A Real Increase in Profitability?

The table below highlights a firm that has dramatically increased its profitability in a few years. But they have focused on a short-term, not long-term, basis and you need to determine what impact this may have.

 

ACTIVITY/TASK

Year 0 Year 1 Year 2 Year 3
Sales 20m 19.50m 18.6m 16m
Costs 5m 4.75m 4.6m 4m
Operating profit 15m 14.75m
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Allocating Fixed Costs

Allocating fixed costs to products, in order to more fully assess product profitability, can be determined in different ways with different outcomes. In the following example, the firm was allocated its fixed costs equally each of its products – what impact does this have?

 

ACTIVITY/TASK

Product  A Product  B Product  C Product D TOTAL
Gross profit $4m $1m $2m
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Reviewing Product Launch Results


In this activity, you need to review the recent new product launch results across different firms. How well did their respective launches go? Can you get a sense of their relative strengths/weaknesses from these results?

 

ACTIVITY/TASK

Firm A

Firm B

Firm C

Firm D
Target market size

     1m

     1m

     1m

  1m
Trial %

                      20

                   40                      20                    10
Repeat %
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Are these good growth results?

The following food retailer has experienced significant top-level growth over the past few years. But underpinning their results is a significant increase in franchised stores/outlets, so are the results as good as they appear?

 

ACTIVITY/TASK

Here are some top-level financial figures for a food retailer growing primarily through a franchise system:

Year 1

Year 2

Year 3

Year 4

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Salespeople Incentive Schemes

There are a variety of incentive schemes that can be implemented in order to help motivate and reward salespeople. In this exercise you need to first calculate the total salary/incentive paid in each of the following payment structures. Then you need to determine which structure is the best approach.

 

ACTIVITY/TASK

For all the incentive schemes below: George, the salesperson, … See the full activity...

Will the Retailer Support the Sales Promotion?

A significant proportion of planned sales promotions do not get effectively, implemented due to the lack of full support by the retailer (except for major brands who tend to have strong retailer relationships). Your task in this activity is to determine whether or not the retailer is likely to run/support the sales promotion.

 

ACTIVITY/TASK

Big ‘n Tasty noodles is the … See the full activity...

Buying Media

After setting the overall promotional budget, the next task is to allocate it across various media options.  In this activity, you need to allocate the overall promotional budget (of 100 points, for a three month campaign) to help support the launch of a new computer game console (that is, in competition with Sony PlayStation and Xbox).

 (Note: The See the full activity...

Return on Promotional Investment (ROI)

The need to justify a firm’s promotional investment, using some of return on investment assessment, is starting to become more common practice. For each of the following decisions, determine whether the promotional expenditure generates a positive return on investment. The first one has been done as an example for you. (Note: Just do simple calculations and do not See the full activity...

Setting the Promotional Budget

In this activity, you simply need to match each example provided to the approach that the firm has used in setting/determining its promotional budget.

 

ACTIVITY/TASK

  1. A shoe company decides to increase its advertising budget to $1m to support the launch of their new range of tennis shoes. Their goal is to achieve a 5% market share within the first three
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A Pricing Strategy Success?

In the following case study, your task is to determine whether the firm should continue with its current strategy (which is mainly priced-based) or does it need to adopt a new approach?

 

ACTIVITY/TASK

Credit unions are like small banks that usually only offer services to individual customers (that is, non-businesses). What is unusual about many of them is that they … See the full activity...

Responding to Competitor Pricing

While it is generally acknowledged that it is best to stay out of a price-cutting war, sometimes competitor actions will force you into one. In this activity, your firm is restaurant C and one of your competitors has recently cut their prices. The question is how you will respond.

 

ACTIVITY/TASK

Three Blue Mountains Restaurants

Let’s assume that there are three … See the full activity...

Setting Your Price

Here is a hypothetical situation that you could potentially face in your career. Assume that you decide to start a business as a marketing consultant.  Complete the following activity to determine how much would you charge for your consulting services?

 

ACTIVITY/TASK

A charity organization has approached you to write a marketing plan for them. From your previous market intelligence, … See the full activity...

What Price Mark-up is Needed?

Many consumers are surprised at the (profit) margin that some retailers make on their sales. However, they do need fairly large margins to cover their significant rent and staff costs that they incur. In this activity, your task is to determine what average prices will need to be charged by these small retailers so they end up making a good See the full activity...

Price Calculations – Marginal Analysis

Marginal analysis is based on the assumption that as the product’s price alters, so will its level of demand (sales). Therefore, this approach looks for the maximum profit point, when considering the firm’s cost structure and the likely sales at different price points (which is essentially the product’s demand curve). 

 

ACTIVITY/TASK

Determine the best price point (that is, what is … See the full activity...

Price Calculation – Target Profit Pricing

As the term suggests, target profit pricing is designed to determine how many units we will need to sell to both cover costs AND achieve a set profit. In some firms, marketers are allocated a profit contribution goal/target for the year, and they will use this approach to estimate the required sales volume. Work through the following two examples to See the full activity...

Price Calculation – Breakeven Pricing

Often a firm will calculate the break-even point for a price. That is, if we set the price at $X, then how many units will we need to sell to cover costs (that is, our break-even point). Work through the following two examples to gain a better understanding of this approach.

 

ACTIVITY/TASK

Using break-even analysis:

  1. How many units need
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Price Calculation – Cost-plus Pricing

Cost-plus pricing is a very simple form of pricing. This approach was once fairly common, but is less widespread today. Your task for this activity is to work through the following two examples to gain a better understanding of this approach.

 

ACTIVITY/TASK

Using cost-plus pricing to:

  1. Set the price if you expect to sell 1,000 units and you want a
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Product Management

Read the following case study on a hypothetical product manager for frozen pizza. They are faced with a strategic challenge for which way to growth the business. If you were this product manager, what would you do?

 

ACTIVITY/TASK

Larry is a product manager for frozen pizza for a large national firm. He is in his late 20’s and is … See the full activity...

Should We Launch? It’s Your Call!

The following case study highlights the experience of two recent university graduates have gotten themselves into a business ‘mess’. They have been working hard to develop and launch a new product. But they’re now at the stage of making a major dollar investment, and suddenly they’re now so sure it’s a still a good idea. They want you to help See the full activity...

Developing a CRM Strategy

Using a CRM strategy is probably one of the best solutions for the problem in the following case study. Your task in this activity is to develop a strategy to increase attendance for this organization’s main event.

Please note that there is an updated version of this activity now available, which also includes an interactive spreadsheet.

ACTIVITY/TASK

You’ve been called … See the full activity...