1. Market Segmentation, Business Cycles, and Simulation

2. Course Objectives n Integrating experience n Firm’s relationship to the economy n Market research n Strategy and planning

3. First Year Courses n IT/IS n Managerial/Team Skills n Business Strategic Environment n Business Research n Financial Statements Analysis

4. IT/IS n n n n n

5. Managerial/Team Skills n n n n n

6. Business Strategic Environment n n n n n

7. Business Research n n n n n

8. Financial Statements Analysis n n n n n

9. The AutoSim Environment n Simulated Marketplace of 250 million people n Exhibits “normal” market behavior n Low GNP and inflation growth rates

10. The AutoSim Environment n Demand is sensitive to: – GNP – interest rates – seasonality n Quarterly decisions over two years (we will make decisions for only 5 quarters)

11. The Industry n 7 divisions, 12 vehicles (some vehicles actively manipulated with remainder played by the computer) n Product design changes n Different strengths and weaknesses

12. The Product - Small Cars n Price n Size n Style (sedan, wagon, etc.) n Drive/Handling n Quality/Reliability n Image/Appeal n Safety n Comfort/Roominess n Prestige n Economy Principle Characteristics - measurable or perceptual

13. Understanding the Customer n Who is your customer? n What is important to these buyers? n Are there other groups with similar needs

14. Customer cont’d n Are you meeting the customer’s needs? n What about the competition?

15. The Consumers n Seven psychographic profiles – Commuters – Traditionals – Free Spirits – Followers – New Families – Economizers – Safety Conscious

16. The Consumers n Different desires/needs - both importance and specific expectation n Different demographic profiles

17. Demographic Data n Six demographic segmentation approaches – Gender – Age – Income – Region – Location – Household Size

18. Demographic Data n Can only view one approach at a time (i.e. can’t look at males in New England with incomes over $25,000) n Demographics for targeting advertising n Three marketing research reports

19. H F G E D A C B Better Quality More Functional/roomy Better Drive/handling *

20. Understanding the Map n Check the stress -- closer to zero the better n check the R-squared -- closer to one the better n perpendicular lines to vectors

21. Advertising Effectiveness n Measured By: – Vehicle Awareness – Ad Awareness – Test Driving – Preference vs Purchase

22. Designing an Ad Campaign n What characteristics were important to the target consumers? n Are you emphasizing what you should?

23. Ad campaign cont’d n Are you spending enough money? n Does it make sense for you to increase your ad dollars?

24. Advertising n Builds and maintains awareness n Corporate and product levels n Stimulates primary demand for product class / segment n Communicates product positioning objectives - “message”

25. Advertising “message” n Primary--Small Car Market n Benefits (price, quality, functionality, drive, styling, economy, safety, prestige) - more tangible n Comparison (with which other vehicle) n Build Image (good value, prestigious, family, sporty, luxurious rugged, roomy, agile) - more perceptual n Special Promotion (to support any promotions you develop) n Reminder

26. Advertising n Target segments (region, primary and secondary demographics) – Gender – age – income – location – household

27. Advertising n Media Choices – Network TV – Spot TV – Magazine – Newspaper – Outdoor – Direct Mail Each has different strengths and weaknesses with regard to cost, ability to target and ability to convey message.

28. Designing A Promo Campaign n Impact of various incentives? n Does the campaign make sense?

29. nHelps to stimulate sales in periods of slow demand (seasonal or weak economy) nConsumer promotion includes rebates and low financing  rebates on model basis and effect the actual selling price of vehicle  not all people will choose financing  can allow both financing and rebates Sales Promotion

30. nTrade promotion includes dealer incentives  set sales goal for dealerships  dealers who achieve goal receive a fixed dollar amount per car  dealers may or may not pass on to consumer nBe sure to publicize promotion in advertising message nSome question as to whether promotion steals from future sales of your vehicle or from your competitors’ sales nDifficult to estimate costs Sales Promotion

31. Forecasts / Production n Forecast total market, share and model sales Defaults: Defaults: Total market = forecast from economic outlook report Total market = forecast from economic outlook report Market share = current share Market share = current share Model sales = last period’s forecast Model sales = last period’s forecast

32. Forecasts / Production n Production to meet your forecasts + sufficient inventory n 25% overtime allowable at a higher cost / unit n Consider how fixed costs affect your decisions

33. Team’s Responsibilities n Quarterly decisions – Demand forecasts - Market, share, model sales – Production - model, OT?, capacity/cost issues – Product Advertising - budget, message, target audience, media – Corporate Advertising - budget, media, image, target

34. Team’s Responsibilities n Quarterly decisions – Sales Promotion - rebates, financing, dealer incentives – Price - (MSRP and dealer) – Somewhat “circular” decision process - all interrelated

35. Team’s Responsibilities n Profit Center – Responsible for materials, labor and fixed production – Revenues less promotion and advertising costs

36. Possible Objectives / Performance Measures n Market share (unit or dollar) n Contribution n Marketing efficiency (return on marketing expenditures) n Return on sales n Sales growth n Corporate and Nameplate Awareness n Capacity utilization n Production/sales ratio