Understanding The Markstrat Interface Marketing Essay
Advertising for these two products was one the lowest among competitors thus leading to a decrease in the market share. In the stock market, our company was second from lowest. In period 2, we could see that the average brand purchase intentions were one of the highest for both the brands SUSI and SULI. Both the brands had a decent share in the market. But in period 3, the market share of SUSI decreased. In this period, the advertising budget for both the brands was increased. We did not focus on the 'vodite' brand in this period (i.e. period 1-3) at all.
Period 4-7: In the period 4, SUSI was withdrawn because of its poor performance. SULI gained market share from 6.2% to 13.6%. A major chunk of the budget was dedicated on SULI's advertising. In period 4, a lot of money was also spent on R&D and two new products SUFI and SUNY were introduced in period 5. Now, the market share of SULI was divided between 'pros' (22.4%), 'high earners' (18.7%) and 'buffs' (18%). SUFI was targeted towards 'others' and SUNY towards 'singles'. As the market forecast showed a negative growth rate in the market of 'buffs', the advertising budget for the advertising of SUSI was concentrated towards 'high earners' and 'pros'. Advertising of SUFI had more spends in the 'others' segment and SUNY had more budget for the 'singles' segment. Thus, SUNY concentrated on departmental stores as well as specialty stores and SULI concentrated more on specialty stores. Thus, there was an increase in the stock market from 1329 to 1603. In period 6, R&D for a product in the 'vodite' market started. Period 6 also saw the decrease of market share in the 'singles' market from 26.8% in period 5 to 14.9% in period 6. Owing to such dismal performance of the product, it was discontinued in period 7. We were late entrants in the 'vodite' market too and in its launch year, failed to capture any significant market share. R&D for another 'sonite' product also started in this period.
Analysis: middle phase
Launch of new brands SUFI and SUNY met with mixed reaction; SUFI captured market share but SUNY did not, thus proving that marketing conditions can be very unpredictable.
SUSI was cannibalizing into SULI's share. Removal of SUSI allowed increased attention to SULI; it targeted the Professionals leading to increased market share in this segment.
SUNY withdrawn in period 7 due to poor performance; singles did not perceive it as meeting their needs; SUSN launched in period 8 as a modification targeted at singles.
VUMI had a slow start in the Vodite market but with the right targeting, i.e. at 'followers', helped it gain market share and become the market leader.
Period 8-11: Since it was a late entrant in the 'vodite' market, VUMI was targeted at 'followers' and maximum advertising spends were spent at this segment. High amount of advertising proved to be very beneficial for VUMI. The 'follower' had the second highest brand purchase intentions in case of 'VUMI'. It captured the third highest market share in period 8. SULI was also discontinued because it was seen that this product did not aim at one particular segment but was also cannibalizing into the sales of other products in different segments. Another 'sonite' product SUSN was launched in this period which aimed at 'singles'. In this period, SUFI had the highest market share (54.2%) among 'others'. In this period, a lot was spent on advertising with SUFI focusing on 'others' and SUSN focusing on 'singles'. In period 9, SUSN had captured the second highest market share in the 'singles' market. Period 10 saw both the products in the 'sonite' market having a combined second largest market share and VUMI having the largest market share in the 'vodite' market. By the end of period 11, VUMI had captured more than 50% of the market share in the 'vodite' market. The stock market price of company U had increased from 1901 in period 10 to 3514 in period 11 placing it second in the industry.
Analysis: end phase
VUMI showed strong growth in market share in this period; 59.4% in period 11 making it the market leader, this was despite VUMI not being the product most closely matching the perceptions of the follower segment
SUFI and SUNI showed an increase in market share in this period; both products matched consumer perceptions closely reflecting the effectiveness of the advertising spend and increased sales force.
Learning from the simulation:
Having a strategy from the outset is a huge advantage. Sometimes strategy becomes even more important than the marketing mix.
Advertising spends need to be backed by spends on advertising research to obtain best ROI. This can be best applied with intensive use of the brand and perceptual maps; this provided an in-depth understanding of the value of targeted advertising
Pricing decisions should primarily be made using competitor benchmarking
Product design has to match the expectations of the target segment; these expectations change over time. New R&D need not be commissioned every time perceptions change; advertising can still generate sales
Production needs to be optimized to meet demand forecasts even if it means over producing. Overproducing is better than not being able to meet the demands.
Market research studies have immense value. They provide a competitive benchmarking for pricing decisions, aid in development of new products, help in understanding consumer perceptions and determining advertising objectives accordingly.
Allocation of sales force to appropriate channels and brands aids in increased sales.
A division of roles is essential for effective decision-making as it reduces time lag in making decisions
A single company consists of many divisions which form the basic skeleton and muscular system of an organisation. Sales Force, in a nutshell, is one such division which is responsible for selling the product or service that the company offers. Managing and evaluating the sales force play a very important part in deciding whether and how to grown the sales team. Keeping in the mind the future growth of the company we should plan a proper sales distribution stratergy, we need to check the past performances and the current status based on that we change or keep constant the number of people in the sales force also what kind of training they require to cope up with the ever dynamic market or perhaps a revamped compensation package. Adding salespeople can result in sustainable increase in sales. It might buy you some time to focus your energy some other task. But likewise it might ruin the sales, lower profits, hurt the customer-company relationship and negative impact on the brand image. The disparity between these two is the difference between hiring the right salespeople and the wrong ones. Sales people cannot be only responsible for building the bottom line but in fact are also the front troops, the ones who are in contact with the consumer on a daily basis. In markstrat there are no wrong salespeople it's only that they are at wrong positions. In markstrat we have three paths which are-
Specialty stores-These stores are the ones which are not very big usually small and are part of unorganized chains. These kinds of stores are very near to their customer's residence or work. These also can provide technical support and high level of assistance. They distribute a very limited range of product category but they offer a broad product line for each category.
Department stores- These stores are a part of organized chain structure and thus have the power to haggle with the manufactures. The characteristic attribute of departmental stores is that they offer a wide range of product assortment. Though they do not offer the same technical know-how as a specialty store but they have a very extensive customer relation making techniques.
Mass Merchandisers-In order to pursue minimum overheads, which is their soul strategy, these stores work on high volume-low price basis i.e. sell in large numbers but at a low price which in turn helps the sales. These stores offer a wide range of product categories but not much option in the depth of each product line. They often offer the cheaper low quality product. They have a lower technical expertise and service as compared to both the above channels.
SUSI: This is the Sonite product which our company launched in the first period. Scrutinizing the market share we comprehended that the maximum sales happening for the product is done by 'others'. Knowing that 'others' are looking for cheap, low-quality products with average convenience, we hence increased the sales force in the department stores and the mass merchandisers in the first period. In the second period we still increased the sales force but due to a constantly low market share we stopped the product in the fourth period.
SULI: this was also launched in the first period. Suli had a strong customer base in the 'buffs' and 'pro' category. And knowing that 'buffs' and 'pros' demand high performance products but are quiet price sensitive we increased the sales force in the specialty store. In the fourth period we concentrated on only specialty stored and departmental stores in term of allocation of sales force and we saw an increased consumer base in the 'hiearners' category. In the fifth period we entered the market with two new products without increase in sales force for Suli and suffered a loss in the market share which continued till the seventh period and the product was discontinued thereafter.
SUFI: We launched this product in the fifth period. As soon as it was launched we observed a high response from the 'others' category. We had a high market share in the same. So as to capitalize on the situation we increased the work force in mass merchandisers and department stores, and we concentrated on the same strategy till the last period and kept on increasing the sales force for the mass merchandise channel. This was a profitable product for us and gave us good return on investment. It was responsible for the major chunk of market share for the company.
SUNY: This was launches at the same time when we launched Sufi. But was a completely different product by the nature of it. 'Singles' were the major contributors in the market share of the product and as they demand nominal level of performance level and convenience, they are also like buffs-price sensitive. Thus keeping that in mind we increased the sales force at specialty stores and departmental stores. It did not go as expected by us the market share dropped in the sixth period, even after we increased the sales force and thus unwilling to take risk we eliminated the product from the portfolio.
SUSN: we launched the product in the later part of the game i.e. the eighth period. Again like SUNY, SUSN got a good response from the 'singles' category. But due to the fact that we had only 2 products in the market we wanted to invest a lot in SUSN in terms of sales force. So we deployed people at all the three channels. Till the ninth month mass merchandise had a lower sales force but in the next period the sales force was increased and we got a very good response from the 'singles' category and this continued to increase our market share till the eleventh period.
As our budget did allow us we hired a lot of sales force during the end period and had a jump in our market share.
VUMI: We entered the VODITE market in the seventh period and the first product we launched was VUMI. Looking at the market share it was observed that we got a good response from the 'followers' category. To motivate that we employed more sales force at departmental stores and mass merchandising and less of the sales force at specialty stores. In the eighth season we made an investment and increased the number of sales force in the specialty stores domain. Though the market share for the followers increased but for the others it rose negligibly. It was in the ninth round that we understood that investment in mass merchandising will give us good return on investment, so we increased the sales force at mass merchandising domain but this time we did not make any investment rather we removed some of the sales force from specialty stores and added to mass merchandising. In the tenth period we again invested in the sales force and divide it across the three domains because we wanted to play safe. As expected the market share of followers increased with a negligible increase in the other two categories. In the last period we again invested and distributed it among the three we achieved 59% market share in the 'followers' category. To our surprise we saw a decrease in the market share of innovators even after incorporating more sales force in that particular category. At the end of it all due to our investments in sales force and other crucial decisions our market share was 56.3% which was the highest in the market and thus below is the graph which shows that increase in the market share.
Thus we can see above that even after average performance till the tenth period we had a sharp rise in the eleventh period.
Application of these strategies on a company
For applying the strategies I have learnt from markstrat I will choose the company HERO HONDA. It is the numero uno company of the world in term of units manufactured its India's most two wheeler selling company. The joint venture between India's Hero group and Honda Motor Company, Japan has created one of the most successful joint ventures in the world. Hero Honda has a lot of brands in its portfolio. I will consider the brands Karizma and Splendor.
SEGMENTATION AND POSITIONING
Let us see the 150 cc segment first; Karizma was the very first 'superbike' in India. Super biking is a niche market and thus no other bike similar to Karizma, in terms of looks and mileage, was manufactured. The bike caters to those who have a passion for head turning, speed, horse power, styling bike. Safety was ensured with the incorporation of disc-breaks and mag wheels in the bike. Keeping side the facts that Karizma being is a superbike and the looks are head turning the concern is the mileage if compared to other bikes available in the market. The price of the new launched Karizma-ZMR is Rs81,000 thus the positioning of the bike is done the way that it targets that SEC A and B class or the people who are ready to take risk for achieving their passion i.e. people taking loan for purchasing the bike. Upper middle class onwards is the TG for this bike. The monogram of Karizma itself is eye catchy and very attractive due to its color. Now talking of the 100 cc segment that is Splendor .It is a high mileage bike which is low on looks if compared to Karizma. It's been a long runner in the market. The price for the bike is even less than half of what Karizma cost, and higher fuel efficiency. This bike is targeted at the lower and the upper middle class or the 'aam junta'.
In order for the brand to excel, the marketing mix of each product has to be taken into account. All the products need to be different from each other and the pricing, the advertising budget, distribution channels etc. decided accordingly. It is recommended that proper Market Research must be done before making any major decision or allocating the budget.
Pricing- Rs 81,000 is the price of the latest Karizma .If we see the competitor products we shall come to know that this pricing is on a higher side in the usual Indian market scenario. It is neither fuel efficient gives a mileage of 30kmpl (company acclaimed).the spare parts of the bike are costlier due to the finer paints used. The earlier model was also priced at 80,000 which is only 1000 less than the latest model, with mag wheels and disc brakes.
Hero Honda spends a lot on promotions and advertising and so is true for Karizma. Hrithik Roshan is the brand ambassador of Karizma not forgetting that he is the highest paid actor in bollywood. The television ads for Karizma are also very trendy and high on budget with jet plane flying and smoke and dirt signifying the toughness in the bike. Though he is not physically involved in the sales but it helps a lot.
Sales Force and Distribution.
Dealers play a major role in catering customers, during growth phase and during sustenance. Hero Honda has a network of more than 3400 authorized dealers. It has helped the company in terms of its promise of reliability in every part of the country The control of this highly efficient and motivated network goes an extensive way to build goodwill for Hero Honda brand among the myriad clients above and beyond creating availability and after sales services. They also have specialized stores and showrooms.
Pricing-it is priced at around 40,000 to 45,000 rupees. This is in tandem with the average price of bikes in the Indian market. This bike offers high mileage and at such a price which can be afforded by a common man thus making its target segment broader than Karizma. No consumer will buy splendor only for status but also for better fuel efficiency. Thus, making the purchase of the bike in favor of the middle class people of India.
The news and TV ads of splendor specifically target the common man. There is no celebrity endorser its only a common man riding the bike. The company wants to tell that this bike is about the common man. They want to make them realize that this is something which is made for you and you totally can purchase it. 'It is a bike for the masses' is the message that the company wants to send across.
Sales Force and Distribution
Hero Honda has a good rural reach. It has a huge number of small dealers present in the interior parts of the company and the spare parts of the bike are also available at small repair shops. Due to the planned distribution system of Hero Honda the company manages to achieve delivery on time policy.
Hero Honda has maintained excitement in the 100 cc segment because of launching new bike modifications and re launching it. It is done in order to match with the ever increasing consumer needs. The company wants to ensure that the latest technology is incorporated in the bike. For that the company must do regular R&D. Now we will look at the portfolios of both splendor and Karizma-
The splendor brand consists of though not a wide assortment but a decent number of line extensions. The portfolio includes-
1) Splendor +
2) Splendor NXG
3) Super Splendor
All the above products are high on mileage and almost the same features but still they have some differentiating factors which cater to the needs of a wide range of consumers. Features like electric start improved shock resistance etc were incorporated later on in the newer models that is. This is how Hero Honda copes up with ever dynamic market.
Karizma consists of not many brand extensions just the two i.e.-
Both the bikes are highly priced keeping in mind the Indian bike price context. Karizma ZMR has few added features and is costlier by Rs 1000.
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