Principles of Marketing MRKT-3013-0 (20005) Spring 2014 Exam #3
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Direction: You are given two essay questions. For each question, provide concise and creative answers. If necessary, youmay provide some relevant examples—or using a series of calculated steps—to clarify the answers.
1. This question is about the Break-Even Point (BEP) analysis. Using the information given, answer the following questions. (30 points)
You are the manager of a company that produces “window cleaners” for household called brand A. You are asked to conduct the break-even analysis using the following information: Retail Price of the product is $10.00. Retail Margin on brand A is 20%, while the wholesaler takes a 20% margin. Variable manufacturing cost for brand A is $1.00 per unit, and the fixed manufacturing costs are $900,000. The advertising budget for this year is $430,000, and the product management expenses (including product manager’s salary) is $80,000. The salesperson’s commissions are 10% of the manufacturer’s selling price, shipping costs are $0.06 per units. The total market demand for window cleaners this year (market size) is 10 million units and brand A’s market share as the marketing goal is 12%.
1) Discuss why it is important to calculate the break-even point (BEP) for any business. Use less than 100 words in a paragraph. (10 points)
2) Show the process of deriving the BEP formula from the profit maximization equation (i.e., Profit = Revenue – Cost). (5 points)
3) Calculate unit sales to break even for Brand A using the given information above. (5 points)
4) Calculate the market share of Brand A which is need to break-even? (5 points)
5) Suppose that the firm decides to achieve the marketing goal of 8% market share. Calculate the profit impact of Brand A when its market share is 8%. (5 points)
2. Read the attached HBR case called “Starbucks: Discovering Customer Service” carefully—along with the details in all the Exhibits—and answer the following questions.For each question, provide detailedand creative answers. If necessary, youmay provide some relevant examples to clarify the answers.(50 points)
1) Discuss why it is important to transform any value proposition of a specific product to one specific positioning statement for the design of an effective positioning strategy. Use less than 200 words in two paragraphs. (10 points)
2) Read the attached article and develop your detailed positioning statement for Starbucks to introduce a new service/product. As a marketing manager, you need to use various types of information in any Exhibit to develop a new service/product. In this case, a new service or product represents any type of new service or new menu. (10 points)
3) Create your definition of product for a Starbucks’ new service/productusing any information in the PowerPoint Lecture slides or other sources.Use less than 200 words in two paragraphs. Do not copy one existing definition of product. (10 points)
4) Discuss why it is critical for marketers to develop product concept and develop your product concept for new Starbucks service/product from the conjoint analytic perspective by using the detailed information in your designed positioning statement mentioned above and various types of information in any Exhibit. (20 points)