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Capsim Simulation: The Marketing Module Promotion and Sales Budgets

Updated on March 27, 2013

Promo and Sales Budgets

At Georgian Court University, Lakewood, NJ in summer session 2012, there are six companies: Andrews, Baldwin, Chester, Digby, Eire and Ferris (Computer). The industry simulation is the sensor industry. The teams play six rounds in the simulation. The simulation modules are: research and development; marketing, production, finance and human resources.

The following lesson explains how to calculate the promotional and sales budgets within the Capsim simulation marketing module as described in the Capstone Team Member Guide 2012 on page 12.
Each company in the simulation must check The Capstone Courier’s Segment Analysis Report every round. In the segment analysis report from pages 5 through 9 we have the promotional budget which corresponds to customer awareness and we have the sales budget which corresponds to customer accessibility.
The promotion budget equals the level of awareness of customers. Each year one third (33%) of potential customers forget about a company's product. For example, let's take a snapshot of Erie company’s traditional product Eat at the end of the second round in the simulation. Eat has 66% customer awareness at the end of round two.

The following formula is used to calculate round three’s starting awareness.
Last year’s awareness (66%) minus [lost awareness (33%) times last year’s awareness (66%)] equals starting awareness. Thus the formula is: [66% - (33%*66%)] = 44.22%.
Therefore Erie’s starting awareness for Eat is 44.22%. Figure 4.2 on page 12 of the Capstone Team Member Guide 2012 shows that a promotion budget of $1,500,000 would add 36% customer awareness to product Eat in the traditional segment.
In the marketing module, team Erie would input $1,500 i.e. ($1,500,000) into Eat product’s promo budget. Thus we have starting awareness of 44.22% plus additional awareness of 36% equals new awareness of 80.22%: [44.22% + 36% = 80.22%]. Thefore new awareness for Eat will be 80.22% for round three.

Next within the marketing module we have the sales budget. The sales budget equals the level of segment accessibility. Accessibility means the percentage of customers that interact with your company through sales people, customer support services and delivery channels. Accessibility applies to a segment, not just a product. For instance Erie has product Eat in the traditional segment and product Ebb in the low end segment. Erie then changes the low end segment product Ebb in the research and development module by increasing performance and decreasing size to match the traditional segment product Eat. These changes move Ebb into the traditional segment’s fine cut criteria. Erie will now have two products in the traditional segment; Eat and Ebb. The sales budget for each product Eat and Ebb contributes to the traditional segment’s accessibility percentage.

When company Erie has only one product Eat in the traditional segment, there is no benefit for Erie to spend more than $3,000,000 on the sales budget. In the marketing module, Erie would input $3,000 i.e. $3,000,000 for product Eat's sales budget.

However, if Erie has two products in the traditional segment: Eat and Ebb; there is no additional benefit for Company Erie to spend more than $4,500,000 on the sales budget between the two products. In the marketing module sales budget cells for Eat and Ebb, we split the $4,500,000 maximum amount. Erie inputs $2,250 i.e. ($2,250,000) for Eat and inputs $2,250 i.e. ($2, 250,000) for Ebb.
Figure 4.3 on page 12 of the Capstone Team Member Guide 2012 displays a graph for the sales budget. Students should study Figure 4.3. It is almost impossible for a company to achieve a 100% accessibility rating. Erie would need both products Eat and Ebb in the traditional segment to attain a 100% accessibility rating. The next year, Erie may be able to scale back the sales budget for the two products in the traditional Segment to $3,500,000, once 100% accessibility is reached.

A final note: the Promotional Budget is spent on advertising and public relations which increases customer awareness. The Sales Budget is spent on distribution channels, order entry and customer service which increases customer accessibility. Each company must be aware of how much money competing companies are spending for their promotional and sales budgets.


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    • JamesCage profile image
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      JamesCage 11 months ago from New Jersey

      Yesmie,

      The promo and sales budget help to increase sales of products. You must keep the budget within a range. In the Capstone Guide, study the section on Sales Forecasting. When you do practice labs adjust your promotion and sales budget and check the outcomes. You are in competition with other companies, you need to check The Capstone Courier’s Segment Analysis Report every round. This is a simulation, a game, the only way to get good at it is to practice before you do the actual simulation. Your professor always provides practice rounds. Choose one of the six basic strategies and follow the one you prefer. To understand the simulation you need to read the Capstone Team Member Guide four or five times and complete a number of practice rounds.

      James

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      Yesmie 11 months ago

      I would like to know how promo budget and sales budget affect the sales of the company

    • JamesCage profile image
      Author

      JamesCage 2 years ago from New Jersey

      Andi,

      Thank you so much. Your kind words are greatly appreciated.

      James

    • profile image

      Andi 2 years ago

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