PDA Simulation for Marketing - Essay Example

?academia research Time Warp PDA Simulation for Marketing Maribel P. Jabido 5/9 It was but the people on television said it’s 2006. My surroundings were different. I realized I was in a different dimension. I have traveled back in time. So I went on with my journey. I was hired at Handheld Corp. and was given a rather comprehensive task. I was asked to review Joe Schmoe’s financial report on handheld products sales from 2006-2009. Running the PDA simulation for handheld products, one can accurately calculate estimated profits by gauging the price and R & D allocation. This tool helped me achieve my goal of yielding higher profits for Handheld, Corp. In this report, I included my analysis, the strategies I used, and what factors affected revenues for product X5, X6, and X7. Time Warp 1 Maribel P. Jabido Academia Research May 8, 2011 Analysis On the PDA simulator I had a final score of 1,185,800,553. I did better than Joe Schmoe by 20,890,196. I have observed that Joe’s strategy was a “lazy” implementation of marketing. If he took the time to analyze the performance of a product and what prices were appropriate to set, he would yield higher profits. I have made numerous attempts using a simulator to prove that my strategies worked better. I followed the advisor’s analysis and used it as my guide in pricing and allocation of R&D. One strategy I used for marketing handheld products is market segmentation. This is implemented by providing handheld products in different categories (X5, X6, and X7) to serve specific needs of target customers and increasing market share. Even with the discontinuation of X5 handheld in 2009, it was a strategy to market better available products to attract buyers. Pricing strategy was also what I’ve used relative to R & D allocations to generate profits. For instance, X5 sales were starting to decline. In 2008, I did not drop the price significantly or I would lose a lot of money. I was able to keep customers who purchased the X5 handheld for $240. Then, I decided to discontinue the product the following year to avoid more losses. R&D allocations were a bit tricky. I used the advisor’s analysis to manipulate the allocations. For example, when X5 was discontinued in 2009, I kept the same prices for X6 and X7 as of 2008 in 2009 and increased their R&D allocations to 30% and 70% respectively. The tremendous Jabido 2 increase in R&D had a positive impact on revenues. However, in 2008, I decided to distribute R&D of 25% equally to X5, X6, and X7 handheld products. When I tried to reduce X5 R&D to 10%, I had a higher loss. With 25% R&D I was able to avoid the loss of -9,870,920 and reduced it to a loss of -$6,176,598. If I didn’t adjust that 10% R&D, it would affect profits for 2009. I also based my analysis on the product performance and on what level they are in terms of sales. For instance, X7 handheld was in the ‘growth phase’ in 2006 with a profit of $3,199,108. The following year, I reduced its price to $200 and allocated a higher R&D of 25%. The result was phenomenal. I had a profit of $23,555,939. Maintaining the price and R&D the following year, the profit for X7 was more than doubled. Here’s the breakdown of prices, R&D allocations, and profits for X5, X6, and X7: 2006 I increased the prices for all handheld products and decreased their R&D. As a result, advisory said X7 handheld was in the growth phase and potential X7 customers were new customers. X7 handheld performance was holding steady while X6 was priced the same as other competing products. Joe gained a higher profit of $295,185,249 in 2006. He performed better with all X5, X6, and X7 handhelds because the prices were lower although it was temporary. Jabido 3 2007 Since X6 performance was better than that of competition, I decided to maintain the price and R&D and it paid off as I had a higher profit. Joe sold X6 for only $400 this year which he could’ve made profit by selling them slightly higher. However, X5 sales were declining so I slightly lowered the price which is lower than Joe’s price of $250. X7 was a new product in the market and was in the growth phase. So, I also decreased the price and increased the R&D to attract more buyers which is the same that of Joe’s price. I did better than Joe in 2007 since he only gained a profit of $332,312,925. His stagnant pricing and R & D allocation backfired on him as he started to decline in 2007. 2008 X5 handheld continued to decline in sales in the shakeout phase. I incurred a loss but didn’t drop the price dramatically as that would result in a higher loss. X6 was also starting to decline so I decreased the price but not much since its performance was better than other products in its category. I sold X6 for the same price as Joe’s but since my R&D were lower than Jabido 4 his of 34%, I gained more profit. X7 continued its growth phase and kept the same price and R&D as in 2007 and I yielded a significant profit. Joe only gained a profit of $213,021,071. 2009 Finally, it was the year of major changes. I decided to discontinue X5 handheld as the continuance of decline in sales couldn’t sustain in the market. The performance of X6 was still better than its competing products. But, I kept the same price to be more reasonable or lesser customers would buy it. However, I increased the R&D to improve the product and it seems to work. X7 continued its growth phase and since it’s becoming a highly profitable product, I invested a significant allocation in R&D. Although, the prices matched Joe’s, the dramatic increase in R&D allocation paid off and affected the performance of X6 and X7 yielding a higher profit than Joe’s. Joe had a cumulative total profit of $124,310,996. I determined the profit for 2009 with this formula (since it’s not available in the demo): 2008 score + X (cumulative total profits) = 2009 score 1,049,544,145 + X = 1,185,800,553 X = 1,185,800,553 – 1,049,544,145 X = 136,256,408 Jabido 5 Table 1 – My Profit vs. Joe’s Profit Joe’s slope (shown in red) is lower than my slope (shown in blue). This is an indication that Joe’s result in profitability is below mine. Although the graph shows a slight difference, in reality, Joe fell short of $10,690,197 in total profits from 2006 – 2009. Jabido 6 Starting in 2007, I was able to yield higher profits despite the downward trend in total sales. My strategy was rather risky as I incurred a loss in 2008 for the X5 handheld and then discontinued the product in 2009. Joe, on the other hand, kept the same prices and R&D but managed to gain little profit for X5 handheld in 2008, but his overall performance was poor. So which strategy is more realistic and which one is better? If the goal of the company is profit maximization, then my strategy would be preferable. Investing in products that yield maximum profits involves higher risks. In my case, the risk of losing money with X5 handheld was tolerable. Although with trial and error, this risk was rather conservative as I managed to gain higher total profits. The downward trend in profits seems to show a decline in sales starting in 2007. This can be solved by investing in new innovation to market better products that would attract more buyers in the future. The concept of “planned obsolescence” in products makes customers think that they need to utilize the newer technology since most of them are attracted to more improved products. People are accustomed to the rapidly accelerating change in technology. As N. Maycroft puts it, ”All must be made obsolete according to capital’s logic, such that all needs should be satisfied via the consumption of commodities, new needs are created to be satisfied in the same way and all needs and their commodified sastisfactions should be continually renewed in order to secure continual and expanding consumption.” (p.3). In summary, price of a commodity affects profit and changing R&D allocation will eventually affect performance of a product. Consequently, the price and performance will affect product attractiveness. Higher prices will lessen the product attractiveness. Product attractiveness will affect product sales, which then affects revenue and cost. Revenue less the amount of cost determines profit. References Maycroft, N. n.d. Consumption, Planned Obsolescence, and Waste, p. 3, 18. Retrieved from http://eprints.lincoln.ac.uk/2062/1/Obsolescence.pdf Toulmin, S. (1969). Toulmin’s Argument Model. The Uses of Argument. Retrieved from http://changingminds.org/disciplines/argument/making_argument/toulmin.htm no author, (2008). Marketing Segmentation. Retrieved from http://www.s-m-a-r- t.com/Exp_marketseg.htm Read More