Week 5

Class Questions

As in previous weeks, I will begin with going through some of my questions from class this week. 
One of my questions related to the idea from Drucker that change is required by companies.  He mentions that any company that remains at status quo will fail.  Although I agree with that as a generalization, I think there are some companies that makes changes and should have remained at status quo.  I think a good local example is Friendly's.  Now that they have had so much financial difficulty, they are trying to go back to their 'old ways' and bring back the original Friendly's.  They got so far away from it I'm not sure they can go back.  Had they just stuck with the burgers and milkshakes that people expected rather than try to compete with other chains - would they have had so much trouble?  I'm not sure they would have.

One of my questions that was discussed in class was when should you start to implement a new product - during the old product's maturity or decline?  We talked about starting a new product early to ensure early adopters are covered since those in the decline stage are generally a small population. 

Prompts

There were a few prompts given out in the class discussion this week that I'd like to go through.

One was to explain the strategy between Neiman Marcus and Target joining together for a marketing campaign based on the Luxury article.  The strategy of Target is easier to see as it's the lower end market that is trying to gain some popularity and 'luxury' by teaming up with those Neiman Marcus customers.  The strategy of Neiman Marcus is not as clear.  There are many reasons why luxury or high end stores would want to get together with non-luxury brands, one of the popular reasons seems to be to gain new customers.  This is an easier way to get their name out to people who don't generally shop with them, but riskier since their current shoppers may not like the luxury brand being associated with non-luxury items.  My teaming with Target, Neiman Marcus could get more customers that may be in the early stages of their life (young families) to look into Neiman Marcus in the future when they may be making more money to be able to afford to shop there.

Another prompt was to explain what Drucker meant when he discussed premium pricing as a bad strategy.  This got my attention as I was reading because there are many companies who use this as their strategy.  He explains that when goods are actually premium this is not bad, but when regular goods try to add on 'bells and whistles' to their regular products to increase price is when this becomes an issue.  I believe he used the Xerox example where they started adding so many high priced features when customers really just wanted a cheap basic copier. 

Pharmasim

On to our fictional medication world of Pharmasim...

We were asked to look at the various types of new potential OTC meds that we could add to our brand line with Allstar during section 4 of the simulation.  To define the market with these potential new products I would say they would fall into the 'product development' category for all of them.  They are new products and services for Allstar that would be reaching our existing markets.  By looking at our market as the cold/cough OTD medicine category I would say any of the potential new options fall into those categories (child cold, 12 hr cold capsule, or 4 hr cough).  There is some overlap with the 'market penetration' category as we discussed these potential options may cannibalize our current product as well.

This week we were also asked to look into market demand for the various potential products we could include.  I started by looking into comparable products between the new potential lines and the overall market.

Total unit sales at my point in the simulation is at 575.9 and market penetration across all cross sections is 64.8% leading to market potential of 888.73 for the overall market.

For each potential unit, I took the product closest to the new market.  It appeared that with all these various vendors the most likely target group was mature and young families looking for cold medicine.  For this cross section the the market penetration was 67.2%.

In the 12-hr capsule market I looked at the brand Extra, which had 32.8 units sold.  Based on the 67.2% market penetration I would estimate the potential to be 48.8 units.

In the 4-hr cough market I used both Coughcure and End, which had a total of 81.1 units sold.  Based on the 67.2% market penetration I would estimate the potential to be 120.1 units.

In the child cold market I used Coldcure as an example, which had 46.8 units sold.  Based on the 67.2% market penetration I would estimate the potential to be 69.6 units.

We also discussed that some of these products may cannibalize some of the original formula sales which would only be beneficial if the profit margin on the new product is higher than the original.  This would impact the decision of the new product as well.