List Paragraph The local shampoo market is dominated by two brands: Clean Hair,
ID: 3354605 • Letter: L
Question
List Paragraph The local shampoo market is dominated by two brands: Clean Hair, which owns 59% of the market, and. Sassy, which owns the remainder. A new brand, All-Over Shampoo, manufactured by the same makers of Sassy, is attempting to break into the shampoo market with an all-natural shampoo that they claim will strengthen hair as it is washed. The local shampoo market volume is 2,900 bottles per month. All- Over Natural Shampoo sells 400 bottles in their first month. The total market for shampoo is mature and no growth is expected to result from All-Over's entry. Variable costs for All-Over Shampoo are estimated at $2.54 per bottle, with a selling price of $4.00 a If All-Over Shampoo continues selling at the same rate per month, what is the total yearly dollar contribution of the Natural launch? (Answer: $7,008) Calculate Unit Contribution ($) per bottle Selling Price per unit-Variable Costs per unit; Then multiply by the number of bottles sold per month and the number of months in a year (12). b, what is All-Over Shampoo's market share in the first month of sales? (Answer: 13.8%) All-Over Market shares All-Over unit sales/Total market unit sal Assuming fair share draw, what will Sassy's new monthly sales volume be after the launch of All-Over Natural shampoo? (Answer: 1,025) c. Monthly Sales Volume = Month Sales Volume (Category sales . Sassy Market Share)-(All Over Volume Shampoo expected volume Sassy fair share draw) What will be Sassy's new percent Market Share following the introduction of All-Over Natural? (Answer: 35.3%) d. New Sassy Market Share-Previous Sassy volume-volume lost to All Over Natural) / Total Market Size. Under fair share draw, Sassy and Clean Hair will both lose share to the new entrant, All-Over Natural, in proportion to their current Market Shares. Therefore, Sassy's new Market Share will be their previous units sold less their proportion of All-Over Natural's units, divided by the total Market Volume. What is the cannibalization rate (the percentage of new product sales coming from an existing product) of All-Over Natural Shampoo on the Sassy brand? e. Cannibalization rate % = (sales lost from existing products)/ (Sales of new product). Thus the formula is: (Sassy Old Sales - Sassy New Sales)/ All-Over Natural Sales 1 of 1 Words: 219 of 403Explanation / Answer
= 2.54*400*12
= 12192
Now, we know that All-Over shampoo bottles are sold at price $4.00. Then the overall income by selling the 400 bottles per month throughout the year would be:
= 4*400*12
= 19200.
Thus the total yearly dollar contribution of the natural launch would be:
= total selling price – total cost
= 19200-12192
= 7008.
2. All over market share of the All-Over Shampoo = All over unit sales/Total market unit sales
= (400/2900)*100
= 13.8%
3. Now, we know that 41% of the share of the market is constituted by Sassy shampoo. We have to find the new monthly sales volume of Sassy shampoo after the launch of All-Over natural shampoo. There is a certain amount of sales taken by All-Over shampoo. Which is given by:
Monthly Sales volume is taken by All over shampoo = (market share x total sales x cannibalization rate)
= (41% x 2900 x 13.8%)
= 164
Thus, the remaining sales amount of Natural shampoo would be:
= 41% x 2900 – 164
= 1189 – 164
= 1025.
4. Sassy’s new market share would be:
(Sassy’s new market volume after introducing the All-Over shampoo)/ (Total market share)*100
= 1025/2900*100
= 35.3%.
5. The cannibalization rate of All over natural shampoo on the Sassy brand is given by:
= (sassy old sales – sassy new sales)/(all over natural sales)
= (1189-1025)/400*100
= 41 %
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