Question 1 (25 points)
Creative Solutions, Inc. has a successful brand with the name Top Goal. The market size in which Top Goal competes is $2 billion, and Top Goal has generated sales of $150 million. It has a contribution margin of 30%.Creative Solutions is thinking of introducing a new brand under the name of Peak Goal. Peak Goal will compete in the same market as Top Goal. The budget to launch this brand is expected to be $20 million.If it is launched, Peak Goal will capture 10% of the market. It has a contribution margin of 40%. Half of the sales of Peak Goal will be cannibalized from the sales of Top Goal. An alternative strategy for Creative Solutions is to cancel the introduction of Peak Goal and instead to spend the $20 million to promote Top Goal. This action is expected to double the sales for Top Goal. Both brands (Top Goal and Peak Goal) would sell at the same price.Where should the company spend the $20 million and why? You must show all calculations to receive credit.
Question 2 (25 points)
A large hotel resort decides to develop a customer retention program. The goal of this program is to motivate its heavy users to continue being loyal to the company by offering them appropriate incentives. You will create a marketing research plan to help the company design the retention program. Specifically, you need to identify:
1. The types of information the company will need to design the retention program.
2. Where to obtain the information.
3. The best method to obtain the information.
Question 3 (25 points)
Your company has a market share of 25%. The total market size is $100 million. Your contribution margin (the ratio of the contribution per unit over the price per unit) is 20%. Your variable cost is $16 per unit.You are thinking of hiring 10 more salespeople. The annual cost per salesperson (including salary and benefits) is $120,000. In addition, each salesperson receives as a bonus 10% of the sales he or she generates. How much should your market share increase to make this a profitable action? (Hint: To solve the problem you need to calculate the price per unit and then calculate the new contribution per unit that will reflect the added cost of the 10% bonus given to the salespeople.) You must show all calculations to receive credit.
Question 4 (25 points)
Anytime Fitness is a company that has 24/7 fitness centers. Members are given keys to the centers and can work out any time, any day. The company provides modern equipment, but not classes and personal training sessions like other gyms. You are a marketing manager for this company and need to select a target market.
1. What segmentation criteria would you use to segment this market?
2. Of the segments you included in your answer above, select one as your target market and describe it in detail. Why did you select it?
3. What key benefits will you present to potential customers? Why should they care (i.e. how will make these benefits appealing)?
Question 5 (25 points)
Travelmania Inc. is a new, Internet based travel agency specializing in customized exotic and adventure travel. The company has limited resources and very low level of awareness in the market. Even within the exotic and adventure travel market, it has to deal with competition from the major online travel companies and needs to create a comprehensive differentiation and branding strategy.
1. What segmentation variables would you use to segment the market, and which segment would you focus on?
2. What should be the key concept at the center of the company’s brand identity? Describe what should cross the customer’s mind when they come across the Travelmania brand name.
Question 6 (25 points)
Forsman, Inc. has sales of $10,000,000. The contribution margin is 40% and the fixed costs are $1,000,000. The price per unit is $10. The company is considering two different strategies for increasing their profits:
1. Spend $800,000 in advertising. The result is expected to increase the company’s sales by 50%.
2. Reduce the price by 20%. The price-demand elasticity is 2.0.
Which of the two strategies will generate the highest profits? You must show all calculations to receive credit.Hide Files: Essay Exam.docx
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