Innovative Toys Inc. Case Analysis Essay
Innovative Toy is entering the infant toy market by distributing through supermarkets. It is important to analyze if our potential supermarket channel, Big Tiger, and Innovative Toys can find a place where there is a win-win situation and where both companies are pursuing the same objectives. It is important to analyze the pros and cons of spending the marketing budget on trade promotion or advertising. It is important to note that the success of Innovative toys and a future launch of a second product next year rely on the success of the product we will launch first in Big Tiger supermarkets. I have carefully analyzed the various matters that affect the decision of which toy to introduce first, the …show more content…
I strongly suggest that the SuperSoft Ball be introduced first, because since we cannot control the retailer’s price, we should look at a product that will give Innovative Toys and Big Tiger the highest profit at the same level of % contribution margin. If we introduce the teether, Big Tiger might increase the level of contribution margin to 40%, where they make the most profit, but we make the least.
Currently, they are making $41,250 (1,500,000*.05 units at a contribution margin of 20% of 2.75) in profits from the unbranded and unpackaged toys. By selling with a contribution margin of 25%, where their total profit is highest for the product, they would make $82,880 (assuming that all the mothers with infants that said that would buy infant products at a certain price buys our product at that price). This is a 100% increase in profits for the infant toy category. I believe this alone is enough reason to happily welcome our boxed infant toy in their store.
These profit numbers are based on the purchase intent of the mothers with infants, numbers that have been adjusted to accommodate the