MARKETING RESEARCH Ricci commissioned a consulting company to perform a feasibility study for the product, which included a demographic profile, cost estimates, packaging recommendations, and a patent search. The patent search revealed the above-mentioned products and a chair that could be folded and carried as a small tote bag that could also hold a few small beach items. None of these were felt to be a threat to Riccis product, and she was optimistic that a patent could be obtained. A focus group was used to determine potential consumer response. Results of the focus group indicated that several features of the product should be modified. For example, the material was perceived as durable; however, the fluorescent colour was see-through and considered trendy, lessening the perceived quality of the bag. The size also represented an issue, as the bag was perceived as much larger than necessary. MARKET POTENTIAL People who use suntan and sunscreen products have been identified as the primary target market for The Beach Carrier. Research indicates that 43.9 percent of the adult U.S. population, or 77,293,000 people, use suntan and sunscreen products. Of these, 57.8 percent are female. Assuming that women are the primary purchases of beach bags, the potential market is estimated at 44,675,000. Beach bags are replaced ever y3 years. The primary market for suntan and sunscreen products is described in Exhibit 1. The market share objectives for the first year of the Beach Carrier sales have been determined based on the following assumptions: People who use suntan and sunscreen product represent the market for The Beach Carrier. Most men do not buy beach bags; consider women only (57.8 percent of population) Women buy new beach bags every 3 years on average; that is , one-third will buy a new bag this year. Based on these assumptions, the unit sales needed to achieve market share objectives of 1, 2, and 5 percent of the total market during the first year of The Beach Carriers sales are shown in Exhibit 2. Ricci is targeting 1 percent of this potential market. Regional market share objectives can be developed from the same data as seen in Exhibits 3A and 3B

STRATEGY Ricci investigated several methods of marketing The Beach Carrier, including selling it in upscale (i.e. Bloomingdales) or discount (i.e., Wal-Mart) stores, licensing the product concept to a manufacturer, selling the idea for a flat fee, selling the bag to corporates for use as a promotional item, selling it on the Internet, and setting up a mail-order operation. Ricci believes that the mail-order option, while requiring the most effort, will provide higher margins, lower risk, and the overall best fit with Riccis strengths and weaknesses, her market penetration objectives, and her limited financial resources. The Internet could also create opportunities, but Ricci was unsure of this option. The mail-order sales strategy will be implemented nationally using a regional rollout and following a seasonal demand pattern. With 3-month intervals between rollout phases, national market exposure will be achieved within 12 months. Ricci is also exploring how to set up a website with a local university team of student consultants.

PROMOTION The product initially will be promoted in novelty and general interest mail-order catalogues and special interest magazines that appeal to beachgoers and boat owners.

PRICING The costs of manufacturing have been estimated at $6.50 per unit for material, zippers, Velcro, and so on. The costs for assembly and packaging have been estimated at $3.50 per unit, bringing the total manufacturing cost to $10.00. After analysis of competitive products and focus group results, a mail-order price is in the $12.99 to $14.99 range has been established.

DISTRIBUTION The product will be manufactured a t a local New England factory, drop-shipped to a storage facility, and shipped via UPS to the consumer. Initially, inventory can be carried at no cost in Riccis house or garage. This same process could also be used if the website is developed. FINANCING A $30,000 small-business loan is the minimum amount Ricci needs to fund her fixed cost for the first phase of the rollout of the mail-order program. Marketing the product through traditional retail channels would require approximately $250,000 for advertising and other selling costs associated with a new product information.

BREAK-EVEN ANALYSIS Break-even analysis was performed at three mail-order prices, as seen in Exhibit 4. On the basis of this analysis, Ricci must meet only one-fourth of her target sales goal, or one-quarter of 1 percent of the total market, in order to break even in the first year.

	Unit Variable	Cost per Unit	Price Contribution
Materials	$6.50	$12.99	$2.99
Assembly	$3.00	$13.99	$3.99
Packaging	$0.50	$14.99	$4.99
Total Unit VC	10
	Northwest	Midwest	South	West	Total
Advertising	$25,000.00	$25,000.00	$25,000.00	$25,000.00	$100,000.00
Warehousing	$266.00	$305.00	$372.00	$256.00	$1,199.00
General S&A	$2,500.00	$2,500.00	$2,500.00	$2,500.00	$10,000.00
Total Fixed Costs	$27,766.00	$27,805.00	$27,872.00	$27,756.00	$111,199.00
Break even units
$12.99	9286	9299	9322	9283	37190
Percent of total market	0.28	0.25	0.2	0.29	0.25
$13.99	6959	6969	6985	6956	27869
Percent of total market	0.21	0.18	0.15	0.22	0.19
$14.99	5564	5572	5586	5562	22284
Percent of total market	0.17	0.15	0.12	0.17	0.15

Questions: From exhibit 4, break-even units, which price would you choose? Why?