Typical exam question imagine you are raising money

“Typical Exam Question”
•
Imagine you are raising money for your sorority / fraternity
•
You have created a calendar that has Columbia-related
photographs that your sorority/ fraternity members took.
•
You have two options facing you (see below)
–
Which option brings in more profit?
–
(A) A (B) B (C) need more info
•
Option A: Sell a 12-page black-and-white calendar, a separate month on
each page. You can sell between 100-
200
calendars. You will charge $10/
calendar. Your margin is 50% and your fixed cost (set-up fee) is $100
•
Option B: Sell a 6-page color calendar, two months on each page. You will
sell 100 calendars. You can charge between $20-30/ calendar. Your variable
cost is $10/calendar and your fixed cost (set-up fee) is $200

The data – another look
Option A
-least profit
Option A
-most profit
Option B
-least profit
Option B
-most profit
Quantity 100 200 100 100
Price $10 $10 $20 $30
Variable
Cost
$5 $5 $10 $10
Fixed Cost $100 $100 $200 $200
Profit $400 $900 $800 $1800

Solving the problem
•
Option A:
–
Least profit = $400
–
Most profit = $900
•
Option B:
–
Least profit = $800
–
Most profit = $1800
•
Profit (Option A) >=< Profit (Option B)
•
→ More info needed

Breakeven analysis!
• Fit Deck
Shark Tank Season 5 Week 15

Plan for this week
• Segmentation-Targeting-Positioning (bit more detail)
•
Break-even analysis
•
Consumer Behavior

The Consumer Decision Process
Need Recognition
Functional needs
Psychological needs
Royalty-Free/CORBIS
©Digital Vision/PunchStock

The Consumer Decision Process
Search for Information
Courtesy of Refinery29.com.

Factors Affecting Consumers’
Search Process
(Perceived)
Benefits
(Perceived)
Costs

Actual or Perceived Risk

The Consumer Decision Process
Evaluation of Alternatives: Attribute Sets

The Consumer Decision Process
Evaluation of Alternatives:
Consumer Decision Rules
Cheerios 10 8 6 8 8.2
Post 8 9 8 3 7.1
Kashi 6 8 10 5 7.2
All photos: ©M. Hruby.
Compensatory

The Consumer Decision Process
Evaluation of Alternatives:
Consumer Decision Rules
Cheerios 10 8 6 8 8.2
Post 8 9 8 3 7.1
Kashi 6 8 10 5 7.2
All photos: ©M. Hruby.
Non-Compensatory