Reference no: EM131922003

Question: Comparing Marketing Mixes Amna Rao is looking for new market opportunities that use her firm's current resources. Her firm has been making plastic packages for producers of CDs, panty hose, and other products-but sales have dropped because these customers are switching away from plastic packages. She is considering the possibility of producing and marketing a new consumer product-sunglasses that float. Consumers in focus group interviews say they might be interested in buying floating sunglasses for when they're at the pool, on a boat. fishing, or otherwise near the water. So Rao is doing some rough comparisons of the likely costs and profitability of possible marketing mixes to reach her tar-get market. She is considering the likely outcomes with two pos. sible marketing mixes. One marketing mix (Mix A) involves selling the sunglasses through discount stores. This mix would involve a plain frame with a simple finish, and the unit production cost would be $5.00. She knows she will have to pay for some consumer advertising to stimulate interest in the product. But personal selling costs would probably be quite low since she would need only

one salesperson to call on some retail chains that would make large orders. An alternative approach (Mix B) would focus on selling the glasses as an impulse product through snackbars at swimming pools and the beach. Selling to the large number of small snack bars would require more personal selling expense. The personal selling would need to be supported with than advertising to final consumers. To support a higher impulse purchase price in this channel, she would use a more stylish (and somewhat more costly to direct-mail advertising to the snack-shop owners. However, the direct-mail ads would be less expensive produce) finish on the sunglasses. She thinks she would sell a smaller quantity through this channel hut the would be willing to pay a higher wholesale price. To get a better idea of the likely profit and break-even levels (or the two different mixes, Rao has developed a spreadsheet based on her estimates of likely sales and costs. She wants to make the biggest profit possible from this new product, but at present she does face one basic limitation: the owner of the company is not willing to invest in new equipment, and with the present equipment the firm cannot produce more than 300,000 pairs of glasses a yew.

a. After the initial spreadsheet, for both marketing mixes evaluate the effects of sales volume being 10 percent less than expected. Discuss the implications of your analysis.

b. Rao thinks her sales estimates are realistic for the two marketing mixes, but she is not certain what the implications would be if demand is greater than she expects. Discuss this issue and illustrate your conclusions with a specific analysts of your choice based on the spreadsheet.

c. Rao feels chat the more costly finish for glasses in Mix B would be attractive to impulse buyers. but

she also thinks that many of these prospects would buy the product even if the firm offered the lower-cost finish she is considering for Mix A. In that case, the unit production cat for Mix B would be the same as for Mix A. How high would sales have to be with Mix B and the lower unit production cost to make a profit of at least $107,000? If the lower-cost marketing mix was as likely to achieve this level of sales as the original plan for Mix B was to achieve sales of 50.000 units, which of the two variations would you recommend? Give your reasons.