Stephanie Walker

MGT 599
SLP 2
Clipboard Tablet Report
Dr. Banks
August 16, 2015

Introduction
According to the income statement for 2011, the company’s profitability is about 16 percent and is largely contributed by X5 and X6 brands while X7 was introduced into the market at the beginning of 2011. The market saturation of X5 is 15 percent while that of X6 is 8 percent implying that both brands have not covered a significant market. On the other hand, X7 is relatively new in the market with a market saturation of 2 percent. The repeat customers of X5 and X6 are relatively low at 86, 250 and 46, 983 as compared to the total sales of 968,979 and 562,961 respectively. Since the customers of X5 are not worried much about the performance of the brand, the company should minimize its R&D allocation as it cannot bring out significant impact on the sales volumes and profitability (V.T., 2015). The customers of X6 are concerned about the performance of the brand and not the price and this implies that the company should increase R&D allocation to enhance its performance. Consequently, the company can increase the price of X6. For X7, customers are worried about its price and performance and hence the company should allocate sufficient resources for R&D and ensure a good penetration price (Mehdi, 2008).
Product Information
Based on this information, it is proposed that the R&D for X5, X6 and X7 should be adjusted from 33%, 34% and 33% to 10%, 47% and 43% respectively. The prices of the three products should also be adjusted from $285, $430 and $190 to $250, $500 and $130 for X5, X6 and X7 respectively. At the end of the year 2012, it is evident that X6 brand is in the growth phase of the product life cycle and majority of the target customers are yet to purchase the product. The profitability of the company has increased from 16% to 28% after making the adjustments. The profitability of X5 and X6 increased from 16% to 29% and 33% respectively. However, X7 recorded a loss of 35% at the end of the year 2012. The adjustments also resulted in an increase of market saturation from 15% to 27% for X5 and 8% to 16% for X6. The number of repeat customers increased for the three brands indicating that they are performing well in the market. The only worry is on X7 that its market remains stagnant at 2% after making the adjustments. This implies that most of the potential customers are not yet sure about the quality of the brand before making the purchase.
Growth Performance Feedback
Considering the performance of the three brands in 2012, it is important to make further adjustments in 2013 to enhance the financial performance of the company. From the Advisor’s message, X6 is the most favored brand as it is in the growth stage. To boost its performance, the amount of R&D allocated to the brand should be increased while maintaining its price constant. On the other hand, the X5 customers are not concerned about its quality and hence some of its R&D should be allocated to X6. Based on this analysis, it is proposed that the R&D for X5 should be reduced to 5% while that of X6 is increased to 52%. Both X5 and X7 are performing favorably and hence their prices should be retained. All the other parameters are maintained at their respective values. After running the simulation, the performance of the three products remained steady. The market saturation of X5 increased from 27% to 66%. The repeat sales of X5 more than doubled but first time customers declined indicating that the X5 brand has reached the shakeout phase of the product lifecycle. On the contrary, X6 and X7 recorded an increase in both new and return customers implying that the two brands are on the growth stage. The total profits of the company increased from 28% to 32% with X6 contributing the largest profit margin. The profits of X5 remained stagnant at 29% while that of X6 and X7 increased from 33% and -35% to 38% and 16% respectively. It should be noted that X7 achieved the breakeven point during this period and hence it is likely to perform better in the coming years as both the other brands move closer to reaching the end of their lifecycle.
Market Revenue Feedback
At the beginning of 2014, X6 and X7 brands are likely to contribute the largest revenues as they were in the growth phase in 2013. Since performance is paramount for both X6 and X7, the company should retain high allocations to R&D for the two products. The R&D allocation for X5 should be maintained relatively low because it is has reached the maturity stage and its customers are not concerned about the performance of the brand. The performance of X6 is appealing and since customers are not concerned about its price, the company should consider increasing it slightly to cover for any revenue losses arising from X5 which has reached the shakeout phase. Based on this data, the price of X5 and X7 should be retained at $250 and $130 respectively while that of X6 is increased to $550. The R&D allocation should be retained the same as the previous year. At the end of the year 2014, the overall profit of the company increased from 32 percent to 35 percent. The profits of X6 and X7 increased from 38 percent and 16 percent to 43 percent and 39 percent respectively. However, the profits of X5 declined from 29 percent to -18 percent implying that the company should consider discontinuing R&D allocated to the product as it has reached the end of its lifecycle. All the customers of X5 at the end of the year 2014 were repeat customers. For X6, the product has reached the shakeout stage as the number of first time customers decreased while repeat customers increased. The market saturation of X6 also increased from 28 percent to 47 percent and this indicates that X6 still has a huge market. X7 is the best performer at the end of the year 2014 as both the number of first time customers and repeat sales more than doubled. The market saturation of X7 also increased from 4 percent to 9 percent and this implies that X7 has the largest untapped market as compared to the other brands.
Brand Performance
The performance of the three brands at the end of 2014 show significant changes should be introduced by the company. The key concern is the performance of X5 which is already causing losses to the company. The company should stop any R&D allocations to X5 and focus on the other two brands. There is a high probability that the decision to increase the cost of X6 to $550 may the cause of decline in sales. The company should consider reducing the cost of X6 to boost its performance because it is the largest revenue contributor. X7 is performing well and hence its price should be retained at $130 to encourage more customers to purchase the brand. In R&D, the company should allocate a significant amount to X7 because it is likely to be the major revenue contributor if the company improves its performance. Based on this information, the price of X6 should be decreased to $450. The R&D allocation of X6 should be reduced to 40 percent while that of X7 is increased to 60 percent. The financial performance of the company at the end of the year 2015 indicates that the profitability of the company increased from 35 percent to 36 percent. The profitability of X6 reduced from 43 percent to 35 percent while that of X7 increased from 39 percent to 49 percent. The market saturation of X6 increased from 47 percent to 64 percent while that of X7 increased from 9 percent to 19 percent. The number of new customers and repeat customers of X7 more than doubled. The number of repeat sales for X6 tripled while new customers increased slightly by about 50 percent. It should be noted that X6 still contributes the largest profit margins for the company.
Overall Assessment
Comparing the performance of the revised strategy to that of Mr. Joe, the new strategy works out very well. The cumulative score of the revised strategy is 2,000,328,665 as compared to that of Mr. Joe that was 1,513,237,527. In terms of profits, the revised strategy resulted in $652 million (39 percent increase in profitability) as compared to $194 million (23 percent increase in profitability) amassed by Mr. Joe. The different results obtained in the two scenarios can be attributed to a number of factors. Basically, a decrease in price requires an increase in price or sales volumes to realize the desired outcomes (Carlos, 2014). At the end of the year 2012, it is clear that the company can maximize revenues and profits from X6 with X7 promising to be a potential revenue contributor based on the market data. Since X6 is the key revenue contributor and customers are concerned about its performance, it was wrong for Mr. Joe to maintain low R&D allocations for the brand. At the end of 2013, X5 reaches shakeout and it is necessary for the company to consider strengthening other brands in preparation for the exit of X5. Failure to take such measures resulted in Mr. Joe performing poorly. Another key factor for the good performance is the pricing strategy. The pricing strategy is often affected by the cost, price sensitivity of customers, competition and the product lifecycle (Lindsey, 2014). By balancing the factors based on market saturation and performance of each product, the company can record a better result. Such basic decisions are the major reason why the revised strategy resulted in a better performance.

Conclusion
Strategy in all aspects of the company’s operation is important. Historical and present data play a complex role in determining the direction an organization should go to improve operations and generate revenue to stay competitive. Organizations should use a pricing strategy that is unique to their company and most of all appealing to customers. Today, consumers are more aggressive when it comes to pricing, they research, compare and contrast to other companies- exploiting those that are not financially beneficial. Based on the economic situation, customers are always looking for discounts without compromising quality, “Discount pricing remains the most popular pricing strategy among retailers, a new study shows, although product bundling and “belowcompetition”pricing are employed nearly as frequently” (Wolf, 2015). It’s obvious that Clipboard Tablet will have to take strategically plan their pricing strategies that is efficient to run operations and satisfy consumer demands while maintaining quality integrity and competitiveness.

References
Carlos, L. M. (2014). How to price a product or service competitively: Marketing tips on product pricing to teach you the best pricing strategies so you know how to set prices for your products and services to be at par with the competition. KMS Publishing.
Lindsey, C. (2014). Pricing your product & service perfectly. Brain Food.
Mehdi, Z. (2008). Pricing challenges in global marketing: A model for export pricing. International Journal of Management Perspectives, 19-34.
V.T. (2015). Product pricing wizard.
Wolf, A. (2015). Discounting Remains Most Popular Pricing Strategy: Report. TWICE: This Week In Consumer Electronics, 30(5), 16
Appendix

Figure 1: Revenue from the three brands over the four-year period

Figure 2: Profits from the three brands over the four-year period

Figure 3: Sales of the three brands over the four-year period

Figure 2. Performance of the three brands over the four-year period
Pricing & R&D Allocations
2012 2013 2014 2015
X5 Price $250 Price $250 Price $250 Price $250
R&D 10% R&D 5% R&D 5% R&D 0%
Discontinue? No Discontinue? No Discontinue? No Discontinue? No
X6 Price $500 Price $500 Price $550 Price $450
R&D 47% R&D 52% R&D 52% R&D 40%
Discontinue? No Discontinue? No Discontinue? No Discontinue? No
X7 Price $130 Price $130 Price $130 Price $130
R&D 43% R&D 43% R&D 43% R&D 60%
Discontinue? No Discontinue? No Discontinue? No Discontinue? No
Table 1: Year by Year Decisions

Table 2. Income statement at the end of the year 2015

Table 3. Market report for X5 at the end of year 2015

Table 4. Market report for X6 at the end of year 2015

Table 5. Market report for X7 at the end of year 2015

Table 6. Income statement of X5 at the end of 2015

Table 7. Income statement of X6 at the end of 2015

Table 8. Income statement of X7 at the end of 2015

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