Marketing Simulation

2 February 2017

The rest of the sales force time would be equally divided between the segments B, C and D. Change in Strategy: During simulation, we studied the effects of percentage increase of sales force time for each market segment individually along with decrease in list price. As we proceeded with the simulation, we found that * A decrease in list price and an increase in percentage sales force time for segment D would be more fruitful in the short run as it will increase the overall sales volume and overall profit much more than in the case where sales force concentrates more on segment A. This is because the overall market share of highly price sensitive customers in segment D and “small volume customers” is almost three times of segment A’s market share. * So, even though the profit margin in segment D and “small volume customers” is lesser than that for segment A, the overall profit was greater because of the scope of much higher sales volume.

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* Hence, we decided to increase the sales force percentage time for segment D to 40% and for segment A to 30%. We decreased the sales force time percentage for segments B and C to 15% each. Also, we reduced the list price from $142 to $136.

Challenges during simulation: During simulation, the primary challenge we faced was to decide on the key parameters that should be changed and the level of change in each of these parameters to get optimum profit and higher market share. Key decisions: Since our initial strategy was to increase the sales volume of segment A, we decided to concentrate on sales force time percentage parameter for each segment and the list price of the motors. We studied the effects of percentage increase of sales force time for each market segment individually along with decrease in list price on the overall profit of the company.

Solution Analysis Decrease in list price from $142 to $136 and increase in sales force time percentage to 40% for segment D and to 30% for segment A. As we proceeded with the simulation, we found that * A decrease in list price and an increase in percentage sales force time for segment D would be more fruitful in the short run as it will increase the overall sales volume and overall profit much more than in the case where sales force concentrates more on segment A. This is because the overall market share of highly price sensitive customers in segment D and “small volume customers” is almost three times of segment A’s market share. * So, even though the profit margin in segment D and “small volume customers” is lesser than that for segment A, the overall profit was greater because of the scope of much higher sales volume. * Segments B and C sales force time was reduced because of the high competition that MM faces in these categories on the basis of thermal resistance parameter.

Hence, in the long run, MM can target for higher profit margins than for higher sales volume if it concentrates the sales and market research resources to segments A, B and C. The main challenge with this approach is that it would difficult to attract customers from these segments who are already loyal to competitors and would require much more effort from the sales team and the product development team to come up with a product that caters the needs of these segments especially segments B and C where MM has yet to prove its overall competitiveness.

Learning and experience This simulation exercise helped us to validate whether our suggested solution was an optimal one and also helped us to arrive at new solutions through experimentation which finally led to change in our overall decisions and strategy. It also showed us how varying a single parameter can change the overall market share and overall profits of the company. Finally, it reinforced the theory behind segmentation of customers according to their buying behavior to achieve optimal marketing strategies.

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Marketing Simulation. (2017, Feb 26). Retrieved September 15, 2019, from https://newyorkessays.com/essay-marketing-simulation/
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