Discussion Homework for Marketing

MarketShare The Marketing Principles Simulation

Stuart W. James, Interpretive Simulations Michael Deighan, Interpretive Simulations

Harlan Spotts, Western New England College

Charlottesville, Virginia, USA

COPYRIGHT NOTICE This manual and the simulation described herein are copyrighted with all rights reserved by Interpretive Software, Inc. Under copyright laws, neither this manual nor the software may be copied, in whole or in part, without written consent of the authors, except in the normal use of the software or to make a backup copy. The same proprietary and copyright notices must be affixed to any permitted copies as were affixed to the original. This exception does not allow copies to be made for others, whether sold or not. Under the law, copying includes translating into another language or format. Purchasing the simulation experience gives the owner the right to participate in a unique learning event. Each student or participant must purchase the simulation to take part in the event or the institution sponsoring the event must purchase for the entire group participating in the event. Limited Warranty on Media and Manuals In no event, will Interpretive Software, Inc. be liable for direct, indirect, special, incidental, or consequential damages resulting from any defect in the software or its documentation, even if advised of the possibility of such damages. In particular, the authors shall have no liability for any programs or data stored in or used with the computer products, including the cost of recovering such programs or data. This simulation experience is sold, "as is," and you, the purchaser, are assuming the entire risk as to its quality and performance. The warranty and remedies set forth above are exclusive and in lieu of all other, oral or written, express or implied. For more information about other simulations from Interpretive, please contact: Interpretive Simulations 1421 Sachem Place, Suite 2 Charlottesville, VA 22901 Phone: (434) 979-0245 Fax: (434) 979-2454 Website: www.interpretive.com Discover a Better Way to Learn. Active Learning through Business Simulations. Copyright © 2005–2012 Interpretive Software, Inc. Illustrations Copyright © BigStockPhoto.com. All rights reserved. Printed in the United States of America. No part of this book may be used or reproduced in any manner whatsoever without written permission of Interpretive Software, Inc. Graphic images used in manuals and incident videos © BigStockPhotos, iStockPhotos, and GettyImages. Footage used in incident videos © GettyImages and iStockPhotos. Audio clips © iStockPhoto.com.

ABOUT THE AUTHORS

Stu James is the founder of Interpretive Simulations, one of the leading publishers and developers of business simulations worldwide. Interpretive’s simulations are an integral part of the curriculum at many of the world’s top business schools in the areas of marketing, strategy, management, and international business. To date, over 100,000 people have experienced one of Interpretive’s simulations, and many rave about how the simulation was one of the best learning tools they have ever used. On the academic front, Stu is currently Visiting Lecturer at the University of Michigan (EMBA and EP programs), and at the Colgate-Darden Graduate School of Business at the University of Virginia (MBA Core Marketing and Custom Executive Programs). In addition, Stu has served at the Allen Center for Executive Education at the Kellogg School of Business, the China Europe International Business School (CEIBS), and the Cheung Kong Graduate School of Business (CKGSB). Along with his academic work at the above business schools, Stu has also worked with American Honda, CIGNA, The Davidson Institute, General Electric, Genworth Financial, Harvard Business School, Navy Federal Credit Union, Pearson Prentice Hall, and McKinsey & Company. He is co-author of a number of leading simulation products including StratSimManagement, StratSimMarketing, StratSimChina, CountryManager, PharmaSim, HRSimSelection, MarketShare, BizCafe, and ServiceSim, all used at leading universities worldwide. Stu has extensive experience in facilitating simulation events, having directly worked with thousands of executive and MBA participants over the past 20 years. Management by the Numbers, Inc. (MBTN), a new venture that Stu has co-founded with Paul Farris of the Darden School of Business, will launch in 2010. The focus of this project is providing a self-paced, on-line environment where students and executives can master the numbers side of marketing. The goal of MBTN is to improve marketing acumen of mid-level managers to ultimately enhance the financial performance of businesses worldwide. Stu and his family reside in Afton, Virginia at the foot of the Blue Ridge Mountains. In his spare time, Stu enjoys playing Irish and old-time traditional music and competing in triathlons.

ABOUT THE AUTHORS (CONTINUED)

Michael Deighan joined Interpretive Simulations in 1989 as lead software developer, and is now Chief Technology Officer. He is co-author of a number of Interpretive's simulations: Airline, AutoSim, BizCafe, CountryManager, Entrepreneur, HRManagement, MarketShare, PharmaSim, ServiceSim, StratSimChina, StratSimManagement, and StratSimMarketing. In addition to developing software, he has been teaching computer programming classes at Piedmont Virginia Community College, in Charlottesville, Virginia, since 1990. Michael received his B.A. in German and Economics from Washington and Lee University, and an M.A. in German from the University of Virginia. Harlan E. Spotts is a Professor of Marketing at the Western New England College School of Business. His areas of expertise include marketing management, marketing communications, and consumer behavior. He teaches marketing management and strategy courses in both the undergraduate and graduate business programs. Dr. Spotts has published his research in the Journal of Marketing, Journal of Advertising Research, European Journal of Marketing, International Journal of Advertising, Journal of Marketing Education, Journal of the International Academy for Case Studies, Journal of Business and Applied Management, the Journal of Marketing Education, The American International College Journal of Business, the Journal of Management Education, and CASE: International Journal of Education Advancement. Dr. Spotts received his Ph.D. and M.B.A. from the University of Massachusetts and his B.S. degree in Business Administration from the College of New Jersey.

ACKNOWLEDGMENTS The authors wish to thank many people for their support in the development of this simulation. Since the simulation is based, in part, on our PharmaSim Marketing Management simulation, all those who have helped us over the years deserve another round of thanks. In particular, Gene Anderson, Jose Rosa, Lori Feldman, Hugh Daubek, and Christine Moorman deserve special mention. Tony Naidu of Interpretive was a critical part of the original team that created the concept of MarketShare. Tony and Bill Womack created the cover design. We especially appreciate the over 80,000 students and faculty who have used PharmaSim as part of their educational experience during the past fifteen years. MarketShare has certainly improved from the feedback faculty and users have provided us with during that time, and that base of experience is certainly reassuring to us as authors as to the potential success of MarketShare.

Harlan Spotts Michael Deighan Stuart W. James

January 2010

TABLE OF CONTENTS

Introduction ................................................................................................................................................. 1 Exploring Marketing ................................................................................................................................ 1 Marketing as a Planning Process .............................................................................................................. 2 Choosing a Course of Action.................................................................................................................... 4

Exhibit 1: The Marketing Planning Process ........................................................................................ 6 Using MarketShare In a Group ............................................................................................................... 10 Responsibilities of the Team Leader ...................................................................................................... 11 The MarketShare Manual ....................................................................................................................... 12

Section 1: The MarketShare Case .......................................................................................................... 13 The Brand Management Group .............................................................................................................. 14 Industry Overview .................................................................................................................................. 14 The OTC Cold Remedy Market ............................................................................................................. 15 Internal Product Development ................................................................................................................ 17 Market Segmentation and the Market Survey ........................................................................................ 22 Financial Situation .................................................................................................................................. 23 The Marketing Task ............................................................................................................................... 24

Section 2: MarketShare Operations Guide ........................................................................................... 25 Simulation Navigation ............................................................................................................................ 26 Detail of Menu Options .......................................................................................................................... 28

STARTUP ........................................................................................................................................... 28 DECISIONS ........................................................................................................................................ 29 DECISION ANALYSIS ....................................................................................................................... 37 COMPANY ......................................................................................................................................... 42 MARKET ............................................................................................................................................ 48 SURVEY ............................................................................................................................................. 61 SIMULATION ..................................................................................................................................... 67

Glossary ..................................................................................................................................................... 69 Index ........................................................................................................................................................... 75

Print date: July 9, 2013

Introduction—Page 1

INTRODUCTION Exploring Marketing Why study marketing? First, marketing is a fascinating and dynamic activity that affects each and every one of us on a daily basis. Second, formal study of marketing helps us make better decisions when faced with multiple opportunities and problems in a business setting. MarketShare is an opportunity to explore marketing through the use of a dynamic computer simulation. During this exploration you will learn about different aspects of marketing – from product design and pricing to advertising and selling. Before playing the simulation, it is important to have an overview of marketing to help you understand the basic underlying concepts as well as the activities you will be pursuing as part of the competition. Marketing touches us on a daily basis, from the time we wake up to when we go to bed. When you pick out your clothes for the day, logos such as the NIKE™ swoosh may adorn your shirt and/or shoes. You may listen to the radio on your way to class. The music that you hear is interrupted as the radio station airs an advertisement for a local business or product. Magazines in your backpack contain advertising and articles on the latest fashions and products that will hit the stores in the coming months. Once at school, you are bombarded by product names and logos that your classmates are wearing. The soda machine down the hall has a large PEPSI sign enticing you to quench your thirst. Throughout the day the list goes on, as you are exposed to marketing decisions made by executives in companies around the world trying to get you to buy their products. Marketing creates exchanges of items of value between buyers and sellers to satisfy consumer needs and wants. There are three important concepts in this definition. The first is that consumers have needs and wants. Needs exist when a person is deprived of something. For example, it is generally accepted that people wear shoes on their feet for both hygiene and protection. Shoes help to protect our feet from hard surfaces, hot sidewalks, stones and other objects that could cause injury. When our shoes wear out, we need to replace them. This could easily be done by selecting a pair of shoes from any number of stores such as K-mart, Payless Shoes, Sears, or Boston Store. As long as the shoes have soles that will protect our feet, we have satisfied our need. Wants are different than needs. Wants are desires that we have for a particular type of product or activity. To go back to the shoes example, a $15 pair of sneakers would satisfy our need for shoes to protect our feet. These shoes might not last very long or be very fashionable, but they would satisfy our need. However, we may desire to have a pair of NIKEs or Reeboks that will cost $100 because that is what our friends wear at school. These shoes would satisfy both our need and our want. The second concept central to the marketing definition involves satisfaction. The total focus

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of marketing is to produce products and services that will satisfy consumer needs and wants. Thus, the products and services created relieve the state of deprivation or desires we feel. This satisfaction comes from the attributes that make up products and services. The third component of the marketing definition involves the exchange. Exchange takes place when buyers and sellers trade something of value. Of course, you as a consumer engage in exchange to satisfy your needs and wants. In order for an exchange to take place, the following conditions must exist:

• The buyer and seller must both own something of value (products, services, money, time, etc.),

• The buyer and seller must be able to communicate with each other, • The buyer and seller must be willing to engage freely in the exchange.

All the marketing activities that affect us on a daily basis can be organized into an easily remembered concept called the 4Ps, which stands for Product, Price, Place, and Promotion. Each P stands for a major area of marketing that requires the attention of marketing managers. The Product is the bundle of attributes that we buy to satisfy our needs and wants, be it an item, service, or intellectual property. Price involves all those factors that affect how much we will pay for a product. Place refers to distribution, or, how products get to the stores so that it is convenient for us to buy. Finally, Promotion involves all activities that companies use to communicate with us from advertising to sales people. It also includes those activities that companies use to get us to buy from them, such as coupons, free products, etc. Marketing, of course, is more than a set of discrete activities. It is essential to integrate the various decisions in a thoughtful, intentional manner. Thus, marketing is also a planning process. Marketing as a Planning Process During the course of the competition you will be learning about the 4Ps. You will also gain an understanding of marketing as a process. This is a process that should be used by every business to create effective marketing programs. The overall process has two basic steps: (1) analyzing the situation, and (2) choosing a course of action. This process is much more detailed and complex than the two simple steps, but if you remember that everything you are doing in marketing planning is part of one of these two steps, you should be able to work through this process with few problems. Analyze the Situation As a marketing manager, your primary focus when analyzing the situation is to gather information to help you identify opportunities in the marketplace that will help your company be successful. In order to do this, you should determine what your company does really well—

Introduction—Page 3

its strengths. At the same time you must also be aware of what your company has a hard time doing—its weaknesses. Finally, you must be aware of any forces in the environment that pose a potential threat to your company's success. This type of analysis is commonly referred to as “SWOT,” the acronym for strengths, weaknesses, opportunities, and threats. Let's use an example to demonstrate the purpose of analyzing the situation. You have just been hired as a marketing manager for a company. It is your first day on the job, and you are sitting in your office wondering what you are supposed to be doing. A good first move would be to find out something about your company and the products it makes. In your search of the company library, you learn that the company has been in business for 50 years and makes aspirin. According to the American Heritage dictionary, aspirin is a white, crystalline compound, CH 3 COOC 6 H 4 COOH, derived from salicylic acid and commonly used in tablet form to relieve pain, and reduce fever and inflammation. Also called acetylsalicylic acid. About 14% of all the people who buy aspirin buy your company’s product. Thus, your product has a 14% share of the market. You also find out that your product is sold through drugstores and grocery stores, and costs $1.99 for 50 tablets. During each year, your company places ads in newspapers and magazines, and buys an occasional radio spot. Consumers receive coupons for 25 cents off a 50 tablet bottle two times a year. At this point, you have an overview of the current marketing activities as defined by the 4Ps. How do you find out how strong or weak you are in the marketplace? You would probably want to find out information about the competition. You look into this further and find out that there are five other competitors in the marketplace, some larger and some smaller than your company. What other kinds of information would you like to know about your competition? You should also talk with consumers to find out if they have a need that aspirin cannot satisfy. What kinds of questions would you ask them? You may find that there are consumers who cannot take aspirin for physical reasons, thus there may be an opportunity to create a new pain reliever to satisfy this need. If your company does not produce a non-aspirin pain reliever, it may be a weakness that could potentially hurt your success. Is there anything else you want to find out about consumers? In addition to the competition and consumers, you probably want to find out other things about the surrounding environment that may create opportunities, or present potential threats. The government regulates all medical products, thus it is important for you to know the current rules and regulations and collect information on new rules and regulations being developed. Technology is constantly changing, providing new materials with which to make products and new processes for production. To remain competitive you will probably need to

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know what is happening within your industry with respect to technological advances. Social trends are also important. What things are going on in society that may impact the use of your product? Perhaps there is a significant trend toward natural medicine that relies on the use of herbs to treat physical problems. You will probably want to find out more about this trend to determine if it poses a significant threat to your business. When conducting a situation analysis, use your market research to find out as much information as you can on your company, your products, the competition and industry, consumers, and environmental factors such as technology. Once you have gathered all of this information, use it to choose a course of action. Choosing a Course of Action The second part of the planning process requires that you make decisions—decisions about the products that you will offer, how they will be priced, where they will be sold, and how you will tell consumers about them. In addition to these decisions, it is very important that you decide whom it is you want to purchase your product. This will be your target market. Will this target market include everyone, or just a smaller subgroup of consumers? In deciding on target markets, most companies go through a process called market segmentation. Market segmentation involves taking a large group of people who may be very different from each other and dividing them into smaller groups. The important aspect of these smaller groups is that they are very similar in terms of their needs and wants. If we can identify those people who have the same, or similar needs, it is easier for us to create a marketing program that will satisfy those needs. Once the market segments have been identified, you will need to define a set of objectives. What would you like to accomplish in the coming year? Some examples include:

• We would like to increase sales by 10 percent this year. • Market share should increase by 5 percent this year. • Profits should increase by 15 percent in the coming year. • This year we will introduce two new products. • We strive to maintain our market leadership this year. • We want to increase the number of stores selling our product.

These examples reflect important characteristics of a good set of objectives. First, objectives should be specific and attainable. Try to avoid being vague and setting a goal for yourself that you cannot reach. Second, objectives should be specified a way that can be measured. Third, objectives can be either quantitative or qualitative. Finally, objectives need to be set for a specific time period, usually one year.

Introduction—Page 5

Once your objectives are set, you will need to develop a plan of action, or strategy, for accomplishing your goals. Your plan of action will address four components under your control: Product, Price, Promotion, and Place. Let's consider a sample strategy for a product. You may decide that you need to make your product different from other aspirins on the market. One way this could be accomplished is by making different color aspirin tablets. This is called creating product differentiation. When pricing the product you may decide to have a high- suggested selling price (MSRP) and then heavily discount the price to the consumer. This would be considered a Hi-Lo pricing strategy. When promoting the product you spend a lot of money on television advertising. Your hope is that this advertising will create a large demand for your product. Then consumers will ask the retailer for your product when shopping for aspirin. This is called a Pull marketing strategy. Finally, your product may only be for sale at drugstores. Thus, you would be using a selective distribution strategy. Notice how these elements incorporate the 4Ps and define your marketing strategy. Strategy is very important because it determines what activities you will use in the next year to accomplish your objectives. Let's examine one of the strategies mentioned above to distinguish between strategy and activities, or tactics. Promotion is one of the 4Ps under your control. There are a number of different promotional activities that you can use in your strategy. These include advertising, consumer sales promotion (coupons, free gifts, price discounts, etc.), personal selling, and trade sales promotion (discounts to the retailer). If you decide to use a Pull strategy for promotion, you will focus on only some of the activities mentioned above. As the name implies, a pull strategy is designed to lure consumers into the retail store. Thus, if your objective is to stimulate demand for your product among consumers, and you are using a pull strategy, then you might spend a lot of money on the promotional activities, or tactics that directly address the consumer. Which ones would these be? Once you have specified your strategy and tactics, it is time for implementation. The production of your aspirin is changed to make different color tablets. The price of your product is set and communicated to retailers and consumers. You make the advertising buys, and deliver coupons to consumers to stimulate demand. Finally, your salespeople call on drugstore owners to get your product on the shelves. Evaluation becomes very important after your strategy has been implemented. You will need to determine if you reached your objectives, if your strategies were effective, and if your tactics worked. To do this you will need to conduct market research to analyze the situation. Once you reach this stage, you have come full circle and are back to the point of situation analysis where you began (see Exhibit 1.1). Now you can prepare to make a new set of decisions for the next year.

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Exhibit 1

THE MARKETING PLANNING PROCESS

Situation Analysis Use market research to examine the internal and external environment.

Select Target market.

Opportunities and Threats Examine both the market and company for this assessment.

Objectives Specific, attainable, quantitative and qualitative, and time period

Strategies Product, Price, Place, Promotion

Tactics Activities carried out in each of the 4Ps that are in line with the strategy

Evaluation Objectives, strategies, and tactics—how are we doing vs. objectives?

Introduction—Page 7

Computer-based simulations are a popular and useful tool for learning and applying business concepts. Simulations offer students the opportunity to experience much of the realism of making business decisions in a low-risk, experiential learning environment. This methodology is an important component of the classroom experience. MarketShare focuses on the 4Ps of marketing and is designed to teach basic marketing concepts in an active and stimulating environment. Although MarketShare is based on consumer packaged goods, the MarketShare concepts are applicable in a broader context, as even dot-com and service industry managers need to find target customers, analyze their needs, motivate the distribution channel, and derive an appropriate pricing structure. In MarketShare, you will typically be making decisions as part of a marketing team. Teamwork is increasingly important in business today, and a valuable part of the MarketShare experience is learning how to make the best decisions when confronted with several different opinions. Your group will have to decide how to sort out your priorities and objectives in the context of a limited budget and a changing environment. Decisions cover a time-span of up to 6 simulated periods (years), allowing you to experience both the short-term and long-term effects of your decisions. Competing in the MarketShare environment will be a new experience for most of you, and this may well be the first time you use a simulation in the context of business education. Therefore, take some time to familiarize yourself with the program and manual before beginning the exercise. While working through the simulation, you will find it helpful to refer to the manual for information and tips. To get the most out of the MarketShare experience, we recommend the following approach:

Read Introduction and Section 1 of the Student Manual.

The Introduction provides an introduction to marketing and Section 1 presents a description of the market and your firm's current situation in the form of a case. You may have already covered some of the material in section 1 in your textbook. Consider this as a quick review and a good context for the simulation. A thorough understanding of marketing and of your firm's situation will help you make better decisions.

Read Section 2 of the Student Manual.

Section 2 (Operations Guide) provides information on how to use the simulation, as well as a detailed description of each menu option. While reading this section, it is best to login to the simulation to become familiar with the menu structure and options, and to learn how to operate the program. Use

Read Introduction, Sections 1 & 2 of the

Manual

Learn How to Operate the Simulation

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MarketShare’s context-sensitive sidebar (located on the right-

hand side of each report, summary, and decision input screen). To open the online operations guide, select the Help button (located at the top of the simulation screen). Read Market Research Reports.

Two years of marketing research is available from within the simulation. For the most part, the information in Section 2 of this manual matches what is available in the software in Period 0. Therefore, you will not need to purchase marketing research for your first decision. After the first decision, though, the information will be out of date and potentially unreliable.

Analyze the Current Situation.

Market research provides key information about customer needs and purchasing behavior, consumer perceptions of your product, potential target markets, and comparative analyses of competing brands. Use this analysis of the market and competition to create insights and alternatives for your decision-making process.

Implement your Marketing Plan.

You will devise and implement an appropriate plan for your brand from this information. Just as in actual business situations, however, some information and reports will prove to be more useful than others. Part of your decision-making process will include deciding which information to purchase each period. These reports, located on the MARKET and SURVEY menus, along with the internal company reports on the COMPANY menu, will help you to analyze your current situation and the competitive environment.

Implement your Marketing Plan

Read Market Research Reports

Analyze the Current Situation

NOTE: You may find it helpful to print out some reports and step back from the computer from time to time. Analyzing information and determining an integrated strategic plan is a complex task. It is important to take time and reflect on the information, especially when working in groups.

Introduction—Page 9

Enter decisions.

After reviewing information about your company, the competition, and the market, you will decide how to manage your brand in terms of product mix, price, advertising, and promotion. Once you have made your marketing decisions, you will use the input screen on the DECISIONS menu to enter them into the computer.

Consider the amount of time necessary to analyze the information and make decisions. This process requires an average of 1 1/2 hours, although one should allow extra time at first to get acclimated to the simulation. Make sure you allow sufficient time to analyze your resources thoroughly and make well-planned decisions. This is especially important in the period when you launch your new product. Use the WHAT IF... Option

. Use What If… on the DECISION ANALYSIS menu to run a financial check on your input decisions. This option will not forecast sales based on your decisions, but it can be used to experiment with different sales and pricing assumptions.

Advance to the Next Period.

After entering your decisions, use the ADVANCE TO NEXT PERIOD option on the SIMULATION menu. The computer will process your decisions and advance the simulation to the next period.

Review Results.

Review the results in the market before making decisions for the next period. The simulation does not tell which strategies worked and which did not. Instead, you must compare your results with those of your competition and consider how well your strategy is working. You may find some of the comparative graphs helpful in your analysis.

Repeat.

Repeat the decision-making process until all 6 periods have been completed (or as many as you will play for your class). At the end of the simulation, you will be able to see how your brand(s) performed over a 6-period span.

Advance to the Next Period

Review Results

Repeat

Use the WHAT IF. . . option

Enter Decisions

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Competing firms will be following their own strategies and reacting to your decisions. The simulation always starts from the same position, but each game will proceed on a unique course depending on the strategy that each team chooses. This will allow competitive comparisons and illustrate how businesses can evolve differently. Using MarketShare should be an exciting and rewarding experience. You will gain a practical understanding of marketing components and how various market factors interact and affect one another. By analyzing information, making decisions, and observing the results, you will experience firsthand the challenges and rewards of marketing. Using MarketShare In a Group If you are using MarketShare in a classroom setting, you may be asked by your instructor to work in groups. Each group will pool its skills and resources to manage collectively as brand manager. Group work is the way business is most often conducted today. It can be both rewarding and frustrating. Thus, it is critical that you learn how to make every group experience a success. One of the most frequent complaints with group work is the amount of time wasted in trying to get organized and make decisions. There are also complaints that individual members are not "pulling their weight." To reduce these problems, your group should answer the following questions in their first

meeting:

1. When, where, and how often should we meet? 2. How should we efficiently and effectively conduct our meetings? 3. Should we choose a general manager? What authority should this person have? 4. How should we divide the marketing tasks among group members? 5. How do we resolve marketing issues and make final decisions? 6. How do we encourage and maintain a high quality of contribution? 7. How will we deal with personal conflicts among group members?

Over time, the group should assess whether it is functioning efficiently and effectively. As your product portfolio changes, new competitive situations arise, and more information becomes available, the group may have to reorganize to best meet the current needs of the business.

Introduction—Page 11

Responsibilities of the Team Leader When playing MarketShare as a team, one member will be designated the “team leader”. The team leader is ultimately responsible for gathering the various decisions made by the team, making sure the decisions are entered correctly and within budget, and advancing the simulation. The team leader also has the option to “lock” decisions so as to block other team members from changing them before the simulation is advanced to the next period. Thus, it is important that the team leader be carefully chosen by the team and that they be a capable leader and accessible by the members of the team and by your instructor. Additionally, if your instructor has allowed the REPLAY or RESTART options, your team leader is the person who will implement these options. The REPLAY option allows your team to replay the last period, whereas, restart will erase all previous periods and decisions, and restart the simulation from Period 0.

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The MarketShare Manual This manual is divided into five sections: Introduction The Introduction explores the concept of marketing: what it is, why it is important, and discusses what concepts will be used in the simulation. Section 1: The MarketShare Case Section 2 presents the over-the-counter cold medicine industry in a form similar to a business school case. This will also serve as an introduction to the situation at the start of the simulation. Section 2: MarketShare Operations Guide Section 3 outlines the operational aspects of using MarketShare, including how to get started, the menu and help systems, and a detailed description of each report and decision screen. Glossary and Index The last section includes a glossary of marketing terms and an index for navigating the manual.

The MarketShare Case―Page 13

SECTION 1: THE MARKETSHARE CASE

Senior management expects that skillful marketing will prove pivotal to the long-term success of Allstar Brands.

Allstar Brands OTC Cold Medicine Group The Allround Brand The management team at the over-the-counter cold medicine (OCM) group of Allstar Brands just completed its third presentation in the past month to the Pharmaceuticals Division manager regarding the status of Allround cold medication. It is apparent from all the attention that the team has received that the Allround brand it manages is of strategic importance to the company. Overview Allstar Brands' Allround product is one of the market leaders in the over-the-counter (OTC) cold and allergy remedy market. Though reasonably successful in the past, Allround has now been identified as one of the brands of the company that should drive future growth and improved profitability. The division anticipates that the brand's cash flow in the coming years will allow the company to pursue new opportunities in emerging markets overseas. However, the division manager responsible for Allround is also concerned with the competitive nature of the OTC cold remedy market. In the past three periods, the industry has seen several product introductions as well as major increases in promotional and advertising expenditures. Though well positioned for growth, Allround has major challenges ahead as well. The Company Allstar Brands Corporation is one of the leading manufacturers of packaged goods in the world. Since its founding in 1924, the company has acquired or merged with a number of smaller packaged goods companies. The company consists of three divisions: Consumer Products, International, and Pharmaceuticals. The Consumer Products Division handles a number of packaged goods, such as laundry detergent, shampoo, and bar soap. The International Division distributes Allstar products on a global basis and has a large presence in the European market. The Pharmaceuticals Division is responsible for the marketing and production of ethical and OTC medications. Ethical drugs are available through pharmacies with a physician's prescription, whereas OTC remedies are widely distributed without the need for a prescription.

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NOTE: The brand management group responsible for Allround work together as a team on all of the marketing decisions related to the OTC cold and allergy remedy market.

The management of Allstar's Pharmaceuticals Division consists of a number of market related groups, including the OCM group. This group is concerned primarily with the marketing activities of the Allround brand and any line extensions or new product introductions that might fall under the same category. The Brand Management Group The marketing managers are concerned with developing the Allround marketing mix strategy each period. In addition, if Allstar's research department develops any promising new product ideas for the cold medicine market, this team will be responsible for the new product launch. Although all product and marketing decisions are made as a group, each member of the brand management group may take a particular role or specialize in different areas of market analysis. How best to divide up responsibilities among team members is left to the managers.

Allstar Brands competes with four other firms in the OTC cold and allergy market. These five firms offer a total of 10 brands in five different product categories (cold liquid, cough liquid, allergy capsule, cold capsule, and nasal spray) listed in Exhibit 2.1.

Industry Overview

Exhibit 2.1: Company and Brand Summary

Company Name Sales (Millions) Brands on the Market

Allstar Brands $285 Allround, 4-hr multi-symptom cold liquid

B&B Health Care $503 Believe, 4-hr allergy capsule Besthelp, 4-hr cold capsule

Curall Pharmaceuticals $345 Coughcure, 4-hr cough liquid

Driscol Corporation $409 Defogg, 4-hr allergy capsule Dripstop, cold nasal spray Dryup, 4-hr multi-symptom cold capsule

Ethik Incorporated $684 Effective, cold nasal spray End, 4-hr cough liquid Extra, 12-hr cold capsule

The MarketShare Case―Page 15

The OTC Cold Remedy Market

Cold remedies are designed to relieve several basic symptoms: aches and fever, nasal congestion, chest congestion, runny nose, and cough. Allergy remedies address many of the same symptoms and are therefore often grouped with cold remedies. However, products formulated specifically for allergy relief are available, and it is common in the industry to consider relief from allergy symptoms as a separate consumer need from cold and flu-like symptom relief. Chronic allergy sufferers tend to have different usage. Brand Formulations (4Ps = Product) In general, various combinations of six basic types of ingredients (see Exhibit 2.2) are used to formulate OTC brands. Each ingredient targets one of the symptoms listed above, or is used as a base for the other ingredients. Exhibit 2.2: Ingredients and Purpose

Ingredients Purpose

Analgesics Provide relief for aches and fever. Common analgesics are aspirin and acetaminophen (an aspirin substitute).

Antihistamines Reduce the secretions that cause runny nose and watery eyes.

Decongestants Reduce nasal congestion by shrinking the blood vessels in the nose lining to clear the passages and restore free breathing.

Cough Suppressants Reduce the cough reflex.

Expectorants Provide relief from chest congestion by loosening the phlegm, thereby making each cough more productive.

Alcohol Provides a base for the other ingredients in some products and helps the patient rest.

Form A brand can be made available in one of three forms: liquid, capsule, or spray. A consumer's choice with regard to form is usually based on personal preference, but some general differences are apparent. Nasal sprays contain only a topical nasal decongestant that provides faster relief from sinus congestion than other forms. Capsule and liquid cold

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medications might contain any combination of ingredients, although

cough medicine is usually found in liquid form to help soothe throat irritation. According to a recent survey, most consumers find that capsule form is somewhat more convenient than liquid. Exhibit 2.3 shows each of the current brand formulations on the market. Duration Product duration is typically either 4-hour or 12-hour. The United States Food and Drug Administration (FDA) regulates the amount of medication for various periods of relief, including the maximum for a 24-hour period without a prescription. The maximum dosage used in 4- hour formulations cannot be taken more than four times each day due to over-medication concerns. Twelve-hour formulations contain half the daily maximum medication. Nasal sprays are considered instant relief products because they act much faster than standard cold medicines, but conversely, they also wear off faster. The duration for each brand is also listed in Exhibit 2.3. Side Effects Side effects have become a greater consideration in recent periods because of the emphasis on healthier lifestyles and concerns about performance under medication. Drowsiness due to antihistamines or alcohol is the most often mentioned negative side effect, especially when these products are used during the day. Other considerations include upset stomach, long-term effects of nasal spray, and excessive medication. As can be seen in Exhibit 2.3, the Allround brand is a 4-hour liquid cold medicine that provides multi-symptom relief. It contains an analgesic, an antihistamine, a decongestant, a cough suppressant, and alcohol. Most consumers use this product for nighttime relief because of the strength of the medication and because the alcohol and antihistamine help the patient rest. Allround is viewed as one of the most effective brands on the market at reducing multiple cold symptoms. However, consumer groups and some physicians have attacked the multi-symptom "shot-gun" approach as providing excessive medication in many circumstances. However, consumers appreciate the convenience of only having one brand in their medicine cabinet that can address several different kinds of cold and flu symptoms.

The MarketShare Case―Page 17

Exhibit 2.3: Current Brand Formulations

Analgesic Antihist Dcngest Cough Supp Expect Alcohol Description

Max. Allowed 1000 4 60 30 200 20 (mg/4-hr dose)

Allround 1000 4 60 30 0 20 4-hr multi liquid Believe 0 4 0 0 0 0 4-hr allergy capsule Besthelp 0 4 60 0 0 0 4-hr cold capsule Coughcure 0 0 30 30 0 10 4-hr cough liquid Defogg 0 4 0 0 0 0 4-hr allergy capsule Dripstop 0 0 60 0 0 0 cold spray Dryup 1000 4 60 0 0 0 4-hr multi capsule Effective 0 0 60 0 0 0 cold spray End 0 0 0 0 200 10 4-hr cough liquid Extra 0 0 120 0 0 0 12-hr cold capsule

Internal Product Development (4Ps = Product) The OCM group has important product development and management decisions to make over the next decade and must work closely with the product research and development (R&D) area within Allstar Brands. R&D will provide two major types of product development for the Allround brand group: reformulation of the ingredients in Allround and development of a new brand.

• Two reformulations of the Allround brand will be available from R&D starting a year from now. The two options under consideration are dropping the alcohol or replacing the cough suppressant with an expectorant. If used, the reformulation would replace the current product configuration.

• Three new product formulations will be available from R&D starting in period 3. The three options under consideration are a 4-hour cough formula, a non-drowsy allergy medication, or a children’s cold medicine. The allergy medication is based on a product that is now available by prescription only, but the company is planning on submitting the product for FDA approval.

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NOTE: The manufacturer’s suggested retail price (MSRP) for Allround is $5.49. NOTE: Allowances are usually discussed with retailers in conjunction with price discounts, but are also considered to be a type of trade promotion.

Pricing and Promotional Allowances (4Ps = Price) It is industry practice for manufacturers to suggest retail prices to retailers, known as the Manufacturer’s Suggested Retail Price (MSRP), although retailers ultimately set the actual selling price to consumers. Most discounts to the channel are set based on MSRP. There are two primary types of discounts: a volume discount (between 15–40%) and a promotional allowance (typically between 10–20%). Thus, distributors usually pay somewhere in the range of 25–50% off the MSRP depending on the volume discount and promotional allowance passed on to the retailer. Allowances are incentive discounts given to the distribution channel to help promote a product that ultimately impact the product's retail price. Allowances are necessary to gain retail distribution, to obtain desired shelf facings in retail outlets, and to gain support for a brand advertised and promoted by the retailer. The current MSRP of Allround is $5.49; retailers receive an allowance of 13% and a volume discount of 30%. The group noted that Allround’s price was significantly higher than the competition. However, the Brand Manager reminded them that the higher price gives them an above average contribution margin, and that the retailer is able to make more money on each unit sold when compared to competitive products. Nonetheless, they all agreed that the MSRP and overall pricing structure should be reviewed in the coming year.

Exhibit 2.4: MSRP, Volume Discount, Promotional Allowance, and Retail Price by Brand

MSRP Vol. Disc. Promo. Allow. Drug-store Grocery Mass Merch. Allround $ 5.49 30.0% 13.0% $ 5.42 $ 5.16 $ 4.58 Believe 3.99 33.5% 15.6% 3.68 3.55 3.15 Besthelp 4.59 34.5% 13.3% 4.26 4.11 3.65 Coughcure 4.69 28.5% 16.7% 4.62 4.38 3.87 Defogg 4.09 22.5% 11.1% 4.44 4.27 3.75 Dripstop 4.09 21.5% 13.3% 4.42 4.26 3.75 Dryup 4.79 21.5% 15.6% 5.10 4.91 4.33 Effective 4.09 30.0% 14.4% 3.96 3.82 3.38 End 4.49 31.0% 12.5% 4.45 4.20 3.72 Extra 4.09 31.0% 12.5% 3.99 3.83 3.39

The MarketShare Case―Page 19

NOTE: Advertising plays a major role in establishing brand awareness among consumers and in helping to shape consumers' perceptions of products.

Advertising and Promotion (4Ps = Promotion) Advertising and promotion for Allround is one of the more significant decision areas. In addition to creating a general advertising campaign for multiple media outlets, the management group must also make several choices in consumer and trade promotion—important aspects of improving distribution effectiveness. Thus, this part of the management decision process includes elements of both pull (consumer-oriented promotion) and push (trade-oriented promotion). Advertising The OCM group must make three basic advertising decisions each period: the amount of dollars allocated to the advertising budget, the content of the advertising message, and, if using the comparison message, the target competitor. Last period, $7 million was spent on Allround's advertising campaign, primarily for commercials aired on network television. Competitive advertising budgets for last period ranged from $1.45 million for the Defogg brand to $22.3 million for Coughcure. There are four basic advertising message types that the OCM group considers potentially useful for Allround: (1) a primary demand stimulation to focus the advertising message on increasing overall demand for OTC remedies while increasing Allround's unaided awareness, (2) a benefits approach that states the symptomatic relief properties of Allround, (3) a comparison approach that positions Allround against another brand, and (4) a reminder advertising message to maintain consumer awareness and stimulate the repurchase of Allround. The advertising message used in any period can be a combination of these types. Last period, Allround's advertising was 25% primary demand, 25% benefits, 25% comparison, and 25% reminder. The group wondered if a more effective choice of message might be implemented. Consumer Promotion Consumer promotions are a significant part of marketing in the OTC cold and allergy remedy market. Allstar Brands spent $3.2 million on consumer promotions for the Allround brand last period, which placed it somewhere in the midrange of its competition.

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NOTE: Consumer promotions used include in-store point-of-purchase displays and distribution of coupons.

The purpose of point-of-purchase items, such as sale racks, on-shelf advertisements, or end-of-aisle displays, are to promote a brand to the consumer in the retail outlet. The OCM group believes that these displays promote brand switching when the consumer is purchasing OTC products. Point-of-purchase money is paid to the retailer, but the promotion targets the end consumer. Last period, $0.8 million was spent on point-of-purchase displays for Allround. Coupons distributed to consumers in special newspaper or magazine supplements offer additional discounts off the retail price when redeemed at the time of purchase. In the last period, $2.4 million was spent on coupon support of the Allround brand. This included money spent on printing, inserts, and mailings. Exhibit 2.5 provides a summary of last period's promotional activity for the Allround brand. Exhibit 2.5: Promotional Activity for Allround Brand (in $000s)

Promo $ (Millions) Promo Allowances 26.5 13.0% of MSP

Point of Purchase 0.8

Coupons 2.4

Retail Channels (4Ps = Place / Distribution) OTC cold and allergy remedies are sold retail in drugstores, grocery stores, and mass merchandisers. A recent study shows that there is some difference in where consumers purchase different types of cold medicine. These are shown in Exhibit 2.6. Exhibit 2.6: Consumer Purchases by Channel

Retailer Cold Cough Allergy Drugstores 28.5% 35.1% 44.3%

Grocery Stores 52.6% 44.8% 38.7%

Mass Merchandisers 18.8% 20.1% 17.0%

The MarketShare Case―Page 21

NOTE: The manufacturer’s sales force plays an important role in success of a brand in the OTC cold and allergy market.

Gaining the support of the channel is an important part of a brand's success, and shelf space allocation and placement can have a significant effect on brand sales. Because of this importance, the OCM group asked their sales force to query retailers about shelf space allocation among brands. The results from this informal survey showed that retailers considered four basic factors regarding shelf space allocation: product turnover (number of units sold in a given period of time), product profitability, promotional allowances and sales force support. In general, large grocery stores, mass merchandisers, and chain drugstores were more focused on turnover and allowances, whereas independent drugstores paid greater attention to sales force support. The OCM group hoped that this information might prove useful in determining how to allocate their resources across distribution channels. Sales Force The sales force is responsible for maintaining relationships with current retailers and for developing new retail accounts. The sales force also provides special support to retailers for their in-store activities, such as shelf location, pricing, and compliance with special promotions. The management group of Allround may direct the sales force to focus on particular channels and special activities in support of all channels. Salespeople allocated to drugstores, grocery stores and mass merchandisers will spend all of their time selling to and supporting that particular channel. Salespeople allocated to indirect support will spend their time on special activities such as merchandising, ensuring use of product displays, working with wholesalers, etc. Sales force allocation (# of sales people) for Allround is listed in Exhibit 2.7. Exhibit 2.7: AllStar—Sales Force Allocation

Channel #SF Drugstores 30

Grocery Stores 40

Mass Merchandisers 10

Indirect Support 30

Total Sales Force 110

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Market Segmentation and the Market Survey The trade typically segments the OTC cold and allergy market on the basis of how the brands are labeled. The three standard product categories in the OTC market are cold, cough, and allergy. The brand management group often uses the information presented in Exhibit 2.8 as a basis for determining the brand’s direct competition, but also realizes that the report fails to account for the cross-usage of brands (e.g., using a cold medicine to relieve allergy symptoms). Exhibit 2.8: Market Share by Product Category

Cold Cough Allergy Total

Mfr Sales ($M) $ 999.8 $ 517.2 $ 160.4 $ 1,677.3 Growth 7.7% 7.0% 0.6% 6.7% Allround 21.4% 0.0% 0.0% 12.8% Believe 0.0% 0.0% 64.6% 6.2% Besthelp 27.0% 0.0% 0.0% 16.1% Coughcure 0.0% 51.4% 0.0% 15.8% Defogg 0.0% 0.0% 35.4% 3.4% Dripstop 7.7% 0.0% 0.0% 4.6% Dryup 18.0% 0.0% 0.0% 10.8% Effective 15.3% 0.0% 0.0% 9.1% End 0.0% 48.6% 0.0% 15.0% Extra 10.5% 0.0% 0.0% 6.2%

A major marketing research firm offers a nationwide survey of OTC cold and allergy consumers. This firm claims that the survey provides a great deal more information on how consumers perceive and use cold and allergy products. The survey is conducted every year. Survey Data The consumer survey consists of the following reports: (1) awareness, purchases and satisfaction, (2) purchase decision-making criteria used by consumers, and (3) brand comparison based on consumers' perceptions of their ability to relieve symptoms. The sample data for awareness, purchases, and satisfaction are presented in Exhibit 2.9.

The MarketShare Case―Page 23

Exhibit 2.9: Market Survey—Awareness, Purchase, Satisfaction

NOTE: The OCM group believes that these studies contain useful information for decision-making, but that there exists a trade-off between the cost of the studies and the importance of the information which they provide. The OCM group also recognizes that all marketing research studies have some error in them.

Brand Awareness Purchases Satisfaction

Allround 68.1% 10.6% 50.6% Believe 35.7% 7.4% 36.0% Besthelp 76.8% 17.1% 47.0% Coughcure 67.0% 15.1% 40.6% Defogg 28.0% 3.4% 35.4% Dripstop 36.3% 4.6% 37.6% Dryup 62.9% 9.1% 47.5% Effective 42.5% 10.2% 38.6% End 69.8% 15.5% 40.2% Extra 61.4% 7.1% 38.0%

Other Marketing Research In addition to the survey data, other information about the market is available. Market trade publications, similar to Exhibit 2.8, are free to the OCM group and provide data for industry outlook on population, industry growth rate, and inflation. Other data concerning competition and distribution are available for a fee. All of these reports are discussed in detail in Section 3. Financial Situation Allround is a successful and profitable brand with sales of $214.3 million at the manufacturer's level last period. The gross margin was $132.5 million, and the contribution after all marketing expenditures, including advertising, promotion, sales force, and administrative costs, was $106.7 million. The Allround brand also carries its share of fixed costs, including the plant where Allround is produced, and a share of corporate overhead charges. These charges were $56.0 million, leaving a net income of $50.7 million. Senior management of Allstar Brands expects the OCM group to make even greater contributions in the future. A detailed income statement is presented in Exhibit 2.10. The group hopes that their budget will increase in future years, but upper management reiterated that their budget would be based on their performance in both sales and profitability. However, due to the new

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emphasis on growing the market share of Allround, additional budget

funds are available to the group. The Brand Manager pointed out that there are enough funds for significant increases in one or more areas of their marketing mix, but also noted that they should consider the marginal impact of spending increases. Exhibit 2.10: OCM Group Income Statement

NOTE: The marketing budget received from the division must cover all sales force, advertising, and promotional expenditures, as well as the cost to purchase marketing research.

$M $M %

Manufacturer Sales 214.3

100.0% Promotional

Allowance 27.9 13.0

Cost of Goods Sold 54.0 25.2 Gross Margin 132.5 61.8

Promotion 3.2

1.5 Advertising 7.0 3.3 Sales Force 8.5 4.0

Administrative 7.1 3.3 Total Marketing 25.8 12.0

Contribution After Marketing 106.7 49.8

Fixed Costs 56.0 26.2

Net Income 50.7 23.6 Next Period Budget 28.3 13.2

The Marketing Task The task of the Allround brand management team is to increase market share and profitability in an increasingly competitive and changing environment. With great enthusiasm the OCM group sets out to do the job. Each member has separate assignments, but all are concerned with the performance of Allround and potentially, a new brand introduction. The group will use the information presented in the exhibits and other marketing research studies to assess Allround’s situation. After completing its analysis of the situation, the group will then make decisions in the areas of product, distribution, promotion, and pricing. The group must keep in mind that all decisions are interrelated, and must be considered in context. This process will be repeated over the coming 6 periods as they attempt to establish AllStar Brands as the leader in both profitability and market share in OTC cold medication.

MarketShare Operations Guide—Page 25

SECTION 2: MARKETSHARE OPERATIONS GUIDE Simulation Navigation

MarketShare is designed to be easy to use and is compatible with most Internet browsers. This chapter contains the information needed to make the decisions for each period and an interpretation of the results found on the reports. This section will first detail simulation access and then will give an overview of the decision-making process of MarketShare. Each page of the MarketShare simulation contains an easy-to-use menu system consisting of three parts: (1) specific menu options and links to decision-making tools and input screens, found on the left side of the MarketShare browser window; (2) green navigation and general control buttons across the top; and (3) pull-down menu to show the current period in the upper right-hand corner. Refer to the informative sidebar to the right of each simulation screen for more in-depth information about that particular screen.

Sample Screen

Menu system: seven

categories

Informative side bar

Change the period view

Industry name and user info

MarketShare screen display

Navigation buttons

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SIMULATION NAVIGATION

The links on the left of the MarketShare window lead to information and tools you will need to analyze your current position, plan a strategy, and input your decisions. These links are divided into seven categories: Startup, Decisions, Decision Analysis, Company, Market, Survey, and Simulation. One of the easiest ways to find out more about an option is just to try it out. If you need more information, use the on-screen HELP button to consult additional information. The menu system is expandable and collapsible. For

instance, click on the button to the left of Startup, and the Briefing, Case, and Glossary will collapse back into Startup.

The navigation and general control buttons found at the top of the simulation

screen are: Back, Home, Print, Spreadsheet, Help, and Logout. The Print button applies to the report currently on the screen. If you click the Print button when viewing the Income Statement report, the report will be sent to your default printer. Clicking the Spreadsheet button will export data to your default spreadsheet program. Clicking the Help button brings up additional information. The Back button lets you reach the last page you visited and the Home button brings you to the homepage of the simulation.

The box in the upper right- hand corner of the simulation screen has a pull-down menu

that lets you choose the period you would like to view. It will automatically default to the "current period" unless you change it. Changing this will show you your results for previous periods once the simulation has been advanced. This can be helpful for reviewing historical information. You will navigate MarketShare through a variety of easy-to-use menus and buttons: the pull-down menu, green navigation buttons, control buttons, scrolled lists, radio buttons, and check boxes, as well as the main menu and its submenus.

MarketShare Operations Guide—Page 27

SIMULATION NAVIGATION

Most reports are graphed to gain historical perspective and to identify important trends. Usually, you will have

the additional option of selecting particular variables to compare, by choosing the [Graph] button below the graph window. A sample graph of net income from the INCOME STATEMENT report is shown below.

Check Boxes and Radio Buttons:

Check boxes and radio buttons allow you to select an option. Click on the box or button to make your selection(s).

Drop-down Menus: Each brand or line extension on the market is listed as an item in the drop-down menu list. When multiple products are on the market (only an issue after Period 3), you can make a particular brand active by selecting it from the drop-down menu in the main decision screen.

Select brand from the drop-down

menu list.

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DETAIL OF MENU OPTIONS

Each menu option from STARTUP through SIMULATION is described on the following pages, along with a sample screen display. The order of the description corresponds to the order of the main menu and secondary menu options therein.

STARTUP

The Case provides background information you will need to help you read the reports and make decisions. Be sure to read the Case before entering your first decision.

Briefing The Briefing includes a message from Allstar’s management regarding information on the Allround brand, industry competition, product distribution and pricing, and market survey reports, as well as decisions on pricing, advertising, promotion, and sales force.

Case The MarketShare Case option on the STARTUP menu provides in- depth information on the Allround brand and its financial situation, the OCM brand management group and its marketing task, internal product development, the OTC cold remedy market, the current state of the industry, market segmentation figures and the market survey. Please make sure to carefully read the case before making any decisions.

Glossary The Glossary provides a list of important terms (and their definitions) for learning the principles of marketing and competing in MarketShare. The Glossary also appears in the Appendix of the MarketShare manual. Click the link to access the document.

Startup Screen: Case

MarketShare Operations Guide—Page 29

DECISIONS

Decisions The DECISIONS menu is where your team will enter its plan each year before advancing the simulation. The decisions will include the marketing mix (price, advertising, promotion) for each brand as well as decisions for the firm, such as sales force, reformulation, and new product introductions. The default set of decisions is to leave everything in place from last year (same price, same advertising message and budget, etc.) Making decisions is the culmination of your analytical process. It is important to realize that some of your decisions will have more of an immediate impact, while others may have longer-term implications. In any case, they should be part of an integrated marketing plan that is well thought out and appropriate in the current competitive and customer environment.

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DECISIONS Use this decision to allocate sales force supporting all Allstar brands. The direct sales force sells directly to retail channels. The indirect sales force engages in merchandising and supports wholesalers. Sales force salaries start at about $60,000 per sales person. Training costs are incurred for expanding the sales force as well as to train replacements for turnover. The team leader may optionally lock decisions to prevent additional changes this period.

Sales Force Direct sales force is the number of salespeople who sell to and support each direct sales channel: drugstores, grocery stores, and mass merchandisers. Indirect support includes merchandisers who are used as supplemental sales support and focus on channel activities, such as checking special promotions, improving shelf location, and performing other in-store support. The decision screen also displays the total costs for salaries, expenses, and training costs for new hires. Salaries at the beginning of the simulation run about $60,000 per sales person. Sales force turnover runs 10-20 percent annually. Therefore, maintaining the current sales force personnel level will incur a training cost for the new hires to cover turnover losses.

MarketShare Operations Guide—Page 31

DECISIONS Set pricing, advertising, and promotion for a brand. MSRP: Manufacturer Suggested Retail Price. Volume Discount: discount to retailers and wholesalers. (10–40% applied to MSRP.) Advertising Budget: total media expenditure. Primary: creates awareness; stimulates demand. Benefits: emphasizes product benefits. (Select benefits to promote.) Comparison: compares your product to a competitor's. (Select one competitor.) Reminder: maintains awareness; stimulates repurchase. Promotional Allowance %: gains shelf space. (10–20% of MSRP). Point of Purchase: displays promote the brand in retail outlets. Coupons: stimulate repurchase; shopper trial. The team leader may optionally lock decisions to prevent additional changes this period.

Product Product decisions include pricing, advertising, and promotion. Enter an MSRP and a volume discount percentage. Standard discounts range from 10–40%. The advertising budget is the total amount spent on media expenditures, much of which goes toward network television time. Select the type of ad message, benefit(s) to promote, and the specific single competitor to target. Types of ad messages available are: Primary: Creates awareness and stimulates primary demand. Benefits: Emphasizes product benefits to consumer (choose benefits). Comparison: Compares product with competitor product (choose 1 competitor). Reminder: Maintains awareness and stimulates repurchase. Promotional decisions include the promotional allowance (the % given to retailers for promotional expenditures) and promotion type. The promotional allowance must range from 10–20 percent and is basically an additional price discount for the channel. Types of promotion and intended purpose are: Allowance %: Gain shelf space and retailer promotion Point-of-Purchase Displays: Create customer brand switching at purchase Coupons: Stimulate repurchase and trial among shoppers

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DECISIONS Upload graphic files (a JPG is best) to a website such as Shutterfly, Picasa, PhotoBucket, etc. Copy and paste the "direct link to layout pages" into the boxes provided. Your ad and/or logo will be made available to your instructor.

Creative Design This option allows you to use your more creative side. For instance, you may create a logo and/or design an ad for your brand. This page will embed your logo and ad links to a site (such as PhotoBucket, Shutterfly, Picasa, etc.) where you’ve uploaded or saved your ad or logo. Once your ad or logo is uploaded, copy your graphic file address link and paste it into the link box on the Creative Design page in the simulation. Remember your ad and logo must be a graphic file to be seen (a jpg file is best). This process may be part of an assignment, or optional.

Paste a link to your logo and/or ad in the spaces

provided here and then click

[Submit].

MarketShare Operations Guide—Page 33

DECISIONS Use this page to respond to incidents, reformulate Allround, and introduce a new product. Read the incident, watch the video, and discuss the issues with your team before making a decision. Your response to an incident may or may not have an effect on your firm's sales or costs. Check for feedback on your choice in the Market Update after the simulation has been advanced. Reformulation of Allround is available starting in period 1 (decisions for period 2). In period 3 (decisions for period 4), you will have the opportunity to introduce a new product. If you introduce a new product, you will get additional budget for the product launch. For both reformulation and new product introduction, you have only a 2-period window to make that choice. The team leader may optionally lock decisions to prevent additional changes this period.

Special Incident Each period your team may have to deal with a special problem, or "incident." Read the full Incident by clicking Read Incident

and discuss the issues with your team before selecting the appropriate response. Some incidents may not offer a choice that you like; select the one closest to your opinion. An Incident response is required and is not optional. The problems change each period and you will not be able to modify your decision for an incident once the simulation is advanced. Any costs will appear in your company financial reports.

Your response to the Incident may or may not have an effect on your firm's sales or costs in the current or subsequent periods. Once the simulation is advanced, feedback on your response will be reported in the MARKET: Market Update, in addition to an announcement about the current period's Incident.

Reformulation and New Product special decision options are shown on the next page.

(Continued on next page…)

Read Incident

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DECISIONS

(…continued) Special Reformulation REFORMULATION of your product is available starting in period 1 (decisions for period 2). Use the radio buttons to select which formula you choose to market. New Product In period 3 (making decisions for period 4), you will have the opportunity to formulate a new product, which will go on sale during the next period.

Sample Reformulation decision screen is shown below:

Sample New Product decision screen is shown below:

Rework this entire page; add new screen shot when

available –OR--

see next page.

Select Reformulation

Select New Product

MarketShare Operations Guide—Page 35

DECISIONS This screen summarizes which reports have been purchased in the report period. The cost of each report is displayed. You have the opportunity to order more for the current decision period. Unlike your other decisions, you cannot "undo" a report purchase. Some reports may not be available in a given period.

Report Purchases This screen summarizes which reports have been purchased this period, and presents the opportunity to order more. The current cost of each report is displayed. Some reports may not be available in a given period.

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DECISIONS Use this report to view your current and previous period decisions. Be sure to check this report at the end of your decision process to make sure all your choices have been entered and saved correctly. You can change your decisions as often as you like until the simulation is advanced.

Decision Summary This report distills all of the decisions into a streamlined format. Printing or copying this summary is recommended to enable you to review the effect of prior decisions.

MarketShare Operations Guide—Page 37

DECISION ANALYSIS

Decision Analysis The DECISION ANALYSIS menu consists of links to resources that will help you analyze the current situation and predict the effects of decisions under consideration. The Budget Allocation, What If…, and Test Market analysis screens all display data which should help you evaluate the results of your strategy.

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DECISION ANALYSIS This analysis tool displays a summary of how the budget is allocated across brands and marketing expenditures. Market research purchases, sales force, advertising budget, and total promotion are all charged against the period budget. If the remaining budget is less than zero, the simulation cannot be advanced and expenditures must be cut. To enter any adjustments, return to the Sales Force or Product DECISIONS screen. A new budget is calculated for each period; unused amounts are not carried forward.

Budget Allocation This screen displays a summary of how the budget is allocated across brands and marketing expenditures. The available budget line displays the funds remaining after the sales, advertising, and promotional decisions have been made. This must be greater than or equal to zero. If less than zero, the simulation cannot be advanced and expenditures must be cut. A warning message will be displayed when attempting to advance the simulation. Marketing research expenditures are included in the budget, and these are accumulated as reports are accessed and purchased To enter any adjustments, return to the SALES FORCE decision input screen under the DECISIONS menu.

MarketShare Operations Guide—Page 39

DECISION ANALYSIS After entering decisions, use this analysis screen to project the results from your decisions. The What If… screen is a helpful financial check on decisions, especially pricing. It may also be used as a sensitivity or breakeven analysis on price and unit sales. The default unit sales estimates are the unit sales from the previous period; it is up to you to adjust the forecast based on how you think your decisions will impact results. The What If... is only your projection of the results – you must advance the simulation to see the actual results from your decisions.

What If . . . After entering decisions, it is a good idea to use the What IF... option on the DECISIONS menu to experiment with several scenarios. The What If... screen is a helpful financial check on decisions, especially pricing. It may also be used as a sensitivity or breakeven analysis on price and unit sales. However, it is up to you to determine whether the sales estimates are realistic. The default unit sales values are the unit sales from the previous period. Thus, for a new product, this value would be zero. The software makes no attempt to forecast sales based on your decisions on this screen. Therefore, if you believe a significant decision will change your market share, adjust the sales estimate accordingly.

First, enter your projected Unit

Sales (M) here…

…and then click Recalculate.

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DECISION ANALYSIS This tool allows you to experiment with different combinations of price, advertising, and promotion. You may run up to 3 test markets at a base cost of $100,000 each. The Baseline represents the current levels of spending on price, advertising, and promotion, and shows results in the test market based on those levels. (The baseline results in the test market may vary from national conditions). The Test column shows the test market inputs and results. You can quickly see the impact of the change in the marketing mix on awareness, market share, and net contribution. Note that results are only estimates based on the test market and don't factor in other changes in the market or competitive landscape that may occur in the decision period. Once run, test markets cannot be undone, so take care in choosing the parameters.

Test Market $ You may run up to 3 test markets at a base cost of $100,000 each. A test market condition is created in a particular city where levels of price, advertising, and promotion are adjusted from your national levels and the change in the sales in that market is measured. By extrapolating this change to national levels, a marketing manager can make better judgments on how much to adjust the marketing mix variables for the coming year. On the first screen, you will select a product and enter the price, advertising, and promotion levels (as if done nationally). There is a maximum change in price of +/- 10%. Advertising and promotion can be run at levels representing $20 million or double the current levels, whichever is greater. Clicking on [Submit] will charge you for the test, run the test market, and display the results. The Baseline represents the current levels of spending on price, advertising, and promotion, and shows results in the test market based on those levels. (The baseline results in the test market may vary from national conditions). The Test column will show the test market conditions and results. You can quickly see the impact of the change in the marketing mix on awareness, market share, and net contribution. Note that these results are only estimates based on the test market and don’t factor in other changes in the market or competitive landscape that may occur in the decision period.

To begin, click "Create New Study.

MarketShare Operations Guide—Page 41

DECISION ANALYSIS

Enter Price, Advertising, and

Promotion amounts, and click "Submit"

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COMPANY

Company Reports The simulation begins in Period 0. The format of Period 0 reports is identical to the reports you will receive each successive period during simulation play. You take over the Allround brand at the beginning of Period 1. The COMPANY Menu contains reports about the current and historical performance of the Allstar company and its brands, income and operating expenses, and sales data. The last period's company reports can be accessed by selecting Period -1 from the period drop-down menu.

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COMPANY The Dashboard provides a graphical representation of performance measures. You can also access the dashboard by clicking the Stock Price in the upper right quadrant of the simulation screen. Use the drop-down menu to select a variable to graph from an array of graphing variables. Feedback from the "Social Media" incident will also be shown on the Dashboard.

Dashboard The Dashboard becomes available after the simulation has been advanced one period and provides a graphical representation of performance measures. Use the drop-down menu to select the graphing variable you wish to view, such as: revenue, cost of goods sold, gross margin %, unit sales, revenue, advertising, etc. You can access the dashboard in either the COMPANY menu, or by clicking the dashboard image in the upper right quadrant of the simulation screen.

You can also access the Dashboard by clicking the stock

price in upper right quadrant of the display screen.

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COMPANY

This report provides an overall summary of performance and the decisions that created that performance. Compare your decisions with your results and try to understand what drove results. Were results due to a change in your pricing? ...advertising? ...promotion? ...sales force? ...competition? The summary also shows a list of reports ordered, periods played, periods replayed, and number of restarts. Use the [Period] drop- down menu to view a summary of performance data from previous periods.

Performance Summary Items included in this report are sales, gross margin, product contribution, net income, stock price, marketing efficiency index, capacity utilization, share of retail sales, and customer satisfaction. In addition, there is a list of reports ordered, periods played, periods replayed, and number of restarts.

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COMPANY This report shows the company's overall results for the most recent year, with major expenditures broken out. Each item is also displayed as a % of manufacturer sales for year-to-year comparative purposes. View detail for a product by clicking on the brand name. The graph shows net income over time by default. Use the [Graph] button to select other measures. Use the Period drop- down menu to display income statements from previous periods.

Income Statement The Income Statement shows the company’s overall results for the most recent year, with major expenditures broken out. Each item is also displayed as a percent of manufacturer sales (not retail sales) for year-to-year comparative purposes. The graph provides analyses of manufacturer’s sales, promotional allowance and expenditures associated with sales, advertising or promotion, and net income, viewed in dollars over time. Each category can be viewed singly or in conjunction with others by choosing from a list accessible by clicking the [Graph] button directly beneath the graph.

Select Product link to view

product detail report.

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Sales: Sales are recognized at the time of purchase by the customer. The dollar amount is based on manufacturer price paid by distribution channel. Promotional Allowance: The amount spent on promotional allowance (additional price discount to channel).

Cost Of Goods Sold: The total variable manufacturing cost for the product sold. Gross Margin: The net of sales minus promotional allowance and COGS.

Promotion: The amount spent on point of purchase and coupons. Advertising: Total media expenditures. Sales Force: Total amount spent on sales force salaries and expenses.

Administrative: Administrative costs. Cont. after marketing: The gross margin minus the total costs of marketing.

Fixed Costs: Fixed costs of production. Plant capacity automatically increases in 20 million unit increments when demand exceeds capacity. Net Income: The contribution after marketing minus fixed costs.

Next Period Budget: Calculated budget for decision expenditures in the coming year.

The graph shows net income over

time by default. Use the [Graph] button

to select other measures.

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COMPANY This report summarizes manufacturer sales by distribution channel. This report provides important feedback on how your decisions are impacting sales in each of the channels. Sales/SF shows the manufacturer sales per salesperson in each channel. Unit sales for each brand are also shown by channel. Click on a brand name to view details for the product. Use the [Period] drop- down menu to display sales reports from previous periods.

Sales Report This report summarizes sales by distribution channel, providing important feedback on how your decisions are impacting sales of your product in different venues. Some of the differences in sales will be due to shopping preferences of customers, some will be due to the decisions you make that impact how the channel views your total offering (promotional allowances and sales force support), and some differences may be due to competitive decisions. One of the challenges of marketing is trying to sort out the cause and effect of different decisions, environmental changes, and competitive changes. This report will provide some directional information, but analyzing other market research will be necessary for deeper insights.

Select Product link to view

product detail report.

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MARKET

NOTE: The channel is an extremely important partner in your success, and you need to understand how to motivate it.

The MARKET menu provides reports in three content categories. First, are links to market-wide news and information that is found in real world trade journals. These reports are free in MarketShare. They include general economic news, information about the products in the marketplace, and expectations for the industry in the forthcoming year. Second, this menu also provides links to competitive reports that may be purchased each period. These contain detailed information about how your competitors are spending their money in operations, sales and marketing. The base cost for each report is given in the descriptions on the following pages, but updated costs are found in the current year’s MARKET – Industry Outlook report. Third, this menu provides access to reports that contain detailed information about retail aspects of the competitive market – in what type of store the products are sold, how much space is allotted to them, who buys them, and how much they cost. These reports are not free. The base cost of each report is given in the descriptions that follow, but a better estimate for the current cost can be found in the MARKET – Industry Outlook report. Competitive spending is essential to track. For instance, if you currently have 10% market share for your brand but want to increase it to 15%, you should recognize the investment necessary to achieve this goal. One important aspect of this investment is the level of marketing expenditures. All things being equal, you would expect to need to spend 15% of the total industry advertising dollars to achieve 15% market share. This would be considered your “share of voice”. The only way to know the appropriate levels to spend is to know what your competition is spending. Analysis of the retail channels should be an important component of your decision-making process, since this is where your customer actually makes the purchase. The first priority is to determine where people actually shop for the items you sell, then focus your resources on the retail locations where people are likely to look for and purchase your product. For instance, cold medicine is typically not sold at Home Depot. However, it is often found at the grocery store. So it makes sense to support the grocery store channel rather than the home improvement channel with price discounts, promotional allowances, and sales personnel.

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MARKET This report highlights some of the major events of the period, and provides feedback based on your decisions. The News

section announces changes in the competitive environment, such as new product introductions, overall levels of advertising and promotional spending, and total market sales.

The Messages

section provides feedback and tips specific to your firm. Be sure to read the messages before you make your next set of decisions.

The Incidents

section tells you what special decision you have to make this period, as well as providing feedback from the previous incident decision.

Use the [Period] drop- down menu to display updates from previous periods.

Once a channel or retailer decides to carry your item, you must understand how the potential customer interacts with the product in the store. On an item such as cold medicine, brand switching often occurs at the retail outlet due to price differences, shelf location, and point-of- purchase promotions. Thus, from a sales perspective alone, you would want to have prime shelf location, lots of it, a low price, and special displays promoting your product. Of course, doing all of that would likely lose money, which is not the goal of a business. Your objective, then, is to provide important in-store competitive advantages without overspending.

Market Update Advancing the simulation creates a Market Update screen highlighting some of the major events of the period, such as product introductions, overall levels of advertising and promotional spending, and total market sales. Previous updates can be obtained by selecting the period number from the Period drop-down menu.

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MARKET This report shows general economic and industry conditions, cost of sales force, and cost of market research. All of the values represent estimates for the current period. The general economic variables of population growth, industry growth, and inflation may provide a basis for evaluating the overall strength of the market. Use the [Period] drop- down menu to view data from previous periods.

Industry Outlook This report is a trade publication of general economic and industry conditions and cost of market research. All of the values represent costs or estimates for the current period. Use the Period drop-down menu to see data from previous periods. The general economic variables of population growth, industry growth, and inflation may provide a basis for evaluating the overall strength of the market. The report also displays the cost of a salesperson's salary and expenses, as well as training costs for new hires. Sales force turnover runs 10–20 percent annually. Therefore, maintaining the current sales force personnel level will incur a training cost for the new hires to cover turnover losses. In addition, the estimated cost for each of the competitive and channel research reports (Share of Channel Sales, Shopping Habits, Operating Statistics, Marketing Expenditures, Pricing and Shelf Space) is presented. Each report offers insight into the competitive dynamics of other firms and feedback from distribution channels. Details of these reports are found in their respective menu guide descriptions. The charge for each report is assessed online when the study is ordered and will be subtracted from the current period’s budget.

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MARKET This report displays current formulations for all products on the market. The maximum allowable limit for each ingredient (based on four doses in a 24-hour period) appears at the top of the column. Each brand is shown with the amount of active ingredients and a brief description. Twelve-hour formulations are allowed to have twice the maximum because the dosage frequency is two times per day. Previous reports can be viewed by choosing the period from the [Period] drop-down menu.

Brand Formulations This report displays the amount of active ingredients in each brand on the market, as well as the current FDA maximum allowable limit for each ingredient (based on four doses in a 24-hour period). Each brand has one or more active ingredients that cannot exceed the maximum allowable dosage in a 4-hour period (or four doses in a 24- hour period). Twelve-hour formulations are allowed to have twice the maximum because the dosage frequency is two times per day. Packaging for the 12-hour capsules contains half as many capsules as packaging for the 4-hour capsules (so that pricing is equivalent per 24 hours of relief).

ACTIVE INGREDIENTS Analgesics Reduce fevers and relieves head and body aches.

Antihistamines Relieve itchy eyes and sneezing. Decongestants Reduce nasal congestion by shrinking swollen nasal passages.

Cough Suppressants Suppress cough reflex.

Expectorant Loosen chest congestion to improve the effectiveness of coughing. Alcohol Helps people rest and numbs the pain.

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MARKET This report shows estimates of total manufacturer sales by product category and each brand's market share. If the brand is labeled for a particular use, it is placed under that category (cold, cough, or allergy). Multi-symptom brands, such as Allround, are listed in the cold category. Compare shares by manufacturer sales with shares in Channel Sales and Brands Purchased reports. The default graph displays the market share for each product over time. Click the [Graph] button to choose a different measure. Select the period number from the [Period] drop- down menu to see market share data from previous periods.

Share of Manufacturer Sales This report contains estimates of each brand's market share and an estimate of total manufacturer sales by product category. Each brand can be in only one category in this report. Therefore, multi-symptom brands, such as Allround, are listed in the cold category despite also being used for cough or allergy symptoms. For purposes of this report, if the brand is labeled for a particular use, it is placed under that category. The default graph displays the market share for each product during the time course of the simulation. To view product market share based on manufacturer sales, product market share for either cold, cough or allergy sufferers, or total market share for each segment, choose the [Graph] button to make your selection. Select product(s) by clicking the [Product] button. Product market shares in this report differ from the values estimated from retail sales due to different sources of data and different price/discount schedules among brands. Retail sales estimates are based on end user prices, whereas manufacturer sales are based on sales to distribution channels (net price after price discounts, but before promotional allowances). The market shares calculated in the market survey of awareness, purchases, and satisfaction will also be different because the values are based on unit purchases and exclude price differences. Therefore, three different measures of market share existshare of manufacturer sales ($), share of retail sales ($), and share of consumer purchases (units). The important point to learn from this is that in any discussion of market share, it is essential to understand which definition is being used: What market definition are we talking about? Is it based on units or dollars? Is it based on retail or manufacturer level revenues? The values and implications of these different definitions can be significant.

(Continued on next page . . . )

MarketShare Operations Guide—Page 53

MARKET

Share of Manufacturer Sales report:

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MARKET This report shows an estimated contribution statement for each of the five firms in the industry. The base cost of the report is $45,000. Estimate competitors' marketing budget by adding expenditures for sales force, advertising, and promotion. Use the estimated capacity utilization to anticipate potential changes in competitors' marketing strategies. Stock price can be used as a measurement of firm performance. The default graph shows net income for the five firms over time. Select the [Graph] button to select a different graphing option. Available Graphs Include: Share of Mfr. Sales Mfr. Sales by Firm Promo. Allow. Expend. Cons. & Trade Promo. Adv. Expenditures Sales Force Expend. Net Income Stock Price Capacity Utilization Use the Period drop- down menu to view data from previous periods.

Operating Statistics This report shows an estimated contribution statement for each of the five firms. This information may be used to analyze differences in resource allocation and costs. . The report provides information similar to that of your firm's Income Statement report, but also includes your competitors’ financial performance. There are three differences, however. First, there is no value for your competitors’ budgets. One possibility for estimating this value for each competitor is to use their previous period’s budget expenditures. This would involve adding the spending for advertising, promotion, and sales force. Second, this report includes an industry consultant's estimate of capacity utilization. This could have strategic implications for your firm. For example, if your competitors are under capacity, you might expect them to try to gain market share through aggressive pricing or increasing marketing expenditures. Third, this report includes a stock price, which can be used as a possible measurement of your performance over time

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MARKET This report contains estimates for the current period of the number of the sales personnel supporting each distribution channel. The base cost of this report is $20,000. The default graph shows total sales force for each company over time. Click the [Graph] button to view sales force for a specific channel. Use the Period drop- down menu to view data from previous periods.

Sales Force The default graph shows the sales force estimates for each company and how they have changed since game inception. Click the [Graph] button to change the graphing variable and display the sales force in each channel (drugstores, grocery stores, mass merchandisers) or in all channels.

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MARKET This report provides estimates of competitive spending on advertising, point of purchase, and coupons. The base cost for the report is $35,000. The default graph shows advertising by brand over time. Click the [Graph] button to select promotion expenditures for the graph. The [Product] button allows you to select the brands to view. Use the [Period] drop- down menu to view data from previous periods.

Marketing Expense The MARKETING EXPENSE report provides estimates of competitive spending on advertising, point of purchase, and coupons. Clicking the [Graph] button allows you to select the display criteria (advertising or promotional expenditures) shown over time. The [Product] button allows you to select particular products for analysis. If no products are selected, all will be displayed.

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MARKET This report displays industry retail sales and shares by channel. The base cost of this report is $25,000. Compare retail shares shown here with the Share of Manufacturer Sales report. Compare unit shares in the Brands Purchased report of the survey. The default graph displays retail sales by channel over time. Use the [Graph] button to view brand shares of retail sales. Use the Period drop- down menu to view data from previous periods.

Channel Sales The CHANNEL SALES report on distribution displays information on market share by retail channel. This report is based on retail sales, not unit sales or manufacturer sales. There is also an estimate of total sales and sales growth rate for each retail channel. This report addresses two issues. First, it provides information about the volume and growth of sales through particular retail channels. These values are displayed at the top of the report and in the default graph. Second, this report addresses each product’s share of sales in each channel. Graph data can be rearranged by clicking the [Graph] button and selecting sales by channel or share of sales (retail, drug, grocery, mass merchandisers).

NOTE: Share by channel is likely to vary due to consumer shopping habits, pricing policies, and sales force distribution. To gain further insight into these data, your firm may want to look at the MARKET Shopping Habits and Pricing reports or the MARKET Sales Force report.

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MARKET This report shows pricing information for each product on the market. The base price of the report is $20,000. MSRP: Manufacturer Suggested Retail Price Volume Discount: the average percentage below MSRP that product is sold to retailers and wholesalers. Promotional allowance: % of MSRP paid to retailers & wholesalers for brand promotion. Average actual retail price is shown for each distribution channel. Actual retail price will differ from MSRP, due to retailer markup, volume discount, & promotional allowance received. Packaging for 12-hour formulas contains half as many capsules as for 4-hour formulas (pricing is equivalent per 24 hours of relief). The graph shows MSRP by brand over time. Use the [Period] drop- down menu to view data from previous periods.

Pricing The Pricing report displays the MSRP, standard discount, promotional allowance and average retail price in each distribution channel. Each retail channel has a different pricing structure and uses different markups for different brands. Furthermore, most brands have different discount structures and promotional allowances that also affect actual retail prices. As with other reports, graph data may be rearranged by clicking the [Product] button and selecting the product or products pricing information to display, over time.

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MARKET This report estimates shopping preferences for consumers with each type of symptom. The base cost of this report is $15,000. Use the report to help with sales force allocation and promotional strategy for each brand. The default graph shows shopping habits of cold sufferers over time. Use the [Graph] button to view other consumer segments. Use the [Period] drop- down menu to view data from previous periods.

Shopping Habits The outlets where consumers shop for cold medications should be an important factor influencing your firm's strategy. For example, a brand targeted for cold sufferers might suggest a promotional emphasis in grocery stores, while a brand targeted to allergy sufferers might focus their efforts in drugstores. Just like consumers, different channels have different needs. Mass merchandisers may prefer discounts to sales force support, whereas drugstores may appreciate the additional support services of salespeople or wholesalers. Also, be aware of how competitors use channel support. Sometimes opportunities arise in distribution because of neglect (or over-emphasis) of a particular channel by other companies. Click [Graph] to select and display the shopping habits of cold, cough, or allergy sufferers, over time.

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MARKET This report estimates how much space the retail channels allocate to each brand. The base cost of this report $25,000. Shelf space is shown in linear feet. Volume discounts and promotional allowances can have a significant impact on the shelf space retailers allocate to a brand. The default graph displays overall shelf space by brand. Click the [Graph] button to select a specific channel. Use the [Period] drop- down menu to view data from previous periods.

Shelf Space Gaining prime shelf space is another key strategy for an OTC brand. Retailers typically give more shelf space to the most profitable brands. The retail outlet usually considers profit in terms of the margin earned per unit (including volume discounts and promotional allowances) and product turnover (the number of units sold in a period). The sales force, especially merchandisers, can also influence the amount of shelf space retail outlets allocate to brands. The graph displays the amount of shelf space given to each product in a particular distribution channel, over time. Rearrange graph data by clicking the [Product] button to select which product or products to analyze. Shelf space allotment for a particular channel (drugstores, grocery stores or mass merchandisers), or all channels together, can be selected by clicking the [Graph] button and selecting from the radio button list.

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SURVEY

Survey A major marketing research firm offers a nationwide survey of OTC cold and allergy consumers. The firm claims that this survey provides a great deal more information on how consumers perceive and use cold and allergy products. This survey is conducted every period. The consumer survey consists of the following reports: (1) awareness, purchases and satisfaction, (2) purchase decision-making criteria used by consumers, and (3) a comparison of brands based on consumers' perceptions of their ability to relieve symptoms. The purpose of the survey is to provide more in-depth information about the consumer: what is important to them, what they think about different brands, and their actual purchase decisions. In addition, since the survey can be analyzed on a cross-section basis, you can learn more about your particular target customers, such as allergy sufferers. A sample survey is provided on the following page to better understand how this data has been collected.

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SAMPLE MARKET SURVEY QUESTIONNAIRE This market survey questionnaire was designed to be asked to consumers at the retail point of purchase (drugstore, grocery store, convenience store).

PURCHASE INFORMATION

1. Did you purchase any cold medicine? YES NO

— If you answered “NO” above, go to question 5 —

2. What illness are you suffering from? Cold Cough Allergy

3. Which brand of cold medicine did you purchase? __________________________ SATISFACTION

4. Overall, are you satisfied with the product you just purchased? YES NO

5. Which brands of cold medicine have you heard of? Surveyor circles response(s).

Allround Besthelp Believe Coldcure Coughcure Dripstop

Defogg Effective Extra End Other

6. Please rank the following product attributes in order of importance in your decision to purchase cold medicine:

____ Product Effectiveness ____ Side Effects ____ Price

____ Form ____ Duration

7. Of the brands you mentioned you have heard of (from Question 5), how effective would you rate the _______________ brand of cold medicine in relieving the following symptoms?

Not at all Effective Extremely Effective Aches 1 2 3 4 5 Nasal

Congestion 1 2 3 4 5

Chest 1 2 3 4 5 Runny Nose 1 2 3 4 5

Cough 1 2 3 4 5 Allergy 1 2 3 4 5

8. What is your perception of the price of ________________ brand?

Inexpensive Affordable Expensive Price 1 2 3 4 5

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SURVEY The consumer survey contains 3 reports: Brands Purchased, Decision Criteria, and Brand Perception. Data on these reports can be analyzed by sufferers of a specific illness, combined illnesses, or by the entire segment of responders. Use the report data to learn more about your target customers. After purchasing the survey, there is no limit to the number of cross- sections or reports you may analyze during that period. The base cost of this report is $100,000. Use the Period drop- down menu to view survey data from previously purchased reports.

Purchase Survey The PURCHASE SURVEY option on the SURVEY menu allows you to buy a tabulation of results from a series of questionnaires distributed by a marketing research company serving the cold medicine market. This survey consists of a consumer database that may be analyzed through three different reports. The entire survey must be purchased to access any of these reports. Base Cost: $100,000 Graphs: (See individual reports.) Market Survey reports: 1. Brands Purchased (awareness, purchases, satisfaction) 2. Decision Criteria (effectiveness, side effects, price, form, duration) 3. Brand Perception (graph of product effectiveness for various symptoms) The [XSection] button on any market survey report allows you to view segmented data cross-sectioned by illness. This cross-sectional analysis may provide a better understanding of the consumer needs that are driving the market. You may place a checkmark in more than one segment. Doing so will enable you to see data from respondents who meet any one of those criteria. If no segments are marked, then data based on all respondents are displayed. The chosen cross-section will be displayed at the top of each market survey report. Once the database is purchased, there is no limit to the quantity of cross-sections or reports in a given period.

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SURVEY This report estimates the awareness, purchases and satisfaction for each brand. This report is part of the $100,000 Market Survey. Awareness is the % of respondents who recognized the brand prior to purchase. The Purchases % is based on units sold, and differs from both share of manufacturer sales and share of retail sales. Satisfaction is the % of respondents who purchased the brand and report they are satisfied with the product. Click [XSection] to view data for cold, cough, or allergy sufferers, or all respondents together. The graph shows the % of consumers purchasing brands over time. Use the Period drop- down menu to view data from previous periods.

Brands Purchased This report estimates the awareness, purchases and satisfaction for each brand, based on unit sales. This analysis can be segmented to view a brand's strengths or weaknesses across different consumer demographics. The survey differs from both the manufacturer market share and retail sales market share because it is based on units sold and product price has no impact. Use [XSection] to view data for cold, cough or allergy sufferers, or all respondents together. The [Product] button enables you to select the product or products for which data will be displayed. The example below is shown with cold as the selected cross-section. Looking at the data in the Purchases column, Besthelp is by far the leading brand, with Allround among several brands that have more than 10% market share. One can also see that allergy brands such as Believe and Defogg have significantly lower sales among people with colds. The report also indicates that cold sufferers represent 75.3 percent of all cold medicine purchases, much larger than cough or allergy-suffering purchasers.

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SURVEY This report indicates what factors are most important to the consumer's brand preference. This report is part of the $100,000 Market Survey. The 5 factors considered are product effectiveness, side effects, price, form, and duration. Use [XSection] to view data for cold, cough, or allergy sufferers, or all respondents together. The graph shows changes in decision criteria over time. Use the Period drop- down menu to view data from previous periods.

Decision Criteria The DECISION CRITERIA report indicates what factors are most important to the consumer's brand preference. The five factors considered are product effectiveness, side effects, price, form, and duration. Use [XSection] to view data for cold, cough or allergy sufferers, or all respondents together.

This report provides insight into what is most important to your customer. In the above example, 2 out of 3 respondents mentioned “product effectiveness” as the most important aspect of choosing a particular brand, with price and side effects coming in second.

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SURVEY This report summarizes consumers' opinions of the effectiveness of brands on the market. This report is part of the $100,000 Market Survey. Respondents were asked to rate each brand's effectiveness for a number of different symptoms. Ratings are on a scale of 1 (not effective) to 5 (extremely effective). Use the [XSection] button for a cross- sectional analysis based on cold, cough, or allergy. Use the [Product] button to select up to 6 brands for graph comparison. Use the Period drop- down menu to view data from previous periods.

Brand Perception The BRAND PERCEPTION report summarizes consumers’ opinions of a brand’s effectiveness. The report compares the perceived strengths and weaknesses of a brand against various symptoms. Use the [Product] button to select up to six brands to compare. Use the [XSection] button for a cross-sectional analysis based on cold, cough, or allergy.

In the example above, the Allround brand is viewed as more effective than Believe against aches and fever, nasal congestion, chest congestion, runny nose and cough, but less effective against allergy symptoms. Your group might want to have a discussion about the benefits and risks of using advertising to try to improve that perception. Is that important to your target customer? Is that an appropriate positioning message? Does that message reflect your product’s actual advantages? All of these issues should be considered before a change is made to your advertising decisions.

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SIMULATION

Simulation The SIMULATION menu controls time in MarketShare. Use ADVANCE to advance to next period when you are confident of your input decisions and are ready to see the consequences of your choices. Use the REPLAY option to return to the previous period. This is an optional feature that may or may not be allowed in any given period, depending on the customization choices of your instructor. Think of it as an “undo” option for running the simulation. This can be very important if you made an error in entering your decisions or if you want to experiment using different decisions. If you are in a classroom situation, you may be asked to inform your instructor why it was necessary to rerun a period.

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Glossary—Page 69

GLOSSARY

Administrative Costs

Expenditures arising from the administration of a product, including some fixed overhead costs, some variable expenses, and some expenses related to the number of orders placed.

Advertising Any paid form of non-personal presentation and promotion of ideas, products, or services by an identified sponsor.

Advertising Message

The point that an advertisement is trying to make, whether to stimulate overall demand for a product group, stress the benefits of the product, compare with other brands, or maintain awareness.

Average Retail Price

The average price for a product charged by retailers, including both those stores with higher prices due to increased personal service, exclusive merchandise lines, attractive store atmosphere, special promotions, convenient location, or special services, and those who offer a no-frills, low-price approach.

Brand Awareness The level of consumer familiarity with a product, brand, or promotional vehicle.

Brand Formulation The physical structure or ingredients of a product or service.

Brand Image The meaning consumers give to a product, based on the perceived benefits that the product provides.

Brand Loyalty A favorable attitude toward, and exclusive purchase of, a brand over time.

Break-even Analysis

An attempt to determine the volume of sales necessary (at various prices) for the manufacturer or merchant to cover costs or to make revenue equal costs. Break-even analysis is useful to help set prices, estimate profit or loss potentials, and help determine the discretionary costs that should be incurred.

Cannibalization Sales of a new product that decrease sales of another product in the product line.

Capacity Utilization

The extent to which the physical production ability of a plant facility is being used. Normally described as a percentage of total capacity (i.e., 50 percent of capacity).

Channel of Distribution

Any firm or individual participating in the flow of products and services as they move from producer to user (consumer or industrial).

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Cooperative (Co-

op) Advertising An agreement in which a manufacturer pays a portion of a retailer's local advertising costs.

Consumer Promotion

Promotional activities aimed at the consumer, including trial sizes of brands, coupons, and point-of-purchase displays.

Contribution after Marketing

The dollar amount remaining after subtracting total marketing expenditures from the gross margin.

Cost of Goods Sold (COGS) The total variable manufacturing cost of producing a product.

Coupons A promotional technique designed to convince consumers to purchase a product by offering an individualized discount on the price of the item.

Demand The desire of consumers for a certain product.

Demography The study of people in the aggregate, including population size, age, income, occupation, and gender.

Detailers Part of the indirect sales force that calls on doctors and pharmacists to provide information about their brand and to introduce new products to consumers.

Direct Channel The distribution flow of a product directly from manufacturer to retail outlet.

Direct Sales Force

Portion of sales force selling directly to retail outlets. The direct sales force maintains relationships with current retail accounts, develops new retail accounts, presents trade promotions and allowances, and introduces new products to retailers.

Fixed Costs

The unchanged financial obligations of a firm regardless of the number of units of a product that are produced and marketed, including amortization charges for capital equipment and plant, as well as such charges as rent, executive salaries, property taxes, and insurance.

Geo- demographics

The neighborhood clustering of people with similar economic and cultural backgrounds and perspectives.

Gross Margin Revenue less the cost of products sold. (Price - unit cost) x units sold.

Income Statement A report of a firm's overall results for a period, including a breakdown of major expenditures and a calculated value of the net income.

Glossary—Page 71

Indirect Channel Distribution channel from manufacturer to retail outlet by way of a wholesaler, merchandiser, or detailer.

Inflation A general rise in the prices that people must pay for products and services.

Line Extensions The introduction of new flavors, sizes, or models to an existing brand within an existing product category.

Manufacturer Sales

Receipts from all sales (both direct and indirect), net of volume discounts.

Margin The difference between the price of a product and its per unit cost.

Market People or businesses with the potential interest, purchasing power, and willingness to buy a product or service that satisfies a need.

Market Penetration

The percentage of actual sales of a product category in relation to the total sales possible in a market.

Market Share The percentage of sales of a product in a market in relation to other products in that market (i.e., Brand X / Total sales in market).

Marketing The process of planning and executing the conception, pricing, promotion, and distribution of ideas, products, and services to create exchanges that satisfy individual and organizational needs or wants.

Marketing Efficiency Index

The ratio of net income divided by marketing expenditures (advertising and promotion budget spent). This does not include promotional allowances because it is viewed as a discount to the channel.

Marketing Research

The systematic and objective approach to the development and provision of information for marketing decision-making.

Markup Pricing A price-setting method common in wholesaling and retailing that adds a markup to average total or variable cost.

Mass Merchandisers

Very large retail outlets that generally offer discount prices on items and have a high level of sales.

Media Type The distinction between broad classes of media, such as newspapers, magazines, television, radio, etc.

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Merchandisers Part of the indirect sales force that provides special support to retailers for in-store activities, such as shelf location, pricing, and compliance with special programs.

Net Contribution The contribution after marketing less fixed costs.

Net Income The profit remaining after all costs are subtracted from revenues.

Point-of-Purchase Promotion (POP)

Special displays, racks, signs, banners, and exhibits placed in a retail store to support the sales of a brand.

Price The amount of money required by a seller to provide products or services to a customer.

Price Structure The use of discounts, allowances, and freight cost absorption in determining price.

Price to Channel The Manufacturer’s Selling Price minus the Promotional Allowance.

Primary Demand Stimulation

Advertising intended to affect demand for a product category and not a specific brand.

Product Life Cycle

The stages that a product goes through during its time on the market, including introduction, growth, maturity, and decline.

Product Mix All of the products available from an organization.

Promotion The communication mechanism of marketing designed to inform and persuade consumers to purchase.

Promotional Allowance

Reduction in the actual price paid by a channel member resulting from an agreement to participate in promotional activity.

Purchase Intentions

A product or brand consumers intend to purchase before they actually enter the retail outlet to make a purchase.

Quality All features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.

Reformulations Changes in the physical formulation of a brand to make the product more desirable to the consumer.

Reminder Advertising

An advertising message designed to maintain awareness and stimulate repurchase of an already established brand.

Glossary—Page 73

Research and Development

A portion of a firm designated to research, analyze, and design products to meet consumer and market needs.

Retailer A merchant whose main business is selling directly to consumers for personal, non-business use.

Retention Ratio The proportion of consumers who have tried a brand and repurchase the product.

Sales Force Employees hired to promote and sell a manufacturer's product through direct or indirect channels.

Segmentation The process of dividing large heterogeneous markets into smaller homogeneous segments of people or businesses with similar needs and/or responses to marketing mix offerings.

Sensitivity Analysis

Calculating the financial effect of various sales and cost scenarios, usually through "what if . . ." assumptions.

Share of Channel Sales Market share segmented by the type of retail outlet.

Shelf Space

The amount of space allocated to a product for display on retail store shelves. Shelf space often depends on the sales and profit potential of the product, as well as special arrangements between the store and manufacturer.

Shopping Habits Consumer shopping preferences, including product and retail preferences.

Trade Promotions Sales promotion activities directed at wholesalers and retailers, including promotional allowances and co-op advertising.

Trade Publications

Publications that target a particular industry. Often these are generated by trade associations and contain articles of interest to the industry, as well as general market research and competitive information.

Trade Rating A summarized result from a survey of retailers and wholesalers on trade support and practices offered by your company. The trade rating value is scaled from 1 to 10, where 10 is highest.

Unit Sales The total volume of units sold by a manufacturer in a market.

Usage Rates How often a product is used/purchased per period.

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Variable Costs Costs tied directly to production, including direct labor and raw materials charges.

Volume Discount Reduction of list price based on the quantity a buyer purchases. May be based on a specific purchase (non-cumulative) or on total purchases over a period (cumulative).

Wholesale Price A special discount price offered to wholesalers to encourage them to purchase and sell merchandise in large quantities.

Wholesaler A business unit that buys and resells merchandise to retailers, other merchants, and/or industrial, institutional, and commercial consumers.

Index—Page 75

INDEX

A

ad, create link · 32 advertising · 19, 31

message · 19 alcohol · 51 Allround · 16, 18 Allstar Brands · 13 analgesics · 51 antihistamines · 51 awareness · 40

B

benefits approach · 19 brand

awareness · 19 effectiveness · 63 formulations · 16 perception · 61, 66 perceptions · 22 purchasing · 63

Brand Formulations report · 51 Brand Perception report and graph · 66 Brands Purchased report · 64 budget · 38 budget allocation · 38

C

capacity utilization · 54 capsule medications · 15 category · 52 Channel Sales report · 57 channels of distribution · 59 COMPANY

Dashboard · 43 Income Statement · 45 Performance Summary · 44 Sales Report · 47

company and brand summary · 14 competition

budget · 54 consumer shopping habits · 57 cough suppressants · 51 coupons · 20 cross-usage of brands · 22

D

Dashboard report · 43 DECISION ANALYSIS

Budget Allocation · 38 Test Market · 40 What If…? · 39

decision criteria · 22, 61 Decision Criteria report · 65 decision summary · 36 decisions

brand manager · 38 DECISIONS · 29

Creative Design · 32 Decision Summary · 36 Product · 31 Report Purchases · 35 Sales Force · 30 Special · 33

decongestants · 51 direct sales force · 21, 30 distribution · 24 drowsiness · 16 duration · 65

E

effectiveness · 65 ethical drugs · 13 expectorant · 51

F

fixed costs · 23 form · 65

G

gross margin · 23

I

Income Statement · 45 industry

overview · 14 industry growth · 50 Industry Outlook report · 50 inflation · 50 ingredients · 15 input screens · 25 internal product development · 17

L

liquid medications · 16

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logo, create link · 32

M

manufacturer sales · 52 manufacturer suggested retail price (MSRP) · 31, 58 margin · 60 market

research · 22, 23, 61 share · 22, 52, 61, 64

growth · 22 trade publications · 23

MARKET Brand Formulations · 51 Channel Sales · 57 Industry Outlook · 50 Market Update · 33, 49 Marketing Expense · 56 Operating Statistics · 54 Pricing · 58 Sales Force · 55 Share of Manufacturer Sales · 52 Shelf Space · 60 Shopping Habits · 59

market share · 40 market survey · 22, 61, 62 Market Update report · 49 marketing

survey · 63 Marketing Expense report · 56 mass merchandisers · 20 menus

brief descriptions of · 26 pull-down · 25

multi-symptom relief · 16

N

nasal sprays · 15 net contribution · 40 new product · 34 new products · 17

O

Operating Statistics report · 54 OTC · 13 overhead charges · 23

P

Performance Summary report · 44 point-of-purchase displays · 20 population growth · 50

pricing · 24, 57, 65 Pricing report · 58 primary demand stimulation · 19 product

choice · 24 development · 17 turnover · 21, 60

profitability · 24 promotion · 19, 24

allowance · 21, 31, 60

Q

questionnaire · 62

R

reformulate product · 17 reformulation · 34 reminder advertising · 19 replay · 67 Report Purchases · 35 research and development · 17 retail

sales · 57 review

historical information · 26

S

sales force · 21 distribution · 57 salary, expenses and training · 30, 50

Sales Force report · 55 Sales Report · 47 segmentation · 63 Share of Manufacturer Sales report · 52 shelf space · 21 Shelf Space report · 60 Shopping Habits report · 59 side effects · 16, 65 simulation

navigation · 25 SIMULATION

Advance · 67 Replay · 67

spray medications · 15 STARTUP

Briefing · 28 Case · 28 Glossary · 28

stock price · 54 SURVEY

Brand Perception · 66 Brands Purchased · 64

Index—Page 77

Decision Criteria · 65 Purchase Survey · 63

Survey report · 63 symptom · 15, 51

T

test market · 40 tools

decision-making · 25 training cost · 30, 50

V

volume discount · 31, 60

W

What If... · 39 wholesale sales force · 30