Group – 05:
Kai Yuan Zheng
The introduction of B&B Health’s new product, Besthelp Cough and Cold, poses many threats to the sales of Allround’s Cold Liquid product. Up until now, Allround has had strong sales in the cold segment, controlling 21.4% of the segment before the Besthelp release. Upon the release of the new Besthelp product, the marketers of Allround projects that Allround’s market share in the cold segment will drop if nothing is done in response. The marketing team at Allround suggest they respond by releasing a new product, however, it is also noted that if Allround does release a new product, they can experience 5-15% of cannibalization from their current customers. In order for Allround’s marketing team to make the correct decision, we must analyze the cost of cannibalization and the net income that will be gained from the new cough syrup product. Projected: Not introducing new product after Besthelp C&C It is projected that if Allround does nothing in response to the Besthelp C&C release, their market share of the cold segment will drop from 21.40% to 18.4%. The following is the projected sales and income numbers for this drop.
| Before Besthelp | After Besthelp| % change|
Sales| 214.3| 184.0| -14.14%|
Net Income| 50.7| 32.0| -36.88%|
Profit Margin| 23.66%| 17.37%| -26.59%|
With no response to the Besthelp C&C release, the Allround product will have sales number decrease to 184 million, a drop of 14.14%. Their net income number will drop from 50.7 to 32 million, a drop of 36.88%. As well, their profit margin will drop from 23.66% to 17.37%, a decrease of 26.59%. As shown by the numbers, it is clear that without any response to the release of Besthelp, sales, net income and profit margin will drop as the new product gains more and more market share. Projected: release of new product
To analyze the potential...