20 Jun marketing330 homework
he following assignment, to be completed as a team, is worth up to 20 points. It is designed to introduce each of you to the information and research available to you in the PharmaSim marketing simulation game that we will be playing in this class. Your team leader must upload the assignment in the assignment upload area by the end of week 1 (Sunday, midnight).
Welcome to Allstar Brands! As a new Marketing Assistant Trainee you have a lot to learn before you can take over management of one of our most important brands, Allround. One key to developing effective marketing strategies is to make informed decisions based on thorough analysis of research information. Your first assignment introduces you to the research reports that we use on a daily basis.
You will have access to many market research reports in the navigation buttons on the left side of the PharmaSim Simulation screen (at interpretive.com). There are only a few reports covering the “Channel” category (and they are interspersed in the Market and Survey menu items) but, much more “Channel” information is found in the Student Manual (accessed in the “Resources” button on the PharmaSim home page). The following category reports are organized in PharmaSim in the following five categories:
1. Company: Provides detailed information about company performance.
2. Market: Provides information on overall market performance and trends affecting the simulation environment.
3. Competition: Provides information necessary to understand what competitors are doing, and if they are succeeding.
4. Channel: Provides information about the distribution channel.
5. Survey: Provides information about consumer buyer behavior.
There is much information presented in these reports. The primary objective of this assignment is for each team member to become familiar with the depth of information available to them to make marketing decisions, and to accomplish that without information overload. Therefore, each team member will develop an understanding of the research reports available in a particular category of reports. The team leader will then collate and upload the team members’ insights. In that way, the team members can then read the insights of the other members of the team to develop a deeper understanding of the reports available to them beyond the category they studied.
Each member of the team must be assigned the responsibility to read, understand and describe ONE (1) of the 5 categories of research described above. Teams with 5 or more members should do all 5 categories (6-member teams can split one of the categories). Teams with 4 members can pick 4 out of the 5 categories.
The reports are generally found in the PharmaSim Simulation navigation button menu. Some reports aren’t available there until later in the game. To find those reports consult the PharmaSim Student Manual. The Manual can be accessed on the PharmaSim home page.
After finding the reports, each person should learn about the kinds and depth of information provided by reports in the category they are reviewing, and then write a one page summary of their insights. (A 5-person team would turn in a 5 page report.) The summary should include the following information and analysis:
1. Type and source of Information: Internal information that comes from company control reports; Environmental information that comes from syndicated market research firms, industry associations, or government sources; or Consumer information that comes from survey research.
2. Interpretation: Describe the data contained within the report and interpret the meaning of the information or numbers presented in ONE (1) of the reports within the category.
3. Use: Describe how the information would be used to make marketing decisions.
Marketing Management HARMASIM IS DESIGNED TO BE A CHALLENGING AND REALISTIC learning experience. One goal of the simulation is to provide you with the opportunity to apply your marketing knowledge in a dynamic environment over multiple years. It is in this setting—wherein customers, competitors, and the environment are constantly changing—that managers are challenged. Even with the constraints of limited decisions and time, you will find PharmaSim an excellent environment to experience these fluctuations. A secondary goal of using PharmaSim is to gain decision-making experience in an ambiguous environment. This is very different than a multiple-choice exam where there is one right answer. In a simulation, there is no single correct answer and all “answers” (e.g. decisions) are interrelated. Remember, there is no ultimate solution for PharmaSim. Many different strategies, if implemented well and followed consistently, can be profitable. Another learning goal is to experience making decisions in a group environment where you and your teammates will likely have different opinions on what your firm should do. If this is your first time experiencing a group decision-making process, you will likely find it challenging. That is part of the learning experience. However, be assured most marketing managers grapple with this environment on a daily basis. And no, it is not easy. Let’s start with some typical questions that can help you frame your group’s discussion. The questions below are grouped into three categories. We’ll address what these categories mean in marketing terms soon enough, but spend a few moments now thinking about these questions. Discussing these questions within your group will provide the strategic direction for your firm. P This section of the manual is designed to help you think through your decision-making process as a team. You may be using a textbook that also offers some advice, and your instructor will also have important insights to share. However, providing a simple framework for decisionmaking will help you think through the process. WHERE ARE WE NOW? WHERE DO WE WANT TO BE? HOW SHOULD WE GET THERE? • Who are our customers? What do they value? • Who are our competitors? What are their strategies? • What are our goals and capabilities? • What value should we provide? • To whom? • Can we do it better than the competition? • How should value be created for the customer? • From what products? Through what channels? • With what communication? At what price? Marketing Management Process — 33 — 5Cs…………………………STP……………………4Ps You will want to discuss these questions in the first few periods of the simulation. Coming to a common understanding in these areas will be important for your group decision-making process. If your group can agree on this analysis, then you will have a common perspective for decisionmaking. You will also want to review this periodically, as customers, competition, and your experience will change with time. Let’s translate these questions into terms that are commonly used in marketing management. So, the question, “Where are we now?” becomes Situation Analysis. The question, “Where do we want to be?” becomes your team’s Marketing Strategy. And the question, “How should we get there?” becomes your team’s Marketing Mix decisions. So, in effect, the situation analysis drives your marketing strategy, and your marketing strategy drives your marketing mix decisions. This process is graphically displayed below. There is a tendency for many of us to jump right into the marketing mix decisions without first going through the situation analysis and marketing strategy stages. This is not surprising. The marketing mix decisions are the hard and fast deadlines and decisions that we must make on a daily basis, whereas the first two stages are more preparatory in nature. However, without the framework of situation analysis and marketing strategy in place, we make decisions in a vacuum, leading to reactive rather than proactive choices. It is essential that your firm does your preparatory work first. So let’s spend a little time defining situation analysis and marketing strategy, before diving into the marketing mix decisions. Situation Analysis When marketers discuss situation analysis, they often use the term “5Cs.” The 5Cs refers to completing an internal and external analysis of the circumstances of the firm or business unit, specifically, the context (environment), competition (current and potential), customers (needs, SITUATION ANALYSIS MARKETING STRATEGY MARKETING MIX • 5Cs: Context, Competitors, Customers, Collaborators, and Company (Internal and External Analysis) • STP: Segmentation, Targeting, and Positioning (Determine the Value Proposition) • 4Ps: Product, Place, Price, Promotion (Determine How to Deliver Value) SITUATION ANALYSIS • 5Cs: Context, Competitors, Customers, Collaborators, and Company (Internal and External Analysis) − 34 − PharmaSim Student Manual 5Cs…………………………STP……………………4Ps buying process, etc.), collaborators (distributors, suppliers, alliances), and company (current products, image, resources, goals, etc.). The 5Cs analysis is where it all begins. Without a good understanding of the 5Cs, it is impossible to craft a successful strategy or make informed marketing mix decisions. Let’s discuss each of the 5Cs in more detail. For a more complete discussion, please refer to your marketing textbook. 5Cs—Context The environment (context) can have an enormous impact on marketing programs. Health concerns, waste disposal, energy shortages, and changes in commodities prices are some examples of “environmental” factors that have altered industries and marketing programs. A good example regarding children’s cold medicine was the 2008 announcement from the government regarding the use of OTC cough and cold products for young children. An excerpt from the transcript is provided below. Obviously, an announcement such as this will have a significant impact on demand for families with young children. But it also may have an impact on other people’s purchasing and use decisions. Think about how a manager might respond to this news. In PharmaSim, there are multiple environmental factors that your firm should monitor. The demand for cold medicine is very much dependent on the number of people reporting various illnesses, as well as seasonal influences (e.g., increased occurrence of influenza or high pollen count). There may be some underlying changes in health concerns that may be monitored by tracking physician recommendations or the purchasing decisions of consumers. The effects of inflation on costs and pricing should also be considered. 5Cs—Competitors Understanding the dynamics of competition is critical to the success of any marketing plan. Are you able to discern your competitors’ strategies? How do you expect them to react to your actions? Another benefit of understanding the dynamics of competition is that through the analysis of competitive marketing programs, one can often gain insight into what may be a more effective use of marketing resources. For instance, you might be tracking advertising expenditures and messages and notice that your competitor has a new program in place. Furthermore, that competitor also had a jump in market share. Perhaps the change in market share was caused, in part, by the change in the advertising decisions. Now your team can have a discussion about the The Public Health Advisory issued today, we strongly recommend that over-the-counter cough and cold products should not be used in infants and young children under two years of age because serious and potentially lifethreatening side effects can occur from use of these products. By reviewing and tracking your competitors’ marketing mix decisions, performance, and resources, one can develop an understanding of their competitive intent. Marketing Management Process — 35 — 5Cs…………………………STP……………………4Ps pros and cons of potentially making a similar change and whether or not that is appropriate for your situation and strategy. The most difficult facet of the dynamics of competition is anticipating the retaliatory moves of your competitors and deciding whether or not they might neutralize your marketing programs. One should consider the effects of changes in a competitor’s price, sales force, promotion, or advertising approach on the success of your strategy. Before you make a decision that is likely to cause a retaliatory reaction, think through whether it is in your long-term best interest to begin this process. Sometimes the short-term gain is more than offset by a long-term chain of negative events that is difficult to reverse. 5Cs—Customers The customer dimension of the 5Cs can be broadly partitioned into two areas for analysis. The first is the nature of demand. This includes understanding what benefits the customer is seeking, how they learn about products, what their motivation is for purchasing, where they buy the product, what they consider when choosing a product, and the like. The study of these types of issues is often called consumer behavior. The second analysis is the extent of demand. This includes market size and growth, purchase quantities and usage rates, etc. A more in-depth description of these two areas is provided below. Understanding the nature of demand involves answering the question, “How do consumers make their purchasing decisions?” To understand this process, one should describe the purchasing behaviors and attitudes of the consumer. You may use your own experiences to some degree, but do not impose your personal purchasing preferences on your target consumers. Try to find out what makes their decisions different from yours. Marketing research can be of great assistance in analyzing these behavioral patterns. One framework that you may find useful is the five-stage model of the buying process as shown below. PROBLEM RECOGNITION Someone in my household has a cough, cold, or allergy. I’m out of medicine. I’ve seen advertisements and/or promotions. INFORMATION SEARCH I’ve used the product before. A doctor or pharmacist recommended one. I’ve seen an advertisement. I’ve looked in the store. EVALUATION OF ALTERNATIVES What brands offer good relief of my symptoms? What else is important to me? What is the price compared to the benefit? PURCHASE DECISION What do I intend to purchase? What happens at the point of purchase? Special promotions? Location on shelf? Actual retail price? POST-PURCHASE BEHAVIOR Did it relieve my symptoms? Do I continue to use it the next time I have a cold? Was I satisfied with the product? − 36 − PharmaSim Student Manual 5Cs…………………………STP……………………4Ps In the above model, the final stage is post-purchase behavior. This is especially important with a consumer packaged-good because satisfaction and repurchase behavior are major drivers of future sales. If one assumes that a satisfied customer is more likely to repurchase and that the repurchase is fairly frequent (consider allergy medication during the spring, for example), then the impact of improving satisfaction and increasing repeat purchases is considerable. Let’s consider these drivers of satisfaction and repurchase in more detail. Consumers will typically have some expectations about product performance based on advertising, word-of-mouth, etc. They will also likely have some expectation of the value received for that particular set of perceived benefits. How well the product actually delivers those benefits at the actual price paid relative to the perceived value will be a driver of customer satisfaction, and ultimately of repeat purchase. It may be helpful to think of this as depicted in the graphic below. Drivers of Satisfaction and Repurchase in PharmaSim Expectations / Advertising Effectiveness Pricing Product Attributes Satisfaction Repurchase Try to discover whether the market can be segmented or grouped based on “what they want” and “how they buy.” One reason for doing this is to target your marketing resources at consumers with common needs and purchasing patterns. In most cases, this will lead to a more efficient use of your limited resources. Some useful variables to consider for segmentation include age, family life cycle, geographic location, and product usage. Attitude-based segmentation and consumer psychographics are other, and perhaps more insightful, segmentation methods. In PharmaSim, one has the ability to segment based on illness (product usage) and demographics (family life cycle/age). In any period of play, any of the Survey reports may be viewed based on any segmentation scheme. When viewing these reports, one should ask whether the information is significantly different using different segmentation schemes. Do all segments view your product in the same way? If not, why? Again, this should provide more insight into the purchasing process of targeted consumers. Finally, keep track of how the nature of demand changes over time. Consumers do not necessarily draw the same conclusion every time they make a purchase decision. Their needs may change, Once you have a general idea of how consumers make decisions, it is important to determine if groups of consumers with similar decision-making paradigms can be identified. Marketing Management Process — 37 — 5Cs…………………………STP……………………4Ps their information level may change, and the environment may change. It is important to anticipate how these dynamics evolve over time, and how this may affect marketing decisions. Extent of demand attempts to determine the current and future size of the market in units and dollars. This information is important to assess what market opportunities offer the greatest potential. How one measures or assesses potential, is a fundamental question. Some primary measures would include market size in units and dollars, market growth rates, and profit potential. Often, one will have to look at several dimensions and consider them in tandem. For example, a smaller, high-growth market may offer more long-term advantages than a larger, stagnant market. Market penetration addresses the measurement of actual sales to potential sales. For example, it is likely that less than 100 percent of the people suffering from colds are buying cold medicine. Some people may choose to just suffer through the symptoms or use home remedies instead of cold medicine. Therefore, the actual percent of people suffering from colds who choose to use cold medicine might be only 60%. This value of 60% would be considered current market penetration. If market penetration increased from 60 percent to 80 percent, actual sales would climb significantly (33 percent). If the current sales are 511 million units, increasing market penetration to 80% would increase sales to 681 million units. Average usage also can have a significant impact on your extent of demand analysis. If the average usage in the current market is 2.7 (i.e., each person who buys cold medicine uses an average of 2.7 bottles/period) what happens if usage increases to 3.0? Sales would climb 11 percent. Therefore, one should go beyond the basics of unit sales to consider market penetration and usage when estimating market demand. Finally, you may want to analyze markets on both an aggregate basis (i.e., the total market for OTC cold medications) as well as a segmented basis (e.g., the market for children’s cold medicine). Often the values for the total market are readily available, but segmented estimates are more difficult to calculate. The SHARE OF MFR SALES option on the MARKET menu provides an estimate of cold, cough, allergy, and nasal spray sales in manufacturer dollars. However, you may prefer segmentation based on usage or demographics. Also, remember that in the Share of Manufacturer Sales report, these “segments” are defined by what label the manufacturer puts on the brand rather than a consumer’s actual use. For example, you may have a brand labeled as “cold” which is often used for allergies. Considering all of the factors discussed above, how might unit sales in a particular segment, such as older cold sufferers, be estimated? First, using the SEGMENTATION option on the SURVEY menu, click the box in front of “cold” and “retired.” This selects the cross-section or segment to view. Then choose the BRANDS PURCHASED option on the SURVEY menu and identify the When evaluating extent of demand, there are three additional issues to consider, especially in PharmaSim: market penetration (which is often related to stage in the product life cycle), usage rates, and segments. − 38 − PharmaSim Student Manual 5Cs…………………………STP……………………4Ps percentage of the total population this segment represents. If this value is 8.7%, then sales to this market segment would be 44 million units/period (511 x 0.087 = 44). 5Cs—Collaborators The distribution structure of an industry plays an important role in marketing decisions. In some industries, manufacturers sell directly to the consumer, whereas in other industries there are multiple levels of distribution (brokers, wholesalers, retailers, etc.). It is important to understand the roles, strengths, and needs of each channel member. Typically, as more intermediaries come between the manufacturer and the consumer, the amount of control the manufacturer has in the marketplace decreases. In addition, the manufacturer may not receive important market feedback directly from the consumer, thus underscoring the need for marketing research. Much of the information regarding channel policies (markup, use of wholesalers, needs, etc.) is found in the case at the beginning of this manual. Remember to consider where your target customers are likely to purchase your medication. Finally, think about the role of the sales force in motivating the channel to carry your product. Another group of people who influence your customers’ decisions are doctors and pharmacists. They are more concerned with using the proper medication for the symptoms and situation and are less likely to be swayed by advertising. However, these influencers still need to be aware of a brand to recommend it, and if two brands offer similar relief, they may be more likely to recommend one brand over another if they are more familiar with it. So, advertising and sales force—especially the detailers (salespeople whose primary task is to inform clients about new products)—do influence doctors and pharmacists. In summary, think about the buying behavior of your collaborators, just as you do with your customers. Of course, collaborators’ motivations are quite different from those of the end user, but they are equally important to understand. 5Cs—Company Now we arrive at the final C—the company. Most people begin situation analysis with the company because internal functions are more easily known than external issues. However, we have purposely left the company last because situation analysis, especially from a marketing perspective, should have an external focus. For company analysis, consider your current and future products and brands. Are they successful? Are they growing? Good margins? Are they unique? Do they meet customer needs? Related to the product, think about your overall position and image in the marketplace with both customers and collaborators. Are you well known? Are you able to charge a premium price? Do you have strength in your distribution channels? It is important to understand how to motivate the channel in terms of discounts, allowances, support, and turnover, all of which play a role in whether or not to stock your brand as well as a brand’s visual placement on retail shelves. Marketing Management Process — 39 — 5Cs…………………………STP……………………4Ps You’ll also want to think about the resources available to your brands. In PharmaSim, this is your budget. Your budget is based on your overall performance on sales and profitability. Is your budget more or less than your competitors? Are you spending your budget wisely? Finally, consider your actual team in the simulation. Do you work together well? Do you share a common vision for your firm and brands? How will you analyze information and come to decisions as a group? Is there trust within the team? Often this aspect of the simulation is overlooked, but it is typically one of the more important determinants of success. This also mirrors the real world. An effective management team and workforce is one of your most important assets. SWOT Analysis One fairly common approach to grouping all of the 5Cs information in a more manageable form is to group issues into four categories—Strengths, Weaknesses, Opportunities, and Threats (SWOT). Strengths and weaknesses are internal (company) factors while opportunities and threats are external factors. A brief description of each is provided below. STRENGTHS Superior resources and/or skills that can be drawn on to exploit opportunities and diminish threats. WEAKNESSES Deficiencies in resources and/or skills that inhibit the firm’s ability to capture opportunities or that must be overcome to avoid failure or underperformance. OPPORTUNITIES Environmental (consumer, competitors, channels, economy, technology, deregulation, etc.) states of being or trends with positive consequences. They provide a potential new basis for competitive advantage and provide a possibility of improved performance if pursued. THREATS Environmental states of being or trends with negative consequences. They may impede the implementation of strategy, increase the risks of strategy, increase the resources required, or reduce performance expectations. Marketing Strategy Defining your marketing strategy consists of choosing a segmentation approach, target markets, and positioning objective. This is known as segmentation, targeting and positioning, or STP for short. STP provides the overall strategic direction for your company—who will you serve, how will you serve them, and on what basis do you intend to compete. As an example, if you are MARKETING STRATEGY • STP: Segmentation, Targeting, and Positioning (Determine the Value Proposition) − 40 − PharmaSim Student Manual 5Cs…………………………STP……………………4Ps selling automobiles, a simple STP statement might be, “We intend to serve the high income market in Canada through high performance, all-wheel drive vehicles.” Your marketing strategy should be based on the 5Cs analysis you did in phase one (or a variation of that such as SWOT analysis). It is important to build upon previous analysis as you proceed through each phase. Failing to do so is easy; we often like to jump right into decisions or strategy without referencing the underlying assumptions. However, if we fail to properly build on the 5Cs analysis, our strategy will have flaws, and we will only have ourselves to blame. Statements such as, “The strategy is perfect except for the possible exception of X, but let’s put that aside for now” reveal potential flaws that need to be addressed. Is “X” something that is essential to the success of the strategy? If so, don’t ignore it or “X” will haunt you as you move forward. Address it up front. Make sure you have analyzed it, and if it still makes sense to proceed, do so knowing that you have done everything you can to take into account the impact of “X.” After your team has agreed on an overall strategy for your business, the next step is creating a marketing plan. You may be asked by your professor to provide this for PharmaSim after a period or two. There are many different ways to write a marketing plan, so make sure to follow the directions provided by your instructor. The marketing plan provided on the PharmaSim course website in essence asks you to go through the 5Cs and STP analysis, and then put your strategy into writing. Most marketing plans will also include financial projections (sales forecasts, expense Often, one of Michael Porter’s three generic strategies will be the underpinning of your marketing strategy. They provide a good starting point for discussing strategy and formulating a marketing plan. They are: • Overall Cost Leadership. Here, the goal of the business is to achieve the lowest possible system cost (production, distribution, supply chain). Generally, a business that pursues this strategy will have the lowest prices and attempt to have the highest market share. This strategy works best for markets where price is the primary consideration in the purchase process. However, it is dependent on your firm being able to achieve the lowest cost position in the industry. If the industry is prone to technological advances that impact cost, it is difficult to achieve a sustainable advantage. • Differentiation. For a differentiation strategy, the goal for the business is to establish superior performance in one or more areas that are of importance to the customer and typically charge a higher price for that superior performance. This strategy is effective in industries where price is not the primary driver and customers are willing to pay more for a product/service that provides superior benefits. • Focus. Here the goal of the business is to leverage the customer relationship. By focusing on a more narrow range of consumer segments, a business can tailor products and services to best meet customer needs. This might be providing low costs or differentiation; whichever is appropriate for the target segment selected. Marketing Management Process — 41 — 5Cs…………………………STP……………………4Ps forecasts, product contribution) and variables that can be monitored to track the progress against the plan. Monitoring Results Against Plan What are the marketing metrics you will use in PharmaSim to track your progress? Net income and market share are good overall benchmarks of performance against other players. However, to determine if your marketing plan is working, you will need to use intermediate measures such as awareness, shelf space, recommendations, etc. One reason to track intermediate measures is to help distinguish between a symptom and a root cause of a problem. A symptom is an obvious result of a specific problem. For example, you may see that sales or profits are down. You have identified a symptom. Now you need to determine the underlying problem that caused this symptom. Keep asking “why” until you find the root cause of the situation. An example: SITUATION / SYMPTOM WHY? YES NO Profits are down Sales are down √ Market Share is down √ Total Market Share is down √ Problem (Root Cause) Competitor product launch √ In many cases, more than one problem can cause a general symptom like “profits are down.” In the example above, it might also be that total market sales are down, which would only compound the problem of a competitor’s product launch. Marketing Mix The marketing mix is the implementation of your marketing strategy. Often, these marketing mix variables are referred to as the 4Ps of marketing—product, place (distribution), price, and promotion. In PharmaSim, the 4Ps represent all of the decisions you make each simulated year. This consists of multiple decisions in each area. For example, the primary pricing decision is the MSRP, but there are many other factors to consider, such as volume discounts, promotional allowances, coupons, etc., which ultimately influence the final price paid by the consumer. Let’s look at each of the 4Ps in a little more detail. Marketing Mix—Product Recall the product development timelines discussed in the case. Every two simulated years, your firm will have the option to change the existing product or introduce a new product through (reformulation, line extension, or new product launch). These are important decision points for
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