Approach Overview
The development of the overall strategy for Minnesota Motors (MM) was formed after a careful review of the targeted market, the level of competitiveness of other motor vehicle corporations and also the current market share that MM Company has. The classes of customers were categorized corresponding to their needs and attention to the company's growth and future performance. Unquestionably, all the customers -large and small- have a part to play in the firm’s growth (Kim et.al, 2006). Accordingly, it is compelling to include all the customers in the overall marketing strategy of the company.
The main goals of development of MM Company marketing strategy were to guarantee that the company is able to boost the sales revenue hence profit. This was to be accomplished by intensifying the level of competition of the organization through improved customer satisfaction levels. Other objectives include expanding the company market share and ensuring sustainability of the motor vehicle business in the long run.
Over time, there was a necessity for strategic intervention to the product positions for instance; distributor discounts had to be restored back to 18% in round 3 so as to improve on product sale. It was recorded that when the discounts were reduced to 13% in round 2, general products sales dropped. Moreover, there was a need for consistent product development budget so as to ensure that quality and customer satisfaction is sustained. Sequentially, some objectives of the MM strategic plan were achieved. These include a subsequent increase in cumulative profits from round 1 to round 3, customers satisfaction levels were maintained at 3 stars for C-segment and Small segment, which is the highest level of satisfaction attained. However, other segments displayed reducing levels of satisfaction by customers for instance customer segment C. Other objectives that were not achieved include inconsiderably contracting market share. This can be credited to tight competition from other motor vehicle companies. Also, sales revenue slightly dropped from a level in round 1 (Capon et. al, 1987)
Executive Summary
o Customer Segmentation: In the marketing strategy, customers of MM Company were categorized into five segments A, B, C, D and Small customer Segments. These classifications were so as to guarantee that the marketing strategy is able to meet each and every need of a given segments. The categorization is based on customer interest and spending habits(Kim et. al, 2006)
o Customer Response to Marketing and Sales Effort: Customers are seen reactive to the sales effort like market research budget that is initiated at a constant cost of $130,000 at every round. This sales effort led to increased customer satisfaction and hence profit.
o Competitive Landscape: From the analysis there is a tendency that MM Company has more online than offline rivals; the tight competition is observed in the loss of market share to the competitors by the end of round 3( Achrol et. al, 1983).
o Evolution of Product Strategy: Power-to-Size Ratio Feature Spending and also Thermal Resistance Feature Spending in all three rounds is in line with the evolution of product strategy so as to improve the earnings of the firm ( Ghosh et. al, 1999).
o Elements of Account Management: Elements of profitability management, accounting relationship selection, product migration paths and accounting planning were utilized in the strategy development so as to gain an understanding of the various segments of customers at MM Company.
o Managing Prices: In the strategy, prices were subsequently increased from around 1, 2, to round three. This was in order to recover the cost incurred in sales effort at the same time enabling MM Company to make profits.
o Sales Force Expenditures: In round 1, sales force expenditure is equally allocated to all segments. However, in subsequent rounds it was shrunk in segments ABC but strategically retained in D. this was in accordance with the sales outcome and customers' satisfaction level in round 1.
o Market Research, Integrated Communication, and Process Improvement: Before the marketing strategy was laid down, a wider market research was conducted to determine what customers want, the level of competition for market share and market trends. This called for process improvements and integrated communication during product promotion ( Fornel et.al, 1987).
o Channel Conflict and Discount Structure: High competition has brought about channel conflicts, thereby leading to increasing distributor discounts in round 3, so as to reverse the trend of contracting market share for MM Company ( Ferner et. al, 2001)
o Customer Satisfaction: Levels of customer satisfaction are affected by pricing, quality of the product, seller-customer relations, and delivery time. All these were factored in when creating the marketing structure.
1.0 Methods of Analysis
In developing the strategy, the methods used for analysis were SWOT analysis, Gap Analysis, and Scenario Analysis. These methods are discussed below:
1.1 SWOT Analysis
Strengths
Various strengths are observed in MM Company's strategy to business market. Firstly, the ability of the company to increase the levels of profits from $1,700,000 in round 1 to $2,200,000 in round 3. This is despite the reduction in cumulative sales revenue and market share in all rounds. The fact that the company was able to endure these declines reveals the strength of the company. Additionally, the ability of the company to raise the price of motor vehicles and still get three star rating from some customer segments is an assertion of the quality of MM Company's products. In fact, it is clear that the company has customer's trust
Weaknesses
Tight competition for market share revealed MM Company’s weakness. The decline in MM’s market share through three rounds is a weakness that other competitors are exploiting. Measures have to be laid down to reverse the trend, hence preventing the company from future imminent collapse.
A huge amount ($80,000 per round) was used for integrated marketing communications and training. Therefore, MM Company has the ability to tap into the wealth of knowledge the newly trained workforce in order to improve the general performance of the firm. Besides, the company will be able to improve on the market share.
Threats
While competition is good for any healthy business, it becomes a threat if an organization is unable to keep up with the pace of other competitors. MM Company is under a threat of completely losing the market share unless it acts to reverse the trend ( Piercy et. al, 1989).
Competitive intelligence: This refers to a marketing strategy that analyzes all the market forces in order to come up with a better solution to better deal with competitors hence increase market share, sales revenue, and profits. From the above SWOT analysis, the marketing manager should utilize the information to boost the performance of the organization's marketing structure.
1.2 Gap Analysis
Gap analysis refers to comparing the actual performance of an organization with a simulated desired potential performance of an organization in the projected short term and long term future. It involves the determination of steps to be taken so that positive changes can be seen in the organization's future from its current performance. Generally, these steps include:
i) Noting down the trait factors like the organizations attributes current level of company’s competency and also its performance status in comparison to other competing firms.
ii) Necessary factors to be considered in order to achieve future objectives should also be noted.
iii) Existing gaps should that should be filled in order to maximize performance levels must also be further highlighted.
Results from the Minnesota
Round 2:
In round 2, there was no interference to the table standings.
Round 3:
Segment focus for round 3
Segment A- I was able to provide a large portion of revenue to this segment. Further, I valued Power-To-Size more than other sections. Still in this section, there was a need for customization.
Segment C- This is the segment that I was least price sensitive. In this segment, I valued Power-To-Size as well as Thermal Heat Resistance.
Strategy For round 3
For the Sales Force Allocation, I allocated majority amount to B and C. However, there was still good allocation to the rest of the segments. Furthermore, as a strategy, I stopped market research entirely. Hence, there was no funding assigned for the same. Additionally, there was 50% spending on acquiring and retaining customers. Left list price was $142. The Discounts for customers in segments A,B,C, and D were 12-14%, 8%, 2-4%, and 18% respectively. As for the distributors, the discount levels were 10-11%. Finally, Power-to-Size spending for product development was cut when the budget was lost.
Results of Round 3:
I got fired in round 3. The results are in the table below.
Lessons learned from being fired.
The number of sales people should be drastically reduced in order to save money. Furthermore, I learned that Customer Segment A requires a higher maintenance and also increased spending on Large Customers increases sales price. Eventually, the discount levels with time should be staggered.
Round 4:
Implementation of the lessons learned in round 3 was necessary for round 4. Therefore, there was major concentration on better service to customers in segment A and C. The list price for this round was placed at $150, the discount levels for A, B, C, and D were 8-12%, 8-10%, 1-4% and 15-20% respectively. Consequently, there was increased spending on Large Customers with 90% to Acquire them and 10% to retain them. Distributors were awarded a discount of between 9-11%. Salesforce allocation for Segment A and C were 45-50% and 32-40% respectively whereas D was not allocated any Sales Force. Additionally, every quarter of round 3 had all budgets spent except in the last two in which the budget was saved With every budgetary increase, the funds should be allocated to research and Design. All the funding for Power -to –Size was further reinvested in Thermal to satisfy Segment C of customers in the long run.
|
Cumulative Profits
|
Cumulative Revenue
|
Market Share
|
Score
|
A Segment
|
B Segment
|
C Segment
|
D Segment
|
Small
|
|
|
Round 2
|
1,800,000
|
49,000,000
|
5%
|
48
|
2 stars
|
1 star
|
3 stars
|
2 stars
|
3 stars
|
|
Round 3
|
520,000
|
26,000,000
|
4.70%
|
44
|
2 stars
|
1 star
|
1 stars
|
1 stars
|
4 stars
|
|
Round 4
|
5,200,000
|
57,000,000
|
6%
|
65
|
4 stars
|
3 stars
|
4 stars
|
2 stars
|
4 stars
|
1.3 Scenario Analysis
Scenario analysis refers to a method of looking into the likely future events via proper consideration of another possibility in outcomes to an organization. This method is used to project more than one likely outcome of the future performance of a given firm. In fact, this method of analysis usually narrows on approximating the value of any given portfolio's extent of decrease as in the case of a very likely unfavorable occurrence. Furthermore, it consists of the calculation of alternative rates of re-investments for projected returns in the foreseeable future.
In 5-10 years, the company can drastically lose customers. This is especially so if it will not to set measures to reverse the worrying trend as seen in the shrinking market share (Figure 3, 4). Technology is ever becoming important in business today. Therefore, if the company embraces technology for example online marketing, it will remain ahead of its competitors. Further, economic as well as political factors have an effect on businesses. The organization should, therefore, ensure that it meets all government regulations so as to be able to do better in the next 5-10 years (Postmat et.al, 2005).
2.0 Business to Business Strategic Decisions
Customer Segmentation
Customer segmentation refers to the categorization of customers according to their needs as well as priority and importance to the organization’s performance. Some customers are regular customers. Therefore, keeping these customers and ensuring their guaranteed satisfaction should be every marketing manager's priority. Generally, these customers loyalty cannot be rewarded in same measures as that of a one-time customer.
MM's customers are reactive to the services offered by the company. As seen in figure 2, their satisfaction levels raise to 3 stars (C segment and Small) as an expression of their satisfaction to the product development measures (Smith et. al, 1956).
Customer Response to Marketing and Sales Effort
Marketing ensures awareness creation of the existence of a new product in the market or its improvements to meet the customers’ needs. Therefore, larger funding should be set aside by every organization to serve the same purpose. If an organization intends to perform and outdo the other product or service providers, it is imperative that it reconsiders the marketing strategy. Sales effort should be more directed towards categories of loyal regular customers. This strategy will yield to higher sales revenue, hence higher profit. At the same time, customer satisfaction will be guaranteed.
Marketing and sales effort is received positively by the customers. As seen in figure 1and 2, the profits made by the company rises as the customers are willing to buy products even if the prices are rising. Additionally, as seen in the Graph figure 1and 2, there is a link between MM's marketing and sales effort as well as customer satisfaction. Increased sales effort and marketing leads to rising in customer satisfaction.
Competitive Landscape
The competitive landscape is a norm more so in a liberal market, where salespersons, consumer, and other stakeholders can direct their loyalty anywhere that fits their options and fulfill their needs. Depending on the time of the year, the competition varies. There are times where competition levels are very high, such that firms with weaker marketing strategies will not be able to survive.
A graph in Figure 3 and 4 clearly depicts the competitive landscape in the simulation. Percentage of market share and profit levels subsequently drops even as the profits rise. The rise is mainly due to a price increase. Otherwise, MM Company is losing market share to competitors who are selling the same motor vehicles at a lower price.
Evolution of Product Strategy
In order to any given firm to perform, it has to come up with innovative ways of keeping up with the market trends and customer needs. The quality of the products should be constantly improved in order to meet the market requirements. Developing a concrete product strategy is one of the steps that should be utilized by marketing managers. The strategy should constantly be updated as per the level of competition in the market.
To curb competition, Money is allocated for product development as a product evolution strategy ( Achrol, 1983). This is to improve the quality of the products to meet customer needs hence increase market share.
Elements of Account Management
Elements of accounting management are crucial to the organization in that the marketing managers will be in a position of gaining an understanding of the key customers that are loyal to the organization. These elements include management of profitability levels, accounting relationship selection process, the migration paths of the products and services offered, and finally the accounting planning and management.
In simulated company MM, efforts spent in acquiring and retaining customers are balanced by increases in prices of products in round 2 and 3 so as to recover the amount (Figure 3 and Figure 4). This clearly shows the utilization of these accounting elements in an attempt to market the products and services offered.
Price increases
Sometimes, it is necessary for an organization to raise the prices of its products and services. By so doing, the company will be able to recover the huge cost incurred in the marketing of the product, especially when the marketing strategy is intended to create an awareness of a new commodity in the market. However, the price increases may at times scare away new customers. This is especially when the competitor is offering the same product at a relatively cheaper price.
Ultimately, there is a need of regulating prices in the market. When the threat of a company losing customers and market share is imminent, it is necessary to relax the pricing levels till the company regains market confidence.
Price increases are sometimes justified by the quality improvement of products through product development. Price flexibility increases profits but reduces sales revenues (Day et. al, 1983)
Sales Force Expenditures
Salesforce expenditures should be allocated in accordance with the priority of consumers. Large consumers should be allocated more sales force funding. Salesforce expenditure, on the other hand, should be minimized for small customers so as to reduce the operational cost by the organization which can lead to loss making.
Salesforce expenditures are in accordance with the customer needs and the budgeted amount. It is responsive to the market requirements and level of competition.
Market Research, Integrated Communications and Process Improvements
Market research and development plays a very critical role to marketing managers in an organization. Allocating more funds to market research category will lead to more innovative ways of marketing product. Eventually, innovation will enable the firm to be competitive in the market. Therefore, the sales revenue will raise leading to profitability and subsequent recovery of the initial amount investment in research and development.
Other investments in market research and Integrated Communications and manufacturing efficiencies lead to rising in profits (Figure 3 and Figure4) in rounds 2 and 3.
Channel Conflicts and Discount Disclosures
Channel conflicts are a common phenomenon in a highly competitive business. Most competitors will offer higher discounts to the distributors as a strategy of wooing them to join their company. This is more common especially if the distributor is highly influential, aggressive and a top performer. Therefore, absorbing him to any given company will mean increased revenue and profit.
Channel conflicts featured leading to the company to increase distributor discount levels so as to ensure their loyalty and also to curb high competition for market share (Stone et. al 1988).
Customer Satisfaction
For a customer to remain loyal to any given company, he/she has to be well satisfied with the products and services that are offered. It is, therefore, important for a company to include customer satisfaction measures when developing a market strategy as was done in MM Company. These measures include higher discount levels, product quality improvement, informative marketing strategies, and good customer service levels. Furthermore, after sales services as well as follow-up activities are also recommended in order to keep the customer satisfied.
Conclusion
From the strategic analysis above, it is essential for MM Company improves a quality of products so as to higher levels of customer content hence earn their loyalty (McCarthy et. al 1975). Additionally, the company should increase fund allocation for marketing strategy so as to reach out to other customers who might be unaware of products offered (Homburg et. al, 2000). Market Research and Development activities should also be intensified in the organization so as to enable more innovative marketing measures to be utilized. Essentially, the organization will become more competitive hence higher performance levels. Ultimately, the more loyal category of customers should be highly rewarded to their satisfaction. This is because they play a critical role in the performance of the organization.
References
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Day, G. S.
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Fornell, C., & Wernerfelt, B. (1987). Defensive marketing strategy by customer complaint management: a theoretical analysis. Journal of Marketing research, 337-346.
Ghosh, M., & John , G. (1999). Governance value analysis and marketing strategy. The Journal of Marketing, 131-145.
Homburg, C., Workman, J. P. Jensen , O. (2000). Fundamental changes in marketing organization: The movement toward a customer-focused organizational structure. Journal of the Academy of Marketing
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