MarkStrat Group Report

Section A Group 2

Shahan Arshad
Saad Jamil
Fahad Zafar Sobani
Tuba Javed
Bilal Salim

20130026
20130023
20130008
20130030
20130014

Team: Rockets
Market: Germany

Period 0
Decisions:
After doing a few practice rounds we thought we had a plan of attack on how to target our
customers. Our team set out several objectives in the beginning:

Be first mover in Nutrites

Target Medium Income and High Income segments for Clinites market initially.
Look closely at market forecast to figure out segment growth
Utilize R&D and regression tools extensively.

After viewing market research reports, we decided that we would increase production levels by
utilizing market shares of brands given by consumer survey and segment growth rates given by
market forecasts. Advertising would be increased per period using the formula (1- average Brand
Awareness percentage given by consumer surveys) x previous period advertising. The reason for
this was because this would be percentage of people who were not aware of our brand and
therefore we would want them to become aware by advertising. Advertising allocation was kept
in accordance with the segments we wanted to target.
We also decided to increase commercial team size and merchandising by purchase intention
percentage given by consumer surveys i.e. purchase intention % x previous commercial team
size. Same formula was used for merchandising expenditure. Channel allocation was selected
according to shopping habits as provided by consumer surveys.
We would order reports for each period especially consumer surveys, distribution panel, market
forecast, semantic scales and MDS. Semantic scales were used for R&D and MDS was used for
strategy. Our decisions on advertising and commercial team were flexible depending upon
circumstances e.g. leftover inventory (decrease production next period), whether a product was
a cash cow or star or question mark (decrease/increase advertising accordingly), pricing issues
and other factors as the situation demanded.
Our pricing policies were
set using ideal values from
semantic
scales
and
regression
tools.
The
physical
attributes
assigned to R&D projects
were also derived from
semantic
scales
and
converted to out of 100
using regression tools. We
would also keep a close
eye on competitor prices
in case they got into price
wars for price sensitive
segments.
This
is
a

snapshot of regression tools section we used to convert price and physical attributes from out of
7 to out of 100.

We started off with 2 brands RICH and RISE and a budget of $7100K. Looking at the pricing and
R&D base of these brands, we decided to target High Income segment with RISE and the medium
income segment with RICH. We set the prices of RISE and RICH at $22 and $15 respectively and
production plans at 940K units and 1640K units respectively. Advertising costs for brand RICH
was kept at $1436K and for RISE at $1626K.
We increased and reallocated Commercial Team size of RICH and RISE according to the
segments shopping habits.

We ordered the following research reports:

Industry benchmark, Consumer survey and panel, Distribution panel, Semantic scales and MDS,
Conjoint Analysis, Market forecast, Semantic scales for Nutrites.
We also invested in R&D project PI-RIMED to modify brand RICH and ordered a feasibility report
for it during period 0. We input the values for PI-RIMED after getting the ideal values from
semantic scales.
Result:
Our revenues increased to $38,355K and we made a profit of $11,506K. Our SPI went up to 1033.
We came in 5th at the beginning of Period 1.

Period 1
Decisions:
Our RISE and RICH were flying off the shelf. Our ending inventory for RICH and RISE were 161
and 3 respectively which was a good sign. We possessed 14.2% of the market share of Clinites.
Our decisions this round varied a little in production, advertising, salesforce and R&D. We kept
the prices at the same level and increased production plan of RICH and RISE to 2,426K and
1,630K respectively. Advertising costs were increased to $2989K.

We increased the salesforce to 57 for RICH focusing on mass merchandising and specialized
mass and 37 for RISE focusing on department stores and specialized mass channels because we
were catering RICH for medium income segment and RISE for high income segment.
We ordered the following research reports during Period 1: Consumer Panel, Distribution Panel,
Semantic scales, Market forecast for Clinites and Consumer Panel and Semantic scales for
Nutrites
We invested in 1 R&D project PU-RUHL during this period aimed at the health conscious segment
of the Nutrite market and 1 R&D project PI-RIMED for modifying RICH to target Medium Income
segment.
Results:
Our SPI rose marginally to 1034 while the leaders were at 1437. We held 5 th position during this
period. Our RISE brand sold 1500 units and RICH sold 1771 units with 340 units left. Our
inventory management was going excellent. RISE made a contribution of $19943 and RICH
contributed $16,444. We were rising slowly but steadily.

Period 2:
Decisions:
We launched two R&D projects, PI-RISN for singles segment and PU-RUHL for the health
conscious segment. We had ordered semantic scales and market forecasts for Nutrites during the
previous period and feasibility report as well so we had a good idea of the ideal physical
attributes and budget to allocate to our Nutrite R&D project.
According to our estimations, we decided to produce the following units:
RISE
1,630

RICH
2,426

Production levels were calculated using market shares from consumer survey and segment
growth rates from market forecast using the formula market share % x growth rate % x previous
production. We did not change our prices in this period. We decreased advertising expenditure by
around 1000(from 3110 to 2193) in order to keep costs low.
Commercial team size was:
period
2
previo
us
change

RISE

RICH

65

43

37
28

57
-14

We ordered the following reports for CLINITES: consumer panel, distribution panel, semantic
scales and market forecast. For NUTRITES: semantic scales.
Results:
As a result of our decisions, we rose to 3 rd position at the beginning of period 3 with an SPI of
1371. Our ending inventory for RICH (340) and RISE (3) was very low, showing that our
production plan was nearly accurate. Our total market share (in dollars) dropped from 14% to

11% due to decreased advertising expenditure. Our market share in Clinites also fell from 14% to
12%. Our revenue decreased by about 2000 resulting in our profit going down by 200.

Period 3:
Decisions:
We entered the Nutrites market in this
period. We targeted the Health
conscious segment with RUKD. We
had ordered the proper research
reports and tailored the product and
advertising to specifically target this
segment. We decided to make a
project PU-RUFAM to target families
segment. Our attributes for this
segment targeting came from ideal
values given by semantic scales.
Consumer panel, Consumer survey,
Distribution panel, Multidimensional
scaling, Market forecast were ordered
at a cost of $439k.
Production units
RIOV
2,400

RUKD
1,675

RUZL
1,425

RUXX
600

Prices were kept at the following levels using ideal price values from semantic scales:
RICH
14.00

RISE
21.00

RUKD
30.00

RIOV
11.50

Advertising was kept at these levels using Brand Awareness ratios from consumer surveys:
RUKD
-1,408

RISE
-981

RICH
-1,635

RIOV
-1,413

Commercial expenditure was kept at the following levels using Purchase Intentions percentage
from consumer surveys:
RUKD

RISE

RICH

RIOV

-537

-1,559

-769

-295

Results:
Our SPI rose to 1435 as a result of our decisions. We held onto 4 th position and distanced
ourselves from 5th. RUKD became our cash cow. Our other products were rising very slowly in
market share. RUKD had been launched precisely to cater to Health Conscious segment and it fit
their requirements perfectly. That is why we were able to capture the leading market share in this
segment.
Period 4:
Decisions:
4

We introduced RUXX to target Families

segment in the Nutrites market. We
also started an R&D project called PURUMB to make a product for Elderly
segment. We ordered 5 R&D reports
namely consumer survey and panel,
semantic
scales,
multidimensional
scaling and market forecast for both
Clinites and Nutrites. For RUKD we
produced 1444K units while for RUXX
we produced 1800K units and the
prices we set for them were $37 and
$34 respectively. We increased the
production plans of each brand by
their respective market shares.
Results:
Our SPI increased to 1435 as a result. Our revenues increased to $76,707 and our EBT was
$19,886. The market share value of our company as a whole was 13.5%, a decrease from 15.3%
in last period. RUKD was our leading brand and was targeted to health conscious people while
RUXX was for families which had not shown the level of success what we expected from it.

Period 5:
Decisions:
The next day we reconvened after
reviewing what we had done so far.
After looking at our competitors
advertising and commercial team
expenditures, we decided to increase
our advertising and commercial
expenditure as well. We took a look
at our growth-share matrix to see
how our brands were doing. Our
theory had told us that cash cows
should be kept and more money
should be invested in stars. Dogs
ought to be sold off as they depress
Return on Assets. Keeping this in
mind, we decided to sell off our
brands RICH and RISE since they
were clearly in the dogs quadrant and to keep RUKD since it was in the cash cow quadrant. We
also had to improve RUZL since it was in the question mark quadrant.
Our production units were:
RIOV
5,650

RUKD
775

RUZL
1,775

RUXX
175

Prices were obtained from ideal values using semantic scales and regression tools:
RUKD
34.00

RIOV
11.50

RUXX
28.30

RUZL
30.30

Advertising was calculated using the brand awareness percentage given in customer surveys and
increasing the previous amount by (1- brand awareness):
Clinites
-3,208

Nutrites
-6,233

Commercial Team was increased by Purchase Intentions percentage given in customer surveys.
We increased the previous amount by Purchase Intentions percentage to get the new periods
amount:
-2,926

-6,354

We introduced a new R&D project PU-RUYY to modify RUZL for the Elderly segment and PI-RIDQ
to start a product to target the Affluent segment. Physical attributes values were derived from
semantic scales and regression tools.
Results:
Our SPI fell to 1203. This was unexpected since our reasoning to sell off our brands in the dogs
quadrant was to increase our SPI but instead it fell. We still held onto 4 th position. RUZL for
Elderly went into production and did mildly well. Our share for RIOV for singles increased to 6.5%
which was a good sign.

Period 6:
Decisions:
We used regression analysis to figure out future ideal values for each segment and decided to
modify our products accordingly for the next period.
We launched a new brand RILV targeted at the affluent segment. We also started an R&D project
PU-RUSZ to again modify RUZL in order to meet the changing demands of the elderly segment as
shown by the semantic scales and regression.
According to our calculations i.e. market share % x segment growth % x previous production
levels, we decided to keep production units at the following levels:
RUXX
400

RUZL
1,028

RUKD
1,250

RIOV
2,054

RILV
1,000

We decreased RIOV and RUZL production substantially from 7054 units in the previous period
because we had leftover inventory for these two brands. The production for RUKD and RUXX was
increased since these products were flying off the shelf. We adjusted our prices as shown below:
RECOMMENDED RETAIL PRICE
RUKD

RIOV

RUXX

RUZL

RILV

35.98

9.00

35.00

33.00

21.00

These prices were obtained using ideal values from semantic scales and regression. We
increased advertising expenditure from around 10,000 to 16,266. Advertising expenditure was
increased by (1- Brand Awareness %). Commercial team size and merchandising were increased
by Purchase Intentions percentage.
Commercial team size
RUXX RUZL
period
176
168

RUKD
48

RIOV
210

RILV
110
6

6
previo
us
chang
e

100

100

40

110

110

76

68

100

We ordered the following reports for CLINITES: consumer survey, consumer panel, semantic
scales, MDS and market forecast.
For NUTRITES: Consumer survey, consumer panel, semantic scales, MDS and market forecast.
Result:
Ending inventory for RILV (482) and RUKD (616) were high which meant that our product did not
meet customer expectations. Conversely, our other three brands RUXX, RUZL and RIOV were
significantly under produced with a total of 5146k units of potential sales being lost. Our
production calculations were insufficient because our products perfectly met the ideal values of
the segments we were targeting. RUZL captured a significant portion of market share upon its
introduction. Our cash cow, RUKD shrank due to shrinking growth of Health conscious segment.
RUXX for Families segment also showed significant improvement as it went from dogs to cash
cow as shown when compared to previous periods growth-share matrix. RILV for Affluent
segment failed to gain significant market share and ended up as a dog.
Our total market share (in dollars)
dropped very slightly from 11% to
10%. Our share in Clinites split
from 6% to 3% and in Nutrites,
dropped slightly from 27% to 25%.
Although our revenue increased
from 84,172 to 92,778, our profit
dropped sharply from 14063 to
2864 due to lost potential sales. As
a result, our SPI also dropped to
1077 from 1203 and we ended up
in 5th position.

Period 7:
Decisions:
In period 7 Brand RILV was shelved since we were unable to grab sufficient market share and the
costs outweighed the benefits of producing that brand.
Our production per brand was
RUZL
15,712

RIOV
6,600

RUXX
1,335

RUKD
100

Using regression analysis, we were able to get the ideal values for price. We converted the ideal
value price out of 7 to that out of 100 by using regression based tools- Semantic. Prices were set
at:
RUKD

RIOV

RUXX

RUZL

37.90

9.00

36.44

34.90

Advertising expenditure was kept as follows:

RUZL
-9,433

RIOV
-8,180

RUXX
-5,497

RUKD
-1,887

Result:
In period 7, SPI of Rockets increased to 1270, the revenues increased by $23,253. The Net
Contribution was as follows:
Clinite
s
-6,691

Nutrit
es
4,367

The market share was 10.8%. Sales

increased by 25% to $116,031.
Commercial expenditure for Nutrites
and Clinites increased by 55% ($6.7
million) and 14% ($2.1 million).There
was an increase of 78% ($8 million)
and 22% ($1.6 million) of advertising
expenditures in Nutrites and Clinites
as compare to period 6. Seeing the
growth-share matrix, RIOV for singles
improved in performance since it
moved out of dogs quadrant and into
question mark quadrant as its market
share and market growth improved
significantly. Although the simulation
ended after this, we would have
preferred if it had run a couple of more periods so that we could see what our strategy would
bring about in the fast growing Elderly segment.