Markstrat Challenge:10-year Report & 3-year Marketing Plan - Lobel Company

10-YEAR COMPANY REPORT
3-YEAR MARKETING PLAN
Company: Lobèl (L)
Team: Psylla Evangelia (131956)
Prontani Ioanna (174825)
Livanou Anthoula (118430)
Course: MK 4447 A1
Advanced Marketing Management & Metrics
Due Date: April 25, 2018
Instructor: Dr. Paraskevi Sarantidou

2
EXECUTIVE SUMMARY
This ten-year company report and 3-year marketing plan for Lobel Company has been created
by its three managers to deliver to the company’s CEO a summary of the outstanding
performance of Lobel, as well as a proposed marketing plan with future directions. Lobel was
launched ten periods ago and has experienced great demand for its offerings. Research proved
that the target market of Nutrites and Clinites consumers would like to buy our cosmetics and
supplements contrary to other companies’ products. The marketing environment has been very
receptive to the Lobel’s high-quality products. Over the next three years, Lobel can increase
its distribution, offer improved products, and win new customers.

3
TABLE OF CONTENTS
Introduction...............................................................................................................................4
1. Situation Analysis The 5 Cs Approach...............................................................................5
1.1 Company .....................................................................................................................5
1.2 Customers..................................................................................................................13
1.3 Competition...............................................................................................................17
1.4 Collaborators..................................................................................................................19
1.5 Context ...........................................................................................................................23
2. SWOT Analysis................................................................................................................24
3. Objectives & Strategies for Lobèl ....................................................................................25
4. Marketing Research..........................................................................................................27
5. Financials..........................................................................................................................28
6. Implementation & Control ...............................................................................................30
References................................................................................................................................32
Appendix A..............................................................................................................................33
Appendix B..............................................................................................................................34

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INTRODUCTION
This project consists a ten-year company report, evaluation of results through specific
marketing metrics, as well as a three-year projection for the company. More specifically, the
report will provide with an extended analysis of 5Cs, an elaborated SWOT analysis referring
to strengths, weaknesses, opportunities and threats of the company. Objectives, strategies and
marketing research will follow. Finally, financials and strategy implementation of the company
will be presented.

5
1. Situation Analysis The 5 Cs Approach
As defined by the AMA (2018), a situation analysis is the systematic compendium and
examination of past and present data to identify trends and conditions that might influence
business performance and strategy. It is the underpinning of a strategic marketing plan and
embraces the study of both internal factors (to detect strengths/weaknesses) and external factors
(to pinpoint threats/opportunities).
1.1 Company
Lobèl is a cosmetics and supplements company that operates in the Aeneas Industry of the
Markstrat Simulation Game. Overall, it markets five brands; four in the Clinites (cosmetics)
and one in the Nutrites Market (Supplements) and the brands are called LULU, LILO, LIMO,
LIME and LIKE. The brands and the periods of their introduction to the market is depicted in
Figure 1.
P3
=3
P4 P6 P0 P0
Figure 1 Lobèl's Brand Portfolio

6
Figure 2 Lobel's Financial Position
Lobel was constantly increasing its revenues throughout the simulation game at an increasing
rate from $35,723,000 to $320,751,000 during the ten periods. As a result, Lobel managed to
be number one in revenues in terms of its competitors.
P0 P1 P2 P3 P4 P5 P6 P7 P8 P9 P10
R$ 35.703 44.364 46.103 61.194 114.117 122.709 152.233 197.821 255.162 279.784 320.751
CBM$ 16.184 21.995 24.964 32.782 59.227 74.412 93.981 125.269 169.117 189.128 226.742
CAM$ 10.706 14.249 16.233 19.208 41.993 54.919 66.855 99.087 137.133 152.973 189.375
EBT$ 10.461 13.854 9.455 15.931 43.018 56.101 69.116 93.993 131.607 150.313 188.544
0
50.000
100.000
150.000
200.000
250.000
300.000
350.000
Lobel's Financial Position
(SR-CBM-CAM-EBT in $)

7
Figure 3 Relationship between CBM%-CAM%-EBT%
Also, Lobel managed to increase its CAM% of total revenues from 30% (P0) to 59% (P10).
The CBM% of total revenues was increased as well from 45% (P0) to 71% (P10). The EBT%
respectively, increased from 29% (P0) to a 59% (P10).
Figure 4 Brand Contribution (CAM$) LULU P10
Finally, in terms of brand contribution, LULU reached its highest brand contribution by P10
($103M CAM) due to successfully implemented pricing and positioning strategies, LILO
followed with $57M, LIKE with $15M, LIME with $8M and LIMO with $6M.
P0 P1 P2 P3 P4 P5 P6 P7 P8 P9 P10
EBT% 29% 31% 21% 26% 38% 46% 45% 48% 52% 54% 59%
CAM% 30% 32% 35% 31% 37% 45% 44% 50% 54% 55% 59%
CBM% 45% 50% 54% 54% 52% 61% 62% 63% 66% 68% 71%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Relationship between CBM%-CAM%-EBT%

8
By P10, Lobèl managed to successfully meet its four main objectives:
1. Be in the Top-3 companies in SPI
Figure 5 SPI
2. Be the leader in both Total SOM$ and SOMu
Figure 6 Total SOM$

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3. Lead all companies in Net Contribution by P10
Figure 8 Net Contribution P10
Figure 7 Total SOMu

10
In terms of net contribution, it seems like Lobel and Stars are at the same level. However,
Lobel managed to surpass Stars by $0.3M, as it can be observed in Figure 9.
Figure 9 Aeneas Industry Benchmarking
4. Be a healthy-debtless company by P10
During P4-5-6 funding was provided to the company to cover and support expenses regarding
product development and advertising of the new brands LULU, LILO and LIMO. By P9,
Lobel achieved the total reimbursement of its payables.
Table 1 Debt Reimbursement
P0 P1 P2 P3 P4 P5 P6 P7 P8 P9 P10
Loan received 0 0 0 0 3.247 4.147 5.539 0 0 0 0
Loan reimbursed 0 0 0 0 0 -1.082 -2.465 -4.311 -3.229 -1.846 0

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Besides its four main objectives, Lobèl achieved strong presence in all segments due to Porter’s
Focus strategy which was adopted by all brands. To support and implement its vision, Lobèl
became also consumer-oriented and R&D-focused. More specifically, each brand tried to
match the ideal values of its targeted segment either by conducting R&D studies or by
repositioning through advertising. Figures 10 and 11 demonstrate all conducted studies
throughout the simulation game.
Figure 10 R&D studies in Clinites
Figure 11 R&D studies in Nutrites

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Finally, by leading the way in terms of Total SOM, Lobèl managed, consequently, to be the
leader in both markets with brand LILO and LULU.
Figure 12 Advertising Expenditures per Company P0-P10
The flow of advertising expenditures per company throughout the simulation game is depicted
in Figure 10. As noted, Companies S and R are first in terms of advertising spending, whereas
Lobel kept its advertising spending at low levels. Having in mind that Lobel achieved to be the
first in SOMu, it is indicated that Lobel used its resources efficiently.

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1.2 Customers
Segmentation was firstly introduced to deal with heterogeneity in the market by grouping
customers who have similar buying behaviour and product preferences. By achieving market
homogeneity, allocation of resources is more efficient (Smith, 1956). Economic pricing led to
the development of the segmentation theory which refers to profit maximization by price
discrimination between different segments (Wind, 1978).
There are two completely independent markets in Markstrat, Clinites and Nutrites. These
markets are comprised of several segments with different needs, characteristics and purchase
decision making standards.
The Clinites Market includes five segments: High Earners (Hi), Low-Income Families (Lo),
Singles (Si), Affluent Families (Af), Medium-Income Families (Me) (Appendix A).
The Nutrites Market consists of three segments: Health Conscious (He), Families (Fa),
Elderly People (El) (Appendix B).
Venter et al. (2015) suggest that the STP process includes three stages, which Lobèl followed
with piety. First, Lobèl grouped customers with similar needs and buying behaviours. Second,
resources were allocated according to the targeting of segments. Finally, Lobèl products were
positioned accordingly through specific marketing efforts.
Lobèl, following the theoretical foundations of Ansoff's matrix which regards product-market
growth (Iacobucci, 2013), focused not only to market penetration and development by
managing existing products, but also to product development and diversity by evolving and
introducing products in new-emerging markets. Also, although Lobèl’s strategy was to target
all segments, its value was to simultaneously serve each segment well and, thus, each brand
was focused on one segment and its needs exclusively, i.e.: each brand was developed and
produced according to the ideal values of its segment.

14
Lobèl started in P0 with two existing Clinites brands: LIKE and LIME, targeting Me-Si and
Af-Hi respectively. Gradually, LIKE focused its targeting to Si and LIME followed the same
strategy, targeting only Hi.
Figure 13 LIKE (Clinites brand)
Figure 14 LIME (Clinites brand)

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In P3, Lobèl introduced a new innovative brand in the Nutrites market named LULU, targeting
initially He and gradually switching to El exclusively, following the diffusion of innovation
theorem, according to which, He were treated as Innovators and El as Early Majority (Rogers,
2010). Due to the launch of this brand, Lobèl’s sales increased by 16% but company’s profits
decreased by 7% in P3, because the company wanted to invest on the brand. However, the
investment paid back, since by the end of the simulation game, LULU became the most
contributing brand to the company.
Figure 15 Diffusion of Innovation Theorem
Figure 16 LULU (Nutrites Brand)

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In P4, Lobèl launched LILO, a new Clinites brand, targeting Lo, with the objective to beat
private labels and be the leader not only in its targeted segment, but also in Clinites market
overall. This brand became the leader in Lo and increased Lobèl’s sales by 9% and its profits
by 6% in the period of its launch.
r
Figure 17 LILO (Clinites Brand)
In P6, Lobèl presented LIMO, a new Clinites brand, targeting Af. This brand increased Lobèl’s
sales by 2% but company’s profits decreased by 6% in P6, because the company wanted to
invest on the brand. However, the investment paid back, since by the end of the simulation
game, LIMO became the leader in its target segment and contributed to company’s profits by
3%.
Figure 18 LIMO (Clinites Brand)

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1.3 Competition
According to Porter and his model on five forces article the five forces, which shape the
industry competition are the threat of new entrants, bargaining power of suppliers, rivalry
among existing competitors, bargaining power of buyers and finally threat of substitute
products or services. The forces must be understood, because their role is important to shape
industry competition, which is the starting point for developing strategy. Companies should
know the average profitability of the industry they operate and how this is changing over the
years. The five forces uncover the reason why industry profitability is what it is, as well as the
most outstanding aspects of the competitive environment. (Porter, 2008)
Figure 19 Revenues, EBT$, EBT%
Lobel’s main competitors are companies Stars and Real and this can be identified by the slight
differences in amount of revenues (Lobel: $320M, Stars: $310M, Real $290M). The same
pattern occurs to the EBT$ and EBT% (See Figure 19)
L M N R S T
Revenues 320.751 66.989 203.848 290.841 310.310 227.220
Earnings before taxes 188.544 23.454 103.160 160.097 188.220 127.693
EBT% 59% 35% 51% 55% 61% 56%
0%
10%
20%
30%
40%
50%
60%
70%
0
50.000
100.000
150.000
200.000
250.000
300.000
350.000
REVENUES x EBT$ x EBT%
Aeneas Industry
Revenues Earnings before taxes EBT%

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Lobel faced intense competition in the Clinites market by SILK, TINY and RICH and in the
Nutrites Market by SUPER, RUN and TU.
Figure 20 SOMu in Clinites
Figure 21 SOMu in Nutrites
P0 P1 P2 P3 P4 P5 P6 P7 P8 P9 P10
LILO 04% 05% 08% 10% 16% 18% 16%
SILK 08% 08% 08% 10% 16% 14% 14% 12% 12% 14% 14%
TINY 08% 10% 14% 15% 10% 12% 10% 09% 07% 06% 06%
RICH 08% 08% 07% 06% 05% 11% 13% 13% 09% 07% 07%
0
0,02
0,04
0,06
0,08
0,1
0,12
0,14
0,16
0,18
0,2
SHARE OF MARKET IN VOLUME
CLINITES MARKET
LILO SILK TINY RICH

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1.4 Collaborators
Lobel’s collaborators are the four different channels of distribution: Mass Merchandisers,
Specialized Mass Merchandisers, Department Stores and Beauty Portals. The number of outlets
is depicted in Figures 22 and 23, according to which it is indicated that the majority of
company’s sales will stem most probably from Mass Merchandisers and Department Stores.
Figure 22 Number of outlets per Channel – Clinites
Figure 23 Number of outlets per Channel – Nutrites

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In addition, Salespeople are important collaborators since they consist the front line of
company, who implement marketing promotions and bring the sales. Due to the introduction
of LILO, whose objective was to be the leader in the Lo, the company had to invest most of its
resources on sales people and merchandising (see Figure 24).
Figure 24 Cumulative Commercial Industry Expenditures

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Lobel directed its brands in strategic intensive distribution decisions, which were implemented
according to segments’ shopping habits. In Figure 23 it is noted that all Lobel brands managed
to have high distribution coverage in all targeted channels.
According to Iacobucci (2013), intensive distribution is selected for products that are sold in
many kind of stores and especially for products that consumers do not need to drive far to
purchase them. Thus, Lobel directed its brands in strategic decisions regarding intensive
distribution, which were implemented according to segments’ shopping habits (Figures 26 and
27). In Figure 25 it is noted that all Lobel brands managed to have high distribution coverage
in all targeted channels.
Figure 25 Distribution Coverage Lobel Brands
LILO LIKE LIME LULU LIMO
Specialized Mass 36% 43% 32% 37% 21%
Mass Merchandisers 59% 38% 17% 43% 11%
Dept. Stores 12% 23% 56% 39% 35%
Beauty Portals 40% 40% 40% 40% 20%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
DISTRIBUTION COVERAGE
LOBEL BRANDS
Beauty Portals Dept. Stores Mass Merchandisers Specialized Mass

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Figure 26 Shopping Habits Clinites Segments
Figure 27 Shopping Habits Nutrites Segments

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1.5 Context
External macro-environment was stable, since no inflation or major socio-economic changes
occurred. Overall market was steadily increasing at a decreasing rate in terms of units and, in
terms of segments, Lo (Clinites) and El (Nutrites) resulted to be the most attractive ones to
invest in.
Figure 28 Segment GR Clinites
Figure 29 Segment GR Nutrites
P0 P5 P10
Low Income 19% 13% 10%
Affluent Families 10% 10% 04%
Singles 29% 08% 05%
High Earners 21% -02% -05%
Medium Income 16% -06% -01%
-10%
-05%
00%
05%
10%
15%
20%
25%
30%
35%
SEGMENT GROWTH RATE (per 5 periods)
-20%
00%
20%
40%
60%
80%
100%
120%
140%
160%
180%
P0 P5 P10
SEGMENT GROWTH RATE P0-P5-P10
NUTRITES MARKET
HE FA EL

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2. SWOT Analysis
A SWOT analysis is purposing in revealing positive or optimistic forces that work
synergistically and in detecting potential issues that need to be addressed (Iacobucci, 2013).

25
3. Objectives & Strategies for Lobèl
Lobel’s primary objectives are to (a) maintain the leading position in SOM$ and SOMu in
both markets, as well as to (b) maintain the leadership in net contribution and, finally, to (c)
become a leading company in SPI. To achieve its objectives, Lobel set some key metrics to
monitor performance and plan resources’ allocation accordingly.
A metric, as defined by Ambler (2000), is "a performance measure that top management
should review… The review should typically take place yearly or half-yearly… Metrics should
be necessary, precise, consistent ad sufficient for review purposes." Marketing metrics are
important in monitoring what competitors are doing and to understand their weaknesses and
strengths. Every company must identify its marketing metrics, i.e.: what it is to be measured to
set future strategies.
Lobel will monitor its (brand) performance through Purchase Intention, Brand Awareness
and Share of Market. All the metrics, will be always interrelated with CBM and CAM, which
represent the outcomes of the metrics it terms of their financial aspect and determine the
profitability of company’s actions and strategy.
Lobel’s main strategy for the company is to be profitable and to give back to the
stakeholders. To achieve that, it implemented different strategies for each of the brands.
Despite this, the overall strategy is the Focus strategy (serve one segment well), which is
adopted by each brand. Complementary to the Porter's Focus marketing strategy, Lobel
adopted the differentiation strategy for LULU, which is a unique and innovative brand,
introduced to a new market. Finally, cost leadership strategy was adopted, which was adjusted
for LILO. By cost leadership is meant that the brand will produce high quantities with the
lowest possible costs and selling them at the lowest price point possible, creating, in this way,
high profit margins.

26
As a result, and since Lobel is known for its brands, the company is adopting brand-oriented
strategies to meet its objectives.
The strategies that will be followed for each brand are:

27
4. Marketing Research
Marketing research is needed, to select facts about the market. Lobel invested in
research for the Clinites Market, with the purpose of monitoring the customers, the
competitors’ actions, relationships between competitors, Lobel and its collaborators, as well as
how customers perceive Lobel’s brands. This investment is important to direct brands’
forecasting for the production and the sales, as well as to observe the market trends to adopt its
products’ characteristics to the customers’ perceptions.
Lobel also invested in research studies for the Nutrite market, which is a new market for the
Aeneas industry, so we needed the same information for sales forecasting, production of units,
customers’ needs, as well as the competition pricing, positioning and advertising costs.

28
5. Financials
A projected Profit & Loss statement is depicted in Table 2. Lobel projected its revenues and
units to be sold based on the overall industry growth, by accumulating Clinites and Nutrites
market growth numbers in units for P11 and by applying and accumulating the growth rates of
each market for P12 and P13. Given that Lobel would have a budget of $38,5M for its
advertising, commercial and research expenses, the company decided to allocate the majority
of resources to the commercial team relatively to advertising. Since the company’s margins are
healthy, Lobel will proceed with financing to fund R&D studies. The loan will be fully
reimbursed in the two following periods without harming its profitability, as it is indicated by
EBT%.
Table 2 P&L Statement P11-P13 Lobel
P11 P12 P13
TOTAL MARKET 131.842 138.434 145.356
SOMIN VOL 28% 30% 32%
SOMIN $ 27% 30% 33%
UNITS SOLD 35.597 41.530 47.967
Avg. Selling Price 12,82 12,88 13,02
Avg. Cost/Unit 3,91 3,29 3,29
Revenues 456.216 535.075 624.344
Cost of goods sold 139.328 136.801 158.005
Inventory holding costs 0 0 0
Inventory selling costs 0 0 0
Contribution before marketing 316.888 398.275 466.339
%SR 69% 74% 75%
Advertising media 13.600 13.600 13.600
Advertising research 2.400 2.400 2.400
Commercial team costs 23.500 23.500 23.500
Contribution after marketing 277.388 358.775 426.839
%SR 61% 67% 68%
Market research studies 850 880 900
Research and development 2.500
Loan reimbursed 1.250 1.250
Loan received 2.500
Interests paid
Exceptional costs or profits
Earnings before taxes 274.038 356.645 424.689
%SR 60% 67% 68%

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Figure 30 Evolution of Projected Revenues
The projected revenues of Lobel will increase, as shown in Figure 31. Given the cost reduction
that will occur due to the implementation of R&D projects, Lobel will increase its margins and
will be more profitable, resulting in this way to higher budgets for advertising and
merchandising purposes. The aforementioned increase of margins is depicted in Figure 32.
Figure 31 CBM%-CAM%-EBT% relationship
P11 P12 P13
R$ 456.216 535.075 624.344
-
100.000
200.000
300.000
400.000
500.000
600.000
700.000
EVOLUTION OF PROJECTED REVENUES
P11 P12 P13
EBT% 60% 67% 68%
CAM% 61% 67% 68%
CBM% 69% 74% 75%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
CBM%-CAM%-EBT%
CBM% CAM% EBT%

30
6. Implementation & Control
The entire proposed plan will be monitored though the aforementioned metrics. If the plan
works as proposed, no changes will be made. In case of more positive results than expected,
Lobel will maintain its strong aspects that brought the result and further improve details that
could boost the company even more, such as the size of commercial team or research in
advertising. In case of negative results, Lobel will re-examine its strategies and alter resource
allocation and positioning. If results are extremely pessimistic, Lobel might want to rethink
commercial team sizes, existence of brands or other miscellaneous expenditures.

32
References
A. (n.d.). Situation analysis. In AMA. Retrieved April 22, 2018, from
https://www.ama.org/resources/Pages/Dictionary.aspx?dLetter=S
Ambler, T. (2000). Marketing Metrics. Business Strategy Review, 11(2), 59-66.
doi:10.1111/1467-8616.00138
David, F. (1993). Strategic Management, 4th Ed. New York, NY: Macmillan Publishing
Company.
Iacobucci, D. (2013). Pricing. In MM4. Mason, Oh.: South-Western College Publishing.
Porter, Michael E. "The Five Competitive Forces That Shape Strategy." Special Issue on HBS
Centennial. Harvard Business Review 86, no. 1 (January 2008): 78–93.
Smith, W. R. (1956). PRODUCT DIFFERENTIATION AND MARKET SEGMENTATION
AS ALTERNATIVE MARKETING STRATEGIES. Journal Of Marketing, 21(1), 3-
8.
Rogers, E. (2010). Diffusion of Innovations. Simon and Schuster.
Venter, P., Wright, A., & Dibb, S. (2015). Performing market segmentation: a performative
perspective. Journal Of Marketing Management, 31(1-2), 62-83.
doi:10.1080/0267257X.2014.980437
Wind, Y. (1978). Issues and Advances in Segmentation Research. Journal Of Marketing
Research (JMR), 15(3), 317-337.

33
Appendix A
Figure 32 Clinites Segments and their characteristic

34
Appendix B
Figure 33 Nutrites Segments and their characteristic

35
Appendix C
- Mass Merch
• Wide variety of goods
• Strive to operate on low price-high volume
• Minimize overheads - Lower service offered - Lack of technical
expertise
• Different product categories
• Distribute the cheaper/lower quality products
- Specialized Mass
• Smaller or more organized chains
• Geographically closer
• High level of Customer Service
• Not a big variety of product categories
• Carry a broad product line
• More expensive and/or high performance products
• High level of expertise
- Dep. Stores
• Wide product assortments
• Extensive customer service
• Organized chains
• Are often organized in chains that have a degree of power in
negotiating margins with manf. = porter’s power of buyers
- Beauty Portals
• Web-only merchants
• All portals have different char. In terms of awareness strength etc.
• Key advantage = convenience
• Access to unlimited choice
• Primary concerns : privacy & security

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