Enter the Metrics

How do you define how successful your company is? What are its metrics? How does the company’s mission and marketing strategy relate to key performance metrics and vice versa? These are three very important questions that the executives and middle managers must answer.  Metrics help to keep a company grounded in achieving their marketing strategy.  These metrics cannot just be a silver metric hat tells the company everything they need to know.  Metrics such as Return On Investment, market share and stock price are all externally driven and easy for outsiders to look at and view how well a company is doing.  Marketing efficiency or specific product relates metrics are more internal and help a company focus if they are achieving their marking goals. 

Dilbert also hits a good point regarding the data that is collected to evaluate the metrics.  As an engineer, I love myself a good set of data and always want more but if you do not know what you are looking for the data can be misleading.    The company must be focused on collecting data that will help answer the metrics for each goal. 

How should the marketing metrics be applied Pharmasim?  As a class the top metrics were decided upon for the final comparison of all teams in this experience but not all firms need to have the same metrics. Internally, a firm must be looking to prove their goals with the correct amount of data and analysis. A jet engine manufacturer will not have the same metrics as an electricity generation company because their goals are not going to be the same. In the article "Managing the Markeitng Metrics Portfolio" the companies of Hilton Hotels, JP Morgan and others are discussed for their key metrics.  None of them share the same metrics.  This can be looked at in Pharmasim too as my group my look for MEI, ROI and ROS as our key metrics and others mights look to gross margin and total unit sales.  These choices depend on what the goals are for Allround such as being the market leader or generating the most sales which are also dependent on their pricing strategy. All of these choices for pricing, marketing and advertising are all connected to the marketing goals and key metrics to be evaluated.

Variance analysis can help a company determine how well they are doing compared to forecasting.  By completing a variance analysis, the company can look at the volume and margin effects a companies bottom line.  The company can look at how their market share or pricing has affected the bottom line.  Also companies can look at their competitors and see how advertising or market share as affected them as well.  Variance analysis can help a company create better forecasts for their markets.

This week I decided that I would check out the blogs of Andrew,  Kenny,  and Ahmed.  Andrew has had in depth writings about Pharmasim.  He also looked to discuss the topics presented from the readings and class.  When we were asked to discuss our classmates blogs last week, he dissected them from many different aspects.  He quantified each persons responses and high lighted parts of each.   His blog did not use any pictures of links to help liven up his points.  Kenny broke up his blog into different sections with header and utilized lists.  This was a different way to present some of the information.  He analyzed the topics well and the discussion on predicting the future was interesting.  The last blog I looked at was Ahmed. Ahmed had great visuals to reinforce his points about the Wright Brothers.  His discussion on change was interesting as he looked at different diapers.  Overall these three blogs all have different perspective on what we are learning in class.

Working with Marty and Alexis has been very successful so far.  We have all has busy schedules (me driving a lot of the timing) and have utilized teleconference services to meet at varying times through the day. After we got together and reviewed our situational analysis, our key issues matched up well so we were able to quickly agree on what route to take for our marketing plan.  Also we have been happy with our progress and success as our stock price keeps rising though I know that is not a key metric and have continued to increase market share and profit.  I hope that we will be able to successfully work through the new four periods quickly and keep those trends continuing.

Pharmasim Score Card

I think a good number to be evaluated on is 5 as it covers the three needed, manufacture sales, net income and share of manufacturer sales, and easily divided into a 100%.   Today in class it was discussed how stock prices are not the end all be all so that one shouldn't be used.  Looking back at the list one that jumps out is the return on marketing.  This helps to determine the ration of new income in relation to the amount spent on marketing. This relates to how much must be spent for each purchase and if the market should be abandoned.  Return on sales is another good option.  This ratio shows the number of sales to net income. This can evaluate the if promotion or channel discount is hurting your bottom line. These five provide a cross section of all decision making and help to evaluate how the team did.

Strategy and Reviews

This week we had to look at three classmates blogs, and I choose Mindy's, Marcin's and Kristin's. Mindy was straight and to the point on what was happening in Pharmsim. She analyzed two reports, Shelf Space and Shopping Habits.  She analyzed that the shopping habits helped because it can be scene where the products are being purchased to help with channel sales. Mindy also analyzed the push and pull strategy tell how she could apply it in her Pharmasim simulation.

Marcin on the other hand started out each blog with a graphic as he did four smaller posts throughout the week.  He discussed how the push and pull strategies were employed in his company and then automakers. In the previous blog, he looked at Pharmasim for pricing strategies but skipping the application of the push pull strategy in Pharmasim.  His other two blogs were brief descriptors about other topics related to the class.

Lastly I reviewed Kristin's blog.  Her blog is bright, has an engaging title for each week and various images to grab the readers attention. She also writes with a 'talkative' voice for easy reading.  This week she discusses the stress of working together but how nice it is have teammates now. Kristin also highlights the big topics from the lecture discussing how the competitor strategy can be ineffective if you are the market leader. Her blog also had great wit and humor for the reader to enjoy.

Drucker says that it is the customer who ultimately determines the marketing decision and what a  business is because they are the one pay for these goods and services.  This is true since a businesses main objective is to create customers.  The customers are the one who decide the value of the product and the need for the product.  If a customer does not have the need for the product they will not buy the product.  That is where early market research in development is needed to see if the consumer wants to buy a product. 

Drucker listed five certainties: the collapsing birthrate of the developed world, shifts in disposable income, new definition of performance in an organization, global competitiveness and grown incongruence between economic globalization and political splintering. These have certainly held true for the past 30 years but will they for the next fifty.  The one certainly will but I am going to spin to say the continued growth of third countries will create large knowledge centers.  This is attributed to the second certainty of globalization. The internet is now far reaching and people are able to get educated through a new source to enrich (some would say "westernize") their lives. This certainty will be key in how companies build their workforce in years to come. Companies have also redefined performance at work and some have limited how their workers can accomplish it. Yahoo has stopped all telecommuting to increase face to face contact and inspire innovation.  This has been a change to work place production and will effect Yahoo and other companies.  Lastly the global economy is so interconnected one countries decisions on bailouts or interesting rates. Japan's stock exchange fell 7.3% yesterday after announcements by Ben Bernanke of the US Fed and China's Manufacturing Purchasing Managers' Index.  This just shows how interconnected the world economics are and will continue to be. US politics for some is starting to have an isolationist view of the world. Ron Paul in his failed presidential campaign discussed it.  Overall these five certainties will continue on for the new 30 to 50 years and companies must be mind full of them.

Historical data is crucial to all companies but it does not always have to predict the future. Data is important to marketers to see how their past decisions have worked and evaluate customers decisions.  This can help the marketers formulate plans to use for the future but it cannot predict the future.  Consumers are irrational and forecasting is one of the toughest statistical areas to work.  This data is important to reveal past trends and what decisions created those trends.

Lehmann states one way to increase profits is to lower the variable costs.  And the main example is to lower the number of the work force.  In today's world, companies are working to become "lean."  They layoff the "fat" those employees that are sitting in the sweet spot until retirement or they offer early retirement packages.  This cost cutting measure can have large consequences for the company as they loose year of experience and tribal knowledge.  Another way to cut costs is the removal of office supplies and other items that create a positive environment for employees. These just reinforce the statement that "beating will continue until moral improves."  Companies are driven by the bottom line and stockholders but that is not always the best way to improve costs.

Early on we talked about the strategic and market plans and how they help to focus the company. 

Now seven weeks later, Drucker discusses defining the specific purpose in Chpt 11. This reinforced why defining a purpose in necessary for a company to ensure that everyone is on the same page and headed in the same direction.  Every aspect of the business must have buy in to this strategy and work to complete it.

Product Reformulation

So while I was shopping today I noticed this little gem.  It is what we have been talking about in Pharmasim.  Here is a POP discount to get the customer to purchase the new reformulated product. This is showing that to keep customers happy there was a change to the product but to ensure that customers stay there is an incentive to but with the discount.
It helps to pull the product through the product through the channel and is part of the 4Ps.  It also touches on the use of social media with the Facebook logo on the discount.

Click Like on Facebook

Social media is huge in today's marketing world as many new consumers can researched from social media.  The use of social media by companies allows for instant feed back from consumers and a company must respond to it quickly. Also companies can be missed guided and spend a lot of money on social media even though the reach is not as big as expected. Companies must utilize social media to their advantage so that they can create good public relations and brand image.

This week there was a story on NPR about the pricing of ammunition as demand has sky rockets due to the pending gun legislation.  The ammo market is generally a inelastic market as people will pay whatever the price is to have their ammo.  But the article points out that many sellers have not been increasing their price with the increase in demand.  I thought this was very interesting because it is ignoring the invisible hand of the market and market demand.  The sellers have choose a pricing strategy as customer focused because they are keeping prices at the value they had previously deemed even though most customers have adjusted their value.

Looking into purchases that I have made in the past and if I have become a loyal customer or not was related to the sales people and customer relationship that were made.  Personal selling, shown above in Dilbert, is just one strategy that can be employed.  The personal selling creates a one on one relations and helps for complicated products and a target market. The relationship just end with the sales though as it must continue to keep the customer happy. Through service, maintenance, holiday cards, companies can keep a personal connection to customers. This is more important in consumer business relationships and car purchases than the nominal and limited purchases.

A company must have an integrated marketing plan to ensure their marketing strategy is understood and communicated the same across all part of the company.  You do not want one part of the company to be saying one thing and another on a different page of the play book.  By having an integrated marketing plan engineers, business analyst, sales force and executives would all have an understand of what the company is wanting to do. The integrated marketing plan is directly linked to the the companies vision and strategy as it creates the full view of where the company is going. Overall the IMP is important to keeping a company focused and motivated.

Push and Pull

How is the market in Pharmasim going to react to a product going through the channel.  Is Allround going to be a pushed through by incentives to the intermediaries of grocery stories or will it be pulled through the channel by the incentives to the customers. There are many different report to look at how the product is moved by the channel or by the consumer.

The promotion report shows the promotion activities of Allround and the competitors.  There are the amount of promo allowed which compare the percentage of promo.  As well the amount of point of purchase value is displayed which is part of a pull strategy.  Also the use of news paper coupons is another pull strategy. The promotion report helps to show the pull strategies that are being employed. To implement these, the amount of point of purchase discounts and coupons should be increased.  The channel sales report can also help on a pull strategy as it can focus the promotion to specific points of purchase.  The sales of allround increased with on the increase to promotion but by a minimal value.

 One way to create a push strategy is to keep a low price for the mass merchants and whole sellers so they can keep pushing product which can be seen on the pricing report.  Another report is the shelf space report that shows how much space is taken up.  The more shelf space at a place the more product is needed which relates to the push strategy.  It would be important to create ways to have benefits of point of purchase displays and other ways to increase the quantity needed.  The Co-op advertising is also a way to increase the channel sales.  By increasing the co-op and discounts, the sales increased less than the amount of the POP increase.

Overall the push and pull strategy can be instituted in pharmasim by  changing the promotional values it becomes a pull strategy and by changing the co-op amount it becomes a push strategy.

Elastic Drugs

Time is quickly winding down for the trial periods of pharmasim.  This week they get reset and it goes on for real. So the try its were on determine price elasticity and channel marketing.  Two excel spread sheets help to guide the work.  Also in class we discussed the market demand and market value from the previous week.  Again I feel that I have not gathered the right information or enough information to make the decisions as the professor but hey that is how it goes when you are learning it.  Also I haven't gotten to advance the simulation much past session four or five because we have to keep restarting it for the try its of the week. 

If we go back to last week we can see the three different line extension for Allround+ : child 4hr cold liquid, 12hr multi capsule and 4hr cough liquid. So we should define the market for these options. Child 4hr cold- Allround+ is an OTC four hr children cold medicine for young and mature families.

12h4 multi cap- Allround+ is a OTC cold remedy for all users.

4hr cough liquid - Allround+ is an OTC cough remedy for adults.

This week the try it for price elasticity showed that the prices were inelastic if the prices were within +8% and -15% of the starting price. Since Pharmasim has a limit to the number of replays period. I ran it at +/-10 percent and refereed to the completed sheet for the full analysis. A liner interpolation of the unit volume holds true but not for the product contribution so the values over to% increase are skewed. This shows that the customers are agreeing to the value of the product for the cost and do not increase sales with a drop in price.  This could be due to best used by date, seasonal affects and that cold medicine is purchased when people are sick not preemptively. 

The channel pricing work sheet is a cool way to show how the cost roll down hill. Using the pricing and sale reports it can be found what each place is selling an item for and the price they are paying for it. Some prices had to be assumed by such as the price each place paid for it.  By doing the math for the unit selling price at the whole sale level is was the same as the unit cost because it was based on profit and unit sale.  So to ensure there was profit of the wholesalers I increased the cost by 12%.  This was then passed to the retailers.  Their unit selling price was calculated from profit (I suppose this is the incorrect word and total unit dollars might be better but anyway) and the number of units sold.  The customer price was from the pricing sheet and shows how it is broken down by point of sales pricing.

Pricing strategies are important to be implemented in pharmasim.  By doing these two activities and evaluating the different strategies of pricing (sales, profits, customer, competitor), it can been how the price of a product is very important the NMC.  The market share and selling price are two of the main parts of the NMC. If there are large fluctuations of these there can be a drop or increase of NMC and hopefully that is an increase.