Advanced Marketing course taught by Prof. Patrick Tran and Prof. Phan Trieu Anh provided us with the opportunity to participate in Markstrat Simulations.
In this semester, we as Team U and other 5 teams were asked to practice our marketing strategy and management skills in the Markstrat world. During the simulation we had 9 different periods in which we asked each of these to take different types of decisions regarding Marketing mix, sales force, Research and Development, Brand Portfolio and Market research tudies. In this report we decided to divide our Markstrat experience into 3 milestones according to our performance during the simulation and for each of these milestones we highlighted the context, strategy, marketing mix, financial and market performance. Our first milestone was characterized by best results compared to our competitors.
Our decisions for the second part have affected our results which led to a huge decrease both in market share and net contribution. Our team decided to recover our position, thanks to better marketing decisions, R&D decisions and financial decisions, we were able to compete with the first 2 competitors. We decided to divide our report in this way because we think this is the best way to describe our track during this enjoyable journey.At the beginning of the simulation all the six competitive firms started from the same level of market share, sales and all with two Sonite brands in the market (with the same characteristics).Our products were: The Sonite market is composed of five customers segment. Each one represents different customer preferences and purchasing behaviours.
* Buffs: People in this segment are very interested in Sonite products and they are extremely knowledgeable about Sonite technology. They are quite price sensitive and they demand high performance products. Singles: They demand average level of both performance and convenience in Sonite product; like buffs they are quite price sensitive.* Professionals: They are looking for high quality, high performance.
They can afford expensive products and often view price as an indication of quality.* High-earners: This group of people have an high income so they can purchase relatively expensive products and their purchase is partially motivated by social status.* Others: This segments includes all consumers who do not belong to any of the above group, and usually they are looking for cheap, low-performance products with average convenience.Sonite and Vodite consumers purchase in the following three distribution channels:* Specialty stores – These stores are usually small and do not belong to organized chains. They are geographically close to their customers and can provide a high level of service and technical support.* Department stores: Department stores are characterized by the wide product assortment they offer, but their technological expertise is lower than that of specialty stores.
* Mass merchandisers: These stores operate on a low-price, high volume basis and try to minimize overheads.At the beginning, our team does not understand clearly how to play Markstrat and make decisions, specially still do not have any specific strategy. After the discussion, we know that cash is really important and we use all budget to gain competitive advantages but one product instead of focusing on only one segment, we focus in several ones. That is the reason why our team performance was quite bad (5th position) in period 1. b.
Decision making: We do not use any money for R&D in this period.About marketing mix, here is what we did: Production: we based on market forecast to make decisions. Pricing: we knew that we should base on Joint Analysis; however, we have not bought this tool in this period yet so we set the price for our products (SUCH and SUIT) based on our knowledge, the information we read from internet and the experience we ask from the previous team, Advertising: we divided 100% for all of 5 segments. For more details, let’s see the figure below. Advertising Research: Because of lack knowledge about this part, we use just small amount of money in this part.
Market Research: we purchased all studies. Sales forces: instead of using Shopping Habits to know how many people we should use for each kind of store, we divided the people for each store randomly. That is why we did not perform well. c. Results: At the end of the period, our team was at 5th position. Below are our results in the first period Period 2: a.
Analysis: Our main objectives in this part were to create our own brand awareness and to increase the level of our sales, gain more market share, gain more cash and finally increase stock price. Based on Consumer Panel tool, we knew that we should focus SUCH only on Others and SUIT only on Professionals.As can be seen from the figure below, those two segments have been already targeted by Team I, so what we need to do to take back those two segments is change our strategy in marketing mix (the details will be listed in the next part). b.
Decision Making: In the meanwhile, we decided to give up the Buffs segment because it was the one that was decreasing in the next 5 years and it is really sensitive so it is not safe to focus on that. To reach the ideal value that best satisfies our target consumer we decided to reposition SUCH and SUIT through: - Focus more on Others for SUCH and on Professionals for SUIT.Start an R&D project for developing our new product in Sonite market which would focus on Hi-earners segment. - Increase the advertising budget and focus the budget more on target segments. Use money for Advertising Research equals 10% the amount used for Advertising.
- Adjust the sales force according to shopping habits and so we increased the forces in Specialty Stores for SUIT and in Mass Merchandisers for SUCH. In period 2 we noticed the possibility to enlarge our brand portfolio in the Vodite Market, that seemed attractive because it was a so-called “Blue-ocean” market, with no competitors and high growth rates in the future.But we do not have enough cash to invest in R&D for Vodite product, we decided to borrow the bank in the next period when the bank is available. Below is the decision summary of Marketing Mix in this period. d.
Results: After changing our strategy into the right way, we won the first place with the highest stock price and Return on Investment. Besides that, we had more market share and more cash than others which would be our competitive advantages.Period 3: a. Analysis: Based on Consumer Panel tool, we can see that our product – SUCH not only took more than 50% market share in Others segment but also got 20. % in Singles which was the highest share in this segment compared with our competitors.
So we decided to release one product for Singles based on SUCH to restrain budgets of other teams. Then we use the money to boost sales and market shares for the new product. The figure above shows that we had two competitors in Professionals segments. That was why we changed our target customer of SUIT from Professionals to Hi-earners.
And we did not know that that decision would lead us to the failure in the next period. b. Decision making:Due to the good performance in the Sonite market, our team had a relatively comfortable position with a large budget, and large revenue. Expecting a rise in sales, we decided to increase our production according to the optimistic growth of the market forecast. In this period, we more and more focused one product on one segment and used more money on Advertising and Advertising Research which shown in the figure below.
In this period, we invested most of our money in R&D projects for Sonite and Vodite. We knew that being the first mover in Vodite market would helps our team gets a lot of competitive advantages than the other teams and if we ade the right decisions, held most of market share in this market, we would be the winner of the game; so developing the product in Vodite was really important to us. That was the reason why we used $K 10,000 just for R&D the product named VODI. The bank was available in this period so we asked the bank to let us borrow this amount of money ($K 10,000) To increase our market share in Sonite and to satisfy the changing needs of Sonite customers, our team decided to invest nearly $K 5,000 on SUCS and SUIP which would target on Singles and Professionals.
c. Results:Here is the result of this period. We lost a lot of money from SUCS, it was not like what we thought at the beginning when we released the new product based on SUCH to target Singles segment. And we made a big mistake when we change SUIT to target Hi-earners not Professionals like the first two periods, our revenue from SUIT decreased considerably. We was kind of shocked when we knew that Team I was the first comer in Vodite market.
We realized that they decided to give up in period 2 just because they invested in Vodite market to being the first mover and attracted all of customer’s awareness.
