Understanding the Sonite and Vodite products analysis

The American Marketing Association defines Marketing as “An organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.”

Marketing gurus like Philip Kotler, Peter Drucker, Michael Porters and many others have emphasized enough upon the importance of marketing. Any organization’s financial success and brand equity is largely a result of its marketing ability. Over the years, in order to recognize the importance of good marketing in a company’s success, many organizations have created the post of Chief Marketing Officer (CMO). Also, apart from highlighting financial successes alone in the press, companies have started emphasizing their marketing successes with equal importance.

Kotler, in his book, Marketing Management insists that marketing is not ‘only’ about selling. Peter Drucker also says “The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself.” Drucker further adds “Marketing is not only much broader than selling, it is not a specialized activity at all It encompasses the entire business. It is the whole business seen from the point of view of the final result, that is, from the customer’s point of view. Concern and responsibility for marketing must therefore permeate all areas of the enterprise.”

This brings us to the next question – What is the key to effective Marketing? The answer is simple – solid, sound, marketing strategy. Marketing strategy is the key to directing and co-ordinating the entire marketing effort.

The closest that MBA students can get to understanding how to create and implement a marketing strategy in a classroom is through simulation softwares like Markstrat. By using Markstrat along with traditional learning methods like case studies and lectures, we were able to be better understand marketing concepts such as: R&D, Brand Portfolio, Marketing Mix, Market Research, Sales Force Management, Product and Industry Lifecycles, Contribution Levels, Consumer Behaviour etc. Personally, I thought Markstrat was a good platform to try out marketing strategies in a risk-free environment before actually trying them out in a real business environment.

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The Markstrat World

The Markstrat world is a fictitious country of 250 million citizens. This country is assumed to be a fairly stable one with stable GDP and Inflation growth rates. While the Markstrat world does not represent any particular industrial or market sector, it behaves like most other markets and general management and marketing knowledge is applicable in this world.

In the Markstrat world, the competing companies manufacture and market consumer durable goods. These goods are comparable to electronic products such as hi-fi systems, telephone sets, office equipments or any other consumer durable goods. All companies got a different situation in terms of product specification, target consumer groups, market share, brand awareness levels, R&D expertise etc.

There are two main types of products in the Markstrat World – Sonite and Vodite. To begin with, all competing companies are given two Sonite Brands. All companies are equipped with competent R&D facilities to maintain, upgrade, withdraw an existing brand or introduce a new brand into the market based on market performance and requirements.

Sonite Products

Sonite products are complex equipments made up of several components. These products have existed in the market for several years and as a result the market is a well established one that has been growing for years. The market has a wide variety of products covering different price points targeting different consumer groups. The different consumer segments that Sonite products cater to are: Buffs, Singles, Pros, HiEarners and Others.

Vodite Products

Vodite products are not available at the start of the simulation. It is tipped to be this new type of electronic product which is completely different from Sonite in terms of demand and the consumer segment they cater to. However, since the technology required for Vodite and Sonite is similar, either our company or our competitors are most likely to be the first suppliers of Vodite. Therefore, all companies will have to make considerable investment in R&D to introduce Vodite to the world and thereby gain first mover advantage.

The various target segments for Vodite products are : Innovators, Adopters and Followers.

Aims & Objectives

To begin with, like everyone else, my team and I were given a company (E), in an industry (Cheetah) with a ready product portfolio to manage in a dynamic and interactive environment.

In the beginning, all the teams across industries had to market two SONITE brands. As explained earlier, the Sonite market is a hypothetical one that is well-established with several strong brands at different price points covering a wide range of needs. The two brands given to our team were SEMI and SELF. The physical characteristics of these products consisted of the following: Weight, Design, Volume, Max. Frequency and Power. The resulting base cost against a minimum production of 100,000 units was given to us as well. They were as follows:

Name

Weight

Design

Volume

Max. Freq

Power

Current cost

Realistic cost

SEMI

14

7

80

45

75

204

138

SELF

15

4

60

45

90

214

148

The five distinct target segments for Sonite products consisted of the following:

Buffs – Tech Savvy, highly interested in Sonite and similar products, price-sensitive, demand high performance, not too concerned about convenience, personal use, not very high-income.

Singles – demand average performance and convenience, price-sensitive like Buffs, for personal use.

Professionals – high income, both personal and professional use, demand high quality, performance and quality.

High-Earners – high income, personal use, demand high performance and convenience.

Others – looking for cheap, low performance, average convenience products.

As people hired in the marketing department, the following were our responsibilities:

To target selected segments and position the various products in a highly competitive and dynamic market.

To regularly liaise with the R&D department to design and develop new products.

To maintain, improve or withdraw existing products or design launch of new products.

To interface with the production department to specify production planning.

To make major marketing decisions such as: pricing, advertising budget etc for each brand in the portfolio.

To decide upon the priorities and allocation of the sales force.

To order and use market research studies that provide up-to-date information and aid in decision making.

To invest enough in R&D and anticipate the launch of a cutting-edge product like Vodite or even better, be the first team to launch it ourselves.

The three distinct consumer segments for Vodite consisted of the following:

Innovators – first users of Vodite products, risk-taking, above-average income

Early adopters – not as risk-taking but will adopt Vodite faster than others, influential consumer segment, serve as opinion-leaders, average income level

Followers – bulk of potential buyers, risk conscious, wait for other to buy before they buy, influenced by innovators and early adopters, below-average income.

Strategies

Sonite Analysis

In the beginning like all other teams, we were given two Sonite brands, SEMI and SELF.

Everything from product composition, cost, sales force distribution, distribution of budget across various activities like advertising, production cost had been pre-decided for the first period.

After the performance of period 1, we observed the following:

SEMI, by default appealed to the Buffs.

SELF was struggling to any particular consumer segment as its product specifications were similar to that of SEMI and in the same price band.

Therefore SELF started cannibalizing on SEMI’s market share. Therefore at the end of period 1, SELF was dropped.

Over periods2 -4, SEMI continued to perform well with increasing market contribution and market share.

The chart below explains the contribution of Sonite products across all period 1 – 12

From the above chart it is clearly visible that the Sonite brands did well from period 1 -4 but period 5-11 saw a great decline and did well in the last period.

Our main strategy with Sonite brands was to continually invest in our already well-performing brand SEMI and launch new products that appeal to different target segments

We therefore launched products like SEBI, SELL, SEKA and SENT that were targeted as the other target segments such as Singles and Others

However due the following mistakes, none of the other products really took off:

Faulty R & D

Insufficient investment in Market Research

Insufficient budget allocation to Marketing activities

Insufficient budget allocation in several periods to Sales Force Management

Inaccurate understanding of consumer behaviour

The overall market contribution of each Sonite Brand launched individually is as follows:

Vodite Analysis:

We launched our first Vodite product, VELA in Period 5.

Due to lack of investment in R&D and market research reports, we found that VELA did not turn out as we wanted it to.

It was targeted to Followers but appealed to Innovators better.

Also, due to lack of funds, we did not enough invest enough in marketing the new product and hence, the launch wasn’t a successful one.

Our biggest strategic victory came with the launch of our second Vodite product : Veer

The following was our strategy:

Adequate investment in R & D

Usage of market research reports to decide on perfect positioning and targeting of the product

Sufficient budget allocated to carry out launch Marketing activities

Adequate allocation of Sales force based on purchase intention levels

The result – We swept the market!

Monitoring from Period 1 – 12

From period 1 – 7, the biggest mistake we made was improper usage of market decision tools and low investment in R & D.

These mistakes caused us heavy loss of market share for different products on a continuous basis and eventually we fell into the debt trap.

This was also the main reason that we did not think of launching Vodite – due to lack of understanding of market research reports and insufficient R & D.

By the time we reached period 8, we were in bad shape financially and realised that we were missing out on something very basic and important.

It was then we realised that the core issue was improper use of analysis tools and the market research reports we were buying.

In period 9, we made a conscious effort to make proper use of the two and managed a good performance towards the end.

Brand Management

As we had multiple brands under both Sonite and Vodite, we ensured that the monitoring for each was done properly across all periods. We were very pro-active with launching and dropping brands where ever necessary.

We monitored targeting keeping in mind the clutter on different segments and future potential of the markets.

Competitors

In any given market scenario, there is one golden rule: Keep a very close eye on your competitors. After all, no one plays in isolation. We kept a close eye on the product portfolio, market share, purchase intention levels, brand contribution levels of our competitors and made changes to our portfolio wherever necessary.

For example: As soon as our competitor launched Vodite, we launched VELA to ensure that we don’t completely lose out the market. If we hadn’t monitored developments on time, we would’ve easily been outplayed by our competitors.

Production Management

Piling up of inventory can cause heavy losses to any brand. At the same time, insufficient inventory can cause heavy market share losses. Therefore, understanding the important of production management, we monitored production levels of all our brands throughout. Our strategy was simple: keep demand in mind and never underestimate the sales potential of our brands. We either increased or reduced production levels looking at our inventory at every level.

However, we made one mistake – underestimating the sales potential of VEER. We did not expect such a sudden surge in sales and therefore did not have enough inventories. This caused us losses initially but we buckled up in the later stage and eventually swept the market.

Advertising Budget Management

Managing marketing budgets was a very important part of our monitoring activity. Sufficient allocating of marketing budgets is very important if brand awareness and resulting sales have to increase. Depending of our financial constraints, we tried to ensure that there was sufficient budget to aid marketing efforts.

However we made a few mistakes – we did not allocate sufficient funds to advertising budget during product launches. Because of this, we lost out on considerable market share. However, we learnt from this mistake and ensured that during the launch of our second Vodite product, VEER, we allocated enough to advertising.

Sales Force Management

Sales force allocation across our brand portfolio and our competitor’s folio was done throughout to ensure that we were not cutting down on basic requirements. Sales force management was done keeping in mind the purchase intention levels of the target segments, consumer behaviour and past performance levels.

Pricing

Product portfolio analysis, competitor pricing, market share reports, consumer behaviour etc helped us make appropriate pricing decisions. With pricing we followed one basic strategy – not to make drastic price changes in segments that were price sensitive.

Individual area of focus – Sales Force Management

“Salespeople are active representatives of a company [who] can influence people’s perception of it through their ability to interact, to customize, and to build relationships with customers.” – Fred Hassan, CEO, Schering-Plough.

The sales force of any company serves as the personal link between the customers and the company. Sales reps are usually the first ones to spot any gap in the product line. Therefore over the years, industrial companies have relied heavily on developing a well-trained professional sales force to locate prospects, develop them into customers and further grow the business.

However, there is one major issue that plagues all companies that rely heavily on an efficient sales force – the rising costs of building and maintaining one. Therefore, the key to building a good sales force in the long run is to increase the productivity of the sales force through better training and more importantly, efficient allocation of the sales force so as to reap maximum benefit.

Sales force management is an extremely important function in any organization. It is one the most expensive and productive assets of any company. Therefore, increasing their number will increase cost for sure and with effective selling, the resulting sales as well.

Through Markstrat, I had the opportunity to better understand, experiment, and learn from strategies employed to achieve effective sales force management.

Period 1-2

Strategy

In period 1, we started with a default allocation of a total of 77 sales reps across our two brands SEMI and SELF. The individual allocation was as follows:

Period

Brand

Speciality Stores

Departmental Stores

Mass Merchandizing

Total

1

SEMI

18

17

5

40

SELF

16

15

6

37

2

SEMI

25

23

10

58

Results achieved

I believe that the sales force allocation was ideal for period 1 since we had a total sales force of 77 versus a firm average of 73.

In period 2, we withdrew our brand SELF due to falling brand contribution and resulting sales. Therefore we reallocated our resources such that we could leverage on the already good performing brand, SEMI.

With SEMI we noticed that Buffs and Professionals representated the highest purchase intention and therefore allocated more sales reps to speciality stores and departmental stores where they were more likely to purchase. Therefore we were able to better utilize our sales force by cutting down on costs as well. The sales force expenditure dropped to $1332 from $1665 in period 2.

Period 3 – 4

Strategy

In period 3, we launched a new product SEBI. For a product that had just been launched, we enjoyed decent brand awareness levels across consumer segments at an average on 17.9%. However, purchase intention level was very low at 1.4%. SEMI which enjoyed a purchase intention level of 9.2% saw a drop to 8.5% as well in spite of increased brand awareness. Market share of sell fell from 16% to 13% as well.

Through the money we received by selling off SELF, we allocated more budget to advertising and sales force management. We allocated $2774 to sales force management in period 3 versus 1332 in period 2 and increased the sales force from 58 in period 2 to 119 in period 3. The allocation was as follows:

Period

Brand

Speciality Stores

Departmental Stores

Mass Merchandizing

Total

3

SEMI

30

27

12

69

SEBI

10

10

30

50

4

SEMI

20

18

8

46

SEBI

10

10

10

30

Results achieved

In period 3, due to a wholesome effort, we saw the overall contribution levels of our company, E increase. The brand contribution level of SEMI saw a minor increase as well. This was because we continued to invest sales force where the highest purchase intentions lay. Market share levels were taken into consideration as well.

However, due to ineffective product positioning and others errors including inefficient allocation of sales force across consumer segments, SEBI started off with negative brand contribution rate of -2888.

Corrective action

In period 4, due the losses incurred due to SEBI we had to drop sales force management budget to $1953. This time, we allocated equally across all target segments for SEBI and cut down the force from 40 to 30. The overall sales force was dropped to 76 from 119 in period 3 in order to improve our company’s failing performance.

Period 5

Strategy

In period 5, we launched 2 new products. 1 Sonite product called SELL and 1 Vodite product called VELA. Our sales force distribution was driven by the segment in which the highest brand purchase intention lay. For example, we allocated 12 out of 23 allocated to SELL in mass merchandizing as the highest purchase intention was displayed by the ‘Others’ consumer segment. The overall distribution was as follows:

Period

Brand

Speciality Stores

Departmental Stores

Mass Merchandizing

Total

5

SEMI

15

15

6

36

SEBI

6

10

10

26

SELL

3

8

12

23

VELA

8

8

6

22

Results achieved

Since our sales force budget increased in period 5 to $2614, we were able to better allocate sales force across the products. However, our allocation was much lower than the industry average of 143 for Sonite products and 64 for Vodite products. However, we did the best that we could within our means.

Period 6 – 8

Strategy

In period 6, we dropped the product SELL as it did not do well at all and dropped our overall market share. So we decided to concentrate on existing brands and allocated budgets accordingly. We therefore dropped advertising budget and increased sales force budget to $3530. In period 7, the budget dropped to $2900 and in period 8 again increased to $4073. The distribution of sales force was as follows:

Period

Brand

Speciality Stores

Departmental Stores

Mass Merchandizing

Total

6

SEMI

18

15

8

41

SEBI

8

8

6

22

VELA

20

25

32

22

7

SEMI

18

15

8

41

VELA

18

22

28

68

8

SEMI

18

15

8

41

SEKA

12

15

18

45

VELA

18

22

28

68

Again, our strategy was simple. To allocate more sales force according to purchase intention of each segment and also the market share levels of every brand. For example, in period 6 for VELA we allocated most sales force to Departmental and Mass Merchandizing as the highest purchase intention lay among the ‘Early Adopters’ and ‘Followers’ consumer segment.

Also, as we can see from the table above, the allocation of sales force for SEMI remained the same from period 6 to 8 due to consistent performance levels of the brand. However, in period 7 SEBI was dropped and SEKA was introduced. The only major difference in allocation was for VELA. The sales force allocation was increased to 68 in period 7 and 8 from 22 in period 6.

Results achieved

We believe that apart from other efforts, proper allocation of sales force for VELA was responsible for increasing market share from 0.8% in period 5 to a whopping 7.4% in period 8.

Period 9 -12

Between period 9 – 12 a lot of product changes took place. SEKA was launched in period 9 and so was VEER. SEKA was finally withdrawn in period 11 and SENT was launched. VEER was retained until period 12.

The following is the snapshot of sales force allocation as a percentage of the total allocation store wise.

Period

Brand

Speciality Stores

Departmental Stores

Mass Merchandizing

38

42

49

12

SEMI

21%

17%

12%

SENT

26%

24%

27%

VELA

21%

24%

24%

VEER

32%

36%

37%

Total

100%

100%

100%

From the above table, we can see that toward s the end, maximum sales force was invested in VEER. This along with marketing efforts resulted in extremely high brand contribution by VEER.

Analysis of marketing strategies adopted by Cadbury India

Cadbury has come a long way since John Cadbury first started selling handmade chocolates to consumers in the latter half of the nineteenth century. Since then, Cadbury has come a long way keeping one value at the core of all its businesses – ‘Make today delicious.’

As of today, Cadbury is owned by Kraft Foods Inc. With annual revenues of approximately $ 50 billion with operations in about 70 countries employing about 140,000 people.

Cadbury India was set up in 1948. Back then no production facility was set up in India; chocolates were imported and sold. Over the last 60 years, several production facilities have been set up across India and today, Cadbury enjoys a 70% market share across several categories in India! This is the highest market share enjoyed by Cadbury anywhere in the world.

In India, currently, Cadbury has several products across the following 4 categories: Chocolate Confectionery, Milk Food Drinks, Gum and Candy.

Some of the key brands for Cadbury in the chocolate confectionery category are Cadbury Dairy Milk, 5 Star, Perk, Celebrations and Eclairs.

The particular marketing strategy of Cadbury that I would like to discuss is the launch of Cadbury 5 Star Crunchy.

Background – For years, 5 Star has been the star product of Cadbury. The product had for years catered to a special market that identified with the unique nougat and caramel taste of the 5 Star bar. However, over the years, the sales were decreasing due to many new offerings in the market.

The Problem – Due to many new offerings in the market, 5 Star was losing out on its audience who were moving on to different tastes. While there was no problem with the positioning of the product, the target segment had simply grown ‘bored’ of the product. Thankfully the brand awareness levels were untouched.

Product Strategy – From what I learnt in Markstrat, I believe the obvious thing to do would be to make appropriate product alterations to ensure that the target audience has something ‘new’ to look forward to in the product. Cadbury did exactly the same thing. While they stuck to the basic nougat + caramel taste, they introduced a new ‘crispy’ element in the bar. Thus, Cadbury 5 Star Crunch – the new variant, was launched.

Marketing Strategy – Another big learning for me from Markstrat was that, any product launch/re-launch must be accompanied by heavy marketing activities. Cadbury, sticking to the rule of thumb, launched this new variant with a solid marketing strategy in place – to ‘surprise’ consumers with the new crispy taste. The marketing campaign was executed across all media ranging from TV, print to outdoor.

Result Achieved – The 5 Star brand registered double the growth post the launch of its new variant 5 Star Crunchy!