AudioMaxMichael Adamo

Helen ButzRob Davis

Ray DemaioJoey Mayfield

James McKeagueNathan Steinhubel

Ease of Learning

• Consumer’s Concerns:1. Having more special commands can lead to

numerous errors and, ultimately, makes the VRD more difficult to comprehend.

2. Detailed tutorials are often paced slowly and can be rather elementary.

3. Availability of Customer Service Support.

AudioMax

AudioMax’s Strategy

• Ease of Learning Rating of (3)

+• High Customer Service Budget Allocation

= • Maximization of Consumer Interests!

• Both Technological and Non-Technological Consumers

AudioMax

Customer Service Allocation/Module

Module Customer Service Allocation

1 $68,000.00

2 $98,000.00

3 $120,000.00

4 $120,000.00

5 $120,000.00 AudioMax

Error Protection

• Consumer’s Concerns:1. More Error Protection = Slower VRD.

2. Conservative users prefer a relatively high level of error protection, while more advanced users don’t.

AudioMax

Attribute Expenditures/Module

ModuleSpecial

CommandsError

ProtectionEase of Learning

1 13 7 3

2 13 7 3

3 13 7 4

4 13 7 4

5 13 7 4

AudioMax

Average Customer Preferences

Special Error Ease of Segment Commands Protection Learning ------- -------- ---------- -------- Students 11.2 4.4 3.7 Home Users 9.6 4.5 7.2 Assistants 12.7 6.3 7.5 Creators 15.7 2.4 3.9 Managers 17.4 5.3 2.7 Parents 5.1 2.2 8.6

AudioMax

Result:

• Doing so would have reduced our unit production cost:

= $4(SC) + $3(EP) + $2(EL)

– Which would increase our contribution to covering fixed expenditures and, ultimately, increasing net income for the period.

AudioMax

Special Commands

Consumers are only interested in the

commands that they can utilize because

having a VRD with multiple special

commands has the following adverse effects: 1. Increases The Error Rate

2. Decreases The Ease of Learning.

AudioMax

Special Commands

– As a result, we established the Special Commands rating at level 13 and kept it at this level through all 5 modules.

– We felt this level was appropriate because it positively correlated with the average customer preference report purchased in Module 1.

AudioMax

Average Customer Preferences Error Ease of Segment Commands Protection Learning ------- -------- ---------- -------- Students 11.2 4.4 3.7 Home Users 9.6 4.5 7.2 Assistants 12.7 6.3 7.5 Creators 15.7 2.4 3.9

Managers 17.4 5.3 2.7

Parents 5.1 2.2 8.6

AudioMax

Promotion

• Advertising Expenses

Trial $309,000

Period 1 $309,000

Period 2 $556,000

Period 3 $350,000

Period 4 $386,000

Period 5 $316,000

AudioMax

Promotion

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

Trial Period 1 Period 2 Period 3 Period 4 Period 5

Promotion

• How we allocated advertising expense…

• Production• Allowance for more production

• Salaries• Dependent upon sales

AudioMax

Promotion

• Sales Force

Channel 1 Channel 2

Trial $140,000 $40,000

Period 1 $140,000 $40,000

Period 2 $200,000 $80,000

Period 3 $220,000 $280,000

Period 4 $200,000 $300,000

Period 5 $200,000 $300,000

AudioMax

Promotion

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

Trial Period 1 Period 2 Period 3 Period 4 Period 5

Channel 1

Channel 2

Promotion

• Sales Promotion

Channel 1 Channel 2

Trial 20,000 10,000

Period 1 50,000 80,000

Period 2 100,000 120,000

Period 3 80,000 115,000

Period 4 80,000 115,000

Period 5 100,000 120,000

AudioMax

Promotion

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Trial Period 1 Period 2 Period 3 Period 4 Period 5

Channel 1

Channel 2

AudioMax

Placement

• Group Decisions• Channel Selection

• Channel Strategy• Successes• Failures

AudioMax

Placement

• Group Decisions

• Choosing a Channel• Use of the table adapted from the book• Provided us with customer attributes

AudioMax

Placement

Segments Price Special Commands

Error Protection

Ease of Learning

Reason for Use

% of Last Year’s Sales

Modern Student

Very Low Moderate Low Fun/School 20%

Home User Moderate Low Moderate High Fun 15%

Harried Assistant

Low Moderate Low/Moderate High Work 25%

Professional Creators

Low High Moderate Low Work 10%

High Tech Managers

Low High Moderate Low Work/Social 22%

Concerned Parents

Low to Moderate

Low Moderate High Learning 8%

AudioMax

Placement

• Channel Selection

• We Decided to Focus on• Modern Student• Professional Creators• High Tech Managers

• We believed these people were Channel 2

AudioMax

Placement

• Channel Strategy

• We would target our product towards Channel 2

• What we Found• Creators and Managers were not Channel 2

AudioMax

Placement

• Problems and Success

• Problems• Possible higher margins based on correct

identification

• Successes• We were able to straddle the Channels• This helped us to gain moderate margins

AudioMax

Pricing, Trial Run and First Period

Channel One

• Initial Price = $403– Skimming Strategy

• Status as well as functionality

Channel Two

• Market Penetration Strategy

• Main Focus • College students are

price sensitive• Home users more likely

to buy new product if cheap

AudioMax

Pricing, Second Period

Channel One

• Lowered price to $379 to stay competitive

EasyVD $260

thevoice $399

YeHu!!! $398

Channel Two

• Thought sales were good, no changes necessary

3 Ch. Two User Segments (mkt share)

Students 38%

Home Users 29%

Parents 22.5%

AudioMax

Pricing, Third Period

Channel One

• thevoice lowered price to $359 to our $379

• Brand Awareness was 78% – Were not worried at the

time thevoice was 4th.

• Kept price constant

Channel Two

• 1st in sales, 2nd in profit – Thought we could safely

raise price to $250 (2nd highest)

• We had the brand name and high sales

AudioMax

Pricing, Fourth Period

Channel One

• Lowered price to EasyVD’s range ($299)

• Average Customer Price Range (all too high)

• Equal in 2 product attributes & better in one

• Better Product in Ch.1 than YeHu!!! & $100 less

Channel Two

• Lowered ten dollars to $240 to stay competitive

• Trying to curb EasyVD’s run

• Period 3 was lowest sales yet

AudioMax

Pricing, Fifth Period

Channel One

• Period 4 showed large growth in sales

• Raise price $10 to gain some needed profits

• Estimated overall profits to be close between EasyVD, AudioMax & YeHu!!!

Channel Two

• Kept our competitive price

• Didn’t want to lower and lose precious last period profits

• Channel Prices had become constant

AudioMax

Channel One Prices over Time

0

50

100

150

200

250

300

350

400

450

1 2 3 4 5

Period

Pri

ce (

$)

thevoice

EasyVD

AudioMax

YeHu!!!

AudioMax

Channel Two Prices over Time

0

50

100

150

200

250

300

1 2 3 4 5

Period

Pri

ce($

)

thevoice

EasyVD

AudioMax

YeHu!!!

AudioMax

AudioMax Profits

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

1800000

1 2 3 4 5

Period

Do

llars

Channel One Price Lowered from $379 to $299

TMG Sales in Units

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

1 2 3 4 5

Period

Un

its

thevoice

EasyVD

AudioMax

YeHu!!!

AudioMax

Lessons Learned

• Focus on one channel

• Look long-term with pricing

• Don’t just follow trends – Find out why they work

• Buy market research in trial run

• Entry into the market is key– Good 1st period kept us afloat

AudioMax