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Minnesota Micromotors Simulation

SMU MBA FT 2016 MKTG601, Dr. Srinivas K. Reddy
by

Jayvee Fulgencio

on 22 February 2016

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Transcript of Minnesota Micromotors Simulation

Minnesota Micromotors Simulation
SMU MBA FT 2016 - Team G


The Objective
Maximize the following parameters:
(1) Revenues
(2) Net Profits
(3) Total Market Share
(4) Customer Satisfaction
Learning - Target Market
Although focusing on certain market segments is imperative, the company should not let go of other segments' specifications and demands as much as possible.
Learning - Pricing
Companies should price accordingly to properly extract the value offered and match the price expectations of the customers.
Learning - R&D
Depending on which market segment to be targeted, R&D investment should be just enough to catch up to product demands.

Over-investing results in lower profits.
Run # 1
Targeted Segments
Run # 2
Learning - Sales Force and Training
It is not just about having the right number of people in your sales sales force.

Strategic mix of sales force, segment targeting, and training and marketing.
Conclusion - The Minnesota Motors
Key ingredients for a successful perfromance in the simulation:

(1) Targeting the right market segments, without completely disregarding other segments

(2) Develop product based on customer specifications without over-investing. Investment should have proper returns

(3) Pricing strategy must be in line with value being offered (premium) but should not exceed what consumers are willing to pay.

(4) Conflicts between 1 - 3 arise, so there will always be a trade-off.
Run # 1 Strategy
Target Segments A/C
Premium Pricing
Develop Only Power-to Size Ratio
Retain Sales Force

Run # 2 Strategy
Results
Pricing Strategy
Set at $175 (premium)

However, with data derived from market research, discounts were applied appropriately among all market segments (0% - 35%)

Other Parameters
Sales Force: 11 (increased to 12)
Primary Focus of Sales Force:
(1) Large Customers
(2) Customer Retention
Focused Market Segments:
(1)
Segments A (58%)
and
C (42%)

Budget Allocation:
(1) Integrated Marketing
Comm. and Training
(2) Power-to-Size Ratio
Results - 89 points
Total Revenues: $84M
Total Profits: $12M
Market Share: 9.1%
Customer Satisfaction:
A - Very Satisfied
B - Not Satisfied
C - Very Satisfied
D - Satisfied
SC - Very Satisfied
Pricing Strategy
Set at $175 (premium)

However, with data derived from market research, discounts were applied appropriately among all market segments (0% - 35%)
Other Parameters
Sales Force: 8
Primary Focus of Sales Force:
(1) Large Customers
(2) Customer Retention
Focused Market Segments:
(1)
Segments A (57%)
,
B (15%)
and
C (28%)

Budget Allocation:
(1) Integrated Marketing
Comm. and Training
(2) Power-to-Size Ratio
(3) Thermal Resistance
Results - 89 points
Total Revenues:
$83M
Total Profits:
$9.4M
Market Share:
10.1%
Customer Satisfaction:
A - Very Satisfied
B - Satisfied
C - Very Satisfied
D - Satisfied
SC - Very Satisfied
Run # 1
Product specifications of Segments B and C were disregarded by not investing in Thermal Resistance.

This resulted in Segment B being dissatisfied, which prevented the group from having a higher score.
Run # 2
Run # 1
Initial price set: $175

Discounts: Give ample discounts to exactly match the price expectations of each segment.

Example: give 28% discount to have a net price of $126.
Run # 2
Initial strategy was slightly changed.

To improve margins, pricing was set at $1 above expected prices.

However, due to additional investments in R&D, pricing was not enough to augment profits.
Run # 1
Invested only in Power-to-Size ratio.

Segment A's needs are fully met, but other segments' satisfactions suffer.

Idea: Invest in Thermal Resistance to have a higher satisfaction for other segments.
Run # 2
Invested in both Power-to-Size Ratio and Thermal Resistance.

Market Share increased, as well as Market Segment B customer satisfaction.

However, additional investment without adjusting pricing reduced net income.
Run # 1
Sales Force: 11 - 12

Constant Investment in Training and Marketing Communication

Primarily focused on Large Customers and Customer Retention

Idea: Will revenues decrease with a lower sales force?
Run # 2
Sales Force: 8

Same Investment in Training and Marketing Communication

Primary focus on Large Customers and Customer Retention

Results: no adverse change in revenue stream
Target All Segments
Premium Pricing
Develop Both Power-to Size Ratio
and Thermal Resistance
Downsize Sales Force

Run 1:
Run 2:
A
C
Segment Value: $21.36M
Initial Market Share: $4.06M (19%)
Priority: High Power-to-Size Ratio
Price Sensitivity: Not too high
Segment Value: $21.90M
Initial Market Share: $874.75K (7.2%)
Priority: High Power-to-Size Ratio
and Thermal Resistance
Price Sensitivity: Low
Segment Value: $21.90M
Initial Market Share: $845.75K (7.2%)
Priority: High Power-to-Size Ratio
and Thermal Resistance
Price Sensitivity: Low
Segment Value: $39.5M
Initial Market Share: $2.76M (22.8%)
Priority: Price
Price Sensitivity: Very High
Targeted Segments
Segment Value: $23.80M
Initial Market Share: $951.6K (7.8%)
Priority: High Thermal Resistance
Price Sensitivity: Low
Segment Value: $21.36M
Initial Market Share: $4.06M (19%)
Priority: High Power-to-Size Ratio
Price Sensitivity: Not too high
A
B
C
D
By investing in both Power-to-Size ratio and Thermal Resistance, market segment B became satisfied.

However, due to investing in higher R&D, cost of manufacturing increased, which put down cumulative profits.
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