3rd edition

Charlotte H. Mason William D. Perreault, Jr.

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The Marketing Game: What is It?

A living case, where you learn about a situation, evaluate opportunities, develop a strategy, and make marketing plan decisions. In which you get regular feedback, in a report that summarizes your marketing outcomes and related financial results, based on both your plan and competitors decisions. Where you analyze what youve learned by doing to figure out answers to what you do not know (and could not know!) at the beginning. That challenges you to improve your strategy in light of the learning...
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A Little Background
Originally developed as the first PC-based marketing strategy simulation in 1985
Routinely revised and updated since that time.

Now one of the most widely used teaching simulations in the world.
Used in hundreds of universities, exec programs and companies, international competitions, etc.

Well be using the third edition

Youll need the student manual and accompanying CDRom (which has Windows software):
The Marketing Game!, by Charlotte H. Mason and William D. Perreault, Jr., 3rd edition, published by McGraw-Hill/Irwin, Burr Ridge, Illinois, 2001.

Special Objectives Served by TMG

To develop skills in identifying marketing opportunities. This encompasses knowledge of and the ability to apply key marketing frameworks and tools for analyzing customers, competition, and marketing strengths and weaknesses. To develop insights about creative selection of target markets and making integrative strategy decisions concerning product, price, promotion, place and the needs of a target market. To develop skills in marketing analysis. To provide meaningful, practical experience in translating qualitative and quantitative analysis into conclusions about profitable marketing strategies and programs.
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The Role of the Marketing Game

The Game offers unique learning advantages, compared to other learning approaches (like reading texts and articles, lectures, guest speakers, case analysis and presentation, projects) because it:

Is dynamic, like most business situations.

Brings the competitive aspects of marketing to life.

Highlights the need for integrative planning based on qualitative and quantitative analysis of the market environment.
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The Marketing Game is Integrative and Covers All Aspects of the Marketing Strategy Planning Process

Narrowing down to focused strategy with quantitative and qualitative screening criteria
Customers
Needs and other Segmenting Dimensions

Company
Mission, Objectives, & Resources

S. W. O. T.

Targeting & Segmentation Positioning & Differentiation

Product Price Target Market Promotion Place

Competitors
Current & Prospective

External Market Environment

Technology Political & Legal Social & Cultural Economic

Overview

You take over marketing management responsibilities for your firm.

Must satisfy customers and earn profits

Focus is on marketing strategy planning. Requires integration of all strategy decisions. Requires attention to competitive environment. Considers short term and long term perspectives. Features ongoing, rapid feedback.

The Process

Analysis of market situation/opportunities Planning and budgeting

Make marketing plan DECISIONS!!!

Next Decision period

Submit plan decisions

The marketing game! simulation

Company reports returned to firms

Industry Environment

Market growth

Technological environment
No major innovations expected Yearly revision cycle

Competitive environment
Type of competition depends on firms decisions
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Six Key Product-Market Segments Concerned Parents High-tech Modern Managers Students Professional Creators

Harried Assistants
Segments have different needs, preferences, situations, sizes, growth rates.

Home Users

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Past Sales By Market Segment

For Voice Recognition Device

25000 20000 15000 10000 5000 0

0 1 2 3 Assistants Managers Students Home Creators Parents

Year

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Distribution Channels
Firm 1 Firm 2 Firm 3 Firm 4
Firms reach customers through full-service dealers and Internet/mail-order discount dealers.

Channel 1 Traditional Dealers

Channel 2 Discount Dealers Concerned Parents

High-tech Managers

Modern Students

Professional Creators

Different segments have different shopping preferences.

Harried Assistants

Home Users
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Product 1: Voice Recognition Device (VRD)

Number of Special Commands (5-20)

Key Product Features

Error Protection (1-10)

Ability to Customize (1-10)

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R&D for Product Modifications: Computing Costs

Feature
Special Commands (5-20)
Error Protection (1-10)

Cost to Decrease
$0
$0

Cost to Increase
$8,000*(change)2
$5,000*(change)2

Ease of Learning (1-10)

$3,000*change

$3,000*(change)2

Example Feature
Special Commands Error Protection
Last periods product This periods product

Change

Cost to Change
$8,000*2*2=$32,000 $0

6 4

8 3

+2 -1

Ease of Learning

+2

$3,000*2*2=$12,000
$44,000

Total modification costs: Note: R&D for product changes is more expensive
if you have to make big changes in a short period of time

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Level 3

Product 2: Digital Vocal Communicator (DVC)

Number of Tasks (1-10)

Key Product Features

Similarity of Commands (1-10)

Ease of Learning (1-10)

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Types of Advertising

Pioneering Direct competitive Indirect competitive Reminder Corporate (Institutional)

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Marketing Decision Responsibilities

PRODUCT PRICE PLACE PROMOTION -Advertising -Personal selling CUSTOMER SERVICE

(Level 1)

Features (and R&D for product modifications) Wholesale price Distribution intensity in each channel $ Spending Number of sales reps in each channel $ Spending

MARKET RESEARCH Demand forecast/ production order

6 reports may be purchased

Number of units
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Expanded Marketing Responsibilities

PRODUCT PRICE PLACE PROMOTION -Advertising -Personal selling

(Level 2)

Features (and R&D for product modifications) Wholesale price in each channel Distribution intensity in each channel $ Spending Type Number of sales reps in each channel Percent non-selling time Commission rate $ Spending per Channel $ Spending 7 Reports May be Purchased Number of Units
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-Sales promotion CUSTOMER SERVICE MARKET RESEARCH Demand Forecast/ Production order

Expanded Marketing Responsibilities

2 PRODUCTs PRICE

(Level 3)

Features (and R&D for product modifications) Wholesale price in each channel for each product

PLACE
PROMOTION -Advertising

Distribution intensity by channel, product

$ Spending for each product Type for each product -Personal selling Number of sales reps in each channel Percent non-selling time in each channel Commission rate -Sales promotion $ Spending per channel, product CUSTOMER SERVICE $ Spending MARKET RESEARCH 7 reports may be purchased Demand forecast/ production order Number of units for each product
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Production Economies of Scale

102

Percent of Base Unit Cost

99 96 93 90 87 84 81 78 75 72 0 100,000 200,000 300,000 400,000 500,000

Cumulative Units Produced

If the president decides to invest in new equipment, unit production costs will decline as cumulative production increases:

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Response Functions and Marketing Spending

Sales

Threshold Level

Saturation Level

Marketing Spending

Spending too little may have little effect, but spending too much just increases costs and reduces profit.

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Marketing Budget Items (Level 1)

R&D product modification costs Sales force salaries and severance pay Advertising expense Customer service expense Market research reports expense

BUDGET FOR FIRST PERIOD: $984k

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Marketing Budget Items (Level 2 and 3)

R&D product modification costs Sales force salaries and severance pay Advertising expense Customer service expense Sales Promotion Expense Market research reports expense

BUDGET FOR FIRST PERIOD: $984k

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Discretionary Budget

Policy on initial discretionary budget. Unspent money carries to future periods and earns interest. When its gone, its gone. Policy on special budget requests.

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Computing Prices

Computing Retail Prices from Wholesale Prices:

Expected Retail Price = Wholesale price/(1-% Markup) Example: Wholesale price = $105 Channel 1 Retail Price = ($105/(1-.50)) = $210 Channel 2 Retail Price = ($105)/(1-.35) = $161.54

Computing Wholesale Prices from Desired Retail

Prices:
Wholesale Price = Retail Price (1 - % Markup) Example: Desired Retail Price = $190 Channel 1 Wholesale Price = $190/(1-.50) = $95.00 Channel 2 Wholesale Price = $190/(1-.35) = $123.50
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Retail Prices Charged Final Consumers

The retail price set by a dealer depends on:

The wholesale price in the dealers channel. The customary markup used in the channel.

The portion of any sales promotion deals that the dealer passes along to consumers as a price reduction.

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A Good Wholesale Price

Should cover the unit cost of the product (given its features). Should result in a retail price that will appeal to target consumers. Should result in a profit margin that will contribute to other expenses and profit.

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Competitor Analysis

Estimate competitors net contribution Analyze past strategies & likely changes. Evaluate positioning and target segments.
Firms
1 1 2 3 4

Segments

3
4 5 6

X
X

?
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Industry Sales Report

Brand Firm 1
Firm 2

Unit Sales Share (units) $ Sales (retail) 25,151 .250 $4,292,964

25,151 .250 $4,292,964

Firm 3
Firm 4 Total Channel 1 2

25,151
25,151 100,604

.250
.250

$4,292,964
$4,292,964 $17,171,854

Unit Sales Dollars Sales 56,296 $10,696.240 44,308 $6,475,614

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Product Features and Prices Report

Brand of VRD Firm 1 Firm 2 Firm 3 Firm 4 Retail Retail Error Ease price price of channel channel Special protect1 2 commands ion learning 8 8 8 8 3 3 3 3 3 3 3 3 $190.00 $190.00 $190.00 $190.00 $146.15 $146.15 $146.15 $146.15

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Market Activity Report (Level 2)

Firm 1 Adv. Dollars Adv. Type Sales Promotion Channel 1 Channel 2 No. Sales Reps Channel 1 Channel 2 Commission Customer Service $250,000 Firm 2 $250,000 Firm 3 $250,000 Firm 4 $250,000

$0 $0

$0 $0

$0 $0

$0 $0

10 10 5% $92,500

10 10 5% $92,500

10 10 5% $92,500

10 10 5% $92,500

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Market Research Reports (Level 1)

1. Market share by segment (all brands) 2. Market share by channel (all brands) 3. Consumer preference study 4. Marketing effectiveness report 5. Sales by segment by channel (own brand) 6. Consumer shopping habits study

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Market Research Reports (Level 2)

1. Market share by segment (all brands) 2. Market share by channel (all brands) 3. Consumer preference study 4. Marketing effectiveness report 5. Sales by segment by channel (own brand) 6. Consumer shopping habits study 7. Product positioning report

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Market Research Reports (Level 3)

1. Market share by segment (all brands) 2. Market share by channel (all brands) 3. Consumer preference study 4. Marketing effectiveness report 5. Sales by segment by channel (own brand) 6. Consumer shopping habits study 7. Product positioning report
Note: separate reports are available for each product, Except for the consumer shopping habits study

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TMGPlan Software

Easy to use for preparing and evaluating plans, managing reports

View, print, and manage password protected reports

Select directory

Enter Plan Decisions

Evaluate spending and profit forecast

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Submitting Marketing Plans

Submitting marketing plans decisions

Policy on paper form Policy on electronic file

Each firm has a distinct industry and firm identification

Need to keep it straight!

Passwords and the TMGPlan software

Remember password used to create Plan It is case sensitive (upper and lower case make a difference) Best to stick to one password!

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Overview of Market Research Reports

Market share by segment (all brands) Market share by channel (all brands) Consumer preference study Marketing effectiveness report Sales by segment by channel (own brand) Consumer shopping habits study Product positioning report (Level 2 & 3)

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Market Share by Segment Report

Segment

Brand
Firm 1 Firm 2 Firm 3 Firm 4 Total Sales (units)

1
0.250 0.250 0.250 0.250 20,028

2
0.250 0.250 0.250 0.250 15,084

3
0.250 0.250 0.250 0.250 25,104

4 0.250 0.250 0.250 0.250 10,240

5
0.250 0.250 0.250 0.250 22,056

6
0.250 0.250 0.250 0.250 8,092

Whos selling to whom? Whos buying what? What is each firm achieving? Which segments are buying?

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Market Share by Channel Report

Brand
Firm 1 Firm 2 Firm 3 Firm 4 Total Sales (units)
Whats selling where? Whos buying what?

Channel 1 Channel 2
0.250 0.250 0.250 0.250 56,296 0.250 0.250 0.250 0.250 44,308

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Consumer Preference Study

Special Error Ease of Commands Protection Learning 10-13 7-10 10-13 12-15 13-16 5-8 2-4 2-4 6-8 2-4 6-8 2-4 1-3 6-8 6-8 4-6 2-4 7-9 Price Range low low high high high low

Segment Students Home Assistants Creators Managers Parents

What kind of product would a segment prefer? What reference price seems typical for the segment? How are segments similar and different?

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Marketing Effectiveness Report Index

Brand Awareness Customer Service Consumer Group Rating Industry Average Rating Channel 1: Sales Rep Workload Dealer Satisfaction Channel Strength (Push) Channel 2: Sales Rep Workload Dealer Satisfaction Channel Strength (Push) 0.550 100% 100%

Competitors Competitors with lower with equal or Index higher Index

0 3

100% 1.00 .500

0 0

3 3

100% 1.00 .500

0 0

3 3

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Detailed Sales Analysis

Segment

Firm
Channel 1 Channel 2 896 5,269 1,109 3,337 5,602 1,396 1,808 1,196 4,363 1,865 1,086 1,074

Unit sales by segment and channel Are you reaching your target?
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Customer Shopping Habits

Percent of Shopping Percent of Shopping

Segment
Students Home Assistants Creators Managers Parents

in Channel 1 ? ? ? ? ? ?

in Channel 2

? ? ? ? ? ?

Who shops where? How do shopping patterns match distribution focus?

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Product Positioning Report

Segment

Brand
Firm 1 Firm 2 Firm 3 Firm 4

1
? ? ? ?

2
? ? ? ?

4
? ? ? ?

? ? ? ?

? ? ? ?

? ? ? ?

Which brands are closest to which segments? Which segments have no close brands?
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Recommendations

Analyze the reports as you would analyze a case. Make intentional changes. Find a balance in marketing research spending. Be integrative--think carefully about how each decision impacts each of the others. Have some fun!
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List of All Slides (with Hyperlinks)

1. Title slide 2. The Marketing Game: What Is It 3. A Little Background 4. Special Objectives Served by TMG The Role of the Marketing Game 6. Integrative Marketing Strategy Planning Process 7. Overview 8. The Process 9. Industry Environment 10. Six Key Product-Market Segments 11. Past Sales by Market Segment (VRD) 12. Distribution Channels 13. Product Features Voice Recognition Device 14. Computing Costs of R&D for Product Mods 15. Product Features Digital Vocal Communicator 16. Types of Advertising 17. Marketing Decision Responsibilities Level 1 18. Expanded Marketing Responsibilities Level 2 19. Expanded Marketing Responsibilities Level 3 20. Production Economies of Scale 21. Response Functions 22. Budget Items Level 1 23. Budget Items Levels 2 and 3 24. Discretionary Budget 25. Computing Prices 26. Retail Prices Charged Final Consumers 27. A Good Wholesale Price 28. Competitor Analysis 29. Industry Sales Report 30. Product Features and Prices Report 31. Marketing Activity Report (Sample) 32. Market Research Reports Level 1 33. Market Research Reports Level 2 34. Market Research Reports Level 3 35. TMG Software 36. Submitting Marketing Plans / Policies 37. Overview of Market Research Reports 38. Market Share by Segment 39. Market Share by Channel 40. Average Customer Preferences 41. Marketing Effectiveness Report 42. Detailed Sales Analysis 43. Customer Shopping Habits 44. Product Positioning Report 45. Recommendations 46. Blank side (end of show) 47. This list 47