Recent Question/Assignment

Evaluate marketing opportunities
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Performance objective
The candidate will demonstrate skills and knowledge required to investigate marketing opportunities and evaluate required changes to current operations.
Assessment description
In response to the simulated business scenario, you will evaluate three marketing opportunities that have been identified for you, rank them in terms of viability and likely contribution to the business, and assess the impact of the top-ranked opportunity on operations.
You will then prepare a report for a board of directors documenting identified marketing opportunities.
Page numbers in BLUE denote the appropriate section of the Student Workbook which you should refer to when necessary. Page numbers in RED denote the appropriate section of the case study which you should refer to when necessary.

Scenario
In Assessment Task 1, each member of the marketing team (including you) presented potential marketing opportunities to the Marketing Manager, Sam Lee. He has chosen three separate marketing opportunities to further evaluate and rank before choosing one to proceed with. These three are
manufacture and sell own-brand of BBQfun barbeques (built in India and imported)
sell products through e-commerce (online) Australia-wide
sell products at bargain prices.
The first opportunity is to manufacture and retail own-branded barbecues and products. Manufacture would take place at a leased plant in India as BBQfun has no manufacturing capability. Also, manufacture in Australia would be too expensive.
The second opportunity is to make all products available in an online store. Existing warehouses would be reconfigured to store the extra stock. Customers would be required to cover extra delivery costs.
The third opportunity is to aim to increase market share by cutting the cost of products and aiming at mass appeal. BBQfun would focus on selling lower priced products while eliminating the higher cost (differentiated and higher quality) products from the product line.
Sam Lee has asked you to evaluate the three opportunities based on a variety of different factors, determine the financial viability of each opportunity, and then rank them.
The first step is to consider if these are appropriate marketing opportunities that BBQfun should be looking to implement. Analyse each opportunity in terms of fit with organisational goals and capabilities (pages 44 – 52).
Is the opportunity consistent with the BBQfun business plan (page 2)?
Consider BBQ’s current capabilities and resources. Is the business capable of exploiting this opportunity?
1. Manufacture own brand
2. Sell through e-commerce (online)
3. Sell at bargain prices
BBQfun’s marketing research found the following market needs and trends:
Market needs
Selection – a wide choice of options.
Accessibility – the customer needs easy access to the store with minimal inconvenience. Online shopping is becoming increasingly popular.
Customer service – the customer needs expert customer service to help sort through choices.
Competitive pricing – the customer needs all products/services to be competitively priced relative to comparable high-end outdoor lifestyle options offered by competitors.
Flexible payment – the customer needs easily managed payment plan.
Quality guarantees – the customer requires three year product guarantees
Market trends
The market trend for outdoor lifestyle stores is headed toward a more sophisticated and informed customer. Outdoor lifestyles customers are becoming more sophisticated in a number of different ways:
Item quality – the preference for high quality items is increasing as customers are learning to appreciate the quality differences.
Unique – our patrons appreciate the opportunity to include outdoor lifestyles in their home that stand out from the mass-produced and low-quality items.
Selection – people are demanding a larger selection of choices; they are no longer accepting a limited offer in outdoor lifestyles.
Based on this research, analyse each opportunity to determine likely impact on current business and customer base.
How will customers react to the implementation of the marketing opportunity?
Is the market share likely to increase or decrease?
Will this opportunity allow BBQfun to enter new markets?
What will be the likely impact on sales volume?
Consider consumer preferences (page 17).
1. Manufacture own brand
2. Sell through e-commerce (online)
3. Sell at bargain prices

Outline any risks associated with the marketing opportunity (page 76). You may wish to consider
risks in terms of implementing the opportunity
risks associated with costs or sales
external factors such as regulations and relevant legislation
you may wish to refer to the SWOT analysis on pages 14 – 15 or the risk register on
pages 11 – 12.
1. Manufacture own brand
2. Sell through e-commerce (online)
3. Sell at bargain prices
Analyse the role of competitors in relation to each opportunity (page 15).
Which businesses would likely be BBQfun’s direct competitors?
Compare BBQfun to competitors in terms of target market, product offering, price etc.
What might be the reaction of these competitors to implementation of the new opportunity?
1. Manufacture own brand
2. Sell through e-commerce (online)
3. Sell at bargain prices

For each of the opportunities, you will do some calculations and statistical analysis in order to determine the impact on the business and customer base. Based on your analysis above, the marketing team has calculated some future estimates for each opportunity (such as future market size and future sales). Based on these estimates you will calculate gross and net profit and return on investment. As an example, the first opportunity (own-branded products) has been completed for you.
1. Manufacture own-branded products.
For the financial year 2012/13, the marketing team has estimated future sales volume if BBQfun decides to sell own-branded products. Use the table below to calculate total revenue, unit contribution margin and total gross profit. You need to fill in the boxes shaded in pink.
BBQs Outdoor Furniture BBQ Accessories
Predicted sales volume (units) 7,200 3,120 21,000
Average selling price $600 $850 $50
Total revenue
sales volume x average selling price 7200 x $600 =
$4,320,000 3,120 x $850 =
$2,652,000 21,000 x $50 =
$1,050,000 Total revenue: $4,320,000 + $2,652,000 + $1,050,000 =
$8,022,000
Cost per unit $100 $250 $10
Unit contribution margin
average selling price – cost per unit $600 - $100 =
$500 $850 - $250 =
$600 $50 - $10 =
$40
Total gross profit
sales volume x unit contribution margin 7200 x $500 =
$3,600,000 3,120 x $600 =
$1,872,000 21,000 x $40 =
$856,000 Total gross profit: $3,600,000 + $1,872,000 + $856,000 =
$6,328,000

The marketing team has estimated additional fixed costs that would need to be considered when selling own-branded products. Use these to calculate total net profit for the year.
You need to fill in the boxes shaded in pink.
Current fixed costs: $4,884,714
Additional lease costs: $500,000
Additional labour costs: $250,000
Total fixed costs:
current fixed costs + additional fixed costs $4,884,714 + $500,000 + $250,000 =
$5,634,714
Total net profit:
total gross profit – total fixed costs $6,328,000 - $5,634,714 =
$693,286

Calculate the probable return on investment for this marketing opportunity. The formula you should use is
Projected return on investment=((New gross profit projection-Original gross profit projection))/Investment x 100
In the formula above:
New gross profit is the net profit you found above.
Original gross profit is the gross profit outlined in the case study (i.e. projected gross profit if the marketing opportunity is not undertaken) (page 5 of the case study shows gross profit of $6,677,000)
Investment in this case is the sum of the additional costs (here, it would be $500,000 + $250,000)
A larger (positive) number indicates a higher return on investment.
Projected return on investment
Return on Investment = [($6,328,000 - $6,677,000) / $750,000] x 100 = -46.53%

2. Sell products through e-commerce (online) Australia-wide.
For the financial year 2012/13, the marketing team has estimated future sales volume if BBQfun decides to sell stock online (as well as in its two existing stores). Use the table below to calculate total revenue, unit contribution margin and total gross profit. You need to fill in the boxes shaded in pink.
BBQs Outdoor Furniture BBQ Accessories
Predicted sales volume (units) 17,000 7,000 30,000
Average selling price $640 $880 $55
Total revenue
sales volume x average selling price Total revenue:
Cost per unit $340 $460 $30
Unit contribution margin
average selling price – cost per unit
Total gross profit
sales volume x unit contribution margin Total gross profit:

The marketing team has estimated additional fixed costs that would need to be considered when selling own-branded products. Use these to calculate total net profit for the year.
You need to fill in the boxes shaded in pink.
Current fixed costs: $4,884,714
Additional training costs: $100,000
Additional website costs: $300,000
Additional reconfiguring or warehouse costs: $300,000
Additional labour costs: $300,000
Total fixed costs:
current fixed costs + additional fixed costs
Total net profit:
total gross profit – total fixed costs
Calculate the probable return on investment for this marketing opportunity. The formula you should use is
Projected return on investment=((New gross profit projection-Original gross profit projection))/Investment x 100
In the formula above:
New gross profit is the net profit you found above.
Original gross profit is the gross profit outlined in the case study (i.e. projected gross profit if the marketing opportunity is not undertaken) (page 5 of the case study shows gross profit of $6,677,000)
Investment in this case is the sum of the additional costs (in this case $100,000 + $300,000 + $300,000 + $300,000)
A larger (positive) number indicates a higher return on investment.
Projected return on investment

3. Sell products at bargain prices.
For the financial year 2012/13, the marketing team has estimated future sales volume if BBQfun decides to sell products at bargain prices. Use the table below to calculate total revenue, unit contribution margin and total gross profit. You need to fill in the boxes shaded in pink.
BBQs Outdoor Furniture BBQ Accessories
Predicted sales volume (units) 10,000 6,000 35,000
Average selling price $400 $500 $30
Total revenue
sales volume x average selling price Total revenue:
Cost per unit $200 $250 $10
Unit contribution margin
average selling price – cost per unit
Total gross profit
sales volume x unit contribution margin Total gross profit:

The marketing team has estimated additional fixed costs that would need to be considered when selling products at bargain prices. Use these to calculate total net profit for the year.
You need to fill in the boxes shaded in pink.
Current fixed costs: $4,884,714
Additional restructuring costs: $50,000
Additional re-training costs: $50,000
Total fixed costs:
current fixed costs + additional fixed costs
Total net profit:
total gross profit – total fixed costs
Calculate the probable return on investment for this marketing opportunity. The formula you should use is:
Projected return on investment=((New gross profit projection-Original gross profit projection))/Investment x 100
In the formula above:
New gross profit is the net profit you found above.
Original gross profit is the gross profit outlined in the case study (i.e. projected gross profit if the marketing opportunity is not undertaken) (page 5 of the case study shows gross profit of $6,677,000)
Investment in this case is the sum of the additional costs (in this case $50,000 + $50,000)
A larger (positive) number indicates a higher return on investment.
Projected return on investment

Rank the three marketing opportunities in order, with 1 being the most desirable opportunity and 3 being the least desirable opportunity. Provide reasons for your ranking. You may consider factors such as
financial indicators including profit, return on investment etc.
viability, risks and likelihood of success
potential competitors
fit with organisational goals and capabilities
customer and market trends
Rank Marketing Opportunity Reason for ranking
1.
2.
3.

Part B: Implementing Marketing Opportunity
The Marketing Manager has decided to implement the number one ranked marketing opportunity which you identified above.
In order to take advantage of this marketing opportunity, he’d like you to identify and document required changes to current operations and to estimate resource requirements for these changes. Do this by using the template below. In the template
Identify the marketing opportunity that is being implemented
Identify at least two required changes to operations. This will depend on the marketing opportunity you are implementing. Examples of changes to operations could include building a new store, developing a website, hiring/firing staff, changing product type etc.
Estimate resource requirements involved in implementing the new opportunity. For each category, estimate the cost and justify the cost (page 91)
Changes to current operations
Marketing Opportunity:
Required changes to current operations (at least 2)
1.
2.
3.
4.
(Estimated) Resource requirements
Category Estimated cost (and reason for cost)
Staff
Training
Infrastructure & Equipment
Information Technology
Marketing

The Marketing Manager wants to ensure that the quality of service to existing customers doesn’t decrease, despite the new marketing opportunity targeting a new customer base. What steps could be taken to ensure that the quality of service to existing customers remains consistent? (page 88)
You have been asked to attend a meeting with the Board of Directors and CEO, Chief Financial Officer, Operations General Manger and the Marketing Manager. They want you to discuss the viability of implementing the marketing opportunity. Briefly outline (dot-points are acceptable) points you would present during the meeting (page 93). You may wish to discuss
Is the marketing opportunity viable?
What will the financial impact of the opportunity be?
What are the necessary changes to operations?
What risks are associated with the opportunity?
Are there any legal issues associated with the opportunity?

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