Assignment I – Quantitative Analysis in Marketing
– Marketing Management – Spring 2020
Due Date: February 26, 2020 by 11:59pm
(upload on Canvas)
an individual assignment. You are not permitted to
complete the assignment with the assistance of any other person nor are you
permitted to assist any other person in completing the assignment. If you
have any questions, you should contact the professor, not other students.
By submitting this assignment, you pledge
to have followed this guideline in accordance with The University of
Nebraska-Lincoln’s Student Code of Conduct (https://studentconduct.unl.edu).
The scenario this assignment is based
on is entirely hypothetical. Please do not search for accurate numbers and
information on the Internet but only use the information provided in the text.
Please note that there is a file with
practice questions (and solutions) posted on Canvas. I recommend working
through these questions before you complete the assignment. All questions on
the assignment are based on the methods we covered in class.
calculations in the space provided. No credit will be given if you do not show your
You have the
option to complete the assignment by hand rather than typing it. Should you
choose to do so, please submit the assignment on February 26, 2020 in class or
submit a scanned pdf copy through Canvas by the regular due date (Feb. 26, 2020,
Note: There are
no carry over mistakes within questions (only among questions). If the result in
a question is wrong, students don’t receive points unless noted otherwise.
However, if students use the incorrect result from one question to find the
result in a subsequent question (and all calculations were done correctly),
they will receive full points for the subsequent question.
HillTop Hiking Shoes
To stay fit, more and
more people are turning to hiking. Hiking requires special shoes that are
resistant, waterproof, offer adequate support, and are comfortable throughout
the day. Hiking shoes can vary depending on the difficulty of the trail one
wants to complete, and range from reinforced walking shoes to professional
hiking boots. HillTop is a leading manufacturer of outdoors apparel, and its
latest entry level hiking shoes, the “Raw” model, features an innovative sole
that allows the foot to breath, while being completely waterproof. The retail
price for a pair of “Raw” is $175.
The market: The USA is home to 300 million
people. Market research has shown that outdoor enthusiast account for 50% of
the population, 40% of which are hikers. However, HillTop’s management knows
that not all hikers will be interested in the “Raw” model, since it is an entry
level model. For this reason, they decide to target beginner and amateur hikers
who make up 15% of the hikers market. Statistics show that beginner and amateur
hikers buy, on average, 0.8 pairs of shoes each year.
and Cost Information: To create the “Raw”, an
initial investment for the product facility was $1,875,000 and HillTop
estimates the general overhead expenses at $200,000. To promote it, HillTop
will set aside $500,000 for advertising, such as TV ads and billboards and
$400,000 on additional fixed promotions in the first year. Management expects
15% of the retail price to account for labour costs, 10% for raw material
expenses, while 10% will be for factory operating costs and 5% for
transportation expenses (percentages refer to retail price). HillTop has
decided to sell the “Raw” model through distributors rather than directly to
retailers. Distributors expect margins of 25% while retailers look for 20%
margins before selling to customers.
Test market: Before launching
nationwide in the US, the management decided to test market the “Raw” model to evaluate its potential success in the hiking shoes market. The
test market size is estimated at 1.5 million people in total. Otherwise it has
the same characteristics as the U.S. market described above. The test lasted
for a total period of 7 months. In the first four months, the “Raw” model was
sold at its original retail price. During the following three months, the
management decided to run a promotion, selling the “Raw” model at
20% off its original retail price. Sales for the first four months reached a
total of 1,600 units*. A total of 1,500 units were sold during the following
three months*. HillTop’s decision to introduce the “Raw” model in the test market also influenced the sales of two other products
(see table below):
Units Sold – First 4 months*
Units Sold - Last 3 months*
(*assume all sales are evenly distributed during the 7 months)