Posted in Advice on March 2, 2012
I’m in a marketing class now that uses the Markstrat marketing simulation software. We’re basically in charge of setting product pricing, hiring a sales force, investing in research and development, and allocating an advertising budget, all in a virtual environment.
I find it disheartening that the software doesn’t take into account allocations for public relations or online marketing, but like some of the other curriculum I have encountered in the EMBA program, it’s dated.
I’m enjoying the conversations surrounding marketing strategy. This week we received the results of the first week decisions for the five teams in our industry. I’m happy to report that, from an equal starting point, our team achieved the highest market capitalization and stock value.
For those of you who are interested, or perhaps doing Markstrat research of your own, the decisions that primarily impacted our first place rank in period one are:
Focus on sales force — We invested in a sales force of almost two times that of the second place team. We had 200 sales reps compared to 113, 110, 66 and 70 sales people for the other teams. The teams ranked 1 to 5, respectively, following the size of the sales force, except for teams four and five where other factors caused the team with 70 sales people to rank last.
Keep advertising cost low — Of all the teams, we were last in our allocation for advertising. I’ll list the team rankings, based on market capitalization (1 is first and 5 is last), and respective team advertising allocations for period one:
Team 1 = $5,100
Team 2 = $7,200
Team 3 = $7,250
Team 4 = $6,450
Team 5 = $8,250
Set your pricing carefully — Determining adjustments to the product price occupied quite a bit of our team’s discussion. Each team had two products, a high-end and low-end product. I’ll list the teams (again by market capitalization with Team 1 obtaining the largest share of the market), and the product price changes each team implemented in period one.
Team 1 = -12.4%| -2.2%
Team 2 = -20% | 0%
Team 3 = -10% | 0%
Team 4 = -8.4% | -10.2%
Team 5 = -16% | +16.6%
Legend: Team Placement = Low-End Product Price Change | High-End Product Price Change
Those three areas seem to be the largest drivers of results. I’ll keep you posted on how future periods turn out.