| Please, do not reformat the worksheet. Only use the green and blue cells. | ||||||||||
| Enter your QU ID number and PharmaSim username. ↓ | Period 3 Decisions | |||||||||
| QU ID Number | 1476169 | 3 | ||||||||
| PharmaSim Username | quin20427134 | 2 | ||||||||
| Promotion to Assistant Brand Manager Congratulations to on your promotion to Assistant Brand Manager. Along with your promotion comes increased responsibilities, access to more reports and research, and more control over the components of your marketing mix. Under each of the decision screens, you will see the additional marketing mix components that you control. For example, in addition to setting the size of the Direct and Indirect Sales Force, you will also be allocating the Direct Sales Force among the various channels of distribution (Independent Drugstores, Chain Drugstores, Grocery Stores, Convenience Stores, and Mass Merchandisers) and the Indirect Salesforce among the various support functions (Wholesaler Support, Merchandisers, and Detailers). |
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| Direct Sales Force Allocation Follow the steps of the Planning Phase of the Strategic Marketing Process (Situation Analysis → Product-Market Focus → Marketing Program) to develop a plan for your direct sales force. |
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| Step 1: Situation Analysis Start by reviewing the reports and other research that are available to you in the simulation. Evaluate the current size and allocation of your direct sales force. What problems or opportunites does your research into your direct sales force reveal? (Limit 1,000 characters) |
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| Based on the Sales Force Report Allstar has the second smallest direct sales force in comparison to competitors. Since Allround has the largest share of the market the direct sales force should be much larger. Looking at the channel sales report, since grocery, chain drug and mass merch have seen growth this period it is crucial that Allround adds to this sales force as an opportunity for growth and support in growing channels. By focusing on markets that are growing Allround will be able to gain a larger shelf space and better placement where customers are buying the most units. Currently Allround has to highest average shelf space across all direct channels which we want to continue to maintain. | ||||||||||
| Step 2: Product-Market Focus: Identify a key performance indicator (KPI) that can be used to track your progress in managing your direct sales force. Explain how the KPI is a good metric for evaluating your progress. Provide the current level of the KPI. Set a target value for the KPI. (Limit 1,000 characters) |
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| The best KPI to track progress in managing direct sales force is average shelf space. As the direct sales force is allocated across channels Allround hopes to get better placement and shelf space so that customers will be more likely to buy the product. The informal survey done early on showed that direct retailers base the amount of shelf space a product recieves on product turnover, promotional allowances, sales force support and co-op advertising. Due to this increasing or decreasing direct sales force in certain channels should directly correlate with average shelf space per channel. Currently level of average shelf space is 1.5 we want to see this reach 2.0 to be around double competitors shelf space. | ||||||||||
| Step 3: Marketing Program: Set the optimal size for your direct sales force and allocate those salespeople among the various channels of distribution (Independent Drugstores, Chain Drugstores, Grocery Stores, Convenience Stores, and Mass Merchandisers). Explain how your plan is linked to your KPI. (Limit 1,000 characters) |
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| Sales Force Allocation | ||||||||||
| Enter decisions for Period 2 from Performance Summary ↓ | ↓ Enter your decisions for Period 3. | |||||||||
| Direct Sales Force (#SF) | ||||||||||
| Indep Drugstores | 8 | 12 | ||||||||
| Chain Drugstores | 38 | 52 | ||||||||
| Grocery Stores | 58 | 82 | ||||||||
| Convenience Stores | 3 | 4 | ||||||||
| Mass Merch | 18 | 22 | ||||||||
| Total Direct Sales Force | 125 | 172 | ||||||||
| Across all channels we want to significantly grow our direct sales force to be closer to competitors . Allocating a high percentage to grocery stores is due to the growth of this channel but also it is where the largest %(43.5%) of consumers purchase cold medicine based on consumer shopping habits report. We also want to add a large amount to chain drugstores and mass march since they are growing channels as well and provide high % consumer sales, 25% and 11.6% respectively. Independent Drugstores and convienance stores saw a decline in channel sales but we still want to add a small portion of sales force to these. Specifically, we want to add to independent drugstores slightly because even though their is a decline this channel still provides 15.7% of consumer sales. Over the next period we will monitor shelf space increase in these areas to determine if the added sales force promoted better support. | ||||||||||
| Indirect Sales Force Allocation Follow the steps of the Planning Phase of the Strategic Marketing Process (Situation Analysis → Product-Market Focus → Marketing Program) to develop a plan for your indirect sales force. |
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| Step 1: Situation Analysis Start by reviewing the reports and other research that are available to you in the simulation. Explain the role that each division of the indirect sales force (i.e, Wholesaler Support, Merchandisers, and Detailers) plays within your firm. Evaluate the current size and allocation of your indirect sales force. What problems or opportunites does your research into your indirect sales force reveal? (Limit 1,000 characters) |
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| Similarly to direct sales force, Allstar has an extremely small indirect sales force of 45 in comparison to competitors such as B & B having 64 or Ethik having 68 according to the sales force report. In order to keep up with competitors we also want to increase the indirect sales force to get a better average. Specifically we want to increase Merchandisers sales force and detailers since Allstar is much smaller is these specific areas. This is an opportunity for Allstar to gain a higher percentage in recommendations by doctors and pharmacists since detailers specifically focus on this. Currently Allround is not highly recommended by Physicians and Pharmacists for any treatment(cold, cough or allergy). By increasing merchandising sales force the price, compliance with promotions and shelf location will be better monitored in hopes that retailers will focus on Allround and in return generate higher sales. | ||||||||||
| Step 2: Product-Market Focus: Identify a key performance indicator (KPI) that can be used to track your progress in managing each division of your indirect sales force. (It can be one KPI or it can be a different KPI for each division of the indirect sales force.) Explain how each KPI is a good metric for evaluating your progress with that division of your salesforce. Provide the current level of each KPI. Set a target value for each KPI. (Limit 1,000 characters) |
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| To track the indirect sales force there are a few necessary KPI’s, Physician and Pharmacist Recommendations, and channel sales. Physician and Pharmacist recommendations is specific to detailers sales force. Currently this is at 11.5% for cold, 3.8% for cough and 3.2% for Allergy. Since Allround primarily target the cold market we want to set a target of 20.2% to match Besthelp, the product most highly recommended. Channel sales will track both Wholesalers and Merchandisers since wholesalers focus on selling to retailers not reached by the direct sales force and merchandisers help to support retailers with in-store activities. Both of which hope to promote good in store experience and generate more sales. The currenlty value across all channels is 21.7% which we want to continue to grow to 26% to maintain spot as industry leader. | ||||||||||
| Step 3: Marketing Program: Set the optimal size for your direct salesforce and allocate those salespeople among various support functions (Wholesaler Support, Merchandisers, and Detailers). Explain how your plan is linked to your KPI. (Limit 1,000 characters) |
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| Salesforce Allocation | ||||||||||
| Enter decisions for Period 4 from Performance Summary ↓ | ↓ Enter your decisions for Period 82. | |||||||||
| Indirect Sales Force (#SF) | ||||||||||
| Wholesaler Support | 20 | 23 | ||||||||
| Merchandisers | 10 | 17 | ||||||||
| Detailers | 15 | 25 | ||||||||
| Total Indirect Sales Force | 45 | 65 | ||||||||
| Wholesaler support sales force was already average with competitors at 20 so I did not want to increase this significantly. Merchandisers and detailers have an extremely small sales force so I chose to increase both significantly to be at least average if not above average with competitors. The major focus is to increase recommendations from Physicians and Pharmacists which explains why Detailers sales force had the most drastic increase. By getting more recommendations customers are more likely to try to product and use it again in the future. Increasing for Wholesaler and Merchandisers is just as important since we need to see Allround generate higher sales. | ||||||||||
| Planning: Situation Analysis → Product-Market Focus → Marketing Program Plan your Marketing Program by developing your Marketing Mix, establishing Projections, and preparing a Pro Forma Income Statement for your product by using the “What If” Analysis in PharmaSim. (Limit 1,000 characters) |
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| Marketing Mix (4Ps) | ||||||||||
| Enter decisions for Period 2 from Performance Summary ↓ | ↓ Enter your decisions for Period 3. | |||||||||
| Mfr Sugg Ret Price | $5.50 | $5.75 | ||||||||
| Volume Discounts (% of MSRP) | ||||||||||
| < 250 | $4.13 | $4.28 | ||||||||
| < 2500 | $3.85 | $4.00 | ||||||||
| 2500+ | $3.58 | $3.71 | ||||||||
| Wholesale | $3.30 | $3.51 | ||||||||
| Advertising (M$) | $21.50 | $18.00 | ||||||||
| Advertising Agency | BMW(15%) | BMW(15%) | ← BMW (15%), S&R (10%), or LLC (5%) | |||||||
| Ad Message: | ||||||||||
| Primary | 10.0% | 10.0% | ||||||||
| Benefits | 10.0% | 12.0% | ||||||||
| Comparison | 40.0% | 38.0% | ||||||||
| Reminder | 40.0% | 40.0% | ||||||||
| Total | 100.0% | 100.0% | ||||||||
| Co-op Advertising (M$) | $3,500.00 | $3,000.00 | ||||||||
| Point of Purchase (M$) | $1,750.00 | $2,000.00 | ||||||||
| Trial Size (M$) | $0.00 | $500.00 | ||||||||
| Coupon Budget (M$) | $5,250.00 | $4,500.00 | ||||||||
| Reformulation Decision (if you did not reformulate in the last period) | Original | ← Original, Switch to Expectorant, or Drop Alcohol | ||||||||
| Explain the reasoning behind the major changes that you made to your marketing mix. Include references to specific measures from the reports in Pharmasim to support your reasoning. (Limit 1,000 characters) | ||||||||||
| Increasing the price to $5.75 is based on the Pricing Report, which shows competitors have significantly increased prices to almost $6 and Coughcure even going above priced at $6.19. Since Allround has always been priced at a high rate this should follow the trend as all brands are increasing. Volume discounts were also based around competitors who have no been giving as high of discounts so I chose to average and look at largest competitors to make slight changes, most around a .5% decrease. Adv. has cost Allstar too much and competitors have barely increased so I felt it was essential to drop advertising expenditures to $18 million, still above competitors but not as high. I also felt this would be the few to save on advertising exp. instead of switching agencies, while BMW does cost a lot we want to maintain the high quality advertising. Slight drops in Co-op advertising and coupon budget in order to add funds to the trial size component as well as adding to Point of Purchase. | ||||||||||
| Results for Period 2 from Performance Summary ↓ | ↓ Enter your estimates for Period 3 | |||||||||
|
543.1 | 593.4 | ||||||||
| Allround’s Share of Unit Sales | 21.3% | 21.9% | ||||||||
| Allround’s Unit Sales (M) | 115.7 | 130.0 | ← Use this value in your What If Analysis. | |||||||
| Explain the factors you used to develop your estimate for Total Unit Sales for the Industry (M). Be specifc about how much impact each factor will have. For example, if you predict a 30% increase caused equally by Factor A and Factor B, you should indicate that you expect Factor A to result in a 15% increase in Total Unit Sales for the Industry (M) and Factor B to result in a 15% increase in Total Unit Sales for the Industry (M). (Limit 1,000 characters) | ||||||||||
| Last Period | This Period | Percentage Change | ||||||||
| Total Unit Sales for the Industry (M) | 543.1 | 593.4 | 9.3% | |||||||
| The growth rate from period 1 to period 2 is 1.10% and from period 0 to period 1 is 17.42% for unit sales. To approximate a growth rate that is average across the last few periods we can average the two growth rates together to get approximately 9.26% for this period. This will estimate approximately 593.4 units for the Industry. | ||||||||||
| Explain the factors you used to develop your estimate for Allround’s Share of Unit Sales. Be specifc about how much impact each factor will have. For example, if you predict a 30% increase caused equally by Factor A and Factor B, you should indicate that you expect Factor A to result in a 15% increase in Allround’s Share of Unit Sales and Factor B to result in a 15% increase in Allround’s Share of Unit Sales. (Limit 1,000 characters) | ||||||||||
| Last Period | This Period | Percentage Change | ||||||||
| Allround’s Share of Unit Sales | 21.30% | 21.90% | 2.8% | |||||||
| With the changes made to the marketing mix we hope Allround gain regain some of the losses of share of unit sales from last period. While averaging similar to unit sales of the industry would give Allround’s share of unit sales to decline by -2.2% to 20.8% we hope to be more optomistic for Allround. Thus I project Allround to have approximately 21.9% of unit sales having similar growth of period 0-period 1 of 1.35%. This optomism stems from the increase of sales force across both direct and indirect. By increasing I believe Allround will gain higher unit sales from better placement, more shelf space and indirect sales force helping with the instoor functionality (merchandisers). I also believe the indirect detailer sales force will help to generate more sales as Physicians and Pharmacists will be more likely to recommend Allround. | ||||||||||
| Pro Forma Income Statement | ||||||||||
| Run a What If Analysis in PharmaSim using the Est. Unit Sales (M) from above and enter the results in the table. | ||||||||||
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Allround | |||||||||
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$5.75 | |||||||||
| Average Discount (%) | 34.1% | |||||||||
| Est. Unit Sales (M) | 130.0 | ← Est. Unit Sales (M) based on your estimates of Industry Demand and | ||||||||
| Est. Mfr. Sales (M$) | 492.7 | Market Share. Use this value in your What If Analysis. | ||||||||
| Promotion Allowance (M$) | 88.7 | |||||||||
| Cost of Goods Sold (M$) | 170.6 | |||||||||
| Gross Margin (M$) | 233.4 | |||||||||
| Promotion | 10.0 | |||||||||
| Advertising | 19.5 | |||||||||
| Prod. Contrib. (M$) | 203.9 | |||||||||
| Sales Force (M$) | 14.7 | |||||||||
| Administrative (M$) | 13.4 | |||||||||
| Fixed Costs (M$) | 67.9 | |||||||||
| Net Income (M$) | 107.9 | |||||||||
| Capacity Utilization (%) | 108.3% | |||||||||
| Stop Here Before the Rollover | ||||||||||
| After the rollover, enter results for Period 3 from the Performance Summary ↓ | ||||||||||
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Planned | Actual | Difference | |||||||
| Manufacturer Sales (M$) | 492.7 | 419.3 | ($73.40) | |||||||
| Promo Allowance (M$) | 88.7 | 75.5 | ($13.20) | |||||||
| Cost of Goods Sold (M$) | 170.6 | 145.4 | ($25.20) | |||||||
| Gross Margin(M$) | 233.4 | 198.4 | ($35.00) | |||||||
| Promotional Expend (M$) | 10.0 | 10.0 | $0.00 | |||||||
| Advertising Expend (M$) | 19.5 | 19.5 | $0.00 | |||||||
| Product Contrib (M$) | 203.9 | 168.9 | ($35.00) | |||||||
| Sales Force (M$) | 14.7 | 14.7 | $0.00 | |||||||
| Administration (M$) | 13.4 | 11.9 | ($1.50) | |||||||
| Fixed Costs (M$) | 67.9 | 66.6 | ($1.30) | |||||||
| Net Income (M$) | 107.9 | 316.9 | $209.00 | |||||||
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130.0 | 110.3 | -19.7 | |||||||
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21.9% | 19.6% | -2.3% |
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593.4 | 562.0 | -31.4 | |||||||
| Reformulation Decision | Original | |||||||||
| Evaluate the effectiveness of your direct sales force plan. Include the level of your KPI before your changes to the direct sales force plan, the objective that you set for that KPI, and the level that you achieved with that KPI. Indicate what you can do to correct any negative deviations or exploit any positive deviations. (Limit 1,000 characters) | ||||||||||
| Evaluate the effectiveness of your indirect sales force plan. Include the levels of your KPIs before your changes to the indirect sales force plan, the objective that you set for each KPI, and the level that you achieved with those KPIs. Indicate what you can do to correct any negative deviations or exploit any positive deviations. (Limit 1,000 characters) | ||||||||||
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| Planned | Actual | |||||||||
| V= Unit Volume (M) | 130.0 | 110.3 | ||||||||
| P=Price | $3.79 | $3.80 | ← Manufacturer Sales/Unit Volume | |||||||
| C=Variable Cost | $2.00 | $2.00 | ← (Promotional Allowance + COGS) / Unit Sales | |||||||
| M=Margin | $1.80 | $1.80 | ← Price – Variable Cost | |||||||
| ME=Marketing Expenditures ($M) | $57.6 | $56.1 | ← Promo Exp + Ad Exp + Sales Force + Administration | |||||||
| S=Market Share | 21.9% | 19.6% | ||||||||
| D=Market Demand (M) | 593.4 | 562.0 | ||||||||
| Calculate each of the components of variance. Report all values in $M. | ||||||||||
| NMC Variance = NMCa – NMCp | ($33.5) | |||||||||
| NMCa= (Va* Ma) – MEa | $142.30 | |||||||||
| NMCp = (Vp * Mp) – MEp | $175.80 | |||||||||
| Demand Variance = Mp * Sp * (Da – Dp) | ||||||||||
| Share Variance = Mp * Da * (Sa – Sp) | ||||||||||
| Price Variance = Va * (Pa – Pp) | ||||||||||
| Cost Variance = – Va * (Ca – Cp) | ||||||||||
| Marketing Exp. Variance = – (MEa – MEp) | ||||||||||
| subscript a=actual | ||||||||||
| subscript p=planned | ||||||||||
| Based on the results from your Marketing Variance Analysis, where did the largest variances occur between your marketing plan and your results? What caused these variances? What can you do during the next period to correct any negative deviations? What can you do during the next period to exploit any positive deviations. (Limit 1,000 characters) | ||||||||||
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