Question;The;Badger Country Dairy Incorporated (BCDI), based in Madison, WI, is;getting ready to add a new gourmet cream cake to its product line, sold;in and popular all over the United States of America. BCDI has asked;you, the Product Manager, to assess ability of the product to win market;acceptance and meet profit goal. You have chosen Tulsa, OK, since that;city is one of the most popular test markets for packaged consumer;convenience and non-durable items like snacks. You figured that if it;does not do well in Tulsa, it is unlikely to fare better elsewhere and;have estimated various test market costs and outcomes as follows: The;typical 16 oz. consumer package will be sold at a retail selling price;of $6.99 each. The retailer buys the product from wholesalers in CASES;defined as 12 sixteen ounce consumer packages. The retail markup is 30%;on the wholesaler?s selling price, which is usual for baked snacks. The;wholesaler markup is 19% on the retailer?s buying price. BCDI;estimates the material costs of the cake snack at about 25% of their;selling price, while direct labor would add another 15%. In addition;BCDI salespeople receive a 7% commission based on the BCDI selling;price. The;Tulsa test market will involve a typical coupon sales promotion;Consumers who use the coupon will save $1.00 per consumer package off;the retail price. Retailers are reimbursed the $1.00 plus an additional;eight cents per package as redemption incentive, upon completion of the;coupon transaction. The coupons are designed to be validated directly on;bar code scanners or, alternatively, collected and sent to the;manufacturer. The objective of the promotion is to encourage trial of;the new cake snack. The Tulsa test market will also involve the following additional annual costs: *;5% of BCDI?s selling price of the consumer package will be spent on;cooperative advertising program to boost sales efforts of the retailers* Another $80,000 will be spent on materials for the cooperative advertising* 50 spot cable TV ads at $9000 each to make consumers aware of the new product.* 5 freeway billboards at $7,000 each, introducing the new item to Tulsa.* 1000 radio ads at $250 each.* 500,000 door to door fliers @ 10 c each, containing the coupon for the promotion.* 750 in store displays at $200 each. The displays will hold coupons as well. The;annualized profit goal for Tulsa is $300,000. Your experience in;previous similar coupon promotions for baked snacks leads you to believe;that about 40% of the all cases expected to be sold in Tulsa will;involve the coupon, while 60% will not. Average;sales of the 10 competitors (including BCDI) in the Tulsa baked snacks;market is about 24,000 cases/year or $ 1.2 million/year at manufacturer;selling prices.
Paper#37508 | Written in 18-Jul-2015Price : $32