PharmaSim Marketing Simulation Introduction:

PharmaSim is a computer-assisted exercise that offers an interesting and different format to learn about marketing. The purpose of this exercise is to learn about marketing management and decision making in a dynamic environment win which you will make decisions over a ten-year period. It is my expectation that this exercise should accomplish several objectives. First, it should allow you plenty of experience in working with all of the concepts and tools that have been introduced in the course. Second, it should reinforce your understanding of how you need to shape your marketing decisions so that they are both internally and externally consistent. Third, it demonstrates, better than any lecture, the complexity of marketing management.

Each group will be in charge of Allround, a quite successful over-the-counter (OTC) cold medicine. You will be responsible for managing the brand for ten years and will have the opportunity to learn the results of your marketing decisions. Your goal is to (1) try to be as successful as possible at achieving whatever marketing goals you establish (e.g., market share, profits, stock price, consumer perceptions, distributor relationships); while (2) learning about marketing and the need to make decisions that make optimal use of available information and that are integrated within some logical strategy.

The PharmaSim textbook has four sections. Section 1 describes the case. Section 2 describes how to play the simulation, and the last half of the book describes all of the available information that can be accessed either free or for some fee. Note that all of the information examples in Section 2 apply to the first period, so you have all that information for free and should not pay to get the same information when you make your decisions for period one. Section 3 discusses strategy and tactics based on analyzing the information, and Section 4 provides several different tools useful in resource allocation issues.

Considerations When Working on the PharmaSim Exercise:

1. Each group starts at the same competitive position. However, because the game is self-contained, Allround’s competitors will react to your strategic decisions, and, thus, each simulation game will follow a different path.

2. Remember that each period is an entire year. Many things can and will happen during that year (e.g., inflation, consumer attitudes, changes in competitors’ actions and success, distribution results).

3. After Period 1, it’s a good idea to buy a lot of information. Assess each piece of information for how helpful it is or could be, how to use this information, and how often you should buy the information. If you buy the survey, remember that you can segment the data in many ways each time you buy the survey information. My recommendation is to err on buying too much information too often. However, it does cost money that is deducted from your budget and it is helpful if you use it in a rational manner.

4. It is important to decide on your strategy, using theories, hypotheses, rules of thumb, etc. You will determine your strategy prior to playing Period 1, and then review/modify the strategy prior to Period 4 and Period 7. You will need to adapt your marketing plan throughout the 10 periods, just like any business would have to. But, you also should put a lot of thinking into any modifications you make. So, adopt specific goals and monitor them to construct and flesh out a theory of what works and why.

5. For each period, keep track of not only what you did but also your rationale and what you concluded from the results.

6. It can be difficult to remember what type of product and what benefits are offered by your brand(s) and competitor brands. You may find it helpful to write this information out and keep it on a card or piece of paper so that you do not have to keep checking up on this as you ponder decisions.

7. This simulation is not meant to be an exercise in which you try a whole bunch of different things and finally optimize in a final run. You may replay a period, but the replay option is limited to no more than 3 times in a period or 10 times over 10 periods. If you use the replay option more than allowed, 10 points will be deducted from the total score of your simulation decisions.

8. You are given an annual marketing budget at the beginning of each period. The budget will change in subsequent years relative to performance, and any unspent budget is added to profits.

Performance Benchmarks

1. Monitor capacity utilization. The simulation game is automatically programmed so that if sales increase beyond production capacity, you will automatically add some fixed amount capacity that will more than cover sales. However, if you lose a lot of market share, capacity utilization will decrease, and if it drops to 75% or less, you will have a very difficult time recovering.

2. The market efficiency index is a measure of the return on marketing expenditures. It is calculated by dividing net income by the sum of advertising, sales force, and promotion expenses. It does not include promotional allowances. The marketing efficiency index should be Š2.

3. The trade rating should be 6.0.

4. Shelf space should be 1.

Mechanics of the Simulation Game

1. Installing the game: follow the instructions in the manual!! You can successfully run the game off the floppy disk or you can install the game on a hard drive and run it from the hard drive. Be aware that Pharmasim comes with its own install program, and does not use the Windows installation process under Add/Remove programs. Instead, double click “My Computer,” then the Floppy (A:), and the install.exe program on the disk to start the installation.

2. After you enter decisions for a period, you must advance to the next year to save your decisions! (Choose “advance to next year” in the file menu). After you have saved your decisions by advancing a year, print an administrator’s report for me--this summarizes the decisions you have just made. The simulation starts at Period 0--that is, you will enter you first decisions in Period 0, and then, when you advance to the next year and print the administrator’s report, the decisions will read Period 1. This can be confusing!!!! When you print the administrator’s report, print one to turn in to me and print one for group, too, because then you will have a printed record of your decisions. If you forget to do this, or lose the report, the print option allows you to print any year of the administrator’s report you want.

3. For each set of decisions, turn in the administrator’s report and the disk to me by class on the due date. I will copy your decisions onto my computer. Note: Someone from each group will need to pick up the disk in order to enter your next set of decisions. If possible, turn in your disk earlier than class on the due date, and I will be able to give it back to you in class.

4. If you run the game off of a hard drive, you must back-up files onto your floppy disk to record your decisions before you turn your disk into me!!! If you don’t do this, I will get an error message telling me that the database cannot be found when I try to load your data into my computer. If you play the game off the floppy disk, this will not be a problem.

5. Make a back-up copy of your disk before you start the game, in case the original disk becomes damaged. It’s a good idea to have another copy on which you back-up the game as you play it, also.