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 Yakult contains 30 Billion live Lactobacillus casei
Shirota, a probiotic strain of good bacteria
Strong enough to survive the journey through the stomach’s gastric juices to reach the small intestine alive, where they help maintain an ideal balance of beneficial bacteria
 Probiotics:
Replenish and balance the level of beneficial bacteria
Help control the number of harmful bacteria that naturally exist in the digestive system
Assist with the digestion of food and absorption of nutrients from the foods you eat
Help manufacture vitamins
Enhance you immune system
Help normalise the regularity of your bowel movements
Copyright © 2002 ACNielsen
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 Market scenario
Cultured milk market comprises of 2 brands, Yakult and
Vitagen, available in only 1 standard (5s) pack size
Price
• Yakult
• Vitagen
Share
• Yakult
• Vitagen
$2.60
$2.40
67%
33%
Copyright © 2002 ACNielsen
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 Case analysis
Yakult is interested in reviewing price and has commissioned a $9.99 research study to understand how consumers respond to changes in price
Research findings are provided. You are required to:
 Compute the price elasticity of demand for Yakult at $2.30,
$2.60, $2.90 and $3.10.
 Estimate the price at which Yakult will maximize profit. (Note that total market remains fixed at the tested price range)
 What are the key implications of taking price up / down? Make a recommendation on the selling price for Yakult.
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 Approach to predicting the sensitivity of demand to price where respondents in separate matched panels are asked to indicate their purchase intent for each brand using a constant sum scale.
 The price of the test brand is varied across the panels while the price of other brands is maintained at their market level
 Estimate of market share for test brand is obtained at different price levels based on the purchase intent of each respondent in each panel
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Copyright © 2002 ACNielsen

To determine the price-share relationship for Yakult
Study Centre: Singapore
Target Group: Household decision makers across all race / income groups
Brand portfolio: Yakult and Vitagen
Price range:
• Yakult: $2.30, $2.60
, $2.90, $3.10
• Vitagen: $2.40
Panel matched on race and income group
Panel matched on brand usage
Copyright © 2002 ACNielsen
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Total Cultured Milk: 80%
Vitagen Only
20 20
40 Yakult Only
Yakult & Vitagen
80% of consumers consume cultured milk. Of this 40% consume Yakult only,
20% consume Vitagen only and the remaining 20% consume both brands
Copyright © 2002 ACNielsen
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Panel
#
1
2
3
4
Total
Yakult
200
200
200
200
800
Yakult &
Vitagen
100
100
100
100
400
Vitagen
100
100
100
100
400
Total
400
400
400
400
1600
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Current price
Panel
#
1
2
3
4
Yakult
2.30
2.60
2.90
3.10
Copyright © 2002 ACNielsen
Vitagen
2.40
2.40
2.40
2.40
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Research Results – Share at different Prices
Yakult – Price Elasticity of Demand?
Yakult – Price and Share
Price Share Elasticity
2.30
2.60
2.90
3.10
76
67
58
52
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?
?
?
?
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 At what price point do we maximise profit?
Assume:
• Trade margin is 20%
• Cost per unit is S$ 1.17
• Total market volume for cultured milk remains unchanged.
(Should Yakult adjust price in the range $2.30 to $3.10, while some consumer will switch brands, we do not expect the market as whole to decline or increase).
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 Make a price decision. What do you recommend as the selling price for Yakult?
Copyright © 2002 ACNielsen
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Relates change in price to change in sales volume
Formula: e = Price elasticity
V = Volume
P = Price
V
𝑃 𝑑𝑉 𝑒 =
𝑉 𝑑𝑃
V
0
Δ V
Δ P
In the chart, the price elasticity at P
0
, V
0 is:
P
0 𝑒 =
𝑃
0 𝑑𝑉
𝑉
0 𝑑𝑃
P
Copyright © 2002 ACNielsen
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

Yakult’s Gross Profit = Revenue – Variable Costs
= Sales Value – Trade Margin – Variable Costs
One approach to comparing profit across price points
Consumer Selling Price
Share
Sales Volume (Index)
Sales Value (Index)
Trade Margin
Revenue (Index)
Variable cost / unit
Variable costs (Index)
Gross Profit (Index)
2.30
I
76
?
?
20%
?
?
?
Current
2.60
67
67
174.2
20%
139.4
1.17
78.4
61.0
III
2.90
58
?
?
20%
?
?
?
IV
3.10
52
?
?
20%
?
?
?
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Copyright © 2002 ACNielsen
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