Gold Plus Gross Margin: 70%

Gold Plus

Gross margin: 70%

Retailer margin: 20%

Retail selling price: $3.49

Profit = Gross margin * Selling price

= Gross margin * (Retail selling price - (Retail selling price * Retailer margin))

= 0.7 * (3.49 - (3.49 * 0.2))

= 1.9544 ($)

Funtime

Gross margin: 70% (We assume that the gross margins of Funtime and Gold Plus are

same)

Retailer margin: 20% (We also assume that the retailer margins of Funtime and Gold

Plus are same)

Retail selling price: $2.79

Profit = Gross margin * Selling price

= Gross margin * ( Retail selling price - ( Retail selling price * Retailer margin ) )

= 0.7 * (2.79 - (2.79 * 0.2))

= 1.5624 ($)

Gold Plus Profit / Funtime Profit = 1.9544 / 1.5624 = 1.2508

If 10% of Gold Plus users change their films to Funtime, then 2.508% of the number

of Kodak customers has to be filled with new customers. This number of new customers

occupy 2.508% * (70% / 100%) = 1.7556% of the whole market share. Moreover, the

market share of Fuji and Polaroid is totally 15%. Therefore, if Kodak want to

compensate their loss, 1.7556% / 15% = 0.11704 = 11.704% of Fuji and Polaroid's

customers have to change their films to Funtime. Here we just consider these two

companies, because these are the largest companies except Kodak with respect to their

market shares. In addition, we can guess that the customers of the other companies are

quite price-sensitive, because the products that they purchase have lower prices than the

products of Kodak, Fuji and Polaroid, and the price of Funtime can not attract those

people easily. In the Funtime marketing plan, there is no advertising support. Therefore,

Kodak has difficulty in attracting these amounts of new customers.