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Marketing: Understanding Customers

Coursera, Foundations of Management Specialization - week 4. peer graded assessment

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85 views4 pages

Marketing: Understanding Customers

Coursera, Foundations of Management Specialization - week 4. peer graded assessment

Uploaded by

dickmoby1969
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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Coursera, Foundations of Management Specialization

Marketing : Understanding Customers


Prof. Mario Capizzani

Rubric: (Below is locked content that will be released when each learner submits his
or her own quiz.)

II. Review Criteria, Prompt 1:


Following the 6-step methodology provided in the assessment question please analyze
the business case for launching Dodot Básico in the Iberian Peninsula in 2009. (8 points
total)

Please read your peers’ response. For full credit, they should address the 6 steps below
as completely as indicated. You can also award partial credit for developing one of the
ideas, even if it is incomplete.

Decision to make: Should Dodot launch Básico? If not, what else would you do?
(State your business case following the 6-point guide provided to you.)

1. CHANNEL ECONOMICS

Etapas (week 2) Básico Private Label(s)

Retail Price (cents) 26 19,5 16


Price minus 8% VAT (cents) 24.1 18.1 14.8
1
Channel Margin (cents) 3.1 2.7 2.5
Price to retailers (cents) 20.9 15.3 12.3
2
Manufacturer gross margin (cents) 9.4 3.8 0.8
Variable Cost (cents) 12.4 11.5 11.5
1
15 % mark-up in the case of Dodot, 20% mark-up for others
2
45% in the case of Dodot

2. Company Analysis

Profitability

 Best-case scenario: All sales come from value conscious buyers. So in


essence from private label buyers. Good for market share & profits!
 Worse-case scenario: All sales come from Etapas would-be buyers. Thus,
every sale would cannibalize existing profitability. How many additional
diapers would need to be sold to compensate in profitability every sale of
the most basic product. Simply compare the Dodot margin for each product:
¢ 9.4 (Etapas) % ¢ 3.8 (Básico) = 2.5x (or two and a half more volume of
diapers to stay equally profitable). Can Dodot realistically sell that many
more diapers? Clearly not!

 Likely outcome:
o Would customers that would pay ¢ 16 per diaper (private label)
stretch themselves to pay ¢ 19.5 (Básico) for the brand with no
discernable difference other than the brand? That is a 22%
difference in price!
o With 15% private label buyers (though growing) and Dodot
holding a 55% market share in Spain and 70% in Portugal, where
are the sales likely to come from? (Certainly, one should not
count on too many additional customers entering the category
since birth rates are very low in both countries).

Market share: As in most consumer package goods and markets in general there is a
tradeoff between price and market share. Launching a product under ¢ 20 can
certainly improve market share, but at what cost? How will it affect sales and
profitability (see answer above).

Brand: Will the brand be strengthened or weakened as a consequence of the


introduction of a new product in the value segment? Unlike the introduction of the I-
pañal, a higher end and innovative product, a basic product in the value segment

3. Customer perspective

What consumers benefit? Value seekers obviously or people affected by


economic crisis. On the other hand and depending how wide is the distribution
of the new diaper, many premium customers (Dodot or Huggies) could be
tempted to buy or experiment with the new basic product.
But will I get many Huggies customers? The case states that 10% of the buyers
are loyal to Huggies, and Huggies has low double-digit market share. So there
is very little room for market share gain from the other main branded
competitor. Therefore, from premium competitors, sales are more likely to be
stolen from Etapas (clearly Activity buyers seek other product benefits).

Will they differentiate the three value propositions?


Does having three products to choose from (instead of two that Dodot always
offered before 2009) benefit the consumer or confuses her?
What will they think about Dodot endorsing a product below ¢ 20? Will they
be happy about it or feel cheated?

4. Channel PERSPECTIVE

Will channels want this product?


The case already states that the leading supermarket in Spain (Mercadona)
rejected carrying the product. Other ever-day-low-price or value retailer chains
will likely also decline to carry the product (and concentrate in the carrying the
market leader and products in he value segment).

Is it profitable for the channel to carry the product?


One needs to compare the channel margin that Básico pays (¢ 2.7) vis-à-vis the
retailer’s own private label (¢ 2.5). Please refer to channel economics from
question 1 for the answer sheet. This suggests that retailers are practically
indifferent between these two products. However, if by putting Básico on its
shelves it encourages comparison between products and possible a trade-down
from Etapas to Básico, then the channel will ultimately be worse-off. For the
value-based retailers most distributors already carry their own private label
brand.

5. Alternative Action Plan (1 point)

The answers below are valid responses provided people state the benefit of each.

Promotions: 3 for the price of two or giving away nappies along with diapers,
etc. In the end, this is a type of giving a discount.

Building Private Label: possible a good idea if I had spare capacity.

Launching new brand in the value segment but not endorsed by Dodot: if the
brand is single most important asset the firm has, what is the point of building
a new brand (particularly in the value segment). Would you really commit any
money to creating and supporting a new brand?

Advertising: the company outspends the most immediate competitor on a 3-


to-1 basis. Everyone recognizes in Iberia the name Dodot, and the company
will already be spending disproportionate to sales volume on the higher-end
product (I-pañal). Does it make sense to spend more on advertising?

Lowering price of Etapas: Will trade-off profitability in exchange for market


share. But does it make sense lowering the price of my flagship product? Is it
good for Dodot or the channel partners?

Other?

6. Conclusive Statement (1 point)


If given the considerations above your peers decide not to launch Dodot Básico, that is
a perfectly acceptable recommendation. In that case participants should state what
action to pursuit (see question 5 above for possible answers) as market share is
slipping and it is clearly affecting profitability.

On the other hand, if the participant decides to launch Básico, at the very minimum,
they should acknowledge the market share vs. profitability trade-off stated clearly in
the questions above.

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