Marketing Advertising in the Hotel Industry

Marketing Advertising in the Hotel Industry Until recently research on advertising appeals focused on either physical products or a comparison in relation to the way in which advertising appeals differed between products and services (predominantly professional services). With the continuing growth in the MICE and 5 star resort hotel market, the purpose of this paper is to look at the effectiveness of rational and emotional advertising appeals with respect to the MICE and 5 star resort hotel sector and provide a foundation for further study in this area. Introduction â€Å"Advertising appeals† are essentially the methods which advertisers employ to sell products and services. Some of the more common forms of advertising appeals include money (saving, making and/or retaining), well being, sex, health, fun, pleasure, love, fear, admiration, convenience, vanity, egotism and environmentalism. Different forms of advertising appeals are more effective for selling different types of products or services. Likewise, cultural factors play a large role in how well a particular advertising campaign is received by consumers. Within the Meetings, Incentives, Conferences and Exhibitions (â€Å"MICE†) and 5 star resort hotel industry, advertising appeals are generally classified according to whether they are rational or emotional appeals. The difference between how effective each of these is can only be ascertained when the customer’s preferences are taken into account. However, it should be remembered that the use of advertising appeals is not a precise science and that the difference between a campaign which is highly effective and one that is not can often be the matter of a few words or the use of the wrong colour. The most important factor with respect to the effectiveness of advertising appeals are the existing customer attitudes toward the product or service and the need or want that the customer is seeking to have the product or service fulfil. It is not therefore surprising that an advertising appeal which is effective in engaging business customers may not fare as well when appealing to leisure customers. The purpose of this paper is therefore to examine, both by secondary and primary research methods, the which type of advertising appeal (ie rational or emotional) is most effective when selling MICE and 5 star resort hotels to leisure and business clients. However, it should be noted that due to time and cost restraints the scope of this paper is limited in two important respects. There is no intention to examine customers who have never used a MICE and 5 star resort hotel before and the cultural aspects of advertising appeals is only briefly touched upon. 2. Aims and Objectives The aims and objectives of this paper are to determine the extent to which rational and emotional appeals apply to MICE and 5 star resort hotels. While the usefulness of various types of advertising appeals within the service sector generally has been researched quite extensively, this paper seeks to determine whether or not that general research can be applied equally to MICE and 5 star resort hotels. The peculiarity that is thrown up by MICE and 5 star resort hotels is that they have to appeal equally to both business and leisure consumers. Whereas most service businesses can focus on one sector of the market alone, MICE and 5 star resort hotels need to be able to attract both types of customers which can make creating an advertising campaign particularly treacherous as different appeals apply to each group. Furthermore, each type of customer group can be broken down into various further categories, for instance personal, family, tour groups, returning or first time clients, conference, by income, by age, etc. In light of the innumerable combinations and types of MICE and 5 star resort hotels, it is important to limit the extent of the research. As such, the focus of this paper is limited to MICE and 5 star resort hotels. These types of establishments only seek to attract the right type of clientele and as such are able to focus their marketing on certain sectors of the population and thereby limit the types of advertising appeals they need to rely upon. 3. Providing a rational for the work This work has both a theoretical and practical basis. From a practical point of view, the MICE and 5 star resort hotel sector is particularly competitive and the clientele is extremely discerning. There are always newer, more fashionable 5 star resort hotels or conference centres opening up and therefore it is extremely important that MICE and resort hotels understand how to market effectively to those sectors which are most likely to use their services. From a theoretical standpoint, research into the rational versus emotional dichotomy as it applies to the service industry is only now being touched upon. Even where it is being touched upon, the research often starts with the way in which emotional and rational appeals affect the marketing of physical products and then compares this to the way in which service advertising appeals are used. By focusing on a specific industry sector, MICE and 5 star resort hotels, this research is able to provide important feedback to the general theoretical position as to how well that research holds up in specific circumstances. By examining the most effective advertising appeals for the MICE and 5 star resort hotel sector, this paper aims to provide a solid foundation for both future academic research in this area and also to provide MICE and 5 star resort hotels with practical information which can be used to better tailor their advertising campaigns and most importantly, to avoid making mistakes the damage from which, particularly in a fast paced industry, can take years to undo. 4. Literature Review and Theoretical Framework In order to determine when it is most appropriate for MICE and 5 star resort hotels to use rational and emotional appeals it is first necessary to create a theoretical framework based on a critical review and synthesis of the relevant work in this area. With such a theoretical framework in place, it will then be possible to come to a conclusion as to the merits of both rational and emotional appeals as they apply to MICE and 5 star resort hotels. It is first important to clearly define the terms being referred to. An advertising appeal is defined by Wells, Burnett and Moriarty as, â€Å"something that makes the product particularly attractive or interesting to the consumer.† There are many types of advertising appeals that can be relied upon (sex, price, fear, etc), but as Albers-Miller note, most authors agree that overall all advertising appeals can be classified as either being rational appeals and emotional appeals. A rational appeal is, â€Å"a form of argument and motivation used in the promotion of products and services. Rational factors, including facts and figures, advantages and benefits, are used in an appeal to consumers’ intellects, rather than their emotions† , while an emotional appeal is where, â€Å"the basis of an advertising message having strong emotional character.† Some examples of rational appeals are; for products, the top speed of a car, the processing power of a computer and the memory size of an MP3 player; and for services, the leg room on a flight and the savings made when travelling on off peak public transport. Examples of emotional appeals include; for productions, the sex appeal of a new sports car and the popularity that comes from drinking certain alcoholic beverages; and for services, the possibilities which open up to a consumer once they obtain a certain credit card and the sex appeal of the latest, must-see Hollywood blockbuster which everyone is talking about. One of the main themes that comes through in the literature in this area is that there has been a lack of empirical research undertaken which focuses predominantly on the role of advertising appeals with respect to service industries. This is somewhat surprising when one considers that most Western economies are now service-based economies. As Mattila notes, this growth in the level of interest in services marketing has not corresponded in a similar level of interest in how service quality is communicated rather, most current research has focused on a comparison between service and goods advertising and even when focusing on services, has concentrated on professional as opposed to retail services. While the research may not have kept pace with the fundamental shift in the underlying economic foundations of Western economies, it is now quickly catching up with interest in this area increasing. While the level of general research in the area of advertising appeals and how they relate to service industries increases and the understanding of the differences between goods and services marketing increases, an opportunity exists for researchers to use this developing research base as a theoretical foundation from which to focus on more specific market segments. As such, the focus of this paper, while falling within the broad scope of the current research with respect to advertising appeals in service industries aims to focus in on a much more specific sub-set of this research area; that of the effectiveness of rational and emotional appeals in advertising MICE and 5 star resort hotels. At the same time as focusing in on a specific area of the advertising appeals in service industries research, it is important that this specific area be considered within the context of the marketing strategies of MICE and 5 star resort hotels as a whole. An organisation which wants to make the most effective use of advertising must have a clear understanding of the market segments that they are targeting and an overall marketing mix which allows them to focus their resources on communicating with that segment of the market. Advertising is only one part of the marketing mix and where the other parts are not working effectively, advertising will not provide the highest return on investment possible. Finally, it is important to take into account the environment (and in particular the external environment) in which MICE and 5 star hotels operate in when considering which advertising appeals are most likely to be effective. For instance, in times of rapid growth and high disposable income or when tax breaks are provided for entertaining, MICE and 5 star hotels would be wise to avoid focusing on appealing to the cost savings that can be made by staying with them. Rather, at these times, rational appeals are unlikely to be as necessary as emotional appeals as the necessity for a customer to substantiate a decision rationally is not as great. Before being able to consider the market segmentation that MICE and 5 star resort hotels target, it is important to define the market in which they operate. The market in which they operate can be defined broadly as, for instance, all hotels and resorts, all holidays, all business communication methods, etc; or specifically as all 5 star hotels, all hotels in a particular location, etc. Because of the diverse nature of MICE and 5 star resort hotels, it is almost impossible to come to a determination as to a market in which specific hotel operates as this will be influenced by cultural, geographic and other features. However, it is a little simpler to determine the market segments that MICE and 5 star resort hotels are interested in targeting. The market segments that all MICE and 5 star resort hotels are interested in targeting are business customers and wealthy individuals. As noted above, advertising is a sub-set of an organisation’s overall marketing mix. As such, before proceeding, it is important that the distinction between marketing and advertising is clearly set out. Marketing has been defined by the (British) Chartered Institute of Marketing as, â€Å"the management process responsible for identifying, anticipating and satisfying customer requirements profitably.† Advertising is defined by the Institute of Practitioners in Advertising as, â€Å"advertising presents the most persuasive possible selling message to the right prospects for the product or service at the lowest possible cost.† The marketing mix refers to the â€Å"price/value proposition† and is, as expanded on by Kotler, often referred to as the four P’s; Product, Place, Price and Promotion. The Product refers to the good or service that the supplier wishes to sell and which the consumer wishes to buy; Place refers to the convenience of buying the goods or services; Price refers to the cost to the consumer of the goods or services; and Promotion refers to the ways in which the supplier and customer communicate with each other. Advertising comes within the ambit of the promotion function. When applying the marketing mix to MICE and resort hotels, one observes that in general the Product is appealing (this may not apply to such an extent in countries in which the idea of staying in hotels is a relatively new concept for a majority of the population); with respect to the Place, while requiring travel to reach and therefore not being entirely convenient to most people, most MICE and resort hotels are located close to either business districts or leisure areas (eg beaches) meaning that while the location may not be entirely convenient, the location is generally desirable; MICE and 5 star resort hotels are generally price prohibitive with a strong emphasis on catering for company functions and higher level clientele; finally, with respect to Promotion, MICE and resort hotels rely on strong business focused advertising and word of mouth. With respect to Porter’s generic strategies matrix, MICE and resort hotels clearly aim for the niche market which is distinguished by high differentiation and high relative costs. That said, while MICE and resort hotels aim to represent themselves as being highly differentiated, exclusive and expensive, they are in fact extremely similar and operate on a low cost principle. As such, it is important for MICE and resort hotels to maintain this faà §ade and to ensure that customers’ experiences of cognitive dissonance are kept at a minimum. This faà §ade that all â€Å"cathedrals of consumption† must maintain, this separation from the mundane events of everyday life, is particularly evident in MICE and 5 star resort hotels. These establishments must be able to offer an entire â€Å"package† not only satisfying a guests physical needs, but also satisfying their wish to be deceived, to believe that for the length of their stay they are deserving of the 5 star treatment that they are receiving even through the next day they their office-bound mundane life. Williamson summarises this â€Å"package† element which applies to all purchases best when he writes: â€Å"Advertisements are selling us something else beside consumer goods; in providing us with a structure in which we and those goods are interchangeable, they are selling us ourselves†¦ Ideology is the meaning made necessary by the condition of society while helping to perpetuate those conditions. We feel a need to belong, to have a social place; it can be hard to find. Instead we may be given an imaginary one.† A supplementary point which arises from Williamson’s statement is that of the language of consumption. Many potential consumers are put off purchasing new goods or services because they do not have experience in having used them previously. For instance, someone who normally eats dinner on the couch in front of the television will be extremely reticent to eat dinner in a 5 star restaurant in which a knowledge of dining etiquette is expected. While this reluctance to try new things increases with age, it can be bridged in several ways. Advertising is a particularly effective means of overcoming potential consumers’ fears of try something new. By using analogies which relate the new product with something that the customer has already used and feels comfortable with advertisers are able to provide new consumers with the consumption queues necessary to use the new good or service and feel more comfortable doing so. In general, such techniques are not often used by MICE and 5 star resort hotels in places in which their use is understood by consumers. In societies in which the role of these hotels is understood by consumers, the aim of their advertising, is to create demand within the specific market segment that they are targeting. As such, it is almost the opposite of teaching new consumers how to use the services. These establishments are more likely to assume that those they are targeting understand how to use their services and are more likely to try to limit the understanding of their services by the general population. This is usually done through language and by offering services which are extremely specialised (eg tens of different types of facials, massages, etc) which are intended to intimidate the average consumer. Cognitive dissonance occurs when a person’s expectations are not met meaning that their level of satisfaction is low. With respect to guests’ perceptions of hotels, Saleh and Ryan write that, â€Å"†¦it is imperative that guests’ expectations be realistic and possible for the firm to deliver, otherwise an obvious gap in service quality is created.† One advantage that MICE and 5 star resort hotels have over other hotels and resorts is that a large portion of their clientele are not required to pay for their own accommodation. In situations in which the accommodation costs are being met by a third party, it is unlikely that any potential feelings of cognitive dissonance will be as strong as those of someone who has booked and paid for a hotel or resort themselves. Furthermore, any such feelings by a guest who is staying at someone else’s expense are more likely to be directed at the payer, who should have chosen a better quality hotel or resort, rather than directed at the actual hotel or resort. In addition, for guests of MICE and 5 star resort hotels, the actual hotel is normally a background factor (ie to a conference, the beach, an event, etc). These guests have other matters to occupy them. This contrasts with individuals who stay at a resort hotel that they have paid for themselves and where actually being at a resort hotel is the focus of their trip. As noted above, Mattila focuses on what she believes to be a gap in the studies examining services advertising. She believes that most of these studies focus on tangibilizing the offering or â€Å"making the service more concrete† and as a result of this a gap exists with respect to knowledge about the role emotional advertising appeals play in services advertising. What is important to keep in mind when advertising either products or services is that the advertising appeal has to match the product or service type. Albers-Miller et al note that previous research on this point has found that, â€Å"a more emotional (value-expressive) appeal should be used for a value-expressive product and a more rational (utilitarian) appeal should be used for a utilitarian product.† The way in which advertisers determine the best combination of rational and emotional appeal is assisted by the level of involvement model developed by Vaughn and adapted by Foote, Cone and Belding. That model focuses on products but provides a useful tool for understanding the differences between rational (thinking) and emotional (feeling) appeals. The four options are, high involvement/thinking which relates to high importance purchases such as cars and houses and the message should be based on â€Å"long copy, informational demonstration, comparative†; low involvement/thinking which relates to routinely purchased products such as food and items for the house and the message should be based on â€Å"coupons and samples†; high involvement/feeling which relate to a customer’s self esteem such as make up, jewellery and clothes and the message should be based on â€Å"emotional and visual† triggers; and low involvement/feeling which relates to products which satisfy personal cravings such as alcohol, snack foods and cigarettes and the message should be â€Å"creativity and lifestyle† based. How well these levels of involvement transfer to the service sector is still open to debate. If one was to take the same levels of involvement and attempted to determine which group MICE and 5 star resort hotels fall into, one might have difficulty as they do not fit cleanly into any of the categories. In general, a large proportion of business-to-business type advertising relies on rational appeals due to the fact that buyers tend to be knowledgeable about the products or services that they are buying and are seeking supportable justification for their purchasing decisions. As Stafford and Albers-Miller note, â€Å"†¦rational informative advertising appeals may help reduce some of the uncertainty often associated with the purchase of services.† That said, in today’s marketplace, it is unlikely that rational advertising appeals would be made without consideration of the emotional aspects. As such, essentially what is being said when one refers to a rational appeal is not that the emotional aspects of the appeal are not present, but that they are used more subtly and as a backdrop to the advertising campaign. As Albers-Miller et al argue: â€Å"†¦there is no reason not to include an emotional appeal and service information and benefits. Indeed many advertising practitioners would argue that this juxtaposition is one of the aims of good advertising – informing the consumer and stimulating a response through appeals to emotional, right-brain influences. However, there still needs to be some guidance given as to where we lay the emphasis in this area or emotions and rationality. And this is especially true in diverse cultures.† The importance of emotional appeals is especially important today when product differentiation is becoming more and more difficult. With respect to the MICE and 5 star resort hotel market sector, while some of these hotels are able to differentiate themselves on the basis of location, facilities and other competitive advantages, the general level of such differentiation is not great. Most people using the facilities of a MICE and 5 star resort hotels expect that certain levels of service and facilities are available. As the, â€Å"USP (unique selling proposition) is fast disappearing, then what becomes correspondingly more important is the ESP – the emotional selling point.† With respect to the advertising that MICE and 5 star resort hotels engage in, it is important for them to ensure that they are using the most effective advertising appeals necessary to persuade the targeted market segment. Louise Ha argues that the study of advertising appeals with respect to the services market has been hampered by a failure to differentiate between service firms. She believes that the type of service firm should be taken into account when determining the appropriate advertising appeals to use and relies on Zeithaml’s classification of services into three categories which are; â€Å"high on search attributes (performance of the service can be known before consumption); high on experience attributes (attributes that can only be discerned after purchase or during consumption) such as haircut and restaurants. These services are non-professional services that can be substituted by self-service of the consumer; and high on credence attributes (attributes that consumers may still find them impossible to evaluate after consuming the service) such as medical services and repair services. These are professional services that require special training or license.† MICE and 5 star resort hotels can be classified as being high on experience attributes. It should also be noted that MICE and 5 star resort hotels operate in a global marketplace. Albers-Miller et al have studied the differences between rational and emotional appeals across cultures (and in particular, Brazil, Taiwan, Mexico and the USA). They conclude that, â€Å"culture appears to play a significant role in the use of emotional and rational advertisements for services, and anthropological measures of culture provide some insight into the differences in emotional appeals.† They also note that across cultures business customers, the main target segment for MICE and 5 star resort hotels, â€Å"tend to make decisions based on more rational criteria†¦ [and that] across cultures, cognition changes little, while emotions change considerably.† While the cultural aspects of rational and emotional advertising appeals with respect to MICE and 5 star resort hotels is beyond the scope of this paper, it does provide an interesting area of research for future studies. While the differentiation between rational and emotional appeals seems like a simple and logical distinction to make, the distinction is largely artificial as an advertising campaign which solely relies on rational or emotional appeals is unlikely, if not impossible. As such, the difference between the two in an advertising campaign is the level of emphasis that is given to one over the other. Both will be used, the decision is rather how best to combine the two for maximum effect. 5. Methodology When considering the type of methodology to employ the choice is between primary or secondary research methods. Primary research methods refer to those that generally require replies from and interaction with service users such as questionnaires, focus-groups and interviews (ie fieldwork). On the other hand, secondary research methods rely on reviewing books, articles, statistical data, etc (ie deskwork). While primary research is generally viewed as being superior to secondary research, this is not always the case. Primary research is almost always hampered by cost considerations, the sample size used, the manner in which the sample population has been decided upon, researcher bias, etc. In light of cost considerations, it is almost always more cost effective to ask yourself whether or not someone else has already done this research and if so to begin at that point and then use primary research to fill in any gaps or specific areas which have not been addressed in the depth required. Secondary research also has its own problems which include such factors as the fact that it is reliant on someone else’s primary research with all the inherent problems that presents as set out above, the researcher is limited to the questions raised in the secondary materials, etc. As such, it is important that in secondary research, the sources of the information to be used are reliable (ie government sources, peer reviewed journals, text books written by qualified authors, etc). In light of the above considerations, it is important that any market research conducted uses a balance of primary and secondary research methods. In the case of this paper, it was found that there was an array of literature (secondary sources) on advertising and the service sector. However, there was less to be found when one looked at the area of MICE and resort hotels specifically. As such, while secondary research could take us to a point, from that point it was necessary to use primary research methods. The most common primary research methods are interviews, questionnaires, surveys, focus groups and secret visits. As the objective of this paper is to determine the most effective methods of advertising appeals with respect to MICE and resort hotels, some of the primary methods referred to above will not be appropriate. MICA and resort hotels cover a large cross-section of the market and large distances. As such, secret visits to the hotels would not only be cost prohibitive, but would be unlikely to provide the necessary data required. On the other hand, as most of the users of these services are UK-based, a focus group may be more appropriate for personal holiday makers. In light of the practical issues of setting up a focus group of business users, questionnaires may be more appropriate for that sector of the market. A decision was finally made to make use of a questionnaire and a focus group. Both would target people who had already used MICE and 5 star resort hotels on the basis that this was the segment of the market that these hotels were targeting. It was decided that an attempt to include customers who had never stayed in a MICE and 5 star resort hotel would be too much for a paper of this length however, it would remain a potential area for future research. With respect to the design of the questionnaire, it was decided that while quantitative responses are the easiest to compile and analyse, they do not give the depth of information that can be gleaned from qualitative answers. Furthermore, in order to be statistically valid, a quantitative questionnaire would need to involve a large, randomly selected sample base. Due to cost and time limitations, this was not considered feasible and as such, it was thought most appropriate to concentrate on a smaller, specifically selected sample of the market segment being targeted and an analysis of their qualitative responses with a clear statement as to the understood limitations of proceeding in this way. 6. Findings, analyses and evaluation The purpose of this dissertation is to determine the extent to which rational and emotional appeals apply to MICE and 5 star resort hotels. A review of secondary sources and current research on the topic showed that this is an area which has suffered from a lack of research interest to date. While Mattila’s work provides a strong overview of advertising appeals as they relate solely to the service sector (as opposed to dealing with them solely in comparison with products), her work is quite broad and as such, while it is used as a starting point for this paper, it was necessary to supplement the secondary research and theoretical framework with primary research which consisted of a questionnaire and focus group. Further primary research was deemed not feasible due to cost and time constraints. In total, 150 questionnaires were posted or handed out. Due to the small sample size, the participants were targeted (eg businesses which book MICE and 5 star resort hotels for conferences, people leaving MICE and 5 star resort hotels, etc). Of the 150 questionnaires posted or handed out, thirty were returned. This was considered to be a reasonable level of returns in light of the type of person being asked to complete them (ie busy individuals who work long hours). A summary of the questionnaire replies are set out in Appendix 2. Due to the qualitative nature of the replies, statistical analysis of the responses is not feasible. However, they do provide an interesting insight into the way in which advertising appeals are able to influence guests of MICE and 5 star resort hotels. Along with the questionnaire, a focus group was used to try to determine in a more direct fashion people’s attitudes to MICE and 5 star resort hotels and more particularly, what effect advertising appeals had on their purchasing behaviour. As with the questionnaire, the group chosen was not chosen randomly, but rather was selected from people who had already used MICE and 5 star resort hotels in the past. Participants were shown various advertisements (not only limited to MICE and 5 star resort hotels) and asked to discuss various propositions put to them. Once again, the results were qualitative and as such not appropriate for statistical analysis. While the response to the questionnaire was not particularly high, those individuals that did respond provided some particularly interesting replies. Predictably perhaps, most responses were from middle aged, well educated men. This group is the market segment that most MICE and 5 star resort hotels seek to target with their advertising. However, the strong response by women suggests that those MICE and 5 star resort hotels that are spending most of their advertising budgets targeting men may be missing out on a large segment of the market which may still Marketing Advertising in the Hotel Industry Marketing Advertising in the Hotel Industry Until recently research on advertising appeals focused on either physical products or a comparison in relation to the way in which advertising appeals differed between products and services (predominantly professional services). With the continuing growth in the MICE and 5 star resort hotel market, the purpose of this paper is to look at the effectiveness of rational and emotional advertising appeals with respect to the MICE and 5 star resort hotel sector and provide a foundation for further study in this area. Introduction â€Å"Advertising appeals† are essentially the methods which advertisers employ to sell products and services. Some of the more common forms of advertising appeals include money (saving, making and/or retaining), well being, sex, health, fun, pleasure, love, fear, admiration, convenience, vanity, egotism and environmentalism. Different forms of advertising appeals are more effective for selling different types of products or services. Likewise, cultural factors play a large role in how well a particular advertising campaign is received by consumers. Within the Meetings, Incentives, Conferences and Exhibitions (â€Å"MICE†) and 5 star resort hotel industry, advertising appeals are generally classified according to whether they are rational or emotional appeals. The difference between how effective each of these is can only be ascertained when the customer’s preferences are taken into account. However, it should be remembered that the use of advertising appeals is not a precise science and that the difference between a campaign which is highly effective and one that is not can often be the matter of a few words or the use of the wrong colour. The most important factor with respect to the effectiveness of advertising appeals are the existing customer attitudes toward the product or service and the need or want that the customer is seeking to have the product or service fulfil. It is not therefore surprising that an advertising appeal which is effective in engaging business customers may not fare as well when appealing to leisure customers. The purpose of this paper is therefore to examine, both by secondary and primary research methods, the which type of advertising appeal (ie rational or emotional) is most effective when selling MICE and 5 star resort hotels to leisure and business clients. However, it should be noted that due to time and cost restraints the scope of this paper is limited in two important respects. There is no intention to examine customers who have never used a MICE and 5 star resort hotel before and the cultural aspects of advertising appeals is only briefly touched upon. 2. Aims and Objectives The aims and objectives of this paper are to determine the extent to which rational and emotional appeals apply to MICE and 5 star resort hotels. While the usefulness of various types of advertising appeals within the service sector generally has been researched quite extensively, this paper seeks to determine whether or not that general research can be applied equally to MICE and 5 star resort hotels. The peculiarity that is thrown up by MICE and 5 star resort hotels is that they have to appeal equally to both business and leisure consumers. Whereas most service businesses can focus on one sector of the market alone, MICE and 5 star resort hotels need to be able to attract both types of customers which can make creating an advertising campaign particularly treacherous as different appeals apply to each group. Furthermore, each type of customer group can be broken down into various further categories, for instance personal, family, tour groups, returning or first time clients, conference, by income, by age, etc. In light of the innumerable combinations and types of MICE and 5 star resort hotels, it is important to limit the extent of the research. As such, the focus of this paper is limited to MICE and 5 star resort hotels. These types of establishments only seek to attract the right type of clientele and as such are able to focus their marketing on certain sectors of the population and thereby limit the types of advertising appeals they need to rely upon. 3. Providing a rational for the work This work has both a theoretical and practical basis. From a practical point of view, the MICE and 5 star resort hotel sector is particularly competitive and the clientele is extremely discerning. There are always newer, more fashionable 5 star resort hotels or conference centres opening up and therefore it is extremely important that MICE and resort hotels understand how to market effectively to those sectors which are most likely to use their services. From a theoretical standpoint, research into the rational versus emotional dichotomy as it applies to the service industry is only now being touched upon. Even where it is being touched upon, the research often starts with the way in which emotional and rational appeals affect the marketing of physical products and then compares this to the way in which service advertising appeals are used. By focusing on a specific industry sector, MICE and 5 star resort hotels, this research is able to provide important feedback to the general theoretical position as to how well that research holds up in specific circumstances. By examining the most effective advertising appeals for the MICE and 5 star resort hotel sector, this paper aims to provide a solid foundation for both future academic research in this area and also to provide MICE and 5 star resort hotels with practical information which can be used to better tailor their advertising campaigns and most importantly, to avoid making mistakes the damage from which, particularly in a fast paced industry, can take years to undo. 4. Literature Review and Theoretical Framework In order to determine when it is most appropriate for MICE and 5 star resort hotels to use rational and emotional appeals it is first necessary to create a theoretical framework based on a critical review and synthesis of the relevant work in this area. With such a theoretical framework in place, it will then be possible to come to a conclusion as to the merits of both rational and emotional appeals as they apply to MICE and 5 star resort hotels. It is first important to clearly define the terms being referred to. An advertising appeal is defined by Wells, Burnett and Moriarty as, â€Å"something that makes the product particularly attractive or interesting to the consumer.† There are many types of advertising appeals that can be relied upon (sex, price, fear, etc), but as Albers-Miller note, most authors agree that overall all advertising appeals can be classified as either being rational appeals and emotional appeals. A rational appeal is, â€Å"a form of argument and motivation used in the promotion of products and services. Rational factors, including facts and figures, advantages and benefits, are used in an appeal to consumers’ intellects, rather than their emotions† , while an emotional appeal is where, â€Å"the basis of an advertising message having strong emotional character.† Some examples of rational appeals are; for products, the top speed of a car, the processing power of a computer and the memory size of an MP3 player; and for services, the leg room on a flight and the savings made when travelling on off peak public transport. Examples of emotional appeals include; for productions, the sex appeal of a new sports car and the popularity that comes from drinking certain alcoholic beverages; and for services, the possibilities which open up to a consumer once they obtain a certain credit card and the sex appeal of the latest, must-see Hollywood blockbuster which everyone is talking about. One of the main themes that comes through in the literature in this area is that there has been a lack of empirical research undertaken which focuses predominantly on the role of advertising appeals with respect to service industries. This is somewhat surprising when one considers that most Western economies are now service-based economies. As Mattila notes, this growth in the level of interest in services marketing has not corresponded in a similar level of interest in how service quality is communicated rather, most current research has focused on a comparison between service and goods advertising and even when focusing on services, has concentrated on professional as opposed to retail services. While the research may not have kept pace with the fundamental shift in the underlying economic foundations of Western economies, it is now quickly catching up with interest in this area increasing. While the level of general research in the area of advertising appeals and how they relate to service industries increases and the understanding of the differences between goods and services marketing increases, an opportunity exists for researchers to use this developing research base as a theoretical foundation from which to focus on more specific market segments. As such, the focus of this paper, while falling within the broad scope of the current research with respect to advertising appeals in service industries aims to focus in on a much more specific sub-set of this research area; that of the effectiveness of rational and emotional appeals in advertising MICE and 5 star resort hotels. At the same time as focusing in on a specific area of the advertising appeals in service industries research, it is important that this specific area be considered within the context of the marketing strategies of MICE and 5 star resort hotels as a whole. An organisation which wants to make the most effective use of advertising must have a clear understanding of the market segments that they are targeting and an overall marketing mix which allows them to focus their resources on communicating with that segment of the market. Advertising is only one part of the marketing mix and where the other parts are not working effectively, advertising will not provide the highest return on investment possible. Finally, it is important to take into account the environment (and in particular the external environment) in which MICE and 5 star hotels operate in when considering which advertising appeals are most likely to be effective. For instance, in times of rapid growth and high disposable income or when tax breaks are provided for entertaining, MICE and 5 star hotels would be wise to avoid focusing on appealing to the cost savings that can be made by staying with them. Rather, at these times, rational appeals are unlikely to be as necessary as emotional appeals as the necessity for a customer to substantiate a decision rationally is not as great. Before being able to consider the market segmentation that MICE and 5 star resort hotels target, it is important to define the market in which they operate. The market in which they operate can be defined broadly as, for instance, all hotels and resorts, all holidays, all business communication methods, etc; or specifically as all 5 star hotels, all hotels in a particular location, etc. Because of the diverse nature of MICE and 5 star resort hotels, it is almost impossible to come to a determination as to a market in which specific hotel operates as this will be influenced by cultural, geographic and other features. However, it is a little simpler to determine the market segments that MICE and 5 star resort hotels are interested in targeting. The market segments that all MICE and 5 star resort hotels are interested in targeting are business customers and wealthy individuals. As noted above, advertising is a sub-set of an organisation’s overall marketing mix. As such, before proceeding, it is important that the distinction between marketing and advertising is clearly set out. Marketing has been defined by the (British) Chartered Institute of Marketing as, â€Å"the management process responsible for identifying, anticipating and satisfying customer requirements profitably.† Advertising is defined by the Institute of Practitioners in Advertising as, â€Å"advertising presents the most persuasive possible selling message to the right prospects for the product or service at the lowest possible cost.† The marketing mix refers to the â€Å"price/value proposition† and is, as expanded on by Kotler, often referred to as the four P’s; Product, Place, Price and Promotion. The Product refers to the good or service that the supplier wishes to sell and which the consumer wishes to buy; Place refers to the convenience of buying the goods or services; Price refers to the cost to the consumer of the goods or services; and Promotion refers to the ways in which the supplier and customer communicate with each other. Advertising comes within the ambit of the promotion function. When applying the marketing mix to MICE and resort hotels, one observes that in general the Product is appealing (this may not apply to such an extent in countries in which the idea of staying in hotels is a relatively new concept for a majority of the population); with respect to the Place, while requiring travel to reach and therefore not being entirely convenient to most people, most MICE and resort hotels are located close to either business districts or leisure areas (eg beaches) meaning that while the location may not be entirely convenient, the location is generally desirable; MICE and 5 star resort hotels are generally price prohibitive with a strong emphasis on catering for company functions and higher level clientele; finally, with respect to Promotion, MICE and resort hotels rely on strong business focused advertising and word of mouth. With respect to Porter’s generic strategies matrix, MICE and resort hotels clearly aim for the niche market which is distinguished by high differentiation and high relative costs. That said, while MICE and resort hotels aim to represent themselves as being highly differentiated, exclusive and expensive, they are in fact extremely similar and operate on a low cost principle. As such, it is important for MICE and resort hotels to maintain this faà §ade and to ensure that customers’ experiences of cognitive dissonance are kept at a minimum. This faà §ade that all â€Å"cathedrals of consumption† must maintain, this separation from the mundane events of everyday life, is particularly evident in MICE and 5 star resort hotels. These establishments must be able to offer an entire â€Å"package† not only satisfying a guests physical needs, but also satisfying their wish to be deceived, to believe that for the length of their stay they are deserving of the 5 star treatment that they are receiving even through the next day they their office-bound mundane life. Williamson summarises this â€Å"package† element which applies to all purchases best when he writes: â€Å"Advertisements are selling us something else beside consumer goods; in providing us with a structure in which we and those goods are interchangeable, they are selling us ourselves†¦ Ideology is the meaning made necessary by the condition of society while helping to perpetuate those conditions. We feel a need to belong, to have a social place; it can be hard to find. Instead we may be given an imaginary one.† A supplementary point which arises from Williamson’s statement is that of the language of consumption. Many potential consumers are put off purchasing new goods or services because they do not have experience in having used them previously. For instance, someone who normally eats dinner on the couch in front of the television will be extremely reticent to eat dinner in a 5 star restaurant in which a knowledge of dining etiquette is expected. While this reluctance to try new things increases with age, it can be bridged in several ways. Advertising is a particularly effective means of overcoming potential consumers’ fears of try something new. By using analogies which relate the new product with something that the customer has already used and feels comfortable with advertisers are able to provide new consumers with the consumption queues necessary to use the new good or service and feel more comfortable doing so. In general, such techniques are not often used by MICE and 5 star resort hotels in places in which their use is understood by consumers. In societies in which the role of these hotels is understood by consumers, the aim of their advertising, is to create demand within the specific market segment that they are targeting. As such, it is almost the opposite of teaching new consumers how to use the services. These establishments are more likely to assume that those they are targeting understand how to use their services and are more likely to try to limit the understanding of their services by the general population. This is usually done through language and by offering services which are extremely specialised (eg tens of different types of facials, massages, etc) which are intended to intimidate the average consumer. Cognitive dissonance occurs when a person’s expectations are not met meaning that their level of satisfaction is low. With respect to guests’ perceptions of hotels, Saleh and Ryan write that, â€Å"†¦it is imperative that guests’ expectations be realistic and possible for the firm to deliver, otherwise an obvious gap in service quality is created.† One advantage that MICE and 5 star resort hotels have over other hotels and resorts is that a large portion of their clientele are not required to pay for their own accommodation. In situations in which the accommodation costs are being met by a third party, it is unlikely that any potential feelings of cognitive dissonance will be as strong as those of someone who has booked and paid for a hotel or resort themselves. Furthermore, any such feelings by a guest who is staying at someone else’s expense are more likely to be directed at the payer, who should have chosen a better quality hotel or resort, rather than directed at the actual hotel or resort. In addition, for guests of MICE and 5 star resort hotels, the actual hotel is normally a background factor (ie to a conference, the beach, an event, etc). These guests have other matters to occupy them. This contrasts with individuals who stay at a resort hotel that they have paid for themselves and where actually being at a resort hotel is the focus of their trip. As noted above, Mattila focuses on what she believes to be a gap in the studies examining services advertising. She believes that most of these studies focus on tangibilizing the offering or â€Å"making the service more concrete† and as a result of this a gap exists with respect to knowledge about the role emotional advertising appeals play in services advertising. What is important to keep in mind when advertising either products or services is that the advertising appeal has to match the product or service type. Albers-Miller et al note that previous research on this point has found that, â€Å"a more emotional (value-expressive) appeal should be used for a value-expressive product and a more rational (utilitarian) appeal should be used for a utilitarian product.† The way in which advertisers determine the best combination of rational and emotional appeal is assisted by the level of involvement model developed by Vaughn and adapted by Foote, Cone and Belding. That model focuses on products but provides a useful tool for understanding the differences between rational (thinking) and emotional (feeling) appeals. The four options are, high involvement/thinking which relates to high importance purchases such as cars and houses and the message should be based on â€Å"long copy, informational demonstration, comparative†; low involvement/thinking which relates to routinely purchased products such as food and items for the house and the message should be based on â€Å"coupons and samples†; high involvement/feeling which relate to a customer’s self esteem such as make up, jewellery and clothes and the message should be based on â€Å"emotional and visual† triggers; and low involvement/feeling which relates to products which satisfy personal cravings such as alcohol, snack foods and cigarettes and the message should be â€Å"creativity and lifestyle† based. How well these levels of involvement transfer to the service sector is still open to debate. If one was to take the same levels of involvement and attempted to determine which group MICE and 5 star resort hotels fall into, one might have difficulty as they do not fit cleanly into any of the categories. In general, a large proportion of business-to-business type advertising relies on rational appeals due to the fact that buyers tend to be knowledgeable about the products or services that they are buying and are seeking supportable justification for their purchasing decisions. As Stafford and Albers-Miller note, â€Å"†¦rational informative advertising appeals may help reduce some of the uncertainty often associated with the purchase of services.† That said, in today’s marketplace, it is unlikely that rational advertising appeals would be made without consideration of the emotional aspects. As such, essentially what is being said when one refers to a rational appeal is not that the emotional aspects of the appeal are not present, but that they are used more subtly and as a backdrop to the advertising campaign. As Albers-Miller et al argue: â€Å"†¦there is no reason not to include an emotional appeal and service information and benefits. Indeed many advertising practitioners would argue that this juxtaposition is one of the aims of good advertising – informing the consumer and stimulating a response through appeals to emotional, right-brain influences. However, there still needs to be some guidance given as to where we lay the emphasis in this area or emotions and rationality. And this is especially true in diverse cultures.† The importance of emotional appeals is especially important today when product differentiation is becoming more and more difficult. With respect to the MICE and 5 star resort hotel market sector, while some of these hotels are able to differentiate themselves on the basis of location, facilities and other competitive advantages, the general level of such differentiation is not great. Most people using the facilities of a MICE and 5 star resort hotels expect that certain levels of service and facilities are available. As the, â€Å"USP (unique selling proposition) is fast disappearing, then what becomes correspondingly more important is the ESP – the emotional selling point.† With respect to the advertising that MICE and 5 star resort hotels engage in, it is important for them to ensure that they are using the most effective advertising appeals necessary to persuade the targeted market segment. Louise Ha argues that the study of advertising appeals with respect to the services market has been hampered by a failure to differentiate between service firms. She believes that the type of service firm should be taken into account when determining the appropriate advertising appeals to use and relies on Zeithaml’s classification of services into three categories which are; â€Å"high on search attributes (performance of the service can be known before consumption); high on experience attributes (attributes that can only be discerned after purchase or during consumption) such as haircut and restaurants. These services are non-professional services that can be substituted by self-service of the consumer; and high on credence attributes (attributes that consumers may still find them impossible to evaluate after consuming the service) such as medical services and repair services. These are professional services that require special training or license.† MICE and 5 star resort hotels can be classified as being high on experience attributes. It should also be noted that MICE and 5 star resort hotels operate in a global marketplace. Albers-Miller et al have studied the differences between rational and emotional appeals across cultures (and in particular, Brazil, Taiwan, Mexico and the USA). They conclude that, â€Å"culture appears to play a significant role in the use of emotional and rational advertisements for services, and anthropological measures of culture provide some insight into the differences in emotional appeals.† They also note that across cultures business customers, the main target segment for MICE and 5 star resort hotels, â€Å"tend to make decisions based on more rational criteria†¦ [and that] across cultures, cognition changes little, while emotions change considerably.† While the cultural aspects of rational and emotional advertising appeals with respect to MICE and 5 star resort hotels is beyond the scope of this paper, it does provide an interesting area of research for future studies. While the differentiation between rational and emotional appeals seems like a simple and logical distinction to make, the distinction is largely artificial as an advertising campaign which solely relies on rational or emotional appeals is unlikely, if not impossible. As such, the difference between the two in an advertising campaign is the level of emphasis that is given to one over the other. Both will be used, the decision is rather how best to combine the two for maximum effect. 5. Methodology When considering the type of methodology to employ the choice is between primary or secondary research methods. Primary research methods refer to those that generally require replies from and interaction with service users such as questionnaires, focus-groups and interviews (ie fieldwork). On the other hand, secondary research methods rely on reviewing books, articles, statistical data, etc (ie deskwork). While primary research is generally viewed as being superior to secondary research, this is not always the case. Primary research is almost always hampered by cost considerations, the sample size used, the manner in which the sample population has been decided upon, researcher bias, etc. In light of cost considerations, it is almost always more cost effective to ask yourself whether or not someone else has already done this research and if so to begin at that point and then use primary research to fill in any gaps or specific areas which have not been addressed in the depth required. Secondary research also has its own problems which include such factors as the fact that it is reliant on someone else’s primary research with all the inherent problems that presents as set out above, the researcher is limited to the questions raised in the secondary materials, etc. As such, it is important that in secondary research, the sources of the information to be used are reliable (ie government sources, peer reviewed journals, text books written by qualified authors, etc). In light of the above considerations, it is important that any market research conducted uses a balance of primary and secondary research methods. In the case of this paper, it was found that there was an array of literature (secondary sources) on advertising and the service sector. However, there was less to be found when one looked at the area of MICE and resort hotels specifically. As such, while secondary research could take us to a point, from that point it was necessary to use primary research methods. The most common primary research methods are interviews, questionnaires, surveys, focus groups and secret visits. As the objective of this paper is to determine the most effective methods of advertising appeals with respect to MICE and resort hotels, some of the primary methods referred to above will not be appropriate. MICA and resort hotels cover a large cross-section of the market and large distances. As such, secret visits to the hotels would not only be cost prohibitive, but would be unlikely to provide the necessary data required. On the other hand, as most of the users of these services are UK-based, a focus group may be more appropriate for personal holiday makers. In light of the practical issues of setting up a focus group of business users, questionnaires may be more appropriate for that sector of the market. A decision was finally made to make use of a questionnaire and a focus group. Both would target people who had already used MICE and 5 star resort hotels on the basis that this was the segment of the market that these hotels were targeting. It was decided that an attempt to include customers who had never stayed in a MICE and 5 star resort hotel would be too much for a paper of this length however, it would remain a potential area for future research. With respect to the design of the questionnaire, it was decided that while quantitative responses are the easiest to compile and analyse, they do not give the depth of information that can be gleaned from qualitative answers. Furthermore, in order to be statistically valid, a quantitative questionnaire would need to involve a large, randomly selected sample base. Due to cost and time limitations, this was not considered feasible and as such, it was thought most appropriate to concentrate on a smaller, specifically selected sample of the market segment being targeted and an analysis of their qualitative responses with a clear statement as to the understood limitations of proceeding in this way. 6. Findings, analyses and evaluation The purpose of this dissertation is to determine the extent to which rational and emotional appeals apply to MICE and 5 star resort hotels. A review of secondary sources and current research on the topic showed that this is an area which has suffered from a lack of research interest to date. While Mattila’s work provides a strong overview of advertising appeals as they relate solely to the service sector (as opposed to dealing with them solely in comparison with products), her work is quite broad and as such, while it is used as a starting point for this paper, it was necessary to supplement the secondary research and theoretical framework with primary research which consisted of a questionnaire and focus group. Further primary research was deemed not feasible due to cost and time constraints. In total, 150 questionnaires were posted or handed out. Due to the small sample size, the participants were targeted (eg businesses which book MICE and 5 star resort hotels for conferences, people leaving MICE and 5 star resort hotels, etc). Of the 150 questionnaires posted or handed out, thirty were returned. This was considered to be a reasonable level of returns in light of the type of person being asked to complete them (ie busy individuals who work long hours). A summary of the questionnaire replies are set out in Appendix 2. Due to the qualitative nature of the replies, statistical analysis of the responses is not feasible. However, they do provide an interesting insight into the way in which advertising appeals are able to influence guests of MICE and 5 star resort hotels. Along with the questionnaire, a focus group was used to try to determine in a more direct fashion people’s attitudes to MICE and 5 star resort hotels and more particularly, what effect advertising appeals had on their purchasing behaviour. As with the questionnaire, the group chosen was not chosen randomly, but rather was selected from people who had already used MICE and 5 star resort hotels in the past. Participants were shown various advertisements (not only limited to MICE and 5 star resort hotels) and asked to discuss various propositions put to them. Once again, the results were qualitative and as such not appropriate for statistical analysis. While the response to the questionnaire was not particularly high, those individuals that did respond provided some particularly interesting replies. Predictably perhaps, most responses were from middle aged, well educated men. This group is the market segment that most MICE and 5 star resort hotels seek to target with their advertising. However, the strong response by women suggests that those MICE and 5 star resort hotels that are spending most of their advertising budgets targeting men may be missing out on a large segment of the market which may still

Pokémon :: Television Cartoons Essays

Pokà ©mon: Little Angels or Little Devils? My younger sisters are victims of the Pokà ©mon craze. On the weekends when I go home for a brief break from college life, Claire and Natalie are drawn to the television to catch the latest episode of Pokà ©mon on Saturday morning. Catching a glimpse of the illuminated screen, I walk into the kitchen and sit down with them as they blindly spoon cereal into their mouths, not missing one millisecond of the cartoon. Watching them absorb the show makes me laugh and, when I do, they turn to me and tell me, "Shut up! We’re trying to watch the show!" I give them a funny look and proceed to watch the show with them. I find that I also am in love with the little yellow Pikachu and can’t get enough of this darling cartoon series. Our addiction to Pokà ©mon is just as benevolent as the individual Pokà ©mon themselves. "Pokà ©mon started as the brainchild of Japanese creator Satoshi Tajiri, 34, who combined his two childhood passions: monster movies and the study of insects to invent Pokà ©mon in 1991" ("Poka" 2/3). There are over 155 Pokà ©mon to learn about and collect. There are Pokà ©mon trading cards, video games (several different versions), and a cartoon series on the Kids’ WB television network. The name Pokà ©mon actually means "pocket monsters" (Holmes 1/2). Pikachu, the most popular Pokà ©mon and my personal favorite, is an electric Pokà ©mon with special attacks such as "Thundershock" and "Lightningbolt." Other Pokà ©mon and their attacks include Krabby, a water Pokà ©mon, with a "vise grip" attack; Tauros a normal type Pokà ©mon with a "tail whip" attack; and Squirtle, also a water type Pokà ©mon, with a "hydro pump" attack (Walk 1/2). In the video game story there are three main trainers that travel around to different islands to catch wild Pokà ©mon that they train and become their own: Ash, Brock, and Misty. Ash wants to become a Pokà ©mon master which means that he must travel to all the Pokà ©mon gyms, defeat the gym leaders’ Pokà ©mon, and collect "badges" so that he can compete in the Pokà ©mon league and achieve his dream. In the video games, the person playing the game takes on the role of Ash and attempts to learn about all the different Pokà ©mon as well as how and when to use their corresponding attacks. As the different Pokà ©mon become more experienced, they may evolve into a new and more powerful Pokà ©mon that the trainer can battle with.

Beer Game

The Beer Game Copyright by Professor John Sterman, MIT October 1984 Sources:http://www. sol-ne. org/pra/tool/beer. html The Fifth Discipline: Pg 27-54 Why play the ‘Beer Game’? Instructions for running the game Steps of the Game Outline for post-game discussion and tasks Supplies Checklist & Mock-up of the Game Board Bibliography CHARTS AND TABLES TO PRINT OUT: [only issue Table 1 and 2 at the onset of the game. Chart 1-3 to be distributed at the end of the game and before post-game discussion. ] Table 1:Record Sheet: Cost of Inventory and Backlog Table 2:Computation of cumulative inventory backlogGraph 1:Inventory and Backlog Graph 2:Orders Graph 3:Perceived order by Customers Slide 1:Facilitator Slides Slide 2:Facilitator Slides Slide 3:Facilitator Slides Slide 4:Facilitator Slides Slide 5:Facilitator Slides Slide 6:Facilitator Slides Slide 7:Facilitator Slides Slide 8:Facilitator Slides Contact Point for loan of Beer Game Set: If you or your unit is interested in play ing this game and need assistance, please contact any of the 1Y LO participants, including the webmaster: Ms Sheila Damodaran at [email  protected] gov. sg. The game sets are kept at TRACOM's Resource Centre (SIRC, TRACOM).Contact: 3594241. Why play the Beer Game? The Fifth Discipline, pg 27 [Prisoners of the System, or Prisoners of our Thinking] This game was developed by Professor John Sterman of MIT to introduce people to fundamental concepts of systems dynamics. Participants experience the pressure of playing a role in a complex system, and come to understand first hand a key principle of systems thinking that structure produces behavior. The Beer Game is a simulation exercise – like a laboratory experiment, where one is able to see: ? The consequences of your decisions play out more clearly in real organisations; In effect it presents a microcosm of how a real organization functions. ? Shift in prevailing assumption of what is required of us for creating fundamentally different organisations; from a perspective of â€Å"the system we are trying to change is out there and we (as change agents) are trying to fix it† to â€Å"we and the system are inextricably linked together†. It was first developed in the 1960s at the Massachusetts Institute of Technology’s Sloan School of Management. Because it is a â€Å"laboratory replica† of a real setting (rather than reality itself), we can: Isolate the disabilities, and; ? Their causes more sharply than is possible in real organisations. Often this reveals that the problems originate in basic ways of thinking and interacting, more than in peculiarities of organisations and policy. Instructions for Running The Beer Distribution Game John Sterman October 1984 This document outlines the protocol for the beer distribution game developed to introduce people to concepts of system dynamics. The game can be played by as few as four and as many as 60 people (assistance is required for lar ger groups).The only prerequisite, besides basic math skills, is that none of the participants have played the game before, or else agree not to reveal the â€Å"trick† of the game. 1. State purpose of Game: a) Introduce people to the key principle â€Å"structure produces behavior† b) Experience the pressures of playing a role in a complex system 2. Provide overview of production-distribution system: a) The game is played on a board, which portrays the production and distribution of beer (show board game). [pic] b) Orders for and cases of beer are represented by chips, which are manipulated by the players.The players at each position are completely free to make any decision that seems prudent. Their only goal is to manage their positions as best as they can to maximise profits. c) Each brewery consists of four sectors: retailer, wholesaler, distributor and factory. One person manages each sector. d) A deck of cards represents customer demand. Each week, customers dema nd beer from the retailer, who ships the beer requested out of inventory. The retailer in turn orders beer from the wholesaler, who ships the beer requested out of the wholesaler's inventory.Likewise, the wholesaler orders and receives beer from the distributor, who in turn orders and receives beer from the factory. The factory produces the beer. At each stage there are shipping delays and order receiving delays. These represent the time required to receive, process, ship and deliver orders, and as well be seen play a crucial role in the dynamics. e) If your participants are not familiar with the concept of manufacturing, shipping, and distribution, consider presenting these concepts initially before proceeding. Call the participants together at one board and demonstrate each step of the way carefully.Often it is the lack of this information that causes the initial confusion of the game. You could say something like: â€Å"The Beer Game immerses us in a type of organization that is widely prevalent in all industrial countries: a system for producing and distributing a single brand of beer. There are four main characters in the story – a retailer, a wholesaler, a distributor and the Marketing Director of a brewery †¦ f) The players at each position are completely free to make any decision that seems prudent. All they have to do is meet customer demand and order enough from your own supplier while avoiding costly backlogs.They should manage their positions as best as they can to maximise profits. 3. State Basic rules: a) Have each team pick a name for their brewery (e. g. the name of a real beer). Have them label their record sheets with the name of their brewery and their position, e. g. retailer, wholesaler, etc. b) Have each person ante up $1. 00, or an appropriate amount, which will go to the winning team, winner take all (optional). c) The object of the game is to minimize total costs for your team. The team with the lowest total costs wins. Co sts are computed in the following way: ? The carrying costs of inventory are $. 0 per case per week ? Out-of-stock costs, or backlog costs, are $1. 00 per case per week ? The costs of each stage (retailer, wholesaler, distributor, factory) for each week, added up for the total length of the game, determine the total cost. d) No communication between sectors. Retailers should not talk to anyone else, same for wholesalers, distributors, and factories. The reason for this is that in real life there may be five factories, several dozen distributors, thousands of wholesalers, and tens of thousands of retailers, and each one cannot find out what the total activity of all the others is.The only communication between sectors should be through the passing of orders and the receiving of beer. e) Retailers are the only ones who know what the customers actually order. They should not reveal this information to anyone else. f) All incoming orders must be filled. If your inventory is insufficient to fill incoming orders plus backlog, fill as many orders as you can and add the remaining orders to your backlog. 4. Steps of the Game. a) Issue only Table 1 and Table 2 to all the participants. b) The game Facilitator should call out the steps as the game progresses. ) The first few times when the system is still in equilibrium the facilitator should go through the steps very slowly to make sure people have the mechanics down. d) Notice that of the six steps of the game, only the fifth, placing orders, involves a decision. e) The remaining five steps only involve moving inventory of beer or order slips or recording your position, and are purely mechanical. For the first few weeks the facilitator should tell everyone to order four units to keep the system in equilibrium. 5. Initialization of the boards: ) There should be twelve pennies or chips representing twelve cases of beer in each inventory. Each chip or penny represents one case. There should be four pennies in each shipping box and production delay. b) There should be order slips with â€Å"4† written on them, face down in each incoming and outgoing order box (orders and production requests). A supply of blank order slips should be available at each sector, as well as a supply of pennies or chips. c) The deck of cards with the customer demand should not be revealed in advance.The pattern of customer demand that is most effective for first-time players is a pattern of (†¦. To be revealed after the game/debrief by the Game Leader). d) Each order deck should have fifty weeks' worth of cards, and the players should be told that the game will be fifty weeks long. Typically it's only necessary to run the game thirty-five weeks or so in order to see the pattern of fluctuation, but telling the players it will be fifty weeks prevents horizon effects, where they run their inventories down because they feel the end of the game is coming. 6. Tips for Facilitators: ) It's very helpful if the game facil itator makes sure that each team stays in step so that you can quickly glance around the room and see that everyone is at the right place. Remind the participants to follow the steps in order to keep pace of the game. b) The game facilitator should write the current week on the blackboard as the steps for that week are called out. c) In about the eighth or ninth week the retailer will run out of inventory and have a backlog for the first time. People do not understand the meaning of backlogs, or the cumulative nature of the backlog.It is necessary to stop the game at this point, ask everyone to pay attention, and explain how backlog accounting works. Explain that: The backlog represents orders you've received, but have not yet filled, and which you must fill in the future, and d) The backlog is cumulative. â€Å"Next week you have to fulfill the incoming orders that you receive, plus whatever is in your backlog, if possible. If it not possible to fulfill the incoming orders, then t he amount left over is added to the existing backlog and must be filled in later weeks. † (see Table 2). ) Emphasize at this point that backlog costs twice as much as inventory. You may need to do this one or two more times, and should be careful to check and be sure that they do in fact fill their backlog. It is helpful to write the following equation on the blackboard to help with backlog accounting (see below). Orders to fill = New orders + Backlog this week + last week + †¦ f) The game can be played in as little as one and a half hours if the facilitator maintains a very brisk pace. The debriefing usually requires at least 40 minutes and can be expanded substantially. g) Consider having 2 persons to play each role.One person is responsible for taking the decision and advancing the chips and order slips and the other person to maintain the figures and filling up Tables 1 and 2. The pair may switch their roles mid-way during the game. 7. End of game a) Halt the game aft er about 36 weeks (but play the game, up to that point as if it is going on to 50 weeks, to avoid unusual end-of-game moves). b) Ask each position on each team to calculate their total cost: c) Cost = Total inventory x $0. 50 + Total Backlog x $1 and to mark the total cost on the Record Sheet for the position d) Pass out Orders graph sheets – one to each position.Ask each position to graph their own orders, week by week. Clarify to Factory that they will graph their Production Requests. e) Pass out Effective Inventory graph sheets – one to each position. Ask each position to graph the inventory week by week, showing any backlog as negative inventory. f) Team name and position must be indicated on all sheets. Once the graph is complete, have the players connect the dots with a bold magic marker (colour coded – Retailer = black, Wholesaler = blue, Distributor = green and Factory = red – to the board) for ease of viewing by the group. ) Pass out the Customer Order graph sheets to everyone except Retailers. Ask each person to sketch what he or she thinks the customer order rate looked like over time. Ask each to indicate a simple scale or maximum value. ? Ask retailers not to discuss anything about customer orders until after the debrief of the game. h) Collect all the sheets, and send players off for a break. i) During break: ? Calculate team costs to determine the winner and compute the average team cost. ? Tape sheets together (as shown below) and hang up team graphs.Effective Inventory Team 1Team 2Team 3 |Retailer | |Retailer | |Retailer | | |Wholesaler | |Wholesaler | |Wholesaler | | |Distributor | |Distributor | |Distributor | | |Factory | |Factory | |Factory | |Orders/Production Requests Team 1Team 2Team 3 |Retailer | |Retailer | |Retailer | | |Wholesaler | |Wholesaler | |Wholesaler | | |Distributor | |Distributor | |Distributor | | |Factory | |Factory | |Factory | |STEPS OF THE GAME (Adapted) |Step # |General instructions |Speci fic Instruction to players playing the roles| | | |of Factory/ Retailer | | |Receive inventory (move chips from shipping delay 2 into current |Factory advance from production delay 1 to | | |inventory) and advance the shipping (from shipping delay 1 to |production delay 2. | |shipping delay 2). | | | |Use both hands to slide the chips over from respective boxes. | | | |Caution players not to move all chips into one box]. | | | |Look at incoming orders (check the order slip placed in your |Retailer draws consumer card. Follow | | |inbox) |instructions as in adjacent set. ] | | |Fulfill orders from your stock (your current inventory only). | | | |Move chips out into shipping delay 1 of the player downstream. | | | |All incoming orders must be filled. Facilitator to re-mention | | | |this step when the team has entered week 6/8) If your inventory | | | |is insufficient to fill incoming orders plus backlog, fill as | | | |many orders as you can and add the remaining orders to your | | | |backlog (use Table 2 to work out your cumulative backlog). | | |Record your balance inventory and/or cumulative backlog (in the | | | |latter case your balance inventory would have been reduced to | | | |zero) on Table 1. | | | |Advance the rder slips that you placed in the previous week from|Factory introduces production requests from | | |your outbox into the inbox of the player upstream. |previous week into production delay 1. | | |Take decision on the orders you wish to place for the upcoming | | | |week. Place your order slips in your outbox. | | | |Record your orders on Table 1. | FOLLOW-UP TASKS AND OUTLINE FOR POST-GAME DISCUSSION (Adapted) |Step # |Tasks and outline |Group Task | | |Remind participants of the objective |Emphasize that although they played the game to minimize cost, that's | | |of the game. |not the real purpose of the game. | | | | | | |The game is designed to: | | | |give players an experience of playing a role in a system | | | |show them how â€Å"st ructure produces behavior† | | |Request players tabulate total current|None. | |inventory, cumulative inventory on | | | |Table 1. | | | |Accounting: |None. | | |Record penalty of $0. 50 per item in | | | |inventory (at each stage). | | | |Record penalty of $1. 0 per item | | | |ordered but not filled. | | | |Plot inventory versus time (Chart 1) |Place charts at front of classroom for everyone to see (see typical | | |and unfilled orders (on Chart 1 also) |chart below). | | |versus time for your stage and for | | | |your company overall. | | | | | | |Plot order versus time (Chart 2) for |Place charts at front of classroom for everyone to see (see typical | | |your stage and for your company |chart below). | | |overall. | | | | | | | | | | | | | | | | | | | | | | |Ask participants: |Each of the players had the best possible intentions: to serve his | | |What’s going through the minds of the |customers well, to keep the product moving smoothly through the system, | | |p layers? |and to avoid penalties. Each participant made well-motivated, clearly | | |What problems arose during the game |defensible judgments based on reasonable guesses about what might | | |playing? |happen.Still there was a crisis- built into the structure of the | | | |system. | | | | | | | |Most people try to explain reality by showing how one set of events | | | |cause another or, if they've studied a problem in more depth, by showing| | | |how a particular set of events are part of a longer term historical | | | |process. | | | | | | |Have the participants illustrate this for themselves by looking at their| | | |own â€Å"explanations† for events during the game. | | | | | | | |Take a particular incident in the game, for example a large surge in | | | |production requests at the factory, and ask the person responsible why | | | |they did that. | | | | | | |Their answer will invariably relate their decision to some prior | | | |decision of the person they supply or who supplies them. Then turn to | | | |that person and ask them why they did that. Continue this until people | | | |see that one can continue to relate one event to earlier events | | | |indefinitely. | | | | | | |Wholesaler/Distributor may say: â€Å"I am ordering four/fives times my usual| | | |order. Maybe the retailer is ordering so much because they can’t get | | | |any of the beer from me. Either way I have to keep up. I am dismayed | | | |the brewery had just stepped up production. How could they be slow? | | | |What if I can’t get any of the beer and they go to one my competitors? | | |The backlog costs due. I am afraid to tell the accountant what to | | | |expect. † | | | | | | | |Retailer may say: â€Å"I ordered more just to be safe and to keep up with | | | |the sales. I don’t want to get a reputation for being out of stock of | | | |popular beers.By the time I call my backlogged customers, I am sold | | | |out before I can sell a single new cas e. What is that wholesaler doing | | | |to me? Doesn’t he know what a ravenous market we have down here? I | | | |think of all the lost potato chip sales† | | | | | | | |Brewery may say: â€Å"Even after Week 14 I had not caught up with the | | | |backlogs.At Week 16 I have finally caught up but the distributors had | | | |not asked for any more beer at all? Why did the order mushroom and then| | | |die? † | | | | | | | |â€Å"The orders have finally arrived but what’s wrong with the retailers? | | | |Why have they stopped ordering? † | | | | | |Briefly describe what strategy you |After a few minutes (about 10) of discussion, look at the graphs of the | | |developed during the game for making |results. Ask them, â€Å"What commonalities do you see in the graphs for the| | |ordering decisions. |different teams? † | | | | | | | |Participants should see common pattern of overshoot and oscillation. | | | |This should be most evident in the effect ive inventory graph. | | | | | | |Get them to really see for themselves that different people in the same | | | |structure produce qualitatively similar results. Even though they acted | | | |very differently as individuals in ordering inventory result (there was | | | |free will), still the overall patterns (qualitative pattern) of behavior| | | |are similar. | | | | | | |This is a very important point–take as long as necessary to have them | | | |see it for themselves. | | | | | | | |Obviously at the factory, the Marketing Director will be blamed for any | | | |layoffs or plant closings that come out of this crisis – just as the | | | |wholesaler blamed the retailer and the retailer blamed the wholesaler | | | |and oth wanted to blame the factory. | | | | | | | |You might reflect at this point on what happens in the real world when | | | |such performance target oscillations are generated. The typical | | | |organizational response is to find the â€Å"person respon sible† (the guy | | | |placing the orders or the inventory manager) and blame him. | | | | | | |The game clearly demonstrates how inappropriate this response | | | |is–different people following different decision rules for ordering a | | | |generated oscillation. | | |Plot what you think was the customer |After having had them all see the extent to which different people | | |order over time (Chart 3) during the |produce similar results in a common structure, you then need to move on | | |game. |to what is usually the most powerful point made by the game: that | | | |internal structure not external events cause system behavior. | | | | | | |The way to make this point is to ask the following question: | | | | | | | |†All of you who were not retailers, or who otherwise have not found out | | | |what the pattern of customer orders was, what do you think the customers| | | |were doing? † | | | | | | | |Most people usually believe that customer demand was fluctu ating because| | | |they believe that the system fluctuations must have been externally | | | |driven. Most draw a curve which rises and falls, just as their orders | | | |rose and fell. | | | | | | |Get each of them (other than retailers) to see that they assumed | | | |fluctuating customer orders. | | |Retailer in your team to plot actual |Draw in each order rate graph the actual customer ordering pattern. The| | |customer order on the same chart. |small step from 4 to 8 orders should make a strong visual impression in | | | |contrast to the order rate fluctuations which often have amplitude of | | | |20- to 40-orders per week.Moreover, the sustained oscillations | | | |generated by the system contrast sharply to the absolutely flat customer| | | |order rate after the step at week 5. | | | | | | | |The Retailer may respond with: â€Å"The demand never mushroomed. And it | | | |never died out. We still sell eight cases of beer – week after week. | | | |But you didn’t send us the beer we wanted. So we had to keep ordering, | | | |just to make sure we had enough to keep up with our customers†. | | | | | | | | | | | | | | |This simple exercise of getting them to see how, contrary to their | | | |expectations, the internal system structure is completely capable of | | | |generating fluctuating behavior is the most profound lesson they can | | |Are the oscillations due to external |learn from the game. | | |or internal reasons? | | | |It is important that they see this for themselves, as a demonstration or| | | |an experimental result, which they did, not as an idea of which you're | | | |trying to convince them. In fact, the game is an experiment in very true| | | |sense. The result of oscillating behavior was not predetermined. | | | | | | | |The assumption that the system's problems are caused by the customer | | | |stems from our deeply felt need to find someone or something to blame | | | |where there are problems. | | | | | | |Initially after the game is over, many believe that the culprits are the| | | |players in the other positions. This belief is shattered by seeing that| | | |the same problems arise in all plays of the game, regardless of who is | | | |manning the different positio ns. Many then direct their search for a | | | |scapegoat toward the consumer. | | | | | | |But when their guesses are compared with the flat customer orders, this | | | |theory is shot down too. This has a devastating effect on some players. | | |In the last 20 years, the beer game |If literally thousands of players all generate the same qualitative | | |has been played thousands of times in |behaviour pattern the causes of the behaviour must lie beyond the | | |classes and management training |individuals. The causes of the behaviour must lie in the structure of | | |seminars. It has been played on five |the game itself. | |continents, among people of all ages, | | | |nationalities, cultural origins and |When placed in the same sy stem, people however different, tend to | | |vastly varied business backgrounds. |produce similar results. | | |Some had never heard of a production/ | | | |distribution system before; others had|In system dynamics we take an alternative viewpoint—that the internal | | |spent a good portion of their lives |structure of a system is more important than external events in | | |working in such businesses. |generating qualitative patterns of behavior. | | | |A system causes its own behaviour. In the game.The structure that | | |Yet every time the game is played the |caused wild swings involved the multi-stage supply chain and the delays | | |same crises ensue. First there is |intervening between different stages (refer Tools on ST), the limited | | |growing demand that can’t be met. |information available (refer Tools on TL) at each stage in the system, | | |Orders build throughout the system. |and the goals, costs, perceptions and fears (refer Tools on MM) that | | |Invent ories are depleted. Backlogs |influenced individuals’ orders for beer. | | |grow. Then the beers arrive enmasse | | | |while incoming orders decline. |These an be illustrated by this diagram: | | | | | | |By the end of the experiment, almost | | | |all players are sitting with large |Events | | |inventories they cannot unload –e. g. |(e. g. inventory backlogs and surges) | | |it is not unusual to find brewery and | | | |distribution inventory levels in the | | | |hundreds over hanging orders from | | | |wholesalers for 8-12 cases per week. Patterns | | | |(Panic behaviours / oscillations) | | | | | | | | | | | | | | | |Structure | | | |(only form of communication is through order slips, the use performance | | | |measures by inventory and order sizes and the effect of delays – from | | | |upstream) | | | | | | | |But also remember the nature of structure in a human system is subtle | | | |because we are a part of it and this means we often have the power to | | | |alter structures, which we are operating. | | | | | | | |How can such controlling structures be recognised? | | | | | | | |Characteristic pattern of order buildup and decline at each position, | | | |amplified in intensity as you move upstream from retailers to breweries. | | | | | | |Each position goes through an inventory-backlog cycle: first there is | | | |insufficient inventory and then there is too much. | | | | | | | |Assumptions of an external cause (e. g. the other players or the | | |Think of examples in your |customer) are characteristics of non-systemic thinking. | |organisations where you can apply | | | |these principles. When we feel: |How would such knowledge help us to be more successful in a complex | | |Too much work? |system – redefining your scope of influence? | | |Not enough information? | | | |Too many changes? |Each player adopts the simplest ordering policy possible – simply place | | |Not able to manage changes? |new orders equal to ord ers he received. When this strategy is followed | | |Someone is unfair to you? unswervingly by all the players, all positions settle into stability by | | |Customers are demanding? |Week 11. The strategy may generate persistent backlogs (may not be | | | |practical in real life as it invites competitors to enter the market) | | | |but it eliminates the buildup and collapse in ordering and the | | | |associated wild-swings in inventories. In 75% of teams that play the | | | |game, the â€Å"no strategy† position have a lower total cost. | | |Most players see their job as â€Å"managing their position† in isolation | | | |from the rest of the system. What is required is to see how their | | | |position interacts with the larger system – your influence is broader | | | |than simply of your own position. | | | |You pay close attention to own inventory, costs, backlog, orders, etc. | | | |(events).You respond to new orders by shipping out beer. What this | | | |view misses, is the ways that your order influences your supplier’s | | | |behaviour. Which in turn might influence yet another supplier’s | | | |behaviour. For example, if they place a large number of orders, they | | | |can wipe out their supplier’s inventory, thereby causing their | | | |supplier’s delivery delay to increase.If they then respond by placing | | | |still more orders, they create a â€Å"vicious cycle† that increases problems| | | |throughout the system (see below). Players that share the systems | | | |viewpoint tends to win – in order for you to succeed others must succeed| | | |as well. | | | | | | | |Causal Diagram of effect of systemic structure downstream & delays | | | |upstream | | | | | | | | | | |(see overleaf) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |What do you believe to be the causes |This is a good point to introduce learning disabilities and our ways of | | |of these problems? thinking in an organization: | | | | | | | |Fixation on events – Each player focuses on events giving very little | | | |power to alter the course of events at a structural or strategic levels. | | | |I am my position – because they â€Å"became their positions†, people do not | | | |see how their own actions affect the other positions. | | |The enemy is out there – The game reveals the problems originate in | | | |basic ways of our thinking and interacting, more than in peculiarities | | | |of organisations and policy. Often when problems arise, people quickly | | | |blame each other – â€Å"the enemy† becomes the players at the other | | | |positions, or even the organization structure and polices and/or | | | |customers. | | |The illusion of taking charge – when they get â€Å"proactive† and place more| | | |orders, they make matters worse. | | | |The pa rable of the boiled frog – because their overordering builds up | | | |gradually, they don’t realise the direness of their situation until its | | | |too late. | | | |Delusion of learning from experience – by and large they don’t learn | | | |from their experiences because the most important consequences of their | | |actions occur elsewhere in the system, eventually coming back to create | | | |the very problems they blame on others. | | | |The Myth of the Management Team – the teams running the different | | | |positions become consumed with blaming the other players for their | | | |problems, precluding any opportunity to learn from each others’ | | | |experience. | | |What could we do to potentially change|Analysis using Levels of Perspective tool: | | |the behaviour observed in the game? Espoused Vision: Everybody working as a team | | | |Vision-in-Use: I am my position | | |Check-up the Vision-Deployment Matrix. |Systemic Structure-in -use: No communications, minimising losses for | | | |one’s position and overanticipating the orders | | | |Patterns-in-use: Are not able to meet orders in time and having to deal | | | |with delayed productions and over-doers in the long-run. | | | |Events: Is constantly reacting leading to frustrations and burnouts in | | | |the long-run. | | |Desired Systemic Structure: First, wait patiently for the beer that you | | | |have ordered but because of the delay, it has not yet arrived. Second, | | | |don’t panic. It takes discipline to contain the overwhelming urge to | | | |order more when backlogs are building and your customers are screaming. | | | |Without the discipline, you and everyone will suffer. Third, assume a | | | |†No strategy† approach can actually work. | | |Shift in prevailing assumption of what is required of us for creating | | | |fundamentally different organisations; from: | | | |Firstly, a perspective of â€Å"the system we are trying to change is out | | | |there and we (as change agents) are trying to fix it† to â€Å"we and the | | | |system are inextricably linked together†. | | | |Secondly, a perspective of serving the team rather than the â€Å"individual†| | | |is who counts here; watch out for Number One! | SUPPLIES CHECKLIST PER TEAM: |3 TEAMS |4 TEAMS |5 TEAMS |6 TEAMS | |Game Board |3 |4 |5 |6 | |Single Chips |600 |840 |960 |1200 | |Ten Chips |90 |120 |150 |150 | |Customer Deck (1) |3 |4 |5 |6 | |Order Slips (200) |600 |800 |1000 |1200 | |Graphs (4) |12 |16 |20 |25 | |Record Sheets (4) |12 |16 |20 |25 | |Pencils (4) |12 |16 |20 |25 | |Calculators (4) |12 |16 |20 |24 | |PER SESSION: |Masking Tape | |Four-color markers per team | |Magic Markers | |Debriefing Book | |Flip Charts | |Either white board to hold charts for each organization or space on a blank wall | |Previous game graphs | |Table set ups | [B]- Items are not available with the game set. Please provide required sets. [I] - Items are not available with the game set. Please make required number of copies. MOCK GAME BOARD [pic] Table 1: Cost of Inventory and Backlog Team Name: _______________________ Circle your position:WholesalerRetailerDistributorFactory Wk | | |INV 1 = | |This week's order from customer: _____ |This week's order from customer: _____ | |last week's backlog: + _____ |last week's backlog: + _____ | |total orders to ship: = _____ |total orders to ship: = _____ |this week's shipments: – _____ |this week's shipments: – _____ | |this week's backlog: = _____ |this week's backlog: = _____ | |This week's order from customer: _____ |This week's order from customer: _____ | |last week's backlog: + _____ |last week's backlog: + _____ | |total orders to ship: = _____ |total orders to ship: = _____ | |this week's shipments: – _____ |this week's shipments: – _____ | |this week's backlog: = _____ |this week's backlog: = _____ | |This week's order from customer: _____ |This week's order from customer: _____ | |last week's backlog: + _____ |last week's backlog: + _____ | |total orders to ship: = _____ |total orders to ship: = _____ | |this week's shipments: – _____ |this week's shipments: – _____ | |this week's backlog: = _____ |this week's backlog: = _____ | |This week's order from customer: _____ |This week's order from customer: _____ | |last week's backlog: + _____ |last week's backlog: + _____ | |total orders to ship: = _____ |total orders to ship: = _____ | |this week's shipments: – _____ |this week's shipments: – _____ | |this week's backlog: = _____ |this week's backlog: = _____ | Graph 1: My Inventory (including Backlog) Team Name: _______________________ [pic] Graph 2: My Orders Team Name: _______________________ [pic] Graph 3: My perception of orders by customer Team Name: _______________________ [pic] The Beer Distribution Game An Annotated Bibliography Covering its History and Use in Education and Research Prepared by John D. Sterman Sloan School of Management Massachusetts Institute of Technology Cambridge, MA 02139 (617) 253-1951 (voice); (617) 253-6466 (fax); [email  protected] edu (email) April 1992; revised July 1992 The Beer Distribution Game dates to the earliest days of system dynamics.The game has been used for three decades as an introduction to systems thinking, dynamics, cumputer simulation, and management. It has been played by thousands of people, all over the world, from high-school students to CEOs of major corporations. The references below provide useful information for those who want to follow up the experience of the game. These works describe the history of the game, the equations for simulating the game on a computer, the success of organizational change efforts based on the original model embodied in the game, the psychological processes people use when playing, and even how these processes can produce chaos. * ? Forrester, J. W. (1958) Industria l Dynamics: A Major Breakthrough for Decision Makers.Harvard Business Review, 36(4), July/August, 37-66. The first asrticle in the field of system dynamics. Presents the production-distribution system as an example of dymanic analysis of a business problem. Reprinted in Roberts (1978). ? Forrester, J. W. (1961) Industrial Dynamics. Cambridge, MA: MIT Press. Contains a description of an early version of the Beer Distribution Game ? MacNeil-Lehrer Report, (1989) Risky Business – Business Cycles, Video, Public Broadcasting System, aired 23 October 1989. Videotape showing students in John Sterman's Systems Dymanics course at MIT playing and discussing the Beer Game. Relates the game to boom and bust cycles in the real world.Excellent in debriefing the game, and helpful to those seeking to learn how to run the game. Copies available from System Dynamics Group, E60-383, MIT, Cambridge MA 02139. ? Mosekilde, E. , E. R. Larsen & J. D. Sterman (1991). Coping with complexity: Determini stic Choas in human decision making bahavior. In J. L. Casti & A. Karlqvist (Eds. ), Beyond Belief: Randomness, Prediction, and Explanation in Science, 199-229. Boston:CRC Press Shows how simple and reasonable decision rules for playing the Beer Game may produce strange nonlinear phenomena, including deterministic chaos. ? Radzicki, M. (1991). Computer-based beer game boards. Worcester Polytechnic Institute, Dept. f Soc Sci and Policy Studies, Worcester, Ma 01609-2280 Beer game boards in PICT format for Macintosh computers available on disk for $5. 00; all proceeds go to the System Dynamics Society. ? Thomsen, J. S. , E. Mosekilde, & J. D. Sterman (1992). Hyperchaotic Phenomena in Dynamic Decision Making. Systems Analysis and Modelling Simulation, forthcoming. Extends earlier papers by Moskilde, Sterman, et al. to examine hyperchaotic modes in which the behavior of the beer distribution system may switch chaotically among several different chaotic attractors (for afficionados, †Å"hyperchaos† exists when a dynamical system contains multiple positive Lyapunov exponents). ? Roberts, E. B. , ed. (1978) Managerial Applications of System Dynamics.Cambridge, MA: Productivity Press. Excellent anthology of early-applied system dynamics work in organizations, including analysis of efforts to implement the results of the model which led to the Beer Game. ? Senge, P. (1990) The Fifth Discipline. New York: Doubleday. Excellent non-technical discussion of the Beer Game, and systems thinking principles generally. ? Sterman, J. D. (1984). Instructions for Running the Beer Distribution Game. D-3679, System Dynamics Group, MIT, E60-383, Cambridge, MA 02139. Explains how to run and debrief the Beer Game, including layout of boards, set up, play, and discussion. Incorporates debriefing notes by Peter Senge.Some people have found this document, in conjunction with the MacNeil/Lehrer video and plenty of practice, is sufficient to enable them to lead the game successfully. ? Sterman, J. D. (1988). Modeling Managerial Behavior: Misperceptions of Feedback in a Dynamic Decision Making Experiemnt. Management Science, 35(3), 321-339. Detailed analysis of Beer Game results. Examines why people do so poorly in the Beer Game. Proposes and tests a model of the decision making processes people use when playing the game and shows why they do so badly. Additional information on systems dynamics, including publications, simulation games, management flight simulators, journals, etc. is available from John Sterman at the address above. *If you know of additional publications which discuss aspects of the game not ncluded in this bibliography please send a copy to John Sterman at the address above so they can be incorporated in future releases of this bibliography. ———————– [1] Order fulfilled Cost Storage] Total Inventory Balance(w=t) = Inventory Balance(w=t-1) + New Inventory Received(w=t) [2] Balance Inventor y After fulfilling Order(w=t) = Total Inventory Balance (w=t) – Order Fulfilled (w=t) [3] Cumm Backlog (w=t) = New Backlog (w=t) + Unfulfilled Cumm Backlog(w=t-1) ———————– Reta