MARKSTRAT3 - FIRM "U"
Marketing Team
Mare Lynn Fitch
Gina Blum
Brian Fowler
Donna Johansen
Prepared for Dr. Glynn Mangold-Mkt. 667
Fall 2000
December 7, 2000
TABLE OF CONTENTS
TOPICS PAGE
I. EXECUTIVE SUMMARY 3
II. FINANCIAL OVERVIEW OF FIRM U 5
III. STARTING POINT FOR FIRM U 6
IV. OVERALL MARKET STRATEGY FOR FIRM U 10
V. FIRM U CURRENT POSITION-PERIOD 8 14
VI. LESSONS LEARNED BY FIRM U 18
VII. RECOMMENDATIONS 20
VIII. APPENDICES: A-D 23
EXECUTIVE SUMMARY
Date: December 7, 2000
To: Dr. Glynn Mangold
CC: Mare Lynn Fitch, Gina Blum, Brian Fowler, and Donna Johansen
From: Outgoing Marketing Department for Firm U
RE: Report to Incoming Management
> Firm U currently maintains the largest Market Share (49.4%) and largest Stock Price Index (2,618) of all the five firms in the Sonite market. [See Financial Overview for complete financial breakdown.] Overall, the Firm has performed far above our initial expectations. When preparing this report, we approached it from the standpoint of the four elements of a marketing mix. Below is a brief summary of each component of this report.
Products
> At the start of our management tenure, we began with two commonplace Sonite brands. By the conclusion of our influence, we had five profitable Sonite brands and one Vodite project. We utilized all statistical analysis tools provided in the Markstrat3 program to better position our brands according to the desired preferences of each of the five consumer segments. Primarily, we targeted only three of the five consumer segments, but our market standing (#1) afforded us the opportunity to expand into the other two consumer segments as well. We spent a great deal of time maintaining our market status by constantly observing and modifying these brands. We placed major emphasis on brand modification as a way to stay ahead of changing consumer preferences, and maintain market share.
> We also spent a great deal of time attempting to master the production ordering levels for our brands. Initially, we had difficulty ordering enough product, and subsequently, we lost sales. And as periods passed, we had difficulty predicting changes in production levels as sales declined. Production was our greatest product challenge. We believe that trusting personal experience, and using every statistical tool possible is the only way to overcome these brand shortages and surpluses.
> When considering the Product side of their marketing mix, future management teams need to complete the current Vodite project, and concentrate on the continual modification of Sonite and Vodite brands. They must continue to use all available statistical data, and apply personal market experience to take full advantage of Firm U's large market share.
Price
> During Team U's tenure as management, we have learned that positioning is the key to optimizing sales. We found that consumers are willing to pay top dollar for a quality product. Proper positioning of a brand allowed us to optimize our retail prices, while constantly increasing our market share.
> Statistical analysis and feasibility studies were paramount in our quest for maximum sales and market share acquisition. We attempted to fine-tune our brands to the specifications of each target market, and charge the maximum price that each was willing to pay for that brand.
> Modification of our brands was another vital element that affected prices. When we recognized a trend in decreasing sales for any brand, we lowered the price and explored brand modifications. By modifying the brand, we were able to raise the price back up to its optimal level, and gain sales due to the fact that our brand was already perceived as being of quality.
Place
> Firm U implemented a distribution strategy that would maximize market share, sales revenue, and profits at the three different retail options available in the Sonite market. The three retailing points were Specialty Stores, Department Stores, and Mass Merchandise locations. Our strategy was to match the results taken from the market research studies (Growth Patterns of Distribution Channels, Consumer Growth Patterns, Consumer Shopping Habits, and Consumer Purchasing Intentions), and draw conclusions that would place our Sonite products at the retail locations where the products' intended consumer would shop. Each period, we deciphered the pattern and adjusted our distribution to reflect the preferences of our consumers in each of the targeted segments.
> We monitored our competitors and evaluated their success or failure in Sonite product placement. These decisions, coupled with the Market Research Studies' conclusions, gave us the needed criteria to steadily increase our market share. By attaining such a large portion of the market share, we were compelled to alter our overall marketing strategy from a "Fast Follower" to that of an "Pioneer."
> Our placement strategy was a decisive factor in the overall success of the firm. By adhering to our market strategy and laboring in numerous staff meetings, the result of the placement of our Sonite products was success, and a standard for all incoming management to be measured against in this firm as well as our competitors' marketing departments. Our successful implementation and execution of a targeted distribution plan thrust us into the forefront of the Sonite market, and secured our position as the industry leader.
Promotion
> Combining the elements of brand positioning, advertising research, and sales force increases was key to our promotional strategy. Accurate interpretation and application of the information gathered from the Market Research Studies proved vital to our promotion efforts.
> The positioning element of our promotional strategy included allocating 10% of each brand's advertising media budget to advertising research. This was to ensure that our message of brand superiority would be transmitted effectively. We also allocated 100% of the advertising media budget for each brand to it's targeted consumer segment.
> We effectively increased our sales force as another promotional strategy. This afforded us a successful distribution channel dominance, and also provided us with well-trained personnel who were able to develop long-term relationships with buyers. The personal touch should never be overlooked in a promotional campaign.
> Our successful application of the promotion mix - advertising, personal selling, sales promotions, and public relations - has held our firm on solid ground with our competitors. We stand ready to tackle any new and challenging developments that the market has to offer in the coming periods.
FINANCIAL OVERVIEW OF FIRM U
> Several financial indicators provided our marketing team with valuable statistics to assist in our decision-making throughout our periods of influence:
> The Market Share [The ratio of our company's sales to total sales of all competitors in Sonite Market.] of our firm has grown steadily from Period 0 to Period 8. In the earlier periods growth was relatively small, but still escalating. The average growth of our Market Share was 12 percent. The Total Market Share in Period 8 was 2.47 times (147%) the Total Market Share of Period 0. We have maintained the largest Market Share in the Sonite market since Period 4. The following exhibit offers a tabular illustration of our Market Share growth throughout our management:
Market Share Growth
Period
Mkt. Share
% of Growth
0
20.0
-
23.4
7.00%
2
23.6
0.85%
3
24.3
2.97%
4
24.5
0.82%
5
26.3
7.35%
6
34.3
30.42%
7
40.1
6.91%
8
49.4
23.19%
*See Appendix A for a graphical representation of data.
> The Retail Sales for our firm have also expanded throughout our management. Retail Sales Totals have provided us with a valuable comparison tool for our brand, distribution, and promotion decisions. The average growth of our Retail Sales was 20.2 percent. The Retail Sales in Period 8 were 4.36 times (336 %) the Retail Sales of Period 0. The following exhibits offers a tabular illustration of our Retail Sales growth throughout our management:
Retail Sales Growth
Period
Retail Sales ($)
% of Growth
0
59,923
-
83,354
39.10%
2
97,464
6.93%
3
11,872
4.78%
4
17,082
4.66%
5
31,103
1.98%
6
73,662
32.46%
7
98,164
4.11%
8
261,156
31.79%
*See Appendix A for a graphical representation of data.
> The Net Contribution After Marketing is one of the key indicators we used when determining the success of each of our Sonite brands. This performance indicator assisted us with decision-making, and provided us with information regarding the outcome of expenses per brand. The average growth of our Net Contribution was 21.5 percent. The Net Contribution for Period 8 was 4.73 times (3.73%) the Net Contribution of Period 0. The following exhibit offers a tabular illustration of our Net Contribution After Marketing for each brand, as well as the total Net Contribution for our firm:
*See Appendix A for graphical representation of data.
> Throughout the course of our management, we utilized several other Key Performance Indicators to provide us with statistical data prior to our decision-making, and also as a form of comparison on the success of our decisions. The following exhibit offers a tabular representation of these other Key Performance Indicators:
Key Performance Indicators
Periods
Stock Price Index
Revenues
ROI
Cumulative ROI
0
,000
39,133
2.57
2.57
,329
54,564
3.44
3.06
2
,519
64,032
3.01
3.03
3
,642
73,990
3.03
3.03
4
,621
77,488
.95
2.71
5
,686
86,500
2.87
2.74
6
2,053
14,640
3.54
2.88
7
2,236
30,823
2.02
2.71
8
2,618
72,953
4.61
2.98
*See Appendix A for graphical representation of data.
> Our Stock Price grew by 162 percent, and our Revenues grew by 342 percent. Our Cumulative Return on Investments peaked at 18 percent above Period 0's ROI, and finished at almost 16 percent above Period 0's ROI total.
STARTING POINT FOR FIRM U
Product
We began our management tenure in Period 0 with only two brands, SUSI and SULI. These brands were competing against eight other brands from four different firms. (A, E, I, and O).
> As we began our management, production levels for our two brands were a little difficult to determine. The first few periods were plagued with brand shortages, especially for our high-end brand, SULI. The consumer demand was actually higher for this brand than we anticipated. Because of these shortages, we lost important sales early on and inevitable Market Share.
> We selected to maintain the original characteristics of our two brands throughout the early periods of our management. The following exhibit offers an illustration of the physical characteristics of our brands:
Physical Characteristics of ...
This is a preview of the whole essay
> As we began our management, production levels for our two brands were a little difficult to determine. The first few periods were plagued with brand shortages, especially for our high-end brand, SULI. The consumer demand was actually higher for this brand than we anticipated. Because of these shortages, we lost important sales early on and inevitable Market Share.
> We selected to maintain the original characteristics of our two brands throughout the early periods of our management. The following exhibit offers an illustration of the physical characteristics of our brands:
Physical Characteristics of Firm U Brands
Weight
Design
Volume
Max Freq.
Power
Brands
(Kg)
(Index)
(Dm3)
(KHz)
(W)
SUSI
8
3
75
25
2
SULI
3
8
40
40
75
*Brand Characteristics courtesy of Firm U Meeting Reports.
> Our early intentions were to target obvious consumer segments for our brands. This was determined through our early analysis of purchased market studies and brand positioning. SUSI was originally selected to target the Singles and the Others, while SULI was selected to target the Professionals and the High-Earners. Below is a brief summary of the information we gathered on each targeted consumer group:
* SUSI targeted consumer segments:
. The Singles: This customer group lives alone, and appears to be less technically knowledgeable than the other segments. They are primarily interested in the performance of the brands they purchase.
2. The Others: This group is made up of customers who do not fit into any of the other consumer segments. They are currently the largest segment, and are forecasted to grow by almost 100 percent in the future. They are most interested in the economy of the Sonite brands.
* SULI targeted consumer segments:
. The Professionals: This customer group is highly educated and receives elevated incomes in their occupations. They are independent with regards to these occupations, and are very involved in social activities. They are primarily interested in the performance and convenience of the brands they purchase, but the social status of a brand is their greatest motivator to purchase.
2. The High-Earners: This customer group also receives elevated incomes, but they are less educated, and retain lower levels of occupational independence than the Professionals. They are most interested in the convenience of the brands they purchase.
> The Research and Development for new brands was very limited in the early periods of our management. Based on our limited knowledge, we were satisfied with feasibility studies for two potential brands. Although we attempted to develop two brands that we felt would meet the needs of our low-end and high-end consumers, we quickly shelved both these projects, PSUCH and PSUPR. After further consideration, they were inadequate to meet the needs of their targeted segments.
Price
> The pricing of the all brands in the Sonite market began on an even playing field. SUSI, our low-end brand, was priced at $250, while SULI, our high-end brand, was priced at $500. As we watched sales take place, we adjusted prices as to maximize our stock price and increase sales.
> Prior to introduction of new brands, we conducted feasibility studies in an attempt to determine the reception of our brands by our targeted segments. We used statistical analysis as well as past experience to determine the optimum price that we could charge for a new or modified brand. The following table offers a display of our brand pricing for the early periods of our management:
Brand Pricing-Early Periods
Period
SUSI
SULI
SUFF
0
$250
$500
$250
$500
-
2
$240
$485
-
3
$240
$485
-
4
$250
$485
$370
*Pricing data courtesy of Firm U Meeting Reports.
Place
In Period 0, there were three possible points of distribution for the Sonite Products. All competing firms sold their brands from these same three locations:
> Specialty Stores carry Sonites as a primary product, and offer specialized services to consumers.
> Department Stores handle a wide variety of merchandise, and may even have a separate department that carries Sonite brands.
> Mass Merchandise Stores carry a large number of brands, of which the Sonites may only be a small percentage. In the first periods of our management, the Mass Merchandise stores were the only growing distribution channel.
> The following exhibits offers a tabular display on the early growth patterns of each channel:
Early Growth Patterns of Distribution Channels
Period
Specialty
Dept.
Mass
0
30,455
6,763
9,595
30,000
6,750
0,000
2
29,545
6,736
0,413
3
29,091
6,719
0,835
*See Appendix B for Graphical Representation of data.
> Our Market Share based on sales shows a pattern of increase over much of this time period. As the R& D Department became more experienced and the marketing research material grew, we were able to place a better Sonite product in the various selling locations. The research studies displayed the buying patterns and preferences of the consumer along with their possible segment growth. With this material, we were able to draw conclusions to implement a distribution strategy to market our brands. The following exhibit displays the market shares based on unit sales for the distribution panel:
Distribution Panel - Market Shares Based on Unit Sales
Period
Brand
Specialty
Dept.
Mass
0
SUSI
SULI
7.7%
2.3%
0.4%
9.6%
2.5%
7.5%
SUSI
SULI
8.6%
5.6%
0.6%
2.2%
4.9%
8.9%
2
SUSI
SULI
7.4%
6.7%
2.1%
2.6%
7.5%
8.9%
3
SUSI
SULI
4.8%
6.0%
1.7%
4.9%
7.8%
0.0%
* Data courtesy of the Markstrat3 Program.
> Our growing Market Share was coupled with promotional affairs to bring about brand awareness that would build a loyal consumer base. At various establishments, displays were used to promote the different brands' unique features. Free gift items dealing with seasonal (i.e. a basketball, MLB baseball jersey, or NASCAR memorabilia) and regional (i.e. Los Angeles Laker team logo basketball, New York Yankee Jersey, or a Dale Earnheart Miniature racing car) activities were given away when consumers purchased a particular brand. There was also a nationwide lottery drawing to win an all-expenses-paid weekend to the NFL Super Bowl. These distribution promotions, aided by our sales force, helped to bring our brand name directly to the public. It also increased sales revenue, market share, and above all-profits.
Promotion
> The promotion activities in Period 0 were comparable for all firms in the Sonite market. These activities consisted of an equal distribution of the sales force among the three distribution channels, a proportionally higher amount of media advertising and research focused on the high-end products, but a lack of brand positioning for target segments.
> In Period 1, we began to lay the foundation for our firm's future promotional activities. We were sure to focus on each component of the promotion mix: advertising, personal selling, sales promotion, and public relations.
> Our promotional agenda beginning from Period 1 and throughout the early periods of our management, focused heavily on the following key areas:
* Positioning our brands at the intended preferences of our targeted segments.
* Researching our advertising message(s) to ensure the highest quality and most effective output was generated.
* Increasing our sales force to provide effective channel coverage and training for future brand introductions.
> Beginning in Period 0, Market Studies were purchased and utilized to gather information in relation to customer product preferences, channel preferences, buying intentions, and market competition. This data was used as the basis for all promotional decisions in future periods.
> The following table offers a brand summary of our advertising media and research expenditures as well as our sales force expenditures during the early periods of our management:
Advertising and Sales Force Expenditures
Period
Brand
Media
Budget
Research
Budget
Total
Sales Force
Budget
Total
# of Salespeople
0
SUSI
,440
60
612
SULI
2,400
00
$4,000
612
$1,224
60
SUSI
,575
87
898
SULI
2,875
62
$4,699
,117
$2,014
92
2
SUSI
,750
75
934
SULI
3,070
307
$5,302
,019
$1,953
92
3
SUSI
,934
93
,067
SULI
2,364
236
$4,727
,622
$2,689
20
*Advertising and Sale Force Totals courtesy of Firm U Meeting Reports.
> In addition to the above information, the following table shows how our sales force was distributed during the early periods of our management, and also includes the percentage of effort per channel by brand.
Number of Sales People and % of Effort by Distribution Channel
Period
Specialty
Stores
Department
Stores
Mass
Merchandise
Total
0
20
SUSI 50%
SULI 50%
20
SUSI 50%
SULI 50%
20
SUSI 50%
SULI 50%
60
45
SUSI 40%
SULI 60%
26
SUSI 40%
SULI 60%
21
SUSI 60%
SULI 40%
92
2
40
SUSI 34%
SULI 66%
30
SUSI 50%
SULI 50%
22
SUSI 70%
SULI 30%
92
3
47
SUSI 18%
SULI 82%
43
SUSI 45%
SULI 55%
30
SUSI 66%
SULI 34%
20
* Sale Force Distribution and Efforts courtesy of Firm U Meeting Reports.
> Establishing our early promotional budget combined features of the Affordability Method and the Objective and Task Method. Each period required adjusted emphasis on the various components of our overall promotion plan.
OVERALL MARKET STRATEGY FOR FIRM U
Product
> For the course of our management, our marketing team decided that we would follow a Product Differentiation Strategy for our new and existing brands. We strove to develop new brands, and modify existing brands according to the expressed interest of each specific targeted consumer segment. We utilized the regression analysis provided in the Markstrat3 program to approximate where consumer Semantic Preferences would be in the following two to three periods. From this analysis, we were able to develop new brands that would be ready for introduction in later periods, as needed. The brands would offer uniquely desired characteristics to each segment of the Sonite market.
> We pursued two brand marketing strategies throughout the course of our management:
* Initially, we exploited a Fast-Follower Strategy for our firm. (Periods 0-4) We wanted to analyze the results of our competitors' brand decisions, and then allow these results to influence our decisions. Once obtaining the necessary data, we modified and introduced brands that would leapfrog over any shortcomings of our competitors, as well as target any untapped consumer segments. We also only targeted three consumer segments: the Others, the Buffs, and the High-Earners. Our Brand SUFF was developed to target the BUFFS segment of the Sonite market. (This consumer segment is enthusiastic and generally very knowledgeable regarding new and available brands. Their greatest interests lie in the quality and technical features of the brands they purchase.) This strategy was extremely successful, in that we rose to become the number one firm by Period 4. Once we accomplished this, we were forced to alter our marketing strategy to accommodate our new leader status. We could no longer be Fast-Followers, we had to consider ourselves Pioneers for the later part of our management.
* As Pioneers (Periods 5-8), we continued to scrutinize all segments of the Sonite market. We wanted to maintain our success with our SUSI (exclusively targeting the Others) and SUFF (exclusively targeting the BUFFS) brands. As innovators, we knew it was now important for us to target all five consumer segments of the Sonite market. We introduced two additional brands (SUSU & SUPR) and modified our existing brand (SULI) by Period 8. We also knew it was necessary to continue to modify our brands to maintain our success. As consumer preferences changed, so did our brands. Our most popular brand, SUSI, was actually modified twice during our management tenure. Below is a summary of our brand portfolio for the later periods of our management:
Brands
Introduction to
Market
Target Segment
Transfer Cost-
Period 7
SUSI
Prior to Period 0
Modified Periods 4&7
Others
$65.00
SULI
Prior to Period 0
Modified Period 8
High-Earners
$180.00
SUFF
Period 4
Modified Period 7
Buffs
$199.00
SUSU
Period 5
Singles
$111.00
SUPR
Period 6
Professionals
$183.00
* Data courtesy of the Markstrat3 Program.
> The Production levels for our brands were determined every period after careful examination of our potential sales totals in the Markstrat3 Marketing Plan. Once sales projections were obtained, we determined what our competitors with similar brands sold, and what sale percentage increases we had experienced in the past. We then added a percent margin for error and gut reaction based on our vast market experience. In most cases, the production levels were estimated to be about 10 to 20 percent higher than the obtained Markstrat3 sales projections.
> Throughout our management, we discussed our entry into the Vodite market. We knew it would only be possible if we could achieve a budget over $20 million. However, we did take steps to prepare for this move. We began ordering Market Studies for the Vodite market in Period 5. (Market Forecast and Semantic Scales) We also completed a Feasibility Study for this market in Period 6. We had every intention of completing our R&D project in Period 9, and introducing a new Vodite brand in Period 10.
Price
> Our pricing strategy early on was to position our brands as high quality. We found that consumers were willing to pay more for a quality product. Our firm continued to make improvements to meet the demands of our target markets, thus giving us the ability to maximize retail prices.
> By optimizing our retail prices early on, we were able to offer discounted prices in periods prior to modification. Therefore, when we lowered prices to meet competition, we were able to increase market share because our brand was already perceived as higher quality.
> Statistical analysis helped us to determine which price would generate the most sales. We used this strategy and it greatly worked to our advantage. We watched purchase intentions and ideal values of our target markets closely. As price became more or less important as an ideal value, we adjusted it accordingly.
Place
> In the early periods (0-3), we concentrated on the Mass Merchandise stores because of the consumer growth in this channel and the shopping habits of our targeted segments (Singles and Others). A strong effort was initiated to sell our low-end brand (SUSI) at the Mass Merchandise locations. SUSI was also a fast-moving Sonite product at the Department Stores locations. Our sales force was evenly divided across these two types of markets. Our strategy entailing the SULI brand was just the opposite. Knowing that this was our high-end item, we channeled this Sonite product mainly through the Specialty and the Department Stores due to the item's price and the shopping habits of its intended customers, which included the "Buffs, Professionals, and the High-Earners".
> The Marketing and Advertising Departments were involved in further implementation of the distribution strategy to bring about brand awareness through displays and sales promotions ranging from lottery drawings, giving away a "demo" brand item, to receiving a free sports item with the purchase of a specific brand item. As the research grew over our management periods, we countered our competitors strategy with that of a "Fast Follower" Strategy. We evaluated competitive maneuvers in brand placement and utilized the Multi-Dimensional Scaling from our Marketing Research Studies to successfully market our brands more effectively and efficiently.
> Throughout the middle periods (4-5), we executed our distribution strategy as a "Fast-Follower," always evaluating our competitors' brand placement against the most recent market surveys. But as our Market Share grew and as our number of brands increased, we were forced to implement a new strategy, that of a "Pioneer." We expanded our Sonite products, which were specifically developed for a particular market segment (SUFF for the Buffs, SUSU for the Singles, and SUPR for the Professionals), which promptly sent us to the forefront of the Sonite market. Each brand was carefully marketed in the various types of selling locations, which was determined through meticulous study of the present and past research studies and ongoing public surveys. The sales force concentrated its efforts on pushing our new brands into the public eye with various displays and discounts. At first the sales force was somewhat evenly divided across the different selling locations, but we began to reallocate our distribution to the Specialty and Department Stores to maximize the capital investment made in our high-end brands. We concentrated our efforts on where our brand loyal customers shopped.
> In the final periods (6-7), we continued to concentrate our efforts at utilizing the "Pioneer" Strategy. The tireless, meticulous study of research material helped our experienced R & D Department modify our existing brands, and aided us in placing these brands at precise selling locations. This allowed us to maximize each brand's selling potential, brand revenue, and market share. We continued to focus our efforts on putting the brand where the potential buyer shops. The sales force continued to utilize various discounts and colorful displays to push the different brands. Free gift items were given away at different regional locations. There was also a continued effort to utilize several forms of media to promote our brands and their locations in order to keep brand awareness elevated and snatch "brand switchers" in the Sonite market.
Promotion
> We focused on three key areas in our promotion strategy: positioning our brands, researching our advertising messages, and increasing our sales force.
> Advertising dollars alone will not 'move' a product, even if the amount is gradually increased. We used the perceptual objectives of economy, performance, and convenience in an attempt to successfully position or 'pull' our brands as closely as possible to the consumer preferences. This information was gathered from the Market Research Studies.
* When employing this strategy, it was necessary to increase our advertising research budget in order to ensure our message would be communicated effectively. The budget we allocated for this strategic element was 10% of the media budget for each brand.
> We increased our sales force in the early periods to gain additional exposure for our brands in the distribution channels, and also in anticipation of the introduction of new brands to the market. We continued to add to our sales force as more competition entered the market.
* This strategy allowed our sales force to devote more time to personal selling and develop long-term relationships within the channels.
* This strategy also permitted our sales force to gain adequate training before new brands were introduced to the market.
> Our marketing department concentrated portions of the budget on television and radio advertising, as well as print ads and brochures.
* The advertising was adjusted based on the brands' position in the product life cycle. During the introductory and early growth stage, advertising was used to create brand awareness. As the brand continued into the late growth stage, advertising was aimed at building brand loyalty.
> Several elements of sales promotion were also used to push our brands'. Discounts and factory rebates were offered, as well as free gifts with the purchase of our brand(s).
* The sales promotion efforts were also adjusted based on the brand's position in the product life cycle. During the introductory and early growth stage, sales promotion was used to create brand awareness. As the product entered the mature stage, sales promotion was aimed at potential brand switchers. During the decline stage, sales promotion would offer a last attempt at capturing additional sales.
> To determine our promotional budget, we combined features of the Affordability Method and Objective and Task Method. This proved to be a very successful approach for our firm in terms of increasing brand awareness and generating sales.
> The following table provides a comparison of total promotional dollars allocated and related period unit sales for each of our Sonite brands.
Promotional Dollars and Period Sales
Period
SUSI
SULI
SUFF
SUSU
SUPR
0
$ 2,112
$ 3,112
0
0
0
77,459
83,193
0
0
0
$ 2,560
$ 4,154
0
0
0
99,928
20,007
0
0
0
2
$ 2,840
$ 4,364
0
0
0
23,915
44,000
0
0
0
3
$ 3,194
$ 4,222
0
0
0
24,331
73,943
0
0
0
4
$ 4,124
$ 4,426
$ 5,278
0
0
16,8000
27,173
47,654
0
0
5
$ 3,234
$ 2,942
$ 2,291
$ 2,160
0
216,000
86,468
60,046
60,000
0
6
$ 2,975
$ 1,571
$ 1,832
$ 1,898
$ 2,337
330,000
52,499
93,600
96,000
20,748
7
$ 5,441
$ 1,610
$ 2,983
$ 3,293
$ 2,849
382,152
38,917
59,995
50,000
52,852
8
$ 4,814
$ 2,503
$ 1,692
$ 2,704
$ 2,268
500,602
72,000
57,377
228,000
52,413
*Graphical illustrations of this information are included in Appendix C.
FIRM U CURRENT POSITION-PERIOD 8
> Period 8 was the perfect example of the success of our strategies. Included in Appendix D is our actual Contribution By Brand and Company Performance for this last period of our management tenure. Through out our management, we utilized a "Meeting Report" as an agenda for our weekly meetings, a record of our collective decisions, and to provide us with reference materials for those decisions. Also included in Appendix D is a sample of this Report for Period 8.
Product
> Period 8 was our most successful period; we were the Market Leader for four of our five brands. (SUSI, SULI, SUFF, and SUSU). Our SUSI brand (targeting the Others) continued to remain our number one selling brand, as well as the number one brand in the Sonite market. It currently holds 29.2 percent of the Sonite market based on unit sales. The following tabular illustration offers the Market Share by brand for Period 8:
Mkt. Share
Brands
SUSI
SULI
SUFF
SUSU
SUPR
Market Share by Segment
71.0%
Others
49.1%
Hi-Earners
59.9%
Buffs
40.5%
Singles
24.6%
Professionals
Total Market Share
29.2%
4.2%
3.3%
3.2%
3.0%
*Data courtesy of the Markstrat3 Program.
> Based on the Differentiation Strategy mentioned in the previously, we were forced to significantly alter the original physical characteristics of many of our brands. The following tabular illustration offers the final physical characteristics of our Sonite brands:
Physical Characteristics of Firm U Brands-Final
Brands
Weight
Design
Volume
Max Freq.
Power
(Kg)
(Index)
(Dm3)
(KHz)
(W)
SUSI
7
6
87
23
31
SULI
6
9
71
24
59
SUFF
5
5
47
40
82
SUSU
8
7
73
33
61
SUPR
3
8
49
41
78
* Data courtesy of Firm U Meeting Reports.
> By Period 8, we had become better at predicting our brand production levels. In the past, we experienced shortages in many brands. But by Period 8, we were only short on our newly modified brand, SULI, and our fastest grower, SUSU. The following tabular illustration offers the final production levels by brand compared to their actual sales totals:
Firm U Production Levels-Final
Brands
Units
Requested
Units
Produced
Units in
Stock
Units
Sold
SUSI
435,000
500,600
48
500,602
SULI
60,000
72,000
0
72,000
SUFF
7,000
7,400
40,005
57,377
SUSU
90,000
228,000
0
228,000
SUPR
85,000
68,000
0
52,413
* Data courtesy of the Markstrat3 Program and Firm U Meeting Reports.
> Our Period 8 decisions were very successful as we finished our management tenure with three brands classified as Cash Cows (SUFF, SULI, and SUPR) and two brands classified as Stars (SUSI and SUSU). The following illustration is the Growth-Share Matrix taken from the Markstrat3 Portfolio Tools:
* Data courtesy of the Markstrat3 Program.
> Currently, we have no Sonite projects and only one Vodite project in progress in our R&D Department. We still need to contribute an additional $7.44 million to complete our Vodite project. This project should be completed next period. The following tabular illustration offers the physical characteristics of our Vodite (PVUMM) project:
PVUMM Physical Characteristic
Projects
Weight
(g)
Design
(Index)
Autonomy
(M)
Max Freq.
(KHz)
Diameter
(Mm)
PVUMM
80
4
30
7
80
* Data courtesy of Firm U Meeting Reports.
Price
> Our prices have varied only slightly from inception to Period 8. This is due to the fact that we tried extensively to determine the price that would optimize both sales and shareholder profit prior to introduction of each new brand. The following exhibit indicates these changes in our prices:
Brand Pricing
Brand
Original Price
Present Price
SUSI
$250
$250
SULI
$500
$480
SUFF
$370
$369
SUSU
$270
$270
SUPR
$520
$512
* Data courtesy of Firm U Meeting Reports. A graphical representation is included in Appendix D.
> The present price of our brands is a result of changes in consumer preferences and prices charged by our competitors.
Place
> In Period 8, we clearly established our dominance in the Sonite market. The study and evaluation of the purchasing intentions and changing semantic preferences of the Sonite consumer segments were the deciding factors in brand placement at each retail location. The exhibit below illustrates the consumer shopping habits for Period 8.
CONSUMER SHOPPING HABITS
Segment
Specialty Stores
Department Stores
Mass Merchandise
Total
Buffs
57.3%
21.8%
20.9%
00%
Singles
33.6%
33.6%
32.7%
00%
Professionals
40.5%
26.8%
32.7%
00%
High Earners
32.7%
50.0%
7.3%
00%
Others
3.6%
33.6%
52.8%
00%
Total
27.4%
33.6%
39.0%
00%
* Data courtesy of the Markstrat3 Program.
> By examining the shopping habits of the consumer, we were able to concentrate our efforts on situating each brand at the specific distribution location where intended consumers shop. The following exhibit offers a visual display of the consumers' purchasing intentions during Period 8 for our brands and the market share for each segment attained by implementing our distribution strategy.
CONSUMER PURCHASING INTENTIONS
Brand
Intended Consumer
Purchase Intention
Mkt. Share
Specialty
Mkt. Share
Dept.
Mkt. Share
Mass
SUSI
Others
52.6%
0.6%
32.5%
50.0%
SULI
Hi-Earners
49.6%
5.0%
6.5%
0.5%
SUFF
Buffs
55.2%
7.7%
0.7%
0.4%
SUSU
Singles
55.9%
5.0%
3.7%
0.5%
SUPR
Pros
26.2%
5.5%
2.1%
0.9%
* Data courtesy of the Markstrat3 Program.
> By following our distribution strategy and moving from a "Fast-Follower" Strategy, to a "Pioneer" Strategy, we captured an astounding amount of the Sonite Market Share by Unit Sales (52.9%).
Promotion
> Our Firm currently employs the largest sales force and is spending more on promotional activities than our competitors. The comparatively larger operating budgets we have been successful in generating have afforded us these opportunities.
> The following graph represents our promotional spending growth over the past eight periods.
*Promotional Spending figures courtesy of Firm U Meeting Reports.
> Our positioning efforts have been successful in moving four of our five products into the market leadership role for their targeted segments. The following graph illustrates our market share for these four brands.
* Graph information courtesy of the Markstrat3 Program.
> Our sales force has been successful in dominating all three distribution channels. The following graph illustrates this dominance.
* Graph information courtesy of the Markstrat3 Program.
> We have begun preliminary promotional research on the Vodite market in anticipation of introducing new brands at a later date.
> The following table lists the current placement of our brands in the product life cycle:
Brand Placement on the Product Life Cycle
INTRODUCTION
EARLY GROWTH
LATE GROWTH
MATURITY
LATE MATURITY
DECLINE
SUSI
SULI
SUFF
SUSU
SUPR
*Information courtesy of Firm U Meeting Reports.
LESSONS LEARNED BY FIRM U
Product
> Through the course of our management, we learned several valuable lessons regarding how brands should properly target the consumers in the Sonite market:
* We learned that it was important to target the largest consumer segments. In addition, it is equally important to target growing segments. We prospered greatly from our efforts aimed at the Others and Singles segments. These are the largest consumer segments, and are also the only growing segment in the Sonite market.
* We also learned that it was important to target relatively untapped segments of Sonite market. Although the Buffs are not a growing segment, they are very important to the success of new brands, because they are innovators. We selected this segment because only one other firm chose to target them in the beginning. By the time others decided to target them, they were too small to contribute to the firm's portfolio.
* Finally, we learned that it was necessary to develop specific brands to target each segments of the marketplace. For example, although not growing, the high-end segments (Professional and High-Earners) are very important to ensure larger revenues. They are willing to pay more for quality brands.
* It is important to have a primary and secondary strategy for targeting these markets. The primary strategy should include one large growing segment, one untapped segment, and one high-end segment. The secondary strategy should include the remaining segments of the market and should be approached based on need and observed trends in the marketplace.
> We learned it is very important to develop R&D projects based on future regression analysis. We tried to develop brands that satisfied consumer preference for future periods, not the current period. By doing so we had time to develop projects, introduce them, and reap the benefits of each before the physical characteristics became obsolete.
> We also learned that it was very important to continually modify our existing brands. Consumer preferences change quickly, and it is necessary to change accordingly in order to maintain market share. However, we learned this lesson the hard way. We failed to modify our SULI brand to better target the High-Earners earlier on. We had previously decided to drop this brand, and develop a new brand for the High-Earners. We watched this brand lose sales for periods, which gave our competitors an opening in the high-end consumer segment. Finally, we decided it was more economical to modify our existing brand, and take advantage of name brand recognition rather than develop a new brand. Once this decision was made, it was another two periods before we actually modified the brand, and reintroduced it to the marketplace. Because of our hesitation, we lost valuable sales, which could have contributed to our attempt at entering the Vodite market.
> Finally, we learned that it is very difficult to accurately predict production levels for our brands. Some periods we experienced shortages that lead to lost sales revenues. While in other periods, we experienced surpluses that caused us to pay high inventory holding costs. We learned that the best way to predict production levels is to analyze the Marketing Plan Sale Forecasts, know what competitors with similar brands sell, and to follow your instincts based on personal market experience.
Price
> Our firm was concerned that we would lose sales due to having prices higher than that of our competition. We learned that positioning our brands properly made an immense difference, and allowed us to charge a higher price than our competition, and actually increased our sales.
> The chart below is an example of our pricing and unit sales for one target market compared to that of our competition in Period 8:
BRANDS TARGETED AT OTHERS
Product
Units Sold
SUSI
500,602
SAMA
31,456
SEMI
27,378
SEOR
2,596
SILK
27,587
SOLD
5,995
*A graphical representation of data is included in Appendix D.
> All but one of our competitors brands were priced lower than our SUSI brand, yet our unit sales were fifteen times higher than that of the firm with the next highest sales.
Place
> We learned a valuable lesson regarding the distribution placement of our brands. They must be allocated to the distribution location where each potential consumer shops. This may seem elementary, but placement of the various brands was an ever-evolving dilemma due to the ever-changing habits of the consumer. As each period passed, our research studies mounted. This gave our staff more statistical data, and allowed us to make better distribution decisions. Also with this data, our R & D Department created new brands and modified existing brands to meet specific consumer segments' preferences. By having a specific brand to match a given segment, it was all but academic to place a brand with its intended consumer at one of the three types of selling establishments. We then determined the amount of sales force concentration needed to adequately promote the various brands through different types of distribution promotions and displays.
Promotion
> We learned that effective promotion is vital to a successful marketing mix. A weakness in any one of the four elements (Product, Price, Place, or Promotion) will dramatically affect your competitive edge.
> We learned that promotion encompasses more than just advertising your brand. You must learn the preferences and intentions of your targeted customers, and present your brand as the "preferred" brand.
* Advertising- Effectively communicate your message to the target audience. Emphasize the need-satisfying attributes of your brand.
* Personal Selling- Maintain a highly trained sales force capable of cultivating and continuing long- term relationships with buyers.
* Sales Promotion- Include activities that will grab the attention of your target audience. Contests, rebates, sweepstakes, and even coupons are effective tools to motivate buyer behavior.
* Public Relations- Guard and preserve the reputation of your firm and their brands. Be sure that all activities will contribute to 'positive press' for the firm.
RECOMMENDATIONS TO INCOMING MANAGEMENT
Product
> We recommend that you continue to modify all Sonite brands as long as the Sonite market continues to show overall growth. (currently 10.2%) You should continue to analyze consumer preferences, and utilize the Semantics regression data provided by Markstrat3 in order to remain forward-looking in your R&D efforts. Using forward-looking R&D projects, your brands should be ready to modify two periods before they are to be re-introduced. As the Sonite market falls into the decline stage of the product life cycle, you should harvest costs involved with unproductive brands, and use these monies to provide additional growth in the Vodite market.
> We recommend that you complete our Vodite project, PVUMM in Period 9, and venture into the Vodite market in Period 10. In the beginning periods of the Vodite market, you should focus all efforts at the Innovators, but remember to develop new projects or modify the existing brand to keep them interested. Within two periods in the Vodite market, you should develop a project to focus on preferences of the Adopters, and follow it in two more periods with a project targeted at the Followers. This will allow you time to analysis trends in the marketplace and competitive actions.
> We recommend that you follow our learning lessons on production levels. It is important that you learn as much about how brands sell from period to period, and follow any trends carefully. Begin by examining the Market Plan Sales Forecasts, and apply any trends you have observed. This will take time, but you should become more effective in your production ordering if you meticulously observe and record changes.
Price
> We have found that performing statistical analysis and feasibility studies helped us to determine optimum pricing for our brands. Do not hesitate to position future brands as being of high quality and pricing them accordingly. It is profitable to begin with a higher price, and adjust to a lower price if it will contribute to sales and revenues. We followed our price decreases with a brand modification.
> Modification of brands allows for an increase in price. In the past, we have introduced modified brands and increased their price, thereby generating an increase in sales. The price increase is justified in the eyes of the consumer due to the modifications. Many times, economies of scale coupled with these modifications will actually decrease the brand's base price. This allows for even higher profit margins. The following exhibit offers a visual illustration of our brand pricing throughout our management:
Evolution of Brand Price and Unit Sales
Brand
Period 0
Period 1
Period 2
Period 3
Period 4
Period 5
Period 6
Period 7
Period 8
SUSI
Price
$250
$250
$240
$240
$250
$250
$249
$250
$250
Unit Sales
77,459
98,635
23,915
24,331
68,000
216,000
330,000
382,152
500,602
SULI
Price
$500
$500
$485
$485
$485
$485
$480
$475
$480
Unit Sales
83,193
20,007
44,000
73,943
24,173
86,468
52,499
38,917
72,000
SUFF
Price
-
-
-
-
$370
$370
$369
$370
$369
Unit Sales
-
-
-
-
47,654
60,046
93,600
59,995
57,377
SUSU
Price
-
-
-
-
-
$270
$270
$270
$270
Unit Sales
-
-
-
-
-
60,000
96,000
50,000
228,000
SUPR
Price
-
-
-
-
-
-
$520
$514
$512
Unit Sales
-
-
-
-
-
-
20,748
52,852
52,413
**Prices in red indicate the introduction of a modified brand. Information courtesy of Firm U Meeting Reports.
> As indicated by the above chart, unit sales continued to increase as we modified brands and increased prices. The exception to this tendency occurred with our SUFF brand. We attribute the decrease in sales not to our increase in price, but to the continual decrease in the size of this segment over the past 8 periods.
Place
> Incoming management should continue to focus on proper distribution placement for each Sonite and Vodite brand. Distribution placement is the key to effective selling and revenue growth. They should also continue to study the statistical data and the changing shopping patterns of the consumer. Overall, these patterns will not drastically change, but being aware of a minute variation may help to increase sales and market share growth. This is where you can possibly capture "brand switchers." Basically, you want to continue to allocate all brands to where each consumer shops. This can be executed by monitoring the different tables of the Market Research Studies: Consumer Purchases Intentions & Consumer Shopping Habits. Also, be aware of your competitors' brands, their brand placement, and their advertisement promotions at the different selling establishments. Implementation of this distribution strategy can only bring about success and profit for the firm.
Promotion
> We recommend that you continue to focus major efforts on strategically positioning all brands. Currently, brand SUPR is the only one of our five brands that does not hold market leadership for the targeted Professionals segment. The Perceptual Objectives of this brand will need to be adjusted as a first priority in the positioning phase.
> We recommend that you continue the practice of allocating advertising research at 10% of the media budget. We have found that this works to our advantage, especially when utilizing our positioning methods.
> We recommend that you increase the sales force in order to assure that we have adequate trained staff on hand when you enter the Vodite market. Your sales efforts in the Sonite market will have to be redirected and redistributed if you are not prepared for this venture in advance.
> We recommend that you continue to monitor all brands in relation to their place in the product life cycle, and direct your promotion efforts accordingly.
CURRENT PRODUCT LIFE CYCLE STATUS FOR FIRM U BRANDS
* Information courtesy of Firm U Meeting Reports.
SUSI Introduced in Period 0 Modified in Period 4 Re-modified in Period 8
SULI Introduced in Period 0 Modified in Period 8
SUFF Introduced in Period 4 Modified in Period 7
SUSU Introduced in Period 5
SUPR Introduced in Period 6
APPENDICES
Appendix A
Appendix B
Appendix C
Appendix D
PERIOD 8 STATEMENT-CONTRIBUTION BY BRAND
PERIOD 8 STATEMENT-COMPANY PERFORMANCE
*Information courtesy of Markstrat3 program.
SAMPLE OF FIRM U MEETING REPORT-PERIOD 8
*Sample courtesy of Firm U Meeting Report-Period 8.
Confidential
2
Firm U- Report to Incoming Management
