marketing strategy simulation learning note

SP Jain School of Global Management

MARKSTRAT COMPREHENSIVE

LEARNING NOTE Team – 6

NYLA

Table of Contents Past Performance Analysis ...................................................................................................................... 3

Period 1 ............................................................................................................................................... 3

Period 2 ............................................................................................................................................... 4

Period 3 ............................................................................................................................................... 4

Period 4 ............................................................................................................................................... 5

Period 5 ............................................................................................................................................... 5

Period 6 ............................................................................................................................................... 6

Comparison of Key Metrics ................................................................................................................. 6

Major Changes in the Business Environment ......................................................................................... 7

Competition & New Product Launch .................................................................................................. 7

Economy.............................................................................................................................................. 7

Average Price of Every Segment ......................................................................................................... 8

Budget ................................................................................................................................................. 8

Market Size ......................................................................................................................................... 8

Period 7 Strategies .................................................................................................................................. 9

Clinites ................................................................................................................................................. 9

Nutrites ............................................................................................................................................... 9

Trends and Scenarios ............................................................................................................................ 10

Scenarios ........................................................................................................................................... 10

Comparison of Profit and Loss as per Scenarios ............................................................................... 10

Metrics and Trends ........................................................................................................................... 11

Indicators .............................................................................................................................................. 12

Lead Indicators .................................................................................................................................. 12

New Customers and Repeat Customers ....................................................................................... 12

Purchase Intentions ...................................................................................................................... 13

Brand Awareness .......................................................................................................................... 15

Shopping Habits ............................................................................................................................ 16

Lag Indicators .................................................................................................................................... 17

Inflation and GDP .......................................................................................................................... 17

Commercial Cost ........................................................................................................................... 17

Profits ............................................................................................................................................ 18

Inventory ....................................................................................................................................... 18

Returns .......................................................................................................................................... 18

MARKSTRAT Learning Experience ......................................................................................................... 19

Budget ............................................................................................................................................... 19

Product Positioning ........................................................................................................................... 19

Market Forecasting ........................................................................................................................... 19

Production Planning .......................................................................................................................... 19

Organizational Layout and Staffing ................................................................................................... 19

Commercial Planning ........................................................................................................................ 20

Distribution Channels ........................................................................................................................ 20

Marketing Expenditures .................................................................................................................... 20

Past Performance Analysis The key strategies and analysis of Team’s past 6 years’ performance

S.No Major Decisions Outcomes Key Learnings

Period 1

1. Target Segment: a. Medium Income

Families b. Singles

Reason: Both segments are price sensitive segments and both segments desire quality products at value prices

Volume Market Share increased from 9.8% to 12% for Nice but increased marginally for Nine. Market Share more in Singles than in Medium Income Families.

Strategy working for Singles. Maybe we need to introduce new brand for Medium Income Families.

2.

Distribution Channel: Mass Merchandise and Specialized Mass: Singles and Medium Income Families purchase maximum from these two distribution channels.

Retail Sale for Nice increased by $ 12 mn and for Nine by $ 6 mn. Unit volume sold by Nice increased by 1,407,000 units and by Nine increased by 462,000 units. Nice Market Share grew in Mass Merchandise and Specialized Mass, whereas for Nine it grew in Department Store and Beauty Portals.

Understood the buying locations for Nice and Nine segments. Can leverage on these distribution channels by focusing on respective channels for respective segments.

3. Advertising Mix: Advertising will increase Brand Awareness and help to capture larger Market Share; This will make the stakeholders happy which will increase SPI

Brand Awareness maximum for Nice and within the chosen segments. For Nine it is more than 50%. Awareness more in Singles segment.

Advertising mix working well. Advertising Media is giving the desired returns i.e. increasing brand awareness and revenue. Therefore SPI increased from 1000 to 1244.

Period 2

4. Positioning: Continue with Singles for Nice and Reposition Nine in Affluent Segment, as Nine has moved more into Affluent segment

Singles market share is 17% but relatively less as compared to competitors. Nine: Gained market share in Affluent but relatively less as compared to competitors.

Singles market is price sensitive and our price was comparatively higher.

5.

Continuing with Period 0 Strategy: High Spending on Advertising and maintaining minimum Inventory

Inventory is well maintained and minimum. Brand Awareness for Nice is highest and has increased to 67.8%

Our forecasting considering market growth and advertising is correct. Advertisements and effective in creating Brand Awareness. Need to work on Purchase Intentions.

6. R&D: Started R&D projects for Nutrites and estimated budget is obtained from online query and adjusted accordingly Target Segment: Elderly as over the period it will be one of the largest segment

Project completed successfully

Estimated budget was more, can use this judgment for launching later projects.

Period 3

7. Target Segment: Continue with Singles for Nice and for Nine since the existing market of Nine is Affluent customers who are loyal. So we can conquer Singles market with the same product (Nine) by keeping optimum prices

Lost Singles market for both Nice and Nine. But Nine has maintained share in Affluent.

Pamper the loyal customers.

8.

Continuing Existing Strategy: Maintaining Advertising and Minimum Inventory

Inventory got adjusted. Advertising is still successful in creating Brand Awareness

Brand Awareness is not creating high Purchase Intentions. Need to change the strategy

9. R&D Investment: Did minimum required because project would not get completed in spite of taking loans and so we wanted to avoid unnecessary interest accumulation

R&D project remained incomplete. Required budget was increased.

R&D should be completed in the minimum possible time.

Period 4

10. Advertising to Target Segment: Allocate more advertising budget to the target segments of the respective brands

Brand Awareness increased, but not purchase intentions

Simply advertising is not helping. Need to come up with new techniques to increase sales and revenue

11.

Continuing Existing Strategy: Maintain Advertising in Nice but lower in Nine and Maintain Minimum Inventory

Inventory cost increased

New products were launched by the competitors which took away the sales and hence lot of inventory was left

12. R&D Investment: Initiated 2 Clinites products and allocated the required budget for Nutrite

R&D projects completed

Sufficient funds and appropriate mix of parameters is essential

Period 5

13. Advertising: Brand Awareness is high and we required some cash, so we reduced advertising in existing brands and invested in advertising 2 new brands

Brand Awareness reduced, impacted SPI and market share

Consumers are highly advertisement sensitive

14.

Commercial and Distribution: Reorganized existing commercial and distribution for older brands and invested in new products

Inventory pending and hence losses

New product launch forecast went wrong. Production of new units should be less, first try and then produce more

15. Product Launch: New products launched; one for medium income segment and one for low income segment

Not many units were sold, pending inventory

Lesser units should be produced, tested and then production to be increased

Period 6

16. Advertising: Put money into Advertisement Research to increase persuasiveness of the brands

Brand Awareness is high for Nice and Nine and low for Nixus and Nike. Purchase intentions still not high

Product specifications and price not in sync to covert the awareness into action

17.

Inventory and Merchandising: Reduced inventory to minimize losses and reshuffled merchandising

Merchandising was adequate Inventory high for Nixus and Nine

Bull whip effect and butterfly effect of pending Inventory

18. Product Launch: Launched Nutrites product – Numen into Elderly market segment. Launched this year only to introduce, aggressively will try to gain share in elderly from next year

Market share is low but not much inventory left. Brand Awareness of Numen in elderly is 35%

The segment is a slow growing and late adaptors. Elderly is expected to purchase more this year.

Comparison of Key Metrics Comparisons of Performance Metrics of Nyla over past 6 periods are:

14%

17% 17%

14%

10%

7%

5%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Market Share

3000

4000 4297 4300

3950 4033

4937

3000

4000

5000

6000

0 1 2 3 4 5 6

Period

Marketing Expenditure

Major Changes in the Business Environment

Competition & New Product Launch

From period 3, the competition became stiff. New product launch started. These conditions lead to lowering the market share. Till period 7, there were about 27 brands of 7 companies in Clinite & 5 brands of Nutrite. The new products were launched with targeting specific market segment, identifying the characteristics of them.

Economy The inflation rate increased from period 1. Earlier it was 2% which rose to about 4%.

35714

47735

53536 52892

43669 39927

35224

20000

30000

40000

50000

60000

0 1 2 3 4 5 6

Period

Revenues

10461

14110

18224 17058

13535

9321

4344

0

4000

8000

12000

16000

20000

0 1 2 3 4 5 6

Period

Profits

Average Price of Every Segment The average price of every segment was reducing year on year except for High Earners. For Affluent families, it reduced from $ 20 to $ 18.

Budget

With revenues, SPI of last year, the budget allocated to every team differed. The budgets for the 7th period were ranging from $ 8.7 million to $ 24.8 million. This started changing from period 2. It was kept constant for first 2 periods. Last years’ performance was the indicator of current years’ budget.

Market Size Market Size over the 7 periods has steadily increased but due to intense competition in the Clinites market, Nyla’s market share could not grow in line with it. In fact the trend lines plotted indicate that despite a growing market, Nyla’s market share as percentage continued to drop after period 2.

26030 29951 38181

46148 54028

75074 89375

0

20000

40000

60000

80000

100000

Period0

Period1

Period2

Period3

Period4

Period5

Period6

Market Size

Period 7 Strategies

S.No Major Decisions Expected Outcomes

Clinites 1. Advertising and Pricing:

Put money into Advertisement Research and priced products according to market expectations and physical characteristics to increase persuasiveness of the brands

Brand Awareness for Nice and Nine is good which should convert to high purchase intentions At the same time Nike and Nixus should gain Awareness and convert to purchase intentions

2. Inventory: To minimize losses, reduced inventory and calculated production based on available inventory, market and segment forecast and advertisement

Pending inventory should be minimized and hence inventory holding cost should get reduced.

3. Merchandising: Reshuffled merchandising budget according shopping habits and buying behaviour of segments

Commercial allotment and merchandising budget distribution should convert to higher sales and gain higher market share

Nutrites 1. Aggressive Advertising:

To gain higher Brand Awareness invested in Advertising Media and higher percent in Advertising Research Allocated more distribution to Elderly segment

Brand Awareness and Purchase Intentions should increase and this should help in gaining more market share of Elderly

2. Inventory: Increased Inventory owing to higher segment growth forecast for Elderly and not many players in Elderly Nutrite market

Production is 25% of the estimated growth, hence pending inventory should be minimum

3. Merchandising: Segment growth is estimated to be more for Elderly hence more sales force deployed at the channels preferred by Elderly and likewise budget is allocated

More elderly should purchase from desired stores and hence market share can increase

Trends and Scenarios

Scenarios Scenarios considered are:

Comparison of Profit and Loss as per Scenarios As Is Pessimistic Optimistic

Revenues 34298 30723 81701

Contribution before Marketing 13352 12685 36201

Contribution after Marketing 4661 3994 27510

Earnings before taxes 4661 3994 27510

As Is

•Calculated on the basis market forecast

•Retained the market share of last period

Pessimistic

•No growth in segment size

•Retained the market share of last period

Optimistic

•Calculated on the basis market forecast

•Calculated market share based on market and segment forecast and advertisement

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

Revenues Contributionbefore Marketing

Contribution afterMarketing

Earnings beforetaxes

Scenarios

As Is Pessimistic Optimistic

Metrics and Trends

Stock Price Index is an indicator of the shareholder value that a company creates. From the trend lines plotted Nyla’s SPI has only been going down after period2, except for in the Optimistic Scenario. This implies that there is erosion in the shareholder value for Nyla over time.

In both the As Is and Pessimistic Scenarios, ROMI has also gone down after period 2 indicating a decrease in the effectiveness of the marketing spend. A downward trend of Return on Marketing Investment implies that the marketing initiatives did not yield as much contribution as desired. In the Optimistic Scenario, which is applicable only to period 7, there is a sharp rise in the ROMI which seems a little too optimistic given the trend. Otherwise the ROMI from period 0 to period 6 has increased and decreased at a steadier rate.

The Return on R&D Expenditure reached a peak in period 3, after which it fell sharply in period 4. From period 5 onwards when there was no more new investment in R&D, the Return on it steadied at a slowly increasing rate. This implied that the overall contribution from the total portfolio was evening out spend on R&D in new brands.

0500

1000150020002500

SPI


0.001.002.003.004.005.006.00

ROMI


0

5

10

15

20

Return on R&D Expenditure


Indicators

Lead Indicators Indicators which signal future events

New Customers and Repeat Customers

The new and repeat customer data gives the lead to number of loyal customers and number of new

customers attracted who can demonstrate the potential to become repeat customers. The growing

or shrinking customer base helps in understanding if the product is positioned correctly or not and

its capacity to convert new potential customers into repeat customers.

In the below charts it can be seen that initially the repeat customers were loyal and number of

repeat customers as well as old customers were increasing. But later the numbers started declining.

In this case, Nyla should try thinking about improving its product by R&D and reposition it.

CLINITES

Lead Indicators

New Customers

and Repeat

Customers

Purchase Intentions

Brand Awareness

Shopping Habits

0

1000

2000

3000

4000

5000

1499 2732 2984 2764

1975 2028 1692

693

868 1400 1656

1614 1218 1028

Nice Customers

New Repeat

0

500

1000

1500

2000

2500

650 1055 1086 1176

588 452 329

503

560 830

993

1079 692

419

Nine Customers

New Repeat

NUTRITES

Purchase Intentions

Purchase intentions convey the likelihood of a particular segment to purchase the product. It help is

positioning the product. It also helps in understanding if the physical characteristics are preferred by

that particular target segment.

0

100

200

300

400

Period 5 Period 6

205 244

0

87

Nike Customers

New Repeat

0

100

200

300

400

Period 5 Period 6

273 228

0 92

Nixus Customers

Nixus New Nixus Repeat

0

100

200

300

New Repeat

236

0

Numen Customers

Period 6

CLINITES

NUTRITES

0%

10%

20%

30%

Nice

High Earners Affluent

Medium Income Low Income

Singles

0%

5%

10%

15%

20%

Nine



Singles

0%

1%

1%

2%

2%

3%

Period 5 Period 6

Nike



Singles

0%

1%

1%

2%

Period 5 Period 6

Nixus



Singles

0%

5%

10%

15%

Health Conscious Families Elderly

Numen

Period 6

Brand Awareness

Higher the Brand Awareness better is the brand known by the audience. But this is only first stage of

influencing the buying behaviour of the consumer.

CLINITES

0%

20%

40%

60%

80%

Nice



Singles

0%

20%

40%

60%

80%

100%

Nine



Singles

0%

5%

10%

15%

20%

25%

30%

35%

Period 5 Period 6

Nike



Singles

0%

5%

10%

15%

20%

25%

30%

35%

Period 5 Period 6

Nixus



Singles

NUTRITES

Shopping Habits

Shopping habits indicate which segment prefers buying from which location. It can be used to

determine merchandising and salesforce deployment and budgets.

CLINITES

0%

20%

40%

HealthConscious

Families Elderly

Numen

Period 6

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

MassMerchandising

SpecialisedMass

DepartmentalStores

Beauty Parlour

6% 25%

55%

14% 11%

34%

44%

12% 42%

26%

25%

6%

57% 29%

5%

9%

27% 47% 13%

13%

Clinites Shopping Habits

Highs Earners Affluent Med. Income Low Income Singles

NUTRITES

Lag Indicators Indicators which follow an event

Inflation and GDP

Inflation can help in understanding the spending power of the consumers. It helps in understanding

the overall economy.

Commercial Cost

Indicates the present staff deployed and helps in determining if the cost incurred is rightly utilized

and spent. Trends helps in determining seasonality and changes if any and helps in forecasting.

0%

20%

40%

60%

80%

100%

120%

MassMerchandising

SpecialisedMass

DepartmentalStores

Beauty Parlour

9%

47% 33%

11% 19%

39%

30%

11%

30%

34%

26%

9%

Nutrite Shopping Habits

Health Conscious Families Elderly

Lag Indicators

Commercial Cost

Inflation

Profits Inventory

Returns

Profits

Helps in determining the revenues gained and costs incurred. Trends helps in determining

seasonality and changes if any and helps in estimating future profits.

Inventory

Inventory analysis helps in determining if the planned inventory in the earlier cycles is appropriate or

not. Trends helps in determining seasonality and changes if any and helps in forecasting.

Returns

ROI, ROMI Returns on R&D etc. helps in determining if the contributions and expenses are on the

right area. It helps in planning for future expenses.

0

1000

2000

3000

0 1 2 3 4 5 6

Period

Commercial Cost

0

4000

8000

12000

16000

20000

0 1 2 3 4 5 6

Period

Profits

0

200

400

600

800

0 1 2 3 4 5 6

Period

Inventory Costs

MARKSTRAT Learning Experience

Budget The budget allocated per year is the most important thing in planning. Every expense should be balanced accordingly for every stakeholder. The future investments like R&D, new product launch should always considered while allocating budget. Relevance – In real world, these kind of balancing acts are required to understand and satisfy every stakeholder.

Product Positioning

It is essential to recognize the needs of each segment & position the product accordingly. R&D investments can be identified, if some product attributes are required to change to meet the customer demands. Relevance – Real world scenario - Apple positioned iPhone in ‘High Quality – High Price segment’. The product is positioned by fulfilling customer requirements keeping in view company’s mission.

Market Forecasting

To estimate the production planning, advertising expenditure and merchandising expenditure it is required know the market growth. Forecasting helps in this. Relevance – Whether the market is growing or will there be any recession economy decides the production planning. If there will not be much growth, then production needs to be cut down.

Production Planning

The market forecasting should be used effectively to estimate the production planning. Wrong planning might lead to huge inventory or loss of sales. The precise production planning avoids the inventory management incurring to additional cost. Relevance – The right usage of machineries, labours and warehousing gives the edge over competitors. Production planning helps in deciding the usage capacities of all these things.

Organizational Layout and Staffing The organizational staffing is one of the most crucial things. There should be skilled labours to have highest output. The staff should be occupied enough and utilized effectively. Relevance – The staff should always be occupied with work and should not remain idle. To havehigh moral, everyone should have work.

Commercial Planning As per the target segment, commercial expenses should be planned. The expenses should be well distributed keeping in view growth of the segment and target customers. Relevance – There should always be focus on which customers are important and are targeted. This becomes critical when there is stiff competition and so many players are there in the market.

Distribution Channels

As per the target segment, buying preferences should be identified. These channels should be focused so as to gain maximum shelf space and to have more sales. Relevance – It becomes much more relevant in real life as choosing the right distribution partner is most important.

Marketing Expenditures

Based on the product attributes, target segment and price sensitivity, the marketing expenditure should be decided. If the product is low priced, then it is required to market it more and vice-versa. There should be focus on increasing the brand awareness and then to increase the purchase intentions. Relevance – The situation is exactly same in real life when it becomes important to spend on marketing and to the specific target segment.