Final Blog Post

Well we have finally made it to the final blog post of the class. I have really enjoyed doing this blog as it was a very unique way for us to express our thoughts on the course and the material. There were a lot of insightful lessons learned throughout the course, and the blog has allowed for a sense of reflection every week. Being the last blog post, this will be a great wrap-up to the term as it will allow me to reflect on the entire scope of the class.

I have to admit, at the start of the class, I would consider myself as having the typical opinion of the marketing side. To me marketing was more sales, advertisements, and promotions and other ways to grow the brand. I think the class has definitely changed that perspective as it has enlightened be into seeing other aspects of marketing. I think a big part of this has been the philosophies and ideas Drucker which have grown during the term. Thinking about my profession, accounting, which is considered the “language of business”, many times company executives have that accounting and financial background. I think there is a common perception that in order to be high up within a company, there must be a financial background to run the company. My feelings about this have definitely changed about this common perception do to the teachings of Drucker. Personally, I think it is very easy for financial executives to be too caught up in the numbers. A lot of the time, financial employees don’t have that customer focus and innovation that Drucker so strongly recommends. To me it something that I realized towards the end of our class as I started to notice the importance of knowing the customer and the products. Even as a financial accountant, I would argue that a marketing employee would most likely be better positioned in driving a company forward. At the end of the day, the customer is the one that drives the business and the economy. Marketing employees have that close customer relationship so they can learn to better the business. Furthermore, knowing the product will often lead to constant improvement and innovation. As Drucker stated, constant improvement and innovation will be vital in order to continue doing business. Without innovation, competitors will eventually surpass your company as the industry will move forward. Those who know the product best will help in innovating and growing the company. It is easy to see that those in marketing have a vast knowledge of both the customer and the product. Those two remain the critical to a successful business.

Hope everyone has a wonderful summer!

WEEK 10

Two Key Decisions

I believe our group has made two very important decisions that have greatly impacted our success. Early on in the simulation, at the end of period 3, we have realized that our product price for Allround was too high. We purchased the Trade-offs Report which we found to be very useful, and found that Allround had a perceived cost of “Very High”. Based on this report, we noticed that customers did not value Allround as much as the cost. Although our product was very effective, customers did not see value in the high cost. After much discussion with Andrew, and performing an analysis of market prices, we decided to decrease the price by 15 cents. Currently, Allround is well positioned in terms of matching the customer’s value with the price.

The second critical decision occurred in period 6 where we decided to introduce Allright (the allergy product). After Andrew and I performed our own individual market attractiveness, we both agreed that the allergy market was an attractive market based on usage, # of competitors, and segment growth. We wanted to introduce the product, but there were several tough decisions that needed to be made. This included allocating the marketing budget and the price. Based on the fact that the product is unique to the market, we attempted to use a skim strategy having a high initial cost. However, we realized after that our competitors increased the prices so our product was no longer above our competitors. Going forward to periods 8,9, and 10, we plan on increasing prices slightly as our product is very unique to the allergy market.

Special Incidents

Looking at some of the special decisions, I found the bad social media comments dilemma to be interesting as it put us in the company’s shoes. When making this decision, we definitely thought of what most companies do. Seeing Facebook pages of Coca Cola, Honda, Nissan, or even WNE, it hard to see these organizations letting users give negative comments so others would see. I would think that they would delete the comments so that other users do not see them. That is the decision we made for this special incident.

A more difficult special incident occurred during period 6 where we had to decide on an unhappy large drug store. We were on the fence but decided to not offer a discount and ultimately lost the customer. We based our decision on the fact that Allstar’s analysis of cost did not indicate that a discount should be given. In my eyes, I felt that this customer was bullying Allstar so we had to stay firm and not offer the discount because of potential effects on other customers. Ultimately, not offering the discount did hurt sales which was offset by other retailers.

Most Important Thing

I think one of the most important things that I have learned in recent periods has been the importance of competitor analysis. It is good to know how your company is doing, but it is also important to compare that to the industry and competitors. If you as a CEO stay in a “bubble” and only look internally, you will not see how you really fair when compared to the industry. I have learned this when looking at the growth of the industry and comparing it to the company growth. This made me realize that although Allstar is doing very well recently, so are competitors, and more importantly so is the entire industry. In my eyes, there has to be a good standard to use as a metric, and looking at industry standards is helpful.

WEEK 9

Business metrics used in Pharmasim and business

In evaluating how my team measures itself, the first easy step is to look at the stock price. The stock price is a very easy indicator for us to show whether we did better or worse than the previous period. It is however not a true indicator of the company’s economic health as many factors go into stock price including speculation and growth. Sometimes these factors are not indicative of the company’s current status and therefore other factors are used to evaluate the company. In most real companies, I would like to think stock price to be somewhat relevant, however my feeling is that growth is much more important. Many company CEO’s often times like to see constant growth going forward. In preparing financial statements at my previous job, management would often look to see how they were doing compared to last year.  If they are doing better than last year in terms of sales or net income, in their eyes, there is growth and they evaluate the company in that manner. Looking at Pharmasim, I like to think I do the same. Upon looking at the stock price, I next look to the change in both sales and net income. If there is a positive change, then I used that growth as a good metric of the company’s health. In recent periods, I have been able to analyze growth a little differently as I began to look at industry growth. I recently noticed that overall the Pharmasim industry has been doing very well. For example, overall industry sales increased by approximately 90% in cold market based on the manufacturer sales report. Of course some of this increase has been based on inflation and price increases, but some has to do with overall market growth. When I compared the increase in manufacturer sales for Allstar, I saw an increase of about 75%. So although sales increase dramatically over the periods for Allstar, so did industry sales. In this case, the idea of looking at growth from the previous year is good, however I found it important to also look at the benchmark. In this case, you have to compare the company’s growth to that of industry standards.

 Class Experiences

Looking at a few of my fellow student’s blogs, I saw that David’s group had made a similar tough decision to my group. I could relate to his group’s introduction of a new product as a tough decision as it was also hard for my group to enter a market. It may have felt risky but after performing our assessment, the market was attractive. Justin’s blog discussed college football’s metric of evaluating their status. I think in his setting, it is a relatively easy metric to use. A lot of the metrics are based on hard numbers which the coach (CEO) can use in evaluating his/her team. There is however some interesting judgement as sometimes the metrics might not look good, but the team may still win. This may be comparable to a company that has low sales but still has net income on the bottom line.

Life as Pharmasim CEO

Managing the company in Pharmasim has been very interesting, especially making the adjustments from year to year. I think that is the biggest that our team has been able to do as it is important to learn from your mistakes. I have also found it important to understand the industry and the competitors and found the situational analysis very helpful in making those adjustments. Managing the company with my team has also helped in creating new ideas. I think each person brings new ideas to the table which I sometimes do not think of. I have really enjoyed sharing ideas and thoughts with fellow teammates as we both might have a different sense of our product and our company.

WEEK 8

Customer vs Company Strategy

In some cases, the customer determines the marketing strategy of the company and the company’s approach in the market. As we know from Drucker, companies should put a lot of emphasis on the customer. The customer’s market tendencies, needs, and wants all factor into how the company approaches its marketing strategy. However I feel that the company must manage to see how customers are reacting while at the same time being innovative in their own unique marketing approach. In the end, I feel like a company must find a balance. As I previously mentioned, a good example of a company that used its own marketing approach has been Apple’s Ipad. The company used its own internal instincts of creating the tablet market even though customers did not indicate a need for them.

A good personal example of a company that used the customers input to create a product is Big Y’s “Big Y 2 Go”. The company saw what customers wanted and developed a product that fulfilled that market need. Big Y 2 Go is a way for customers to make purchases online, have Big Y employees do the shopping, and ultimately pick up your groceries at the door. The product is meant to target customers who do not have time to shop and focuses on those who want shopping done quickly. In the creation of this product, Big Y realized that customers value time. Big Y successfully tapped into these new customers as there was a need for such a product. Similarly, Stop and Shop has a similar service targeting the same consumer who values time. In comparing the two examples discussed, Apple acted almost purely internally when creating the Apple Ipad. Big Y on the other hand, saw how the customer market was acting and reacting to that market through their Big Y 2 Go service.

Drucker's Historical Data and 5 Certanities

Drucker believed that historical data should not be used to predict the future when performing a strategic analysis of a company. Although historical data should not be a key point in forming strategic decisions of a company, I feel that this data can help to confirm past decisions while providing additional assurance to new ones. Being in the accounting industry, I feel that I constantly work on historical data. Financial statements which we complete for companies in some cases are not finalized until several months past the company’s year-end. Ultimately, when this data is complete, members of the board use it as a way to see how the company is doing. I have seen that mainly in the not for profit world, organizations rely on this historical data as a way to envision where the company is headed. When the organization is low in terms of resources, any data, even old data can be used as a way to form a strategic analysis.

 Looking at Drucker’s 5 economic certainties, I feel that they still hold a lot of truth in today’s world. The collapsing birth-rate in the developing world is a key factor that affects global business. I would add however the fact that third world countries are expected to have huge booms in population which will likely change the balance. What is currently certain is that business and people are becoming much closer because of technology. The fact that there are major shifts in population growth is another change to Drucker's 5 economic certainties.

Pharmasim World - Metrics

In examining what metrics should be used in Pharmasim, cummulative net income would be a good judgment of overall company success. Although sales dollars and unit sales would also be good in analyzing company success, these can be skewed for several reasons. For example, a company may have very high sales due to very low price which is near cost, therefore their sales will be very high. However when looking at their bottom line, the company may be operating at a net loss due to a low gross profit margin. Likewise high sales may be achived due to vey high advertising and promtions. These expenses would not be picked up in the manufactuer sales or unit sales calculation. However when looking at the bottom line of net income, the expenses will be shown and the “inflated” sales will be shown net of the related expenses. Cummulative net income captures both sales and expenses are are equally important when evaluting a company’s overall health.

Should we push or pull?

This week I wanted to compare how companies incorporate either a push or pull strategy in order to generate more sales. I was curious to see how different companies approached their customers and their strategy. In my company, we do not necessarily incorporate either strategy but if I had to choose one, I would say that accounting firms generally have a pull strategy. In bringing in new and current customers, accounting firms will work on creating good customer relationships. The profession is highly dependent on word of mouth referrals that will pull customers in. Many new clients that we receive often times come to us seeking help or assistance. These companies know the type of work in which we perform and come to us. I did notice however that little advertising is used to pull customers in. Unlike most companies which may incorporate a pull strategy, I have seen that little advertising is done to pull the customer in. Instead we rely on strong word of mouth advertising to bring in those new customers. That word of mouth advertising comes from our relationship selling in which we successfully manage the customer.

Next I looked at automakers in how they implement either a pull or push strategy. I believe that in the automobile industry, implementing the strategy is dependent on the type of vehicle. For example, standard and basic cars such as the Honda Accord or Toyota Camry use a pull strategy by advertising to customers as much as possible. These automakers compete heavily and try their best to draw customers to them. Similar to my company, these automakers also look to create those valued relationships with customers. Other tactics used include offering varying promotions and rebates which will further help to draw customers to them. In looking at higher end automobiles such as Lamborghini or luxury Mercedes Benz and BMW, more of a push strategy is used. For example, these vehicles are highly specialized to a specific market (high cost luxury vehicles) and companies strive to be close to their customers. This includes having special trade show promotion that encourages more demand. This push strategy works to establish a more specific customer as the product is very defined and is not intended for the entire population. These companies must push the product to the customer because it might be the only way to get them aware of it.

This week in PharmaSim World

In examining the elasticity of Allround cold medicine, prices changes from 1%-15% did not affect the sales. It is determined that the product is inelastic as the price changes had no major impact. I think a big part of this has to do with the brand loyalty of Allround. Customers are willing to pay more for the product as they remain loyal with price increases. The brand also has very high customer satisfaction and brand perception. The increase in price is equal to the already added value the product has. Therefore we are able to increase the price as much as 15% without there being setbacks in net income. At a 20% increase in price, I believe that is where customers realize that the price is too high and are therefore no longer willing to pay that premium for the brand.

Implementing the 4 Strategies:

Everyday Low Price: Implementing this approach would include dropping the price dramatically in order to become the lowest priced cough medicine in the market. However, as seen in the elasticity work this week, decreasing the price is a strategy that will not increase sales. The brand has strong customer awareness, therefore a low price strategy will be unsuccessful. Allround can produce a new line priced very low  in the market but this strategy may be at odds with the customer’s perception of the brand. It might have to create a 2^nd brand to implement an EDLP strategy.

High/Low – I think this strategy would be successful if implemented as customers would get perceived added value. The brand is already highly regarded based on customer surveys. Therefore having set a high price, and then giving rebates and discounts will have customers believing that there is a huge deal when they buy Allround.

Skim – A price skimming strategy would involve introducing a new Allround product at a high price and decreasing the price over time.  Similar to the EDLP strategy, I also feel that having a reduced price with the strong brnad name of Allround would confuse customers. It would make for an unclear strategy for Allround.

Penetration – Penetrating the market with a low price and increasing over time may work if Allround introducing a price just slightly lower and then increases it. The low price initially would make customers try the new product and the company will be able to increase the price over time as soon as a strong customer base is established.

Correct price means correct value

Determining the “correct price” for any given product can lead to many mistakes for the company and its customers. I know in my profession, public accounting, determining the proper price to charge a customer can become a major issue. There are really no rebates or promotions as it is service based and price is determined by the magnitude of the client. There can be small promotional discounts or fee reductions, however that is rarely the case, and when discounts due occur it is often small. Discounts may also occur if there have been errors or setbacks on our company’s behalf. In those cases, we reduce the price charged to the customer because of the reduced value we have given. In looking at the “correct price” in my profession, it can be the price that matches the value we give to the customer. I think Drucker would agree that the price charged must be equal to the assumed value given to the customer. Customers will pay the price in which they believe they are getting value for the product or service. In my company’s case, customers will be unwilling to pay a high fee if they believ they are not getting added value in return. In that case, they would likely change accounting firms, and go to a firm that can match their price with their value.

Samsung vs. Apple

Something interesting that I have seen in recent months has been the marketing strategy used by Samsung in promoting the new S4 smartphone. Like everyone else, I have seen commercials promoting the S4 as” the next big thing is here”. As a direct competitor to the Apple iPhone, Samsung’s strategy has been to bluntly show customers that it is better than the iPhone. Its commercials clearly mock Apple users and the idea of waiting for the next version to come out. As an iPhone user, I have to say that I was turned off to Samsung’s strategy as it clearly criticizes Apple’s iPhone.  I feel that many Apple users will likely stay away from Samsung unless they are very dissatisfied with their phone. The strategy taken by Samsung made me think of other situations where a company took its competitors “head-on”. The first example that comes to mind is Pepsi’s commercial of the Pepsi-Coke challenge where it directly stated that it is better than Coca Cola. Marketing techniques like these are interesting as the company states that it is better where in most cases the market or the customer will determine the better product.

This week in PharmaSim World

The three products that are line extensions for me include a 4hr child cold liquid, 4hr allergy capsule, and a cold spray. Trying to find the market demand for the three possible product lines, I used the brands purchased report and allocated the percentages based on the type of care needed and the population. For the child 4 hour cold liquid, out of the 561 total units, 74.7% was cold, of which 26.5% was young family. I found that based on the data, approximately 111 units are purchased for young family with colds. The average cost of cold medicine was about $5.25 making the total market. Moving to the allergy line extension, the total market is 561 units x 11.5% which equals a total market demand of just 30 units. The last line extension of the cold spray has a market demand of the total cold market of 74.7% x 561 units = 419 units.

Luxury Branding Sin

Drucker’s sin of premium pricing and high profit margin shows how companies can become too narrow focused on increasing profits. In the example of Xerox, the company believed that it could continue to grow sales by adding “bells and whistles”. The added features were thought to have added value to the product, however the customer did not have perceived value for these added features. This was also the case in Drucker’s example of the car industry where auto makers did not focus on what customers wanted. Customers saw no value in the features provided and were unwilling to pay that premium price. Apple is course a premium pricing brand which Drucker might consider as breaking one of the sins. However, I feel that unlike the automakers of the 1970’s and Xerox, apple is able to provide added value to the customer. It is easy to see that customers are willing to pay a premium price for the brand. Customers value Apple’s product innovation and most importantly their brand equity. They are willing to pay the premium to “fit in” with others who have Apple products. That premium pricing strategy will be successful as the Apple brand has been built into the culture.

Target Luxury

The relationship between Target and Nieman Marcus brought about a lot of questions when the collaboration was first announced in 2012. The mix between low cost and premium luxury branding gives many customers question marks. However, as seen in the class article, there are several circumstances where, if done properly, downward luxury brand extensions work. In the Target and Nieman Marcus venture, both parties saw benefits. For Target, it allowed them to give customers a sense of luxury. Customers who shop at Target look for low prices and value for their money. Offering them luxury brands would be allow them to get a little bit of that luxury. This is similar to the luxury car makers who brand entry level sedans. Luxury car makers like BMW and Mercedes Benz have entry level vehicles for those seeking a level of luxury. These vehicles are priced at the bottom, but still have the luxury brand and prestige. While Target gives customers a new sense of luxury, Nieman Marcus gains new customers in this relationship. Similar to Rolls Royce introducing the Ghost model, Nieman Marcus will target new customers when working with Target. Although this may prove to devalue the brand as it happened to the Mercedes Benz A class model. Nieman Marcus must not lose their premium pricing value.

This article discusses the venture as a big flop:

http://business.time.com/2013/01/02/epic-retail-fail-where-did-the-target-neiman-marcus-collection-go-wrong/

This week in PharmaSim

In the first trial, based on the conjoint analysis, I set the price to 3.59 which decreased my stock price. Brand awareness increased and overall manufacturer sales decreased. Although my sales and units sold increased dramatically, my net income decreased based on the drop in price.

Replaying the period, I set my next price at $4.79. In this second try, I saw brand awareness stay relatively steady around 83% while unit sales jumped to 130 million. I saw my share of manufacturer sales decrease also but not nearly as much (from 25% to 23%).

 Next I performed a test looking at two separate bundles. Bundle 3 (price of $4.31 and drop alcohol) decreased net income from $85 million to $52 million and slightly decreased the stock price. As expected with the drop in price, the number of units sold increased from 115 million to 140 million. I knew that sales would increase but I was hoping that my net income figure would not decrease as much as it did. Looking at the industry market, my manufacturer sales was similar to the 2^nd trial above. Bundle 3 decreased my manufacturer sales from 24% to 23%. I also saw the purchases survey indicate an increase from 18% to 24% for percentage of units sold.

Bundle 11 (price $5.27 and switch to expectorant) had mixed results. I saw both my stock price and net income decrease. Income going from $85 million to $77 million. The drop in net income was much better than the bundle 3 trial. I saw the number of units sold slightly increase which was surprising to me. Especially with my changes in pricing. This bundle also had an increase in the purchasing intentions of the customer.

Looking at my personal preferences when buying over the counter cold medicine, I typically try to get a good balance with both price and quality. I think that can be said for most customers who are buying OTC products. I do not have a preference to buy a specific brand and price will typically be the deciding factor.

Product that depends on customer's use situation

When examining a brand which varies depending on the customer’s situation, I first thought of the clothing industry and how varying brands will change depending on the weather. The customer will often times wear clothing depending on the weather or season. This is very dependent on the customer’s use of the product. The customer’s use situation will dictate the market in some ways especially in extreme seasons where certain clothing is needed. For example, an umbrella is only needed in the rain. This product is highly dependent on the customer’s use situation. Certain customers who do not need to walk far from their car to work, might even choose to not have an umbrella. Other clothing such as sweaters, shorts, or jackets are also very seasonal. The products will only used depending on the situation the customer is in.

Construction and Football - Looking and other blogs

This week I looked at Kenny’s blog and examined some of his points related to class. I found his analysis of the construction industry very interesting especially his experiences as it relates to marketing. Being a very unique industry, Kenny indicates that the majority of their business is repeat customers. I found this very interesting as the majority of the customer interaction is after the sale. When looking at most sales/marketing in different industries, companies will work with the customer before the sale. Typically once the sale occurs, marketing/sales takes a step back as the customer is already satisfied. Kenny demonstrates that customer service in the construction industry becomes vital throughout the entire process. Especially with repeat customers and word of mouth advertising, where customer service makes an impact.

Looking at Justin’s blog, he also examined WNE football recruits as potential customers. As noted while looking at Kenny’s blog, most industries have a ig push on marketing and sales leading up to the sale. In Justin’s case, the “sale” would be the commitment of a recruit. His analysis of the customer is interesting and continues to illustrate the importance of the customer as we have learned through Drucker. WNE does a lot of customer research in learning recruits and ways to improve on customer satisfaction. Similar to the construction industry, both WNE and Kenny’s construction business hold value to the customer. Lastly, I found WNE’s competitor analysis intriguing in the way they see what other schools do in terms of recruiting.

Customer defines the demand process

-Drucker emphasizes the fact that customers control the market and the product. As discussed in the class this past week, customers also control the demand process for products produced by companies. This did however make me think of the unique case of the Apple Ipad when it hit markets about three years ago. Customers did not really create the demand for the product, Apple created the demand for the Ipad and created new customers. This new innovation sparked a completely new line of products which is now demanded by the customer. However, in the beginning, Apple definitely created the demand for the product as customers did not really know what the product would be used for. I recall huge disappointments when first seeing the product, as many people thought that it was a product that would not be used by the customer (expected no customer demand. However, Apple was able to successfully create this demand even though initially people were very sceptical of the Ipad.

I found this very interesting article discussing the criticism received by Apple upon launching the Ipad. Customers were uncertain of the product initially, but demand was created.

http://appleinsider.com/articles/13/04/03/on-its-third-birthday-apples-ipad-looks-back-at-years-of-comical-criticism

This Week in PharmaSim World

This week I looked at the Advertising reports generated in PharmaSim and compared how my company matched up with competition. This report is very helpful in showing how companies are spending their advertising and how they try to lure the customer to buy the product. Performing a little bit of competitive analysis, I noticed that my company was much different in its approach to advertising. I noticed that many competitors spent a much higher percentage of advertising on “reminder” and “primary. I tended to focus my advertising on the benefits and comparisons and my percentage of reminder advertising was much lower. Upon looking at the competition, I instinctively thought to increase my reminder advertising as to align with industry norms. I thought that it was important for my advertising to be in line with the competition.  I was also able to analyze the total advertising budget by comparing to sales. This gave me a good idea of how much my competition is spending advertising.

Population of PharmaSim world is approximately 263.9 million

Fellow Blogger

Kristen's blog from the previous week was a good read in how it described the idea of companies "painting themselves in the corner". I agree with her analysis that many companies out there fail to keep up with the ever changing customer and fail to please there needs. When a customer's needs change, so must the company's products and services. Constant innovation becomes a centerpoint to a changing customer. Kristen's example of Blockbuster focused on that idea of failing to change with the customer and failing to innovate. As many of us know, the company failed to successfully innovate and when it finnally did, it was likely too late. I also like her camparison of the railroad industry example discussed in the article to Blockbuster. Similarly, they both failed to focus on the broader industry instead of the product.

Leaders and Marketers

Do company leaders have marketing philosophy?

 

Looking at the connections between leadership and marketing, I believe that all leaders of an organization are in some way “marketing thinkers”. Those in charge of leading an organization will be customer focused in growing and developing the company. Drucker emphasizes the idea that many marketing concepts and philosophies are applicable to leadership techniques. This includes strategic thinking with an emphasis on the customer. I feel that many leaders must be customer focused in their daily operations. Including both top and middle management, having a marketing background will help the leader keep the customer’s needs in mind. Leaders must “know their stuff”, and those with marketing backgrounds have a great handle on the products. After all, they work closely with the customer in ensuring they have all their specified features. Knowing the customer is a key point in leading a small group of individuals or an entire organization.

Leaders must know the product, as well as staying educated as to the changes in the industry. Staying educated with a marketing philosophy will also help in ensuring innovation. As Drucker indicates, innovation is essential to business success and will help the company continue to grow. Forward thinking is necessary for any leader, as indicated one of Cohen’s 8 Leadership Principles (Get out in front).  Leaders must also know the customer’s needs/wants as well as potential future implications. Looking at the leaders that I have previously worked with, I would definitely say that they were very customer driven. In the accounting industry, creating valuable relationships while giving great customer service becomes vital. A part of that is to “know your stuff” and knowing your customers. Leaders of my previous firms knew the customer’s needs and wants and were able to communicate those ideas to others members of the organization. Their information was essential in strengthening the team, and in the end improving everyone’s customer relationships.This helped in making improving customer satisfaction.