Markstrat allows you to put theory into practice by managing all marketing aspects of a consumer tech company, including brand management, product and market development, and integrated marketing communications. The beauty of Markstrat lies in its balance: it is complex enough to incorporate all the main Marketing principles but is also simple enough to provide a clear feedback loop on what you did right and wrong. In short, it will keep you interested throughout many rounds and allow you to feel the workings of marketing theory.
After many years of teaching Markstrat, I thought it was time to distill what I learned into 10 guiding principles to help you win the simulation. Here they are:
1. Know the Basics
In Markstrat, you and your team will manage a consumer tech company, competing with other companies managed by your classmates.
There are two markets: Sonites and Vodites, which can be thought of as different product categories. Each product category has its own set of attributes, such as Processing Power, Battery Life, Autonomy, Apps, etc. Each market also has a set number of consumer segments with different preferences and shopping habits.
The goal of the game is to have the highest Share Price Index by the end of the game. This is achieved by having a solid presence in the most relevant segments and maintaining a healthy bottom line.
2. Read the Manual
Reading the manual will give you a head start in the game. Most students tend not to read the manual and end up losing a significant amount of time and making avoidable mistakes. These delays and errors can cost you the game, so it’s worth taking some time to familiarize yourself with the rules and mechanics of the game before you start.
One of the most common mistakes that can be avoided by reading the manual is this: after developing a new R&D project, do not forget to launch it; R&D projects do not launch themselves.
3. Use Market Research Reports
Market Research reports are an invaluable resource in Markstrat. They provide detailed information about the Sonites and Vodites markets, including consumer preferences, segment trends, and competitor strategies.
At least in the beginning, it is crucial to buy all available reports, even for markets you still need to enter. These reports help you make informed decisions and develop effective strategies for segments in which you are already competing and for those you may want to enter in future rounds.
Are all reports equally relevant? No, they are not, but they all provide some value, so keep purchasing all of them until you figure out which ones you can live without. In How To Win Markstrat, we review all the reports in detail, stating their importance and highlighting the critical pieces for decision-making.
4. Diagnose Your Company’s Starting Strengths and Weaknesses
Understanding your company’s strengths and weaknesses is crucial for developing a successful strategy. All companies start with two Sonite brands with the same budget, but their situations vary greatly. Some companies may have higher revenue or brand share, while others may have promising long-term prospects but little revenue or profit in the early periods. In the first period, focus on understanding how your brands are faring, their profitability, and from which segments they derive their sales. This will help identify your company’s blind spots and align your brands with long-term opportunities.
5. Choose Your Target Segments Wisely
Not all segments are created equal. Some promise incredible growth, while others provide significant early profits. When prioritizing segments, you should consider their future value, the expected level of competition, and the timing of your entry. It’s essential to focus on segments that promise significant volume and profitable margins and to plan your entry in stages to maximize your budget and resources.
In How To Win Markstrat, we show the best way to assess the long-term attractiveness of the different segments and prioritize them sequentially to compete effectively.
6. Develop Brands that Meet Exactly the Segments’ Needs
Each segment in Markstrat has specific preferences about price, product attributes, and shopping habits. Your job is to develop brands that meet exactly those preferences. This means you must create products that match your target segment’s ideal attributes and price and allocate your brand’s marketing budget to promotional and commercial efforts tailored to the segment. Avoid common mistakes like maintaining multi-segment products and cutting corners on less important attributes to save on costs.
7. Invest in R&D early and frequently
Research and Development (R&D) is crucial for developing new products and increasing market share. Start using R&D as soon as possible, focusing on the segments you identified as priorities for your long-term success. Always aim for the minimum base cost and use online consultations to complete your project in one round. Keep updating your brands as preferences evolve over time, and don’t be afraid of the price tag—a well-developed product will pay back for itself in the first round after launch.
In How To Win Markstrat, we provide a step-by-step process for designing the perfect product for a specific segment.
8. Prepare Your Launches for Success
The first step to launching a brand is to actively create a new brand in the Brand Portfolio section, using the recently completed project as the base.
With the brand created, it is now crucial that you fully fund your marketing efforts: invest a sizeable amount in advertising and adequately staff your sales team, especially in relevant channels for the segment. Also, make sure you produce enough units to meet demand.
Another critical decision in the Marketing Mix is setting the right price. This is particularly important in the Vodite market, where the first mover sets the price point for the category.
All these aspects are covered in detail in How To Win Markstrat.
9. Optimize Your Marketing Funnel
After launching your brands, you must manage the marketing funnel to boost and sustain their growth.
You may ask yourself: where can I quickly see the marketing funnel in Markstrat? The answer is nowhere. However, the logic of the marketing funnel is behind the scenes, driving brand performance. The best way to visualize the funnel is with three questions:
- Do consumers know my brand?
- Is my brand attractive to consumers?
- Can consumers find and buy my brand if they want to?
If the answer to any of these questions is no, you will have a bottleneck in your marketing funnel, resulting in a low market share. To unlock the bottleneck:
- To grow awareness: Invest more in Advertising, with an appropriate percentage going to Advertising Research (~15%).
- To increase brand preference: Adjust the price and the product attributes with R&D to meet segments’ ideal values, while using the perceptual objectives of media to let the consumers know of any changes you made to your brand attributes.
- To allow the consumers to find your products at the point of sale: Ensure you produce enough units and have sufficient salespeople covering the most relevant channels to expand distribution coverage.
10. Manage Your Budget
The marketing budget is the scarce resource of the game, and you must maximize it to remain competitive. To increase your budget, you must grow your bottom line. To achieve this, first prioritize the segments that can provide sizeable profits early on and transition into long-term opportunities just after capturing them.
If you deploy a well-thought-out strategy, you will eventually grow your profits enough to hit the budget ceiling in later rounds. At that point, you should focus on investing in brands and markets that provide a greater Return on Marketing Investment. Review the relation of Contribution After Marketing to Marketing Expenses regularly and redirect investment from the brand with the lower ROI to the one with the highest.
So that’s all you need to win, folks. Keep these ten principles present in every round of planning and execution, and they will get you 90% of the way to winning the game. If you need more details, check out the book How To Win Markstrat, which includes a step-by-step guide on how to implement the principles and the perfect playbook for the game.
Good luck!