The Markstrat simulation was created more than thirty years back by Jean-Claude Larréché, Alfred H. Heineken Teacher of Marketing at INSEAD, and Hubert Gatignon, The Claude Janssen Chaired Professor of Business Supervision and Professor of Marketing at INSEAD, and has been constantly upgraded since its creation.
Used in combo with traditional training methods such as conceptual lessons or circumstance studies, Markstrat is an efficient tool to learn strategic marketing principles, such as brand profile strategy or segmentation and positioning strategy, as well as functional marketing. Similar to a journey simulator, this marketing simulation allows students and managers to apply new skills in an intensive timeframe and in a risk-free environment prior to trying them out in their real business environment.
The mathematical model of Markstrat is dependant on solid theoretical foundations, and the actual formulas have been extensively tested. These simulations have been used to effectively train a sizable number of participants and professionals from many colleges and organizations.
OVERVIEW FROM THE MARKSTRAT WORLD
The Markstrat world is a fictitious industrialized country of 250 million inhabitants whose monetary product is the Markstrat dollars ($). In this country both inflation and GNP growth are fairly stable, no major political, social or monetary event is expected soon.
The Markstrat world does not intend to represent any particular country, market or professional sector. However, it around behaves like the majority of markets, and the general management and marketing knowledge that you have obtained through business experience or formal education applies to this " new world ".
In the Markstrat world, there are a handful of competing companies that manufacture and market consumer durable goods. These goods are much like electronic products such as hi-fi systems, mobile phone sets or personal computers as well as office equipment, autos, literature, or any other consumer durable goods. With most scenarios, each firm begins in another situation in conditions of product specification, target customer categories, brand awareness levels, market talk about, distribution coverage, success, R&D competence, etc. Therefore, the marketing strategy of each company should be adapted to its particular situation within the industry.
However it includes a few cases where all firms start in the very same situation. These scenarios are called competition situation and an teacher informs the participants if they're using them.
Nevertheless, no organization has a relative advantage over the others and in the beginning many characteristics are common to all firms. For instance, the original brand portfolio of all companies is comprised of two brands.
As discussed earlier, each organization will possess the possibility to design and develop new R&D tasks and to introduce services or upgrade existing ones. All R&D departments have the same features to build up new tasks, in their range of experience. Similarly, all sales pushes are equally experienced to handle distributor human relationships.
SONITE PRODUCTS
At the start of the simulation, all rival businesses market two Sonite brands. It really is now a well-established market, with several strong brands at different price tips covering a variety of needs. Analysts assume that the Sonite market will continue to grow over the next five years.
VODITE PRODUCTS
Recently, there's been industry speculation a new type of electronic product might emerge, the Vodite. Vodite products will meet totally different needs from that of Sonite products so that demand for the two products will be completely independent. They'll not be complementary in any way and there will never be any substitution in one to the other. The know-how required of potential suppliers is comparable for both markets in conditions of technology, creation, marketing and circulation.
STRATEGY AND PLANNING:
Strategy:
Long Term Planning - Primary presence in good deal market, so gradually waited for higher volume level in later intervals.
Focus on Gaps - Catered to the markets that have been not targeted by competitors
Fig: OVERALL PERFORMANCE
PERIOD 1, 2:
Strategy - SELL was focused on Singles, SECT on others, both of these segments were going to develop at high rate in 5 years, so we prolonged with product with investment in marketing.
Performance - A reduction in SPI
Leanings - It's important to concentrate on Ideal setting of the merchandise. To improve the brand consciousness, marketing and sales expenses needs to be more than that of challengers.
PERIOD 3, 4:
Strategy - Adjustment of products according to Brand Map to obtain ideal values
SELL on basis of PSELT
SECT on basis of PSEXY
Performance - Positive growth in SPI since P0
Learning - When the gap between the recognized product and ideal product is large then increase in marketing spend can't do much, in such a case R&D is required.
PERIOD 5, 6, 7:
Strategy - Tapping the untapped Market
Launch of SEPR for professionals
Entry in Vodite Market with VERY
Withdrawal of Bad Product SECT
High Investment in Research for ideal setting according to Ideal value development- Regression Research (as per future potential client)
PSEY2 for others
PSEH1 for Hi-Earners
PSEP1 for Professionals
PSES1 for Singles
Performance - Exponential progress in the period with the SPI index achieving the Top Position in the Industry.
Learning -
Untapped marketplaces, though with reduced growth rate are an gaining opportunity.
While entering a new market, launch a product with high initial price.
Had to kick off a new product with same settings but higher price in
Vodite Market.
When a product is bad, investment in it's marketing is waste materials of money,
therefore it will better be withdrawn from the marketplace.
Fig: PERIOD 5
Fig: PERIOD 6, 7
PERIOD 8, 9
Strategy -
Monitoring the Ideal values of the products.
Entry in High earners with SEHI
Improvement in Others & Hi-earners market through PSEY1, PSEHI
Performance - A drop in market share due to superior placement and heavy marketing of competition.
Learning -
When arriving with a much better product high investment in Marketing is also necessary.
With every improvement in product, the inventory is sold to the investments. To reduce damage, either improve the production or introduction increased product as a new brand (though it'll require heavy marketing)
PERIOD 10, 11
Strategy - Investment in focused Heavy Advertising and Sales makes of the products.
Performance - Exponential Upsurge in SPI
Year
No. of brands
Work Style
Objective
Sonite
Vodite
0
Having only 2 brands to control, work was allocated in terms of varied functions involved with marketing the 2 2 brands. The function-wise division was as follows:
Market Research on requirements and perceptions
Production planning
Sales Drive Management & Advertising
Research and Development
Market size analysis
1 person was assigned to co-ordinate expenses on the study projects, sales team management and advertising expenses between your brands
No significant activities in terms of targeting a particular brand to a specific group of customers with particular characteristics.
Heavy emphasis on R&D for both Sonite and Vodite categories
To get familiar with the Markstrat world and various functions involved in producing, marketing and providing the merchandise to customers.
1
2
3
4
2 individuals were allocated to focus on the Vodite Market and the remaining were to focus on the Sonite Market
1 person allocating budgets towards various activities remained constant
The need for newer products to match various customer units started out being formalised and the necessity to establish vodites was also very critical for organization profitability and growth as competition was catching-up in Sonite markets
Most people in the team were now familiar with various functions and could control brands to the fullest. The business was required to leap-frog in to the Vodite market and become a pioneer in the same.
5
Specific brands were being completed by particular group members whose function was to trail performance of a specific brand vis-à-vis competition and measure the important aspects that assist in increasing sales.
Functions like Production planning and Budget allocation remained split from the brand managing functions.
To run the Sonite and Vodite Market as individual business centres with separate profit-generating functions. Overlap of folks employed in both markets was averted.
6
The second calendar year, we took financing to invest in research and development. Our knowing that R&D would lead to raised products was re-instated with the fact that we took a loan every alternate season to invest in development of services and bettering existing ones
7
The department of Sonite products and Vodite products extended with a separate persons controlling budget allocation and demand planning
changes to products continued
Sales pressure allocation needed to be improved
Advertising costs were rationalised scheduled to lack of budgets
Year 9 - 11 observed 4 brands in Vodite market as a flanking strategy but failed to deliver over time due to added ventures in Sales team and advertising
8
9
10
11
Key Emphasis Areas throughout the overall game:
Expenditure on SALES TEAM management (Highest on the market)
Expenditure on Research and Development (Highest on the market)
Expenditure on Advertising (Highest in the Industry)
Loans taken on a consistent basis to boast R&D projects
SWOT Analysis:
Strengths
Weaknesses
Largest Sales Force
Largest Budget allocations for many years
Largest R&D expenses
Largest Advertising Expenses
Very High Brand Recall across brands
Very high syndication across brands
Brands created for specific MARKET with minimum amount overlap
Low base charges for several products across industries
Lack of give attention to specific audiences
Out-of stock situations for quite some time, leading to lack of sales revenues
Inventory pile-up for few years leading to high inventory positioning and disposal costs
Very low brand purchase intentions
Inability to quickly follow changing tendencies in various customer segments
Opportunities
Threats
Focussing on Vodite markets
Gaining maximum market show among sonite players
Increasing profitability and sustaining income and market shares
Competition from other groups (organizations) with specific products for specific customer segments
Increasing marketing budgets for other teams (organizations)
Higher turn-around of R&D
Quicker changes in customer ideal values
MARKET Contrast WITH THE REAL WORLD
COMPETITION: A business most similar to our scenario currently is the detergent and soap market.
Industry Overview
The cleaning soap and detergent industry includes companies that are primarily engaged in developing soap, synthetic organic and natural detergents, inorganic alkaline detergents, and crude and refined glycerin from veg oils and pet fats. It really is an international industry, and during the early on years of 1990, world demand for its products has increased 1 to 3 percent each year. Lots of the participants in the industry competed on a global basis. Relating to analysts, there is a firm correlation the typical of living of your nation and its usage of cleaning soap and detergent products. The experts expect the industry to continue to grow in both the industrialized as well as developing nations.
According to recent movements, liquid cleaning products are outpacing the traditional bar cleaning soap and natural powder cleaning products. In addition to environmental and health concerns, societal change has propelled the changes in the soap and detergent industry
Population development, especially homeowners with children, drives demand in the buyer sector, while development in current economic climate drives demand in the commercial sector. The profitability of specific companies depends upon several factors, such as reliable functions and effective sales and marketing
.
Large companies have scale advantages in domains like buying, processing, distribution, and marketing. Small companies can effectively contend with large companies by formulating special products, offering superior customer support, or catering an area market
The adjustments in the cleaning products were also spurred by technical innovation, availability of improved elements, such as bleach additives, better optical brighteners, and improved upon technologies to improve the performance of cleaning soap and detergent products. Marketers packaged products diversely to meet up with the needs and requirements of specialized users like homeowners with babies or with men undertaking responsibilities that are customarily associated with women.
To meet up with the requirements of different market segments, the industry observed a development of brands and varieties. For example, a specific large super-market might contain much more than 40 different types of soaps and detergent detergents including both fluids and powders.
Category
Houseware -> House supplies -> Standard Laundry Accessories -> Laundry Detergents
Laundry Detergents
Laundry detergent, or cleaning natural powder, is a chemical which really is a type of soap that is added when you are washing laundry to assist in getting the laundry solution. Laundry detergent has usually been in a powdered or sturdy granular format, however the use of liquid laundry detergents has slowly but surely increased over the years, and the recognition of liquid detergent now rivals that of stable detergent.
In some countries where cleansing clothes by hand is popular, detergent pubs are popular. Recently, environmentally friendly detergents have observed a boost in popularity. Laundry detergent typically involves ionic and anionic surfactants which act as the ingredient to eliminate the dirt and grime from the clothes, perfume, phosphors which will make clothes show up whiter, as well as for powders anti attacking brokers to avoid the powder becoming one large lump in the presence of moisture content. For liquid detergents, the bulk of the merchandise is water; for concentrated liquids, this inflatable water content is relatively reduced. Detergents may have other chemicals such as bleaches and textile softeners and they are usually advertised evidently on the packets as providing points
Solid laundry detergent is commonly sold in cardboard boxes and clear plastic tubs as a powder, although compressed tablets are also available. In lots of parts of the world, laundry detergent is also bought from single-use packets or sachets. This sole use allows the consumer to buy the detergent they want for your day rather than having to spend a larger amount upfront. How big is the boxes may differ from small single-use boxes to large economy-size containers. For domestic use, natural powder detergent is generally sold by volume in container sizes of around 1 kilogram (2. 2 lb) and 3 kilograms (6. 6 lb). In some cases, vinyl measuring scoops have been included inside the boxes. Liquid detergent comes in plastic containers, usually high density polyethylene or sometimes Dog or cat or other kinds. Again, various sizes are available. On large-size containers, a handle to transport the container is often pre-formed as part of the bottle. The bottle caps tend to be made large enough to allow them to be used as mugs for measuring out the liquid detergent;
Types of discolorations : Organic and natural, Inorganic, Pigments
Stain removal : Normal water, Surfactants, Phosphates, Acids and Bases, Enzymes, Oxidizing Real estate agents, Temperature
Some types of the major brand in this category are Tide, Ariel, Browse Excel, Comfort, Natural light, Nirma, Wheel
As an example we look at the SWOT research for Surf Excel
Strengths : Strong brand portfolio, Price number and variety, Stable company base, ground breaking aspects, Top quality manpower, Extensive Reach, Public responsibility, Competitive advantages, Success of its tagline
Weakness : Strong competition, high price, alternative products, Financials, insufficient control in markets, lack trustworthiness of data, plan predictability, lack of competitive strength
Opportunity : Changing life style of people, new market segments, vertical, horizontal, increasing the quantity of production, seasonal weather and fashion affects, physical export and import, niche marketplace, Business and product development, Technology development
Threats : Political effects, legislative results, environmental effects, monetary turmoil, change in lifestyle, launch of local products, Obstacles faced, upsurge in creation and labor cost, likelihood of price battle.
All the brands in this category are facing limited competition. Because the competition is high, the company/brands have to keep observing the market carefully for avoiding any unexpected collapse for the merchandise. For surviving in the approaching years, the business needs to have a whole lot of steps in growing the products by doing research and research, introducing inventions and new technology, producing different types of products according to the likes of the consumers etc.
Category: Personal Good care -> Bathing Soaps
Bathing Soaps :
Personal care products are usually used for personal health insurance and hygiene. Soap is a product that many people usually takes for granted or consider rather ordinary, but for some, lathering up can be a treasured part of an morning hours or nightly routine.
Scented or unscented, in pubs, gels, and fluids, soap is an integral part of our day to day lives.
India is a vast country. Household penetration of soaps is 98%. People belonging to different income levels use different brands, which are categorized as different segments (see stand below), but all income levels use soaps, making it the second major category in India (detergents are number 1). Rural consumers in India constitute 70% of the populace. Rural demand is growing, with more and much more cleaning soap brands being launched in the discount segment targeting the low socio-economic strata of consumers.
The basic need for bathing soaps is self cleaning and a feeling of freshness after bath tub. The marketers have various brands of cleaning soap with practically similar function to perform. All of these are segmented relating to consumers inclination and choice also according to the cost factor.
Example : Top quality (Lux, Dove), Market (Nirma, Lifebouy), Popular (Cinthol, Nirma), Others ( Rexona, Dove, Santoor) Godrej, Fiama Di wills, Nivea, Pears
The two major players in personal clean (cleaning soap) market are HUL, Nirma, P&G
Soap price in Rupees (per 75 gm wedding cake)
Carbolic : 5 ; Discount : 7 ; Popular : 11 ; High quality : 17 ; Super High quality : 35
Soap is mainly targeted towards women, as they are the principle decision-makers in terms of soap purchase. Medicated positionings like germ killing and anti-bacterial are advertised to people.
About 75% of soap can be purchased through these different types of stores:
Kirana Store: That is the most common source for buying cleaning soap, which usually forms an integral part of the month's food list (which is purchased from these Kirana Stores). Consumers display devotion to these stores, which is basically dependent on closeness to consumers' homes. Here consumers buy over the counter, nor have a choice of browsing through display cabinets.
Pan-Beedi Retailers: They are really small shops, almost like handcarts, and they're primarily set up to dispense cigarettes and chewing tobacco. However, you might find such a shop at every corner and they are the main resources of soap purchase for the low socio-economic classes. These sorts of shops exist by the dozen in rural areas.
Department Store: In India, there are very few department stores and the "Indianised" version of department stores are called "Sahakari Bhandars. " It is still a fairly new idea. However, department stores have good display counters which is the only real place where consumers get a first hand connection with shopping and choosing from available choices. Here soap prices are also low priced below the retail prices.
Similarities between real and markstrat world
Understanding customer needs
Long term perspective
Marketing as a revenue center
Competitive environment with major players discovering different brands targeting different customer segments
Marketing strategy is dependant on segmentation, placement, and reference allocation
Large place with highly developed economy
Firms attended into life at different time things in different respects
Distribution channels
Objective : To increase talk about price index by optimizing market show, sales growth, online development, cumulative net contribution, R&D investments
Market research to understand consumer survey, consumer panel, distribution -panel, semantic scales, multi-dimensional scaling, industry benchmarking, market forecast, competitive advertising, competitive sales force, advertising test/research, conjoint analysis
Tactical decisions regarding Creation planning, Inventory removal, costs, mass communication, sales team and distribution, market research
Each organization has a marketing budget for the current calendar year based on the prior years performance
It can be done to have a loan amount
The Sonite is the only real product type presently marketed because of your company. Sonite brands are differentiated mainly in conditions of physical characteristics as well as platform cost. In our chosen industry we can look at Bathing soaps as a sonite product.
We can distinguish five segments in the Sonite and hence Bathing soaps market with different characteristics and significantly different purchasing action:
Buffs (Bu) - Folks who are enthusiastic and very knowledgeable about the products. They are mainly concerned with quality and technological features. e. g. Nirma, Lifebouy
Singles (Si) - People in this segment live only. Although they are less officially qualified than Buffs, they demand good performance from a product that they may use more than the average consumer. E. g. Pears, Nivea
Professionals (Pr) - Folks who have a higher degree of education and income. They tend to be 3rd party in their occupations and also to engage in many social activities. Their purchase of the merchandise is partially determined by social position needs. E. g. Dove, Fiama di wills
High earners (Hi) - People who have high earnings but do not have got the higher degree of education or occupational self-reliance of the individuals in the experts portion. E. g. Lux, Cinthol
Others (Ot) - Consumers who do not participate in the above organizations. This segment symbolizes the largest proportion of the population. E. g. Rexona, Santoor
Although the medical bases are known and available, considerable R&D efforts will tend to be required for the introduction of a Vodite product. In our industry, Detergent soaps can be comparable to Vodites.
COMPANY MOST SIMLIAR TO YOUR COMPANY IN MARKSTART
The company chosen is Hindustan Unilever Pvt. Ltd.
The Similarities determined are:
Aggressive Marketing and Distribution Strategy:
HUL sets its consumers and customers at the heart of its business. HUL positively engages its consumers and customers, translating their needs and requirements into products and services, thus creating consumer value wherever it positions its products.
This was the foundation of its invention process. In the same way, our company E acquired a very competitive distribution and online marketing strategy.
Throughout the 12 durations, we have constantly focussed on marketing as a means to attain our consumers. Our products were maintained after much research keeping in mind the consumers' product needs in terms of product characteristics. Thorough research was done on every consumer portion and the entire profile was created. Based on this segment account, the merchandise development process was completely based on this examination.
Even during intervals of low revenue, we've never shifted our concentration from the consumer in order to maintain success. HUL also creates products clearly targeted at a specific target segment and creates the placement and marketing with respect to the consumer portion and what appeals to them in terms of product characteristics. The circulation in our products was well identified based on where our consumers for the product shop. As the shopping behaviour changed, our distribution changed with it to ensure that the product meant for a particular segment reached them according to their convenience.
Today, HUL has one of the best marketing spends. Our company acquired the best marketing spends almost through the majority of the 12 periods. We've even taken lending options to fund our marketing. Even when competition was focussed more on product research and development, we retained our concentrate on marketing along with R&D. Our sales force statistics were always one of the highest on the market and led others to check out our approach of reselling aggressively.
In its market, HUL too is the first choice in syndication and is known for its strong advertising strategy. Our activities were exemplary for competitors so much so that people could visit a sharp rise in sales team sizes of other companies after the period whenever we increased our sales team strength for a particular brand.
Focus On Advancement and Product Research
HUL has always managed it focus on creating value for the consumers through well researched products. The company has always looked after its attention on well constructed functions and products. Likewise, our company E has always tried to divert more money towards research and development. We conducted multiple research and development jobs for an individual brand so that our products fit well with the consumers' changing needs. Whenever we could not commission a research task, we brought fewer products of the brand into the market so our consumers are not given products they do not prefer (in terms of characteristics).
We were the first ever to commission a study task on the Vodite market. Our strategy is definitely to provide the best products to our consumers by having a well researched couple of product characteristics. We innovated in conditions of managing product characteristics and intelligently provide what the consumer needs.
Brand Management and restructuring
We possessed one brand administrator assigned to each brand in our team of ten people so as to have a detailed review on earlier years brand performance and steps to be taken to improve the brand value for our consumers. HUL also offers a very extensive brand management team for every single brand and has a very strong strategy towards effective brand management. When the company had low money, we went the HUL way in restructuring our brand collection in the Vodite market in order to streamline procedures and direct money to essential areas (vitality brands).
We shelved two of our Vodite brands so as to target our attention on other electricity brands (brands performing well). In the beginning of each period, our analysis focussed on an in depth yet quick research of every brand's performance versus its opponents and whether there have been any new opponents in the market. The evaluation was done keeping in mind distribution, marketing, product characteristics, sales rep allocation, amongst many other parameters.
Differences:
Quality as the essential to HUL's Business Success
Quality of products is definitely the concentration of HUL's business strategy with no point has HUL possessed any case wherein consumers lost rely upon its brands. Though our company performed employ a high goal for product development and characteristics, restrictions in the game did not allow us to manipulate processes to check on for quality of the merchandise being delivered on the market to the buyer.
HUL as an environmentally in charge organisation
Again this difference was because of the limitations of rivalling virtually rather than in real life where such initiatives are possible. Though our company could have been inclined to undertake such activities, we were tied to the possible activities in the overall game, therefore we are different from HUL in this field. Real life poses such problems in which a company can take on activities beyond its perview to add in bettering the surroundings. This may also provide as CSR (part of marketing) for HUL, which is something we could not achieve scheduled to game constraints.
HUL's presence in various product categories
HUL is a very big entity and has high muscle power to be competitive in multiple product categories. Our company could be competitive in two product categories - Sonites & Vodites. HUL also has been market head consistently for days gone by many years. Although working and working strategies have many similarities, performance-wise we've not been able to complement up to HUL's expectations.
DECISIONS BASED ON ENVIRONMENTAL VARIABLES
Market Competition (Brand Characteristics)
Change of retail price of products based on competition product in the same segment
Modifications through R&D in our product based on Ideal Value craze of the consumers in various segments.
Economy (Economic Parameters)
Increase in price predicated on inflation rate of the period
Inventory sale decisions based on forecasted Inventory Positioning Costs
Shift in sales force allocation
FUTURE Tips AND CONCLUSION
Based on forecasted demands in respective markets
Taking into account un explored market segments
On current brand consciousness levels of a product
Future planning of two years ahead, as it requires a year to analyze of new product, and another to build up and launch
Sonite Market
Target the unexplored growing Specialists market
Consolidation of existing successful products
Vodite Market
As R&D has been conducted on few brands, Launching a fresh product for Innovators
