Welcome to the Marketing Simulation Game Class Dr

Welcome to the Marketing Simulation Game Class! Dr. Satyendra Singh

Overview • • • Long-term Perspective Focus on Marketing Planning Focus on Strategic Issues Competitive Environment Rapid Feedback

The Process • • • Analysis of Company Results Planning and Budgeting Marketing Plan DECISIONS!!! Turn in Decision Forms THE MARKETING GAME SIMULATION Company Reports Returned to Firms

Industry Environment • Market Growth • Competitive Environment – Type of Competition Depends on Firms’ Decision • Technical Environment – No Major Innovations Expected – Yearly Revision Cycle

The Market Segments • There are Six Product-Market Segments – – – High-tech Managers Modern Students Concerned Parents Commercial Artists Harried Assistants Home Producers

Distribution Channels • Channel 1 – Traditional Dealers – 50% Margin • Channel 2 – Discount Dealers – 35% Margin

Product Features - Multimedia • Number of Special Commands (5 -20) • Error Protection (1 -10) • Ease of Learning (1 -10)

Types of Advertising • • • Pioneering Direct Competitive Indirect Competitive Reminder Corporate (Institutional)

Marketing Responsibilities… • • • Product Features Modify Do Not! Price Wholesale Price in Each Channel? Place Distribution Intensity in Each Channel? Production How many units? Customer Service $ How much?

Marketing Responsibilities… • Promotion – Advertising • $ Spending How much? • Type P, D, I, R, or C ? – Selling • # of Sales Reps in Each Channel. • % Non-Selling Time – Sales Promotion • $ Spending How much?

Marketing Responsibilities • Market Research - 7 Reports Which? #1 #2 #3 #4 #5 #6 #7 Mkt. Share by Segment (all brands) Mkt. Share by Channel (all brands) Consumer Preference Study Marketing Effectiveness Report Detailed Sales Analysis (own brand) Customer Shopping Habits Product Positioning Report $15, 000 $12, 000 $30, 000 $25, 000 $15, 000 $7, 000 $30, 000

Budget Items • • • R & D Product Modification Costs Sales Force Salaries and Severance pay Advertising Expense Customer Service Expense Sales Promotion Expense Market Research Reports Expenses

Computing Prices • Retail Prices from Wholesale Prices: – Expected Retail Price = (Wholesale price/1 -% Margin) – Example: Wholesale price = $105 • Channel 1 Retail Price = ($105/1 -. 50) = $ 210. 00 • Channel 2 Retail Price = ($105/1 -. 35) = $ 161. 54 • Wholesale Prices from Desired retail Price: – Wholesale Price = Retail price (1 -% Margin) – Example: Desired Retail price = $ 190 • Channel 1 Wholesale Price = $190 (1 -. 50) = $95. 00 • Channel 2 Wholesale Price = $190 (1 -. 35) = $123. 50

Retail Prices Charged Final Consumers • The retail price set by a dealer depends on: – The wholesale price in the dealer’s channel – The customary margin used in the channel – The portion of any sales promotion “deals” that the dealer passes along to consumers as a price reduction.

A “Good” Wholesale Price • Should cover the unit cost of the product (given its features). • Results in a profit margin that will contribute to other expenses and profit. • Result in a retail price that will appeal to target customers.

Computing Costs of R & D for Product Modifications • • Feature Cost to Decrease Special Commands (5 -20) $0 Error Protection (1 -10) $0 Ease of Learning (1 -10) $3, 000 x change • Example: • Old Brand • 6 • 4 • 3 • New Brand 8 3 5 Cost to Increase $8, 000 x (change)2 $5, 000 x (change)2 $3, 000 x (change)2 Change Cost +2 $8, 000 x 2 = $32, 000 -1 = $0 +2 $3, 000 x 2 = $12, 000 Total Costs = $ 44, 000

And finally…. • Looking forward to receiving your quality decisions!