Transcript The Markstrat Challenge II

SM91.87 Business Simulation
Part II
Your success in Markstrat will greatly depend on
your ability to manage the development and
positioning of brands
Positioning
Strategy
R&D
2
Customers make purchase decisions based on
their perception of your brands
Your perception of brands
Brand
A
Brand
B
Brand
C
Brand
D
Technical quality
Their perception of brands
?
Brand
C
Brand
BBrand
D
?
Brand
A
3
The "Perceptual Map" is a valuable tool for
visualizing brand positioning
Need 2
+20
Bu
SONO
SELF
Perceptual Map
based on MDS Study
SEMI
SUL
I
SOLD
Pr
Hi
-20
+20
Si
Need 1
SALT
SUSI
SIBI
Ot
Ot Segment ideal point
SAMA
-20
Key
SIRO
Perceptual positioning
of brands
4
There are two key ways to re-position brands in
Markstrat
Perceived
Performance
Advertising
Perceived
Economy
R&D
5
Physical positioning involves matching brand
characteristics to customer needs
Customer Needs
Weight
Volume
Design
Max. Freq.
Performance Convenience
Power
Price
Economy
Brand Characteristics
6
Positioning with advertising requires setting
"Perceptual Objectives"
Perceived
Performance
20
10
Si
9
5
Perceived
Economy
0
5
11
-10
-20
-20
-10
0
10
20
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Your success will greatly depend on your ability to
manage the development and positioning of
brands
Positioning
Strategy
R&D
8
R&D success demands long-term thinking and
the ability to identify evolving opportunities...
Hi
Si
New
target
segments
Changing
segment
needs
Pressure
on
margins
Pr
Competitor entry
Ot
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. . . and also requires working effectively with
your R&D department
R&D = Profit Center
Number
of Projects
Experience


Provide sufficient budgets
Set realistic expected
unit costs
Similarity
of Projects
10
When doing R&D, keep in mind both positioning
and economic factors
SONITE
Weight Design Volume
Max.
Freq.
C
Power
Base Cost
(at 100K units of
production)
Most important physical
characteristics

Market needs

Target margin

Competitive brands

Cost in other projects

Feasible range

Project budget

Project budget

Impact of physical characteristics
Positioning Factors
Economic Factors
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Impact of physical characteristics on base cost
The HIGHER the
requested
characteristic
the HIGHER the
base cost
The HIGHER the
requested
characteristic
the LOWER the
base cost
Base
cost
• Design
• Max. Frequency
• Power
• Autonomy
Requested characteristic
Base
cost
• Volume
• Weight
• Diameter
Requested characteristic
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The budget required to complete an R&D
project is a function of several factors
R&D
experience
to find out more:
Physical
characteristics
R&D
budget required
for completion
accuracy
feasibility
study
vs.
Requested
base
cost
speed
on-line
query
13
There are two possible outcomes of any R&D
project
Project submitted to R&D:
weight design volume
17
6
85
max.
freq.
power
35
70
Minimum base cost is calculated
at an early stage in the project.
Minimum base cost = $110
Case A
Case B
Requested Base Cost = $80
Requested Base Cost = $130
(requested base cost is below minimum, but the R&D will try
to develop the project at the minimum base cost)
Budget required for completion is also
calculated at an early stage in the project
Budget required for completion = $ 800
(at base cost = $ 110)
Case A1
Case A2
Budget allocated by team for this period:
$ 1,000
Project is available at
base cost = 110
$ 300
Project unsuccessful
Budget required for completion = $ 550
(at base cost = $ 130)
Case B1
Case B2
Budget allocated by team for this period:
$ 1,000
Project is available at
base cost = 130
$ 300
Project unsuccessful
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A completed R&D project may be used to modify
existing brands and/or introduce new brands
Performance
Bu
Pr
Si
Hi
Economy
New Brand
"SAMY"
Ot
New SAMA
more performance
Old SAMA
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Bringing successful R&D projects onto the
market may result in obsolete inventory
I'll buy any product
at a given % of its
transfer cost
Brand
modification
(name kept)
Inventory
disposal
Obsolete
inventory
Brand
withdrawal
TRADING
COMPANY
16
Cost reduction projects should be weighed against
experience curve effects
Transfer cost
A
Base cost A
Current product
(initial experience curve)
Base cost B
B
A1
Current
transfer cost A1
Cost reduced product
(new experience curve)
100 KU
225 KU
Cumulative production
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The MDS study measures brand perception along
three composite dimensions...
SONITE market
Influence of brand characteristics on MDS dimensions in P0
Perceived Economy increases
if Price decreases
Perceived Economy
increases if Max. Freq.
increases
Product
charac.
Composite
dimensions
Weight
Design
Volume
Max. Freq.
Power
Price
slight
slight
slight
moderate
moderate
strong
slight
slight
slight
strong
strong
moderate
moderate
strong
moderate
slight
slight
slight
Economy
Performance
Convenience
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... which are more or less influenced by the
various brand attributes
VODITE market
Influence of brand characteristics on MDS dimensions in P0
Perceived Efficacy
increases if Max. Freq. increases
Product
charac.
Composite
dimensions
Perceived Flexibility increases
if Weight decreases
Autonomy
Max.
Freq.
Diameter
Design
Weight
Price
slight
very strong
slight
moderate
slight
slight
strong
slight
moderate
slight
moderate
slight
slight
slight
slight
slight
slight
very strong
Efficacy
Flexibility
Economy
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New decisions introduced in Period 2:
1. Brand portfolio
2. Perceptual objectives (on semantic scales or MDS)
3. R&D
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You can now extend your portfolio by introducing
new brands ...
Click here to
display the
completed R&D
projects and their
features
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... you can also modify existing brands
Keep the
same name
Select a new
R&D project
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To convey the right message to the market, you can
set perceptual objectives for each of your products
1
Do you want to
communicate on the
semantic scales or on the
MDS composite
dimensions?
2
On which dimensions
do you want to
communicate?
3
Input the coordinates
of the point that you
want to reach on the map
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You can initiate up to five R&D projects per period
and per product type (five Sonite and five Vodite)
Click here to obtain an
estimate of the minimum
base cost and budget
required for completion
of this project
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You now know everything.
From here on, it's down to your strategy...
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