The Wrap-Up: Markstrat Analysis

COMM 363 202: Team Money

Initiating Markstrat Analysis- Preparing rocket for journey

Section 1: Initial Strategy/Learning/Application

Initial Strategy

Our initial strategy was to be a first mover in the Vodite market, however we initially chose to postpone commencing work on this product until at least the second period, in order to see how we would do with our current offerings, and make money that we could invest into our Vodite. We initially focused on advertizing, believing that heavily promoting our product, more so than our competitors would allow us to stand out among our competitors, at a point in the game where products were not yet very differentiated or targeted. We believed this would help us gain an early advantage in our volume of sales. We also believed that we should increase price by inflation (2%) with every passing period. The final point in our initial strategy was to consistently purchase many of the offered studies, as this would give us much needed insight into the markstrat world.

Learning Outcomes

We quickly realized that spending as much money as we did on advertizing was not our best option. Using one of our purchased market research studies, the “Competitive Advantage Report”  we found that we had fallen behind competitors on such categories as commercial team, and this was dampening our sales. We immediately had to move to correct this. By period three we saw some more of the effects of this strategy, as we noted serious and lasting shortages in production, this will be discussed further in the “Overall Game” section below. Correction of these initial errors prevented us from being a first mover in the Vodite market, launching our product in period six, two periods behind the first mover in said market.

The downfalls of our initial strategy taught us that we needed to be adaptable. The Markstrat World is quite simplified compared to the real world, many variables that could have derailed our progress in a real business situation, such as new competitors or a market crash, had no chance of occurring. This was an important lesson because in real life business situations, you need to adapt constantly, leveraging company strengths, adjusting strategy and fixing errors. We went into the simulation with one strategy, and ended the game with another. From our initial strategy we learnt the importance of learning from your mistakes or misjudgments, and applying this knowledge to figure out how to improve.

Application to Industry

Our initial advertisement heavy strategy was chosen due to the belief that it would allow us to stand out in a market with many similar products.  It was logical to lean into advertizing to get an upfront advantage, hopefully achieving high brand loyalty from our consumers going forwards. In determining this we looked to a classic example of advertizing competing products, Coke versus Pepsi. Coca-Cola is well known for their exceptional advertizing campaigns, and they put in the money to make that happen. According to AdvertizingAge, in 2013, Coke spent almost three billion on advertising compared to Pepsico’s two billion, this goes to slow that investing in advertising does pay off. Coke and Pepsi are very similar products, and a main differentiating factor has been how they are advertized. The more advertizing coke has successfully implemented, the greater market share and brand recognition they have received. This was the rationale behind our choice to lean into advertizing, we believed that having the most investment in advertising would lead to similar results.

Section 2: Recommendations

If our team were to continue playing more rounds in Markstrat, we want to change to a segmentation-based strategy that aims to increase each brand’s contribution margin. This shift in strategy will need us to modify our existing brands as well as launch a new brand to target different segments. First, we saw a disadvantage in the long run for targeting more than one consumer segment for our Sonite products. Thus, we need to change perceptual objectives and advertising accordingly to tailor Most for savers and Move for professionals. By targeting a specific segment, we will be able to adjust brands and marketing techniques to appeal to each group more effectively. Secondly, we noticed that our Sonite products Most and Move have entered the decline stage of product life cycle, showing a decline in sales. We need to rejuvenate them by improving their characteristics to match with the target segment value. The newly introduced Momo has entered the growth stage and we need to increase production to meet the increasing demands. Lastly, we need to do an R&D upgrade for the Vodite product Meh to meet the ideal value of the growing followers segment. The current brand characteristics for Meh are very far from the ideal values of followers, and results in a decreasing market share of 11.3%. We should also launch a new brand that targets high earners as they are the less price sensitive allows high contribution margin. By having a perfect product for each segment, we will avoid cannibalization in sales as well as increase market share per segment. Hopefully having high contribution margin for most of our products to allow us to gain more budgets to use it in modification of existing brands.  

Learning Outcomes

The segmentation-based strategy will allow us to get a deeper understanding of the importance of target marketing when we try to optimize the ability to sell to a wide variety of consumer segments. From the results of simulation, we will be able to see the difference of segmentation strategy vs. mass marketing. We can understand how to allocate commercial teams effectively in different distribution channels when the company results came out. As well as understand the diminishing marginal return when having too much commercial teams. Perceptual objective is very effective in changing consumer’s perception about the brand. When reviewing the results, it will reflect the message quality sent and received by segments and thus allowing us learn the values of each segment and act accordingly. Overall, we will see the effect of adopting segmentation strategy compared to our performance earlier when using mass marketing technique.

Application to Industry

Businesses often use segmentation-based strategy to tailor their product development and advertising to meet key consumer’s needs. For example, the high-end grocery store Whole Foods targets high-income, educated urban elites who are health and eco-conscious by carrying products specifically meets the target segment needs. This allows them to maintain a high profit margin and gain a competitive advantage of being a healthy and organic brand among other giant grocery stores like Safeway and Save on Foods. Another example of a group of businesses that use this strategy is hair care, beauty and grooming products. Razors marketed to male and female are fundamentally the same, but by using segmentation strategy, the packaging and advertising message is very different. Companies use perceptual objectives to send diversified message to target segments. Walking into any drugstore, we can notice women’s grooming products are packaged in soft and gentle colors and featuring beautiful smiling models. Conversely, the packaging for men’s product is predominantly by darker colors and features models emphasizing strength and ruggedness. By defining perceptual objectives for each brand, it enables businesses to convey perceptual messages and emphasize on the uniqueness and its competitive advantage.

Section 3: Overall Game

For Markstrat, originally our initial strategy was to try to prioritize putting out a vodite quickly, to try to capture two key segments with one product. However, this proved ineffective, and once we started realizing where we could improve, we decided to change our strategy to combat the competitive nature of the market.Through the industry benchmarking studies and the competitive commercial team studies we recognized how much more the top place team was spending into commercial team, and that our targeting strategy needed to change. We sought to hone in on specific segments and then to broaden our product line to be able to efficiently meet the needs of each segment. For example, our “MOVE” product was successful, but we started to notice that our dual targeting of the Professionals and High Earners was not working, so we then prioritized our ad spending to focus primarily on the Professionals. Following this, we saw this product jump to second highest sales.
One of the key areas of our decision-making revolved around the expected growth rates for the markets and various segments. Therefore, much of our R&D was based around these growth rates. To illustrate how this strategy actually worked, we chose to modify our “MOST” product to target Savers because they had the largest growth rate and was the second largest segment, and following this modification, we launched a new product to then target the Shoppers. This properly targeted the two largest segments, and ultimately led us to placing second in our industry.

Learning outcomes

Our team took the second place in the industry, however the first place team dominated the industry, so evidently there is much to learn from what we did and did not do. We generally tried to not engage dying segments, i.e. those segments with negative growth. However, given the 10 year time frame for the simulation, targeting these segments that have little or no growth may actually be quite fortuitous. This was most visible with our Vodite, where we tried to target the Followers segment as this was poised for the most amount of growth. However, by not going after the other two segments, it is hard to gain a good base for sales as these two segments influence sales with the Followers.Secondly, and most importantly, what we learned was just how crucial meeting consumer demand was with respect to our success. Early on when our team was poised for growth and potentially the first place team, we did not forecast the strong growth in demand, which led us to under produce. Not only does this mean we lost sales, but most likely lost potential sales because of tainted brand image. Often production and distribution are elements of marketing that are overlooked when many people think of marketing, but it can easily make or break a firm.

Application to Industry

Taking these lessons into consideration, real world applications can be seen all over of companies not meeting demand. Wal-mart is famously known for its excellent supply chain management, and their expansion into Canada was a huge success. In contrast, Target, which in the US has been very successful, was a supply chain disaster. With a poor supply chain, Target was unable to meet demand, leaving shelves empty, and the high expectations that came with their expansion were met with disappointment. Target did face other challenges, but their supply chain was the most damaging. This shows that even huge companies like Target can fail when they can’t properly distribute products to meet customer demand.

Section 4: Markstrat’s Real World Application

When engaging with Markstrat, our team noted a few features that affected the way we played and our discussions. Several aspects of the game like the product names, competition, and promotional strategies could have been improved on to simulate the strategies and challenges that marketers face today.
A real product or at least a visualization of the product we were working on would have allowed us a frame of reference when working with the Sonite and Vodite market. The idea of these products seemed so foreign and alien during gameplay. Our team agreed that having a frame of reference as to the market, the types of stores we were in, and the type of product would be helpful not only when playing Markstrat, but also when we were thinking of applying it later in the real world. For example, if the Sonite and Vodite market was more aptly described as a smartphone or tablet market, it would have helped us understand the types of consumers in a more complex and real-world way. Having an invented product in a vague market was a little confusing and made us feel as though it was oversimplified.

Another aspect of the game we thought would make it more realistic was the presence or effect of indirect competition/factors. Having another type of gadget to compete with Sonites in general would have been an interesting exercise in positioning and simulates the real world quite well. For example, in the Doritos case, we had to consider other snacks and candy as competitors beyond the chip and flavoured tortilla chip category. In this case, the indirect competition could be either built into the simulation or the two main groups (UK and Italy) in class could be markets/categories in indirect competition and we could have the opportunity to compete in that way.

Given both of those recommendations, our team is much more aware of the complexities of marketing in an actual marketplace with actual consumers. We often found ourselves mentioning that data or actions seemed too simple to act upon, and while simulations like Markstrat are helpful with overall strategy skills, the day to day of marketing relies heavily upon a solid understanding of the problem at hand and a logical thinking process.

Lastly, the presence of promotional programs like loyalty cards or total price reductions would have better simulated the tools that marketers today have at their disposal. Companies today have leveraged a plethora of programs as part of their promotional mix. Loyalty programs and memberships also gather the data that lets us gauge customer loyalty, which allows us to tailor our strategies. We focused on playing with a data driven strategy, but a strategy that allowed us to create richer data we could work from would have been a benefit. Especially with technology that allows marketers to learn more and more information about their consumers, a more comprehensive research strategy beyond ordering reports seems like a necessary improvement.

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