Pre-Simulation Planning

Key Marketing Objectives:

•Increase the market share of Allround.•Increase the retention rate of Allround.•Launch new products in non-overlapping market segments.

Competitive Marketing Strategy:

•Compete on product differentiation and positioning.•Do not start price-wars or rely on price discounting.•To maintain the highest sales and net income figures among competitors.

•Cold market should be target with primary and flanking products

Desired Positioning:

•Allround should be a premium product positioned ahead of its competitors on price-performance trade-off line.

•Our target market should be Young families, Mature families, and Empty Nesters, which comprise nearly 75% of the market.

Strengths•Allround is a volume and price leader

•Allround is the most effective brand to reduce multiple cold symptoms

•Allround has the highest brand awareness, trial and purchase frequency among its competitors

Weaknesses•Allstar heavily relies on revenues from Allround

•Allround creates drowsiness due to antihistamines and alcohol

•The use of Allround is limited to nighttime relief and is blamed for excessive medication.

•Allround has lower retention ratio and channel placement issues

Opportunities•Allergy and Nasal Markets provide opportunities for growth.

•Capsule or spray drug form present an expansion opportunity

Threats•Increasing competitiveness of cold and allergy markets

•Increases in promotional and advertising expenses can increase the marketing costs

•Doctor’s may resist recommending Allround due to concerns about over-medication.

Product Objectives

• Reformulate Allround according to the market needs, such as removal of Alcohol.

• Flanker products should be launched in cold and other markets.

Pricing Objectives

• Premium product pricing.

Distribution Objectives

• Sales force allocation should be aligned with the market share of each channel.

• Total sales force should be either equal or more than the closest competitor.

Promotion Objectives

• Marketing agency should be the premium one i.e. BMW.

• Allround needs to maintain or increase its ad expenditure.

• Both consumer and trade promotions will be used to execute push-pull strategy.

In-Simulation Marketing ExecutionPrimary Support

1) Sales Force Saqib Ben

2) Pricing Echo Nicole

3) Advertising Nicole Saqib

4) Promotion Ben Echo

Advertisement•Symptoms reported, Advertising Market Report,

Conjoint Analysis, Brand Awareness, Decision Criteria, Brand Perception

Pricing•Market update, Industry Outlook, and Sales Report,

Manufacturer Sales Report, Channel Sales Report, Pricing Report by Channel, Marketing Survey of Brands Purchased, Marketing Survey of Purchase Intentions, Marketing Survey of Decision Criteria

Sales•Market update, Industry outlook, Mfr. Sales, Channel

sales, Sales force estimates for all competitors, Operating Statistics, Consumer shopping habits, Shelf space, Brands purchased, Purchase Intentions

Promotion•Market update, Industry outlook, Mfr. Sales,

Operating statistics, Shelf space, Promotion Activity of Competitors, Recommendations, Channel sales

Advertisement•Competitor advertising and media expenditures•Brand perception of effectiveness•Rank of product attributes for decision making•% of market share and growth

Pricing•Manufacturer Sales and Channel Sales• Industry MSRP & Volume Discount•Sales by Discount Schedule and Distribution Channel

Sales•Manufacturer sales•Channel sales•% share of each channel sales•Sales force as compared to closest competitor

Promotion•Shelf space•Product trade ratings•Manufacturer Sales•Recommendations (Trial Size)

Manufacturer Sales 355.3 100.00% 961.8 100.00%Promotional Allowance 60.4 17.00% 152.6 15.90%Cost of Goods Sold 122.6 34.50% 262.8 27.30% Gross Margin 172.3 48.50% 546.5 56.80%

Consumer & Trade Promotion 7 2.00% 15.6 1.60%

Advertising 20 5.60% 57.2 5.90%Sales Force 6 1.70% 24.5 2.50%Administrative 9.8 2.70% 30.1 3.10% Total Marketing 42.8 12.00% 127.4 13.20%

 Contribution after Marketing 129.5 36.50% 419.1 43.60%

 Fixed Costs 62.4 17.60% 127.7 13.30%

 Net Income 67.2 18.90% 291.4 30.30%171%198%

11.40%% Increase in marketing expenses

% Increase in Return on Sales

Sales Growth

Period 0 Period 10Income Statement for Allstar (in $ million)

Period 0 Period 10

Incremental Revenue 355.3 606.5Contribution Margin 48.50% 56.80%Marketing Spending 42.8 127.4Return on Marketing Investment 3.03 1.70

Return on Marketing Investment (ROMI)

Period Category Team Decision Strategic Intent

Period 1 Social media incident

Select Facebook and Twitter.

Increase brand awareness

Period 2 Product reformulation

Dropping the alcohol from Allround

Product alignment with customer preferences to increase its market share

Period 4 Social media incident

Check the social media page often and respond to comments.

Customer engagement, market research and word of mouth.

Period 4 Line extension

Launch Allround+ as Child 4hr cold liquid

Flanker product

Period 6 New product launch

Allright - A nasal spray with topical decongestant.

Flanker product initially with the potential to become a major product in nasal spray category.

Period 8 Product tampering

a) Issue a statement b) Remove all productsc) Modify the

packaging

Brand image and reputation. Placing customers before revenue.

Period 8 Product reformulation

Remove antihistamine and maximum expectorant in Allround.

Niche positioning to maintain and gain market share.

Period 9 Promotions a) Send coupons to mobile phone

b) Have a sweepstakesc) Start a rewards

program

Increase the market share through pull approach. Build customer database, identify loyalists, and increase revenue from existing customers.

Period 9 Product reformulation

Reformulate Allround to reduce analgesic to 500 units

To bring Allround in line with other competing and market share gaining formulations such as Allround+, Besthelp, Cold cure, Coughcure, End, Dryup+.

Strategic Decisions and Simulation Performance

Return on Marketing Investment (ROMI) = [Incremental Revenue Attributable to Marketing ($) * Gross Margin (%) - Marketing Spending ($)] / Marketing Spending ($)

  Target Market for OTC Remedies

Cold Cough Allergy Nasal

Target demograph-ics

Young singles Allround     Allright

Young familiesAllround

Allround+   

 

Mature families Allround+      

Empty nesters Allround     Allright

Retired Allround      

Post-Simulation Lessons and Recommendations

Ceiling Price - Allround$5.99- Perceived value to consumer (Conjoint analysis)

$5.49 - Coughcure MSRP

$5.29 - End MSRP

$5.09 - Dryup MSRP

$4.89 - Besthelp MSRP

$1.24 - Estimated Unit Cost

Floor Price

Strengths •Allstar has a portfolio of three profitable products.

•Allright has gained 38.5% of the Nasal market, despite being the late entrant.

•Allstar brands enjoy best shelf space ranking among its competitors.

•Allstar brands have consistently outperformed rival brands.

Weaknesses•Allround+ may be cannibalizing Allround.

•Allround and Allround+ offer 4 hr. relief, which may not give cold sufferer full night relief.

•The market share of Allround is consistently decreasing over last 4 periods.

•The retention ratio of Allround has further decreased from Period.

Opportunities•Allergy and Cough markets offer an opportunity for future expansion for Allstar.

•Allstar may rename Allround+ to Allround-kids to curb cannibalization of Allround.

•Dropping Allround+ may reduce the cannibalization of Allround.

Threats•Entrance of more Cold OTC remedies will further erode the market share of Allstar.

•Launching flanker brands in Cold market may cannibalize the market share of Allround.