FINAL

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This document is now in order of the simulation

Introduction

Sales force (number allocated to the five types of retail stores as well as to wholesale and indirect support functions)

Allround’s salesforce allocations were made directly based on amount of retail sales in each area. The board of directors initially allocated sales forces based on the perception of where a higher end product would be purchased. This reduced the amount of allocations in convenience stores as well as wholesalers due to the infantile stage of the market. The initial variance of allocations across the different retail stores were made due to the lack of knowledge of each retail performance margins from the year prior. Upon further analysis, grocery stores were identified as the largest individual source and quickly began the main focus of further allocations. Understanding that independent and chain stores combined were higher than the leading sales channel, Allround decided to target these two sources as well thus effectively targeting the majority of the market in revenue. As the mass merchandisers grew in size, Allround’s board of directors wanted to ensure a portion of that revenue stream was captured by the company. Convenience stores controlled 2.8% of the total market at the end of the year 8 and showcased the shallowness of revenue that could be generated by this avenue thus justifying the board of director’s decision to not cultivate growth in this sector.

Overall, the trajectory of sales force allocations were executed as initially planned. As seen with growing companies, the highest sales force allocations occured in the early years of the company and scaled down as time went by. With year one increasing sales force by 16% and year two increasing allocations by 82%, the board of directors pushed sales into the company’s pipeline thus increase value and production rates. Investing into research and market updates, the board of directors were able to view areas of profit that could be earned by penetrating those particular sectors. As the markets matured, a shift from direct sales force channels occured towards indirect sales force channels due to the increase of capital within those channels. In summary, direct sales force allocations increased 243% and indirect sales force channels increased 385% over the 8 years governing by the board of directors.

Manufacturer’s suggested retail price

As the board of directors of Allround were recently brought into the company to establish growth of the overall company, the manufacturer’s suggested retail price was quickly identified as a concern and tool to increase the revenue made. Unsure of the elasticity in price within the marketplace, Allround exercised caution during the initial period of introducing products and decided not to shift pricing within the first three years. In hindsight, this might have reduced the profit margins within the earlier years however the tradeoff was an increase of bulk sales and confirmation of customer loyalty. Once the board of directors felt the increase of price was necessary to maintain profit within the company as well as keep pace with competitors in the industry, the manufacturer’s suggested retail price was raised conservatively in accordance within the elasticity of the market and increases made by competitors.

Volume discounts and promotional allowance

Originally, we adjusted volume discounts by decreasing <250 and increasing <2500 to encourage retailers to purchase more product. We readjusted these discounts by increasing them again midway through the sim. Reports showed that the largest bulk of our sales were in the <2500 and wholesale categories, so toward the end of the sim we gradually reduced volume discount percentages by small amount annually in these areas to increase income. A lesson learned in the adjustments of wholesale discount percentages was that this element of pricing can be used as a tool to effectively increase income when needed.

Initially, we adjusted the promotional allowances based upon market research which yielded data indicating that the majority of our sales were being made in the grocery store, chain drug store, mass merchandiser, and wholesaler arenas. Upon making these adjustments, our trade ratings fell and we subsequently increased them back to above the initial 17% to 18% and provided consistency between retail types. Winer and Dhar (2016) relate that promotion allowance should be the largest part of a company’s advertising budget, and we used this direction from the text to justify raising promotional allowances to 18% or above. An important lesson learned relative to promotion allowances was that continuity of allowance percentages between retail types and ample allowance amounts are integral elements in maintaining trade ratings and retail/detailer support. If we had it to do over again, it may have been beneficial to maintain consistent and ample allowance percentages throughout the sim.

We funded point of purchase and co-op promotions to enhance shelf space, ensure that our product was visible and available, and to increase interest and unintentional purchasing. Upon introduction of Allround+, we offered trial sizes as a promotional strategy to garner interest in the new product, and were prompted by social media comments the following year to add a coupon for this product as well. Using this introduction response experience as guidance, we introduced our third product with a trial size and a coupon, and had a good consumer response. Through this experience we learned that the promotional strategy in the introduction of a new product is more successful when more than one promotional item is offered.

Advertising

Allround advertising budget was a constant area of interest for the company as the board of directors continuously addressed the demand of advertising. There were three pillars in which the advertising budget depended upon; brand awareness, competitor actions and cost. Brand awareness was the first and most important aspect during the beginning years of the company. Within the first year, Allround allocated $20 million in advertising, $4 million more than the next competitor in the industry, and was acquired 74.1% of brand awareness within the first year of the market. This strong push into the minds of consumers allowed for Allround to stand head and shoulders above its main competitor, Besthelp, who entered the market with 56.6% brand awareness. Peaking in the highest advertising budget of $24 million for two consecutive years, Allround was to incrementally increase the company’s brand awareness and remain the most well known company within the industry. The secondary pillar was based on the actions of competitors and their budgets within the industry. While the main focus was to maintain dominance in brand awareness, the board of directors understood the actions of competitors must be supervised as the company’s brand awareness and sales could be effected. Each year, competitors continually increased their advertising budgets but never overtook Allround’s ability to fund its advertising sector. The final pillar of advertising budget that was considered was cost of the budget and how it affected the bottom line within the company. Since Allround’s strategic plan was to increase and maintain brand awareness throughout the industry, the inflated budget was planned for and utilized to gain the desired results. Upon achieving the results and realizing competitors would not attempt to gain control of this sector of the industry, the concern of cost was taken into consideration. To increase the value of the company, the board of directors began to reduce the advertising budget once dominance was established.

Selected advertising agency

Allround’s core concept was to present a higher end product to consumer from the launch of Allround primary. With quality on the forefront of the company’s actions, the immediate and only choice of advertising agency was Brewster, Maxwell & Wheeler. Maintaining a consistent quality of advertising created continuity with consumers that Allround products would not waiver regardless of the lifecycle of products provided.

Relative emphasis on the four types of advertising messages

Due to the large amount of advertising spent for the company, the four types of advertising messages were critical to achieving the specific areas of advertising that were desired. Changes to the different ratios of advertising conducted were not conducted until the third year as the company was address more vital aspects during this timeframe. Once Allround had achieved a high level of brand awareness and market penetration, alterations were made to the message ratios to compete against BestHelp, main competitor, and mitigate any competitor’s advertising plan to convert ___________________________

Advertising Segmentation

Tia

Promotion’s budget with allocations to cooperative advertising and the three types of consumer promotions

Initially, we adjusted the promotional allowances based upon market research which yielded data indicating that the majority of our sales were being made by grocery stores, chain drug stores, mass merchandisers, and wholesaler arenas. Upon making these adjustments, our trade ratings fell and we subsequently increased them back to above the initial 17% to 18% and provided consistency between retail types. Winer and Dhar (2016) relate that promotion allowance should be the largest part of a company’s advertising budget, and we used this direction from the text to justify raising promotional allowances to 18% or above. An important lesson learned relative to promotion allowances was that continuity of allowance percentages between retail types and ample allowance amounts are integral elements in maintaining trade ratings and retail/detailer support. If we had it to do over again, it may have been beneficial to maintain consistent and ample allowance percentages throughout the sim. We funded point of purchase and co-op promotions to enhance shelf space, ensure that our product was visible and available, and to increase interest and unintentional purchasing. Upon introduction of Allround+, we offered trial sizes as a promotional strategy to garner interest in the new product, and were prompted by social media comments the following year to add a coupon for this product as well. Using this introduction response experience as guidance, we introduced our third product with a trial size and a coupon, and had a good consumer response. Through this experience we learned that the promotional strategy in the introduction of a new product is more successful when more than one promotional item is offered.

High advertising and promotional budgets were applied to our new products upon introduction in efforts such as funding of trial sizes. Toward the end of the sim, we noticed that the promotion budgets between products were largely uneven, and decided to increase point of purchase and co-op funding on our secondary products to enhance promotional consistency between products.

One lesson learned from this was that the expansion of a product line has the capacity to serve as a life preserver in some situations. For example, if the product Allround had taken a dive in sales in response to the controversy surrounding the bleach incident in week 8, then sales from other products in Allstar’s line may have been enough to help the company survive until Allround’s popularity returned. This is why it is important to consistently promote all products in a company’s line. In hindsight, increasing the promotion budgets on our secondary products may have increased the sales in the products and constituted a higher overall net income for the company.

Line extensions

The decision to extend the company’s line of products was an element that was decided upon as an element of our initial strategy. Extending a company’s line of products is a strategy which required careful consideration relative to consumer needs and desires, competing company products, and a company’s current products. Reports showed that there were current consumer markets for child cold and allergy medications, of which we were not yet taking advantage. By choosing to develop and introduce a child’s cold medicine and an allergy medicine, we were selecting products with uses that differed from that of our existing product, thus ensuring that these products would be taking sales from other company’s products rather than our own. We made formulation decisions to select medication ingredients with minimal side effects based upon consumer reports that related that side effects were an area of concern to consumers in selecting OTC medication. As described above, the decisions to expand a product line is a strategic move that has the capacity to serve as insurance for the primary product. Though our new products were not particularly profitable in their introductory years, they have now gained traction and are turning a profit which constitutes additional earnings for the company. (Jess)

Specials and Incidents

Period 1

For the opening period, the Marketing Team was tasked by management with adding a more interactive dimension to their marketing plans.  The choice our team picked was to utilize social media avenues Facebook and Twitter, and use up to five-percent of the advertising budget toward Google Adwords to generate additional awareness and direct people to the Facebook page.

Our social media decision was well received  Our Facebook and Twitter accounts were up and running, and traffic was stated to be good.  The social media comments for Allround were overall positive.

Period 2

Period two presented the team with an incident in which a batch of Allround was within six months of expiration, and the team needed to decide what to do with expiring product.  The team’s decision was to dispose of the expiring batch at a one-time cost to the company of $100,000. There was relatively little impact to the company’s performance other than the cost of  the disposal which registered as an expense for the company.   

Period two social media comments for Allround remained as positive and more upbeat than the previous period.

Period 3

In period three, Allstar needed to consider a line extension of the Allround brand to counter market erosion from increased competition.  Each formula targets of specific types of users and symptoms. The concern for this period was the problem of cannibalism. Team one chose to market a children's liquid cold medicine which would have the least amount of impact upon our base product.

Since the decision was made to drop alcohol from Allround in a reformulation for the  use of the product for children, the use of our product increased in that segment. Sales of our main product were not greatly affected since doctors and pharmacists were recommending the expectorant in the children's version over the cough suppressant in Allround.  Both of our products, segmented properly, were performing well.

Period 4

Period four stirred up some social media issues.  The Brand Management Team found a number of posters stirring up negative comments that they felt may hurt the brand's image.

Team one’s decision to respond to check the page often and respond to comments, both good and bad, increased participation on the social media site.

Period 5

Period five’s incident was to handle the effectiveness of detailers contacts with doctors  

and pharmacists. The team’s choice for a one-time cost of one-million dollars was to provide more training to detailers.

Our efforts with the detailers were well received by both sales force and physicians and social media comments remained positive and promising.

Period 6

In this period, team one was tasked with making an advertising decision to supplement Allround’s advertising.  The team decided to mix things up a bit and select two options to boost advertising. However, when the period’s simulation was submitted, our choices were not registered and we unable to obtain a valid result.  Our team felt cheated. We felt as though we had a good combination of decisions to boost advertising. But we will, unfortunately, never know.

Period 7

Period seven presented a dilemma for our team to debate.  A large drugstore chain was unhappy with the price discounts it was receiving and requested an additional discount with the possibility of the store removing our brand if it did not get what it wanted.

Our team’s decision to not offer the additional discount and reject the chain's demands affected sales in the channel, but orders from other retailers increased offset the loss.  Our team felt that it had made the best decision possible and it showed by our results.

Period 8

In period eight, our team faced its most serious incident of contamination of a product.  We had to make a critical, responsible decision that would be good for the consumers of our brand and enhance the public perception of our brand name.

Our team chose to issue a statement of sympathy for the victims, remove all product from

shelves at a cost of $1.5 million, and modify the packaging of our product at an added cost of  

one-million dollars.  Our efforts to address the tampering crisis met with some success, and sales do not appear to be significantly affected by the bad press.

In the final performance summary for our products, overall social media comments remained positive for all three of our products with minimal dissention among the comments.  Our team feels as though it has made the best decisions for both it customers and its brand.

Cumulative net income throughout the simulation and final stock price

Graphs added by Walt

Summary

References

Winer, R. and Dhar, R. (2016). Marketing Management, 4th Edition. [BryteWave].

Retrieved from, https://shelf.brytewave.com/#/books/undefined/

Appendicies

SWOT Analysis

Period 1 – 8 Company Decisions, Results, and Interpretation of Results

Period 1

Period 2

Period 2 Analysis of Results:

Period 3

Period 3 Analysis of Results:

Period 4

Period 4 Analysis of Results:

Period 5

Period 5 Analysis of Results:

Period 6

Period 6 Analysis of Results:

Period 7

Period 7 Analysis of Results:

Period 8