PARTICIPANT HANDBOOK

Jean-Claude Larréché
The Alfred H. Heineken Chaired Professor of Marketing
INSEAD

Hubert Gatignon
The Claude Janssen Chaired Professor of Business Administration and Professor
of Marketing
INSEAD

Rémi Triolet
Partner, Director of R&D
STRATX

Copyright © StratX 2010-04-19 1

Publisher: StratX

Production: Coptech, Inc., Woburn, Massachusetts

Marketing Team Americas: Paul Ritmo & Andréa Hernandez

Marketing Team EMEAA: Stéphanie Zanon & Patricia Huber
Development Team Laetitia Benhous, Aurélien Dauvergne & Rémi Triolet
Support Team Andréa Hernandez & Annie Houde

Copyright © 2003, 2010 by Jean-Claude Larréché, Hubert Gatignon & Rémi Triolet
Software © 2003, 2010 by StratX
Markstrat is a registered trademark of StratX
All rights reserved

No part of this book may be reproduced in any form, electronic or mechanical, without
the prior permission of the publisher.

Used books should not be purchased or sold. Each Student Handbook comes with a
unique serial number that is to be used by the person who purchased the book only. If
the registration card in the back of this book has been tampered with, return the book
because you will not be able to use the serial number

ISBN# 0-9743063-6-3 for the electronic version

ISBN# 0-9743063-7-1 for the paper version

Edited 2010

How you can save paper.

Please refer to page 11 before printing this document.

Copyright © StratX 2010-04-19 2

TABLE OF CONTENT
Introduction __________________________________________________________ 6
About STRATX SIMULATIONS ______________________________________________________ 6
Questions & Technical Support ____________________________________________________ 7
Registration and Software Setup _________________________________________ 8
The Registration Process __________________________________________________________ 8
Downloading and Installing the Team Software ______________________________________ 10
The PRACTICE Industry __________________________________________________________ 11
How to print the pdf version of this handbook _______________________________________ 11
The Interface Menu ___________________________________________________ 13
DATA EXCHANGE Overview ______________________________________________________ 13
Opening a Markstrat Session _____________________________________________________ 15
Closing a Markstrat Session ______________________________________________________ 18
Software Configuration __________________________________________________________ 20
Printing Documents ____________________________________________________________ 20
Overview of the Markstrat World ________________________________________ 23
Overview of the Markstrat World _________________________________________________ 23
Sonite Products ________________________________________________________________ 24
Vodite Products ________________________________________________________________ 25
Naming Conventions ____________________________________________________________ 26
Sonite Customers ______________________________________________________________ 26
Vodite Customers ______________________________________________________________ 27
Distribution Channels ___________________________________________________________ 28
Managing Your Firm __________________________________________________ 30
Production ____________________________________________________________________ 30
Pricing _______________________________________________________________________ 31
Communication ________________________________________________________________ 32
Sales Force ____________________________________________________________________ 33
Ordering Market Research Studies _________________________________________________ 33
Research & Development ________________________________________________________ 34
Marketing Budget ______________________________________________________________ 34
Understanding Your Annual Report ______________________________________ 36
Industry Newsletter ____________________________________________________________ 36
Company Report _______________________________________________________________ 36

Copyright © StratX 2010-04-19 3

 Market Research Studies ________________________________________________________ 41
Making Decisions _____________________________________________________ 44
Group Dynamics _______________________________________________________________ 44
Markstrat Main Screen __________________________________________________________ 44
Brand Portfolio Decisions ________________________________________________________ 46
Marketing Mix Decisions ________________________________________________________ 47
Market Research Studies ________________________________________________________ 49
Sales Force and Distribution ______________________________________________________ 50
Research & Development Decisions ________________________________________________ 51
Checking your Decisions _________________________________________________________ 52
Validating decisions with the Marketing Plan Tool ____________________________________ 54
Positioning and Research & Development _________________________________ 59
Semantic Scales & Multidimensional Scaling _________________________________________ 59
Repositioning Strategies _________________________________________________________ 64
Positioning with Advertising ______________________________________________________ 65
Positioning through Research & Development _______________________________________ 66
Research & Development ________________________________________________________ 67
About this handbook __________________________________________________ 72
INDEX ______________________________________________________________ 73

Copyright © StratX 2010-04-19 4

TABLE OF FIGURES
Figure 1 – Sample Markstrat ID card (front & back) __________________________ 10
Figure 2 – How to print two pages per sheet ________________________________ 12
Figure 3 – Data exchange overview _______________________________________ 14
Figure 4 – Open session assistant – Source selection _________________________ 16
Figure 5 – Open session assistant – Authentication___________________________ 17
Figure 6 – Open session assistant – Industry and team selection ________________ 18
Figure 7 – Close session assistant – Target selection __________________________ 19
Figure 8 – Application Configuration Screen ________________________________ 20
Figure 9 – Printing a Markstrat document __________________________________ 21
Figure 10 – Printing Annual Report _______________________________________ 22
Figure 11 – Sonite main physical characteristics _____________________________ 24
Figure 12 – A typical list of marketed brands ________________________________ 25
Figure 13 – Vodite main physical characteristics _____________________________ 26
Figure 14 – Inventory and production plan versus market demand ______________ 31
Figure 15 – From retail price to unit contribution ____________________________ 32
Figure 16 – Available market research studies_______________________________ 34
Figure 17 – Company performance – Sample chart & explanations ______________ 38
Figure 18 – Brand contribution – Sample chart & explanations _________________ 39
Figure 19 – R&D report – Sample chart & explanations _______________________ 40
Figure 20 – Markstrat Main Screen _______________________________________ 45
Figure 21 – Brand Portfolio decision screen_________________________________ 46
Figure 22 – Marketing Mix decision screen _________________________________ 48
Figure 23 – Market Research Study decision screen __________________________ 50
Figure 24 – Sales Force and Distribution decision screen ______________________ 51
Figure 25 – Research & Development decision screen ________________________ 52
Figure 26 – Decisions – Overall marketing budget ____________________________ 53
Figure 27 – Decisions – Errors & Warnings _________________________________ 53
Figure 28 – Semantic scales study: Ideal values and brand perceptions ___________ 61
Figure 29 – Relationship between attributes and semantic scales _______________ 61
Figure 30 – Perceptual map _____________________________________________ 63
Figure 31 – Relationship between attributes and MDS perceptions ______________ 63
Figure 32 – Interface with R&D department ________________________________ 70

Copyright © StratX 2010-04-19 5

INTRODUCTION

The Markstrat simulation was created more than thirty years ago by Jean-Claude
Larréché, Alfred H. Heineken Professor of Marketing at INSEAD, and Hubert Gatignon,
The Claude Janssen Chaired Professor of Business Administration and Professor of
Marketing at INSEAD, and has been constantly improved since its creation.
Used in combination with traditional training methods such as conceptual sessions or
case studies, Markstrat is a highly effective tool to learn strategic marketing concepts,
such as brand portfolio strategy or segmentation and positioning strategy, as well as
operational marketing. Similar to a flight simulator, this marketing simulation allows
students and managers to practice new skills in an intensive time frame and in a risk-
free environment before trying them out in their real business environment.
The mathematical model of Markstrat is based on solid theoretical foundations, and
the underlying formulas have been extensively tested. These simulations have been
used to successfully train a large number of participants and executives from many
universities and organizations.
You and your team will be given a company and product portfolio to manage in a
dynamic and interactive environment. No previous computer experience is required
but it is important to read this handbook prior to your course. If you do not read it
carefully, you will run the risk of putting your team at a competitive disadvantage!

ABOUT STRATX SIMULATIONS

StratX Simulations is a subsidiary of StratX, a unique training and development group
founded by INSEAD Marketing Professor, Jean-Claude Larréché. StratX brings together
disciplines from leading business schools, management consultants and learning
design specialists.
StratX Simulations mission is to develop and market Business Games to the Academic
Community. We develop high-tech, sophisticated simulations and tools, in partnership
with academic stars such as Jean-Claude Larréché, Huber Gatignon, Chan Kim and
Renée Mauborgne, all professors at INSEAD.
StratX Simulations is active in three disciplines: Marketing, Strategy and Management.
Our methodology is based on our belief that new skills must be learned through action
and experience rather than from books or lectures.

Copyright © StratX 2010-04-19 6

Over the past twenty years, StratX Simulations has designed and developed a portfolio
of world-class business simulations, including Markstrat, used in over 500 business
schools, or eStrat, used in the L’Oréal E-Strat Challenge for 9 years.

QUESTIONS & TECHNICAL SUPPORT

We have done our best to make this handbook as clear and complete as possible. But
the Markstrat simulation is fairly complex and we know from experience that some
topics will require additional explanation. If you have questions regarding this
handbook or the simulation we suggest that you review the Frequently Asked
Questions (FAQ’s), located in the ONLINE DOCS section of your Markstrat Team
Software. Other participants may have already asked similar questions and a response
may be available in the FAQ’s. Save time by checking the site first.
Responses to frequently asked questions do not address specific team situations and
do not provide advice or hints on strategy, management, marketing, finances or any
other topic. For these subjects, you should only count on your knowledge and your
experience.
Here are some examples of questions already addressed in the FAQ’s:
What is the formula for the Stock Price Index?
How are default decisions calculated?
Is Markstrat compatible with Windows Vista?
Can you explain the position of circles on the growth-share matrix?
Etc …
If you do not find the response to your question in the FAQ’s, please contact your
instructor. Do not contact StratX directly as we are not equipped to handle requests
from thousands of participants.

Copyright © StratX 2010-04-19 7

REGISTRATION AND SOFTWARE SETUP
You will have to go through a number of administrative steps before you are able to
make your first set of decisions with Markstrat. Please carefully read the following
pages as it is important that you perform these steps in the appropriate order and at
the right time.
The tasks to perform are listed below and are explained in more detail in the following
pages.
Purchasing your Participant Activation Key (PAK) and a copy of this handbook
Registering in our database of Markstrat authorized users;
Downloading and installing the Markstrat Team software;
Testing your installation and discovering the Markstrat environment with the
PRACTICE industry.

THE REGISTRATION PROCESS

WHY REGISTER
The use of Markstrat is strictly reserved to registered participants. The registration
process will allow you to be uniquely identified in our database. The PAK and
registration details that you enter will authenticate you when using the
Markstrat software.
Registration is absolutely mandatory, for several reasons.
As explained in The Markstrat Overview section you will have to exchange data
back and forth with your instructor during your Markstrat course. All data
exchange will take place over the Internet, through a server. For security reasons,
you will have to be logged in before you are allowed to transfer data to or from the
server.
The Markstrat software includes a facility allowing your professor to easily send
emails to all registered participants, to keep them informed of the latest course
news (when will the next decision round start or finish, the latest results, how to
better perform in the Vodite market, …). If you are not a registered user, you will
not receive these emails and you might miss some important information.

Copyright © StratX 2010-04-19 8

HOW TO REGISTER
To register you will need to purchase a Participant Activation Key (PAK) and your own
copy of this handbook. Each PAK is valid for the course you link it to when registering
and cannot be used for any other course; your registration details are saved for 1 year.
You have several options to obtain a PAK:
You may purchase your handbook and your PAK through our e-commerce website.
You will receive your order by email. Registration in our database will be done
automatically upon purchase.
You may purchase your handbook and PAK in a bookstore. The hardcopy of the
handbook will include a sealed envelope with your personal Markstrat ID Card,
including your PAK. See a sample card in Figure 1. The PAK printed on the front of
the card is unique. It is required to register on the Markstrat web site. Keep your
personal Markstrat ID Card in a safe place.
You may also receive a PAK from your professor. This happens if your university
purchases PAK directly from StratX in bulk quantity. In this case, you must proceed
to the registration process.
To register visit www.markstrat.com and select the Registration section and follow the
instructions carefully. You will be asked to enter your PAK, course ID and contact
details. The Course ID should be given to you by your instructor. If you do not know
your course ID yet, leave the field blank and continue; you will be allowed to enter it
later. If the team software has already been installed for you, as is the case in a
network installation or for a corporate/executive program you can register directly in
the team software, see the Opening a Markstrat Session section.
A Markstrat course will usually last several weeks, the best way to remember all of this
information is to write them down on the back of the ID card, as shown on the sample
card in Figure 1. The additional fields; Industry name, Team name and Team Password
will be explained in the next section.

Copyright © StratX 2010-04-19 9

 Figure 1 – Sample Markstrat ID card (front & back)

DOWNLOADING AND INSTALLING THE TEAM SOFTWARE

HOW TO DOWNLOAD THE SETUP FILE
To download the software, visit our web site at http://www.markstrat.com, log in
using your PAK and select Downloads. Click the Simulation Software link to initiate the
download. Your browser may ask you whether you want to execute the file transfer
directly from the site or save it to disk. Select the save to disk option and save the file
on your local hard drive.
COMPUTER REQUIREMENTS
The minimum computer configuration required to operate the Markstrat software is
the following:
PC running Windows 95 (or later version) and Internet Explorer 6.0 (or later
version);
Hard disk with at least 20 megabytes of available storage;
Internet connection ;
INSTALLING THE SOFTWARE
You should now have on your hard drive a setup file named Markstrat-Team-Setup-
VXX.exe. Double-click on this file to start the setup. The Welcome to the InstallShield
Wizard for Markstrat appears, click on the Next > button to continue the setup.
A window pops up allowing you specify which folder Markstrat should be installed. We
strongly advise you to use the default folder as it will reduce the risk of errors. For
instance, reading the FAQ’s will be simplified as we will always refer to the default

Copyright © StratX 2010-04-19 10

installation folder. If you need to install Markstrat in another folder, click on the
Browse… button.
The actual installation starts when you click on the Next > button. All files are copied
into the folder which you specified. Two of these files are registered automatically in
the Windows registry.
The setup utility creates a shortcut called Markstrat Team on your desktop. Double-
click on this shortcut to launch the application.

THE PRACTICE INDUSTRY

You can now test your installation as well as your knowledge of the Markstrat
environment. All registered users can download a sample data file called PRACTICE.
Refer to the Section Opening a Markstrat Session for these download instructions. The
PRACTICE file is an actual data file, obtained during a past Markstrat course. You will be
allowed to browse through all charts and graphs and to make decisions. However, you
will not be able to check the results of your decisions as the PRACTICE file will not be
run through the Markstrat mathematical model.

HOW TO PRINT THE PDF VERSION OF THIS HANDBOOK

Paper is too valuable to waste. We advise you to think twice before printing this
handbook. The full text is available within the simulation, with a search-engine to help
you find the information you need. In addition, context-sensitive help is available on all
important forms, such as decision forms.
Should you decide to print this handbook, we advise you to print two pages per sheet,
and, if your printer allows it, to print double-sided.
Figure 2 shows how to print two pages per sheet. Select “Multiple pages per sheet” in
the “Page scaling” choice box, and enter 2 in the cell below.
To print double-sided, please refer to your printer documentation.

Copyright © StratX 2010-04-19 11

 Figure 2 – How to print two pages per sheet

Copyright © StratX 2010-04-19 12

THE INTERFACE MENU
A detailed overview of Markstrat Team is described in the next section of this
handbook. This chapter focuses on the Interface menu, which is related to the
administration of the course, i.e. the communication between you, your teammates
and the Instructor.
During your course, you will go through a number of decision rounds, usually 6 to 12
rounds. A decision round starts when you receive the latest simulation results, and it
finishes when you submit a new set of decisions to the Instructor. The typical duration
of a decision round is from 2 to 4 hours, depending on the time you devote to your
Markstrat exercise, or depending on constraints set by your instructor.
You and your teammates will have to decide on how to organize your work. Markstrat
includes features to handle various situations. Here are a number of questions that will
help you find the best possible organization.
Will you work non-stop on your Markstrat exercise for 3 hours from start to finish?
Or will you spread your work over several days?
Will all team members meet when they make decisions? Or are you geographically
dispersed?
Will all team members be involved in all decisions? Or will you assign
responsibilities (R&D? Production, Finances …) to team members, each making
decisions on his or her own?
Will you always work on the same computer? Or will you share your time between
a computer in the University lab and your home computer?
Will you always have a good internet connection? Or will you have to work on your
Markstrat exercise while being on the go?
In future sections, we will explain how to handle these different situations, and we will
then explain various organization strategies.

DATA EXCHANGE OVERVIEW

Figure 3 shows an overview of the Markstrat structure. All teams must exchange data
back and forth with the instructor during the course. All data exchange will take place
over the Internet, through a server, called the Markstrat server. For security reasons,
you will have to be logged in before you are allowed to transfer data to or from the
server.

Copyright © StratX 2010-04-19 13

The data to be exchanged are the simulation results and the teams’ decisions. This
data is saved in files called team files. There is only one file per team as all members of
the same team share the same results and the same decisions. However, you will see
that the team file can be duplicated on several computers if two or more teammates
want to work in parallel.
This is how the transfers work:
1. Your instructor is in charge of putting your team file onto the Markstrat server
at the beginning each decision round, so that you have access to the latest
simulation results.
2. Now, you and your teammates are in charge of the team file and can make
your decisions
3. The instructor is responsible for taking your team file back from the
Markstrat server, at the end of the decision round. This operation must be
done just before running the simulation model, to produce a new set of
results.
The next section explains that the team file can be downloaded from or uploaded to
the Markstrat server; saved on your hard drive, on your LAN or on a removable storage
(zip drive, disk, tape, flash USB drive, …) and duplicated on several computers.

Figure 3 – Data exchange overview

Copyright © StratX 2010-04-19 14

OPENING A MARKSTRAT SESSION
A decision round is composed of one or several working sessions with the Markstrat
software. For instance, you could make a detailed analysis of your results on day 1,
make R&D and brand portfolio decisions on day 2, make marketing mix decisions on
day 3 and finalize everything on the day 4.
The Markstrat software includes an Open Session assistant to guide you through the
start of your working session; there are 5 quick steps to go through.
WHICH TEAM FILE TO USE
The Open Session Assistant automatically starts when you open the Team Software,
see Figure 4. If you are already in the software another option is to select
Interface/Open session. Three choices are available:
Download the PRACTICE file from the Markstrat server. Select this option if you
want to test your installation or to discover Markstrat. All registered users can
download a sample data file called PRACTICE. You will be allowed to browse
through all charts and graphs and to make decisions. However, you will not be able
to check the results of your decisions as the PRACTICE file cannot be run through
the Markstrat mathematical model.
Download your team file from the Markstrat server. Select this option to
download your team file from the Markstrat server at the beginning of each
decision round. The file you will receive will contain the most recent simulation
results, provided by your instructor. Another reason to use this option is if you or
one of your teammates has already downloaded the file, made some decisions and
uploaded the file back to the server. Your team file is named INDUSTRY-TEAMX.zip
where INDUSTRY is the name of your industry and X is your team initial (A,E,I,O,U
or Y). The file is located in the folder “My Markstrat files” in your “My documents”
main folder.
Open a team file located on your computer or on your network places. With this
option, you will be able to open a team file that was saved locally, at the end of a
previous working session. When you close your session, your team file is saved
automatically on your hard-drive but you also have the choice to upload it back to
the Markstrat server, and/or to save a copy on another local resource, for example
your LAN or removable storage.

Copyright © StratX 2010-04-19 15

 Figure 4 – Open session assistant – Source selection

LOG IN
You must log in each time you connect to the Markstrat server, both to download or to
upload your team file. For security reasons, access to the Markstrat server is reserved
to registered participants. If you are not yet registered, please refer the How to
Register section of this manual.
Figure 5 shows your log in screen, enter your PAK (Participant Activation Key) and
select Next >. The software will connect to the Markstrat server and check your
identification. You must be connected to the internet before trying to log in.
If you do not remember your PAK, click on the Lookup button and follow the steps
provided.

Copyright © StratX 2010-04-19 16

 Figure 5 – Open session assistant – Authentication

If you are working on your own computer, you can check the option Remember your
PAK, your information will be stored locally and you will no longer have to type it in.
This option should not be used on shared computers.
If you already registered on our website you will see your profile information in this
next screen; check to make sure it’s correct. If these fields are empty please fill them
in to complete your registration.
INDUSTRY AND TEAM SELECTION
This step is required to download your team file from the Markstrat server. You must
confirm your industry name, your team name and, for confidentiality reasons, your
team password. Type your information and password in the screen shown in Figure 6
and select Next >.

Copyright © StratX 2010-04-19 17

 Figure 6 – Open session assistant – Industry and team selection
These three pieces of information will be given to you by your instructor, most likely
during class or by email. Please, write them down on your Markstrat Id Card, as shown
on Figure 1.
The Markstrat software will automatically check several requirements on your
computer to make sure you can get started without any issues.

CLOSING A MARKSTRAT SESSION

The Markstrat software includes a Close Session assistant to guide you through the end
of your working session. As this assistant is easy to use, we only discuss the most
important steps here.
SAVING YOUR TEAM FILE
Your industry file is saved automatically each time you modify your decisions and click
OK. This way, you can interrupt your work at any time and restart it without being
connected to the Internet. All you have to do is select the third option from Figure 4
and reopen your team file.

Copyright © StratX 2010-04-19 18

CLOSING YOUR SESSION
Select Interface/Close session to finish the session as shown in Figure 7. Two options
are available; they can be both activated at the same time.
Upload your team file to the Markstrat server. You should upload your team file
each time you modify your decisions so that your teammates, your instructor or
yourself can retrieve the file. If you are not connected to internet, you can save a
copy of the file locally, open it later and upload it when you have a connection.
Save a copy of your team file on a memory stick or in a folder located on your
network places. This option is useful in several situations. For instance, if you want
to move your team file onto a computer not connected to internet. In this case,
you can save a copy of your team file on a removable storage (zip drive, disk, tape,
flash USB drive …) and then use this storage on another computer.

Figure 7 – Close session assistant – Target selection

Note that if you select only the second option, your team file will not be saved on the
Markstrat server.

Copyright © StratX 2010-04-19 19

SOFTWARE CONFIGURATION
Several options are available to configure Markstrat for your needs and preferences.
Click on Interface/Configuration in the toolbar to open screen shown in Figure 8.

Figure 8 – Application Configuration Screen

The available options are:
− Default file location. This is where the Markstrat software will store your files:
industry files, Excel export files, backup files, etc. You may change the location
of this folder by clicking the Browse... button.
− Warning if no internet connection. If you check this option, Markstrat will
inform you if no internet connection is available.
− Online help window. If you check this option, the Online help window will stay
on the front of all other windows when it is opened.
− Automatic save. This will automatically save the industry on the server each
time you modify your decisions or click OK.

PRINTING DOCUMENTS
Markstrat documents can be printed on any Windows-compatible printer. Click on the
Print icon located at the top right corner of the screen. You have several printing
options as shown in Figure 9:
The currently displayed screen or graph.
One of the three decision-related documents: summary of decisions and budget,
detailed budget or company report.

Copyright © StratX 2010-04-19 20

 Figure 9 – Printing a Markstrat document

PRINTING DECISION RELATED DOCUMENTS

While making decisions, you can print the following documents by clicking on the print
icon and selecting the required document as shown in Figure 9.
Summary of decisions and budget. A 3- to 5-page document providing a clear view
of the current decisions and of the current expenditures granted loans and
allocated budget.
Detailed budget. A 2-page document providing a detailed view of the current
expenditures, loan, budget modification and allocated budget.
Annual Report. This selection will print: one copy of the Newsletter; one copy of
your Company report; and one copy of all available Market research studies. See
Figure 10.
Excel files only. If this is checked, Markstrat produces an Excel compatible file
containing the document image. The Excel files are produced and saved in your
C:/My Documents/My Markstrat Files directory. Participants can implement
mathematical or statistical models within their Excel compatible spreadsheet
package and then use these files to analyze Markstrat data without having to type
in all numbers. The Excel files are located in the default directory; their names are
formed with the industry name, the team initial and the period number. For
instance, Vultures-U-Studies-P04.xls is the team U study document of industry
Vultures in period 4.

Copyright © StratX 2010-04-19 21

 Figure 10 – Printing Annual Report

PRINTING DATA TABLES OR GRAPHS

Any data table, graph, map or portfolio matrix can be printed by first displaying it and
then clicking on the printer button.

Copyright © StratX 2010-04-19 22

OVERVIEW OF THE MARKSTRAT WORLD
You and the other members of your team have just been recruited by a large
corporation to manage the marketing department of one of its divisions. Coming from
a different industry, your team has no experience in the Markstrat world. You will
compete with several other firms to market two types of durable goods to consumers.
During this exercise, you will be responsible for formulating and implementing the
long-term marketing strategy of your division. In particular, you and your team
members will have to:
Target selected segments and position your products in a highly competitive
market;
Interface with the R&D department to design and develop new products;
Prepare the launch of new products, improve, maintain or withdraw existing ones;
Interface with the production department to specify production planning;
Make marketing mix decisions, such as pricing or advertising budget, for each
brand in your portfolio;
Decide on the size and priorities of your sales force;
Order market research studies that provide up-to-date information for decision
making.

OVERVIEW OF THE MARKSTRAT WORLD

The Markstrat world is a fictitious industrialized country of 250 million inhabitants
whose monetary unit is the Markstrat dollar ($). In this country both inflation and GNP
growth are fairly stable, and no major political, social or economic event is anticipated
in the near future. The Markstrat world does not intend to represent any particular
country, market or industrial sector. However, it roughly behaves like most markets,
and the general management and marketing knowledge that you have acquired
through business experience or formal education applies to this new world.
In the Markstrat world, there are a handful of competing companies that manufacture
and market consumer durable goods. These goods are comparable to electronic
products such as hi-fi systems, telephone sets or computers as well as office
equipment, cars, books, or any other consumer durable goods. With most
scenarios, each firm starts in a different situation in terms of product specification,
target customer groups, brand awareness levels, market share, distribution coverage,
profitability, R&D expertise, etc. Consequently, the marketing strategy of each firm
should be adapted to its particular situation within the industry. However, Markstrat

Copyright © StratX 2010-04-19 23

includes a few scenarios where all firms start in the exact same situation. These
scenarios are called competition scenario and your instructor will let you know if you
are using them.
Nevertheless, no firm has a relative advantage over the others and initially many
characteristics are common to all firms. For instance, the initial brand portfolio of all
companies is comprised of two brands. As mentioned before, each firm will have the
opportunity to design and develop new R&D projects and to introduce new products
or upgrade existing ones. All R&D departments have the same capabilities to develop
new projects, in their range of experience. Similarly, all sales forces are equally
qualified to handle distributor relationships.

SONITE PRODUCTS
At the beginning of the simulation, all rival firms market two Sonite brands. Sonite
products have existed for several years and the market has grown quite consistently
since the introduction of the first Sonite brand. It is now a well-established market,
with several strong brands at different price points covering a wide range of needs.
Analysts believe that the Sonite market will continue to grow over the next five years.
A Sonite is a complex piece of equipment made up of several components. Although
they can be evaluated along more than fifty attributes, Sonite brands are primarily
differentiated in terms of the five most important physical characteristics listed in
Figure 11. The base cost is also an important factor; this is the cost at which each unit
will be produced, based on an initial production batch of 100,000 units. The base cost
is decided jointly by the Marketing department – which is mainly concerned by margin
and profitability– and by the R&D department –which is mainly concerned with
product feasibility. Only the following characteristics will be considered during the
course of the simulation:

Characteristic Unit Feasible range

Weight Kilogram (kg) 10 – 20
Design Index 3 – 10
Volume Cubic decimeter (dm³) 20 – 100
Maximum frequency (bandwidth) Kilohertz (kHz) 5 – 50
Power Watt (W) 5 – 100
Base cost $ 10 +
Figure 11 – Sonite main physical characteristics

Copyright © StratX 2010-04-19 24

Note that Design is not related to the product esthetic but to the type of raw materials
used (wood, plastic, metal ...) or to the aspect of its various components. Therefore, a
product rated 8 on the design scale is not better or easier-to-use than one rated 4 on
the same scale.
All brands marketed in a given period will be listed in the corresponding Newsletter, in
a table similar to Figure 12.

VODITE PRODUCTS
Recently, there has been industry speculation that a new type of electronic product
might emerge, the Vodite. Although no Vodite brands are available at the start of the
simulation, industry experts have a pretty good idea of what future Vodite products
might resemble.
Vodite products will satisfy entirely different needs from that of Sonite products so
that demand for the two products will be completely independent. They will not be
complementary in any way and there will not be any substitution from one to the
other. The expertise required of potential suppliers is similar for both markets in terms
of technology, manufacturing, marketing and distribution. Therefore, your division and
your competitors are the most likely suppliers of Vodites. Although the Sonite and
Vodite technologies are similar, all firms will have to engage substantial R&D resources
to develop their first Vodite product; recent calculations suggest that an investment of
about 10 million dollars may be required for each Vodite.

Figure 12 – A typical list of marketed brands

Copyright © StratX 2010-04-19 25

Experts agree that the main physical characteristics of a Vodite will be the ones
described in Figure 13. Finally, it is anticipated that the Vodite market could be quite
attractive if the right products were made available at the right price.

Characteristics Unit Feasible range

Autonomy Meter (m) 5 – 100
Maximum frequency Kilohertz (kHz) 5 – 20
Diameter Millimeter (mm) 10 – 100
Design Index 3 – 10
Weight Gram (g) 10 – 100
Base cost $ 10 +
Figure 13 – Vodite main physical characteristics

NAMING CONVENTIONS
In Markstrat brand names are made up of four characters, as shown in the figure
below. The first letter must be an 'S' for a Sonite or a 'V' for a Vodite. The second letter
identifies the firm marketing the brand and must be a vowel (A, E, I, O, U or Y). Finally,
the last two characters can be letters or numbers, and can be freely chosen by each
firm to generate different brand names.
For instance, brands SIBI and SIRO would be Sonites marketed by firm I, and brand
VAIN would be a Vodite marketed by company A. All new brands must follow these
conventions, and must have different names. The selected name has no influence on
the market response to the brand.

SONITE CUSTOMERS
Sonite customers are adults who purchase the products for personal or professional
use. Market research studies show that the Sonite market can be divided into five
major groups of customers or segments, having similar needs and purchasing behavior.
Buffs (Bu) – People in this segment show a high level of interest in Sonites and
other similar products. They are extremely knowledgeable about Sonite
technology and the different characteristics of the existing brands. Buffs were
probably among the first to use Sonite products. They demand high-performance
products, but are less concerned by the convenience of the products. However,
they are quite price-sensitive, since they use Sonite products for their personal use
and do not necessarily have high incomes.

Copyright © StratX 2010-04-19 26

 Singles (Si) – As the name of this segment indicates, Singles live alone. They
demand average levels of both performance and convenience in Sonite products.
Like Buffs, they use Sonite products for personal purposes and are quite price-
sensitive.
Professionals (Pr) – Individuals in this segment may use Sonite products for both
personal and professional reasons. As a consequence, they are looking for high
quality, high-performance and easy-to-use products. They can afford expensive
products and often view price as an indication of quality.
High earners (Hi) – This group is characterized by their high incomes, using Sonite
products on a private basis. Studies show that they usually buy fairly expensive
products, which they can afford, and that their purchase is partially motivated by
social status. Although they tend to use their Sonites less than the average
consumer, they demand performance and convenience from the products.
Others (Ot) – This segment includes all consumers who do not belong to any of the
above groups. Although this segment is the largest and is composed of several sub-
groups, most customers have similar needs. They are looking for cheap, low-
performance products with average convenience. Experts believe that the
penetration of this segment is not as high as the other segments. As a
consequence, its future growth rate could exceed forecasts.
Each segment has specific needs in terms of physical characteristics and price.
Awareness levels and purchase intentions vary significantly for existing products from
one group to the other. Market forecast studies show that the sizes and growth rates
of the five segments are significantly different. This is explained in part by the
development stage of each segment, by the varying product offerings, and by the
intensity of marketing effort targeted at each segment.

VODITE CUSTOMERS
While potential consumers for Vodites are the same individuals as those who buy
Sonites, a different segmentation strategy is likely to be appropriate for Vodites.
Further studies need to be completed, but marketing experts believe that it will be
more effective to group consumers according to how they adopt new products. In this
light, three groups are examined for Vodites:
Innovators (In) – These consumers will be the first users of Vodite products.
People in this segment tend to be adventurous and are willing to try new ideas at
some risk. Although this segment will probably be the largest one in the early days,
it represents only a small percentage of total potential consumers. They

Copyright © StratX 2010-04-19 27

 demonstrate both a high desire and interest for Vodite products and their income
levels are above average.
Early adopters (Ad) – Consumers in this segment will not adopt Vodite products as
quickly as innovators but will certainly do so before a majority of people have
accepted the new technology. As this group is usually much larger than the
previous one, its influence on other consumers is fairly high. Early adopters tend to
be opinion leaders and helpful in 'advertising' the new product to other potential
buyers. They are critical to the adoption process, and should not be neglected by
marketers. They have an average income level.
Followers (Fo) - These individuals represent the bulk of potential consumers.
Because they perceive more risk in buying new products, they adopt a product
innovation only after a large number of consumers have tried it. Innovators and
early adopters particularly influence followers. Their income level is usually below
average.

DISTRIBUTION CHANNELS
Sonite and Vodite consumers tend to shop in the following three distribution
channels:
Specialty stores – These stores are usually small and do not belong to organized
chains. They are geographically close to their customers and can provide a high
level of service and technical support. As they do not distribute many different
product categories, Sonite products account for a large proportion of their sales.
These stores usually carry a broad product line for each category, including the
most expensive and/or high-performance products. Because of their high level of
technological expertise, specialty stores are likely to be the preferred distribution
channel for Vodite products.
Department stores – Department stores are characterized by the wide product
assortment they offer. They usually have a department carrying Sonites. They
provide extensive customer service, but their technological expertise is lower than
that of specialty stores. Department stores are often organized in chains that have
a degree of power in negotiating margins with manufacturers.
Mass Merchandisers – These stores operate on a low-price, high-volume basis and
try to minimize overheads. As a consequence, the level of service offered is lower
than that of the two other channels. While mass merchandisers carry many
different product categories, the depth of each product line is usually restricted to
a few units. They often distribute the cheaper, low-performance products. Their

Copyright © StratX 2010-04-19 28

 lack of technical expertise and the low level of service may well prevent them from
distributing Vodites in the early years.
Within the Sonite market, market research studies show that all three distribution
channels are important; therefore each of them should be visited by the companies’
sales forces. There are approximately 30,000 specialty stores, 7,000 department stores
belonging to 15 different chains, and 10,000 mass merchandisers belonging to 8
different chains.
Differences between margins obtained by the stores in each of the three channels are
mainly due to differences in the level of service and volume sold. These margins are
applied to retail prices and are approximately constant across brands for a given
channel. In Markstrat the distributor margins are: 40% for specialty stores; 30% for
department stores; and 30% for mass merchandisers.

Copyright © StratX 2010-04-19 29

MANAGING YOUR FIRM
The Marketing department that you and your team will be working for is responsible
for the design and implementation of the marketing strategy of your division. You will
have to decide the overall direction of the company regarding:
The product portfolio strategy – which brands the company is going to develop and
market;
The segmentation and positioning strategy – which market segments will be
targeted and how products will be positioned;
The marketing mix strategy – the day-to-day operational marketing decisions such
as pricing, production, communication and distribution.
You will manage the Marketing department as a profit center and your performance
will be measured by the following indicators: net contribution generated, brand
market shares, your ability to grow the firms’ revenues, quality of R&D projects
successfully completed, etc. Finally, the best measure of your company's success will
be its stock price index, a measure that takes all of the above indicators into account.
This chapter describes the decisions you will have to make each period. Before making
dramatic changes, you should try to get a feel for the behavior of the market. Do not
jump hastily to conclusions and bear in mind that obvious solutions may be based
upon an incomplete analysis. To reach more robust decisions, use the information
from market research studies to analyze your situation and past competitive behavior.

PRODUCTION
Each period, you are responsible for submitting a production plan for each of your
marketed brands. In the case of a relatively unsuccessful brand you may also decide to
decrease the inventory, by selling all or part of it to a trading company.
The Production department is working for several divisions of your company, and can
thus be viewed as a highly flexible external supplier. As a consequence, you are not
concerned about manufacturing investments, fixed costs or capacity utilization. From
one period to the next, you are completely free to increase or decrease the production
planning of a given product, without any penalty. The Production department will
always manufacture the required quantities in the best possible conditions.
In a given period, the actual production level for each product is automatically
adjusted in response to actual demand for that product, within plus or minus 20% of
the production plan submitted by Marketing. Figure 14 gives a few examples for

Copyright © StratX 2010-04-19 30

varying situations of inventory, production plan and market demand (all numbers are
in units).
A B C D
Potential sales 154 000 154 000 154 000 154 000
Beginning
20 000 20 000 20 000 None
inventory
Production plan
150 000 100 000 200 000 200 000
(your decision)
134 000 120 000 160 000 160 000
(automatically (automatically (automatically (automatically
Actual
reduced to adjust increased to increased to increased to
production
to potential sales adjust to potential adjust to potential adjust to potential
+ inventory) sales + inventory) sales + inventory) sales)
154 000 140 000 154 000 154 000
Actual sales (20 000 + (20 000 +
134 000) 140 000)
Lost sales None 14 000 None 0
26 000
6 000
Ending (20 000 +
None None (160 000 – 154
inventory 160 000 – 154
000)
000)
Figure 14 – Inventory and production plan versus market demand
The flexibility of the Production department goes beyond automatic adjustment of
production plans. The units produced are charged to the Marketing department only
when they are sold to distributors. The price paid to production is called the transfer
cost; it incorporates all costs associated with this high level of flexibility, including
depreciation and fixed costs. Units produced in excess are kept in inventory, and
inventory-holding costs are charged to the Marketing department. Inventory costs per
unit are calculated as a percentage of the transfer cost, this information can be found
in the Newsletter.
The transfer cost of a given product increases with inflation. On the other hand, it
decreases over time because of experience effects and economies of scale. As a rule of
thumb, you can expect the transfer cost to be reduced by about 15% each time the
cumulative production of a given product is doubled.

PRICING
In Markstrat, you must set the recommended retail price for each marketed brand. The
retail price is the list price for customers. The average selling price is the price at which
you sell your product to distributors. It varies by distribution channel since different

Copyright © StratX 2010-04-19 31

margins hold in each of the three channels, as explained in the Distribution Channel
Chapter.
Specialty and department stores tend to respect the recommended retail prices set by
the firms. However, mass merchandisers use promotions or special offers to sell
products that, on average, are equivalent to a discount rate of 10% off the list price. As
a consequence, in absolute terms, mass merchandisers' margins are lower than those
of the other two channels because the percentage margin applies to discounted prices.
Figure 15 provides a summary of prices, margins and discounts for a recommended
Retail Price of $400.
Specialty Department Mass
Stores stores Merchandisers
Actual retail price $400 $400 $360
Distribution margin 40% − $160 30% − $120 30% − $108
Selling price $240 $280 $252
Transfer cost $123 $123 $123
Unit gross contribution $117 $157 $129
Figure 15 – From retail price to unit contribution
Dumping is strictly forbidden in the Markstrat world; therefore the recommended
retail price must be set so that the lowest selling price of a product is higher than its
transfer cost. Finally, price increases or decreases greater than 30% in one period are
highly discouraged as they often result in negative market reactions. On one hand, an
excessive price increase is usually not accepted by consumers who may react strongly
and stop purchasing the brand. On the other hand, an excessive price decrease will
result in a proportional cut in the distributors’ margin, and your salespeople may have
a hard time finding distributors for the brand. A message will warn you when such
decisions are made. If you ignore the warning, the recommended retail price will be
automatically adjusted up or down to stop such adverse reactions.

COMMUNICATION
You must make several communication decisions each period. First, you should
determine the advertising budget allocated to each brand. This budget will be used to
purchase media space and time. Second, you must specify the budget allocated to
advertising research. This finances the creative work, media selection, or other
activities conducted by advertising agencies that improve the quality of your message.
In past years, companies have devoted on average 7% of their total communication
expenditures to advertising research. Advertising research will usually make your

Copyright © StratX 2010-04-19 32

advertising more effective, and is especially important when you introduce a new
brand or when you want to reposition an existing one. In these last two instances,
higher percentages are recommended (in the range of 15 to 20%).
Third, you are required to specify which segments should be targeted with your
advertising. This way, the advertising agency will select the most appropriate media
vehicle for the targeted segments.
Finally, you must define perceptual advertising objectives for each brand. This enables
you to convey a perceptual message and emphasize, for instance, how weak a given
brand is, or how powerful another one is. The Positioning through Advertising chapter
at the end of the handbook is devoted to brand positioning through advertising and
explains how to set perceptual objectives.

SALES FORCE
Your sales force is organized in three groups; each group is specialized to focus on the
stores of a single distribution channel. The marketing department must specify the
number of salespeople in each group. Salespeople may be reallocated from one
distribution channel to another at no cost. Hiring or firing costs will be automatically
charged to your department when the total number of salespeople increases or
decreases.
Each of your sales representatives carries the entire line of products marketed by your
firm. However, you must instruct them on how to allocate their time and efforts across
the various brands in your portfolio.

ORDERING MARKET RESEARCH STUDIES

One of your decisions will be to order market research studies. All studies are ordered
at the beginning of a period and are conducted by a specialized research firm during
that period. The results are delivered with your annual report at the end of the period.
All of the studies you purchase can be available on paper and/or on screen. The
information provided is relevant to the market situation during the analyzed period,
with the exception of the market-forecast study. The list of available studies is given in
Figure 16 and all studies are detailed further in the Understanding your Annual Report
chapter.
All studies except Industry benchmarking apply specifically to either the Sonite or
Vodite market. A maximum of 23 different studies may be ordered each period.

Copyright © StratX 2010-04-19 33

 Consumer survey Competitive sales force estimates
Consumer panel Industry benchmarking
Distribution panel Advertising experiment
Semantic scales Sales force experiment
Multidimensional scaling Market forecast
Competitive advertising estimates Conjoint analysis
Figure 16 – Available market research studies

RESEARCH & DEVELOPMENT

The Marketing department is responsible for initiating research & development
projects. Making R&D decisions is a crucial task because: (1) existing products will
probably have to be improved during their lifetime to suit the changing needs of
consumers; (2) new products may have to be designed in order to target untapped
segments in existing or new markets.
When launching a new R&D project, the Marketing department must specify the
desired characteristics for the new or improved product, including the target transfer
cost. You must also allocate a budget to each project. The R&D department is
responsible for conducting the actual research & development work. The Positioning
and Research & Development chapter is devoted to the interface between the
Marketing and Research & Development departments.

MARKETING BUDGET
Each period, the marketing department is allocated a budget to cover its expenses as
shown in the table below:
Advertising Sales Force R&D Market Research
Operating Cost
Advertising Media
Hiring & Training Development
Advertising Study Costs
Costs Budgets
Research
Firing Costs
For all markets For all markets For all markets
For all channels
& all brands & all projects & all studies

Your marketing budget is linked to the success of the department, being equal to 40%
of the net contribution generated in the previous period. However, there is a
maximum level where resources are reallocated to other divisions of the company to

Copyright © StratX 2010-04-19 34

maximize the return on investment at the corporate level. Similarly, there is a
minimum budget level for each period, whereby headquarters may effectively
subsidize your division if you are not generating sufficient contribution internally so
your division can continue operations.
In general, your budget for each period will be between $7,000,000 and $20,000,000
(adjusted for inflation). You will have to work within this given budget! If total
spending exceeds the allocated budget for a period, expenses will be automatically cut,
starting with advertising expenditures.
Note that if your objective is to maximize your return on investment, you should not
necessarily spend your entire budget in every situation. If you perform outstandingly,
you may be granted a large budget; however, spending it completely might be a waste
of money.

Copyright © StratX 2010-04-19 35

UNDERSTANDING YOUR ANNUAL REPORT
You will receive your annual report at the beginning of each decision round. This report
provides you with the results of the period that just ended. For instance, you will be
making decisions for period 5 based on the annual report of period 4. The annual
report is composed of three separate documents: the Industry Newsletter, the
Company Report and the Market Research Studies. Before reading this chapter, we
suggest that you install the Markstrat software and open the PRACTICE industry, as
explained previously.

INDUSTRY NEWSLETTER
The Industry Newsletter provides general and financial data on the industry, on the
competing firms and on marketed brands. This is publicly held information; i.e. all
competing firms have access to the same Industry Newsletter. The Newsletter consists
of three or four sections, depending on the availability of Vodite brands.
Stock market and key performance indicators – This section provides comparative
charts with various financial and marketing performance indicators such as: market
shares, sales, contributions, stock price indices and return on investment ratios. All
numbers are given in absolute values and show the percentage change from the
previous period.
Economic variables and costs – The evolution of economic variables such as the
inflation rate and GNP growth rate are highlighted in this part of the Newsletter.
Various costs relative to the market research studies, salespeople, and inventory are
also provided.
Information on Sonite market – This section details the physical characteristics and
price of all marketed Sonite products, and it indicates which brands have been recently
improved upon or introduced. It also provides the market shares (in units and in dollar
value), the volume sold and the retail sales of all Sonite products. Volume and retail
sales are given in absolute values and show the percentage change from the previous
period.
Information on Vodite market – The same data as above is provided for any Vodite
products on the market.

COMPANY REPORT
The Company Report provides confidential company information. You and your team
members are the only ones who have access to the information disclosed in your

Copyright © StratX 2010-04-19 36

company report, with the exception of data given in the Industry Benchmarking study.
The company report is comprised of the following five sections.
Company results
Brand results
Research & Development results
Cumulative results
Decision summary
COMPANY RESULTS
The Company Scorecard included in this section, provides various financial and
marketing performance indicators such as: market shares, sales, contributions, stock
price index and return on investment ratios. All numbers are given in absolute values,
show the percentage change from the previous period and show the percentage
change since period 0. This section also incorporates the Company Performance
statement, illustrated in Figure 17. This chart is a simplified Profit and Loss statement
for your company; the basic financial elements are explained below.
Units sold : Number of units purchased by consumers.
Average retail price : Average price paid by consumers.
Average selling price : Average retail price – distributors' margins.
Revenues : Number of units sold x Average selling price.
Units produced : Number of units manufactured by the Production department.
Cost of goods sold (COGS) : Number of units sold x Average unit transfer cost.
Inventory holding cost : Units in inventory x Unit transfer cost x Inventory holding
cost in %.
Inventory disposal loss : Loss incurred when selling inventory to a trading
company.
Contribution before marketing (CBM) : Revenues - COGS - inventory costs -
inventory disposal loss.
Contribution after marketing (CAM) : CBM - (advertising + advertising research +
sales force).
Interest paid : Interest paid on loans granted in previous periods.
Exceptional cost or profit (ECP) : Exceptional items such as brand withdrawal
costs.
Net contribution : CAM – (market research studies + R&D + interest + ECP).

Copyright © StratX 2010-04-19 37

 Next period budget : 40% of net contribution; minimum = M$ 7; maximum = M$
20 (adjusted for inflation)

Figure 17 – Company performance – Sample chart & explanations

BRAND RESULTS
This section provides the Contribution by Brand chart, detailed in Figure 18. This chart
is similar to the Company performance chart; it provides financial elements for each
marketed brand, as explained below:
Units sold : Number of units purchased by consumers.
Average retail price : Average price paid by consumers.
Average selling price : Average retail price – distributors' margins.
Revenues : Number of units sold x Average selling price.
Unit transfer cost : Price paid by Marketing to Production for each unit sold.
Cost of goods sold (COGS) : Number of units sold x Average unit transfer cost.
Units in inventory : Number of units produced but not sold at end of a period.
Inventory holding cost : Units in inventory x Unit transfer cost x Inventory holding
cost in %.

Copyright © StratX 2010-04-19 38

 Inventory disposal loss : Loss incurred when selling inventory to a trading
company.
Contribution before marketing (CBM) : Revenues – COGS – inventory holding
costs – inventory disposal loss.
Contribution after marketing (CAM) : CBM – (advertising + advertising research +
sales force).
This section also shows the total market share of each brand, and its distribution
coverage, i.e. the number of stores carrying the brand.

Figure 18 – Brand contribution – Sample chart & explanations

RESEARCH & DEVELOPMENT RESULTS

This section provides the list of all R&D projects launched in the previous periods and
provides the following details for each project. Figure 19 shows a list of R&D projects,
the following information is a detailed explanation of this screen.
Column 1 – Project name.
Columns 2 to 6 – The physical characteristics of the future product. This data
is given in the relevant units for each characteristic: kilograms for weight,
watts for power, etc.

Copyright © StratX 2010-04-19 39

 Columns 7 and 8 – The current and the minimum realistic base cost. The
base cost is the transfer cost at which the future product will be
manufactured. It is calculated on the basis of an initial production batch of
100,000 units. The actual transfer cost will be higher than the base cost if
the cumulated production is below 100,000 units, and lower than the base
cost if the cumulated production is above 100,000 units. The minimum
realistic base cost is the cost below which it is impossible to manufacture the
future product (at least the first batch of 100,000 units). This minimum cost
takes into account the purchase of raw materials, the labor required to
manufacture the product and the depreciation of investments to be made in
production processes.
Column 9 – The total cumulative budget invested so far in the project. Note
that a project may be completed over several periods as explained in the
Making Decisions chapter.
Column 10 (project not completed) – The budget required to finish the
project. This information is only relevant if the project is not completed. It
indicates the additional budget that must be invested to ensure that the
project will be completed in the following period. You may attempt to finish
the project with a lower budget, but its successful completion is not
guaranteed.
Column 10 (project completed) – The period which the project was
completed.

Figure 19 – R&D report – Sample chart & explanations

Copyright © StratX 2010-04-19 40

CUMULATIVE RESULTS
Cumulative results on sales, production and marketing are provided in this section. It
includes cumulative data since period 0, for all of the brands introduced and marketed
since that time. Company performance results are also provided in the same format as
the one illustrated in Figure 17.
DECISION SUMMARY
This section recalls the decisions that your team made at the beginning of the current
period: brand management, sales force management, R&D projects and the market
research studies purchased. The previous management team made the decisions
shown in Period 0.

MARKET RESEARCH STUDIES

You may purchase up to 23 Market Research Studies each period. The following list
provides a brief summary of information within each study.
Industry benchmarking – The benchmarking report compiles general information from
annual reports about each of the Markstrat competitors. The same data is provided in
a common format for all companies in such a way that would allow you to compare
competitive performance. The data provided includes sales, production costs,
marketing expenditures and other expenses.
Consumer survey – The consumer survey provides information on: (1) the level of
brand awareness – the percentage of potential consumers in each segment who can
spontaneously recall a given brand name; (2) brand purchase intentions – the
percentage of potential consumers in each segment who intended to buy a given
brand; (3) shopping habits – percentage of potential consumers in each segment who
prefer to shop in a given distribution channel.
Consumer panel – This study provides the total unit sales for each segment; the
relative size of each segment; and the market shares, based on units sold, for each
brand in each segment.
Distribution panel – The distribution panel gives information on the total sales in units
in each distribution channel; the relative size of each channel; and the market shares,
based on units sold, for each brand in each channel. A second chart provides the
distribution coverage for each brand in each channel, i.e. the percentage of stores
carrying a given brand.
Semantic scales – Semantic scales describe how consumers perceive the marketed
brands. Respondents are asked to rate each brand along each physical characteristic

Copyright © StratX 2010-04-19 41

on a scale from 1 to 7 according to the way they perceive the brand. For instance, a
brand rated 2.3 on the Power scale is perceived as being less powerful than a brand
rating 5.5 on the same scale. The study also provides the ideal ratings of each segment
for each physical characteristic. Finally, it provides the importance of each
characteristic, in other words, the weight each characteristic holds in the buying
decision. Additional charts and graphs are available in the simulation. For instance, you
can obtain a graph representing the relationship between physical characteristics and
perceptions, or a graph representing the evolution of customer needs since the
beginning of the simulation.
Multidimensional scaling of brand similarities and preferences – This is one of the
most important studies that may be purchased. It provides a map showing the
similarities and differences between marketed brands on three different dimensions.
Two brands close to one another on the map are perceived as being similar. Inversely,
two brands located in different quadrants are perceived as being significantly different;
for instance, one may be perceived as less economical or as more convenient. Further
information on perceptual maps and their interpretation will be explained in the next
chapter.
Market forecast – This study estimates the expected size in units and the growth rate
of each segment for the next period as well as in five years time. These estimates are
based on the current market situation and assume that no substantial changes such as
brand introductions, or significant price increases or decreases will take place in the
future. Consequently, depending on what actions are actually taken by your firm and
your competitors, the resulting market size will either be higher or lower. For the new
Vodite market, the estimates are based on interviews of potential consumers; these
are less accurate and often turn out to be optimistic.
Competitive advertising estimates – This study estimates the total advertising
expenditures for each competitive brand by segment. This study also provides an
estimate of the communication messages used by competitive brands in their
advertising. Finally, it estimates the quality and design of the advertising copy, which
depends on how much was spent in advertising research.
Competitive sales force estimates – This study estimates the number of salespeople
allocated to each competitive brand, by distribution channel and in total. It also
provides the average sales force size by brand and by firm, in total and for each
channel.
Advertising experiment – This study estimates the effects of increasing your
advertising budget by a given percentage. It projects brand awareness and market
share for each of your brands. If for example, the advertising budget has been

Copyright © StratX 2010-04-19 42

increased by 20% – assuming no change in other competitive actions, the resulting
change in contribution after marketing is also provided. An increase in contribution for
a given brand shows that you would have benefited from a higher level of advertising
spending for this brand.
Sales force experiment – The sales force experiment predicts the increased
distribution coverage and market share for each of your brands, if the number of
salespeople had been increased. For example, you may test the impact of adding 10
more salespeople – assuming no change in other competitive actions. The resulting
change in contribution after marketing is also provided. An increase in contribution for
a given brand shows that you would have benefited from allocating more salespeople
to this brand.
Conjoint analysis – This study is rather complex and expensive and is therefore not
always made available to participants. It provides the utilities – a real number between
from 0 to 1 – of various levels for each of the four most important physical
characteristics and for each segment. High utilities, for instance close to 1,
demonstrate high consumer preferences for the corresponding physical levels.

Copyright © StratX 2010-04-19 43

MAKING DECISIONS
At the beginning of each decision round, you will be given your firm’s annual Company
Report, the Industry Newsletter and the Market Research Studies that you ordered in
the previous period. The team should start by analyzing this information and agree on
a strategy for the company. Once you have determined your marketing objectives, you
will make decisions for the next period.
At the end of the decision round, you will submit your decisions to your instructor,
together with the decisions of your competitors. The Markstrat software model will
compile the data and generate the results of that period. These results will be reflected
in your next Company Report, a new Industry Newsletter and new Market Research
Studies.
After examining this new set of information, the team will review the objectives and
decide whether to maintain or adapt the strategy. Your team will then make decisions
for the next period, following this cycle of decisions and results for up to twelve
simulated years.

GROUP DYNAMICS
During the first set of decisions, it is essential that you develop a good working
relationship within your group. In the beginning it is important that each team member
be involved in the discussion of all issues and that everyone develops a grasp of the
business situation. For these reasons, try to avoid the inclination that each member
concentrates in his or her area of expertise.
Later in the simulation, everybody will have developed a common understanding of
the strategic issues. At the same time, the management of the firm will become more
complex in terms of the number of brands, the R&D interface, the market
developments, and the intensity of competition. Period 3 or 4 is usually a good time for
each individual to start concentrating on some specific area of responsibility. In this
way, the group will learn to work efficiently, and each of its members will benefit
equally from the Markstrat experience.

MARKSTRAT MAIN SCREEN

The Markstrat main screen is shown in Figure 20. Markstrat is a standard Microsoft
Windows application like Word or Excel, with a menu bar at the top, a tool bar just
below, and a main area to display charts, graphs or decision screens. Under the main
menu bar you will see links to key charts, graphs, decision forms and tools, online docs
as well as links to your recent activity.
Copyright © StratX 2010-04-19 44
 Figure 20 – Markstrat Main Screen
The menus at the top give you access to the entire set of charts, graphs and tools; they
are labeled:
Home, Report, Newsletter, Market studies, Analysis charts, Analysis tools, Interface
Home. This menu gives you access to the five main screens that should be used to
make decisions: Brand Portfolio; Production, Price & Advertising; Sales Force &
Distribution; Market Research Studies; and Research & Development. You will see a
series of links under the main menu bar for each Decision form. The link for Decision
Tools includes additional summary charts to help you make your decisions: Budget,
Decision summary, Errors & warnings and Past decisions. The Marketing plan tool will
help you calculate your company net contribution based on your current decisions and
on sales estimates. Finally, New loan, Loan schedule and Budget increase or decrease
will let you interface with the Bank or with the Corporate finance department to get
loans or budget increases.
Report, Newsletter, Market studies. These menus provide the same information as
the printed your annual report, plus a few additional graphs.

Copyright © StratX 2010-04-19 45

Analysis charts, Analysis Tools. These menus provide a comprehensive set of graphs
and tools to help you analyze the market and competitive offerings.
Interface. Using the Open/Close session assistant you can upload or download files to
and from the Markstrat server and backup files locally. You should use this menu to
retrieve the latest results from the instructor and to transfer your decisions to the
instructor.

BRAND PORTFOLIO DECISIONS

The Brand portfolio decision screen is displayed in Figure 21. It enables you to
introduce new brands and to modify or withdraw existing ones. The team may develop
up to 5 Sonite brands and 5 Vodite brands per period.
INTRODUCING A NEW BRAND
After clicking on the Introduce new brand button, a decision screen appears that will
help you bring a new Sonite and/or Vodite brand to market. The name of the new
brand must be entered using the naming conventions discussed previously. The name
of a completed R&D project –giving the technical specifications for producing the
brand– must be selected from the list of available R&D projects, the available R&D
projects chart is shown as a reference.
The Undo button can be used to remove a new brand added to the portfolio that you
subsequently decide not to launch. Select the new brand and click on the Undo button
to remove it from the Marketed brands list.

Figure 21 – Brand Portfolio decision screen

Copyright © StratX 2010-04-19 46

MODIFYING AN EXISTING BRAND
After selecting the brand to be modified, click on the Modification button. A decision
screen appears. The R&D project name corresponding to the new product specification
must be selected from the completed R&D projects. The name of a modified brand
does not change; otherwise, it would be a brand introduction.
The Undo button can be used to cancel the change made to a brand using the
Modification button. Select the modified brand and click on the Undo button to
retrieve the project which the brand was based in the previous period.
WITHDRAWING A BRAND
The Withdraw option removes a brand that was marketed in the previous period. The
brand will no longer be marketed or distributed to consumers. Select the brand to be
removed in the Marketed brands list and click on the Withdraw button; the brand
moves to the Withdrawn brands list.
If inventories remain when a brand is withdrawn from the market, they are sold to a
trading company at a given percentage of the transfer cost and a loss is incurred. A
brand that was marketed in the past and withdrawn from the market may not be
reintroduced later in the simulation.
The Undo option enables you to cancel a brand withdrawal. Select the name of the
withdrawn brand and then click on the Undo button.

MARKETING MIX DECISIONS

The Production, Price & Advertising decision screen is displayed in Figure 22. You can
switch between the Sonite and Voite brands by clicking on the drop-down (top left).
The brands that you have chosen to market next period are listed on the tabs at the
top of the screen. Click on the tab of the brand to be displayed and enter your
marketing mix decisions.
PRODUCTION
Enter a production plan based on your sales forecasts for the upcoming period, taking
into account any units left in inventory. The production department will adjust your
plan by plus or minus 20% to respond to the actual market demand. If you are holding
a high level of inventory, you can set the production plan to 0; but in this case, no
automatic adjustment is possible.
Alternatively, you can decide to sell part of the inventory to a trading company which
will buy it at a given percentage of its value, usually 50 to 80% hence, the loss incurred

Copyright © StratX 2010-04-19 47

for inventory disposal is usually between 20% and 50%. The exact percentage can be
found in the Newsletter.
PRICE
Enter the recommended retail price in dollars, the list price of the brand. This
corresponds to the price usually paid by customers, except for shoppers using mass
merchandisers which practice a 10% discount.

Figure 22 – Marketing Mix decision screen

ADVERTISING
Enter the Advertising media budget, to purchase media space, and the Advertising
research budget, to improve the quality and the effectiveness of your advertising. Both
budgets must be given in thousands of dollars. Then, allocate your advertising budget
to the various market segments, by indicating the proportion of the budget targeted to
each segment. The percentages must add to 100%.

Copyright © StratX 2010-04-19 48

PERCEPTUAL OBJECTIVES
When you want to reposition a brand with advertising, as explained in the next
section, you need to inform the advertising agency of the desired perceptual objectives
for the brand. This is a complex decision that you will not have to make in the first
period. You can skip this paragraph until you have reviewed the appropriate
conceptual session with your Instructor, or until you have read and understood the
Understanding your Annual Report chapter.
If the advertising objective is to raise brand awareness without changing the
perception of the brand, select the No objectives option.
Perceptual objectives can be chosen on any two communication dimensions. They may
be provided either in terms of semantic scales or in terms of the composite dimensions
given by the multidimensional scaling study. Just click on the scale of your choice: MDS
dimensions or Semantic scales. Then, select the dimensions in the Dimension 1 and
Dimension 2 boxes. Finally, the objective level for each desired position on each
dimension must be entered. For the scales based on the multidimensional scaling
study, these numbers should be between -20 and +20. For the semantic scales, the
range is from 1 to 7, with one decimal point.
These perceptual objectives convey primarily qualitative information for the design of
the advertising platform and copy (for example, to emphasize the light weight nature
of the product). The numeric representation of these perceptual objectives is used only
for communication purposes.
The communication may also be focused on a single dimension (a unique selling
proposition). In this case, pick None in the list box of Dimension 2 to indicate that the
communication is on the single dimension indicated in Dimension 1.

MARKET RESEARCH STUDIES

The Market Research Studies decision screen is displayed in Figure 23. To purchase
market studies, simply check the boxes that correspond to the studies you would like.
The cost of these studies appear as the boxes are checked.
When you order a study, the research is performed during the next simulated period
and the results are made available at the end of the period. This information is
available for the following period's decisions.
Some of the studies may apply only if there are brands marketed during the period
(e.g., the consumer panel for the Vodite market). You can use the Benchmarking study

Copyright © StratX 2010-04-19 49

to anticipate whether competition will launch new brands. If you order these studies
and if no brands were marketed in the period, you will not be charged for them.

Figure 23 – Market Research Study decision screen

SALES FORCE AND DISTRIBUTION

The Sales Force and Distribution decision screen is displayed in Figure 24. Your
company's sales force is organized by distribution channel. You will have to decide how
many salespeople to assign to each distribution channel for each brand.
Enter the number of salespeople that you wish to assign to each brand and each
distribution channel. Changes in the number of salespersons are expected to have an
influence on the distribution coverage of your brands. Since your sales force is
knowledgeable about all your products, you can modify the allocation of salespeople
across distribution channels and brands at no cost.
The input form automatically calculates the cost of your sales force, as well as the
allocation by channel and brand cost. The two tabs “View %Total by Channel” and
“View %Total by brand” enables you to visualize how to allocate your sales force across
channels and brands.
The Assistant button can help you allocate the sales force efforts automatically,
according to four predefined rules. Equal allocation across all brands allocates an equal
percentage of effort to each brand within a channel. The three other options,

Copyright © StratX 2010-04-19 50

Proportional to last period’s unit sales, retail sales or contribution, are based on the
previous period's results. Note that using this feature, no sales effort will be allocated
to new brands introduced during the current period. You will need to enter some
figures so that a certain amount of effort is devoted to new brands.

Figure 24 – Sales Force and Distribution decision screen

RESEARCH & DEVELOPMENT DECISIONS

Research & Development decisions are quite complex. It is unlikely that these
decisions will be necessary during your first period. You can skip this section until you
have attended the appropriate conceptual session with your Instructor, or until you
have read and understood the Understanding your Annual Report Chapter.
The Research & Development decision screen is displayed in Figure 25. Buttons at the
bottom of the window are used to start new R&D projects; shelve an incomplete
project; or continue a project that had been temporarily suspended. The projects that
your R&D department will work on next period are listed on the tabs at the bottom of
the screen. You can switch between the Sonite and Voite projects by clicking on the
drop-down (top left).
For each project, the values of the five physical characteristics for the desired future
product must be entered in the corresponding cells. The range of technically feasible
characteristics for each dimension is indicated in brackets. The requested base cost is
the transfer cost that will be charged to the Marketing department for each unit of the
future product, assuming a production batch of 100,000 units. You can ask the R&D

Copyright © StratX 2010-04-19 51

department to seek the minimum transfer cost technically feasible by checking the box
Request project at minimum base cost. The allocated budget corresponds to the
budget devoted to the project over the next period. The cumulative R&D budget is also
indicated.

Figure 25 – Research & Development decision screen

You can order a feasibility study from the R&D department for $100,000. This study
will tell you the minimum cost at which the product can realistically be manufactured,
and the R&D budget required to guarantee its completion at the currently requested
base cost. A feasibility study takes one period, the information is provided in the next
period within the R&D section of the company report.
Alternatively, you can initiate up to five on-line queries per period, which will give the
same information as the feasibility studies, at no charge. However, these immediate
results are often over-estimated by as much as 50%.

CHECKING YOUR DECISIONS

Before submitting your decisions to the Instructor, it is recommended that you check
that Markstrat has not discovered any mistakes with your decisions. The Decision Tools
will help you verify your decisions.
Budget (see Figure 26). The budget charts provide details on how you have
decided to spend your marketing budget in the upcoming period. At any time you
can check your expenditures against your allocated budget. A warning message
will appear if the budget is exceeded. This message should not be ignored;

Copyright © StratX 2010-04-19 52

 otherwise, the simulation will arbitrarily cut your expenditures, starting with
advertising.
Review your Decisions. The Summary button leads to five charts that provide a
detailed description of all decisions made by your team.
Check your Decisions (see Figure 27). This screen will show a list of errors and
warnings generated by the simulation. Errors indicate corrections that should be
made because of inconsistent decisions, while warnings draw attention to possible
problems. In these instances, you should check your decisions carefully to make
sure that all entries are correct.

Figure 26 – Decisions – Overall marketing budget

Figure 27 – Decisions – Errors & Warnings

Copyright © StratX 2010-04-19 53

VALIDATING DECISIONS WITH THE MARKETING PLAN TOOL
After accessing the marketing plan section there are five distinct components which
appear in the tabs at the top of the screen: Segment sizes, Brand shares/sales,
Distribution mix, Brand contribution, and Company performance. Click on the
corresponding tab accesses each component of the marketing plan. The first three
correspond to the different types of estimates that you have to type into the plan. The
last two provide estimated results based on both your decisions and your estimates.
MARKETING PLAN - SEGMENT SIZES
The first estimate you must provide as input to the marketing plan concern the size (in
thousands of units) of each segment. Click on the Segment sizes tab in the Marketing
Plan section. The chart at the center of the screen initially displays each segment’s size
last period. The estimates for the variation of the segments’ sizes next period should
be entered in one of the two columns on the right-hand side, in thousands of units or
in percentage change. You can view the Sonites and Vodites screen by using the drop
down in the top left-hand corner of this screen.
Two automated estimation approaches are available. You can click on the “Same as
last period” button to use segment's size from the previous period, or click on the “As
in market forecast study” selection to input the segment size projections from market
research. The second alternative is available only if the corresponding study has been
purchased. If this is not the case, the selection is grayed. These two automated
approaches provide a basis on which individual adjustments can be made, either in
thousands of units or in percentage change.
MARKETING PLAN - BRAND SALES OR BRAND SHARE ESTIMATES BY
SEGMENT
One of the most important aspects of marketing planning is the anticipation of the
market response to a specific set of decisions or actions. In this screen, anticipated
market reactions must be entered for each brand in each segment. They can be
specified either in terms of brand shares or brand sales by selecting the appropriate
tab selection at the bottom of the screen. The numbers for the previous period are
displayed for each brand in each segment as well as for the total market. An estimate
for the next period can be entered either as a target or as a change from the previous
period.
When making these estimates, make sure to take into account your own portfolio
decisions as well as the ones of your competitors. In particular, brand introduction or

Copyright © StratX 2010-04-19 54

upgrade should be examined closely to best estimate their impact on brand market
shares.
Assuming that brand share inputs are first selected, one easy way to start is to use the
same brand shares as in the previous period. Estimates can then be changed for each
brand/segment combination, either as expected brand shares or as expected changes
in brand share points. Whenever a change is made in any of the estimates, the number
for the other mode of entry is automatically updated. The total brand share estimates
for the market as a whole are also updated in the right-hand column. Simultaneously,
the estimates of the corresponding brand unit sales in each segment are calculated
based on the segment sizes previously defined and the brand share inputs. These
numbers can be displayed by selecting the brand sales tab selection at the bottom of
the screen. The estimates of brand sales can then be updated as targets or as changes
from the previous period in the same way as for the brand shares.
The approach described above consists of:
1. Starting with brand share estimates,
2. Displaying the expected brand sales resulting from the segment size and market
share estimates, and
3. Updating selected brand sales estimates. It reflects the most logical process but it is
also possible to directly set estimates of expected brand sales. In this case, brand share
estimates are calculated on the basis of the brand sales and the segment sizes.
MARKETING PLAN - DISTRIBUTION MIX
The price received by the firm for the sale of a product is equal to the retail price minus
the distributor’s margin. As the distribution margin varies across channels, the average
selling price of a brand will depend on the mix of its sales across the channels. To
calculate the financial contribution of a brand requires an estimate of its distribution
mix.
Selecting the corresponding tab in the marketing plan section can make the
Distribution mix estimates. They can be set to the same values as in the last period, or
be calculated automatically based on the shopping habits study, by selecting the
appropriate tab selection at the bottom center of the screen. The second alternative is
available only if this market research study has been purchased in the current period.
In this case, Markstrat uses the brand sales projections entered in the previous steps of
the marketing plan. For each brand, the purchases of each segment are split by
channel based on the shopping habits data. The sales of a brand in a given channel are
obtained by total over the segments.

Copyright © StratX 2010-04-19 55

The distribution mix estimates can also be entered or updated manually one by one.
You should be particularly careful that the vertical sum of the percentages adds up to
100. The average distribution margin corresponding to a given mix is displayed on the
bottom line and is updated any time a change is made in the chart.
MARKETING PLAN - PROJECTIONS
On the basis of the decisions and the estimates for segment sizes, brand shares, brand
sales, and the distribution mix, the marketing plan section can make financial
projections for the next period. These projections can be displayed by selecting the
Brand contribution and Company performance tabs at the bottom of the screen. When
making financial projections, the software also makes a number of consistency checks;
an errors and warnings screen may be displayed if any problems are encountered.
Common inconsistencies include forgetting to enter some estimates, the distribution
mix for a brand not adding up to 100%, or the sales forecast for a brand exceeding the
available inventory volume plus the production plan. Such errors and warnings will
require corrections in either the marketing plan estimates or the decisions. In the first
case, just select the appropriate tab and make the desired adjustments before
returning to the financial projections. In the second case, you can go back to the
decision menu by clicking on the close selection at the bottom of the screen, make any
needed changes to the decisions, and return to the marketing plan section. The
previous estimates entered in this marketing plan section have been saved and will be
used for financial projections unless modified.
Selecting the Brand contribution tab gives access, if all consistency checks are passed,
to a pro forma statement of brand contribution. From the top line of the statement,
units sold, to the bottom line, contribution after marketing, the software uses your
decisions and estimates to produce a simulation of the brand contribution statement,
which will appear in the company report. For instance, the average selling price is
obtained from the retail pricing decision and the average distribution margin
calculated from the distribution mix estimates. Similarly, the inventory level is
calculated on the basis of the previous inventory (factual data) plus the production
plan (a decision) minus the sales estimates, allowing for upward or downward
adjustments possible in the production process. A separate brand contribution report
is available for Sonites and Vodites, simply by selecting the Sonite or Vodite drop-down
at the top of the screen.
Selecting the Company performance tab gives access, if all consistency checks are
passed, to a pro forma statement of company performance. This replicates a page in
the company report but allows you to go one step further by simulating results based
on estimates. From the top line of units sold to the level of contribution after

Copyright © StratX 2010-04-19 56

marketing, it is an aggregate of the information available in the brand contribution pro
forma statement, separately for Sonites and Vodites as well as in total. Other expenses
are then deducted to provide the net contribution. Finally, a budget for next period is
estimated on the basis of these expected financial results.
MARKETING PLAN - THE PLANNING PROCESS
The Markstrat marketing plan section is a useful tool to check the consistency of
decisions and to easily anticipate their possible financial consequences. However it
provides no guarantee of achieving the projected results. The actual brand
contribution and company performance statements for the next period may be quite
different from the pro forma projections obtained from the plan!
Many facets of the environment may have changed unexpectedly, including consumer
needs or competitive actions. Other aspects directly controlled by the firm may not
have been properly incorporated, or may have been overlooked. For example,
participants often overlook the following issues:
the distribution mix estimates may not have taken into account the fact that the
deployment of the firm’s sales force no longer corresponds to the new shopping
trends;
or the share estimates for a given brand did not anticipate negative consumer
reactions to the price increase;
or the cut in the advertising budget did not have such a negative impact on sales
and that, as a result, the brand has performed better than expected and is out of
stock.
The process of planning in Markstrat brings discipline to marketing thinking, action,
and learning in at least three important ways: first, by demanding a focus on the
tangible results of decisions at the brand level; second by making it easy to check the
validity of the overall financial results; and third by providing support for a post-
mortem analysis.
On the first aspect, the marketing plan section helps to focus on the three key
elements of market evolution (segment sizes), brand performance (in shares or
volume), and distribution coverage. Having to submit estimates for these components
of the plan should solicit discussion and reflection about the variables affecting them.
By modifying the estimates, it is also relatively convenient to perform sensitivity
analyses to better understand how they affect the brand contribution. If the resulting
projected brand contribution appears significantly higher or lower than expected, then
the validity of some of the decisions or estimates should be questioned. For instance,
observing an abnormally high projected contribution for a given brand may lead to

Copyright © StratX 2010-04-19 57

checking if the share estimate is coherent with the competitive positioning, the retail
price, or the advertising support of the brand. It is easy to switch between the
marketing plan section and the other components of the decision screen to adjust
either the decisions or the estimates, and reach a situation where the firm’s
management is confident.
The marketing plan section of the Markstrat software also allows you to easily check
on the expected overall financial performance of the firm. Within the firm’s portfolio, it
may be decided to invest heavily in a new brand and to accept a substantially negative
contribution for this brand as long as other products generate sufficient funds to reach
financial objectives. This financial interdependence between brands is sometimes
difficult to apprehend but it is easy to investigate and analyze with the marketing plan
section.
Finally, an important role of the marketing plan is to provide a tangible basis to learn
over time. The Brand Contribution and Company Performance statements in the
marketing plan are in the same format as in the company report. This makes it easy to
compare between the anticipated projections and the actual results when they are
obtained. A systematic analysis of the sources of variance between the two documents
will help you learn both about the market mechanisms and about the planning
process. In the long-term, this learning dimension is probably the most important
contribution of the marketing planning process.

Copyright © StratX 2010-04-19 58

POSITIONING AND RESEARCH & DEVELOPMENT
As you may expect, the market environment will change during the course of the
simulation. For instance, the needs of customers will probably evolve over time. (i.e.
some segments may want more powerful brands while others may expect prices to
fall). To respond to these changes, companies will have to introduce new Sonite or
Vodite brands, and reposition or withdraw existing ones. As marketing resources are
limited, it is extremely important to adopt optimal segmentation and positioning
strategies, especially because a Markstrat company cannot market more than five
brands in a given period in each market. Your department will be faced with the
following strategic issues on market segmentation and product positioning:
Which segments to target?
How to design products satisfying the needs of these segments?
How to position new brands effectively?
How to reposition existing brands to better fit customers’ needs?
The goal of this chapter is to describe the various approaches that can be used in
Markstrat to address these issues.

SEMANTIC SCALES & MULTIDIMENSIONAL SCALING

Technical experts can easily classify the marketed brands based on objective data such
as technical attributes and prices. However, consumers who are about to make a
purchase decision are influenced by their perceptions of the brands available on the
market rather than by the actual features and properties of these brands.
Perceptions are by definition subjective and can therefore be distorted from reality.
The Markstrat simulation provides two market research studies to assess consumers’
needs and to estimate how brands are perceived: the Semantic scales study and the
Multidimensional scaling study.
Semantic scales – This study describes how consumers perceive the marketed brands.
Respondents are asked to rate the physical characteristics of each brand on a scale
from 1 to 7. For instance, consumers have rated the brand SAND at 2.4 on the Power
scale shown below because they perceive it as being less powerful than brand SILK,
rated at 5.3 on the same scale.

Copyright © StratX 2010-04-19 59

 SAND (2.4) SILK (5.3)
Low  Average  High Power
Power Power

1 2 3 4 5 6 7

The study also provides the ideal rating for each characteristic and each segment. The
results of this study are shown in Figure 28. By comparing the perceived ratings of your
brand with the ideal ones for a given segment, you can determine if this brand fits the
needs of customers in that segment. If not, you can compare its physical characteristics
with those of the most preferred brands, and see how large the technical gap is. In
order to bridge a significant technical gap, you will need to launch a new R&D project.
Note that even the most preferred brand may not be ideally positioned. In this case,
you need to extrapolate what may be the ideal physical attributes (power, weight...
price) for the targeted customer group. The graph shown in Figure 29 is provided in the
simulation for each physical attribute when you purchase the Semantic scales study.
Perceptions are plotted against actual attributes for all marketed brands. A graphical
interpolation on this graph will let you accurately calculate which physical level is
required to reach a given perceived level.

Multidimensional scaling of brands similarities and preferences – This study provides

a three-dimensional map showing the similarities and differences between marketed
brands. This map is built through a complex process. First, respondents are asked to
rate pairs of marketed brands according to the similarities or differences between two
brands. Second, complex mathematical formulas are applied to these ratings to build a
three-dimensional map where the distance between two brands is small for similar

Copyright © StratX 2010-04-19 60

brands –brands that are close to each other on the map– and large for dissimilar
brands –brands that are far from each other on the map.

Figure 28 – Semantic scales study: Ideal values and brand perceptions

Figure 29 – Relationship between attributes and semantic scales

The map is a graphical representation of the respondents’ ratings. Third, experts
provide an interpretation for each of the three axes. Each axis is usually attached to a

Copyright © StratX 2010-04-19 61

composite dimension like Convenience or Performance, i.e. a combination of several
physical characteristics. Finally, respondents are asked to indicate what would be their
ideal position on the map.
The result of this long process is shown in Figure 30. Note that only two dimensions
out of the three can be represented simultaneously. The circles Bu, Si, Pr, Hi, and Ot on
the graph represent the ideal points of the five segments. Each circle only represents
the center of gravity of the whole segment. The various geometric shapes (square,
triangle, star...) correspond to the positioning of the brands as they are perceived by
the market at the time of the study. Each brand name is clearly labeled. One specific
color and shape is attributed to each firm (for example, all brands marketed by firm A
is represented by red stars).
For the Sonite market, the best interpretation of the three axes is given in the table
below.
Composite Relative Influence of physical characteristics
Axis
Dimension importance Weight Design Volume Max Freq. Power Price
1 Economy High Slight Slight Slight Slight Slight Strong
2 Performance Medium Slight Slight Slight Moderate Strong Slight
3 Convenience Low Moderate Strong Moderate Slight Slight Slight

Note that for Weight, Volume, Diameter and Price, the relationship between the
corresponding composite dimension and the attribute is an inverse function. For
instance the lower the weight, the higher the perceived convenience or flexibility.
Experts have attempted to build the same table for the Vodite market and have come
up with the following results, which should be used with care since no brands are
marketed yet.
Influence of physical characteristics
Composite Relative
Axis Max
Dimension importance Autonomy Diameter Design Weight Price
Freq.
1 Efficacy High Slight Strong Slight Moderate Slight Slight
2 Flexibility Medium Strong Slight Moderate Slight Moderate Slight
3 Economy Low Slight Slight Slight Slight Slight Strong

Finally, this complex task cannot be achieved unless a significant number of brands are
marketed. The MDS study is therefore not available for the Vodite market until a
sufficient number of brands are marketed.

Copyright © StratX 2010-04-19 62

 Figure 30 – Perceptual map

Figure 31 – Relationship between attributes and MDS perceptions

Copyright © StratX 2010-04-19 63

REPOSITIONING STRATEGIES
Ideal points on the perceptual map, or on the semantic scales’ chart, reflect the needs
of consumers, or the price that they are ready to pay to get a product that fits these
needs. For a given brand and a given segment, the optimal position on the map is as
close as possible to the ideal point of that segment. However, there are several reasons
why brands are not always ideally positioned.
CHANGING SEGMENT NEEDS
Segment needs evolve over time, this may be due to changes in the environment or in
the consumers’ value and behavior. Consequently, a brand which was well positioned
when it was introduced on the market may now be perceived as low-performance or as
having an unnecessarily high frequency a few periods later. Period after period, the
distance on the map between the brand and the ideal point becomes greater and
greater.
PRICE PRESSURE
This situation is similar to the previous one. As price is the most important dimension
in the Sonite market, manufacturers should expect pressure from consumers to lower
prices, especially in the low-end segments. Again, if brand prices are not adjusted
accordingly, the distance between the brand and the ideal point along the price or
economy axis is likely to increase.
NEW TARGET SEGMENTS
For a new market in its early stages, a good strategy may be to serve several segments
with a single brand. This situation may occur if the needs of two segments are fairly
similar or if one segment is too small to allow the necessary economies of scale. Then,
as these needs change, or as the segment size increases, it may become necessary to
position one brand closer to each ideal point.
COMPETITOR ENTRY
In the absence of competition, one firm may successful serve consumers with a
product that is not exactly adapted to their needs. Then, if a competitor introduces a
new brand that fits these needs better, it may become necessary to reposition the old
brand closer to the ideal point.
In all the above situations, brands must be repositioned to adapt to new
environmental conditions; however, a brand does not always need to be repositioned
on all dimensions. For instance, a two or three year old brand may now be perceived
as low-performance, but as having the right convenience level. In this case, there is no

Copyright © StratX 2010-04-19 64

reason to change the perception along the convenience dimension. Repositioning can
be achieved by changing the brand’s price, through advertising or via R&D.

POSITIONING WITH ADVERTISING

Advertising in Markstrat is mainly used to build brand awareness and to inform
customers about its physical characteristics. Advertising can also be used to reposition
a brand. Although consumers' perceptions are linked to the brand’s physical
characteristics, they can be slightly influenced by communication. But the
repositioning effect is limited; this is especially true when the brand awareness level is
high, because a brand which consumers are extremely familiar with is more difficult to
reposition. Beyond a certain level, brand repositioning can no longer be done by
advertising alone, and it therefore becomes necessary to complete an R&D project
with physical characteristics matching consumers' needs, and then to upgrade the
brand. R&D projects will take at least one period to complete, while repositioning
through advertising has an immediate effect.
Using advertising to reposition a product is a four step process:
Identify the target position on the perceptual map or on the semantic scales’ chart.
Specify perceptual objectives for the brand when making Production, Price &
Advertising decisions, as explained in the Marketing Mix Decisions chapter. You
can choose to set perceptual objectives either on semantic scales or on MDS
dimensions. For example, to reposition a brand closer to the Singles segment along
dimensions Weight and Power, you must first try to estimate the future ideal
positions of that segment on these two dimensions, by looking at the chart Ideal
value evolution in the semantic scales study; then you must select the two chosen
dimensions and enter the coordinates of the point that you want to reach on the
semantic scales’ chart. A maximum of two dimensions may be specified to keep
the message simple and effective.
Allocate an advertising media budget for the brand, to buy media space and time,
and an advertising research budget. The effect of advertising research is two-fold.
First, it makes your advertising campaign more effective, by a better selection of
media and a better design of the advertising copy. Second, the repositioning
impact will be higher in terms of reaching the perceptual objectives, although
there will naturally be a limit as to how far and how fast advertising can change
perceptions.
Indicate the percentages allocated to the Targeted segments. The targeted
segments must be coherent with the perceptual objectives, this decision alone is
not sufficient to reposition a brand. Targeting specific segments is mainly done by

Copyright © StratX 2010-04-19 65

 selecting the most appropriate media to communicate the message, but it has little
effect on the content of the message.
Finally, you will have to implement the same type of advertising program when you
change the physical characteristics of a brand – by implementing a new R&D project –
or when you increase or decrease its price significantly, to inform the consumers about
these new characteristics and price.

POSITIONING THROUGH RESEARCH & DEVELOPMENT

As explained before, a brand must be repositioned through R&D when the distance on
the perceptual map – or on the semantic scales’ chart – between the brand and the
target segment’s ideal position is too large. Research and development must also be
used to introduce new brands, since all marketed brands must be based on R&D
projects.
Using R&D to reposition a product or to introduce a new one is a four step process:
Identify the target position on the perceptual map or on the semantic scales’ chart.
Estimate the physical characteristics that correspond to this target position. This
can be done in at least three different ways.
− The best solution is to use one of the two charts plotting the relationships
between physical attributes (power, weight... price) and semantic scales or
coordinates on the perceptual map. These two charts are provided in the
simulation, one with the semantic scales study (see Figure 29), and the other
with the MDS study (see Figure 31). A simple graphical interpolation on the
appropriate chart will let you calculate quite accurately which physical level is
required to reach a given semantic scale or a given MDS position.
− These charts may not be available when only a few brands are marketed. This
is likely to be true in the early stages of the Vodite market. In this case, the
best solution is to simply estimate the optimal physical characteristic for a
given segment from the closest brand available in the market. For instance, on
the map in Figure 30, brand SODU appears to have the appropriate
Performance level for the Singles segment, and brand SAMA for Others
segment.
− The perceptual map is not available when no brands are marketed. However,
you may still obtain information on segment needs from the semantic scales
study. Consumers may indicate that they are looking for brands with a high
autonomy, rated 5.5 on the 1 to 7 scale. Your best option is to assume that
there exists a linear relationship between autonomy in meters and semantic
scales, i.e. that the lowest autonomy (5 meters) would be rated 1, and that the
Copyright © StratX 2010-04-19 66
 highest autonomy (100 meters) would be rated 7. In this case, the conversion
formulas are:
S = [(X-LB) / (UB-LB)] x 6+1 OR X = {[(S-1)/6] X (UB-LB)} + LB
where S is the target semantic scale, X is the corresponding physical level, and
LB and UB are the lower and upper limits of the physical characteristic’s
feasible range. In the previous example, the autonomy corresponding to 5.5 is:
[(5.5-1) / 6] x (100-5) + 5= 76 (rounded to the nearest whole number)
This method, although imperfect, allows you to make approximations until
more data becomes available over time.
Develop an R&D project with the physical characteristics calculated above. This is
done in cooperation with the R&D department as explained below.
Introduce a new brand or modifying an existing one. Completed R&D projects can
be used to reposition existing brands by modifying the physical characteristics that
are the basis of consumers’ perceptions. They can also be used to introduce new
brands. In both cases, a coherent advertising campaign will have to be
implemented at the same time to inform consumers about these changes.
Note that this process will take at least one period.

RESEARCH & DEVELOPMENT

The marketing department (you) may ask the R&D department to develop specific
projects in order to improve existing products or to introduce new ones. The R&D
department of the firm works for all the divisions, including yours, and operates as a
profit center. Up to ten R&D projects may be ordered each period for the two markets,
five Sonite projects and five Vodite projects. Over the course of the simulation, a
maximum of thirty Sonite and thirty Vodite projects can be developed.
In the past, each firm has successfully completed two R&D projects on which the
brands marketed in Period 0 are based. The project name starts with the letter P
followed by the corresponding brand name. For instance, the R&D project
corresponding to the existing brand SAMA was called PSAMA. To order a new project,
the marketing department must specify the following information:
Project name;
Technical specifications of the desired product;
Target manufacturing unit cost;
Allocated development budget.

Copyright © StratX 2010-04-19 67

PROJECT NAME
The names of R&D projects are made up of five characters. The first letter is always a P
for project. The second letter identifies the type of product being developed, S for
Sonite and V for Vodite. The firm can freely choose the last three characters.

P S I B I
Product Type
Always a
S = Sonite Freely chosen letters or numbers
P as in Project
V = Vodite
The name of a completed project can never be reused for a new project, even if it is a
minor modification of the older project.
TECHNICAL SPECIFICATIONS
The marketing department must provide the physical characteristics of the desired
product. Each of the five attributes must be specified, and the levels must be within
the feasible range. For instance, a Sonite project must include specifications for
Weight, Design, Volume, Maximum Frequency and Power. The previous section
explains how to estimate the physical characteristics for product development.
TARGET MANUFACTURING UNIT COST
The Marketing department must also provide the target manufacturing unit cost of the
desired product. Because this cost decreases over time with experience and volume of
production, you initially need to specify the transfer cost of the first 100,000 units of
the new product. This cost is called the Base cost.
Base costs have no upper limit. If you indicate a high base cost, the R&D department
will have more flexibility in finding the appropriate materials and manufacturing
processes. As a consequence, the project is easier to develop, and is less expensive in
terms of the total development budget.
The lower limit of the base cost for a given project depends on its technical
specifications: the more sophisticated a product is, the higher the minimum base cost
will be. High levels of design, maximum frequency, power and autonomy increase the
base cost. Similarly, low levels of weight, diameter, and volume increase the base cost.
This is understandable since a small, light and powerful Sonite is more complex than a
big, heavy and low power Sonite.

Copyright © StratX 2010-04-19 68

There are many ways to estimate the base cost of a product.
One solution is to start from the ideal price of the targeted segment, i.e. the price
that consumers in this segment are willing to pay for a product fitting their needs.
The base cost is then obtained by subtracting the average distributors’ margin, plus
the minimum margin that will make the future product economically attractive for
you to market. This cost will be higher than the minimum one in many cases, but at
least, this method provides the highest base cost economically achievable.
Another method is to request that the R&D department develop the project at the
minimum base cost. This solution is highly attractive in terms of margins, but may
be more expensive overall since the development budget is likely to be much
higher than the one required with the previous solution.
A third procedure is to do an on-line query or a feasibility study, as explained
previously. On-line queries and feasibility studies provide an estimate of the base
cost and of the required development budget. On-line queries are free of charge
and provide results instantaneously but they generally overestimate budget
requirements. Feasibility studies cost $100,000 and take one period to complete
but give fairly accurate results.
R&D EXPENDITURES
An R&D project includes the research work necessary to develop a prototype of the
desired product, and the development work necessary to find potential suppliers and
set up manufacturing processes. Your department must allocate a budget to each
project to cover these R&D expenses. When the project is completed, the production
department is ready to produce the first units of the product, at the transfer cost
specified in the R&D report, assuming a first production batch of 100,000 units.
The budget required for the completion of a project is a function of several
parameters. The budget depends on the requested physical characteristics: the more
sophisticated the future product, the higher the budget. It also depends on the
experience of the firm with comparable products, i.e. on the number of projects
completed in the past with similar characteristics. Finally, the development budget
depends on the base cost requested, as explained in the previous section. Note that
the R&D department is managed as a profit center, and will not reimburse you if you
allocate exceedingly high budgets.
RESPONSES FROM THE R&D DEPARTMENT
All the R&D projects which the firm has worked on in the previous periods are listed in
the R&D section of the company report. The report details completed and

Copyright © StratX 2010-04-19 69

uncompleted projects, including the two projects which existed at the beginning of the
simulation. A typical report is shown in Figure 19.
Let’s use the following example to illustrate the possible responses from the R&D
department. The table in Figure 32 summarizes the responses for a new project with
identical physical characteristics but with four different requested levels of base cost
and allocated budget.
Note that the Minimum base cost is the same in all cases because it only depends on
the technical specifications. Similarly, the Normal budget for completion is the same in
case A and B, or in cases C and D, because it depends on the technical specifications
and on the requested base cost. The project is completed only in cases A and C. For the
later one, the Marketing department could decide to immediately launch a cost
reduction project, so as to complete a new project with the same physical
characteristics and a base cost of $110.
Uncompleted R&D projects may be continued the following period, or may be
suspended for one or several periods before being continued. If you choose to never
continue the project, the budget allocated so far is lost. The technical characteristics of
a continued project may not be changed from their original values. However the base
cost may be changed without having to start a new project or sacrificing the money
invested in the first project.
& Case A Case B Case C Case D
Weight (Kg) 17 17 17 17
Design (Index) 6 6 6 6
3
Volume (Dm ) 85 85 85 85
Project
Max. Freq. (kHz) 35 35 35 35
specifications
Power (W) 70 70 70 70
Requested base cost $80 $80 $130 $130
Allocated budget $1 000k $300k $1 000k $300k
Normal budget for completion $800k $800k $550k $550k
Minimum Base Cost $110 $110 $110 $110
Response Project successfully completed Yes No Yes No
from R&D at
end of period Current base cost $110 $110 $130 $130
Minimum base cost $110 $110 $110 $110
Additional budget for completion - 500k - 250k
Figure 32 – Interface with R&D department

Copyright © StratX 2010-04-19 70

BRAND INTRODUCTION, MODIFICATION OR WITHDRAWAL
R&D projects may be used as soon as they are completed to launch new brands or to
modify existing ones. They may also be shelved for future use. Brand portfolio
decisions are summarized below and are detailed in the Brand Portfolio Decisions
chapter.
A new brand is introduced on the market by entering a brand name which has not
been used in the past. This brand name is completely independent of the code used for
the R&D project. An existing brand is modified by keeping its current name and using
the physical characteristics corresponding to a new completed project. Using a new
brand name will facilitate the product’s positioning, but the brand awareness will have
to be completely built from scratch. Using an existing brand name makes its
repositioning more difficult, since consumers are familiar with the brand at its previous
position. However, as the awareness level is maintained, the brand’s purchase
intentions are likely to be higher than with a new brand.
The same product can be marketed under different names. The presence of multiple
brands targeted at the same segment is a good strategy to build barriers to entry of
new brands by competitors. A company may also market multiple brands based on the
same project to different segments which are willing to pay different prices while
having similar technical needs.
When a brand is modified, the Production department will immediately start
producing the new version of the product. Lowering the cost of a brand is considered a
brand modification. Obsolete inventories are sold by the Production department to a
trading company at a fixed percentage of their value, usually 80%. This company will
then export the old products outside the Markstrat world. Consequently, a loss of x%
(the given percentage) of the inventory value is charged to the marketing department.
The same rule applies if inventories remain when a brand is withdrawn from the
market. For example, if the Marketing department decides to modify or withdraw
brand SICK in Figure 18, the loss would be calculated as:
105 units x $129 x (100% – 80%) = $ 2,709

Copyright © StratX 2010-04-19 71

ABOUT THIS HANDBOOK
Publisher: StratX
Production: Coptech, Inc., Woburn, Massachusetts

Marketing Team Americas: Paul Ritmo & Andréa Hernandez

Marketing Team EMEAA: Stéphanie Zanon & Patricia Huber
Development Team : Laetitia Benhous, Aurélien Dauvergne & Rémi Triolet
Support Team : Annie Houde & Andréa Hernandez

Copyright © 2003, 2010 by Jean-Claude Larréché, Hubert Gatignon & Rémi Triolet
Software © 2003, 2010 by StratX
Markstrat is a registered trademark of StratX
All rights reserved

No part of this book may be reproduced in any form, electronic or mechanical, without
the prior permission of the publisher.

Used books should not be purchased or sold. Each Student Handbook comes with a
unique serial number that is to be used by the person who purchased the book only. If
the registration card in the back of this book has been tampered with, return the book
because you will not be able to use the serial number

ISBN# 0-9743063-6-3 for the electronic version

ISBN# 0-9743063-7-1 for the paper version

Edited 2010

Copyright © StratX 2010-04-19 72

INDEX
100,000 units, 24, 51, brand is withdrawn, 47, completion of a
68, 69 71 project, 69
5 SoniteBrands, 46 brand performance, 57 Conjoint analysis, 43
5 Vodite Brands, 46 brand portfolio Consumer panel, 41
advertising, 23, 28, 32, decisions, 15 Consumer survey, 41
33, 34, 35, 42, 48, Brand results, 37 consumers, 23, 27, 28,
49, 53, 57, 58, 65, budget, 20, 21, 32, 34, 31, 32, 34, 41, 42,
66, 67 35, 42, 45, 48, 52, 47, 48, 59, 64, 65,
advertising budget, 23, 53, 57, 65, 67, 68, 66, 67, 69, 71
32, 42, 48, 57 69, 70 Contribution by Brand
Advertising Buffs, 26 chart, 38
experiment, 42 Close session, 19 contributions, 36, 37
Advertising media Company performance, cumulative production,
budget, 48 38, 41, 54, 56 31
advertising research, Company Performance, Cumulative results, 37,
32, 65 37, 58 41
Advertising research Company Performance data exchange, 8, 13
budget, 48 statement, 37 decision round, 8, 13,
annual report, 33, 36, Company report, 21 14, 15, 36, 44
45
Company Report, 36, Decision summary, 45
authenticate, 8, 16 44 Department stores, 32
authentication, 10 Company results, 37 Department Stores, 28
average selling price, Company Scorecard, 37 depreciation, 31
31, 55, 56
competition, 24, 44, design, 6, 23, 24, 25,
base cost, 24, 51, 52, 50, 64 30, 49, 59, 65, 68
68, 69, 70
competition scenario, distribution channels,
brand contribution, 56, 24 28, 29, 50
57
Competitive distribution coverage,
Brand Contribution, 58 advertising 23, 39, 41, 43, 50,
brand introduction, 47, estimates, 42 57
54 Competitive sales Distribution panel, 41
brand is introduced, 71 force estimates,
distributor margins, 29
brand is modified, 71 42

Copyright © StratX 2010-04-19 73

download, 10, 11, 15, InstallShield Wizard, 10 Markstrat remote
16, 17, 46 internet, 13, 16, 19 database, 8
Download the Practice inventory, 30, 31, 36, Markstrat server, 13,
file, 15 47, 56 14, 15, 16, 17, 19
Download your team loans, 21 Markstrat team
file, 15 software, 8, 13
long-term marketing
Dumping, 32 strategy, 23 MARKSTRAT world, 23
durable goods, 23 making decisions, 21 Markstrat-Online-
Early adopters, 28 Team-Setup-
margins, 28, 29, 32, 69
VXX.exe, 10
economic variables, 36 market evolution, 57
mass merchandisers,
Errors, 45, 53 Market forecast, 42 28, 29, 32, 48
FAQ section, 7 Market forecast Mass Merchandisers,
Feasibility studies, 69 studies, 27 28
feasibility study, 52, 69 market research MDS, 49, 62, 63, 65, 66
fixed costs, 30, 31 studies, 23, 29, 30,
Minimum base cost, 70
33, 34, 36, 41, 59
Followers, 28 minimum computer
market share, 23, 39,
forecasts, 27, 47 configuration, 10
42, 43, 55
GNP, 23, 36 modification, 21
market shares, 30, 36,
growth-share matrix, 7 37, 41, 55 Modification button,
High earners, 27 47
marketed under
ideal point, 64 different names, Multidimensional
ideal price, 69 71 scaling, 42, 60
Ideal value evolution, marketing department, My Markstrat files, 15
65 23, 33, 34, 67, 68 new products, 23, 24,
Industry marketing mix, 15, 23, 27, 28, 34
benchmarking, 41 30 Newsletter, 25, 31, 36,
Industry Benchmarking marketing mix strategy, 44, 45
study, 37 30 on-line query, 69
industry ID, 17 marketing plan, 54, 55, Open a team file, 15
INDUSTRY-TEAMX.zip, 56, 57, 58 Others, 27
15 MARKSTRAT dollar, 23 overview, 13
inflation, 23, 31, 36 Markstrat ID Card, 9 password, 16, 17
Innovators, 27 Markstrat ID CARD,, 18 Perceptions, 59, 60

Copyright © StratX 2010-04-19 74

perceptual advertising, Registration, 8, 9 Session assistant, 15,
33 remote server, 8, 13, 18
perceptual map, 64, 46 shelve, 51
65, 66 reposition a brand, 49, Singles, 27
perceptual objectives, 65 Sonite, 24, 25, 26, 27,
33, 49, 65 requested base cost, 28, 29, 33, 36, 46,
performance 51, 70 56, 59, 62, 64, 67,
indicators, 36, 37 research & 68
portfolio, 22 development, 34 Sonites, 26, 27, 28, 54,
positioning, 6, 30, 33, Research & 56, 57
58, 59, 62, 71 Development, 34, Specialty stores, 28
price, 24, 26, 27, 28, 37, 39, 45, 51, 52 stock price index, 7, 30,
30, 31, 32, 36, 37, results, 8, 11, 13, 14, 37
42, 48, 55, 57, 58, 15, 33, 36, 37, 44, stock price indices, 36
60, 64, 65, 66, 69 46, 49, 51, 52, 54,
suspended, 51, 70
pricing, 23, 30, 56 56, 57, 58, 60, 62,
69 Targeted segments, 65
product portfolio
return on investment, teammates, 13, 14, 15,
strategy, 30
35, 36, 37 19
Production
sales, 23, 24, 28, 29, The PRACTICE file, 11
department, 23,
30, 31, 71 33, 34, 36, 37, 41, trading company, 30,
42, 43, 45, 47, 50, 47, 71
production plan, 30,
54, 55, 56, 57 transfer cost, 31, 32,
31, 47, 56
sales force, 23, 33, 34, 34, 47, 51, 68, 69
Professionals, 27
41, 42, 43, 50, 57 Undo button, 46, 47
profit center, 30, 67, 69
Sales force units produced, 31
R&D, 13, 15, 23, 24, 25, experiment, 43
30, 34, 39, 41, 44, Vodite, 8, 25, 26, 27,
salespeople, 32, 33, 36, 28, 33, 36, 42, 46,
46, 47, 51, 52, 60,
42, 43, 50 49, 56, 59, 62, 66,
65, 66, 67, 68, 69,
70, 71 segmentation and 67, 68
positioning Vodites, 25, 27, 28, 29,
recommended retail
strategy, 30 54, 56, 57
price, 31, 32, 48
semantic scales, 34, 41, warnings, 45, 53, 56
registered students, 8,
49, 59, 60, 64, 65,
16
66

Copyright © StratX 2010-04-19 75

Copyright © StratX 2010-04-19 76