Team 5 MARK 1120-002 Final Project Report

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MARK 1120-002 Final Project Report Team 5 LEE YI HSUAN - 300378776 JUAN CARLOS SANDOVAL MONTIEL - 300386861 MANZEEL POUDEL - 300384722 YASH JHUNJHUNWALA - 300383816 McGraw Hill Practice Marketing Simulator November 27th, 2023 1

MARK 1120-002 Final Project Report 1. Overall Outcome 2. Strategy 3. Target Market 4. Marketing Mix 5. Competitive Analysis 6. Turn Decision-Making Review 7. Improvement 8. Application of Marketing Knowledge Conclusion Appendix 2

1. Overall Outcome Throughout McGraw Hill’s “Practice Marketing” Marketing Simulator, our team ( Team 5 ) was tasked with making strategic decisions to maximize our brand’s performance in a competitive market. With a focus on achieving strong financial performance, capturing market share, return on marketing, and enhancing customer satisfaction, we developed and executed a comprehensive marketing strategy. In this report, we will delve into our results, analyzing our performance across all key metrics and identifying opportunities for improvement. Based on Figure 1 , our financial performance shows that we have achieved a cumulative Net Profit of $3,248.55 and a Total Revenue of $53,612.55. These figures demonstrate the strength of our strategic approach and have significantly contributed to an overall Account Balance of $13,248.55, indicating a solid financial standing. Figure 1. Financial Performance Figure 2 shows that our promotional campaign was efficient, as reflected by the cumulative Return On Marketing of 31%. However, there is still room for improvement in meeting customer expectations since the cumulative Customer Satisfaction Score was 30%. Although our cumulative Market Share of 14% showcases a competitive market presence, we believe that had our strategy been different, we could have improved our presence. 3

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Figure 2. Market Share, ROM, and CSS Performance 2. Strategy Managers need a strategy to navigate the competitive landscape. Our initial Strategic Plan served as a guide for us as marketing decision-makers. Here, we'll discuss our approach during the game's turns, the reasoning behind our strategy changes, and the outcomes. Initial Strategy The changes to the Strategic Plan were felt right away, initially, our strategy was to sell our backpacks at $60 a piece, however, we realized that this was a very risky move to make, so we lowered the price to $40 per backpack in the first quarter. We will delve deeper into our pricing strategy in Section 4, as well as the rest of the 4 P’s. As stated in our Strategic Plan, our target market was University Students. To differentiate our product from others, we designed it to meet our client’s preferences for eco-friendliness and capacity of the backpack. Reaching our target audience was of the utmost importance to us, which is why we developed a promotional strategy that specifically targeted the channels that our audience was typically exposed to. We chose cheaper channels to avoid overspending, rather than costly ones. 4

We initially focused on distributing our product through the most popular channels among university students. As a result, we decided to distribute our backpacks through University Stores and Department Stores. Strategy Evolution and Key Shifts As the game progressed, our promotional strategy shifted and we began to incorporate additional channels. In addition to an increased number of channels, we also began to increase the frequency of our advertisements on selected channels. We closed more distribution deals over time. However, as we adjusted our prices, our backpack's eligibility for certain distribution channels changed as well. On average, we sold our backpacks through three distribution channels in each quarter. On average, our backpacks were sold at $35 apiece. The biggest price changes were made after looking at initial feedback from University Students, and a major change in our selected target audience. During the third quarter, we made an important decision to change our target audience to school children. We noticed that this group was showing a growing interest in our products and brand. After studying the feedback we received from school children on the product and size aspects, we were pleasantly surprised to find that they were very satisfied with our offerings. Their comments such as "This is exactly the kind of pack I need" and "It's the perfect size" helped us realize that we had found a winning segment for our business, and we had to change our entire strategy accordingly. In Sections 4 and 6, we will delve into the specific changes we made to our strategy. However, the most significant modifications we made to our marketing mix were focused on the backpack itself due to the change in target audience. 3. Target Market Initially, we focused on University Students, as we believed they were the perfect target audience for our product. During the first two quarters, we learned to customize its features to meet the preferences of this specific market. However, we encountered difficulties while trying to optimize our promotion and advertising strategies to attain maximum efficiency. When we shifted our focus to School Children, we diligently adapted the materials and features of our backpack to cater to their preferences, aiming to increase sales through diverse channels. Transitioning from university students to school children as our target market was a difficult decision. Though we were seeing promising sales among University Students, we noticed a rise in sales for School Children, as well as very positive feedback regarding our backpack and its features. This presented us with a dilemma: should we cater to both groups simultaneously? 5

After careful consideration, we came to the realization that managing both segments was not feasible. We decided to shift our focus entirely to the School Children's market and slightly reduce our advertising costs to improve profitability. School Children showed a preference for backpacks with rounded tops and basic straps. Keeping this in mind, we added a water bottle feature to the backpacks, which we believed would be an appealing addition without making the design too complicated. To ensure affordability, we decided against adding any other features. After conducting research, we found that synthetic material and red colour were particularly popular among school children, so we chose these for our backpacks. These changes proved to be effective and significantly boosted our sales. 4. Marketing Mix Product University Students as our Target Market: Our backpack’s design included the rounded top model, basic straps, and a University logo to provide our clients with a sense of community among their peers. We used European hemp in our products to cater to University Student’s preference for eco-friendly materials. School Children as our Target Market: We kept the rounded top model and basic straps, but we switched the colour to red and added a water bottle pocket to cater to the preferences and practical needs of a younger demographic. To enhance affordability, we replaced the European hemp material with synthetic materials to make our backpacks more affordable for our new target audience. Promotion Our advertising campaign was primarily focused on the Internet, but we occasionally used printed media and television as well. Among all the options, we spent the most on Internet sites, with the Gaming Site being the most used platform in our campaign because University Students and School Children frequented this site often. We chose the Internet as our main media channel not only because it was more cost- effective than television but also because it had slightly more reach than printed media for School Children, while its reach for University Students was very low. 6

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Price Initially, we priced our backpack at $40, which was the highest price point at which we sold it. However, after looking at the feedback from University Students and later on changing our target audience, we made two changes to the pricing. First, we lowered the price to $33 for a brief period to effectively penetrate the School Children’s market. Later on, we settled on a price point of $35 in an effort to get a considerable return for every sale we made but were careful not to exceed the price that School Children were willing to spend. Place Initially, we focused on making our backpacks available to as many University Students as possible. Therefore, we primarily started distribution agreements with the University Store and Department Store during the first two quarters. After we shifted our target market to school children, we added more distribution channels where this segment shopped most often. For this reason, we added the online discount retailer and the discount retail chain. In the third and fourth quarters, we ended our distribution deal with the University Store. We believed that university students were no longer interested in our backpacks. However, we noticed that this segment was still buying our products through other channels. As a result, we decided to restart our distribution agreement with the University Store in the last two quarters. 5. Competitive Analysis As the game developed, we had to learn to be adaptable and that meant making multiple strategic shifts. As mentioned before, we initially targeted university students, understanding their needs and preferences. However, a big factor that made us pivot our focus to School Children was Team 6’s success with this younger demographic Our pricing strategy was flexible. Initially, we offered our products at a high price, but we adjusted it to a range of $33 to $35 in response to market feedback and Team 6's pricing. We aimed to achieve a balance between affordability and maximum value for our buyers. Our promotional tactics were diverse, ranging from social media to comic books, and we constantly tweaked our approach for maximum impact. This was partly influenced by Team 6's similar strategies, showing that competitive intelligence played a crucial role in our decision- making. We closely monitored Team 6's moves, allowing us to adapt our marketing mix effectively. During the simulation, we demonstrated our ability to adapt to changing market dynamics and competition. Our strategic decisions regarding distribution, pricing, product development, and marketing were carefully crafted in response to the presence of a strong competitor in Team 6. 7

6. Turn Decision-Making Review 1-3 Turn In the first round of our marketing simulation, we focused on University Students. We opted for the "Rounded Top" model and used Eco-Friendly materials to align with the environmental principles that University Students value. Our research showed that the colour Blue was highly preferred by university students, so we used it for our backpacks. With this strategy, we aimed to create a product that not only met practical needs but also appealed to the aesthetic preferences of our target audience. Our distribution channels included the University Store, Department Store, and Discount Retail Chain, to reach our audience more effectively. Our advertising campaign targeted the student audience through social media, using "Funky" messages. These actions were based on market trends and insights from weekly reports and emphasized the importance of an online presence and digital marketing in reaching our audience. Our pricing approach began with a premium price of $40.00, which was ultimately reduced to $35.00 in response to market feedback. This was part of our aim to strike a balance between perceived quality and price. In order to improve practicality and attractiveness, we added features such as "Water Bottle" and “University Logo”. During our campaign, we noticed an increase in sales among school children. We did not expect this, so we decided to focus on this market to take advantage of this unexpected trend and increase our profits. Our main goal was to make our product more appealing to kids, which drove our decision-making during the rest of the game. We made a strategic change based on market responses and data patterns, which proved to be a crucial point in our campaign. This change demonstrated our flexibility and responsiveness to changing market conditions. 4-6 Turn As the game progressed into its later stages, our plan underwent significant changes. We integrated several strategic elements and made deliberate modifications to our initial strategic plan. This phase was characterized by a more focused strategy, which incorporated crucial learnings from the outcomes and dynamics of previous turns. At first, our knowledge of how advertising and cost allocation affected each other was a little hazy. However, we eventually refined our plan through trial and error. Our advertising strategy became more focused. We adjusted campaigns to maximize impact and minimize cost. At the same time, we were constantly refining our price strategy. Recognizing the need to strike a balance between affordability and perceived value, we altered our price points with the goal of 8

strengthening our market position and increasing profitability. This meant keeping a careful eye on market trends as well as our competitors' pricing methods. On the sixth turn, we made an important and drastic decision to improve our profitability. We decided to completely stop all spending on our media campaign, with the hope that the existing awareness of our brand in the market would help us achieve our goal. This risky move turned out to be a success, resulting in an Overall Net Profit of $5,324.75. Essentially, the latter half of our campaign was devoted to refining and consolidating our drastic change in direction. We focused on using the insights and experiences gained throughout the simulation to strengthen our market position. This strategy resulted in more steady and consistent market performance. 7. Improvement We identified some areas of improvement when analyzing the results of the game, the most glaring one was discontinuing our distribution agreement with the University Store in the third quarter. Initially, we believed that focusing solely on the distribution channels that School Children shopped at the most was the best strategy, but as we have since learned, University Students were still purchasing our products through other channels. Had we not pulled out of the University Store, we likely would have seen higher sales for the quarter. Another area of improvement was our media spending. We were hesitant to invest heavily in this aspect, fearing we might lose money. As a result, we had to constantly compete with other teams for market attention. If we had spent a considerable amount of money on media for a few quarters, exponentially increasing brand awareness, and then scaled back those costs while maintaining moderate spending, we would not have had to play catch-up with our competitors. 8. Application of Marketing Knowledge The knowledge we acquired from the textbook and during class played a crucial role in guiding our decision-making process. By applying the key concepts we learned, we were able to perform effectively in the game. The first concept we used was that of the marketing strategy, specifically the three steps that make the marketing strategy: Plan, Implement, and Evaluate. The Strategic Plan was a crucial tool during the planning stage, enabling us to make informed decisions when we had limited information about the overall market. It helped us establish clear objectives and goals for our campaign. After each turn, we conducted thorough evaluations of the previous quarter in order to plan effectively for the next. We made use of another important concept that was mentioned during class and in the textbook, called the Marketing Dashboard. 9

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The game included charts, graphs, and other tools to easily digest information on how our brand stood compared to the other teams’ performance and our performance from previous quarters. Talking about other teams, another important concept we leveraged from the course was that of the Marketing Environment. We had to be aware of what was happening in our environment during each turn. By answering questions such as "What distribution channels give us the most sales?" and "What are our direct competitors doing?", we were able to make informed decisions. Two other important concepts we applied from the course were the Place Decisions and Promotion to Communicate with clients. We had to be aware of the places and media that our Target Market frequented the most, and by learning about these two concepts during class, we were able to make well-informed decisions. Conclusion Using the McGraw Hill 'Practical Marketing' simulator allowed us to apply the knowledge acquired during the course in an interactive and competitive manner. Our team demonstrated its ability to adapt and make strategic decisions, leading to a net profit of $3,248.55. Although we scored positively in market share (14%), customer satisfaction (30%), and return on marketing (31%), we acknowledge that there is room for improvement in these areas. The simulation was a valuable practical test of our marketing knowledge, teaching us the importance of adaptability, market analysis, competitive strategy, and a well-rounded marketing mix. These lessons are practical insights that we will carry into our future marketing careers. Appendix STRATEGIC PLAN MISSION STATEMENT LeafCraft aims to create reliable backpacks for university students. We deliver sustainability through long-lasting products and environment-focused processes while still catering to university students' unique needs and values. 10

VISION LeafCraft as the preferred brand for university students across North America, promoting sustainability and academic excellence within the next decade. GOALS Net Profit: Over the next four quarters, we aim to achieve a 20% increase in our Net Profit at the end of each quarter. Also, we will maintain our marketing costs below 30% of our bank balance at the end of the fiscal year. Market Share: By the end of the fiscal year, our goal is to get a 25% market share in the backpack industry, and to secure a 35% market share among university students within the same period. Return on Marketing: Increase interest among university students by 2 points at the end of every quarter. While making sure that the campaign does not exceed 7.5% of each quarterly revenue. Customer Satisfaction Score: Providing backpacks that incorporate many of the desired characteristics and features university students care for. We will measure this through feedback from focus groups. This objective is achievable with our available resources and is relevant to our business mission statement. STRATEGY Customer Segment Strategy: We chose university students because this segment has a market size of 24,000, with a 5% growth rate and a notable 15% purchase behaviour in the last quarter. We are certain that our mission of creating reliable, sustainable backpacks will resonate with this demographic. By catering to the needs and preferences of this segment, we aim to fulfill our commitment to delivering sustainability and environmental awareness. Product Strategy: Having our audience's preference for capacity and eco-friendliness in mind, our backpack will feature a rounded top for increased storage, basic straps for more comfort and durability, and the university logo as a feature to instill a sense of school spirit. The backpack will be crafted with certified European hemp to align with our eco-friendly values. Finally, blue will be used as the colour of the pack. 11

Pricing Strategy: Despite the average purchase price in our target segment being $32, we will set our backpack price at $65. We aim to maximize revenue with this higher price point by allowing us to invest in product awareness. While our price point is above the average, our target market's desire for quality and eco-friendliness provides an opportunity to position our product as a premium, environmentally responsible choice. Placement Strategy: Our distribution strategy will leverage department stores, for their reach of 1,419 university students, and the most important one is university stores with a reach of 3,345 students. We also chose these channels because of their commission rates, with university stores keeping 30% of the total MSRP and department stores taking a 44% cut from the backpack’s price. Promotional (Positioning and Media) Strategy: Our message will be 'eco-friendly and funky”. This will cater to our target audience’s value of sustainability while making it even more appealing with a dynamic, style-conscious tone. To determine the best media for our product, we will focus on platforms that our target audience directly engages with. Social media, with a reach of university students of 60 points is an obvious choice. In addition, internet gaming sites, with a reach of university students of 35 points, present an opportunity to connect with students even further. MEASUREMENT Net Profit goals: They will be measured with the quarterly and yearly reports. Market share goals: They will be measured with performance reports and sales data from each segment. Return on marketing: This will be measured with our media campaign reports and quarterly reports. Customer Satisfaction: This will be measured with customer feedback from the marketing research department. Practice Marketing | McGraw-Hill Canada. (n.d.). https://www.mheducation.ca/practice- marketingPractice Marketing | McGraw-Hill Canada. (n.d.). https://www.mheducation.ca/practice-marketing 12

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FIGURES Figure 1. Financial Performance Figure 2. Market Share, ROM, and CSS Performance 13

Figure 3. Units Sold Figure 4. Units Sold and Market Costs 14

Team 5 MARK 1120-002 Final Project Report

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