Project 3
Sales Promotion Break Even Analysis
due Tuesday, 19 NOV, 11:59 PM (back one week from syllabus date)

Variblo sells its ionic hairdryers to independent hair salons, who typically retail them to their own customers at a markup of about 33% (based on final retail price).  Variblo total fixed costs are currently about $500,000 per year, including an annual promotion budget of $90,000.  Unit variable costs are $50 (including shipping as purchased from a Chinese manufacturer).  The factory price to the salons is $89 each with the buyer paying shipping and handling costs.  In its first year in business, last year, Variblo sold almost 25,000 units.  In an effort to increase market share, Variblo is considering a sales promotion which would cost Variblo an additional $15,600 across the next 1,000 units.  Should Variblo go ahead with the sales promotion campaign?  Consider qualitative as well as quantitative issues.  Your analysis is to use only the above information and commonly known information about the current marketing environment; you are not to conduct additional research.

As the product manager for the Variblo hair dryer line, write a memo to the vice president of marketing to recommend whether or not you should move ahead with this sales promotion.  Your memo must include the following format, not necessarily with any sort of headings:

  1. objectives of this assessment
    (aka problem statement)

  2. facts and assumptions that will be used in analysis
    (aka situation analysis)

  3. discussion/ assessment of alternative strategies
    (aka alternatives)

  4. discussion of the conclusions
    (aka recommendation and implications)

Note that "memo" is used here to mean a brief report; don't include "to" and "from" lines and such.  Appropriate length of the report body is about one single-spaced page.  It is not appropriate to include a cover page with a professional business memo.  All calculations for numbers that are derived from given case information must be clearly shown in your report (either in the body or as an attachment that is referenced).  Reports that are much longer or much shorter than about a single-spaced page are unlikely to receive high marks.  I will open only ONE file for y our submission, no matter how many you send.  The file MUST be in either MS Word (.doc) format or PDF format and must print on 8.5 x 11 inch paper (no spreadsheet files).  Please be sure to include your name at the top of the document!

Be sure that you have read the assignments from Weeks 11 and 13 that are related to this project (pricing, break-even analysis, and sales promotion).  Although I encourage you to collaborate on the course discussion board and outside of class with regard to how to do these projects, the analysis and the entire submitted report that you submit must be your own work. 

Regularly check the discussion board for additional information, advice, or constraints. 

Project Scores

For the final grade on all three projects (not exams), I'll drop the lowest of the three and then multiply the remaining two by 3/2.  If you didn't do as well as hoped on one project, it goes away, but the remaining two get weighted more heavily.

For example, if you received a score of 70 on the first project, 100 on each of second and third projects, the 70 is dropped and your total of the remaining two projects is (3/2)*(100+100) = 300 points total (out of 300 possible).

For example, if you have received a score of 90 on Project 1, 87 on Project 2, and accidentally or deliberately forget to submit Project 3, you have three project scores: 90, 87, and 0.  Dropping the lowest (0), your score for all projects would be calculated as (3/2)*(90+87)=265.5 points total (out of 300 possible, or 88.5% on this component of the course).