ALL-STAR
BRANDS
MARK CHARLTON
TERRA CHRISTENSEN
JOSE ROMO
CRAIG PAPROCKI
2/5/02
EXECUTIVE SUMMARY
Allstar made significant strides in the over-the-counter cold medication market over
the past ten years under the watchful eye of its highly skilled brand managers. Although these
courageous and brilliant tacticians would prefer to deflect their just praise, it is difficult to
argue with the results. Thanks to their unwavering steadfastness, Allstar’s stock price
increased from $39 to $168. This can be attributed to their relentless pursuit of market share,
holding 35% of the entire cough, cold and allergy market share with three product offerings.
Total sales increased from $102 million to just under one billion dollars annually, and net
income increased from $67 million to $193 million. As if that were not enough, they also
managed to successfully launch two new products and lead the company to the promise land
during the reformulation of the flagship brand.
The company’s success over the past decade can be attributed in part to improved
relations with distributors and in part to a more focused advertising campaign, which targeted
young singles, young and mature families. To accomplish improving relations with
distributors, these heroes significantly upgraded the sales force, increased trade and promotion
allowances and increased co-op advertising expenditures. But it was their bold decision to
reformulate Allround, the market leader in the cold medicine industry, which will be the talk of
the industry for years to come.
Just as quickly as the brand managers redirected praise, they were even quicker to
deflect criticism for any missed opportunities. Despite the brand managers many successes,
they were unable to make significant strides with respect to retention ratios, and their pricing
scheme failed to capture all available profits. Nonetheless, despite any perceived missed
opportunities, their achievements set new extraordinary standards and their contributions will
forever be legends in the hallowed halls of Allstar Brands.
OVERALL STRATEGY
Vision. It is the vision of AllStar Corporation to redefine quality and to maintain the leader in
the cough, cold and allergy medication market space. To accomplish this, we will break down
our plan defined by the marketing mix, with our strategies summarized in terms product, price,
place and promotion.
Target Market. We will primarily target three groups: young singles, young families and
mature families. The three groups make up greater than 60% of the market for cold
medication, and coincidentally their decision criteria is similar. According to surveys, these
three groups focus on effectiveness first and side effects second. Price is not a big issue for
any of these groups as long as the product is effective and has no side effects.
Product. To better meet the needs of our target audience, particularly when it comes to side
effects, we will remove the alcohol from our product after period 1. We will also evaluate any
opportunities in the marketplace that appear to be underserved when the opportunity for a
line extension becomes available. Our main focus will be to market a product that is effective
and free of side effects.
Price. Our goal is to price our product competitively in the marketplace. Our target market is
somewhat price inelastic; therefore, we will not forego profits by engaging in any price wars
with our competition. We will purchase the market research report on pricing every period to
make sure that our product is not priced too low.
Place. We believe that our product and name recognition is superior to our competition.
Our greatest sales come from grocery stores and chain drugstores, but our strategy is to bring
class to mass by serving all channels that provide benefits that exceed the costs. We will focus
on providing services and promotions tailored to meet to each channel’s needs in order to
make sure our product has the best position on store shelves.
Promotion. Our promotion strategy can be broken into customer-focused strategies and
channel-focused strategies.
Customer-focused. First, our advertising campaign will focus on reaching our target market –
young singles, young families and mature families. Second, our campaign will promote the
side-effect free nature of our products after we reformulate Allround to eliminate the alcohol.
Third, we will engage primarily in comparison and reminder advertising for mature products,
and primary and benefit advertising for new products. Finally, we will offer significant trial
sizes in years that we launch new products to attract new customers, and coupons for more
mature products to entice repeat purchases.
Channel Focused. First, we will focus on increasing our sales force to support our channel
partners. Second, we will increase promotion allowances to all channel members except for
wholesalers, increase co-op advertising expenditures and increase trade discounts to improve
our shelf space. Finally, we will increase point of purchase expenditures to improve our
retention ratio.
10 YEAR HISTORICAL FINANCIAL AND STRATEGIC SUMMARY
Period 0—Letter to Our Shareholders
Financial Overview and Profitability
With over $355 million in annual revenue, we have entered the new decade with a
great sense of accomplishment. AllStar’s AllRight has become the de-facto standard for the
general cough and cold market, and we believe our growth possibilities are limitless with the
potential line of related products.
Strategy and Analysis
Our brand is known for quality, and we have positioned ourselves as the defining
leader in the industry. Young and mature families are our target market, and we focus our
messaging on the effectiveness our product with little side effects. This is based on a study
that showed that these are the key factors that this market looks for when purchasing a cold
medication. Our company also places a great deal of funding into research studies,
emphasizing truly knowing our customer and making product decisions accordingly. From
the information we gathered, we decided to put a freeze on our product’s price for
following year to allow for the popularity of AllRound to grow. With a beginning
advertising budget of $20 million, we are focusing our ads to our target market with
emphasis on benefits and our primary product message. We wanted to build the brand of
our product, and to capture market share away from our competitors with informing buyers
about the superiority of our product.
Period 1—Letter to Our Shareholders
Financial Overview and Profitability
What an exciting year for AllStar—our sales revenues grew 25% (See Exhibit1) and
our stock price leaped 50% to a closing price of $58 a share (See Exhibit 2). The confidence
of our investors is encouraging and we plan on continuing success with AllRound. Our
capacity utilization was almost 90%, and customer satisfaction and brand awareness is up over
3% from last year.
Strategy and Analysis
Our brand managers were focused on long term strategies to improve our flagship
brand’s profitability and standing in the industry. We determined from a marketing report on
shelf space that our product was not getting the prime real estate on store shelves. To conquer
this problem, we decided to beef up our sales force over a two-year period, improve trade
allowance and discount policies, and increase co-op advertising expenditures. Smaller retail
outlets prefer more sales support, while larger retail outlets prefer discounts and allowances.
We also believe that the increased sales force will improve product turnover, which will
strengthen our relationship with retailers. By the end of the year, the updated shelf space
report proved that we are moving in the right direction.
Our second concern was that, while our brand awareness and trial rates are high, our
retention rate is disappointing. To attack this issue, we shifted some of our advertising focus
to reminder advertising to keep our product fresh in consumers’ minds. We also increased our
spending on point of purchase displays and coupons to improve our retention rate. It is still
an issue at year’s end. Our retention ratio improved at the end of the year, but we still believe
that this is a golden opportunity once there is significant improvement.
The third major issue was in our ad targeting. We believe that we were using too
much of a shotgun approach to advertising in the past; therefore, we decided to focus our
ad message on young and mature families. These groups are more focused on results and
are less price elastic than empty nesters and retirees. They also make up approximately
50% of the cold medicine market. We intend to pursue the young single market when we
reformulate our product to remove the alcohol next period.
Period 2—Letter to Our Shareholders
Financial Overview and Profitability
This year continues to be solid for AllStar. Our net income grew over 6%, and sales
revenues grew over 3%. We continued to grow our sales force to 277, and capacity utilization
is improving. Our satisfaction level for AllRound is climbing, and maintains its leadership
position in the market. Brand awareness is very high and AllRound maintains a 25% of the
growing industry market share.
Strategy and Analysis
Our brand managers again focused on the long-term for this period. After researching
the market, the decision was made to remove the alcohol from Allround. This decision was
very difficult, but it is one we believe made the most strategic sense for a couple of reasons.
First, Allround’s formulation, particularly the alcohol ingredient, has been criticized by some in
the medical profession. Second, our target market is focused primarily on effectiveness and
side effects. Based on survey results, Allround is considered highly effective, but we were
concerned that we were alienating some consumers in our target market when it came to side
effects. Therefore, we listened to our consumers and removed the alcohol.
We changed our marketing focus this period as a result of the reformulation of
Allround. In effect, we had created a new product that would need to be marketed as such.
First, we began to offer significant trial sizes to entice potential consumers to try our new
product. We also increased our spending on co-op advertising and point of purchase displays
to get the word out to the public. We increased our ad budget by 10% with a significant
portion of the budget used to promote the benefits of our new product and to compare our
product to that of our chief rival in the cold medicine market, Besthelp. Additionally, we
continued to increase the size of our sales force, including our detailers, to be more
competitive with our rivals with the intention of increasing sales and physician
recommendations. We also began targeting the health conscious young singles this period,
and touting the side-effect free benefits of our product.
The results were exceptional. Although the company took a risk by reformulating the marketleading product, our results show that this new formulation was well received in the
marketplace, and our sales will benefit from this reformulation for many years to come.
Period 3—Letter to Our Shareholders
Financial Overview and Profitability
This year was a good year for the company, with a steady 7% growth and nearly $500
million in revenues. The outlook continues to be very bright for AllRound with a 70%
customer satisfactory rating (See Exhibit 3), and a contribution margin that leads the cough
and cold medication market space. Chain and grocery stores continue to be are largest sales
contributors for each of our products.
Strategy and Analysis
This year was much more tame compared to the frantic pace that had been set the last
two years as we continue to focus on growing the market leader in cold medicine, Allround.
Our reformulated product is in its second year and it continues to be a success. Our sales
force grew approximately 10% this year to maintain the strongest position in the market. Our
sales force is a long-term strategy to increase sales and shelf space at our retail channels, but
our main focus this year was to increase Allround’s retention ratio. We increased our ad
budget approximately 20% for the year and shifted our advertising message to more of a
reminder campaign to keep our product fresh in our consumer’s minds. We scaled back on
trial size offers, which was temporarily increased to support prior year’s reformulation, and
increased co-op advertising, point of purchase displays and coupon offers in an attempt to
improve our retention ratio. Our retention ratio improved slightly during the year as a result
of this focus, but as the market becomes increasingly competitive we are finding that the
results are a little slower than we would prefer.
Period 4—Letter to Our Shareholders
Financial Overview and Profitability
A great year for Allstar. With a 15% growth in revenues and the introduction of our
promising new children’s cough medicine with expectorant, AllRound Plus, AllStar’s stock
price climbed 12 points to $75.00 per share.
Our net income results were better than expected. Our income decreased only slightly,
and Allround Plus had a negative contribution margin for the year, but this was anticipated due
to the high advertising expenditures. Additionally, we opened a new factory, which increased
our fixed costs for the year, but it gives us the ability to grow significantly in the years to come.
We expect both of our products to be very profitable in the future due to our long-term focus
to grow the products.
Analysis and Strategy
The previous year was much too tame by our standards so we decided to keep
everyone on their toes by launching a new product, Allround Plus, which will target the child
cold medication market. We decided to launch a child cold medication for a couple of
reasons. First, it is a market that we believe is underserved. The market for children’s cold
medication has only one competitor, Coldcure, which has a notoriously low satisfaction rating.
Second, we believe that our product is superior to Coldcure and it fits with our strategy of
providing effective, side-effect free cold medication products to families.
Launching a new product required a subtle shift in our marketing strategy. Fortunately
we went down this road two years ago when we reformulated Allround, so we have experience
in these matters. We offered significant trial sizes to entice families to try our new product.
We invested heavily in an advertising campaign with a focus on primary and benefit messaging.
Approximately one-quarter of our ad campaign was spent comparing the superior
effectiveness of Allround Plus with its only competitor, Coldcure. Some of the advertising
dollars spent on the new product would have ordinarily been spent on our flagship brand,
Allround, but we felt that it was important to create brand awareness with our new product in
the first year. Brand awareness for Allround is at an all-time high so we felt that advertising
dollars in the short-term would be better spent on Allround Plus. Very few changes were
made to our marketing focus for Allround. We continue to increase coupon offerings and
reminder advertising to improve our retention ratio.
Period 5—Letters to Our Shareholders
Financial Overview and Profitability
Awesome year! With the growing popularity of AllRound Plus, revenue grew 12%
with a 21% increase of AllStar’s stock price. AllStar experienced a slight decline in net
income, which can be attributed to the opening of a new plant. We can also attribute our
success to an increase in the market size and a highly effective marketing campaign.
Our flagship product, AllRound sustains its leadership position in the market with a
staggering $243 million product contribution margin (See Exhibit 4). AllRound Plus grew
from a negative contribution margin last year to a successful $13 million this year.
Strategy and Analysis
1995 was a breakout year for Allstar. Our long-term strategies of maintaining a
superior sales force, creating brand awareness for our new product and focusing on the
attributes that our target market cares about, namely side-effect free products that are
effective, really paid off this year.
For the second year in a row, the decision was made to spend equal advertising dollars
on both of our products to show the commitment we have in our new product. We increased
our trial size offers for Allround Plus to entice users to our product. We also tweaked our ad
campaign to compare Allround Plus more heavily to our competitor, Coldcure. Unfortunately,
we had a slightly smaller marketing budget to work with this year, but no fundamental changes
were made to our advertising campaign in the current year.
The results for the year were phenomenal. Sales increased significantly during the year,
particularly in our new product, Allround Plus. The retention ratio for Allround Plus is greater
than 50%, and the satisfaction rating is greater than 70%, which proves that the market is
excited about our new product. Allround’s retention ratio slipped slightly this year, but this is
not unexpected due to the competitive nature of the industry in which Allround competes.
Period 6—Letter to Our Shareholders
Financial Overview and Profitability
AllStar continues its success with a revenue topping $650 million this year, which is
over 9% growth from last year. We introduced our new promising allergy medication,
AllRight, which helps relieve allergy symptoms without major side effects. We were very
pleased that even with the introduction of our new product and its expected, minor negative
contribution margin and the building of a new plant, only a slight decrease in net income from
last year was realized.
Strategy and Analysis
The main strategy of the year was focused on the launching of our new product,
AllRight. With studies indicating that the allergy market was underserved and unsatisfied for
this smaller niche market, we capitalized on this opportunity with this high quality product.
We allocated a large portion of our ad budget on this product, focusing our messaging on the
primary message and benefits of relieving allergy symptoms, minimizing side effects, clearing
nasal congestion and drying up runny nose. We priced our medication at $5.39, a bit above
competitors. This was targeted at the general population, which stated in studies that price
was not a concern when purchasing this kind of product. We focused our promotional
budgeting trials because it is a new product, and bumped up sales force 10 percent to
accommodate AllRight’s sales.
We are also very pleased at the success of our children’s cold medication, AllRound
Plus. Customer satisfaction and brand awareness climbed from the previous year. Wit a
smaller ad budget for this product due to AllRight’s launch, we took out comparison
advertising and focused on benefits and reminder and primary. We bumped up coop budgets
to increase shelf space, and a provided bigger discounts for retailers in order to increase
awareness. We raised the price 10 cents to keep with inflation. We made big adjustments to
promotions this year, bumping up trials and coupons because we were still struggling with
brand awareness.
AllRound continues success as the leader in the general cough and cold market space.
We transferred a large percentage of our ad budget back to continue reinforcing our primary
product. We wanted to spike sales to help pad the high costs of the new product launch.
Period 7—Letter to Our Shareholders
Financial Overview and Profitability
Success continues for AllStar with 12.5% growth in revenues to $775 million and a
staggering 38% increase in net income. This can be attributed to a large increase in the growth
of the industry in general and, specifically to the company, the smaller ratio of fixed expenses
to profits.
AllRound has a continued solid performance, contributing to 45% of the company’s
sales. Even with decreased expenditures in advertising due to the reallocation of funds to the
newer products, its brand awareness and satisfaction ratings remain high. AllRound Plus, now
in its third year, had a contribution margin increase of 27%, indicating a staggering growth in
popularity. We are confident that this trend will continue with studies indicating a strong
demand. AllRight had a 45.5% increase in its contribution margin to 8.4%, which is
considerable growth on a first year product.
Strategy and Analysis
With the record setting net income this year, we really wanted to continue on the same
strategy as the previous year. With our long-term goal of a successful wide range of products
now realized, we want to focus on truly owning each of these markets and becoming more
efficient in what markets we are in. We were very pleased with the results of last years plan, so
we funneled some of the funding out of promotional items, and focused on advertising. We
changed our pricing again, confident that the increases are warranted. The new pricing
strategy is as follows:



AllRound: $5.99 raised 30 cents.
AllRound: Plus $5.69, raised 30 cents.
AllRight: $5.59 raised 20 cents.
We did not want to increase funding this period, but rather, we targeted to spend the
same amount more efficiently. We reallocated some of our sales force from grocery to
independent, wanting to capture more sales from the smaller niche markets.
For AllRound, we changed message to primary message, more reminder, less
comparison. We dropped coop budget to $2 million, and eliminated trials for this mature
product. We decided keep point of purchases because they help with our ever struggle for
retention.
For AllRound Plus, we changed the ad budget to $8 million, and we kept promos the
same. We placed the additional promotions and advertising into AllRight, where branding was
very needed.
Period 8—Letter to Our Shareholders
Financial Overview and Profitability
A steady revenue growth of 9.3% indicates AllStar is moving in the right direction.
AllRight produced a lower than anticipated contribution margin, which was attributed to a low
brand awareness. Since satisfaction was high, a large portion of advertising was placed into
supporting that product line. We hope to see an improvement in sales next year with more
exposure of the product.
Strategy and Analysis
Continuing with the focus of owning our market spaces for our three products, the
focus of this year was to increase awareness, with a greater budget to accomplish this task. We
again raise product prices, confident that their demand will continue to increase.
We reallocated much of our advertising budget into AllRight because of the slow
growth brand awareness. We changed our focus to reminder and less on benefits to improve
retention on our current customers.
For AllRound, we took more away from comparison and added to primary and
reminder. Since there really are no competitors that come close as far as quality and popularity
to this product, there is no need to waste resources in comparisons. We kept promotions the
same.
For AllRound Plus, not many changes were made because we were satisfied with the
performance of the previous year. As mentioned previously, we placed the majority of our ad
budget in AllRight, hoping to gain momentum with the product. With the advertising we
moved to reminder and not so much benefit and comparison, and promotions we increased
coupons and left trials the same.
Period 9—Letter to Our Shareholders
Financial Overview and Profitability
Revenue continues at a 6.5% growth rate over last year, breaking the $900 million
mark. Net income did not increase substantially because of the construction of a new plant to
meet increased capacity. An 8% jump in our stock price continues to show the confidence of
our investors in our line of products.
Strategy and Analysis
AllRound continues extraordinary success with an 87% brand awareness and near 70%
satisfaction rating. The product continues to account for 77% of our sales revenues. We
decided to reallocate more of our advertising expenditures to this line because it is our main
source of revenues. Additionally, we ramped up the cooperative budgets to continue to
improve shelf positioning and vendor relationships.
AllRound Plus has proven to be very satisfactory, with high ratings as well.
Satisfactory ratings remain constant, and we are looking to improve upon it. Because of this,
we increased the price and changed our messaging from benefit to reminder.
Allright’s contribution margin skyrockets over 200% with the increased awareness.
This area still needs improvement, but we are happy with the increase. Even with lower
awareness rates, satisfaction is very high. So we increased the price, and ramped up the sales
force to accommodate the growing demand for the product. Specifically, we increased sales to
mass merchandisers, grocery stores and convenience stores. Additionally, we changed the
advertising strategy for the product. We moved from benefit to reminder, and then changed
to comparison format in order to address the fact that Defogg changed the formula of their
allergy medications. We also increased co-op budget to continue to help with shelf
positioning.
Period 10—Letter to Our Shareholders
Financial Overview and Profitability
AllStar celebrates the approach of a milestone as we jump in revenues of 10.5% to
nearly $200 million in for the year, and over a 25% leap in net income, which is attributed to a
lower ratio of fixed expenses being funneled back into the company. With a 17% jump in
AllStar’s stock price, investors are confident that we are on a path of continued success. We
are operating at almost 100% capacity, and with the combined mix of products, have attained
record-breaking market share of 34% (See Exhibit 5).
All product lines are on track, and we are please with the progress we have made with
each of them. AllRound continues as the leader in the industry with all time high awareness
and top satisfactory ratings. AllRound Plus makes an extraordinary showing with a solid 19%
improvement in contribution margin. AllRight continues at an extraordinary 45% growth rate
in contributions to the company’s bottom line.
In a quick glimpse at the past decade, AllStar has a cumulative revenue of over $7
billion and a net income over $1.36 billion total for the 10 years (See Exhibit 6). They have
grown in market share to 35% of the total market, with the next competitor coming in at 22%
(See Exhibit 7).
Strategy and Analysis
This period our focus was on improving profitability with higher profit margins and
retention rates. The one continues challenge we faced every period with every product is
retention. Several new competitors entering the market was a constant barrier to obtaining
high numbers in this area, but when compared to every other competitor in this market space,
we did very well. With that goal, we substantially raised prices. After conducting competitorpricing research, we discovered our prices were still a great deal lower than all of our
competitors. Additionally, since our products are leading the market, we believe that
consumers would continue to purchase our brands at the current rates even with the cost
increase. We implemented an increase in prices as follows:



Allround—$6.39, from $6.19.
Allround Plus—$6.29 from $5.99.
Allright—$6.49 from $5.99.
To improve retention, we needed a different strategy for AllRound than for AllRound
Plus and AllRight. For AllRight and AllRound Plus, where consumers still need incentives to
try the products, we offered more coupons and increased the amount of each coupon to $1.00.
We also increased our co-op budgets to help with shelf spacing and awareness. We reallocated
some of our ad budget back to these products, making the ad budget $12 million for all
products. For AllRound, where consumers are aware of the product and already buy it, we
needed to remind them and keep the product in their thoughts.
SUMMARY OF ACTUAL MARKETING MIX STRATEGY
We continued to follow the majority of our long-term strategy throughout the course
of the simulation. However, a few minor adjustments were made as the simulation
progressed.
Target Market. We continued to market our flagship brand, Allround, to young singles,
young families and mature families. We introduced a child cold medicine, Allround Plus, after
period 3. Our intention was to market the product to both young families and mature
families. However, upon seeing the purchase statistics, we determined that our target market
was young families. We introduced an allergy medication after period 5 and we marketed it
according to our original target market unchanged.
Product. Our long-term strategy was unchanged from our original plan. We changed the
formulation of Allround after period 1 to remove the alcohol from the product. We evaluated
the market after period 3 and felt that the child cold medicine market was underserved. The
market for child medicine had only one competitor that we felt was vulnerable due to an
inferior product. We again evaluated the market after period 5 and determined that the allergy
market was grossly underserved. There were only two competitors in the market, and we
again felt that we could deliver a superior product. Additionally, the fact that a large number
of allergy sufferers were using traditional cold medicine signaled to us that the products
currently in the market were not meeting their needs.
Price. We stuck to our plan to not engage in any price wars with our competitors. However,
we discovered that it was somewhat difficult to maintain a premium pricing strategy, to take
advantage of our price inelastic target market, as our competitors raised their prices more often
than we were expecting. We purchased the pricing survey every period, and it seemed that we
were priced too low in the market nearly every time.
Place. We maintained a sales force that exceeded our competitor’s sales force across the
board. Sales to independent drug stores and convenience stores grew significantly over the
course of the simulation, and we attribute this success to our superior sales force at these
channels.
Promotion. We made one fairly significant departure from our original promotion strategy.
Our original plan was to focus primarily on comparison and reminder advertising for mature
products, and primary and benefit advertising for new products. However, as the years went
along, we felt that primary advertising was very important for all products as a long-term
strategy to grow the entire market. As we began to increase the primary advertising, we noted
that the entire market started to grow by 10% or more per year, which was significantly greater
than when we had lower levels of primary advertising. We also felt that comparison
advertising was more important for new products to steal customers from our competitors,
but was less beneficial for mature products that are regarded as the superior product in the
market. We noted that market share did not shift significantly in years that we spent a large
portion of our ad budget on comparison advertising. The benefits of comparison advertising
did not outweigh the costs.
CONCLUSION
Our ten-year tenure as brand managers at Allstar saw significant accomplishments in
net income, stock price and product offerings, but it was not without its frustrations either.
Success. During our ten years at Allstar’s pharmaceutical division, the stock price increased
from $39 to $168. Total sales increased from $102 million to just under one billion dollars
annually, net income increased from $67 million to $193 million, two new products were
successfully launched and the flagship brand was successfully reformulated. Allround
continues to be the market leader for over the counter cold medication, Allround Plus is the
market leader for children’s cold medicine, and Allright is the market leader in allergy
medications.
We attribute our success to a solid long-term strategy. We purchased the survey every
period to find areas that we could improve. From the survey we were able to determine that
the needs of young singles, young families and mature families were very similar. We
formulated our strategy around providing products that were effective without causing
unnecessary side-effects. The survey also helped us to find underserved niche markets within
our target market. We purchased the pricing survey every period to insure that our products
would always be priced competitively and the sales force survey so that we could maintain the
best sales force in the market.
We also purchased the shelf space survey to make sure we had the best placement in the
market. We were able to gain superior shelf space through a combination of an increased sales
force, particularly for the smaller channel members, increased trade promotions, and product
turnover, which resulted from our ad campaign.
Lessons Learned. Despite our many successes, we have a couple of recommendations for
improvement for our successors. First, we believe that we left some money on the table by
not aggressively pursuing a premium pricing strategy. Although we purchased the pricing
survey every period, we still found that our competitors increased prices faster than we were
expecting. According to the survey reports, our target market was expected to be price
inelastic. Allstar’s products are the most effective cold remedies on the market. According to
the pricing reports and the survey report on our target market’s decision criteria, we could
have increased prices more than we did.
Second, we recently discovered that an ad campaign with a high allocation to primary
advertising is a solid long-term strategy for growing the entire market. Since all three of our
brands are the market leader in their respective categories, Allstar would be poised to take a
significant share of a growing market.
Third, there is room for retention ratio improvement. Part of our low retention ratio
can be explained by the highly competitive nature of the cold remedy market. The final survey
report indicates that Allround has the best retention ratio in the cold remedy market.
However, we expected a retention ratio greater than 39% for Allround, which has a 93%
brand awareness ratio, 78% trial ratio, 84% conversion ratio and a 65% satisfaction rating.
Towards the end of the simulation, we focused more of our ad campaign on reminder
advertising. A continual increase in coupons and point of purchase displays, together with the
increase in reminder advertising, may be the key to improving the retention rate.
Pe
ri o
Pe d 0
ri o
Pe d 1
ri o
Pe d 2
ri o
Pe d 3
ri o
Pe d 4
ri o
Pe d 5
ri o
Pe d 6
ri o
Pe d 7
ri o
Pe d 8
ri
Pe od 9
ri o
d
10
Dollars
Pe
ri o
Pe d 0
ri o
Pe d 1
ri o
Pe d 2
ri o
Pe d 3
ri o
Pe d 4
ri o
Pe d 5
ri o
Pe d 6
ri o
Pe d 7
ri o
Pe d 8
ri
Pe od 9
ri o
d
10
Dollars (in millions)
EXHIBITS:
Exhibit 1
Revenue vs. Net Income
1100
1000
900
800
700
600
500
400
300
200
100
0
Revenue
Net Income
Year
Exhibit 2
Net Income vs. Stock Price
250
200
150
Net Income
100
Stock Price
50
0
Year
Exhibit 3
100
90
80
70
60
50
40
30
20
10
0
AllRight Satisfaction
AllRight Brand
Awareness
Period 10
Period 9
Period 8
Period 7
Period 6
Period 5
Period 4
Period 3
Period 2
Period 1
AllRound Plus
Satisfaction
Period 0
Rating
Satisfaction Vs. Brand Awareness
Period
AllRound Plus Brand
Awareness
AllRound Satisfaction
AllRound Brand
Awareness
Exhibit 4
Contribution Margin
120%
100%
AllRound
AllRound Plus
AllRight
60%
40%
20%
0%
-20%
Pe
rio
Pe d 0
rio
Pe d 1
rio
Pe d 2
rio
Pe d 3
rio
Pe d 4
rio
Pe d 5
rio
Pe d 6
rio
Pe d 7
rio
Pe d 8
r
Pe iod
rio 9
d
10
Share
80%
Period
Exhibit 5
AllStar's Market Share by Product
22%
AllRound
6%
AllRound Plus
AllRight
Other
6%
66%
Exhibit 6
AllStar's 10 Year Performance
(in millions)
Period
TOT
Revenue
Net Income
Period 0
355.3
67.2
Period 1
Period 2
Period 3
Period 4
Period 5
Period 6
Period 7
443
98.4
458
491
561
629
689
775
104
108
108
128
106
146
Period 8
Period 9
Period 10
848
903
997
153
153
193
7149.3
1364.6
Exhibit 7