TEAM SUADELA: A CASE STUDY MKTG 560: MARKETING MANAGEMENT

DANICA DZIPKOVIC & LYNDSEY EAGLE DDZIPK2@UIC.EDU & EAGLE1@UIC.EDU

Germany Industry – Team Suadela

MAY 2, 2018

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Executive Summary

When the new managers of Suadela took control of the firm, their brand portfolio

consisted of two Sonites. These brands, Soft and Solo, possessed the same characteristics as

other Sonites in the marketplace. Management evaluated these brands’ performance and

determined that Soft and Solo would not sustain the firm. That determination left management

with two tough questions to answer: how can Suadela profitably differentiate their Sonites in the

market and when should the firm enter the bourgeoning, but lucrative, Vodite market. The firm’s

success would rely on innovation and a careful, balanced marketing strategy. In their efforts to

become the industry leader, Suadela faced many challenges, some facilitated by other firms in

the market and others due to managerial miscalculations. This case study will evaluate the

managers’ decision-making and Suadela’s performance over the previous ten periods.

Suadela’s managers initially set out to have a careful marketing strategy that hinged on

continued innovation and market research. By becoming informed about the consumer market,

management believed that the research and development department could create the ideal brand

for each individual segment. Because consumer needs are always changing, Suadela would

continue to invest in R&D, modifying and developing new brands. Market research studies

helped guide Suadela’s segmentation and product development strategies.

Based on these studies, Suadela immediately launched two new brands, Soleil and

Sonnet, to target the growing Shoppers and High Earners segments. Early market forecasts

showed slow growth in the Explorers and Professionals segments, and management decided that

they would not be a top priority for the firm. This proved to be a smart decision; by the end of

ten periods, the Explorers and Professionals segments accounted for less than 10% of the market.

While Soleil and Sonnet built awareness in the market, Solo and Soft continued to be profitable

for the firm. By the fourth period, Solo was the top Sonite in the market, earning $104 million.

Initial sales of Soleil and Sonnet also defied expectations, which resulted in a production

shortage. This miscalculation is a symptom of the conservatism that would plague Suadela

throughout these ten periods.

However, this early success could not be sustained. Firm Newton modified their brand

Nova, which resulted in dramatic sales losses for Solo. The brand would be unable to recover

from this rejection in the market, and management would be forced to abandon production of

Solo in later periods. However, Suadela’s entry into the Vodite market yielded high returns,

selling over 275 thousand units of their brand Seduce in Period 9 for a total of $54 million in

revenues. Despite a price undercut by competitors, Seduce continues to offer consumers an ideal

product and will remain profitable. Suadela’s Sonites are also positioned to be successful in

future periods. Soleil and Sonnet are the most preferred brands for the Shoppers and High

Earners segments, and the research and development department has a new project available for

the growing Savers market.

At the end of ten periods, Suadela was a highly profitable firm, earning over $520 million

in net contribution and 2,410 SPI points. The new management team will also have a maximum

advertising budget of $26.4 million to invest in future R&D projects, advertising, and

commercial team members. With four strong brands in both the Sonite and Vodite market, the

previous managers have left Suadela in great shape to become a market leader in the future.

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Initial Team Strategy

The new managers of firm Suadela inherited two Sonite brands, Soft and Solo, with the

same characteristics as other brands in the market. Suadela’s strategy – and its success – would

hinge on continued innovation and careful, balanced decision-making. Their initial strategy had

two key components: research and development and market research studies.

To stay ahead of the competition, Suadela planned to create and continually modify

brands tailored to each consumer segment. Perfect brands for each segment should allow Suadela

to secure significant revenues. To create those ideal brands, the managers at Suadela must invest

in market research studies to become fully-informed about consumers. This will be especially

true in the Vodite market. As part of Suadela’s strategy, they would allow another firm to enter

the Vodite market first to gain knowledge prior to R&D, using this research to create a better

Vodite and usurp market share from the first-mover. These market research studies would also

guide Suadela’s segmentation decisions, targeting segments with the strongest growth.

Despite Suadela’s good intentions, however, the initial strategy would not be a winning

one. While there were some positive decisions, an overly conservative approach would stifle any

initial successes Suadela would experience.

Major Decisions

Periods 1 – 4

In early rounds of the simulation, product differentiation relied solely on price. With

brand Solo, management mistakenly raised the price while competitors lowered theirs, resulting

in reduced sales and market share. After the initially disappointing performance, Suadela

recovered. By Period 4, Solo was the industry’s best performing Sonite with $104 million in

sales and 239 thousand units sold.

Suadela also immediately recognized the need for new products in the market and

launched two new brands, Soleil and Sonnet, in Periods 3 and 4 respectively. In line with their

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initial segmentation strategy, Soleil targeted the Shoppers segment and Sonnet targeted High

Earners. By Period 4, Soleil and Sonnet were the closest brands to their targeted segments

(Figure 1). Despite this successful positioning, management underestimated consumer interest

and could not fulfill all orders for these brands. This miscalculation in production is a symptom

of the conservatism that Suadela would show throughout the simulation.

Periods 5 – 7

By Period 5, Suadela had lost significant sales to poor production plans stemming from

their “play-it-safe” strategy. With new brands emerging in the market, Suadela faced shrinking

segment shares and sales. Modifications to brand Nova resulted in substantial losses for Solo by

edging itself closer to the Professionals’ ideal point. Other firms used advertising to shift

consumer perceptions of their brands, further diluting Suadela’s share. Solo – once Suadela’s top

performing brand – made a meager $24 million in Period 7, losing $80 million in sales.

In Period 6, Suadela launched their first Vodite brand, Sexier. Despite Ravage’s

dominant position in the Vodite market, Sexier attained a 7.2% share of the market and earned

$40 million in sales. Suadela originally intended to enter the Vodite market sooner than Period 6,

but limited resources prevented earlier entry. Not to be left behind in the coveted Followers

segment, Suadela also invested $3.5 million in R&D to create their ideal Vodite.

Periods 8 – 10

Despite their optimism and research, Suadela still miscalculated the interest in their Sonite

brands. In Period 8, they had over $2.5 million in inventory and lost over 130 thousand sales due

to distribution. To negate these decisions, the management team went on the offensive by

increasing advertising expenditures, investing in commercial team members, and focusing their

efforts on the successful brands Soleil and Sonnet.

Suadela launched their second Vodite, Seduce, with much success; consumers purchased

99,000 units of Seduce in Period 8. The brand increased production in the following period,

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selling 275 thousand units and earning $54 million in revenues. According to perceptual maps, it

was the closest brand to the Followers’ ideals along nearly all attributes (Figure 2). The strong

growth in the Followers segment made this a key opportunity to improve firm performance.

Using all the research tools at their disposal, Suadela lowered the price of Seduce to $630 in

Period 10. In the end, a drastic $101 price reduction of brand Letuswin reduced sales of Seduce.

Optimistic production decisions also resulted in heavy inventory costs, which dragged down

Suadela’s SPI.

How did the markets evolve?

Sonites

To start the game, the Savers were the largest segment, accounting for 30.3% of the

market, followed by the Explorers (21.9%) and Shoppers (18.8%). However, the market forecast

report indicated that the Explorers would shrink to 8.5% over the next five periods. In contrast,

the Shoppers segment was forecasted to nearly double in size. Based on this information,

Suadela decided to concentrate on the Savers, Shoppers, and High Earners (Figure 3).

By Period 5, the market included 16 Sonites, with two new brands from Suadela as well

as new and modified brands from firms LoMein, M, and Newton. Compared to the Period 0

forecast, the Shoppers did not achieve as much growth as initially predicted and the

Professionals, originally forecasted to shrink, experienced 1.3% growth (Figure 4). This may be

due to high awareness of the brands targeted to this segment as well as large advertising

expenditures. In the first five periods, firms spent $36.5 million on advertising targeted to the

Professionals (Figure 6). The market forecast report from Period 5 predicted that by Period 10

the Savers and Shoppers segments would account for over 75% of the market.

That forecast, it turned out, underestimated the growth of these segments. In fact, the

Savers and Shoppers accounted for 84% of the market in Period 10 (Figure 7). While there was

an overall lack of R&D in this industry, most new or modified products were targeted to these

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segments (Figure 8). The Shoppers and Savers also received a substantial share of advertising

expenditures. According to Competitive Intelligence, firms spent $68.3 million on the Shoppers

segment and $72 million on the Savers.

Vodites

The Followers segment dominated the Vodite market with 51.7% of the market in Period

6. Adopters and Innovators accounted for 32.8% and 15.5% respectively. At the time, the

Followers segment was targeted closely by three of firm Ravage’s brands while the Innovators

and Adopters only had one brand near their ideal points. It was forecasted that the Followers

would account for 92% of the Vodite market within the next five periods (Figure 9).

At the end of Period 10, the Followers accounted for approximately 96% of the market,

exceeding the predictions from Period 6. Of the ten Vodite brands in the market, seven of them

were targeted to the Followers (Figure 10). Additionally, $18.9 million was spent in advertising

to this segment in Period 10, compared to $10.6 million in Period 6 (Figure 11). The array of

Follower-specific products likely contributed to the explosive growth of this segment. At the

same time, firms reduced their advertising toward Innovators and Adopters and did not develop

products for those segments.

Strategy Effectiveness

Most Effective Strategy

The management team at Suadela believed if they had more market research then they

could make more informed decisions. They utilized these market research studies throughout the

simulation for both Sonites and Vodites. The most important studies for Suadela were Industry

Benchmarking, Consumer Survey, Semantic Scales, Market Forecast, and Competitive

Intelligence. These studies helped Suadela determine how their brands were perceived in the

market, learn if their competitors had invested in R&D, select the market segments on which to

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concentrate, and determine the best characteristics for their R&D projects. It was in using these

studies to develop new products where Suadela had the most success.

Suadela continually developed and modified the brands in their portfolio throughout the

simulation. Their first new brand was Soleil, a Sonite targeted to the Shoppers segment and

launched in Period 3. Using perceptual maps, the management team evaluated the relationship

between physical product characteristics and consumer perceptions to determine the most ideal

brand to create. Despite successful development of the product, when Soleil was available for sale

in Period 3, the brand only sold 14,000 units. Unhappy with Soleil’s performance, Suadela

continued to modify the brand over the next several periods, using regression-based tools to

determine the ideal preferences of the Shoppers. With the help of a larger commercial team, higher

advertising budgets, and better brand perception, Suadela sold over 200 thousand units of Soleil

in Period 7. Soleil remained a competitive brand in the market until the end of the simulation,

despite strong competition from brand Lollipop.

Least Effective Strategy

Despite the successful R&D projects, the management team suffered from an overly

conservative strategy. In the early periods, Suadela struggled to determine the correct production

levels and disregarded the importance of commercial team members. While firms LoMein,

Newton, and M were increasing their commercial teams, Suadela focused on advertising and

R&D to grow their product portfolio for both markets. Unsurprisingly, when management

decided to increase commercial team expenditures, sales increased. The increase in commercial

team helped push product, and the lack of team members is a reason Suadela often

underproduced their brands. This was an ongoing problem, especially in Period 10 when

management increased the commercial team substantially for both Soleil and Sonnet and

underestimated how many units would sell.

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Suadela also became too optimistic about their performance when their products aligned

well with consumer preferences and did not consider what competitors would do, especially in

pricing decisions. For example, in Period 10, management used the regression-based tools to

determine the ideal price point for the Followers segment in the Vodite market. The ideal price

was expected to be around $623. However, LoMein dropped their price to $580, which shifted

the Followers’ ideal price lower than expected and reduced sales of Seduce.

There were also moments where Suadela’s R&D projects floundered. In Period 8,

management chose to modify brand Soft to better target the Savers segment, but miscalculated the

proper level of processing power, the second most important characteristic in the Sonite market.

Because of this, Suadela was not able to make inroads in the Savers segment at the end of the

simulation. These were errors from which Suadela could not recover.

How would we change our strategy and tactics?

The Next Two Periods

In Periods 11 and 12, Suadela would trim their portfolio by eliminating underperforming

brands – Soft, Solo, and Sexier. Removing these brands frees up resources to promote Soleil,

Sonnet, and Seduce. The extra resources will also allow Suadela to launch a new brand targeted to

Savers. There was a project available in Period 10, but due to low profit margins, Suadela elected

to keep the project on the shelf. With extra time and resources to build awareness, however, this

brand could take market share from Lock. Suadela also has an R&D project started to modify

Sonnet, the brand targeted to High Earners. Sonnet is still a successful brand; however, changing

market preferences necessitate brand modifications.

Suadela will also need to lower the price of Seduce to $575 to bring Seduce back to the

ideal price for Followers, regain market share from competitors, and sell the remaining inventory.

Seduce is one of the best brands on the market, and the lower price should help improve sales. To

make accurate pricing and commercial team decisions, Suadela will also need to add more research

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studies to give the firm a more holistic view of the market. Adding the Consumer Panel and

Distribution Panel would provide valuable insights into brand performance.

Starting Over

If the simulation were to start over from Period 1, Suadela’s management team would

amend their initial strategy. First, the team would read the entire MarkStrat manual before making

decisions, instead of reading only up to page fifty. On page sixty, the manual states that

manufacturers should expect pressure from consumers to lower prices on Sonites. Had the team

read this prior to the start of the simulation, early pricing decisions would have been different. The

team would also invest in more commercial team members at the start of the game to improve

sales of ideal brands in the market. Suadela would also limit their brand portfolio to three or four

brands targeted to the growing segments. The limited portfolio will allow Suadela to competitively

allocate their budget to advertising and commercial team.

Conclusion

At the end of the simulation, the management team at Suadela is leaving the firm in good

hands, despite the slight dip in SPI points. The firm made $520 million in Net Contribution over

ten periods and has a solid portfolio of stable brands. Brand Soleil has 50% purchase intention

and Sonnet has 59% purchase intention going into Period 11. There are also R&D projects in the

pipeline to better target Savers and High Earners. With slight pricing adjustments, Seduce could

be repositioned to take back a substantial share of the Followers segment. The new management

team will also have the maximum budget of $26.4 million in the next round. With four strong

brands in their portfolio, Suadela is in great shape to become a market leader in the future. Based

on this information, the managers of Suadela should receive a score of 93% for their

performance in the simulation. Recommendations for future gameplay include offering loans and

making regression-based tools available earlier in the game.

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Appendix

Figure 1: Sonites Perceptual Map, Period 4

Figure 2: Vodites Perceptual Map, Period 8

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Figure 3: Period 0 Sonite Market Forecast

Figure 4: Period 5 Sonite Market Forecast

Figure 5: Period 5 Perceptual Map - Sonites

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Figure 6: Sonite Advertising Expenditures, Period 1 -5

Figure 7: Period 10 Sonite Market Forecast

Figure 8: Period 10 Perceptual Map - Sonites

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Figure 9: Period 6 Vodite Market Forecast

Figure 10: Perceptual Map – Vodite Market – Period 10

Figure 11: Vodite Advertising Expenditures, Period 6 - 10