MarkStrat Test

Describe the different distribution channels. Are they different for Sonites and Vodites?

* The channels are the same for the two products 1. Specialty Stores (10,000) - geographically close together, high level of service and tech support - they do not distribute many different products categories, sonites are their main sales (broad product line) - the products they sell tend to have greater PP - likely to be the preferred channel for Vodites - Margins: 40% 2. Mass Merchandisers (6,000) - low price, high volume model - low service - broad categories, not a lot of depth into product lines - lack of service may mean they want distribute Vodites in the early years -Margins: 30% 3. Online Store (1,000) - web-only merchants (e.g. amazon) and traditional retailer websites (e.g. bestbuy.com) - higher percentage for sonites sales, especially for SHOPPERS - this is convenience shopping - likely to become more important in 5-10 years -Margins: 30%

Describe the MS world- how many people? What currency? What will be looked at and what won't be?

- 80 million people in the MS world (40 Urban in top 5 cities, 25 smaller urban cities, 35 rural) - inflation (2%) and GNP (4%) are fairly stable, no major political/enviro events anticipated - the Markstrat dollar $

What is in the Tools section?

- allows you to graph different things against each other + allows you to see KPIs for financial (rev), marketing (market share), distribution coverage+cost), production (sold, inventory), R+D (expenses)

What are some situations where repositioning is required?

- changing segment needs (brand + ideal point grow further apart with time) - price pressure - new target segments - competitor entry

What are the 5 areas that a Marketing plan helps with?

1) Estimate consumer segment sizes 2) Estimate shares of your brands in each segments 3) calculate brand sales 4) calculate brand revs and contribution 5) calculate firm consolidated revs and profit

What are the different components of the annual report?

1) Market and Competitive News - Industry Dashboard: share market, retail sales, revenues, contribution - Industry info: inflation, GNP, cost for next period research studies, inventory costs - Market report: looks at all the brands' market shares, volume sold, etc 2) Company Results (confidential) - Company dashboard: share of market, revenues, SPI - Financial Report: profit & loss statement - Production report: sales, production, inventory + unit cost, COGS, Inventory hold cost - R+D report: project name, traits, current/min base costs - Decision Review

What decisions can you make under Brand Portfolio?

1. Maintained 2. Modified 3. Launched 4. Withdrawn

What are the three areas that the team needs to manage?

1. The Product Portfolio: brands the company will develop an market 2. The Segmentation + Positioning Strategy: market segments targeted and how products will be positioned 3. The Marketing Mix Strategy: day-to-day operational marketing decisions such as pricing, production, communication, distribution

How many graphs are there for MDS for MDS dimension x physical characteristic?

18

How much money is is believed to introduce a new vodite product?

5-10 million MS dollars

What are the different project levels in R+D?

Completed Uncompleted Continued Shelved New

What's a good way to block of competitors for segments?

Create multiple brands targeted at same segments

What is forbidden price wise in MS?

Dumping! The RRP must be set so that ASP is higher than TC

What are the naming conventions for both types of products? What are they for R+D projects?

First letter of your company and then the next letter is O for sonites and E for Vodites R+D Projects= P(roject)ROCK PO-INNOv would be a project directed at innovators for sonites

What is size of your commercial team based on?

Full-Time-Equivalent: equivalent of one person working full-time for one person

The minimum cost of a product goes up with....?

Higher numbers in each of the traits EXCEPT carbon footprint!!!

How much is your budget for the week?

It is 40% of your net contribution for the week before

How are inventory costs calculated?

It is a percentage of the transfer cost (found in Newsletter)

What is the Experience Effect? (vs economies of scale)

Manufacturing costs decrease over time (EOS= manu costs decrease with size of plant) You can this effect by producing more units- decreases about 15% each time it is doubled

What is the difference between Ad Media and Ad Research? When should you use each?

Media= purchase media space and time Research= improve quality and the persuasive power of your message Maintain awareness: most on media, 4-8% on research Re-position brand: 10-15% on research, rest on media

What does the line look like in MDS scales and why?

Not straight because of repositioning etc..

What is the recommended retail price, actual RP and average selling price? How much change should you make in one period?

RRP- you set it each period ARP- what it sold for in each channel (Specialty stores respect it, the others use special offers- 10% off list price for MM, 5% off for online) ASP- what you sold it to distributors for no more than 30% change!!

What is the scale range of the SS vs the MDS?

SS= 1 to 7 MDS= -20 to +20

What will happen if you produce more than 100,000 units?

TC will reduce due to Productivity Gains

What is the objective of MS? (i.e. what must you have to win & what is that thing judged on?)

The highest Share (stock) Price Index which is calculated by taking into account: - net contribution - the product's market size - ability to grow the organization's revenues - the quality of the projects successfully completed

After modifying a brand, what happens to old versions that weren't changed? Or if a brand is withdrawn from a market?

They get sold to a trading company for usually 80% their value. Same thing for withdrawn brand.

When would you use a Benchmarking study?

To anticipate whether competition will launch new brands

Formula to convert ideal into the right index

X = physical level P = ideal level on 1-7 scale LB + UB = bounds of the physical trait X = LB + ((UB-LB) x ((P-1)/6))

What do you pay back for a loan?

You only pay back the interest, start paying back in P+1 but incur costs in P

What is a Perceptual Message in advertising?

allows you to emphasize something about the product (e.g. PP or features)

Perceptual Objective in the Marketing Mix Decisions

can use semantic/MultiD scales here-> write objective for dimension (convenience, performance, price)

How do you calculate Share of Voice?

divide your own advertising budget by the industry total advertising budget. (need a larger one for successful brand launch/reposition)

What is a strategy for choosing a base cost?

request that R+D develop the project at min price Calculate highest base cost economically achievable: start with idel price + subtract the average distributor's margin + ad amount/comm team amount feasibility study

What are feasibility studies and online queries and when do they pop up?

they come up when you are specifying a new R+D project. FS= costs 100,000 and takes one period- tells you min base cost + cost required to complete OQ- est. of budget for project completion (usually overestimate by 5%), no more than 5 a period

Budgets for R+D projects- what happens if they're too high/low?

too high- not given money back too low- project delayed another period

What are the different consumer segments for vodites?

*consumers are based on how they will adapt to the Vodites 1. Innovators (In) - largest segment initially, small % of total potential consumers - above average income, high interest, risk takers 2. Early Adopters (Ad) - a.k.a. opinion leaders - still adapt before majority, high influence - they are helpful for advertising in of themselves - average income 3. Followers (Fo) - perceive more risk in buying new products - influenced by others, bulk of potential customers - below average income

Define the Production department of your company, what is transfer cost?

- they will adjust your production numbers to actual demand by 20% of your initial plan - transfer cost: price paid by marketing to production (when they are shipped to distributors)

What are the different consumer segments for Sonites?

1. Explorers (ex) - high level of interest, first to use - extremely knowledgeable about sonites and the existing brands - High Concern: performance (PP, display size) - Low Concern: convenience (battery life, design, # features) - price-sensitive because personal use 2. Professionals (pr) - both personal and professional use therefore can afford more - view price as an indication of quality - looking for high quality + performance and easy-to-use 3. High Earners (hi) - demand high performance and high convenience - high income level, buy expensive products motivated by social status - use their products less, on a private basis 4. Shoppers (sh) - have good knowledge on brands and do extensive comparison - want a high quality to price ratio + average performance and convenience - have a personal use and they are price sensitive 5. Savers (sa) - largest segment and growth rate could exceed forecasts (because low penetration into this segment) - cheap, low performance, average convenience

What are the Market Research Studies?

1. Industry Benchmarking: overll performance of all brands 2. Consumer Survey: questionnaire on awareness, purchase intention, shopping habit 3. Consumer Panel: buying behaviour for diff segments for which brand 4. Distribution Panel: where the segments have been buying their stuff 5. Semantic Scales: Brand perceptions, ideal values, trait importance (for R+D studies, extra graphs) 6. MultiD scaling of brand sims + prefs: 3 dimensions looked at (Economy, Performance, Convenience) 7. Competitive Ad + Comm Team Estimates: what segments + distribution channels others have been putting money into 8. Ad + Comm Team Experiments: increase both areas and see what happens to market shares 9. Market forecast: estimates of consumer growth rates + market size next period and in 5 periods 10. Conjoint Analysis: calculates value (utility) attached by consumers to diff trait levels or prices

What are the 5 characteristics of a Sonite?

1. Processing Power (5-100 gigaflops i.e. billions of floating point operations/sec)- internal processor speed, more of this= good graphics, fast calculations, multiple tasks at once 2. Display Size (4-40")- higher display size= better quality images 3. Design Index (3-10 index)- relates to number of raw materials and components and the aspects of those components 4. Battery Life (24-96 hours) 5. Features (5-20) 6. Base Cost ($30+, the T.A. says min. $10)

What are the 5 characteristics of a Vodite?

1. Resolution: clarity/quality of image NOT definition which is size of image (20-100 lines per millimeter, LPM) 2. Energy Efficiency (10-100 billion computations per Watt-hour, b C/Wh): as this goes up, electricity usage goes down; it is improved with more efficient technologies e.g. smaller gates, less frequent micro-circuits 3. Carbon Footprint (a.k.a greenhouse gas emission): the only thing you want a smaller number of; reps the carbon impact through its life-cycle of manu, transport, use, recycling (5-50 kilograms of CO2 released into atmosphere~~ prof can decide to tax us for carbon proportional to amount we emit) 4. Connectivity: (3-10 Index) how well the vodite can connect to databases and networks + the speed of that connection 5. Number of Apps: (5-100)- must offer some apps off very long catalog 6. Base Cost: $30+

Revenues, COGS, Inventory costs, cont before marketing, cont after marketing, mark research studies, R+D, interests paid, Exceptional Cost or Profit (ECP), net earnings

Rev: # units x average SP COGS: #units sold x TC Inventory holding: inits in inv x TC x cost % for inv (usually 8%) Inventory disposal loss: units x TC x disposal % (usually 20%) cont before: revenue - cogs - inventory cost cont after: cont before - ad - commercial exceptional cost/profit: e.g. brand withdrawal costs net earnings (before taxes): CAM-research-r+d-interest paid-ECP

What id the difference between Semantic Scales, MultiD Scaling and Conjoint Analysis?

Semantic Scales= designing R+D projects, ideal values MDS= deciding strategy, where you should position your existing brands + communication or repositioning about physical traits Conjoint= only 4 levels tested of 4 dimensions, used to validate/invalidate findings made with other two

What is the Transfer Cost for 100,000 units? How will the TC change over time?

The same as the base cost of a project In the beginning it will rise with inflation but then decrease as we become more experienced making them Rule of thumb: you can expect the TC to be reduced by 15% each time the cumulative production of a given product is doubled- If first batch is 50,000 units, TC will be 15% higher than BC

What are some repositioning strategies?

Through Ads= perceptual objectives from SS + target those segments Through R+D= when distance between desired position + bran dis too large