Wharton simulation report
With little experience in mock decision making tasks, I entered the group feeling both reluctant and excited by the prospect of our future strategic collaboration in the Wharton Customer Centricity Simulation. Due to the groups being randomly assorted, I had never interacted with any of my team members before, making this experience especially unique
Coming into the first round of the simulation, our group objective was to simply experience growth in market valuation and customer growth. Not knowing any of my group members I was initially uncomfortable with challenging each other in identifying issues and relevant marketing principles. However, we agreed on our overall aims and objectives as:
- To utilise the learnings from className and understand deficiencies in previous rounds when making decisions
- For market valuation to increases every round and to experience continual portfolio growth
- Become the best performing team
As the decision making simulation was a foreign for all team members we did not have an initial strategy set in stone. Previous marketing subjects always had a more customer centric focus, thus we agreed that customer service would be the most influential factor in increasing profits, heightening future projections and expanding growth. With the Assignments emphasis on the four marketing principles we wanted our overall approach to encompass all these rules.
Our initial strategy had an emphasis on internal and external marketing efforts as a way to sequentially address customer acquisitions than expansions and finally retention which would also establish a sustainable competitive advantage. It was only after a few rounds that we realised branding had a larger impact on valuation, thus prompting us to redistribute spending. As a secondary step to establishing market awareness we decided to prioritise creating customer loyalty programs. My simulation experience is detailed as followed:
We purchased the CRM package in our first period as a means to obtain useful data about our customers and their lifetime value. However, we realised later that the expensive purchase
decreased our market valuation to 3.1M and net income to 394K as it forced us to decreased spending elsewhere. Had this have been an individual decision, I would have still acquired the CRM package as it showed us what sectors our customers actually belonged in, however I would have passed on the Number of Customers, by Acquisition Channel Report and reallocated the 100K to Branding expenditure. Although our budget decreased for the next round, purchasing the package earlier on allowed for better long term growth and we were able to attain a more effective customer acquisition strategy.
In the second round we went with the safer option of equally distributing 100K in internal and external marketing and delegated a smaller amount of 50K to customer service. Our objective for period 2 was to focus on customer acquisition. This round we were able to distribute different amounts to each sector thanks to the previously purchased CRM package. We also had an incremental increase in branding, as a strong brand means stronger sales, profit enhancement and loyalty effects. Customer acquisition was highlighted early on in the rounds as the customer dynamic segmentation approach predicts that customer acquisitions occur in the initial stages of interaction with firms.
In order to have customer insight we spent 250K on purchasing the detailed CRM module. From the last round we noticed a drastic change in distribution of customers with automotives representing half of our customer base. We used a heuristics approach relying on anchors, and adjusted our decisions every period based on prior outcomes. This led us to double our automotives investment to 300K. The remaining budget was then distributed 50/50 for other sectors and we continued to increase spending on branding. Unexpectedly our Market Value decrease to 19.6M and Net Income decrease to 1.8M. If redone individually I would have increased branding allocation to 500K as we learnt later on the importance of branding for initial market-based SCA for firms.
To boost the effectiveness of internal marketing we purchased a Strategic Account Manager for 600K.
They were brought in with the intention to bridge gaps between customer service, sales and marketing. The simulation emphasised the scarcity of resources and so we used a heuristic based approach using anchors to reallocate spending based on prior decisions and outcomes. As an increase in branding was seen to work in the previously, we reallocated spending from smaller segment marketing efforts and reinvested in branding. We also noticed that there was a ‘referrals’ in the 'acquired' tab which prompted us to increase focus on customer loyalty later. This led Market Valuation to increase to (23.7M) and Net Income increase by (20.9%). My own action plan would not have included purchasing the strategic role as it took up 26% of our budget.
This round our decision rationale was heavily influenced by the results from previous rounds, as we used a heuristic approach to observe the growth trend over time, increasing expenditure by 67%. Instead of focusing on our weaknesses we increased spending in stronger areas, expanding our efforts from 216K to 300K in our largest segment; automotives to further acquisitions. We also went ahead in purchasing the Customer Loyalty Program starter to boost customer loyalty. We believed purchasing the starter would have a flow on effect as increased customer loyalty would lead to increased referrals, thus ultimately bringing down acquisition cost per customer. Our results mirrored previous rounds with market valuation increasing by 46.7M and net income increasing by 68.5%. With market valuation doubling and customer growth increasing by 40% this was an overall great round and I would have chosen the same action plan if played again by myself.
With our growing budget, we were able to increase spending in all three marketing sectors. The rest of our funds were evenly split between customer service and the newly added loyalty program. We decided to allocate spending equally between the two as we had grouped customer service and the loyalty program as having the same initiative and effect. A response model-based attribution approach was also implemented capturing relationships between past marketing resources and past outcomes. This saw our group continuing to play to our strengths; mirroring last rounds decisions with an increased gap in spending between our strongest sector and the remaining two.
Not only did market valuation increase by 51M but net income also went up by 18%. Aligning customer service with the loyalty program also resulted in growth for both customer acquisition (75) and retention (126).
Once again we increased expenditure in branding, however our results were weak signalling that the previous strength of the branding strategy had hit its peak. This may have also been a result of limited customer and market analysis. In order to combat this, I would've used an attribution approach. This would have required a more detailed data showing how specific increases in a resource option affect a particular outcome and allow for a mathematical assessment, produced through integrating past decisions and past outcomes. Customer growth had decreased from 40% to 25.3% last round, thus we decided to invest in the referral program as a means of increasing market share. In addition to this we also boosted spending in internal marketing. We still had an overall increase in both market value and net income, by 58.6M and 22.6% respectively.
Although we had been experiencing continual growth in both market value and net income, our customer growth rate was still low, prompting the increase of budget allocation into each sectors referral program. The strategic manager purchased in period 4 had enhanced the effectiveness of spending in internal marketing and sales force, thus underpinning our decision to increase spending by 50K in each category. Other than the 1.759M distribution our second largest purchase was 800K on the Premium Service. We decided to invest in the service as 33% of our customers expressed interest in upgrading. This led to self-selection as customers change and differentiate themselves naturally overtime when new services are offered. Our previous addition of the loyalty and referral program had paid off resulting in a stronger customer base and general customer loyalty. Due to this confidence we decided to provide customers with a premium option which would also lead to higher revenue due to the larger profit margin.
The last round saw us combining all our prior learnings as we:
- Invested a further 4M in branding
- Boosted spending for the referral and loyalty program by 100K and
- Enhanced customer service by
Surprisingly this only saw only a minor 20% increase in net income and a 10.5M decrease in market valuation. We relied too heavily on past decisions and failed to keep in mind the 2nd and 3rd marketing principles Especially since the speed at which customers change and their expectations about firms' response time has increased due to technological developments. We learnt that by not taking into account the marketing principles our performance plateaued. If played again I would not rely so heavily on previous outcomes and used a more data driven approach.
Apart from the above this simulation also taught me the traditional organisational structures of leadership teams. Through the neat visual layout, we were able to easily see how our previous decisions effected revenue, sector sales, market valuation, market share, net income and customers and contracts. For future assessment tasks I would make stronger efforts to arrange more online conference calls to allow for more consistent communication.