MAR445 Midterm
how does a "brand map" differ from a "perceptual map" in markstrat? where would you go to find each of these?
*the perceptual map is valuable tool for visualizing brand positioning* (based on needs, so use MDS), we can find the "perceptual map" under the "multidimensional scaling" folder *the brand map plots perceived physical characteristics rather than consumer needs* (based on product attributes, so use semantic scales)
most calculation methods for brand equity combine:
- consumer perceptual metrics (ex. brand awareness, brand liking, brand loyalty) - brand performance metrics (ex. trial rates, price premiums, share of wallet) - firm financial metrics (ex. revenues, market share, cost savings, risk reduction)
under what conditions are brands useful and important to consumers and companies
- strong "branding: works best" 1. when it solves a problem for the customer: - when quality is unpredictable - when the customer is unfamiliar with the category - when the customer wants a "badge" - when the brand signals a special feature 2. when it solves a problem for the manufacturer - inly when quality can be controlled - only when demand is strong enough to support the cost - economies of production scale - when attributes can be easily imitated - when different market segments want different benefits - when the product is otherwise "invisible" - when the brand can speed acceptance of new products by both customers and retailers
what are 3 things that spending on advertising can do for your brand, in markstrat?
- 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 yours products - to create a barrier to entry for your competitors
feasibility study
-advantage: the information is provided -drawback: the time it takes to get this information; a full period
budget query
-advantage: the information is provided to you immediately -drawback: results are usually overestimated by as much as 15%, and that no more than five queries may be made in any given period
markstrat world:
1. a large territory with a highly developed economy 2. population: 80M, 40% Urban, 25% Small Urban, 35% Rural 3. 2% inflation rate 4. markstrat dollar 5. 3% GNP growth rate
4 possible explanations of what brands actually represent
1. decision heuristic: people are 'cognitive misers' 2. consumer cultures: ex) starbucks, harley-davidson 3. sets of cognitive associations 4. neurological phenomena/physiological biochemical reactions
how do you set "perceptual objectives" for advertising in markstrat?
1. enter a significant advertising budget and spend 10% to 15% in advertising research 2. decide which scales (semantic or MDS) you want to communicate on 3. select the dimensions which you want to communicate on 4. input the coordinates of the point that you want to reach on the map
sonite segments (just terms)
1. explorers 2. professionals 3. shoppers 4. high earners 5. savers
Vodite segments (just terms)
1. innovators 2. early adopters 3. followers
how to actually calculate the dollar value of a brand's brand equity?
1. interbrand 2. brandZ 3. brand finance
4 components of brand value for consumers:
1. reputation value (perceived quality) ex: swiss made, Volvo 2. experiential value (one key benefit) ex: McDonald's, Disney 3. Relationship value (long-term partner) ex: tide, lysol 4. symbolic value (self expression, badge) ex: rolex, apple
what are the "3 consumer needs" in markstrat? how do the 6 product features relate to each of these needs?
3 consumer needs: economy, performance, convenience 6 product features: economy - price performance - processing power & display size convenience - design & number of features & battery life
What are 2 ways to determine the budget needed to complete an R&D project in Markstrat? What are the upsides and the downsides of each method? OPTION 2
Run a Feasibility Study (more accurate, but takes 1 round to complete) ● Feasibility studies cost $100,000 ● The project will not be completed this round ● After one year, R&D will tell you: (1) the budget needed to develop the project; (2) what the project Minimum Base Cost is ● Quite useful to investigate various options for the new Vodite market
What are 2 ways to determine the budget needed to complete an R&D project in Markstrat? What are the upsides and the downsides of each method? OPTION 1
Run an online query (less accurate, but quick) ● R&D will tell you the budget needed to develop the project ● R&D will also provide you with the project Minimum Base Cost ● You don't have to allocate the entire budget in 1 year: can complete the project in 1, 2 or 3 years ● Beware: budgets given by online queries are usually overestimated
Savers
SONITE cautious in the way they spend money, demand cheap - low-performance - avg convenience, high growth rate
Shoppers
SONITE good product knowledge, high quality-price ratio, price sensitive
High earners
SONITE high income, demand performance, convenience, purchase expensive products
Explorers
SONITE highly interested, demand high performance, quite price sensitive
Professionals
SONITE personal & professional usage, look for high quality-performance-easy
Early adopters
VODITE adopt before a majority, larger than innovators, influence is high, opinion leaders, helpful in advertising, avg. income
Followers
VODITE bulk of potential consumers, adopt only after a large number have tried income is below avg.
Innovators
VODITE first users, adventurous, high desire & interest, income is above avg
re-positioning
a company changes a brand's status in the marketplace especially for a declining brand
house of brands
a company that markets a range of separate brand names ex: P&G
range branding
a firm develops separate product range names for different families of product -permits brand's expansion into nearby territories of complementary products which support the main product's usage
contribution margin
a product's price minus all associated variable costs
brand management is about creating and extracting value a___________
added
what are 2 ways to re-position brands in markstrat
advertising r&d
Store and House brand
brand name owned by a retailer that carries the name of the store ex: Sears, Wegmans, amazon
Private label brand
brand name owned by a wholesaler or a retailer ex: kenmore, craftsman, Wegmans Soda
Manufacturers brand and (national brands)
brand name owned by the manufacturer ex: LG, SONY, Kellogg's, etc
difference between "branding" and "brand management"
branding: creating and forming the image or personality for any product, company or venture brand management: is about... -strategy who: segmentation and Target Market what: brand positioning, creating equity where: distribution how: product/design/modification, communication value added (cost to serve) -> value recovered (rewarded for serving)
brand name
can be spoken, including letters, words and numbers ex: apple brand
perceptual map
charts consumers' perceptions of how each brand does in meeting their needs based on multidimensional scaling (economy, performance, and convenience) -help: find where to reposition your existing brands; where to launch new ones; and, last but not least, anticipate the moves of your competitors -problems: only two dimensions out of the three can be represented simultaneously
how do you change actual product features in markstrat?
click on R&D projects button in the decisions section, then set up an R&D project by filling in the desired product characteristics and setting up a budget for the project
what market research study reports 'purchase intentions'
consumer survey & panel
how to modify a product in markstrat
do a R&D project then change brand portfolio
how to create a new product in markstrat
do a R&D project then launch a new product
how is your company's budget determined each Period, in markstrat?
each firm receives a marketing budget for the coming period. the budget amount is based on the previous period's performance and the budget is equal to 40% of your firm's earnings before taxes in the previous period.
how well your company did vs. other firms in terms of market share last period
industry dashboard
how much each market segment will grow next period
market forecast
how much each market research report will cost this period
market research studies
contribution per unit for each of your prands
marketing mix->price
building brand image entails:
message & promise provides value to customers: -helps them interpret the service -helps them evaluate potential for post-purchase satisfaction -helps make decisions easier -gives them more confidence in their purchase -comfort and familiarity: brand is a "partner" -confers its image onto user
how companies go about targeting specific market segments
provide needs and desires most closely match their product or service
brand management is about creating and extracting value r_________
recovered
brand equity:
return due & "tank to the bank" provides value to the firm: -allows to charge price premiums and make high profit margins -creates brand loyalty: habitual buying behavior value added (cost to serve) -> value recovered (rewarded for serving)
whether or not you are over budget
see numbers in top right
how customers perceive the actual features of your products
semantic scale
the 'ideal' points for product features of a Sonite, by market segment
semantic scale -> ideal values
where to find out the ideal points of physical characteristics
semantic scales -> ideal values retail price: the list price for customers selling price: the price at which you sell your product to distributors
features in markstrat:
sonite: # of features, design, battery life, display size, processing power, base cost vodite: resolution, energy efficiency, carbon footprint, connectivity, # of apps, base cost
branded house
the company itself is the brand, and its products of services are subsets of the main brand ex: BMW
brand repositioning
the conceptual place you want to own in the target consumer's mind
brand mark
the elements of brand that cannot be spoken, Logo, design ex: the apple shape of apple brand
marketing concept and how it impacts brand management
the philosophy that firms should analyze the need of their customers and then make decisions to satisfy those needs, better than the competition. That impacts brand management by strategic decisions.
average selling price
the price at which you sell your product to distributors
transfer cost
the price paid by marketing to production; incorporates all costs associated with this high level of flexibility, including depreciation and fixed costs -can expect the transfer cost to be reduced by about 15% each time the cumulative production of a given product is doubled
brand equity
the value of the company's brand name(s) ex: apple worth 247 billion
how do you translate consumers' evaluations of brand features (on the 1-7 scale) to actual levels of product features?
to translate teh 1-7 scale into the actual range that each feature can have, scroll down to the bottom of the semantic scales page, click on the green box that says "other charts" and then use the drop-down menu to choose which feature you want to convert from 1-7 into the appropriate range
what is the minimum budget you can be allocated? what is the maximum budget you can be allocated?
with a minimum of $7m and a maximum of $20m
what are 3 things that your commercial team does for your brand in markstrat?
your commercial team is responsible for obtaining and entering orders, and for supporting distributor - 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
How to calculate and understand relationship between allocated budget, expenditure decisions and loans
● Allocated budget = 40% of last periods EBT, min 7 mill and max of 20 mill ● Each decision we make in advertising, commercial teams , R&D and market research contribute to expenditure decisions and need to be subtracted from the allocated budget. ● Loans can increase budget but must be paid back with interest. The interest rate and the amount for the loan and the amount of periods it takes to pay back loan is determined by the professor. You incur interest on the first period that you use the loan but don't start paying back the loan until after the initial period that you started using the loan. ● Budget deviation = what's left over on the budget sheet and should always be positive or 0.
How you can calculate lost sales in Markstrat
● Compare purchase intentions with market share and that will roughly give you sales lost to competitors. (purchase intentions - market share)
Contribution before marketing and contribution after marketing in total and per units sold
● Given info = sales volume of brand, transfer cost, average sales price, inventory holding cost and spending on ad and commercial team. ● Contribution before marketing = revenue - COGS - inventory holding cost - inventory disposal cost ● Contribution after marketing = contribution before marketing - ad media - ad research - commercial team costs
How you have to consider inventory when planning product decisions
● If there is inventory leftover from previous periods...subtract the estimated sales from inventory amount and that's how much you should produce. ● Take into account inventory to make sure that you meet market demand and don't miss sales or overproduce and have inventory left.
How to calculate the unit contribution margin for each of the 3 distribution channels.
● MSRP (manufacturer's suggested retail price) and transfer cost are given for each brand ● Transfer cost = the price per unit paid by marketing to production (cost to make the product). This cost is reduced each time you double production order consecutively. ● IMPORTANT: specialty stores take no discount. Mass Merch take 10% and Online stores take 5% discount. To find actual retail price = (discount x MSRP) - MSRP. ● Distribution margin for specialty stores is 40%, Mass Merch and Online are 30%. Distribution margin = the amount the channel keeps on each sale (actual retail price x % by channel) ● Selling price = actual retail price - distribution margin ● Unit contribution (what each unit sold makes in profit for Redhot) = selling price - transfer cost (remember transfer cost and MSRP are given)
