Hanikanen, a Canadian beer manufacturer, is evaluating the feasibility of manufacturing a new light beer in one of its plants that has a capacity to produce five million bottles of this beer annually. Hanikanen is considering targeting either young professionals or university students with this new light beer in the region. If they want to target students, the maximum selling price that the market will absorb is $10.99 per six pack, with a contribution margin of 30%. This contribution margin is expected to increase by 5% annually thereafter. For this market, Hanikanen should spend $700,000 on a local promotion annually to persuade 30,000 students to buy their product in Year 1. These students are expected to buy 12 times per year. Retention rate in this market is 85%. If they want to target young professionals, the maximum selling price that the market will absorb is $11.99 per six pack, with a contribution margin of 35%. For this market, Hanikanen should spend $1,000,000 on a local promotion in year 1 and expects to persuade 50,000 young professionals to buy their product 10 times per year. In the subsequent years, the promotion cost drops 50% annually. Retention rate in this market is 60%. Which of these two markets can generate more value over a 3-year relationship with Hanikanen? Hint: calculate CLV
Contingency Table
A contingency table can be defined as the visual representation of the relationship between two or more categorical variables that can be evaluated and registered. It is a categorical version of the scatterplot, which is used to investigate the linear relationship between two variables. A contingency table is indeed a type of frequency distribution table that displays two variables at the same time.
Binomial Distribution
Binomial is an algebraic expression of the sum or the difference of two terms. Before knowing about binomial distribution, we must know about the binomial theorem.
Hanikanen, a Canadian beer manufacturer, is evaluating the feasibility of manufacturing a new light beer in one of its plants that has a capacity to produce five million bottles of this beer annually. Hanikanen is considering targeting either young professionals or university students with this new light beer in the region. If they want to target students, the maximum selling price that the market will absorb is $10.99 per six pack, with a contribution margin of 30%. This contribution margin is expected to increase by 5% annually thereafter. For this market, Hanikanen should spend $700,000 on a local promotion annually to persuade 30,000 students to buy their product in Year 1. These students are expected to buy 12 times per year. Retention rate in this market is 85%. If they want to target young professionals, the maximum selling price that the market will absorb is $11.99 per six pack, with a contribution margin of 35%. For this market, Hanikanen should spend $1,000,000 on a local promotion in year 1 and expects to persuade 50,000 young professionals to buy their product 10 times per year. In the subsequent years, the promotion cost drops 50% annually. Retention rate in this market is 60%. Which of these two markets can generate more value over a 3-year relationship with Hanikanen? Hint: calculate CLV
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