Marketing simulation managing segments and customers

Marketing Simulation Strategy Assignment- McGraw Hill Simulation Game

Carolyn Sterenberg

Gurpartap Baidwan

Husayn Nathoo

Abdullah Muhammad

Team Strategy

Serpents Backpack Co. is a high end backpack company, boasting elegant, and eye-catching product designs and features. We at Serpents strive to deliver the best possible product for our targeted market of luxury-trend followers. With a strong commitment and organizational culture founded on the implication that luxury trends aren’t simply a hobby or side interest, but rather a lifestyle. We deliver a classic and luxurious backpack at a price that’ll make you say “the price is right!”

Segment

In the simulation there are five market segments available to choose from. In no specific order they are: university, luxury-trend followers, outdoor enthusiasts, school children, and urban commuters.

· Segment

· Luxury-trend followers

· Highest % growth rate (7%)

· Niche market

· Really narrow and hammer down what they want and monopolise the segment

· Less risk of competition - many will turn away as they are the smallest segment group

· Can afford an expensive backpack

· Increase margin/unit

· Ensure we rank high in terms of profit

· Ensure we are able to retain significant profit post distributor cut(s)

· Product features

· Segment needs and wants:

· 62% comfort

· 31% capacity

· 31% durability

· 16% waterproof

· 16% eco-friendly

· Teardrop rucksack shape

· Pleasantly tapered, stylish pack

· Appeals to the segment as they care for their appearance and aesthetic

· Ranks highest for comfort at “6”

· Comfort is the main prerequisite for our chosen segment

· Basic straps

· They are inexpensive straps to help boost profit margins

· Provide even support and basic comfort

· Purchasing a more comfortable strap means doubling, even tripling the price of this one

· Instead boost comfort in other areas and keep costs down

· Features designer tag

· Luxury-trend followers will be able to do exactly that - follow a luxury trend

· “Appeal to the fashion forward by licensing a designer tag”

· Luxury material

· Provides extremely high levels of comfort and durability - boosts overall score and aligns our product with the needs of our segment

· Appeals to the luxury-trend followers as the name of the material itself is “luxury”

· “Finest quality high-grained soft leather provides a comfortable feel and long-lasting durability”

· Tan colour

· Upon research during the persona assignment, it was revealed that neutral colours take the cake for luxury-trend followers

· Tan is a neutral and popular color choice for those aiming to boost their aesthetic in a high-class manner

· Overall segment needs and wants fulfilled

· In the demo mode, we went in and tested how our segment would like or dislike our product design by viewing their feedback

· “Exactly the kind of pack I need”

· “Has many of the special features I am looking for”

· “I love the colour of this pack!”

· “It’s the perfect size”

· All feedback received from our target segment

· It was important to keep the price of the product as low as possible, considering the retail price certain distributors might decide to put up (lower than our MSRP)

· Pricing strategy, actual price and margin

· With our current product design, the price of production equated to $44

· The average purchase price listed for the segment states “$70” however, this figure seems awfully low for a luxury-trend follower segment

· By comparing the average purchase prices, it only made sense for the luxury-trend followers to be willing to spend the most amount of money on a product, this is a part of the experience of being a luxury-trend follower after all

· Because the “outdoor enthusiast” segments average purchase price is listed as $90, we priced ourselves so that we were above that figure

· The unit price we arrived at is $110 MSRP

· This allows for a significant margin per unit, specifically, $66 per unit

· This means our profit scale is 150% greater than the production cost, a fair position to be in

· This number also means we can make agreements with many distributors without fear of being unprofitable, or significantly lowering our profit margins

· Upon feedback in demo mode from our target segment, we determined an MSRP of $110 is the perfect price as the segment responded with “the price is right!”

· Distribution decisions

· With the end goal of this simulation being the team who has made the most money, mass distribution would help ensure our product is able to reach its full sales potential

· As a result of our high MSRP, the Discount Retail Chain, as well as the University Store were made unavailable to us as distributors

· However, this was of little concern to us as only 0.36% and 1.1% of our target segment, respectively, falls under those distributors customer reach

· The main distributor we seeked to employ was the Fashion Boutique, as they are a luxury retailer, with 27% of their customer reach being luxury-trend followers: the highest of any distributor

· Ensuring our profit margins were high as aforementioned played a fundamental role in accepting Fashion Boutiques terms as a distributor as they take the highest cut: 55% which is $60.50

· Once the production cost ($44) and the distributor cut ($60.50) is taken out of the retail price ($110), we are left with a profit margin of $5.50

· This number is unfortunately low however, it allows us to maintain Fashion Boutique as a distributor

· In keeping with our mass distribution strategy, we employed every other available distributor available to us

· Online discount retailer

· Online shopping retailer which offers a plethora of products at discounted rates

· Allows for luxury-trend followers who might not have the financial means to continue their luxury-trend venture the opportunity to continue doing so

· 5.4% of their customer reach is our target segment

· Retail price $82.50

· $27.5 lower than our MSRP

· Distributor cut 40% = $44

· Profit margin = $22

· Department Store

· Mid-level chain of stores

· Opens up our product to more purchasing opportunities

· 7.3% of customer reach is our target segment

· Retail price $99

· $11 lower than our MSRP

· Distributor cut 45% = $49.50

· Profit margin = $16.50

Conclusion

In summary, we believe this initial marketing strategy will create the largest profit for Serpent Backpack Co. The organizations profit will come through a high end luxury backpack, that is fashionable, and up to standards with the latest trends.

(Goldston, 2017)

(Hetrick, 2014)

References
(n.d.).

Goldston, N. (2017, December 29). Forbes. Retrieved November 13, 2018, from What You Need To Know About Luxury Consumer Trends For 2018: https://www.forbes.com/sites/njgoldston/2017/12/29/what-you-need-to-know-about-luxury-consumer-trends-for-2018/#538d5fce21eb

Hetrick, R. (2014, June 09). Kelley Indianapolis Hub. Retrieved November 13, 2018, from Luxury Trend Followers: Every Marketer's Best Friend: https://hub.kelley.iupui.edu/blog/_blog/luxury-trend-followers-every-marketers-best-friend.html