Please help, I have no idea what to do.. Within a certain market area, there are
ID: 2983717 • Letter: P
Question
Please help, I have no idea what to do..
Within a certain market area, there are two brands of soap that most people use: "super soap" and "cheap soap", with the current market split evenly between the two brands. A company is considering introducing a third brand called "extra clean soap", and they have done some initial studies of market conditions. Their estimates of weekly shopping patterns are as follows: If a customer buys super soap this week, there is a 75% chance that next week the super soap will be used again, a 10% chance that extra clean will be used and a 15% chance that the cheap soap will be used. If a customer buys the extra clean this week, there is a fifty-fifty chance the customer will switch, and if a switch is made it will always be to super soap. If a customer buys cheap soap this week, it is equally likely that next week the customer will buy any of the three brands. Assuming that the Markov assumptions are good, use the above data to estimate a Markov matrix. What would be the problems with such a model? What is the long-run market share for the new soap? What will be the market share of the new soap two weeks after it is introduced? The market consists of approximately one million customers each week. Each purchase of super soap yields a profit of 15 cents; a purchase of cheap soap yields a profit of 10 cents; and a purchase of extra clean will yield a profit of 25 cents. Assume that the market was at steady-state with the even split between the two products. The initial advertising campaign to introduce the new brand was $100,000. How many weeks will it be until the $100,000 is recovered from the added revenue iof the new product? The company feels that with these three brands, an advertising campaign of 530,000 per week will increase the weekly total market by a quarter of a million cestomers? Is the campaign worthwhile? (Use a long-term average criterion.)Explanation / Answer
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