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T3-Product and Customer Profitability

The document discusses marketing segmentation and brand equity, using examples of 100PLUS sports drink. It also discusses Coca-Cola's product line expansion strategy by launching Coca-Cola Plus in Japan, a zero-calorie soda with dietary fiber. Finally, it asks about calculating the maximum customer acquisition cost an airline can afford based on churn rate, customer spending, variable costs, and retention costs.

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6 views

T3-Product and Customer Profitability

The document discusses marketing segmentation and brand equity, using examples of 100PLUS sports drink. It also discusses Coca-Cola's product line expansion strategy by launching Coca-Cola Plus in Japan, a zero-calorie soda with dietary fiber. Finally, it asks about calculating the maximum customer acquisition cost an airline can afford based on churn rate, customer spending, variable costs, and retention costs.

Uploaded by

shoppingcatsanddogs
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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BT2201 Business Concepts and Metrics for Analytics, Semester 2, AY21/22

Tutorial 3: Product and Customer Profitability

1. Apple is going to release its new iPhone 14 model in a few month later and the marketing
team plans to design and implement different advertising videos to attract potential
customers in 20s and 30s. Which segmentation requirement may cause most doubt to this
marketing plan?
A) Measurable
B) Accessible
C) Differentiable
D) Actionable

2. Which of the following is true with regard to brand equity?


A) Brand equity refers to how much a brand could be sold in financial terms.
B) High brand equity provides a company with many competitive advantages.
C) A brand has positive brand equity if consumers react less favorably to it than to an
unbranded version.
D) The total financial value of a brand can be easily measured.

3. a) 100PLUS is isotonic sports drink and sold in many countries. Currently, its revenue
market share is 40%, and its unit market share is 30%. The average price for isotonic
sports drink per 100ml is $0.25, while the average price for 100PLUS is $0.33. Half of
the people who purchase 100PLUS this year is expected to repeat next year, generating a
durability figure of 0.5. What is 100PLUS’s brand equity index?

b) 100PLUS is isotonic sports drink. Assume that currently it is just sold in APAC and
North America area. In APAC, which accounts for 60% of its total unit sales, the drink
has a 30% share of the market. In North America, where 100PLUS makes the remaining
40% of its unit sales, it has a 10% share of the market. The average price for isotonic
sports drink per 100ml is $0.25, while the average price for 100PLUS is $0.33. Half of
the people who purchase 100PLUS this year is expected to repeat next year, generating a
durability figure of 0.5. What is 100PLUS’s brand equity index?
4. Coca-Cola launched Coca-Cola Plus in a limited market in Japan last year and now plans
to launch it nationwide in that country. Coca-Cola Plus is a zero-calorie soda (essentially
Diet Coke) with 5 grams of an indigestible dietary fiber called dextrin. Although some
might just call it Diet Coke with a laxative, Coca-Cola Plus is touted in Japan as a health
food that suppresses the absorption of fat and keeps blood triglycerides at moderate
levels. In fact, the product has earned the Japanese government’s “gold label,”
designating it as a government-approved Food of Specific Health Use (FOSHU).
Although the new Coca-Cola Plus reaps a higher wholesale price for the company ($1.20
per 470-milliliter bottle versus $1.15 per bottle for the original Diet Coke), it also comes
with higher variable costs ($0.65 per bottle versus $0.55 per bottle for the original
product). Although some Diet Coke drinkers will switch to Coca-Cola Plus, the company
believes the new product will attract new customers because of its health benefits. Coca-
Cola is no stranger to introducing new products in Japan. The company released Coca-
Cola Coffee Plus last year and recently introduced its first alcoholic beverage called
Lemon Do.

1) What product line expansion strategy is Coca-Cola undertaking?

2) Assume the company expects to sell 5 million bottles of Coca-Cola Plus in the first year
after introduction but that 60 percent of those sales will come from buyers who would
normally purchase Diet Coke (that is, cannibalized sales). Assuming the sales of Diet
Coke are normally 300 million bottles per year and that the company will incur an
increase in fixed costs of $500,000 during the first year to launch Coca-Cola Plus, will the
new product be profitable for the company?

5. An airline company is looking to acquire new customers. The churn rate historically has
been 40% yearly. An average consumer spends about $450 twice a year. The variable cost
for serving the consumer each time is about $200. The average retention cost for each
consumer per year is about $20. What’s the maximum customer acquisition cost that the
airline can afford? You may assume a discount rate of 2% per year.

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