293 Gross Margin Help With Business Questions

293 Gross Margin Help With Business Questions

293 Gross Margin Help With Business Questions

Question 6: On Attribute Importance

Given the information shown below (from a screen shot of Market Study 15 at decision period 0, or round 0, which your team will have access to in making your Period 1 decisions), what are the top 3 most important attributes as demanded by market segments Alpha and Epsilon, respectively? How would you use this information in various pertinent aspects of strategic marketing decision-making? (10 points)

Your Answer:

The top 3 attributes for Alpha:

The top 3 attributes for Epsilon:

Decision-making implications:

Question 7: On Attribute Perception

Below is a screen shot of Market Study 14 (see page 19 of the Student Guide), which lists the ideal values (or needs) for all 5 segments on 6 product attributes and the performance values of all products in the market on all the attributes. This would be a great tool for analyzing your products’ market and relative competitive performances. For example, the ideal Speed level for Segment Alpha (Segment 1) is at level 12.4, while the actual Speed levels for products Faldo and Fano are -12.9 and 11.4, respectively. You may use the absolute “Performance – Need” difference score to represent a product’s ability to meet customers’ need on an attribute, assuming major departures in either direction are increasingly bad. Please note that the values shown in Report 14 all range from -25 to +25; these are non-dimensional (or standardized) values converted from the original attribute scales for easiness of comparisons of product performances across attributes. The original scales are shown in Report 9.

The Performance – Need difference score for Faldo is: -12.9 – 12.4 = -25.3 (for an absolute value of 25.3; or being very far away from the ideal value).

The Performance – Need difference score for Fano is: 11.4 – 12.4 = -1 (for an absolute value of 1; or being fairly close to the ideal value).

Based on the above information, Fano (at an absolute difference of 1) is much better than Faldo (at an absolute difference of 25.3) in meeting Alpha customers’ need on Speed. Remember to use the absolute difference values to make your judgment as values too high and too low could be equally dissatisfying. The same logic of performance evaluations also applies to Price, Complexity, and all other attributes (Price could be an indicator of overall quality so a very low price could be very undesirable).

Question: Use the above example as a reference to determine the relative attractiveness of Faldo and Fano in meeting Segment Gamma’s (Segment 3’s) need on Frequency. (10 points)

Your Answer:

Hint: You may use the below figure (a screen shot of Market Study 15 for this Period) as a reference to verify the correctness of your answer.

Optional but highly recommended extension of your answers:

Please generate an Excel table, complete with necessary formulas, which automatically calculates the relative performances of all products on all attributions. Furthermore, you may combine this analysis with the attribute importance information to seek to increase the informational value of all available data to you in your company’s strategic marketing decision-making. Please use this opportunity to explore such analyses so as to better help your company (team) make high informed decisions.

Question 8: On Media Preferences

The following Market Study (8) shows the media sources from which customers in various segments obtain product information. For example, Epsilon customers get 43% of their product information from Direct mail, while Alpha customers obtain 50% of their product information from Journals.

Report 3 (below) further shows how your company allocated your total advertising budget across the media channels in the last decision round.

Question: Let’s assume that Baller is targeted at Segment 4 (Delta). How might you want to adjust your media spendings for Baller in the next Period? (10 points)

Your Answer:

Question 9: On Relative Performance Impacts of Your Own Products

Below is a summary of Report 6. Compare the relative performance of the two products (Baller and Banness) in Period 0 (the last Period of decisions) in terms of their sales percentages (of company total), gross profits (of company total), expenses (of company total), and net contributions (of company total). Which product seems to have performed much better than the other in contributing to the company’s bottom-line? Why? How might the company’s pricing decisions have caused the big differences in their relative performances (Hint: examine the Gross Margin %)? What would you do in the next round’s strategic marketing decision-making, in terms of production, pricing, advertising about both products, given the unequal profit impacts of these two products? (15 points)

Report 6 – Income Statement

Run Name: TGaoDemo-W1

Company: Comp 1 (Company 1)

Period: 0




Gross Sales




– Distr Margin




Sales (net)




Cost of Sales




Gross Profit




Gross Margin (%)












Holding Costs




Net Contribution




Note: Sales, expenses, and profits in thousand $s.

Your Answer:

Question 10: On Advertising Experiment

Read the explanations on advertising experiment (and on sales force experiment) on page 18 of the student guide and examine the following screen shot for Market Study 11 from the perspective of Company 1. Based on this collective information, how much sales increase (in % terms) could Company 1 expect to achieve with product Baller if it were to double its advertising expenditure in the next Period, assuming everything else is unchanged? What would you recommend that your company do with regard to total advertising spending on both products in the next decision round? Note: The negative numbers represent how the sales of your competitors’ products will be (negatively) impacted as you double your advertising spending, all else being unchanged. (10 points)

Your answer:

Question 11: On Conversion of Measurement Units

Carefully read page 43 of the Student Guide. Note that different product attributes have different measurement units and different ranges of customer preferences (as shown in Report 9). Non-dimensional (or standardized) values are often used in perceptual maps to make easy comparisons of products relative performances against customer demands on various attributes. In Sabre, the customers’ demand levels for all attributes are expressed in non-dimensional scales of -25 to 25 no matter what the actual attribute ranges are. For example, whereas the customers’ needs for Complexity range from 7 to 150, you would find the ideal customer demand somewhere in between -25 and +25 using the non-dimensional scales. When you do R&D on a product, you would need to convert the non-dimensional value into actual measurement units.

Using the example given on page 43 of the Student Guide, what actual attribute level would you aim for producing if the ideal customer demand is 15 on the non-dimensional scale? (Hint: Use the formula given on page 43 but change -11 to +15 and go from there. The result would be much closer to 100 than to 20.) (10 points)

Your Answer (Show your calculation process):

Question 12. SWOT Analysis:

Performance a brief SWOT analysis of your company’s (or team’s) performance at the end of Round 0 based on all the information (all reports and studies) you have in Sabre. Specifically, identify the top 4 strengths, top 4 weaknesses, top 4 opportunities, and top 4 threats for your company. Then briefly speculate how you would recommend to your teammates that your company should do in Round 1 of decision-making. Please examine the information contained in all the reports and studies and rank order your answers for each categories of the SWOT analysis. (15 points)

As a general recommendation, all the answers to why some teams would be winning and others losing are in the reports and studies. You may export many reports and studies into Excel for more sophisticated analyses, and being able to identify, generate, and perform such extended analyses could very well determine your team’s ultimate competitive performance. Your hard work in conducting these innovative analyses would be rewarded not only in this simulation but also in the real world, in terms of your advanced ability to contribute to your current or future companies, as companies must perform essentially the same analyses to make best informed strategic marketing decisions.

Your Answer: