Sample Final Exam Question: MM Lite Sales Projections
You are the product manager for the new Mountain Man Lite beer. Marketing research results are in for the new positioning strategy,
which targets 21-34-year-old, men and women. This demographic represents 30% of the Light Beer market, which is expected to be
20,000,000 barrels per year. The research results indicate the following response to the new positioning strategy.
Definitely would try MM Lite
Probably would try MM Lite
Probably or Definitely would not try MM Lite
20%
20%
60%
Past experience indicates that adjusted trial rates are 80% for respondents indicating they “Definitely would try…,” 30% for
respondents indicating they “Probably would try…,” and zero for all others.
You also worked up numbers for two communications campaigns. The $2,000,000 campaign focuses on a pull strategy, using
advertising to build awareness among the target market. With this campaign, 60% of the target market will be aware of MM Lite.
Using the current sales staff to promote the MM Lite to current retail customers, you expect to achieve 20% distribution coverage.
The $3,000,000 campaign implements the same pull strategy but also implements a push strategy that includes trade promotions and
point-of-sale merchandising. These efforts will increase distribution coverage to 40% but will likely have little additional impact on
target customer awareness.
Two product concepts have also been tested. One concept remains true to the “bitter flavor and slightly higher-than-average alcohol
content” that differentiates Mountain Man Lager, the flagship beer. Pretests indicate that the target market responds favorably to this
concept, with 50% saying they would definitely retry the product. The target market responds even more positively to the second
concept, which offers a smoother taste and average alcohol content. Sixty percent of the target market indicates that they would
definitely retry the product. Pricing for both products will be around $100 per barrel. The COGS for the “Bitter Flavor” concept will
be $70, the same as the MM Lager COGS. COGS for the “Smooth Taste” concept would be $74, because it requires different
ingredients than those currently used. Product development expenses, which were $2,000,000, are treated as sunk costs.
Assuming that awareness and distribution coverage targets apply for the entire first year, what is the first-year barrel volume sales
forecast for the first year for each option. What are revenue and contribution margin forecasts for the first year? Assuming the
communications campaign is a fixed cost for the first year only (i.e., not recurring after the first year), at what point will MM Lite
break even under the best scenario? Which option would you choose and why?
Research Results
Definites 20%
Probables 20%
Research Results
Definites 20%
Probables 20%
Research Results
Definites 20%
Probables 20%
Research Results
Definites 20%
Probables 20%
Options
$2MM Bitter
$2MM Smooth
$3MM Bitter
$3MM Smooth
Adjusted Trial
80%
30%
Adjusted Trial
80%
30%
Adjusted Trial
80%
30%
Adjusted Trial
80%
30%
Market Share
Awareness
60%
60%
$2MM
Coverage
20%
20%
Promotion &
Awareness
60%
60%
$2MM
Coverage
20%
20%
Promotion &
Awareness
60%
60%
$3MM
Coverage
40%
40%
Promotion &
Awareness
60%
60%
$3MM
Coverage
40%
40%
Promotion &
Market Size
20,000,000
20,000,000
20,000,000
20,000,000
Volume Forecast
Trial Rate
Repeat Rate
Bitter Flavor
Market Share
Trial Rate
Repeat Rate
Smooth Taste
Market Share
Trial Rate
Repeat Rate
Bitter Flavor
Market Share
Trial Rate
Repeat Rate
Smooth Taste
Market Share
Revenue Forecast
COGS
Market Share
Market Share
Market Share
Market Share
Contribution