Assume that you are the product manager for “Snickers” chocolate bars. You sell these to retailers for $ 0.50 each. Retailers sell these bars to…

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 Assume that you are the product manager for “Snickers” chocolate bars. You sell these to retailers for $ 0.50 each. Retailers sell these bars to consumers for $ 1.00 each. Each Snickers bar package contains a $ 0.10 coupon that consumers can redeem by returning it to the manufacturer (i.e., you). Based on historical data, you expect 10% of the consumers to redeem their coupons. It costs you $ 0.09 to manufacture each bar. In a normal year, you sell 30 million bars, and spend $ 10 million on marketing campaigns.

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a.     In order to boost sales in 2019, you are planning to launch an additional campaign involving TV advertising and in-store displays. This additional campaign will cost you $ 2 million. How many additional Snickers bars will you need to sell to break-even on the additional marketing spending/investment of $ 2 million?

b.     If you eventually end up selling a total of 40 million bars during the year, what would be your ROMI (return on the additional marketing spending/investment of $ 2 million)?

c.     Trend research indicates that more and more consumers care about health and wellness. Accordingly, in 2019 Snickers is looking into launching a low-calorie version made with the natural sweetener, Stevia. The new bar will be called “Snickers Lite,” and will be available for sale to consumers at the same $1.00 price point as regular Snickers. Retailers have agreed to work on the same margins as the regular Snickers bars. However, it will cost the company $0.14 to manufacture each bar of “Snickers Lite” due to the more costly natural ingredients. The company will offer a $.10 coupon on the “Lite” bars, similar to that offered with regular Snickers bars and expects similar redemption ratesPreliminary forecasts indicate that the “Snickers Lite” bar will generate annual sales of 4 million bars, but that 40% of those sales will come directly from the regular Snickers brand. Incremental advertising to drive awareness and purchase of “Snickers Lite” is expected to be $1.5 million over the normal annual million spending. Based purely on the economics, would you advise management to launch the new “Snickers Lite” bar? Please show your step-by-step calculations clearly.

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