Allocator Player Manual 1. Overview of the Marketing Metrics Allocator Exercise The Allocator exercise is a simulation that puts the class, as Brand teams, in the role of product managers in the beer market. The purposes of the exercise are to gain experience in allocating marketing resources, to learn “how to learn” about market dynamics and to gain experience in choosing and analyzing marketing metrics via a marketing dashboard. Within the simulation, your primary objective is to maximize profitability and your secondary objective is to grow market share. Each brand has a budget that may be used to support marketing activities and purchase marketing research information. You are not required to spend the full budget, but it is extremely important that you do not exceed the budget allocated. 2. Allocator Decisions You will begin the Allocator exercise with data from previous periods and make decisions for subsequent periods. Prior to submitting your decisions you will have an opportunity to conduct (sequentially) up to five test markets. When interpreting test market results, note that they (necessarily) are based on the current competitive environment. Use the “Test” tab to plan and conduct test markets. Be sure to save the results in a separate file so that you can compare outcomes of different tests. You will be given historical information on your brand and certain information on competitors. You will also have the opportunity to purchase more information on your brand and the other competitors in the market. Historical data on previous periods are also provided to help you learn how the market works. 1 The due dates and time for submission of each Period’s decisions will be provided by the instructors. For you added convenience the time remaining before the next decisions are due is given in the upper right corner of the Allocator exercise window. 3. Sequence of Activities A. Review this memo covering the simulation’s structure. Access the Web page at the URL provided to review the Web form and submit brand decisions. The URL and your password required to access the site will be emailed to you separately. B. Your first task is to choose which metrics you will purchase. Use the “Dashboard Purchases” tab to make these purchases BEFORE conducting test markets or submitting decisions. C. Your second task is to choose whether to conduct one or more (up to five) test markets as described in this note. You are strongly encouraged to conduct multiple tests and save the data for subsequent analyses. D. Then, before the deadline noted on the schedule, your team submits its final decisions. The instructors will advance the simulation, using the final inputs received. Teams not submitting new “live” decisions by the deadline will have next round results based on the decisions made in the previous period. Please note that you can overwrite a previously submitted decision. The most recently submitted decision will be used for the next round. E. Next, using the knowledge gained from the previous rounds, your team formulates its moves for the next round and repeats steps B-D, purchasing metrics for your dashboard in each period. 2 4. Nine Marketing Inputs In the Allocator simulation five brands compete on the basis of nine marketing inputs listed below. The brands are: Alpha, Barley, Cream, Draft, and Ester. The situation of each brand is slightly different in terms of starting position, market share, and other variables. 1. Number of variants: The simulation starts with each brand offering one product. At any period, the brand can decide to offer a companion product (a brand extension, if you will). Submitting 2 as the number of variants is how the brand introduces a second product into the market. Once 2 is submitted, it is not possible to return to 1. There is a one-time charge of $10 million to introduce a second brand variant and a 10% increase in per-unit costs as noted below. The increase in unit costs applies to both variants. Advertising two versions of the product is also less efficient per brand. 2. Flavor Mix. The numbers you enter are an index reflecting a combination of flavor heartiness and calories. This number is called “flavor mix” and runs from 0 to 1. Products low on this scale would normally be viewed as “light” beers, although no such formal designation is part of the allocator simulation. Each brand starts with one product with a known (but changeable) flavor mix value. Each brand also has the option to introduce a companion product (a brand extension or brand variant) at any future time in the simulation. 3. Manufacturer Price: (both the regular and light variants sell at the same price, which you select 3each period); Retailers will determine Retail Price by applying a Retail Margin. Retail Margin varies with market share and availability. 4. Advertising spending: authorized for the purchase of media and development of advertising copy. 5. Copy tests: number of copy tests authorized to improve advertising’s “selling power”. Each copy test will reduce the proportion of the advertising budget available to purchase media by 5% (e.g., two copy tests will result in 90% of the advertising budget being spent to purchase media space and time). Important note: the copy test function has been disabled and for this exercise you should leave copy tests at “1.” 6. Viral (buzz) Spending: to generate positive word-of-mouth and preference – tending to work better for small-share brands. 7. Category Management Programs: spending to work with retailers on plans to reduce out-of-stocks and maintain share-of-shelf – generally more effective for market leaders. 8. Sales Force Spending: for efforts to convince stores to stock your product and push your brand. 9. Trade Spending: spending for temporary discounts and POP (point-of-purchase) displays to improve in-store push. Inputs 2-9 apply to the total brand and are not specific to each variant. The next section describes the market research that may be purchased and displayed on your Dashboard to monitor spending and market response. 3 5. Marketing Dashboard for the Allocator Game In addition to the most recent input values (decision variables above), the Dashboard can report a variety of metrics as discussed below. These values are reported as of the end of the most recently completed round. Once purchased, the marketing dashboard reports are available for your brand and each of your competitors. Advertising recall. Indicates the degree to which consumers remember and can “play back” a brand’s advertising message. Brand awareness. Measures the extent to which consumers name a given brand when prompted with the question, “What are some beer brands that come to mind?” Buzz Index Share. The share of mentions that your brand receives among category opinion leaders, including selected magazines, TV shows, and popular bars and restaurants. Cumulative profit. Total profits for a given brand over all periods to date. Distribution. The share of category sales accounted for by outlets that stock at least one SKU of a given brand. Distribution is reported net of out-of-stocks and measures your access to the market for the category. Beer is distributed through chains (35% of market), Mom & Pop grocery stores and convenience stores (25%), Liquor stores (20%), bars/clubs/restaurants (15%), and miscellaneous (5%). Smaller stores generally stock fewer beer brands. % Good Value. The percentage of consumers who consider the price/quality relationship of a given brand to provide a “good value.” % Like Advertising. The percentage of consumers who say they “like” a given brand’s current advertising. Price. The realized average price for all brand sales. Manufacturer Price is Retail Price * (1-Retail Margin). Share. The brand’s share of unit sales. % No Substitute. The percentage of a brand’s customers who say they will “accept no substitute” for your brand. % Penetration. The percentage of beer drinkers buying a given brand at least once during a period. Profit. The current period profit. Subject to rounding, this is the product of market size, market share, and unit contribution (Manufacturer Net Selling Price less unit cost) less total marketing spending. Recall, the unit costs increases by 10% with the introduction of a second variant. And there is an additional one-time fixed costs associated with the introduction of the second variant. Preference. The percentage of beer drinkers naming your brand as the one they intend to purchase on their next shopping trip. Preference Segment 1-4. The percentage of beer drinkers in these respective segments naming a given brand as the one they intend to purchase on the next shopping trip. Average Retail Price. Retailer Margin is the difference between Average Retail Price and Manufacturer Net selling Price, expressed as percentage of the former. Share of Requirements: Among consumers who purchased a given brand in the last period, the average share of total category purchases accounted for by that brand. 4 Trade Support. A measure of the lift due to retailer efforts your brand enjoys (or doesn’t enjoy) for the relevant period, indexed at an average value of 1.0. 5 6. Decision Form Your team’s decisions and test market inputs are made with the Allocator’s Input decision forms. There are separate forms for “Test” and “Live” decisions. Be sure you have the relevant tab clicked before hitting the submit button. Market details are displayed on the Dashboard and brand positioning is available by clicking Graph. The “TEST” tab is used only for test markets and neither Dashboard nor Graph is available in this mode. An example of the Input form is provided below. The values on this Dashboard are only for illustration.