MarkStrat Quiz Flashcards
describe some general characteristics of the markstrat world
- fictitious industrialized country of 80 million inhabitants whose monetary unit is the Markstrat dollar ($).
- roughly behaves like most markets
- inflation (2%) and GNP growth (4%) are fairly stable
- no major political, social, or economic event is anticipated in near future
What are the five primary characteristics of clinite products? (since they can be evaluated along more than 50 attributes)
- efficacy
- safety
- packaging
- pleasure
- usability
def. this refers to the ability of the product to deliver the benefit intended. For instance, the rating is a measure of the product’s sun protection, anti-wrinkle effect, color coverage, micro-emulsion, etc.;
efficacy
def. This attribute measures the degree to which the product produces few or many side effects. A high rating is an indicator of harmlessness, absence of allergic reactions, purity, medical approval, etc
safety
def. Characteristics of the product packaging. Several benefits are included here, such as attractiveness, convenience to carry, appropriate size, etc.;
packaging
def. This is a somewhat subjective attribute, but it is a measure of how pleasing a product is to use, over and above its efficacy or convenience. Here it refers to texture, scent, etc
pleasing
def. A measure which indicates ease of use, time to dry, required number of applications per day, compatibility with other skin care products, resistance to water, etc.;
usability
how are characteristic dimensions rated?
on a scale of 10 (poor) to 100 (excellent)
t or F: offering more of a given characteristic is always better
False, it is not necessarily better
e.g. . For instance, sun-protection products with very high protection indices will prevent you skin to tan; if your objective is to tan, you may want to use a lower index product.
describe clinite market
- Clinites are skin-care cosmetic products such as beauty or anti-aging creams, sun-care or skin care lotions.
- Clinite products have existed for several years and the market has grown quite consistently since the introduction of the first Clinite brand.
- It is now a well-established market, with several strong brands at different price points covering a wide range of needs.
- Analysts believe that the Clinite market will continue to grow over the next five years.
def. the cost at which each unit will be produced, based on an initial production batch of 2.5 million units
base cost (min is 1.2$)
The base cost is decided jointly by the Marketing department – which is mainly concerned with ____________ – and by the R&D department –which is mainly concerned with ___________
margin and profitability (marketing)
product feasibility (R&D)
describe the nutrite market
Nutrite products will satisfy entirely different needs from that of Clinite products so that demand for the two products will be completely independent. They will not be complementary in any way and there will not be any substitution from one to the other. It is anticipated that the Nutrite market will be quite attractive if high quality and great tasting products with clinically proven benefits is made available at the right price.
- Recent calculations suggest that an investment of about 10 million dollars may be required for the first Nutrite.
what are the 5 most important characteristics of the nutrite market
- clinical benefit
- nutrition facts
- packaging
- flavour
- variety
def, This refers to the ability of the product to deliver the benefit intended. For instance, the rating is a measure of the increase in skin elasticity, reduction of aging spots, reduction of hair loss, etc.;
clinical benefit
def. This attribute measures the degree to which the product is “good for you” or has high quality ingredients. A high rating is an indicator of no preservatives, little artificial color, no added sugar, reduced salt, low saturated fat, etc.;
nutrition facts
def. Characteristics of the product packaging. Several benefits are included here, such as attractiveness, convenience to carry, appropriate size, etc.;
packagaging
def. Quality of the product taste, in terms of uniqueness and pleasure of the taste experience with the product, and of ability to support the performance claim. For instance, high quality flavors can express concepts such as smooth, natural, fresh, etc..
flavour
def. A measure which indicates the number of product variations, in term of serving sizes, flavors or presentations.
variety
how are nutrite characteristics rated?
on a scale of 0 (poor) to 100 (excellent)
what is the min base cost for a nutrite
$2.30
describe naming conventions
Brand names are made up of up to six characters. The first letter identifies the firm marketing the brand (M, R, S, T, L or N). The second letter must be an ‘I’ for a Clinite or an ‘U’ for a Nutrite. The other characters can be letters or numbers and can be freely chosen by each firm to generate different brand names.
what are 5 consumer segments for clinite market
- high earners (Hi)
- Affluent Families (Af)
- Medium Income Families (Me)
- Low Income Families (Lo)
- Singles (Si)
def. The members of this group are characterized by their high incomes.
- They are women over 25 years of age, either single or married without kids, and studies show that they usually buy expensive products, which they can afford, and that their purchases are partially motivated by social status.
- They are heavy users, with an average loyalty to their favorite brands, and they are price insensitive to the point of disregarding cheap brands, and they demand high levels of performance attributes from their products.
high earners (hi)
def. Women in this segment are aged 25 – 45, are either married with kids or single parents.
Their high income levels leads them to be highly loyal, frequent buyers and users of cosmetics, and they are definitely not price sensitive.
Consumers in this segment are looking for high quality, high- performance and pleasant-to-use products.
They can afford expensive products and often view price as an indication of quality.
affluent families
def. These consumers have less disposable income than the Affluent Families, and are thus more price sensitive.
This segment also includes some sub-groups who do not fit with the other segments.
Although this segment is the largest and is composed of several sub-groups, most customers have similar needs.
They are looking for relatively inexpensive products with average physical attributes.
Experts believe that the penetration of this segment is not as high as the other segments.
As a consequence, its future growth rate could exceed forecasts.
Their loyalty is above average.
Medium Income families (Me)
def. Individuals in this segment have a similar family situation and age range as the Affluent Income families.
Their lower income levels, however, causes their budgets to be strained, and leads them to be less frequent buyers and users of cosmetics, and to be very price sensitive.
Their loyalty is below average.
low income families (Lo)
def. As the name of this segment indicates, ______ live alone.
They are generally between 16 and 35 years of age and can be students or employees.
All in all, while being relatively heavy users, they demand average levels of both performance and pleasure from their cosmetic products and tend to be rather price-sensitive.
_________ are not loyal to any brand; on the opposite, they tend to favor new brands and switch very easily is the new brands fit their needs.
Singles (Si)
what are the known three consumer groups/segments in Nutrites
- health conscious (He)
- families (Fa)
- elderly (El)
def. Those are individuals, usually young adults, who lead a “wellness-oriented” lifestyle and are generally concerned with nutrition, fitness, stress, and their environment.
- They accept responsibility for their health and are excellent customers for health-related products.
Although this segment will probably be the largest one in the early days, it represents only a small percentage of total potential consumers.
Health conscious (HE)
def. The second wave of Nutrite product will include affluent and medium-income families who are concerned with nutrition and its impact on their health.
They believe that healthy food can help parents and children live a better life and solve minor medical conditions
families (Fa)
def. Many metabolic and physiological changes occur in the body when people get older. Some medical conditions are also directly related to age such as dehydration, cholesterol, hypertension, osteoporosis, etc.
As getting older people to eat better is actually easier than persuading many young adults to do the same, industry experts believe that ______ are likely to become the biggest segment of Nutrite consumer within 3 to 5 years.
elderly
what are the four distribution channels?
- mass merchandisers and e-grocers (Carrefour, Walmart, peapod.com, walmart.com)
- specialized mass retailers (Sephora, Boots, CVS, Duane Reade)
- Department stores (Nordstrom, Macy’s, Sogo)
- beauty specialist portals (such as buymebeauty.com or feelunique.com (web-only) or ulta.com, sephora.com)
def. These “super stores” typically sell a wide variety of goods, including food items, housewares, and personal care products.
They strive to operate on a low-price, high-volume basis and to minimize overheads.
As a consequence, the level of service offered is lower than that of the two other channels.
While ___________c arry many different product categories, the depth of each product line is usually restricted to few units.
They often distribute the cheaper, lower-quality products. Their lack of technical expertise and the low level of service may well prevent them from distributing Nutrites in the early years. There are 3 main chains of such stores, for a total of 12,000 outlets.
mass merchandisers and e-grocers
def. These stores are usually smaller and also belong to organized chains.
They are geographically close to their customers (in shopping centers or downtown areas) and can provide a high level of customer service.
As they do not distribute many different product categories, cosmetics account for a large proportion of their sales.
These stores usually carry a broad product line for each category, including the most expensive and/or high- performance products.
Because of their high level of expertise in cosmetics, specialty stores are likely to be the preferred distribution channel for Nutrite products. Four main chains exist in this category, representing 2,000 stores.
specialized mass retailers
def. characterized by the wide product assortment they offer.
They usually have a significant amount of space displaying cosmetics, often with a specific counter dedicated to each major manufacturer.
They also provide extensive customer service.
_________________ are often organized in chains that have a degree of power in negotiating margins with manufacturers.
Similar to specialized mass retailers, _____________ are likely to be the second preferred distribution channel for Nutrite products.
Five such chains with a total of 10,000 stores are identified in the Markstrat world.
department stores
def. These are dedicated to highlighting the range of beauty products found in the owners’ stores.
There are about a dozen _________ in period 0.
All these various portals and sites have different characteristics in terms of image, awareness levels, financial strength, range of products offered, price ranges, the selling mechanisms applied (up-selling, cross-selling, automated replenishment), the customer base (proportion of each segment likely to visit the site), etc.
Convenience is the key advantage of __________ as consumers may shop from their home at the time of their choice. In addition, they have access to an almost unlimited choice and can compare features and prices very easily.
Privacy and security are the primary concerns of online shoppers, but new mechanisms are put in place by banks and e-commerce sites to reduce fraud.
Online stores are likely to become more important in the next 5 to 10 years.
beauty specialist portals
which distribution channels are importatn to clinite market?
all of them
which distribution channels are initially important for nutrite market
Specialized mass retailers, then department stores + mass merchandisers
margins for mass merchandisers
30%
margins for department stores
40%
margins for beauty specialist portals and specialized mass merchandisers
35%
which channel(s) initially have private label brands
mass merchandisers
what are the three kinds of strategies teams need to decide?
- The product portfolio strategy – which brands the company will develop and market;
- The segmentation and positioning strategy – which market segments will be targeted and how
products will be positioned; - The marketing mix strategy – the day-to-day operational marketing decisions such as pricing, production, communication and distribution.
how will performance be measured
Your performance will be measured by several indicators such as net contribution generated, brand market shares, your ability to grow the firms’ revenues, quality of R&D projects successfully completed, etc. Finally, the best measure of your company’s success will be its share price index, a measure that takes all of the above indicators into account.
by what % does initial production plan adjust based on demand
20% (up or down)
what is transfer cost
The price paid by Marketing to Production is called the transfer unit cost; it incorporates all costs associated with this high level of flexibility, including depreciation and fixed costs.
The transfer cost of a product is initially equal to the base cost of its base project, assuming that the first production batch is 2.5 million units.
The transfer cost will then increase with inflation and decrease over time because of experience effects and economies of scale. As a rule of thumb, you can expect the transfer cost to be reduced by about 15% each time the cumulative production of a given product is doubled. If the first production batch is lower than 2.5 million units, then the transfer cost will be higher than the project base cost. For instance, if the initial production is 1.25 million units, the cost will be 15% higher.
how are inventory costs per united calculated
as a percentage of the transfer cost
what other prices fo you need to set
recommended retail price
which channel tends to respect recommended retail price set by companies
department stores
what are the promotion rates to sell products at mass merchandisers, beauty portals, and specialized mass?
- 10% for mass and beauty
- 5% for specialized mass
what are some objectives of advertising?
- the primary objective of advertising is to build awareness for brand names and to make consumer familiar with the characteristics and price of your product. (remind them for brands that have been on market)
- Another objective of advertising is to develop demand for the whole market. Indeed, as potential consumers become more familiar with the products and their characteristics they are more likely to purchase one of them
- Finally, advertising will influence the decision of whether or not distributors will carry your products. Spending more in advertising will most likely increase your distribution coverage. It also creates a barrier to entry for your competitors.
share of voice
dividing your own advertising budget (usually several million dollars for a given brand and period) by the industry total advertising budget.
A share of voice greater than the ones of your direct competitors is required for a successful new brand launch or for brand repositioning.
what are the two kinds of advertising budgts
advertising media and advertising research.
- As its name indicates, the advertising media budget is used to purchase media space and time.
- Advertising research is about the creative work, media selection, or other activities conducted by advertising agencies, that improve the quality and the persuasive power of your message.
what other things do you need to decide regarding advertising
- specify which segments should be targeted with advertising
- define perceptual advertising objectives for each brand/convey a perceptual message (helps with positioning)
what does the commercial team do?
Your commercial team is responsible for obtaining and entering orders and for supporting distributors.
It is organized by channel to better meet the needs of the distributors, and by brand.
The team includes multiple categories of people and resources depending on the channels: sales representatives, customer support, merchandisers, web masters, blog managers, etc.
The main tasks conducted by the commercial team are to visit stores, distributors and wholesalers; to enroll them in trade programs; to take orders; to handle out of stock situations; to participate in trade shows; and to help stores organize and conduct promotions.
What must the marketing department decdie with regards to the commercial team?
- specify the number of people to allocate to each channel and each brand (this also involves deciding the size of the commercial team (in number of full-time-equivalents))
- specify the merchandising budget to allocate to each channel and each brand. This budget is aimed at enhancing the physical presentation of your products in such a way that it stimulates consumer interest.
what are the 12 kinds of market research studies you can buy and which four are the only ones available in period 0?
4 available in period 0:
* Consumer survey
* Consumer panel
* Distribution panel
* Market forecast
the rest:
* Semantic scales
* Multidimensional scaling
* Competitive advertising estimates
* Competitive Commercial team estimates
* Industry benchmarking
* Advertising experiment
* Commercial team experiment
* Conjoint analysis
What do you have to decide when requesting a new R&D project? (up to ten r&D projects can be ordered each period) (5 clinite) (5 nutrite)
- project name
- the desired characteristics for the new or improved product,
- the target base cost (assuming an initial production batch of 2.5 million units)
- project allocated budget (must be equal to or higher than the budget required for completion, but any extra allocated budget will not be given back to marketing)
—> if it isn’t enough budget, project can be completed in next period or shelved
factors for decideing base cost
You may ask the R&D department to develop the project at the lowest possible base cost also called minimum base cost. This cost depends on the project characteristics: the higher the level in each attribute (Efficacy, Safety, etc.), the higher the minimum unit cost. Developing a project at the minimum base cost will usually be quite expensive in term of the development budget. Indeed, the R&D team must not only develop the new characteristics requested, but also select materials and ingredients that are compatible with the low-cost target.
You may also ask the R&D department to develop the project at a specified base cost, higher than the minimum cost. This will give more flexibility to the R&D team in the materials and technology selection, and is likely to reduce the development budget. Obviously, the desired base cost must be compatible with the expected brand profitability, taking all factors into account: price, distributor margin, production costs, marketing and sales expenses, etc.
def. ________ study costs $100,000 and takes one period to complete. The information is provided in the next period within the R&D section of the company results; it includes the minimum base cost at which the product can realistically be manufactured, and the budget required to guarantee its completion at the currently requested base cost.
feasibility
what are online queries
online query provides you with an estimate of the budget required to complete a project. You may order an online query only when the project is fully specified, i.e. when you have entered the physical characteristics and the requested base cost, unless you have specified that you want to develop the project at the minimum base cost.
The main advantage of online queries is that the information is provided to you immediately. Their main drawbacks are that their results are usually over-estimated by as much as 15% (or even more for the new Nutrite technology) and that no more than 5 queries may be made in any given period
What are ways manufacturing costs can be reduced?
- experience effect leading to more efficiency, etc
- producing more units of the same product (economies of scale, estimated that manufacturing costs decrease by 15% each time cumulative production is doubled)
- launching a cost reduction R&D project (ie a project specifying the same physical characteristics as the initial project, but at a lower base cost)
**note that costs will be adjusted for inflation (offsetting part of the reduction obtained through experience)
what are the overall costs that will be subtracted from revenues to determine marketing contribution?
- R&D: budgets allocated to R&D projects;
- Production: costs of goods sold and inventory holding costs;
- Advertising: advertising media & research budgets allocated to marketed brands;
- Commercial: merchandising budget plus costs incurred by the commercial team, in all three channels;
- Market research: costs of market studies ordered in the period;
how is the budget linked to the success of the department?
This budget is linked to the success of the department, being equal to 40% of the net contribution generated in the previous period.
However, there is a maximum level where resources are reallocated to other divisions of the company to maximize the return on investment at the corporate level. Similarly, there is a minimum budget level for each period, whereby headquarters may effectively subsidize your division if you are not generating the contribution sufficient for your division can continue operations.
T or F: you should always spend your entire budget
False
Your objective is to maximize your return on investment. As a consequence, you should not necessarily spend your entire budget in every situation. Indeed, you should not spend one additional dollar unless you expect this dollar to generate a return higher than one dollar. If you perform outstandingly, you may be granted a large budget; however, spending it completely might be a waste of money.
when can you use a loan’s principal and when can you start to pay it back?
In the Markstrat world, loans are granted at the beginning of the year so that you can use the principal immediately, for instance to invest in new R&D projects. As a consequence, you will incur interest in the first year of the loan.
However, you will not start to reimburse the principal before period P+1 so that it can be paid with the outcome of the period P investment.
what are the things in your financial report/P&L statement?
- Revenues: Number of units sold x Average selling price. The selling price is equal to the retail price (your decision) minus the distributors’ margin.
- Cost of goods sold (COGS): Number of units sold x Unit transfer cost. The transfer cost is equal to the base cost of the underlying R&D project minus the productivity gains.
- Inventory costs: Inventory holding cost + Inventory disposal loss
- Inventory holding costs: Units in inventory x Unit transfer cost x Inventory holding cost in % (given in the market news report).
- Inventory disposal loss: Loss incurred when selling inventory to a trading company because of a product upgrade. Units in inventory x Unit transfer cost x Inventory disposal cost in % (given in the market news report).
- Contribution before marketing (CBM): Revenues – COGS – inventory costs.
- Contribution after marketing (CAM): CBM – advertising media – advertising research – commercial team costs (your decisions).
- Market research studies: costs of the market studies purchased during the period (your decision).
- Research & Development: budgets allocated to R&D projects during the period (your decision).
- Interests paid: Interest paid on loans granted in previous periods.
- Exceptional cost or profit (ECP): Exceptional items such as brand withdrawal costs.
- Net earnings: CAM – market research studies – R&D – interests paid – ECP
industry benchmarking
The benchmarking study compiles general information from annual reports about each of the Markstrat competitors. The same data is provided in a common format for all companies in such a way that would allow you to compare competitive performance.
Summary graphs are provided as well to facilitate the comparison of key data across competitive teams.
The data provided includes sales, production costs, marketing expenditures and other expenses, including R&D.
consumer survey
The consumer survey is a survey questionnaire administered to 3,000 individuals during the simulated period. It gives brand awareness, purchase intentions and shopping habit data for each consumer segment in the market.
The purchase intentions figures represent the proportion of individuals who would select a brand as their first choice, if they were buying within a year. This is obtained by asking respondents a question such as: “Do you intend to purchase a Nutrite brand this period?” If the response is yes, then respondents are asked to indicate the brand of their choice. The report gives the information for each brand currently on the market in total and by consumer segment.
Please note that these figures correspond to the period when the study is done and does not necessarily represent purchase intentions for the following year.
Two points require additional explanations. First, awareness is factored in purchase intentions. Indeed, if respondents are not aware of a specific brand they will not list this brand as the brand of their first choice. Second, purchase intentions are normalized so as to sum up to 100%. This facilitates the comparison between purchase intentions and market shares but it may produce purchase intentions figures that are higher than awareness figures.
The shopping habit data represent, for each of the three channels, the proportion of individuals who would choose that channel when shopping for a Clinite or a Nutrite product
consumer panel
based on a sample group of over 500 consumers whose buying behavior is believed to be representative of the entire market. It provides market share by consumer segment as well as industry sales in the product category
distribution panel
The distribution panel provides continuous tracking of product sales to consumers based on information gathered at the retail point-of-sale. Information is primarily gathered from scanning cash-registers with supplementary store audits.
Finally, this study gives the share of shelf space allocated to each brand in a given channel. Shelf space is usually measured in meters or in number of facings. If a product is given a large shelf space, it is likely to be highly visible and thus to be purchased more frequently. This is especially true for impulse product categories such as cosmetics.
semantic scales
provides data based on a semantic differential questionnaire administered to 600 individuals. Several semantic scales corresponding to the physical attributes were presented to the respondents.
Crucial information is derived from these questionnaires: brand perceptions, ideal value along each scale, ideal value evolution, brand maps and ship between brand attributes and brand perceptions.
semantic scales: brand perceptions
Respondents are asked to rate each brand on a scale from 1 to 7 according to the way they perceive the brand.
semantic scales: ideal values
Respondents are also asked to indicate their preferred (also called “Ideal”) value on each scale.
semantic scales: importance of characteristics
respondents are asked to rate the importance of each characteristic in their purchasing decision. Although consumer segments differ on the exact importance attributed to each characteristic, they tend to agree on the ranking of the scales, i.e. their “relative” importance (get average values)
semantic scales: brand maps
Brand maps provide a graphical representation of ideal values and brand perceptions on two dimensions at a time. Five maps are provided in the study.
semantic scales: ideal value evolution
. The study monitors the evolution of consumer needs over time. The preferred values on each scale over the past 3 years are recorded and displayed in a table for each consumer segmen
semantic scales: additional graphs
The charts and graphs listed above are given in the main report of the study. Two additional series of charts can be found by clicking on a link at the top of the study. The first series will provide you with a graphical representation of ideal point evolution since the beginning of the simulation. The second series shows the relationships that exist between brand physical characteristics and brand perceptions. These charts are mostly used to design R&D projects
multidimensional scaling of brand similarties and preferences
joint space configuration obtained with non-metric multidimensional scaling. It relies on similarity and preference data on the complete set of brands available in the market. These data were obtained through interviews with 200 individuals.
- perceptual maps, ideal value evolution, influence of product characteristics on perceptual dimensions, additional grapsh
MDS: perceptual maps
The study gives the minimum number of dimensions that are sufficient to provide a good fit to the data. In the case of the Clinite product category, three dimensions are necessary: Economy, Performance and Convenience. Then, the study provides a graphical representation of the perceptual positioning of the marketed brands.
Respondents are also asked to indicate their preferred (also called “Ideal”) position on the map. The reported results are s
ummarized on the map, using the mean value for each segment
MDS: infuence of product characterisitcs on perceptual dimensions
We will see in chapter “Positioning and Research & Development” that the MDS study is useful in positioning brands. This is why it is important to relate the three dimensions identified by the MDS study to the most important physical characteristics of the category.
For example, you may see that “Convenience” is very strongly related to “Pleasure” and strongly to “Packaging” and “Usability”.
competitive advertising and commercial team estimates
The “Competitive Intelligence” report provides estimates of the advertising and commercial budgets spent by the companies in each market during the simulated period.
Competitive Advertising. Estimated competitive advertising budgets are given by firm, brand and consumer segment. The breakdown by brand and consumer segment is also provided. All brands marketed in the current period are included in the study, except private labels.
Estimated Communication Dimensions and Message Quality. This section provides an estimate of the dimensions that have been used by all brands in their communication, as well as an estimate of the message quality. The message quality is a function of the level of advertising research budget allocated to a brand, as well as its position towards the targeted segment’s ideal point.
Competitive Commercial Team. Estimated merchandising budgets and sizes of commercial teams are given by firm, brand and channel. The breakdown by brand and channel is also provided. All brands marketed in the current period are included in the study, except private labels.
advertising and commercial team experiments
The “Experiment” report provides the results of advertising and commercial team experiments that are conducted in a selected regional test market during the simulated period.
Advertising experiment. An advertising experiment is conducted by increasing advertising budgets in a selected regional market. The results of the study are used to project the level of awareness and the market share that would have been achieved nationwide by each brand with the same increase in advertising and if competitive actions had remained unchanged. The impact on brand contribution is provided as well. An increase in contribution for a given brand shows that you would have benefited from advertising for this brand. The layout of this study is very similar to that of the commercial team experiment
Commercial Team experiment. This experiment is set up by increasing the merchandising budget or the size of the commercial team in each channel in a selected regional market. The results of the study are used to project the additional number of (FTEs needed ? - guess - sentence unfinished)
The report includes two distinct parts: one on merchandising budget increase and one on commercial team increase.
market forecast
study provides estimates of the expected market size in one period and in five periods. Results are given for the whole market and are also broken down by consumer segment.
These estimates are based on the current market situation and assume that no substantial changes such as brand introductions, or significant price increases or decreases will take place in the future.
Consequently, depending on what actions are actually taken by your firm and your competitors, the resulting market size will either be higher or lower.
For the new Nutrite market, the estimates are based on interviews of potential consumers: These are less accurate and often turn out to be optimistic
conjoint analysis
statistical technique used to calculate the value – also called utility – attached by consumers to varying levels of physical characteristics and/or price.
Conjoint analysis is conducted by showing respondents a set of fictitious products – each having a specific price and specific levels of limited number of attributes – and asking them to sort these products by decreasing order of preference. By analyzing the preference data and the combination of attributes and price for each product, the methodology evaluates the utility attached by respondents to the individual elements making up the product.
conjoint analysis
statistical technique used to calculate the value – also called utility – attached by consumers to varying levels of physical characteristics and/or price.
Conjoint analysis is conducted by showing respondents a set of fictitious products – each having a specific price and specific levels of limited number of attributes – and asking them to sort these products by decreasing order of preference. By analyzing the preference data and the combination of attributes and price for each product, the methodology evaluates the utility attached by respondents to the individual elements making up the product.
- relative importance of price and physical characteristics
-uutility charts
*t is important to note that the level with the highest utility is not necessarily the ideal level, as given in the semantic scales or MDS studies
use ______ study to design R&D projects, i.e. to determine the ideal level in each physical characteristic. This study is very much appropriate to do this because there is a one-to-one relation between the dimensions of the study and product physical characteristics.
semantic scales
use the ______ study to decide on your strategy. The_____ study is great for strategy because it provides a helicopter view of the entire competitive situation. Putting the two perceptual maps next to each other on the same page or screen will help you; find where to reposition your existing brands; where to launch new ones; and, last but not least, anticipate the moves of your competitors.
MDS
use the ______ study also for communication. The reason is twofold: (1) you will communicate on the dimensions that really matter to your customers: Economy, Performance, Reliability, …; (2) You can reposition a brand along more physical characteristics by using ____ than by using ________
MDS, MDS than by using semantic scales
use _______ to validate or invalidate the findings made with the other two studies. Will the new characteristics or price of my product maximize total utility? But be cautious: this study may be misleading because only four levels are tested along four dimensions. The optimal level for a given dimension is usually in between two of the four tested values, but you do not know where exactly.
conjoint analysis
use _______ to validate or invalidate the findings made with the other two studies. Will the new characteristics or price of my product maximize total utility? But be cautious: this study may be misleading because only four levels are tested along four dimensions. The optimal level for a given dimension is usually in between two of the four tested values, but you do not know where exactly.
conjoint analysis
5 categories of graph
Market. Evolution of selected market data: market sizes and growth rates; segment sizes; number of marketed brands; prices, market average and by consumer segment.
- Performance. Evolution of key performance indicators at firm level: retail sales; sales and shares by market, segment and channel; contribution (profit) per period and cumulative; return on investment; share price index.
- Benchmarking (M$ and %Revenues - thus two kinds). Evolution of profit and loss data at firm level: retail sales; revenues; production costs; marketing costs; R&D costs; profit; etc. Benchmarking charts are available in million dollars as well as in percentage of revenues to allow an easier comparison across firms of varying sizes.
- Brand charts. Evolution of key performance indicators at brand level: retail sales; market shares; contribution. Brand charts are available in varying format, for instance top 5 brands across all marketed brands, or only the brands of a selected firm.
what 5 kind of kpis does the score card show
- Financial KPIs. Total revenues; revenues in each market; revenues from new brands (other than your two initial brands); Total contribution after marketing (CAM); CAM generated by each market; CAM generated by new brands; net contribution, in million dollars and in percentage of revenues.
- Marketing KPIs. Total market share, in volume and value; market share in each market; number of marketed brands, in total and in each market; number of brands leading in a segment.
- Distribution KPIs. Overall distribution coverage; distribution costs, in million dollars and in percentage of revenues; estimates of lost sales due to insufficient commercial efforts.
- Production KPIs. Volume sold; volume produced; units in inventory; inventory costs; estimates of lost sales due to production shortage.
- R&D KPIs. R&D expenses, in total and in each market; number of completed R&D projects, in total and in each market.
what are strategic issues regarding positioning
- Which segments to target
- How to design products satisfying the needs of these segments
- How to position new brands effectively
- How to reposition existing brands to better fit customers’ needs
reasons you may need to reposition
- changing segment needs
- price pressure
- new target segments
- competitor entry
repositioning strategies
- positioning with advertising
- ## positioning through R&D
