Dr. Gerald Smith
MK-719
1

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.
2

The Process
Next
Decision period
Analysis of market situation/opportunities
Planning and budgeting
Make marketing plan DECISIONS!!!
Submit plan decisions
The marketing game! simulation
Company reports returned to firms
3

Industry Environment
 Market growth
 Technological environment
 No major innovations expected
 Yearly revision cycle
 Competitive environment
 Type of competition depends on firms’ decisions
4

Distribution Channels
Firm 1 Firm 2 Firm 3 Firm 4
Channel 1
Traditional
Dealers
Channel 2
Discount
Dealers
Firms reach customers through full-service dealers and
Internet/mail-order discount dealers.
High-tech
Managers
Concerned
Parents
Modern
Students Professional
Creators
Different segments have different shopping preferences.
Harried
Assistants
Home
Users
5

Past Sales By Market Segment
For Voice Recognition Device
25000
20000
15000
10000
5000
0
0 1
Year
2 3
Assistants
Managers
Students
Home
Creators
Parents
6

Competitor Analysis
 Estimate competitor’s net contribution
 Analyze past strategies & likely changes.
 Evaluate positioning and target segments.
3
4
1
2
5
6
Firms
1 2 3 4
X
?
X
X
?
X
?
7

Expanded Marketing Responsibilities
(Level 2)
PRODUCT Features (and R&D for product modifications)
PRICE
PLACE
Wholesale price in each channel
Distribution intensity in each channel
PROMOTION
-Advertising
-Personal selling
-Sales promotion
CUSTOMER SERVICE
$ Spending
Type
Number of sales reps in each channel
Percent non-selling time
Commission rate
$ Spending per Channel
$ Spending
MARKET RESEARCH
Demand Forecast/
Production order
7 Reports May be Purchased
Number of Units
8

Response Functions and Marketing Spending
Sales
Threshold
Level
Saturation
Level
Marketing Spending
Spending too little may have little effect, but spending too much just increases costs and reduces profit.
9

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
10

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.
11

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) = $161.54
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
12

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.
13

R&D for Product Modifications:
Computing Costs
Feature
Special Commands (5-20)
Error Protection (1-10)
Ease of Learning (1-10)
Cost to Decrease Cost to Increase
$0
$8,000*(change) 2
$0
$5,000*(change) 2
$3,000*change
$3,000*(change) 2
Feature
Special Commands
Error Protection
Ease of Learning
Last period’s product
Example
This period’s product Change
6 8 +2
4 3 -1
3 5 +2
Total modification costs:
Note: R&D for product changes is more expensive if you have to make big changes in a short period of time…
Cost to Change
$8,000*2*2=$32,000
$0
$3,000*2*2=$12,000
$44,000
14

Industry Sales Report
Brand
Firm 1
Firm 2
Firm 3
Firm 4
Total
Unit Sales Share (units) $ Sales (retail)
25,151 .250
$4,292,964
25,151
25,151
.250
.250
$4,292,964
$4,292,964
25,151
100,604
.250
$4,292,964
$17,171,854
Channel Unit Sales Dollars Sales
1 56,296 $10,696.240
2 44,308 $6,475,614
15

Product Features and Prices Report
Brand of
VRD
Error Ease
Special commands protection of learning
Retail price channel
1
Retail price channel
2
Firm 1
Firm 2
Firm 3
Firm 4
8
8
8
8
3
3
3
3
3
3
3
3
$190.00
$190.00
$190.00
$190.00
$146.15
$146.15
$146.15
$146.15
16

Market Activity Report
(Level 2)
Firm 1
$250,000 Adv. Dollars
Adv. Type
Sales Promotion
Channel 1
Channel 2
$0
$0
No. Sales Reps
Channel 1
Channel 2
Commission
Customer Service
10
10
5%
$92,500
Firm 2
$250,000
$0
$0
10
10
5%
$92,500
Firm 3
$250,000
$0
$0
10
10
5%
$92,500
Firm 4
$250,000
$0
$0
10
10
5%
$92,500
17

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
18

TMGPlan Software
Easy to use for preparing and evaluating plans, managing reports
View, print, and manage password protected reports
Select directory
Enter
Plan
Decisions
Evaluate spending and profit forecast
19

Market Share by Segment Report
Brand
Firm 1
Firm 2
Firm 3
Firm 4
1
0.250
0.250
0.250
0.250
2
0.250
0.250
0.250
0.250
Segment
3 4
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
5
0.250
0.250
0.250
0.250
6
0.250
0.250
0.250
0.250
Total
Sales
(units)
20,028 15,084
Who’s selling to whom?
Who’s buying what?
What is each firm achieving?
Which segments are buying?
25,104 10,240 22,056 8,092
20

Market Share by Channel Report
Brand
Firm 1
Firm 2
Firm 3
Firm 4
Channel 1 Channel 2
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
44,308 Total Sales
(units)
What’s selling where?
Who’s buying what?
56,296
21

Consumer Preference Study
Segment
Special Error
Commands Protection
Ease of
Learning
Students
Home
Assistants
Creators
Managers
Parents
10-13
7-10
10-13
12-15
13-16
5-8
2-4
2-4
6-8
2-4
6-8
2-4
What kind of product would a segment prefer?
What reference price seems typical for the segment?
How are segments similar and different?
1-3
6-8
6-8
4-6
2-4
7-9
22
Price
Range low low high high high low

Marketing Effectiveness Report
Index
0.550
Brand Awareness
Customer Service
Consumer Group Rating
Industry Average Rating
100%
100%
Channel 1:
Sales Rep Workload
Dealer Satisfaction
Channel Strength
(“Push”)
100%
1.00
.500
Channel 2:
Sales Rep Workload
Dealer Satisfaction
Channel Strength
(“Push”)
100%
1.00
.500
Competitors with lower
Index
0
Competitors with equal or higher Index
3
0
0
0
0
3
3
3
3
23

Detailed Sales Analysis
1 2
Segment
3
Firm
Channel 1
4 5 6
896 1,109 5,602 1,808 4,363 1,086
Channel 2 5,269 3,337 1,396 1,196 1,865 1,074
Unit sales by segment and channel
Are you reaching your target?
24

Detailed Sales Analysis
1 2
Segment
3
Firm
Channel 1
4 5 6
896 1,109 5,602 1,808 4,363 1,086
Channel 2 5,269 3,337 1,396 1,196 1,865 1,074
Unit sales by segment and channel
Are you reaching your target?
25

Customer Shopping Habits
Segment
Percent of Shopping in Channel 1
Percent of Shopping in Channel 2
Students
Home
Assistants
Creators
Managers
Parents
?
?
?
?
?
?
Who shops where?
How do shopping patterns match distribution focus?
?
?
?
?
?
?
26

Product Positioning Report
Brand 1 2
Segment
3 4
Firm 1
Firm 2
Firm 3
Firm 4
?
?
?
?
?
?
?
?
?
?
?
?
?
?
?
?
5
?
?
?
?
6
?
?
?
?
Which brands are closest to which segments?
Which segments have no close brands?
27