Marginal profit problem

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Reference no: EM13219135

Increasingly women with in the age group 15-45 years with active lifestyle demand for long lasting deodorant. Owing to this unmet need, Smellfresh has introduced a new range of long lasting deodorants with a unique chemical that allows the deodorant to last for more than close to five days even after showering. Similar deodorants available in the market are quiet costly (Kilma Antiperspirant - US$24.95 for 50ml bottle, Adidas Absorbent-Deo Wetness Control - US$38.95 for 50ml bottle), and are not effective in majority of the cases. However, this new product offered by Smellfresh is aimed at targeting the low and mid income segment customers. Besides the low price (US$ 10-12 for 50ml), the new chemical used in the deodorant will boost its effectiveness.

Besides the low price, and higher quality, this new product comes would be launched in six different fragrances. Together these features will serve as the major competitive advantage for this product. Federal Food, Drug, and Cosmetic Act (FD&C Act), the Fair Packaging and Labeling Act (FPLA) monitor the range of cosmetics marketed in the United States. All the cosmetic products being manufactured or imported in US should comply with the rules and regulations stated by these authorities. Cosmetics as defined by these bodies are intended to help human in cleansing, and increasing their attractiveness without affecting the body structure of the user. In addition, the labels used over the product should help the consumer in better understanding of the product. Further, these agencies also stipulate that the advertisements or the promotional campaigns used should not mislead the customers at any given point of time.

Mission statement

"Helping women to stay fresh all day and night long". The company with its new product aims at helping its target customers to remain fresh at all times, without thinking twice about the bad odour due to sweat.

Marketing Objective

Women are very much peculiar about the brand of cosmetic they use. Customers across the income segments are highly brand conscious, and think twice before testing a new product on their body. Thus it is very much essential that the brand building exercise is done initially to ensure that people are aware of Smellfresh as a long lasting deodorant manufacturer. Thus the short term objective would be entirely focused on building the brand of the company in the market. Focused advertisement and marketing plans should be carried out for reaching to the target customers. Campaigns should be conducted in large schools or institutions, or even at large corporate for promotion of these products. In addition samples should also be distributed. In addition, we would try and enter into arrangements with distributors and retailers to showcase their product and help them. In turn, they will be provided with heavy margins.

Financial objective

In the very first year of operations, we would aim at selling close to 100,000 bottles of the deodorant, thus generating total revenue of US$1.1mn. Assuming in the very first year the SG&A expenses will be pretty higher, we assume to breakeven in the first year, with a marginal profit of approximately 2%. In this way we plan to capture close to 5% of the market (deodorant for women).

From the 100,000 units planned to be sold, the company will distribute approximately 10,000 bottles of deodorant as samples to the customers. These samples will not be entirely free, but will be sold at a subsidized price or ~30% of the cost.

Reference no: EM13219135

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