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GBA463

ECONOMICS AND MARKETING STRATEGY

Fall A 2022

TEAM HOMEWORK #3

QUESTION 1 (15 points)

Consumers choose between beer and soda. Soda is known to be healthier than beer, but beer has fewer calories. Consumers have decreasing marginal utility for both fewer calories and health. Answer the following questions: (limit: 2 total pages)

a) A process is developed that allows the health content of beer to be improved. Based on economic theory, show graphically (budget constraint and indifference curves) and explain in 2-3 sentences how this development will alter a consumer’s choice decision.

b) Using the multiattribute model, show graphically and explain in 2-3 sentences how this same development will change a consumer’s choice decision.

c) Based on your answer to either part a) or part b), show graphically and explain in 2-3 sentences how this development concerning beer impacts an individual’s demand curve for soda.

QUESTION 2 (10 points)

You decide to go out for a chicken sandwich with a side dish of potatoes. KFC (Kentucky Fried Chicken) is more expensive than McDonald's but you like their chicken more. The potato side dish also differs - fries at McDonald's and mashed potatoes at KFC. Where do you go for food? Explain using the multi-attribute model. DO NOT assume numbers to answer this question. An intuitive explanation is required. (limit:  1 total page)

QUESTION 3 (15 points)

The candy bar market has three available brands: Choco-Blast, OHMY?#! and ChewGoo.  Each sells for $1.00.  Consumers consider only two attributes and price when deciding which brand to purchase.  The attributes are chocolate goodness and chewiness.  The attribute levels of the brands are summarized in the following table (using a 1-10 scale with 10 being the best):

Chocolate Goodness Chewiness

OHMY?#! 6 6

Choco-Blast 9 2

ChewGoo 3 7

Each consumer has decided to spend $1.00 on a candy bar, has a linear utility function concerning the two attributes and will definitely buy only one of the 3 brands. (limit: 1 total page)

a) Locate the three brands on a product map with chocolate goodness on one axis and chewiness on the other axis.

b) Using the product map you drew for part a) illustrate graphically a consumer who would be indifferent between Choco-Blast and ChewGoo. What candy bar would this consumer purchase?

c) On the product map you used in part a) also illustrate graphically a consumer who would buy ChewGoo and a consumer who would buy Choco-Blast. How does the utility function differ for these two individuals?

d) Where would you position a new product called “Aaaaahhh” that is price at one dollar in order to get one but not both of the consumers identified in part c) to purchase the new product? Identify the total possible area for this positioning not just a single point.

QUESTION 4 (15 points)

Provide a link to an online article that was not discussed in class for which the topic matter is related to a firm’s decision to reposition a product. Use the multiattribute model to explain why this firm choice makes sense. (limit: 1 page)

QUESTION 5 (10 points)

Provide a link to an online advertisement that was not discussed in class (it can be a video ad similar to a TV ad, a display ad similar to a magazine ad or even a simple text ad like Google uses). For this ad, identify the implied positioning of the product advertised and the consumer benefit segment being targeted. Also discuss anything in the ad that likely is tied to the demographics/psychographics of this targeted benefit segment. In addition, provide and explain one additional idea that you feel would further tie the ad content to the segment’s demographics/psychographics profile. (limit: 1 page)

QUESTION 6 (25 points)

For one team member’s former employer provide detailed answers to the following multiattribute model and STP questions concerning a product it sells. (limit: 2 total pages)

a) Position your firm’s product and its main competitors on a product map for which the axes are the 2 most important attributes to consumers of this product category. Mention any additional attributes that are relevant to consumers.

b) Provide the prices of the mapped products.

c) Describe the benefit segmentation that exists in this category. Identify all segments not just the one your firm targets. Using your answers to parts (a) and (b), discuss which products are preferred by which segments.

d) Explain how your firm’s product might reposition itself to better appeal to a benefit segment it is not currently targeting.

e) Which observable variables (demographics and such) do you believe are associated with the benefit segment your firm targets?

f) Given your answers to parts (c) and (e), do the promotion and distribution decisions of your firm make sense? Provide reasonably detailed explanations for both these decisions.

QUESTION 7(10 points)

Provide a link to an online article that was not discussed in class for which the topic matter is related to price discrimination. Explain whether or not the mechanism does a reasonable job in addressing the roadblocks that face a firm wishing to price discriminate. (limit: 1 page)