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PharmaSim AnalysisJoey BringhurstKrysta HendersonBradley ShinnLaura WingerMay 4, 2010
1OverviewAllstar had some big decisions ahead of it. With changing market conditions and strongcompetitors, their relative...
2Indep DrugstoreChain DrugstoreGrocery StoresConvenience StoresMass MerchWholesaler SupportMerchandisersDetailers050100150...
3$27$28$29$30$31$32$33$34$35$52$54$56$58$60$62$64$66Aches Nasal Chest RunnyNoseCough Rest All butRestStockPrice(inPer3)Net...
4analgesics, nasal congestion, chest congestion and coughing. These areas were always at the topof symptoms reported by th...
5be effective in targeting the consumer, as demonstrated by our approximate market penetrationof over 70% and increased av...
6From the outset of the simulation, the threat of competitive activity within the market was madeclear. The case specifica...
7If we could beat our competitors to the punch, we would be able to continue with our plans asopposed to spending time, mo...
80.00%10.00%20.00%30.00%40.00%50.00%60.00%70.00%$-$50$100$150$200$250$300$350$400$450Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr...
9the 250-2500 unit bucket. This was to drive higher volume sales. We looked at the marketconditions in each period and bas...
10Since our allergy medication was the first non-drowsy product in the allergy segment, the pricingdirection was not evide...
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Winning PharmaSim Marketing Game Strategy

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With a symphony of heavy data mining and simulation, my team was able to beat the competition (teams of fellow classmates) with no spending on pricey market research reports in this marketing game.

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Winning PharmaSim Marketing Game Strategy

  1. 1. PharmaSim AnalysisJoey BringhurstKrysta HendersonBradley ShinnLaura WingerMay 4, 2010
  2. 2. 1OverviewAllstar had some big decisions ahead of it. With changing market conditions and strongcompetitors, their relatively decent market share and brand recognition were not enough tosustain and increase sales revenue and net income. Armed with the ability to experiment in thefirst three periods, our team set out a game plan to methodically determine the variables with thegreatest influence over net income, sales and market share. The results of our trial and errorapproach, and later refinement, were supported by business intuition, marketing strategy andinformation from the case. Once we understood a few key variables, we were able to formulate asolid base to launch us into even greater profits in the following seven periods. The three mostrelevant decisions were to strengthen the indirect sales force, increase point of purchasepromotions, and to focus advertising efforts to target young families. Our position as the highestperforming team in the class with cumulative net sales of $2,134M confirms that our overallstrategy and subsequent decisions throughout the simulation were sound marketing choices.AnalysisCompany, Customers, CompetitorsMuch to the benefit of the OCM group, Allstar was already an established product in the marketat the beginning of period 1. The company had already developed a reputation as “one of themost effective brands on the market at reducing multiple cold symptoms,” as well as being moresuccessful than average in a financial sense. That being said, there were a number of strengthsand weaknesses to the company both before and during this simulation that contributed to andinfluenced our brand strategy.
  3. 3. 2Indep DrugstoreChain DrugstoreGrocery StoresConvenience StoresMass MerchWholesaler SupportMerchandisersDetailers0501001502002503000 1 2 3 4 5 6 7 8 9 10Sales Force by PeriodAt the start of this simulation, Allround owned 40.4% of the cold medicine market share (23.8%of the entire cold and allergy market). On top of this, Allround also had the highest brandawareness, was the most frequently purchased, and had the highest trial level. This greatlyinfluenced our brand strategy as we did not need to create a buzz about our product, we justsimply needed to develop it beyond the point to which it had already grown. As was previouslystated, the Allstar brand had been very successful financially with its Allround product, and theamount of money that the company had at the start of this simulation significantly affected ourstrategy as well. First off, we were able to confidently invest in the most expensive advertisingagency, which was known for its high quality work. We believe that this helped us to stay aheadof the curve in a promotional sense, especially considering that our OCM group believed, at thestart of period 1, thatwe already had morepromotional supportthan any other brand onthe market. Thisfinancial stability alsoallowed us to employ asubstantial sales force,totaling nearly 1000 employees by the end of the simulation. Our initial approach to staffing wasto focus our sales force on two of the indirect channels, which had proven successful in our trialperiods. This also meant that much of our business was being done before the product reachedthe consumer. With the added income, we were later able to add employees in direct saleschannels as we saw fit.
  4. 4. 3$27$28$29$30$31$32$33$34$35$52$54$56$58$60$62$64$66Aches Nasal Chest RunnyNoseCough Rest All butRestStockPrice(inPer3)NetIncome($MinPer3)Advertising Message StrategyThe company possessed some weaknesses at the beginning of the simulation that contributed toour brand strategy, but we chose to focus on these weaknesses more as opportunities. First, theAllstar brand had a limited product line compared to the competitors, specifically when it cameto the allergy market. In addition to that, Allround was often viewed as an exclusively nighttimeproduct due to the alcohol and antihistamine in the ingredients, which limited the scope of theproduct’s use. Removing the advertising message that it “Helps you sleep” was profitable in thetrial periods, so we not onlyremoved that message but alsoremoved the alcohol when wecould, increasing customersatisfaction.In later periods we were able tofurther reformulate Allround, as well as introduce a non-drowsy allergy medication, Allright,which greatly contributed to our net income by the end of the simulation. Based on our initialexperimentation and business intuition, we decided that our Allround brand was established wellenough that promotional trials were unnecessary and unprofitable. We did, however, utilizepromotional trials to promote the introduction of Allright. With the other competitors in themarket, we knew we needed to invest in co-op advertising to maintain and improve our shelfspace.Allstar Brand was trying to fulfill the consumer wishes by helping to alleviate their coldsymptoms. The consumer awareness and satisfaction were key drivers of our efforts as thesefigures were indicative of future sales. The four areas that we primarily focused on were
  5. 5. 4analgesics, nasal congestion, chest congestion and coughing. These areas were always at the topof symptoms reported by the consumer. This was accomplished primarily by our Allroundproduct which focused on aches, decongestion and cough suppression. Additionally we addedthe expectorant in period 7 which helped with chest congestion by loosening phlegm. Thishelped us to meet the consumers’ needs as it came to a cold remedy. Our brand expansion to theAllright product allowed us to diversify the product line and meet additional customer needswithout cannibalizing demand for our main product. This was the first product available on themarket which served to answer our consumers’ needs.We heavily targeted young families throughout all periods for several reasons. First, ourexperimentation showed that targeting them and them alone was the most profitable option.Second, we believed that more mature customers were set in their ways; their habitual shoppingpatterns would be difficult and costly to change. Most importantly, if young families wereattracted to Allround’s products and could be retained, this segment would have the greatestlifetime value.Customers want a quality product that will deliver effectiveness at a reasonable price which weprovided for them. Brand Awareness increased from 74.1% in period 1 to 93.4% in period 10for the Allround product with over a 51% retention rate.Our ad message to the young families was a primary and reminder message type. We wanted tocreate awareness and stimulate demand for new customers with the primary message and thenmaintain the awareness and demand with the reminder message. We felt this worked very wellwith this target segment as we saw successful purchasing, conversions and retention. In ourtrials, promoting benefits or product comparison were not as profitable as the primary andreminder, so we continued to focus on those throughout the simulation. This strategy showed to
  6. 6. 5be effective in targeting the consumer, as demonstrated by our approximate market penetrationof over 70% and increased average purchase per year of 3.5 units.We increased consumer satisfaction by listening to the customer and acting on it - they did notwant alcohol to cause drowsiness. At the end of period 2 when we removed the alcohol from ouringredients we saw a huge increase in consumer satisfaction from 58% to 66% which wemaintained for the most part through the 10 periods. We saw a minor dip when we maxed outthe expectorant in a subsequent reformulation. We realized that customers and physicians alikewanted to avoid excessive medication. Therefore, we made the appropriate changes to meet theconsumers’ request by reducing the dosage of the expectorant.Our price was set at a value for the consumer. Our prices were actually lower than mostconsumers anticipated and therefore have a higher value to the consumer. This strategycombined with our high brand awareness and consumer satisfaction provided great results forThe Allstar Brand.Trends that we observed were that retail sales continued to increase each period. This trendhelped us focus on the consumer by providing appropriate awareness primarily in grocery storesand drug chains. We influenced stores to allocate additional shelf space to our brand in order toprovide more products for the consumer. By focusing increasing numbers of sales forceemployees at the grocery stores and drug chains we made it convenient for the consumer to pickup the cold medicine without having to go out of their way. Symptoms reported remained fairlyconstant, so consumer demands for products addressing those symptoms could be easilypredicted. These trends helped us to maintain our focus on the customer, modify our formulaappropriately, introduce a new product to meet consumer needs, and reject the option tointroduce a brand extension that would have provided minimal benefits for the consumer.
  7. 7. 6From the outset of the simulation, the threat of competitive activity within the market was madeclear. The case specifically states that the industry had recently seen several productintroductions as well as major increases in promotional and advertising expenditures. Stayingabreast of developments taking place with competing brands proved useful. It was helpful to beaware of their relevant operating statistics such as sales force allocation, advertisingexpenditures, and message and promotional programs, as a gauge to determine appropriateoutput levels for the Allstar brand. Moreover, it was our goal to beat our competition from thevery beginning as we believed in creating an innovative marketing strategy as opposed to areactionary approach. For this reason, we did not mimic the competitors’ actions and insteadstayed true to our initial strategy based on our research and analysis. This tactic proved to be asuccessful one as we were able to consistently gain market share and increase profitability.Our primary competitors changed through the course of the simulation. In the earlier rounds,Coughcure and End were identified as our primary competition followed by Besthelp and Extra.We focused on these brands since they had the strongest presence in the cough and cold sector.Although Allround considered itself an allergy relief medication, the bottom line was the publicdid not share this view. Allround’s market share in allergy product category was 0% in theopening period. For this reason, our initial concentration focused on the cough and coldsegments. Once Allright was introduced in later periods to specifically address the needs ofcustomers suffering from allergy symptoms, the scope of our attention grew accordingly.Careful consideration was given to the activities and developments with Believe and Defogg,two of the strongest performers in the allergy category.We recognized that it is imperative to be well informed of competitors’ movements. However,we did not want to let their decisions sway us from continuing with our own marketing strategy.
  8. 8. 7If we could beat our competitors to the punch, we would be able to continue with our plans asopposed to spending time, money, and efforts on countering their efforts. For this reason, wenever used any of our budget for comparative advertising campaigns or marketing reports inaddition to the data automatically generated in the simulation. We believed our brand andproduct were strong enough to stand alone with primary and reminder advertising messages.II. Product, Pricing, Promotion, and PlaceThe Allround product was an effective, affordable and well known remedy for cough and coldsymptoms from the start of the simulation. However, there was concern that the multi-symptom“shot-gun” approach provided excessive medication. We corrected this problem by dropping thealcohol in the Period 3 reformulation. Customers not only wanted to avoid over-medicating butadvertising results showed there was little interest in the benefit of sleep assistance.In Period 4, we chose not to move forward with the line extension known as Allround +. Sincethe ingredients and benefits were so similar to the original formula, we did not believe this was avaluable line extension to Allstar Brands. In fact, we saw this option as having the potential tocannibalize our existing product offering.
  9. 9. 80.00%10.00%20.00%30.00%40.00%50.00%60.00%70.00%$-$50$100$150$200$250$300$350$400$450Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10MarketShareManufacturingSales($M)Sales and Market Share - Allergy SegmentAllright Believe Defogg Allright Believe DefoggWe introducedAllright in Period 6. Thereasoning behind thisdecision was to create astrong presence in theallergy relief sector that wehad previously been lacking.Our advertising for Allright focused on relieving allergy symptoms and not causing drowsiness.These were two areas that were not promoted for Allround. Since the Allround and Allrightproducts addressed separate sectors, cough/cold and allergy relief respectively, we wereconfident that the addition of Allright would not cannibalize Allround sales. We strongly believethat being the first to introduce this new product had a profound impact on our sales. Having astrong company performance in prior rounds made us confident that we were prepared to launcha complimentary product. The strong brand awareness of 90%, existing sales support, and largebudget of $18M resulted in a 42% market share in Allright’s first period on the market.Our final product adjustments took place in Periods 8 and 9. We added the maximum dosage ofexpectorant in Period 8 because cough and chest congestion were repeatedly the mostcomplained about symptoms. We revised this decision in Period 9 to a lower dose of 100 sincewe realized that this was in line with our competitors’ formulations and our customers want toavoid overmedicating.Our pricing strategy was initially based off trial Periods 1 through 3. The result of the trialsshowed that starting at $5.16 MSRP maximized net income and nearly maximized retail andmanufacturing sales. At this point we also offered minimal discounts to the wholesale sector and
  10. 10. 9the 250-2500 unit bucket. This was to drive higher volume sales. We looked at the marketconditions in each period and based our decisions on the market in general as well as inflation.We used Sully and Rogers, the Tier 2 advertising firms in the starting periods. With increasedbudgets in later rounds, we had the additional funds to use BMW, the Tier 1 advertising firm. Asmentioned earlier, young families were our primary advertising target with primary and remindermessages. Benefit messages were implemented when the Allright product was introduced.Point of purchase promotions proved to increase brand awareness, market share, and unit sales.We did not do point of purchase promotions in convenience stores since this was not profitablein trials. Co-op advertising improved shelf space figures. We did not have a strong response tocoupons so these were kept at minimal levels. In our trial periods, we found that offering freetrials was not profitable for Allround. However, we chose to offer free trials of Allright since itwas a new product and this was a profitable promotion.Initially we focused on indirect sales force; specifically merchandisers and detailers. Our directsales force was minimal coming out of Period 3 and this was an area we continuously increasedacross each subsequent period. Convenience store sales increased in later periods (starting inPeriod 6, and through period 9) and the sales force was allocated accordingly.Take-AwaysIf we could replay the simulation, we would have paid closer attention to details. One examplewhere we overlooked information was when we maxed out our expectorant having theknowledge that our customers were hesitant of over-medicating. We got better results when welowered the expectorant dosage, so in hindsight this was consistent with what we knew aboutconsumers based on the case.
  11. 11. 10Since our allergy medication was the first non-drowsy product in the allergy segment, the pricingdirection was not evident. More research and comparative analysis might have enabled us toprice the product more efficiently and maximized revenue from this product.One other factor we did not prioritize in our research and analysis was how to effectively manageour capacity constraints and expansions. Since these factors were overlooked, there werepotential savings that we could have missed.The amount of variables to consider in a marketing plan was much greater than we first realized.It was a little daunting and overwhelming at first, but once we broke it up into groups, we startedto understand how they influenced performance and interacted together.The simulation deepened our appreciation for the relationship between marketing researchconcerning consumer needs and communicated these findings to the R&D team responsible forproduct reformulation, expansion and when necessary, product discontinuation.$67$226$351$492$661$833$1,037$1,280$1,508$1,789$2,13505001000150020002500Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10Team Performance- Cumulative Net Income

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