Group 6 - Final Report PDF

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Final report- backpack...

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Term Project – Final Report Backpack Company

Group 6 Larissa Santos Medeiros - ID 300294368 Lucienne Augusto Alves de Matos - ID 300316557 Marcel Eduardo Staats - ID 300333276 Seohui Choi - ID 300339614

Faculty of Commerce and Business Administration Introductory Marketing MARK 1120 –050 Dr. Rosalie Hilde

March 28th, 2021

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EXECUTIVE SUMMARY Considering the target market choice, which is Outdoor Enthusiasts, its size has 16,000 individuals and a growth rate of 5%. In regards to the financial results, in figure 1 it is possible to see that all indicators reached positive values in the final turn. In addition, final balance and total revenue followed an upward trend during the final turns reaching $56.600,14 and $111.573,60 respectively. Net profit remained stable reaching $ 17.668,60. Practice Marketing Simulation (McGraw Hill,2012)

As figure 2 depicts, return on marketing experienced a drastic change and settled at 23%. Market share and customer satisfaction decreased over time resulting in 20% and almost 40% respectively.

STRATEGY

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The initial strategy focused on achieving the needs of the target market. The product was designed to meet capacity, durability and waterproof characteristics. Initially, the price was set at $99 considering the costs of $45 as a way to maximize profits considering the constraints provided by the feedback from customers. The distribution was done considering the price constraints, distribution costs and profits. Regarding promotion, team 6 focused on messages that are directed to the target market in order to provide information to the maximum number of potential customers. In addition, the message was delivered by platforms which individuals within this segment are keen on. Taking into consideration that KPIs were not stable and following a downward trend, team 6 decided to add Commuters as a new segment to its target market and develop a marketing mix that was able to cope with those new conditions. The product was remodeled considering elements from both consumers. The price was reduced to a price that both segments considered fair. Investments in distribution were made in order to increase sales and promotion was based on the number of potential customers reached and cost. As a result, team 6 reached a profitable situation, where all financial key performance indicators were positive and following an upward trend, and customer satisfaction was at higher levels. Finally, the goals set in the initial strategy were all achieved getting the company into a stable position in the marketplace. TARGET MARKET CHOICE

The reason why we chose our target market and the reason why they were so attractive to us goes hand-in-hand. We decided on making outdoor enthusiasts our target market for a multitude of reasons. Firstly, we had to select a target market that would not be crowded by competitors and could be somewhat of a niche for our team. We suspected that the most mainstream and popular markets

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would be school children and university students, so we strayed away from those. Furthermore, these markets focused on appealing to the aesthetics of the customer by way of university logo, design, etc. whereas, we could focus solely on figuring out ways to improve the two logistical aspects of our backpack (durability & waterproofing). Our target market, the outdoor enthusiasts, have a decent market size which we could capitalize on by securing more market share if there are not many competitors. Additionally, outdoor enthusiasts had the highest average purchase price among all the other markets which meant that projected revenues will be high given a high enough sales level. Moreover, the outdoor enthusiasts had the 2nd highest growth rate which is a good sign for growth.

MARKETING MIX

With respect to the 4 Ps of the Marketing Mix, we initially designed our product to be a premium product that goes above and beyond the customer’s wants and needs. Consequently, we charged a high price – the highest we could without breaking the consumer’s budget level. After seeing the market feedback and financial data, we decided to adjust our strategy to creating a decent backpack that uses cheaper inputs but maintains a decent quality and passing the savings onto the customer. We meticulously adjusted our product to still meet consumer needs and give them a good price within their budget, which was much more efficient and increased our profits. As for pricing, we priced it at $99 (premium quality) initially, but we lowered it to $80, which was a little lower than our competitors in the market because we were showing net losses and a low gross margin. When we lowered to $80, we started becoming profitable and showing net income rather than losses thus, we maintained this price.

For distribution, we looked at the data on which stores have the highest purchase rate from outdoor enthusiasts. These distributors turned out to be the online discount retailer, department store,

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and high-end outdoor shop. We chose these channels to maximize the reach to our target market. Additionally, we also distributed our products to university stores and fashion boutiques to perhaps get secondary sales income from our 2nd target market, urban commuters, who had a decent purchase rate from these stores. There was no cost to direct selling, so we included this channel as well. One of the more complex aspects of this simulation was the promotion method. We tried to position our product with the keyword "peak performance" and continued to put it up for the following turns to maintain consistency and clarity for our target markets - outdoor enthusiasts and urban commuters. For advertising, at first, we chose TV to promote our product, but we figured that using the same cost, we could reach more of our target market with a savvier combination of print, internet, and radio media. This change showed good results as we ended up cutting our advertising costs and even reaching out to more people.

COMPETITIVE ANALYSIS Our target market initially was only outdoor enthusiasts, however along with the game we realized that Commuter was another segment where we had the potential to grow. In this way, we had 2 main competitors, Team 4 and Team 8. In the beginning, we reduce our backpack price according to our competitors, however, because of this decision we end up having negative net profit. So the solution found was to remodel our product and set the price at $80.00, so we could have a positive net profit and still be in line with our competitors. As comparing ourselves with Team 4, we could see that we shared the outdoor enthusiast, we also had the same message as Peak performance, and our distributions were similar as well, both teams had online retailers, direct, department store and High end outdoor. Our features

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were very comparable, both teams had water bottles and waterproofing, however, our price was $15 cheaper than Team 4, which could be the reason we had more market share than team 4. As long as our other competitor, Team 8, we shared the commuters segment, even though this team wasn’t our first direct competition, we share similar features, distribution. Our strategy concerning this competitor was to focus on a different message, mostly because we wanted to focus not only on the commuters segment but also on the outdoor enthusiast. We seek to create a competitive edge by continuously researching our competitors' tactics. We tried to incorporate innovative features in our products, with a better price so the consumers would want to buy our products instead of the competition.

TURN DECISION – MAKING REVIEW Price was set as $99.00, using price skimming strategy to insert the product at a higher price, but still suitable to our target's market budget. However, along the game we made the decision of remodeling our product and reducing its cost to reach a secondary target market. As for distribution decisions, we chose to include more channels than the initially defined in order to reach out commuters as well. The message that seemed to be more clear for our audience were “Tough” and “Peak Performance”. We then removed Tough and replaced for Lightweight, since we had a secondary target that was interested in our product, the Commuters. As promotion, Wilderness Cable Network seem to reach our public most effectively, and although Online News had a smaller reach to our target, we still chose it, since we were selling our product online and the cost was less expensive.We then started varying our promotion to increase the

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awareness of our brand, so we advertised at National Network and Sports Talk Radio. Later on Gym and Sports Locations, Outdoor Adventure Magazine, Top 40, Newspaper. We ended the game choosing to maintain advertising at Top 40 and Social Media, since they were low cost and seemed to be effective. We also invested in some $5,00 discount on most profitable retailers and invested MDF mainly on Online Discount Retailer, Department Store and High End Outdoor. LESSONS LEARNED Promotional Mix: we used a combination of promotional tools—including advertising in diverse media, investing in points of distribution and offered discounts in most profitable retailers (sales promotion). Price Skimming: our first strategy of price, setting a high introductory price that was gradually reduced. Status quo pricing: we also based our price in our main competitor (team 4), with the objective of meeting the competition’s price margin. Multisegment targeting strategy: a strategy used when we realized we had another market interested in our product, the commuters. Based on that we redesign our product, message and price to reach both segments, since we could not create another product item in the game.

The importance of promotional strategy: a combination of strategies to reach our target marketing, that involved advertising, right point of distribution, sales promotion, direct-response communication, and social media. Through the game we realize that a combination of these factors was responsible for building the awareness of our product and gradually increasing our revenue.

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The importance of competitive advantage: always looking at competitor's strategy was something that we tried to do to build a competitive advantage. We tried to include unique features in our products in order to make customers think our product was superior to competition. Great use of brainstorming: It wasn't easy to gather our group, especially with different time zones and the avoidance of personal meetings due to the pandemic. Even with this barrier, we managed to talk briefly every day we had to make a decision, in order to brainstorm ideas on how to improve our strategy and get better results. Awareness of product life cycle (PLC): we had some difficulty in making decisions and maintaining our marketing strategy because at the beginning of the game you start losing a lot of money and enter into a negative net profit margin. But as the game and the learning on marketing progressed, we understood that there is a product life cycle that is inevitable, so take some time for things to happen and you start the growth and maturity peak of your product. Sometimes repositioning might be a way out: when we saw that we were losing market share and another market was also buying our product, we decided to reposition our product, changing the consumers’ perceptions by defining new messages, price and product features. We end up reaching 42% of commuters and 32% outdoors.

REFERENCES Practice Marketing Simulation. (2012) (Online Version) [Video Game simulation]. Dave McCool. McGraw-Hill Education. Retrieved from https://www.mhpractice.com/products/Practice_Marketing...