Implementing the Plan: Periods 3-7

Hello Readers!

This week was all about implementing out market plan into Pharmasim.  We stayed pretty close to our plan, but we realized that we had to be flexible.  We understood the value of sticking to our analysis and reasoning, but when unexpected results are occuring, sometimes you have to find an alternate route if a team wants to stay afloat!

First, we need to explain that the marketing budget and advertisement budget are two different things.  Our marketing plan called for us to ADJUST the marketing budget and decrease the advertising budget, which would allow us to spend the extra marketing dollars elsewhere.  We looked at advertising expense as a subset of the marketing budget. 

In period three we made substantial changes.

We

1.  answered a question that we would Children’s liquid option if we had to introduce a line extension… but not right now.

2. Eliminated Point of Purchase fund for Convenience stores

3. Reduced Trial size for Allround to $400K

4. Stopped focusing on Allergy (3.9 effectiveness rating) and Chest (2.8 effectiveness rating)

5. Re focused our advertising strategy. 

15% Primary

35% Benefits

15% Comparison

35% Reminder

6. Reduced overall advertising budget 16.5 to 15.5.. saving $1M

7. Reduced Sales force.  THIS REDUCTION WAS NOT BECAUSE OF OUR PLAN. OUR PLAN IS TO REALLOCATE THE SALES FORCE.  WE REDUCED SALES FORCE SIMPLY BECAUSE OF BUDGET CUTS.

      Grocery from 68 to 66

      Chain drugstores from 44 – 42

Stock Price before: $27.75

Stock Price after $36.71!!!

Stock price is not our metric that we're grading out marketing plan on, but when it increases, we're definitely going to promote it! 

During period 4:

We had to make a number of actions in the Special Report menu that could not be predicted by our plan. We chose to respond to positive and negative comments on our Social Media sites.  This resulted in positive feedback. We also chose not do a line extension at this time.  Our plan calls for us to implement this in Period 6.

Coupons: increased from 4.1 – 4.5  Increased by $400K

    This was to keep returning customers happy.

Sales Force Change:  This is in marketing plan.

            Ind. Drugstores from 12 – 14.

            Detailers from 18 – 19

Discounts:

Less than 250 qty: decreased from 20 -1

More than 2500: increased from 37 – 40

Increased price by 2.5% to stay with inflation.  $5.63

Our Marketing plan described how we would increase price, but we also added a caveat that we should stay close to the rate of inflation.  In the simulation, inflation seems to be slowing down, so we are increasing our prices at a lower amount as well.

 In Period 5:

1. Bought all Surveys

Satisfaction is still the highest among all competitors

Physician Recommendations dropped from 12.9 to 12.6 over 2 periods (did not buy reports last period)

2. Focused advertising on Singles

3. Increased price by 1.6% (inflation)  New price is $5.72

Perceived price is average

Effect perceived is high!

ACCOMPLISHED ABILITY TO REDUCE ADVERTISING and KEEP BRAND AWARENESS HIGH  .. even increased it.

This is really important to address because there was some skepticism if we could do both of these at the same time.  We stayed true to our plan and accomplished our goal!  This was very encouraging.

4. Added 3 detailers: 22

We have focused on detailers because they are the driving force 

5. Ind. Drug stores sales force from 14 – 15

Total sales force is 206 now.

6. Chain Drugstores sales force increase: 42 – 43

7. Special: option 2: $1M to provide training to detailers on negative effects of product.

Stock price went up from $32.97 - $34.15.

Period 6:

Marketing Incident: option 2 and 5 for special decisions. We chose to place product advertising in a movie to reach young singles and we also chose to run an ad contest.  The total cost of the options was $1.1M, but we feel that the benefits will be many times that amount.

We Introduced Allright product

- This decision was made in our marketing plan to be implemented in this period.  We felt that by the time period 6 rolled around, we would have to do something to reach new customers in new markets.  We realized that our product already had the highest brand awareness in the cold Market and reaching new customers was becoming more difficult.  We chose the Cough market because or product had a high perceived effectiveness for the cough market and because the cough market industry leader at the time had a low perceived effectiveness rating. 

Coughcure, our competitor, raised its price to $6.59, so we set our price to be competitive at $6.09.  This is a deter from our plan, which called for a much lower price originally.  Coughcure is perceived as being very high - priced.

            Differed from plan a little b/c inflation was not calculated during plan.

Value Discount for Allright

Did not change price of Allround because entire industry is on a down swing. Inflation was -0.5

During Periods 6 and 7: 

Our budget exploded!  We didn't have enough money for anything.  We thought that with the $14M budget increase we received when we introduced Allright, that we would be able to cover expenses, but we drastically underestimated the costs of operating two separate product lines. 

We cut so many expenses that it would take me another two pages to describe them all. 

Overall, we think our plan has been a success.  All of our surveys and metrics show that we are performing well.  We're battling with our budget issues, but we still have the option of maintaining these budget cuts or cutting the new product line.  This issue will have to be addressed in periods 8 - 10.

Mini-Marketing Plan Development

This week was a huge learning opportunity.  Team 5 (my team) developed our Mini-Marketing Plan.  We're charged with improving Allround's brand and that begins with a good mini-marketing plan.

Before we developed our mini-marketing plan, our team took a good look at the results of our decisions from periods 0, 1, and 2.  Our Brand's awareness is still doing well, but our profitability and market share had decreased each of the three periods.  We know that the Marketing plan must focus on maintaining our high brand awareness and improving our brand's profitability.

In our marketing plan, we identified three key issues that are related to our goals:
1. High share of the cold market
2. Reduce costs of Goods Sold
3. Reduce perception of Allround's price.

We developed three main goals that we felt would lead to accomplishing our objectives.
1. Increase Revenues/ Units Sold by 8% ea. period
2. Increase Mkt Share by 5%
3. Maintain high level of Brand Awareness

We felt that the path to accomplishing our goals and objectives would be through segmenting the market and then implementing a target Market Selection group.
We segmented the market and then targeted Young families and mature families that purchase cold medicine at grocery stores and chain drug stores.  We felt that by advertising directly to these specific markets, we would maintain our high brand awareness.

In order to increase our profitability, all signs were pointing to hitting a new market that we aren't currently in because there is little room for improvement in our current markets.  We want to introduce a Children's cold medicine to strike into a new market.  We realize that this could cause some cannibalization of sales from our young family market, but overall, we think the move will be a good one.

Our Marketing plan was thorough and has lead to several decisions:
1. remove alcohol from our formula (survey showed a positive utility
2. produce new line: children's cold medicine
3. In the future, break into the cough market
4. target young and mature families that shop at grocery stores and chain drug stores for cold medicine.

See you next week!

SITUATIONAL ANALYSIS

This week, we’ve all been working pretty hard on our Situational Analysis and so I wanted to speak a little about some of the Metrics that I think should be used to evaluate team performance in PharmaSim.

 

Each of these Metrics help the marketing manager assess the health of the product / service.

1.  Unit Sales:  Unit sales seems to be a bench mark metric that is commonly used to guage how well ad company is doing.  If unit sales are high, but the company is not doing well, then that brings management and pricing into question.  If unit sales are low, the marketing must take action to determine the reasoning.  Unit sales drive the train.

2. Customer Satisfaction – Buyer dissonance. Do they regret purchasing our product?  How likely are they to buy again?  Customer satisfaction is the backbone of a successful business.  A high customer satisfaction might cause us to continue our steady course.  A low customer satisfaction will cause the company to go through every step of buyer dissonance and modify our approach until our customers have complete utility with our products.

3. Market Share -  knowing our level of control may be more valuable than knowing simply how many units we sold.  Market share let’s us know how much breathing room we have from the competition.  If our product controls the market, and yet we’re experiencing a loss, then we know that it may be a down market and out of our marketing controls.

4. Brand Awareness – Brand awareness is one of my favorite metrics.  I appreciate it contribution to the decision making process because this tool allows us gauge the popularity and reach of our product.   If future customers are aware of our product now, it could possible lead to future sales/growth.

5. STOCK PRICE – Don’t judge me for using this Metric. I understand that stock price isn’t a good measurement of how well the marketing strategy is doing, but share price is the metric that gets marketing managers fired! Or job security. So, we must always be aware of it.

WEEK6: ADVANTAGE ATTRACTIVENESS

Hello everyone. 

This week was very busy as we began our real group simulations and progressed through 2 periods.  We also started working on our Situation Analysis papers.  The upcoming papers will flow from using a Situational Analysis, to develop a Market Strategy, and then implement our plan. 

In the pharmasim program, my team performed well (in my opinion).  Our share price has dropped a little, but marketing managers should not measure success by the share price (that ‘s the CEOs job).  Marketing managers rate their product performance by measuring brand awareness, consumer satisfaction with the product and repeat customers. 

My group spent the first two periods really trying to assess market situation surrounding our product.  We bought every report that was available to us (which came out to about half of a million dollars).  We studied each report to assess where were had competitive advantages and where our competition was doing well. 

There were a couple of incidents that my team had to address in Pharmasim this week.  Since we had already vowed to pay more attention to the customer than the competition, when we were faced with the option of incorporating social media into our brand, we jumped at the opportunity.  Since our budget was very close to zero, especially after purchasing every report, we decided to go with the inexpensive options of using Facebook and Twitter.  Now, for almost no cost, we can connect with our consumers and truly assess how they feel about our product.  We received a favorable review because of using the Facebook and Twitter accounts and maintain the sites well. 

Another incident that my team had to over-come was the negative attention that quickly expiring products were receiving from our distributors and vendors.  We had some product that was expiring within 6 months and it was making the product hard to sell.  Also, the quick expiration date was causing confusion with our return policy.  My group decided to take the responsible action in order to represent the brand well.  We chose to pull the product from our normal distributors and use special quick turnaround vendors to sell the product.  To do this, we had to pay a $50K premium, but in the end it all worked out.  The brand’s good name was maintained and we even turned a product because the special vendors were able to sell the discounted product.

Marketing is not advertising.  Marketing is more concerned with how a company represents a product in terms of quality and benefits.   Brand awareness is extremely important, and that does have something to do with advertising.  In class we discussed the price that the Washington Post sold for.  It was almost double what the company was valued at.  What caused that difference between price and value was the worth of the brand name (goodwill). 

The reading for this week was Cohen chapters 10 – 14.  The big takeaway for me from the reading was Drucker’s four questions that every company must answer when creating their future.  One of the questions was “What opportunities does the company want to pursue, and what risks is it willing and able to accept.”  I believe that this question is more for the CEO / CFO than the Marketing Manager.  I envisioned the Marketing manager would develop alternative courses of actions and the CEO / Manager would make the risk decisions.

As a real world application, my firm answered this question a long time ago when it was building its foundation of clients and we re-emphasize the decision each day.  The service my firm chose to deliver was that of Real Estate acquisition, bankruptcy, business law, commercial litigation, employment law and loan closings.  The managing partner (and everyone else) protects our brand like any other marketing manager.  We routinely turn away or refer out cases that are outside the scope of our Market plan.  The Managing partner knows exactly what kind of future he wants to create for the firm.

Chalk Talks were fascinating.  In the Advantages – Attractiveness video, the matrix at the end showed three markets, A, B, and C.  The Market Shares were 10%, 33%, and 5% respectively.  One of the questions I had was why is it prudent to take from Market ‘A’ to boost market ‘C’, instead of using Market ‘B’’s budget?  I understand that market ‘A’ is unattractive, but if Market ‘B’ is so strong, then taking from Market ‘B’ to give to market ‘C’ shouldn’t be that harmful.  Why should we harvest from Market ‘A’, which could extinguish it, if it is profitable?  I don’t understand the desire to leave a market if the product is profitable, even if it is unattractive?

WEEK 5: MARKET ANALYSIS - CONSUMER

Hello!

This week was fast paced and serious as it was the last week to get in good practice with Pharmasim before the team assignments started.  I tried my hand at Pharmasim and failed miserably the first couple of runs.  I was making too many drastic changes at once.  I was doing too much.  I learned a lot about how sensitive the effects of marketing could be from period to period.

Some of the lessons I learned were that quality of advertising counts.  The money saved from moving down to a less qualified advertising agency does not truly add anything to the bottom line.

I did some tweaking in the early periods of the first simulation this week with the percentage of marketing directed towards Independent Drug stores.  I thought that since the grocery stores were not that big for us, that our company should focus on the places where people go strictly for medicine. The scenario tells us that we do not have a problem bringing in customers, we have a problem keeping them.  My share price plummeted $3/sh by increasing this from 6% to 16%.  I obviously over did it.
I wised up and realized that since we commanded so much of the market, consumers want our product.  So why were they leaving.  I spent less on advertising and then I wondered if our price was a little too high so I lowered it by 25 cents. Worked like  charm.  The next period our share price rose by $2 back to a healthy $33.03/ share.
After this, I made a series of bad move that I learned from.  Most notably was my horrible decision to add a new line of product called All round +.  This tanked the mkt share price and placed me well over budget at the same time.  In the next period I tried to salvage the company by discontinuing the new line but it was too late.

In class this week, we focused on the consumer.  Market analysis is where marketing managers earn their bucks and figuring out the customer is a lot more important than learning about the competition.  One of the concepts discussed in class was the difference between product features and product benefits.  We also hit on this in our book.
In chapter five, Lehman and Winer talk about product features and product benefits.  Features need to provide a useful function for the customer, otherwise it is not a benefit.  In the book, the benefit simply seems like a description of what he feature can do (or the feature’s ability).  If this is the case, why don’t marketing managers promote the benefits first, and then back them up with the label of the feature once the customer asks how it’s possible?  Why doesn’t Lehman teach us to do this?  For example, instead of leading with ‘The car has a North star engine.’  The marketing manager could have the company lead with “The car will not need a tune-up for the first 100,000 miles.  That sounds a lot better to me.

In the discussion post, one of our classmates made a comment that I felt that I should comment on.  Randall posted "The buying decisions video discussed the decision making continuum.  After watching the video it seemed that keeping the customer in the normal range to ensure repeat purchases.  Doesn’t this suggest that quality to ensure customer retention is more important that mass marketing campaigns?"  Yes Yes Yes Randal.  Mass advertising can only get you so far.  True marketing will focus on the consumer.  The consumer wants benefits and the consumer wants those benefits to be of the highest quality.  I think that is why we're going through so much in pharmasim simulation.  Our product is well known (I think our advertising department is doing very well... so well, that I tend to take money from them), but something must be wrong with our product (or it could be price) that is causing consumers to leave.

This brings me to the 'Try This' for this week. 
I spoke to a family member about what type of Cold medicine they use.  I asked them a series of questions about cognitive dissonance, but did not tell them what Cognitive dissonance was nor did I use that term in the
Cognative Dissonance is the uncomfortable tensions or feelings that occur when we make decisions that conflict with our beliefs. Basically, I told them have they ever bought cold medicine and then wished that they had bought a different type / brand.  So, I basically told the about post purchase dissonance because I believe that when someone is sick or hurting, they are making a high involvement decision.
My Mom informed me that she just uses the store brand (whatever store she happens to go to) Nyquil.  This means that she does not buy Nyquil, she buys the generic drug that is produced by the drug store she goes to (most likely Walgreens).  She told me that she never feels any guilt about the purchase.  She is satisfied with it.  Most of the time, she takes it at night, she goes to sleep, she wakes up and her cold is gone.
I explained to her that the most likely reason that she never feels any post purchase dissonance is because this is not a high involvement decision for her.  This is because of her associations that she has created between her and the drug over the span of 50 years.
1. My Mom believes in Nyquil to cure all of her cold symptoms (even if it’s not specifically made for that).   I’m sure that because she sleeps an entire night after taking it, her body does most of the healing on its own.
2. My mom has financial limitations, so she picks a cheaper brand (store brand) and this reduces the amount of dissonance that she feels.  If she had purchased the actual Nyquil brand, she might feel bad because she is not in a great financial situation.
3.  My mom thinks that the store brand is just as good as the ‘name brand’ because in order for the medicine to be of the same type, it has to have the same ingredients.  She’s mostly accurate.   Her knowledge also lowers the amount of dissonance she feels.
I told her that the combination of those three associations is why she can purchase her Nyquil knock off and feel good about it.
Advertising and Marketing by Nyquil actually hurt the brand in this case b/c it made her want Nyquil, but not pay that price… so ‘she had no choice’ but to go with a cheaper option.

In conclusion this week was blur.  I was able to advise my Mom purely by watching the Week 5 videos on Cognitive dissonance.  It was very helpful  and I explained most of the concepts in the above paragraph.  Being that this is the last opportunity to practice Pharmasim, I'm going to stay up late to work on it.  It has become very addictive.