Mms Student Manual

Dr. Robert W.
Cook
Mars Simulations
T 304.276.5322
robert.cook@shootformars.com
http://www.shootformars.com
Mars Simulations: http://www.shootformars.com
Dedication
This edition of the MARS Marketing Management Simulation is dedicated to Emily and Melissa Cook. Emily is the wife of author Robert W. Cook and the mother of author Kathryn J. Cook. Melissa is the wife of author James C. Cook. They have served as our inspiration in life as well as in this project. We are grateful for their love, loyalty, understanding, and total support.
Acknowledgements
The authors also wish to acknowledge the council and assistance of Kevin Robert Cook, MBA. His many contributions to the MARS project are most sincerely appreciated.
Copyright 2004 - 2010 Cook Enterprises, LLC. All rights reserved.
MARS MMS Students Manual
Table of Contents
Background ....................................................................................7
Why a Simulation? ...................................................................................................7
What is a Simulation? ...............................................................................................................7 Advantages of Learning by Simulation ...................................................................................7 What Can I Learn From the Marketing Management Simulation? ........................................8
The MARS Marketing Management Simulation .....................................................9

A Marketing Management Role Play ........................................................................................9 The Decision-Making Process ..................................................................................................9
Features of a Simulated Environment ..................................................................11

Manageable ..............................................................................................................................11 Counterintuitive .......................................................................................................................12
Marketing Strategy .......................................................................12

The Elements of Strategic Marketing Planning ...................................................12
Market Segmentation ..............................................................................................................12 Beginner Segment ...................................................................................................................13 Winner Segment ......................................................................................................................13 Problem-Solver Segment ........................................................................................................13 Classic Gamer Segment .........................................................................................................14 Target Market Selection ..........................................................................................................14 Product Positioning ................................................................................................................14
The Marketing Mix ..................................................................................................14
The Simulated Environment .......................................................16

Your Company ........................................................................................................16 Your Position ...........................................................................................................17 Your Product ...........................................................................................................17 Consumer Behavior ................................................................................................18
Market Segments ....................................................................................................................18 Consumer Choice Processes .................................................................................................18 Consumer Perception .............................................................................................................19 Seasonality ..............................................................................................................................19
The Competitive Environment ...............................................................................20
Making Decisions .........................................................................21

Using the Decision Form ........................................................................................21 Your Budget .............................................................................................................22 Accounting Review .................................................................................................23 Product Decisions ..................................................................................................24
Current Products .....................................................................................................................24 Branding ...................................................................................................................................25 Product Dimensions and Attributes ......................................................................................25
Research and Development ...................................................................................26

Starting a Research and Development Project ....................................................................26 Allocating Budget Dollars to the R&D Project ......................................................................27 Changing Product Attributes to Affect Product Dimensions ..............................................27 Additional Impact of the Violence Attribute ..........................................................................28
Pricing Decisions ...................................................................................................29

Retail Price ...............................................................................................................................29 Wholesale Price .......................................................................................................................30
Marketing Communication (Promotional) Decisions ..........................................31 Distribution Decisions ...........................................................................................32 Market Research .....................................................................................................34
Strategic Versus Financial Health ...............................................34 Free, Automatic Output Reports .................................................35
Quest Memoranda ..................................................................................................36
Failure To Submit Decisions Memorandum ..........................................................................36 Quarterly Evaluative Memorandum .......................................................................................36
Management Decisions Report .............................................................................38 R&D Project Status Report ....................................................................................39 Protability Analysis Report ..................................................................................40 Marketing Control Report ......................................................................................41 Team Ranking Reports ...........................................................................................42 Market Share Analysis Report ...............................................................................43 Industry Performance Report ................................................................................44 Commercialized Products Report .........................................................................45
Purchased Research Reports .....................................................46

Industry Market Potential: Cost = $5,000 .............................................................46 Perceptual Map: Cost = $2,000 ..............................................................................47
Macromedia Flash-Enabled Browsers ..................................................................................48 Browsers Without Macromedia Flash ...................................................................................48
Brand Awareness: Cost = $2,000 ..........................................................................49 Competitive Promotional Expenditures: Cost = $5,000 ......................................49 Competitive Sales Force Allocation: Cost = $5,000 ............................................50 Competitive Sales Force Time Allocation: Cost = $5,000 ...................................50 Competitive Prot Contribution by Product: Cost = $5,000 ...............................50 Ultimate Consumer Satisfaction Survey by Segment: Cost = $2,000 ................51 Retailer Satisfaction Survey by Segment: Cost = $2,000 ...................................52
Conclusion ....................................................................................52 Appendix A ....................................................................................54

Printing Instructions for Simulation Output .........................................................54
Background
Why a Simulation?
What is a Simulation? By definition, a simulation is the imitative representation of the functioning of a system or process by means of modeling. A simulation, therefore, is nothing more than a model of some system or process of interest. Because it is a dynamic model, a simulation allows you to better understand how the components of a system or process work together. Although simulation models tend to simplify reality, they are able to produce sufficient realism to uniquely achieve critical learning objectives. In this business simulation, you will be interacting with a model of the marketing management process. Although this model is set in the electronic gaming industry, the decision-making principles that you will learn and practice in this generic model will apply to virtually any marketing management situation. Advantages of Learning by Simulation Research conducted by the National Training Laboratories in Maine, U.S.A., concluded that simulations provide a highly effective environment for learning. The learning pyramid, shown at right, illustrates the results of this research. It shows that simulations and other Practice by Doing styles of learning are much more effective than traditional methods for helping students retain information. According to these studies, traditional methods of learning such as listening to lectures and reading textbooks produce retention rates of only 10% or less. In contrast, methods that require students to actively engage in the learning process are far more effective. For example, computerized business simulations, which fall into the Practice by Doing category, boast an information retention rate of around 75%. As you work with simulated tasks, therefore, you will learn more quickly and retain more
information. You may retain as much as 7 to 15 times more material than by reading or listening to lectures alone. A business simulation offers other distinct advantages over traditional methods of learning. Because simulated learning environments require you to interact with the information you are studying, critical learning objectives can be accomplished more easily than with traditional, passive methods of learning. For example, with a simulation you can master cognitive, problem-solving and analytical skillsso highly prized by employersmore readily and thoroughly than with a lecture/textbook format. A business simulation provides continual, hands-on opportunities to develop your analytical and problem-solving competencies. In the business world, on-the-job training is one of the most frequently used methods for training entry-level marketing personnel. Simulations come closer to providing this type of experience than either lecture or textbook. In additionto the benefit of future employersmistakes you make in a simulation do not generate the adverse effects that they otherwise would once you are on the job. Business simulations provide opportunities to experiment and learn without causing real damage to your company or your career! What Can I Learn From the Marketing Management Simulation? As you engage in the MARS Marketing Management Simulation, you will reinforce the marketing course concepts that you are studying in class. You will be repeatedly exposed to these concepts, which are integrated into the simulation, as you make your marketing managerial decisions. In fact, you will find that most topics in your marketing course are supported in this simulation. Second, you will develop skills in market analysis, problem solving, and decision making. These are the higher-level skill sets that are highly sought by employers as they search for college graduates to fill their entry-level positions. Third, you will develop your small-group management skills. Business today is becoming more and more a group effort. Teams often experience a synergy resulting in performance beyond the sum of their individual members. The ability to work with, and direct, team efforts constitutes another skill set highly prized by employers. From the perspective of your professional growth, it is not essential that you master the MARS Marketing Management Simulation. When you graduate, you will not work for a company that exactly fits the model in this simulation. The advantage of the Marketing Management Simulation is that its underlying marketing concepts, problem-solving techniques, and team-management skill sets are transferable to any business situation. You will reap lifelong benefits from your participation in the MARS simulation through your enhanced understanding of these marketing concepts and techniques and through the development of your managerial skills.
The MARS Marketing Management Simulation

A Marketing Management Role Play The MARS Marketing Management simulation is a form of role play. As a student participant in the simulation, you will assume the role of a newly hired director of marketing for a manufacturer of computer games. In this role you will be required to set the strategic marketing direction for the company and make all corporate marketing decisions in a competitive environment. Your professor will divide your class into a number of competing teams, each of which represents a unique company in the simulation. You and your fellow team members will jointly make decisions as the collective marketing manager for your particular company. Your professor will determine the number of teams (companies), the number of student participants on each team, and the number of decision periods in the simulation. Each team will make the same set of decisions. As is the case in the real world, the decisions of one team (company) affect the results of all others. Consequently, whether your decisions are good are bad depends to a considerable extent on the decisions made by other teams. Keeping an eye on the competition pays huge dividends. The Decision-Making Process The simulation is an iterative decision-making process. The Simulation Decision-Making Process 1. Students Make Management Decisions 2. Students Submit Decisions to Professor 3. Professor Runs Simulation 4. Students Analyze Output Reports 5. (Rinse and Repeat) Step 1: Make Marketing Management Decisions. This manual will provide you with background information and a starting scenario. Additional information is available in the simulations output reports. These output reports are accessed through the Reports tab at the top of the simulations Web page. Based on this information, you will make a set of marketing decisions for your company. Make these decisions by filling in the form available through the Management Decisions tab at the top of the Web page. There is sufficient breadth of decision making in this simulation to give you a good feel for the kinds of decisions a marketing manager often makes. Your participation will encourage you to develop sound decision-making and problem-solving skills.
Decisions are easy to make; it is the making of consistently good decisions that is difficult. As with any learning opportunity, you will get out of this simulation what you put into it. If you simply fill out the decision form, you will receive little benefit. If you work hard to make good decisions, your problemsolving and decision-making skills will improve. At the same time, you will develop a better understanding of the marketing management process. As you are challenged by the decision-making opportunities and responsibilities of a marketing manager, you will also get a better feel for your own interest in making a career in the field of marketing management. Each decision period represents a quarter of the year. The first decision represents the time period January through March. The second is for April through June. The third is for July through September. The fourth is for October through December. Although some decisions in real-world business cycles are typically made on an annual basis, in this simulation all decisions are to be made quarterly. This format is particularly useful because it allows for changes to be made in all decision variables each decision period. It is not unusual for this simulation to be played for twelve decision periods, affording you the equivalent of three years of simulated experience. Step 2: Submit Decisions to Professor. Once you have made your marketing decisions by filling out the decision form, they must be submitted over the Internet to your professor. Your team submits its decisions by clicking on the Submit Decisions button located near the top of the Web page containing the decision form. Your professor will set a deadline for submitting your decisions. You must click on the Submit Decisions button prior to this deadline each decision period. The Submit Decisions button serves two purposes. First, it saves your decisions. If you log off the Web site without clicking on the Submit Decisions button, your decision form will not be updated with your changes. You may update your decision form at any time. For any given decision period, only the information from the final update before the deadline will be used in the simulation. If your team makes it a practice to click on the Submit Decisions button every time you make changes to your decision form, then it will always contain your most recent set of decision inputs. The second purpose of the Submit Decisions button is to transmit your decisions to your professors Web site, where he or she will have access to your teams most recent changes. If you fail to submit new decisions during any quarter, the simulation will be run using your prior periods decisions. Because of the constantly changing simulation environment, outdated decisions will likely result in significantly poorer performance than if you had submitted a revised decision set. Your professor may choose to impose additional non-compliance penalties on your team for failure to submit decisions on time. Step 3: Professor Runs Simulation. The information from your decision form will be inputted into the computer simulation model together with the decision data submitted by all competing teams. Then your professor will run the simulation, with the marketing decisions of all the teams running concurrently. The computer models equations will compare the decisions made by all teams in a simulated marketing environment and then generate results based on the quality of those decisions. Your professor will notify you when the simulation will be run.
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Step 4: Retrieve and Analyze Output Reports. A report of the results will be available to you as soon as your professor runs the simulation. You can access your results by clicking on the Reports tab at the top of your simulation Web page. Once you have analyzed the report, you will start the decision-making process again. You will find that the market has changed. Some of the changes are due to the decisions made by the participating teams. Other changes are built into the computer model. In combination, these changes can be significant from period to period. Based on your review of the information contained in your output reports, you will then make new decisions based on the same set that you used in the prior period. Due to the changed environment, however, and the insights you receive from your teams performance, your new inputs will likely be quite different than those that you made in the previous iteration. This iterative process will continue for the number of decision periods determined by your professor.
Features of a Simulated Environment

Manageable A primary concern in the creation of a simulated environment is to strike a balance between realism and manageability. Often, realism is inexorably tied to complexity; this is certainly so in a marketing management environment. Unfortunately, making the simulation complex enough to cover all the circumstances actually encountered by a marketing manager would make it too difficult and time consuming for you to handle in a one-course format. On the other hand, making the simulation too simplistic would make it less useful as a teaching tool. The goals to develop skills both in decisionmaking and problem-solving require some rigor in the simulation. Likewise, helping students make a valid assessment for choosing a career in marketing management, including creating a feel for what kinds of decisions need to be made, also requires a certain degree of realistic complexity. The MARS Marketing Management Simulation limits some decision-making activities in order to keep it manageable with a reasonable amount of effort. For example, in the simulation you are required to set only the overall advertising budget; you will not make decisions regarding specific advertising media (magazines, radio, television, etc.) or message content. (For some organizations, in fact, this is how advertising is handled. Marketing managers give a budget to an independent advertising agency and leave the details up to the agency.) In other cases, the simulation gives you more flexibility than you might typically find in a marketing management position. An example of this enhanced flexibility is your ability to change the product attributes on a quarterly basis. Most companies do not make such changes so frequently. Allowing the alteration of these variables on a quarterly basis creates greater learning opportunities than if they were manipulated only once every four decision periods (representing an annual decision). The result is a balanced simulation that is complex enough to provide valid learning opportunities and simple enough to be manageable in the allotted time frame. If you allow yourself to get past these
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distortions and simplifications of reality, you will find that the simulation presents ample opportunity to develop your skills and enhance your marketing knowledge. Counterintuitive The simulation has been designed with some elements that are counterintuitive. That is, as you work through each scenario, your intuition and experience might lead you in the wrong direction. The purpose of this design is to encourage you to rely on data-based decision making. That is the essence of becoming a market-driven company. While intuition can play a viable role in real-world management, studies have shown that marketing managers are often wrong about what motivates their customers. So, from time to time your intuition will mislead you in this simulation. Therefore, the more you objectively rely on your output reports for answers, the greater will be the probability that your decisions will be good ones.
Marketing Strategy
The Elements of Strategic Marketing Planning
In order to do well in the simulation, you should first develop a marketing strategy, which will then be implemented through your decision making. The essence of marketing strategy involves three interrelated concepts: Market Segmentation, Target Segment Selection, and Product Positioning. Once strategic decisions in these three areas have been made, they can be implemented with an appropriate marketing mix. The marketing mix (also called the 4 Ps) is the marketers tool kit because it contains the controllable variables of marketing. In the context of the simulation, the marketing mix consists of the following: Product: The video games made by your company Price: The dollar value you place on your video games Promotion: Marketing communications used to inform, persuade, or remind consumers Place: The retail outlets that carry and distribute your products Market Segmentation Market segmentation is the process of breaking down a total market into smaller groups, called market segments. Since a total market often comprises a large number of potential customers with very different needs, it is difficult to make one product that will satisfy everyone. The solution to this problem is to divide the total market into smaller groups (market segments) with similar product needs. The objective is to create market segments that will respond in a similar way to a specific marketing mix. While no segmentation scheme does this perfectly, it should result in making the
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segments easier to satisfy because their needs are more closely related than those of the market as a whole. In the MARS Marketing Management Simulation, the process of market segmentation has already been accomplished for you. Market research for the simulation has identified four distinct market segments: Beginners, Winners, Problem Solvers, and Classic Gamers. These segments were identified on the basis of psychographics and are differentiated in terms of consumers needs in two product dimensions: Thrill and Challenge. (These product dimensions are explained under the topic, Product Dimensions and Attributes.) Within each market segment, the potential consumers have similar product needs and are therefore looking for very similar qualities in the video games they are seeking to purchase. Beginner Segment The Beginner Segment of the market includes actual and potential consumers who have very little experience playing video games. Most of them are young children (ages 5-11), but not exclusively so. People of any age who are just starting to play video games fall into this category as well. Some older people may want to play with their children or grandchildren, or they simply may have developed an interest in the games. From a psychological standpoint, consumers in this segment do not want to be overwhelmed by video games. Games that are too complicated kill their interest very quickly. Consequently, they are looking for video games relatively low in the thrill and challenge dimensions. Your companys current sales to this segment are approximately 170,000 units. Winner Segment The Winner Segment of the market includes actual and potential consumers who want to win at all costs. Losing is repugnant to them. However, they are limited in the amount of time they can spend learning to play video games. As a result, they seek games that are not too difficult or challenging. In that way, they can learn to beat the game very quickly. They will play these games over and over because winning gives them a huge psychological boost. They savor the thrill of victory and prefer games that provide other thrilling aspects as well. Your companys current sales to this segment are approximately 20,600 units. Problem-Solver Segment The Problem-Solver Segment of the market includes actual and potential consumers who love to solve puzzles. It is the challenge that is important to them. Games that score high on the thrilling dimension are considered by this segment to be over the top. From their perspective, the thrilling aspects only get in the way of the challenge of problem solving. For them, playing Sherlock Holmes is the true thrill of gaming. A game that is not challenging enough will turn them off quickly. Once they have solved the puzzle, they have little interest in playing the game again; they will move on to another. Your companys current sales to this segment are approximately 40,000 units.
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Classic Gamer Segment The Classic Gamer Segment of the market includes actual and potential consumers who are virtually addicted to playing video games. If they could play games 24/7, they would. They seek games that equally provide significant thrills and challenges. These classic gamers like to compete against each other over the Internet. They do not grow tired of their favorite gamesuntil the next version arrives on the market. Winning is not as important to them as being respected for their playing ability. They often will find other classic gamers to play with rather than play against any other market segment. When they occasionally play someone from another market segment, they call it a noob stomp. (A noob is an inexperienced player; a stomp is beating the heck out of them.) Your companys current sales to this segment are approximately 45,000 units. Target Market Selection Target market selection is the process of identifying one or more market segments that will become the focus of marketing efforts. You can choose to focus on one, two, three, or all four segments simultaneously. The targeting choice is entirely up to you. There are many factors to consider when deciding what segments to target, such as potential sales volume, segment growth rate, and the nature of competition in that segment. But most certainly you will want to consider the profit potential of any segment that you enter. Target market selection sets the playing field for your company, so you should take great care in selecting the segments you choose to serve. In this simulation you will begin with four identical products, each one targeted to a different market segment. Your predecessor decided not to tailor products to meet the specific needs of individual segments, but instead used a one product fits all strategy. You may continue that strategy, or you can create individual marketing mixes tailored specifically to meet the needs of the segments you decide to target. The choice is yours. Product Positioning Product positioning is the process of creating a perceptual image with respect to how you want your potential customers to view your products compared to products offered by your competitors. You need to give potential customers a reason to purchase your product instead of competing products. Product positioning is accomplished by implementing a specific marketing mix tailored to match the needs of each targeted segment.
The Marketing Mix

As explained previously, the marketing mix (or 4 Ps) includes the following four marketing mix elements: Product: The video games made by your company Price: The dollar value you place on your video games Promotion: Marketing communications used to inform, persuade, or remind consumers
MARS MMS Students Manual 14
Place: The retail outlets that carry and distribute your product The marketing managers primary responsibility is to maximize the marketing departments sales performance as defined by corporate objectives. Two primary corporate objectives are to achieve target levels of product sales and to enhance corporate profitability. Product sales generate the revenue that allows the company to exist. However, to generate these sales, costs must be incurred. When costs are subtracted from revenues, the result is corporate profitabilityor loss, when costs exceed revenues. Hence, it is not only important to generate sales revenues; it is equally important to control the costs that generate them. The simulation is built around a model that incorporates the marketing mix as the primary driver of sales performance. In equation form, the model is: Sales = f (product, price, marketing communications, distribution methods) The first component of the model, the product, is the core variable of the marketing mix. Without a product there is nothing to exchange and no need for marketing. While production of the product is not a marketing function, assistance in determining product attributes certainly is. In this simulation, you will be able to request new products or to modify existing ones. Your job will be to provide the Research and Development Department with the specifications for products that you think will meet the needs of your customers. The products will then be created and manufactured to your specifications. The second component of the model, the price, is the exchange value that you place on your product. Your customers will have certain expectations about price, and you will have to consider your cost structure and pricing policies in order to satisfy these expectations. The third component of the model, promotion or marketing communications, allows you to reach target audiences with important information. It includes four elements: advertising, sales promotion, publicity, and personal selling. You will allocate a portion of your budget to each of these elements. The fourth component of the model, place or distribution, is the method used to get the product from place of creation to place of use. In this simulation you will have four alternative types of retail outlets through which to sell your products. You will need to allocate your sales force to these channel alternatives. If the product is not carried by retail outlets, it will not be purchased by the consumer. Your salespeople will make the product available through the retail outlets you select. While the marketing mix is the primary driver of sales performance, it is not the only factor influencing results. For example, the external environment also impacts performance. The external environment is represented by the current and potential sales volume and by your competitors. While marketing managers have very little control over the external environment, it is something that certainly affects profit and sales performance. The sales performance of your products will unquestionably be affected by the performance of the other companies in the simulation. You are not playing the simulation against a computer; you are
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playing against the other teams in your simulation. Their decisions will affect your results, and vice versa. It is important to note that in the real world these marketing mix variables are not independent. That is, they can produce interaction effects on one another. For example, price level can affect perception of product quality. These interaction effects are not explicitly part of the decision-making process in the simulation, but they are incorporated into the model when the simulation is run. Ignoring any of these variables can have potential impacts on the others.
The Simulated Environment

Your Company
Your employer is James C. Quest Enterprises Inc., a maker of electronic video gaming products. The company was founded several years ago by James C. Quest. After beginning his career as a computer programmer, over time he developed an expertise in computer graphics and computer game design. In his spare time he created a video game that he thought had great promise. His children loved it, and the neighborhood kids were always at his house begging to play. So he decided to form his own company and go commercial with his product. Mr. Quest worked incredibly hard, and as a result of his personal direction, the company grew rapidly. As sole owner of James C. Quest Enterprises Inc., Mr. Quest is now quite wealthy. And yet, most of his time is still devoted to company operations. He has only one hobby outside of his work: Mr. Quest has acquired an affinity for horses. He spends what little time he can spare with his equine friends; he has even placed an equine theme on company letterhead. But he unfortunately finds precious little time to engage in these pursuits. Mr. Quest has retained tight control of the company. He maintains his position
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as President and Chief Executive Officer. He has made it his business to know what is going on, and he is very unhappy with anything less than excellent performance. Mr. Quest often says, From those to whom much is given, much is expected. And as a consequence of that philosophy, he expects a great deal from himself. Likewise, he tends to reward his employees wellthen expects great things in return.
Your Position
You have just been hired for the position of Director of Marketing for James C. Quest Enterprises Inc. Congratulations! You report directly to President, and CEO, James C. Quest. Mr. Quest is particularly happy to have you as his new Director of Marketing. He personally selected you based primarily on your stellar career performance, first as a salesperson, then as a district sales manager, and finally as a regional sales manager for Quest Enterprises. He was pleased that you attended college at a school he greatly admires, having graduated from that same hallowed institution himself. When he personally informed you of your selection, Mr. Quest said to you, Nothing happens until it happens in the marketplace! I am entrusting you with the well-being of my company. I expect great things from youand will tolerate nothing less. Welcome to the position of Director of Marketing for Quest Enterprises. You are our future. The position of Director of Marketing was vacated by the firing of your predecessor, Laura Loser. She had a very good career in advertising but failed miserably when she was hired as the Director of Marketing. That just goes to show that there is a huge difference between advertising and marketing, Mr. Quest has said on multiple occasions since Lauras termination. The firing of Laura Loser is an incident that James C. Quest never wants to repeat. That is why he selected you. Mr. Quest believes in you. He feels that you have the potential for greatness. All you need to do is work hard, using your decision-making, problem-solving, and people skills in combination with your marketing knowledge to achieve your fullest potential. Taking a page from his fondness for horses, James C. Quest has confided in other members of his management team that you are his Man O War and Secretariat rolled into one, sure to win the race for profitability and market domination.
Your Product
The product you are selling is an electronic computer game that can be played on individual PCs, local area networks, or over the Internet. The game is sold under the brand name Jimmy-Quest. It is the offspring of the creative genius of the founder, president, and CEO of your company, James C. Quest. The companys urban legend has it that James C. Quest invented the first Jimmy-Quest game after his lovely, hard working, and very talented wife accused him of playing computer games 24/7. She followed this statement by sweetly suggesting that he get off his duff and do something positive with his life. As a result, he is now a multimillionaire.
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Consumer Behavior
Market Segments At Mr. Quests direction, the company has used psychographics combined with elements of lifestyle and demographics to divide the gaming market into smaller market segments (described above). His idea was to tailor games to match the particular needs of each target segment. Your predecessor, Laura Loser, chose to make little use of this segmentation scheme and stayed with only the original product created by Mr. Quest. Her attitude was, If its not broke, dont fix it. And in spite of multiple requests by Mr. Quest to use his segmentation scheme, she steadfastly refused to do so. Her only concession was to make duplicates of the original game and then target these duplicates to the market segments that Mr. Quest had identified. The Jimmy-Quest video game promises to become a cultural phenomenon. It has tremendous sales potential over the year. However, Laura Loser parlayed Mr. Quests spectacular product concept into very mediocre sales and profit performance. This ultimately resulted in her termination. Consumer Choice Processes The consumers product choice process is an important consideration in the design of your marketing mix. Your target segment will have specific needs with respect to each of your marketing mix variables. The better you understand and satisfy those needs, the greater your sales volume is likely to be. When analyzing consumer choices, you must recognize whether your customers are using compensatory or non-compensatory processes in their product selection. In a compensatory decision process, having more of one valued attribute will make up for having less of another. For example, a person might be willing to trade gas mileage for safety in an automobile purchase decision. Maximum miles per gallon and safety would be the ideal, but these two attributes are in conflict. So the purchaser will make a trade-off between economy and safety as viable automotive alternatives are considered. Greater safety will compensate for less fuel efficiency in the decision-making process, and vice versa. In a non-compensatory decision process, a particular product attribute must be present, at least to a minimally acceptable level, or the product will not be purchased. Using the automotive example, a customer might want a vehicle with an automatic transmission. If no automatic transmission is available, the automobile will not be purchased regardless of other attributes it might possess. In the MARS Marketing Management Simulation, your customers will use both types of decisionmaking processes. They will use a non-compensatory process to narrow down the number of games from which to make a final decision. They do this by considering only games that are targeted specifically to their market segment. You will be required to select a target market segment for each product you place on the market. Only consumers in that segment will consider purchasing it. Then, once a product has been identified as having been targeted for their specific segment, consumers will use a compensatory decision-making process to select among the alternative product offerings in their segment. For example, they will accept different product configurations tailored for their segment.
What this means to you is that your potential sales are limited by the segments you target. Consumers outside your target market segments will not consider purchasing your offering. When considering the consumer choice process, it is also important to determine whether customers are purchasing based on some ideal level of an attribute, or whether they wish the maximum level of that attribute. Where they are seeking an ideal level, it is equally bad to have too much or too little. For example, a soft drink could be too sweet or not sweet enough. There is some ideal level of sweetness that will satisfy a consumers needs. Where consumers are seeking to maximize the level of an attribute, the more of it you can provide, the greater is the perceived value. For example, a consumer might want the best quality available. The greater the quality, the more attractive the product will be. In the simulation, your customers will again use both types of processes, depending on which variables they are considering. For some of your decisions, it will be equally bad to have too much or too little. For others, the more you can provide, the more attractive your product will be. But beware: even in cases where more is better, there are diminishing returns to scale. For example, as you increase the number of salespeople, at some point the effectiveness of the last sales people hired will begin to diminish. Or, consumers may want an infinite amount of some attribute, but the costs associated with providing large amounts of that attribute may result in a price that exceeds what the consumer is willing to pay. Consumer Perception Perception is a persons interpretation of the world around them. From a marketing perspective, perception becomes extremely important when it relates to a potential customers beliefs about the companys product offerings. This is because perception is not perfect. People use a variety of sources to develop opinions about products, and often they get it wrong. But, right or wrong, consumers purchase on the basis of their perceptions. Here is an example that illustrates this point. The American Chrysler Corporation went into a joint venture with the Japanese company Mitsubishi for the collaborative production of an automobile. Together they built an automobile assembly plant. As cars rolled off the assembly line, one automobile would get a Chrysler logo and another would get the Mitsubishi logo. In essence, the automobiles were identical except for their brand names and minor trim differences. When American consumers were asked which automobile they thought was superior, a substantial majority chose the Japanese car. That is because Japanese automobiles had a better reputation for quality, and American consumers generalized that concept to this particular automobile. Seasonality Video games demonstrate a high degree of seasonality in sales. This means that some quarters have much higher sales volumes than others. Periods of high and low sales occur in a regular pattern each year. Sales typically peak during the fourth quarter as retailers ramp up for the big Christmas season. Sales drop off dramatically in January and continue at a sluggish level throughout the first quarter of the year. Sales pick up in the second quarter as students begin their summer break; they are home with nothing to do, and so gaming becomes a prime source of entertainment. The third quarter
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generally represents the lowest sales period as gamers hold off buying Jimmy-Quest games because they anticipate getting some games for Christmas. In the fourth quarter, the cycle starts once more. You should take this seasonality into account when assessing your companys performance.
The Competitive Environment

The number of teams in the competitive environment will be set by your instructor. Each competing team has an identical starting position with respect to sales, costs, and marketing mix. While this is not the situation in the real world, it does present an element of fairness when evaluating student performance. Since the starting positions of all teams are equal, and the simulation equations are deterministic, your performance will strictly, and entirely, depend on the quality of the decisions you make. There is no element of luck built into the simulation. Teams that work hard, develop sound problem-solving and decision-making skills, and wisely practice the managerial tenets of planning, implementation, and control will fare better than teams that do not. The actions of one competitor will affect the results of all other competitors. Teams can capture sales and market share from one another by manipulating their marketing mix more effectively than other teams. Each company will determine the market segments in which they wish to compete. Only products targeted to the same market segment will be in direct competition for that segments potential sales volume. Finally, remember that you are in a class of high-quality business students who all want to win as badly as you. That makes doing well both difficult and highly rewarding. Every team will be trying hard to win. Therefore, you will need to apply yourself and do your best during every decision period in order to achieve positive results.
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Making Decisions
Using the Decision Form
Decisions are made by logging on to the MARS Web site and selecting the Management Decisions tab. Clicking on that tab will take you to the management decisions form. You are required to complete this form every decision period. When you have finished making decisions, you must click on the Submit Decisions button located at the top of the form. This will transmit the data to your professor for processing. This is also the button you use to save your input if you wish to return at a later time and work on the simulation further. You can click on the Submit Decisions button as often as you like until your professor runs the simulation. Every time you submit your decisions, the old ones are overwritten and replaced with the new decision set. After your professor runs the simulation, the decision-making process starts over. Each section of the decision form is explained in detail below.
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Your Budget
The amount of money you can spend each quarter is constrained by your budget. Your budget is set annually by Mr. James C. Quest and given to you in equal quarterly increments. For each of the four quarters in a calendar year, your budget will remain the same. Mr. Quest will change your budget prior to the first quarter of each subsequent calendar year to reflect changes in the companys operating environment. Your budget for each quarter can be found at the top of your decision input form and at the bottom of your Profitability Analysis report. The simulation will not allow you to submit decisions when their cost exceeds your budget. You will have to reduce your expenditures until you meet, or are under, budget. Your Total Budget, Total Expenditures, and Amount Over/Under Budget all appear at the top of the decision form. The simulation automatically provides you with the necessary information about your expenditures as you fill out the form. Unspent budget does not carry over to the next decision period. However, money you decide to spend from your budget is deducted from your revenues and thus affects your profitability. These expense deductions can be seen on the Profitability Analysis Report that is automatically available to you after each computer run. So spend money when you believe you will get a return on that investment, either in the current period or in future periods. Do not spend it simply because it is available to you. It is not wise to waste Mr. Quests money.
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Accounting Review
When you submit your decisions, they first go to the Quest Enterprises Accounting Department for review. You will immediately get a message back on your computer screen from Jennifer Lee, CPA. If you do not immediately get this message from accounting, that means there was a problem submitting your decisions, and they have not been entered into the computer system. While this is a very rare occurrence, it might happen. In the event that it does, click on the Submit Decisions button again to resolve the problem. The message you receive from Jennifer Lee will tell you either that your decisions have been forwarded to your professor for processing or that they violate some standard accounting practices. Remember that Jennifer is an accountant, not a marketer. If Jennifer Lee suggests that your decisions violate Quest company policy or standard accounting practices and procedures, it merely means that your decisions might contain an error. For example, it might be that you have tripled your products price, and that is not a normal practice at Quest Enterprises. This notification from Jennifer Lee does not mean that your decision is a bad one; it means only that it is different from common practice. Jennifer Lee never makes a value judgment on your decisions, because she has absolutely no marketing background. She is simply an accountant
nothing more or less. She determines only if you have violated some exception reports rule of thumb. If you are satisfied with your decisions, simply ignore the accounting memo, and your decisions will be submitted to your professor exactly as you entered them. If you wish to change your decisions, you may do so and then resubmit the new decisions by clicking on the Submit Decisions button. Once again you will get a message from accounting. You may repeat this process until you are satisfied with the decisions you have made. Then you may log off the simulation. The next section of the decision form is described below.
Product Decisions
Current Products The simulation begins with each team having one basic product (a computer game) in four identical versions currently on the market. The marketing strategy was the brainchild of your predecessor, Laura Loser. Laura did not really believe in market segmentation, although through exhaustive research Mr. Quest had identified four distinct market segments. So she took Mr. Quests original product and replicated it to create four identical products. Then she made some minor packaging adjustments, including the photograph on the front of the box, and marketed these four new products to the four market segments. Although she varied the marketing communications a little bit, the four products are physically identical. Mr. Quest, on the other hand, recognized the competitive vulnerability of such a strategy. He knew that it could be successful only in the absence of competition. If a competitor made a product specifically tailored for a particular segment, the current Quest product could be in serious jeopardy. Given that there are several competitors in the market with the ability to do so quickly, Mr. Quest became very concerned about the long-term viability of this strategy. He believed this approach placed his company in a poor strategic health position. He discussed his concerns at length with Laura, but she could not be persuaded to his point of view.
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Branding Brand names, as such, are not a part of the simulation. Therefore you will not have to create brand names. Instead, products will be identified by their internal company designation. As teams register for the simulation, they will automatically be assigned a team name. The team name will follow the International Phonetic Alphabet (Alpha, Bravo, Charlie, Delta, etc.) The maximum number of products that a team can have on the market in any given decision period is four. You will be able to identify products by matching the first letter of a team name with a product number from 1 to 4. So, for example, Team Alpha will have the product names A1, A2, A3, and A4 reserved for their exclusive use. Team Bravo will have the product names B1, B2, B3, and B4, and so forth. While you must never have less than one product on the market, you are not required to have more. The decision whether to create new products or to modify existing products is entirely up to you. Product Dimensions and Attributes A product dimension is a characteristic of a product that is made up of multiple component parts. In that sense, it is like a category name. The individual items included in each dimensional category are called product attributes. Market research has indicated that consumers purchase video games on the basis of their perceptions of overall product dimensions rather than individual product attributes. In particular, consumers strongly consider two product dimensions when deciding which video games to purchase. Those two dimensions define the extent to which specific games are thrilling and challenging. Each of these two product dimensions includes three individual attributes. These attributes are very important, because you have the ability to change consumer perceptions of your products dimensions by changing the levels of these six product attributes. The six product attributes and their associated dimensions are listed below: Thrilling Dimension 1. Action 2. Adventure 3. Violence Challenging Dimension 1. Skill required 2. Difficulty 3. Problem solving
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Research and Development

Starting a Research and Development Project At Quest Enterprises, the Research and Development (R&D) Department is separate from the marketing department. It consists of a departmental manager and several computer programmers. These programmers can create new video games as well as perform other programming tasks for the company. If you wish to change the attributes of any of your products, you must request the R&D Department to commence a development project and then allocate funds from your budget for its completion. If the project is fully funded, it will take exactly one quarter for the programmers to complete it. The product will then be automatically placed on the market at the beginning of the following quarter. To request that an R&D project be initiated, you simply click on the arrow in the Project Purpose row of your decision form. The drop-down box will give you two options: Modify Product and Replace Product. Selecting either of these alternatives initiates an R&D project. If you select the Replace Product option, the project will result in an entirely new video game to replace the one currently on the market. If you select the Modify Product option, the project will result in a new and improved version of the product you currently have on the market. The decision whether to modify or replace a product is strategic. If you modify a product, the cumulative brand awareness that you have built up over time remains, but you will have to concern yourself with changing the consumers perceptions of the product. Many consumers will remember the product as it was, and so your message will have to change these old perceptions. On the other hand, if you replace a product, your new one will have no old perceptions to overcome. However, you will lose the brand awareness that had been created for the original product. In essence, you would be starting over with the introduction of a brand new product. Therefore, modifying a product makes sense if you are simply trying to fine-tune a products perceptual position. But replacing it is ordinarily the best alternative if you are trying to move the product over a large psychological distance such as would be required in order to move it from one target market segment to another. (For more on this topic, see the Perceptual Map discussion under the topic Purchased Research Reports). It is important for you to note that there is a one-to-one correspondence between your research and development projects and the four products you currently have on the market. Project A1 must be
used to modify or replace Product A1. Project A2 must be used to modify or replace Product A2, and so forth. Make absolutely certain that you are starting the correct R&D project for the product you want to change. Allocating Budget Dollars to the R&D Project You will have to allocate money from your budget to your research and development projects in order to get them approved. You can allocate money to a specific R&D project by entering the amount you wish to allocate in the Current $ Allocation box on your decision form. This amount will be subtracted from your budget. After you have specified the attribute levels, the total cost required for completion of the research and development project will appear in the Total Project Cost row. If you allocate an amount equal to the total project cost, the R&D project will be completed at the end of the quarter. It takes R&D one fully-funded quarter to design, program, and fully test any product changes before they are ready to be put on the market. Consequently, your old product will remain on the market until the R&D project is completed. The cost of completing a new product or of modifying an existing one will depend on the level of the attributes you select. It costs $10,000 for each unit change in the level of any given attribute. For example, if you wish to modify an existing product by changing Problem Solving from level 2 to level 4, it will cost $20,000. For your convenience, the project cost is calculated as you enter the product attribute levels on the decision form and is displayed in the Total Project Cost row on the form. You may allocate the total dollar amount required for completion in one decision period or allocate portions of the required total over several decision periods. If you decide to allocate the required funds over more than one decision period, the simulation will keep track of the dollars allocated and subtract them from the total project cost. The remaining funds required for completion will appear in the Remaining Cost row of the decision form. There is no financial penalty for allocating the cost across multiple decision periods. However, the project will not be completed until all required funds have been allocated. Should you inadvertently allocate more than the required dollar amount, that money will be accepted and kept by research and development. It is not a wise thing to do. As soon as a research and development project is completed, the old product will automatically disappear and be replaced by the new one. If you would like to delay this product exchange, do not allocate enough money to complete the project. Your money will sit in R&D waiting for you to allocate the remaining funds. You cannot change an ongoing research and development project without losing the money you have already allocated. Money allocated to R&D is a sunk cost and is not recoverable. Therefore, do not start projects until you are sure of the changes you want to make to the product attributes. Changing Product Attributes to Affect Product Dimensions Each product attribute can have a level from 1, being very low, to 10, being the maximum amount currently possible. The individual attributes, however, do not have an equal effect on customer perceptions of each product dimension. For example, increasing the level of the Violence attribute has
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three times more impact on the Thrill Dimension than does increasing the level of the Action attribute. The impact of each attribute on its associated dimension is as follows: Thrilling Action Adventure Violence Impact =1 =2 =3 Challenging Problem Solving Difficulty Skill Required Impact =3 =2 =1
In order to calculate the combined impact of the attributes on their associated dimension, it is necessary to multiply each attributes level times its impact and then add the totals across all three attributes. For example, if you want to build a product with a Thrill Dimension level of 30, you could do it in a variety of ways. Each of the following would work: Action level 1, Adventure level 1, Violence level 9 = 1(1) + 1(2) + 9(3) = 30, or Action level 6, Adventure level 3, Violence level 6 = 6(1) + 3(2) + 6(3) = 30 While they are different in makeup, both games would be perceived by potential customers as being equally thrilling. It is important to note that the level of an attribute has an effect on its cost of production, which is reflected in the cost of goods sold on your profitability statement. An attribute with level 10 costs about 100 times as much to produce as an attribute with level 1. Costs increase at an increasing rate as you go from level 1 to level 10 for any attribute. That means it is significantly more costly to go from level 9 to level 10 than it is to go from level 1 to level 2. Additional Impact of the Violence Attribute Of particular importance is the level of violence that you integrate into your games. The Entertainment Software Association has created the following designations that are applicable to the level of violence in Jimmy-Quest Games: E: Titles rated "Everyone (E)" have content that may be suitable for persons ages six and older. These titles will appeal to people of many ages and tastes. They may contain minimal violence. T: Titles rated "Teen (T)" have content that may be suitable for persons ages 13 and older. Titles in this category may contain violent content. M: Titles rated "Mature (M)" have content that may be suitable for persons ages 17 and older. These products may include more intense violence.
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For Jimmy Quest Games, the violence level attribute will result in the following designations: Violence Level 1-3 4-7 8-10 Rating E T M
The level of violence will have differential effects on product demand for different market segments. Classic Gamers enjoy more violent games; Beginners tend to shy away from them. The effect of violence on the other two segments in the simulation is not influenced by the ESA Violence Designation. The Perceptual Map, discussed under the topic Purchased Research Reports, is an excellent tool for determining your customers perceptions of your products dimensions.
Pricing Decisions
The pricing variable of the marketing mix represents the value that you place on your product. As you decide on your products price, you should keep three Cs in mind: Cost, Competition, and Customers. James C. Quest is very concerned about his companys profitability. He keeps the following equation on the huge white board in his office: Profit = $ Sales Volume Cost. Mr. Quest knows that the top line (sales volume) is important, but he also knows that the bottom line is strongly influenced by cost. He likes to remind his employees of the importance of that equation whenever they enter his cavernous office. So in addition to thinking about your competition and customers in making your pricing decisions, be sure to cover your costs of manufacture, R&D, and marketing. You are responsible for setting two prices. You must determine the price at which you will sell your products to the retail outlets that carry them. And you must also set a recommend retail price for the ultimate consumers who will purchase them from the retailers. Retail Price The retail price is what the ultimate consumer of the product will pay for your products. These consumers purchase them for their own use or perhaps for gifts. They do not purchase them directly from your company but from a retail store of some type. You will set this price by putting the
appropriate number in the Retail Price/Unit row of your decision form. Remember, this price is not revenue back to your company. It is revenue for the retail store that carries your product. While this is only a recommended retail price, your retailers are very cooperative and will charge exactly what you suggest. Price is a relative concept. That is, the prices of other competing products in the market place help determine whether consumers consider a particular products price to be high or low. A price of $40 for a game may be high if other companies with similar products are charging $30.00. Or a price of $40.00 may be low if these companies are charging $50.00. Since competing teams set consumer expectations with respect to a fair market price, you should keep an eye on your competitors to see how your prices compare. Often ultimate consumers have an ideal price in mind for the products they are considering for purchase. This is the case in your companys market. While your potential ultimate consumers vary in sophistication by market segment, they all have some idea of what they would like to pay for an electronic game. Pricing your product above their ideal will discourage purchase. Pricing your product below their ideal will also discourage purchase. Your market tends to equate price and quality, and will think that a price below expectations is a sure sign of an inferior product. These pricing ideals will vary by market segment. Consider another very important pricing issue: if your price gets too high, it will be rejected by the market. In that case your sales will fall to zero. The price where your product is rejected by the market is approximately double what ultimate consumers in your targeted segment expect to pay (the ideal price) for a product like the one you are offering. You should consider the potential for market rejection when selecting your retail price. Note that ideal price is often a dynamic perceptual concept. That is, the ideal price, by segment, is likely to evolve over time. As time passes, your customers will change their perception of what constitutes an ideal price. You should track these changes to help plan your pricing decisions. Wholesale Price The wholesale price is the amount that retail stores pay for the products that you make and they sell. The difference between the retail price and the wholesale price is called the channels gross margin. The channel margin must cover the retailers expenses and leave a contribution for profitability as well. It is the wholesale price, not the retail price, that produces the revenue for your firm. When setting your wholesale price, you need to make the same kinds of considerations that you did when setting the retail price. Remember also that the greater the difference in retail and wholesale prices (gross margin), the more motivated your wholesalers will be to carry and emphasize your product lines. Traditionally, James C. Quest Enterprises has used a keystone pricing strategy. Keystone pricing is where the retailer doubles the wholesale price for the items they sell. That gives them a 50% markup on selling price, or a 100% markup on cost (depending on how it is calculated). In either case, the dollars are the same. You may decide to keep this pricing strategy, or you are welcome to change it.
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But whatever you do, keep an eye on the effect that your pricing decisions have on your sales volume and departmental profitability. For each product you have on the market, you will need to set the retail and wholesale selling prices every decision period. You may set them as high or as low as you wish. But be sure to consider the sales and profit effects of your decisions before implementing them. And remember that your retail price must always be higher than your wholesale price, or you will be asking your wholesalers to carry your product without compensation.
Marketing Communication (Promotional) Decisions

During your job interview, Mr. Quest indicated your predecessor believed that if you build a better mouse trap, the world will beat a path to your door. Essentially, she spent almost nothing on product promotion; she left it to product development to create products that would sell themselves. Laura Loser and Mr. Quest were not on the same page. That reminded you of something that you learned in college: the Promotional variable works best as an integrated communications package. That means that you should use as many elements of the promotional mix (advertising, sales promotion, publicity, and personal selling) as possible in a coordinated and integrated communications campaign in order to maximize the campaigns effectiveness. The integrated communications variable is important for two reasons. First, it affects the level of brand awareness for your product. If consumers have not heard about your product, they will not purchase it. Second, it has persuasive communication effects that lead potential customers through the stages of brand awareness, increased levels of interest, evaluation of your product compared to other offerings, trial of your product if possible, and finally, adoption of your product if they believe that it best meets their needs. Brand awareness is a result of cumulative communications expenditures. Over time you can build up brand awareness in a segment. However, if you replace a product with a new one, your brand awareness goes to zero and you start over. If you change segments with an existing product, there will be a significant negative effect on brand awareness. This is due to the fact that many members of the new segment never paid attention to this product since it historically was not targeted to them. If you remove a product from the market and then bring it back, your brand awareness will also be negatively affected. The longer the product stays off the market, the greater the negative effect on brand awareness will be.
At James C. Quest Enterprises, your primary communications responsibility is to establish an integrated communications program for each product that you have on the market. Your integrated marketing communications program requires spending a portion of your overall budget on advertising, sales promotion, publicity, and personal selling. For each of your commercialized products, you will have to allocate funds across the advertising, sales promotion, and publicity components. (The personal selling component is associated with your distribution decisions.) When distributing your budget across elements of the communications mix, it would be wise to think about the effects of each variable and the stage of the product life. When a product is launched, it is important to not only advertise the product but to take full advantage of sales promotions and publicity. Trade-oriented sales promotions are essential for gaining distribution and obtaining the support of channel members. Consumer-oriented promotions are essential for obtaining trial. Publicity requires a level of public interest in order to get the media to publish it. Public interest occurs most strongly at the time of new product launch. Over time, advertising will take an even larger role; the other two elements diminish in their importance and effectiveness. However, at no time is sales promotion or publicity as cost-effective as the advertising component.
Distribution Decisions
Your product is sold to retail outlets that, in turn, sell your product to the ultimate consumers. There are four types (categories) of retail outlets that carry your product. These are the four categories of alternative retail outlets: Mass Merchandisers (e.g., Wal-Mart and Target) Video Game Specialty Stores (e.g., Electronics Boutique and Babbages) Game Rental Establishments (e.g., Blockbuster and Hollywood Video) Internet and Other (e.g., Amazon.com and Sams Club) You will need to allocate your sales force to those outlet types that you believe will best serve your target customers. And you will need to decide how many salespeople to place in each type of distribution channel you choose. For each salesperson you hire, there will be a fixed cost of $20,000
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per quarter. That includes their direct compensation, fringe benefits, selling expenses, and automobile. You may move salespeople between distribution channels at no additional cost. If the total number of salespeople summed across all channel types is larger than in the previous period, you will have hired additional salespeople and will therefore have a higher cost. Similarly, if you have a smaller total number of salespeople summed across all distribution channels, you have fired salespeople, and your total sales force cost will be reduced. There are no hiring or severance costs allocated to your department; they are absorbed by the company. The company sales force is organized by type of retailer. Each salesperson, however, carries your whole line of products. So you will need to decide whether you want salespeople in each channel to emphasize your products equally or to concentrate more on some products than others. You will do this by allocating your salespeoples time across the different products. When allocating sales force, it is very important to consider the shopping habits of your target customers. Research has concluded that the shopping habits of the ultimate consumers in this product category are relatively stable. The percentage of each target market segment shopping at each type of retail establishment is in the following table.
Retail Shopping Habits by Segment

Segment/ Channel Classic Gamers Beginners Problem Solvers Winners Mass Merchandisers 5% 60% 5% 30% Specialty Stores 60% 5% 30% 5% Internet & Other 30% 5% 60% 5% Game Rentals 5% 30% 5% 60%
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Market Research
During your job interview, James C. Quest gave you a little advice: Anything that is worth doing is worth measuring. Good decisions are difficult to make on a consistent basis. Quality decisions require information, analysis, and significant effort. Mr. Quest also mentioned that your predecessor never bought a single research report. It became fairly obvious that one of the primary reasons that your predecessor performed so poorly was that she refused to purchase and use the available research reports in her decision making. As a result, her decisions were hit and miss, and they apparently missed more than they hit. The good news is that there are a number of research reports available for purchase. The bad news is that the cost of each purchased report is subtracted from your profitability. There is an old saying: It takes money to make money. The point being, if you can make better decisions that will increase your profitability either now or in the future by purchasing a research report, and if that increase in profitability is greater than the cost of the report, then you should buy the research report. However, if you purchase a report, glance at it, and proceed to make the same decisions you would have made without it, then you are wasting your time and your companys money. For every decision that you input onto the decision form, there is a corresponding output report that will give you feedback on the effectiveness of that decision. One of your first tasks in deciding which reports to purchase should be to identify which reports relate to which decisions. Then you will be in a position to better judge which research reports to purchase. Making these judgments will help you develop your problem-solving and data-based, decision-making skills. The research reports available for purchase are described in the Purchased Research Reports section of this manual. It is wise to make extensive use of them.
Strategic Versus Financial Health

There are two categories of information that are important in marketing strategy. The first is financial health. In business, financial health information is generally readily available as an output of the accounting system. It focuses on the profitability of the organization. It is very important for you to be concerned both about the financial health of James C. Quest Enterprises Inc. and the marketing departments contribution to corporate profits. The marketing departments contribution to corporate profitability is how your corporate president, James C. Quest, (and perhaps your professor as well)
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evaluates your performance. This information will be available to you as part of the free, automatic output reports that are generated by your company. The second informational category is strategic health. Whereas financial health is a function of past performance, strategic health is a measure of your companys competitive situation for the future. Over the long term, one would expect financial health and strategic health to parallel each other. But in the short term they can go in opposite directions. This is because past performance does not always predict the future. A firm could show good profitability and yet be very vulnerable in terms of its competitive position. Measures of your strategic, or competitive, health can be found in the Purchased Research Reports section of this manual. Through these studies you can find your competitive strengths and weaknesses and make adjustments that will secure your financial health for the future.
Free, Automatic Output Reports

The reports discussed in the following sections are illustrated with screen shots from the simulation. You should not rely on the data in these sample reports as accurately reflecting your simulation. The illustrations are to show you the format of the various reports and the kinds of information they provide. The screen shots and explanations should help you determine each reports applicability to any aspect of your decision-making process. After every run of the simulation, participants will be provided automatically with the following information: A failure to submit decisions Memorandum from the company president, James C. Quest (This memorandum is only issued when the decisions form is not submitted.) An evaluative Memorandum from the company president, James C. Quest A Management Decisions report showing the previous periods input decisions for their team A Profitability Analysis report by product for their team A Marketing Control report providing a variety of feedback measures Team Ranking Reports for profit contribution, total sales, and market share A Market Share Analysis report An Industry Performance report ranking teams on sales, market share, and contribution to company profits A report on all Commercialized Products on the market There will be no cost charged to the marketing department for this information. It is perceived as an important feedback mechanism by Mr. Quest, and it is therefore automatically provided to you.
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Quest Memoranda
Failure To Submit Decisions Memorandum Each decision period your marketing management decisions are submitted to Mr. Quest (and to your professor) by clicking the submit decisions button on the Management Decisions form. Failure to submit a decision by clicking this button will be extremely displeasing to Mr. Quest because he will believe you put no effort into your marketing management duties. For each decision period where you fail to submit a decision, Mr. Quest will send you an unpleasant memorandum voicing his displeasure at your failure to do your job properly. It will be the first of your automatic output reports. You will only receive this memorandum when you have failed to submit your management decisions form prior to the time when the simulation is run. If you do not receive this memorandum, it means that you submitted your decisions properly, and before the deadline. Your professor may choose to include additional penalties for each failure to submit a decision. Quarterly Evaluative Memorandum After every simulation run, you will receive a quarterly evaluative memorandum from James C. Quest, President and Chief Executive Officer. This memorandum will give you some guidance with reference to how Mr. Quest feels you are progressing. From Mr. Quests perspective, the key to his evaluation of your performance is your departments net contribution to corporate profitability. James C. Quest will be pleased if your performance is above the industry average. Similarly, he will be less than enthusiastic, to say the least, if your performance is below the industry mean. After all, corporate profits go right into Mr. Quests bank account! The greater the frequency of above-average performance, the happier it will make Mr. Quest. The greater the frequency of below-average performance, the less you will appreciate hearing from him. Your instructor may evaluate you differently for grading purposes. But James C. Quest is a bottom line man, and his memoranda reflect that philosophy. You need to be a little thick-skinned if your performance is below average and realize that Mr. Quests evaluations of your performance are strictly businessnot personal.
You should pay particular attention to the P.S. at the end of each memorandum. In this postscript he will summarize his evaluation of your performance and give you his opinion of your strongest and weakest decision areas. That does not mean your other decisions are perfect. You should still make every attempt to improve all your decisions every decision period. That is the essence of continuous improvementa winning business philosophy in the marketplace.
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Management Decisions Report

The input decisions that your team entered prior to the simulation run appear on the Management Decisions report. It is important to understand that this report is really an input report rather than an output report. It contains your input decisions not the results of those decisions. It is replicated as part of your automatic output because the data contained in the output reports that follow it are a direct result of the input decisions on this report. When you are evaluating your performance, it will be easy to scroll back to this report to refresh your memory on the decisions you made going into the current simulated business quarter. Do not be confused by the fact that this is an input report. For example, you may have conducted a fully funded research and development project that would result in an approved product to be launched at the beginning of the next quarter. However, this Management Decisions Report would indicate not approved because it is an input report, not an output report. Your company President, Mr. James C. Quest, makes it a practice to review this report. Using an exception reporting process, he employs two colors to highlight what he believes to be your strongest and weakest decisions. Decision areas highlighted in green indicate that Mr. Quest believes these were the best decisions you made. Decision
areas highlighted in yellow represent his view that these were the weakest decisions you made. He makes no comments on the other decisions; they may have been good or bad. It is up to you to make that determination, correct your weaknesses, and build on your strengths.
R&D Project Status Report

The R&D Status Report provides you with the status of your 4 research and development projects. You begin the simulation with four completed research and development projects, and these are all on the market. If you start a new project and do not provide sufficient budgetary funds to complete that project, the status will be Not Approved. You may complete that project in future periods. Whenever you provide sufficient funds to complete an R&D project, this report will say Approved and it will be automatically placed on the market when you submit your next decision set. Once on the market, the status remains Approved until you begin a new project. Then, the new project replaces the old one on the project status report.
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Profitability Analysis Report

The Profitability Analysis report is based on Mr. Quests decision to evaluate each department managers performance as head of a profit center. A profit center is a department that can be thought of as generating revenues and incurring costs. The difference between these two dollar amounts is that departments contribution to corporate profitability. You will generate marketing department revenue through product sales, and you will incur costs associated with the operation of the department. The dollar difference between revenues generated and costs incurred is the marketing departments contribution to corporate profitability. This report also breaks down profit contribution by individual products to help with your performance analysis.
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Marketing Control Report

The Marketing Control report provides company-specific measures for the current period, and cumulatively, on: Total Sales Profit Contribution Profit Contribution as a Percent of Sales Market Share Gross Margin as a Percent of Sales Operating Expenses as a Percent of Sales
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Team Ranking Reports

There are three Team Ranking reports showing your companys performance relative to your competitors. In each case you are provided with both current period and cumulative data. These Team Ranking reports show your competitive standing with respect to the following: Profit Contribution Total Sales Market Share Your professor may use any or all of the above in evaluating your team performance. But at Quest Enterprises, Mr. Quest is only concerned with the bottom line. He will evaluate your performance based on total profit contribution as illustrated in the first of these three team ranking reports. The data in these reports range in value from 1 to a number equal to the total number of competing teams in your simulation. A value of 1 indicates that the competitor is ranked first on the measure. A value of 2 indicates that the competitor is ranked second, and so forth. Areas highlighted in green indicate better-than-average performance, and areas highlighted in red reflect below-average performance.
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Market Share Analysis Report

The Market Share Analysis report provides period-by-period data on your current market share based on dollar sales for each of the commercialized products you have on the market. The market share data are presented in both tabular and graphical formats. A gap in the data, as illustrated in this sample report, indicates that the product was not on the market during that time.
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Industry Performance Report

At Quest Enterprises, you are also automatically provided with an Industry Performance report as an informational input for your marketing control responsibilities. This report provides both period-specific and cumulative data on sales, market share, and profit contribution for every competitor in your simulation. The three Team Ranking reports are based on these data. You will also be provided with graphs of period results by company for sales, profit contribution, and market share.
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Commercialized Products Report

You will automatically be provided with a report on all products currently on the market. This report includes product prices and physical attributes. Products will appear on this list after they have been created and approved by Research and Development and have been launched by a company in your industry. A changed product from an R&D project that has just been completed but not yet been sold will not appear on the Commercialized Products report until it has been on the market for one quarter. The old product that was on the market during the period just completed will be the one that appears on this report. If products are removed from the market, they will not appear on this report.
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Purchased Research Reports

Each decision period, you have the option of purchasing all, some, or none of the following research reports. These reports are generated by an independent market research company, MRR (Market Research Reports) Inc. Every report provided by MRR includes data applicable to all teams. In essence, MRR does the research and then sells the results to whomever wishes to purchase them. While Mr. Quest has not provided you with these reports automatically, he does believe in their value and encourages you to make data-based decisions. He leaves the choices to you.
Industry Market Potential: Cost = $5,000

The Industry Market Potential report provides an industry-wide, seasonally adjusted estimate of the maximum sales possible in the next decision period for each market segment. This number is not a sales forecast for your company. You will have to create your own sales forecast by considering such factors as brand awareness for your product and what portion of the total segment potential your product is likely to achieve. You need to remember that sales are a function of your own marketing mix and also take into account the nature of competition in any given segment. Your company sales forecast for each product will likely be significantly smaller than the total industry market potential shown in this report.
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Perceptual Map: Cost = $2,000

The Perceptual Map displays all commercialized products on a two-dimensional map. It illustrates consumer perceptions of each product based on how thrilling and challenging they perceive it to be. It also illustrates each segments ideal levels for the thrilling and challenging dimensions. The closer a product is located to the segments ideal value, the more likely it is to be purchased. In making their evaluations for each product, consumers use several sources of information. Some sources (e.g., advertising) are controlled by marketers, and others (e.g., word of mouth or prior experience) are not. Therefore, any given products location on the map may or may not accurately reflect the actual physical characteristics of the product. Clicking on the perceptual map, and then moving your cursor over the circles, will display information about the product. Each market segments perceptions of commercialized products are strongly influenced by the products attributes as described in the Product Dimensions and Attributes section of this manual. The markets perception of the challenge dimension is influenced by a products requirements for problem solving, level of difficulty, and skill required in playing it. The
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markets perception of the thrill dimension is influenced by the amount of violence, the degree of adventure, and the level of action reflected in the game. You can influence a products perceived position on the map by altering its physical attributes through research and development as discussed previously. If you instruct R&D to create a Replacement Product, when it is completed and placed on the market it will appear on the map exactly where the physical attributes suggest it belongs. Your primary problem will be that brand awareness is reduced to zero; you must spend a significant amount on advertising, sales promotion, and publicity to get brand awareness up to acceptable levels. On the other hand, if you instruct R&D to create a Modified Product, when it is completed and placed on the market it will appear on the map at a location between where the old product was located and where the modified products physical attributes suggest it should be. This is a direct result of the brand awareness and product positioning that you created for the old product. Your level of brand awareness is not diminished by introducing a product modification. However, the greater the brand awareness at the time of the modified products market launch, the closer the modified product will appear to the old products location on the map. Over time, you can move the modified product to its ideal location by spending money on advertising, sales promotion, and publicity to correct the consumers misperceptions. Each period, the modified product will move closer to the ideal position. The more marketing communications dollars you spend, the faster it will move. Your primary problem will be to correct the misperceptions created by the old products position. Macromedia Flash-Enabled Browsers If the browser on your computer is Flash enabled, your perceptual map will appear like the perceptual map illustrated above. The large red circles represent the ideal points, and the smaller colored circles represent the products that teams have placed on the market. The size of each circle reflects that products market share for its target segment. You will be able to see a products market share and intended target segment by clicking on the perceptual map and then moving your cursor over the product circle. The perceptual map includes a table showing the market share and the perceived physical map location of all commercialized products. If two or more products occupy the same position and therefore appear on top of each other on the perceptual map, when you move your cursor over the circle, only data from the company whose name comes last alphabetically will be visible. Browsers Without Macromedia Flash If the browser on your computer is not Flash enabled, the basic information will be the same as for Flash-enabled browsers. The report will contain all products map locations and market shares in the table, but the graph will not display that information when the mouse cursor is moved over each products location on the map. Also, the size of the product symbols on the map will not reflect their actual market share. If you would like to download the free Macromedia Flash Player, you may do so here: http://www.macromedia.com/shockwave/download/download.cgi? P1_Prod_Version=ShockwaveFlash
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Note: You should not download the player to a university computer without university permission.
Brand Awareness: Cost = $2,000

The Brand Awareness report indicates the percentage of people in each target segment that are aware of each of the commercialized products. It is very important for you to understand that brand awareness is a prerequisite to purchase. If potential customers have not heard of a product, they certainly will not be looking for it and are therefore not likely to purchase it. The consumer decision-making process is often described as going through the stages of awareness, interest, evaluation, trial, and adoption. This report suggests how many people have made it through the first stage. Brand awareness is a function of cumulative integrated marketing communication dollars spent on advertising, sales promotion, and publicity for each product on the market. The percentages are given by product and associated target segment for all companies
Competitive Promotional Expenditures: Cost = $5,000

This report provides the total integrated marketing communications expenditures in the current period on advertising, sales promotion, and publicity. Period and cumulative expenditures are given by product for all companies
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Competitive Sales Force Allocation: Cost = $5,000

For every competitor, this report provides the number of salespeople currently allocated to each distribution channel.
Competitive Sales Force Time Allocation: Cost = $5,000

For each channel of distribution, this report provides each competitors sales force time allocated to its commercialized products.
Competitive Profit Contribution by Product: Cost = $5,000

For every competitor, this report provides each commercialized products current total dollar contribution to profitability.
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Ultimate Consumer Satisfaction Survey by Segment: Cost = $2,000

There is a separate Ultimate Consumer Satisfaction Survey report available for each of the four market segments. These reports provide feedback from a survey of a random sample of ultimate consumers who fit each target segment profile and are knowledgeable about the competitive game offerings in their segment. The reports provide feedback on the marketing mix used for each product targeted to their segment. The variables included in this report include consumer perceptions defined as follows: Product Attributes The perceived value of the actual physical attributes making up the thrill and challenge product dimensions of each product. Price The attractiveness of the retail price charged by your distributors for each product. Promotion The effectiveness of total integrated communications by product. This is a weighted average of current and historical communications expenditures for the product. Current expenditures are weighted 75% and cumulative historical expenditures are weighted 25%. Promotional Split The effectiveness of the communication elements by product. This reflects the relative proportion of the total integrated communications dollars allocated to each of the three marketing communication elements (advertising, sales promotion, and publicity). Distribution The effectiveness of your distribution system. This reflects the effectiveness of your sales force in selling your products to each channel of distribution. In this Ultimate Consumer Satisfaction Survey, product attributes, price, promotion, promotional split (advertising, sales promotion, publicity), and distribution are all ranked from 1 = best to X = worst, where X is equal to the number of competing products in the segment.
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Retailer Satisfaction Survey by Segment: Cost = $2,000

This survey provides feedback from your retailers on those factors that most influence their willingness to carry and support your products. The variables included in this report are retailer perceptions defined as follows: Gross Margin The difference between the wholesale cost and the retail price charged for the games. Since you set both prices as part of your decision-making process, you control the retailers gross margin. Promotional Support The total current expenditures for integrated communications (advertising, sales promotion, and publicity). The more you spend on marketing communications, the more your retailers believe you will get significant sales volumes. Since in their profit calculations retailers look at the per-unit gross margin multiplied by the total sales volume, they love seeing large dollar amounts for promotional support, which often translates into large sales volumes and therefore greater profitability. Satisfaction with Sales Force The effectiveness of the sales force calling on your retailers. The greater the attention your retailers receive from the sales force, the happier they are. This component of retailer satisfaction is broken down by retailer type. In this Retailer Satisfaction Survey, gross margin, promotional support, and sales force support are all ranked from 1 = best to X = worst, where X is equal to the number of products in the segment.
Conclusion
You are now ready to begin making marketing decisions. Your starting period represents your first day in your new position as Marketing Manager for James C. Quest Enterprises. Take your time in making decisions. Use the information available. Learn from both your successes and your failures. Your instructor will inform you how your performance in this simulation will be evaluated and what part its evaluation will play in your course grade. You will also get quarterly evaluation memos from your company president and immediate superior, James C. Quest. James Quest is probably more intolerant of poor performance than your professor. And he is probably more effusive in his praise for above-average performance. You will have to learn to deal with praise
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and criticism when you take a permanent position upon graduation, so encountering them in the simulation can also be a learning experience. The authors of the simulation want you to have fun while learning. You will find our sense of humor breaking through from time to time. Perhaps you have noticed it in this student manual. Have a great time, be competitive, and above all, maximize the learning opportunity presented to you. Best wishes on your learning experience from Bob, Jim, and Katie.
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Appendix A
Printing Instructions for Simulation Output
If you wish to print the manual or any simulation output, you may do so for your personal use. For optimal results when printing any simulation output, you should use the Microsoft Internet Explorer browser and insure that the Print background colors and images option is selected. You should have to make this selection only once. To turn the option on, from your browser select the Tools menu item and then click on Internet Options. Next click on the Advanced tab and scroll down to the Printing section. Make sure that the Print background colors and images box is checked. Click OK.
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Mars Simulations: http://www.shootformars.com

Copyright 2004 - 2010 Cook Enterprises, LLC. All rights reserved.

MARS MMS Students Manual

Mars Simulations: http://www.shootformars.com

The MARS Marketing Management Simulation .....................................................9

Features of a Simulated Environment ..................................................................11

Marketing Strategy .......................................................................12

The Marketing Mix ..................................................................................................14

MARS MMS Students Manual

Mars Simulations: http://www.shootformars.com

The Simulated Environment .......................................................16

The Competitive Environment ...............................................................................20

Making Decisions .........................................................................21

Research and Development ...................................................................................26

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Mars Simulations: http://www.shootformars.com

Pricing Decisions ...................................................................................................29

Purchased Research Reports .....................................................46

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Mars Simulations: http://www.shootformars.com

Macromedia Flash-Enabled Browsers ..................................................................................48 Browsers Without Macromedia Flash ...................................................................................48

Conclusion ....................................................................................52 Appendix A ....................................................................................54

MARS MMS Students Manual

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MARS MMS Students Manual

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MARS MMS Students Manual

Mars Simulations: http://www.shootformars.com

The MARS Marketing Management Simulation

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MARS MMS Students Manual

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Features of a Simulated Environment

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The Marketing Mix

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The Simulated Environment

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The Competitive Environment

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MARS MMS Students Manual