TEAM -A

MARKSTRAT
SIMULATION REPORT

TEAM A
Unal Omer CALISKAN
Alp CIBILI
June 3rd, 2011

1
Contents

A) OVERALL STRATEGY............................................................................................................3

A-1) OBJECTIVES & GOALS........................................................................................................3

A-2) RESOURCES..........................................................................................................................6

B) 4C ANALYSIS...........................................................................................................................6

B-1) COMPANY...............................................................................................................................6

B-2) CUSTOMER............................................................................................................................7

B-3) COLLABORATORS..............................................................................................................11

B-4) COMPETITORS....................................................................................................................12

C) PERIOD SYNOPSIS.............................................................................................................13

C-1) DECISIONS OF PERIOD-1.................................................................................................14

C-2) DECISIONS OF PERIOD-2.................................................................................................15

C-3) DECISIONS OF PERIOD-3.................................................................................................16

C-4) DECISIONS OF PERIOD-4.................................................................................................17

C-5) DECISIONS OF PERIOD-5.................................................................................................18

C-6) DECISIONS OF PERIOD-6.................................................................................................19

D) CONCLUSION.......................................................................................................................21

D-1) LEARNING EXPERIENCE..................................................................................................21

D-2) MISTAKES.............................................................................................................................21

E) APPENDICES........................................................................................................................22

2
A)OVERALL STRATEGY
At the beginning of the game, we knew that we had to increase net contribution of our team in order to
have higher budget for our future marketing and R&D activities. In order to increase net contribution:

 We had to be good at forecasting the future needs and perceptions of the targeted segments. In
other words, we had to be good at R&D. We had to forecast the evaluation of the needs of the
segments in the upcoming 2 periods, since the newly produced projects could be available in two
periods of time.

 We had to increase the share of our team in both Vodite and Sonite markets. We had to evaluate
each segment in terms of forecasted value and number of competitors. The segments which were
growing in terms of value (roughly all segments except the Buffs), were going to be our targets
during the simulation.

 We had to be the pioneer of Vodite market in order to get advantage of being the first comer.

In addition, we knew that we had to increase our market share by using the following strategic rules:

 We had to keep track of the MDS evaluation of our targeted customer segments.

 We had to be good at reaching the targeted segment with the distribution of our sales force.

 We knew that we should not have tried to market same brand for 2 different segments unless the
MDS values of each segment were very close to each other.

 We had to define our competitor(s) for each of our brands and to keep an eye on each of the
competitors in terms of their investments and advertisement budget distribution.

o Competitor was defined on brand basis for each period. Competitor was the brand which
allocated the largest (or second largest if we are the provider of the largest marketing
budget) marketing budget for our targeted segment in the previous period.

o In order to increase our market share, we had to have higher marketing budget spending
when compared with the competitor’s brand.

o In order to protect our market share, we had to have at least the same marketing budget
spending when compared with the competitor’s brand.

A-1) OBJECTIVES & GOALS

OBJECTIVES that should be achieved between the beginning of Period-1 and the end of
Period-3:

1. Increase the budget of marketing department (a.k.a. Net Contribution).

3
 Reason: We evaluated our current situation and found that in order to be competitive, we had to
have funds for our future actions. Therefore we set the main objective as to increase the budget of
the marketing department.
2. Our brand “SAMA” must stay as the market leader of “Others” segment until the end of period-3.
Reason: We saw that our brand, SAMA, was the major revenue generator and this brand was
majorly favored by the “Others” segment. In order to serve the first objective, we had to protect our
revenue generating brand.
3. Become the pioneer of the Vodite market.
Reason: The Sonite Market was highly segmented and all of the competitors were either
dominating 1 or 2 different segments. However the Vodite market was not explored by any of the
teams yet. In addition, the Vodite market was initially created by one segment which was called
the “Innovators”. Being the first team to enter the Vodite market would help us to get the funds we
needed.
4. Create a Sonite brand which serves the needs of “High Earners” and “Professionals”.
Reason: We saw that the Teams E and O had the largest “Net Contributions” and they were
targeting the segments which had the largest wallet in the Sonite Market. Plus, the market forecast
was showing that these segments were going to grow in future. So we decided to create a brand
which could capture market share from both of these segments. 1

OBJECTIVES that should be achieved between the beginning of Period-4 and the end of
Period-6:

By the end of the third period, we accomplished all the objectives of the first three periods and had the
targeted net contribution and marketing department budget. The revenue was majorly being generated
from our Vodite brand, VANA. We knew that the other teams would also enter the Vodite market and
our market share would drop due to competition. The main objective for the second half of the
simulation was to protect the net contribution budget of the team by investing into unexplored
segments of both Vodite and Sonite markets. The objectives were:

1. Have one brand which targets only “Singles” segment.

Reason: We saw that the “Singles” segment was growing in terms of size. Plus, the major share
holder (Team I) of this segment was weak in terms of financials. So we decided that it would be
profitable for us to introduce a brand which targeted only this segment.
2. Withdraw SALT from the market.
Reason: In the beginning of the simulation, we decided that it would not be rational to spend
money on this brand due to its low return of investment. In addition, we had already decided to
enter the “Singles” segment with a new brand and withdrawing SALT which was mainly targeting
the “Singles” seemed rational.
3. Have one brand which targets only “Professionals” segment.
Reason: Our brand, “SANA” was targeting both “Professionals” and “High Earners”. Plus the MDS
values of these two segments were close to each other in the first half of the simulation. However
the difference between the perceptions of each segment was becoming larger in the second half.

1
Later, we changed this objective and decided to aim only Professionals in the second half of the objectives.

4
 Plus, “Professionals” were forecasted as a segment which would grow in size and value.
Therefore we decided that repositioning SANA only for the “Professionals” would be good idea.
4. Have one brand which targets only “Followers” segment.
Reason: The Vodite market was becoming highly competitive and different segments were
emerging. One of those segments was the Followers which were requesting a brand with different
product attributes. Therefore in order to stay competitive in the Vodite market, we decided to target
this segment with a new brand.
5. Have one brand which targets only “Early Adopters” segment.
Reason: The Vodite market was becoming highly competitive and different segments were
emerging. One of these segments was the “Early Adopters”. Our brand VANA was designed for
meeting the expectations of “Early Adopters” and “Innovators” because the needs and perceptions
of these two segments were close each other in the early periods. With the coming periods, it was
more visible that these two segments were having greater differences in terms of perceptions;
therefore we needed to have a different brand just for “Early Adopters” segment.
6. Stay as the market leader of “Others” segment with brand, SAMA. Stay as the market leader of
“Innovators” segment with brand, VANA.
Reason: These two brands were the main revenue generators for our team and we decided hold
these two brands.

GOALS for the whole simulation:

Since the beginning of the simulation, we knew that if we had enough money then we could be the
market leader of both Sonite and Vodite because we were good at R&D and forecasting the need and
perception evaluation of each customer segment. We decided to target the segments which were
growing in terms of value in both of the markets in order to generate revenue as explained in the
objectives. As the team goals we had the followings:

 Become the market leader of Sonite in terms of the number of units sold.

 Become the market leader of Vodite in terms of the number of units sold.

 Have highest stock price index among all teams.

 Have highest return of investment among all teams.

A-2) RESOURCES
As resources we had the distribution channels, brands, market research studies, R&D capability to
produce new brands and financial funds which would be gained through selling the brands. We used

following Markstrat tools to decide on how to allocate our resources to reach the company goals.

Decision to be taken Where we look at? How to decide?

5

Production Level of Brand
R&D activity
Advertising Budget to be
Allocated for a Brand
Perceptual Objectives of
Brand Advertisement
Number of Sales Force
Distribution of Sales Force
Market Forecast
Inventory
Consumer Panel-Market Shares
Semantic Scales Ideal Values
Regression Analysis of Semantic
Scales
Competitive Intelligence on
Advertisement Expenditure
Multi Dimensional Scales (MDS)
Semantic Scales
Sales Force Experiment
Number of Brands in the Market
Consumer Survey Shopping
Habits)
Production level of a brand = (Forecasted size
of the targeted segment) * (Brand's Estimated
Market Share percentage) - (Brand Number
held in Inventory)
In addition to this formula we can add a
tolerance of 20%.
Targeted segment's ideal semantic scale
values of next 2 periods are calculated by the
regression formula since the product will be
available in two periods.
To steal share we must outspend the
competitors for our targeted segment. To
preserve share, we have to match the
advertisement spending of the competitor.
If applicable use MDS vales otherwise use
semantic values.
Observe the net contribution effect of
increasing the sales force for each brand.
Allocate the number of sales forces for each
brand in each distribution channel by
observing both consumer survey and the
competitors sales force distribution.

B)4C ANALYSIS
B-1) COMPANY
Position of the Company: In the beginning of the simulation, Team-A penetrated only Sonite market
with two brands SAMA and SALT. SAMA was targeting the “Others”. SALT was targeting both “Singles”
and “Buffs”. The team was earning its revenue majorly from the SAMA; SALT was not providing a high
return for the company.

Strength of the Company: The team was the market leader for the “Other” segment. The company
had good R&D and forecasting capabilities due to the academic background of the team members.

Weakness of the Company: It was hard to reposition the SALT brand since it was not satisfying the
needs of any specific segment. The company did not have enough funds for future marketing and
R&D activities.

Desired Future: As explained in the “Goals and Objectives” section, company wanted to be market
leader of the Sonite and Vodite markets. By doing so, the company had to have higher budget and
new product lines for growing valuable customer segments.

6
At the end of the game, Company had 6 brands. For Sonite market; brands SAMA, SANA, SAKA were
offered. For Vodite market; brands VANA, VAKA, VADA were offered. In addition, company
successfully achieved its goal of being the market leader.

B-2) CUSTOMER
There are 2 markets in Marskstrat world, Sonite and Vodite. These markets are divided into several
segments and each segment has different characteristics, needs and purchase decision making
criteria. In order to decide which customer segments to target, we checked the market forecast for the
segment’s future value. In order to decide which marketing strategy we will use, we used the help
notes of Markstart simulation, Conjoint and MDS charts. The conjoint charts provided us the degree of
importance that the selected segment was giving to the product attribute. Then we checked which
MDS dimensions these physical attributes were influencing. As a result, we came up with following
customer analysis for both markets:

Sonite Market:

This market is made of 5 customer segments. As shown in Figure B-1, the market evaluated during
the simulation as below:

 Among those segments, Buffs and Professionals have been willing to pay higher prices for the
products.

 Among those segments, only Buffs market size (the number of products units demanded)
decreased.

 Among those segments, only Buffs and High Earners decreased the desired performance
attributes for a product.

Buffs (Bu):

Marketing Strategy for Forecast on

Characteristics of the Buffs Reaching Buffs Segment Value Decision

7
This segment is extremely According to Conjoint
knowledgeable about Sonite technology. Analysis, they give highest
They demand high performance importance to price then
products. They are among to the first to power and then frequency. According to market Do not target
use Sonite products. They are price According to MDS charts, forecast, this this segment
sensitive consumers because they do not this segment has to be segment will due to
have high income. They desire high targeted through Economy decrease in market decreasing
performance. They use the products for and Performance size of units and market size of
personal needs. dimensions. value. the segment.

Singles (Si):

Marketing Strategy for Reaching Forecast on

Characteristics of Singles Singles Segment Value Decision

They demand average level of According to Conjoint Analysis, they According to market Target this
both performance and give highest importance to price then forecast, this segment with
convenience in Sonite power and then frequency. segment will one brand
products. This segment is price According to MDS charts, this segment increase in market which is
sensitive. They use the has to be targeted through Economy size of units and designed for
products for personal needs. and Performance dimensions. value. its needs.

Professionals (Pr):

Marketing Strategy for Forecast on

Characteristics of Professionals Reaching Professionals Segment Value Decision

This segment demands for high According to Conjoint Analysis,

quality, high performance and easy to they give highest importance to According to market
use products. They can afford price then power, then design. forecast, this
expensive products and see price as According to MDS charts, this segment will
an indication of quality. They use the segment has to be targeted increase in market
products for both personal and through Economy and size of units and Target this
professional reasons. Performance dimensions. value. segment.

High Earners (Hi):

Characteristics of Marketing Strategy for Forecast on Segment

High Earners Reaching High Earners Value Decision
8
This segment has According to Conjoint
high income. Their Analysis, they give highest According to market Target this segment
purchase is partially importance to price then forecast this segment will cautiously. Introduce a
motivated by their power, then design. increase in market size of product which targets this
social status. They According to MDS charts, this units and value. However segment and also targets
demand performance segment has to be targeted there is a risk that this the Professionals since the
and convenience from through Economy and segment will request both segments have close
Sonite products. Performance dimensions. cheaper products in future. MDS preferences.

Others (Ot):

Characteristics of
Others
This segment is the
largest one in the
Sonite market. The
customers in this
segment look for
cheap, low-
performance products
with average
convenience.
Forecast on
Marketing Strategy for Reaching Segment
Others Value Decision
According to Conjoint Analysis, they
give highest importance to price We are already the
then power, then maximum market leader of this
Frequency. segment with our brand
According to MDS charts, this SAMA. We should
segment has to be targeted through protect our place as the
Economy and Performance This segment market leader of Others
dimensions. will grow. segment.

Vodite Market:

This market is made of 3 customer segments. As shown in Figure B-2, the market evaluated during
the simulation as below:

 All of the segments decreased their will to pay higher prices for the products.

 All of the segments desired higher efficacy.

 Among those segments, only Innovators’ market size (the number of products units demanded)
decreased.

Innovators (In):

Characteristics of Marketing Strategy for Reaching Forecast on

Innovators Innovators Segment Value Decision

9
 In the initial stage, there is not any Conjoint or
MDS data that we can choose for marketing
This segment will be strategy. Instead we have semantic scales
the first users of given for the product attributes. In other
Vodite products. words, in the early periods we use the When
They are willing to semantic scales for defining marketing This segment will entering the
try new ideas at strategy then switch to MDS. be the largest in Vodite market,
some risk. According to Conjoint Analysis, they give the early periods. the product
They are not price highest importance to max frequency then But later the attributes
sensitive. Their price then autonomy. According to MDS market size of must satisfy
income level is charts, this segment has to be targeted this segment will the needs of
above average. through Economy and Efficacy dimensions. decrease. this segment.

Early Adopters (Ad):

Characteristics of Marketing Strategy for Reaching Forecast on

Early Adopters Early Adopters Segment Value Decision
When entering the
Vodite market, the
In the initial stage there is no conjoint product attributes must
and MDS values that we can choose satisfy the needs of
This segment will for marketing strategy. Instead we this segment along
adapt the Vodite have semantic scales given for the This segment will with the innovators.
products as fast as product attributes. In other words, In be the second However the size and
Innovators, however the early periods use the semantic largest in the purchasing power of
they look for scales for defining marketing strategy early periods. Innovators are much
majority of people to then switch to MDS. The segment is higher than those of
accept the According to Conjoint Analysis, they forecasted to Early Adopters.
technology first. give highest importance to Max grow but at a Therefore design the
This segment is the Frequency then Price then Autonomy. slower rate when initial product to meet
opinion leader. They According to MDS charts, this compared with of majorly innovators
have average segment has to be targeted through Followers and secondarily Early
income. Economy and Efficacy dimensions. segment Adopters.

Followers (Fo):

Characteristics of Marketing Strategy for Reaching Forecast on

Followers Followers Segment Value Decision
10
 When followers become large enough
to be an attractive customer segment,
we would be able to use MDS and
Conjoint Analysis tools to decide the
marketing strategy. According to This segment will
Conjoint Analysis, they give highest be the smallest in Target this
They adopt a product importance to price then max frequency the early periods. segment with a
only after a large then autonomy. According to MDS But it is going to separate brand
number of consumers charts, this segment has to be targeted be largest as the which satisfies
tried it. Their income through Economy and Efficacy simulation comes only the needs of
level is below average dimensions. to an end. followers.

B-3) COLLABORATORS
The distributors of these two markets can be named as specialty stores, department store
and mass merchandiser. The Market Research >> Consumer Survey >> Shopping Habits
page gives us from where the consumer segments like to buy the brands. We had to allocate
sales force to the favored distribution channels with respect to a brand and its targeted
segment(s). In addition, by looking at the pricing policies of each distribution segment, the
retail prices had to be decided carefully. The followings are the characteristics of the
collaborators in the Markstrat world:

Specialty Stores: The specially stores can be used for reaching the segments of
Professionals, High Earners, Buffs, Innovators and Early Adopters since these
segments need the technical expertise and service while making their purchase
decision.

Characteristics of Specialty Stores Pricing and Profit Margins

These stores are small and do not belong to chains. They can
provide high level of technical advice and service. They generally
include the most expensive and high performance products.
These stores are much likely to be preferred in the early periods The specialty stores' distribution
of Vodite market due to their expertise in technology. margin is 40%.

Department Stores: The department stores can be used for reaching all of the
segments. Plus the profit margin earned from sales in these stores is much higher
when compared with mass merchandisers and specialty stores.

11
Characteristics of Department Stores Pricing and Profit Margins
The department stores provide extensive customer service
but their technological expertise is lower than specialty The department stores' distribution margin
stores. is 30%.

Mass Merchandisers: This channel can be used for reaching Singles, Others and Followers
segments.

Characteristics of Mass Merchandisers Pricing and Profit Margins

They operate on the low-price, high volume basis. The level
of service is low. They often distribute the cheaper and low- The mass merchandisers’ distribution
performance products. They lack the technical and service margin is 30%. But these stores apply
expertise which prevents them from distributing Vodite additional 10% discount from the
products in the early periods. recommended retail price of the brand.

B-4) COMPETITORS

We used the Market Research and Newsletter reports to predict the strategies of the
competitors.

Market Research>>Benchmarking reports can be used:

 To predict the future R&D projects of the competitors. For instance: if the R&D investment was
between 5 and 10 million $ then we could assume that the competitor would be preparing a
product for the Vodite market. “Research and Development expense” was used for this purpose.

 To predict the financial capability of the competitors to defend themselves in case of an attack.
“Next period budget” was used for this purpose.

 To predict the risk tolerance of the competitors. We checked whether the teams were willing to
take bank loans for future strategy implementation. “Interest paid” was used for this purpose.

Newsletter>>Market reports can be used:

 To predict which segments the competitor was targeting with its brands. Brand Characteristics and
Retail price was giving us the clue for this purpose.

 To predict until which price level the competitor would earn profit from its products. Base cost was
used for this purpose.

 To see to which brands we lost our market share for a targeted segment or from which competitors
we stole share. “Brand Sales and Market Shares” page was used for this comparison.

12
Market Research>>Competitive Intelligence reports can be used:

 To predict which segments the competitor is targeting with its brands. The brand and distribution of
the marketing spending among segments can be watched via the Competitive Advertising
Expenditures page. The same page can be used to decide on the marketing budget of our brands
according to our strategy. If strategy is to steal share, then our brand must have the highest
marketing expenditure when compared with others. If strategy is to protect share, then the
marketing expenditure should be matching with that of the competitor.

Market Research>>Multi Dimensional and Semantic Scale Perception Maps reports can be used for
making comparison between perceived values of our brands and those of competitors.

By looking at such reports we evaluated our competitors and came up with following
assumptions:

Team E: The team has a strong financial status. They will not risk their funds for exploring the Vodite
market. Most possibly, this team is going to be a follower when entering the Vodite market. They
compete with Team O for the segments of Professionals and High Earners.

Team I: The team has weak financial status. This team resembles to us in terms of financial and
product lines. We think they will be one of first entrants of Vodite market since they will seek for higher
financial status. Their products target Buff, Singles and Others.

Team O: The team has moderate financial status. They compete with Team E for the segments of
Professionals and High Earners. We think they will be one of first entrants of Vodite market since they
will seek for higher financial status, however they may postpone their product introductions since they
will need to allocate most of their budget to protect their Sonite market share against Team E.

C)PERIOD SYNOPSIS

Unless otherwise is stated the followings are true for each of the period decisions:

 The production levels of brands were decided as explained in Resources section (Section A-2).

 If the repositioning or new brand introduction was the marketing strategy then at least 20% of the
brand’s advertisement budget was reserved for Advertising Research Budget. Otherwise 10-15%
percent was reserved.

 For Advertisement perceptional objectives; MDS dimensions of Economy and Performance were
chosen for Sonite brands. MDS dimensions of Economy and Efficacy were chosen for Vodite
brands.

 Estimations through Markstrat tools were done as explained in Strategy Section (Section A).

13
 The base cost and investment values for R&D projects are found through Online Query.

Following figures shows the brand evaluations in their lifecycles:

Figure C-1: Shows the product life cycle details for SAMA and its targeted segment.

Figure C-2: Shows the product life cycle details for SALT and its targeted segment.

Figure C-3: Shows the product life cycle details for SANA and its targeted segment.

Figure C-4: Shows the product life cycle details for SAKA and its targeted segment.

Figure C-5: Shows the product life cycle details for VANA and its targeted segment.

Figure C-6: Shows the product life cycle details for VAKA and its targeted segment.

Figure C-7: Shows the product life cycle details for VADA and its targeted segment.

C-1) DECISIONS OF PERIOD-1

Initial Situation: We had 2 brands SAMA and SALT. SAMA was the market leader for the “Others”
segment with 53.3% share. SALT had its largest share in “Singles” segment with 12.8% share. The
company did not have enough funds to support future marketing activities. Plus return on money
invested in SALT was very low. The main competitor for both of the brands was Team I.

Actions Taken on Brands’ Marketing Mix and Sales Force Allocation: We decided our objectives
for the first half. We determined not to produce SALT anymore for the period 1 since we had
substantial amount of stocks for that brand that should have been diminished first. Our goal for the
SAMA was to preserve the same market share for “Others” segment. Meaning that in addition to the
retention of our existing customers, we were going to acquire the substantial portion of the new
potential customers. Thus for the SAMA, the production level is adjusted with respect to the Others’
forecasted market growth rate.

In terms of advertising decisions we had a difficult situation because we had limited budget. We
allocated the same amount of budget that was spent in period 0 for the SAMA and SALT to preserve
our positions. In our advertising efforts, we were sure that in order to enhance the impact of the ads,
we had to be targeting one specific segment. Thus for the SAMA, we increased the percentage of the
advertising efforts for the “Others” segment. While for the advertisements of SALT, we targeted
“Singles” more drastically.

We allocated the sales force for each brand according the segments’ shopping habits as it was
explained in the Consumer Shopping Habits window.

Actions for R&D and Market Research: To compete in the Sonite market, we believed that we
should have focused on the Market Expansion strategy. Besides from the “Others”, we had to enter
to other growing and profitable segments. Moreover there was an emerging market called Vodite

14
which would be a great opportunity for us if we were the pioneers. Thus in order to make future R&D
projects and marketing strategies, we decided to collect all the market research data for Vodite and
Sonite market.

C-2) DECISIONS OF PERIOD-2

Initial Situation: At the beginning of the period, the instructor gave us additional 10 million $. We had
2 brands, SALT and SAMA. We could not empty the inventory of SALT and we lost share on SALT to
our competitor, Team I. For SAMA we were able to increase the sales and market share. We were
aware of the fact that the decisions that we were going to take would be the turning point of the
simulation for us. We had two alternatives that we could follow whether to bolster our marketing efforts
in Sonite or separate the effort among Sonite and Vodite markets. There was a fierce competition
going on in Sonite for each of the segments. Unless we had sufficient budget, stealing share in Sonite
market from the competitors was almost impossible. We were sure that if we were going to enter
different segments, then the market leaders and established brands of these segments would retaliate
and drive us out of the market. Thus rather than applying frontal attack to any competitive brand in
Sonite, we preferred a market where a competition did not exist. We believed that by being the first to
enter to Vodite market would attain a competitive advantage to us. As a result of first mover
advantages, we could conquer the market and influence the early adopters and the followers through
the innovators.

Actions Taken on Brands’ Marketing Mix and Sales Force Allocation: We decided not to produce
any SALT since we would phase out the product in future. As our withdrawal strategy for SALT, we
decreased its retail price to sell more. We decided to increase the production level of SAMA with
respect to the “Others” forecasted growth rate. We did not allocate any advertising budget to SALT and
directed the entire budget that was left from R&D expenditures to SAMA in order to protect the market
share of that brand. Since all the market studies were available at this period, we directed our SAMA
for Perceptual Objectives driven by the MDS Dimension values of Economy and Performance of the
“Others” segment. The performance and economy were the two dimensions which “Other” segment
really cares about as explained in 4C Section of this report. We directed our SALT for Perceptual
Objectives driven by the MDS Dimensions of Economy and Convenience. The economy and
performance are the two dimensions which “Buffs” and “Singles” segments really cares about as
explained in 4C Section of this report. We allocated the sales force for each brand according the
segments shopping habits as it was explained in the Consumer Shopping Habits window.

Actions for R&D and Market Research: We had the budget for R&D and market research data
for estimations: We decided to make R&D for both Sonite and Vodite markets. In Sonite, we saw that
the competitor’s product attributes (SIRO) were closer to the ideal values of the “Others” segment;
therefore we had to modify the SAMA with a new project called PSAM2. Plus SIRO was applying a
frontal attack to our SAMA brand, so PSAM2 was our Frontal Defense against that attack. We
realized that the “High Earners” and “Professionals” were two growing segments and there was not
any competitive product which was fitting right onto the preferred coordination of economy and

15
performance in MDS perception map for those segments. Furthermore the MDS preferred values of
these two segments were close to each other and each of these segments could be reached with the
same distributional channels. We started a new Sonite R&D project called PSHEP. This product would
be our Leapfrog Strategy since it would be offering a differentiated set of physical attributes mainly
for Professionals. We estimated that same product would be attracting customers from High Earners.

For satisfying the Vodite market, we initiated a R&D project called PVINA which would be our Pioneer
Brand. Since Vodite is an emerging market, we could use only the estimated Semantic scales (Ideal

Values) which were displayed in the Market Research Studies. In addition, there was not any available
semantic regression study to formulate the ideal attribute specifications. By making the assumption
that the semantic values were linear with the product attributes, we came up with the ideal product
attributes for each Vodite segments as listed below:

Autonomy Max Freq Diameter Design Weight

Innovators 62 15 52 6 58
Adopters 70 13 42 7 50
Followers 43 10 62 7 65

From the list above as an R&D project, called PVINA, was created to satisfy mainly the needs of
Innovators and secondarily the needs of Early Adopters.

C-3) DECISIONS OF PERIOD-3

Initial Situation: The R&D projects that we invested in period 2 became available in the period 3. We
had 3 new products; PSHEP and PSAM2 for Sonite market, PVINA for the Vodite market. We had
limited budget for marketing expenditures.

Actions Taken on Brands’ Marketing Mix and Sales Force Allocation:

For SAMA: We allocated 100% of advertisement just for “Others”. The competitor of SAMA was found
as SIRO. We modified SAMA with PSAM2 as our Frontal Defense strategy against SIRO and
followed a repositioning strategy by using MDS dimensions of Economy and Performance.

For SALT: We decided not to produce any SALT since we would phase out the product in future.

For SANA: We introduced SANA with PSHEP as a part of our Leapfrog Attack strategy against SEMI.
We both observed the semantic scales regression tool, and also the semantic perceptual maps to
determine the desired price for SANA. The estimated price had to be lower than those of our
competitors in order to steal share. We came with the final price decision with regards to the MDS
desires of the targeted segment which was the Professionals.

For VANA: We introduced VANA with PVIMA as a part of being the pioneer of Vodite market. Due to
the first mover advantages, we thought that we could successfully apply Skimming Strategy. We

16
considered the base cost as our starting point of our pricing of VANA. We recognized that in some of
the Sonite brands had almost 300% profit margin. So we come up with a price with cost-plus
method for our new Vodite brand decided to have a profit margin as high as 400%. In our
advertisement, we distributed the efforts of targeting the segments as 80% to innovators to 20% to
early adopters.

We allocated the sales force for each brand according the segments shopping habits as it was
explained in the Consumer Shopping Habits window. We increased the number of sales person going
to specialty stores since our new brands SANA and VANA would be sold through those channels.

We gave the largest share of our advertisement budget to VANA then to SANA and least to SAMA. We
knew that VANA and SANA had to have high advertisement expenditures for increasing brand
awareness and repositioning.

Actions for R&D and Market Research: We did not do any R&D activity and selectively ordered
market research data to increase fund for advertising the brands.

C-4) DECISIONS OF PERIOD-4

Initial Situation: We realized the success of our introduction of 2 new brands let us to boost our net
contribution. With our VANA brand, we dominated Vodite market. The net contribution, we received
from this market was generating more than 60% percent of our team’s total net contribution. Thus we
managed to apply skimming strategy successfully. With our SANA brand, we managed to steal a
substantial percent of the shares from the SOLD brand. We saw that Team I also entered to the Vodite
market but they could not do decide correctly on the product attributes and price for their brand, VIDA.
Lastly we realized that the entire first half of the objectives were successfully achieved so as the initial
action we decided on the second half of the objectives.

Actions Taken on Brands’ Marketing Mix and Sales Force Allocation:

For SAMA: The competitor changed to SOBO and they were threatening our market share in “Others”
with low prices and overwhelming advertising expenditure. As our Fortress Defense strategy, we
decreased our retail price and increased our advertisement expenditure for the brand.

For SALT: We decided not to produce any SALT product since we would phase out the product in
future.

For SANA: We increased our retail price to a level which was matching the desired price value by the
Professionals segment and lower than that of the competitor, SEMI. We continued our Frontal Attack
by giving a higher advertising budget for the SANA when compared with SEMI. We aimed to steal
more share.

For VANA: We decreased the retail price of the brand in order to increase the market share. There
was not any competitor which could match with the specifications of our brand. In addition, we
increased our brand’s advertising budget.
17
We hired more sales force due to increasing number of brand portfolio.

Actions for R&D and Market Research:

We knew that period 4 would be the last period for doing R&D activities because we would have only 2
more periods to have return from any R&D investments that could be done in period 4. We ordered
all of the Market Research studies for both Sonite and Vodite markets.

For SAMA: The competitor was changed to SOBO, we realized that the competitor had better
matching of product attributes for the “Others” segment, therefore we decided a Fortress Defense by
launching a R&D project called PSAM3.

For SANA: The ideal MDS values for professionals and high earners were close to each other. The
competitor SEMI went into a cost improvement but we decided not to launch any R&D project for this
brand.

For SAKA: We decided that “Singles” is a promising segment to target due to its forecasted market
growth however there could be competition with Teams E and I. We started an R&D project which
satisfied the needs of Singles and called the project as PSIN1.

For VANA: We decided to introduce another R&D project named as PVOKA for satisfying the future
needs of the Innovators. We thought that innovators would protect their market size in the upcoming
periods and competition would be severe. In order to protect our share in Innovators, this new project
would be introduced as our Fortress Defense strategy. Later we could use PVINA to target the Early
Adopters since the product attributes of PVINA was fitting to the expectations of this segment.

For VAKA: We decided we needed a new brand just for “Followers” segment of the Vodite market,
because there was no competition for this segment and this segment would be the largest in the
upcoming periods. As results, we decided to start the PVAKA project for our Market Expansion
strategy in Vodite.

C-5) DECISIONS OF PERIOD-5

Initial Situation: The R&D projects that we invested in period 4 became available in the period 5. We
had 4 new products; PSIN1and PSAM3 for Sonite market, PVAKA and PVOKA for the Vodite market.
We had enough budget for our marketing activities and more competitors started to enter both Vodite
and Sonite markets.

Actions Taken on Brands’ Marketing Mix and Sales Force Allocation:

For SAMA: We modified SAMA with the new project PSAM3. The competitor changed to SEEN. We
saw that there were now 3 brands fighting for “Others” in addition to ours. In order to protect our
market share and even to increase it, we had to allocate the highest advertising expenditure for
“Others” when compared with the closest competitor, SEMI. We did not do any price discount in
SAMA.
18
For SALT: The contribution of the brand was close to zero in addition we had a new brand which could
target “Singles”. Therefore at this period, we withdrew SALT from the market.

For SANA: The MDS ideal values for “Professionals” and “High Earners” were getting apart. We set
SANA to target 90% to “Professionals” and 10% to “High Earners”. In addition we cared to exceed the
advertisement budget spending of our competitor in order to continue steal share.

For SAKA: We introduced SAKA with PSIN1. We targeted only Singles with this product. Our
competitor was SEDA. We decided to have the highest advertisement spending for Singles segment in
order steal share. We decided on the price of SAKA after comparing the segment’s desired price level
and competitor’s price level.

For VANA: We decided to continue with PVINA. We did not change the project with PVOKA because
the MDS values of Innovators and Early Adopters were still close and competition was not severe. In
order to generate more profit, it would be better to stay with a more expensive brand in Vodite market.
We continued to target 75% Innovators and 25% Early Adopters. The competitors VIDA and VENI
were weak in terms of meeting the customers’ needs therefore we assumed that consumers would
prefer our brand. However we omitted the possibility that new brands would emerge for this market in
period-4 so this was our major mistake in this period.

For VAKA: As a part of our Market Expansion strategy for Vodite market, we introduced VAKA with
project PVAKA. We targeted only “Followers” with this brand and decided the retail price with respect
to the price preference of the targeted segment.

We hired more sales force due to increasing number of brand portfolio.

Actions for R&D and Market Research: We did not do any R&D activity and ordered all market
research data of both Markets.

C-6) DECISIONS OF PERIOD-6

Initial Situation: The competition in both markets became very severe now every team had around 6
brands and targeting one segment for each brand.

Actions Taken on Brands’ Marketing Mix and Sales Force Allocation:

We were at the last decision period and in order to reach our goals we had to increase market share in
the Sonite market and protect the Vodite market share. Therefore we followed a price discount in
Vodite market and assured that our stocks of brands in Sonite market would meet the customer
demand.

For SAMA: In order to protect our market share and even to increase it, we had to allocate the highest
advertising expenditure for “Other” in this product when compared with the closest competitor, SEMI. .

19
For SANA: The MDS ideal values for “Professionals” and “High Earners” were getting apart. We set
SANA to target 95% to “Professionals” and 5% to “High Earners”, in addition we cared to exceed the
advertisement budget spending of our competitor in order to continue steal share.

For SAKA: We saw that the brand contribution of SAKA was negative since we could not produce
enough products to meet the customer demand. We readjusted our production level. Our competitor
was SEDA. We decided to have the highest advertisement spending for Singles segment in order to
steal share.

For VANA: We modified VANA with PVOKA and targeted only Innovators. The Innovators segment got
smaller towards the end of the simulation, therefore our inventory increased due to unsold brand. Plus
a new competitor, VOLA, was stealing share from our brand. As a frontal defense we decreased the
retail price of our brand.

For VAKA: We targeted only “Followers” with this brand and we decreased retail price of the brand in
order to increase the share. In addition we decreased the advertising expenditure and matched with
the level of the competitor, VELI.

For VADA: We introduced VADA with PVINA. We targeted only Early Adopters. Our competitor was
VOLU so we overspent the competitor’s budget in order to get more share. We decided the price level
of the product with respect to the desired amount in the Semantic Scales.

We hired more sales force due to increasing number of brand portfolio.

Actions for R&D and Market Research: We did not do any R&D activity and selectively ordered
market research data. We thought we would need market research data for the presentation and
report writing process of the simulation game. Later, we learned that being the only requester of
Market Research improved our stock price index.

D)CONCLUSION
During the simulation we successfully used our estimation and marketing strategies and accomplished
our goals which were mentioned in the Section A-1 as shown in Figure D-1. Furthermore we realize
our mistakes and learning experience as:

D-1) LEARNING EXPERIENCE

The lessons learned from the Markstrat simulation can be listed as:

1) The team which had the core competences of Speed and R&D wins. The team who enters the
Vodite market with the right product attributes and prices eventually wins the game.

20
2) Being a pioneer, a company enjoys high profit/unit at growth stage but profit/unit decreases as
market goes into shakeout and maturity stages. After the growth stage, the competitors (a.k.a.
followers) started to enter the Vodite market and the price war and competition occurred. As a
solution to this problem, we focused on profitable but unexplored segments in both in Vodite and
Sonite markets.

3) The (value of a segment) is defined by the (profit/unit) multiplied with the (segment size in terms of
unit number).

4) In the early periods of the simulation, we knew that we had to expand our product line and
continuously improve our product attributes to match with the needs of the targeted segments. In
order have the highest speed, we used R&D query instead of R&D feasibility reports.

5) We used Semantic Scales to decide on product attributes at R&D stage. In deciding perceptual
values of the brands we used the Multi Dimensional Scales.

D-2) MISTAKES
We believe we should have targeted the “Singles” earlier because later the competition for this
segment got severe. We should have created a separate brand just for “High Earner” since there was
no brand which was fitting the needs and perceptions of this segment. We neglect the fact that being
a pioneer does not mean we will always dominate market. Due to the competition in Vodite market, we
lost share to our competitors. At some point we become emotional with Innovators segment and
introduced a new product for this segment although they were shrinking in size and value. We should
have known the time to leave the Innovators segments and focused on other opportunities.

E) APPENDICES
Figure B-1: Evaluation of Sonite Market & Its Segments from Period-0 (P0) to Period-6 (P6)

21
Figure B-2: Evaluation of Vodite Market & Its Segments from Period-0 (P0) to Period-6 (P6)

Figure C-1: Product Life Cycle Details of SAMA

22
Figure C-2: Product Life Cycle Details of SALT

Figure C-3: Product Life Cycle Details of SANA

23
Figure C-4: Product Life Cycle Details of SAKA

Figure C-5: Product Life Cycle Details of VANA

24
Figure C-6: Product Life Cycle Details of VAKA

25
Figure C-6: Product Life Cycle Details of VADA

Figure D-1: Goals Accomplished by Team-A

(*) Become the market leader of both Sonite and Vodite in terms of the number of units sold.

(*) Have highest stock price index and return of investment among all teams.

26