1 Charlotte H. Mason William D. Perreault, Jr. 3 rd edition

2 The Marketing Game is Integrative … and Covers All Aspects of the Marketing Strategy Planning Process Technology Political & Legal Social & Cultural Economic Company Mission, Objectives, & Resources Competitors Current & Prospective S.W.O.T. Target Market Product Price Promotion External Market Environment External Market Environment Targeting & Segmentation Positioning & Differentiation Narrowing down to focused strategy with quantitative and qualitative screening criteria Place Customers Needs and other SegmentingDimensions

3 Overview >You take over marketing management responsibilities for your firm.  Must satisfy customers and earn profits >Focus is on marketing strategy planning. >Requires integration of all strategy decisions. >Requires attention to competitive environment. >Considers short term and long term perspectives. >Features ongoing, rapid feedback.

4 The Process Analysis of market situation/opportunities Planning and budgeting Make marketing plan DECISIONS!!! Submit plan decisions The marketing game! simulation Company reports returned to firms Next Decision period

5 Industry Environment >Market growth >Technological environment  No major innovations expected  Yearly revision cycle >Competitive environment  Type of competition depends on firms’ decisions

6 Six Key Product-Market Segments Harried Assistants Home Users High-tech Managers Modern Students Professional Creators Concerned Parents Segments have different needs, preferences, situations, sizes, growth rates.

7 Past Sales By Market Segment For Voice Recognition Device

8 Distribution Channels Harried Assistants Home Users High-tech Managers Modern Students Professional Creators Concerned Parents Firm 1Firm 2Firm 3 Channel 1 Traditional Dealers Channel 2 Discount Dealers Firm 4 Firms reach customers through full-service dealers and Internet/mail-order discount dealers. Different segments have different shopping preferences.

9 Product 1: Voice Recognition Device (VRD) Key Product Features Error Protection (1-10) Number of Special Commands (5-20) Ability to Customize (1-10)

10 R&D for Product Modifications: Computing Costs FeatureCost to DecreaseCost to Increase Special Commands (5-20)$0 $8,000*(change) 2 Error Protection (1-10)$0 $5,000*(change) 2 Ease of Learning (1-10)$3,000*change $3,000*(change) 2 Example Feature Last period’s product This period’s product Change Cost to Change Special Commands68+2 $8,000*2*2=$32,000 Error Protection43 $0 Ease of Learning35+2 $3,000*2*2=$12,000 Total modification costs: $44,000 Note: R&D for product changes is more expensive if you have to make big changes in a short period of time…

11 Product 2: Digital Vocal Communicator (DVC) Key Product Features Similarity of Commands (1-10) Number of Tasks (1-10) Ease of Learning (1-10) Level 3

12 Types of Advertising >Pioneering >Direct competitive >Indirect competitive >Reminder >Corporate (Institutional)

13 Expanded Marketing Responsibilities (Level 2) PRODUCTFeatures (and R&D for product modifications) PRICEWholesale price in each channel PLACEDistribution intensity in each channel PROMOTION -Advertising$ Spending Type -Personal sellingNumber of sales reps in each channel Percent non-selling time Commission rate -Sales promotion$ Spending per Channel CUSTOMER SERVICE$ Spending MARKET RESEARCH 7 Reports May be Purchased Demand Forecast/ Production orderNumber of Units

14 Expanded Marketing Responsibilities (Level 3) 2 PRODUCTsFeatures (and R&D for product modifications) PRICEWholesale price in each channel for each product PLACEDistribution intensity by channel, product PROMOTION -Advertising$ Spending for each product Type for each product -Personal sellingNumber of sales reps in each channel Percent non-selling time in each channel Commission rate -Sales promotion$ Spending per channel, product CUSTOMER SERVICE$ Spending MARKET RESEARCH 7 reports may be purchased Demand forecast/ production orderNumber of units for each product

15 Marketing Budget Items (Level 2 and 3) >R&D product modification costs >Sales force salaries and severance pay >Advertising expense >Customer service expense >Sales Promotion Expense >Market research reports expense BUDGET FOR FIRST PERIOD: $984k

16 Discretionary Budget >Policy on initial discretionary budget. >Unspent money carries to future periods and earns interest. >“When it’s gone, it’s gone.” >Policy on special budget requests.

17 Computing Prices Computing Retail Prices from Wholesale Prices: Expected Retail Price = Wholesale price/(1-% Markup) Example: Wholesale price = $105 Channel 1 Retail Price = ($105/(1-.50)) = $210 Channel 2 Retail Price = ($105)/(1-.35) = $ Computing Wholesale Prices from Desired Retail Prices : Wholesale Price = Retail Price (1 - % Markup) Example: Desired Retail Price = $190 Channel 1 Wholesale Price = $190/(1-.50) = $95.00 Channel 2 Wholesale Price = $190/(1-.35) = $123.50

18 Retail Prices Charged Final Consumers The retail price set by a dealer depends on: >The wholesale price in the dealer’s channel. >The customary markup used in the channel. >The portion of any sales promotion “deals” that the dealer passes along to consumers as a price reduction.

19 A “Good” Wholesale Price >Should cover the unit cost of the product (given its features). >Should result in a retail price that will appeal to target consumers. >Should result in a profit margin that will contribute to other expenses and profit.

20 Industry Sales Report BrandUnit SalesShare (units)$ Sales (retail) Firm 1 25, $4,292,964 Firm 2 25, $4,292,964 Firm 3 25, $4,292,964 Firm 4 25, $4,292,964 Total100,604$17,171,854 ChannelUnit SalesDollars Sales 156,296$10, ,308$6,475,614

21 Product Features and Prices Report Brand of VRD Firm 1 Firm 2 Firm 3 Firm 4 Special commands 8 Error protect- ion 3 Ease of learning 3 Retail price channel 1 $ Retail price channel 2 $146.15

22 Market Activity Report (Level 2) Adv. Dollars Adv. Type Sales Promotion Channel 1 Channel 2 No. Sales Reps Channel 1 Channel 2 Commission Customer Service Firm 1 $250,000 $0 10 5% $92,500 Firm 2 $250,000 $0 10 5% $92,500 Firm 3 $250,000 $0 10 5% $92,500 Firm 4 $250,000 $0 10 5% $92,500

23 Overview of Market Research Reports >Market share by segment (all brands) >Market share by channel (all brands) >Consumer preference study >Marketing effectiveness report >Sales by segment by channel (own brand) >Consumer shopping habits study >Product positioning report (Level 2 & 3)

24 Market Share by Segment Report Brand Firm 1 Firm 2 Firm 3 Firm 4 Total Sales (units) , , , , , ,092 Segment Who’s selling to whom? Who’s buying what? What is each firm achieving? Which segments are buying?

25 Market Share by Channel Report Brand Firm 1 Firm 2 Firm 3 Firm 4 Total Sales (units) Channel ,296 What’s selling where? Who’s buying what? Channel ,308

26 Consumer Preference Study Segment Students Home Assistants Creators Managers Parents Special Commands Error Protection Ease of Learning Price Range low high low What kind of product would a segment prefer? What reference price seems typical for the segment? How are segments similar and different?

27 Marketing Effectiveness Report Brand Awareness Customer Service Consumer Group Rating Industry Average Rating Channel 1: Sales Rep Workload Dealer Satisfaction Channel Strength (“Push”) Channel 2: Sales Rep Workload Dealer Satisfaction Channel Strength (“Push”) Index % % Competitors with lower Index 0 Competitors with equal or higher Index 3

28 Detailed Sales Analysis Firm Channel 1 Channel , ,109 3, ,602 1, ,808 1, ,363 1, ,086 1,074 Segment Unit sales by segment and channel Are you reaching your target?

29 Customer Shopping Habits Segment Students Home Assistants Creators Managers Parents Percent of Shopping in Channel 1 ? Who shops where? How do shopping patterns match distribution focus? Percent of Shopping in Channel 2 ?

30 Product Positioning Report Brand Firm 1 Firm 2 Firm 3 Firm 4 1????1???? 2????2???? 3 ? 4???? 4???? 5????5???? 6????6???? Segment Which brands are closest to which segments? Which segments have no close brands?

31 Recommendations >Analyze the reports as you would analyze a case. >Make intentional changes. >Find a balance in marketing research spending. >Be integrative--think carefully about how each decision impacts each of the others. >Have some fun!

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33 Market Research Reports (Level 2) >1. Market share by segment (all brands) >2. Market share by channel (all brands) >3. Consumer preference study >4. Marketing effectiveness report >5. Sales by segment by channel (own brand) >6. Consumer shopping habits study >7. Product positioning report

34 Market Research Reports (Level 3) >1. Market share by segment (all brands) >2. Market share by channel (all brands) >3. Consumer preference study >4. Marketing effectiveness report >5. Sales by segment by channel (own brand) >6. Consumer shopping habits study >7. Product positioning report Note: separate reports are available for each product, Except for the consumer shopping habits study

35 Submitting Marketing Plans >Submitting marketing plans decisions  Policy on paper form  Policy on electronic file >Each firm has a distinct industry and firm identification  Need to keep it straight! > Passwords and the TMGPlan software  Remember password used to create Plan  It is case sensitive (upper and lower case make a difference)  Best to stick to one password!

36 List of All Slides (with Hyperlinks) 1. Title slide 2. The Marketing Game: What Is It 3. A Little Background 4. Special Objectives Served by TMG The Role of the Marketing Game 6. Integrative Marketing Strategy Planning Process 7. Overview 8. The Process 9. Industry Environment 10. Six Key Product-Market Segments 11. Past Sales by Market Segment (VRD) 12. Distribution Channels 13. Product Features – Voice Recognition Device 14. Computing Costs of R&D for Product Mods 15. Product Features – Digital Vocal Communicator 16. Types of Advertising 17. Marketing Decision Responsibilities – Level Expanded Marketing Responsibilities – Level Expanded Marketing Responsibilities – Level Production Economies of Scale 21. Response Functions 22. Budget Items – Level Budget Items – Levels 2 and Discretionary Budget 25. Computing Prices 26. Retail Prices Charged Final Consumers 27. A “Good” Wholesale Price 28. Competitor Analysis 29. Industry Sales Report 30. Product Features and Prices Report 31. Marketing Activity Report (Sample) 32. Market Research Reports – Level Market Research Reports – Level Market Research Reports – Level TMG Software 36. Submitting Marketing Plans / Policies 37. Overview of Market Research Reports 38. Market Share by Segment 39. Market Share by Channel 40. Average Customer Preferences 41. Marketing Effectiveness Report 42. Detailed Sales Analysis 43. Customer Shopping Habits 44. Product Positioning Report 45. Recommendations 46. Blank side (end of show) 47. This list

37 Marketing Decision Responsibilities (Level 1) PRODUCTFeatures (and R&D for product modifications) PRICEWholesale price PLACEDistribution intensity in each channel PROMOTION -Advertising$ Spending -Personal sellingNumber of sales reps in each channel CUSTOMER SERVICE$ Spending MARKET RESEARCH 6 reports may be purchased Demand forecast/ production orderNumber of units

38 Marketing Budget Items (Level 1) >R&D product modification costs >Sales force salaries and severance pay >Advertising expense >Customer service expense >Market research reports expense BUDGET FOR FIRST PERIOD: $984k

39 Market Research Reports (Level 1) >1. Market share by segment (all brands) >2. Market share by channel (all brands) >3. Consumer preference study >4. Marketing effectiveness report >5. Sales by segment by channel (own brand) >6. Consumer shopping habits study

40 TMGPlan Software Easy to use for preparing and evaluating plans, managing reports Select directory Enter Plan Decisions Evaluate spending and profit forecast View, print, and manage password protected reports

41 A Little Background >Originally developed as the first PC-based marketing strategy simulation in 1985 …  Routinely revised and updated since that time. >Now one of the most widely used teaching simulations in the world.  Used in hundreds of universities, exec programs and companies, international competitions, etc. >We’ll be using the third edition  You’ll need the student manual and accompanying CD- Rom (which has Windows software): The Marketing Game!, by Charlotte H. Mason and William D. Perreault, Jr., 3 rd edition, published by McGraw-Hill/Irwin, Burr Ridge, Illinois, 2001.

42 Competitor Analysis >Estimate competitor’s net contribution >Analyze past strategies & likely changes. >Evaluate positioning and target segments. ? X X X ? ? X Firms Segments

43 The Marketing Game: What is It? >A “living” case, where you learn about a situation, evaluate opportunities, develop a strategy, and make marketing plan decisions. >In which you get regular feedback, in a report that summarizes your marketing outcomes and related financial results, based on both your plan and competitors’ decisions. >Where you analyze what you’ve learned by doing … to figure out answers to what you do not know (and could not know!) at the beginning. >That challenges you to improve your strategy in light of the learning...

44 The Role of the Marketing Game The Game offers unique learning advantages, compared to other learning approaches (like reading texts and articles, lectures, guest speakers, case analysis and presentation, projects) because it: >Is dynamic, like most business situations. >Brings the competitive aspects of marketing to life. >Highlights the need for integrative planning based on qualitative and quantitative analysis of the market environment.

45 Special Objectives Served by TMG >To develop skills in identifying marketing opportunities. This encompasses knowledge of and the ability to apply key marketing frameworks and tools for analyzing customers, competition, and marketing strengths and weaknesses. >To develop insights about creative selection of target markets and making integrative strategy decisions concerning product, price, promotion, place and the needs of a target market. >To develop skills in marketing analysis. >To provide meaningful, practical experience in translating qualitative and quantitative analysis into conclusions about profitable marketing strategies and programs.

46 Response Functions and Marketing Spending Sales Marketing Spending Threshold Level Saturation Level Spending too little may have little effect, but spending too much just increases costs and reduces profit.

48 Production Economies of Scale If the president decides to invest in new equipment, unit production costs will decline as cumulative production increases: