Diminishing returns apply
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CAPSIM : Introduction to Marketing Strategy Alisara Charinsarn 22 June 2013 CAPSIM Marketing 4 main things to consider and Plug in in the spreadsheet •Sales Forecast •Sales Budget Promo Budget •Promo •Price Price Price setting g for each segment g Too high? Too low? How to set price? Competitors’ price setting Check “Customer Buying Criteria” in setting price Price Check competitor’s price Price Price impacts margin. Price P i decreases d each h year!! Therefore, it pressures to manage cost. How to cut cost? Something Extra!! You can also play with your credit terms: Check whether it will do you any good!!!! Promo Budget PR,, Advertising g Awareness (& Trial) Awareness a e ess is? s e e.g. g what at does 50% a awareness a e ess mean? Awareness drop out ((33% decrease each y year ((Y1= 100%, Y2 = 100%-33%= 67%) Diminishing return Promo Budget How? (Message) Media ed a • Contact point • The right media • At the right time • Media investment/ cost e e.g. g Buzz is 25% awareness with no cost Promo Budget Reminder New product gets 25% awareness up front Analyze a y e co competitor pet to Why we do what we do? Monitor your margin Sales Budget = Sales force,, Distribution,, Order Entry, y, Customer service, etc. Objective: To increase Accessibility Note that Accessibility impacts “segment” (people), not a particular “product” Sales Forecast Total Industry Unit Demand Expected Growth ((Growth Rate Next Year)) Start with the same market share in the first round. Sales Forecast Inventory carrying cost CAPSIM assumes (in the first round) that competitor has mediocre product in each segment Sales Forecast Note (1) Gross Revenue (Price x projected sales) (2) Variable Cost (Labor (Labor, Materials) (3) Contribution Margin (Gross Revenue – Variable Costs) ((4)) Less Promotional & Sales ( Contribution Margin g – Promotional & Sales Budget) CAPSIM : Advanced Marketing Module Advanced Marketing Module Allow companies to have greater control. Explore the marketing mix 5 M Media di Print media, Direct Mail, Web Media, Email and T d Sh Trade Shows 3 Sales channel Outside Sales, Inside Sales, and Distributors Reach and Frequency Each segment will respond to different media type differently. The impact is driven by two factors: Reach: The potential number of customers who would see the message message. Frequency: The number of time the media is repeated. t d Print Media Industry related magazines and newspapers Industry-related Potential reach varies by segment. Traditional: Good Low-end: Good High-end: High end: Poor Performance: Poor Size: Si F Fair i Diminishing returns apply Additional awareness becomes prohibitive beyond $700 thousand per product. Direct Mail Information about your product will be sent by mail to a purchased mailing list. Lists are selected on the basis of SIC code, job title, and similar factors which select for your customers. Potential reach varies by segment. Traditional: Good Low-end: Good High-end: Fair Performance: Poor Size: Poor Diminishing returns apply Additional awareness becomes prohibitive beyond $700 thousand per product. Web Media Information on industry-related y websites and search engines This method created many wasted hits. Potential P t ti l reach h varies i by b segment. t Traditional: Poor Low-end: Low end: Poor High-end: Fair Performance: Good Size: Good Diminishing returns apply Additional awareness becomes prohibitive beyond $500 thousand per product. E-mail Similar to direct mail. Readers are invited to respond directly or to click hyperlink to your website. Potential P t ti l reach h varies i by b segment. t Traditional: Poor Low-end: Low end: Poor High-end: Fair Performance: Good Size: Good Diminishing returns apply Additional awareness becomes prohibitive beyond $600 thousand per product. Trade Shows Allow y you to meet face to face with y your customers in a convention-like setting. Potential reach varies by segment. Traditional: Fair Low-end: Fair High-end: Good Performance: Fair Size: Poor Diminishing g returns apply pp y Additional awareness becomes prohibitive beyond $300 thousand per product. Sales Budget 3 Different Sales Channels Outside Sales Inside I id S Sales l Distributors Outside Sales Each salesperson costs $125,000, which include salary, commission, travel and support. Diminishing returns in a segment is reached at 12 salespeople. salespeople Inside Sales Each inside salesperson costs $50,000. Diminishing returns in a segment is reached at 30 salespeople. salespeople Distributors Distributors offer customers an opportunity to see your product, compare it with other products, and take delivery. Each distributor costs $100,000 per year. Di i i hi returns Diminishing t in i a segmentt is i reached h d at 15 distributors. Sales Channel Effectiveness Final Thoughts Game s rule vs Learning for Real Game’s Real-life life Competing with Real Competitors!! Impact I t from f Competitors. C tit Both our and Competitors’ activity impact Sales. g Linked with other Function e.g. High-tech Segment requires R&D Mass requires Economy of Scale Final Thoughts! (Cont.) Set your marketing objectives! STP 4P Short term vs Long-term Short-term Long term
