You are the marketing manager of a 100-year-old organization called "Cannuck
Ltd" who manufactures a wide variety of sporting goods ranging from precision
manufactured rugby balls to sports clothes and accessories. Currently, you are
developing the marketing plan for one particular rugby ball, which exploits latest
developments in manufacturing technology. This plan focuses on a new market for the
organization namely France. There is intense competition in the rugby ball market for
distribution space in sports retailers. Consequently, you are planning to devote
significant promotional spend to advertising and sales promotion to generate awareness
of the new rugby ball among retailers and the rugby sporting community. You accept
that the introduction costs will be high, but you are also aware that potential financial
returns are also high. The size of the market is 11,000 units.
Each box of balls (or unit), costs $29 to manufacture, and will retail at $250 in
France. In addition, the raw material cost $17 to Cannuck Ltd. The retailer retains a 20%
margin (of the retail price). The plan is to ship the balls to a large sports wholesaler who
then distribute to large sports retailers in the main urban areas (total freight /
documentation costs get an estimate of $34 per box/unit). The wholesaler retains a
margin equivalence of 20% of the retail price.
"Cannuck Ltd" has decided to allocate $18000 for trade magazine advertising
directed to the sports wholesalers. There are also two sports goods trade shows, which
the organization plans to attend so that it can use point-of-sale material to generate
awareness of the new rugby ball among sports retails. Each trade show costs $3200. In
addition to this, you are planning to instigate a direct mail campaign targeted at the 1500
sports retailers throughout France. Each direct mail piece to retailers will cost $1.50 per
direct mail piece.
End-user advertising has also been budgeted at $25000. A part-time agent has also
been appointed and this individual earns $12 for each box of balls sold to the sports
wholesalers.
Questions:
a) What required level of sales (RLS) in units and dollar sales (revenue) required to
achieve a target profit of $38,000?
b) What is the market share in % that can be achieved? Is it feasible?
c) What is the breakeven point in units and dollars?
d) Provide and critically analyze any 2 factors (market analyses) that you, as the marketing
manager would look at in order to judge whether the target profit (TP) of $38,000 is
achievable?