoyable journey. Our first milestone was characterised by best results compared to our competitors. During the simulation we had 10 different periods in which we asked each of these to take different types of decisions regarding Marketing mix .Simulation Report . we were able to compete with the first 2 competitors. Our team decided to recover our position.87@hotmail. In this report we decided to divide our Markstrat experience into 3 milestones according to our performance during the simulation and for each of these milestones we highlighted the context.merli. Team A is: Federica Merli fede. financial and market performance . we as Team A and other 5 teams were asked to practice our marketing strategy and management skills in the Markstrat world.alsady@gmail. strategy.
7 Pag. 18 Pag. Research & Development Pag.Team A Summary CHAPTER 1 – The Great Illusion (Period 0 to Period 3) 1. 19 Key learning points & Conclusions 2 . 4 Pag. 8 CHAPTER 2 – Hard Times for Team A (Period 4 to Period 7) 2. 14 Pag. The Marketing Mix Recap 1. The Context 1.5.4. 12 Pag. Financial & Market performances 1.3.1. Research & Development Pag. Our Strategy 2. Financial & Market performances 126.96.36.199. The Marketing Mix Recap 2.4. 5 Pag. Our strategy 1.6. 13 CHAPTER 3– The Resurrection (Period 8 to Period 10) 3. Our Strategy 3. 5 Pag. 17 Pag.3. 10 Pag.Simulation Report . 9 Pag. 15 Pag. 10 Pag. Marketing Mix Recap 3. Evolution of the simulation during period 1 to 3 1.5. 15 Pag.4. 3 Pag.2. Research & Development Pag. Context & Evolution of the Markets 3.1 Context & Evolution of the Markets 2. Financial & Market performances 2.5.1.
and usually they are looking for cheap.Others: this segments includes all consumers who do not belong to any of the above group. sales and all with two Sonite brands in the market (with the same characteristics). like Buffs they are quite price sensitive. Sonite and Vodite consumers purchase in the following three distribution channels: . The Sonite market is composed of five customers segment. They are geographically close to their customers and can provide a high level of service and technical support. .Buffs: people in this segment are very interested in Sonite products and they are extremely knowledgeable about Sonite technology. They are quite price sensitive and they demand high performance products. Each one represents different customers preferences and purchasing behaviours.1.Singles: they demand average level of both performance and convenience in Sonite product.High-earners: this group of people have an high income so they can purchase relatively expensive products and their purchase is partially motivated by social status. Our products were: SAMA and SALT.Team A CHAPTER 1 – The Great Illusion (Period 0 to Period 3) 1. . low-performance products with average convenience. 3 .Simulation Report . . . . The Context At the beginning of the simulation all the six competitive firms started from the same level of market share.Specialty stores – These stores are usually small and do not belong to organized chains.Professionals: they are looking for high quality. They can afford expensive products and often view price as an indication of quality. high performance.
Evolution of the simulation during period 1 to 3 During these three periods we observed some changes of the Sonite market in relation to the segment size and growth rate as the Market forecast report suggested (see Figure). We concentrated our attention on the 4 segments with the best growth within the next 5 periods. and Net contribution ($ 30+M and $40+M). . high volume basis and try to minimize overheads.2. As concerning the competitive environment.Department stores – Department stores are characterized by the wide product assortment they offer. For SAMA we focused on Singles and Others while for SALT on High earners and Professionals. both in terms of market shares (21% and 19% respectively).Simulation Report . but their technological expertise is lower than that of specialty stores. 4 .Team A . 1.Mass merchandisers .These stores operate on a low-price. the first three periods saw good performance by our group and group O.
1. As regarding the market share. Adjust the sales force according to shopping habits and so we increased the forces in Specialty Stores for SALT and in Mass Merchandisers for SAMA.4. while in period 3 it registered an increase for the segment Single from 16.Team A 1. We decided to increase our production according to the optimistic growth of the market forecast. SAMA (performance rating: B+) SAMA. both of them dynamic groups with growth rates between 20% and 30% each year. SAMA). Financial & Market performances In the first three period. due to the increase in the selling for the product SALT (and. In this part of the simulation our team had a relatively comfortable position with a large budget. 5 . Clearly. both in terms of time and of budget. in period 2 we started an R&D project in order to create the first Vodite (available in period 4). Others and Singles with SAMA. and Pros. passing from $16 M of period 0 to $34 M in period 3. PSALT2). This decision was made because: It was not possible to develop new products for each segments. At the beginning our team decided not to focus only on one segment. to a certain extent.Simulation Report . but with each of our product we decided to target two segment at the same moment. the two most relevant characteristics to consumers. Expecting a rise in sales.7 to 26. with SALT.6% overall (Sonite market).6%. the performance was quite stable in the first two periods. To reach the ideal value that best satisfy our target consumer we decided to reposition SAMA and SALT through: R&D project (PSAM2. In the meanwhile. The result was so to target Hi-earns. which registered higher volumes sold and higher margins than SAMA. In period 2 we noticed the possibility to enlarge our brand portfolio in the Vodite Market. in order to improve products’ characteristics (period 2). we observed a +213% in the revenues. increase the advertising budget and focus the budget more on target segments. Now let’s consider the products one by one.3 Our strategy Our main objectives in this initial part were to create our own brand awareness and to increase the level of our sales. The two couple of segments (as can be seen in the figure here) had similar characteristics in terms of Power and Price. that seemed attractive because it was a so-called “Blue-ocean” market. during the first three periods was chosen to target two segments at the same moment: Others and Singles. For this reason. and from 7 to 9. most of the growth came from SALT product. we decided to give up the Buffs segment because it was the one that was decreasing in the next 5 years. with no competitors and high growth rates in the future. and large revenue due to the good performance in the Sonite market.
500 4.955 193 131 19. This phenomenon can be explained both with advertising policies and price policies (the price was increased). our company started the R&D project PSAM2 in order to upgrade the product. Said this. while in the third.890 5. we can take a look at the graphic here.399 -2. the same cannot be said in terms of its profitability. in order to cut away our competitors and secure the segments of Others and Singles.414 97.947 151.000 70 (a) -10.Simulation Report . inventory (<10% of units sold for all three periods) and sales forces resulted appropriated.250 80.140 3. We can notice a substantial equilibrium in the first two periods. If in period 1 SAMA was sold at 163 to the distributor. working on design and power. the production cost raised from 58 to 70.650 6. The error here was to work only on those two characteristics and not on its producing cost: with 1 M more invested on the R&D project.621 150.261 6. in period 2 the value shrinked to 130.553 9.126 U $ $ K$ 71.000 74 -5.138 -1. SAMA Periods Sales Units sold Average retail price (final consumer) Average selling price (distributors) Revenues Production Units produced Average unit transfer cost Cost of goods sold Contribution before marketing Marketing Advertising expenditures + Sales force Contribution after marketing K$ K$ -1.3%. And this fact is linked to two clear reasons. with a decrease in margins. which were also the most price-sensitive. b) In period 2 we decided to decrease the selling cost for SAMA from 250 to 200.350 8.535 243 163 13.064 194 (b) 130 12. the product became the Hi-earns first product of the market with a share of 30. the same cannot be said for its profitability.000 58 -5. As regarding the Market shares. from period 2 to period 3.690 5. Even if the move worked in terms of market share.970 -2.737 Unit 0 1 2 3 a) During the second period.Team A Even if in the market share SAMA performed quite well.562 82.320 244 162 11. marked with red in the table. 6 .033 96. where there are represented the market shares of SALT for three segments. The result then resulted the opposite: as can be seen in the production cost per unit.491 U $ K$ K$ 80. the production cost could have been decreased in order to increase the profit margin. SALT (performance rating: A-) SALT was the product that was targeting Pros’ and Hi-Earns’ segments (with annual growth rates between 14 and 20% during the first three periods). making its physical characteristics more suitable to the two segments. with a resulting in a big jump in terms of COGS.000 65 -5.
Promotion: the advertising budget was increased both for media and research. In period 3.348 156. while did not affected at all the market shares (Hi-earners instead.111 493 321 43. 1. SALT resulted in much better performances than ones of SAMA.400 161 -15.820 U $ K$ U K$ 97.479 -3. two little mistakes could have been avoided during the period. The main reason was that the market forecast showed a relevant growth. With the developing of the R&D project PSAL2. Price: the price was maintained at the same level just the first period and in the following two periods the team decided to decrease the price (from 250 to 200) in order to compete with other brands focused on the same segments.5%.095 492 320 50. increased).180 Unit 0 1 2 3 Anyway.100 148 (B) -26.055 508 334 59. with low inventory cost.850 0 (A) 31. - - 7 .591 135.005 177.000 121 -18.550 21. The Marketing Mix Recap SAMA Production: the team decided to increase the production in all the three periods. The average increase was 8.010 U $ $ K$ 97. we focused only on characteristics without taking into account the production price: a bigger investment could have bring higher profits in the period 3 and followings.200 134 -18. Place: we focused on “Mass merchandiser” since our segments shown high level of purchasing in this distribution channel. in order to increase the Net contribution.394 493 321 31.895 27. the level of production have been forecasted quite well.Team A For what concerns the profitability.278 156.170 45 33.390 28.5.100 12.154 177.680 6 15.069 95 25. especially in Singles’ and Others’ segments. in order to reach the targeted segments. The second is similar to the error made for SAMA. the increase of the price increased the margin. The first (A on the table) is due to a too low level of production during period 2 (we did not dimensioned the level properly).724 -3. with a net contribution that grew during all the periods and passing from $16 M in period 0 to $28 M in period 3 (+175%) and a doubling in units sold. SALT Periods Sales Units sold Average retail price (final consumer) Average selling price (distributors) Revenues Production Units produced Average unit transfer cost Cost of goods sold Units in inventory Contribution before marketing Marketing Advertising expenditures + Sales force Contribution after marketing K$ K$ -3.350 -4.271 135.Simulation Report . but during other periods.
Place: we focused mainly on “Specialty stores” and secondary on “Department stores”. Max Frequency and Design.Simulation Report .Team A SALT Production: the team decided to increase the production in all the three periods as in the case of SAMA. Promotion: the advertising budget was increased both for media and research. Price: the starting price was much more higher than SAMA’s price and it was settled at 500.6 M$ in this project and this amount of money was very low to create a good product.6. in order to reach the targeted segments. This was due to the fact that despite all the efforts made by the Production department. which are less price-sensitive in comparison to the other segments. Moreover. and MaxFreq & Power (SALT). Regarding this project. The average increase was much higher than SAMA. they were not able to fulfill all the orders of the brand. that could have decreased with some more investments). since it was 47%. We invest only 4. We decided to increase a little (from 500 to 515 in the period 3). Since we targeted “Professionals” and “High earners”. - - 1. Prototypes were ready for the following periods. In particular. and turned out to be a good plus (except of the production cost. since our segments shown high level of purchasing in these distribution channels. we did not expect a negative reaction for the increase in price. they provided higher technical support. Research & Development In period 2 we decided to upgrade our Sonite product with project PSAM2 and PSAL2 in order to better answer to consumers’ needs. 8 . we did not have a precise idea of what was the best solution to satisfy the Vodite Market’s consumers. especially in terms of Design & Power (SAMA). the prototype resulted weak in terms of Autonomy. We also started an R&D project for developing our first Vodite product in period 2 and we finished it in period 3.
especially in period 4 and 5. decrease in Buffs and substantial stability for the other segments. resulting in stunning performances both in terms of market shares (35% by period 7) and Net contribution (>$100 M. As regarding our company’s situation. putting us from the 1st position of period 3 to the 3rd position in period 7. Because they perceive more risk in buying new products. Vodite The central part of simulation saw also the born of the Vodite market.Team A CHAPTER 2 – Hard Times for Group A (Period 4 to Period 7) 2. registering loss both in market share and net profit contribution: something did changed. Thanks to more clever marketing policies. compared to an averafe of $20 M performed by other teams). This resulted in a loss of market shares.These individuals represent the bulk of potential consumers. Followers (Fo) . Context & Evolution of the Markets Sonite The Sonite market evolution during the central part of the simulation was the following: rise in Others. As we can see from the graph the only market segment that increased significantly was the Others segment that was satisfy by our SAMA.1. 9 . Losses in market shares meant also loss in net contribution.Simulation Report . they adopt a product innovation only after a large number of consumers have tried it. team O and E stole to our group relevant part of market shares in the market. team O made a very good work. Let’s take a look at its segments. at the beginning of period 4 we founded our position dramatically changed. but from period 4 to period 7 our competitors developed others product that made the competitive environment more complex.In particular. it represents only a small percentage of total potential consumers. Early adopters (Ad) – Consumers in this segment will not adopt Vodite products as quickly as innovators but will certainly do so before a majority of people have accepted the new technology. Innovators (In) – These consumers will be the first users of Vodite products. Although this segment will probably be the largest one in the early days. but this point will be better explained in the next paragraph.
In period 5 we had low budget due to our bad result of previous period and so we were forced to reduce the production of SAMA and especially VARA. created in order to perfectly fit the preferences of Singles’ segment that was the segment with highest forecast of growth in the next years. 2. In Sonite market we had loss in market share because our product were not able to cover the actual requests of the market segment so we decided to upgrade our SAMA for Others and to develop a new product SAFA. Overall. We had utilized the semantic scale and especially the MDS as a source of insight into the similarities and differences of the 3 target segment . especially during period 7. when we ended with a very low budget. leaving our VARA at weak market shares. The objective was to regain a good position in Vodite market.Team A Vodite market officially started in period 4. and for us disappointing numbers are the followings: Total Net Contribution: from $31 M to $8 M between period 3 and period 6. Financial & Market performances As already introduced. The lowest peak was reached in the 6th period. and the results are clear when we look at the financial side. with the launch of VARA product by our group and VOA1 by group O. As it will be explained later. Our main competitor (firm O). in the central part of the simulation (period 4 to period 7) our company did not performed well. and so we had to ask a loan of $4 M. 10 .3. We started also to identify our perceptual objectives to clarify our advertising intention to our customers. period after periods. while in period 7 – thanks to extra-budget coming from outside – a little advertisement-led recover did happened. our expensive and best product. which was a very bad and so hard-to-sell product. the bad characteristics of our product were putting it completely out of the market. In period 6. launched its first Vodite product much better than our VARA and they reached almost 98% of market share in Vodite Market in the first year. The big. VARA. Period 4. 2. our weak performances turned out in lower budgets. We focused SALT. contributed to a remarkable recover for our Sonite’s product. Our financials have been saved in period 6 by a $ 4M loan (used to re-launch successfully our Sonite and upgrade our VARA) and in period 7 by an external “surprise bonus” of $5 M. united with better marketing policies. mostly used for the improvement of our Vodite product. and group and VYBI by group Y. we thought this product focusing on the followers segment. They performed much better than us. Those two injections. Our Strategy Due to our bad performance in period 4. on the Hi-earners segment that was composed by people willing to spend an extra budget for a good product. our main objective was to try to re-launch our products and to gain position in market share and net profit.2. two new competitors entered. Market Shares: from 20% (2nd position) to 12% (4th position) between same periods. group E with its VERI. so thanks to a loan of 4M$ in period 6 we were able to start an R&D project in order to improve VARA and create a competitive product with better characteristics. 5 and 6 registered losses both in terms of market share and net contribution.Simulation Report .
but still not so good in terms of revenues (less than 7% of our company’s revenues). In period 6 we performed better. when we launched the new version of SAMA we made a very big mistake and we underestimate the quantity of unit sold. SAMA (performance rating: C-) SAMA started very bad. This result is mainly due to our bad price management. concentrated more on the Other segment than Single. that we considered potentially very profitable. SAFA was launched with a retail price of $ 220. third positioned in the segment). in the long term. during periods 5 to 7 performed well in terms of market share and bad in terms of net contribution. and a negative Net contribution. with shares between 35% and 23%. SALT (performance rating: B+) SALT was the product that could make us survive during the central part of the simulation. and so low margins. Our reaction – as it will be explained in the R&D chapter – was to start a modification of the product in order to better target the segment of Others (which was. SAFA (performance rating: C+) SAFA was launched in period 5 with the intent of targeting the segment of Single. resulting in high producing cost. from 100k in the previous period). also because of the low margins of the segment. it reached in the second year the 23% of Single segment. especially in terms of physical characteristics. This fact granted SALT to be the segment’s first product in the market.Team A But let’s see now the performance product by product. Exploiting its high margins and scale economies. and we could steal some of the lost market share and avoiding negative Net contributions. due to our competitors SIRO and SOLD. both because the competition was not too high (competitors. By producing so few units (60k. At the other side of the coin – instead – SAFA turned out to be a great delusion. We concentrated more the sales force in the specialty stores. registering in period 4 a loss in terms of market share of 35. making it the first product for this group of consumer: a very satisfying result. where the margins are bigger. 11 . we could make SALT a good source of revenues – between $31 M (period 4) and $21 M (in period 6). and so revenues. As regarding market shares. while in period 7 SAMA finally came back as one of the Others’ mass products (11.1%. during all the simulation). 2) we did not benefited from scaleeconomies. the biggest and most dynamic in Sonite market). that stole us relevant part of the Others segment. registering weak performances in terms of revenues. those bad mistakes bring us to a loss – again – in market share. both because of market forecasts. The success of SALT during periods 4 to 7 was mainly due to its good positioning among the segment of Hi-earners.Simulation Report . we decided to put up some modifications: We increased the price from 220 to 260. In period 5. in fact. which alone could not cover the cost of production: an important mistake mainly due to our inexperience. SAFA. In fact. After having understood the roots of our mistake. that we could understand only on the next period. we suffered 2 bad effects: 1) we loss potential selling.6%. covering – on average – more than 90% of our total revenues.
mainly due to the growth in the Vodite market.5 M for the improvement of the product. How this happened? The answer is clear and simply: our product was very bad. in period 5 we introduced the modified brand.4% of the new-born Vodite market.%).3 M in period 7 (with selling lost in this period due to under-estimation of the production). even before the marketing expenses. between 370 and 400. and for this reason our team decided to invest $3. compared to a retail price of (on average) 500. and again. Thanks to an increase in sales. Production units was dimensioned at 80K units. because it was the first product in Vodite market. Probably. nor it changed the perception of customers. These changes were mainly due to a lower budget caused by a high level of inventory in SAMA which was sold to a trading company with a disposal loss of K$178.Team A The result was that. that results to be low. VARA (performance rating: E) VARA was launched in period 4 with the highest expectations.4. 50% of the expected new-born market (we did know that one of our competitors was going to launch another Vodite in the same period). 12 . and too low R&D investments were put on it. and eventually increased in later periods.Simulation Report . Net contribution resulted in $1. VARA during those periods was a total disaster. the price could have been raised until 280. in period 6 selling went down to the entering of new competitors. The change in price did not result in a lost in market share. corresponding to 1. Moreover. where our segment-competitor SINO was located. using the money of a loan we received in period 6. because of lower budget in comparison to the previous periods. Place: we focused on Mass merchandiser since our segments shown high level of purchasing in this distribution channel. Price: the price progressively decrease from 210 in period 4 to 200 in both periods 5 and 6. after 2 periods of negative performances. The Marketing Mix Recap SAMA Production: the team decided to decrease a lot the production in period 5 (-64. Promotion: the advertising budget was increased both for media and research. and production cost was around 400. The result was that consumers were not buying VARA. Weak performances were registered for the product also in terms of revenues: negative Net contributions in all the three periods. In the following period units sold increased to 27K. In few words. and those few were also characterized by a price lower than production cost. 2. Vodite so registered low selling. and so retailers were forced to sell it under-price. Price: the team decided to maintained the same price for all the macro-period. - SALT Production: the production was decreased a little in the fifth and sixth periods. The result was a disastrous: just 2K units were sold. Promotion: the advertising budget decreased because of a reallocation budget. resulting in negative net contributions. the team decided to increase again the production of the brand in period 6 (+260%) because on the previous year the demand was higher than what we produced before.
13 . This action was chosen according to our strategy which was to pass by a multi-targeting of the product (SAMA was targeting both Singles and Others at the beginning) to a focus only on Others’ segment. SAFA (introduced in period 5) Production: the starting level of production was fixed at 150 KU for both periods 5 and 6. the “Innovators”. in period 6 we started an R&D in order to improve the product. the team decided to decrease the price (even if the base cost was very high) in order to reach a higher market share. For this reason. it showed that it was not the right product that satisfied the need for that specific segment. launched in the same period. Research & Development In period 4 we developed an R&D project (PSAM3) in order to improve and upgrade SAMA with the intention to better fit the Others’ segment. we soon understood that our products’ characteristics were the main cause of its total failure.Simulation Report .5 M that the project worth. Autonomy and Max Frequency as can be seen in table of comparison here. As regarding our VARA. Then. since it was a key step in the introduction in the market. Price: in the first period the fixed price was 680. in particular. Thanks to this clever action.created for Singles. One year later. which was much higher than our main competitor VOA1. giving us good performances in terms of market shares. the team understood that the sales force distribution was allocated in the right way. we looked at the graph of “Ideal Values evolution” to have an idea of where were going the preferences of consumers in the following periods. For this reason. Promotion: the team spent a little bit more in 5 period. the budget decreased by -18%. To choose the characteristics of the products. we parallel decided to develop a new Product – SAFA . Promotion: the advertising budget was increased in the period 6 both for advertising media and research (+18%). Place: VARA’s sales allocation was distributed mainly between Department stores and Specialty stores. Price: the price was fixed at 220 and the targeted segment was Singles. Due to budget constraints. VARA (introduced in period 4) Production: the team decided to start with 100 KU of units produced. since our segments shown high level of purchasing in these distribution channels. according to consumers’ habits research. since the market forecast shown a high growth level.Team A Place: thanks to the sales force experiment. - 2.5. After its first period. we had to ask a loan in order to face the cost of $3. Place: we focused mainly on Specialty stores and secondary on Department stores. SAFA turned out to be a perfect answer for the segment Singles.
relevant performances came by product VYBE of group Y. while instead an increase was expected. The greater change that was observed during this period came essentially from our group A. In the last period.1.Team A CHAPTER 3– The Resurrection (Period 8 to Period 10) 3. becoming a monopolist-like group. In fact. our new-modified-VARA was able to steal relevant shares to group O in the Vodite market. In terms of competition. In period 8. passing by 26 to 23. Context & Evolution of the Markets In the last part of the simulation. only the first one was increasing also in terms of value. many brands folded. 14 .Simulation Report . our two markets were presenting similar dynamics. While both Vodite and Sonite were increasing in terms of number of units sold at relevant rates. the expanding of the market did not result in great competition: Group O increased its market shares until 50% of the total market (both in terms of Value and units sold)in the last period.
The decision to concentrate resources would have turned out to be quite profitable. while SALT decrease dramatically. 15 . This strategy. The other increase came from the product SAFA. As of SAMA and SALT. At the beginning of period 10 we had an great budget so we decided to reposition all our brand through the advertisement and also through a better advertising research to create best quality message. due to budget constraints. 3. will turn into success.Vodite market was more dynamic and less competitive (only 7 brands at the end of period 7) Considered that. dived by product. our main objective was so to market our new-modified VARA in order to increase our market share and net contribution. Regarding the Sonite market. we saw potential in our SAFA.Team A 3. We tried to do that by increasing our advertisement budget and so the production volumes.2.Simulation Report . . In particular. that was targeting well the cluster of Singles. our performance improved a lot. from $24 to $9 K. and so their performances went bad. Financial & Market performances In the last three periods. But let’s see now the details product by product. as it we will see in the next paragraph. SALT suffered from the increasing competition of SOHI and SELF. Our Strategy In this last part we decided to focus our resources more on Vodite market because: Sonite market was much more competitive and with not so dynamic (“mature market”). we could not be able to give them the right quantity of budget for the marketing. the great part of our success was due to the stunning performance of our Vodite product VARA.3. with no big competitors. In the following graphs are represented the Net contribution in the three periods. we tried to anticipate the evolution of customer preferences by studying the “ideal value evolution graph”. 60000 50000 40000 30000 20000 10000 0 -10000 -20000 8 9 10 5k -10K 5K 9K 24K 16K 4K 11K 9K 19K 19K VARA SAFA SALT SAMA As it can be seen. especially in terms of profitability. It gave us an idea of how we had to modify our perceptual objectives in order to improve our advertisement. As regarding our positioning policies.
Better price-policy: both of our competitors decreased the price while we were maintaining it constant: it bring them more close to consumers in terms of economy and convenience. SEMI and SOOT had been turned out to be more profitable than our SAMA because of 2 reasons: They were selling more (due to better positioning). while SOHI from 5 to 20% of Hi-earners segment. Said this. and so bad positioning. and so producing more: this let them decrease production cost with scale economies. How can be explained this big loss in market shares? Let’s see to whom we lost them: SELF and SOHI: the first went from 55 to 70%. - Lost in market shares turned out to decrease deeply profitability and so. Net contribution. In terms of net contribution. we can see that those two products were selling much more than us (<30% compared to 10%). 16 . Could we make it better with this brand? The answer is yes.Simulation Report . Their better results came from: Better positioning through advertisement (they spent on average $ 800 more than us. with a decrease in selling price (assisted by a better and greater investment in terms of advertisement). an objective failed due to weak marketing policies. passing from a market share of 21. scale economies would have maintained the product very profitable. In the end. we can observe that. Surely. we could have increased our revenues here with greater volumes of selling. and to understand it we can take a look at our competitors.Team A SAMA (performance rating: D) SAMA bring us very low margins during all the last three periods. SALT (performance rating: C+) SALT were the second disappointment of the last part of the simulation. Their basic margin between production cost and retail price were greater at the beginning (86. the segment Others were the less profitable one in all the Sonite industry because of its state of maturity and so its low prices to consumers. mainly thanks to a better advertisement (product characteristics were more or less the same).8% among Hi-earners (2nd position) to just 6. compared to 89 and 99). and had registered better results. In the table here there are values of SAMA and the two main competitors SEMI and SOLD in periods 8 and 9 (average values). as can be seen in the table “communication dimension and message quality” that we purchased in period 9). even if our per-unit margins would have reduced. and so low level of revenues. it passed from $24 K of period 8 to $9 K in the last one. First of all.6% in period 10.
Team A SAFA (performance rating: B) SAFA. consolidating its first position among the segment of Singles. mainly due to low budget. since the targeted segment was price-sensitive ( “Others”). In terms of advertisement. compared to the other two Sonite products. compared to 40 and 50). Net contribution resulted in $19 K. we registered a poor performance (see market research studies of period 9). In terms of market shares. In terms of price management. In period 8 we introduced the new model of VARA (based on the R&D project PVAR1). 3. it passed from 22% of Period 7 to 31% in the last period. especially in terms of Power (68. Despite those numbers. The result came surprisingly with the increase of the sales among the cluster of Early Adopters. merits go to the R&D department that created an ad-hoc product for the segment. and the results came: units sold passed by 7 to 111K and market share from 1. mainly due to our inventory disposal loss which is the cost derived by the lost of old Vodites we had in inventory (without this negative line. Place: we focused on “Mass merchandiser” and “Department stores”.Simulation Report . A bad mark goes instead to the dimensioning of the volumes to be produced: in period 8 the production resulted in being too low. even if we offered the highest price among our segment-competitors SOLD and SUSI. In this sense. Price: the price was maintained the same for all the four periods. VARA (performance rating: B+) VARA was our biggest disappointment in the central part of the simulation. on average $ 500 below SOLD and SUSI volumes. with an increase of market share from 15% to 24%. and so we lost potential customers. VARA would have turned out in a Net contribution of $3 K. Promotion: the main changes were represented by a completely cut on the advertising budget in period 9 (0K$) and an increased in period 10 (2500K$) since the budget was available thanks to an increase in the net contribution in the previous period. Our success in this segment was the characteristics of SAFA. we did not lost any market share. - 17 .4. Marketing Mix Recap SAMA Production: the level remained the same just in the period 7 and 8 (180KU). turned out to be a good success. which was the second most relevant characteristic after price.5% to 15%. SAFA have probably been the brand that we better managed. Period 9 was a consolidation of the previous success: units sold from 111 K to 248 K. In the last part it became instead our biggest success. the Net contribution turned out to be negative. which was much better than our competitors. rather than Followers. while in period 9 it was decreased (50KU) and finally in period 10 it was increased a lot (300KU).
Price: the price was fixed at 260 for the four periods. This decision was due to the fact that. Price: in order to satisfy segment’s needs and to compete with other 8 Vodite’s products the team decided to decrease the price from 600. in order to have a good quality of the message. Place: we focused on “Specialty stores” and “Department stores”. to 550 in the remaining periods. Price: the team decided to maintained the same price for the first three periods. Promotion: the team decreased the expenditure on advertising media and there was a focus on the advertising research. since we introduced a modified brand in period 8 which met the need of both Followers (95% targeted) and Early Adopters (5% targeted). that we made in the last period.5. Research & Development In the last part of the simulation we just had one R&D project. by knowing that the simulation was going to end soon. - 3.Team A SALT Production: the production was almost at the same levels for all the periods (130KU). because of the success of this brand on the targeted segment (“Singles”). SAFA Production: the level of production constantly increasing. but it was decreased during the last period from 515 to 450.Simulation Report . Promotion: the advertising budget was increased both for media and research. because the available budget was addressed to the brand with lower brand awareness. Place: the sales forces were distributed mainly in Department stores and Mass merchandiser. in the first two periods. we preferred to concentrate our means in order to improve market shares and net contribution rather than create products that would have been available for periods after the end of the simulation. since the team decided to focus on “High Earners”. Promotion: the advertising budget was constantly increased in all the periods because we observed that our product was one of the best in terms of quality. 18 . Place: the sales forces were distributed in all the three distribution channels with no significant difference. VARA Production: the production constantly increased in all the periods.
Thanks to the Market Research report the team could also consider. Until period 4 we did not understand well the role of Perceptual Objective and so our brands were not perceived as we wanted by our target segments. resulting in the winning team. In order to better understand the targeted customer we have analyzed Consumer Panel and Consumer Survey.Team A Key learning points & Conclusions We believed that the biggest success’ factors in the Markstrat simulation was to first launch the Vodite product in order to take advantage of a blue ocean strategy in a new and unexplored market. but our R&D investment was too low and our product. we have also improved our teamwork skills. unlike the Vodite of Firm O. this improves the quality of the message for our targeted segments. If we would have studied better the manual. In general our team is very satisfied and proud to have take part to this simulation. In relation to the Marketing mix decision we made some mistakes. First of all we mismanaged the production of SAMA and SALT in the central period and we lost potential sales of these products.e. and so our final results! 19 . R&D. group O could do that. the learning process would have been faster and easier. Study well the manual before the start! Some points have been understood by us only in the central part of the simulation. Don’t invest too low in your first Vodite ( at least $ 8-10 M)! We made the mistake to create a weak Vodite and so our performance was terrible! Manage well your time! If in your case. if our brands were correctly targeted. also in according to the competitors’ decisions. we have not always done the right choice. Thanks to Markstrat. if you believe in your project! Our company was performing very bad in the central part of the simulation. With a loan of $4 M we could develop an R&D to improve our Vodite: it resulted in a great success. but sometimes we did it too late. Our team have understood the importance of all the Market Research studies that we could purchase each period. Than considering the price. In the first 2 periods we had a good position both in market share and in net profit contribution. also by dividing the team in sub-parts (i. organize efficiently the team. advertisement team). We tried to do this. With this mistake our competitors could reach higher rates both in market share and net contribution. …And some tips for future Markstrat’s generations Don’t be afraid to ask for a loan. segment by segment. the time is low for each period. putting in practice our theoretical knowledge. We have also learned that for a good advertising message it is important to invest a specific part of our budget in advertising research.Simulation Report . We all agreed that Markstrat was a great opportunity for each member of the team at both professional and personal level to improve our notions in marketing field. was very bad and very far from the customers preferences. and we well understood that each segment required its own price decision. In the other hand. but our great mistake was in the Vodite R&D project. like ours.