Copyright 2001 Ernest R. Cadotte Using the Marketplace simulation Benoit Duguay STLHE Conference...

Copyright 2001 Ernest R. Cadotte

Using the Marketplace simulation

Benoit Duguay

STLHE ConferenceJune 17 2004


Copyright

Almost all slides of this presentation have been originally created by Ernest R. Cadotte.

For the purpose of presenting the Marketplace simulation at the 2004 STLHE annual conference, most slides have been reformatted and some modified, sometimes created, by Benoit Duguay.


Marketplace is Realistic It brings to life marketing concepts, principles,

and ways of thinking. You do what your real-life Managers do:

• Design brands

• Design ad copy

• Schedule media

• Set selling prices

• Hire and train sales people

• Worry about profits


Marketplace 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.


Learning Strategy:Learn by Doing

You learn about all aspects of marketing by

managing a simulated marketing department.

The Marketplace scenario follows the life cycle

of a new product.

Marketing decisions are introduced as they

become relevant in the evolution of the product.


Key Benefits Develop teamwork across marketing functions. Promote better decision making by helping you see how your

marketing decisions are interconnected and need to be managed as a whole.

Facilitate learning of important marketing concepts, principles and ways of thinking.

Develop marketing planning and execution skills within a rapidly changing environment.

Instill a bottom line focus and the simultaneous need to deliver customer value.


Key Benefits(continued)

Crystallize the financial implications of marketing decisions

by linking them to cash flows and bottom-line performance.

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.


Simulation Pedagogy Create a microcosm of the firm by including all key

business functions – students must manage a whole firm. Start at beginning of story – a new venture. Gradually layer in new decision content as it becomes

relevant in life of firm – a natural progression that is more intuitive.

Frequently repeat difficult decisions in order to set important concepts, principles and ways of thinking into the students’ natural thought process.

Create a storyline that is interesting and relevant to the student in the role of an entrepreneur.


Simulation Pedagogy(continued)

Reinforce a process for making good decisions:• Present a logical order to the decisions to be made• Present relevant information before a decision• Link decisions to cash flow and profitability

Encourage a balanced perspective on the management of the firm: the Balanced Scorecard

What drives the learning process?• Competitiveness is in our genes• Ownership of a business


The Balanced Scorecard

Based upon:• Financial Performance (profit as percent of sales)• Market Performance (market shares in 2 target

segments)• Marketing Effectiveness (customer satisfaction with

brand and advertising designs in 2 target segments (scored 0 to 100) plus unit sales per sales person)

• Investments in the Future (spending on new offices and research and development as percent of sales)

• Creation of Wealth (total profit/total investment)


Why Use a Balanced Scorecard?

It is too easy to get caught up in market share and short-term profits.

Long-term viability requires that managers also deliver customer satisfaction and invest in the future.

The balanced scorecard measures both the long-term and the short-term.

The best managers will be good in all measured areas.


Each quarter, each team is presented with a Balanced Scorecard. The goal is to rank the highest in Total Business Performance in Q8.


Scores can be compared against industry standards.


Instructor’s Role

CoachMentorDevil’s Advocate


Delivery of Learning Content

Lectures• Few lectures

• Overview of decisions and learning points

• Software demonstration of decisions and information

• Key concepts, principles, ways of thinking

In depth treatment • Help files

• Storyline and task description

• Cadotte and Bruce textbook


Development of Critical Thinking Skills

Discussion and debate within each teamInstructor interaction with teams:

• Meetings• Contact through email


Tools to Help Instructor

Flash demos for training participants on signing up, use of software and overview of game

Instructor Guidelines for creating and managing a course

Online coaching tips Power Point presentations for training Balanced Scorecard for grading or awarding a

winner Online survey, testing, and peer evaluations


Tools to Help Instructor(continued)

Online access to all team and student information Hold and release option :

• check results before release • if unhappy, can ask support to adjust demand

which could change outcome Diagnostic Coaching System to drill down into

causes of a team’s strengths and weaknesses


Game Scenario

You work for a large international electronics firm. Corporate Headquarters wants to enter the personal

computer business. You have been selected to head up the new marketing

division to sell computers into Asia, North America, and Western Europe.

Several other international firms are entering the market at the same time.


Game Scenario(continued)

Your marketing strategy will be tightly focused on direct sales to business customers:

• You will not sell to the home market or through retail stores.

• You will sell through company-owned sales offices in major metropolitan markets around the world.

The market is structured into five segments. As the quarters progress, you decide how you want to

expand your international market coverage.


How is the marketing game conducted?

Teams are placed in a game scenario in which they start up and run a new marketing division.

The opposition can be played out by computer-generated competitors or other student teams.

At the outset of each quarter, teams receive information on the current situation.

The 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 teams.


Funding

The initial funding is 2,000,000 which is being

invested by Corporate Headquarters in

500,000 increments over the first 4 quarters.

Corporate Headquarters will provide another

5,000,000 in Quarter 5 if it approves your

marketing plan for the second year.


Marketing plan

Report to Corporate Headquarters

Strategic thinking and tactical execution

Market performance:

• Profitability

• Customer satisfaction

• Market share in targeted markets

• Investments in the firm’s future

• Creation of wealth for Headquarters

Total Performance Evaluation


Suggested course evaluation

Individual Quiz 10% Presentation of initial Marketing plan 10% Formal Marketing plan 25% Company performance 25% Presentation of company results 10% Critical evaluation of simulation 20%


Sequence of Key Activities Startup phase (Q1 to Q4)

• Organize the team and learn to work together

• Learn the business

• Test the market

Transition phase Q5• Prepare Business Plan to accelerate growth

• Present Business Plan to and negotiate equity investment with Corporate Headquarters

Growth phase (Q6 to end) • Execute Business Plan

• Skillfully adjust tactics in response to unforeseen problems and opportunities


Quarter 1 Organize the Business


Learning Points for Quarter 1

Managing the teamOrganizing the workDeciding what one wants from the learning

experience


Tasks for Quarter 1

Name the companyAssign organizational responsibilitiesPurchase survey of end users


Marketing TeamEach team member assumes a tactical

area of responsibility:

• Overall leadership• Brand management

• Advertising

• Sales office managementEveryone is responsible for marketing

research and profit management.


Before you Wrap Up

your decisions, a

quality check is

done by the independent

auditor to help prevent

common mistakes.


1-Alpha2-Bravo3-Charlie4-Delta5-Echo6-Foxtrot7-Golf8-Hotel9-India10-Juliet

11-Kilo12-Lima13-Mike14-November15-Oscar16-Papa17-Quebec18-Romeo19-Sierra20-Tango

Teams, login & password

Email (login name):[email protected]

Password:Company name (lower case)

eg alpha

mailto:[email protected]


Q1 decision

http://www.marketplace6.com/mindex.htm


Quarter 2 Establish Strategic Direction



Market opportunity analysis Segmentation and target marketing Strategic and tactical planning Competitive positioning

Brand design: • Linking product features to customer benefits

• Finding the customer’s response functions


Tasks for Quarter 2

Analyze market information

Establish strategic direction: • Select 2 target segments

• Decide on competitive posture

Set up shop: • Develop distribution strategy:

open initial sales offices for test market

• Design 2 brands, 1 for each target segment


Market Segments

Price

Performance

Cost Cutter

WorkHorse

TravelerInnovator

Mercedes


Each market segment has its own set of needs.


Select two segments to

target initially. As the game

progresses, you may also sell to other segments.

For example, the Traveler segment might be selected.


Once you select a

segment, you must design a brand to meet the

needs of that segment.

What features would make a computer more attractive to the

Traveler segment?


Customers buy benefits, not features… But benefits are derived from features Translate wants and needs into specific features Is more speed, software applications, memory,

keys on the keyboard, etc. always valued? Could “more of some feature” even make a

customer unhappy? Which response functions apply to the market

segments you have selected?

Brand design


Deduce the market’s many response functions

Like

Dislike

Less More Less More Less More

Less More Less More Less More

Like

Dislike

Like

Dislike

Like

Dislike

Like

Dislike

Like

Dislike


Q2 decision



Quarter 3 Go to Test Market



Execution of a coherent strategy Management of cash in the face of great uncertainty Learning to walk before you run Marketing strategy - coordinating a host of tactics 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


Objective

The Goal is to Maximize Learning and Not Profits


Tasks for Quarter 3

Set selling prices

Develop advertising campaign:• Design 2 ads, one for each brand

• Determine number of placements per ad

Develop distribution strategy:• Hire sales force for quarter

• Open new sales offices for Q4

Test Market:• Contract for market research on customers and

competition

• Check pro forma financial position


How to Set Price?

Costs (production, marketing, overhead)Profit goalsWhat the market will bearCompetition


In the beginning, your revenues will not cover all 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.


Profits will come later

Profits come later.You are here.

Profit

Profits0

Time

Costs to setup & grow the business

Revenue+

-


Your goal is to speed up the adoption rate

Demand

Time

Introduction

Growth

Maturity

Decline

You are here(High costs-low demand)


What Will the Market Bear?You must discover the market

response function regarding price.


What is the market’s price response function?

YourDemand

Your Price

Elastic (demand drops fast with increasing prices)

Inelastic (price is not a big factor)


Maybe it looks like this?

YourDemand

Your Price

Demand drops slowly with small price increases and then drops dramatically with larger

price increases


How will the market respond to competitor prices?

YourDemand

Competitor’s Price

Low competitor prices will kill your demand


You set the brand

price, any rebate you

wish to offer, and designatethe sales priority.


How to Create Ads?

Order of priority tells the ad agency what to stress in the ad and implies importance of message to customer.

Low priceEasy to use

More productiveFast

Office applicationsPicture office workers

Most Important

Least Important


How much to say in an ad?(Number of benefits?)

Which response function is at work?

More is good to a point and then ceases

to add excitement

Like

Dislike

Less More Less More

More addsvalue to a point& then takes away value

Like

Dislike


How often do you advertise?

YourDemand

Number of Ads

Diminishing returns

Too little


But it also depends on what your competitors do.

YourDemand

Competitor’s Advertising

Strong competitor advertising

will steal away your customers


Design ads to appeal to your 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.


How many sales people?

YourDemand

Number of Sales People

Too many

Diminishing returns

Too few


The response function is dynamic!

Shift the response function upwards with better brands, prices, advertising, web tactics, sales force placement and compensation

YourDemand

Number of Sales People


Immediately after

processing, you find out

how profitable

the division was in the previous quarter.


You can see your market

share by segment and for

the whole market.

Your company is Traveler.


The market research

shows how satisfied

each segment is with your

designs and those of the competition

.


If a brand is not doing

well, compare it to the

higher rated brands in that segment and redesign the

brand.

Yourbrand

Higher ratedbrand


You are also given a

profit analysis of each brand so that you can adjust your brand

strategy.


Q3 decision



Quarter 4Skillfully Adjust Strategy



Using the tools of management:• Market feedback • Competitive benchmarking• Profitability analysis (activity based costing)


Learning Points for Quarter 4 (continued)

The management of strategy:• Learning from your customers• Learning from your competition• Learning from your financial information• Skillfully adjusting your strategy and tactics

Management of financial resources


Q4: Evaluate Performance

Check customer reaction to brands, prices and advertising

Check financial performanceCheck out competition:

• Strategic direction• Tactics• Market’s response to their prices, brands, ads


Q4: Skillfully Adjust Strategy

Adjust as needed:• Strategy• Brand designs and prices• Advertising• Sales office locations• Sales force management

Check finances


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 initial brand and ad rating. 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.


Goal of Monitoring Customer Satisfaction

Give the customer what they want and do so better

than the competition.


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


Based upon customer feedback skillfully adjust marketing tactics

Revise brand designs or create new onesRevise ad copy Adjust pricesHire more sales people or deploy them

differently

Add or take away elements to find the sweet spot in the customer’s response function.


Competitor Benchmarks

Brand and ad designsPrices and sale prioritiesSales staffing Ad placementsDemand by brand by segment


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.


Financial Performance

Division profitabilityBrand profitabilityRegion profitabilityReturn on investment


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.


Measurement of the Firm’s Performance

The Balanced Scorecard


Q4 decision



Benoit Duguay

[email protected]

Telephone office 51.49.87.30.00 #8171

Telephone residence 45.04.61.16.97

mailto:[email protected]

Copyright 2001 Ernest R. Cadotte Using the Marketplace simulation Benoit Duguay STLHE Conference...

Documents

Transcript of Copyright 2001 Ernest R. Cadotte Using the Marketplace simulation Benoit Duguay STLHE Conference...