Importance Weights) and Pricing
"In Marketing Research Study #21, self-reported importance weights for perceived performance, perceived convenience, and dealer price are reported. Even though students are cautioned about the impreciseness of such self-reported importance weights, the consistently high values of the relative importance for dealer prices encourages students to pursue price cutting strategies sometimes to their detriment. Do you have any advice on how to deal with this?"
The self-reported importance weights in Marketing Research Study #21 for perceived performance, perceived convenience, and dealer price are fragile things. There is no special magic to them. Presumably, they reflect customer brand choice behavior to a degree. However, the track record of such self-reported weights is poor. It's easy for customers to say they want it all, to avoid trade-offs, and to run to convenient/transparent/obvious variables like price rather than make the necessary trade-offs between price and product/service benefits.
There are many other marketing research resources available to assess the role of pricing is customers choices and in brand/firm profitability. The key teaching issue is to demand that your students focus on profitability and not just volume (market share) issues.
The market position summaries provided in Marketing Research Study #41 ("Regional Summary Analysis") suggest the salience of the performance, convenience, and price market drivers. If, for example, the major market share brands are high in perceived performance, that would suggest the relative supremacy of perceived performance in this market region. On the other hand, if high performing brands differ widely in market shares, then other factors (perceived convenience, dealer price, relative maturity of the brand/formulation) must be relevant to explaining market share positions.
Preference testing with varying dealer prices is a simple way to quantify formulation- price trade-offs, without relying on self-reported importance weights of questionable quality. Test marketing major price changes is another important marketing research resource to gauge the potential profitability of low-price strategies and tactics prior to instituting them in the real vaporware market place. Indeed, some instructors have required test marketing evidence to be presented prior to approving any reduction in dealer price.
One effective teaching approach is to require teams to complete a pricing worksheet prior to or in connection with any reductions in dealer prices. Such a one-page pricing worksheet is provided in PRICING.DOC, a Word document listed on the home page. The use of this pricing worksheet will force students to consider profitability and not just volume in their pricing decisions. While there is no magic to this pricing worksheet, its use does force profitability issues to the forefront. It also creates a wonderful opportunity for instructor-student interaction about strategies and tactics, when the instructor insists on a contemporaneous or post-quarter review of price reduction decisions.
The broader teaching issue here is really differential advantage. Attempting to compete by using low prices avoids the much harder challenge of offering a superior benefit proposition to customers. Students should be forced to justify low-price strategies and tactics in written analyses, oral presentations, etc. Are such strategies sustainable? How will price wars be avoided? Are low-price strategies really the most profitable ones?
What combination of benefits (perceived performance and perceived convenience) and price are most profitable in the long run?
Marketing Research Study #30
"Does Marketing Research Study #30 in BRANDMAPS™ report on all existing patents or only the patents held by other firms?"
In BRANDMAPS™, Marketing Research Study #18 and Marketing Research Study #30 search over all existing patents, including those currently held by your firm. Thus, a "false positive" could occur. A patent could be reported as existing but that patent could be your own. On a reformulation, only other brands' existing patent zones are checked, not the brand that is being reformulated. Thus, during a reformulation effort, you may violate your own brand's patent (but not any of your other brands' patents), providing that you don't also violate other brands' existing patents.
Note, also, that Marketing Research Study #18 and Marketing Research Study #30 search for patents now. But, when reformulations occur next quarter, all patent zones decrease by three patent zone points prior to reformulation bid queue processing. Thus, a patent violation now might actually not be a patent violation at the start of the start of the next quarter.
The only way to know about patent zones is to track everyone's patents carefully with the available marketing research resources within BRANDMAPS™. Of course, you can't predict who will reformulate or how much they'll bid in the future, but you can at least know where all the existing patents lie.
Marketing Research Study #31
"We are considering ordering Marketing Research Study #31 ('Industry Sales Volume Forecast') for a newly opened market region. We wonder if it will be relevant since there are currently no industry sales and no historical industry sales data in the newly opened market region. Can Marketing Research Study #31 still provide us with an estimate of industry sales in a newly opened market region?"
Marketing Research Study #31 ("Industry Sales Volume Forecast") is indeed based on historical data. Since a newly opened market region has, by definition, no past industry sales data, an industry sales forecast about the future cannot be created in the absence of such historical data. However, please do note the timing of the execution of Marketing Research Study #31. Like all marketing research studies, Marketing Research Study #31 will be executed after the next game run. If there is at least one active brand in a new market in the next quarter, then there will be some historical data available (one quarter of data) on which to base a future industry sales volume forecast. On the other hand, perhaps you would prefer to create your own industry sales volume forecast using measures and criteria other than historical sales data.
Marketing Research Study #33 (Bidding Statistics)
"From BRANDMAPS™ Marketing Research Study #33, there were 7 bids submitted with an average bid of $827,204 and a high bid of $5,300,000. However, our financial reports show a reformulation charge of $2,843,568. Note that $827,207 times 7 equals $5,790,428 for the total amount of the seven bids submitted. But, if I subtract the high bid and our team's bid, I end up with a negative number. What's up?"Your "reformulation" amount on your divisional operating statement includes the $2,500,000 costs associated with a major reformulation. The reformulation bidding statistics from Marketing Research Study #33 only refer to the amounts bid for position in the reformulation queue, not to the subsequent reformulation costs.
Marketing Research #33 (Blank Reformulation)
"A current-quarter reformulation shows up blank on the output of Marketing Research Study #33. Why is that?"
Marketing Research Study #33 reports the reformulations of products that have been successfully reformulated in the current (i.e., just-completed) quarter. To conduct a formulation analysis, products must be actively distributed in at least one market region. (A sample unit must be purchased through normal distribution channels to conduct the reverse engineering.) Apparently, this product was reformulated but was not introduced. Once introduced into one or more market regions, this product's current formulation can be accessed by reverse engineering it via Marketing Research Study #2.