Wednesday, May 11, 2005

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Re: advertising strategy
« Reply #4 on: Apr 30th, 2005, 06:54am »

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R&D is cash hungry activities. Sometime you could not wait for so long a gestation period (min 2 years if 9 units as it will make you about at least close to 100 technology rating). Trying to sell something that you have 30 point in production technology is just a waste of money. I think a good ad strategy which is what we call clustering effect. Like you have 3 drug stores (specialises store prefer) selling 10 items from bath supplies, cosmetics and drugs will make the same dollar of advertising go further. Or 4 hardware stores selling 14 different products all in the same city. This is the so called mass differentiatio.

The other one is matching the necessity index with the salary level (spending level dun affect much since a high salary level with low spending level is always better than low salary level with high spending level). In rich city (both spending and salary above 80) after you got just one good product with very good brand rating and very good quality, you could raise the price to insanely high level without reducing the demand much. I will called that niched/focused differentiation by Michael Porters term. For example you have a gold mine at 95% quality, u invest in one R&D with 9 units to raise the level to 200 and you choose to sell in just one city opening 3 (that is the max I try for a rich city and minimum 3 million population ) jewellery stores selling just Gold Ring. You can possibly net a few hundred million profit a year. You will noticed when you brand rating is 80 and above, you could raise the prices several times without reducing the demand.

And firstly developed new product such as palm computer or handheld game device where you are the only supplier and you can open many stores to sell in same rich city has a "bug". You can literally raise your price so high for the first year at least that you make a few hundred millions at least. I considered it a bug since not much effort is needed compared to previous 2 brand strategy.

For economies of scale and cost leadership (both broad and focused), it only works in mines. Capiatalism game engine seem to have a bias against cost leader (unless you initially lower to ridiculously low level for 3 to 6 months to raise the brand awareness) and you can never defend yourself against a high quailty and good brand competitor no matter how cheap (that is way beyond your break even point). So milohaze observation quality and brand is more important generally speaking fits my own experience.

Now come the macro part. Like at the middle stage of the game of 15 years you dominate all categories at 200% difficulty level and control all media outlet. Here you are like Walmart plus China and you max out all factor of production. Here my interesting observation is once the profit hit a magical 15 billion on sales of 50 to 80 billions, you will run out of raw materials such as oil, timber, gold and chemical minerals. If you hire a good COO, the AI is quite intelligent in allocating the scarse timber for dyestuff and bed. The COO will choose dyestuff and cut down on bed if your cosmetic is making alot of money and the COO will raise the cosmetic to very high price. But if your bed is superior relative to cosmetics, the COO will mac the bed and raise price. But overall you will suffer a long term profit decline from year 15 at 15 billion and seldom recovered due to the raw materials constraint. To make the demand, I will set the newspaper ad rate at 1.50, radio at 2.50 and TV at 3.50. You will find that your media firms max out automatically. I call this ad market segmentation where expensive product will choose to advertise at TV and cheap product at newspaper by the CMO. Many people find COO and CMO clumsy at managing less than 10 stores, but if you have more than 300 factories, retail store, farm and mine for my case, the COO and CMO has a very good sense how to max the overall profitabilty of the 4 cities GDP/GNP.

One last thing, media firms doi go bnakrupt. My estimate is the general cost you buy from the government is the media firm paid up capital so 300m for TV for example. Since you control all the media, about 1/3 of the media will go banrupt no matter how yoiu finetune your ad strategy. So for a TV station which is inferior to other media firm in the same city, the TV station say lose 3 million a month. About 100 month later or 8 years your TV station will backrupt and the government will have a new one for sale. I call this the government anti-trust media rule lol.

Happy experimenting,
FG

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