Your friend Jorge is in charge of market research. He conducts concept tests. First, he describes the product to study respondents and then asks them to rate how likely they are to buy BuzzyBB using a 5 point scale. Then he collects demographic and prior usage information from respondents. "Concept acceptance rates are different for the chronic pain and the recreational markets," he tells your team. Chronic pain segment Recreational user segment Definitely will buy 42% 26% Probably will buy 17% 22% Might or might not 10% 30% buy Probably won't buy 5% 5% Definitely won't buy 26% 17% "These are raw scores from respondents. They're inflated because respondents are trying to be supportive and helpful. A rule of thumb: we can count on trial purchases from 80% of people who say they'd definitely" buy, and just 30% of those who say they'd "probably" buy. The others are very unlikely to try the product," he advises, Based on this info, you estimate the trial rate percentages for the chronic pain market [Select) and for the recreational user market Select "If we position BuzzBB for the chronic market, we can count on 50% of supermarkets and drug stores (all commodity volume) to carry BuzzBB," Sissy assures you. "But, if we go after the rec market, supermarkets and drug stores will be skeptical about carrying the product. They'll be worried about a backlash from people who don't approve of marijuana. I predict just 30% of supermarkets and drug stores will carry the product." Your classmate, Kitty, will head up advertising. "Our budget is tight. So we'll use social media to build awareness of BuzzyBB." "With a solid social media campaign, 17% of the chronic pain market and 22% of the rec market will be aware of our product," she promises. Assume the following: 1. The market potential for the chronic market is 36 million and the market potential for the rec market is 45 million. Note: You calculated the market potential for each segment above. But if you had an error above, I don't want that error to ripple through the entire exam. So I am making up these numbers out of thin air. Do not rethink your earlier calculations based on the assumptions I'm using here! 2. The trial rates are 44% and 39%. Same disclaimer Based on this information, approximately what will year 1 trial be in millions of people for chronic pain sufferers (Select] and for recreational users [ Select) ? Unit sales forecast You know that repurchases depend on the whether the product lives up to expectations. If the product is acceptable, then chronic pain users will buy an additional 15 packages per year because they're in constant pain. Otherwise, they will only buy the trial package. Because marijuana doesn't relieve all kinds of pain, you estimate 40% of the chronic pain users will find the product acceptable. If the product is acceptable, then rec users an additional 10 packages per year Otherwise, they will only buy the trial package. There are fewer substitutes in the rec market, and so you think 50% of the rec users will find the product acceptable. Assume that Year 1 trial is 7 million chronic pain users and 4 million rec users. (Agair that's inconsistent with your earlier calculations provide these estimates to prevent cascading errors.) What is your year 1 retail sales forecast in units (packages, in millions) for Chronic pains sufferers [Select] Recreational users [ Select] The product will retail for $34.00 in the chronic pain market and $22.00 in the rec market. Retailers' demand a gross margin of 30%. What is your wholesale sales forecast (that is, your sales to retailers) in $ millions for Chronic market [Select] Recreational market (Select]
