BRANDMAPS FAQ S. Frequently Asked Questions

BRANDMAPS

FAQ’S

Opening New Market Regions

Permanent Marketing Research For "All" Regions

[1] "After opening a new market region, one of my teams has reported that they are not receiving some marketing research results for the new region. They previously specified 'all' markets when ordering Marketing Research Study #36 and everything was fine up to the most-recent quarter (when I opened a new market). What's going on here?" [2] "I've opened a new market region and marketing research studies on permanent order are not executing for the new market region. Why is that?"

When you open new regions, the "all" regions designation for some marketing research studies does not adjust automatically. Software flags are set for each market region is existence at the time the "all" pre-order is made. However, there's no way to read students' minds regarding what is intended with the use of the "all" designation. Does "all" mean every market region all of the time or does "all" mean all of the current market regions at the time the permanent marketing research order was executed? Rather than guess, the software makes no changes in the original "all" market regions designation.

Advise your students to re-enter data for marketing research studies where "all" regions had been previously ordered permanently and for which it is desired that "all" continue to refer to all market regions now in existence (after the opening of the new market region or regions). For temporary marketing research ordering, nothing special needs to be done, since the correct breadth of regions will be specified when the next "all" regions order is processed for any marketing research study.

Sales Forecasting

Sales Forecasting Accuracy and Inaccuracy

"Earlier today, I was discussing the team's problems (they're at 75% performance level, losing sales revenue and market share) and they commented about their disenchantment with Marketing Research Study #32 ('Brand Sales Forecasting'). The report before their last decision suggested that for region 3 only about 9,000 units would be sold. As it turned out nearly 20,000 units were sold. This affected not only their sales forecasting accuracy percentage but resulted in a large share of unfilled orders. The current forecasting report shows a low number of unit sales forecast with a relatively small-size error. The students express little faith in the forecast, saying what good is it, and then they use it, in part, to blame why their overall performance in the simulation is bad. My response to them was that the sales forecast uses data as described in the student manual. If there is much variability in industry sales by total and region, forecasting may be less accurate (but the error term should be large also, shouldn't it?) I also told them that the forecast is based on current competitor activity and cannot anticipate what marketing decisions will be forthcoming. Consequently, any new and dramatic 'moves' by competition is not accounted for in the forecast. It

4 marketing research studies) and don't temper it with other information available to them or with reasonable intuition. I looked in your instructor's manual to learn what factors go into the sales forecast other than historical industry sales data and environmental factors, but could not find any discussion of the forecasting methodology except what the student manual provided. What competitor activities are factored into the forecast?"

The sales forecasting marketing research studies (#31 and #32) are merely short-term extrapolations. As you note, they don't take competitive actions into account, except at the most general level. This group apparently is not reading or not believing what they read. Push them to justify their marketing decisions based on facts, evidence, analysis. Don't let them get away with blaming the marketing research.

If the marketing research quality is low, then the students should make their own sales volume forecasts. There's no requirement to purchase any particular marketing research study. Indeed, if the value is lower than the cost, don't do it!

My experience with poorly performing teams is to require meetings with me prior to every decision. Make them justify what they are doing and don't let them get away with guessing and seat-of-the-pants decision making.

Sales Forecasting Accuracy Score

[1] "How is the Sales Forecasting Accuracy Score calculated?" [2] "Our Sales Forecasting Accuracy Score for 5-2 in market region 5 is .00% but we sold 5,165 and had a sales forecast of 15,000. I realize we weren't very accurate but it should be near 30%, not 0. This really hurt our average score and thus impacted our overhead. Why the .00%?"

Sales Forecasting Accuracy Score is calculated in two steps. First, sales forecasting error is calculated for each active product in every market region:

ERROR={FORECAST-(ACTUAL+UNFILLED)}/ {ACTUAL+UNFILLED}

where ERROR is the sales forecasting error (expressed as a proportion), FORECAST is the sales volume forecast, ACTUAL is the actual sales volume, and UNFILLED is the unfilled orders. Second, the Sales Forecasting Accuracy Score, SFAS, is then calculated:

SFAS=100*(1-abs(ERROR))

where abs(.) is the absolute value function. Sales Forecasting Accuracy Scores are calculated and accumulated whenever the volume market share for a product in a region exceeds 2.5%.

With a forecast of 15,000 and actual sales of 5,165, the associated Sales Forecasting Accuracy Score is calculated as (forecast-{actual+unfilled})/ {actual+unfilled}, adjusted to percentage terms. Relative to actual sales, the forecast was more than 100% in error, thus the .00% Sales Forecasting Accuracy Score.

Suppose that brand 4-1 in region 2 had a sales forecast of 9,000 and actual sales of 7,779. Applying the Sales Forecasting Accuracy Score definition yields the following result: abs(9,000-7,779)/7,779} = abs(1,221/7,779) = 100.0*{1-abs(0.1570)} = 100.0*{0.8430} = 84.30.

Sales Forecasting Accuracy Score Reporting on

Financial Statements

"One of my groups did not get a message about sales forecasting accuracy score for one of the regions on the FINANCIAL AND OPERATING STATEMENT MESSAGES page of the financial results. Their other brands are mentioned but not this one. In the SALES FORECASTING ACCURACY REPORT, this brand is included with an accuracy score of 89.77. They were concerned about whether by some chance this score was not counted. Are the FINANCIAL AND OPERATING STATEMENT MESSAGES only produced for performance outliers (i.e., for 'very good' or 'very bad' cases) or for all cases?"

The FINANCIAL AND OPERATING STATEMENT MESSAGES part of the financial results generally only reports exceptional and noteworthy things. It's meant to be the beginning of an exception accounting style of report. For sales forecasting accuracy, only extremes of sales forecasting performance are noted here.

Sales forecasting accuracy only counts (for the purposes of the Sales Forecasting Accuracy Score) when a brand's regional market share is 2.5% or higher. Otherwise, it's too difficult to accurately predict market shares, with a percentage-error loss function. All "recorded" sales forecasts reported within the SALES FORECASTING ACCURACY REPORT have been counted in the determination of the Sales Forecasting Accuracy Score.

Sales Forecasts

"Are sales forecasts what customers purchase or what dealers are forecast to purchase from manufacturers?"

The decision variable "Sales Forecast" refers to what dealers purchase from manufacturers (i.e., manufacturer sales volume). Remember, dealers are the direct customers of vaporware manufacturers, although they are not the final consumers of vaporware.

Marketing research studies reference final-customers' purchases of vaporware (i.e., dealers' sales). Thus, marketing research studies that refer to sales forecasts are based on final-customer sales volume. It follows, for example, that "Industry Sales Volume" refers to the sales of all actively-distributed vaporware brands to final customers. Of course, manufacturer sales volume only equals dealer sales volume for a brand if dealers keep constant their vaporware brand inventory.

Sales Forecasts For Q#2

"How should students make sales forecasts for Q#2? Because of the time lag involved in obtaining marketing research studies, they can not make these forecasts based on the results of Marketing Research Study #31. So, what information should be used to create the Q#2 sales forecast?"

If a firm plans no decision variable changes for Q#2, then the best sales forecast for Q#2 is probably current (Q#1) sales levels. A firm planning some decision variable changes (e.g., increasing advertising spending) should take the impact of the changes into account (e.g., an advertising spending increase presumably leads to increases in sales volume). Obviously, the Q#2 sales forecasting problem is a great challenge with very limited data. However, all firms face the same problem so it's at least equitable (if unpleasant) for everyone.

The biggest issue here is to look forward and assemble relevant data that will be helpful in making future sales forecasts. Learning is crucial. Unless you know more tomorrow than you do today, you're not moving forward and keeping up with your competitors.

Conjoint Analysis

Conjoint Analysis in a New Market Region

"Will a conjoint analysis be of any value for the new market region which just opened? I was thinking that it wouldn't be useful now because the customers in the new market region have not had any experience with vaporware."

Conjoint analysis is concerned with assessing underlying customer values for products and services (product/service positioning and pricing, in particular). As such, it doesn't explicitly reference already existing products/services. Remember, it is a concept testing style of marketing research, involving the elicitation of customer reactions to hypothetical products/services. Thus, conjoint analysis should work fine in a newly opened market even though the customers have not yet personally experienced vaporware. There may be a little more random noise in the conjoint analysis results (reflecting customer inexperience with vaporware), but the basic pattern of the findings should not be affected materially.

Conjoint Analysis in "All" Market Regions

"If a conjoint analysis is specified for 'all' market regions, are average results reported or are individual results reported for each market region?"

"All" market regions for conjoint analysis means that the specified experimental design (specified levels for each of the five raw materials, Compatibility, Warranty, and dealer price) is executed independently in each market region with results being reported separately for each market region. Although the student manual shows an example of results only for a single market region, "all" means that there will be separate results for each market region. Average results across market regions are not reported since they

would have little meaning if regional variations exist. And, of course, students could create their own averages if they thought that such numbers were meaningful.

Conjoint Analysis in Multiple Regions

"I ordered a conjoint analysis (Marketing Research Study #10) for market regions 2 and 4. However, I only received the results for market region 4. What gives?"

Marketing Research Study #10 (Conjoint Analysis) can be executed either for one market region or for all market regions simultaneously. It cannot be executed for two particular market regions in one quarter. Only the last entry (for market region 4) was retained and executed. If you really want to execute conjoint analyses for two specific market regions in one quarter, you will have to use Marketing Research Study #10 for the first one and Marketing Research Study #34 for the second one.

Conjoint Analysis Relat ive Importances

"The conjoint analysis indicates that Glomp is the least important attribute to customers (3.9% relative importance). Concept tests results indicate that customers also prefer a standard vaporware weight (weight of the five raw materials sums to about 100). Based on this, I developed a formulation with the other attributes at their peak of desirability (per the conjoint) and plugged Glomp at 27 to get a standard vaporware weight. The preference rating was a lot lower (30 points!) than other formulations where the other attributes varied from their high points but Glomp was in the range of 6-9. If Glomp has so little importance, why does it impact the preference so significantly? I'm really getting confused here."

"Relative importance" in conjoints is within the range of the specified weights. If you go well outside the range, then who knows what might happen. Be wary the "relative importances." They can easily be misleading. Always look to the weights. They never lie or mislead providing, of course, that you don't extrapolate too much outside the range of the weights you specified for the design of the conjoint analysis study.

You are placing a lot of credence in the belief that "standard" vaporware (raw materials sum to 100) is somehow important to customers. Customers want what they want. If their wants happen to lead to a vaporware product whose raw materials to sum (or near) 100, that is incidental to customers' requirements for specific levels of the raw materials. It's vaporware-industry talk that refers to vaporware as being "light," "standard," or "heavy." Customers don't necessarily speak in such terms. The moral here should be clear: don't worry about the sum of the raw materials (unless, of course, the sum violated current vaporware technology limits).

Conjoint Analysis Weights

"The part-worth utilities obtained in conjoint analysis never have gone above 100 or below 0. Yet, in textbook discussions and various articles about conjoint analysis, there are examples where these values have different ranges and can even have

Conjoint analysis yields only relative trade-off weights (the part-worth utilities), not absolute weights. Technically, conjoint weights are intervally scaled, not ratio scaled. Thus, differences in conjoint weights are meaningful but ratios are not. With intervally scaled data, any positive linear transformation of the raw conjoint weights is permissible. Relative differences are unaffected by such positive linear transformations. I've chosen to scale the raw conjoint weights into the interval 0 to 100 for ease of interpretation. Other researchers and authors use different intervals (0 to 1 or centering the attribute-level weights on each attribute to sum to zero, thus yielding positive and negative weights across the attribute-levels). None of these scaling approaches is "right" or "wrong" in some fundamental sense. They're just different approaches to reporting the same underlying raw conjoint weights. I continue to prefer the 0 to 100 approach, and that's why it's the one you see in BRANDMAPS™.

Web-Based Supplementary Readings

"Can you recommend some web-based supplementary readings about conjoint analysis?"

Yes, here are some nice web-based readings that you and your students can freely access to learn more about conjoint analysis:

1. "Understanding Conjoint Analysis in 15 Minutes" (Quirk's Marketing Research Review Jun/Jul '89), http://www.sawtooth.com/news/library/articles/15min.htm 2. "Conjoint Analysis: After the Basics" (Marketing Research: A Magazine of Management & Applications), http://www.sawtooth.com/news/library/articles/basics.htm

3. "Trade-Off Analysis of Consumer Values" (Journal of Marketing Research May'74), http://www.sawtooth.com/news/library/articles/johnson.htm

Opening New Market Regions

Cost Consequences of Withdrawing a Brand

"What are the cost considerations that a firm should take into account when contemplating withdrawing a brand from a region?"

There are no direct costs associated with dropping a brand from a region. However, there are a lot of indirect cost-related considerations and a lot of implicit considerations in brand withdrawal decisions.

Here's some counsel from Sam Gillespie (Texas A&M University) on this topic: "The decision to withdraw a brand from a region needs to be well thought out. The upside to withdrawing could be: (1) Concentrating limited resources on brands and regions perceived to be more profitable; (2) Focusing brands in a single region; and (3) Inability to gain market share in a region due to strong first-mover advantage of a competitor. There are no direct product costs in withdrawing a brand from a region. However, if a firm chooses to re-enter that market in a later quarter, there will be another introduction

cost. New entries and re-entries are treated similarly and incur the same introduction cost.

In withdrawing a brand from a region, it is important to remember to reduce to zero all marketing support spending (advertising and promotion) associated with that brand in that region. If there are other brands still active in that region, then sales force time allocation must be shifted to still-active brands. If there are no other brands active in that region, then the sales force size in that region must be set to zero to eliminate sales costs.

If the sales force is retained in a region with no actively marketed brands, sales salaries and overhead will continue to be charged to the firm. Firms need to decide if retaining the sales force for future activity would outweigh the costs associated with firing and hiring in the region from which the firm withdrew.

If the sales force is fired, a settlement fee equal to two months salary per salesperson fired will be charged to the firm in that region. Additionally, a sales overhead charge of the same amount will occur. For example, if the sales force size in the region is 50 and monthly salary is $2,500, then sales force and sales overhead will incur charges of 50*($2,500*2) or $250,000 each."

Decision Variable

Capacity Order Payments

"When are payments for plant capacity orders charged?"

The full purchase price is due when plant capacity is ordered. Note that this is a balance-sheet transaction only (a swap of cash for plant capacity), with no immediate profit-and-loss implications until the plant capacity is put into actual use and depreciation begins. Firms with insufficient cash to pay for a plant capacity order will, of course, have automatic loans generated to provide such cash.

Correcting an Introducti on Request

"An erroneous introduction request was entered. The brand was erroneously introduced into region 3 when it was meant to be introduced to region 4. What should I do?"

As long as the game wasn't run, there's no problem. Just drop the brand from the erroneous region and introduce it into the correct region. Of course, the brand will need a complete marketing program (price, rebate, advertising, media content, etc.) for the correct region.

Decision Variable Change Limits in BRANDMAPS™

"On p. 36 in the BRANDMAPS™ 4/e student manual, marketing decision variable change limits are summarized. But, are they overall firm-wide limits, brand-specific

BRANDMAPS™ marketing decision variables have built-in limitations related to how much they may change from one quarter to the next. For reference purposes, these limitations are summarized in a table on p. 36 of the BRANDMAPS™ 4/e student manual.

The summary table on p. 36 of the BRANDMAPS™ 4/e student manual does specify these limits correctly, but the frame of reference is not indicated explicitly. For example, the maximum possible increase in sales force size is specified as 50, implicitly interpreted as "per market region" which is the natural frame of reference for sales force size in BRANDMAPS™. (As a BRANDMAPS™ decision variable, sales force size is always expressed in per-region terms. Similarly, promotion is always expressed in "per-brand, per-region" terms.) In every case, these limits refer to the frame of reference associated with the relevant decision variable in BRANDMAPS™, even though not explicitly mentioned in the BRANDMAPS™ 4/e student manual. Advertising, for example, is always specified at the brand-specific level in a market region. Thus, the advertising change limit also refers to brand-specific and market-specific advertising. These per-brand, per-region, and per-brand per-region decision variable change limits are explicitly specified in the corresponding table on p. 25 of the BRANDS™ 2/e student manual.

Decision Variable Checks

"When exiting the decision variable input program B_DV.EXE, the following message appears on the screen: 'No decision variable check warnings for firm 1.' What does this warning/error message mean?"

The B_DV.EXE software performs a variety of logical checks on decision variables when the user exits the program. For example, the decision variable checks include verifications that marketing support spending only occurs for active or to-be-introduced brands and that marketing support spending is not too "small" (e.g., advertising of $10 would be flagged with a warning message, since values of advertising spending less than $100,000 are rare). This message, "No decision variable check warnings for firm 1," just verifies that all internal decision checks have been satisfied for firm 1's decision inputs. If there were any apparent problems based on the specific decision variable checks encoded in the software, specific warning messages would be displayed on the screen.

Dividend Policy in BRANDMAPS™

[1] "What is the right dividend policy in BRANDMAPS™?" [2] "How can I use dividends effectively in BRANDMAPS™?"

Financial theory generally suggests that dividend policy is irrelevant to lots of things, such as stock prices. In BRANDMAPS™, dividends are a dollar amount returned to stock holders (not a per-share amount). Indeed, the number of outstanding shares of each firm is not known information in BRANDMAPS™, so a per-share dividend amount cannot be calculated.

The immediate impact for the dividend-paying BRANDMAPS™ firm is to reduce cash and to reduce owner's equity. In general, then, excess cash invested automatically by the

software at relatively low rates of return in marketable securities might be returned to shareholders directly via dividends. This reduces the "I" part of ROI and can improve ROI, if profitability remains high.

The bottom line is simply that firms should be able to earn more in the vaporware market than in having cash automatically invested in marketable securities. Overall firm ROI is a combination of return on investment from cash (0%), marketable securities, and firm-wide profitability. Therefore, excess cash should be discarded and dividends are the way to discard such excess cash. Note, however, that excess cash is also available for use in funding inventory expansions, plant capacity expansions, and new product launches which may lead to short-run negative profitability.

Dropping a Product and Associated Inventory

Consequences

"If a team drops a brand from a market region (i.e., if they quite selling the brand in a particular market region) in BRANDMAPS™, what happens to the finished goods inventory on the balance sheet?"

Finished goods inventory on the balance sheet exists to service dealer requests for brand purchases anywhere in the world. As long as a dropped brand is still active in at least one other market region, the existing finished goods inventory will be used in those still-active market regions. In BRANDMAPS™, there is only one plant and one warehouse (located adjacent to that plant). Production and inventory of each brand is for worldwide use, in all market regions in which brands are actively distributed.

If a dropped brand is no longer active anywhere, the existing finished goods inventory will continue to remain on the balance sheet until a subsequent reformulation of that brand. Of course, there are inventory charges associated with finished goods inventory and those inventory charges continue to accrue as long as finished goods inventory exists.

Emergency Production Limit Costs

"In BRANDMAPS™, what are the costs associated with having a non-zero emergency production limit if emergency production turns out not to be needed in a quarter?"

There are no costs associated with emergency production limits in BRANDMAPS™ unless emergency production is actually required.

Introduction and Reintroduction

"Brand 2 was previously in market region 3 but was dropped several quarters ago. If the firm reintroduces brand 2 into market region 3, will it have to pay another introduction charge?"

Yes. Introduction charges are incurred in the first quarter of an introduction. Here, "introduction" is defined to be a situation where a brand is inactive in one quarter and is

Launching Other 30/30/30/5/5/5/5 Brands

"The game starts with a single brand active for each firm. Its formulation is 30/30/30/5/5/5/5. Is it correct that other brands can only be launched if they are reformulated? Otherwise, won't there be patent infringements?"

All existing brands' patents are legal at initialization due to grandfathering clauses in the vaporware patent laws. However, new reformulations must honor existing patent laws. The initial formulations 30/30/..., for brand 1 and for other brands, are legal and can be launched. But, it doesn't seem to make a lot of sense to launch another 30/30/... brand when there are already a bunch of those out there.

Marketable Securities

"Are marketable securities in BRANDMAPS™ just another form of cash on hand? If not, can they be liquidated?"

Marketable securities are another form of cash, although one that does earn interest. To liquidate marketable securities, pay a dividend. But, be careful. Cash or marketable securities are needed to fund operating losses, plant capacity purchases, and inventory investments. In the absence of sufficient cash and/or marketable securities, loans are automatically issued by the BRANDMAPS™ software.

Pre-Launch Marketing Support Spending

"One of my firms just tried to do pre-launch marketing support spending in the quarter prior to reformulating and launching a new product. They spent $2,000,000 in advertising, promotion (sales representative training and dealer training), and sales salaries. This spending was included on the firm's financial statements for the quarter. However, the firm noticed that their brand was not listed on the Marketing Research Study #8 ('Media Content Analysis') output. The firm is concerned that this pre-launch marketing support spending was wasted. Please advise."

Pre-launch marketing support spending (e.g., advertising, research and development, and sales force) is possible and does have some residual value beyond the quarter of spending. However, pre-launch promotion makes no sense given its well-known short-run nature. Of course, just because there is long-term value in advertising, research and development, and sales force efforts doesn't imply that pre-launch spending is the most profitable thing to do.

With regard to marketing research reports, only active brands are displayed. Since, by definition, pre-launch spending is for inactive brands that are to be launched in the future, their current market status will be masked until they are launched. To use a Star Trek metaphor, pre-launch marketing support spending is "cloaked" (i.e., undetectable or stealth) spending since it cannot be observed by competitors ahead of the time at which such brands are activated. However, the pre-launch money is spent and there will be some non-zero (although not necessarily profitable) impact on the market.

Producing More Than Current Capacity

"Several of my students want to know if they can actually produce and sell more units than they have capacity. Is this an option? Should I let them?"

Production orders are separate and independent of plant capacity. For example, if a firm has 100,000 units of plant capacity and orders 110,000 units of production across its various products, 110,000 units of production will be produced even though production will be on an over-capacity basis. There will be accelerated depreciation in effect associated with the units produced beyond 100,000, but it's not a big deal if the over-capacity production is relatively modest (say less than 10% or so) and short term. Repeated and substantial over-capacity usage can lead to plant capacity depreciating faster than it can be replenished through normal plant capacity orders. See the discussion on p. 38 of the BRANDMAPS™ student manual for details of the economics associated with over-capacity usage. My recommendation is to permit the students to do what they wish with regard to production ordering and capacity management. They will suffer the consequences if they fail to coordinate production orders with plant capacity.

Promotional Type Equals Zero

"Promotional type is reported as being zero in some marketing research study reports. However, promotional types equal to zero are impossible in BRANDMAPS™. What gives?"

Promotional type is reported as being zero in marketing research study output when the associated promotional spending is zero. After all, if there's no spending, there's no promotional type of record at that moment, even if the software has a promotional type recorded in it. Only when there is promotional spending is the promotional type revealed to the world.

Promotions (Customer Rebates)

[1] "Suppose that a firm wished to give a $100 customer rebate. I do not believe that there is a place in the input to assign a dollar amount per-unit sold for this type of promotion. Instead, you must assign a total promotion budget. Therefore, by assumption, if I input a $10,000,000 promotion budget with promotional type 9 and a forecasted sales of 100,000 units, that would correspond to $100 rebate per unit. If sales only reached 65,000 units, would that team be charged the entire $10,000,000 for promotion or $6,500,000 (i.e., $100 times 65,000 units)?" [2] "Product 1-1 had sales volume of 0 in market region 4 this quarter. The firm had budgeted $10,000,000 in promotion for this quarter for 'customer rebates.' Where did the $10,000,000 in 'customer rebates' go if there were actual sales in this quarter?"

The total promotion dollars are always spent, regardless of the promotional type chosen and regardless of the sales volume that occurs in the subsequent quarter. With customer rebates, an estimate of sales volume is created to size the per-unit customer rebate that

If there are no actual sales in the quarter, there is an obvious problem because the promotion dollars will all be spent. I suggest that you refund the promotion amount (as a negative consulting fee). Also, promotion spending of $10,000,000 is certainly a huge amount, even in large markets. You might wish to review with the particular team how they arrived at that amount of promotion dollars. Did they actually calculate what this would mean in terms of per-unit customer rebates (based, for example, on their actual sales forecast for the particular quarter)?

Promotion Spending Not as Input

"Promotion spending as reported on the financial results is not equal to what my students input on their disk. What's happening?"

BYESNO (line 349 in the game parameter file) is set equal to "2" for each firm in your industry. Thus, quarterly budget constraints are in effect for marketing support spending (advertising, promotion, research and development, and sales force). Your firms are exceeding their marketing support spending limits and the software is automatically reducing marketing support spending (to zero, if necessary), starting first with promotion. Quarterly budget constraints are described in pp. 167-168 of the BRANDMAPS™ student manual. If your students are using disk input, then the software has been warning them about marketing support spending violations. Also, the second last page of the financial results reports these software-based changes in marketing support spending

Research and Development After a Reformulation

"When a currently-active brand is reformulated, does the R&D drop to $0 (i.e., they can only spend a maximum of $250,000 in that quarter)? The manual doesn't seem very clear on this."

Research and development spending does not automatically revert to $0 for a reformulated brand. Research and development spending continues on from its previous dollar amount, regardless of the reformulation status of a brand. After all, if a brand is reformulated, then it's "new and improved" and research and development is still appropriate to fine-tune its quality.

Sales Force Size Maximum Change

"Is the maximum possible sales force size change from one quarter to the next equal to 50 across all market regions in total or equal to 50 per market region?"

The maximum possible increase in sales force size is 50 sales representatives per market region per quarter.

Definitions

Brand Quality Perceptions of Zero

"Is there any reason a brand should have a brand quality perception of 0.0 when other brands of the firm have non-zero values?"

Research and development spending for the brand is $0. Since brand quality perception is driven by research and development spending, $0 spending results in 0.0 brand quality.

Cash

"Our current cash balance is about $3,000,000. Are our costs expensed at the beginning of the next quarter or the end of the next quarter? The answer influences our marketing support spending decisions, since we obviously don't want to spend money before we have it."

Assume that all revenues and costs happen uniformly throughout the quarter. That is, with a 90-day quarter, about 1/90 of the quarter's revenues and costs are attributable to each day's operations. Thus, you do have revenue coming in regularly throughout the quarter to pay for your various within-quarter operating costs. Thus, there's no need to worry about within-quarter cash flow issues with regard to covering your operating costs and within-quarter marketing support spending. Also, note that you do have access to loans, as necessary, to cover shortages in cash.

Compatibility

"What is compatibility? How does low compatibility reduce the benefits that customers derive from vaporware?"

Like "vaporware" itself, the product attribute "compatibility" is an abstract, generic construct. The implication of building higher-compatible vaporware is clear: costs rise. Cost-based consequences of compatibility for product costs are well described in the student manual. But, what is "compatibility"? Vaporware is a durable, capital good with a presumed lengthy life. Its useful life isn't exhausted in the first customer usage occasion. If vaporware is an electronic product like a stereo system or personal computer or high-definition digital television or color printer for personal computers or a multi-purpose set-top box for TVs, then "compatibility" might refer to how easy it is for a particular vaporware brand to interface with other system components. Vaporware with high [low] compatibility would be easy [difficult] for the customer to use with other system components. Low-compatible vaporware is less useful to customers than high-compatible vaporware. Thus, compatibility is desirable and customers prefer vaporware brands with higher compatibility.

Consumer Price Indices

"How should the Consumer Price Indices be interpreted?"

The Consumer Price Index is a relative measure of general prices. Values may be compared across market regions and through time. One important use of Consumer Price Indices is in the calculation of real income. If incomes grow in nominal terms less than the rate of growth in the Consumer Price Index, then real incomes are falling. For "normal" goods (in the economic sense), falling real incomes would be associated with reductions in industry demand. Also, Consumer Price Indices are relevant in assessing current vaporware price levels. Vaporware prices which rise faster than the growth in the Consumer Price Index should be expected to result in decreased levels of demand for vaporware, since all other goods and services are priced more attractively by comparison.

Convenience

As described in the student manual (Marketing Research Study #21) in a very terse fashion, "convenience" refers to convenience to buy and convenience to use after purchasing. "Convenience" is, of course, perceptual so a brand's communications program (particularly media content) would presumably influence such perceptions. However, for a durable good like vaporware, it should be expected that more engineering-like, objective variables are the principal drivers of convenience perception. Convenience perception depends on the convenience of buying and using vaporware. Brands that are convenient to buy would be stocked by lots of dealers (dealer availability), would be well-known with easy top-of-mind awareness (customer brand awareness), and would be in-stock (no or low or infrequent unfilled orders). In general, the various components of marketing support spending (advertising, promotion, and sales force) will be major drivers of the convenient-to-buy part of convenience perception.

Easy-to-use vaporware brands would work well in their intended setting, be highly compatible with existing systems and infrastructure, fail infrequently, and would be well-warranted if they fail. Thus, the easy-to-use part of convenience perception involves Compatibility, quality (as driven by research and development spending), and Warranty.

To provide further insight into the drivers of convenience perception, the v4.07 software (dated 02/01/99 or later) includes estimates of correlations of various drivers of convenience perception as part of an expanded Marketing Research Study #21. These correlations are provided on a regional basis, consistent with the display of each region's perceptual map. Since correlations must be interpreted with caution, the following interpretive notes are printed as the second-last page of marketing research results whenever a marketing research study that includes correlations is reported: "These marketing research results contain one or more research studies where correlations have been reported as part of the marketing research output. Such correlations should be interpreted with caution, as the following notes suggest.

1. Correlations measure the strength of linear association between two variables. Correlations run from -1.0 (exact negative relationship) to +1.0 (exact positive relationship). A zero correlation implies that two variables are statistically unrelated to one another.

2. These correlations are based on data from the last five quarters, to the extent that such data exist in the historical archives of this industry. Sample sizes are reported. Correlations based on less than five data points and/or negative correlations are reported as 'n/s'.

3. These correlations are based on products with market shares of at least 2.5% in a quarter. This avoids using data from products with small market shares that might distort calculated correlations. Products with small market shares might have unusual or extreme associated performance and convenience perception driver-values.

4. Pairwise correlations can be influenced by other forces which are highly correlated with the two variables for which correlations are calculated. Correlation does not mean causation. These correlations, like all correlations, should be interpreted with a measure of caution.

5. Only theoretically plausible drivers of the specific variables that are the subject of interest are reported. For example, dealer price is not included among the reported drivers of performance and convenience perceptions. While higher dealer prices might well increase performance and convenience perception, a simpler explanation exists: firms choose to set higher prices for products with higher perceived performance or higher perceived convenience. Thus, causality runs from performance and/or convenience to dealer price and not the other way around. Of course, correlations do not establish the direction of causality but merely the magnitude of a statistical association."

Customer Preference For Vaporware

"If you give customers more than what they want, will they like vaporware better? Since we cannot customize our marketing research to target segments other than at the regional level, it may simply be a software constraint that we must assume that more is better (i.e., if you prefer 1/4 lb. of beef on your hamburger, you'll like 1/2 lb. even better)."

What does your marketing research tell you about customer preferences for vaporware product attributes? Is more always preferred to less? In addressing these questions, you must distinguish between the physical raw materials (attributes 1-5) and the associated vaporware product characteristics, Compatibility and Warranty (attributes 6 and 7). The raw materials (attributes 1-5) are of the "I-want-what-I-want" variety, so you'll normally be striving to provide customers with exactly the levels of these attributes that they want (and are willing to pay for). Too much of attributes 1-5 is not necessarily preferred to just the right amount.

For Compatibility and Warranty (attributes 6 and 7), "more-is-always-better" is presumably the theoretically correct answer. Of course, cost considerations are relevant too, so it's possible that customers may want more than they are really willing to pay for.

Dealer Margin

"Dealer margin" is total dollars earned by dealers from selling a brand, which equals volume times the sum of unit margin and unit rebates.

Dealer Price

"What's the difference between 'manufacturer price' and 'dealer price'?"

"Manufacturer price" is the price at which you sell to dealers/distributors, "dealer price" is the price at which dealers sell to final customers. You only control the "manufacturer price" not the "dealer price" (dealers markup your products some amount). The only way to tell what the dealer markup rates are in the various market regions is to compare your "manufacturer price" to the "dealer prices." Of course, you always know your own "manufacturer price" but you will need marketing research to learn about "dealer prices."

Depreciation

"How is depreciation calculated in BRANDMAPS™?"

To show all details of the calculation of total depreciation costs and physical plant-capacity units in a quarter, the following worksheet/spreadsheet would be needed. This simplified worksheet assumes that plant capacity utilization does not exceed 100%; if so, then refer to Table 8 on page 38 of the BRANDMAPS™ 4/e student manual for details on how to modify the value of plant capacity utilization rate shown in line (5) below.

(1) Beginning-Quarter Capacity [Units] {from balance sheet} (2) Beginning-Quarter Capacity Investment [$] {from balance sheet} (3) Capacity Value Per Unit [$/unit] {divide line (2) by line (1)} (4) Total Production (Regular and Emergency) For All Products [Units] (5) Plant Capacity Utilization Rate {divide line (4) by line (1)}

(6) Calculation of Depreciation:

(a) Fixed Depreciation [Units] = 0.03 * line (1) (b) Variable Depreciation [Units] = 0.12 * line (5) (c) Total Depreciation [Units] = line (6a) + line (6b) (7) Calculation of Depreciation Costs:

(a) Fixed Depreciation Costs [$] = line (3) * 0.03 * line (1) (b) Variable Depreciation Costs [$] = line (3) * 0.12 * line (5) (c) Total Depreciation Costs [$] = line (7a) + line (7b).

Disposal Sales

After a minor or major reformulations in BRANDMAPS™, any available finished goods inventory is immediately sold-off before the quarter occurs. A reformulated brand always has zero inventory available for sale as the quarter begins. Thus, current-quarter

production after a reformulation will have to be sufficient to meet anticipated current-quarter sales at the time of a reformulation. The appropriate disposal sale charge (5% of the finished goods inventory value for a minor reformulation and 25% of the finished goods inventory value for a major reformulation) is recorded on the DIVISIONAL OPERATING STATEMENT as Disposal Sales.

Dividends

"Why are dividends reported as negative numbers on the DIVISIONAL BALANCE SHEET?"

Dividends are reported on the DIVISIONAL BALANCE SHEET as negative numbers since they represent cash outflows that effectively reduce owners' equity.

Emergency Production Limits

"We set our emergency production limit for product 5-1 to the maximum possible value of 10%. However, we actually produced 14.2% emergency production last quarter. What's happening here?"

The emergency production limit in BRANDMAPS™ is based on the total potential sales (actual and unfilled), not on your production level. A "10% emergency production level" means that a maximum of 10% of total potential sales (actual and unfilled) can be produced on an emergency production basis.

If the emergency production limit was based on production, then a production order of zero units would also mean that emergency production was zero units. This would be non-intuitive and of no value to a firm wishing to reduce its current inventory level by producing zero units but also wishing to have some flexibility in meeting demand in case current-quarter demand exceeds existing inventory levels.

Industry Sales and Market Shares

"To calculate the total volume for a market region, I am dividing the number of units we sold by our market share. I am unsure whether adding the unfilled orders to this total would be a better reflection of the market volume had we produced sufficient quantity. Any advice?"

Total sales in a market region is equal to your actual unit sales divided by your actual market share (expressed in proportional not percentage terms). Market shares reflect actual sales not unfilled orders. Your proposed recalculation of actual market share is a reasonable thing to do to account for potential market share. You may wish to track both actual market share and potential market share through time to monitor the performance of your firm and of individual brands.

Interest Expense

[1] "With a substantial investment in capacity this past quarter, we used up all of our cash and marketable securities and took on $34M in debt. Normally, this interest expense reduces the income tax liability but I do not see where this is shown on our income statement. What gives?" [2] "Our company had quite a lot of loans already on the DIVISIONAL BALANCE SHEET when we took over the firm. Why was our non-operating expense from these loans only $723,242 in Q#8 and $10,410,855 in Q#9? What would cause it to jump so dramatically?"

Interest expense is lagged a quarter. Next quarter, you pay interest on the outstanding loans that were in effect at the end of this quarter. Incidentally, the same lagged process works for marketable securities. Last quarter's marketable securities yield interest on this quarter's profit-and-loss statement. Thus, for example, interest expenses reported on the Q#9 financial statements reflect outstanding loans on the Q#8 DIVISIONAL BALANCE SHEET.

Introduction Charges

[1] "Is the charge to introduce a brand the same regardless of the number of market regions involved in the introduction or is the charge a per-region charge?" [2] "If I stop selling a brand in a region and then later (after several quarters) decide to sell the same brand with the same formulation, will that be treated as a new product introduction (and be assessed the appropriate charges)?"

The new product introduction charge is per brand per region. It reflects the inevitable setup costs incurred when a product is first launched into a market. Prior participation in a market region is irrelevant to new product introduction charges. New product introduction charges are automatically charged for any product that is active in the current quarter and that was inactive in the previous quarter.

Inventory Charges

"How are inventory charges calculated in BRANDMAPS™?"

In BRANDMAPS™, product-specific inventory charges are based on the average of beginning-quarter and ending-quarter inventory levels. Here, "beginning-quarter" inventory refers to the inventory level at the end of the previous quarter and "ending-quarter" inventory refers to the inventory level at the end of the current quarter. The only time inventory charges will be zero is when both beginning-quarter and ending-quarter inventory equal zero. (Since production is on "automatic" in BRANDS™, there is never any inventory and associated inventory charges are always zero.)

Inventory Consequences of Reformulations

"Assume that firm 1 does a product modification on brand 1-3 in BRANDMAPS™. They have 30,000 units of 1-3 finished goods inventory and dealers hold an additional 10,000 units in inventory. What happens to these inventories?"

On all reformulations, a firm's finished goods inventory is immediately sold at cost ("at cost" on the DIVISIONAL BALANCE SHEET as of the previous quarter) as the quarter begins. Thus, beginning-quarter finished goods inventory becomes zero when a reformulation occurs. In addition, dealers' inventory is liquidated. "Old" inventory is never converted to "new" inventory. Inventory disposal penalties are levied on the current values of finished goods inventory and dealers' inventory, as described in the BRANDMAPS™ student manual.

Loans

"How are loans paid back? Is it possible to accelerate loan repayment?"

Excess cash at the end of any quarter is used to retire existing loans. (The sources of such excess cash to retire loans include profits from operations, reductions in plant capacity investments, and reductions in investments in finished goods inventory.) If there are no outstanding loans, the excess cash is invested in marketable securities. These operations are conducted automatically by the game software, with no student or instructor intervention required. Given this automation situation, accelerated repayment of loans does not exist. Loans are already paid off as rapidly as available cash permits.

Manufacturer Price

"What's the difference between 'manufacturer price' and 'dealer price'?"

"Manufacturer price" is the price at which you sell to dealers/distributors, "dealer price" is the price at which dealers sell to final customers. You only control the "manufacturer price" not the "dealer price" (dealers markup your products some amount). The only way to tell what the dealer markup rates are in the various market regions is to compare your "manufacturer price" to the "dealer prices." Of course, you always know your own "manufacturer price" but you will need marketing research to learn about "dealer prices."

Non-Operating Income

"Would you please explain the non-operating income credit/charge on the Divisional Operating Statement in more depth? The student manual explains that this charge is the result of marketable securities (in our case since the groups were credited rather than debited this amount). All the groups were credited the same amount: $925,620 (the game is in the second quarter)."

Positive non-operating income in Q#2 means that there were marketable securities on the Q#1 balance sheet. This is why all the firms' numbers are identical in Q#2; all of the firms' balance sheets were identical at initialization at Q#1. Through time, the non-operating income will vary (positive if last quarter's balance sheet includes marketable securities and negative if last quarter's balance sheet includes loans).

Patent Zones Next Quarter

"In BRANDMAPS™, a competitor's product has a current patent zone of 19. How far away does my reformulation have to be to be successful when the game next runs?"

The game run sequence is as follows: (1) the clock advances by one quarter; (2) all patent zones are reduced by three units; (3) reformulations are processed; (4) the game runs; and, (5) marketing research pre-orders are processed. Thus, you have to be 17 patent zone units away from this product's current formulation to be legal, since its patent zone will be 16 units when the game next runs. Of course, you also have to be outside all other products' patents, including those reformulated ahead of you at the start of the next quarter.

Pending

[1] "When introducing a brand to a market, 'Inactive' is replaced by 'Pending' on the decision variables change screen. What does 'Pending' mean?" [2] "One of my teams has 'Pending' on a brand that it introduced in a previous quarter. Shouldn't the 'Pending' have already been replaced by 'Active' status?"

Introducing a brand actually means "order an introduction which will actually occur the next time the game runs." Introduction does not occur at the time the introduce command is given. The status "Pending" means that the introduction of the brand in the specified region is pending and that it will occur in the next quarter.

Once a brand is introduced, it is "Active." If students mistakenly attempt to reintroduce it, there's no harm caused. True, the activity status will show "Pending" on the decision input screen prior to the next quarter being run. And, the software will introduce this brand the next quarter. But, there will be no introduction charges because the software will note that the brand was actually "Active" last quarter.

One other case could lead to "Pending" being reported for a brand that was introduced in the previous quarter. That case involved a team disk that was not updated correctly after the previous game run. The updating process copies the revised post-game files back to the team's disk. If that operation doesn't occur (e.g., just didn't happen or disk write errors occurred), then the team's disk doesn't contain the current status of all decision variables. This would be a major problem and a replacement disk should be created to permit the students to input their decision variable changes and marketing research pre-orders for the next quarter.

Plant Capacity Sales

"When a team sells capacity to another team, is that capacity sold permanently or is it leased for that quarter only?"

Such plant transactions, which must be implemented by the course instructor, are sales not leases. The buying firm has permanent possession of the purchased plant capacity.

Promotional Type #10

"When we choose promotion type #10 in BRANDMAPS™, are there random percentages of the promotional budget allocated to promotional types #1-#5 for dealers or does promotional type #10 just mean a general promotion push on dealers?"

In BRANDMAPS™, promotional type #10 means that the regional sales manager chooses a particular promotional type for the next quarter. You should assume that means your brand receives a more-or-less average kind of promotional selection, "average" effectiveness of promotions upon which perhaps you could improve through time with superior promotional type decisions.

Relative Product Desirability

"What is Relative Product Desirability (referenced in Marketing Research Study #29)?"

Relative Product Desirability refers to the desirability of a product's formulation. It's based on an implicit "n"-way preference test, for the "n" active brands in a market region. High performance on Relative Product Desirability is consistent with a superior product formulation, compared to competitors' formulations in a specific market region.

Return-on-Assets

Return-on-assets is equal to current-quarter profits from the divisional operating statement divided by the previous quarter's assets from the firm's balance sheet, expressed in percentage terms.

Note, also, the definition of return-on-equity: return-on-equity is equal to current-quarter profits from the divisional operating statement divided by the previous current-quarter's net equity (which equals total liabilities and equity minus loans) from the firm's balance sheet, expressed in percentage terms. Return on assets will be equal to or less than return on equity since the asset base of a firm will be greater than the equity base whenever a firm as outstanding loans.

Return-on-Equity

Return-on-equity is equal to current-quarter profits from the divisional operating statement divided by the previous quarter's net equity (which equals total liabilities and equity minus loans) from the firm's balance sheet, expressed in percentage terms. Note, also, the definition of return-on-assets: return-on-assets is equal to current-quarter profits from the divisional operating statement divided by the previous quarter's assets from the firm's balance sheet, expressed in percentage terms. Return on equity will be equal to or greater than return on assets since the asset base of a firm will be greater than the equity base whenever a firm as outstanding loans.

Return-On-Investment

"How should the ROI (return-on-investment) figures be calculated for individual decision periods? Given the information on the DIVISIONAL BALANCE SHEET, what data should be used to obtain the ROI for that quarter?"

Quarterly ROE (return-on-equity), which is also ROI (return-on-investment), equals current-quarter net operating income divided by last quarter's net assets. Net assets are assets minus loans. Another similar financial performance measure is ROA (return-on-assets), with quarterly ROA being equal to current-quarter net operating income divided by last quarter's total assets. Multiply these figures by 100 to express these figures in percentage terms. multiply them by 100. Note that quarterly ROI (or quarterly ROE) is not the same as annual or annualized ROI, which has to take into account when net income and dividends for earlier quarters of the current year actually occurred.

Sales Force Salaries

"Our sales force salaries seem too high. For example, product 4-3 has a sales force size of 115 people (it's only sold in one market region). No change was made to sales force size or sales force salary between Q#8 and Q#9. Our sales salary is $2,600. As I understand it, sales salaries should be (115)($2,600) = $299,000, but our current product operating statement shows total salaries of $897,000. What's going on?" Sales force salary is quoted is $/month terms as a decision variable but the financial statements represent a full quarter's operations. Multiple your monthly sales force salary decision variable by three to obtain your quarterly sales force salary expenses.

Sales Overhead

[1] "How is Sales Overhead defined?" [2] "I have a firm who have just received their output from Q#2 and Sales Overhead went from about 1.6 million to about 3.6 million although their sales had increased only about 13% from 70,000 to 79,000. The only sales force decision that had been changed was sales commission, which went from the default 1% to 4%. Why did their Sales Overhead increase so much?"

As defined in the student manual, Sales Overhead is equal to the sum of Sales Salaries and Sales Commissions. Thus, every dollar of sales force compensation, whether in the form of salary or commission, also has associated with it a dollar of sales overhead. This 100% sales overhead rate covers a wide range of implicit and indirect sales force representative costs such as benefits, selling expenses, office space and related expenses, sales support, sales training, and administrative support and other indirect expenses.

Seasonality

"When sales fluctuate due to seasonality, does the seasonality effect depend on the brands' marketing efforts?"

Seasonality is an exogenous factor that influences industry sales volume. It happens regardless of, and is independent of, the marketing activities of the firms in the vaporware industry.

Smoothing Costs Associa ted With Reformulations

"We are planning a reformulation and have ordered 25,000 units of production with the new formulation versus 28,000 units of production that we ordered last quarter for the old formulation. When calculating production and labor smoothing costs in BRANDMAPS™, should we assume that it is a 12% change or a 100% change, the latter occurring if you zero out the old product and then start production up in the new product formulation? Please advise."

The previous production order was 28K. This is all that matters in the smoothing cost calculation in BRANDMAPS™. A reformulation is irrelevant to the calculation of smoothing costs; only last quarter and current quarter production levels influence smoothing costs. A change in production from 28K to 25K will have a 12% smoothing adjustment cost associated with it.

Smoothing Costs When Previous Production Was Zero

"In BRANDMAPS™, if production of a product changes from zero to any positive number in the next quarter, what are the associated smoothing costs?"

In moving a product's production from 0 in a quarter to any positive number in the subsequent quarter, smoothing costs will hit their maximum values (since the base case production level is 0 and the change in production always exceeds 100% of the base case production level, by definition). Maximum smoothing costs are equal to current production and current labor costs.

Transportation and Shipping Costs

"Are transportation and shipping costs reduced for lighter-weight vaporware brands?"

No. Transportation and shipping costs are expressed in per-vaporware-unit terms. Transportation and shipping costs are not based on the weight of the vaporware brand.

Unfilled Orders

[1] "What are unfilled orders?" [2] "In BRANDMAPS™, what happens to my unfilled orders? Do they come back as sales in the next quarter?" [3] "On unfilled orders, how do customers make their brand selections in the next quarter? Are they guaranteed the product at the previous quarter's price, when they first wished to purchase it?"

In BRANDMAPS™, if a brand's sales volume exceeds current-quarter production plus emergency production plus beginning-of-quarter inventory, unfilled orders result. Some part of a brand's unfilled orders shift to other available brands in the current quarter. Unfilled orders are not backorders. Customers who are unable to purchase their first-choice brand do one of three things: (1) wait until the next quarter to attempt a purchase of their preferred brand; (2) switch to another brand that is available; or, (3) purchase no brand now or in the next quarter. Thus, some part of your brand's "unfilled orders" shift to competitors' brands in the current quarter, providing that the competitors' brands do have available inventory to meet this shifted demand. However, some of your brand's "unfilled orders" are truly backorders and return again next quarter. The division between shifters and backorders is unknown.

For customers of the first type, a purchase in the next quarter is based on the brand's relative standing at that time compared to all other brands available for purchase. Presumably, customers of the first type are predisposed to purchasing their preferred brand from the prior quarter. However, brand prices in the next quarter do influence customers' brand choices. All transactions in the next quarter are at the prices in effect in the next quarter.

Unfilled Orders Allocations

"How does BRANDMAPS™ allocate the production of a brand between regions in instances when demand exceeds the available production and existing inventory? Does it allocate on the basis of the region that has the highest margin or by some other criteria?"

BRANDMAPS™ fills all dealer orders proportionately to total demand. Thus, unfilled orders will always be a constant percentage of total possible sales (actual sales plus unfilled orders). There is no way to direct orders to be filled in some prioritized fashion, say by highest margin. All dealers are dealt with equally in this approach regardless of their profit or margin potential.

Variable Depreciation

"Our Q6 DIVISIONAL BALANCE SHEET shows 116K units of plant capacity. Our total production for all products in Q7 was 115K. Why is our variable depreciation $90.68? Shouldn't it be $90.00 per unit (12% of $750)? It would seem that the extra $0.68 per unit is a premium for producing over 100% of our capacity yet our production volume was actually under 100%."

When you order plant capacity in BRANDMAPS™, there is a fixed cost per order in addition to the variable cost of $750 per unit. That fixed cost is included within the value of your plant capacity as recorded on the DIVISIONAL BALANCE SHEET, since it appropriate to pro-rate this cost over the useful life of the plant capacity. Thus, the effective cost per unit of plant capacity in BRANDMAPS™ will be a little above $750 per unit.

Marketing Research

Advertising Program Experiments

"Is the cost of Marketing Research Study #35 (Advertising Experiment) per experiment or the specified total for any number of experiments (one to ten)?"

The cost is per experiment. If you execute the maximum possible number of advertising experiments in a quarter (10), the total cost would be ten times the stated per-experiment cost.

Billings Records

"In some cases, the marketing research study billings records seem to report more usage than the students claim to have ordered. Any help on this would be appreciated."

Marketing research is run after the quarter has concluded and after the quarter's financial statements have been assembled. It follows, then, that marketing research is not billed until the next quarter's financial reports are generated. So, Q#2 marketing research is billed with the Q#3 financial statements. See the footnotes at the MARKETING RESEARCH BILLINGS records on the financial statements for confirmation of this point. Direct your students to these footnotes, too.

Some marketing research studies are costed on a per-unit basis, where the "per-unit" metric is not the same as executing the marketing research study once. This is done for accounting purposes, so that the software only needs to track two items: frequency of execution and cost per-unit of execution. As an example, Marketing Research Study #12 ("Concept Testing") is recorded as being executed as many times as there are market regions when the study is ordered for "all" market regions. In a four-region industry, "all" implies that four concept tests are executed as far as the software is concerned.