MACQUAIRIE UNIVERSITY MTKG310

Department of MarketingMTKG310 – Assignment 2

Potato chips manufacturer Snack Brands Australia (SBA) sells premium potato chips in different flavours under the brand name “Kettle”. SBA aims to obtain 25% market share in the potato chips category, which is currently dominated by larger players such as Smith’s and Thins. SBA thus manages to pursue an aggressive growth strategy and plans to extensively use price promotions. You are hired as its marketing consultant to assess 4 different price promotion strategies and identify the optimal strategy. Details of these strategies are given in the below table.

Regular (pre-promotion) price of Kettle potato chips is $4.5 and its regular contribution (margin) is $3. The company also has to cover any additional cost that the retailer will incur in running the promotion.

To compare the effectiveness of these strategies, SBA conducted field experiments in four stores (one strategy per store) of a major Australian supermarket chain during the past 26 weeks. In these field experiments, one of the four promotions was offered in weeks 11-14. Baseline category sales and Kettle’s brand market share were observed for 10 weeks prior to promotion. Post-promotion dip was observed for 2 weeks following the promotional period. Long term effect, if any, was measured in the 10 weeks following the post-promotion period. The attached excel sheet contains the weekly category sales and brand market share for the 10-week pre-promotion period, 4-week promotion period (highlighted in yellow) and 2-week post-promotion period (highlighted in orange). Long term weekly average category sales and brand market shares (evaluated in the 10 weeks following the post- promotion dip period) are also given in the data.

Your task is to evaluate the net impact of promotion taking into account any retailer’s cost and long term impact on category sales and brand market share; and recommend the best promotion strategy for SBA’s. Discuss your intuition for the observed results and provide justification for your recommendation. Weekly sales potato chips and SBA’s market share for the experimental period are given in the data file.

MKTG310 2019 S2 1

Department of MarketingInstructions:

1. Brand unit sales = Category sales × Market share

2. Long term impact is not part of the net impact of promotion and should be computed and

   assessed separately

MKTG310 2019 S2 2