Marketing and Financial Analysis of Simulation Games Industry
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In the recent past, simulation games have gained popularity with professionals and learning institutions. As such, there has been a widespread development of simulation games in a variety of subjects. One of the fields where the use of simulation games is quite popular is retail marketing. According to Faria (2008), simulation game models are widely applied both in the learning and professional setup.
As such, the retail marketing simulation game is an important tool in marketing as it offers professionals and students a risk-free platform to test their strategies and make decisions (Martilla & James 2011). This paper will analyse marketing and financial performance based on the retail marketing simulation game and provides recommendations on improving the marketing and financial performance.
According to Léger (2013) in the modern complex and risky markets where the strategies applied to determine the success or failure of the business, the use of simulation games has become a part of the decision making. Therefore, understanding the results of the retail marketing simulation analysis is crucial in identifying and choosing appropriate strategies to be implemented to improve performance. The failure to critically analyze the simulation results could lead to the adoption of wrong strategies and the failure of the business.
Marketing performance analysis can be conducted through the use of the marketing performance management (MPM) tool. MPM refers to efficient management of the marketing processes and resources with the aim of achieving efficiency and quantifiable gains on ROI, while ensuring quality customer experience. Marketing performance management is the cornerstone of marketing operations, and it relies on focused outcomes, a set of measurable standards of performance, and accountability (Martilla & James 2011).
Furthermore, Martilla and James (2011) argue that marketing performance management plays a crucial role in ensuring marketing objectives are met. The marketing performance concept can be applied in retail marketing to ascertain the ability of the retail stores to achieve their marketing objective. Retail marketing refers to the marketing process relied upon by the retailers to create awareness, interest and drive their products and services sales.
According to Sullian and Adcock (2002), retail marketing plays an important role in increasing business sales and increasing the rate of customer conversation. They further argue that the objectives of retail marketing are to increase revenue, influence sales, reduce customer acquisition costs and increase the organisation’s market share.
As such, marketing performance in retail marketing can be analyzed using the following techniques;
Comparing the Marketing Efforts Against the Sales
Marketing efforts ought to have a direct impact on the sales increase if the strategies used are appropriate. As such, when analyzing the marketing performance the first indicator to consider is the marketing activities and campaigns influence on the sales. Therefore, marketing attribution is essential in helping to track the marketing activities or campaigns which led customer behavior to purchase the products. The failure of the marketing effort to result in increased sales volume would be an indication that the marketing strategies adopted were a failure and need to be revised (Armstrong and Brennan p.64 2010).
Transaction Value and Quantity
According to Cravens and Piercy (p.32 2006), the objective of the marketing strategy is not only to attract customers but also to ensure that buyers spend more money and purchase more items. As such, when analyzing the marketing performance of retail marketing, it is essential to track the number of purchased items and the average value per transaction. Therefore, it is important to keep an eye on the average number of products purchased and the number of customers visiting the stores influenced by marketing activities to ascertain their impact.
Customer Acquisition Cost
In the retail market, the customer acquisition cost depends on the market competitiveness, brand equity, and the period of the year. The customer acquisition cost is influenced by many factors among them the effectiveness of its marketing strategies. The adoption of proper marketing strategies ought to have the effect of reducing the customer acquisition cost.
Often marketing efforts are considered as a cost center hence the need to ensure marketing strategies not only attract customers but also reduce the cost of acquiring those customers (Thomas & Kumar 2015). As such, when evaluating the marketing performance, it is essential to keep track of the decrease in the customer acquisition cost. Therefore, marketing needs to prove that it not only increases sales but also reduces business costs.
Rayburn and Rayburn (2012) one of the objectives of marketing is to increase the business market share. Therefore, the marketing performance of a firm could be evaluated based on its effect on the market share. Ordinarily, effective marketing strategies are expected to increase a firm’s market share. As such, if the marketing strategies do not result in an increase in the market share, such strategies would be considered to have failed. Market share refers to the portion of the target market that is influenced and controlled by the firm’s operations.
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According to Burt (2009), marketing is an integral part of any business and it is quite difficult for a business to achieve its goals without the presence of strong marketing. As such, marketing plays a crucial role in influencing organisations’ future growth especially in the retailing sector which is characterized by intense competition. As such, marketing can make a huge difference between the failure of a business and its success. Therefore, improving marketing performance is crucial to the success of an organization. There are various concepts employed by marketers to improve marketing performance. Some of the strategies include;
According to Davis, Guiltinan, and Jones (2009), the understanding of the service characteristics and their influence on the product or service helps the management in deciding what strategies to use to promote a product or service. Therefore, service characteristics play a significant role in the packaging and delivery of a service to the target market. The main characteristics of service include perishability, pricing of service, inseparability, intangibility, heterogeneity, fluctuating demand, and service of quality is not measurable.
Market segmentation refers to the act of dividing the market into different segments based on customer needs and preferences. Market segmentation can be based on geographic, behavioral, demographic, and psychographic factors. Market segmentation helps a business to appropriately use target marketing strategies to increase sales and conversion rates.
Additionally, market segmentation allows a business to concentrate on a particular target market which enables the business to meet the needs and wants of the customer. Market segmentation is important, especially where the business has a variety of products that target a different group of consumers. In such a case, market segmentation helps a business to maximize the potential of a segment by directing the right strategies to a particular segment (Frank & Massy 2012).
Enhancing Physical Environment
Research indicates that the physical environment within which the product or service is offered plays a crucial role in influencing the customers’ buyer behavior. As such, it is important for the business to enhance the physical environment of its operations. Thus, marketing managers need to understand the Servicescape model when designing the business physical environment.
The Servicescape model emphasizes the effects of the business psychical environment on the consumers’ behavior with the objective of designing an environment that will help a business to accomplish its objectives in achieving a specific desired behavior. Therefore, it is important to ensure that the physical environment of the business is in line with the consumers’ behavior, so as to achieve the objectives of the servicescape model (Reimer & Kuehn 2005).
Building Strong Customer Relationships
According to Barnes (2014), one of the factors that influence consumers to either buy or not to buy a product is their relationship with the company. As such, building a strong customer relationship with the target market is crucial if the business is to convert customer visits into actual sales and thus increase its overall sales. There are various strategies that a business could use to build strong customer relationships, such as improving customer care services, understanding the customer needs and wants, appreciating customer feedback, taking actions on customer complaints, and staying in regular contact with the customers.
One of the key elements of business success is the quality of service. Therefore, it is essential for the business to improve its service of quality as a means of enhancing customer satisfaction and retention. Customer satisfaction plays a crucial role in customer retention which is necessary for creating more sales. The failure of the business to retain its customers could result in a reduction in sales.
A business can improve its quality of service through motivating employees, employee training programs, taking account of customers’ feedback, and enhancing service delivery through increased efficiency. Improving the quality of service helps create a strong brand and also enhances customer satisfaction. Therefore, much of the effort of the business need to be directed to improving the quality of services offered (Oh 2009).
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Financial Performance Analysis
According to Higgins and Reimers (2013), financial performance analysis helps understand the financial position of the business and its liquidity. The financial performance analysis involves the interpretation and evaluation of the organisation’s financial statements with the objective of undertaking a full diagnosis of its profitability as well as its financial soundness. Financial performance analysis can be conducted through the use of proportions analysis like ratios or trends like changes in cash, net profit, debt, accounts receivable, gross margin, and revenues.
Financial performance analysis can be conducted using two main techniques which are horizontal and vertical analysis, and the use of ratios. The horizontal analysis involves comparing financial information over a series of financial reporting periods like months or years, while vertical analysis involves proportional evaluation of the financial statements usually used in a single period. The other techniques involve using different ratios to analyze financial performance by comparing the current period ratio with the previous period ratio.
The total sales revenue comprises the revenue generated from the sales of all the products and services of the company during a particular month. For example, the total sales for the month of Green the total sales revenue were 1,824,931. Using the month of Green as the base period, the total sales revenue has increased slightly throughout the first nine months of the year while the total sales revenue for the last three months dropped significantly.
The sales reduction during the last three months could be associated with poor marketing strategies or other factors like changes in consumer disposable income. However, it is important to conduct a survey to ascertain the specific causes of sales decline in the last three months.
According to Bernstein and Wild (2011), current assets are the most liquid assets of the business because they can easily be converted to cash. As such, current assets are used to pay off the current liabilities. As such, the current assets of the company should be more than its current liabilities otherwise the company will have liquidity problems. As such, the more the current assets compared to the current liabilities the more liquid is a company.
The simulation game results indicate an increasing trend throughout the year except for the month of Athena and Brown when the total assets are lower than that of the month of Green which is the base period. Additionally, the assets are more than the liabilities except in the month of Brown when the liabilities are more than the recorded current assets. Therefore, the company could be faced with liquidity problems if the trend continues to the following year.
The process of improving the financial performance of the business involves identifying the crucial financial components that are controllable and then implementing appropriate strategies to achieve the desired goals (Neely 2010). Some of the strategies that can be recommended to improve financial performance include the following;
Strong Internal Control System
According to Merchant (2013), establishing a strong internal control system is crucial in minimizing wastage and safeguarding resources. As such, a business needs to establish a strong internal control system with the aim of minimizing wastage through unnecessary expenditures and ensuring accountability in the use of resources. Research indicates that some debts could have been avoided by businesses if proper controls were established to avoid misuse of resources. There a strong control system could help enhance the organisation’s financial performance.
Establishing Budgetary Controls
Briers and Hirst (2011) argue that establishing budgetary controls ensures that the developed budgets are meaningful and realistic. Also, a budget can be used to drive profitability and pricing. Additionally, budgetary controls ensure proper allocation of resources, efficient use of resources as well as ensuring resources are used for the intended purpose thus minimizing misappropriation and wastage of resources.
The computerization of business processes and systems helps tighten the loopholes that could contribute to the wastage of financial resources. Also, the computerization of processes and systems increases effectiveness and promotes efficiency in the business (Shin 2014). For example, computerization could enhance the collection of receivables. Additionally, Shin (2014) argues that computerizing business processes increases customer satisfaction thus resulting in increased sales. As such, computerization in an organization would play a significant role in enhancing financial performance.
According to Cleverley (2015), the ratio of sales revenue to cost has a strong implication on the financial performance of the business. Therefore, to improve a business’s financial performance, a business needs to implement strategies that increase sales revenue. In most cases, when a business is faced with financial constraints it’s likely that its marketing strategies are not effective. As such, a business needs to adopt new marketing strategies with the objective of increasing the sales and the overall financial performance of the business.
A retail marketing simulation game is crucial for the marketing professional and students at it helps them try their strategies in a risk-free environment. The retail market is a market that is characterized by intense competition. Therefore, conducting a marketing and financial performance analysis is necessary for ascertaining if the marketing objectives are being met and the financial position of the business. The process of conducting the analysis could be risky to the business because if wrong strategies are adopted, it could lead to the loss of business market share and reduced profitability. As such, there is not a better way of initially trying out the strategies than using a marketing simulation game that is risk-free.
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