These exercises are to gain more practice with some of the basic metrics that are used in marketing management. Understanding how to calculate these metrics is helpful as they form the basis of many managerial and company decisions. Therefore, in addition to the math, some questions also have inferences to be made based on the metrics. Most of these exercises are based on actual examples and formulae for which we have covered the math in our course content, either during the chapter content or during the case content. If you are unsure how to proceed, please check with me, and I am more than happy to help in whatever way I can.
(1) Assume that you are the brand manager for Apple’s iPhone 12. Estimate annual US market potential, annual US market demand, and annual US company demand in 2021. Use the “Funnel” method to estimate the number of buyers. Clearly list and justify all other assumptions; e.g., how you are defining your market, number of units purchased by average buyer, etc. (1.5 points)
(2) Use the Chain-Ratio method to estimate annual US market demand in 2021 for Coke soda. Clearly list and justify all assumptions. (1 point)
Questions 3 to 6 are based on the common scenario in Question 3, so price and cost information can be shared across these questions as appropriate.
(3) Macrohard Corporation is a new business based out of Puerto Rico that is considering a plan to manufacture and market cellphones in Peurto Rico starting in 2021. However, before it decides to take the plunge, it needs to understand the feasibility of breaking even. Macrohard is planning to sell the cellphones to wholesalers at $25. The electronic circuitry costs $7.50, CORNING supplies the screen for $3.75, and the battery costs $1.25. Additionally, the cost of a fabrication facility is $8.5 million, and Macrohard estimates that it will need to spend $2 million on sales and marketing expenses in order to achieve its objectives, and $2 million on general and administrative expenses. Calculate the break-even volume, and explain how feasible it is for Macrohard to break even. (1 point)
(4) When wholesalers sell to retailers, in order to ensure suitable margins, they typically add a 10% markup to the price at which they buy cellphones from Macrohard. Additionally, when retailers sell to consumers, to ensure their own margins, they typically add a 15% markup to the price at which they buy cellphones from wholesalers. What is the price that wholesalers charge retailers, and what is the price that retailers charge consumers? (.5 point)
(5) Now assume that Macrohard has started its operations and is doing fairly well. However, based on some market research about economic demand curves and price sensitivity, Macrohard is considering lowering its price to $20. What is the incremental break-even volume as a percentage of the old no. of units? Explain whether or not this incremental level of sales appears feasible. Hint: Gross Margin % is the same as Unit Margin %. (1 point)
(6) Macrohard has commissioned some more market research to understand how consumers make their buying decisions, with specific focus on how consumers evaluate alternatives. Create an expectancy-value model that depicts three cellphone brands (including Macrohard), their average ratings across consumers on three attributes that are relevant to consumers’ buying decisions for cellphones, the average importance weights for the three attributes across consumers, and the overall evaluation for each brand. Clearly list and justify all assumptions. Does this decision appear to follow a compensatory or non-compensatory model? Based on your conclusion about a compensatory or non-compensatory model, which brand is the average consumer likely to choose and why? (1.25 points)
(7) Nike estimates that it can persuade Ms. Consumer in 2020 to start purchasing Nike shoes in 2021, and to continue purchasing Nike shoes in 2022 and 2023 before switching to Adidas. The likelihood of purchase is expected to decrease by 10% each year starting in 2022. Marketing expenses in 2020 to get her to start using Nike shoes in 2021 are estimated at $50, and she is expected to spend $100 on a pair of Nike shoes each year from 2021, with the variable costs for each pair of shoes being $50 each year. Using a discount rate of 10%, what is her CLV to Nike, assuming the calculations are done in 2020? (1.25 points)
(8) As you might be aware, Seattle University recently entered the online graduate business programs industry with an online MBA offering and an online MSBA (M. S. in Business Analytics) offering. Use an appropriate scorecard to evaluate the brand extendibility of Seattle University’s pre-online-offering brand into the online graduate business programs industry. Clearly list and justify all assumptions. Based on your analysis, explain whether you would recommend a sub-brand strategy for branding or some other strategy. If some other strategy, which strategy would that be? (1 point)
(9) Use the principles of new-product adoption to estimate the annual number of regional buyers in 2023 for hyper-loop rides between Seattle and Portland (both directions). Clearly list and justify all assumptions; e.g., how you are defining your market, etc. Based on your estimate, explain whether this market appears worthwhile or not. (1 point)
(10) Professionalism, including adhering to the submission guidelines (.5 point).
1) Show and explain all calculations and formulae that you are doing/using.
2) Provide in-depth explanations and justifications, especially for any assumptions.
3) Answer all parts of the question, and provide specific responses to the questions asked.
