Mark strat simulation( firm presentation)

FIRM

By: Katherine Showalter, Evelyne Ringia, Chad Frutig, Stephanie Nord, and Dana WuMarkstrax presentation: December 9, 2013

Why Firm M?

– Two products that could be targeted to high income earners and savers

– High income earners had potentially higher profit margins but the savers represented a larger portion of the market

Executive summary- Strategy over allInitially we started by targeting multiple segments using two brands followed by R&D projects and a discontinuation of one of our brands in order to better position ourselves.

In period five we decided to target multiple segments but this time using one brand for each segment; however, the sales did not generate enough revenue in a then highly competitive market.

Some of the new brands were discontinued after only 2 periods and some after 3 periods. Finally, we decided to focus on only two segments using two brands that were doing better than the rest and the last period ended with those brands.

Another strategic turn was the increase in prices in all of the new brands and the slight reduction of the price on the old one done in period 7. The results of this strategy are explained later in this presentation.

Executive summary- outcomes

The ROI result of 44% is a better measure of marketing performance because it only takes into account figures which are related to marketing, unlike the 12% which accounts for the acquisition expenses as well.

Own calculation: gain/cost of investment: 12%

Calculated by Markstrat: 44%

ROI results

Other measures of success:

• Contribution before marketing

• Steady increase in EPS (chart shown in outcomes)

• Stable stock price in second half

Executive summary- outcomes (continued)

Executive summary- Ending portfolio: Period 10

Evaluation of firm’s ending position

• By period 10 Firm M had improvements

• Revenue of $51,035 compared to $33,313 of period 0

• Slight improvement of contribution before marketing, $13,679 compared to $13,508

Recommendation for future management

• We recommend having fewer brands in the market

• We recommend defining the target market early on and creating brands that focus on their specific markets

Starting portfolio… (period 0)

• Information about M– MOST had a lower base cost with a higher potential to make profits– Earnings before taxes: $13.3 M

• Firms with higher revenue could out- perform M

• Our potential target markets: High income earners had potentially higher profit margins but the savers’ large numbers offered a large potential for higher sales

• The brand MOVE did not have sufficient design capabilitiess to support its positioning with our target markets

• Firm M had the second highest net contribution

• Brand MOST had the highest market share, 18%

Strengths Weaknesses

ThreatsOpportunities

SWOT for the starting portfolio

SWOT (starting portfolio) continued

Net contribution comparison: Period 0

Period 0 Competitive Analysis

Competitor relative market shares

Competitor selling prices

Competitors analysis, their relative market shares and pricing, distribution,. None of competitors had started R&D in period 0

Matrix strategy

Product

Price

Promotion

Place

Initial Strategies

ProductWe decided on a production of 175,000 units for MOST because the 152,000 units produced in period 0 were sold out. The Brand awareness for MOST was 54.6% and had the highest purchase intentions so a 16% increase in production was reasonable. For MOVE we decided to produce only 50,000 units because we had more inventory from the prior period, and its brand awareness and intention to purchase were not as strong as MOST’s.

PriceThere were no price changes made during the initial period because the semantic scales showed our price positioned us well with our targets.

Explorers Highs Earners

Professionals Savers Shoppers0

1

2

3

4

5

6

7

Price and positioning

Ideal Price MOST MOVE

Target: MOVE for high earners and professionals; MOST for savers and shoppers

PromotionTarget market allocation: MOST ($3.0 M), MOVE ($1.9 M)

Explorers High earners Professionals Shoppers Savers

MOST 10% 5% 10% 30% 45%

MOVE 30% 30% 30% 10% 0%

PlaceWe allocated more people in mass merchandizing than specialty stores and the fewest in online stores. This decision was guided by the consumer survey study which showed that generally more population shopped in mass merchandizing.

Outcomes of the Initial Strategy

MetricsPeriod 0 Period 1

Net resultsRevenues 33,313 36,997

3,684Cost of goods sold (13,945) (14,256)

(311)Inventory costs (636) (605)

(31)Contribution before marketing 18,732 22,136

3,404Advertising expenditures (4,000) (5,241)

(1,241)Commercial team costs (1,224) (1,425)

(201)Contribution after marketing 13,508 15,470

1,962Market research studies (245) (458)

(213)Earnings before taxes 13,263 15,012

1,749

As results were obtained for the initial strategies . . .

. . . further strategies were developed

Product Strategy

Matrix R&D strategy over the 10 period

We positioned our original brands (MOST & MOVE) for high income earners and savers

R&D trend for 10 periods

Brand Target Period

MOST Savers Original

MOVE High income earners

MORE Professionals P 3

MEGA Followers

MERMAID Adopters P 6

MELON Innovators

MESSY Followers

MOXIE Explorers Period 2

Period 3

Period 4

Period 5

Period 6

Period 7

Period 8

Period 9

Period 10

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Some of our brands were discontinued after being in the market for a number of periods because their performance did not meet our targets

We decided to focus on only two targets markets, professionals and followers, with two brands (MORE & MEGA) towards the final periods

Product Strategy continued

Period 3 .Move

Moxie. Period 8

Period 8Messy

Mermaid Period

9

Period 9 .Melon

This had a positive impact to our overall performance in the respective periods

Production amount was always decided considering the inventory value and future selling prospects from consumer survey data

Discontinued Brands

Brand Management:

Price Strategy

• Most price changes done were a reflection of how much inventory was left, competition, and future selling prospects from consumer survey studies in aspects like brand awareness, purchase intentions, market shares. For new brands we relied on market studies.

• A strategy turn occurred in Period 7 in which prices of all new brands were raised to in order to achieve improved profit margins.

P1 P2 P3 P4 P5 P6 P7 P8 P9 P100

100

200

300

400

500

600

700

Most More Mega Melon Mermaid Move Moxie Messy

Price trend: All Matrix brands

Promotion strategyCommercial teams and advertising were our major tools used for targeting and positioning. Research studies showed each brand’s status with regard to brand awareness, where our customers liked to shop, customer intentions to buy, and experiments which showed the impacts of advertising and commercial team allocation. Perceptual Maps were used to give direction on positioning.

Advertising and commercial team expenses trend

Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Period 8 Period 9 Period 100

1,000

2,000

3,000

4,000

5,000

6,000

Advertising expenditures Commercial team costs

A drop in advertising expenses in period 5 was caused by more money being allocated to R&D projects for 4 of our products

Place strategy• Places of sales in the Alpha market included

specialty, mass, and online stores

• Consumer surveys showed where every segment of customer preferred to shop

• Experiments showed us the impact of commercial team allocation to our brands

Bubble blots showing over all team distribution

Contribution after marketing

The price changes from period 7 showed tremendous improvements to both contribution before marketing and earnings before taxes.

P2 P3 P4 P5 P6 P7 P8 P9 P10

-10000

-5000

0

5000

10000

15000

20000

25000

Contibution before marketing Earnings before tax

Outcomes

• Stock Price Index1 2 3 4 5 6 7 8 9 10

1019 998 670 708 579 456 471 464 463 453

Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Period 8 Period 9 Period 100

200

400

600

800

1000

1200

Stock price Index

Outcomes (Continued)

Outcomes (Continued)Segment Shares- Sonites /Explorers

Period 0 Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Period 8 Period 9 Period 100

10,000

20,000

30,000

40,000

50,000

60,000

Revenues

Our segment share for explorers improved towards the second half which we suspect might be a result of our Moxie brand which was targeted the explorers from period 6

Period 0 Period 10 Difference Initial and

Final

Cumulative 10 periods

Revenues 33,313 51,035 17,722 404,431

Cost of goods sold -13,945 -28,045 -14,100 -224,719

Inventory costs -636 -1,390 -754 -14,431

Contribution before marketing 18,732 21,599 2,867 165,281

Advertising expenditures -4,000 -2,892 1,108 -37,673

Commercial team costs -1,224 -5,028 -3,804 -36,781

Contribution after marketing 13,508 13,679 171 90,826

Market research studies -245 -1,081 -836 -8,652

Research and development 0 0 0 -24,150

Exceptional cost or profit 0 0 0 -7,681

Earnings before taxes 13,263 12,598 -665 50,344

Comparison of the Initial and final portfolios

STRENGTHS

• The introduction of MORE was a great success in all of our history because it was well positioned with professionals for a number of periods

Positioning of brand MORE

• We made a fast turn around when it was clear that advertising our products further was not profitable and therefore allocated more of the budget towards the commercial teams.

Advertising expenses

• From period 6 to period 10 Firm M made constant improvements that can be demonstrated by the earnings before tax and contribution before marketing in slide 10.

Improvements in second half

CHALLENGES• Some of our brands did not

withstand the competition from other firms and eventually we had to withdraw them from the market.

Competition

• We did R&D for 4 brands at a time and as a result there were scarce resources to support their existence in the market.

Brand introduction

• The brand MOVE had a poor design and high base cost which affected its survival in the market.

Poor design of MOVE

Opportunities & Threats

In period 5 our three products were MORE, MOST, and MEGA. We saw the opportunity to increase our sales through having one product for each target market. So in period 6 we introduced 4 new products, making it 7 total products

The increased competition in the market proved to

be our threat.

What we learned

Competition analysis: study what other brands are doing and try to position more efficiently than them by adjusting the marketing mix and commercial teamHaving many products doesn’t necessarily guarantee increase in sales; it’s better to focus on fewer products that are well positioned to attract their target market to build brand identity

Segmentation, Targeting and Positioning are key

Pricing strategy: we used the exact price from the conjoint analysis but it didn’t take into account production costs so we lost money