Why does the market leader use comparative messages

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.

Advertising Messages

In the first few periods we opted to try and steal market share from Coughcure, primarily by altering our Advertising messages. We chose to compare to Coughcure with a 45% emphasis in the comparison message section. This strategy proved ineffective. Allround was known as a cold medicine and therefore we switched the comparison company to Besthelp, again with a 45% emphasis. Allrounds performance improved. The team often struggled with how to allocate the percentages amidst the messages and consequently did not always perform as well as we could. In period 2 we decided to reformulate Allround and removed the alcohol. At this point benefits was at 35% and we were promoting that Allround helps you rest. It wasn't until the following period that we changed this messaging to remove helps you rest and add minimizes side effects.

When we first introduced Allright in period 6, we put most of our advertising messages on primary since it was a new product and we needed to create awareness. The team decided that we could lower the primary message percentage by the second period since Allright was associated with Allround who already had great brand awareness. Allround's distinct presence in the medicine market offered a great advantage to our new allergy product. We also kept a lot of emphasis on benefits since Allright was a unique non-drowsy product that did not require a prescription. We compared to Believe because at the time, they had 70% of the allergy market share. By period 8, Allright had 43.9% and Believe decreased to 38.9%.

Promotions

Team A opted to invest in Cooperative (Co-Op) Advertising initially with a conservative approach spending $1.4M and allocating it to all retailers. Co-Op advertising is defined as an agreement between a manufacturer and a retailer, where the manufacturer pays for some of the costs of the retailer’s local advertising in an effort to promote their products (Bergen & John, 1997). This approach, in line with other marketing decisions, proved effective during the early stages of Allround's growth. In subsequent attempts, although increasing the Co-Op spend incrementally, the percent of retailers participating remained flat.

The team then opted to be more discerning in the channel it selected. For instance, convenient stores only accounted for 1.5% of total Allround sales; therefore this channel was eliminated from the co-op strategy. Additionally, the budget was increased from 1.7M, to 3M, to 4.5M resulting in improved retailer participation. When the team introduced Allright, all the sales channels were allocated Co-Op monies again, with the intent of hitting more immediate sales goals since the product was in its infancy in the product life cycle. Also, the team expected to improve consumer re-purchase with Allround. The retailers responded to the increased budget for one cycle, then flattened out. It was determined that the promotional budget would be better allocated elsewhere to earn a better retail conversion ratio.

The team instituted a similar approach for the point of purchase (POP) strategy, allocating the channels based on sales performance, however added consumer-shopping preferences to the mix. For instance, the shopping habits report (period 5) stated that over 83% of consumers preferred to purchase cold medicine in independent and chain drugstores as well as grocery stores. Chain drugstores, grocery stores, and wholesalers accounted for over 63% of the sales therefore, the point of purchase channels selected most frequently were chain drugstores and grocery stores. This channel strategy approach in line with incremental budget increases proved successful accounting for increased retail participation. In an effort to stimulate sales for the new introduction of Allright in period 5, half of Allrounds POP funds were allocated to the new allergy product. Interestingly, not only did the retailers respond well to Allright, the percent participating for Allround increased 2.6% even though, 1.3M less was spent and sales rose. This may be due to Allround hitting its stride in the growth phase of the product life cycle in which “sales rise much faster than promotional expenditures”, causing a desirable decline in the promotion-sales ratio (Kotler & Keller, 2012, p. 313).

Initially, the A Team budgeted 4.2M for Allround for consumer coupons in fifty-cent increments ($.50). The consumers’ response was flat, over multiple periods and then declined representing approximately 3.4% in total sales. This could be the result of consumers’ disposition towards excessive promotional offerings. Consumers are regularly pummeled with price breaks, deals, rebates, and coupons. They may simply be oblivious to another promotional offering. Consumers may also not be as inclined to utilize a coupon especially if the buyers are loyal to another brand. Kotler and Keller (2012) contend that advertising has more of an impact on expanding brand loyalty and that consumers that are loyal to one brand tend not to alter their buying habits based on a promotional offering by a competitor. Conversely, when Allright was introduced in period 5, the $2M coupon ($.50 increments) promotion resulted in 7.2% of redeemed sales. An additional $1M increase for a total $3M budget for Allright, with seventy-five cents off ($.75) further resulted in a total of 9.2% in redeemed sales. These results may in part be due to Allright acting as a “market pioneer”, by being the first to sell in the new non-drowsy OTC allergy market category (Kotler & Keller, 2012, p. 312). Early users will remember the pioneer’s brand name assuming the product satisfies them translating into more effective marketing spend and higher rates of repeat purchases (Kotler & Keller, 2012).

Monetary promotions directly influence the cost benefit relation of a product, such as utilizing price discounts like coupons or free trials. Buttner, Florack, and Goritz (2015) purpose that the influence of monetary promotions in retail environments seems to be the best strategy for promotions at a mass-market level. This was significantly evidenced when Team A introduced Allright and launched a trial size promotion. To date, Team A had not employed trial sizes for Allround since it was the market leader in the cold category and the product was well known and had good brand awareness. The initial trial spend for Allright was $2M and resulted in over a 50% conversion ratio, making it the most effective promotional offering to date. This decision partnered with other strategic marketing decisions led to a significant increase in revenue, gross margins, and net income. In addition, the stock price moved from $48.30 to $62.69. Overall, Team A learned that sales promotions expenditures should increase as a percent of the overall marketing budget expenditures to keep on pace with the product life cycle and account for costs while attempting to gain market share.

Sales Force

The sales force (SF) allocation was modest initially, starting at 127 and adding 11 for a total of 138. At this juncture, Allround was in the growth or “rapid market acceptance” phase of the product life cycle (PLC) and the moderate SF designation was satisfactory. Market share grew and the stock price increased.

The team’s strategy was to then base the SF on the distribution channel’s performance with data gathered from the sales report. For instance, if in the prior period the indirect/wholesale group contributed the biggest percent of sales, SF staff was added in that category in an attempt to increase that particular channels sales success. When implemented, Allround as a whole performed poorly, dropping over ten dollars in stock price and losing market share. Zoltners, Sinha, and Lorimer (2006) state that although the growth phase of a company’s product life cycle is often rewarding organizations still make crucial errors in sizing their sales forces resulting in lost opportunities.

With back-to-back periods of poor performance the team chose to purchase the sales force report going into period 4. Zoltners et al. (2006) recommends that in the growth phase of the PLC that, companies must invest in market research and in developing forecasting methods and sales response analytics in order to make better decisions about sales force sizing. The report proved enlightening. In comparison to the competition, Team A was still understaffed significantly. An additional 40 sales force personnel were added. This addition proved beneficial. The SF was now in line with the primary competitor Besthelp, and Allrounds performance improved which resulted in a dramatic increase in market share, net income, and stock price.

Having learned the importance of investing in market research Team A purchased the sales force report again and initiated a more aggressive sales approach for the introduction of the new allergy product, Allright since it was in the first or “introductory” phase of the product life cycle. Zoltners et al. (2006) stresses that by not hiring enough salespeople, companies miss the opportunity to earn tens of millions of dollars in additional sales and profits in their first three years. The team increased the SF significantly from 249 to 377. Heavy sales force emphasis was placed amidst the detailers in an effort to stimulate new sales for the allergy product. Organizations must deploy sales forces strategically so they “call on the right customers, at the right time, in the right way” (Kotler & Keller, 2012, p. 554). This strategy proved successful, the SF designation in line with other marketing decisions helped launch Allright and capture 21.7% of the allergy market. The winning formula proved to be optimizing the sales force’s effectiveness by utilizing the market research to ensure the right size sales force and align the force per proper channel. 


Segmentation

The initial market segmentation strategy was to attempt to market Allround in the cough segment (in addition to Cold) by redirecting the Advertising message to compare against the market leader, Coughcure and highlight the cough suppression benefit. Additionally all segment demographics were targeted: young singles, young families, mature families, empty nesters, and retired. There was one cycle of performance improvement and then Allround failed to produce positive revenue and the stock price plummeted. “Regardless of what type of segmentation scheme we use, the key is adjusting the marketing program to recognize customer differences” (Kotler & Keller, 2012, p. 214).

The A Team therefore, invested in the conjoint analysis to identify what the different customer types wanted. It was determined that young families, mature families, and retired consumers, accounting for over sixty-three percent (63%) of the overall target market, were most interested in an alcohol free cold product that also relieved cough symptoms. Subsequently, the Allround product was reformulated with no alcohol in an effort to appeal to this demographic segmentation to improve sales and market share. This strategy proved successful and was maintained throughout the remainder of the cycles for the Allround product.

Allright (4 hour non drowsy OTC allergy capsule) was introduced in period 5 and a new segmentation strategy was required for this product specifically. As a market pioneer in the product life cycle, it was determined that to gain the greatest advantage the product would be marketed specifically in the allergy segment and target all the demographic groups. Kotler and Keller (2012) state that the market pioneer’s brand usually establishes the attributes the product class should have, therefore the strategy is to aim at a broad market. The strategy proved successful, Allright captured a broad portion of the market share, revenues accelerated and the stock price increased.

Line Extensions

Allstar was given the opportunity to add a line extension to Allround in period three and four. The three options were a 4-hour cough liquid for children, a 12-hour multi-symptom capsule, or a 4-hour cough liquid. Team A bought the conjoint analysis survey in period three to aid in our decision. “With conjoint analysis, respondents see different hypothetical offers formed by combining varying levels of the attributes, then rank the various offers. Management can identify the most appealing offer and its estimated market share and profit” (Kotler & Keller, 2014, p. 581). After deliberating the benefits and risks of each choice, we ultimately decided against adding a line extension based on the data presented in the conjoint analysis.

The conjoint analysis revealed that Allround’s current 4-hour liquid multi-symptom product was the highest ranked in preference and product utility according to all respondents. We quickly excluded the 12-hour multi-symptom capsule from consideration based on the conjoint analysis as well as the survey of decision making criteria that we purchased in period two. According to the conjoint analysis, the 12-hour multi symptom capsule is consistently rated least appealing. This conclusion is supported by the survey of decision making criteria that reports form and duration as being rated less important than product effectiveness, side effects, and price. The form and duration would be the primary changes in this line extension so we determined that it would not assist in Allround’s overall success.

Based on the data presented in the conjoint analysis, we chose not to add a 4-hour children’s cough liquid either. Although the report indicated that it was favored over the 12-hour capsule, the product utility was still low for all respondents. Team A concluded that the market would be too specific and it was not in line with the direction we had planned for Allround. Another consideration we took into account for the children’s cough medicine and 12-hour capsule was the similarity between our current 4-hour multi-symptom liquid. We were concerned that these products would be too similar to the parent brand and result in cannibalization of Allround. According to Kotler and Keller (2014), “Even if sales of a brand extension are high and meet targets, the revenue may be coming from consumers switching to the extension from existing parent-brand offerings – in effect cannibalizing the parent brand” (p. 265). Team A decided not to create these line extensions based on these reports and possible outcomes.

We also chose not to add the 4-hour cough liquid line extension so we could focus on our new unique non-drowsy allergy product. After looking back on our decisions, we concluded that not doing a 4-hour cough liquid line extension was a missed opportunity. Our initial strategy was to capture some of the cough market by changing the advertising of Allround to compare to Coughcure and promote the similar ingredients. We quickly saw that this strategy was not working and consumers seemed to be confused. Looking back, we believe that it would have helped our Allround brand by adding the 4-hour cough liquid as a line extension. This possibility is supported by the data from the conjoint analysis. When cough is selected as the illness, the 4-hour cough liquid has the highest rank and product utility. This would have given us an opportunity to focus solely on the cough market and obtain some of that market share as well as building our brand in the cold market.

We had another opportunity in period five and six to add a line extension but chose against it and instead introduced a new allergy product in period six. The new allergy product would be the first of its kind because it is a non-drowsy allergy capsule that does not require a prescription. Allround's brand recognition likely would have made a line extension successful, however, we decided to take a bigger risk and introduce a unique product in order to set ourselves apart from our competition. This decision proved to be successful and we saw a large increase in our stock price.

Cumulative Net Income and Stock Price

Allstar's cumulative net income has steadily improved each period. From start to finish, Allstar's cumulative net income has increased by $727.08 million. The average increase from each period was roughly $91 million. Our largest increase in net income was in period six when it increased by over $25 million after we introduced our new allergy product, Allright. We saw the lowest increase in our cumulative net income between periods one and three. Team A believes that we could have increased our net income during this time by purchasing more reports and making our decisions based on the results. We saw an increase in our net income when we added additional sales force and used more of our remaining budget on advertising and promotion.

Allstar's stock price ranged from $38 to $50 until period six when it increased to $62.69. The strongest growth in stock price occurred in period seven when it increased $20.16 for a total of $82.85. This large increase can again be attributed to our new allergy product, Allright. Similar to our net income, our stock price was lowest between periods one and three. We saw great improvement when we started purchasing additional reports to assist in our decision making.

Period Nine

We anticipate continuing growth for the Allstar brands in period nine. Throughout the simulation, Allround has been in the growth phase of the product life cycle. As Allround transitions into period nine, we expect that it will enter the maturity phase and we will see sales start to slow down for the Allround product. We will continue to focus our efforts on retention of our customers and keeping our strong brand recognition.

Since inception, Allright has managed to capture 43.9% of the allergy market share in just three periods. In the introduction phase, Allright had a pioneer advantage which allowed us to have significant profit improvement and market penetration in a short amount of time. Allround’s successful brand recognition provided a significant advantage to Allright and allowed us to move from the introduction phase to the growth stage quickly. Allright will be the focus in period nine. Ninety percent of the remaining $4 million budget will go towards Allright’s promotion, advertising and additional sales force. We predict that these changes will result in a significant increase to our net income as well as a raise in our stock price to the $90 range.

Conclusion

Team A’s short term strategy with Allround was to further penetrate the OTC cold medicine market, which we planned to do by altering our advertising message, reallocating our sales force and appropriately aligning our promotional resources, and the long term strategy was to shift to a more focused or narrow range of customer segment. The team planned to introduce an allergy medication to capture that aspect of the market. This strategy was implemented over the eight period simulation.

The results of Team A’s efforts proved worthwhile. We experienced a growth in net income to $115 million a year from $67 million a year. We led Allstar from a 23.8% market share to a 27.3% market share. The stock price ended at $87.37 from $38.35.

As the product life-cycle of Allround was in the growth phase, Team A anticipated and realized successfully guiding the Allround product through the growth stage and into a level maturity stage. The Team introduced the Allright allergy medication into the market and carefully directed it to the growth stage, which it is in currently.

Team A learned to depend on previously conducted research in order to advance our products via market share and consumer perception. The importance of a sufficient amount of staffing became apparent to the Team around period four, and the sales force was successfully allocated since that time.

References

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Hill, B. (2016). How to Capture Market Share Through the Understanding of Consumer Needs. Houston Chronicle. Retrieved from http://smallbusiness.chron.com/capture-market-share-through-understanding-consumer-needs-21904.html

Hrebiniak, L.G. (2005). Making Strategy Work: Leading Effective Execution and Change. Upper Saddle River, NJ: FT Press.

Kokemuller, N. (2016). Market Development vs. Market Penetration. Chron.com. Retrieved from http://smallbusiness.chron.com/market-development-vs-market-penetration-66561.html

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Zoltners, A. A., Sinha, P., & Lorimer, S. E. (2006, July-August). Match Your Sales Force Structure to Your Business Life Cycle. Harvard Business Review. Retrieved from https://hbr.org/2006/07/match-your-sales-force-structure-to-your-business-life-cycle

Appendix A

Initial Strategy

Allround has achieved success in the over the counter (OTC) cold market by utilizing a differentiation strategy. Short-term Allround will further penetrate the OTC cold medicine market by altering the sales and marketing strategy to capture more of the cough segment. Hill (2016) states that companies will succeed in capturing market share if the products they provide match up well with consumers’ needs. Allround’s long-term strategy will shift to a more focused or narrow range of customer segment by leveraging the customer relationship and introducing a non-drowsy 4-hour allergy capsule to fulfill the consumers’ needs.

The current target market definition is that Allround helps relieve cold symptoms. This definition tends to “focus on selling a product or service to a current market” (Kotler & Keller, 2012, p. 39). Currently, the competitor Coughcure owns 54.3 % of the market share for this product category.

The long-term marketing strategy extends Allrounds business definition to help relieve cold and allergy symptoms. Market development, in particular the allergy segment, is a potential growth arena for Allround. This is markedly true when "competitors have not already targeted the new potential market”(Kokemuller, 2016, para. 4). Allround’s long-term strategy encompasses introducing a unique 4-hour allergy capsule that is non-drowsy. Allround introduce an Allergy specific product, positioning it as non-drowsy daytime relief, the consumer base should respond favorably. Dens and De Pelsmacker (2010) suggest that when known brands offer a new product, “we expect consumers to transfer their pre- existing attitudes to the extension” (p. 52).

Allround's many strengths are represented by its strong profitability. Allround has maintained a price leadership role in the market which has significantly contributed to its profitability. An advantage of the Allround product is that it is able to target all cold symptoms with its single product. A weakness that the Allround brand has faced is retention of consumers. The advertising agency Allround uses could become a disadvantage because it is having an adverse impact on Allround's profits. Another weakness Allround faces is the allocation of its sales force.

A Team's short term strategic plan for Allround is to aggressively attack the cough market and snag a piece of the market share. We will achieve this by altering our advertising message, reallocating our sales force and appropriately aligning our promotional resources.

The primary performance objective of the marketing management team of the Allround product is to increase the market share of the cold, cough and allergy markets. The performance objectives of the Allround brand marketing strategy will be met by targeting a specific demographic segmentation. With an increase in market share, cumulative profit will increase. When cumulative profit increases, it will lead to a stock market per share increase. (Kumar & Makhiha, 1986)

Allround's aggressive short-term plan to capture more of the cough segment will be achieved by altering our advertising message, reallocating our sales force and appropriately aligning our promotional resources. This strategy will lead to a higher share in the cough market and allows the A Team to continue to increase brand awareness and consumer retention. Our current position as a market leader in the cold category allows us to take more risks and attain higher rewards. The A Team recognizes the importance of being proactive and anticipating consumer's future needs which is why our long-term approach will include a shift to a more focused consumer segment by introducing a non-drowsy 4-hour allergy capsule. This marketing strategy will extend Allround's business definition to help relieve both cold and allergy symptoms. When consumers have symptoms associated with colds, coughs, or allergies, they will think Allround without hesitation.

Decisions, Results, and Interpretations

The team’s decisions and results centered on the sales force, pricing, advertising, and promotion. To assist the team with making decisions were the opportunities to purchase the following reports: purchase survey (at a cost of $133,195), operating statistics (for $59,938), sales force ($26,639), advertising ($46,618), promotion ($46,618), channel sales ($33,299), pricing ($26,639), shopping habits ($19,979), shelf space ($33,299), recommendations ($26,639), and conjoint analysis ($133,195).

The sales force decision was used to allocate sales force supporting all Allstar brands. There were two categories to consider involving the sales force allocation: direct sales (sells directly to retail channels) and indirect. The indirect sales force consists of wholesaler, who sale to retailers who do not buy direct from manufacturers; detailers, who distribute free samples and promo materials to influence physicians and pharmacists; and merchandisers, who focus on special promotions and shelf space, and other in-store support.

The pricing decision involved setting a Manufacturer Suggested Retail Price (MSRP) and setting volume discounts. The advertising decision allowed the team to set the advertising budget, agency, targets, and message for a brand. The promotion decision involved setting the promotion allowance, trade promotion, and consumer promotion for a brand.

Our decisions for period one were based on our purchases of the following reports: channel sales; pricing, and; shopping habits. Sales force was 19.7% of our budget, and was distributed as follows: 8 people for independent drugstores, 30 people for chain drugstores, 35 people for grocery stores, five people for convenient stores, 18 people for mass merchandising stores, 20 people for wholesale support, 20 merchandisers, and 10 detailers, for a total sales force of 138 people.

Advertising was 58.3% of our budget, or $20 million. Our ad agency was Brewster, Maxwell, & Wheeler. Our symptom targets were cough and cold and our demographic targets chosen were all of them. Our MSRP was $5.39 and we gave the following volume discounts: <250=25%; <2500=33%; >2500=37%, and; 40% to wholesalers. Our promotion included no trial size products and $4.2 million worth of $.50 coupons.

The results for period one were a 20.1% growth in revenue (to $426.8 million), a 13.3% growth in gross margin (to $195.2 million), a 29.6% growth in net income (to $87 million), and a stock price increase to $49.92.

Our decisions for period two were based on the purchase of the survey report. Sales force was 22.5% of our budget, and was distributed as follows: 10 people for independent drugstores, 30 people for chain drugstores, 45 people for grocery stores, six people for convenient stores, 15 people for mass merchandising stores, 20 people for wholesale support, 12 merchandisers, and 10 detailers, for a total sales force of 148 people.

Advertising was 45.3% of our budget, or $15 million. Our ad agency was Sully and Rogers. Our symptom targets were cough and cold and our demographic targets chosen were all of them. Our MSRP was $5.71 and we gave the following volume discounts: <250=25%; <2500=35%; >2500=35%, and; 38% to wholesalers. Our promotion included no trial size products and $4.2 million worth of $.50 coupons.

The results for period two were a 4.9% decline in growth in revenue (to $406 million), a 7.2% decline in growth in gross margin (to $181.1 million), a 19.1% decline in growth in net income (to $70.4 million), and a stock price decrease to $39.89.

Our decisions for period three were based on our purchases of the following reports: sales force and conjoint analysis. Sales force was 29.4% of our budget, and was distributed as follows: 15 people for independent drugstores, 45 people for chain drugstores, 65 people for grocery stores, six people for convenient stores, 18 people for mass merchandising stores, 25 people for wholesale support, 15 merchandisers, and 20 detailers, for a total sales force of 209 people.

Advertising was 39% of our budget, or $15 million. Our ad agency was Sully & Rogers. Our symptom targets were cough and cold and our demographic targets were young families, mature families, and retirees. Our MSRP was $5.61 and we gave the following volume discounts: <250=23%; <2500=33%; >2500=37%, and; 38% to wholesalers. Our promotion included no trial size products and $4.2 million worth of $.50 coupons.

The results for period three were a .6% decline in growth in revenue (to $403.6 million), a 7.9% growth in gross margin (to $195.4 million), a 19.7% growth in net income (to $84.2 million), and a stock price decrease to $39.38.

Our decisions for period four were based on our purchases of the advertising report. Sales force was 29.6% of our budget, and was distributed as follows: 20 people for independent drugstores, 45 people for chain drugstores, 90 people for grocery stores, six people for convenient stores, 18 people for mass merchandising stores, 25 people for wholesale support, 20 merchandisers, and 25 detailers, for a total sales force of 249 people.

Advertising was 43% of our budget, or $20 million. Our ad agency was Sully & Rogers. Our symptom targets were cough and cold and our demographic targets were young families, mature families, and retirees. Our MSRP was $5.61 and we gave the following volume discounts: <250=25%; <2500=33%; >2500=38%, and ; 40% to wholesalers. Our promotion included no trial size products and $4.2 million worth of $.50 coupons.

The results for period four were a 12% growth in revenue (to $452.1 million), a 7.1% growth in gross margin (to $209.3 million), a 6.3% growth in net income (to $89.6 million), and a stock price increase to $47.55.

Our decisions for period five were based on our purchases of the following reports: purchase survey; sales force; advertising; pricing, and; shopping habits. Our four-hour non-drowsy allergy capsule, Allright, was introduced during this period. Sales force was 30.9% of our budget, and was distributed as follows: 30 people for independent drugstores, 80 people for chain drugstores, 100 people for grocery stores, six people for convenient stores, 26 people for mass merchandising stores, 40 people for wholesale support, 35 merchandisers, and 60 detailers, for a total sales force of 377 people.

Advertising was 41.7% of our budget, or $15 million. Our ad agency was Sully & Rogers. Our symptom targets for Allround were cough and cold and our demographic targets for Allround were young families, mature families, and retirees. Our symptom targets for Allright were allergy and our demographic targets for Allright were all. Our MSRP for Allround was $5.85 and we gave the following volume discounts: <250=25%; <2500=30%; >2500=38%, and; 40% to wholesalers. Our MSRP for Allright was $5.50 and we gave the following volume discounts: <250=20%; <2500=25%; >2500=35%, and; 39% to wholesalers. Our promotion included no trial size products and $2.0 million worth of $.50 coupons for Allround and $2.0 million in trial size and $2.0 million worth of $.50 coupons for Allright.

The results for period five were a 7.1% growth in revenue (to $484.1 million), a 2.2% growth in gross margin (to $214 million), an 8% decrease in growth in net income (to $82.4 million), and a stock price increase to $48.30.

Our decisions for period six were based on our purchases of the following reports: sales force; promotion, and; pricing. Sales force was 30.5% of our budget, and was distributed as follows: 30 people for independent drugstores, 74 people for chain drugstores, 100 people for grocery stores, six people for convenient stores, 26 people for mass merchandising stores, 40 people for wholesale support, 35 merchandisers, and 60 detailers, for a total sales force of 371 people.

Advertising was 43.0% of our budget, or $17 million for Allround and $13 million for Allright. Our ad agency was Sully & Rogers. Our symptom targets for Allround were cough and cold and our demographic targets for Allround were young families, mature families, and retirees. Our symptom targets for Allright were allergy and our demographic targets for Allright were all. Our MSRP for Allround was $5.85 and we gave the following volume discounts: <250=25%; <2500=30%; >2500=38%, and; 40% to wholesalers. Our MSRP for Allright was $6.50 and we gave the following volume discounts: <250=20%; <2500=25%; >2500=35%, and; 39% to wholesalers. Our promotion included no trial size products and $2.0 million worth of $.50 coupons for Allround and $2.0 million in trial size and $3.0 million worth of $.75 coupons for Allright.

The results for period six were a 22.2% growth in revenue (to $591.7 million), a 20.8% growth in gross margin (to $258.4 million), a 5.1% growth in net income (to $86.6 million), and a stock price increase to $62.69.

Our decisions for period seven were based on our purchases of the following reports: advertising, and; promotion. Sales force was 29.4% of our budget, and was distributed as follows: 30 people for independent drugstores, 66 people for chain drugstores, 104 people for grocery stores, 10 people for convenient stores, 26 people for mass merchandising stores, 40 people for wholesale support, 35 merchandisers, and 60 detailers, for a total sales force of 371 people.

Advertising was 47.3% of our budget, or $17 million for Allround and $18.6 million for Allright. Our ad agency was Sully & Rogers. Our symptom targets for Allround were cough and cold and our demographic targets for Allround were young families, mature families, and retirees. Our symptom targets for Allright were allergy and our demographic targets for Allright were all. Our MSRP for Allround was $6.50 and we gave the following volume discounts: <250=30%; <2500=35%; >2500=43%, and; 45% to wholesalers. Our MSRP for Allright was $7.25 and we gave the following volume discounts: <250=25%; <2500=30%; >2500=40%, and; 44% to wholesalers. Our promotion included no trial size products and $2.0 million worth of $.50 coupons for Allround and no trial size products and $3.8 million worth of $1.00 coupons for Allright.

The results for period seven were a 14.1% growth in revenue (to $675.4 million), a 13.2% growth in gross margin (to $292.6 million), a 29.3% growth in net income (to $112 million), and a stock price increase to $82.85.

Our decisions for period eight were based on the purchase of no reports. Sales force was 30.4% of our budget, and was distributed as follows: 30 people for independent drugstores, 66 people for chain drugstores, 104 people for grocery stores, 10 people for convenient stores, 26 people for mass merchandising stores, 40 people for wholesale support, 35 merchandisers, and 60 detailers, for a total sales force of 371 people.

Advertising was 46.6% of our budget, or $17 million for Allround and $18.6 million for Allright. Our ad agency was Sully & Rogers. Our symptom targets for Allround were cough and cold and our demographic targets for Allround were young families, mature families, and retirees. Our symptom targets for Allright were allergy and our demographic targets for Allright were all. Our MSRP for Allround was $6.50 and we gave the following volume discounts: <250=30%; <2500=35%; >2500=43%, and; 45% to wholesalers. Our MSRP for Allright was $7.25 and we gave the following volume discounts: <250=25%; <2500=30%; >2500=40%, and; 44% to wholesalers. Our promotion included no trial size products and $2.0 million worth of $.50 coupons for Allround and no trial size products and $3.8 million worth of $1.00 coupons for Allright.

The results for period eight were a 7.5% growth in revenue (to $725.7 million), a 4.7% growth in gross margin (to $306.4 million), a 2.6% growth in net income (to $114.9 million), and a stock price increase to $87.37.

Appendix B

Net Income

PERIOD NET INCOME CUM. NET INCOME

ONE

$87.04

$154.20

TWO

$70.37

$224.57

THREE

$84.22

$308.79

FOUR

$89.56

$398.35

FIVE

$82.40

$480.76

SIX

$86.62

$567.38

SEVEN

$111.98

$679.35

EIGHT

$114.89

$794.24

Manufacturer Sales and Stock Price

PERIOD MANUFACTURER SALES CUM. MANUFACTURER SALES

ONE

$426.84

$782.11

TWO

$405.97

$1188.08

THREE

$403.61

$1591.69

FOUR

$452.10

$2043.79

FIVE

$484.09

$2527.88

SIX

$591.74

$3119.62

SEVEN

$675.35

$3794.97

EIGHT

$725.74

$4520.71

PERIOD SHARE OF MAN. SALES STOCK PRICE

ONE

23.48%

$49.92

TWO

21.66%

$39.89

THREE

20.41%

$39.38

FOUR

21.62%

$47.55

FIVE

21.59%

$48.30

SIX

24.95%

$62.69

SEVEN

27.04%

$82.85

EIGHT

27.26%

$87.37

TEAM C

Final Simulation Report
Table of Contents Executive Summary 4 Manufacturer’s Suggested Retail Price 4 Volume Discounts and Promotional Allowances 5 Advertising Budget 6 Selected Advertising Agency 7 Relative Emphasis on the Four Types of Advertising Messages 7 Promotions 8 Sales Force Allocation 9 Market Segmentation 11 Product Lifecycle and Line Extensions 11 Results: Net Income and Stock Price 12 Looking Ahead: Future State 13 References 15 Appendix 16 Initial Strategy Summary 16 SWOT Analysis 16 Performance Objectives 16 Decision Summary 17 Sales Force 17 Price 18 Advertising 19 Promotions 21 Special Incidents 22 Overall Results 23 Comparative Sales 23 Comparative Net Income 23 Comparative Market Share 24 Comparative Stock Price 25 Brand Performance 26 Price Value 27 Satisfaction 28 Perception 29 Portfolio 30 Trade Ratings 31 Work Log – Group C 32

Executive Summary
The PharmaSim project began with a challenge from Allstar Brands management. The mandate was to improve the performance of Allround and reaffirm its market leading position in the highly competitive over-the-counter market. The brand has lost one full share point over the last year. The Allround brand is of strategic importance to the overall success of Allstar Brands Corporation as the brand’s strong cash flow position will enable the company to pursue new opportunities in emerging markets. The brand management team was tasked with managing resources and making decisions in the key areas of advertising, sales force allocation, promotions, and pricing. With the initial strategy plan in place, the following sections provide details into how the strategy was executed by managing the limited budget dollars to maximize benefits and provide shareholder value. The execution of the strategy proved to be highly successful as Group C grew the stock price by over 120% during the simulation with double-digit growth in net income and two basis point increases in market share.

Manufacturer’s Suggested Retail Price
Price changes are one of the very few tools available to marketers to have a significant instant impact on a brand’s sale. Consumers’ responses to similar pricing activities can be vastly different across different time periods and markets. Understanding the influences on this variation is of great practical importance to marketers (Dunn, Bogomolova & Davis 2013).

The strength of the Allround brand was the products high effectiveness and approval rating due to the product’s multi-symptom formulation. Consequently, the guiding principle for pricing was a premium product warrants a higher price point. The trade-off report was utilized during the entire simulation in conjunction with pricing reports to support pricing decisions and policies.

The objective was to have a resilient brand with inelastic demand which justifies a higher price point. The ideal location of Allstar Brands product pricing would be as high up and close to the price line in the trade-off plot as seen in period four. Early in the simulation, due to a clerical error, pricing was mismanaged. The benefit was customers viewed the product as having tremendous value and rewarded Allstar Brands with almost a 2% increase in market share. The downside was gross margins and net income suffered. To rectify the situation prices were increased by 25% between period 2 and 3. The go-forward pricing strategy was to adjust prices based on previous inflation rate which ranged between 3 – 5%. The pricing strategy proved effective indicated by 50% profit margins and cumulative net income grew on average by $100,000 per period.

Volume Discounts and Promotional Allowances
Establishing the manufacturer’s suggested retail price represents one component of the overall pricing strategy. The second element of pricing relates to discounts and promotional allowances. As brand managers, it was agreed discounts and promotions were a means to reward large volume customers, however, profitability and the margin could not be sacrificed as this would contradict the long-term profit goals as outlined within the strategy document. Within the over the counter cold remedy market, it is common industry practice for drug manufacturers to recommend to retailers what their suggested retail price for their product is. However, the final determination of the final product price will be made at the retail level. As such, it is standard practice to offer retailers volume discounts for their wholesale purchases ranging from 15 to 40 percent of the suggested retail price. Additionally, manufacturers can provide an additional volume discount to retailers based on the volume quantities of products purchased (James, Kinnear & Deighan 2014). Once the volume discounts were established, there was little to no changes during the entire simulation. The strong brand equity and high demand for the Allround product line did not require heavy discounting which would have eroded profitability. Consequently, pricing was managed primarily at the suggested retail price level once discounts were established.

Advertising Budget
The advertising budget throughout our simulation process was implemented based on our feedback from the prior decisions results. During the simulation reliance was placed on the advertising dollars report as well as the income statement. During the entire simulation, the goal was to maintain an adverting spend in the range of 55% to 60% of total expenses. We believed this provided flexibility to either increase or decrease advertising spending based on market conditions, performance, and opportunity. The chart below depicts the trend of Allstar Brands' advertising expenditures compared to three major competitive products.

The decisions on advertising dollar allocation made each period were influenced by Allstar Brands' strong brand equity and the use of high-quality advertising to both keep the message of quality and superiority at the forefront but also to capture the family and singles market so they would become lifelong, satisfied, loyal customers.

Selected Advertising Agency
The selected advertising agency we used throughout the simulation was Brewster, Maxwell & Wheeler. In each decision, we maintained our ad agency choice. Though this firm incurred the company a cost of fifteen percent in commission on media placements, the results from using this body had a high reward with our consumers. The Allround product line was regarded as a premium product and as such the decision was made to partner with a high-end advertising organization that could further strengthen the brand. The steady cash flow of Allstar Brands Company contributed to the decision to use Brewster as the company could afford the additional expense. During the entire simulation, the advertising dollar report and customer feedback received within the social media campaign was monitored to ensure the investment in Brewster was creating tangible benefits for Allstar Brands, the brand, and our clients.

Relative Emphasis on the Four Types of Advertising Messages
The concern and challenge from Allstar Brands management before the first week of the simulation was the Allround brand had lost some market share and had sluggish quarterly results. As brand managers, particular attention was focused on maximizing the advertising benefits given the significant spend, which averaged $26.5M a period. Though the use of advertising messaging based on the categories listed in the chart below, the message could be modified or adapted on a period by period basis as determined by market conditions and the competition.

Primary:

Function is to generate awareness encourage and primary demand

Benefits:

Articulates what symptoms the product will relieve

Comparison:

Evaluates against particular competitive product

Reminder:

Maintains awareness and reinforces brand for the first time and repeat customers.

The benefits category for seven of the eight weeks on average received 45% of the message attention. Allround was renowned for its effectiveness as a multi-symptom cough and cold remedy. Given a market share between 22 – 24%, the approach was to promote the benefits when compared to the competition, especially Besthelp. The strategy was effective in maintaining share but not as effective on the growth side. In period eight, the approach was shifted to 60% primary benefits and 30% reminder. With young and mature families as our target demographics, the messaging strategy focused on generating demand and reinforcement. At week eight market share was at an all-time high of 25.7%. When Allstar Brands introduced a new product, Allright, in period six the initial strategy was to promote generate initiate demand and promote the products benefits. As the product matured and gained market acceptance, the future direction would be to migrate some of the advertising spend into the reminder category.

Promotions
Sales promotion tools vary in their specific objectives. Sales promotions often attract brand switchers, who are primarily looking for low price, good value or premiums. If some of them would not have otherwise tried the brand, promotions can yield long-term increases in market share (Kotler & Keller 2012). The management and decision of promotional decisions relied on participation/redemption rates, and data from our competitors with the promotion activity report. The initial strategy was to distribute the promotional allowances with the range of 17 – 20% with an emphasis on chain drug stores and grocery stores as the channel sales report indicated these two channels represent 40% of Allround sales. Conveniences stores wholesalers were excluded. A key indicator to monitor the effectiveness of promotion spend was a survey of intentions report. The goal is to have the actual purchase percentage trend higher than the intended rate. The result is at the point of purchases the promotions are convincing customers to purchase Allstar Brands products. The Allround brand on the average period over period trended one basis point higher.

A promotion strategy consisted of two key components, co-operative advertising, and consumer promotions. Co-op advertising enables retailers to promote Allstar Brands products and increase awareness. The point of purchase promotions increased brand awareness, market share, and unit sales. The strategy was to develop a balance between the both mechanisms based on market conditions and growth opportunities. For example, when the alcohol was removed from Allround in a reformulation, a tan increase in trial samples was beneficial as a means to promote the change so the consumer can experience the benefits. Traditionally, a mature product line such as Allround would not benefit from trial samples when compared to coupon offerings. Feedback provided from the target markets of families expressed a desire for coupons. In those periods where the coupon funding was reduced, the customer based responded negatively. The average redemption rate was 2%. When the Allright product was launched a heavy emphasis was on placed trial sizes and coupons ($3.5M). As the product gained acceptance in the market

Sales Force Allocation
Companies must deploy sales forces strategically so they can call on the right customers at the right time in the right way, acting as “account managers” who arrange fruitful contact between people in the buying and selling organizations (Kotler & Keller 2012). A sound sales force strategy would capitalize on the sales opportunities and brand strength presented as a result of the expansive advertising campaigns. The simulation began with 145 sales force associated which totaled $7M in spend. At the end of the simulation, the sales force had grown to 341 (135%) associates totaling $21M. The exponential growth was attributed to new products launched in the later portion of the simulation and the continued focus on maintaining and growing the Allround brand. The sales force allocation strategy relied on dashboard reports, performance summaries, sales reporting, market outlook and channel sales. The information was analyzed holistically with an emphasis on the chain and grocery segments which represented on average 65% of sales. The chart below summarizes the calculation used to determine the sales force allocation and growth. The distribution of the prior period sales was translated into a percentage of sales for the channel.

The market updates and outlook were compared to the sales force allocations and where applicable adjustments were made to either increase or decrease sales force associates per channel based on market anticipated growth. The average split between direct and indirect sales force was 70/30.During the simulation, we did maintain larger sales force compared to our competitors mainly due to the anticipation of future product launches. The strategy provided flexibility from period to period as if necessary spend could have been shifted to other areas without weakening the sales force.

Market Segmentation
Once the sales force allocation was established with the right people careful consider was given to how the market would subdivide thus creating a focused selling approach. A market segment consists of a group of customers who share a similar set of needs and wants. As a brand manager, the task was to identify the appropriate number and nature of market segments and decide which ones to target (Kotler and Keller 2012). The segmentation method utilized in the simulation was based on needs, i.e., a solution to cold and cough relief specifically for singles and families (young and mature). The Allround product line was a mature, proven, established and well-respected brand. By focusing our segmentation efforts on the younger generation and families, it was believed these consumers would become loyal, satisfied customers. The older demographic of empty nesters and retirees was not as attractive for expanding market share and growth given fixed income, and the potential for the strong Allround formulation to possible conflict with other medications or ailments which an aging demographic would encounter

Product Lifecycle and Line Extensions
Product life cycle is the stages that Allround goes through during its time in the market. This incorporates the different phases ranging from initial introduction to product growth, leading into product maturity, and concluding with the product decline or market exit (Mankiw, 2012). Through these phases, one can effectively evaluate and determine the product’s current state in the market. During the third period of the simulation, Allstar Brands had to make a decision on a line extension or brand reformulation. The threat analysis highlighted a potential weakness was Allstar Brands' heavily reliance on the Allround product which was mature. The decision was made not to become reactionary and launch a new product which could cannibalize or diminish the strength of Allround. A reformulation of removing alcohol, a primary concern for consumers extended the product life cycle of the Allround product and strengthens the brand. Advertising and promotion resources were deployed to not only attract new customers but also to position the brand as being attentive to consumer demands and become more child-friendly.

As reformulation provided an opportunity for the Allround product line, the risk remained Allstar Brands was heavily reliant on a single product. In period five the decision was made to enter into the allergy space with the Allright product. The symptoms report market research indicated the Allstar Brands did not have a product or reformulation which in 18% of the reported symptoms which related to allergy.

Results: Net Income and Stock Price
Pricing, advertising, promotions, segmentation and sales force allocation were interrelated components that needed to be integrated and viewed holistically for the marketing strategy to be effective. The long-term success of the strategy which guided the decisions period over a period can be measured by financial performance, market share and in the stock price. The guiding principles of a customer-centric approach supported by financial stewardship and a commitment to executing on the strategy would enable consistent solid financial results and shareholder value. The initial plan outlined a goal of achieving 10% top line growth and 5% bottom line growth period over period. The net income goal growth period over period dramatically was exceeded as depicted in the chart below. Net income grew from $67M in period 1 to $124M in period 8. Allstar Brands experienced a $57M increase in net income for the entire simulation.

The steady cash flow and consistent growth in sales disciplined spend management, and net income was consequently rewarded and reflected in the Allstar Brands stock price which increased by $48.38 or 127% over the eight periods.

Looking Ahead: Future State
The future is bright for Allstar Brands and the consumer product division. The emergence of the Allright product line in the allergy segment has demonstrated strong performance since the launch in period 6. The Allstar Brands product is projected and trending to move into the star quadrant with the portfolio graph. Allround continues to generate strong cash flow and is viewed as the market leader with close to 25% share.

The market segmentation strategy focusing on the young singles and families has proven successful as market research indicates high brand satisfaction and loyalty. The strong cash flow and margins will fund new initiatives and products which are critical in the highly competitive over-the-counter industry. The economic outlook for the sector remains positive, and Allstar Brands must continue to stay disciplined with an intense focus on our customers and quality to grow the business steadily and strengthen the brand.

References
Dunn, S., Bogomolova, S., & Dawes, J. (2013, May). An investigation into the effect of competitive context on brand price elasticities. In International Choice Modelling Conference 2013.

James, S. W., Kinnear, T. C., & Deighan, M. (2014). PharmaSim: The Marketing Management Simulation. Charlottesville, VA: Interpretive Simulations.

Kotler, P., & Keller, K. L. (2012). Marketing Management (14th ed.). Upper Saddle River, NJ: Pearson Prentice Hall.

Mankiw, N. G. (2012). Principles of Economics (6th ed.). Mason, OH: South-Western Cengage Learning.

Appendix
Initial Strategy Summary
SWOT Analysis
STRENGTHS

1. Brand loyalty (46% retention ratio)

1. Strong reputation

1. High-quality multi-symptom product

1. Price leader

1. Market leader in cold (40% share)

WEAKNESS

1. Heavy reliance on one product

1. Zero market position in nasal, allergy and cough

1. Physicians hesitant to recommend

OPPORTUNITIES

1. Product develops and expansion

1. OTC market is strong and growing

1. Channel expansion ( physicians)

THREATS

1. Intense competition and innovation

1. Price erosion

1. External market and business factors such as mild cold season; mergers/acquisitions; private label; changes in healthcare; new regulatory requirements; quality or recall issues

Performance Objectives
Allstar Brands is committed to four performance goals which will contribute to sound financial performance, brand strength, and increase market share.

Objective 1

Financial Performance

One of the most important goals of our business is to prove value to our shareholders through sound management, cost management disciplines, and innovation. The goal is to achieve top line growth of 10% and bottom line growth of 5%.

Objective 2

Brand Strength

Allround has not been receiving the best shelf placement. One of our goals is to partner with retailers to ensure that our product is placed in the prime areas of the shelf to be more visible to our customers.

Objective 3

Increase Market Share

One of our goals is to have our brand recognized around the world with no further explanation. We will focus our advertising message on increasing overall demand, increase customer awareness, and stimulate the repurchase of Allround. Our brand management group will work on making effective marketing decisions in all marketing mix areas to maximize the profitability of Allstar Brands

Decision Summary
The following represents screenshots period by period decisions made by team three during the simulation

Sales Force

Period1

Period2

Period3

Period4

Period5

Period6

Period7

Period8

Direct SF

Indep. Drugstores

8

17

20

35

35

39

20

16

Chain Drugstores

30

50

55

51

55

58

85

75

Grocery Stores

48

45

65

75

84

85

70

95

Convenience Stores

5

5

5

5

5

5

5

3

Mass Merch.

15

18

19

25

28

28

20

32

Total Direct

106

135

164

191

207

215

200

221

Indirect SF

Wholesale Support

18

25

28

28

28

28

25

40

Merchandisers

10

25

28

28

29

29

25

40

Detailers

11

15

28

28

28

28

25

40

Total Indirect

39

65

84

84

85

85

75

120

TOTAL SALES FORCE

145

200

248

275

292

300

275

341

Price

Advertising

Promotions

Special Incidents

Period 8 new formulations

Overall Results
The following represents a brief summary of the weekly results team 3 experienced based on the decisions made in the area of pricing, sales force allocation, promotions, advertising spend, market segmentation, messaging and special incidents.

Comparative Sales
Our group, team 3, was the top performer regarding comparable sales for the simulation. Through the use of promotions, competitive pricing, favorable trade ratings, brand equity and high-quality products Allstar Brands was able to achieve high single digit to low double digit sales growth consistently period over period.

Comparative Net Income
Though financial discipline and a careful analysis of the income statement Group C was able to translate the strong top line growth to the bottom line. Profit margins in the low 50% range were consistently maintained. The strategy was not based on volume but rather maintaining a premium, high-quality, effective product which would justify a premium price. The profitability would drive future innovation, product development or line extensions.

Comparative Market Share
Two risks identified in the SWOT analysis indicated reliance on a single product line and Allround being a mature product. The first half of the simulation was used to stay the course and implement the strategy until the right opportunity arose for a product launch. The entrance into the allergy market and introduction of the Allright product line complement the Allround brand and drove market share increases in period seven and eight.

Comparative Stock Price
The reaction of the stock price was reflective of the sound decisions made period after period. The factors included the decision making was based on the customer needs, trust, commitment to quality, strong relationship with trading partners and dedication to improving brand equity.

Brand Performance
Each period, the brand performance was monitored. The voice of customer alerted the brand management team both strengths and opportunities. Overall during the entire simulation, the feedback was well received which was an indicator the Allround and Allround products were effective and the advertising message was being heard.

Price Value
The trade-off report was carefully monitored every period. The objective was to convenience the consumer the trade-off in high price will translate into effective symptom relief. When the Allright product was introduced to the marketplace price point was critical given the product was not yet proven and Allstar Brands had a zero percent market share.

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Satisfaction
The customer satisfaction metric was instrumental in managing the advertising and promotions each period. For example, the original formulation contained alcohol which gave both consumer and doctors recommending the product some concern. Based on the feedback, the product was reformulated to remove alcohol and the benefit messaging was changed accordingly. The result was customer satisfaction increased.

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Perception
The perception of our products lines was a key indicator which messages to promote as well as to understand product effectiveness. During the simulation, the opinion data was closely monitored as there was a direct correlation to price.

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Portfolio
The portfolio is a culmination of the decisions made each period. The goal was to have the Allround product reside in the star and cash cow quadrant. We believe the Allright brand is well positioned to reside entirely in the star category in future periods.

Trade Ratings
The trade rating was reviewed each period to ensure the relationship with our channel partners was sound. An acceptable, healthy level and expectation was to maintain a minimum rating of 7.0. We were confident the promotional and volume discounts were fair and equitable.

Work Log – Group C
Area Focus
Team Member
Executive Summary
Section 1 Price

Section 7 Sales Force Allocation

Appendix

Combined All Sections into Final Report

Lou Schroeter
Section 10 Results and Net Income
Section 11 Looking Ahead

Melody Pryor
Section 2 Volume Discount and Promotion Allowance
Section 9 Product Lifecycle

Roberto Rodriguez
Section 6 Promotions
Section 8 Market Segmentation
Tamika Miller
Section 3 Advertising
Section 4 Agency Selection

Section 5 Advertising Messaging

Kristyn Johnson
(*) all team members had participated in the review process of each section to provide feedback
Team D:

Table of Contents

Executive Summary….………………………………………………………………………3

Final Simulation Report

Manufacturers Suggested Retail Price………………………………………….........4

Volume Discounts and Promotional Allowances.……………………………..…….5

Advertising Budget…………………………………………………………………..6

Advertising Agency………………………………………………………………….8

Advertising Messages………………………………………………………………..8

Promotion…………………………………………………………………………….9

Sales Force…………………………………………………………………………..11

Segmentation………………………………………………………………………..12

Line Extensions……………………………………………………………………..13

Net Income and Stock Price………………………………………………………...14

Allround Projections………………………………………………………………..15

References…………………………………………………………………………..18

Appendix

Initial Strategy Report………………………………………………………………20

Business Definition…………………………………………………………20

Competitive Advantage……………………………………………………..21

Performance Objectives…………………………………………………….22

Key Success Factors………………………………………………………...23

Tables and Graphs………...……….………………………………………………..26

Allround

The Allround Brand

Executive Summary

Allround Brand is a sub-division of the Pharmaceuticals division within Allstar Brands Corporation that is responsible for over the counter cold and allergy remedy market. Our group is comprised of a marketing management team within Allround that work together on the matters related to over the counter cold and allergy remedy market. The task of the Allround brand management team is to maintain long-term profitability and market share in an increasing competitive and changing environment. This will be achieved through sound marketing strategies that allows Allround to not only maintain our current market of customers, but expand our market share to untapped segments. To remain relevant our marketing management team will focus on brand awareness, differentiation, pricing and promotional allowances, commitment to innovation, and proper sales force allocations. Success factors will depend on how Allround marketing strategy responds to a changing market while allocating the appropriate funding to meet these changes.

Final Simulation Report

Manufacturer’s Suggested Retail Price

For manufacturer’s suggested retail price, our firm followed a strategy of increases based on several market factors. One of the main factors we looked at was the inflation rate, which oftentimes outpaced our increases in MSRP. We followed a very conservative approach for price increases and strived to have a product that worked well, met the consumer’s expectations, and was competitively priced to the lower end of our closest competitor’s products. This strategy was followed across the board for both Allround, and Allround+. We found that conservative price increases did not drastically affect the demand for the product and that our core brand, Allround remained inelastic in nature. This was likely due to the brand loyalty and brand image obtained throughout the simulation.

Volume Discounts and Promotional Allowances

For volume discounts and promotional allowances, we had a straightforward and simple process. We never changed our allowances from our initial strategy and this worked well for the firm. Every analysis showed that we were within industry norms and we did not feel a need to changes something that was not broken. We had our allocation set as listed in the appendix (see table 1) for our core brand, Allround.

Allround+ followed a similar strategy of allowances and promotional/advertising budgetary allowances. Our firm’s strategy for this was to maximize the allowable percentage of budget for new brands as a way to build brand identity and customer loyalty. Overall, social media criticism was a big determining factor of the promotional strategy for all brands. In hindsight, our firm would have most likely reduced some of the allocation for point of purchase and Co-Op advertisement as we were substantially higher than any of the competition.

Advertising budget

For advertising, we were given several different decisions to make. Our firm maintained a relationship with Brewster, Maxwell, & Wheeler ad agency for the entire simulation period. While they were the most expensive ad agency to go with, we were extremely happy with the results we achieved. Several of the other agencies offered cheaper results, but we chose to stick with our initial plan of allocating a larger portion of our budget to advertising, ensuring adequate chance of our product being consumed. One of the biggest lessons we learned with advertising was the value associated with customer loyalty and the brand equity associated with Allround. When a new line was introduced, it seemed very difficult to get the same results as original Allround when it contained very similar company support and funding. Finding that balance in Advertising budget was quite challenging without being able to quantify the value of brand equity and customer loyalty.