Markstrat Simulation

1. PARIS – BOSTON
www.stratxsimulations.com
Dr. Easwar Krishna Iyer
GREAT LAKES INSTITUTE OF MANAGEMENT
THE MARKSTRAT CHALLENGE - INTRODUCTION
B2C – DURABLE GOODS

2. VERY IMPORTANT NOTE
There are 3 aspects to understanding and mastering Markstrat
Core Skill What all does it entail Faculty’s role
Marketing
Strategy
• Understanding competitive markets
• Targeting and Product development for a given target
• Demand Forecasting
• Pricing, Price Dynamics
• Prorated investments in P3 [Place] and P4 [Promotions]
• Understanding the power of trade offs
• What is the appropriate type of data to be used here
Data
Access
• Where is the data available
• Which data takes priority over which other form of data
• Am I using the right scale
• Where does the handout give all these info?
• Where does the Markstrat page give the relevant info
• Which hand out gives which info [larger one gives all info]
Screen
Navigation
• What are the various screens
• Which is a read only screen
• Which is the write screen
• Who should be writing
• When should data entry be done
• How to avoid data entry errors

3. Your role for the next 8 Years [8 Rounds]
Work in a highly competitive market
Target consumer segments and position your
products
Interface with R&D to design & develop new
products, launch them and improve existing ones
Interface with the production department
Make marketing mix decisions: pricing, advertising, …
Decide on the size and priorities of your commercial
team
Order market research studies to get up-to-date
information for decision making.
Your business results – overall sales, market share,
profitability, margins, contribution, R&D Focus
– are all combined in Share Price Index (SPI)
3
EA
STP
NPD
SCM
P2,P4
P3
MR
SM

4. Getting
started
Managing
your firm
The
Markstrat
World
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Introduction to the Markstrat Challenge - Part I

5. The Markstrat World
A large territory with a highly developed economy
A population of 80 million inhabitants, 40% Urban (in the top five cities), 25% in
smaller urban areas and 35% rural
Inflation and GNP growth are fairly stable
No major political, social or economic event is anticipated in the near future
Currency: Markstrat Dollar ($)
Markstrat
City
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Introduction to the Markstrat Challenge - Part I

6. 6 competitors fight in this market
There are 6 competing firms (teams) in each industry [We have 2 parallel industries]
Each team here (M,R,S,T,L,N) represent one of these competitors within that industry
AQUA & BLACK are 2 separate ecosystems. Each of them compete within their own
MRSTLN teams. What happens in Industry 1 no way affects industry 2.
All firms start in the same situation in terms of:
• Product specification, target consumers, brand awareness levels, market share, distribution coverage,
profitability, R&D expertise, ...
Your subsequent marketing strategy reflects your capability to grow and adapt from this
situation
All competitors operate under similar budget constraints, with annual budget granted as
a percentage of past period profits (EBT).
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Introduction to the Markstrat Challenge - Part I
Team M Team R Team S Team T Team L Team N

7. Each firm will compete in
two product categories
You can market up to 5 brands in each category at a given time
• Independent
• Not substitute
• Not complement
SONITES VODITES
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Introduction to the Markstrat Challenge - Part I
Can you come up with Independent,
Non-Complementary Product pairs in
Real life Consumer Durables Markets?
 Washing Machines & Air Conditioners
 Refrigerators & Cooking Range
 Microwave Ovens & Television Sets

8. Sonite brands are already marketed,
Each characterized by 6 main attributes
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Introduction to the Markstrat Challenge - Part I
Stick to the number range given during Product Design
NUMBER OF
FEATURES
5 – 20
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

9. No Vodites exist yet.
Experts believe that they will be characterized by
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Introduction to the Markstrat Challenge - Part I
Stick to the number range given during Product Design
RESOLUTION
20 – 100 LINES/MM
ENERGY EFFICIENCY
10–100 BIO
COMPUTATIONS/WH
CARBON
FOOTPRINT
5 – 50 KG
CONNECTIVITY
INDEX 3 – 10
NUMBER OF APPS
5 – 100
BASE COST
MINIMUM $10

10. It is easy to recognize the origin of the brands from
their names
Product
Category:
O = Sonite
E = Vodite
Company
marketing
the brand:
L, M, N,
R, S, T
Freely chosen
letters or numbers
T O NIC
M E LODY
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Introduction to the Markstrat Challenge - Part I
Preferably stick to 4 characters
The name has no bearing in your success
(Unlike real markets)

11. Sonite consumers have traditionally been classified into 5
segments
• Highly interested in Sonite product
• Demand high performance products
• Quite price sensitive
EXPLORERS
(Ex)
• Personal and professional usage
• Look for high quality, high-performance and easy-to-use products
• Can afford expensive products
PROFESSIONALS
(Pr)
• Good product knowledge through extensive product comparison.
• Demand high quality–price ratio
• Quite price-sensitive.
SHOPPERS
(Sh)
• High income level
• Demand performance and convenience
• Purchase expensive products
HIGH EARNERS
(Hi)
• Cautious in the way they spend their money
• Demand cheap, low-performance, average convenience products
• Future growth rate could exceed forecasts.
SAVERS
(Sa)
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Introduction to the Markstrat Challenge - Part I
Classic
STP
To whom
do you
sell?
Try to make your own team-wise excel sheets of H-M-L behaviors across multiple parameters

12. Sonite & Vodite customers purchase through three
distinct distribution channels
• 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.
Specialty
Stores
• 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
Mass
Merchandisers
• Includes web-only merchants and retailers’ websites
• Low but significant percentage of sales are done on the web
• High convenience as consumers shop from home
• Almost unlimited choice and easy comparison
• Likely to become more important in the next 5 to 10 years.
Online Stores
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Introduction to the Markstrat Challenge - Part I
Where
do you
sell?
Continue your multiple parameter mapping on where each segment buys
Similar to
real markets

13. Initial studies have pointed to a different segmentation scheme for
Vodites
Followers
Early
Adopters
Innovators
Sales
Time
Typical segment size evolution over time
02/06/2023 Introduction to the Markstrat Challenge - Part I 13

14. Getting
started
The
Markstrat
World
Managing
your firm
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Introduction to the Markstrat Challenge - Part I

15. Your objective
Maximize your Share Price Index
You will have to optimize:
• Market share
• Sales growth
• Net contribution
• Cumulative net contribution
• R & D investments
02/06/2023 Introduction to the Markstrat Challenge - Part I 15
Y
x1, x2, x3, x4 …
Can you think of Tradeoffs?
Market Share Vs. Margin driven Contribution
With Price as the Defining Variable
It is a classic Regression Game in which we know the variables
but NOT the Beta Functions !!!

16. Winning MarksTraT is possible …
Only by Learning; not by Gaming
As far as Learning goes, this is
ANADHIMADHYANTHA
No specific beginning, middle or end …

17. From Data to Strategy
You will need some analysis before setting a strategic direction for your firm
Data Information Strategy

18. Research studies provide market data. Your task is to prioritize,
digest & interpret them
Consumer survey & consumer panel
Distribution panel
Semantic scales
Multi-dimensional scaling (MDS)
Market forecast
Industry benchmarking
Competitive advertising & commercial team
Advertising and commercial team experiment
Conjoint analysis
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Introduction to the Markstrat Challenge - Part I
SUM UP OF THE ANNUAL REPORT
OF ALL COMPETITORS
MR OUTPUTS OF SURVEYS
AS RELIABLE AS ANY MR SURVEY
MARKET MOVEMENT INFO
FROM POS
MARKET PERCEPTION OF YOUR
PRODUCT ATTRIBUTES
PERCEPTUAL MAPS
ESTIMATES OF P3 AND P4
R&D FOR THE ABOVE
SALES & GROWTH FORECAST
PART WORTH ANALYSIS
UTILITY CHARTS
HOW TO DESIGN
– THE PRE GAME
HOW TO POSTION
– THE POST GAME

19. Once your strategy is clear, you should make a number of tactical
decisions each year
Marketing Mix
• Production planning
• Pricing
• Advertising & segmentation strategy
Commercial Team
• Size of commercial team
• Allocation across distribution channels
• Allocation across marketed brands
Market Research
• Ordering industry-wide market studies
• Ordering market-specific market studies
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Introduction to the Markstrat Challenge - Part I
P1
P2
P4
P3

20.  STRATEGIC  TACTICAL
 NON-CYCLICAL  CYCLICAL
• New Product Introduction
• New Market Entry [Vodite]
• Product Attribute Planning
• Research and Development
• Budgeting
• Loans
• Production Planning [P1]
• Pricing Planning [P2]
• Distribution Planning [P3]
• Communication Planning [P4]
• Inventory Management
• Creation / Commn Alignment
Critical
SLIDE

21. Making Production Planning Decisions
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%
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Introduction to the Markstrat Challenge - Part I
Will be
explained in
next slide

22. 02/06/2023 Introduction to the Markstrat Challenge - Part I 22
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
What you
THINK
What you
TYPE

23. 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
Competitors
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Introduction to the Markstrat Challenge - Part I
Optimism ending in Inventory Carriage is easily measurable
Pessimism ending in Lost Sales is not so easily measurable
Thankfully, we have a proxy ….

24. Brand prices must be set once a 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
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Introduction to the Markstrat Challenge - Part I
In this context, every team is
advised to have either :
 Brand Owners
(3600 ownership of a brand)
OR
 Function Owners
(3600 ownership of a function)
PRICING IS ALWAYS A
TRICHOTOMOUS DECISION

25. Sample prices and contributions
Assuming a price of $400 and a transfer cost of $125
Specialty
Stores
Mass
Merchandisers
Online
Stores
Average Discount None 10% − $40 5% − $20
Actual retail price $400 $360 $380
Distribution margin 40% − $160 30% − $108 30% − $114
Selling price $240 $252 $266
Transfer cost [SAME] $125 $125 $125
Unit gross contribution $115 $127 $141
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Introduction to the Markstrat Challenge - Part I
Important
Slide
DECISION 01 IN YOUR
HAND - PRICE
DECISION 02 IN YOUR
HAND - COST

26. 02/06/2023 Introduction to the Markstrat Challenge - Part I 26
Advertising decisions must be made each period for each of your
marketed brands
To build brand awareness
To make consumer familiar with product
characteristics and price
To develop demand for the whole market
To influence the decision of distributors to
carry or not your products
To create a barrier to entry to your
competitors
Media budget : to purchase
media space and time
Research budget : to improve
the quality / persuasive power
of your message
Segmentation Strategy:
Indicate which consumers
should be targeted
POWER PERCEPTION PRORATED POSITIONING
You will get a
sliding bar for this

27. 02/06/2023 Introduction to the Markstrat Challenge - Part I 27
Commercial Team Decisions
You decide the size of your commercial team for
each channel and brand
Your commercial team is responsible for
obtaining and entering orders, and for
supporting distributors
• visit stores, distributors and wholesalers
• Enroll customers in trade programs
• Help stores organize and conduct promotions
• Take orders and handle out of stock situations
• Participate to trade shows
Its cost is proportional to the number of
allocated people

28. Each firm receives a marketing budget for the coming period
The budget amount is based on the previous period’s performance
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Introduction to the Markstrat Challenge - Part I
40% of previous year EBT,
with a minimum of $7m 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
Y N
Unlike in real markets,
this amount will lapse
in not used

29. Understanding Brand Contribution
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Introduction to the Markstrat Challenge - Part I
Read &
Understand
[ENOUGH SUCH INFO]

30. Understanding your Company P&L
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Introduction to the Markstrat Challenge - Part I
Read &
Understand
[ENOUGH SUCH INFO]

31. The simulation starts at the end of the initial period
.
. The new
management (you!)
make decisions for
the next period
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Introduction to the Markstrat Challenge - Part I

32. The decisions for the first period are limited in scope
You will not be authorized to :
• Introduce new products, modify or withdraw existing ones
• Start R&D projects
• Specify perceptual objectives for communication
Get familiar with Markstrat and with your teammates
• Gather information
• Do not make any major changes in your firm's operation
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Introduction to the Markstrat Challenge - Part I

33. Organize yourselves and manage the group
process
Time
pressure
Conflicting
opinions
Information
overload
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Introduction to the Markstrat Challenge - Part I

34. The
Markstrat
World
Managing
your firm
Getting
started
02/06/2023 34
Introduction to the Markstrat Challenge - Part I

35. Starting a working session – Option 1
1. Sign in
www.stratxsimulations.com
using your Participant
Activation Key (PAK)
2. Click the Markstrat
Logo
02/06/2023 Introduction to the Markstrat Challenge - Part I 35
3. Enter the
information given by
your Instructor
Go to www.stratxsimulations.com

36. 02/06/2023 Introduction to the Markstrat Challenge - Part I 36
Starting a working session – Option 2
Enter the information given by your
Instructor
Go to http://login.markstrat.com

37. Browse the ANALYZE menu to review
the available reports and studies
Click here
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Introduction to the Markstrat Challenge - Part I
Click one image
to open the
corresponding
report or study

38. You can access all decisions on the
DECIDE Home
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Introduction to the Markstrat Challenge - Part I
Click here

39. Choose a name for your firm
It must start with the
initial of your firm and
be 8 character long
maximum
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Introduction to the Markstrat Challenge - Part I
IGNORE THIS; DON’T DO IT

40. Marketing Mix decisions should be entered for
each brand
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Introduction to the Markstrat Challenge - Part I
Your
marketed
brands

41. 02/06/2023 41
The commercial team is allocated across distribution channels and
brands
Introduction to the Markstrat Challenge - Part I

42. Buying market research studies will help you make information-
based decisions
The cost of each
study is given here
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Introduction to the Markstrat Challenge - Part I
IMPORTANT

43. Check your budget at regular intervals
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Introduction to the Markstrat Challenge - Part I
Click here to check
your budget

44. 02/06/2023 Introduction to the Markstrat Challenge - Part I 44
Check your errors & warnings
at regular intervals
Click here to check
your messages

45. ON YOUR MARKS, GET SET, GO!
Respect the deadlines
02/06/2023 Introduction to the Markstrat Challenge - Part I 45