Music2go Simulation Final Report

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The business target of our firm in youth segment is to achieve a STAR product of “Bang” and the leader position in this segment according to the highest contribution in the industry. It can be achieved by the following ways:

- The market share shall not be less than 25% of the total youth market potential size

- The gross margin of “Bang” is higher than the industry average level

Awesome: for the active users:

Therefore instead of a Cash-Cow or Star for the company, the purpose of our sport product “Awesome” is more like a sword to attack. And our plan is to play as a follower in the sport segment at the initial stages, and then try to diminish the profitability of other companies’ high margin products by initiating a price war in the market segment.

- Marketing Mix Strategy for Standard, Youth and Sport Segments

- Product Development Strategy

From Figure 3, we can see compared to Sonic 1, Bang and Awesome have a much steeper line, due to heavier investment and higher average spec ratings

Standard Segment

We adopted very conservative product development strategy on “Sonic 1”, the product name for standard segment, as it is our Cash Cow. From the year 4 of 2018, we stop to invest on spec develop but continuously invest on cost reduction.

Youth Segment

In order to benefit from first mover advantage, our firm is the first entrant into youth market and hopes to develop with the segment’s growth. In youth segment, we believe that keeping up with product development both in specs and cost is essential for success of “Bang”. Thus our firm persistently invested product development in specs enhancement and cost reduction from the product launch year 2016.

Sport Segment

We launched our product “Awesome” to the Sport market at the third round in 2017 and priced at the lower end of the market, since our product Awesome has a lower spec at 0.6 compare with 0.73 the market average we believe the best way to compete is to attack the market with a lower price to achieve a market share around 20 – 30%.

- Price Strategy

Standard Segment

The pricing strategy at this launching stage is very important. Although it is our Cash Cow product, we still apply skimming strategy by setting price high at $100 in order to leave buffer for following years. When entering the third years, the Sonic 1 segment was moving toward the decline stage. We considered possibly changing the packaging in order to make the product seem newer and to refresh it in the consumers’ minds and lowered the price to keep consumers interested. We did a good job, when price decreasing, we successfully kept Sonic 1 margin increasing given the expanding of scale of economy (see Figure 1).

Youth Segment

Our firm do not want to be a price leader in the youth segment, but to achieve relatively high product margin in the industry. The following is the unit price and gross margin every year for “Bang” in youth segment:

Price Strategy

1st year 2016

2nd year 2017

3rd year 2018

Plan in 2019

Unit Price ($)

68

68

75

62

Gross Margin

32%

39%

53%

47%

Market Share

21.6%

21.9%

24.7%

40%

In the 3rd year, we thought our “Bang” product go into the Mostly Mature stage. When we forecasted our competitors in youth market, like firm InfiniteDrivingForce, would increase product price, we also substantially increased our price to $75 with gross margin 53% to capture the high margin.

However the total contribution record is not good. Noticing that our market share is not enough due to highest product price in 2018, our firm plans to reduce the product price to industry lowest $62 to see what will happen. Our firm’s target is to capture 40% of total market share in 2019 after price reduction.

Sport Segment

We launched our product to the Sport market priced at the lower end of the market at $130. But after the trial of the first year, it appears the low-price strategy will require far more investment on both adverting and promotion in order to achieve the expected impact on the market (Awesome only made 12% of the market) and our competitors’ profit margins. And in order to focus our resource on the more profitable product segments to make the final dash, we adjusted our strategy on Awesome in the following year by switching our focus from market dominance to profit generation.

We increased our retail price from $130 to $138 (Margin increased from $22 to $39 ) and boosted both our advertising and promotion budgets by a million. In the same time, by taking advantage of the “growing stage” of the product, we also lowered the Retailer Margin from 35% to 31% in order to make the most out from limited marketing budget for the product.

- Promotion Strategy

Our firm continuously increased the product marketing expense step by step along with the market growth as following

Marketing

2015

2016

2017

2018

Advertising ($)

4,000,000

9,000,000

10,000,000