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Simulated Marketing

Game Report

PREPARED ON: December 10, 2016


PREPARED FOR: Pamela Culver
PREPARED BY: Corey Dressel (002713377)
COURSE: Marketing Principles: 16FA-10104114-0101
INSTRUCTOR: Pamela Culver
TABLE OF CONTENTS

SECTION PAGE

1. Target Market . 3

2. Product Features . 4

3. Price & Why . 5

4. Distribution ... 67

5. Promotion . 89

6. Overall Decisions .. 10

7. Overall Performance . 1112

8. What I Did Well ... 1314

9. How I Could Improve . 15

2|P age
TARGET MARKET
Based upon the criteria used for successful segmentation, the school children
segment was an option available to me in the simulated marketing game. I chose this
segment due to three main reasons: this segments large size, their rather high
purchasing frequency, and the fact that I have personal experience with this group (I
have four children). Additionally, the special features they want and attributes they
prefer are not expensive, allowing for a low price point. I chose a concentrated targeting
strategy believing I would be able to hone in on the school children demographics like
age, benefits (what it will be used for), & usage (purchase frequency) and thus be able
to create an optimized marketing mix.
By being able to focus my marketing mix, I am best able to increase my
profitability. This ability comes from understanding who I need to sell my backpack to,
which answers the questions as to where and how much I need to sell it for. Nearly all
markets include groups of people or organizations with different product needs and
preferences. By maintaining my focus on the school children segment, I have been able
to research my customer needs and wants very carefully and then define my marketing
objectives and allocation of resources to specifically target this segment, maximizing my
profits. In this way, I will be market oriented as I plan on satisfying my customers needs
and wants while meeting my own business objectives.
I did think of expanding my traditional consumer product into a successful
business to business product, unlocking the potential of the business market to increase
my share of the backpack market. I figured that if I did this, I would choose to sell to the
government category, specifically to various labor departments (federal, state, and
local) such as road workers, parks and rec, & the DNR. If I was going to do this I
needed to find a need they have that my backpack could satisfy. So, I thought perhaps
they could use my bag as a day pack.
However, I did not change my targeted segment. I kept the specific features I
originally selected based upon the needs and wants of my originally selected target
market (school children). I continued to work hard to strategize the best marketing plan I
could for this segment, with my existing backpack.

3|P age
PRODUCT CHOICE/FEATURES
The product I am selling is a backpack and is classified consumer and
categorized as a shopping product as consumers do not buy this product regularly nor
without much thought. Rather, this is an item that consumers will take the time to seek
out, comparing several brands, styles, practicality, price, and lifestyle compatibility.
More specifically, consumers would consider this item homogeneous as they are all
basically similar. While they will be willing to spend more money on it than convenience
products, consumers are typically looking for the lowest priced item that has the desired
features they need/want.
I am both a consumer and an employee. As a consumer I saw a need for a better
designed backpack for school-aged children. As an employee, I saw the opportunity to
develop a product that could generate a profit. As both entities, I saw a need for a larger
capacity backpack. My backpack is designed stylistically to appeal to school-aged
children. Its practical use is designed and constructed to carry all the items its owner
needs/desires as they commute to their desired destination. This product will be
replaced by the consumer in one to two years.
I added the rounded-top shape, which provided a modest level capacity (based
upon a 47% interest in capacity); inexpensive basic straps (based upon my segment
being children); inexpensive, synthetic material (again, based upon my segments non-
desire for anything fancier); a water bottle holder (based upon my segment indicating
this to be a mildly wants feature); and, a cartoon character (based upon my segment
indicating this to be a strongly wants feature). In the for-credit I never changed any of
the features on my bag. I learned in the practice game what I should add and/or leave
off based on my target segment and their desires/likes as well as using the cost for
each item as a deciding point as I did not want my bag to end up priced outside their
comfort zone.
My segment most desired a fun backpack that they could get for a great
value. The cartoon character and red color makes it fun, while minimizing my upgrades
and add-ons keeps the price low. In this way, even though my segment showed interest
in the GPS feature, its $20 per bag cost has kept me from adding it. Likewise, 47% of
my segment indicated that capacity was an important attribute. While I didnt go for the
square shape (2nd largest in capacity), I did opt for the rounded top, which is larger than
the teardrop rucksack. If I had tried to save money by using the smaller size, I would
have lost the interest and sale of many consumers; likewise, if I had changed my bag to
the next size up, my price would have increased too much and I would have either had
to forfeit profits or increased the price of my bag, again losing the interest and sale of
many consumers.

4|P age
PRICE
Of the six categories of new products, my backpack would be considered a new
product line. Within the steps of the new product development process, specifically the
Business analysis step, I generated some preliminary figures for demand, cost, sales,
and profitability on the Marketing Game. I was be able to assess the costs versus the
potential revenues.

I opted to add:
rounded-top shape for a cost of $3.00
basic straps for a cost of $3.00
synthetic material for a cost of $1.00
a water bottle holder for a cost of $2.00
a cartoon graphic for a cost of $5.00
This gave me an overall cost of $14.00 per backpack to manufacture. My pricing
strategy was to keep my cost as low as possible while pricing my backpack high enough
to be able to offer it for discounts, invest in promotions, and still be able to generate a
profit. Those in my chosen market segment are fairly price sensitive as ideally the
margin should be between $25 and $35 dollars. This is not a very high price and not a
very large range.
I opted to go with profit-oriented pricing and, as such, set the MSRP at $35.00.
Within this category of pricing objectives, I aimed for profit maximization as my goal was
to generate as much total revenue as possible in relation to cost. Likewise, by coming in
at the higher end of my target markets ideal margin, I was attempting to use the price
skimming strategy to give the illusion that my backpack was somehow unique and worth
its higher price. In turn 14, I aimed for this goal even more when I increased my price to
$40.00.

5|P age
DISTRIBUTION
The commercialization of my backpack initiated my first turn in the simulated
marketing game. This means, if everything has gone well and looks good so far in the
steps of the new product development process, I can go into the final stage of
development: commercialization. At this point, I would have ordered production
materials and equipment, started production, built inventories, shipped the product to
field distribution points, trained the sales force, announced the new product to the trade,
and advertised to potential customers.
While that is actually quite a few steps, one of the steps included the careful and
deliberate choice of distribution channels. The factors that affected my channel choice
included:
Customer Reach How many customers served each turn
Customer Mix Breakdown of distributors customers across target markets
% MSRP the channel will pay for a pack affects margin
Price Discount to Consumers Amount retailer will discount my MSRP. Each
Channel will set its own price for your pack.
Sales Dedication How much effort will the retailer put into pushing my product?
This push is lower at large chains, while higher at specialty goods stores. I have
the opportunity to increase sales dedication by investing in market development
funds (MDF).
Preferred Price Range Some channels have price points above or below which
they wont want to carry a product. So, for example, I simply cannot place my
product in the specialty stores, High End Outdoor or Fashion Boutique, due to
their preferred price range being too high.
I chose to use intensive distribution. I was trying to make my backpack available in
every outlet wherein my target segment might want to buy it. Based on the various
types of retailers and their characteristics, I opted to distribute my backpack in:
Department Store: because they sell a wide-range of products. Those who might
not have come to buy one of my backpacks might do so as they happen to walk
past it. Their customer reach is high at nearly 14,000; they are willing to sell my
backpack for $36.00; they want a cut of 44%; leaving me with a profit per bag of
$8.00.
Specialty Store (i.e. University Store): offers a chance at making a higher profit
based upon the ability to sell at a higher price with a lower cut being given to the
retailer. Their customer reach is nearly 8,000; they are willing to sell my
backpack at the full MSRP of $40.00; they want a cut of only 30%; leaving me
with a profit per bag of $14.00.

6|P age
Warehouse Club (i.e. Discount Retail Chain): a great way to sell in bulk to a retail
store that carries low and high-end products to the masses. Their customer reach
is nearly 10,000; they are willing to sell my backpack for only $34.00; they want a
cut of 50%; leaving me with a profit per bag of $6.00.
Off-Price Retailers (i.e. Discount Retail Chain): Even though they sell at 25% or
more below traditional department store prices, they buy their inventories with
cash. They can scoop up any of my overruns, irregular merchandise, and/or
overstocks. Their customer reach is nearly 10,000; they are willing to sell my
backpack for only $34.00; they want a cut of 50%; leaving me with a profit per
bag of $6.00.
Online Retailer (i.e. Online Discount Retailer): enables customers to shop without
visiting a physical store, adding a level of convenience for customers. I would
utilize Internet retailing; this is fast growing retail channel. Their customer reach
is nearly 10,000; they are only willing to sell my backpack for $30.00; however,
they only want a cut of 39%; leaving me with a profit per bag of $10.00.
By far my most profitable distribution channel is direct selling as I am able to make a
maximum profit from each sale. However, although I might be able to profit $26 per bag
by selling direct, my customer reach is very small, at just short of 3000.
While I am using retailer channels, I am not using nontraditional channels. Of the
retailer channels (wherein I am able to make moderate profit gains with no need for
involvement in each individual backpack sale), I am making the greatest profit through
the department store. That is because the department store is the largest distributor
available; meaning, my backpack was available in the distributor that had the largest
number of shoppers from my target market. They are able to physically put my
backpack in front of my target market. They provide constant efficiency for consumers.
They also simplify the distribution by reducing the number of transactions required by
consumers and by making an assortment of goods available in one location. However,
when looking at my profit per bag, the department store is not my highest profit
distributor.
I am also using digital channels as I have opted to sell my backpack through an
online discount distributor. And, because of shopper analytics, there is a greater
understanding of how shopper behavior is changing. One of these ways is by using their
mobile devices. I would like to make sure I have my backpack in retail locations that
have created mobile apps for shoppers. As the manufacturer, I would be interested in
the technology of the virtual reality imaging that is out there. Perhaps if someone could
see my backpack in a more realistic way, they would be more apt to buy it. And, finally,
the strategy of retail channel omnification would facilitate additional sales due to the
single systems more streamlined approach to fulfilling customer needs and wants.

7|P age
PROMOTION
The nature of the product is a factor that will affect my promotional mix because
my product is a consumer product and they are promoted very differently from business
products. My product will rely heavily upon advertising and/social media, which will help
to create brand familiarity. Sales promotion, the brand name, and the products
packaging are about twice as important for consumer goods as for business products.
And, while there is only a slight cost and risk when purchasing my product there is most
likely a significant social risk due to age and influence of peer pressure.
Likewise, the products stage in its life cycle is a big factor in designing a
promotional mix. While in the introduction stage I had to depend largely upon informing
types of promotion, I dramatically moved into heavy advertising during what I
considered the growth stage. Accordingly, because my target market was widely
scattered, I needed to focus on more advertising and sales promotion and less personal
selling. Because I would not categorize my product as routine or complex, I used
advertising as a way to help establish awareness for my product. As my product moves
into maturity and toward the decline stage, I will have to focus on persuasive and
reminder promotion and rely upon sales promotion to build/maintain market share.
As a new company starting out with only $10,000 in the bank, I did not have a lot
of money to spend in my promotional mix. I had to rely on some of the more low-cost
options such as online strategies and social media as I will be able to reach a mass
number of people in my target market. Like suggested, I would use a combination of the
push-pull-strategies, placing my initial emphasis on pull. I would do this through
introductory consumer advertising.
The fundamental goals of my promotion strategy are two-fold: Informing and
persuading. Considering the fact that informative promotion seeks to convert an existing
need into a want or to stimulate interest in a new product and the fact that my backpack
is a new product, I executed this as my initial promotion goal. However, because my
product was not complex or technical, I was able to move into persuasive promotion
sooner than some other more complicated products. Persuasive promotion is designed
to stimulate a purchase by emphasizing my products real and perceived competitive
advantages, while appealing to emotional needs such as love, belonging, self-esteem,
and ego satisfaction. Additionally, the backpack industry has many competitors so my
message would encourage brand switching, attempting to convert some buyers into
loyal customers.
In this way, I had been focusing on the action in the AIDA model. As effective
integrated communications will move market segments further along the AIDA scale as
they go from being Aware of, Interested in, and ultimately Desiring and Buying a
product, it was important that I created a powerful and effective position message and

8|P age
advertising campaign so as to facilitate this movement and continually
increase/maximize my market segments product interest. Therefore, my positioning
message was Fun & Great Value. I chose this positioning message as it is what my
target segment was most looking for and it maintains clarity & consistency.
I feel I had a competitive advantage as I offered a product that satisfied some of
the greatest desires my target segment wanted while maintaining a decent pricebut, a
price that is high enough for me to afford advertising. As advertising is a good method of
communicating to a large number of people; thus, a great tool for increasing awareness
and knowledge of a good or service, I placed ads in the following media vehicles:
1. PrintComics: spending $450; with an overall reach of 35% and an actual
reach of 10,767 in my target segment; for an average value cost of $0.0417
per contact.
2. Social media/InternetGaming: spending $700; with an overall reach of 40%
and an actual reach of 45,764 in my target segment; for an average value
cost of $0.0392 per contact.
3. TelevisionCartoon Network: spending $1,800; with an overall reach of 65%
and an actual reach of 62,201 in my target segment; for an average value
cost of $0.0445 per contact.
4. RadioTop 40: spending $1,150; with an overall reach of 23% and an actual
reach of 47,962 in my target segment; for an average value cost of $0.1042
per contact.
In the beginning, due to my small revenue, I advertised primarily through online gaming
& comics: These two are very inexpensive and yet they reach a large number in my
target market. I also invested in the online discount retailer. By turn 6, I invested in the
department store as well.
As sales promotion is effective when consumers are at the purchase stage of the
decision-making process, I have invested in market development funds (MDF) with
the department store, online discount retailer, university store, and my direct selling
channelas a way to encourage my target market to purchase. I used this element to
improve the effectiveness of other ingredients in the promotional mix; but, specifically as
a short-run tool to stimulate immediate increases in demand.
I spent a percentage of my revenue on advertising and promotions. I always
knew I could (and did) increase my promotions and advertising budget as my revenues
grew. However, my goal was to keep my budget at around 11%. Whenever I have
deviated from this budget, it was to try a specific promotion through one of my channels
such as investing in the department store.

9|P age
Overall Decisions
Outlined below are the decisions that I discussed in the previous sections, outlined by
turn and element in the marketing mix:

Segment Turn 2 targeted the segment School Children


Turn 2 adopts the Rounded Top model
Turn 2 replaces Thin Spaghetti straps with Basic
Product Turn 2 adds a Water Bottle
Turn 2 adds a Cartoon Graphic
Turn 2 recolors their backpack Red
Price Turn 2 increases price from 0.00 to 35.00
Turn 2 added a distribution deal with Department Store
Investment Turn 2 added a distribution deal with Discount Retail Chain
Turn 2 added a distribution deal with Online Discount Retailer
Turn 2 added a distribution deal with University Store

Message Turn 2 added Fun to its messages


Turn 2 added Great Value to its messages
Advertising Turn 2 added Comic Book to its advertising platform
Turn 2 added Gaming Site to its advertising platform

Investment Turn 3 started MDF spending with Online Discount Retailer

Investment
Turn 6 started MDF spending with Online Discount Retailer
Turn 6 started MDF spending with Department Store
Turn 6 added Top 40 to its advertising platform
Advertising
Turn 6 removed Gaming Site from its advertising platform

Turn 7 removed Comic Book from its advertising platform


Advertising Turn 7 removed Top 40 from its advertising platform
Turn 7 added Cartoon Channel to its advertising platform

Turn 12 started a sales promotion with Direct


Investment Turn 12 ended MDF spending with Direct
Turn 12 started MDF spending with University Store
Turn 12 added Gaming Site to its advertising platform
Advertising
Turn 12 added Comic Book to its advertising platform

Price Turn 14 increases price from 35.00 to 40.00


Turn 14 ended a sales promotion with Direct
Investment Turn 14 ended MDF spending with Online Discount Retailer

10 | P a g e
Overall Performance

Throughout the simulated three years, my business (EastWest) had continual


and steady growth. Using the AIDA concept helped me understand what effect my
integrated communications and promotional decisions were having on my target market.
Thus, the way I designed and carried out my marketing mix provided me with instant
profit as well as a positive net profit in every turn, a constant and steady growth in sales,
and an ever-increasing bank balance. And, while I never achieved the market share I
hoped for, my customer satisfaction was high.

FINANCIAL
In the end I feel I did well in this simulated marketing game. While having started
with a bank balance of $10,000, I finished out my third year with a balance of
$109,983. While my total revenue in my last turn was $63,174, my net profit was
at $20,606, giving me the full 30 out of 30 points, and a profit rank of #1. I also
never carried a distributor deficit, negative balance in my bank account, or
negative net profits.

Integrated Communications

Promotional Campaign
I received full points for my return on marketing (ROM) or return on investment
(ROI). This represents my overall effectiveness in generating profits with my
available assets. My media spending remained consistently low, ranging from
$1,150 to $2,950 per turn, roughly 11% of each turns revenue.

Message
My message score increased slow but steadily, rising from an 18 out of 35 to a
final score of 32. In turn 2, I created the positioning message: Fun & Great
Value. I based this upon how much my target segment cares about those two
messages when concerning their greatest desires in a backpack. For each of
these messages, school children gave them the highest score of 50.

Interest/Appeal
I ended with a score a 30 out of 30 for customer satisfaction. However, this is just
one measure of successful integrated communications. I ended with a
characteristics score of 93/100; a features score of 77/100; for an average

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appeal score of 85/100. Ultimately my interest level moved from an 18/100 in turn
2 to an ending score of 34/100. This low interest score is reflected in my low
market share (see next subsection). Additionally, I got a price score of 3, which is
effecting my overall interest level score as well.

Market Share & Units Sold


My units sold ended high, at 2,687 in my last turn; although, for my segment, this
is not equal to a high market share. I had some innovators and some early
adopters. But, though my sales increased, they did so slow and steady. I started
out with 634 units sold after my first turn (wherein I had actually designed my
bag, set a price, and selected various distribution channels). It wouldnt be until
after my 7th turn that I would break into the seven hundreds. By turn 9 I sat right
at 1000 units sold and turn 15 before breaking the 2,000 units mark. At the end of
three years, my market share was at 16%, giving me only 12 out 20 possible
points and a market share rank of #3.

12 | P a g e
What I did well

Based upon the statistics in the previous section, I can confidently conclude that
overall I did a fairly good job in this simulated marketing game. Specifically, I did a good
job financially, achieving a profit rank of #1. Finishing out my third year with a balance of
$109,983, a total revenue for my final quarter of $63,174, and a net profit of $20,606 for
this same quarter, is better than I had thought I would do after completing the practice
game. I also never carried a distributor deficit, negative balance in my bank account, or
had to record negative net profits within any quarter.

I would have to attribute some of this financial success to the design and price of
my product. I carefully looked over the research to understand the various dynamics
that comprise my target segment; this included their buying frequency, their price
sensitivity, segment characteristics, and attribute preferences. Based upon this
information, I designed my bag to optimize the features my segment desired while
maintaining low enough costs to keep it within their preferred price marginas well as
being able to make a profit.
Similarly, I would say that based upon my ROM score, I managed to figure out an
effective spending budget and platform for launching my advertising. I chose
investments, promotions, and advertisements that paid off based upon what I spent and
the sales they inspired. I diligently scrutinized the effectiveness of each possible media,
finding out exactly what my actual target segment reach was, the total cost, and then
the cost per contact. By doing this I was able to maximize the effectiveness of my
advertising budget while simultaneously maximizing my reach.
In the same way, I analyzed the research I was provided about my target
segment and assiduously followed the necessary steps to insure I created the most
powerful positioning message I could. Throughout the game, my message score
increased slow but steadily, rising from a score of 18/35 to a final score of 32/35. I
believe this is entirely due to the fact that my CARE factor was as high as it could be
while also maintaining a clear, concise, and consistent message throughout. In turn 2, I
created the positioning message: Fun & Great Value. I based this upon how much my
target segment cares about those two messages when concerning their greatest
desires in a backpack. For each of these messages, school children gave them the
highest score of 50. Therefore, I chose two very strong messages. While it was
tempting to want to experiment with changing my message, I also understood that
consistency is a big part of making my message a long-term success. And, while my

13 | P a g e
clarity score suffered a .2 drop due to having picked two messages, the other factors
(care level, consistency, and competitiveness) ensured my position message would be
effective.
One other area I feel I was successful, was in my level of customer satisfaction.
However, this is just one measure of successful integrated communications. I ended
with a characteristics score of 93/100; a features score of 77/100; for an average appeal
score of 85/100. Ultimately my interest level moved from an 18/35 in turn 2 to an ending
score of 34/100. This low interest score is reflected in my low market share (see next
subsection). Additionally, I got a price score of 3, which is effecting my overall interest
level. While this is not a completely negative of 4 wherein the product price is grossly
out of the target segments margin, a score of 2 is ultimately desired.

14 | P a g e
How I could improve

In order to increase my market share, I must be willing to take more risks with my
advertising/promotions budget. While I sold 2,687 units, which was the highest number
of units sold in the game, this does not equal a high market share for my segment. At
the end of three years, my market share was only at 16%. Although this placed me as
the third highest in the game, in reality this is not as high as it could/should have been
as I only received a 12 out 20. I believe that if I spent a bit more money on advertising in
an attempt to expand my reach, it would pay off by increasing my market share.
Another area I feel I could improve is with my interest level. Although I ended
with a score a 30 out of 30 for customer satisfaction, this is just one measure of
successful integrated communications. I ended with a characteristics score of 93/100; a
features score of 77/100; for an average appeal score of 85/100. Ultimately my interest
level moved from an 18/100 in turn 2 to an ending score of 34/100. This low interest
score is reflected in my low market share.
Additionally, with my backpack priced anywhere from $35.00 to $40.00, I
maintained a price score of 3, which I believe is most likely effecting my overall interest
level. While this is not a completely negative score of 4wherein the product price is
grossly out of the target segments margina score of 2 is ultimately desired. I could
easily lower my price to $30.00 to see if my interest level increases thus my market
shares (ultimately meaning my sales will have increased). Even with lowering my price,
if this particular score ends up having the domino effect I just mentioned, I could
increase the profitability of my business by expanding my market share. Without
actually doing this, I cannot say for sure whether this would actually have the desired
effect. Often, consumers seeing a lower price equate a lower quality with it and vice
versa. If this were to be the case, I could end up losing customers even though I
dropped my price.

15 | P a g e