THE MARKSTRAT CHALLENGE - INTRODUCTION I

B2C – DURABLE GOODS

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CONGRATULATIONS ON YOUR NEW POSITION

You have been recruited to manage the marketing

department of the Electronics division of a large
corporation:

• You will compete with several other firms to market two

types of durable goods to consumers

• You will be responsible for formulating and implementing

the long-term marketing strategy of your division

Your performance will be assessed each year on:

• Your business results – sales, market share gain and

improved profit – are combined in a Share Price Index (SPI)
Introduction to the Markstrat Challenge - Part I 2
YOUR ROLE FOR THE NEXT 10 YEARS

• Work in a highly competitive market

• Target consumer segments and position your products
• Interface with R&D to design and develop new products
• Launch new products and improve existing ones
• Interface with the production department
• Make marketing mix decisions: pricing, advertising, …
• Decide on your digital marketing strategy
• Decide on the size and priorities of your commercial team
• Launch Marketing initiatives
• Order market research studies to get up-to-date
information for decision making.
Introduction to the Markstrat Challenge - Part I 3
THE MANAGING
GETTING
MARKSTRAT YOUR
STARTED
WORLD FIRM

Introduction to the Markstrat Challenge - Part I 4

 THE MARKSTRAT WORLD
80 MILLION INHABITANTS: MARKET CONDITIONS:
• Large territory with a highly developed economy

• Inflation and GNP growth fairly stable and no

40% URBAN 25% SMALLER 35% major political, social or economic events are
(top 5 cities) URBAN RURAL anticipated.

• Currency: Markstrat Dollar ($)

UP TO 6 COMPETING FIRMS EACH MANAGED ANNUAL BUDGET FUNCTION OF RESULTS:

BY A TEAM:
• All firms start in a different situation:
Product specification, target consumers, All competitors operate under similar budget
brand awareness levels, market share, constraints, with annual budget granted as a
distribution coverage, profitability, R&D percentage of past period profits (EBT).
expertise, ...

• The marketing strategy of your firm should

be adapted to its particular situation;
Introduction to the Markstrat Challenge - Part I 5
 TWO PRODUCT CATEGORIES

You can market up to 5 brands in each category at a given time

INDEPENDENT
NOT SUBSTITUTES
NOT COMPLEMENTARY

SONITES VODITES

Introduction to the Markstrat Challenge - Part I 6

 SONITE PRODUCT ATTRIBUTES
Sonite brands are already marketed, each characterized by 6 main attributes

NUMBER OF
DESIGN BATTERY LIFE
FEATURES
INDEX 3 – 10 24 – 96 HOURS (H)
10 – 20

PROCESSING POWER
DISPLAY SIZE BASE COST
5-100 GIGAFLOPS
4 – 40 INCHES (”) (GFLOPS) MINIMUM $10

Introduction to the Markstrat Challenge - Part I 7

 VODITE PRODUCT ATTRIBUTES
No Vodites exist yet. Experts believe that they will be characterized by

RESOLUTION ENERGY EFFICIENCY CARBON

20 – 100 LINES/MM 10–100 BIO FOOTPRINT
COMPUTATIONS/WH 5 – 50 KG

CONNECTIVITY NUMBER OF APPS BASE COST

INDEX 3 – 10 5 – 100 MINIMUM $10

Introduction to the Markstrat Challenge - Part I 8

BRAND NAME CONVENTIONS

T O NIC
M E LODY
Company Product Freely chosen
marketing Category: letters or numbers
the brand:
O = Sonite
L, M, N,
R, S, T E = Vodite
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 SONITE CONSUMERS

Look for high quality, Highly interested in Like premium Tech dependent, have
quality products, good product knowledge Value performance
high-performance and Sonite product and convenience
easy-to-use products Demand high and price can be through extensive
seen as an product comparison. But very price
Can afford expensive performance products sensitive
products Quite price sensitive indication of quality Demand high quality–
price ratio.

Introduction to the Markstrat Challenge - Part I

10
 DIFFERENT SEGMENTATION SCHEME FOR VODITES
FOLLOWERS
Sales
TYPICAL SEGMENT SIZE EVOLUTION OVER
TIME

EARLY
ADOPTERS

INNOVATORS

Introduction to the Markstrat Challenge - Part I

Time 11
 MEDIA CATEGORIES

This is media owned and Paid media is bought by the Earned media is essentially Traditional media is any Outdoor media is all
controlled by the product. company to build its online word of mouth, form of mass media that reaches
This includes company's position, usually display usually seen in the form of communication available consumers when they
web site, mobile apps, ads, paid search or 'viral', mentions, shares, before the advent of are outside their homes.
blogs and their social sponsorship. Ideally this reposts, reviews, digital media. This Common forms of
presence (Facebook, investment feeds ‘owned’ recommendations, or includes television, radio, outdoor advertising
LinkedIn, Twitter, etc.) and creates ‘earned’ media content picked up by 3rd newspapers, books, and today fall into three
party sites magazines. categories: Billboards,
Public Transport,
Sponsored Events.

Introduction to the Markstrat Challenge - Part I 12

 DISTRIBUTION CHANNELS

• Small stores not necessarily • Operate on a low-price, high- • Includes web-only

organized in chains volume basis • Companies’ eStores
merchants and retailers’
websites • Direct sale to consumers
• Located close to their • Lower level of service than in
customers and providing a specialty stores with better margins
• High convenience as
high level of service and consumers shop from home
technical support • Depth of product lines usually • Prices may be higher than
restricted to a few units in mass distributions
• Almost unlimited choice
• Broad product line including and easy comparison
high-end products • Distribute the cheaper, low-
performance products • Likely to become more
• Preferred for Vodites important
• Low level of service not
adapted to first Vodites

Introduction to the Markstrat Challenge - Part I 13

THE MANAGING
GETTING
MARKSTRAT YOUR
STARTED
WORLD FIRM

Introduction to the Markstrat Challenge - Part I 14

 YOUR OBJECTIVE

• Maximize your Share Price Index

• You will have to optimize:

• Market share
• Sales growth
• Net contribution
• Cumulative net contribution
• R & D investments

• ….but the main objective is to LEARN!

Introduction to the Markstrat Challenge - Part I 15
 FROM DATA TO STRATEGY
You will need to do a certain amount of analysis before setting a strategic direction for your firm

Data Information Strategy

Introduction to the Markstrat Challenge - Part I 16

 TACTICAL DECISIONS PERIOD 1

• Launching
marketing & digital • Production planning • Allocate • Size of commercial • Ordering industry-
initiatives at the communication team wide market
company level • Pricing efforts between studies
online and • Allocation across
• Initiatives have an • Advertising & traditional media distribution • Ordering market-
effect on purchase segmentation channels specific market
funnel over 1 year strategy studies
can be repeated • Allocation across
marketed brands

Introduction to the Markstrat Challenge - Part I 17

 PRODUCTION PLANNING
• A production plan must be submitted each period for each brand, taking into
account:
• The potential sales for the brand
• The existing inventory at the beginning of the period
• The flexibility of the Production department

• From one period to the next, production plans may be increased or decreased
without any penalty
• Actual production levels are automatically adjusted in response to actual
demand by plus or minus 20%
MARKETING MIX

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SAMPLE PRODUCTION PLANNING DECISIONS
180,000 150,000
IDEAL
154,000 124,000
Production Lost Sales = 0
Your Plan Potential Actual
Estimated Sales Production &
(your
Sales decision) (market (reduced) Ending Inventory = 0
30,000
demand)
Inventory
PESSIMISTIC
154,000 28,000
80,000 96,000 Lost Sales
110,000 Potential
Production Actual
Your Plan
Sales
Production
Ending Inventory = 0
Estimated (market
30,000 (your decision) (Increased)
Sales Inventory demand)

230,000 200,000 OPTIMISTIC

160,000 36,000
Production 154,000 Ending Inventory
Your Plan Actual
Estimated (your Potential
Production
Sales decision) Sales
(reduced)
Lost Sales = 0
30,000 (market
demand)
Inventory
Introduction to the Markstrat Challenge - Part I 19
ESTIMATING LOST SALES

Comparing purchase intentions with market shares at the end of the

period can give you a feel for how many sales you have lost

Purchase
Intentions − Market
Shares  Sales Lost
to

Competitors
“Order-book”
Industry

Introduction to the Markstrat Challenge - Part I 20

 PRICING
• Every year, you set the Recommended Retail Price in $

MARKETING MIX

• To decide on a price, you should take into account

• The margin of the distributors
• The discounts made by some channels
• Consumers’ expectations
• Competitive prices
• Etc…
Introduction to the Markstrat Challenge - Part I 21
 SAMPLE PRICES AND CONTRIBUTIONS

• Assuming a price of $400 and a transfer cost of $125

Specialty Mass
eCommerce eStore
Stores Merchandisers

Average Discount None 10% − $40 5% − $20 None

Actual retail price $400 $360 $380 $400

Distribution margin 40% − $160 30% − $108 30% − $114 20%* - $80

Selling price $240 $252 $266 $320

Transfer cost $125 $125 $125 $125

* For eStore there is no distributor margins, the 20% is used for the eStore server management and cost

Introduction to the Markstrat Challenge - Part I 22

 ADVERTISING
• To build brand awareness
• To make consumers familiar with product
characteristics and price
• To develop demand for the whole market
• To influence the decision of distributors to carry
or not your products
• To create a barrier to entry for your competitors
Media budget : to purchase Research budget : to improve Segmentation Strategy: Indicate
media space and time the quality / persuasive power which consumers should be targeted
of your message & normalize to 100% to save

MARKETING MIX

Introduction to the Markstrat Challenge - Part I 23

 DIGITAL MARKETING
• Allocate efforts across Traditional and Digital Marketing for each product.
• Specify a media strategy for each Media Category.

Media Strategy: Indicate which Media

should be prioritized, You can use the
normalize button to normalize to 100%

Introduction to the Markstrat Challenge - Part I 24

 SALESFORCE & COMMERCIAL
• You decide your Salesforce & Commercial efforts for each channel and product:
• Number of Full-Time Equivalent people in traditional channels
• Commercial budget in Digital Channels
• Your commercial team is responsible for obtaining and entering orders, and for
supporting distributors
• Visiting stores, distributors and wholesalers
• Enrolling customers in trade programs
• Helping stores organize and conducting promotions
• Taking orders and handling out of stock situations
• Participating in trade shows

SALESFORCE &
COMMERCIAL

Introduction to the Markstrat Challenge - Part I 25

 MARKETING POWERHOUSE
• Available to reinforce your overall marketing efforts.
• Some initiatives will be available later during the simulation, and some events will have a specific seasonality.
You can implement up to three initiatives per year.
• The initiatives are grouped into two categories:
• The Marketing Initiatives
• Trade in offers & bundles
• Partnerships
• Product placement
• Additional services
• The Digital initiatives
• Influencer & content marketing
• Paid advertising
• Organic channels
• Retargeting
• Email Marketing
• Mobile App building
• Performance marketing
• Cross selling

Introduction to the Markstrat Challenge - Part I 26

MARKETING BUDGET FOR THE COMING PERIOD
Budget based on the previous period’s performance

40% of previous year EBT,

with a minimum of $10m
and a maximum of $20m

Loan and budget

increase/decrease granted
by instructor

Total available budget

Expenses generated by
your decisions

Deviation from budget.

Should always be positive
or equal to 0

Introduction to the Markstrat Challenge - Part I 27

UNDERSTANDING P&L

Introduction to the Markstrat Challenge - Part I 28

UNDERSTANDING BRAND CONTRIBUTION

Introduction to the Markstrat Challenge - Part I 29

 GETTING STARTED
Ready to get started on your first year’s decisions?
• Get familiar with Markstrat and with your teammates
• Do not make any major changes in your firm's operation in the first round!

ANALYZE DECIDE RUN

PERIOD 1 PERIOD 2 PERIOD 3 PERIOD 4 PERIOD 5 PERIOD …

THAT’S IT – YOU ARE READY TO START. GOOD LUCK IN ACHIEVING ALL YOUR OBJECTIVES!

Introduction to the Markstrat Challenge - Part I 30

ORGANISE YOURSELVES AND MANAGE THE GROUP PROCESS

CONFLICTING
OPINIONS INFORMATION
OVERLOAD

TIME
PRESSURE

Introduction to the Markstrat Challenge - Part I 31

THE MANAGING
GETTING
MARKSTRAT YOUR
STARTED
WORLD FIRM

Introduction to the Markstrat Challenge - Part I 32

ACCESS THROUGH WEBSITE OR DIRECT URL

OR 1 Go to http://digitalmarkstrat.stratxsimulations.com

Sign in www.stratxsimulations.com using your

1 Participant Activation Key (PAK)

2 Click the Markstrat Logo

Enter the information

given by your Instructor
Introduction to the Markstrat Challenge - Part I 33
ANALYZE REPORTS AND MARKET STUDIES BEFORE MAKING DECISIONS

Introduction to the Markstrat Challenge - Part I 34

CHOOSE A NAME FOR YOUR FIRM

It must start with the initial

of your firm and be 8
character long maximum

Introduction to the Markstrat Challenge - Part I 35

CHECK YOUR BUDGET AT REGULAR INTERVALS

Click here
to check
your
budget

Introduction to the Markstrat Challenge - Part I 36

CHECK YOUR ERRORS & WARNINGS AT REGULAR INTERVALS

Click here
to check
your
messages

Introduction to the Markstrat Challenge - Part I 37

RESPECT THE DEADLINES – GOOD LUCK !

ON YOUR MARKS,
GET SET, GO! 38