Copyright 2001 Ernest R. Cadotte The following slides are for the introduction to the Marketplace...

transcript

The following slides are for the introduction to the

Marketplace game.

Experiencing Marketing @ the Marketplace

The Marketplace Is a Fun Way to Learn About Marketing.

• It is a marketing game.• It is learning by doing.• It brings to life marketing concepts,

principles, and ways of thinking.• It energizes the competitive spirit.

It Is Realistic!

• You do what your real-life counterparts do– Design brands– Design ad copy– Schedule media– Set selling prices – Hire and train sales people– Worry about profits

It Is Organized!

• The game scenario follows the logical process of starting up a new product line.

• You are guided through the decision-making process.

• Detailed help files are available at the touch of a button.

On the left is the step-by-step process that walks you through the information and decisions. The software controls your progression to reduce your uncertainty (and your need to contact the instructor) and to help you see the logic of the marketing process.

The Marketplace software is all set up to print the results for each quarter’s play, starting with the Q2 test market.

–Name, ID, balanced scorecard, profit statement, market share, customer satisfaction ratings

For illustration purposes, suppose you start up a company named

Apollo Computers

Here is the game scenario

• You work for a large international electronics firm.

• Corporate Headquarters wants to enter the personal computer business.

Game Scenario

• You have been selected to head up the new marketing division to sell computers into Asia, United States, Canada, and Western Europe.

• Three other international firms are entering the market at the same time.

There are three market segments that have different price and performance requirements.

Performance

WorkHorse

TravelerMercedes

Each market segment has its own set of needs

You must decide which segment you want to target initially. As the exercise progresses, you are asked

to select a second segment.

For example, the Traveler segment might be selected.

Once you select a segment, you must design a brand to meet the needs of the segment.

For example, portability is important to the Traveler segment. What features would increase the portability of a PC?

You must design ads which appeal to the target segment.

You select the benefits to mention in the ad and indicate their order of priority.

you decide which brand will be featured in the ad.

You set the selling price, decide if you want to use a rebate, and signal to the sales staff which brand has the highest priority.

As the quarters progress, you decide how you want to

expand your international market coverage.

When your decisions are ready to be processed through the Marketplace

simulator, a quality check is made to make sure there were no entry errors and nothing important was forgotten.

Immediately after processing (which takes 2 minutes), you find out how profitable the division was in the quarter that just ended.

You can see your market share by segment and for the whole market.

Your company is Apollo, black.

You are given market research that tells you how satisfied your target segment is with your brand design and those of the competition. (100 is total satisfaction.)

Your brand

If a brand is not doing well, you can study other brands and

redesign your brand.

Yourbrand

Betterbrand

You are also given a profit analysis of each brand so that you can adjust

your brand strategy.

Grading:The Balanced Scorecard

Your final grade will be the average of your firm’s profitability, market share, and customer satisfaction – Operating profit/20,000,000– Sum of market shares in 2 target segments– Average customer satisfaction with brand and

advertising designs in 2 target segments (scored 0 to 100)

– Quarter 6 results will be used to compute grade.

Each quarter, you will be presented with your balanced scorecard. Your goal is to

achieve a 90 or better by Quarter 6 in Total Business Performance.

CD Installation

• 5 minutes to set up• Home computer

– hard drive installation– always need CD

• Computer lab – mobile installation– select high density disk option (Zip disk, do not use the

floppy disk installation)– purchase Zip disk – files saved on Zip disk– always need CD and Zip disk

How is the marketing game conducted?

• Teams are placed in a game scenario that has them starting up and running a new marketing division.

• The opposition is played out by computer-generated competitors.

Business TeamBusiness Team MarketMarket

OpponentOpponent

Objective is to profitably capture a dominant market position

How Conducted?

• At the outset of each quarter, you will receive information on the current situation.

• Current situation is evaluated, strategy formulated, and tactics set in placed.

• Tactical decisions are fed into the marketplace simulator, along with decisions of opponents.

• Results of decisions are fed back to you.

Chronology of EventsQ1, Organize the Division

• Name the company,

• Analyze the market survey,

• Choose the initial target segment,

• Schedule the opening of one sales office.

Q2, Test Market

• Design a brand for the target segment,

• Hire a few sales people,

• Price the brand, and

• Design a small advertising campaign.

Q3, Skillful Adjustment

• Review the market data from the test market,

• Adjust the division’s strategy and tactics (brand design, pricing, advertising, sales force) as needed.

Q4, Expand the Market Offering

• Select a second segment to target and design a marketing program to go after that segment. – design a new brand, – price the brand, – add sales people, – design a new ad, – run the ad in the local media. – schedule the opening of a new sales office.

Q5, Enhance the Market Offering

• Introduce new brands with new R&D features,

• Continue with market expansion by adding advertising, sales people and new offices.

Q6, Refine the Marketing Strategy

• Study the market data to determine how to better meet customer needs and surpass the competition through brand design, pricing, advertising, and distribution.

Q7, Present Report to Corporate Headquarters

• Strategic thinking and tactical execution• Market performance (Balanced Scorecard)– profitability– customer satisfaction– market share in targeted markets• How well is the division prepared for the future

The Marketplace Is a Fun Way to Learn About Marketing!

The following slides are for Quarter1

Q1, Organize the Division

• Name the company,

• Analyze the market survey,

• Choose the initial target segment,

• Schedule the opening of one sales office.

Learning Points for Quarter 1

• Image creation (company name)• Market opportunity analysis• Segmentation and target marketing

The following slides are for Quarter 2

•Execute a coherent strategy

•Learn to walk before you run

Q2, Test Market: The Goal is to Maximize Learning and Not

Profits.

Q2, Test market

• Design a brand for the target segment,

• Hire a few sales people,

• Price the brand, and

• Design a small advertising campaign.

How do you decide what to design into a brand?

The most important rule in brand design:

Customers Buy Benefits,Not Features

Once you select a segment, you must design a brand to meet the needs of the segment.

“Using the computer on the road” is important to the Traveler segment. What features would provide this benefit?

How far do you go in giving the customers what they say they want?

Is more speed, software applications, memory, keys on the keyboard, etc.

always valued?

Could “more of some feature” even make a customer unhappy?

Let’s take a look at this question in another industry – candy bars.

What is the elasticity of the peanut?

Searching for the Market’s Response Function

Suppose you could design the ideal candy bar. How many peanuts would you put in the candy bar to make you

the happiest?

• A few?• A bunch?• A whole lot?

Which candy bar has the most peanuts?

• MilkyWay• Snickers• Baby Ruth• PayDay

Which candy bar do you like the most?

• MilkyWay• Snickers• Baby Ruth• PayDay

What does your response function look like for peanuts?

Is more always better?

Would your happiness increase with every new peanut we added to the

candy bar?

Is there a limit?

What would be your response function for the following?

• Chocolate• Caramel• Coconut• Rice• Peanut butter

Here are a number of response functions. Which one applies to peanuts, chocolate, coconut, etc?

Less More

More is always better More is good to a

point and then ceases to add excitement

Less More

A little is justright, more onlytakes away value

Less More

More addsvalue to a point& then takes away value

Less More

Little interestuntil threshold

is crossed

Less More

Any amount is bad

Less More

No reaction/indifferenceto having the feature

Take any PC segment, how excited will it become if you provide?

• More memory• More speed• More functions on the keyboard• More software• More ….

Just like the candy bar ingredients, you must discover the response function for each PC component.

How to Set Price?

• Costs (production, marketing, overhead)• Profit goals• What the market will bear• Competition

In the beginning, you will not be able to price above your costs.

• There are many startup costs which will exceed your revenues.

• Your production volumes will be very low, resulting in high per unit costs

No early profits

Money0

costs to setup & grow the business

Revenues will fall below costs at the outset of a new business

Money0

Revenue

Profits will come later

Profits come later.

You are here.

Profit Profits0

Revenue

Your goal is to speed up the adoption rate.

Demand

introduction

growth

maturity

decline

You are here, high costs-low demand

What will the market bear?

You must discover the market response function regarding price.

What is the market’s price response function?

YourDemand

YourPrice

Elastic (demand drops fast with increasing prices)

Inelastic (price is not a big factor.)

Or, maybe it looks like this.

YourDemand

YourPrice

Demand drops slowly with small price increases and then drops dramatically with larger price

increases.

How will the market respond to competitor prices?

YourDemand

Competitor’s Price

Low competitor prices will kill your demand

How to create ads?

Low priceEasy to use

More productiveFast

Office applicationsPicture office workers

Most important

Order of priority implies importance of message to customer

Order of priority tells the ad agency what to

stress in the ad

Your Ad

Least important

How much to say in an ad?(number of benefits)

Less More

More is good to a point and then ceases

to add excitement

Less More

More addsvalue to a point& then takes away value

Which response function is at work?

How often do you advertise?

YourDemand

Number of ads

Diminishing returns

Too little

But it also depends on what your competitors do

YourDemand

Competitor’s Advertising

Strong competitor advertising

will steal away your customers

How many sales people?

YourDemand

Number of sales people

Too many

Diminishing returns

Too few

YourDemand

Number of sales people

Shift the response function upwards with better brands,

prices, advertising, sales force placement

The response function is dynamic!

Q2 results will be available at the start of Q3.

What to turn in after Q2 decisions have been run through

the marketplace simulator?• Q2 results are available at the start of Q3.• The Marketplace software is all set up to print the

results for each quarter’s play, starting with the results of the Q2 test market.– Name, balanced scorecard, profit statement, market

share, customer satisfaction ratings• Print options

– Paper copy– Electronic copy

Paper Copy of Results

• Follow the normal decision sequence, or• Click on button labeled, “Print everything for

instructor” from the Headquarters file folder.• Click on “Print” button.

Electronic Copy of Results• Your instructor might want an electronic copy in

place of, or in addition to, the paper copy.• Click on the button, “Copy Performance Data to

Floppy for Instructor”.

• Execution of a coherent strategy• Learning to walk before you run

Learning Points for Quarter 2• Marketing strategy - coordinating a host of tactics• Brand design – linking product features to customer

benefits• Pricing - balancing costs, profit, what the market will

bear, and competition• Advertising – deciding what to say, how to say it and

how frequently to say it• Sales force – hiring and targeting the sales staff• Testing the market - discovering the market’s many

response functions

The following slides are for Quarter 3.

Q3, Skillful Adjustment

• Review the market data from the test market,

• Adjust the division’s strategy and tactics (brand design, pricing, advertising, sales force) as needed.

Q3, Evaluate Performance

• Check customer reaction to brands, prices, and advertising

• Check financial performance• Check out competition

– strategic direction– tactics– market’s response to their prices, brands, ads

Q3, Skillfully Adjust Strategy

• As needed, adjust– strategy– brand designs and prices– advertising– sales office locations– sales force management

• Feed decisions into Marketplace simulator

Measures of Customer Satisfaction

• Brand judgment (0 to 100)• Price judgment (0 to 100)• Ad judgment (0 to 100)

100 indicates complete satisfaction. 70 would be a good brand and ad rating for the first year. New technology will be

available in Quarter 5. The new features will make customers happier and yield higher ratings.

Price ratings should be near 100 in all quarters.

Goal of Monitoring Customer Satisfaction

Give the customer what it wants and do so better than the competition.

Deduce the market’s many response functions

Less More

Based upon customer feedback, skillfully adjust marketing tactics

• Revise brand design or create new one• Revise ad copy • Adjust prices• Hire more sales people or deploy them

differently

Add or take away elements to find the sweet spot in the customer’s response function.

Competitor Benchmarks

• Brand and ad designs• Prices and sale priorities• Sales staffing • Ad placements• Demand by brand by segment

Goals of Competitive Benchmarking

• Reverse engineer the strategy of each competitor• Determine who is a threat and who is not• Determine strengths and weakness of competition• Emulate good decisions• Predict direction of competitive moves • Adjust strategy and tactics in reaction to

competitor strengths and weaknesses and in anticipation of future moves.

Grading is Based upon Achievement of Goals!

• Earn $20,000,000 in profit by Quarter 6, • Capture 50% of the market in at least two

market segments; and, • Achieve 90% customer satisfaction in your

brand designs and advertising copy.

Grading:The Balanced Scorecard

• Final grade will be the average of your firm’s profitability, market share, and customer satisfaction – Operating profit/20,000,000– Sum of market shares in 2 target segments– Average customer satisfaction with brand and

Why Use a Balanced Scorecard?

• It is too easy to get caught up in market share.• Long-term viability requires that managers

also deliver customer satisfaction and profits.• The balanced scorecard measures both the

long-term and the short-term.• The best managers will be good in the 3 areas

measured.

Q4, Expand the Market Offering

• Select a second segment to target and design a marketing program to go after that segment. – design a new brand, – price the brand, – add sales people, – design a new ad, – run the ad in the local media. – schedule the opening of a new sales office.

Your goal is to speed up the adoption rate.

Demand

introduction

growth

maturity

decline

You are here. New segments, brands, advertising, sales staff and sales offices will push you into

the growth phase.

Grow the Market

• Target a new segment• Develop a second marketing strategy

targeted at the new segment.

Financial Performance

• Now that you have multiple brands, you can evaluate your performance by brand and the division as a whole.

Goals of Financial Management

• Discover which brands and markets are making the greatest and weakest contribution to the bottom line.

• Deploy resources to correct weaknesses and take advantage of strong performers.

Learning Points for Quarter 4 • Differentiating the marketing strategy –

multiple strategies aimed at multiple segments

• The management of strategy– learning from your customers– learning from your competition– learning from your financial information– skillfully adjusting your strategy and tactics

The following slides are for Quarter 5.

Q5, Enhance the Market Offering

• Introduce new brands with new R&D features,

• Continue with market expansion by adding advertising, sales people, and new offices.

What Is New In Quarter 5?

• Ability to design new brands with new R&D features from engineering

Corporate Headquarters is expecting great things from you!

• Demand is up for the entire industry• Your firm has established itself as a viable

competitor• New sales offices would greatly expand

distribution, drive up unit volume, and thereby reduce unit costs.

• New brand features could increase customer satisfaction, and thereby demand.

Skillfully adjust your marketing strategy to expand your position in the market

Demand

introduction

growth

maturity

decline

You want to move in this direction.

• Management of strategy – discover the causes of performance shortfalls– adapt to new opportunities and problems– work on the margin to improve performance

• where should money be spent next?• how can we get more out of our current investments?

– manage the future (taking the initiative now by expending resources that will shape the events and opportunities of the future)

• Management of strategy (continued)– discover and exploit the market’s many response

functions– learn from smart competitor decisions– You can not go to Hawaii on market share (at the end of the day, wealth creation is the goal)

Q6, Refine the Marketing Strategy

Study the market data to determine how to better meet customer needs and surpass the competition through brand design, pricing,

advertising, and distribution.

Your goal is to manage your division’s total performance

• The best marketers are good at managing– Financial Performance– Market Performance – Marketing Effectiveness

Use the Balanced Scorecard

• Final grade will be the average of your firm’s profitability, market share and customer satisfaction – Operating profit/20,000,000– Sum of market shares in 2 target segments– Average customer satisfaction with brand and

Skillfully adjust the marketing mix to grow your market

Demand

introduction

growth

maturity

decline

You want to be here.

Learning Points for Quarters 6

• Management of strategy – discover the causes of performance shortfalls– adapt to new opportunities and problems– work on the margin to improve performance

• where should money be spent next?• how can we get more out of our current investments?

– manage the tactical details

• Management of strategy– discover and exploit the market’s many response

functions– learn from smart competitor decisions– You can not go to Hawaii on market share (at the end of the day, wealth creation is the goal)

Learning Points for Quarters 6

The Following Slides Are Used for the Final Summary

Experiencing Marketing Strategy @ the Marketplace

When we work strictly in our functional areas, we are like a bunch of blind

people trying to understand what an elephant is.

Please tell mewhat it is..

It’s a snake.It’s a

tree trunk.

It’s a sheetof rawhide.

It’s a steeltube.

With business war games, you can crawl all over and under the marketing organization to help you

to see and understand the whole thing.

It is a marketing organization!

Brands

Distribution

ResearchPricing

Advertising

Key Benefits

• Facilitate learning of important marketing concepts, principles, and ways of thinking.

• Promote better decision making by helping students see how their marketing decisions are interconnected and need to be managed as a whole.

Key Benefits

• Develop marketing planning and execution skills within a rapidly changing environment.

• Instill a bottom line focus and the simultaneous need to deliver customer value.

• Crystallize the financial implications of marketing decisions by linking them to bottom-line performance .

Key Benefits

• Discover how important it is to use market data and competitive signals to adjust the strategic plan and more tightly focus business tactics.

• Build marketing confidence through knowledge and experience.

Course Evaluation

Experiencing Marketing @ the Marketplace

Copyright 2001 Ernest R. Cadotte The following slides are for the introduction to the Marketplace...

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