Pharmasim simulation answers

Team A

Introduction......................................................................................................................................3

Manufacturer's Suggested Retail Price............................................................................................4

Volume Discount and Promotional Allowances..............................................................................5

Advertising Budget..........................................................................................................................5

Advertising Agency.........................................................................................................................6

Advertising Messages......................................................................................................................6

Promotions.......................................................................................................................................7

Sales Force.....................................................................................................................................10

Segmentation..................................................................................................................................11

Line Extensions..............................................................................................................................12

Cumulative Net Income and Stock Price.......................................................................................14

Period Nine....................................................................................................................................15

Conclusion.....................................................................................................................................16

References......................................................................................................................................17

Appendix A....................................................................................................................................19

Initial Strategy....................................................................................................................19

Decisions, Results, and Interpretations..............................................................................21

Appendix B....................................................................................................................................28

Net Income Graphs and Charts..........................................................................................28

Manufacturer Sales and Stock Price Graphs and Charts...................................................29

Introduction

Marketing strategies only result in superior returns for an organization when they are implemented successfully. Kotler (1997) describes implementing a marketing strategy as the process that turns plans into action. Team A’s PharmaSim plan was to utilize the initial strategy report as a template for decisions and adjust accordingly based on market conditions and performance. Accordingly, the team’s initial short-term strategy was to steal market share in the cough segment by adjusting the advertising, segmentation, and demographics and competing against the market leader Coughcure. This strategy proved ineffective, most likely due to the competitor pursuing a focus strategy that allowed them to achieve an even greater differentiation in the cough market segment.

The team then altered the strategy to strive to improve Allround's market share and sales by further penetrating the existing market base. Kokemuller (2016) contends that this approach requires additional marketing and more focused sales efforts to penetrate more deeply into an existing customer base. This approach worked, only after a significant amount of additional money was invested in the sales force and promotions.

In the early stages of the simulation the team acted conservatively in terms of budget and was hesitant to spend resources on research or analytics. Over two consecutive periods, the stock price lagged and net income declined. Therefore, in an effort to identify the issues, the team began to invest in reports relevant to the performance challenges so that educated decisions could be made. McClymont and Jocumsen (2003) suggest that the use of customer research to pursue segmentation and targeting strategies has afforded opportunities to significantly improve marketing effectiveness and reduce costs. This proved to be an effective use of resources and performance improved.

Having learned from Allround’s performance, and making the necessary strategy adjustments, Team A was prepared to implement the long-term marketing strategy and launch Allright. The team purchased and reviewed numerous reports, aligned the pricing and advertising to enter the market as a pioneer in the product life cycle, and adjusted the sales force and promotions accordingly. The Allright launch was a success. The Allstar brand experienced rapid revenue growth and the stock price increased. This formula subsequently served as the foundation in making the remainder of the PharmaSim decisions. “The road to successful execution is full of potholes that must be negotiated for execution success” (Hrebiniak, 2005, p. 5).

Manufacturer’s Suggested Retail Price

In marketing a product many key factors should be considered, the price is amongst one of the most important. There are several important things to consider such as the target group purchasing the product, the effectiveness of the product, and brand loyalty. Pricing of a product depends on all these things and can be detrimental to an upcoming product if you don’t get it just right.

The team decided to increase the price in period 1 after purchasing the pricing report. The pricing report allowed us to compare our price to our competitors and adjust accordingly. We quickly learned how sensitive changes in pricing could be in period 2 when we increased our price significantly from $5.39 to $5.61. In the PharmaSim report for that period we were told that our MSRP was too high also evidenced in the decline in stock price from $49.82 to $39.89. Consumers did not react well to the price increase and as a result, our net income and stock price significantly decreased. In the following period we lowered our price down to $5.61 in response to the negative feedback we received.

We purchased the pricing report in period 5 in order to establish a price for our new non-drowsy product, Allright. We set the beginning price conservatively at $5.50 for Allright based on other allergy products on the market but soon realized that this was not the best approach since Allright had the pioneer advantage of a new unique product. We purchased the pricing report again in period 6 when we got the feedback that our price was too low and increased Allright's price a whole dollar to $5.50.

Volume Discounts and Promotional Allowances

When dealing with the volume discounts we quickly learned that it was very important to consider everyone that was offering his or her assistance. It was important to make sure that the retailers were supporting our brand and continued to do so. We also noticed that in the beginning we were steadily deemphasizing our allowances and discounts compared to competition.

For example, in period 2 the team adjusted the volume discounts for the 2500+ and < 2500 groups to 35% for period 3 based on data from the dashboard and a theory that this may improve Allround’s sales in other groups. This did not work, the 2500+ group produced 0.0% the following period and the volume discounts were realigned across all groups to be more even. We learned that supporting the people that support us is very important. As we began to make sure they had full support both our net income and stock price increased.

Advertising Budget

In the beginning of the simulation we were conservative with our spending and we often had additional funds remaining in our budget. When the team started with the simulation we considered Allround to be in the growth stage of the product life cycle and wanted to keep advertising effective. We kept the advertising budget at $20 million until period 2 when we decreased it to $15 million. The team brought it back up to $20 million in period 4 after we experienced a decrease in stock and net income in the last few periods.

In period 5 we brought the budget again down to $15 million so we could use another $15 million to introduce our new product, Allright. In order to help with the introduction of our new product, we were given additional funds to advertise and promote Allright. We then kept Allround's advertising budget steady at $17 million to maintain our advertising as we focused on Allright too. We were able to get a more comprehensive look at our competitions advertising budget once we purchased the advertising report in periods 4, 5, and 7. This helped us with our overall budget allocation as well as our message decisions.

Advertising Agency

Allround started the simulation with Brewster, Maxwell, & Wheeler as our advertising agency. We decided to switch to Sully and Rogers for period three. We made this decision based on our high brand recognition. According to the brand awareness portion of the purchase survey, Allround had 79.3% brand awareness. In addition to our strong brand recognition, we wanted to increase our net income. Allround continued to be represented by Sully and Rodgers for the remainder of the simulation which proved to be a positive decision. Our brand recognition continued to remain strong and our stock price and net income all increased. When we introduced our new product, Allright, we remained with Sully and Rogers and continued to be effective.