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Copyright 2001 Ernest R. Cadotte The Marketplace Is a Fun Way to Learn About Marketing. It is a marketing game. It is learning by doing. It brings to life marketing concepts, principles, and ways of thinking. It energizes the competitive spirit.
Citation preview
Copyright 2001 Ernest R. Cadotte
The following slides are for the introduction to the
Marketplace game.
Copyright 2001 Ernest R. Cadotte
Experiencing Marketing @ the Marketplace
Copyright 2001 Ernest R. Cadotte
The Marketplace Is a Fun Way to Learn About Marketing.
• It is a marketing game.• It is learning by doing.• It brings to life marketing concepts,
principles, and ways of thinking.• It energizes the competitive spirit.
Copyright 2001 Ernest R. Cadotte
It Is Realistic!
• You do what your real-life counterparts do– Design brands– Design ad copy– Schedule media– Set selling prices – Hire and train sales people– Worry about profits
Copyright 2001 Ernest R. Cadotte
It Is Organized!
• The game scenario follows the logical process of starting up a new product line.
• You are guided through the decision-making process.
• Detailed help files are available at the touch of a button.
Copyright 2001 Ernest R. Cadotte
On the left is the step-by-step process that walks you through the information and decisions. The software controls your progression to reduce your uncertainty (and your need to contact the instructor) and to help you see the logic of the marketing process.
The Marketplace software is all set up to print the results for each quarter’s play, starting with the Q2 test market.
–Name, ID, balanced scorecard, profit statement, market share, customer satisfaction ratings
Copyright 2001 Ernest R. Cadotte
For illustration purposes, suppose you start up a company named
Apollo Computers
Copyright 2001 Ernest R. Cadotte
Here is the game scenario
• You work for a large international electronics firm.
• Corporate Headquarters wants to enter the personal computer business.
Copyright 2001 Ernest R. Cadotte
Game Scenario
• You have been selected to head up the new marketing division to sell computers into Asia, United States, Canada, and Western Europe.
• Three other international firms are entering the market at the same time.
Copyright 2001 Ernest R. Cadotte
There are three market segments that have different price and performance requirements.
Price
Performance
WorkHorse
TravelerMercedes
Copyright 2001 Ernest R. Cadotte
Each market segment has its own set of needs
Copyright 2001 Ernest R. Cadotte
You must decide which segment you want to target initially. As the exercise progresses, you are asked
to select a second segment.
For example, the Traveler segment might be selected.
Copyright 2001 Ernest R. Cadotte
Once you select a segment, you must design a brand to meet the needs of the segment.
For example, portability is important to the Traveler segment. What features would increase the portability of a PC?
Copyright 2001 Ernest R. Cadotte
You must design ads which appeal to the target segment.
You select the benefits to mention in the ad and indicate their order of priority.
you decide which brand will be featured in the ad.
Copyright 2001 Ernest R. Cadotte
You set the selling price, decide if you want to use a rebate, and signal to the sales staff which brand has the highest priority.
Copyright 2001 Ernest R. Cadotte
As the quarters progress, you decide how you want to
expand your international market coverage.
Copyright 2001 Ernest R. Cadotte
When your decisions are ready to be processed through the Marketplace
simulator, a quality check is made to make sure there were no entry errors and nothing important was forgotten.
Copyright 2001 Ernest R. Cadotte
Immediately after processing (which takes 2 minutes), you find out how profitable the division was in the quarter that just ended.
Copyright 2001 Ernest R. Cadotte
You can see your market share by segment and for the whole market.
Your company is Apollo, black.
Copyright 2001 Ernest R. Cadotte
You are given market research that tells you how satisfied your target segment is with your brand design and those of the competition. (100 is total satisfaction.)
Your brand
Copyright 2001 Ernest R. Cadotte
If a brand is not doing well, you can study other brands and
redesign your brand.
Yourbrand
Betterbrand
Copyright 2001 Ernest R. Cadotte
You are also given a profit analysis of each brand so that you can adjust
your brand strategy.
Copyright 2001 Ernest R. Cadotte
Grading:The Balanced Scorecard
Your final grade will be the average of your firm’s profitability, market share, and customer satisfaction – Operating profit/20,000,000– Sum of market shares in 2 target segments– Average customer satisfaction with brand and
advertising designs in 2 target segments (scored 0 to 100)
– Quarter 6 results will be used to compute grade.
Copyright 2001 Ernest R. Cadotte
Each quarter, you will be presented with your balanced scorecard. Your goal is to
achieve a 90 or better by Quarter 6 in Total Business Performance.
Copyright 2001 Ernest R. Cadotte
CD Installation
• 5 minutes to set up• Home computer
– hard drive installation– always need CD
• Computer lab – mobile installation– select high density disk option (Zip disk, do not use the
floppy disk installation)– purchase Zip disk – files saved on Zip disk– always need CD and Zip disk
Copyright 2001 Ernest R. Cadotte
How is the marketing game conducted?
• Teams are placed in a game scenario that has them starting up and running a new marketing division.
• The opposition is played out by computer-generated competitors.
Copyright 2001 Ernest R. Cadotte
Business TeamBusiness Team MarketMarket
OpponentOpponent
OpponentOpponent
OpponentOpponent
Objective is to profitably capture a dominant market position
Copyright 2001 Ernest R. Cadotte
How Conducted?
• At the outset of each quarter, you will receive information on the current situation.
• Current situation is evaluated, strategy formulated, and tactics set in placed.
• Tactical decisions are fed into the marketplace simulator, along with decisions of opponents.
• Results of decisions are fed back to you.
Copyright 2001 Ernest R. Cadotte
Chronology of EventsQ1, Organize the Division
• Name the company,
• Analyze the market survey,
• Choose the initial target segment,
• Schedule the opening of one sales office.
Copyright 2001 Ernest R. Cadotte
Q2, Test Market
• Design a brand for the target segment,
• Hire a few sales people,
• Price the brand, and
• Design a small advertising campaign.
Copyright 2001 Ernest R. Cadotte
Q3, Skillful Adjustment
• Review the market data from the test market,
• Adjust the division’s strategy and tactics (brand design, pricing, advertising, sales force) as needed.
Copyright 2001 Ernest R. Cadotte
Q4, Expand the Market Offering
• Select a second segment to target and design a marketing program to go after that segment. – design a new brand, – price the brand, – add sales people, – design a new ad, – run the ad in the local media. – schedule the opening of a new sales office.
Copyright 2001 Ernest R. Cadotte
Q5, Enhance the Market Offering
• Introduce new brands with new R&D features,
• Continue with market expansion by adding advertising, sales people and new offices.
Copyright 2001 Ernest R. Cadotte
Q6, Refine the Marketing Strategy
• Study the market data to determine how to better meet customer needs and surpass the competition through brand design, pricing, advertising, and distribution.
Copyright 2001 Ernest R. Cadotte
Q7, Present Report to Corporate Headquarters
• Strategic thinking and tactical execution• Market performance (Balanced Scorecard)– profitability– customer satisfaction– market share in targeted markets• How well is the division prepared for the future
Copyright 2001 Ernest R. Cadotte
The Marketplace Is a Fun Way to Learn About Marketing!
Copyright 2001 Ernest R. Cadotte
The following slides are for Quarter1
Copyright 2001 Ernest R. Cadotte
Q1, Organize the Division
• Name the company,
• Analyze the market survey,
• Choose the initial target segment,
• Schedule the opening of one sales office.
Copyright 2001 Ernest R. Cadotte
Learning Points for Quarter 1
• Image creation (company name)• Market opportunity analysis• Segmentation and target marketing
Copyright 2001 Ernest R. Cadotte
The following slides are for Quarter 2
Copyright 2001 Ernest R. Cadotte
•Execute a coherent strategy
•Learn to walk before you run
Q2, Test Market: The Goal is to Maximize Learning and Not
Profits.
Copyright 2001 Ernest R. Cadotte
Q2, Test market
• Design a brand for the target segment,
• Hire a few sales people,
• Price the brand, and
• Design a small advertising campaign.
Copyright 2001 Ernest R. Cadotte
How do you decide what to design into a brand?
Copyright 2001 Ernest R. Cadotte
The most important rule in brand design:
Customers Buy Benefits,Not Features
Copyright 2001 Ernest R. Cadotte
Once you select a segment, you must design a brand to meet the needs of the segment.
“Using the computer on the road” is important to the Traveler segment. What features would provide this benefit?
Copyright 2001 Ernest R. Cadotte
How far do you go in giving the customers what they say they want?
Is more speed, software applications, memory, keys on the keyboard, etc.
always valued?
Could “more of some feature” even make a customer unhappy?
Let’s take a look at this question in another industry – candy bars.
Copyright 2001 Ernest R. Cadotte
What is the elasticity of the peanut?
Searching for the Market’s Response Function
Copyright 2001 Ernest R. Cadotte
Suppose you could design the ideal candy bar. How many peanuts would you put in the candy bar to make you
the happiest?
• A few?• A bunch?• A whole lot?
Copyright 2001 Ernest R. Cadotte
Which candy bar has the most peanuts?
• MilkyWay• Snickers• Baby Ruth• PayDay
Copyright 2001 Ernest R. Cadotte
Which candy bar do you like the most?
• MilkyWay• Snickers• Baby Ruth• PayDay
Copyright 2001 Ernest R. Cadotte
What does your response function look like for peanuts?
Is more always better?
Would your happiness increase with every new peanut we added to the
candy bar?
Is there a limit?
Copyright 2001 Ernest R. Cadotte
What would be your response function for the following?
• Chocolate• Caramel• Coconut• Rice• Peanut butter
Copyright 2001 Ernest R. Cadotte
Here are a number of response functions. Which one applies to peanuts, chocolate, coconut, etc?
Hot
Cold
Less More
Hot
Cold
Less More
More is always better More is good to a
point and then ceases to add excitement
Copyright 2001 Ernest R. Cadotte
Hot
Cold
Less More
A little is justright, more onlytakes away value
Hot
Cold
Less More
More addsvalue to a point& then takes away value
Copyright 2001 Ernest R. Cadotte
Hot
Cold
Less More
Little interestuntil threshold
is crossed
Hot
Cold
Less More
Any amount is bad
Copyright 2001 Ernest R. Cadotte
Hot
Cold
Less More
No reaction/indifferenceto having the feature
Copyright 2001 Ernest R. Cadotte
Take any PC segment, how excited will it become if you provide?
• More memory• More speed• More functions on the keyboard• More software• More ….
Just like the candy bar ingredients, you must discover the response function for each PC component.
Copyright 2001 Ernest R. Cadotte
How to Set Price?
• Costs (production, marketing, overhead)• Profit goals• What the market will bear• Competition
Copyright 2001 Ernest R. Cadotte
In the beginning, you will not be able to price above your costs.
• There are many startup costs which will exceed your revenues.
• Your production volumes will be very low, resulting in high per unit costs
Copyright 2001 Ernest R. Cadotte
No early profits
Money0
Time
costs to setup & grow the business
+
Copyright 2001 Ernest R. Cadotte
Revenues will fall below costs at the outset of a new business
Money0
Time
costs to setup & grow the business
Revenue
+
Copyright 2001 Ernest R. Cadotte
Profits will come later
Profits come later.
You are here.
Profit Profits0
Time
costs to setup & grow the business
Revenue
+
-
Copyright 2001 Ernest R. Cadotte
Your goal is to speed up the adoption rate.
Demand
Time
introduction
growth
maturity
decline
You are here, high costs-low demand
Copyright 2001 Ernest R. Cadotte
What will the market bear?
You must discover the market response function regarding price.
Copyright 2001 Ernest R. Cadotte
What is the market’s price response function?
YourDemand
YourPrice
Elastic (demand drops fast with increasing prices)
Inelastic (price is not a big factor.)
Copyright 2001 Ernest R. Cadotte
Or, maybe it looks like this.
YourDemand
YourPrice
Demand drops slowly with small price increases and then drops dramatically with larger price
increases.
Copyright 2001 Ernest R. Cadotte
How will the market respond to competitor prices?
YourDemand
Competitor’s Price
Low competitor prices will kill your demand
Copyright 2001 Ernest R. Cadotte
How to create ads?
Low priceEasy to use
More productiveFast
Office applicationsPicture office workers
Most important
Order of priority implies importance of message to customer
Order of priority tells the ad agency what to
stress in the ad
Your Ad
Least important
Copyright 2001 Ernest R. Cadotte
How much to say in an ad?(number of benefits)
Hot
Cold
Less More
More is good to a point and then ceases
to add excitement
Hot
Cold
Less More
More addsvalue to a point& then takes away value
Which response function is at work?
or
Copyright 2001 Ernest R. Cadotte
How often do you advertise?
YourDemand
Number of ads
Diminishing returns
Too little
Copyright 2001 Ernest R. Cadotte
But it also depends on what your competitors do
YourDemand
Competitor’s Advertising
Strong competitor advertising
will steal away your customers
Copyright 2001 Ernest R. Cadotte
How many sales people?
YourDemand
Number of sales people
Too many
Diminishing returns
Too few
Copyright 2001 Ernest R. Cadotte
YourDemand
Number of sales people
Shift the response function upwards with better brands,
prices, advertising, sales force placement
The response function is dynamic!
Copyright 2001 Ernest R. Cadotte
Q2 results will be available at the start of Q3.
Copyright 2001 Ernest R. Cadotte
What to turn in after Q2 decisions have been run through
the marketplace simulator?• Q2 results are available at the start of Q3.• The Marketplace software is all set up to print the
results for each quarter’s play, starting with the results of the Q2 test market.– Name, balanced scorecard, profit statement, market
share, customer satisfaction ratings• Print options
– Paper copy– Electronic copy
Copyright 2001 Ernest R. Cadotte
Paper Copy of Results
• Follow the normal decision sequence, or• Click on button labeled, “Print everything for
instructor” from the Headquarters file folder.• Click on “Print” button.
Copyright 2001 Ernest R. Cadotte
Electronic Copy of Results• Your instructor might want an electronic copy in
place of, or in addition to, the paper copy.• Click on the button, “Copy Performance Data to
Floppy for Instructor”.
Copyright 2001 Ernest R. Cadotte
Learning Points for Quarter 2
• Execution of a coherent strategy• Learning to walk before you run
Copyright 2001 Ernest R. Cadotte
Learning Points for Quarter 2• Marketing strategy - coordinating a host of tactics• Brand design – linking product features to customer
benefits• Pricing - balancing costs, profit, what the market will
bear, and competition• Advertising – deciding what to say, how to say it and
how frequently to say it• Sales force – hiring and targeting the sales staff• Testing the market - discovering the market’s many
response functions
Copyright 2001 Ernest R. Cadotte
The following slides are for Quarter 3.
Copyright 2001 Ernest R. Cadotte
Q3, Skillful Adjustment
• Review the market data from the test market,
• Adjust the division’s strategy and tactics (brand design, pricing, advertising, sales force) as needed.
Copyright 2001 Ernest R. Cadotte
Q3, Evaluate Performance
• Check customer reaction to brands, prices, and advertising
• Check financial performance• Check out competition
– strategic direction– tactics– market’s response to their prices, brands, ads
Copyright 2001 Ernest R. Cadotte
Q3, Skillfully Adjust Strategy
• As needed, adjust– strategy– brand designs and prices– advertising– sales office locations– sales force management
• Feed decisions into Marketplace simulator
Copyright 2001 Ernest R. Cadotte
Measures of Customer Satisfaction
• Brand judgment (0 to 100)• Price judgment (0 to 100)• Ad judgment (0 to 100)
100 indicates complete satisfaction. 70 would be a good brand and ad rating for the first year. New technology will be
available in Quarter 5. The new features will make customers happier and yield higher ratings.
Price ratings should be near 100 in all quarters.
Copyright 2001 Ernest R. Cadotte
Goal of Monitoring Customer Satisfaction
Give the customer what it wants and do so better than the competition.
Copyright 2001 Ernest R. Cadotte
Deduce the market’s many response functions
Hot
Cold
Less More
Hot
Cold
Less More
Hot
Cold
Less More
Hot
Cold
Less More
Hot
Cold
Less More
Hot
Cold
Less More
Copyright 2001 Ernest R. Cadotte
Based upon customer feedback, skillfully adjust marketing tactics
• Revise brand design or create new one• Revise ad copy • Adjust prices• Hire more sales people or deploy them
differently
Add or take away elements to find the sweet spot in the customer’s response function.
Copyright 2001 Ernest R. Cadotte
Competitor Benchmarks
• Brand and ad designs• Prices and sale priorities• Sales staffing • Ad placements• Demand by brand by segment
Copyright 2001 Ernest R. Cadotte
Goals of Competitive Benchmarking
• Reverse engineer the strategy of each competitor• Determine who is a threat and who is not• Determine strengths and weakness of competition• Emulate good decisions• Predict direction of competitive moves • Adjust strategy and tactics in reaction to
competitor strengths and weaknesses and in anticipation of future moves.
Copyright 2001 Ernest R. Cadotte
Grading is Based upon Achievement of Goals!
• Earn $20,000,000 in profit by Quarter 6, • Capture 50% of the market in at least two
market segments; and, • Achieve 90% customer satisfaction in your
brand designs and advertising copy.
Copyright 2001 Ernest R. Cadotte
Grading:The Balanced Scorecard
• Final grade will be the average of your firm’s profitability, market share, and customer satisfaction – Operating profit/20,000,000– Sum of market shares in 2 target segments– Average customer satisfaction with brand and
advertising designs in 2 target segments (scored 0 to 100)
– Quarter 6 results will be used to compute grade.
Copyright 2001 Ernest R. Cadotte
Why Use a Balanced Scorecard?
• It is too easy to get caught up in market share.• Long-term viability requires that managers
also deliver customer satisfaction and profits.• The balanced scorecard measures both the
long-term and the short-term.• The best managers will be good in the 3 areas
measured.
Copyright 2001 Ernest R. Cadotte
The following slides are for Quarter 4
Copyright 2001 Ernest R. Cadotte
Q4, Expand the Market Offering
• Select a second segment to target and design a marketing program to go after that segment. – design a new brand, – price the brand, – add sales people, – design a new ad, – run the ad in the local media. – schedule the opening of a new sales office.
Copyright 2001 Ernest R. Cadotte
Your goal is to speed up the adoption rate.
Demand
Time
introduction
growth
maturity
decline
You are here. New segments, brands, advertising, sales staff and sales offices will push you into
the growth phase.
Copyright 2001 Ernest R. Cadotte
Grow the Market
• Target a new segment• Develop a second marketing strategy
targeted at the new segment.
Copyright 2001 Ernest R. Cadotte
Financial Performance
• Now that you have multiple brands, you can evaluate your performance by brand and the division as a whole.
Copyright 2001 Ernest R. Cadotte
Goals of Financial Management
• Discover which brands and markets are making the greatest and weakest contribution to the bottom line.
• Deploy resources to correct weaknesses and take advantage of strong performers.
Copyright 2001 Ernest R. Cadotte
Learning Points for Quarter 4 • Differentiating the marketing strategy –
multiple strategies aimed at multiple segments
• The management of strategy– learning from your customers– learning from your competition– learning from your financial information– skillfully adjusting your strategy and tactics
Copyright 2001 Ernest R. Cadotte
The following slides are for Quarter 5.
Copyright 2001 Ernest R. Cadotte
Q5, Enhance the Market Offering
• Introduce new brands with new R&D features,
• Continue with market expansion by adding advertising, sales people, and new offices.
Copyright 2001 Ernest R. Cadotte
What Is New In Quarter 5?
• Ability to design new brands with new R&D features from engineering
Copyright 2001 Ernest R. Cadotte
Corporate Headquarters is expecting great things from you!
• Demand is up for the entire industry• Your firm has established itself as a viable
competitor• New sales offices would greatly expand
distribution, drive up unit volume, and thereby reduce unit costs.
• New brand features could increase customer satisfaction, and thereby demand.
Skillfully adjust your marketing strategy to expand your position in the market
Demand
Time
introduction
growth
maturity
decline
You want to move in this direction.
Copyright 2001 Ernest R. Cadotte
Learning Points for Quarter 5
• Management of strategy – discover the causes of performance shortfalls– adapt to new opportunities and problems– work on the margin to improve performance
• where should money be spent next?• how can we get more out of our current investments?
– manage the future (taking the initiative now by expending resources that will shape the events and opportunities of the future)
Copyright 2001 Ernest R. Cadotte
Learning Points for Quarter 5
• Management of strategy (continued)– discover and exploit the market’s many response
functions– learn from smart competitor decisions– You can not go to Hawaii on market share (at the end of the day, wealth creation is the goal)
Copyright 2001 Ernest R. Cadotte
The following slides are for Quarter 6
Copyright 2001 Ernest R. Cadotte
Q6, Refine the Marketing Strategy
Study the market data to determine how to better meet customer needs and surpass the competition through brand design, pricing,
advertising, and distribution.
Copyright 2001 Ernest R. Cadotte
Your goal is to manage your division’s total performance
• The best marketers are good at managing– Financial Performance– Market Performance – Marketing Effectiveness
Copyright 2001 Ernest R. Cadotte
Use the Balanced Scorecard
• Final grade will be the average of your firm’s profitability, market share and customer satisfaction – Operating profit/20,000,000– Sum of market shares in 2 target segments– Average customer satisfaction with brand and
advertising designs in 2 target segments (scored 0 to 100)
– Quarter 6 results will be used to compute grade.
Copyright 2001 Ernest R. Cadotte
Skillfully adjust the marketing mix to grow your market
Demand
Time
introduction
growth
maturity
decline
You want to be here.
Copyright 2001 Ernest R. Cadotte
Learning Points for Quarters 6
• Management of strategy – discover the causes of performance shortfalls– adapt to new opportunities and problems– work on the margin to improve performance
• where should money be spent next?• how can we get more out of our current investments?
– manage the tactical details
Copyright 2001 Ernest R. Cadotte
• Management of strategy– discover and exploit the market’s many response
functions– learn from smart competitor decisions– You can not go to Hawaii on market share (at the end of the day, wealth creation is the goal)
Learning Points for Quarters 6
Copyright 2001 Ernest R. Cadotte
The Following Slides Are Used for the Final Summary
Copyright 2001 Ernest R. Cadotte
Experiencing Marketing Strategy @ the Marketplace
Copyright 2001 Ernest R. Cadotte
When we work strictly in our functional areas, we are like a bunch of blind
people trying to understand what an elephant is.
Please tell mewhat it is..
It’s a snake.It’s a
tree trunk.
It’s a sheetof rawhide.
It’s a steeltube.
Copyright 2001 Ernest R. Cadotte
With business war games, you can crawl all over and under the marketing organization to help you
to see and understand the whole thing.
It is a marketing organization!
Brands
Distribution
ResearchPricing
Advertising
Copyright 2001 Ernest R. Cadotte
Key Benefits
• Facilitate learning of important marketing concepts, principles, and ways of thinking.
• Promote better decision making by helping students see how their marketing decisions are interconnected and need to be managed as a whole.
Copyright 2001 Ernest R. Cadotte
Key Benefits
• Develop marketing planning and execution skills within a rapidly changing environment.
• Instill a bottom line focus and the simultaneous need to deliver customer value.
• Crystallize the financial implications of marketing decisions by linking them to bottom-line performance .
Copyright 2001 Ernest R. Cadotte
Key Benefits
• Discover how important it is to use market data and competitive signals to adjust the strategic plan and more tightly focus business tactics.
• Build marketing confidence through knowledge and experience.
Copyright 2001 Ernest R. Cadotte
Course Evaluation
Experiencing Marketing @ the Marketplace
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