Sec102Team6FinalReport (2)

Final Report COMR 465 102 Instructor’s Name: Phaedra Burke Date Submitted: Monday, December 5th, 2022 Simulation Team: 6 Names: Isha Afzal, 51722585 Lynn Campbell, 19443662 Emma Ho, 37195534 Koosha Issari, 66800392 Maanit Rohira, 21952205

Table of Contents Overall Outcome 1 Target Market Choice 2 Turn Decision-Making Review 3 Product Strategy 3 Price Strategy 3 Promotional: Advertisement Strategy 4 Promotional: Distribution Strategy 4 Competitive Analysis 5 Pricing 5 Distribution 6 Promotion 7 Competitive Intelligence 8 Our models/theories 9 Areas for Improvement 10 Lessons Learned 10 Conclusion 11 Exhibits 12 A.1: Important Characteristics for School Children in Backpacks 12 A.2: Customer Feedback from School Children for Team 6 Backpacks 12 A.3: Unit Price: Team 6 (orange) 13 A.4: Sales in Different Channels 13 A.5: Net Profit Throughout the Simulation 14 A.6: Market Share Throughout the Simulation 14 A.7: Cost Per Every School Child for All Types of Advertisements 15 A.8: Units Sold Throughout the Simulation for Team 6 16 A.9: Marketing and Campaign costs over the 6 quarters 16 A.10 Total Revenue of every firm from quarters 1 - 6 17 A.11 Overall team performance from quarters 1 to 6 17 Overall Outcome Throughout our 6 simulation quarters, we were able to create a low cost backpack paired with a marketing strategy that successfully placed us #1 amongst our competitors in gross profit, gross margin, units sold, net profit, and final balance at the end of round 6. 1

sacrifice some of the school children’s desired characteristics such as cartoon graphics. Therefore, our backpack has a more mature design, appealing to many segments. We stuck to the same target segment throughout the simulation because we wanted to focus on how we can grow our market share, which was when we decided to purely choose advertisements that attracted school children after realizing social media and gaming sites didn’t attract as many children. Turn Decision-Making Review As team 6, once we started the simulation, the main objective for our company was to get the greatest market share and also the greatest net profit from all the teams. Throughout the simulation, we focused on trying out different advertisements and promotions strategies to be able to get the highest market share and profit. Initially when we started, we had wanted to get the greatest share in both school children and university students' market. Therefore, we had chosen to design a minimal backpack which can easily be targeted to both groups. This also helped us have the lowest production cost of $7.00 per unit from all the teams. In the first quarter of 2022, we had followed our strategic plan closely and soon realised that we have a lot of competition with other teams for school children and university students. There was one team targeting school children and two teams targeting university students, but they also had a good share of the school children market. Product Strategy Due to the high level of competition in the school children market, the backpacks looked really similar between the teams. Therefore, in the second quarter of 2022, we replaced the thin spaghetti straps with basic straps. The basic straps cost us one additional dollar per bag. However, we were able to increase the level of comfort and durability by one point each. These are the second most important characteristics in school bags for school children at 23% for both. This can be seen in Exhibit A.1, which shows the importance of the five characteristics for school children in backpacks. Other than this change, we had kept the backpack the same throughout the rest of the simulation because we had good feedback from the school children group, as seen in Exhibit A.2. Price Strategy After the first quarter of 2022, we also changed the price of the backpack from $32.00 to $34.00 to cover for the extra marketing costs, investment in market development funds, and the product changes (straps). In the second quarter of 2022, we verified with the feedback from our target group, and they were satisfied with the pack price. As seen in Exhibit A.2, the price was “high, but still in their budget,” and so we decided to keep it at $34.00 throughout the simulation. End of the simulation, this was the lowest price per unit from all of the teams as seen in Exhibit A.3. 3

Promotional: Advertisement Strategy After the first quarter of 2022 results came in, we realised we are in close competition with team 8. We were in rank 1 for profit at $2968.00 (Exhibit A.5). However, we were at rank 2 for market share at 27%, while team 8 was in rank 1 with 42% of the market share (Exhibit A.6). We wanted to increase our market share, therefore we decided to invest in more advertising to increase our market reach. We kept the advertising frequency at 1x for gaming sites. However, we increased the advertising frequency from 2x to 4x for comic books. The purpose was to increase market reach for school children and university students through this change. We were able to change the total reach from comic books from 61 to 244. More specifically the reach to school children increased from 35 to 140. The reach of university students increased from 15 to 60. We also decided to start an advertisement with social media at 1x frequency. The main purpose of starting this advertisement was to increase the reach to university students. With one social media advertisement frequency, we were able to reach additional 60 university students and an overall increase of 187 for total reach. However, after the second quarter of 2022, our profit rank was still 1st at $2,311.00 (Exhibit A.5), however the market share had decreased to 23% (Exhibit A.6), and we were at rank 3. We realised it was best for our team to focus only on school children and change our advertising strategy. At this point, we changed our overall strategy to target two groups (school children and university students) to instead only focus on one group more closely, school children. We performed calculations to calculate the largest reach to school children with the lowest cost per every school child (Exhibit A.7). We realised that the best way to get the largest reach with the lowest cost per school child is through comic books. We were able to reach 1 school child for $13 through comic books. Therefore, we changed the advertising strategy to having 8 full page ads in comic books. This increased our marketing costs by $100 from the second quarter of 2022. The change did decrease the total reach from 521 to 488, however, it increased our total reach to school children from 182 to 280. After the third quarter of 2022, the number of units sold had increased from 474 in the second quarter of 2022 to 553 in the third quarter of 2022 (Exhibit A.8). Promotional: Distribution Strategy We were still worried about the market share and decided to invest in additional promotional strategies through distribution channels. We observed that in the second quarter of 2022, the Discount Retail Chain had the highest reach to school children of 3262 and also had the highest number of total sales of 427 (Exhibit A.4). We had the best chance to increase our market share by increasing our share in this channel. Therefore, we invested in the $1000 Market Development Funds in the Discount Retail Chain. In the third quarter of 2022, it increased our sales in the Discount Retail Chain from 210 in the second quarter of 2022 to 285 (Exhibit A.4). In the final quarter of 2022, we held 33% of the Channel Market Share in Discount Retail Chain. We decided to keep the investment in market development funds in the Discount Retail Chain throughout the rest of the simulation. After the second quarter of 2023, we had 367 sales from the total sales of 995 in this channel which meant we had 36% of the market share in this channel. 4

backpack market, however leading to low revenues thus lower margins due to the increased cost of the “eco-friendly” material used in their backpacks. EastWest and AlpineHigh were among the higher cost range, both utilising Premium pricing and setting their prices at $75 and $110 respectively. Their bags remained at this price throughout the entire simulation to maintain price consistency and to develop a luxurious and exclusive image for their brands. In the second quarter of 2022, Team 3 increased their price to $41. The third quarter of 2022 saw the introduction of Team 5 into the market, originally setting their price to $30. This again is a form of predatory pricing performed by another firm. However this firm was targeting the biggest sector of the market, school children. Having seen the success of our firm’s marketing mix in the school children segment, Team 5’s decision to simulate our marketing mix coupled with their predatory pricing at $4 below our MSRP yielded great results for them and considerably impacted our strategy. By the second quarter of 2023, Team 5 had become the second highest revenue firm accredited to their substantial growth between the third quarter of 2022 and the second quarter of 2023. As Team 5 had a higher production cost for their bag pertaining to an added water bottle feature, their price eventually made its way up to $37, $3 above ours. All These prices stabilised towards the end of the simulation, offering less changes with most firms concluding on their pricing strategies (Exhibit A.3). Distribution While we and Team 8 opted for an intensive distribution strategy, where we opted to sell our product in as many stores as we could to penetrate the market, other companies had different ideas on how to develop the place of their product. In the first quarter, EastWest and Alpine High dually focused on their direct on department store channels. Proceeding to then move into the High end Outdoor and luxury goods stores in the next couple of quarters. Alpine High and EastWest demonstrated an exclusive distribution strategy to sell to more high end clientele and to justify their high MSRP’s. This did not have much of an impact on the sales through our channels as we were not priced high enough to break into those more high-end retailers. Teams 3 and 5 practised a similar distribution strategy. An exclusive style distribution strategy whereby during the first quarter’s of their respective campaigns they sold only through selective channels, Online discount retailer and department store for Team 5 and University store and Online Discount Retailer for Team 3. Throughout the quarters, these two teams made various changes to their distribution channels. Team 3 slowly expanded their product to more channels quarter after quarter including the high end outdoor retailer. This helped increase their product awareness over time and did have a small impact on our market share through our channels but not enough to become a threat. A possible cause for this might be because Team 3 decided to reposition their brand fairly late in the campaign from being a value-friendly option for university students to becoming a luxurious alternative for high end clients. Team 5 also added a new distribution channel roughly every quarter. Because they were positioned towards the largest market segment, school children, their sales and revenues had exceptional growth with the addition of more and more channels as seen in the yellow line of exhibit A.11. Team 5 had the 6

biggest impact on our market share as they entered into a price competition with us over a very similar product. Promotion We found promotion to be the most important strategic principle in determining the success of our product. Whether it be advertising, a sales promotion or a market development fund, there were many ways to promote our product. Using SWOT analysis we were able to determine our strengths and differences when comparing to our competitors. Because of this analysis we determined that our brand awareness would benefit the most from advertising. Sales promotions and MDF helped us later in the simulation to help defend our high market share. Looking towards our competition, it was important to understand their decisions when it came to their promotion strategy. Knowing what audience they’re advertising to and what channels they are trying to promote gave us superior insight into making our decisions. Our promotion over the 6 quarters is tracked through exhibit A.9 in the appendix. Starting off with Team 5, they had a very similar advertising promotion to us, indulging their resources in comic book and gaming site advertisements. This gave them substantial exposure to school children and university students, two of our biggest markets. As a result, this impacted our market share heavily, throughout quarters 3 to 5 is where we saw the lowest growth whilst they saw the highest. Alpine High started out by investing in the costly wilderness cable network at 2x frequency. The high marketing costs associated with this coupled with their low sales growth yielded negative results, which did not end up affecting our bottom line extensively. In the 6th quarter, Alpine High invested in a market development fund with the high end outdoor retailer. They were mostly in direct competition with EastWest for the high end channels as we did not have access due to our low price, thus further allowing us to oversee the changes they made to their promotion strategy. EastWest on the other hand was able to successfully position themselves as a high-quality luxurious product through the use of their positioning and promotion strategies. They had very low promotion costs simply advertising through the financial journals that commuters often connect with. As a result of their low costs and exclusivity through the high end channels, we found it difficult to compete with their return on marketing but were able to overcome their sales growth. Team 8 took advantage of their promotional pricing strategy by offering $5 sales promotions across most of its channels. In the first two quarters they postponed our growth claiming 42% of the initial market share. However, these sales promotions effectively reduced 7

dominated this quarter, capturing almost all of the commuter market and shooting up from the third lowest in revenue to the highest. We reacted to these unforeseen circumstances in the final quarter of 2022 by completely exiting the commuter market, and from that point focusing all our resources towards school children. Team 5 began as a low threat target. Their late move into the market distinguished any first mover advantage they could have had. Because of their absence in the first two quarters of the year, we overestimated our market share and revenue figures for the future remaining quarters as there was one less firm to compete in the market. This gave us the confidence to be able to venture out into a new segment (commuters), as well as the inflated revenue to increase promotion costs as we had believed we had room to bring down our profit margin. By the third quarter, Team 3 had entered. We noticed they had seen the success of our product and we believe they mimicked us as the industry leader to gain a quick advantage in the market. This apparently worked, with Team 3 targeting school children, our segment, our market share in our target segment had reduced noticeably. In response to this threat, we decided to use our first mover advantage gained from the previous quarters and invest heavily in promotion, buying 8 full page ads in comic books while also investing in a market development fund for the best performing sales channel for our target segment. This was an attempt to focus all our resources towards our target segment and capture as much market share as possible as there were now multiple firms competing for the same segment, increasing monopolistic competition from the oligopoly procured in the first quarter. This decision kept us as market share leaders for the rest of the time period. Lastly, Team 3’s distribution and promotion campaign was very strong towards the last half of the simulation, with heavy expenditure in both their media promotion and their market development fund, or MDF, spending. In the third quarter, in an attempt to claim first mover advantage utilising pull strategies we started an MDF within the discount retail chain. The MDF caused note-worthy sales increases but decreased in effectiveness the next quarter when Team 3 also invested in an MDF through the same channel. As a consequence of this, over the next two quarters our market share started to dip. This prompted us to invest in a secondary MDF using the resources saved from the cheaper advertising costs that quarter. Our models/theories We used market penetration and everyday low pricing to guide our pricing decisions. Focusing on creating a minimalist product at a good price point to capture as much market share as possible in the beginning. Our price merely had 1 change, a big disparity when compared to our competitors .We initiated an intensive distribution strategy to model our positioning and channel selection tactics. Again, to capture as much of the market share as possible. Our philosophy was that the pricing models we were following would drive sales no matter what channel we distributed through. SWOT Analysis was also drastically helpful in guiding our turn decision making. Every quarter a SWOT analysis was performed to locate the weaknesses we needed to focus on, the strengths we needed to take advantage of, the threats we needed to be aware of and finally the opportunities we needed to capitalise on. 9

Areas for Improvement Throughout the entire game, overall our team performed really well. We started off the first round of the simulation with a profit rank of #1 and we ended the simulation with a profit rank of #1 in the last quarter of the simulation as well. Towards the end, our team also had a good market share rank as well we were #2 by the end of the simulation and on an average of all quarters, we held the second position most of the time. Our team could’ve done better by having a higher number of sales. The competitor who was above us in terms of number of sales, had more sales than us however, their profit margin was lower than ours. This was because they had more expensive costs of production (like eco-friendly material) and a similar pricing to ours which cut down their profit margins even though they had more sales than us. Our team could’ve done better if from the beginning, we had a better advertising plan. In the beginning, our advertising was done through social media, and gaming sites which we later realised did not work the best for our product as our products target audience is school children and most younger school children were not that active on social media platforms and gaming sites at they are still at a very young age, therefore, towards the end of the game we changed our advertising strategy to comic books, and started selling our products in departmental stores which helped us to boost sales. We changed it to comic books as we realised that younger children read more comic books than they use social media platforms and gaming sites and therefore, it was a good way to reach our target audience. Moreover, we decided to sell our products in departmental stores as most children go with their parents to their departmental store or even if parents go alone to their store, they will look at our bag and this way we reach a very large audience to sell our product. Lessons Learned ● If the simulation could be done again, we would have a better advertising strategy and reach our target audience through the correct required platforms (comic books, departmental stores) from the very beginning of the simulation. ● There is a decent amount of our target audience who would potentially be more interested in our product if it was completely environmentally friendly (i.e. made out of eco-friendly material) and this would contribute towards a boost in sales as well. Therefore, if the simulation could be done again, our team would find a way to use the eco-friendly material and still have a high profit margin. We know this as our competitors used eco-friendly material for their product and their sales were well boosted after that. ● Promotional strategies and important: We realised that having promotional offers frequently is a great way to boost our sales and have a higher market share. We could’ve implemented more promotional strategies throughout the game and had more deals or discounts on the bag occasionally. ● Product enhancement: Since our main target audience was school children, we could’ve added one or two more features to our product which would cater only to school children as this could’ve helped us achieve a high market share in the market. ● With the help of this simulation, we understood how consumer behaviour works under different circumstances and how we have to change and adapt to the customers changing wants and needs. 10

Exhibits A.1: Important Characteristics for School Children in Backpacks A.2: Customer Feedback from School Children for Team 6 Backpacks 12

A.3: Unit Price: Team 6 (orange) A.4: Sales in Different Channels 13

A.7: Cost Per Every School Child for All Types of Advertisments Type of Advertisement Rate $ School Children cost per every child $ Print Financial Journal 650 1 650 Print Fashion Magazine 750 2 375 Print Outdoor Adventure Magazine 800 20 40 Print Comic Book 450 35 13 Print Newspaper 1000 5 200 Internet Celebrity Gossip Blog 1100 12 92 Internet Gaming Site 700 40 18 Internet Online News 1400 10 140 Internet Social Media 1000 2 500 TV Wilderness Cable Network 3000 35 86 TV Cartoon Channel 1800 65 28 TV National Network 5200 44 118 Radio Sports Talk Radio 1000 5 200 Radio News Radio 1150 4 288 Radio Top 40 1600 23 70 Poster Gym and Sporting Locations 250 1 250 Poster Billboards 600 10 60 Poster Subways 500 5 100 15

A.8: Units Sold Throughout the Simulation for Team 6 A.9: Marketing and Campaign costs over the 6 quarters 16