Awareness and Accessibility are indeed crucial for creating a more competitive product. Many students tend to make rough estimates of the amounts to be allocated to promotion and sales budgets. However, Capsim provides all the necessary information for making precise decisions. It’s important to leverage this data to optimize our promotional and sales strategies, ensuring that we invest the right amounts to maximize product visibility and availability to our target market. By doing so, we can make informed decisions that are not just based on estimates but on strategic analysis, which can significantly improve our product’s market performance.
Awareness
First let read the information provided by Capsim, Quote:
“Promotion budget this year (in thousands). Promotion drives customer Awareness. The more customers that are aware of your product, the more likely they will choose your product. You can think of Promotion as driving all interactions with customers before they begin to actively shop. Awareness decays over time. You lose about 1/3rd each year as customers forget the product. If your product had 60% Awareness last year, this year it would fall to 40% if you spent $0 to promote the product. Promotion efforts are subject to diminishing returns. Your first $1M increases awareness about 22%. The second million adds another 23%, and the third million only another 5%. Here are two examples. Suppose you had 60% Awareness last year. One third will be lost, leaving 40% of customers aware of your product. If you spent $1M, you would end the year with 62%. A $2M budget would yield 85% Awareness, and $3M would yield 89%. Suppose you attained 100% Awareness last year. This will decay by 33% to 67%. Replacing the loss would cost about $1.4M.”
Base on this information we can summarize three points, (1, 0.22) (2, 0.45) (3, 0.5), If we drag this three-point and look for a line across all these three-point, with a domain of (0,∞) and range of (0,3) we will end with a function of y=-9x^2+50x-19
Figure 1, Graph of “y=-9x^2+50x-19”
Figure 2, Spending in million and % of awareness gain each round
Accessibility
Similar idea, quote from Capsim:
“Sales budget this year (in thousands). Sales budget drives Accessibility. Accessibility examines the question, “How easy is it for customers in the segment to interact with your company during and after the sale?” It measures distribution channels, sales force, shelf space, order entry systems, customer support, etc. The easier it is to interact with your company, the more likely it is customers will choose your products. A 60% Accessibility rating means that 60% of customers find it easy to work with you and 40% do not. Put simply, if you and a competitor offer identical products, you are more likely to win the sale if your Accessibility is higher than your competitors. Accessibility is a segment issue. Products within the segment are assigned the segment’s accessibility. Products in the rough cuts are pro-rated. Diminishing returns apply. If you have one product in a segment there is no additional benefit for spending more than $3M. If you have two or more products in a segment, there is no additional benefit for spending more than a combined $4.5M. Accessibility decays over time. You lose about 1/3rd each year. A $1M sales budget (combined across all products in the segment) adds 7%, $2M adds 22%, $3M adds 32%, and $4.5M adds 35%. For example, suppose you had 60% Accessibility in a segment last year. One third will be lost, leaving 40% of your customers happy with their interactions with you. You offer two products in the segment. If your combined Sales Budgets are $2M (say $1M each), you would end the year with 62% Accessibility. A combined $3M would attain 72% and $4.5M would attain 75%.”
Base on this information we can summarize three points, (1, 0.07) (2, 0.22) (3, 0.32), If we drag this three-point and look for a line across all these three-point, with a domain of (0,∞) and range of (0,3) we will end with a function of y= -2.5* x^2 + 22.5*x-13
Figure 3, Graph of “y= -2.5* x^2 + 22.5*x-13”
Figure 4, Spending in million and % of accessibly gain each round.