THE MARKSTRAT CHALLENGE - INTRODUCTION IB2C – DURABLE GOODS

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CONGRATULATIONS ON YOUR NEW POSITION

You have been recruited to manage the marketing department of the Electronics division of a large corporation:

• You will compete with several other firms to market two types of durable goods to consumers

• You will be responsible for formulating and implementing the long-term marketing strategy of your division

Your performance will be assessed each year on:

• Your business results – sales, market share gain and improved profit – are combined in a Share Price Index (SPI)

2Introduction to the Markstrat Challenge - Part I

YOUR ROLE FOR THE NEXT 10 YEARS

• Work in a highly competitive market

• Target consumer segments and position your products

• Interface with R&D to design and develop new products

• Launch new products and improve existing ones

• Interface with the production department

• Make marketing mix decisions: pricing, advertising, …

• Decide on your digital marketing strategy

• Decide on the size and priorities of your commercial team

• Launch Marketing initiatives

• Order market research studies to get up-to-date

information for decision making.

3Introduction to the Markstrat Challenge - Part I

4Introduction to the Markstrat Challenge - Part I

GETTING

STARTED

MANAGING

YOUR

FIRM

THE

MARKSTRAT

WORLD

THE MARKSTRAT WORLD

80 MILLION INHABITANTS:

UP TO 6 COMPETING FIRMS EACH MANAGED

BY A TEAM:

• All firms start in a different situation: Product specification, target consumers, brand awareness levels, market share, distribution coverage, profitability, R&D expertise, ...

• The marketing strategy of your firm should be adapted to its particular situation;

ANNUAL BUDGET FUNCTION OF RESULTS:

All competitors operate under similar budget constraints, with annual budget granted as a percentage of past period profits (EBT).

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MARKET CONDITIONS:

• Large territory with a highly developed economy

• Inflation and GNP growth fairly stable and no major political, social or economic events are anticipated.

• Currency: Markstrat Dollar ($)

40% URBAN(top 5 cities)

35% RURAL

25% SMALLER URBAN

TWO PRODUCT CATEGORIES

You can market up to 5 brands in each category at a given time

SONITES VODITES

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INDEPENDENT

NOT SUBSTITUTES

NOT COMPLEMENTARY

SONITE PRODUCT ATTRIBUTES

NUMBER OF

FEATURES

10 – 20

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DESIGN

INDEX 3 – 10

BATTERY LIFE

24 – 96 HOURS (H)

DISPLAY SIZE

4 – 40 INCHES (”)

PROCESSING POWER

5-100 GIGAFLOPS

(GFLOPS)

BASE COST

MINIMUM $10

Sonite brands are already marketed, each characterized by 6 main attributes

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VODITE PRODUCT ATTRIBUTES

RESOLUTION

20 – 100 LINES/MM

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ENERGY EFFICIENCY

10–100 BIO

COMPUTATIONS/WH

CARBON

FOOTPRINT

5 – 50 KG

CONNECTIVITY

INDEX 3 – 10

NUMBER OF APPS

5 – 100

BASE COST

MINIMUM $10

No Vodites exist yet. Experts believe that they will be characterized by

Introduction to the Markstrat Challenge - Part I

BRAND NAME CONVENTIONS

T O NIC

M E LODY

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Company marketing the brand:

L, M, N, R, S, T

Product Category:

O = Sonite

E = Vodite

Freely chosen letters or numbers

SONITE CONSUMERS

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Look for high quality, high-performance and easy-to-use productsCan afford expensive

products

Highly interested in Sonite productDemand high

performance productsQuite price sensitive

Like premium quality products, and price can be

seen as an indication of quality

Tech dependent, have good product knowledge

through extensive product comparison.

Demand high quality–price ratio.

Value performance and convenience

But very price sensitive

DIFFERENT SEGMENTATION SCHEME FOR VODITES

TYPICAL SEGMENT SIZE EVOLUTION OVER TIME

Sales

Time11

FOLLOWERS

EARLY

ADOPTERS

INNOVATORS

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MEDIA CATEGORIES

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This is media owned and controlled by the product. This includes company's web site, mobile apps, blogs and their social presence (Facebook, LinkedIn, Twitter, etc.)

Earned media is essentially online word of mouth, usually seen in the form of 'viral', mentions, shares, reposts, reviews, recommendations, or content picked up by 3rd party sites

Paid media is bought by the company to build its position, usually display ads, paid search or sponsorship. Ideally this investment feeds ‘owned’ and creates ‘earned’ media

Traditional media is any form of mass communication available before the advent of digital media. This includes television, radio, newspapers, books, and magazines.

Outdoor media is all media that reaches consumers when they are outside their homes. Common forms of outdoor advertising today fall into three categories: Billboards, Public Transport, Sponsored Events.

DISTRIBUTION CHANNELS

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• Small stores not necessarily organized in chains

• Located close to their customers and providing a high level of service and technical support

• Broad product line including high-end products

• Preferred for Vodites

• Includes web-only merchants and retailers’ websites

• High convenience as consumers shop from home

• Almost unlimited choice and easy comparison

• Likely to become more important

• Operate on a low-price, high-volume basis

• Lower level of service than in specialty stores

• Depth of product lines usually restricted to a few units

• Distribute the cheaper, low-performance products

• Low level of service not adapted to first Vodites

• Companies’ eStores

• Direct sale to consumers with better margins

• Prices may be higher than in mass distributions

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GETTING

STARTED

MANAGING

YOUR

FIRM

THE

MARKSTRAT

WORLD

YOUR OBJECTIVE

• Maximize your Share Price Index

• You will have to optimize:• Market share

• Sales growth

• Net contribution

• Cumulative net contribution

• R & D investments

• ….but the main objective is to LEARN!

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FROM DATA TO STRATEGY

You will need to do a certain amount of analysis before setting a strategic direction for your firm

Data Information Strategy

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TACTICAL DECISIONS PERIOD 1

17

• Production planning

• Pricing

• Advertising & segmentation strategy

• Ordering industry-wide market studies

• Ordering market-specific market studies

• Size of commercial team

• Allocation across distribution channels

• Allocation across marketed brands

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• Launching marketing & digital initiatives at the company level

• Initiatives have an effect on purchase funnel over 1 year can be repeated

• Allocate communication efforts between online and traditional media

PRODUCTION PLANNING

• A production plan must be submitted each period for each brand, taking into account:• The potential sales for the brand

• The existing inventory at the beginning of the period

• The flexibility of the Production department

• From one period to the next, production plans may be increased or decreased without any penalty

• Actual production levels are automatically adjusted in response to actual demand by plus or minus 20%

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MARKETING MIX

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SAMPLE PRODUCTION PLANNING DECISIONS

Inventory

ProductionPlan

(yourdecision)

PotentialSales

(market demand)

ActualProduction(reduced)

154,000150,000

30,000

124,000Lost Sales = 0

&Ending Inventory = 0

IDEAL

YourEstimated

Sales

180,000

Inventory

ProductionPlan

(your decision)

ActualProduction(Increased)

80,000

30,000

96,000

Ending Inventory = 0

Lost Sales28,000

PotentialSales

(market demand)

154,000PESSIMISTIC

YourEstimated

Sales

110,000

Inventory

ProductionPlan(your

decision)

ActualProduction(reduced)

200,000

30,000

160,000

PotentialSales

(market demand)

154,000

Lost Sales = 0

Ending Inventory

36,000

OPTIMISTIC

YourEstimated

Sales

230,000

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Competitors

“Order-book”

Industry

ESTIMATING LOST SALES

Comparing purchase intentions with market shares at the end of the period can give you a feel for how many sales you have lost

PurchaseIntentions

MarketShares

Sales Lost to

20

−

Introduction to the Markstrat Challenge - Part I

PRICING

• Every year, you set the Recommended Retail Price in $

• To decide on a price, you should take into account• The margin of the distributors• The discounts made by some channels• Consumers’ expectations• Competitive prices• Etc…

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MARKETING MIX

Introduction to the Markstrat Challenge - Part I

SAMPLE PRICES AND CONTRIBUTIONS

• Assuming a price of $400 and a transfer cost of $125

SpecialtyStores

Mass Merchandisers

eCommerce eStore

Average Discount None 10% − $40 5% − $20 None

Actual retail price $400 $360 $380 $400

Distribution margin 40% − $160 30% − $108 30% − $114 20%* - $80

Selling price $240 $252 $266 $320

Transfer cost $125 $125 $125 $125

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* For eStore there is no distributor margins, the 20% is used for the eStore server management and cost

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ADVERTISING

• To build brand awareness

• To make consumers familiar with product characteristics and price

• To develop demand for the whole market

• To influence the decision of distributors to carry or not your products

• To create a barrier to entry for your competitors

Media budget : to purchase media space and time

Research budget : to improve the quality / persuasive power of your message

MARKETING MIX

Segmentation Strategy: Indicate which consumers should be targeted & normalize to 100% to save

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DIGITAL MARKETING

• Allocate efforts across Traditional and Digital Marketing for each product.

• Specify a media strategy for each Media Category.

Media Strategy: Indicate which Media should be prioritized, You can use the

normalize button to normalize to 100%

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SALESFORCE & COMMERCIAL

• You decide your Salesforce & Commercial efforts for each channel and product:• Number of Full-Time Equivalent people in traditional channels

• Commercial budget in Digital Channels

• Your commercial team is responsible for obtaining and entering orders, and for supporting distributors• Visiting stores, distributors and wholesalers

• Enrolling customers in trade programs

• Helping stores organize and conducting promotions

• Taking orders and handling out of stock situations

• Participating in trade shows

SALESFORCE &

COMMERCIAL

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26

MARKETING POWERHOUSE

• Available to reinforce your overall marketing efforts.

• Some initiatives will be available later during the simulation, and some events will have a specific seasonality. You can implement up to three initiatives per year.

• The initiatives are grouped into two categories:• The Marketing Initiatives

• Trade in offers & bundles

• Partnerships

• Product placement

• Additional services

• The Digital initiatives

• Influencer & content marketing

• Paid advertising

• Organic channels

• Retargeting

• Email Marketing

• Mobile App building

• Performance marketing

• Cross selling

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MARKETING BUDGET FOR THE COMING PERIOD

Budget based on the previous period’s performance

27

40% of previous year EBT, with a minimum of $10m and a maximum of $20m

Loan and budget increase/decrease granted by instructor

Total available budget

Deviation from budget. Should always be positive or equal to 0

Expenses generated by your decisions

Introduction to the Markstrat Challenge - Part I

UNDERSTANDING P&L

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UNDERSTANDING BRAND CONTRIBUTION

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GETTING STARTED

Ready to get started on your first year’s decisions?• Get familiar with Markstrat and with your teammates

• Do not make any major changes in your firm's operation in the first round!

ANALYZE

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DECIDE RUN

PERIOD 2

THAT’S IT – YOU ARE READY TO START. GOOD LUCK IN ACHIEVING ALL YOUR OBJECTIVES!

PERIOD 1 PERIOD 3 PERIOD 4 PERIOD 5 PERIOD …

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ORGANISE YOURSELVES AND MANAGE THE GROUP PROCESS

INFORMATION OVERLOAD

TIME PRESSURE

CONFLICTING OPINIONS

32Introduction to the Markstrat Challenge - Part I

GETTING

STARTED

MANAGING

YOUR

FIRM

THE

MARKSTRAT

WORLD

ACCESS THROUGH WEBSITE OR DIRECT URL

Introduction to the Markstrat Challenge - Part I 33

1Sign in www.stratxsimulations.com using your Participant Activation Key (PAK)

2 Click the Markstrat Logo

Enter the information given by your Instructor

1 Go to http://digitalmarkstrat.stratxsimulations.comOR

ANALYZE REPORTS AND MARKET STUDIES BEFORE MAKING DECISIONS

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CHOOSE A NAME FOR YOUR FIRM

It must start with the initial of your firm and be 8

character long maximum

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CHECK YOUR BUDGET AT REGULAR INTERVALS

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Click here to check

your budget

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CHECK YOUR ERRORS & WARNINGS AT REGULAR INTERVALS

Click here to check

your messages

ON YOUR MARKS,

GET SET, GO!

RESPECT THE DEADLINES – GOOD LUCK !

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