SOLUTIONQUIZ1YQUESTIONS

1Y. HerbalHealthInc.(HHI),alargeproducerofvarietyofherbalproducts,istestinganew herbaldrinkforthegrowinghealthfoodmarket.Thecompanyclaimsthatthisnewproduct stabilizesbloodpressureandreducescholesterolabsorption.Itcomesintheformoffine granulescontainedinasmallsachetwhichcanbepouredinaglassofwatertogeta refreshingdrinkgoodforhealth!Althoughaherbalhealthproduct,itcanbedistributed throughnormalwholesale/retailchannels,ratherthanrequiringanyspecialdistribution networksnowusedbymosthealthfoodmanufacturers. Decidewhichstageoftheproductlifecyclebestdescribesthesituationintheabovecase consideringtherelevantproductmarket. Sincethisproducthasnotyetbeenintroduceditistechnicallystillinthepre commercialisationstagesofthenewproductdevelopmentprocessmostlikelythe developmentstage.Obviously,thisisanewproductconcept,notjustanothermeto product.Ifandwhenitbecomescommercialised,itwillbeginatthemarketintroduction stageoftheproductlifecycle. Whatmarketingstrategieswouldyousuggesttothesecompanies? Thismightbeagoodtimetoreviewthenewproductdevelopmentprocessanddiscusswhat thecompanyoughttobedoingforthisproduct,duringeachstepoftheprocess. Atrulynewproductconceptisbeingdevelopedand,despitesomerealproductadvantages, itwillrequiresomeconsumereducationandsomenewdistributionchannelarrangements forthisparticularproductmarkethastobeworkedout.Itwillbesometimebeforethe companyrecoversitsinvestmentandbeginstoearnaprofit,althoughitspatentwillhelp protectitfromimitators.Alsoconsumersmaynotbetooeagertobuyanewformofa popularproduct,despitesomerealadvantagesintermsofconvenienceandperhaps economy.

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 2Y. PacketsoffoursachetsofthisnewproductdescribedinQuestion1Yabovearesoldto consumersfor$2.49.Retailersearn27%ontheretailsellingprice.Wholesalerstypically earn25%markupontheircostofgoods.Whatisthemanufacturerssellingprice?To manufactureandmarketthisproductHHIhasfixedcostsof$10,000andaveragevariable costof$1.00perpacketoffoursachets.Howmanypackets(offoursachets)mustHHI producetobreakeven? Solution: Retailsellingprice: $2.49 27%

Retailmarkuponsellingprice: Retailerscost: Wholesalerssellingprice: Wholesalercost:

$2.49(10.27)=$1.818>>Wholesalerssellingprice

$1.818

Wc+0.25Wc=$1.818

Or,Wc=$1.818/1.25i.e.,$1.454>>Manufacturerssellingprice LetthebreakevenquantitybeQ Then; $10,000+$1.00Q=$1.454Q Or.Q=$10,000/0.454=22026.

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 3Y. UsethefollowingTabletoshowhowspecialty,shopping,andconveniencegoodsgenerally relatetointensive,selective,andexclusivedistribution.Suggestabrandnamethatisan exampleofeachgoodsdistributionmatchup. Answers:

DISTRIBUTION DENSITY PRODUCT TYPE BRAND

Intensivedistribution

Conveniencegoods

Selectivedistribution

Shoppinggoods

Exclusivedistribution

Specialtygoods

ColgateToothpaste CocaCola MostFMCGBrands PanasonicHDTV LOrealCosmetics HugoBossClothing RollsRoyce NikeSneakers ABOJewelry KodakEasysharePrinters RolexWatch

Question4Y

(6x0.5marks=3marks)

ReadeachoftheFOURstatementsintheboxbelowcarefully.IfastatementisTRUEwriteTinthe cellnexttothestatementintheYourAnswercolumn;ifitisFALSE,writeF.

STATEMENTSTOBEEVALUATED IMCreferstoInteractiveMarketingCommunications TheHierarchyofEffectsModelexplainswhyabranddoesnothave100% marketshare. IntheAIDAModel(theframeworkusedinselectinganadvertisement message),Astandsforattention,Istandsforinterest;Dstandsfordesireand Astandsforaction Pullstrategiesrelyonpersonalsellingandsalespromotionstoencourage intermediariestotaketheproductandpromote. Advertisinghelpsmarketersincreaseormaintainbrandawarenessand, subsequently,marketshare. Themainobjectivesofsalespromotionaretoincreasetrialpurchases, consumerinventoriesandrepeatpurchases.

YourAnswer T(TRUE) F(FALSE F T T

F T T

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SOLUTIONQUIZ1GQUESTIONS
1G. OutdoorExpertsInc.(OEI),manufacturerofalineofproductsforcampingandother outdooruses,hasannouncedplanstosellanewinsectrepellantgel,calledSafeRepel.The companyintendstospendheavilyonTV,radioandmagazineadvertisementsbeforeSchool HolidaysandChrismasbreakthatwillpromoteSafeRepelasthesafestnonstickyinsect repellantGelforeveryonewithacleanandnaturalfragrance.OEIalsodecidedtooffer freesamplesofSafeRepeltothebuyersofotherOEIproducts.Despitecompetition,OEI anticipatesthatthisnewproductwillcapturea3percentshareoftherelevantmarketwhich hasbeengrowingataratherslowpace. Decidewhichstageoftheproductlifecyclebestdescribesthesituationintheabovecase consideringtherelevantproductmarket. Marketintroduction Whatmarketingstrategieswouldyousuggesttothesecompanies? Atrulynewproductconceptisbeingintroducedand,despitesomerealproductadvantages, itwillrequireconsiderableconsumereducationandsomenewdistributionchannel arrangementsforthisparticularproductmarket.Itwillbesometimebeforethecompany recoversitsinvestmentandbeginstoearnaprofit,althoughitspatentwillhelpprotectit fromimitators.Alsoconsumersmaynotbetooeagertobuyanewformofapopular product,despitesomerealadvantagesintermsofconvenienceandperhapseconomy.

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 2G. OutdoorExpertsInc.(OEI)manufacturesalineofproductsforcampingandotheroutdoor uses.OneoftheirbestsellingproductsisaninsectrepellantlampcalledClearGlow.To manufactureandmarketthisproductOEIhasfixedcostsof$100,000andaveragevariable costof$12.00.Averageannualsalesoftheproductis8000unitsyieldingaprofitof $100,000.OEImarketstheproductsthroughwholesalerstotheretailoutlets. Ifwholesalerstakeamarkuponmanufacturerssellingpriceof25%andretailersearna markupof40%ontheircost,whatisthepriceconsumerswillpayforthelamps? LetthemanufacturerssellingpricebeMP; formakingaprofitof$100,000thefollowingequationmustbetrue: $100,000+$12x8000+100,000=8000xMP Or,MP=$37.00 Wholesalersmarkuponmanufacturerssellingpriceis25% LetWholesalerssellingpriceisWP; Then,Wp(10.25)=$37.00 OrWp=$37.00/0.75=$49.33 Retailersmarkuponcost:40% LetretailerspricebeRp; ThenRp=$49.33+0.4(49.33)=$69.07

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 3G. Howdospecialty,shopping,andconveniencegoodsgenerallyrelatetointensive,selective,and exclusivedistribution?Giveabrandnamethatisanexampleofeachgoodsdistributionmatch up. Answers:

DISTRIBUTION DENSITY PRODUCT TYPE BRAND

Exclusive distribution Selective distribution Intensive distribution

Specialty goods Shopping goods Convenience goods

Rolls Royce Panasonic HDTV Orbit chewing gum

Question4G

(6x0.5marks=3marks)

ReadeachoftheFOURstatementsintheboxbelowcarefully.IfastatementisTRUEwriteTinthe cellnexttothestatementintheYourAnswercolumn;ifitisFALSE,writeF.

STATEMENTSTOBEEVALUATED Companieswithinthesameindustrydiffergreatlyinhowtheydesigntheir IMCmixes. TheHierarchyofEffectsModelexplainswhyabranddoesnothave100% marketshare. IntheAIDAModel(theframeworkusedinselectinganadvertisement message),Astandsforassertion,Istandsforinterest;Dstandsfordesireand Astandsforaction Pushstrategiesrelyonpersonalsellingandsalespromotionstoencourage intermediariestotaketheproductandpromote. Advertisinghelpsmarketersincreaseormaintainbrandawarenessand, subsequently,marketshare. Themainobjectivesofsalespromotionaretoincreasetrialpurchases, consumerinventoriesandrepeatpurchases.

YourAnswer T(TRUE) F(FALSE T T F

T T T

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SOLUTIONQUIZ1BQUESTIONS
1B. AlphaEmporium(AE)havelongbeenmanufacturingvarioustypesofmanuallyoperated kitchenappliancessuchaskitchenknives,canopeners,kitchenscissorsetc.Manyofthe productssuchasthehandheldmanualcanopeners,havebeensteadilylosingtheirappealto customersbecauseoftheavailabilityoftheirelectricalorelectronicsubstituteswhich,though muchmoreexpensivethanthemanualversion,aremoreconvenienttouse.Infactthemarket forthisparticularproducthasbeenshrinkingforthelastcoupleofmonths. Decidewhichstageoftheproductlifecyclebestdescribeshandheldmanualcanopeners. Why? Marketmaturity Explainyouranswerconsideringtherelevantproductmarket.Whatmarketingstrategies wouldyousuggesttothesecompanies? Productsandserviceprobablydifferonlyslightlyamongcompetitors.Competitionisbeginning toemphasiseprice,andthereiskeencompetitionfordecliningindustryprofits. Handheldcanopenerfirmsmaychoosetomarkettheircanopenersindevelopingcountries whereelectricityisnotwidelyavailableinhouseholdsorwhereelectriccanopenersare viewedasadiscretionaryitem.

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 2B. TomanufactureandmarketthisproductAEhasfixedcostsof$120,000andaveragevariable costof$1.80.Averageannualsalesoftheproductis100,000unitsyieldingaprofitof $100,000.AEmarketstheproductsthroughwholesalerstotheretailoutlets. AlphaEmporium(AE)useswholesalersandretailerstodistributethishandheldmanualcan opener.Thewholesalertakesaprofitof20%onitssellingpricetotheretailer.Theretailer takesa40%markuponthepricepaidtothewholesaler.Howmuchwouldbethefinalprice paidbytheconsumer? LetthemanufacturerssellingpricebeMp; formakingaprofitof$100,000thefollowingequationmustbetrue: $120,000+$1.80x100,000+$100,000=100,000xMP OrMp=$4.00>>Thisisthepricethewholesalerspaythemanufacturers. Wholesalersmarkuponsellingprice:20% LetWholesalerssellingpriceisWp; Then,Wp(10.20)=$4.00 OrWp=$4.00/0.80=$5.00>>Thisisthepriceretailerspaythewholesaler Retailersmarkuponcost:20% LetretailerspricebeRp; ThenRp=$5.00+0.4(5.00)=$7.00

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 3B. Howdospecialty,shopping,andconveniencegoodsgenerallyrelatetointensive,selective, andexclusivedistribution?Giveabrandnamethatisanexampleofeachgoodsdistribution matchup. Answers

DISTRIBUTION DENSITY PRODUCT TYPE BRAND

Selective distribution Intensive distribution Exclusive distribution

Shopping goods Convenience goods Specialty goods

Panasonic HDTV Orbit chewing gum Rolls Royce

Question4B

(6x0.5marks=3marks)

ReadeachoftheFOURstatementsintheboxbelowcarefully.IfastatementisTRUEwriteTinthe cellnexttothestatementintheYourAnswercolumn;ifitisFALSE,writeF.

STATEMENTSTOBEEVALUATED AnIMCapproachisnotjustconcernedwithadvertisingandsalespromotion; itcoversallthetraditionalareasofmarketing TheHierarchyofEffectsModelexplainshowabrandcanhave100%market penetration. IntheAIDAModel(theframeworkusedinselectinganadvertisement message),Astandsforattention,Istandsforintensity;Dstandsfordesireand Astandsforassertion. Pushstrategiesrelyonpersonalsellingandsalespromotionstoencourage intermediariestotaketheproductandpromote. Advertisingisanyformofnonpersonal,paidcommunicationinwhichthe sponsororcompanyisidentified. Themainobjectivesofsalespromotionaretoincreaselongtermcustomer loyaltyandmarketshare.

YourAnswer T(TRUE) F(FALSE

T F F T T F

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