The 2020 Coronavirus pandemic has increased the demand for disinfectant products in the U.S. More and more customers are seeking disinfectant products for personal care as well as for their household needs. Responding to the growing demand in the category, Michelle Colban, a Marketing Director at Unilever has proposed launching a new disinfectant product under the Dove brand. The proposal is to launch a new hand strong sanitizing gel tube, a clear gel which promises to kill 99% of germs while keeping the skin soft and protected.

Two distinct market segments. The company expects the market potential for this product to be about 90 million people. That is, about 90 million people could potentially buy this new product in the long run. About 20% of them (18 million) are existing Dove brand users; the remaining are non-users of the brand.

Purchase Funnel Metrics. A BASES-like concept test revealed that the Dove brand users and non-users of the brand will respond differently to the new hand sanitizing gel. Among the users of Dove brand, 30% of the surveyed respondents said that they will definitely try the new product and another 60% said that they will probably try it. In contrast, among the non-users of Dove brand, 20% said they will definitely buy and 30% said they will probably buy.

Because brand users are more likely to pay attention to ads for the new product, the brand users and non-users are also expected to have different awareness rates. While 50% of the brand users are expected to be aware of the new product after the launch campaign, only 15% of the non-users are expected to be aware of the new product.

These two groups also differ in the repeat purchase rates and quantities. 70% of brand users are expected to keep buying the product after the initial trial, and they are likely to buy it 3 more times in a year (i.e., a total of 4 times a year). Only 50% of the brand non-users are expected to continue buying the product after the initial trial and they are likely to buy it 2 more times (i.e., a total of 3 times a year).

The new product is expected to have strong distribution with an availability rate of about 75% of the market potential, the same for users and non-users of Dove.

Financials. The proposal is to launch only one pack, a 3 oz gel tube at retail selling price of $4.79 per tube (i.e., price paid by customers in retail stores such as WalMart and Amazon). The average retail margin for the product is 35%. The team estimates that the annual fixed cost for the launch would be around $19 million. This included all the fixed costs associated with this new product, including the advertising and promotional costs for launching the product. The team expects the variable cost of each 3 oz tube to be $1.85.

As Sunny Jain, the President of Personal and Beauty Care division at Unilever, sat down with Michelle Colban and other members of the marketing team to analyze the proposal, he posed several questions.

a) Based on the concept test results, what is the projected sales of the new product in the first year? Please note that there are two distinct market segments here - brand users and brand non-users. So you have to calculate the projected sales separately for the two groups and then add them up to get the total sales.

b) How much will Unilever have to sell to breakeven on the fixed costs? Clearly show all your calculations. Based on these figures will the new product break even in the first year?