Ülker Bar has historically been Turkey’s top-selling brand of plain milk chocolate bar. For years, because of its dominant market position, Ülker concentrated on stimulating demand among current customers. Assume Ülker has done little advertising, concentrating instead on price promotions. These price promotions have two components: a trade promotion in the form of a temporary price reduction to grocers, and a consumer promotion in the form of a coupon offering 1.00TL off the purchase price. The coupons are delivered via an “FSI” – a “Free Standing Insert” booklet of coupons in local newspapers.
The Ülker Bar brand manager is considering options for price promotions for the month of January 2005. He has decided that he freeze trade promotions so that all amounts will be identical to the same month of 2004 (i.e. Jan 05 = Jan 04, Feb 05 = Feb 04). He is still considering whether to offer a consumer promotion during the month of January. Here’s what he knows:
• Ülker Bars are sold to retailers in cases of 24 packages of six. The regular gross margin the company makes on each package of six bars is 2.20TL per package, after the trade discount (i.e., 2.20TL * 24 = 52.8TL per case). (For simplicity, assume that the company offers only this six-pack to retailers).
• The plan is to distribute 2 million coupons of 1.00TL face value in each of the four Sundays in January. Each coupon is valid towards the purchase of one six-bar package. Based on past research, the manager knows that on average 10% of the coupons are redeemed. Printing and distribution costs for the coupons are 20TL per thousand coupons. Coupon processing costs are 10 kuruş per redeemed coupon.
• He has data from the last few years (see Ülkers.xls) in which he has offered different consumer and trade promotions and seen various levels of sales. Note that the Consumer Promotion variable in the dataset represents the total dollar amount of redeemed...