A link that might help copy/paste -

http://www.stratxsimulations.com/latest_materials_markstrat_web/enu/Handbook-SM-B2C-D
G/DocToHelpOutput/NetHelp/default.htm#!WordDocuments/advertising.htm

Q1. What is role of flagship brand in any company? Did your Markstrat company have a
flagship brand? Explain your flagship brand’s performance.
Flagship brand is the main product/service in the company’s portfolio and to which the
customer most relates or identifies the company.
Example: Maggi noodles are flagship product of Nestle,
It is also called core product/service and is generally the major revenue generator for the
company. This product/service defines the company’s core competency and helps create a
competitive advantage. It is a brand which the company defends in the market and spends its
major promotional budget for it.
The brand equity built up from these brands can be a beneficial foundation to stand on when
building new complementary brands, especially if those share a commonality with the iconic
brand
In Markstrat flagship brand could be the brand with the highest volume share or the highest
value share or a market leader in a particular segment.
For ID and performance – check out report.

Q2. How does Advertising Expenditure impact sales? Explain metrics useful for tracking effect
of advertising?
The primary objective of advertising is to build awareness for brand names and to make
consumer familiar with the characteristics and price of your product. Advertising is crucial for
new brands, but is also important for brands that have been on the market for some years.
Indeed, consumers tend to forget about a brand in the absence of advertising.
Another objective of advertising is to develop demand for the whole market. Indeed, as
potential consumers become more familiar with the products and their characteristics, they are
more likely to purchase one of them. The size and growth rate of consumer segments is
influenced by the amount spent in advertising by the entire industry.
Finally, advertising will influence the decision of whether or not distributors will carry your
products. Spending more in advertising will most likely increase your distribution coverage. It
also creates a barrier to entry for your competitors.
The absolute amount of advertising spent on your brands is a key factor in the success of your
campaign. Your advertising share of voice is important as well. The share of voice is calculated
by dividing your own advertising budget by the industry total advertising budget. A share of
voice greater than the ones of your direct competitors is required for a successful new brand
launch or for brand repositioning.
There are two separate advertising budgets: advertising media and advertising research. The
advertising media budget is used to purchase media space and time. Advertising research is
about the creative work, media selection, or other activities conducted by advertising agencies,
that improve the quality and the persuasive power of your message.

If objective is to increase or maintain awareness, spend the bulk of budget in media space
purchase and only a small percentage in advertising research to make advertising more
effective. If your objective is to reposition a brand, i.e. to change consumers’ perceptions, then
should spend a significant percentage of total budget in advertising research

For metrics to track result -

https://www.allbusiness.com/metrics-for-measuring-ad-campaign-effectiveness-1415-1.html

Q3. How are purchase intentions formed? How does market structure play a role in formation
of purchase intention?
The purchase intentions represent the proportion of individuals who would select a brand as
their first choice, if they were buying within a year. This is obtained by asking respondents a
question such as: “Do you intend to purchase a Vodite brand this period?” If the response is yes,
then respondents are asked to indicate the brand of their choice.
First, awareness is factored in purchase intentions. If respondents are not aware of a specific
brand, they will not list this brand as the brand of their first choice.

Awareness – Extent to which a product is recognized by potential consumers and is correctly

associated with a particular product.
Consideration – Consumer evaluation of how your offering meets this need, including the
evaluation of offerings from your competitors.
Preference – A consumer’s logical and emotional inclination towards one solution or another,
ultimately leading to a purchasing decision.
These 3 lead up to – Purchase Intention - Consumers will intend to purchase the product if they can
find it. Advertising, Promotions and having wide distribution coverage across channels will help
consumers be aware and find the product.

Note - (Markstrat - purchase intentions are normalized so as to sum up to 100%. This facilitates
the comparison between purchase intentions and market shares but it may produce purchase
intentions figures that are higher than awareness figures. A typical example is the launch of the
first Vodite brand: even if this brand is known by only a few passionate innovators it will have
100% purchase intentions if it is the only one on the market.)

For market structure not sure. Might have something to do with Red Ocean

Q4. What are challenges a company faces in estimating demand – a) for existing brand across
stages of PLC, b) for introducing a new brand?
Actual market sizes depend on several factors: introduction of powerful brands; price changes;
production shortages of preferred brands; commercial team sizes, etc. You should thus take into
account your own moves as well as the anticipated moves of your competitors.
a) Demand estimates are based on the current market situation and assume that no
substantial changes such as brand introductions, or significant price increases or
decreases will take place in the future. Consequently, depending on what actions are
actually taken by your firm and your competitors, the resulting market size will either be
higher or lower.
b) For the new Vodite market, the estimates are based on interviews of potential
consumers. These are less accurate and often turn out to be optimistic.

Q5. How do you decide on a price for your brand in Markstrat? Compare and contrast with
existing practices and theory?
Pricing - decide on a price, you should take into account

▪ The margin of the distributors

▪ The discounts made by some channels
▪ Consumers’ expectations
▪ Competitive prices
▪ Ideal Values of consumer

Some pricing strategies – (correlate with pricing in markstrat – like how for first vodite we tried
Premium Pricing, then subsequently skimming to come down in price. Penetration pricing for
lower brands etc.)
Premium pricing: high price is used as a defining criterion. Such pricing strategies work in
segments and industries where a strong competitive advantage exists for the company.
Example: Porche in cars and Gillette in blades.

Penetration pricing: price is set artificially low to gain market share quickly. This is done when a
new product is being launched. It is understood that prices will be raised once the promotion
period is over and market share objectives are achieved. Example: Mobile phone rates in India;
housing loans etc.

Economy pricing: no-frills price. Margins are wafer thin; overheads like marketing and
advertising costs are very low. Targets the mass market and high market share. Example:
Friendly wash detergents; Nirma; local tea producers.

Skimming strategy: high price is charged for a product till such time as competitors allow after
which prices can be dropped. The idea is to recover maximum money before the product or
segment attracts more competitors who will lower profits for all concerned. Example: the
earliest prices for mobile phones, VCRs and other electronic items where a few players ruled
attracted lower cost Asian players.

Q6. How did you decide on Advertising and salesforce budget in each round? Compare and
contrast with existing practices and theory.
Ad budget in each round
If your objective is to increase or maintain awareness, you should spend the bulk of your budget
in media space purchase and only a small percentage in advertising research to make your
advertising more effective (for instance 4% to 8%). If your objective is to reposition a brand, i.e.
to change consumers’ perceptions, then you should spend a significant percentage of your total
budget in advertising research (usually from 10% to 15%). In past years, companies have
devoted on average 4% of their total advertising expenditures to advertising research.
You are also required to specify which segments should be targeted with your advertising. This
decision should be consistent with the marketing strategy of your firm and/or brand.
Salesforce Budget – (selective)
Your commercial team is responsible for obtaining and entering orders and for supporting
distributors. It is organized by channel in order to better meet the needs of the distributors, and
by brand. The team includes multiple categories of people and resources depending on the
channels: sales representatives, customer support, merchandisers, web masters, blog
managers, etc. The main tasks conducted by the commercial team are to visit stores,
distributors and wholesalers; to enroll them in trade programs; to take orders; to handle out of
stock situations; to participate in trade shows; and to help stores organize and conduct
promotions.

The marketing department must specify the number of people to allocate to each channel and
each brand. Commercial people may be reallocated at no cost across distribution channels
and/or across brands. However, hiring or firing costs will be automatically charged to your
department when the total size of the commercial team increases or decreases.
The cost of your commercial team is proportional to the number of allocated FTEs plus the
hiring or firing costs in case you have extended or decreased its size. Hiring and firing costs are
calculated as a percentage of the FTE cost, as indicated in the newsletter. This cost includes the
salary of the person plus additional expenses such as company car, medical/dental care, etc. It
also includes a sales budget that commercial people can use in activities or tools aimed at
increasing sales, such as trade programs, catalogs, permanent or temporary POS materials, gifts,
etc. The commercial team will decide on the best mix of tools depending on the channel and
the target consumers.

Existing Methods –
• Percentage of Sales Method:
In this method, the amount for advertising is decided on the basis of sales. Advertising budget is
specific per cent of sales. The sales may be current, or anticipated. Sometimes, the past sales
are also used as the base for deciding on ad budget.
● Competitive Parity: This method advocates that a company sets an advertising budget
similar to the one that is set up by its competitor to yield similar results.
● Objective and Task: This method is based on the advertising objectives under this
method. Once the objectives are decided, the cost is estimated to complete those
objectives, and accordingly, a marketing budget is set.
● Market Share: In this method, the advertising budget is based on the market share of a
company. For a higher market share, less marketing budget is set.
● All available Funds: This is a very aggressive method under which all available profits are
allocated towards advertising activities. This method can be used by start-up businesses
that need advertisements to attract customers.
● Unit Sales: Under this method, the cost of advertisement per article is calculated and
based on the total number of articles, it is set.
● Affordable: As the name suggested, the company sets its budget based on how much it
can afford to spend.
Q7. Explain competition. Explain competitive scenario for your team in Markstrat. Compare it
with and industry of your choice. Bring in role of competitive advantages and disadvantages
to explain your position
(Modify answer to fit competition)
https://corporatefinanceinstitute.com/resources/knowledge/strategy/competitive-advantage
/
Competitive advantage refers to factors that allow a company to produce goods or services better or
more cheaply than its rivals. These factors allow the productive entity to generate more sales or superior
margins compared to its market rivals.

Competitive advantages are attributed to a variety of factors including cost structure, branding, the

quality of product offerings, the distribution network, intellectual property, and customer service.

● Competitive advantage is what makes an entity's products or services more desirable to

customers than that of any other rival.
● Competitive advantages can be broken down into comparative advantages and differential
advantages.
● Comparative advantage is a company's ability to produce something more efficiently than a rival,
which leads to greater profit margins.
● A differential advantage is when a company's products are seen as both unique and higher
quality, relative to those of a competitor.

Competition is a sign of a Red Ocean market and that the market already contains a number of
competitors. A Red Ocean Strategy is a strategy which aims to fight and beat the competition.
Red Ocean Strategies have the following common characteristics:
hey focus on competing in a marketplace which already exists.
They focus on beating the competition.
They focus on the value/cost trade-off. The value/cost trade-off is the view that a company has
the choice between creating more value for customers but at a higher cost, or reasonable value
for customers at a lower cost. In contrast, those who attempt a blue ocean strategy aim to
achieve differentiation and at the same time, low cost.
They focus on exploiting existing demand.
They focus on execution (better marketing, lower cost base etc).
A Red Ocean Strategy ultimately leads to an organization choosing to follow one of two
strategies – differentiation or low cost. Whichever is chosen the organization must align all
activities with one of these strategic directions.
Q8. What is Marketing? What is Marketing Strategy? What is a Marketing Plan? What is
Strategic Marketing?

Marketing refers to activities a company undertakes to promote the buying or selling of a

product or service. Marketing includes advertising, selling, and delivering products to
consumers or other businesses.
● Marketing refers to all activities a company does to promote and sell products or
services to consumers.
● Marketing makes use of the "marketing mix," also known as the four Ps—product, price,
place, and promotion.
● At its core, marketing seeks to take a product or service, identify its ideal customers, and
draw the customers' attention to the product or service available.

A marketing strategy refers to a business's overall game plan for reaching prospective

consumers and turning them into customers of the products or services the business provides.
A marketing strategy contains the company’s value proposition, key brand messaging, data on
target customer demographics, and other high-level elements.

The marketing strategy informs the marketing plan, which is a document that details the specific
types of marketing activities a company conducts and contains timetables for rolling out various
marketing initiatives.
Marketing strategies should ideally have longer lifespans than individual marketing plans
because they contain value propositions and other key elements of a company’s brand, which
generally hold consistent over the long haul. In other words, marketing strategies cover
big-picture messaging, while marketing plans delineate the logistical details of specific
campaigns.

Strategic Marketing -
https://www.insivia.com/whats-the-difference-between-marketing-and-strategic-marketing/

A strategic marketing plan integrates selected, targeted marketing tactics all with common
goals; while marketing alone is often activity without purpose.
Strategic marketing is ensuring that every one of your marketing efforts ( e.g., e-newsletters,
advertising in magazines, website, direct mailers and so on ) aligns with your overall plan to
connect the information you have with the audience that needs to hear it.
The key to understanding and creating an effective strategic marketing campaign is developing a
comprehensive strategic marketing plan that allows everyone in your organization to
understand what your marketing goals are and your plan for accomplishing them

MarkStrat Overview

Business results – sales, market share gain and improved profit – are combined in a Share Price Index
(SPI)

To optimize - Market share, Sales growth, Net contribution, Cumulative net contribution and R & D
investments

Sonite – Design, Battery Life, Processing Power, No. of features, Display - Base Cost

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

Vodite – Resolution, Connectivity, Energy, Carbon Footprint, No. of Apps – Base Cost

Innovators - People in this segment tend to be adventurous and are willing to try new ideas with some
risk. Their income levels are above average.
Adopters - Early adopters tend to be opinion leaders and helpful in 'advertising' the new product to
other potential buyers. They are critical to the adoption process and should not be neglected by
marketers. They have an average income level.
Followers - Innovators and early adopters particularly influence followers. Their income level is usually
below average.

Second letter O is a Sonite brand, second letter E is a Vodite brand.

Decision Making

1.Marketing Mix

• Production planning - Actual production levels are automatically adjusted in response to actual
demand by plus or minus 20%

production plan taking into account:

▪ The potential sales for the brand

▪ The existing inventory at the beginning of the period

▪ The flexibility of the Production department

Units produced in excess are kept in inventory, and inventory-holding costs are charged to the Marketing
department until these units are sold. Inventory costs per unit are calculated as a percentage of the
transfer cost.

Estimating lost Sales = Purchase Intention – Market Share

• Pricing - decide on a price, you should take into account

▪ The margin of the distributors

▪ The discounts made by some channels
▪ Consumers’ expectations
▪ Competitive prices
▪ Ideal Values of consumer

Specialty stores tend to respect the recommended retail prices. However, mass merchandisers and
online stores use promotions or special offers to sell products. On average, these promotions are
equivalent to a discount rate of 10% for mass merchandisers and 5% for online stores.

Price increase or decrease more than 30% is discouraged and would lead to negative impact in sales.

• Advertising & segmentation strategy – Media Budget (Purchase media space and time), Research
Budget (to improve quality/persuasive power of budget), Segmentation Strategy (to target
consumers)

▪ 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
The share of voice is calculated by dividing your own advertising budget by the industry total advertising
budget. A share of voice greater than the ones of your direct competitors is required for a successful new
brand launch or for brand repositioning.

Advertising research is about the creative work, media selection, or other activities conducted by
advertising agencies, that improve the quality and the persuasive power of your message. (10-15% of
advertising budget should be spent on this)

2.Digital Marketing

Digitally Owned, Digitally paid, Digitally earned, Traditional and Outdoor

• Allocate efforts across Traditional and Digital Marketing for each product.

• Specify a media strategy for each Media Category

Return on Marketing Investments (ROMI) experiments can be purchased from research studies.

3.Sales force &Commercial Team -

Specialty Stores (preferred for vodite), Mass Merchandise, E-Commerce, E-Store

• Number of Full-Time Equivalent people in traditional channels

• Commercial budget in Digital Channels

The team includes multiple categories of people and resources depending on the channels: sales
representatives, customer support, merchandisers, web masters, blog managers, etc. The main tasks
conducted by the commercial team are to visit stores, distributors and wholesalers; to enroll them in
trade programs; to take orders; to handle out of stock situations; to participate in trade shows; and to
help stores organize and conduct promotions.

The cost of your commercial team is proportional to the number of allocated FTEs plus the hiring or
firing costs in case you have extended or decreased its size. Hiring and firing costs are calculated as a
percentage of the FTE cost, as indicated in the newsletter. This cost includes the salary of the person plus
additional expenses such as company car, medical/dental care, etc. It also includes a sales budget that
commercial people can use in activities or tools aimed at increasing sales, such as trade programs,
catalogs, permanent or temporary POS materials, gifts, etc. The commercial team will decide on the best
mix of tools depending on the channel and the target consumers.

4.Marketing Powerhouse

Available to reinforce your overall marketing efforts. (Can implement 3 per year)
The Marketing Initiatives

1. Trade in offers & bundles – Bundling your products into a single offer is generally done to create
greater value. This type of initiative will lead price sensitive customers to purchase and increase
the average basket price. It can however push back some customers who cannot afford the
purchase of multiple products at once. To encourage customers to buy your latest models, you
may initiate Trade-In offers on your e-Store. Examples of trade-in offers include discounts on
upgrading to new model or providing a special offer on returning an old model to have it
upgraded. This type of initiative should have an immediate effect on your sales.

2. Partnerships - firm can partner with an Educational or Commercial Institution by providing

company’s technological products at a discounted price of for free. Showing an engagement and
commitment to the education sector will boost your company’s corporate social responsibility
image and potentially result in a more loyal customer base who are proud of the company’s
involvement in such an initiative.

3. Product placement – Product placement is the inclusion of a branded product in media, usually
without explicit reference to the product. Investing in product placement in Blockbuster movies
and series should raise your awareness among all types of customers and enhance the image of
your products.

4. Additional services - prolonged warranty to your consumers, can reinforce customers’ trust in
the high quality of your products and reassure them that they are taking low risk by purchasing
your products. It will attract potential customers to consider your products and will have a direct
impact on sales.

The Digital initiatives

1. Influencer & content marketing - sponsored articles and co-creating content to brand
ambassadors. Your campaign is launched on various social networks (such as Instagram,
Facebook, YouTube, Twitter, etc.) and influence the behaviors and opinions of their audiences,
who are mostly from the younger generation.

2. Paid advertising – increase the number of products sold to your clients. You will then purchase
some advertising space online on some websites’ brands.

3. Organic channels - To support the launch of your new product during an annual exhibition, you
decide to use organic channel like Google, Firefox, Apple Appstore or Google Play store on
mobile. You want to measure how many visitors come from a query made on a free search
engine. The objective is to raise some visibility, interest and engagement among the target.

4. Retargeting - more visibility to your brand. Your firm will then display advertising messages in the
form of banners on websites after a user has shown a particular interest in a product on a
particular page of your website.
 5. Email Marketing - to know your brand and purchase your products. Your firm will send marketing
emails to inform and retain a base of contacts interested in your products or services and
generate sales by encouraging them to visit specific pages of your site. Channel is abandoned by
the younger generation.

6. Mobile App building - firm organize an event, an exhibition next month. You want your guests to
use their phone, as much as it is to participate, to exchange, to network. This is the role of the
mobile application of your event because mobile phone is used a lot by tech enthusiasts as well
as by the millennials. Engage participants to make them live a unique and unforgettable event.
When you launch this initiative, you’ll have access to specific events. (Performance Marketing
and Cross-Selling)

Performance marketing - You want to "activate the growth" of your firm by a set of marketing techniques
(organic, paid, influence) to quickly accelerate and significantly increase its turnover. You will study each
of these stages in the conversion tunnel and optimize them by segmenting, testing and analyzing the
data. The main goal is to maximize all metrics to generate the best results.

FIFA World Cup, Tennis Tournament and E-Gaming (League of Legends) tournament are available one for
a specific year

Cross selling - Your firm want to increase the number of products sold to your clients. You will then offer
a complementary product to another already purchased by the customer. But to be more effective you
want to engage your best clients by selling your complementary product on another device in order to
keep them in your environment as well by showing them that you are a technological brand.

5.Market Research Studies

Companies can buy 14 different types of studies All have to be purchased

▪ Consumer survey – Purchase Intention, Brand Awareness, Shopping Habits

▪ Competitive Commercial team estimates
▪ Consumer panel – Market share, Industry volume
▪ Media reporting
▪ Customer centricity – Brand Funnel and Marketing Initiatives
▪ Industry benchmarking
▪ Distribution panel
▪ Advertising experiment
▪ Semantic scales
▪ Commercial team experiment
▪ Multidimensional scaling
▪ Market forecast – Market Size, Segment Growth Rate
▪ Competitive advertising estimates
▪ Conjoint analysis
CONSUMERS MAKE PURCHASE DECISIONS BASED ON THEIR PERCEPTION OF YOUR BRANDS

Semantic Scales help view what consumer’s perceived values are for your different brand characteristics
as well as for price. The study will also show Ideal Values of the consumer along with Ideal Value
evolution (Shows change in ideal values over previous period) and we make changes to our product or
price to match the ideal values for our target group either through changes through R&D or through
advertising

Finding new market Values –

The general formulas are:

𝑃 =1.0+[6.0× 𝑋−𝐿𝐵𝑈𝐵−𝐿𝐵] or 𝑋 =𝐿𝐵+[(𝑈𝐵−𝐿𝐵)× 𝑃−1.06.0]
where P is the desired value on the 1 to 7 scale; X is the corresponding physical level; and LB and UB are
the lower and upper limits of the physical characteristic’s feasible range.

Multidimensional Scaling matches brand characteristics to Consumer needs. Has 3 main elements

For Sonite

• Economy - Price
• Performance – Processing Power, Display Size
• Convenience – Design, No. of features, Battery Life
For Vodite

• Economy - Price
• Sophistication – Carbon Footprint, No. of Apps, Resolution
• Autonomy – Connectivity, Energy

Perceptual Map is a tool to for visualizing Brand Positioning

TWO KEY WAYS TO RE-POSITION BRANDS IN MARKSTRAT –

1. Positioning through R&D

Why do R&D?

•To develop and launch a brand in a new market (eg: Vodite)

•To develop and launch a brand in a new segment (eg: Millennials)
•To develop and launch a brand in a segment where you are not yet present
•To modify a brand if its characteristics do not match consumers’ expectations
•To reduce the manufacturing unit cost of an existing product.

Process of R&D
Select Project Name – Select Product Characteristics – Desired Base Cost – Project Allocated
Budget – Feasibility Study – Online Query

Use the formula below to calculate the “ideal” attribute

(where C is characteristic value in semantic study graph)
 DETERMINE HOW MUCH BUDGET IS NEEDED TO DEVELOP THE
PROJECT - Run an online query

Productivity Gains – Over time, manufacturing costs decrease due to thanks to the experience
effect. This is due to many factors such as increase in labor efficiency (fewer mistakes are made),
improvement of methodologies & processes, use of new and fewer expensive materials and/or
technologies and product redesign.

Firms can further reduce manufacturing costs by launching a cost reduction R&D project

2. Positioning through Advertising

Setting Perceptual Objectives in the Marketing Mix either using Semantic Scales or through
Multidimensional Scaling

Introduce new Brands through Brand Portfolio decision. Can also modify or withdraw brands using this
space.

Economic Environment –

Operating in an economy that currently has an average inflation rate of 2%. Inflation affects the
production, advertising, commercial and market research costs of company. GNP growing at 4%
previously.

Scorecard
• Financial KPIs. Total revenues; revenues in each market; revenues from new brands (other than your
two initial brands); Total contribution after marketing (CAM); CAM generated by each market; CAM
generated by new brands; net contribution, in million dollars and in percentage of revenues.
• Marketing KPIs. Total market share, in volume and value; market share in each market; number of
marketed brands, in total and in each market; number of brands leading in a segment.
• Distribution KPIs. Overall distribution coverage; distribution costs, in million dollars and in percentage
of revenues; estimates of lost sales due to insufficient commercial efforts.
• Production KPIs. Volume sold; volume produced; units in inventory; inventory costs; estimates of lost
sales due to production shortage.
• R&D KPIs. R&D expenses, in total and in each market; number of completed R&D projects, in total and
in each market.
Marketing Plan Tool

The marketing plan built-in assistant will guide you through five steps:

(1) estimating consumer segment sizes;

(2) estimating the shares of your marketed brands in each of these segments;

(3) calculating brand sales;

(4) calculating brand revenues and contribution; and

(5) calculating firm consolidated revenues and profit.