A company is trying to predict the long-run market share of a new men\'s deodora

Question

A company is trying to predict the long-run market share of a new men's deodorant. Based on initial marketing studies, they believe that 35% of new purchasers in the market will ultimately try this brand. They believe that customers will purchase their brand about 40% of the time in the future. Preliminary data also suggest that the brand will attract heavier-than-average buyers, such as those who exercise frequently and participate in sports, and that they will purchase about 15% more than the average buyer.

a. Calculate the long-run market share that the company can anticipate under these assumptions.

b. Develop a general model for predicting long-run market share.

Explanation / Answer

a)

In the long run each customer will be a new purchaser once.

Let Total number of customer=100

Out of this 100 customer 35 will try this brand

Customer will purchase this brand about 40% of time. Out of these 20 %( average buyers) will buy it 15% more than average buyers

Thus effective number of purchasers=20+20*(1.15)=43%

Out of 35 customers who tries this brand, 43% will be buy it

Thus total number of customer who will buy this brand=35*0.43=15.05

Thus total market share = 15.05/100=15.05%

b)

General model for market share=(% of people who tries this brand)*(% of people who will be repeat buyers)*(% of time these repeat buyers will buy this particular brand)

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