Reflective Report TeamU

Reflective Assignment

THE UNIVERSITY OF BRITISH COLUMBIA

Reflections on MarkStrat – Team U: Charlsy Dobell | Whitney Strachan | Tyler Bowles | Sahar Ghobeh Mohajer

SECTION 1: Rationale, Initial Strategy and Learning Outcomes: We decided as a team to meet each week to make the decisions on Markstrat as we felt it was important to have input from every team member. This way we could each learn about every aspect of the game. Our first meeting was lengthy as we spent time exploring the game as a team and analyzing the given figures. Devising our initial strategy was difficult as we were very unsure about how the game was going to react and what our competitors were going to do. There was a large element of the unknown so we used the market research and figures available as our rationale for our decisions. We learned that market research was an important resource to have as it gave major insights into the industry. Our first strategy was to go through the various numbers available for our two Sonite brands: SUSI and SULI, and write down the figures to gain an overall understanding of what segment to target. We examined: customer intensions, customer awareness and various segments’ needs. We put a higher value on customer purchasing intensions rather than customer awareness because actual purchasing would help us improve our sales. We learned that this was a good move as we did well in the trial round of the game. In the beginning, our strategy for targeting segments was a broad approach as we placed importance on Singles, Others, and Buffs for SUSI and High Earners, Pros and Buffs for SULI. Reflecting on the decision now, we should have focused in on one group with the intent of gaining a large market share. We did not have the resources or knowledge to apply such a concept. With this strategy, we did well initially but we had a large number of competitors. With sales force, we wanted to allocate them to the more popular areas; however, we believed advertising was more important in the beginning. Although advertising is important, we slowly learned that more sales force would have been a better initial strategy to get consumers educated about our products and to aid in the actual sale. For pricing in the initial round, we put SULI at a higher price as our main segment saw price as quality and we put SUSI’s price slightly lower than the starting Markstrat price to satisfy the target segments. Going into the first period after the trial round, we made small changes, as we were happy with our results. We underestimated the amount of changes other teams were going to make. We kept the same strategy but lowered our price by $1.00 hoping that if competitors were to copy us we would undercut them. SULI’s target segment saw price as quality so we decided to charge a higher price but we noticed this strategy didn’t always work well. Other competitors that had a similar price but a bit lower had more market share. We didn’t change this for a couple of periods as we thought that the segment wanted a high price. We underestimated the price sensitivity of that target segment. This first period decision we also only focused in on two segments rather than the three original because the third segment had a low percentage for purchase intentions so we decided it was more important to focus our resources. We learned that a more focused strategy on target segments allowed for a larger market share potential. Going into the second period, we were still working on our initial strategy. We started to use the perceptual maps and brand maps to see how our brand was portrayed as we learned that the customer views are the most important. We should have

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spent more time examining the maps before we made our decisions. We were dissuaded at first to using the maps as there were so many options of viewing the different perceptions. We also used a MDS study to see if we could reposition our product, which was a good strategy; however, we think we could have done more cost effective roots like examining the change from the last period to the current period and then make future predictions. This was an important strategy, which we didn’t start until later in the game. Our main decision at this point was whether we should focus on just one segment or split between two segments. Our concern with focusing on one segment was that if we missed the mark at all we would completely lose to the competitors rather than splitting in the middle with the intent to gain some market share in both segments. Reflecting back, we chose the safer route of going in the middle but we did not gain substantial market share. Our mistake here was not having the product fully appeal to either group’s needs. At this point in the game, we also started feasibility projects for two new potential products. We thought we could replace one of our lower brands with an improved new product in hopes to improve our position in the game. This initial stage of the game was a learning process that ultimately helped us take second place at the end of the game. Industry Application: An example of our initial strategy of having one product for a multiple segments would be CocaCola. They are a global brand that uses a strategy of advertising to all segments from young people to older individuals. This creates some economies of scale with regards to advertising; however, this strategy did not work for our team and we did not gain the market share desired. When we were deciding whether or not to focus on one segment we thought of the industry example of cars. Car models can be advertised to two different segments even though each segment has different needs. For example, Nissan Canada targets both graduates and older individuals. Nissan offers a “Graduate Rebate” which entices an individual that has spent a lot of money on education but now needs a car for the next step of their life. Nissan satisfies this by offering a reduction in price. For example, they offer a $1,000 rebate on their 2010 Sentra and 2011 Sentra. They also have other car models available with their own rebates associated. Nissan also focuses on the older individual by advertising safety and space within their vehicles. For example, their Versa 1.6 S Sedan advertises how it can easily hold 5 passengers and other cargo. The testimonials on their website for the Sentra model, which they are also advertising to graduates, includes many older individuals mentioning such features as good brakes, control, steering and a generally good car to take the children in. This is an industry example where the same product is used to try and capture two different segments. Graduate Rebate: Below are screenshots that show the graduate advertising Nissan has in place on their website. They are trying to attract the segment of students who have just graduated and are looking for their first car.

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THE UNIVERSITY OF BRITISH COLUMBIA

Site: http://www.nissan.ca/buying/ncf/en/grad.html

Targeting Older Individuals: Below are screenshots from the testimonial video on Nissans website. These represent the older segment Nissan is targeting with the same product.

Site: http://www.nissan.ca/vehicles/en/videos/index.html#/Sentra/Testimonials

SECTION 2: Our Next Move: Sonite: We have never had very strong market share or brand awareness in the Sonite market. As a result, two of the products we introduced earlier in the game were withdrawn. We were successful in modifying our SULI product using Semantic Scaling to better fit with consumer tastes; however our SUSI product was ultimately unsuccessful with its poor sales figures. As a result, in the next decision we would drop SUSI and put far more money into advertising and sales force for SULI. SULI has been correctly designed in every way, and with small Semantic Scale adjustments, price decreases and increased advertising over the next periods, the product will continue to sell and grow its market share. The reason we will not use R&D to modify and/or release any new Sonites is because this market is becoming less profitable. Sonites eventually become like ‘toilet paper’ - in the sense that they garner low margins, and gaining more market share is difficult with what has grown into a highly competitive, mature market. This is why we believe it is imperative to focus on, and gain as much market share as possible in the new lucrative Vodite market. Vodite: Our company took a very large risk entering the Vodite market with no market research. It was unclear as to how large the market size would be, as well as the price we should have set. It was, however, correct to assume that in this new market we would have the ability to price much higher than the other teams. Our price was nearly double that of the other teams, yet we still managed to garner 54.2% market share in the Vodite market. The total volume sold of Vodites decreased by 17.1% from period 6 to period 7, and as a result we would not want to produce as much in our next period. We bet everything on our strategy in period 7, which included not purchasing any market research in an effort to spend everything we could on advertising and sales force. This undoubtedly paid off; however it has left us with little information on how to move forward this period. This game has a very strong focus on linear regressions, and it was our focus on aligning our products with the predicted consumer values in our last

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THE UNIVERSITY OF BRITISH COLUMBIA

decision that ultimately allowed us to be so successful. We do not have this information for an upcoming decision, so we will be very conservative. We will utilize the same strategy from period 7 due to the fact that we know that it worked. We will lower price slightly (by 5%) to keep up with consumer values. We will decrease production in the Vodite market to a level where we will have the capacity to sell up to 50% more than we did last period, which will minimize our holding costs. Without product design tools we are unable to R&D another Vodite which is unfortunate as we doubled our budget over last period. We will purchase all marketing information this time, as well as put nearly triple the dollar amount from last period into advertising and advertising research. Without the ability to accurately use MDS or Semantic Scale modification, this strategy is our only hope of maintaining the market share we gained. With such large market share (and obvious consumer satisfaction with our product), we believe that consumers will continue to buy our product because of the good impression they are getting from it. A real-world example of this can be seen in heavy-up advertising campaigns that company’s use to effectively boost sales in the short term. Industry Example of our Next Move: A recent example of our next move strategy in the real world can be seen through Apple’s heavyup campaign on their MacBook Air product. Usually the company only advertises new products, however in this case they have not introduced anything new for the past few months, so they are heavily marketing an older product to boost sales across the board. This also has an effect of boosting overall brand awareness for the company. SECTION 3: Strategy: Continuing on from our initial strategy, we evaluated our competitors’ positioning strategy and the nature of the market. Throughout the game, we were constantly aware of our industry structure, our position within the industry, and the actions of our competitors. We acted on any opportunities and towards the end of the game began to make predictions about future periods. We began with a clear strategy, but we also adjusted our strategy as the industry evolved. Our strategy at the end of the game was an aggressive one with the intent to increase our stock market value. We released our Vodite with a lot of advertising and charged a premium price. We produced a large amount of Vodites as we believe the market would grow in the future. Also, we used the Semantic Scale to match our product to what the target segment desired. Since our product was properly designed, we believe we could gain a huge market share with its appeal. With our huge advertising budget, advertising research budget and sales force, we were making our product the best in the perspective of our customer in case another team were to release a Vodite. Throughout the periods, we priced our product based on our competitor’s price, regarded price sensitivity of our target segments and also reviewed the ideal characteristics analysis tool to help in product development. We charged a premium for our Vodite even though the other team priced their Vodite low, we charged higher because

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we believed our product matched consumer tastes better. This high price also was done in the aggressive intent to gain a profit. Industry Example: Premium Automobiles Mercedes Benz has successfully tapped into high-end customer needs, which is focusing on three things: quality, safety and luxury. Understanding target market’s values is important in positioning as it was part of our strategy when introducing our Vodite, by which we successfully tapped into our customer’s taste. Mercedes has s particular target market segment with high-end customers with a relatively high income. The strategy of targeting in this small, yet profitable segment, has helped them succeed in obtaining lots of market share in the premium auto market. Targeting between segments might work, however, if your competitors focus on one, they may take over a huge market share for that segment, which is hard to penetrate after it has taken place in the market. This can be clearly shown in premium auto industry, where the high-end market has been dominated by four successful brands: Benz, BMW, Audi and Lexus. If an auto brand wants to target both the premium auto industry and the middle market segment, they will not succeed because they are not able to satisfy the high end buyer’s need of luxury, quality and sophisticated driving experience and also, meet the middle group’s need for lower price. Brands and Innovation in the Auto Industry

http://www.youtube.com/watch?v=977H-8wq2Yk

Strategy for managing premium brand: - Brand awareness – innovative power. Customer value in the brand, best quality is a prerequisite. It is important to communicate to community a certain status. - It is necessary to produce the best possible product and manage it in the right way, while at the same time always understanding what are the needs and wants of your customers . SECTION 4: Our Evaluation of Markstrat: After an intimate relationship with the inner workings of the Markstrat simulator, we feel that we have an in-depth understanding of what features were useful and which could use improvement. As for areas where we feel the game could be improved, our recommendations revolve around ease of use and clarification. For example, we felt that it would be beneficial if the Sonite/Vodite markets were given tangible identities (i.e. the use of a real product: Sneakers). In addition, the price disparity (that was

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unknown to a lot of teams) between the Sonite and Vodite markets made late stage comebacks an easy option for some teams. Therefore if the game had more of a rational and realistic feel, students may have a more valuable marketing strategy experience. Furthermore, many tools that were deemed useful in theory were quite ineffective or unreliable in practice (i.e. feasibility study was broad and ill conceived, MDS and Semantic Scaling made ineffective changes). Thus, some tools could be done away with and in turn fewer yet more effective tools would be at the student’s disposal. Another improvement we thought of was the need for the removal of abstract numbers in areas such as sales force and positioning. These complicate decisions and should be replaced by concrete, realistic figures. The final improvement we felt would contribute to students learning was the concept of Markstrat Tips. Through this, the game would give you small improvement tips that would allow learning from mistakes in your past period. Often we would have little idea why we did poorly and therefore tips would allow teams to get back on track and reposition their strategies. The valuable aspects of Markstrat were tools that we greatly utilized in the success of the team. Through the purchase of reports, having access to the prices of competitors as well as their relative position to ourselves on the Semantics and MDS maps was very helpful. As well, we found the R&D area of Markstrat useful in our team’s strategy. This feature allowed us to ‘go back to the drawing board’ and re- engineer products to fit with our strategy moving forward. Ultimately, having the option to modify products if they were in a bad situation or launch a new product entirely contributed the most to the success of our team. In addition, we found that keeping a keen eye on our inventory and production levels was important if we wanted to sell as much as we could of a top selling product or avoid inventory holding costs for a less successful one. It was also valuable to learn that it is crucial to always be looking forward in the game. In choosing a target segment for example, it was necessary to be looking at what the population numbers of this segment would be in the future periods of the game and as well the segment’s future ideal Semantic figures would always be considered in designing well targeted products. Overall, the simulation tools that were utilized in Markstrat were helpful in gaining a better understanding of a competitive marketing environment. What we learned: By not having our recommended improvements we really were able to experience all the features and tactics of the game. Some of these were interesting and creative, others were irrational and frustrating. We came to learn that many of the figures in the game were inaccurate and could not be relied upon for important decisions. In addition, even the ideal Semantic figures accounted for future change were often unreliable. Our team began to understand the creation and execution general strategies required incorporating of a large amount of variables. We also began to realize the practicality and usefulness of simple trial and error methods. This would be as basic as manipulating variables in the game and seeing how it responded and then adjusting accordingly next period. After trying to be rational and logical with game strategies however, we slowly learned that the game responded to more drastic, aggressive and somewhat illogical tactics. If our improvements were incorporated into the game, we feel that the result would be a more realistic and tangible felt. In this sense, the game would have stronger ties to the real world and the

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learning experience would not be so abstract. As well, students would have the opportunity to learn quickly from their mistakes and adjust accordingly. These recommendations will also help to cut out some of the frustration and confusion that are strongly associated with playing this game. The end result would be a learning experience that better mirrors that of the business world. Students will be able to understand and execute the game more effectively and consequently they will have a more rewarding marketing simulation experience. Real World Applications: After participating in the Markstrat experience, there are a variety of applications that we feel can take into real world situations. For example, a key principle we learned was the fact that you cannot rely on numbers in isolation. Even though the numbers may be solid, they cannot be the sole factor in your decision. This could be utilized in a consulting position when the numbers are telling you to take one alternative but other qualitative factors (i.e. corporate goals, industry growth etc.) must also be carefully taken into consideration. Another concept that was learned through markstrat was the absolute necessity to account for trends, anticipate marketplace changes and always be aware of competitors’ actions. All of these items are crucial to staying competitive in the marketplace. Furthermore, another critical concept we discovered was the need to nail a niche. Specializing in a specific are and targeting a specific segment is often successful in harnessing the needs of that group of people. This concept could be important if you are in charge of designing a campaign for a new product at a marketing firm. In addition, the Markstrat experience allowed us to really understand the power and usefulness of market research. As well, working as a team was a valuable in itself as it allowed the exchange of many views on an issue as well as mutual problem solving skills. All of the tools discussed above are crucial for any individual as he/she moves forward in school, career or life. Conclusion: Through all the trials and tribulations of the MarkStrat program, in the end we all found the program to be incredibly insightful. While some of the specific functions of the game do not necessarily apply to the real world (i.e. 5 companies entering an industry at the same time with the same product), it is not often you are given the opportunity to make real-world relevant decisions in an environment where you won’t lose real money! In the end we were able to figure out exactly how the game worked, and we are quite certain that our next period decisions would have continued our team’s rapid growth in both ROI and market share.

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