Using simulations in marketing to integrate learning
-Lynn Vos
(The photo above is from Stratx, developer of the simulation Markstrat. For more informtion on this simulation please go to: https://web.stratxsimulations.com/simulation/strategic-marketing-simulation)
This post draws on my experiences of using simulations in marketing at both undergrad and postgraduate levels. It is based upon two articles: · Vos, L. (2015). Simulation games in business and marketing: How educators assess their students. International Journal of Management Education, 13(1): 57-74. and Vos, L. (2014). Marketing Simulation Games: A review of issues in teaching and learning. The Marketing Review, 14(1): 67-96.
Marketing simulation games give student teams the opportunity to manage a product line, department or small company, to make strategic and operational decisions that are measured against performance indicators and to compete with other teams in the class or elsewhere to become industry leader or achieve the highest profitability or market share. They are fun, engaging and create a great deal of excitement in the classroom. Moreover, they are perhaps one of the best ways to integrate student learning from across their degree programme.
I have been using simulation games in marketing for the past 20 years. I have also conducted research, run national seminars on their value as educational tools, advised on their development and looked at how other academics use them effectively in the classroom. Aside from their being a fun and active learning tool, simulations have a vast array of educational benefits. In this post, I will look at these benefits, consider different types of marketing simulation games, look at the range of learning opportunities and learning outcomes that games offer, and consider how, in many ways, they are the perfect course assessment tool.
EDUCATIONAL BENEFITS
Simulations have a range of educational benefits. They allow students to:
• see how business functional areas are integrated;
• engage in an active and experiential learning activity that gives them decision-making experience in a dynamic and interactive environment;
• experience the competitive and uncertain landscape faced by real world businesses, but in a low risk environment;
• integrate theory learned in other contexts into simulated practice so they gain a better understanding of marketing concepts and marketing theories;
• develop skills valued in the workplace, including team working, organisational, and time management skills;
• get quick feedback on the consequences of their decisions supported with a broad assortment of market and financial performance data;
• take part in an activity that most find enjoyable, thus helping to build engagement with learning; and
• work with and interpret numeric and financial data, thus gaining a better understanding of how marketing performance is measured.
This represents a pretty impressive list of outcomes for a single educational learning approach and over the years, I have seen students enjoy the competitive nature of the game and their growing desire to improve their performance based on the weekly feedback and results they achieve.
TYPES OF GAMES: Games can be divided into three categories:
• Introductory games
• Strategic level games
• Specialist games
Introductory games are designed for introduction to, or principles of, marketing courses, either for students on specialist marketing programmes or for those who are taking marketing for the first time as part of a business or other degree. These games are likely to have a smaller number of decision areas than strategic level games and are more focussed on marketing concepts and operational decisions than on integrating a range of decisions across functional areas of a business. Introductory games often measure participant performance in terms of market share and profitability or contribution. A good example of an introductory game is ‘MyMarketingExperience’ by Pearson.
Strategic level games are designed for those in higher level marketing courses who have already received a foundation in marketing and other business subjects. Games at this level include both operational and strategic decisions; involve decisions related to other functional areas of a business such as production, finance, and human resources; and provide a much larger selection of market, financial and competitor information for students to work with. They also include more performance indicators and numerical data for students to interpret and to measure their decisions against. Examples of strategic level games are ‘Cesim Simbrand’ and ‘Markstrat’ by StratX.
Specialist games focus on aspects of marketing decision-making such as advertising, digital marketing, pricing, brand management, positioning or in an alternative decision-making context such as B2B, services, digital or international marketing. Like the strategic level games, many are more cross-functional, have a greater number of decision areas, and include additional performance indicators. Links B2B Marketing Simulation, Mars Sales Simulation, Simbound and Simventure entrepreneurship game are just some examples.
Games are for the most part online and available in different digital formats, such as tablets and mobile phones. With online games, students can join the simulation from any location at a time convenient to them and the tutor does not have to upload software to local machines. All technical issues are dealt with by the software provider. In addition, online games allow for much greater support and feedback documentation to be available for both students and tutors. As noted earlier, one of the benefits of simulation games as a teaching and learning tool, particularly at the strategy level, is that they allow students to integrate such a broad range of business decision areas and allow them to see the impacts of their decisions almost immediately after the deadline for inputting has passed.
GAME DECISION AREAS AND LEARNING
A key benefit of simulation games is that they allow students to integrate a range of business related decisions/outcomes including marketing, financial decisions, budgeting and KPI's. Table 1 provides a summary of the operational and strategic decision areas found in most strategy level games, as well as a summary of typical game features.
Table 1 Typical decision areas and features of marketing simulation
Operational Decisions
Segmentation and positioning
· Tailor aspects of the marketing mix to each segment such as product features, price, channel and promotional media.
Choose from 2-8 different customer segments who will buy the final product either directly or through channel members
May offer perceptual positioning ma
Generally offers a range of positioning options such as broad low-cost approach, value priced products with fewer features, focus on wide distribution.
Product and product portfolio decisions
· Allow teams to offer between 1-6 products, 1 or more at the beginning with more added as the game progresses.
· Configure product features based on segment and cost.
· Can add or reduce features over time.
· Game generally has a product life cycle feature built in - teams need to judge when their products are reaching maturity stage as there are no specific messages to teams saying when this will occur.
· Allows for investment in research and development.
· Often allows for different after sales service packages to be added to each product (see later in table).
Brand decisions
· Many games allow teams to choose brand names for their products.
· Some games use the term ‘brand’ where others use the term ‘product’.
· Investments and decisions around a brand in one game are generally similar to investments and decisions around products in other games.
· Some games provide specific brand profitability reports.
Pricing decisions
· Will either be final consumer price or price to channel member - either wholesale or retail depending on game.
· May offer promotional prices decisions, including discounts, rebates, or other forms.
· Pricing decisions based on segment needs, costs, competitor offerings and/or current market conditions.
Promotional Decisions
· Could set different promotions for each brand.
· Promotional methods may include advertising, direct mail, corporate advertising, sales discounts (see earlier in table), and sales force incentives (see later in table).
· Could include decisions on choice of media, quality, and benefits to focus on and other ad copy decisions.
· Impact of promotional effectiveness may have a carry-over effect to future periods.
Channel Decisions
· May include 2-6 direct-to-customer, retail, and/or wholesale channels, depending on the game.
· Channel members use different margins depending on factors such as type of channel and level of service offered.
· Channel decisions linked to segment characteristics, competitor offerings and cost.
· Can offer channel members various types of promotions (see pricing and sales force).
Sales Force
Sales force may sell direct to customer or via retailers/wholesalers.
Need to select number of salespeople, compensation approach and level, and whether to provide training.
Hiring and firing of salespeople both carry costs.
Salespeople may offer promotional pricing and other incentives/services to channel members.
Production
· Allows teams to set production levels by product.
· Generally, allows a margin for under or over production before team is charged extra.
· May allow for stock buy-backs or disposal of excess inventory at a cost.
· May allow for investment in increased plant capacity and/or new plant technology to allow for product upgrades or new products.
· Production process likely to have both fixed and variable costs.
Strategy and Planning
Planning and planning tools
· May include business or marketing planning tool that allows for forecasting (see budgeting and forecasting).
· May include cash flow planning.
· Generally allows students to think about their source of competitive advantage, to conduct a SWOT analysis.
· Documentation to help with each part of the planning process and that includes strategy terminology such as choosing a ‘broad low-cost strategy’ vs. a ‘focused differentiation strategy.
Research - macro-environment, market, competitors
· May provide free market updates for each decision period with information on changes to the macro-environmental factors, segment needs, and other factors.
· Will allow teams to purchase a range of market research reports, include market share and sales reports for all teams, market analysis, sales by segment, customer preferences, reports from focus groups or product tests, conjoint analysis and perceptual maps, among many others.
· Will allow access to a range of competitor data - some providing free access to competitors’ pricing, segmentation, and product decisions, among others.
· Most games have a fairly limited set of macro-environmental factors that impact on the game.
Financial decisions, budgeting and forecasting
· Budgets for each period depend upon performance in previous period or periods.
· Usually provide a minimum budget regardless of performance.
· Provide a budgeting and forecasting spreadsheet where teams can enter products by each segment, associated costs for all marketing tactics used, production levels, research and development expenditure (see later in table), after sales service (e.g., Warranty).
· May include fixed costs or other cost allocations that are allocated to the marketing division. These may change during the game but cannot be changed by students.
· Whereas some costs will be taken as given by the teams, other costs are variable and will change depending on sales, marketing strategies, competitor strategies, changes to the market environment and/or production. These changes will not be known to teams until they get their results.
· Allows for the creation of pro forma income statements, cash flow and/or balance sheets, among others.
· Budgeting and forecasting software generally allows teams to change their decisions as many times as needed until they input their final decision.
· Teams do not have to invest their entire budget each period in some games. They may be able to invest some money for the future (see later in table).
· Some games allow teams to raise money through short-term borrowing, selling stocks and bonds, selling inventory, investing cash, etc.
Performance Indicators/KPI’s
· Offer a range of measures of team decision-making quality and success each period.
· Could include from 4-45 performance indicators, some of which may only be viewed by the instructor.
· Generally include an income statement and/or contribution statement, a balance sheet and market share reports.
· Generally include a range of charts that may include team position against competitors with respect to profitability, market share, segments served, products and product features and/or portfolio analysis, pricing, production levels and efficiency, dealer ratings, R&D and other spending. Some of this information may only be available to purchase.
· Allow for detailed financial and decision-making analysis.
· More sophisticated games include conjoint, regression and shareholder value analyses
Research and development and investments
· Generally allow teams to invest in research and development to upgrade current products or introduce new ones to meet changing customer needs, address a changing product life cycle or market conditions, and to be competitive.
· Impact of investment in research and development occurs over a few or more periods, thus forcing students to think about the longer term.
· Generally give students a choice of what features to add to/remove from products.
· Other expenditures often seen as investments whose impact will not be seen immediately, thus encouraging teams to think about the longer term. These may include investments in technology, capacity, inventory, financial investments (investing cash, buying bonds, etc.), and marketing investments such as advertising and new product development.
Game Features
Levels of Complexity
· Most games will have different levels of complexity. Generally, the instructor sets the initial level of complexity with the opportunity to raise it over time.
Decision Periods
· On average there are between 1 and 10 decision periods, each decision period representing a financial year. Some are quarterly decisions.
Changes to the decision-making environment
· Most games have built in changes to aspects of the operating and decision-making environment that come in over the duration of the game, such as the economic climate and the product life cycle.
· Most games allow instructors to make some changes to the operating environment during the game to make it more or less challenging or to demonstrate the impact of particular conditions such as a recession.
Competitive frameworks
· Some games allow teams to either compete against other teams or compete against the computer only.
Built in assessments
· Most games will offer multiple choice tests and essay questions, some offer online objective testing.
· Most games provide guidance to students on how to write up business, marketing and financial plans, how to prepare a presentation for the board of directors, and what to include in each.
Instructors can use these as assessments and may be given specific rubrics to look for.
Some games have other forms of assessment such as leadership evaluation tools and peer evaluation tools that provide the instructor with guidelines for assessing.
LEARNING OUTCOMES
Given the range of decision making areas, games can allow for an impressive number of learning outcomes to be achieved. From playing most marketing simulation games, students learn:
· The difference between short and longer term planning strategies and perspectives
· The difference between strategic and (operational) tactical decision making
· The importance of focusing on customer needs, characteristics and buying behaviour in decision making and how these can change over time.
· The need to tailor marketing mix features to the needs and buying behaviour of specific market segments.
· How organisations make decisions within a context of limited resources and that trade-offs will need to be made.
· How to set objectives and their role in decision-making
· The features of a marketing and/or business plan and how to create them
· How to interpret research on markets, customers and competitors to improve decision making.
· The value of good, timely information to decision making.
· The impact of market, macro-environmental and competitive forces on a company’s success.
· The interconnectedness of functional disciplines within an organisation, including marketing, production, finance, accounting and human resources.
· How to interpret financial statements and performance indicators to improve decision making.• How to interpret financial and market data presented in graphs.
· How to undertake aspects of financial analysis.
· How to set up a budget.
· How to make sales, market share and profitability forecasts.
· The interconnectedness of marketing mix decisions and how to integrate them.
· How to research and analyse market, consumer and competitor data to identify marketing opportunities and develop effective marketing strategies.
· The value of a coherent positioning strategy and how to achieve a unique position in the market based on the organisation’s competitive advantages.
· The differences between alternative strategy approaches such as low-cost approaches vs. differentiation strategies, among others.
· The impact of particular decisions made on a firm’s current market position.
· The impact of the product life cycle on product sales and profitability.
· How competitor decisions can impact the firm’s market position and strategy.
· How to design an effective product portfolio strategy.
· How pricing promotional tools can be used to stimulate sales in different channels.
· How to calculate final selling prices given different dealer margins, competitor pricing and customer expectations.
· The relationships between costs, prices, sales and contribution.
· The impact of promotional decisions on costs and sales.
· The impact of promotion and promotion objectives in developing brand awareness and on sales and market share.
· How to apply theories and concepts learned in other settings to improve decision making.
· Ways to improve team dynamics and team performance.
· The impact of good communication, negotiation and personal skills on team performance.
· The dynamic nature of marketing - that markets develop, operating conditions change, customer needs change and competitors adapt their strategies over time, and a firm’s need to adapt.
AUTHENTIC ASSESSMENT (AA)
When implemented well, games allow instructors to achieve all of the principles of authentic assessment practices, including:
A real world value of the task - a key principle of AA is that learning tasks and assessments should mirror the kinds of activities that graduates will undertake in professional settings. Simulation games allow the students to run a division or a company and to simulate all of the decisions a manager might make with many the kinds of information they would make use of - market research, competitor information, customer information and performance indicators.
Students perform or create a product as output - AA is all about active learning and engaging with knowledge to build their own insights and understanding (constructivism) and certainly simulations are an active experience where students grapple with decisions and information that is often difficult in the early stages.
Challenge and complexity of the task and issues of transfer - research shows that students need to be challenged to be engaged and that learning tasks should integrate a range of prior learning with new concepts, ideas and processes. Few learning tasks allow for integration of prior with new knowledge and yet this is what we want students to be able to do as they move up in their degree programme. However, without specific learning tasks that are structured to allow for integration, this rarely happens. One challenge of integration, and of any learning is the difficulty that we all have of transferring knowledge learned in one subject or domain to another. For example, students may take an accounting and finance course, but when asked to apply these principles in a marketing planning course, they will struggle. Opportunities to integrate and bring in knowledge from prior learning are needed and so is repetition. Simulations allow for both.
Known criteria and assessment literacy - if students know what they will be assessed on and furthermore understand the assessment and marking process they are known to perform better and achieve higher grades. Because simulation decisions are relatively similar each week until the instructor decides to bring in additional complexity, students begin to understand what the game is teaching them and how to interpret their results.
Developmental opportunities with formative and regular feedback - a key principle of AA is to build in many opportunities for students to get feedback on their learning that does not count towards their grade but helps them to understand where they can improve. As noted above, simulations require students to make similar decisions each week and receive feedback in a similar form on their decisions, the latter acting as weekly formative feedback so they can improve their decisions.
Sufficient and varied activities make up the whole - Authentic assessment should require students to engage in sufficient and varied activities to ensure that they cover all the associated learning outcomes or intentions rather than allowing them a choice of what to be assessed on (e.g. final exam with a choice of questions). According to the principles of constructive alignment, assessment should cover all intended learning outcomes (Biggs, 1996). Furthermore, complex tasks require students to demonstrate a range of competencies that cannot be judged in a single test or activity so assessment “should involve a full array of tasks and multiple indicators of learning in order to come to fair conclusions” (Gulikers et al., 2004, p. 80). In addition, as noted above, assessment should involve scaffolding, such that students are exposed to incrementally more challenging problems requiring progressive application of higher order thinking skills, and therefore more than one task is generally required. Simulations meet these criteria.
Opportunities for reflection on learning - Reflection is a critical aspect of an authentic learning environment and one that should be encouraged and guided. Boud, Keogh, and Walker (1985)see reflection as a natural process of having engaged in meaningful experiences. During reflection, students are exploring what they have done or learned in order to make new connections, form new understandings, but also to identify weak or missing links in knowledge or skills. In addition to the cognitive-structuring benefits of reflection, it allows students to consider their own approaches to learning. The latter ,‘thinking about one's thinking’, is termed metacognition and is important in assessments involving an array of tasks, complexity and formative feedback. It is also considered by many advocates to be essential to improving critical thinking processes. Simulations may not in themselves lead to reflection, but many simulation tutors will have students keep weekly logs of their learning and to comment on what they have learned, the challenges they have faced and how to overcome them. In fact, most tutors assess the learning process from simulations (what you did well, what you didn't do so well and what you would do now given what you've learned) as a final assessment. Marks are rarely given on the basis for performance in the game. It is the learning and the thinking about learning that is and can be assessed with simulations.
Interaction and collaboration - A number of researchers include collaboration as a necessary requirement of authentic assessment (e.g. Herrington & Herrington, 1998; Reeves et al., 2002) and base this requirement on social constructivist theories such as that of Vygotsky(1978). Vygotsky argued for the importance of social and cultural influences on learning and of social interactions as the means by which individuals make sense of the world. Interaction and discussion with more experienced peers and with tutors help students move towards greater levels of understanding and performance than could be achieved independently, particularly if those peers/tutors can scaffold the learning appropriately for the level of the student. Vygotsky (1978) termed the gap between current levels of understanding and what is possible with effective collaborative instruction as the 'zone of proximal development'. In addition interaction and collaboration builds team making and cooperation skills, particularly if the instructor provides guidance on how to manage team behaviour.
Overall, simulations can be vary powerful learning tools that most students enjoy engaging in. Please write to me if you are interested in using a simulation in your marketing class and would like some advice on what type of game to use and how best to set up the process for maximum learning.
