Boots Hair Care Analysis - William Sill AEM 222 Case...

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William Sill AEM 222 Case Analysis 29 February 2008 Boots Problem: Boots is trying to establish a market share in the U.K. They are faced with the struggle of having to promote and gain brand equity amongst customers with its new line of premium hair care products, and gain a market share from their promotion. Solution #1 - Solution one’s promotional strategy states that customers would be able to buy two hair-care items and get a third, at equal or lesser value, at no cost. It is called the “3 for 2.” Immediately, Boots has one up on this promotion. No other company has the technology to enforce a promotion such as this one. Boots is the only company that could implement this promotion regardless if prices were the same or not. This strategy will increase sales by 300 percent, and 60 percent of sales would be to new customers who would not buy them at first. Implementing this strategy would not only increase sales, but also increase profit. The cost of the shampoo/conditioner from the manufacturer is 2.39 pounds, which is found by 3.99 pounds(retail selling price at Boots)=cost/1-(40/100). The profits for each individual sale of the 3 for 2 offer are as follows: 2 units x 3.99(revenue received from sale) pounds minus 3 units x 2.39(cost of manufacturing) pounds equals .81 pounds of profit per sale. This means that if before the promotion there were 100 units sold per day, now there would 300 units sold per day. It would give Boots a profit of 300 units sold x .81 pounds equaling 243 pounds in profit. For the month of December they would make 7,533 pounds. This solution has a lot of advantages to it. Not only is Boots making a good profit, but also it is getting their products out there and hopefully capturing a steady market share. Also, 60 percent of these sales are to customers who would have not purchased them without the promotional deal. Per day that is 40 new customers trying their products. 200 units sold is divided by 3 to get 66.67 returning customers, and then that is X by .60 to get 40 new customers a day. All things considered, one of the few disadvantages of this solution is that you are
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Boots Hair Care Analysis - William Sill AEM 222 Case...

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