Putting the Plan Into Action

Last week was spent focusing on creating a marketing plan for Allstar for periods 3-7 in Pharmasim. This week then spent implementing that plan. Kind of.

I ended my posting last week making it clear that flexibility is needed and that going into this process and being willing to stray from the plan would be necessary. While the plan was adhered to relatively well, especially in the early going, making changes did prove to be necessary.

Getting restarted with the simulation, I was expecting continued success with the Allround product. After advancing through a couple more periods, I quickly found that to be much more challenging when we began focusing a great deal of attention on the new product, Allround+. It did not seem like much of our budget was being reallocated to the new product, but it sure made a big difference as the unit sales and profit began to plummet. It was rather dissatisfying to see our product go from being rated as a Star to being in the Dog category. Typically I'm a big fan of canines but not in this instance.

One result that was particularly shocking to me was in regards to pricing. As our products our based on quality and we went into the plan with a price skimming strategy, we always had the intent of being a relatively high priced product. I was surprised to see how little prices increased through the periods, and also how inflation rates were not rising nearly as quickly as before. As a result, our prices became too high and problematic for consumers. This was not something I was anticipating and called for an adjustment in our thinking.

One rather pleasant surprise was the success of Allround+. While it got off to a slow start, more than likely due to our poor initial backing of our new product, Allround+ came together and quickly began earning more and more market share and adding to our contribution after marketing. It was very important in keeping Allstar moving forward while our original Allround was beginning to decline.

What was not as shocking to me to see in hindsight was the failure of Allright. I think I glorified the market attractiveness of both the cough and allergy markets among all households in Pharmasim, especially the allergy market. Both ended up being much tougher to enter and establish than anticipated. This was proven when Allround+ had much poorer results in its initial period. When we found that Allright had a negative impact on contribution after marketing, I was not too shocked and felt right away that we should pull the product and bring more focus back to Allround.

The one mind boggler that I still can't seem to personally figure out, and our team as a whole is struggling with, is in regards to the sales force. No matter what adjustments we make we never seem to curb our problems there. This last period, I took the approach of matching Sales Force personnel as identical as possible to the respective share of each channel based on percentages. This effort also failed, just as the rest of our attempts have. After each attempt at reallocating as been unsuccessful, I'm left with the temporary conclusion that we just need to add sales force into every channel until the prompts disappear. Of course there's no money in the budget for this solution to be practical.

Planning was a very long, thought provoking process. After such an effort to plan for periods 3-7, it is rather annoying to see so much changing needing to be done. This just goes to show the importance of gathering information beforehand, analyzing it well, and determining to the best of your ability the potential outcomes. Clearly, the more accurate your predictions are, the more effective your plan will be, and the less you will need to stray from that plan.

After much thought and research I've reached my final conclusion: I plan on planning better next time.

Developing a Marketing Plan

This past week has been spent focusing on developing our Pharmasim marketing plans in our teams. I'm happy to say that this portion of the course went much more smoothly than the individual situational analysis. It is much nicer to have teammates to discuss things with and bounce ideas off. While often times I prefer working individually so as to not run into barriers with my thoughts or ideas, I much prefer the team format for the marketing plan as it was helpful to share ideas and rationalize them to others to ensure the best strategies were being taken. And speaking of strategies, let's get into that right now.

My main focus on the strategy going forward was to develop the Allstar Brands into an industry leader. It was clear that they dominated the cold market but the struggles were quite obvious in the cough and allergy markets. Thus, I was on board with developing new products to enter these markets from the get-go, which my team chose to follow through with. We will be introducing two new products. The first, Allround+, will be a cough remedy targeted to all households in the Pharmasim world. The second, Allright, will be an allergy remedy again targeted to all households. I thought that these were the two best markets to pursue in moving Allstar forward. The cough and allergy segments are not very large, especially compared to the cold market, but still presented an opportunity to be profitable. The competition within these segments was rather limited with only a few products available in each. It would be easy for us to introduce a brand that can compete right away.

There were additional market segments that were available to us that we collectively chose not to pursue. A product was recently introduced by a competitor specifically targeting children in the cold segment. Allstar had the opportunity to introduced a competing product. In my opinion, while this may have proved to be a profitable product itself, I believe it would have had a negative impact on the sales of Allround due to cannibalization. The risk of cutting into current sales with the two products we chose to introduce appear to be much less than with introducing a children's product. My thought was always that there was no need to interfere with the current product that is a Star in the market and for the brand.

Another reason that the choices were easy to make is because they were in demand by the consumers within Pharmasim. There was a call for remedies that were symptom specific and not multiple in nature. Consumers only wanted to take in a remedy what they were intending to treat and nothing extra. These two products will be exactly what consumers are looking for.

In introducing these products, our team chose to implement a price skimming strategy. We have seen that Allround is perceived as a high quality product and is perceived as a highly priced product as well. Consumers are willing to pay for a good quality product. My thoughts were that it is best to continue to uphold a standard of high quality throughout the Allstar brand and not just in one product specifically. Therefore, setting a higher price to reflect the high quality of the product made the most sense.

One final note to discuss is the need for flexibility moving forward. Obviously, this plan was created for a reason. It was thought out and anticipated to be the best strategy for Allstar as the periods progress. Therefore, it will be stuck to early and often. With that said, it is important to continue to analyze the environment and see if things change, if our decisions are working, or if something is taking a turn for the worse. If the situation presents an opportunity to do something that strays from the original plan, an appropriate decision needs to be made that best suits the brand in the future. Planning is very important to do and is best when it can be adhered to but it is by no means concrete and must be adjustable at any point in time.

A Welcomed Relief

What a week it has been. My family could not have picked a worse time to have new flooring installed downstairs. Or maybe it was my boss having me work 28 out of the 31 days in August that is doing me in. Regardless, this week's shortened blog post was welcomed and is certainly invited to stay a while. On to the top metrics from my point of view.

Units Sold

This metric seems appropriate to me as it dictates market demand. Not only does it dictate the demand for Allround's product in particular but for the market as a whole. That whole concept of supply and demand makes me think that knowing the demand side of things is awfully helpful in determining what to supply. This would be no different in Pharmasim.

Market Share

Market share is important to help you determine where you are in relation to the overall industry or a particular market segment, as well as where you stand among your competitors. It helps to dictate how well you're doing in particular areas, which segments might need work, and if there is a competitor who is clearly dominating that you might want to pay more attention to or direct your advertising comparison towards.

Brand Awareness

There have been many times in my personal life where I have found a fantastic product that I would have loved to use a long time ago had I known about it. It is important that people know about the brand. And it is even more important that the brand knows whether or not the people know about the brand. Because if the people don't know and the brand doesn't know that the people don't know, who's ever going to know? You know?

Perceived Effectiveness vs. Perceived Price (Tradeoffs)

I overlooked this throughout most of my time in the practice rounds but I have found it to be quite telling. A product can only be worth the value given to it by its users. In the case of a medicinal product, consumers want the damn thing to make them better. So the product is only worth how effective it is. It is important for a brand to be aware of how the price of their product is being perceived versus how effective it is. They should be aware of undervaluing or overvaluing their products and keeping one in line with the other.

Net Marketing Contribution (Contribution after marketing)

This number is perhaps the most telling in that it lays out for you how effective your marketing approach is. It factors into it what a brand did for marketing in a period and what results they have received. It doesn't get much more useful than that.

Good Thing It's Only a Simulation

No more messing around. Play time is over. After having used Pharmasim in a practice mode on an individual basis for many weeks, the team phase has finally begun. Finally, its the real deal, of the fake world that is. It is nice to be able to throw some ideas on to other people and get feedback other than just second guessing yourself. It's also nice to see some new elements tied in with the simulation, rather than retrying different decisions in the same circumstances to find the best outcomes. Included in those new elements were a couple of decisions that were to be made by the teams.

Our first decision to be made was in regards to our presence on the internet and in social media. We were to choose between developing a website and an interactive blog for customers to visit or we could choose to create a Facebook and Twitter account for customers to interact with. First things first, how does Allround not have a website to begin with? I'm not totally certain on the time period this simulation is taking place in but if Facebook and Twitter are around we're at least into the new millennium. Every company should have a website to visit. With that said, our team chose the social media route. While I'm shocked that the company didn't already have a website, it seems to make more sense to use the more popular and interactive feature than to simply create a website. While the blog may have lead to some interaction with customers, I strongly felt and my partners seemed to agree that Facebook and Twitter would be much more highly visited and effective than a blog. Judging by own social media experience, I definitely think blogs are far less frequently visited.

The second decision our group was faced with was much more of a dilemma than simply choosing how to better reach out to our customers. This decision involved how to handle an expiring batch of product. Just like not having a website previously, I cannot fathom how such a large quantity of product can be so close to expiration, especially considering the explicit terms that the retailers have in insisting that they do not receive product that is within one year of expiration. Nonetheless, a decision had to be made as to whether or not we should send the product out and hope that it was not sent back to us, get rid of the product altogether at a cost of $100,000 or to sell the product to another party with less strict expiration rules at less than cost, resulting in a $50,000 loss. In my eyes it was a no-brainer. There was no sense in sending out the product to our regular retailers only to have it sent back. This would not only be a hassle but could have a negative effect on relations. Selling at less than cost to a less strict retailer was never an option. The 1 year rule was obviously created with the purpose of not putting expiring products on the shelf. Why would we want to risk having a product that won't be effective on the shelf, hurting our brand image in the eyes of the consumer who did not get the effects they would have by purchasing a batch that was not expired? Additionally, I personally wouldn't trust a company that looks to purchase products on there way out at a cheaper rate so they can profit more. Had I looked past all of that in making my decision and decided the company needed to save money, it still would not have been worth it for a $50,000 savings in the grand scheme of things. Getting rid of the product and taking the hit on the cost was the only viable option that I saw in this scenario.

Based on these two decisions that had to be made, I'm glad that this is only a simulation and not a real company that is faced with these dilemmas. I would be nervous to buy from, let alone be employed by, a company that is so behind the times and apparently careless with their inventory. Thankfully, it is only a simulation. Looking ahead, I wonder what else is in store for our team as we move through the rest of the periods in the simulation. Clearly, it will not be following the same story as the practice mode was telling and I am excited to see how well our team does at handling the new surprises thrown our way.

The Consumer Experience

Having a great deal of experience in various customer service industries, I am pretty well versed in handling customers. I have seen a whole lot of the good, the bad, and the extremely stupid when it comes to customers. What I had yet to see until this week was the real behind the scenes to these customers. This weeks' material gave an insight into the minds of customers, how to analyze them, and ultimately benefit your business. I now have a much better understanding but am still left with some thoughts on the subject, especially on some things that were not covered within the discussion.

Customer Profitability

While reading from the Lehmann and Winer text this week, I got to thinking a lot about how profitable some customers are. The goal of business is to maintain repeat customers. But I have discovered in my time that customer retention does not necessarily lead to profits in all cases. Customers can be unprofitable based on how they shop. 

In analyzing my current work, I can see many examples of this. We offer a special that changes daily to entice customers to try new things and reward repeat customers who stick to their usual by giving them an opportunity for a price break every now and then. What I have noticed is that there are customers who only purchase the special on a daily basis. Others only come in when a particular item that they enjoy is on special. In both instances, these customers never make a full priced purchase, leading to very minimal profits, if any, as some of the specials wind up distributing product at cost. One particular customer would only come in when the milkshakes were on special. This special was designed to get customers in the habit of coming in during a hot afternoon for a refreshing shake but was priced to do little more than cover the cost of making it. Since the time we have stopped running this special, this customer has never been seen in our store again. These type of "deal prone customers" as they are labeled in the text are not exactly what businesses have in mind when seeking customer retention.

However, this is not to say that all customers who come in for a deal do not have the potential to be profitable. In fact, great deals or even freebies have proven to be very beneficial to many businesses in getting customers in the door. One initiative we have taken is to offer a free ice cream cake to all new residents in town. As part of their welcome package, they receive a voucher in the mail to redeem their free cake within 30 days. The customers who come in for this freebie are being introduced to our product and great service in the hopes that they will be extremely satisfied with both and come back for more on a regular basis. These customers who entered because of a deal have a much greater potential to wind up being more profitable for our business than those mentioned earlier.

The Importance of After-Sales Service

While most companies place a lot of importance on great service before and during a sale, it is equally important that the service that is provided to a consumer post-sale is just as good. We see the importance of after-sales service at my business on a regular basis, but more so from the customer's perspective. At our shop, every piece of machinery we have is crucial in the creation and preservation of our products as well as all of our ingredients. These various refrigerators, freezers, air conditioning and other machinery are all very important and need to be functioning appropriately for us to be able to operate. In the event that a problem arises (which occurs far too often for our liking) we count on the after-service sales of different companies to fix the problem and get us back to full functioning capacity. This is typically more important to us and will be of more value when going into an initial purchase than almost any other factor involved in our decision making process.

This demand for quality service after sales is not just relevant in machinery and other things where regular maintenance is a given. This is also important for us from the warehouse where we purchase the majority of our ingredients and packaging products. In the event that a product is out of stock, discontinued, or simply not offered by this particular warehouse, we have a tremendous sales manager that goes out and finds a company that can provide us with what we need, regardless of the fact that he will not be making a profit from this transaction and it will not directly benefit his own company. This type of service goes a long way and is never overlooked by us, making us a very happy, and more importantly for our supplier, a repeat customer.

The Transaction Utility

One topic that I found quite compelling in the reading this week was the concept of the transaction utility. The idea that businesses are informing consumers of what they have gotten or what they have preserved, rather than what they have lost is one that is smart and one that I have noticed quite a bit.

The first place I ever noticed the transaction utility being present was when shopping at Kohl's. Whenever I would check out of a store, the cashier always circled or highlighted and verbally informed me of the amount of money I saved on this trip through sales, clearances, coupons, or any other form of discount. Very little attention was paid to the price I actually paid outside of the exchange of payment itself. After noticing this on every trip I would take to Kohl's, I began noticing this in other places, particularly grocery stores. This trend was catching on and there were always savings to be highlighted.

And after a while, I got to thinking. Why are there always savings being highlighted? I began looking around at Kohl's and realized that there was not a single item in the store that wasn't being presented at a discounted price in some way. Shopping at a grocery store, provided that you have store card, nothing was ever purchased at full price. Additionally, I began to realize that at Kohl's in particular, I never shopped there without an additional 15-30% coupon in my hand or some other enticing offer. In fact, I had become one of those aforementioned deal prone customers that my business fears so much. Yet, Kohl's was still making a profit off of me, and every other customer who was in the store and shopping at a discount. Because unlike the deals at my business, these deals are set to entice but still be quite profitable.

I realize now that even the most basic sale that they offer, typically buy one get one 1/2 off, is no sale at all. This is simply the normal price that one should pay for them to maximize their profits. So what is in an MSRP? Are all of these numbers being inflated and overvalued just so that the customer thinks they are getting a great deal, when in reality they are paying what the product or service should be valued at in the first place? This transaction utility manipulates customers into believing that these extraordinary sales are a great savings and quite beneficial and that we are getting a steal at these prices. And stores are extremely effective in doing this. If you price the same exact product in two different stores at $19.99 but one store comes equipped with a 50% sign while the other makes no mentioned of a sale, what is going to look more enticing to a customer?

The transaction utility is a sneaky, devilish tool being used by companies to provoke customers into buying. It is highly effective, very smart, and is making me want to end this blog right now and go find a sale. 

The Benefit Ladder: Tangible and Emotional Benefits

As discussed this week in class, products and services offer both tangible benefits that actually serve a purpose to the consumer, as well as emotional benefits that satisfy the consumer and help them respond to particular products and services. Looking at the Pharmasim simulation, both tangible and emotional benefits can be found.

The Allround product is created to fight cold, cough and allergy. The purpose of the product is clear, meaning that the tangible benefits are clear. The consumer who uses the product will receive a treatment to eliminate the symptoms they are feeling from their body, leading to a healthier consumer. With the tangible benefits come emotional benefits. People will feel better about feeling better, and as a result will feel good about the product. Peace of mind is a benefit that this product offers as consumers can be comforted in knowing that should any of the applicable symptoms arise, they have a trusty solution to their problem and will be able to go on about their lives normally. The benefits of Allround are very clear to be both tangible and emotional.

In the classroom discussion, I got the sense that people were more conscious of tangible benefits and felt that they were more important than emotional benefits of a product. In my particular industry, I do not think that's the case. Take our standard sundae or ice cream cone as an example. The product is clear. But what tangible benefit is it providing? In reality, the items we offer are more of a luxury item and not at all considered a necessity. I suppose you could argue that the tangible benefit is to satisfy hunger. In the end, I'm not buying that. We are considered a "frozen dessert retailer" officially, dessert being the key word meaning your hunger was satisfied before coming to our establishment. If anything, I would say that our tangible benefit is more of a hindrance on some consumers as we directly conflict with the weight loss, summer beach bodies, and lower cholesterol that so many desire. So if there is not a clear tangible benefit, it has to be the emotional benefits of our products that keep customers coming back for more. Indeed I find that to be true. People become attached to a particular product or a certain flavor that they have always loved. Some people even become attached to the shop itself. We have many people that have moved away to different cities, states, and even countries, yet every time they come back home they always come back to the shop they grew up going to. There is clearly an emotional benefit for our customers that supersedes the tangible benefits that the majority of our products offer. While this may not be the case with every company, it is certainly true for ours. 

Cognitive Dissonance 

I found the discussion on cognitive dissonance to be quite interesting. There were numerous different outlooks on this subject that all brought up interesting points. I certainly understand how this post purchase dissonance takes place and have seen examples of it in myself and from others. What I would most like to discuss is two of the questions posed in class.

The first question centers on why companies don't do more to prevent or alleviate cognitive dissonance. The way I understand it, companies are not trying to have a buyer experience cognitive dissonance after they purchase their good or service. They would much rather prefer a customer be completely satisfied and not second guess their decision at all. That is why companies make information easily accessible to consumers, have a sales and support staff available for their use, and try to provide great customer service after purchase. Most companies would find it hard to do any more to prevent cognitive dissonance. It is other companies that are the ones causing the cognitive dissonance to occur because they are also doing their job in spreading information about their products or services. Now that a consumer has made a purchase and they begin to see promotion of a similar product, it is only human nature to second guess yourself and think what would have been had you chosen the other option previously. This is not reflective on the efforts of the original company you bought from in anyway but is rather reflective of a consumer being unaware of all choices available to them. This leads into the second question that I wanted to focus on: whether or not an educated buyer makes a difference. Absolutely! An educated buyer is the best way to prevent cognitive dissonance from occurring. It is up to the consumer to research all available options to them, weigh the pros and cons, and determine what product or service will benefit them the most and create the most value for them. A consumer who does their research and narrows down their decision based on all available options will likely not experience cognitive dissonance. The only way this can occur is if the product does not live up to expectations, a change in what benefit the customer needs occurs, or the consumer simply makes a bad decision. 

I recently bought a new car (Nissan Altima) and made sure that during this process I researched all options that had any interest to me. I did my research based on the money I was willing to spend and sifted through all my options. I determined the best fit for me based on all of the benefits I valued most and made my choice. As a result, I have not experienced cognitive dissonance because I was a well informed and educated buyer. I took into account all the information that was given to me by various companies, made my well-educated decision, and was extremely content in making it. 

If only I had bought that Aston Martin...