MarkStrat - Lesson's Learned

Today, Industry "Charlie" teams presented this morning and we were Team E. It was an interesting exercise and we learned quite a bit. Teams seemed to have the same message for subsequent periods (or for people planning on playing this game in the future):

1. Get it right the first time - Hit a target market, don't hedge your bets. While hedging works in early stages, as teams compete in later stages everyone moves right on top of their products
2. Leverage your base products to create products for other groups (branching from Singles to High-Earners).
3. Price undercutting doesn't work (especially for premium products). You hit the sweet spot or you don't.

This had a particular way of manifesting for our team as we tried a very aggressive strategy.

We were selling 200+KU per period and selling out for two periods in a row. We wanted to push our boundaries so we looked at the market.

The Market Size was a total of 600KU and MarkStrat adjusts your projections up or down by 20%. Therefore, we targeted 500KU (a dramatic and highly aggresive target) where +20% (600KU) would raise the ceiling on our production to capture the entire market and -20% (400KU) would result in creating at most two years worth of product (and after selling 1 year's worth, would leave us holding 1 year's inventory) - our worst case scenario.

Unfortunately, our focus on the price using conjoint analysis was misguided. Conjoint analysis, by it's incomplete nature, only provides a few points of reference and it is possible to project at least two potential sweet spots. We weren't sure which was correct, but we hoped that by progressing towards the lower one, our drop in price would be offset by higher volumes (hoping to aggressively capture the market at a lower price).

However, this didn't work (see lesson 3) above. Instead we got killed. Our price was too low and our product was intercepted by Team U who placed their product between us and our target market capturing our market share and dropping our unit sales to 159KU.

In following periods, our group learned a lot quite fast. Our group became much better at predicting where our markets would be and landing right on top. Our stock price bounced back considerably in the aftermath of our recovery from our previous plummet.