Being evaluated on shareholder wealth is significantly different from evaluation based on net profit, market share, or earnings per share.
You should aim to:
Maximize net profit
Minimize shareholder investment
Minimize risk (associated with high levels of debt)
Due to these multiple objectives, a small niche marketer consistently earning good margins and without much debt may outperform a large heavily-indebted firm with earnings several times greater.
Firms will need to carefully consider these objectives when developing their overall strategy, their marketing, operational and financial plans. Simply increasing in size will not necessarily lead to an increase in shareholder value. You should only invest money (for example in new plant, new product development, or on factory improvements) if you believe that the return on these investments will be greater than what shareholders could achieve elsewhere at the same level of risk (e.g. shareholders can earn returns of 8% by investing in a term deposit). If not, you should instead consider repaying debt, paying a dividend, or repurchasing issued shares.
Devon Palmer (pictured above), a student of Professor Harold Lowe from Nova Scotia Community College has previously used our MikesBikes Introduction simulation in his Business course. Upon completion, he was asked by Professor Lowe to also trial both Music2Go Marketing and AdSim Advertising simulations for his work placement.
The review below is written by Devon. He shares his point of view on the AdSim Advertising simulation and some advice on how to do well in the simulation. He also created a few videos on both Music2Go and AdSim business simulations, which you can watch at the end of his review.
“AdSim is a computer-based Advertising Simulation of the Digital Camera division of a Consumer Electronics Corporation. You get the opportunity to experience and understand many of the key decision required to plan and implement an Integrated Marketing Communications (IMC) Plan.
AdSim will give you the opportunity to have practical hands on experience at making critical advertising decisions and seeing the outcome in a live, interactive case study.”
The goal of the AdSim simulation is to maximize your Cumulative Net Marketing Contribution.
How do you do this?
The first step is renaming your firm. This is available to you both in Single-Player as well as Multi-Player. Being able to make this decision gives the simulation a personal feel, rather than just being “Company #12452”. Your two market segments that you get to advertise and sell your product to are the Existing and New markets. Unlike other simulations that allow you to have multiple products in multiple market segments, AdSim only has the one camera that goes into the two segments.
As this is the advertising simulation, your main contribution is the Advertising Plan. Your main goal is to set your advertising budget and allocate it among the five areas; TV, Radio, Magazines, Newspapers, and Interactive Digital Media. While other simulations, like MikesBikes or Music2Go, also give you this option, AdSim goes a step further allowing you to allocate within those five areas. This is more in-depth and a great addition, especially for an advertising class.
Within the TV advertising you may allocate to four segments, Network TV, National TV, Local Spot TV, and Cable TV. Even further, you can allocate your budget into the Network TV segment into six more segments. These range from Early Morning to Late Fringe times of day.
Newspapers have four segments as well, which include, General, Business, Tabloid, and Sunday.
You can also further allocate within the General segment to five geographical regions such as North and South East, North and South West, and Central.
Magazines have five categories that you can advertise in, Women’s Lifestyle, Men’s Lifestyle, Entertainment, Family, and News.
The Women’s and Men’s Lifestyle choice further breaks down into four more choices based on the age of the customer. These are, Youth 12-17, Adults 18-34, Adults 35-55, and Adults 55+.
Radio gives you six station formats to choose from, these are, Contemporary Hit Radio, Urban, Country, Rock, Adult Contemporary, and Newstalk.
The Country Station gives you the option of allocating your budget between the five geographical regions.
The Adult Contemporary Stations allocated between various peak listening times ranging from Morning Drive to Nighttime.
Finally, the Interactive segment is new and unknown in this simulation. It gives you two choices of allocation, Direct Mail and Internet. They recommend experimenting within this segment to see how effective it is.
After doing multiple simulations and seeing how the advertising plan selections work, I find that AdSim does it best out of all other Smartsims simulations I have used. The option to further allocate my budget into different areas is a great choice and would greatly benefit any other simulation. It is also very easy to use and understand as you just need to make sure your “pie-chart” equals 100%. Reading the reports for Chapter 2 of the Player’s Manual will put you in the right direction on how to effectively use each segment to their absolute best.
Another part of the AdSim simulation is the Agency Selection. Here you decide on either trusting yourself to choose your media selections in a custom plan. This is a high-risk, high-reward option in my opinion. As you may select the right numbers in the right segments, but if you don’t do that it can be disastrous. I recommend only using a Internal Plan if you do the research beforehand. The other three options for your agency include TV Magic, Print Works, and Radio Can. These have their obvious strengths in one area, or two in the case for Print Works, but are still better than the default plans for each segment. I recommend picking one of these three agencies as they will give you good results when used correctly.
This is where you pick how you want your digital camera to appear on the market, as well as who you want to target. You have four decisions to make in each of the four categories, Target, Benefit, Proof, and Personality.
To make these decisions all you have to do is click the one you want and then click “Apply.” Target is who you are targeting to sell your camera to – Professional, Amateur, Recreational, or Family. Then you select the Benefit of your camera, Simplicity, Small Size, Picture Quality, or Feature Packed. After selecting your Benefit, you will need to select the Proof, which are, Lens, Focus, Digital Chip, or Direct Printing. The final message you will convey to your customers is the Personality of your camera. The options include Simple and Reliable, Fun and Exciting, Precise and Efficient, or Thoughtful and Nostalgic.
There are reports you can read that give you an insight on which choices to make to maximize in your desired market. Like the other choices you are able to make, these are extremely easy to make and understand as its just a simple click to decide.
Customer Relationships is another feature made available during the simulation. The options for these screens are: CRM System, Warranty, Support, and Loyalty. When choosing your CRM System, you are given four options, to not have one at all, an Entry-Level, a Mid-Level, or a Custom system. These decisions require a bit more research than others, but by reading the chapter section about CRM, as well as the reports about it, will help you in making your CRM, if you choose to have one.
The Warranty selection give you the choice of what kind of warranty you’d like to offer to your customers: 90 days, 180 days, 1 year, or 2 years. Support is how your customers will go about fixing any issues with the product. This is offered by a manual, a website tool, an email helpdesk, or a telephone helpdesk. The last option is the Loyalty program. You can choose not to have one, having a regular newsletter, a regular photo contest, or offering a Photo School. Information on making these decisions are available in various market research reports.
Later in the simulation, you will be given the opportunity to make the Marketing Communications decisions. This gives you the option of four choices, Sales Promotions, Trade Promotions, Sponsorships, and Public Relations.
Sales Promotions give the customer something a little extra when purchasing your product over the competitors, for example a bonus memory card. Trade Promotions are similar to Sales Promotions but give benefits to a Retailer instead. Sponsorships are a way to boost exposure for your product at a specific event. Public Relations is hiring PR consultants to attempt to promote towards journalist interest into writing reviews about your product. Again, there are reports you can read to give insight into which options to choose and when choosing the options, they are straightforward and simple to make.
Market Research reports are available to purchase every year, with new and updated reports available every year. The price of these reports vary from $25,000 to $50,000 and can give you very valuable information that can help you win. Some reports are more important to buy than others, while some are not worth buying at all, so make sure you know what you’re looking for before purchasing.
I feel the price for these reports are very worth it, especially if you were to purchase a report you didn’t need or felt didn’t give you the right information. There are reports that the Player’s Manual recommends purchasing, and I completely agree as the information that is given is highly useful in dominating the market, especially early on.
In conclusion, I highly recommend the AdSim simulation by Smartsims for any class or business looking for business simulations that have a focus on Advertising. It gives you the right amount of content where it feels complete and spreads it out evenly throughout the rollovers.
For me personally, my class at NSCC Pictou would have greatly appreciated using this simulation during our first semester in our second year, as we had both an Advertising class as well as a Market Research class. It would have fit perfectly in our schedule as well as setting us up for our final semester where we challenged our Management counterparts to the MikesBikes simulation.
I give this simulation a 9.5/10 and again, highly recommend it to any classes or business that would like to use a business simulation to teach the fundamentals of advertising and its affect on the business.
Here are the videos that Devon created for both AdSim and Music2Go:
There are some real benefits from this short-term and intense competition between our teams. We do not have time to get complacent, we are doing two rollovers a week now and constantly have to be reevaluating and making new decisions. We are also establishing the brand for our company through our strategic focus.
This game makes us become self-aware of what we do not understand and need to review so we can be more successful in the next round. What changes we make in one area and how they may impact another area positively or negatively.
Each of us are also discovering our strengths within our teams and what we can focus on that sets our company apart. We are also learning how to better evaluate our competitors and analyze what data we can see from the other teams. This helps us make calculated decisions based on what we think their next move may be and plan accordingly.
We are also learning to plan far ahead to anticipate growth and expansion, not just focus on the rollover within the next few days. Another business mainstay we are strengthening is to always focus on what our customers need and want (Kittaneh, 2015).
We are lucky within this game because we get a lot of helpful data in this area, but our teams have to constantly look at where our bikes fall on the perceptual maps.