MKT 352 Name Lauren Como
Marketing Research Section: 9:00 ( ) / 12:00 ( )
Individual Homework #1 (Due date: 9/13 Th.)
•Please note that individual assignments must be completed and submitted individually, without
assistance from other students.
•You may seek clarifications from me.
•Assignments are due at the beginning of class on the due date.
•Credit for late assignments will be reduced by 30% for each day that they are late. If an
assignment is turned in after the beginning of class, this will count as being one day late.
•A hard copy of each assignment is requested, unbound, corner-stapled.
1. [2 points]
You are the brand manager for Krunchy cereal. Despite $2 million in annual profits for the brand,
your boss still thinks that you can do even better with a new cereal. The CFO of the firm
estimates that annual profits will be $1.8 million if the new product fails and will be $3 million if
the new product succeeds. If the firm does not introduce the new product, the profit will be $2
million. The probability of success is assessed at 0.4.
a) Should you introduce the new cereal? Show your calculations.
Current profits=2 million
Product fails (0.4 X 1,800,000)=720,000
Product is successful: (0.4 X 3,000,000)= 1,200,000 + 720,000 =1,920,000.
*Even if the product is successful, it would only generate $1,920,000 million versus the $2
million that the company already makes. Therefore, do not introduce the new product.
b) Suppose that a test market would inform you perfectly about whether the new will succeed or
fail. What is the most you would pay for such a test market? Show your calculations.
2,000,000-1,920,000= $80,000 is the most you would pay for the test market.
1
2. [3.5 points] A researcher wants to study the changes in sales of various brands in a certain
product category. Assume the market is made up of four brands--X, Y, Z and W. Assume every
respondent buys exactly one unit of the product in each period.
a) Using the following consumer panel data, construct a transition table.
Consumer ID 201
0
201
1
Consumer ID 201
0
201
1
1 X X 19 Y W
2 X X 20 Y W
3 X X 21 Z X
4 X X 22 Z Y
5 X X 23 Z Y
6 X X 24 Z Z
7 X X 25 Z Z
8 X X 26 Z Z
9 X X 27 Z Z
10 X Y 28 W X
11 X Y 29 W X
12 Y Y 30 W X
13 Y Y 31 W X
14 Y Y 32 W W
15 Y Z 33 W W
16 Y Z 34 W W
17 Y Z 35 W W
18 Y W 36 W W
37 W W
Bought in 2011
X Y Z W
X3442
Y5220
Z7002
2
Bought in
2010
W4331
*I made my own graph because I couldn’t get the one provided to edit.
X Y Z W
X ( ) ( ) ( ) ( ) ( )
Y ( ) ( ) ( ) ( ) ( )
Z ( ) ( ) ( ) ( ) ( )
W ( ) ( ) ( ) ( ) ( )
( ) ( ) ( ) ( ) ( )
Bought at 2011
Bought at 2010
b) On the basis of these data, is brand W doing well? Focus on the changes in market shares
between 2010 and 2011.
No, brand W is not doing well.
c) How many individuals in total switched brands between periods 2010 and 2011?
15
d) Which brand exhibited the highest loyalty (retention rate)? Which brand exhibited the lowest
loyalty? Show your calculations.
Brand X: Brand Y: Brand Z: Brand W:
3
2010: 11/37=29.7% 2010: 9/37=24.3% 2010: 7/37=18.9% 2010:10/37=27%
2011: 14/37=37.8% 2011:7/37= 18.9% 2011: 7/37=18.9% 2011: 9/37=24.3%
Brand X Changes Brand Y Changes: Brand Z Changes: Brand W:
37.8-29.7=8.1% 24.3-18.9=5.4 18.9-18.9=0% 27-24.3%=2.7%
Brand Z exhibited the highest loyalty, while Brand X showed the lowest loyalty, since they had
the largest percentage of customers switch brands.
3. Multiple Choice Questions (0.5 point)
Store audit data provides a lot of information to marketing managers. However, store audit data is
not an appropriate source of information if managers want to learn about ( ) .
1) market share 2) market leader 3) impact of promotion on sales 4) retention rate
4
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