Taylor Smith owns a small clothing company, Cuteness for You, that offers an online subscription and personal shopping service targeted at busy families with children aged newborn to five years old. Currently, Taylor has one level of subscription service, the standard service. For $100 a month, the standard service provides its customers a monthly delivery of 10 clothing items carefully chosen to match the child's size, gender, and emerging style. The online clothing subscription market is fairly new but is growing rapidly and thus Taylor is considering extending the product line to increase its market share and profits.   Taylor is debating whether to add a premium subscription service featuring profitable high-markup items for $125 per month, a basic subscription service that contains lower-markup popular items priced at $75 per month, or possibly both. Taylor knows that the new product lines provide an opportunity to attract more customers and possibly increase revenues and profit, but recognizes that new product lines, especially ones priced below the $100 standard service, might steal sales from the standard line through cannibalization.   To evaluate, Taylor creates a spreadsheet containing key marketing metrics including estimated firm sales revenue and units, firm profit, and industry sales revenue. Based on industry research, he estimates that basic subscriptions would cannibalize standard sales at 4X the rate premium would.   Market share = Firm's sales revenue / Total industry sales revenue (including the firm's)   highlighted yellow fields can be changed to test   Questions: 1. Based on the data provided in the above spreadsheet, what product line extension strategy should Cuteness for You pursue? a. Add the premium subscription service. b. Keep the product line streamlined with onlv the standard subscription service. c. Add both the premium and the basic subscription services d. It depends on whether market share or profit is the firm's goal. e. Add the basic subscription service.

Taylor Smith owns a small clothing company, Cuteness for You, that offers an online subscription and personal shopping service targeted at busy families with children aged newborn to five years old. Currently, Taylor has one level of subscription service, the standard service. For $100 a month, the standard service provides its customers a monthly delivery of 10 clothing items carefully chosen to match the child's size, gender, and emerging style. The online clothing subscription market is fairly new but is growing rapidly and thus Taylor is considering extending the product line to increase its market share and profits.

Taylor is debating whether to add a premium subscription service featuring profitable high-markup items for $125 per month, a basic subscription service that contains lower-markup popular items priced at $75 per month, or possibly both. Taylor knows that the new product lines provide an opportunity to attract more customers and possibly increase revenues and profit, but recognizes that new product lines, especially ones priced below the $100 standard service, might steal sales from the standard line through cannibalization.

To evaluate, Taylor creates a spreadsheet containing key marketing metrics including estimated firm sales revenue and units, firm profit, and industry sales revenue. Based on industry research, he estimates that basic subscriptions would cannibalize standard sales at 4X the rate premium would.

Market share = Firm's sales revenue / Total industry sales revenue (including the firm's)

highlighted yellow fields can be changed to test

Questions:

1. Based on the data provided in the above spreadsheet, what product line extension strategy should Cuteness for You pursue?

a. Add the premium subscription service.
b. Keep the product line streamlined with onlv the standard subscription service.
c. Add both the premium and the basic subscription services
d. It depends on whether market share or profit is the firm's goal.
e. Add the basic subscription service.

2. Taylor conducts additional market research and discovers that the target market would be willing to pay $140 for the premium subscription without a negative impact to demand. Assuming that increasing market share is the primary goal for his firm, is the premium subscription product line extension the best strategy?

a. Yes, because with the $140 premium subscription price, market share increases by 0.26%
b. Yes, because increasing the price of the subscription service increases profit by $29,500.
c. No, because changing the price of the subscription service has no impact on market share.
d. Yes, because the $15 price increase without a drop in the demand for the product, indicates that the product was underpriced.
e. No, because even with a $140 premium subscription price, Cuteness for You's market share is only 10.09%.

3. Taylor has decided that the goal really should be to maximize the number of subscriptions sold, regardless of whether the subscription is basic, standard, or premium. Given his new goal, which product line extension strategy should Cuteness for You pursue?

a. Add only the basic subscription product line extension.
b. Add only the premium subscription product line extension.
c. Do not add either the basic or the premium subscription product line extension.
d. Create an even lower-priced limited subscription product line extension.
e. Add both the basic and premium subscription product line extensions.

4. Sales in Taylor's test market have far exceeded expectations, so he revises his sales estimates as follows: Strategy 1: premium $125 subscriptions increase to 4000; Strategy 2: basic $75 subscriptions increase to 8000; and Strategy 3: premium $125 subscriptions increase to 2000 and basic $75 subscriptions increase to 6000. Update the spreadsheet to reflect the new sales units, and determine which strategy maximizes market share.

a. Strategy 1: add the premium subscription service to maximize market share
b. Alternate strategy: consider increasing spending on the standard service
c. Strategy 3: add both of the new subscription services to maximize market share
d. Initial strategy: do not add either of the product line extensions to maximize market share
e. Strategy 3e add the basic subscription service to increase market share

5. Talyor decides that he wants to evaluate a more conservative outcome for scenario 1 and estimates that the sales from the premium service will only be 1550 subscriptions. Which of the following statements most accurately describes the outcome?

a. Adding a premium subscription service does not cannibalize sales from the standard subscription service.
b. There is no difference in the outcomes with or without the new premium subscription service.
c. The revenue increase from the premium subscription service is insignificant.
d. The drop in market share does not support the addition of the premium subscription service
e. The increase in market share does not support the addition of the premium subscription service