The-Circular-Markstrat-Challenge-1-(CircularMS-SM-B2C-DG).pptx

Business Simulation

1. THE CIRCULAR MARKSTRAT CHALLENGE - INTRODUCTION I B2C – DURABLE GOODS Powered by With the collaboration of Professor Caroline Ducarroz, Professor of Marketing at UCLouvain (Louvain School of Management)

2. CONGRATULATIONS ON YOUR NEW POSITION You have been recruited to manage the marketing department of the Electronics division of a large corporation: You will compete with several other firms to market durable goods to consumers You will be responsible for formulating and implementing the long-term marketing strategy of your division You manage your company in a business setting where environmental stakes are more and more considered as essential by the market and by the government. You have to deal with digitalization of markets. 2 Introduction to the Circular Markstrat Challenge - Part I

3. YOUR OBJECTIVE Introduction to the Circular Markstrat Challenge - Part I 3 Your performance will be assessed each year on: Share Price Index (SPI) : average of : Your business performance (Financial Price Index) : depends on product market share, net contribution, Earning Before Taxes, … ….but the main objective is to LEARN ! Your Eco-score : depends on brand characteristics and on circular initiatives. All companies start with similar situations (P0) FPI=1000; Eco-Score= 200; SPI = 600

4. YOUR ROLE FOR THE NEXT 10 YEARS Work in a highly competitive market Elaborate your marketing strategy: Target consumer segments and position your products Design and develop new products, improve existing ones (interface with the R&D department) Specify your production planning (interface with the production department) Make marketing mix decisions: pricing, advertising, online and offline communication channels (media categories), … Decide on your distribution channels (size and priorities of your commercial team and commercial budget) Launch Marketing, Digital and/or circular initiatives Order and master market research studies to get up-to-date information for decision making. 4 Introduction to the Circular Markstrat Challenge - Part I The market keeps evolving ; so do consumers ’ needs !

5. 5 Introduction to the Circular Markstrat Challenge - Part I GETTING STARTED MANAGING YOUR FIRM THE CIRCULAR MARKSTRAT WORLD

6. THE CIRCULAR MARKSTRAT WORLD 80 MILLION INHABITANTS : UP TO 6 COMPETING FIRMS EACH MANAGED BY A TEAM: All firms start in a different situation: Product specification, target consumers, brand awareness levels, market share, distribution coverage, profitability, R&D expertise, ... The marketing strategy of your firm should be adapted to its particular situation; ANNUAL BUDGET FUNCTION OF RESULTS: All competitors operate under similar budget constraints, with annual budget granted as a percentage of past period profits (EBT). Introduction to the Circular Markstrat Challenge - Part I 6 MARKET CONDITIONS: Large territory with a highly developed economy Inflation and GNP growth fairly stable and no major political, social or economic events are anticipated. Currency: Circular Markstrat Dollar ($) 40% U RBAN (top 5 cities) 35% RURAL 25% SMALLER U RBAN

7. ONE PRODUCT CATEGORY You can market up to 5 brands in this product category at a given time S o nites 7 Introduction to the Circular Markstrat Challenge - Part I

8. SONITE PRODUCT ATTRIBUTES REYCLED MATERIALS 0-80 % 8 DESIGN INDEX 3 – 10 BATTERY LIFE 24 – 96 HOURS (H) DISPLAY SIZE 4 – 40 INCHES (”) PROCESSING POWER 5-100 GIGAFLOPS (GFLOPS) BASE COST MINIMUM $10 Sonite brands are already marketed, each characterized by 8(+1) main attributes Introduction to the Circular Markstrat Challenge - Part I DURABILITY RATING 1 – 100 CARBON FOOTPRINT 5 – 55 KG (”) REPAIRABILITY RATING 1 – 100

9. BRAND NAME CONVENTIONS T O NIC 9 Introduction to the Circular Markstrat Challenge - Part I Company marketing the brand: L, M, N, R, S, T Product Category: O = Sonite Freely chosen letters or numbers

10. SONITE CONSUMERS 10 Introduction to the Circular Markstrat Challenge - Part I Look for high quality, high-performance and easy-to-use products Can afford expensive products Highly interested in Sonite product Demand high performance products Quite price sensitive Like premium quality products, and price can be seen as an indication of quality Tech dependent, have good product knowledge through extensive product comparison. Demand high quality–price ratio. Value performance and convenience But very price sensitive

11. DISTRIBUTION CHANNELS 11 Introduction to the Circular Markstrat Challenge - Part I Small stores not necessarily organized in chains Located close to their customers and providing a high level of service and technical support Broad product line including high-end products Preferred for Vodites Includes web-only merchants and retailers’ websites High convenience as consumers shop from home Almost unlimited choice and easy comparison Likely to become more important in the next 5-10 years Operate on a low-price, high-volume basis Lower level of service than in specialty stores Depth of product lines usually restricted to a few units Distribute the cheaper, low-performance products Low level of service not adapted to first Vodites Company’s eStore Direct sale to consumers with better margins Prices may be higher than in mass distributions

12. MEDIA CATEGORIES (Communication Channels) 12 Introduction to the Circular Markstrat Challenge - Part I Media owned and controlled by the firm Examples: company’s website, mobile apps, blogs, social networks (Instagram, Twitter, Facebook, LinkedIn, etc ). Investing in creating online content. Ideally, this investment creates earned media (word-of-mouth, shares,…) made by consumers. Word-of-mouth, shares, reviews, posts, recommendations, made by consumers. The company may have an impact on Earned Media by stimulating consumers’ willingness to share about the product (e.g. sending products to test, organizing events, …). Media bought by the firm to build its online position Examples: displayed ads on relevant e-platforms (websites, social media, …), paid search, Pay-per-click, SEO (Search Engine Optimization), etc. Ideally, this investment helps create earned media (word-of-mouth, shares,…) made by consumers. Any form of mass communication available offline Examples: television, radio, newspapers, books, magazines, product placement, etc. All media that reach consumers when they are outside their homes Examples: billboards, ads in Public Transport, Sponsored Events, clean tags, etc.

13. ECO-SCORE and GOVERNMENT ACTIONS Based on physical product characteristics (e.g. product durability) Introduction to the Circular Markstrat Challenge - Part I 13 Circular initiatives implemented (or not) at the company level. A company Eco-score is calculated by an external certified organization, based on:   Eco-bonus (grant) or eco-malus (tax) based on your company eco-score . Eco-taxes specific to circular characteristics (e.g. the government may announce that companies producing a product whose Percentage of Recyclable Materials is under a given threshold will be taxed at some point ) . Government actions : Weight = number of units sold

14. GREENWASHING Using advertising to communicate in an exaggerated way about the circular aspects of your products ( perceptual message) Pretending that you are doing more to protect the environment than what you are really doing is considered as greenwashing: Raising circular initiatives while your products are actually bad on circular attributes Communication will fail (no repositioning, and even greenwashing backlash)! Initiative effect will decrease to 0 if circular attributes are very bad! Introduction to the Circular Markstrat Challenge - Part I

15. 15 Introduction to the Circular Markstrat Challenge - Part I GETTING STARTED MANAGING YOUR FIRM THE CIRCULAR MARKSTRAT WORLD

16. FROM DATA TO STRATEGY You will need to do a certain amount of analysis before setting a strategic direction for your firm 16 Introduction to the Circular Markstrat Challenge - Part I

17. TACTICAL DECISIONS PERIOD 1 17 Production planning Pricing Advertising & segmentation strategy Ordering industry-wide market studies Ordering market-specific market studies Size of commercial team and amount of commercial budget Allocation across distribution channels Allocation across marketed brands Introduction to the Circular Markstrat Challenge - Part I Launching marketing, digital & circular initiatives at the company level Initiatives have an effect on purchase funnel over 1 year (can be repeated) Allocate communication efforts between online and traditional media

18. PRODUCTION PLANNING A production plan must be submitted each period for each brand , taking into account: The potential sales for the brand The existing inventory at the beginning of the period The flexibility of the Production department From one period to the next, production plans may be increased or decreased without any penalty Actual production levels are automatically adjusted in response to actual demand by plus or minus 20% 18 Introduction to the Circular Markstrat Challenge - Part I MARKETING MIX

19. 19 SAMPLE PRODUCTION PLANNING DECISIONS Inventory Production Plan (your decision) Potential Sales (market demand) Actual Production (reduced) 154,000 150,000 30,000 124,000 Lost Sales = 0 & Ending Inventory = 0 IDEAL Your Estimated Sales 180,000 Inventory Production Plan (your decision) Actual Production (Increased) 80,000 30,000 96,000 Ending Inventory = 0 Lost Sales 28,000 Potential Sales (market demand) 154,000 PESSIMISTIC Your Estimated Sales 110,000 Inventory Production Plan (your decision) Actual Production (reduced) 200,000 30,000 160,000 Potential Sales (market demand) 154,000 Lost Sales = 0 Ending Inventory 36,000 OPTIMISTIC Your Estimated Sales 230,000 Introduction to the Circular Markstrat Challenge - Part I

20. Competitors “Order-book” Industry ESTIMATING LOST SALES Comparing purchase intentions with market shares at the end of the period can give you a feel for how many sales you have lost Purchase Intentions Market Shares Sales Lost to 20   Introduction to the Circular Markstrat Challenge - Part I

21. PRICING Every year, you set the Recommended Retail Price in $ To decide on a price , you should take into account The margin of the distributors The discounts made by some channels Consumers’ expectations Competitive prices Etc… 21 MARKETING MIX Introduction to the Circular Markstrat Challenge - Part I

22. SAMPLE PRICES AND CONTRIBUTIONS Specialty Stores Mass Merchandisers Pure Online Players eStore Recommended retail price $400 $400 $400 $400 Average Discount None 10% − $40 5% − $20 None Actual retail price $400 $360 $380 $400 Distribution margin 40% ($160) 30% ($108) 30% ($114) 20% ($80)* Selling price $240 $252 $266 $320 Transfer cost $123 $123 $123 $123 Unit contribution $117 $129 $143 $197 22 Introduction to the Circular Markstrat Challenge - Part I * For eStores , there are no distributor margins, the 20% are used for the eStore server management and costs

23. Introduction to the Circular Markstrat Challenge - Part I 23 ADVERTISING Building brand awareness and make consumers familiar with product characteristics and price Developing demand for the whole market Influencing distributors’ decision to carry or not your products (distribution coverage) Creating a barrier to entry for your competitors A dvertising is made on your products (not on your company as a whole) A dvertising objectives: Share of voice  

24. Introduction to the Circular Markstrat Challenge - Part I 24 ADVERTISING DECISIONS Advertising Media budget media space and time (= Quantity) Advertising Research budget persuasive power of your message (= Quality) $ $ Segmentation Strategy : which consumers to target (normalize to 100%) $ Perceptual Objectives perceptual message $ Media Strategy Media to prioritize (normalize to 100%) $

25. 25 DISTRIBUTION CHANNELS You decide your Salesforce & Commercial efforts for each channel and product: Introduction to the Circular Markstrat Challenge - Part I Commercial budget = amount of budget (in K$) devoted to supporting digital channels e.g. developing and managing your company eStore , homepage of online pure players Sales force (commercial team) = Number of Full-Time Equivalent people in traditional channels e.g. obtaining orders from distributors and understanding their needs (tasks: visiting stores, enrolling distributors in trade programs, helping stores organize and conducting promotions, …

26. 26 MARKETING POWERHOUSE Available to reinforce your overall marketing efforts . Up to three initiatives per year. Some are available later during the simulation, some have a specific seasonality. Three categories of initiatives: Marketing Initiatives Product placement Extended Warranty Digital initiatives Influencers Retargeting Data Analytics Contextual Campaign FIFA World Cup Circular Initiatives Use Product Recycling (Recycling 1) Waste Recycling (2) Photovoltaic Panels (Energy 1) Windmill park (Energy 2) Global Firm Carbon Footprint Packaging Social Education Introduction to the Circular Markstrat Challenge - Part I Potential impact on the customer purchase funnel Potential impact on the customer purchase funnel + on the global company eco-score. INTEREST ACTION ENGAGEMENT

27. MARKETING BUDGET FOR THE COMING PERIOD Budget based on the previous period’s performance 27 20% of previous year EBT, with a minimum of $10m and a maximum of $20m Loan and budget increase/decrease granted by instructor Total available budget Deviation from budget. Should always be positive or equal to 0 Expenses generated by your decisions Introduction to the Circular Markstrat Challenge - Part I The unused budget is not carried over to the next period . Saving money is not useful…

28. UNDERSTANDING P&L 28 Introduction to the Circular Markstrat Challenge - Part I

29. UNDERSTANDING BRAND CONTRIBUTION 29 Introduction to the Circular Markstrat Challenge - Part I

30. GETTING STARTED Ready to get started on your first year’s decisions? Get familiar with Circular Markstrat and with your teammates Do not make any major changes in your firm's operation in the first round! ANALYZE 30 DECIDE RUN PERIOD 2 THAT’S IT – YOU ARE READY TO START. GOOD LUCK IN ACHIEVING ALL YOUR OBJECTIVES! PERIOD 1 PERIOD 3 PERIOD 4 PERIOD 5 PERIOD … Introduction to the Circular Markstrat Challenge - Part I

31. 31 Introduction to the Circular Markstrat Challenge - Part I ORGANISE YOURSELVES AND MANAGE THE GROUP PROCESS INFORMATION OVERLOAD TIME PRESSURE CONFLICTING OPINIONS

32. 32 Introduction to the Circular Markstrat Challenge - Part I GETTING STARTED MANAGING YOUR FIRM THE Circular Markstrat WORLD

33. ACCESS THROUGH WEBSITE OR DIRECT URL Introduction to the Circular Markstrat Challenge - Part I 33 1 Sign in www.stratxsimulations.com using your Participant Activation Key (PAK) 2 Click the Circular Markstrat Logo Enter the information given by your Instructor 1 Go to http s :// c ircular m arkstrat . stratxsimulations .com OR

34. ANALYZE REPORTS AND MARKET STUDIES BEFORE MAKING DECISIONS 34 Introduction to the Circular Markstrat Challenge - Part I

35. CHOOSE A NAME FOR YOUR FIRM It must start with the initial of your firm and be 8 character long maximum 35 Introduction to the Circular Markstrat Challenge - Part I

36. CHECK YOUR BUDGET AT REGULAR INTERVALS 36 Introduction to the Circular Markstrat Challenge - Part I Click here to check your budget

37. Introduction to the Circular Markstrat Challenge - Part I 37 CHECK YOUR ERRORS & WARNINGS AT REGULAR INTERVALS Click here to check your messages

38. ON YOUR MARKS, GET SET, GO! RESPECT THE DEADLINES – GOOD LUCK ! 38