Welcome to

the Marketing Simulation Game Class!

Dr. Satyendra Singh

Overview

• Long-term Perspective• Focus on Marketing Planning• Focus on Strategic Issues• Competitive Environment• Rapid Feedback

The Process

• Analysis of Company Results

• Planning and Budgeting

• Marketing Plan DECISIONS!!!

• Turn in Decision Forms

• THE MARKETING GAME SIMULATION

• Company Reports Returned to Firms

Industry Environment

• Market Growth

• Competitive Environment– Type of Competition Depends on Firms’ Decision

• Technical Environment– No Major Innovations Expected– Yearly Revision Cycle

The Market Segments

• There are Six Product-Market Segments– High-tech Managers – Modern Students– Concerned Parents– Commercial Artists– Harried Assistants– Home Producers

Distribution Channels

• Channel 1– Traditional Dealers– 50% Margin

• Channel 2– Discount Dealers– 35% Margin

Product Features - Multimedia

• Number of Special Commands (5-20)

• Error Protection (1-10)

• Ease of Learning (1-10)

Types of Advertising

• Pioneering• Direct Competitive• Indirect Competitive• Reminder• Corporate (Institutional)

Marketing Responsibilities…

• Product Features Modify Do Not!• Price Wholesale Price in Each Channel?

• Place Distribution Intensity in Each Channel?

• Production How many units?• Customer Service $ How much?

Marketing Responsibilities…• Promotion

– Advertising• $ Spending How much?• Type P, D, I, R, or C ?

– Selling• # of Sales Reps in Each Channel.• % Non-Selling Time

– Sales Promotion• $ Spending How much?

Marketing Responsibilities• Market Research - 7 Reports Which?

#1 Mkt. Share by Segment (all brands) $15,000

#2 Mkt. Share by Channel (all brands) $12,000

#3 Consumer Preference Study $30,000

#4 Marketing Effectiveness Report $25,000

#5 Detailed Sales Analysis (own brand) $15,000

#6 Customer Shopping Habits $7,000

#7 Product Positioning Report $30,000

Budget Items

• R & D Product Modification Costs• Sales Force Salaries and Severance pay• Advertising Expense• Customer Service Expense• Sales Promotion Expense• Market Research Reports Expenses

Computing Prices

• Retail Prices from Wholesale Prices:– Expected Retail Price = (Wholesale price/1-% Margin)– Example: Wholesale price = $105

• Channel1 Retail Price = ($105/1-.50) = $ 210.00• Channel 2 Retail Price = ($105/1-.35) = $ 161.54

• Wholesale Prices from Desired retail Price:– Wholesale Price = Retail price (1-% Margin)– Example: Desired Retail price = $ 190

• Channel 1 Wholesale Price = $190 (1-.50) = $95.00• Channel 2 Wholesale Price = $190 (1-.35) = $123.50

Retail Prices Charged Final Consumers

• The retail price set by a dealer depends on:– The wholesale price in the dealer’s channel– The customary margin used in the channel– The portion of any sales promotion “deals”

that the dealer passes along to consumers as a price reduction.

A “Good” Wholesale Price

• Should cover the unit cost of the product (given its features).

• Results in a profit margin that will contribute to other expenses and profit.

• Result in a retail price that will appeal to target customers.

Computing Costs of R & D for Product Modifications

• Feature Cost to Decrease Cost to Increase• Special Commands (5-20) $0 $8,000 x (change)2

• Error Protection (1-10) $0 $5,000 x (change)2

• Ease of Learning (1-10) $3,000 x change $3,000 x (change)2

• Example:• Old Brand New Brand Change Cost• 6 8 +2 $8,000 x 2 x 2 = $32,000• 4 3 -1 = $ 0• 3 5 +2 $3,000 x 2 x 2 = $12,000• Total Costs = $ 44,000

And finally….

• Looking forward to receiving your quality decisions!