Taylor Smith owns a small clothing company, Cuteness for You, that offers an online subscription and personal shopping service targeted at busy families with children aged newborn to five years old. Currently, Taylor has one level of subscription service, the standard service. For $100 a month, the standard service provides its customers a monthly delivery of 10 clothing items carefully chosen to match the child's size, gender, and emerging style. The online clothing subscription market is fairly new, but is growing rapidly and thus Taylor is consdidering extending the product line to increase its market share and profits. Taylor is debating whether to add a premium subscription service featuring profitable high-markup items for $125 per month, a basic subscription service which contains lower-markup popular items priced at $75 per month, or possibly both. Taylor knows that the new product lines provide an opportunity to attract more customers and possibly increase revenues and profit, but recognizes that new product lines, especially ones priced below the $100 standard service, might steal sales from the standard line through cannibalization. To evaluate the options, Taylor creates a spreadsheet containing the key marketing metrics including estimated firm sales revenue and units, firm profit, and industry sales revenue. Based on industry research, he estimates that basic subscriptions would cannibalize standard sales at four times the rate at which premium subscriptions would. The goal of this activity is to understand the potential impact that a product line extension has on a firm's revenue, profit, and market share. Keep in mind that: Market share = Firm's sales revenue / Total industry sales revenue (including the firm's) Refer to the formulas above and the spreadsheet below to help answer the questions that follow. The spreadsheet fields highlighted in yellow can be changed in order to determine possible outcomes. You can find the initial values in the corresponding blue cells in columns F to I. Start by entering the initial values into columns B to E. Then review the questions below and adjust the values in columns B to E to determine the correct answers. A 1 D 2 Standard service sales (units) 3 Premium service sales (units) 4 Basic service sales (units) 5 Price standard subscription 6 Price - premium subscription 7 Price basic subscription - 8 Sales revenue standard. 9 Sales revenue - premium 10 Sales revenue - basic 11 Firm's total revenue 12 Profit standard 13 Profit-premium 14 Profit-basic 15 Firm's total profit 16 Total industry revenue 17 Firm's market share 18 B Standard Service $ $ 3 $ $ C Strategy 1: New Product Premium Service 0 100 $ a $ $ 0 $ 0 $ $ 0.00 $ 9,000,000.00 $ 0.00% D E Strategy 2: New Product -Basic Service Strategy 2: New Product Strategy 3: New Products -Premium + Basic Service 0 0 100 S 0 S D $ OS OS 0 S 0.00 $ 9,000,000.00 S 0.00% $ 100 0 $ $ 0 $ 0 $ 0 $ $ 0 $ 0.00 $ 9,000.000.00 $ 0.00% Initial Value: Standard Service 100 $ 0 $ 0 0 0 0 $ 0 $ 0 0 0.00 $ 9,000,000.00 $ 0.00% 10000 G Initial Value: Strategy 1: New Product Premium Service 100 $ $ 1,000,000 $ $ 1,000,000 $ 500,000 $ $ 500,000.00 $ 10,000,000.00 $ 10.00% 8000 1500 H Initial Value: Initial Value: Strategy 2: New Product Strategy 3: New Products -Basic Service -Premium + Basic Service 6000 5000 1500 7000 5000 100 125 75 500,000 187,500 375,000 1,062,500 250,000 140,625 112,500 503,125.00 10,082,500.00 10.58% 100 $ 125 $ 800,000 $ 187,500 $ 987,500 $ 400,000 $ 140,625 $ 540,625.00 $ 9,987,500.00 $ 9.89% 100 S $ 75 S 600.000 S 525,000 $ $ 1,125,000 $ 300.000 S S 157,500 $ 457,500.00 S 10,125,000.00 11.11% Taylor Smith owns a small clothing company, Cuteness for You, that offers an online subscription and personal shopping service targeted at busy families with children aged newborn to five years old. Currently, Taylor has one level of subscription service, the standard service. For $100 a month, the standard service provides its customers a monthly delivery of 10 clothing items carefully chosen to match the child's size, gender, and emerging style. The online clothing subscription market is fairly new, but is growing rapidly and thus Taylor is consdidering extending the product line to increase its market share and profits. Taylor is debating whether to add a premium subscription service featuring profitable high-markup items for $125 per month, a basic subscription service which contains lower-markup popular items priced at $75 per month, or possibly both. Taylor knows that the new product lines provide an opportunity to attract more customers and possibly increase revenues and profit, but recognizes that new product lines, especially ones priced below the $100 standard service, might steal sales from the standard line through cannibalization. To evaluate the options, Taylor creates a spreadsheet containing the key marketing metrics including estimated firm sales revenue and units, firm profit, and industry sales revenue. Based on industry research, he estimates that basic subscriptions would cannibalize standard sales at four times the rate at which premium subscriptions would. The goal of this activity is to understand the potential impact that a product line extension has on a firm's revenue, profit, and market share. Keep in mind that: Market share = Firm's sales revenue / Total industry sales revenue (including the firm's) Refer to the formulas above and the spreadsheet below to help answer the questions that follow. The spreadsheet fields highlighted in yellow can be changed in order to determine possible outcomes. You can find the initial values in the corresponding blue cells in columns F to I. Start by entering the initial values into columns B to E. Then review the questions below and adjust the values in columns B to E to determine the correct answers. A 1 D 2 Standard service sales (units) 3 Premium service sales (units) 4 Basic service sales (units) 5 Price standard subscription 6 Price - premium subscription 7 Price basic subscription - 8 Sales revenue standard. 9 Sales revenue - premium 10 Sales revenue - basic 11 Firm's total revenue 12 Profit standard 13 Profit-premium 14 Profit-basic 15 Firm's total profit 16 Total industry revenue 17 Firm's market share 18 B Standard Service $ $ 3 $ $ C Strategy 1: New Product Premium Service 0 100 $ a $ $ 0 $ 0 $ $ 0.00 $ 9,000,000.00 $ 0.00% D E Strategy 2: New Product -Basic Service Strategy 2: New Product Strategy 3: New Products -Premium + Basic Service 0 0 100 S 0 S D $ OS OS 0 S 0.00 $ 9,000,000.00 S 0.00% $ 100 0 $ $ 0 $ 0 $ 0 $ $ 0 $ 0.00 $ 9,000.000.00 $ 0.00% Initial Value: Standard Service 100 $ 0 $ 0 0 0 0 $ 0 $ 0 0 0.00 $ 9,000,000.00 $ 0.00% 10000 G Initial Value: Strategy 1: New Product Premium Service 100 $ $ 1,000,000 $ $ 1,000,000 $ 500,000 $ $ 500,000.00 $ 10,000,000.00 $ 10.00% 8000 1500 H Initial Value: Initial Value: Strategy 2: New Product Strategy 3: New Products -Basic Service -Premium + Basic Service 6000 5000 1500 7000 5000 100 125 75 500,000 187,500 375,000 1,062,500 250,000 140,625 112,500 503,125.00 10,082,500.00 10.58% 100 $ 125 $ 800,000 $ 187,500 $ 987,500 $ 400,000 $ 140,625 $ 540,625.00 $ 9,987,500.00 $ 9.89% 100 S $ 75 S 600.000 S 525,000 $ $ 1,125,000 $ 300.000 S S 157,500 $ 457,500.00 S 10,125,000.00 11.11%