Salem™ Marketing Report

Salem™ Marketing Report An analysis of the failure of Salem’s strategic marketing objectives

Noah Murphy

Marketing Manager, Salem™

September 24, 2015

Executive Summary This report discusses the performance of Salem in relation to the strategic objectives drafted after

decision period three (D3). It evaluates the reasons behind Salem’s failure to achieve any of its

firm level marketing objectives, aside from the sonite sales objective, which was only due to the

success of Salem’s sonite, SOLO. SOLO achieved both its sales and revenue objectives targeting

the Shoppers segment. While Salem’s other sonite, SOFT, also achieved its sales objective, it is

apparent that the objective was set too low, as SOFT’s D7 purchase intentions fell well short of

its objective, as a result of product characteristics deviating from the Savers segment’s desired

attributes. No vodite objectives were accomplished, due to SELF’s failure to protect its volume

share from D4’s wave of new entrants, and SEEK’s failure to penetrate the market; both also

largely attributable to product characteristics not aligning with target segments’ ideals.

Table of Contents

Executive Summary ......................................................................................................................... i

Salem™ Marketing Report ............................................................................................................. 1

1.0 Introduction ........................................................................................................................... 1

2.0 Summary of the Market Environment .................................................................................. 1

3.0 Evaluation & Analysis of Objectives ................................................................................. 2 3.1 Marketing Objectives (Firm Level) ........................................................................................................... 2 3.2 Marketing Objectives (Brand Level) ......................................................................................................... 4 3.3 Innovation Objectives ................................................................................................................................ 6 3.4 Operational Objectives ............................................................................................................................... 6 3.5 Financial Objectives ................................................................................................................................... 7

4.0 Conclusion ............................................................................................................................ 8

Noah Murphy

Marketing Manager, Salem™

September 24, 2015

Salem™ Marketing Report 1

Salem™ Marketing Report

1.0 Introduction

Objectives for Salem’s performance in the Madrid marketplace were drafted after D3, which

sought to provide direction and guidelines for Salem’s strategic marketing decisions. The

majority of these objectives were not accomplished, creating the need to establish what caused

the failures, in order to improve Salem’s performance in future periods. This report examines the

marketing decisions in which Salem could have taken a more strategic focus, and the negative

outcomes that resulted from not doing so.

2.0 Summary of the Market Environment

Between the four periods, the vodite market fluctuated substantially (Hooley et al., 2012). The

introduction of four new brands in decision period four (D4) saw SELF’s volume share drop

from 100% to 2.5%, indicating a total failure of Salem’s pre-emptive defensive strategies

(Hooley, Piercy & Nicoulaud, 2012) implemented in this period, and rendering REAL the new

strong market leader with 42.8% volume share. REAL’s share also suffered however, with the

market expanding to seven brands by D7, resulting in a more evenly divided vodite market, as

AnanalysisofthefailureofSalem’sstrategicmarketingobjectives


indicated by Appendix 1. SELF’s direct competitor became MELT; another low price, low

volume share vodite targeting Followers, as well as Salem’s own new vodite, SEEK, also

targeting Followers. Much the same occurred in the sonites market, with new entrants

diversifying the volume share and removing the presence of a strong market leader (Hooley et

al., 2012), as indicated by Appendix 2. The Shoppers and Savers segments became saturated

(Hooley et al., 2012), with SOLO’s new direct competitors becoming ROLL, LOCO, LOOP,

ROME and TONE, as well as Salem’s far less successful sonite SOFT, which also had direct

competitors in LOCK, LOCO, MOJITO, MOST, ROME, ROSE and TOPS. The following

section locates these failures and addresses their causes.

3.0 Evaluation & Analysis of Objectives

3.1 Marketing Objectives (Firm Level)

Marketing Objective (Firm Level) Achieved?

Obtain 20% overall volume (unit) share by end of

D7

No. Volume share = 11%

Obtain 15% overall market (value) share by end

of D7

No. Market share = 9%

Sell 1,000,000 vodites by end of D7

No. Vodites sold = 179,000

Sell 500,000 sonites by end of D7 Yes. Sonites sold = 1,459,000


In the sonites market, Salem’s inability to grow in market and volume share cannot be blamed on

new entrants, which as mentioned in Section 2 were the cause of share loss for other existing

brands. Instead it was predominantly due to a severely low production budget for the highly

desirable SOLO, and the continuing inaction to increase this budget to meet demand. Salem’s

management of its human resources is lacking in several areas stipulated by Collis &

Montgomery’s (1998) resource-based view of corporate strategy. The allocation of the role of

marketing manager ceased after D2, leaving no central figure to assign tasks and ensure they

were completed satisfactorily. Instead, staff members carried out tasks with no central

management (Collis & Montgomery, 1998), which led to no allocation of the task of increasing

the production budget, and the failure to increase it sufficiently in following periods. The

insufficient increases were also attributable to an oversight of the Purchase Intention chart, which

at D4 indicated that 10% of the market intended to purchase SOLO. This high demand was not

addressed until D6, where the production plan was finally increased to 340,000 and SOLO’s

supply met demand for the first time since D2. Thus the poor management of the company’s

human resources resulted in significant opportunity costs (Collis & Montgomery, 1998) for

Salem.

New entrants to the vodites market on the other hand were definitely the cause of failure of

Salem’s vodite market firm level objective. When SELF was the only vodite on the market, its

deviations from Innovators’ ideal characteristics were forgiven, but when vodites such as REAL

entered the market in D4, which provided much greater resolution and connectivity, the two most

important characteristics for Innovators, consumers had no reason to purchase a less suitable

product for a barely lower price (Hooley, Piercy & Nicoulaud, 2012), and SELF’s volume share

fell from 100% to 0.8%. Salem’s own vodite, SEEK, also contributed to SELF losing its

substantial volume share. Once SEEK and SELF both targeted Followers in D5, they began to

cannibalise each other’s sales to this target segment (Cheng-Hsui Chen & Chen, 2015).


3.2 Marketing Objectives (Brand Level)

Brand SOFT SOLO SELF

Objective 1. Sell 240,000 units by end of

D7

2. Increase purchase intentions

of Savers to 25% by end of D7

1. Sell 260,000 units by

end of D7

2. Increase revenue to

$20M per period until end

of D7

1. Maintain 50%

volume share until

end of D7

2. Earn revenue of

$30M per period until

end of D7

Achieved? 1. Yes. 604,000 units sold

2. No. D7 purchase

intentions = 3%

1. Yes. 804,000 units

sold

2. Yes

1. No

2. No

The low purchase intentions for SOFT suggest that there was either an issue with product

awareness or the product itself (Hooley et al., 2012). SOFT was the fourth most recognised

sonite in D7, so the product’s characteristics were obviously too far from the target segment’s

ideals compared to competitors. The semantic scales (Hooley et al., 2012) corroborate this,

revealing that SOFT’s characteristics were significantly different from Savers’ ideal

characteristics, deviating by an average of 0.95 per characteristic, with the least satisfactory

characteristics being power and battery; areas where the competitors mentioned in Section 2

were more suitable, particularly ROSE and LOCK.

SOFT’s deviation from Savers’ ideals began when Salem stopped ordering research and

development after D5, to increase overall profit. The preferences of the Savers segment

continued to adapt, but without research Salem was blind to these changes, and decreasingly able


to serve the segment satisfactorily (Hooley et al., 2012). Obviously the sales objective was set

too low in comparison, as it was achieved despite failing to achieve the purchase intentions

objective. SOLO has been a far more successful brand for Salem with both its sales and revenue

objectives, despite selling out in three consecutive periods. This is a result of SOLO’s close

alignment with the Shoppers segment’s ideals.

Meanwhile vodites began as a niche market in D3, with only Salem’s SELF available. But as

Salem predicted and Hooley, Piercy & Nicoulaud (2012) warn, the niche market grew to a size

that was attractive to competitors. As discussed in the firm level marketing objectives, SELF’s

market share and sales plummeted after the introduction of a wave of new vodites, including

Salem’s own SEEK. SELF’s pre-emptive defensive strategies (Hooley et al., 2012) failed

dismally in preventing share loss to these new competitors. Salem intended to use SEEK as a

fortification strategy, by using it to target Followers and consequently impede entry into the

market from this access point (Hooley et al., 2012). But new entrants chose another segment

through which to enter. They were able to penetrate the market and gain considerable volume

share by targeting Innovators. Salem’s fortification strategy was defeated by this bypass strategy

(Hooley et al., 2012) and thus failed to impede competitors’ entry. Furthermore, once SELF

abandoned the saturated Innovators segment in D5, it began competing for the same segment as

SEEK, and consequently Salem’s vodites cannibalised each other (Cheng-Hsui Chen & Chen,

2015). While it is difficult to measure the extent of this cannibalisation, it is suggested by the

lack of increase in volume share once SELF entered the less saturated Followers segment, with

only LEXI and MELT as other direct competitors, but only gained 4% more share.


3.3 Innovation Objectives

Innovation Objective Achieved?

SEEK obtain 20% vodite volume share by the end of

D7

No. D7 volume

share = 6.9%

SEEK generate 30% of Salem’s total revenue by the

end of D7

No. SEEK

revenue = 2.2% of

total

As discussed in the previous objectives, SEEK was unsuccessful because its product

characteristics deviated far more from Followers’ ideals than competitors, and was cannibalised

by SELF also targeting Followers as of D5 (Hooley et al., 2012).

3.4 Operational Objectives

Area Objective Achieved?

Production Maximum remaining inventory each period

D4-D7 20,000 units/brand

No

Commercial

Teams

Hold commercial team budget above $2M

for each period D4-D7

Yes


Salem’s production objective was not achieved due to the gross underperformance of the

company’s vodites, as production plans were calculated assuming the success of the defensive

strategies discussed in Section 3.2. Their failure saw 74,000 units of SELF inventoried after D4,

and 47,000 of SEEK.

3.5 Financial Objectives

Area Objective Achieved?

Revenue Achieve $75M total revenue by end of

D7

No. Total revenue = $51M

Share Price

Index (SPI)

Increase SPI to 1,750 by end of D7 No. SPI = 778

Both financial objectives failed as a result of the failures of each other objective. Revenue fell

short of $75 million because sales were below expectation for three out of Salem’s four brands.

SOLO achieved success in D6 and D7, once supply met demand, and SELF was highly

profitable in D3 as the only vodite on the market, but aside from these exceptions, Salem largely

failed to achieve financial success (Hooley et al., 2012). In the vodites market, a major

contributor to this failure was in the Place dimension of the 4 P’s (Hooley et al., 2012). Both

vodites had extremely low coverage across all channels until D7, where a significant increase in

commercial teams was reflected in improved brand performance. However a factor that crippled

the performance of all of Salem’s products but SOLO was the failure of the Product dimension

(Hooley et al., 2012). Salem’s product awareness was high and the products used a market-

oriented pricing strategy (Hooley et al., 2012), being set according to the target segments’


preferences, but competitors more accurately customised their products to the target segments’

needs. Therefore if Salem had not decreased its research and development budget after D5, it

would have ensured its products continually aligned as closely as possible to the target segments’

ideal characteristics, and Salem would have achieved significantly greater market share and

consequently greater revenue and share price index.

4.0 Conclusion

If Salem had adopted a more strategic focus with its marketing operations, it would have been far

more successful in penetrating the Madrid market. Both sonites and vodites largely failed to

accomplish the strategic objectives set after D3. This was predominantly due to research and

development issues, where Salem’s products’ characteristics did not align with target segments’

ideals. In the case of SOLO, Salem’s only brand to strategically utilise research and

development, poor marketing team management resulted in a recurringly inadequate production

plan, and prevented SOLO from reaching its full potential in Madrid. If Salem continues to

correct the mistakes discussed in this report as it has begun to in some cases in the later periods,

it will continue to improve market share and become a more dominant presence in both the

sonite and vodite markets.


Appendix

1)

2)

TENDER

REAL

LEAF

Self SEEK

Vodite Volume Share D4

TENDER

REAL LEAF

Self

SEEK Melt

Mega

Vodite Volume Share D7

ROCK

LOCK

TOPS TONE

TOTAL

MOST

ROLL

LOCO

LOOP

SOLO SOFT

Sonite Volume Share D4

ROCK

LOCK

TOPS

TONE

TOTAL

MOST

ROLL

LOCO

LOOP

SOLO

SOFT ROSE

ROME MOJITO

Sonite Volume Share D7


Reference List

Cheng‐Hsui Chen, A. & Chen, S.K. (2015). Brand dilution effect of extension failure – a Taiwan

study. Journal of Product & Brand Management, 9, 4. doi: 10.1108/10610420010344031

Collis, D., & Montgomery, C. (1998). Corporate strategy. Boston, MA: McGraw-Hill.

Hooley, G. J., Piercy, N., & Nicoulaud, B. (2012). Marketing strategy & competitive positioning

(5th ed.). Harlow, ES: Pearson Education Limited.


Personal Reflection As a member of Salem’s marketing team, I believe there are a number of areas in which I could have had more of an impact on the firm’s marketing decisions. While at meetings I always spearheaded decision-making discussions, the managerial issues mentioned in this report could have been avoided if I had been more actively involved in the implementation of the strategies decided upon in the meetings. In the meeting after D3, it was my suggestion to increase SOLO’s production budget, but I had no involvement with the implementation of this decision and therefore was not aware that the increase was omitted.

My depth of knowledge with defensive strategies was of great use to the team in providing a theoretical framework to our decision making surrounding D3 and D4. Other team members brought forward their concerns about preparing SELF for the influx of new vodites in D4, and I was able to suggest a variety of defensive strategies from strategic marketing theory. However I found that my focus on theory came at the expense of my familiarisation with the simulation, which is why other team members’ proficiency with the simulation was highly beneficial in complementing my theoretical knowledge, and our group was able to combine our skills to make informed and strategic decisions. These decisions formed the basis of Salem’s strategic report after D3.

Despite the team’s possession of this diversity of skills, we failed to use them to their full potential in drafting objectives for the strategic report. Each team member was assigned a different objective category, resulting in little cohesion between the objectives. This was another crucial team management error, as the categories need to relate to each other, given each one is necessary to accomplish the others. Salem’s objectives overlapped, with operational objectives discussing marketing topics, and marketing objectives discussing financial topics. Salem’s marketing team should have developed and discussed the objectives as a team, in order to allow the different categories to effectively interrelate.

From participating in this team experience I have gained a plethora of key strategic marketing knowledge, most notably in these three forms:

1. Diversity is a valuable asset in any team. As mentioned above, my theoretical knowledge combined effectively with other group members’ practical experience to form a strategic unit that trumped what any team member could have achieved on their own.

2. Teamwork is not about dividing a task into independent activities. Each team member working independently on their own section was problematic for the interrelation of sections. Teamwork requires constant communication to breed cohesion and consistency.

3. Moving into the industry, I am now wary that following theoretical frameworks does not guarantee success. We implemented specific defensive strategies to protect SELF’s volume share, adhering to strategic marketing theory, but these strategies failed dismally in practice.

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Salem™ Marketing Report