Period 8 Decision and Results

Rationale:

With two competitors with one brand and another brand on its way in Nutrites, we need to be careful to not give up too much ground. Riesling will likely take a bit of market share away from TUGR, but so long as we snag a fair share of the growth in the segment, we should be fine.

To figure out which metrics to go after on semantic/MDS scales, we are using a new method rather than just going after the obvious low-hanging fruit. We are taking the difference between our brand's perceived position and its segment's ideal values then multiplying the result by the utility weight for each characteristic. This value will tell us which characteristic we have the most to gain from improving upon its perceptions for each brand. There have been some surprising results from this analysis. For instance, we never would have thought to advertise the packaging characteristic for TILT by just looking at the semantic scale map, but this analysis has that characteristic's difference in part-worth being 33% higher than any of the others when importance is taken into account. Though TUGR has several segments that could use work, we decided to put everything into the clinical characteristic because that is the only characteristic that we lag on against Riesling's RUGS.

Our spending on advertising this period is going to need to cannibalize several of our Clinites brands. At first, we were going to try and keep things relatively close as far as how much we spend compared to our competitors. This is unwise. Of our top three products last period, only one was Clinites (TINY), and TUNA in third place had more than double the contribution than the brand with the fourth highest contribution, TILT. A $43 million (TUNA) to $18 million (TILT) split should not result in the two brands getting nearly the same budgets, especially when TUNA is in a growing (and much more profitable) market, and TILT is in a much more mature market. TINK will be the hardest hit due to its laggard performance compared to the other brands. Though it is our oldest self-released brand, TINK only brings in 6.4% of the contribution after marketing for the Clinites market, and 2.1% of our overall contribution last period, yet TINK commanded 10.3% of our advertising and commercial expenses. For next period, TINK will be brought closer to reality, with approximately 4% of our marketing budget going towards the brand. TINK's price will also be going up since it is still perceived lower than the ideal price point for the ME segment.

Something worrisome about this period is the fact that we will be researching a modification for TUGR. Though we do not believe we are making the same mistake as last time, the worrisome part comes in the form of the potential for excess inventory. With a transfer cost of $5.29, we will be looking at $1.058/unit disposal cost, in addition to $0.42/unit in inventory holding that we would have to accrue. If we were to miss our low end projection of 15.03 million units, this would result in $1.48 million in inventory holding and disposal costs. This does pale in comparison to the CBM/unit we would be losing of $24.03/unit, which if we missed by a million on the top end would be a devastating loss of $24 million.

Results:

Not bad, but still could have been much better. SPI is now at 12440, revenues inched up to $731 million, and EBT was $501 million, and our total contribution before marketing broke the $2 billion mark. Next period we will see our cumulative revenues break $3 billion, and our contribution after marketing and earnings before taxes break $2 billion. Big numbers, but we have some big problems as well. We saw decreases in the sizes