With a symphony of heavy data mining and simulation, my team was able to beat the competition (teams of fellow classmates) with no spending on pricey market research reports in this marketing game.
2. 1
Overview
Allstar had some big decisions ahead of it. With changing market conditions and strong
competitors, their relatively decent market share and brand recognition were not enough to
sustain and increase sales revenue and net income. Armed with the ability to experiment in the
first three periods, our team set out a game plan to methodically determine the variables with the
greatest influence over net income, sales and market share. The results of our trial and error
approach, and later refinement, were supported by business intuition, marketing strategy and
information from the case. Once we understood a few key variables, we were able to formulate a
solid base to launch us into even greater profits in the following seven periods. The three most
relevant decisions were to strengthen the indirect sales force, increase point of purchase
promotions, and to focus advertising efforts to target young families. Our position as the highest
performing team in the class with cumulative net sales of $2,134M confirms that our overall
strategy and subsequent decisions throughout the simulation were sound marketing choices.
Analysis
Company, Customers, Competitors
Much to the benefit of the OCM group, Allstar was already an established product in the market
at the beginning of period 1. The company had already developed a reputation as “one of the
most effective brands on the market at reducing multiple cold symptoms,” as well as being more
successful than average in a financial sense. That being said, there were a number of strengths
and weaknesses to the company both before and during this simulation that contributed to and
influenced our brand strategy.
3. 2
Indep Drugstore
Chain Drugstore
Grocery Stores
Convenience Stores
Mass Merch
Wholesaler Support
Merchandisers
Detailers
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0 1 2 3 4 5 6 7 8 9 10
Sales Force by Period
At the start of this simulation, Allround owned 40.4% of the cold medicine market share (23.8%
of the entire cold and allergy market). On top of this, Allround also had the highest brand
awareness, was the most frequently purchased, and had the highest trial level. This greatly
influenced our brand strategy as we did not need to create a buzz about our product, we just
simply needed to develop it beyond the point to which it had already grown. As was previously
stated, the Allstar brand had been very successful financially with its Allround product, and the
amount of money that the company had at the start of this simulation significantly affected our
strategy as well. First off, we were able to confidently invest in the most expensive advertising
agency, which was known for its high quality work. We believe that this helped us to stay ahead
of the curve in a promotional sense, especially considering that our OCM group believed, at the
start of period 1, that
we already had more
promotional support
than any other brand on
the market. This
financial stability also
allowed us to employ a
substantial sales force,
totaling nearly 1000 employees by the end of the simulation. Our initial approach to staffing was
to focus our sales force on two of the indirect channels, which had proven successful in our trial
periods. This also meant that much of our business was being done before the product reached
the consumer. With the added income, we were later able to add employees in direct sales
channels as we saw fit.
4. 3
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Aches Nasal Chest Runny
Nose
Cough Rest All but
Rest
StockPrice(inPer3)
NetIncome($MinPer3)
Advertising Message Strategy
The company possessed some weaknesses at the beginning of the simulation that contributed to
our brand strategy, but we chose to focus on these weaknesses more as opportunities. First, the
Allstar brand had a limited product line compared to the competitors, specifically when it came
to the allergy market. In addition to that, Allround was often viewed as an exclusively nighttime
product due to the alcohol and antihistamine in the ingredients, which limited the scope of the
product’s use. Removing the advertising message that it “Helps you sleep” was profitable in the
trial periods, so we not only
removed that message but also
removed the alcohol when we
could, increasing customer
satisfaction.
In later periods we were able to
further reformulate Allround, as well as introduce a non-drowsy allergy medication, Allright,
which greatly contributed to our net income by the end of the simulation. Based on our initial
experimentation and business intuition, we decided that our Allround brand was established well
enough that promotional trials were unnecessary and unprofitable. We did, however, utilize
promotional trials to promote the introduction of Allright. With the other competitors in the
market, we knew we needed to invest in co-op advertising to maintain and improve our shelf
space.
Allstar Brand was trying to fulfill the consumer wishes by helping to alleviate their cold
symptoms. The consumer awareness and satisfaction were key drivers of our efforts as these
figures were indicative of future sales. The four areas that we primarily focused on were
5. 4
analgesics, nasal congestion, chest congestion and coughing. These areas were always at the top
of symptoms reported by the consumer. This was accomplished primarily by our Allround
product which focused on aches, decongestion and cough suppression. Additionally we added
the expectorant in period 7 which helped with chest congestion by loosening phlegm. This
helped us to meet the consumers’ needs as it came to a cold remedy. Our brand expansion to the
Allright product allowed us to diversify the product line and meet additional customer needs
without cannibalizing demand for our main product. This was the first product available on the
market which served to answer our consumers’ needs.
We heavily targeted young families throughout all periods for several reasons. First, our
experimentation showed that targeting them and them alone was the most profitable option.
Second, we believed that more mature customers were set in their ways; their habitual shopping
patterns would be difficult and costly to change. Most importantly, if young families were
attracted to Allround’s products and could be retained, this segment would have the greatest
lifetime value.
Customers want a quality product that will deliver effectiveness at a reasonable price which we
provided for them. Brand Awareness increased from 74.1% in period 1 to 93.4% in period 10
for the Allround product with over a 51% retention rate.
Our ad message to the young families was a primary and reminder message type. We wanted to
create awareness and stimulate demand for new customers with the primary message and then
maintain the awareness and demand with the reminder message. We felt this worked very well
with this target segment as we saw successful purchasing, conversions and retention. In our
trials, promoting benefits or product comparison were not as profitable as the primary and
reminder, so we continued to focus on those throughout the simulation. This strategy showed to
6. 5
be effective in targeting the consumer, as demonstrated by our approximate market penetration
of over 70% and increased average purchase per year of 3.5 units.
We increased consumer satisfaction by listening to the customer and acting on it - they did not
want alcohol to cause drowsiness. At the end of period 2 when we removed the alcohol from our
ingredients we saw a huge increase in consumer satisfaction from 58% to 66% which we
maintained for the most part through the 10 periods. We saw a minor dip when we maxed out
the expectorant in a subsequent reformulation. We realized that customers and physicians alike
wanted to avoid excessive medication. Therefore, we made the appropriate changes to meet the
consumers’ request by reducing the dosage of the expectorant.
Our price was set at a value for the consumer. Our prices were actually lower than most
consumers anticipated and therefore have a higher value to the consumer. This strategy
combined with our high brand awareness and consumer satisfaction provided great results for
The Allstar Brand.
Trends that we observed were that retail sales continued to increase each period. This trend
helped us focus on the consumer by providing appropriate awareness primarily in grocery stores
and drug chains. We influenced stores to allocate additional shelf space to our brand in order to
provide more products for the consumer. By focusing increasing numbers of sales force
employees at the grocery stores and drug chains we made it convenient for the consumer to pick
up the cold medicine without having to go out of their way. Symptoms reported remained fairly
constant, so consumer demands for products addressing those symptoms could be easily
predicted. These trends helped us to maintain our focus on the customer, modify our formula
appropriately, introduce a new product to meet consumer needs, and reject the option to
introduce a brand extension that would have provided minimal benefits for the consumer.
7. 6
From the outset of the simulation, the threat of competitive activity within the market was made
clear. The case specifically states that the industry had recently seen several product
introductions as well as major increases in promotional and advertising expenditures. Staying
abreast of developments taking place with competing brands proved useful. It was helpful to be
aware of their relevant operating statistics such as sales force allocation, advertising
expenditures, and message and promotional programs, as a gauge to determine appropriate
output levels for the Allstar brand. Moreover, it was our goal to beat our competition from the
very beginning as we believed in creating an innovative marketing strategy as opposed to a
reactionary approach. For this reason, we did not mimic the competitors’ actions and instead
stayed true to our initial strategy based on our research and analysis. This tactic proved to be a
successful one as we were able to consistently gain market share and increase profitability.
Our primary competitors changed through the course of the simulation. In the earlier rounds,
Coughcure and End were identified as our primary competition followed by Besthelp and Extra.
We focused on these brands since they had the strongest presence in the cough and cold sector.
Although Allround considered itself an allergy relief medication, the bottom line was the public
did not share this view. Allround’s market share in allergy product category was 0% in the
opening period. For this reason, our initial concentration focused on the cough and cold
segments. Once Allright was introduced in later periods to specifically address the needs of
customers suffering from allergy symptoms, the scope of our attention grew accordingly.
Careful consideration was given to the activities and developments with Believe and Defogg,
two of the strongest performers in the allergy category.
We recognized that it is imperative to be well informed of competitors’ movements. However,
we did not want to let their decisions sway us from continuing with our own marketing strategy.
8. 7
If we could beat our competitors to the punch, we would be able to continue with our plans as
opposed to spending time, money, and efforts on countering their efforts. For this reason, we
never used any of our budget for comparative advertising campaigns or marketing reports in
addition to the data automatically generated in the simulation. We believed our brand and
product were strong enough to stand alone with primary and reminder advertising messages.
II. Product, Pricing, Promotion, and Place
The Allround product was an effective, affordable and well known remedy for cough and cold
symptoms from the start of the simulation. However, there was concern that the multi-symptom
“shot-gun” approach provided excessive medication. We corrected this problem by dropping the
alcohol in the Period 3 reformulation. Customers not only wanted to avoid over-medicating but
advertising results showed there was little interest in the benefit of sleep assistance.
In Period 4, we chose not to move forward with the line extension known as Allround +. Since
the ingredients and benefits were so similar to the original formula, we did not believe this was a
valuable line extension to Allstar Brands. In fact, we saw this option as having the potential to
cannibalize our existing product offering.
9. 8
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60.00%
70.00%
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Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10
MarketShare
ManufacturingSales($M)
Sales and Market Share - Allergy Segment
Allright Believe Defogg Allright Believe Defogg
We introduced
Allright in Period 6. The
reasoning behind this
decision was to create a
strong presence in the
allergy relief sector that we
had previously been lacking.
Our advertising for Allright focused on relieving allergy symptoms and not causing drowsiness.
These were two areas that were not promoted for Allround. Since the Allround and Allright
products addressed separate sectors, cough/cold and allergy relief respectively, we were
confident that the addition of Allright would not cannibalize Allround sales. We strongly believe
that being the first to introduce this new product had a profound impact on our sales. Having a
strong company performance in prior rounds made us confident that we were prepared to launch
a complimentary product. The strong brand awareness of 90%, existing sales support, and large
budget of $18M resulted in a 42% market share in Allright’s first period on the market.
Our final product adjustments took place in Periods 8 and 9. We added the maximum dosage of
expectorant in Period 8 because cough and chest congestion were repeatedly the most
complained about symptoms. We revised this decision in Period 9 to a lower dose of 100 since
we realized that this was in line with our competitors’ formulations and our customers want to
avoid overmedicating.
Our pricing strategy was initially based off trial Periods 1 through 3. The result of the trials
showed that starting at $5.16 MSRP maximized net income and nearly maximized retail and
manufacturing sales. At this point we also offered minimal discounts to the wholesale sector and
10. 9
the 250-2500 unit bucket. This was to drive higher volume sales. We looked at the market
conditions in each period and based our decisions on the market in general as well as inflation.
We used Sully and Rogers, the Tier 2 advertising firms in the starting periods. With increased
budgets in later rounds, we had the additional funds to use BMW, the Tier 1 advertising firm. As
mentioned earlier, young families were our primary advertising target with primary and reminder
messages. Benefit messages were implemented when the Allright product was introduced.
Point of purchase promotions proved to increase brand awareness, market share, and unit sales.
We did not do point of purchase promotions in convenience stores since this was not profitable
in trials. Co-op advertising improved shelf space figures. We did not have a strong response to
coupons so these were kept at minimal levels. In our trial periods, we found that offering free
trials was not profitable for Allround. However, we chose to offer free trials of Allright since it
was a new product and this was a profitable promotion.
Initially we focused on indirect sales force; specifically merchandisers and detailers. Our direct
sales force was minimal coming out of Period 3 and this was an area we continuously increased
across each subsequent period. Convenience store sales increased in later periods (starting in
Period 6, and through period 9) and the sales force was allocated accordingly.
Take-Aways
If we could replay the simulation, we would have paid closer attention to details. One example
where we overlooked information was when we maxed out our expectorant having the
knowledge that our customers were hesitant of over-medicating. We got better results when we
lowered the expectorant dosage, so in hindsight this was consistent with what we knew about
consumers based on the case.
11. 10
Since our allergy medication was the first non-drowsy product in the allergy segment, the pricing
direction was not evident. More research and comparative analysis might have enabled us to
price the product more efficiently and maximized revenue from this product.
One other factor we did not prioritize in our research and analysis was how to effectively manage
our capacity constraints and expansions. Since these factors were overlooked, there were
potential savings that we could have missed.
The amount of variables to consider in a marketing plan was much greater than we first realized.
It was a little daunting and overwhelming at first, but once we broke it up into groups, we started
to understand how they influenced performance and interacted together.
The simulation deepened our appreciation for the relationship between marketing research
concerning consumer needs and communicated these findings to the R&D team responsible for
product reformulation, expansion and when necessary, product discontinuation.
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$1,037
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$1,508
$1,789
$2,135
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Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10
Team Performance- Cumulative Net Income