MarkStrat

MarkStrat is Marketing Analytics based Strategy

•Wealth of data •Many different paths you can take on strategic decisions The Example •I took over running of company T in Industry Bravo in the second turn of the practice round. •At this point, T had the lowest share price index (920) •My first step was performing a situation analysis using SWOT (Strengths, Weaknesses, Opportunity, Threats.

Vodite Products

- Satisfy different needs from that of Sonite products so that demand for the 2 products will be completely independent. - Wont be complementary or any substitution from 1 to the other. - It is anticipated that the Vodite market will be quite attractive if the right products are made available at the right price. - The expertise required of potential suppliers is similar for both markets in terms of technology, manufacturing, marketing & distribution. Therefore, ur division & competitors are the most likely suppliers of Vodites. - Although Sonite & Vodite technologies are similar, all firms will have to engage substantial R&D resources to develop their 1st Vodite product. - Investment of $5 - $10 million may be required 4 each Vodite. . 5 most important physical characteristics 1. Resolution (L/mm): Relates to the sharpness or clarity of the images processed by the Vodite product. A higher level of details can be observed & processed w/ high resolution products. - Resolution isn't definition = total size of the image. - Expressed in lines per millimeter - Range: 20 - 100. 2. Energy Efficiency (bC/Wh): (efficient energy use), About using less energy to provide the same level of performance & convenience. - Higher energy efficiency = Less electricity is used. - Energy efficiency is usually improved w/ more efficient technologies (smaller gates & lower frequency in microcircuits). - Measured in billion computations per watt-hour - Range: 10 - 100. 3. Carbon Footprint (Kg of CO2 released): (greenhouse gas emission) Weights the carbon impact of the product through its lifecycle: manufacturing, transportation, use, recycling and/or discarding. Depending on the scenario selected by your instructor, a "greenhouse gas emission" tax may be put in place by the Markstrat government. In this case, you will be notified 1 or 2 years in advance of the amount that you will have to pay if you market a Vodite product with a Carbon Footprint level above a certain threshold value (in kilograms of CO2). This tax will appear as an exceptional cost, proportional to the kilograms of CO2 emitted by your product above the threshold value. This tax has a fixed amount and will not depend on your volume sales. 4. Connectivity (Index b/w 3-10): Measures the ability of the product to connect to varying networks and/or databases as well as the speed of the connection. - Higher connectivity indices guarantee that the product will be able to connect to a network in almost any situation and to exchange data at a fast pace. - Range: 3 - 10 5. Application programs or Apps (#): # of application programs that can be set up & used w/ the Vodite product. Applications allow user to customize the product & to adapt it to their own needs. - Although there are only a handful of basic applications that each Vodite product must offer, some products offer a very large catalog. - Range: 5 - 100 - - Base Cost ($): 30 +

In Markstrat, if you have no units in inventory, you ask your production department to produce 100,000 units and the demand is 140,000, you will be able to sell:

120,000 (Hence, if you did not order enough units to cover the demand, the production will be automatically increased by up to 20%. On the contrary, if you ordered too many units and cannot sell them in the period, the production will be automatically reduced by up to 20%.)

The battery life characteristic for the Sonite brands is between:

24-96

How many customer segments are in the Sonite market:

5

Naming Conventions

Brand names are made up of up to 6 characters. - 1st letter identifies the firm marketing the brand (M, R, S, T, L or N). - 2nd letter must be an 'O' for a Sonite or an 'E' for a Vodite. - Other characters can be letters or #'s & can be freely chosen by each firm to generate different brand names. - Ex: brands TONE & TOPS would be Sonites marketed by firm TIGERS, while MEGA and MEMO would be Vodites marketed by company MARMOTS. - All new brands must follow these conventions & have different names. - The selected name has no influence on the market response to the brand.

Marketing Mix Strategy

Day-to-day operational marketing decisions such as pricing, production, communication and distribution.

In Markstrat, Market Research Reports are free:

False

The two markets in Markstrat are:

Independent

The two industries in Markstrat include Sonites and:

Vodites

Economic Environment

You operate in an economy that currently has an average inflation rate of 2%. Inflation affects the production, advertising, commercial and market research costs of your company. - It is unlikely that inflation will reach much higher levels in the future. Should this be the case, the gov may decide to impose price control on all brands. The Gross National Product (GNP) provides u w/ information about trends in the Markstrat economy. In the recent past, the overall economy has been growing at a rate of 4%.

product portfolio strategy.

which brands the company will develop and market;

Base Cost ($)

(Part of Sonite) Cost at which each unit will be produced, based on an initial production batch of 100,000 units. - decided jointly by the Marketing department - which is mainly concerned w/ margin & profitability- & by the R&D department -which is mainly concerned w/ product feasibility.

The maximum number of Sonite brands a firm can market at any given time is:

5

The product MOST is manufactured by firm:

M

The segmentation and positioning strategy

which market segments will be targeted and how products will be positioned;

In Markstrat, there are 4 distribution channels available: Specialty Stores, Mass Merchandisers, Online Stores and Direct Sales Force.

False (3: Specialty stores, Mass merchandisers, Online stores)

Vodite Customers

While potential consumers for Vodites are the same individuals as those who buy Sonites, a different segmentation strategy is likely to be appropriate for Vodites. Further studies needed, but experts believe that it will be more effective to group consumers according to how they adopt new products. 1. Innovators (In) - Will be the 1st users of Vodite products. - Adventurous & willing to try new ideas w/ some risk. - Although this segment will probably be the largest 1 initially, it represents only a small % of total potential consumers. - Demonstrate both a high desire for & interest in Vodite products. - Income level = above average. 2. Early adopters (Ad) - Wont adopt Vodite products as quickly as innovators but will do so before a majority of ppl have accepted the new technology. - Usually much larger than the previous one, its influence on other consumers is fairly high. - Are opinion leaders & helpful in 'advertising' the new product to other potential buyers. - Critical to the adoption process & shouldn't be neglected by marketers. - Income level = average 3. Followers (Fo) - Bulk of potential consumers - Bc they perceive more risk in buying new products, they adopt a product innovation only after a large # of consumers have tried it. - Innovators and early adopters particularly influence followers. - Income level = Below average

MDS (Mutidimensional Scaling)

is my preferred positioning tool because it boils all the different features and price down to the three dimensions consumers care about when shopping for Vodites. Also, it is easier to think in 3 dimensions than 7.

Sonite Products

All rival firms market 2 Sonite brands @ the beginning of the simulation. - Existed for several years and the market has grown consistently since existence. - Now a well-established market, w/ several strong brands at different price points covering a wide range of needs. - Analysts believe that the Sonite market will continue to grow over the next 5 years. - A Sonite is a complex piece of equipment made up of several components. Although they can be evaluated along more than 50 attributes, Sonite brands are primarily differentiated by 5 physical characteristics - offering more of a certain characteristic is not necessarily better. . 1. Processing Power (GFLOPS): Measures the speed of the internal processor. High processing power is critical for applications using extensive graphics or doing a lot of calculations. It gives the ability of the Sonite product to process multiple tasks simultaneously. - Given in gigaflops (billions of floating point operations per second), a standard & respected measure that takes several factors into account: # of "cores", internal memory size, frequency, etc. - Range: 5 - 100 2. Display Size (inch): Size of the screen. Enables Sonite product to display higher quality images or videos, or more info to the user @ given time. - Range: 4 - 40 3. Design (Index): Doesnt relate to the product esthetic but the type of raw materials used (wood, plastic, metal ...), to the # of components (all-in-one type versus multiple-component type), to the aspect of its various components (position, size ...). Therefore, a product rated 8 on the design scale is not better or easier-to-use than one rated 4 on the same scale. - Range: 3 - 10 4. Battery Life (H): # of hours during which the Sonite product can operate w/o being connected to the main power. - Range: 24 - 96 5. Features (#): Total # of features offered by the Sonite product. Can be hardware related (ability to connect various devices to Sonite product, or software related). - There are a minimum # of core features that each Sonite product must offer. Additional ones are nice to have that may be of interest to some consumers. - Range: 5 - 20 - - Base Cost ($): 25 +

In Markstrat, your marketing budget is used each period to invest in:

All of the other alternatives (Advertising, Sales Force, Market Research)

Distribution Channels

Sonite & Vodite consumers tend to shop in these 3 distribution channels: 1. Specialty Stores - Usually small & may not belong to organized chains. - Geographically close to their customers & can provide a high level of service & technical support. - Don't distribute many different product categories, Sonite products account for a large proportion of their sales. - Carry a broad product line for each category, including the most expensive and/or high-performance products. - Bc of their high level of technological expertise, specialty stores are likely to be the preferred distribution channel for Vodite products. 2. Mass Merchandisers - Operate on a low-price, high-volume basis & try to minimize overhead. - Level of service is lower than that of the other 2. - Carry many different product categories, the depth of each product line they carry is usually restricted to a few units. - Often distribute the cheaper, low-performance products. - Lack of technical expertise & low level of service may well prevent them from distributing Vodites in the early yrs. 3. Online stores - Includes web-only merchants (amazon.com and newegg.com) & e-commerce websites of traditional retailers (BestBuy.com, Walmart.com, etc.). - Although only a small % of consumer electronic sales are done on the web, this % is much higher for Sonites products, especially for highly connected consumers (Shoppers). - Key advantage of online stores = Convenience, as consumers may shop from their home at the time of their choice. - Have access to an almost unlimited choice & can compare features & prices very easily. - Privacy & security = primary concerns of online shoppers, but new mechanisms are put in place by banks & e-commerce sites to reduce fraud. - Online stores are likely to become more important in next 5 - 10 yrs. . - Within the Sonite market, market research studies show that all 3 distribution channels are important; therefore, each of them should be visited by the companies' commercial team. There are approximately 10,000 specialty stores, 6,000 mass merchandisers belonging to 6 different chains, and 1,000 online stores. - Differences b/w margins obtained by the stores in each of the 3 channels are mainly due to differences in the level of service & volume sold. - These margins are applied to retail prices & are constant across brands for a given channel. - In Markstrat, the distributor margins are 40% for specialty stores & 30% for the other ones.

Sonite Customers

Adults who purchase the products for personal or professional use. 5 groups of customers/segments w/ similar needs & purchasing behavior. 1. Explorers (Ex) - High level of interest in Sonites & other similar products. - Knowledgeable about Sonite technology & different characteristics of existing brands. Probably among the 1st to use Sonite products. - Demand high-performance products (products w/ high processing power and/or large screens) - Less concerned w/ convenience of the products (battery life, design or number of features) but are quite price-sensitive, since they use Sonite products for their personal use & don't necessarily have high incomes. 2. Shoppers (Sh) - Do a lot of shopping. - Have good knowledge of marketed brands & do extensive product comparison. Look for products w/ a high quality -price ratio & average levels of both performance and convenience. - Like Explorers, they use Sonite products for personal purposes & are price-sensitive. 3. Professionals (Pr) - May use Sonite products for both personal & professional reasons. - Looking for high quality, high-performance & easy-to-use products. Can afford expensive products & often view price as an indication of quality. 4. High Earners (Hi) - High incomes, using Sonite products on a private basis. Usually buy fairly expensive products which they can afford, & their purchase is partially motivated by social status. - Although they tend to use their Sonites less than the average consumer, they demand performance & convenience from the products. 5. Savers (Sa) - Consumers who are cautious in the way they spend their money. - Although this segment is the largest & is composed of several sub-groups, most customers have similar needs. - Looking for cheap, low-performance products w/ average convenience. The penetration of this segment is not as high as the other segments. Consequently, its future growth rate could exceed forecasts. . Each segment has specific needs in terms of physical characteristics and price. Awareness levels and purchase intentions vary significantly for existing products from one group to the other. Market forecast studies show that the sizes and growth rates of the five segments are significantly different. This is explained in part by the development stage of each segment, by the varying product offerings, and by the intensity of marketing effort targeted at each segment.