Marketplace, segundo trimestre

1. Quarter 2: Go toQuarter 2: Go to
Test MarketTest Market
February 6, 2017Copyrighted in its entirety, Innovative Learning Solutions,

2. The Goal is to
Maximize Learning
and Not Profits.

3. 50% of the firm’s decisions
will prove to be unacceptable
– be careful

4. • Set selling prices
• Develop advertising campaign
• Design 2 ads, one for each brand
• Determine number of placements
per ad
• Develop sales channel
• Hire sales force for quarter
• Open new sales outlets for Q3

5. • Schedule production
• Forecast demand
• Set operating capacity
• Set desired ending inventory
• Run factory simulation, check numbers
• Contract for market research on
customers and competition
• Check pro forma financial statements

6. The Market is not waiting for you to take their orders.
You must create the market
• Sell brands that Customers want and at a price they are willing to pay
• Locate sales channels where the largest number of Customers can be
found
• Inform and persuade Customers to buy a PC through advertising
• Hire Sales People to find Customers and persuade them to buy your PC

7. Costs – production, marketing, overhead
Profit goals
What Market will bear
Competition

8. There are many startup costs
which will exceed your
revenues. Your production
volumes will be very low,
resulting in high per unit
costs.

9. Time
Profit
Costs to setup and
grow the
business
0

10. Time
Profit
Costs to setup and
grow the
business
0
Revenue

11. Time
Profit
Costs to setup and
grow the
business
0
Revenue
Profits come later
You are here You are trying
to get here
Free
cash flow

12. Demand
Time
Introduction
Growth
Maturity
Decline
You are here.
High costs, low demand

13. You must discover the Market
Response Function regarding price.

14. Your
Demand
Your Price
Elastic (demand drops fast
with increasing prices)
Inelastic
(price is not a big factor)

15. Your
Demand
Price premium for your brand
Less Elastic
Elastic
Differential Advantage shifts
the demand curve and
reduces price elasticity

16. Your
Demand
Competitor’s Price
Low competitor prices
will kill your demand

17. Your Ad
Order of priority tells
the ad agency what
to stress in the ad
Order of priority implies
importance of message
to customer
Low price
Easy to use
More productive
Fast
Office applications
Picture office workers
Most important
Least important

18. Is this too cluttered?Is this too cluttered?

19. 73 Total Interface Elements73 Total Interface Elements

20. Example of “high”
clutter stimulus
(i.e. high quantity,proximity and
intrusiveness of
interface elements)

21. Example of “medium”
clutter stimulus (i.e.
medium quantity,
proximity and
intrusiveness of
interface elements)

22. Example of “low”
clutter stimulus (i.e.
low quantity, proximity
and intrusiveness of
interface elements)

23. Which response function is at work?
OR
More is good to a
point and then ceases
to add excitement
Hot
Cold
Less More
Hot
Cold
Less More
More adds
value to a point
& then takes
away value

24. Your
Demand
Number of ads
Diminishing
returns
Too little

25. Strong competitor
advertising will steal
away your customers
Your
Demand
Competitor’s Advertising

26. Your
Demand
Number of sales people
Too many
Diminishing
returns
Too few

27. Shift the Response Function
upwards with better
brands, prices,
advertising, web tactics,
sales force placement, and
compensation.
Your
Demand
Number of sales people

28. High production
Lower unit production costs
Risk of too much inventory
Uses up large volumes of cash
Risk of brand obsolescence (wrong product in warehouse)
Low production
Low cash requirements
Higher per unit production costs
Risk of too little inventory
Stock outs // Lost revenue // Customer ill will (unhappy
customers)

29. • Sale people will probably sell
between 30 and 100 units
each.
• Demand is a function of
market potential of the
segment and the market along
with the quality of marketing
decisions.
• On average, sales people will
sell 50 units each for the
entire quarter.

30. The plant manager checks
the warehouse every day
to determine the rate at
which each brand is being
pulled out of the warehouse
The production schedule is
set to mirror the demand
pattern in the warehouse, faster
moving brands get more time
on the production line than
slower moving brands.

31. Enter all decisions. The financial component of each decision will be posted to the Pro
Forma Cash Flow.
Run the factory simulation. The simulator will estimate production costs and revenues.
Load data into the Pro Forma Cash Flow.
Check the ending cash position. A desired ending cash position would be $500,000 or
more.
Prepare a pessimistic scenario.
Reduce demand by 50%, keeping all the other expenses the same
Rerun the factory simulation
Reload the Pro Forma Cash Flow
For this pessimistic scenario, the ending cash position should be $300,000 or more.
Prepare a worst-case scenario.
Set demand at 25 total
Look at the numbers, how bad would it be?

32. Time
Profit
Costs to setup and
grow the
business
0
Revenue
Profits come later
You are here

33. Execution of a coherent strategy
Management of cash in the face
of great uncertainty
Learning to walk before you run

34. Coordinating a host of tactics
Pricing – balancing costs, profit,
what the market will bear, and
competition
Testing the market – discovering the
markets’ many response functions
Production – managing capacity,
inventories, and costs to meet demand-based goals