CAPSIM : Introduction to Marketing StrategyCAPSIM : Introduction to Marketing Strategy

Alisara Charinsarn22 June 2013

CAPSIM Marketing

4 main things to consider and Plug in in the spreadsheetPlug in in the spreadsheet•Sales Forecast•Sales Budget•Promo BudgetPromo Budget•Price

PricePrice setting for each segmentg g

Too high?Too low?How to set price?

Competitors’ price setting

Check “Customer Buying Criteria” in setting price

Price

Check competitor’s price

PricePrice impacts margin.Price impacts margin.

P i d h !Price decreases each year!Therefore, it pressures to manage cost.

How to cut cost?

Something Extra!! You can also play with your creditalso play with your credit terms: Check whether it will do you any good!!!!

Promo BudgetPR, Advertising, gAwareness (& Trial)

Awareness is? e.g. what does 50% awareness a e ess s e g at does 50% a a e essmean?

Awareness drop out (33% decrease each year (Y1= ( y (100%, Y2 = 100%-33%= 67%)Diminishing return

Promo BudgetHow?

(Message)Mediaed a

• Contact point• The right media• At the right time

Media investment/ cost e g Buzz is 25% awareness• Media investment/ cost e.g. Buzz is 25% awareness with no cost

Promo BudgetReminder

New product gets 25% awareness up frontAnalyze competitora y e co pet toWhy we do what we do?Monitor your marginMonitor your margin

Sales Budget= Sales force, Distribution, Order Entry, Customer , , y,service, etc.Objective: To increase AccessibilityNote that Accessibility impacts “segment” (people), not a particular “product”

Sales ForecastTotal Industry Unit Demand

Expected Growth (Growth Rate Next Year)( )

Start with the same market share in the first round.

Sales ForecastInventory carrying costInventory carrying costCAPSIM assumes (in the first round) that competitor has mediocre product in eachcompetitor has mediocre product in each segment

Sales ForecastNoteNote

(1) Gross Revenue (Price x projected sales)(2) Variable Cost (Labor Materials)(2) Variable Cost (Labor, Materials)(3) Contribution Margin (Gross Revenue – Variable Costs)(4) Less Promotional & Sales ( Contribution Margin –( ) ( gPromotional & Sales Budget)

CAPSIM : Advanced Marketing ModuleCAPSIM : Advanced Marketing Module

Advanced Marketing ModuleAllow companies to have greater control.Allow companies to have greater control.Explore the marketing mix

5 M di5 Media Print media, Direct Mail, Web Media, Email and T d ShTrade Shows

3 Sales channelOutside Sales, Inside Sales, and Distributors

Reach and FrequencyEach segment will respond to different mediaEach segment will respond to different media type differently. The impact is driven by two factors:factors:

Reach: The potential number of customers who would see the messagewho would see the message.Frequency: The number of time the media is

t drepeated.

Print MediaIndustry-related magazines and newspapersIndustry related magazines and newspapersPotential reach varies by segment.

Traditional: GoodTraditional: GoodLow-end: GoodHigh end: PoorHigh-end: PoorPerformance: PoorSi F iSize: Fair

Diminishing returns applyAdditional awareness becomes prohibitive beyond $700 thousand per product.

Direct MailInformation about your product will be sent by mail to a purchased mailing list.Lists are selected on the basis of SIC code, job title, and similar factors which select for your customers.and similar factors which select for your customers.Potential reach varies by segment.

Traditional: GoodLow-end: GoodHigh-end: FairPerformance: PoorPerformance: PoorSize: Poor

Diminishing returns applyDiminishing returns applyAdditional awareness becomes prohibitive beyond $700 thousand per product.

Web MediaInformation on industry-related websites and ysearch enginesThis method created many wasted hits.P t ti l h i b tPotential reach varies by segment.

Traditional: PoorLow end: PoorLow-end: PoorHigh-end: FairPerformance: GoodPerformance: GoodSize: Good

Diminishing returns applyDiminishing returns applyAdditional awareness becomes prohibitive beyond $500 thousand per product.

E-mailSimilar to direct mail.Readers are invited to respond directly or to click hyperlink to your website.P t ti l h i b tPotential reach varies by segment.

Traditional: PoorLow end: PoorLow-end: PoorHigh-end: FairPerformance: GoodPerformance: GoodSize: Good

Diminishing returns applyDiminishing returns applyAdditional awareness becomes prohibitive beyond $600 thousand per product.

Trade ShowsAllow you to meet face to face with your y ycustomers in a convention-like setting.Potential reach varies by segment.

Traditional: FairLow-end: FairHigh-end: GoodPerformance: FairSize: Poor

Diminishing returns applyg pp yAdditional awareness becomes prohibitive beyond $300 thousand per product.

Sales Budget3 Different Sales Channels3 Different Sales Channels

Outside SalesI id S lInside SalesDistributors

Outside SalesEach salesperson costs $125,000, whichEach salesperson costs $125,000, which include salary, commission, travel and support.support.Diminishing returns in a segment is reached at 12 salespeopleat 12 salespeople.

Inside SalesEach inside salesperson costs $50,000.Each inside salesperson costs $50,000.Diminishing returns in a segment is reached at 30 salespeopleat 30 salespeople.

DistributorsDistributors offer customers an opportunityDistributors offer customers an opportunity to see your product, compare it with other products, and take delivery.products, and take delivery. Each distributor costs $100,000 per year.Di i i hi t i t i h dDiminishing returns in a segment is reached at 15 distributors.

Sales Channel Effectiveness

Final ThoughtsGame’s rule vs Learning for Real-lifeGame s rule vs Learning for Real lifeCompeting with Real Competitors!!

I t f C titImpact from Competitors.Both our and Competitors’ activity impact Sales.Linked with other Function e.g. g

High-tech Segment requires R&DMass requires Economy of ScaleMass requires Economy of Scale

Final Thoughts! (Cont.)

Set your marketing objectives!STPSTP4PShort term vs Long termShort-term vs Long-term