MARKETING INTERACTION: A MARKETING MANAGEMENT GAME Simulations, Games and Experiential Learning Techniques, Volume 1, 1974 135 MARKETING INTERACTION: A MARKETING MANAGEMENT GAME Stephen K. Keiser, University of Delaware MARKETING MANAGEMENT GAMES Increasingly, teachers of marketing management have become cognizant of the need to use simulation games. Simulation games, providing students with the tasks of planning and implementing various strategy elements of the marketing mix, have been added to college-level courses in marketing management. Although games have been developed and adopted for courses in a single strategy area of marketing management such as advertising or sales management, the game, Marketing Interaction, discussed in this paper pertains to those college courses which focus on the management of all marketing activities. Simulation games which have been developed for the marketing management course include “Marksim,” “Marketing in Action,” “Marketing Strategy,” and “Compete” (1; 2; 3; 4). Available marketing management games vary in their content as types of products marketed in the games include soda, sound systems, and automobiles. Moreover, the available games range from those such as “Marketing in Action” which was developed over ten years ago to very recently developed games such as “Compete”. Although the available marketing management games vary in their characteristics, they are generally used for similar classroom purposes. The major purposes of a marketing management game include helping students learn to apply principles and practices of marketing management to the management of all strategy elements in a quasi-realistic situation. Moreover, simulation games are used to teach students how to adjust strategies to satisfy constraints imposed by a dynamic environment. Although other benefits of gaming such as learning about the behavioral dimensions of team work, it is the viewpoint of the author that learning to apply concepts to all dimensions of marketing strategy in a dynamic environment should be the major goal of use of marketing management games. EVALUATION OF AVAILABLE GAMES Classroom evaluation of several of the available marketing management games resulted in game weaknesses which may detract from the chances of successful accomplishment of goals set for these games. Major emphasis during the examination of marketing management games was on the decision variables included in the games. The decision variables included in “Marksim,” “Marketing in Action,” “Marketing Strategy,” and “Compete” are summarized in Figure 1. One weakness felt to exist in these games was that certain strategy elements of marketing management are ignored while non-marketing variables may be over emphasized in terms of relative impact on game performance. Simulations, Games and Experiential Learning Techniques, Volume 1, 1974 136 Generally, these games do not include some aspects of product line decisions such as product addition or product life cycles. FIGURE 1 DECISION VARIABLES OF COMPETITIVE GAMES NAME OF GAME Type of Decision Marksim Marketing In Action Marketing Strategy Compete Product Production Scheduling Production Scheduling Production Scheduling Research & Development Product Quality Product Addition Brands Product Character Package Price Retail Price Price per case for 3 products Retail price for 3 brands Wholesale price for 3 products & regions Place 2 Channels Number of Dealers Size of Shipment Size of Shipment Allocate Dealers among brands Promotion Size of Advertising Budget Size of Sales Force Size of Advertising Budget Size of Advertising Budget Advertising Allowances for retailers Allocate Sales Force to products Allocate Advertising to brands Allocate Advertising to products, media, & regions Salesmen profit sharing Simulations, Games and Experiential Learning Techniques, Volume 1, 1974 137 Similarly, available games require few, if any, channel management decisions. Channel decisions in these games may include determination of number of dealers to sell automobiles or setting the size of shipments to different markets. One major nonmarketing variable which predominates at least one of the available marketing management games is production scheduling. Student performance in the “Marketing Strategy” game depends, to a great extent on the accuracy of production scheduling. Another weakness of available games relates to the purpose of learning in a dynamic environment. Most games tend to offer the student a relatively constant level of difficulty throughout the periods of the game. As a result, these games do not provide the student with an opportunity to apply his knowledge of marketing management to problems of increasing difficulty during the duration of the course. The student’s task of applying what he has learned may be decreased in difficulty if the initial game experience is at a relatively simple level with increased levels of difficulty introduced in later stages of the game. MARKETING INTERACTION Using the input of undergraduate marketing management majors, Marketing Interaction, was developed. The game requires participants to make decisions about marketing garments to the consumer market. The major decisions required in the game are summarized in Figure 2. Product Decisions As indicated in Figure 2, product decisions In the game include choice of new products to add if new products are discovered based on the amount of Research and Development expenditures, deletion of products, and allocation of Research and Development expenditures among marketed products. Each team starts the game marketing the same product and are provided a choice among nine other products when new products are discovered. Price Decisions Price decisions include establishing prices which are submitted to channel members as part of a bid to acquire the agreement of channel members to stock a firm’s product. These retail selling prices may be changed after the channel has agreed to stock the product although a penalty on sales results from variations from bid prices. The channel markup decision involves establishing the percentage of retail sales which is guaranteed to the channel through which the sales are made. These channel markup percentages are fixed when a channel contract is established between a seller and the channel. These markups cannot be varied until the channel contract expires. Simulations, Games and Experiential Learning Techniques, Volume 1, 1974 138 FIGURE 2 DECISION VARIABLES OF MARKETING INTERACTION DECISION VARIABLE DECISION REQUIRED IN MARKETING INTERACTION Product Product addition or deletion for 10 products Amount of Research & Development expenditure Allocate R & D among game products Price Suggested retail price set for channel bids Channel markups as a percent of retail price Actual retail price for each product sold and each channel used Place Choice of 20 game channels for which price and markup bids are submitted Promotion Size of advertising budget Allocate advertising among 5 media Place Decision The channel choice decision of “Marketing Interaction” is discussed in more detail than other decision variables due to its divergence from available games. There are twenty different channels in the game which will market products of those companies which provide them with the highest projected revenue. In order to evaluate the channel offering of game companies, each company must submit channel bids which consist of channel markups expressed as a percent of retail selling price and the retail selling price the company will most likely charge if a channel will accept its bid. Channel bids must be submitted prior to the initiation of game play as students do not have channels for the one product they are marketing. Teams also have to submit channel bids at the end of the fourth period of play because initial channel contracts expire in four periods. In order to keep the game dynamic, the duration of channel contracts made after the fourth quarter of the game are shortened to two periods. Consequently, bid decisions must be submitted after periods six, eight, ten, and twelve. An overly complex game environment is avoided by informing teams about the availability of new products immediately prior to the submittal of Simulations, Games and Experiential Learning Techniques, Volume 1, 1974 139 the bid decision. Therefore, channel bids are made simultaneously for both old and new products. The basic model used to evaluate the channel bids of each team is shown in Figure 3. The bid price submitted by each team is evaluated against historical prices for the product for which the bid is submitted and psychological price endings. The result of this process is a price effectiveness index for the firm. The resultant price effectiveness index is compiled in indices of channel effectiveness, product effectiveness, and game period to project sales for the firm through the channel for which a bid is submitted for the product being sold and for the game period during which it will be sold. Finally, the bid markup is multiplied times projected sales to determine the expected return to the channel. Channels then select those bids promising the highest dollar markup. However, the number of bids accepted by channels carries from one to all firms. This limitation is set in the game. Available game channels vary in their characteristics. Some channels consist of no middlemen while others include some combination of retailers, merchant middlemen, or agent middlemen. Moreover, the game channels vary in their effectiveness in selling each game product. Marketing information can be purchased about the effectiveness of the channels. Another way, in which available channels vary, is that their historically acceptable markups range from eighteen to thirty-eight percent. Furthermore, the minimum gross margin which the channel expects each period differs among channels. Some channels require sellers to guarantee $9,000 in channel markup per period while others require quarterly minimums in excess of $20,000. Promotion Decisions The nature of the promotion decisions in “Marketing Interaction” are comparable to available games. Students are required to allocate their advertising budget among two types of national television advertising and three nationally distributed magazines. Marketing Research The marketing research decisions in the game include a relatively different twist than that available in other games. The student participant must decide how much reliability he desires to pay for in his marketing research information. As an example the various costs and degrees of reliability of information about competitors’ expenditures for Research and Development are shown in Figure 4. Available degrees of reliability of estimates of Research and Development expenditures range from 52 to 97 percent with a range of costs between $21,000 and $333,000. Simulations, Games and Experiential Learning Techniques, Volume 1, 1974 140 Simulations, Games and Experiential Learning Techniques, Volume 1, 1974 141 Figure 4 Reliability and Costs of Estimates of Competitors’ Expenditures for Research and Development Degree of Reliability Cost Per Product 52% $21,000 64% $28,000 76% $42,000 82% $56,000 88% $83,000 91% $111,000 94% $167,000 97% $333,000 Game Complexity Finally, game design does involve increasing complexity as the game progresses. The manner in which this complexity is introduced is through the increased number of products which can be marketed by firms. Each firm starts out with one product and can finish the game with ten products. However, the game administrator, can reduce this complexity by terminating the game at the end of the first four periods of play. GAME EXPERIENCE Classroom testing of “Marketing Interaction” has shown that students are learning the need to simultaneously balance all the marketing mix variables. Generally, the initial reaction of students to any game is to hunt the one decision variable which provides the key to instant success. As a result of revisions in the channel bid evaluation procedure and the dynamic nature of the game students have found that decision simplification cannot successfully replace careful planning of all variables. Simulations, Games and Experiential Learning Techniques, Volume 1, 1974 142 REFERENCES 1. Greenlaw, Paul S. and Fred W. Kniff in, Marksim: A Marketing Decision Simulation, (Scranton, PA: International Textbook Co., 1964). 2. Day, Ralph L. and Thomas E. Ness, Marketing in Action, (Homewood, Illinois: Richard D. Irwin, Inc., 1973). 3. Boone, Louis E., Marketing Strategy: A Marketing Decision Game, (Columbus, Ohio: Charles E. Merrill Publishing Co., 1971). 4. Faria, A. J., D. G. Johnstone, and R. 0. Nulsen, Jr., Compete: A Dynamic Marketing Simulation (Dallas, Texas: Business Publications, Inc., 1974). Table of Contents Volume 1, 1974 Long Live Your Business Game Marketing In Action In Collegiate Education How to Create Your Own Business Game with Imaginit The Design, Conduct and Evaluation of a Computerized Management Game as a Form of Experiential Learning Experiential Learning: Conceptualization and Definition The Teaching Potential of a Structured Experience The Lecture versus the Game Tracking the Elective: Student-Goal Oriented Education The Use of Internal and External Assignments with a Marketing Simulation Game Constructing Mini-Courses to Supplement Business Simulations A Video-Tape/Computer Learning Experience A Collective Bargaining Negotiation Simulation: Settle or Strike Simulation in Personnel Administration Introduction to Pablum: A public Administration Game Enrichment of a Multi-Functional Game through Dynamic Overlays and Intensive Decision Analysis An Orientation to the Oklahoma Farm Management Game A Description of INTSTRAT: A Game of Investment Strategy DØG: A Decision Mathematics Game The Use of Production Scheduling Simulation in a Production Planning and Control Course Interactive Gaming: A Production Example Marketing Interaction: A Marketing Management Game ADMAG I: An Advertising Management Game Meeting the Decline in College Enrollments Using the Money Game in the Classroom Training Salesmen with The Sales Management Game Smith Management Game (BUSOP) The Business Game: A New Approach to Managerial Accounting Administration: The Key to a Successful Gaming Experience Simulation: A Frustration, A ‘Game’, or a Meaningful Experience Using Complex Simulations in Policy Courses in Institutions with Limited Resources Flexibility in Simulation Design for Continual Student Motivation A Terminal Keyboard Experience in Executive Gaming Application of Theory and of Computerized Grading in Management Simulation The Executive Education Experience Using the Toronto Management Game Experiences with the Harvard Management Game Managing the Dynamic Small Business Via Simulation The Use of Business Game and a Simulated Stock Exchange in a Business Policy Course Managerial Strategy and Systems - An integrative M.B.A. Course SIMQ, A Business Simulation Game for Decision Science Students: Towards a Total Gaming and Teaching Package The Use of Simulation in a Financial Planning Course Simulation as a Supplementary Learning Experience in Marketing Principles Intercollegiate Business Gaming: The State of the Art Intercollegiate Business Gaming from a Participant's Viewpoint Correlates of Satisfaction, Learning and Success in Business Gaming A Student' s View of Leadership Training with a Two-Level Hierarchy, Two Course Simulation Autocratic versus Democratic Decision Making: The Executive Game as an Experiment Identifying Potential Game Participants Assessment Centers Selection Based on Simulation Business Games in the Process of Management Training in Israel and the United States Evolution and Flexibility in Business Gaming Quantitative Applications of Games Growing Emphasis on Implementation Debits and Credits: First National ABSEL Conference