Marketing Strategy Simulation Learning Note
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The document provides a comprehensive analysis of the performance of Nyla, a company operating in the competitive clinites and nutrites markets, over seven periods. It details the company's strategies, market share evolution, advertising impacts, budgeting decisions, and the challenges faced, particularly around brand awareness and customer retention. Key metrics indicate a decline in market share despite increasing market size, alongside shifts in customer purchasing behavior and the economic environment affecting operation costs and revenues.
Marketing Strategy Simulation Learning Note
- 1. SP Jain School of Global Management MARKSTRAT COMPREHENSIVE LEARNING NOTE Team – 6 NYLA
- 2. Table of Contents Past Performance Analysis......................................................................................................................3 Period 1...............................................................................................................................................3 Period 2...............................................................................................................................................4 Period 3...............................................................................................................................................4 Period 4...............................................................................................................................................5 Period 5...............................................................................................................................................5 Period 6...............................................................................................................................................6 Comparison of Key Metrics.................................................................................................................6 Major Changes in the Business Environment .........................................................................................7 Competition & New Product Launch ..................................................................................................7 Economy..............................................................................................................................................7 Average Price of Every Segment.........................................................................................................8 Budget.................................................................................................................................................8 Market Size .........................................................................................................................................8 Period 7 Strategies..................................................................................................................................9 Clinites.................................................................................................................................................9 Nutrites ...............................................................................................................................................9 Trends and Scenarios............................................................................................................................10 Scenarios...........................................................................................................................................10 Comparison of Profit and Loss as per Scenarios...............................................................................10 Metrics and Trends ...........................................................................................................................11 Indicators ..............................................................................................................................................12 Lead Indicators..................................................................................................................................12 New Customers and Repeat Customers .......................................................................................12 Purchase Intentions ......................................................................................................................13 Brand Awareness ..........................................................................................................................15 Shopping Habits ............................................................................................................................16 Lag Indicators....................................................................................................................................17 Inflation and GDP..........................................................................................................................17 Commercial Cost...........................................................................................................................17 Profits............................................................................................................................................18 Inventory.......................................................................................................................................18 Returns..........................................................................................................................................18
- 3. MARKSTRAT Learning Experience.........................................................................................................19 Budget...............................................................................................................................................19 Product Positioning...........................................................................................................................19 Market Forecasting...........................................................................................................................19 Production Planning..........................................................................................................................19 Organizational Layout and Staffing...................................................................................................19 Commercial Planning ........................................................................................................................20 Distribution Channels........................................................................................................................20 Marketing Expenditures....................................................................................................................20
- 4. Past Performance Analysis The key strategies and analysis of Team’s past 6 years’ performance S.No Major Decisions Outcomes Key Learnings Period 1 1. Target Segment: a. Medium Income Families b. Singles Reason: Both segments are price sensitive segments and both segments desire quality products at value prices Volume Market Share increased from 9.8% to 12% for Nice but increased marginally for Nine. Market Share more in Singles than in Medium Income Families. Strategy working for Singles. Maybe we need to introduce new brand for Medium Income Families. 2. Distribution Channel: Mass Merchandise and Specialized Mass: Singles and Medium Income Families purchase maximum from these two distribution channels. Retail Sale for Nice increased by $ 12 mn and for Nine by $ 6 mn. Unit volume sold by Nice increased by 1,407,000 units and by Nine increased by 462,000 units. Nice Market Share grew in Mass Merchandise and Specialized Mass, whereas for Nine it grew in Department Store and Beauty Portals. Understood the buying locations for Nice and Nine segments. Can leverage on these distribution channels by focusing on respective channels for respective segments. 3. Advertising Mix: Advertising will increase Brand Awareness and help to capture larger Market Share; This will make the stakeholders happy which will increase SPI Brand Awareness maximum for Nice and within the chosen segments. For Nine it is more than 50%. Awareness more in Singles segment. Advertising mix working well. Advertising Media is giving the desired returns i.e. increasing brand awareness and revenue. Therefore SPI increased from 1000 to 1244.
- 5. Period 2 4. Positioning: Continue with Singles for Nice and Reposition Nine in Affluent Segment, as Nine has moved more into Affluent segment Singles market share is 17% but relatively less as compared to competitors. Nine: Gained market share in Affluent but relatively less as compared to competitors. Singles market is price sensitive and our price was comparatively higher. 5. Continuing with Period 0 Strategy: High Spending on Advertising and maintaining minimum Inventory Inventory is well maintained and minimum. Brand Awareness for Nice is highest and has increased to 67.8% Our forecasting considering market growth and advertising is correct. Advertisements and effective in creating Brand Awareness. Need to work on Purchase Intentions. 6. R&D: Started R&D projects for Nutrites and estimated budget is obtained from online query and adjusted accordingly Target Segment: Elderly as over the period it will be one of the largest segment Project completed successfully Estimated budget was more, can use this judgment for launching later projects. Period 3 7. Target Segment: Continue with Singles for Nice and for Nine since the existing market of Nine is Affluent customers who are loyal. So we can conquer Singles market with the same product (Nine) by keeping optimum prices Lost Singles market for both Nice and Nine. But Nine has maintained share in Affluent. Pamper the loyal customers. 8. Continuing Existing Strategy: Maintaining Advertising and Minimum Inventory Inventory got adjusted. Advertising is still successful in creating Brand Awareness Brand Awareness is not creating high Purchase Intentions. Need to change the strategy
- 6. 9. R&D Investment: Did minimum required because project would not get completed in spite of taking loans and so we wanted to avoid unnecessary interest accumulation R&D project remained incomplete. Required budget was increased. R&D should be completed in the minimum possible time. Period 4 10. Advertising to Target Segment: Allocate more advertising budget to the target segments of the respective brands Brand Awareness increased, but not purchase intentions Simply advertising is not helping. Need to come up with new techniques to increase sales and revenue 11. Continuing Existing Strategy: Maintain Advertising in Nice but lower in Nine and Maintain Minimum Inventory Inventory cost increased New products were launched by the competitors which took away the sales and hence lot of inventory was left 12. R&D Investment: Initiated 2 Clinites products and allocated the required budget for Nutrite R&D projects completed Sufficient funds and appropriate mix of parameters is essential Period 5 13. Advertising: Brand Awareness is high and we required some cash, so we reduced advertising in existing brands and invested in advertising 2 new brands Brand Awareness reduced, impacted SPI and market share Consumers are highly advertisement sensitive 14. Commercial and Distribution: Reorganized existing commercial and distribution for older brands and invested in new products Inventory pending and hence losses New product launch forecast went wrong. Production of new units should be less, first try and then produce more
- 7. 15. Product Launch: New products launched; one for medium income segment and one for low income segment Not many units were sold, pending inventory Lesser units should be produced, tested and then production to be increased Period 6 16. Advertising: Put money into Advertisement Research to increase persuasiveness of the brands Brand Awareness is high for Nice and Nine and low for Nixus and Nike. Purchase intentions still not high Product specifications and price not in sync to covert the awareness into action 17. Inventory and Merchandising: Reduced inventory to minimize losses and reshuffled merchandising Merchandising was adequate Inventory high for Nixus and Nine Bull whip effect and butterfly effect of pending Inventory 18. Product Launch: Launched Nutrites product – Numen into Elderly market segment. Launched this year only to introduce, aggressively will try to gain share in elderly from next year Market share is low but not much inventory left. Brand Awareness of Numen in elderly is 35% The segment is a slow growing and late adaptors. Elderly is expected to purchase more this year. Comparison of Key Metrics Comparisons of Performance Metrics of Nyla over past 6 periods are: 14% 17% 17% 14% 10% 7% 5% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% Market Share 3000 4000 4297 4300 3950 4033 4937 3000 4000 5000 6000 0 1 2 3 4 5 6 Period Marketing Expenditure
- 8. Major Changes in the Business Environment Competition & New Product Launch From period 3, the competition became stiff. New product launch started. These conditions lead to lowering the market share. Till period 7, there were about 27 brands of 7 companies in Clinite & 5 brands of Nutrite. The new products were launched with targeting specific market segment, identifying the characteristics of them. Economy The inflation rate increased from period 1. Earlier it was 2% which rose to about 4%. 35714 47735 5353652892 43669 39927 35224 20000 30000 40000 50000 60000 0 1 2 3 4 5 6 Period Revenues 10461 14110 18224 17058 13535 9321 4344 0 4000 8000 12000 16000 20000 0 1 2 3 4 5 6 Period Profits
- 9. Average Price of Every Segment The average price of every segment was reducing year on year except for High Earners. For Affluent families, it reduced from $ 20 to $ 18. Budget With revenues, SPI of last year, the budget allocated to every team differed. The budgets for the 7th period were ranging from $ 8.7 million to $ 24.8 million. This started changing from period 2. It was kept constant for first 2 periods. Last years’ performance was the indicator of current years’ budget. Market Size Market Size over the 7 periods has steadily increased but due to intense competition in the Clinites market, Nyla’s market share could not grow in line with it. In fact the trend lines plotted indicate that despite a growing market, Nyla’s market share as percentage continued to drop after period 2. 26030 29951 38181 46148 54028 75074 89375 0 20000 40000 60000 80000 100000 Period 0 Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Market Size
- 10. Period 7 Strategies S.No Major Decisions Expected Outcomes Clinites 1. Advertising and Pricing: Put money into Advertisement Research and priced products according to market expectations and physical characteristics to increase persuasiveness of the brands Brand Awareness for Nice and Nine is good which should convert to high purchase intentions At the same time Nike and Nixus should gain Awareness and convert to purchase intentions 2. Inventory: To minimize losses, reduced inventory and calculated production based on available inventory, market and segment forecast and advertisement Pending inventory should be minimized and hence inventory holding cost should get reduced. 3. Merchandising: Reshuffled merchandising budget according shopping habits and buying behaviour of segments Commercial allotment and merchandising budget distribution should convert to higher sales and gain higher market share Nutrites 1. Aggressive Advertising: To gain higher Brand Awareness invested in Advertising Media and higher percent in Advertising Research Allocated more distribution to Elderly segment Brand Awareness and Purchase Intentions should increase and this should help in gaining more market share of Elderly 2. Inventory: Increased Inventory owing to higher segment growth forecast for Elderly and not many players in Elderly Nutrite market Production is 25% of the estimated growth, hence pending inventory should be minimum 3. Merchandising: Segment growth is estimated to be more for Elderly hence more sales force deployed at the channels preferred by Elderly and likewise budget is allocated More elderly should purchase from desired stores and hence market share can increase
- 11. Trends and Scenarios Scenarios Scenarios considered are: Comparison of Profit and Loss as per Scenarios As Is Pessimistic Optimistic Revenues 34298 30723 81701 Contribution before Marketing 13352 12685 36201 Contribution after Marketing 4661 3994 27510 Earnings before taxes 4661 3994 27510 As Is •Calculated on the basis market forecast •Retained the market share of last period Pessimistic •No growth in segment size •Retained the market share of last period Optimistic •Calculated on the basis market forecast •Calculated market share based on market and segment forecast and advertisement 0 10000 20000 30000 40000 50000 60000 70000 80000 90000 Revenues Contribution before Marketing Contribution after Marketing Earnings before taxes Scenarios As Is Pessimistic Optimistic
- 12. Metrics and Trends Stock Price Index is an indicator of the shareholder value that a company creates. From the trend lines plotted Nyla’s SPI has only been going down after period2, except for in the Optimistic Scenario. This implies that there is erosion in the shareholder value for Nyla over time. In both the As Is and Pessimistic Scenarios, ROMI has also gone down after period 2 indicating a decrease in the effectiveness of the marketing spend. A downward trend of Return on Marketing Investment implies that the marketing initiatives did not yield as much contribution as desired. In the Optimistic Scenario, which is applicable only to period 7, there is a sharp rise in the ROMI which seems a little too optimistic given the trend. Otherwise the ROMI from period 0 to period 6 has increased and decreased at a steadier rate. The Return on R&D Expenditure reached a peak in period 3, after which it fell sharply in period 4. From period 5 onwards when there was no more new investment in R&D, the Return on it steadied at a slowly increasing rate. This implied that the overall contribution from the total portfolio was evening out spend on R&D in new brands. 0 500 1000 1500 2000 2500 SPI As Is Pessimistic Optimistic 0.00 1.00 2.00 3.00 4.00 5.00 6.00 ROMI As Is Pessimistic Optimistic 0 5 10 15 20 Return on R&D Expenditure As Is Pessimistic Optimistic
- 13. Indicators Lead Indicators Indicators which signal future events New Customers and Repeat Customers The new and repeat customer data gives the lead to number of loyal customers and number of new customers attracted who can demonstrate the potential to become repeat customers. The growing or shrinking customer base helps in understanding if the product is positioned correctly or not and its capacity to convert new potential customers into repeat customers. In the below charts it can be seen that initially the repeat customers were loyal and number of repeat customers as well as old customers were increasing. But later the numbers started declining. In this case, Nyla should try thinking about improving its product by R&D and reposition it. CLINITES Lead Indicators New Customers and Repeat Customers Purchase Intentions Brand Awareness Shopping Habits 0 1000 2000 3000 4000 5000 1499 273229842764 197520281692 693 868 14001656 16141218 1028 Nice Customers New Repeat 0 500 1000 1500 2000 2500 650 105510861176 588 452 329 503 560 830 993 1079 692 419 Nine Customers New Repeat
- 14. NUTRITES Purchase Intentions Purchase intentions convey the likelihood of a particular segment to purchase the product. It help is positioning the product. It also helps in understanding if the physical characteristics are preferred by that particular target segment. 0 100 200 300 400 Period 5 Period 6 205 244 0 87 Nike Customers New Repeat 0 100 200 300 400 Period 5 Period 6 273 228 0 92 Nixus Customers Nixus New Nixus Repeat 0 100 200 300 New Repeat 236 0 Numen Customers Period 6
- 15. CLINITES NUTRITES 0% 10% 20% 30% Nice High Earners Affluent Medium Income Low Income Singles 0% 5% 10% 15% 20% Nine High Earners Affluent Medium Income Low Income Singles 0% 1% 1% 2% 2% 3% Period 5 Period 6 Nike High Earners Affluent Medium Income Low Income Singles 0% 1% 1% 2% Period 5 Period 6 Nixus High Earners Affluent Medium Income Low Income Singles 0% 5% 10% 15% Health Conscious Families Elderly Numen Period 6
- 16. Brand Awareness Higher the Brand Awareness better is the brand known by the audience. But this is only first stage of influencing the buying behaviour of the consumer. CLINITES 0% 20% 40% 60% 80% Nice High Earners Affluent Medium Income Low Income Singles 0% 20% 40% 60% 80% 100% Nine High Earners Affluent Medium Income Low Income Singles 0% 5% 10% 15% 20% 25% 30% 35% Period 5 Period 6 Nike High Earners Affluent Medium Income Low Income Singles 0% 5% 10% 15% 20% 25% 30% 35% Period 5 Period 6 Nixus High Earners Affluent Medium Income Low Income Singles
- 17. NUTRITES Shopping Habits Shopping habits indicate which segment prefers buying from which location. It can be used to determine merchandising and salesforce deployment and budgets. CLINITES 0% 20% 40% Health Conscious Families Elderly Numen Period 6 0% 20% 40% 60% 80% 100% 120% 140% 160% 180% Mass Merchandising Specialised Mass Departmental Stores Beauty Parlour 6% 25% 55% 14%11% 34% 44% 12% 42% 26% 25% 6% 57% 29% 5% 9% 27% 47% 13% 13% Clinites Shopping Habits Highs Earners Affluent Med. Income Low Income Singles
- 18. NUTRITES Lag Indicators Indicators which follow an event Inflation and GDP Inflation can help in understanding the spending power of the consumers. It helps in understanding the overall economy. Commercial Cost Indicates the present staff deployed and helps in determining if the cost incurred is rightly utilized and spent. Trends helps in determining seasonality and changes if any and helps in forecasting. 0% 20% 40% 60% 80% 100% 120% Mass Merchandising Specialised Mass Departmental Stores Beauty Parlour 9% 47% 33% 11% 19% 39% 30% 11% 30% 34% 26% 9% Nutrite Shopping Habits Health Conscious Families Elderly Lag Indicators Commercial Cost Inflation ProfitsInventory Returns
- 19. Profits Helps in determining the revenues gained and costs incurred. Trends helps in determining seasonality and changes if any and helps in estimating future profits. Inventory Inventory analysis helps in determining if the planned inventory in the earlier cycles is appropriate or not. Trends helps in determining seasonality and changes if any and helps in forecasting. Returns ROI, ROMI Returns on R&D etc. helps in determining if the contributions and expenses are on the right area. It helps in planning for future expenses. 0 1000 2000 3000 0 1 2 3 4 5 6 Period Commercial Cost 0 4000 8000 12000 16000 20000 0 1 2 3 4 5 6 Period Profits 0 200 400 600 800 0 1 2 3 4 5 6 Period Inventory Costs
- 20. MARKSTRAT Learning Experience Budget The budget allocated per year is the most important thing in planning. Every expense should be balanced accordingly for every stakeholder. The future investments like R&D, new product launch should always considered while allocating budget. Relevance – In real world, these kind of balancing acts are required to understand and satisfy every stakeholder. Product Positioning It is essential to recognize the needs of each segment & position the product accordingly. R&D investments can be identified, if some product attributes are required to change to meet the customer demands. Relevance – Real world scenario - Apple positioned iPhone in ‘High Quality – High Price segment’. The product is positioned by fulfilling customer requirements keeping in view company’s mission. Market Forecasting To estimate the production planning, advertising expenditure and merchandising expenditure it is required know the market growth. Forecasting helps in this. Relevance – Whether the market is growing or will there be any recession economy decides the production planning. If there will not be much growth, then production needs to be cut down. Production Planning The market forecasting should be used effectively to estimate the production planning. Wrong planning might lead to huge inventory or loss of sales. The precise production planning avoids the inventory management incurring to additional cost. Relevance – The right usage of machineries, labours and warehousing gives the edge over competitors. Production planning helps in deciding the usage capacities of all these things. Organizational Layout and Staffing The organizational staffing is one of the most crucial things. There should be skilled labours to have highest output. The staff should be occupied enough and utilized effectively. Relevance – The staff should always be occupied with work and should not remain idle. To havehigh moral, everyone should have work.
- 21. Commercial Planning As per the target segment, commercial expenses should be planned. The expenses should be well distributed keeping in view growth of the segment and target customers. Relevance – There should always be focus on which customers are important and are targeted. This becomes critical when there is stiff competition and so many players are there in the market. Distribution Channels As per the target segment, buying preferences should be identified. These channels should be focused so as to gain maximum shelf space and to have more sales. Relevance – It becomes much more relevant in real life as choosing the right distribution partner is most important. Marketing Expenditures Based on the product attributes, target segment and price sensitivity, the marketing expenditure should be decided. If the product is low priced, then it is required to market it more and vice-versa. There should be focus on increasing the brand awareness and then to increase the purchase intentions. Relevance – The situation is exactly same in real life when it becomes important to spend on marketing and to the specific target segment.