Harvard Business School Marketing Simulation Help Guide
The Story Playing the CEO of Minnesota Micromotors, a manufacturer for motors used in medical devices, students analyze and capture the most profitable market segments. Customers are divided into market segments based on their requirements for price and key performance features. Students allocate sales and marketing resources for each targeted segment, deciding which new customers they want to acquire and which loyal customers they need to retain. Ultimately, students work to find levels of spending on market research and marketing communications that maximize cumulative profit for the company.
John Gourville is the Albert J. Weatherhead, Jr.
Professor of Business Administration at the Harvard Business School. He joined the HBS Marketing Unit in 1995 after receiving his Ph.D. At the University of Chicago in marketing and behavioral research. He has recently returned to teaching in the Core Marketing course in the first year of the MBA program, a course for which he is currently the course head. He has also taught the electives The Marketing of Innovations, Consumer Marketing, and Entrepreneurial Marketing in the second year of the MBA program.
In the HBS Executive Education program, he has chaired the program. He also teaches in the program and the Program for Leadership Development, as well as a number of custom company programs. John also has participated in specialized executive education programs throughout the world. Prior to receiving his Ph.D., John held management positions with Booz, Allen & Hamilton, Mobil Oil, and New York Telephone. John's research focuses on consumer decision making, especially in the areas of pricing and the adoption of innovations.
For instance, in several papers John has investigated subtle changes in the presentation of product price can lead to significant changes in a consumer's decision to purchase and consume that product. In other work, he has looked at the impact of product variety on consumer choice and finds that offering a wide assortment of goods often harms a brand. Finally, his current research investigates when and why innovative new products fail to gain traction in the marketplace. John's research has appeared in the Harvard Business Review, Marketing Science, the Journal of Consumer Research, the Journal of Marketing Research, and in Marketing Letters. Many companies are in competition with their customers to extract as much value as possible from every transaction. Pricing is their weapon of choice, and consumers fight back by rooting out and disseminating pricing policies that seem unfair. The problem is that companies generally think of value as a pie that is rightfully theirs.
But value is not fixed, and it neither originates with nor belongs solely to the firm. Without a willing customer, there is no value. Instead of using pricing in a way that turns customers into adversaries, companies can use it to enlarge the pie. That means viewing customers as partners in value creation—a collaboration that increases customers' engagement and taps their insights about the value they seek and how firms could deliver it. The result can be new revenue, increased customer satisfaction and loyalty, positive word of mouth, and cost savings. Although there's ample research to guide marketers in naming new products, little of it has addressed follow-on offerings, even though these make up the bulk of new products in many industries. Companies have two basic strategies to choose from.
They can stick with a name, often adding a sequential indicator (PlayStation 2, PlayStation 3), or they can come up with an entirely new name (Nintendo's Wii). Three questions managers should consider when deciding whether brand-name continuation or brand-name change is the best way to go for their next-generation product. Consumers who buy a product intending to use an accompanying mail-in rebate often do not redeem the rebate. To explain this behavior, we argue that consumers use an anchoring and adjustment approach to predicting the likelihood of redeeming a rebate. In keeping with previous research on anchoring and adjustment, for instance, we show that when presented with a desirable product, consumers anchor on scenarios of successful redemption and adjust insufficiently for things that could go wrong in the redemption process. However, we also propose this anchoring and adjustment process is impacted by a consumer's motivation to purchase the rebated product.
In particular, we propose the anchor employed will be driven by the valence of a consumer's underlying motivation. Specifically, a consumer that is motivated to purchase the product will anchor on scenarios of successful redemption, while a consumer that is motivated to avoid purchasing will anchor on scenarios of failed redemption. We also propose that the degree of adjustment consumers employ will be driven by their strength of motivation-i.e., the stronger the motivation, the less the adjustment to the motivational anchor. Consequently, mail-in rebates either can serve to enhance or to dampen purchase intention depending on a consumer's underlying motivation.
In other words, rebates offer consumers a means to justify a preferred course of action. Across a series of three studies, we show this to be the case. One job of product managers, marketers, strategic planners, and other corporate executives is to predict what the demand will be for a new product. This task is easier for certain classes of new products than for others. For new consumer package goods, for instance, one can look at past product rollouts, one can look at similar products currently in the marketplace, or one can do test markets—selling the product in a small section of the country to assess consumer acceptance.
Quite often, for new products that represent incremental variations or improvements over existing products, marketers do a pretty good job of understanding how that product will be adopted in the marketplace. This is not to say that managers always get it right, as has been made evidently clear in the case of New Coke, dry beers, and the Edsel. However, more often than not, managers of incremental new products predict demand within the right order of magnitude. It was mid-December 2016 as Alexandra (Alex) Willis read with satisfaction that The All England Lawn Tennis & Croquet Club (AELTC) had won yet another award for its use of social media to reach its fan base.
As the organizer and host of “The Championships, Wimbledon,” the oldest of tennis's four Grand Slams, the AELTC prided itself on tradition and decorum. Widely regarded as the most prestigious professional tennis tournament in the world and contested each year over two weeks in late June and early July, Wimbledon, in many ways, had changed little over the years. Its showcase venue—the 15,000 seat “Centre Court,” complete with a “Royal Box”—was built in 1926. Slazenger had been the official and only supplier of tennis balls since 1902. A strictly enforced ban on any player clothing other than white dated back to the 1800s. And, whereas other tournaments referred to their Men’s and Women’s Championships, at Wimbledon, these events were referred to as the Gentlemen’s and Ladies’ Championships.
It was against this “steeped-in-tradition” background that Willis, hired by Wimbledon in 2012 and promoted to Head of Digital and Content in 2015, had to figure out the proper role for digital and social media at Wimbledon. The motivation behind the push into digital was one of communicating and engaging with fans and potential fans around the world, as noted by Richard Lewis, Chief Executive of the AELTC.
Companies have long tried to enhance consumers’ perceptions of their firms and the products they sell in a variety of ways. Such efforts include the development of a brand image that the public views favorably, as in the case of Apple. It extends to the development of memorable advertising, as with Nike's “Just Do it” campaign. It includes associations with famous individuals (e.g., Michael Jordan) or with charitable entities (e.g., the Ronald McDonald House). And it encompasses efforts to be environmentally conscious, as when Starbucks buys from sustainable sources or when S’well encourages the purchase of its reusable water bottle to reduce the use of plastic drinking containers. An updated 'Four Products' case. This 2014 version includes: raw lobster meat, electric-powered Formula One race cars, a 3D printer for cosmetics, and a 'smart' tennis racket.
These four products form the basis to assess the drivers of new product adoption. In particular, one of the critical tasks in the marketing of new innovations is predicting demand and rates of diffusion for those products. And while one can speculate on the scope and rate of diffusion for any given product, it's helpful to compare and contrast diffusion across products.
Doing so allows one to focus on the drivers or product characteristics that influence product diffusion, making one product a star and another a dog. Specifically, looking across products allows one to pick up on things that get lost in discussing a single product. Note that this case often gets used with HBS Note #505-075, 'Note on Innovation Diffusion: Rogers' Five Factors,' which either can be distributed along with the case or after the case has been taught. Singapore Metals Limited (SML) has declining sales but has developed a new product (curled metal pile driver pads) that, in field tests, delivers customer benefits that are many times SML's manufacturing costs. Jonathan Lee and Alex Tan of SML's Engineered Products Division are responsible for formulating a strategy for the new product. A key issue is the price to charge for the pads. The case raises issues of analyzing market potential, aligning price with business strategy, and determining the implications of price on the development and execution of integrated strategic options.
An updated 'Four Products' case. This 2011 version includes: sliced peanut butter, artificial dirt for thoroughbred race tracks, interactive tombstones, and stride-changing running shoes. These four products form the basis to assess the drivers of new product adoption.
In particular, one of the critical tasks in marketing new innovations is predicting demand and rates of diffusion for those products. And while one can speculate on the scope and rate of diffusion for any given product, it's helpful to compare and contrast diffusion across products. Doing so allows one to focus on the drivers or product characteristics that influence product diffusion, making one product a star and another a dog. Specifically, looking across products allows one to pick up on things that get lost in discussing a single product.
Note that this case often gets used with HBS No. 505-075, 'Note on Innovation Diffusion: Rogers' Five Factors,' which can be distributed along with the case or after the case has been taught. Set in 2002, this case looks at the potential for hybrid electric vehicles in the United States. Looks at the pressures on the automotive industry to produce a commercially viable, environmentally friendly vehicle and the consumer behavior surrounding purchase of those vehicles. Traces efforts over the years to produce electric vehicles, hybrid electric vehicles, and fuel-cell vehicles. Presents the questions of whether and why hybrid electric vehicles will succeed where other alternative-fuel vehicles have failed. It's 2009 and Paul Williamson, Head of Ticketing, must finalize ticket prices for the 2012 London Olympic Games.
Yet, there are many criteria to consider. First, given the importance of ticketing to the Games' bottom line, he has a strong incentive to maximize revenues.
Second, because the entire world will be watching, he wants to maximize attendance-not just at the Opening Ceremony and swimming finals, which are easy sells, but also at events such as handball and table tennis, which are not. Third, he wants to fill seats with the right people-knowledgeable fans who add to the energy and atmosphere of the event. Finally, tickets have to be accessible not only to the world's elite but also to average Londoners, many of whom live around the corner from the Olympic Park. Traces the 12-year career of a pharmaceutical salesperson, Bob Marsh, from recruitment to termination.
Marsh has had an uneven career with Cabot Pharmaceuticals and eventually is asked to resign. Following his termination, a number of Marsh's former customers complain vigorously, and Cabot's vice president of sales is asked to investigate the matter and to decide what, if anything, to do about it. The case raises issues in aligning strategy and sales systems, performance evaluation criteria, and on-going performance management processes in field selling situations.
Marketing as Competitive Advantage: Fundamentals will help today's business executives and tomorrow's business leaders understand the key elements of a successful marketing strategy. The multimedia resource includes video lectures by Harvard Business School faculty, who teach core principles of marketing, as well as animated frameworks, articles, and notes. Instructional workbook exercises will help you evaluate your own marketing efforts and create a marketing plan for your organization. This case concerns the selection and scheduling of orders by a small industrial titanium fabricator that recently has been plagued by poor deliveries and a lack of capacity. At the time of the case, Ti-Tech must decide which of four orders to accept, with capacity making it impossible to accept all four. Each order represents a different mix of labor, revenues, and potential future work.
The case forces the student to choose among the four orders, given limited capacity available, other business likely to come along, and the requirements of each order. The case is an updated version of Fabtek (A). This case concerns the selection and scheduling of orders by a small industrial titanium fabricator that recently has been plagued by poor deliveries and a lack of capacity. At the time of the case, Ti-Tech must decide which of four orders to accept, with capacity making it impossible to accept all four.
Each order represents a different mix of labor, revenues, and potential future work. The case forces the student to choose among the four orders, given limited capacity available, other businesses likely to come along, and the requirements of each order. The case is an updated version of an earlier supplement, Fabtek (B). It should be distributed in class after discussion of the (A) case. An updated 'Four Products' case. This 2008 version includes: sliced peanut butter, foldable bicycle tires, high-end wooden puzzles, and artificial dirt for thoroughbred race tracks. These four products form the basis to assess the drivers of new product adoption.
In particular, one of the critical tasks in the marketing of new innovations in predicting demand and rates of diffusion for those products. And while one can speculate on the scope and rate of diffusion for any given product, it's helpful to compare and contrast diffusion across products. Doing so allows one to focus on the drivers or product characteristics that influence product diffusion, making one product a star and another a dog. Specifically, looking across products allows one to pick up on things that get lost in discussing a single product.
Note that this case often gets used with HBS No. 505-075, 'Note on Innovation Diffusion: Rogers' Five Factors,' which either can be distributed along with the case or after the case has been taught.
This web-based simulation presents an engaging context in which students develop their knowledge of pricing by managing a rental car operation (Universal) in Florida and improve regional performance by developing a pricing strategy. The simulation involves three regions-Orlando, Tampa, and Miami-which vary in size, market dynamics, and customer mix. The focus is competition between two car rental companies with players inputting decisions for Universal. The simulation lasts up to 12 simulated months. Whether assigned as individuals or teams, players must set weekday and weekend prices for each region for each period (month) and make fleet capacity decisions at several points throughout the simulation. The simulation is asynchronous and can be assigned for homework.
A Facilitator's Guide provides an overview of simulation screens as well as a Teaching Note with detailed commentary on debriefing the simulation. The simulation can be assigned and used in different ways to meet the needs of the instructor. For example, it can be assigned as a pre-class exercise with subsequent in-class debrief. Alternatively, given the range of variables at the professor's disposal, the professor can craft weekly assignments throughout the course which highlight specific learning objectives.
Finally, the simulation can be run multiple times, with increasing complexity. Computer with minimum 1024x768 screen resolution, High speed internet connection (DSL / cable modem quality), Windows 2000, XP, or Vista / Macintosh operating systems, Internet Explorer 6+ / Firefox 2.0+ web browser with javascript and cookies enabled, Flash Player 9+ browser plug-in (Users with earlier versions of Flash will be notified automatically and given the option to upgrade. This is a free browser plug-in.), Microsoft Excel (optional). In November 2004, The Wall Street Journal reported that consumer electronics retailer Best Buy's new customer approach was to shun the 'devils' among its customers.
The 'customer centricity' initiative, which was led by Best Buy's CEO Brad Anderson, was based on an analysis of the purchase histories of several customer groups. The central idea was to revamp stores according to the most lucrative types of customers they served—the 'angels' among the company's customers. Encourages an assessment of Best Buy's strategy and, more generally, of the challenges and opportunities in managing customers for profits. One of the critical tasks in the marketing of new innovations is predicting demand and rates of diffusion for those products. Focuses on four innovative products from different domains. Although one can speculate on the scope and rate of diffusion for each of these products independently, it's helpful to compare and contrast diffusion across these products.
Doing so allows one to focus on the 'levers' or product characteristics that influence product diffusion, making one product a star and another a dog. Importantly, looking across products allows one to pick up on things that get lost in discussing a single product. It is early 2001 and the Medicines Co. Just received FDA approval to market Angiomax, a blood thinner to be used during angioplasties and heart procedures. It is intended to be a better alternative to Heparin, an 80-year-old drug that costs less then $10 per dose.
The company believes it can sell Angiomax for a much higher price than Heparin-but how much more? Angiomax also represents the first of several drugs being developed under a rather unique business model. The company is in the business of 'rescuing' drugs that other companies have given up on-i.e., they purchase or license the rights to drugs that other companies have halted development on, with the intent of completing the development process and bringing the drug to market.
With the success of Angiomax, the company feels that this business model has been validated. Microsoft is on the verge of launching its Smart Watch technology, which will allow specially designed watches to receive up-to-date information on sports, business, traffic, news, etc. After several years of effort and millions of dollars spent, the questions now revolve around launch strategy and likely consumer adoption. Is this the next big thing for Microsoft or is this a waste of money and resources?
Complicating the matter is the fact that although Microsoft designed and will operate the technology to deliver information to these watches, the watches themselves will be sold and marketed by several prominent watch-making partners. Analysis of an interview with Red Auerbach, HBR No. Webber, who conducted the interview, probed for the lessons that Auerbach has learned from a long and productive career coaching and managing the Boston Celtics, a professional basketball team in the National Basketball Association (NBA). The HBR article is used as a surrogate for a customer interview, providing the 'raw data' for an analysis technique known as the trademarked Language Processing (LP) methodology, developed by professor Shoji Shiba of Tsukuba University and the member companies of the Cambridge, Massachusetts-based Center for Quality of Management. Includes color exhibits. Cape Wind has proposed placing a 170-tower wind farm, with each tower more than 400-feet tall, in Nantucket Sound. Not surprisingly, public reaction is mixed.
Some view the wind farm as clean, renewable energy. Others view it as an eyesore and a desecration of a valued public resource. Other attempts at wind farms in the United States have run into similar resistance. Although the public can agree that wind power is a good idea, no one wants a wind farm in their community. How can firms overcome this type of resistance to change? GolfLogix has developed a small, GPS-based device to help golfers track their play.
They must decide how best to distribute these devices: 1) sell them directly to golfers through traditional retail channels; 2) sell them to courses, which would then provide them to golfers as part of their greens fee or for a nominal rental charge; or 3) simultaneously sell them to both groups. Complicating the decision is the fact that GolfLogix has two devices it is trying to sell: a distance-only device, which tells golfers how far they are from the green, and a complete device that additionally allows golfers to track how far and how accurately they are hitting the ball with each club and how many putts they are taking on each hole. The distance-only device is easy to use and explain, whereas the complete device likely requires some support from the golf courses. Contains color exhibits. One of the critical tasks in the marketing of new innovations is predicting demand and rates of diffusion for those products. Focuses on four innovative products from different domains. Although one can speculate on the scope and rate of diffusion for each of these products independently, it's helpful to compare and contrast diffusion across these products.
Doing so allows one to focus on the 'levers' or product characteristics that influence product diffusion, making one product a star and another a dog. Importantly, looking across products allows one to pick up on things that get lost in discussing a single product. In 1993, Calgene is on the verge of introducing the world's first genetically engineered plant product-a tomato will taste better and stay fresh longer.
At the same time, it is using biotechnology to produce improved plant products for the cottonseed and the industrial and edible oil markets. As it develops and brings these products to market, however, it faces a series of marketing and public relations hurdles, including regulatory requirements consumer education activist resistance to production, and distribution logistics. How Calgene reacts to these challenges may determine whether it succeeds or fails in its quest to revolutionize the business of agriculture.
A rewritten version of an earlier case. Synthes is the recognized leader in the U.S. Orthopedic implant market, with a 50% market share in the metallic plates, rods, and screws used to fix severe bone fractures.
Synthes' marketplace strength lies in the strength of its sales force and in the quality and reliability of its products. A major drawback to all metallic implants, however, is that they often need to be removed after the bones have healed.
To address this problem, several major competitors have recently introduced polymer-based 'bioresorbable' implants. In theory, these new implants remain rigid while the fracture heals, then gradually dissolve, eliminating their need for removal. In reality, however, some of these new implants have proven problematic-causing infection, incomplete healing, or the need for a second surgery.
This leaves Synthes debating whether to enter the bioresorbable market and risk a high-profile product failure or to remain an observer and allow others to test the market and eventually validate (or invalidate) the concept. In early 2001, makers of AIDS drugs were suing to prevent developing countries from violating their patents. The issue was driven by price. The developing countries could not afford the market price for these drugs. At the same time, the drug companies were reluctant to sell drugs at or below cost in one country and at 10 to 20 times cost in another country. Using a series of published articles, this case outlines the pressures facing the drug companies and asks the question, 'How should they respond?' It is 1995 and Steinway & Sons has just been purchased by two young entrepreneurs.
For 140 years, Steinway has held the reputation for making the finest quality grand pianos in the world. The past 25 years have proven to be a challenge, however.
First, the company has changed hands several times and product quality has become a concern. Second, the worldwide market for pianos has been in a steady decline, and competition for high-end grand pianos has increased. Finally in 1992, Steinway took the questionable steps of introducing a mid-priced line of grand pianos under the brand name 'Boston.' Designed by Steinway, but manufactured by a Japanese piano maker, the Boston line represented a major shift in strategy for the company. Within this context, what do two young entrepreneurs (with little or no experience in the piano industry) hope to accomplish in buying Steinway? In particular, what value do they bring to the company and what decisions should they make? In the past 18 months, ZEFER has gone from a several-person Internet consulting firm to a major player in the information-technology services industry.
In particular, in the past six months, it has grown from 40 to 400 professionals, has hired a seasoned management team, has received $100 million in venture capital funding, and has acquired three companies. Is such explosive growth necessary? If so, how can it be managed to ensure a healthy and consistent corporate culture? Finally, how should the founding partners of the firm think about their roles in the evolving company?
Harvard Business School Marketing And Communications
It is early 1998 and Biopure Corp., a small biopharmaceutical firm with no sales revenues in its ten-year history, has just received government approval to release Oxyglobin, a revolutionary new 'blood substitute' designed to replace the need for donated animal blood in the veterinary market. A virtually identical product for the human market, Hemopure, is in the final stages of testing by Biopure and is expected to gain approval within one to two years. In response to the timing of approval for these two products, there has been a long-running debate within Biopure as how to proceed with Oxyglobin. At odds are those in charge of Oxyglobin, who want to see the animal product released immediately, and those in charge of the Hemopure, who worry that an immediate release of Oxyglobin would create an unrealistically low price expectation for what they feel should be a very high-margin human product. Exacerbating the problem is the nature of the biopharmaceutical industry, where product approval is never a certainty until achieved.
The note introduces the behavioral or psychological aspects of consumer price acceptance. Begins by reviewing the traditional economic approach to product pricing and consumer price acceptance-namely, that consumers should be willing to purchase anytime a product's perceived value exceeds price. This purely economic approach questioned, and the concept of transaction 'fairness' is introduced as an additional component of consumer price acceptance.
Through paired vignettes, the behavioral side to product pricing is explored in some detail. In the end, the traditional economic perspective on product pricing is combined with the behavioral or psychological perspective to provide a more realistic understanding of how consumers respond to a firm's pricing decisions. In the early 1990s, Tweeter etc., a small regional retailer of higher-end audio and video equipment, faced increasing competitive pricing pressures from several large regional and national consumer electronics chains.
In response, in 1993, they introduced 'Automatic Price Protection' (APP) as the cornerstone of a strategy to restore price credibility in the minds of consumers. Under APP, Tweeter monitored local newspaper ads and automatically mailed a refund check to a consumer if an item purchased at Tweeter was advertised for a lower price by a competitor. Three years later, in 1996, Tweeter is questioning the impact of APP on their current competitive positioning. More importantly, with the pending entry of another major discount chain, Tweeter is forced to question how effective APP will be in a market increasingly dominated by large discount retailers.