You work for a large health food marketer, and you are responsible for the cereal line....

 

Transcribed Image Text:

You work for a large health food marketer, and you are responsible for the cereal line. One of your products is Raisin Bran which comes in a 20-ounce box and currently sells at the retail level for $5.00. The raw material costs for this product have increased significantly recently, all but eating up your profit margin. Your chief marketing officer (CMO) is now telling you that the retail price of the cereal has to be increased from 25 cents an ounce to 30 cents an ounce within the next year, or she will seriously consider deleting that product from the company's product mix. Company research shows that your target consumers' Just Noticeable Difference for food products in this category is a 12%. You know you need to accommodate the cost increase to stay in the current markup level. If you make the price change as demanded by the CMO, it will result in an increase in the retail price of the 20-ounce box of cereal from $5.00 to $6.00, and you schedule the full price change to take effect within a year. estions: 1) What is the percentage increase demanded by the CMO? 2) Considering the given JND, what would such as increase mean to the company in terms of consumer perception and subsequent sales? 3) Think about two alternatives to accommodate the cost increase without causing consumer dissatisfaction. You work for a large health food marketer, and you are responsible for the cereal line. One of your products is Raisin Bran which comes in a 20-ounce box and currently sells at the retail level for $5.00. The raw material costs for this product have increased significantly recently, all but eating up your profit margin. Your chief marketing officer (CMO) is now telling you that the retail price of the cereal has to be increased from 25 cents an ounce to 30 cents an ounce within the next year, or she will seriously consider deleting that product from the company's product mix. Company research shows that your target consumers' Just Noticeable Difference for food products in this category is a 12%. You know you need to accommodate the cost increase to stay in the current markup level. If you make the price change as demanded by the CMO, it will result in an increase in the retail price of the 20-ounce box of cereal from $5.00 to $6.00, and you schedule the full price change to take effect within a year. estions: 1) What is the percentage increase demanded by the CMO? 2) Considering the given JND, what would such as increase mean to the company in terms of consumer perception and subsequent sales? 3) Think about two alternatives to accommodate the cost increase without causing consumer dissatisfaction.