This section is to respond to questions from students only. To comment on an Assignment, please go to the respective assignment (scroll up)
Q1 The executives of your company met. They are organized in 3 regions: Americas (South & North), Europe, and Asia/rest of the world. For 2021, there is a limited amount of money that can be assigned to the Marketing Budget. Pick one of the regions, and justify why your region should be funded, instead of the others. If you want to increase your budget for new launches, please use the payback template for it (see the last slide). Use this checklist:
1.What is the business idea? Describe it with words/photos. Use the 27 slides with material submitted by other students for inspiration.
2.Revenue & Cost: estimate the cost to make, sales price, and revenue for 3 years
3.How are you going to sell it/launch it?
4.Why would consumers buy it? and Where are you going to sell it?
5.How much do you need to invest in marketing?
Example
1.We will launch a new line of Nike shoes.
2.Revenue & Cost: Sales will be $500 Million, cost $250 Million the first two years; The 3rd year, both will double.
5.Investment: you recommend we invest $250 Million in this activity. As seen on the excel template, the payback is 2 years.
2.What launch should we look at?
Try to use the work you did for inventory management, to minimize work. Listen to the class recording, for the launches we spoke about in the session. You can launch any product/idea you want.
3.How do we get these figures?
To get the figures, you will have to estimate all numbers. For example, we know that Nike’s gross margin is 45%. In the payback template, we are using an estimate of 50%.
4. I’ve found only the information about Delta’s investment in advertising from Statista (2019-2022), but I couldn’t find the breakdown of the investment – that is, the percentages by channel and divided into the three regions. The only information I found is ad spend on TV in 2022, and there is Delta. With this, I found that Delta spent 24% on TV. That’s the only detail I got.
Yes, for many companies we just won’t be able to find a breakdown of the data. I was able to find how much they invest overall ($302 Million) by googling that, which took me to this statista report. I recommend that you assume that they spend proportionally the same amount in each region.
5.To finish my payback assignment, I see Delta generally spends a very low percentage on marketing relative to its total sales. For this reason, the proposed investment, while slightly higher than what they spent in 2022, results in the payback scenarios always showing me a return of 1 year.
For a marketing payback, a 1 year payback is a good target. However, also consider this:
1.For your specific project, the marketing investment would always be a much higher ratio. For example, if the ratio is 3%, you may propose to invest 3X more or 5X more of incremental sales.
2.Remember that your payback should be estimated on the incremental gross margin, based on incremental sales for Sky Clubs
Should I focus on the sales of the category where I’m focusing my business idea, which is the Sky Clubs?
Yes, you should look at the specific category you are considering.
6.Can I use the FY20 full-year report and reason for 2021?
You can choose any period you want. The strategic plan is for 2022-2025 though. You will save time by using that period.
7.Can I use the payback template for McDonald’s?
Yes, you can. You can use it for any investment. Just remember that to calculate payback, you need:
- The cash you are going to make per year
- The amount you are going to invest to make it
The template is saved in the Assignments folder.
8.My proposal is to increase the number of McCafe’s throughout Asia (McDonald’s invested $380 million into the market: Link) along with the introduction of some new breakfast items to entice customers to enter these new locations/restaurants. How do I calculate the payback?
Investment: your proposal is $380 million.
Revenue: MarketWatch says store sales of coffee in China are $6.4 billion (from the article you found on the link above). Let’s assume McDonald’s gets a 15% share after five years, based on the US market. Let’s estimate a share of 5% on year 1 (revenue $320M) and 7% on year 2 ($448M)
Net margin: use Starbuck’s global net margin we studied in session 1 when discussing marginal cost (slide 34), and round it to 55%.
The payback will be 22 months.
55% on revenue of $320M after the first 12 months will be $176M. Not enough to recover the investment of $380M. We still need to recover $204M ($380-$176)
55% on revenue of $448M after the second 12 months will be $246M. That’s more than we need ($204M). $204 is 83% of $246. 83% of 12 months is 10 months. So we need 12+10 months, or a total of 22 months to recover the investment (payback).
7.We propose making an investment of $85 Million dollars to upgrade Dolby at Spotify. This is not a marketing investment. How do we calculate payback?
Since this question is about the strategic plan, see response number 7 on the strategic plan page
My proposal is that LVMH can build a shopping mall in America, which contains all the flagship stores of LVMH brands.
Investment: In addition to the brand, we also have to consider the cost of building the mall, which ranges from $25 million to $180 million on average to build a mall. In the middle, the cost is about $100 million. LVMH has about 80 brands, with each store averaging about 150 square meters and costing around $1 million to renovate. 100 times 80 is $8 million. The total value of the mall construction is estimated at $108 million. Add in the cost of labor, electricity, etc., and my proposal is 150 million dollars.
Net margin: LVMH’s net profit in the U.S. is about $635 million per year, with a net margin of 17.8%. However, due to regional environmental constraints, the net profit figure must be lower than $635 million, because the construction in one city does not include all consumption. There are 50 states in the United States, and the net profit for each can be counted as $12.7 million.
The payback will be $150 million / $12.7 million =11.8 years.
The proposal for my company, Starbucks would be to open multiple stores around the train stations in the United States. In comparison to Europe and Asia, the USA is a bigger market due to its higher population and economy. As a result, Starbucks may be able to grab a larger market share and more potential customers.
The cost of opening a new store would be $300,000 as it is around the train stations, which is a hub for passengers. My proposal would be around $250,000.
Additional costs would be for severe marketing and advertising, as we need to push the sales during the opening of a new store. Let’s say there are 20 new stores to be open and the net profit per store would be around $150,000-$200,000
The payback would be 1.25 years
The proposal for my company, Starbucks would be to open multiple stores around the train stations in the United States. In comparison to Europe and Asia, the USA is a bigger market due to its higher population and economy. As a result, Starbucks may be able to grab a larger market share and more potential customers.
The cost of opening a new store would be $300,000 as it is around the train stations, which is a hub for passengers. My proposal would be around $250,000.
Additional costs would be for severe marketing and advertising, as we need to push the sales during the opening of a new store. Let’s say there are 20 new stores to be open and the net profit per store would be around $150,000-$200,000
The payback would be 1.25 years
The luxury industry is booming after the pandemic, in fact, the sales in this market increased tremendously and did not show a great effect because of the pandemic. this market was a great example of showing a fast recovery from the pandemic, for instance, the annual sales of LVMH increased from 44,651 Mio in 2020 to 79,184 Mio in 2022, on the other hand, the net profit was 4,702 Mio in 2020 and increased to 14,084 Mio in 2022, a growth rate of almost 200%. According to the income statement, the marketing and selling expenses represent a great part of revenues in the same period, accounting for 37.60% of sales in 2020 and 35.55% in 2022. This has a huge impact on the sales growth in this period. Thus, a base of 36% of advertising would be a good ground base, to consider as a budget for marketing investment. Asia including Japan would be the best geographical region for marketing investment, as it accounts for 37% of revenues, and this market is growing more, According to a report by Bain Company, Millenialls and Gen z have the biggest impact on sales growth and they will remain to have this impact during the whole decade, especially in Asia. This can be attributed to their high focus on experiences and willingness to pay extra for premium products as they associate luxury with social status. For marketing and advertising, LVMH would focus on digital marketing, in-store experiences, avatars, and virtual reality, as the best channels to promote LVMH brands for this target market for an efficient and wider reach. Supposedly, the marketing budget is 30,000, and supposedly the net profit is 16,000, so the payback period is 1.8 years.
I propose expanding the company’s digital banking services and offering a more user-friendly and personalized mobile application. With the rise of digital banking and the increased need for remote access to financial services, J.P. Morgan can tap into the growing market by investing in its digital infrastructure.
Investment: The estimated investment for this project is $500 million.
Revenue: According to Statista, the digital banking market is projected to reach $22.3 trillion globally by 2027. Assuming J.P. Morgan captures a 2% market share after five years, with an estimated revenue of $446 billion, we can estimate a revenue of $50 billion in the first year, $70 billion in the second year, and $100 billion in the third year.
Net margin: Based on J.P. Morgan’s financial reports, we can assume a net margin of 40%.
Payback:
Year 1: Revenue = $50 billion
Net income = $20 billion
Cumulative net income = $20 billion
Year 2: Revenue = $70 billion
Net income = $28 billion
Cumulative net income = $48 billion
Year 3: Revenue = $100 billion
Net income = $40 billion
Cumulative net income = $88 billion
To calculate the payback period, we need to find the point at which the cumulative net income exceeds the initial investment of $500 million.
Payback = Initial Investment / Average Annual Net Income
Payback = $500 million / ($28 billion / 2) = 18 months
Therefore, the proposed project has a payback period of 18 months, making it a feasible investment for J.P. Morgan.
For Starbucks, my proposal would be to still focus on the United States market but focus in expanding its presence in School buildings. Students tend to grab their coffee or beverages in between classes, in which they don’t have that much time. Having a Starbucks grab and go counter located in school buildings will really be beneficial for students and increase their likelihood of purchasing Starbucks even more due to its ease of accessibility.
The cost of opening a licensed Starbucks store starts at around $250,000, with the grab and go concept the company won’t be needing too big of a space and may cut the cost so we may cut down the cost to $200,000 instead. If we focus on two big universities in New York City, NYU and Columbia with 3 outlets for NYU and 2 outlets for Columbia. Total cost for opening the new stores will be $1,000,000.
Let’s say that the new grab and go outlet turns out to be a huge success with a net profit of $100,000 per store. The total profit that all stores can generate will be at $500,000. The payback will then be $1,000,000 / $500,000 = 2 years.
Amazon have been increasing its marketing expenses for the past years from 32,551 to 42,238 millions of dollars. Its primary sales and marketing spending goes to increases payroll and marketing efforts to launch new services such as the AWS.
–
After analyzing Amazon’s sales growth for all three segments (North American, International and AWS) from the previous assignment, we saw that only the international segment was experiencing a loss for the past 2 years due to poor inventory management and effects of Covid-19 related challenges. Therefore, I would recommend Amazon to increase their marketing spend for the international segment to recover their losses from previous years and potentially expand their markets and global reach.
–
The strategy would involve opening Amazon-Go and Wholefoods stores in Asia-Pacific regions that specialise in selling western or North American products. This would differentiate Amazon-Go and Wholefood stores from local grocery stores in Asia to position them as high-end, high-quality, and food-safety-ensured grocery stores. Amazon could also implement a members only system for its grocery stores, like Costco or Sam’s (in Asia), to encourage shopper’s conversion to loyal customers.
–
To quantity the payback for Amazon marketing spend:
1. It costs approximately 1 million dollars to open an Amazon-Go store with auto-purchasing technology.
2. If Amazon opened a store in every major metropolitan city in the Asia-Pacific region, that would be 7 cities – Tokyo, Hong Kong, Beijing, Singapore, Seoul, Sydney, Shanghai.
3. In total, the cost of opening 7 grocery stores is $1,000,000 x 7 stores = $7,000,000 dollars.
4. On average, the annual revenue of an Amazon-Go store is $1,500,000.
5. The net profit per store would be $1,500,000 – $1,000,000 = $500,000. For 7 stores, that is $3,500,000.
6. $7,000,000 / $3,500,000 = 2 years.
Unilever has recently acquired the U.S. Greek yogurt brand Yasso to enhance its market share in the premium dessert market. Currently, Unilever has sales of $41,586 million, with a net income of 12.7%, or $5,290 million. The ice cream segment accounts for 13% of total sales, resulting in $5,406 million in sales.
For revenue, Yasso had over $200 million in 2022 retail sales and is expected to reach $300 million in 2023, resulting in a $100 million increase in revenue per year.
Unilever aims to increase the distribution channels of Yasso, expanding from supermarkets to convenience stores and fitness boutiques. They have invested in technology and released new smart freezers that assist all Yasso vendors in monitoring stock levels. Additionally, they provide a chatbot feature to help with inventory fulfillment and delivery. The estimated cost of R&D and building the pilot smart freezer and chatbot is $600,000, and the cost of an individual freezer ended up being around $2,000 USD. Unilever plans to distribute 100 freezers to their top stores which results in $200,000 USD, including the delivery fee. The total cost of investment is $800,000 USD.
Assuming a 15% growth, we can estimate that the total sales of Unilever in 2025 will be $47,824 million, and the sales of the ice cream segment will be $6 million. Net income will remain the same at 12.7%, which equals $6,074 million.
The payback period is calculated as $800,000/$783,635 = 1 year.
Remark: Unilever’s sales are converted to the 2022 Annual Average rate of 0.811347
Apple will invest $8.6 billion to launch the new iPhone 16 and Vision Pro2. The iPhone has always been Apple’s flagship product, but in recent years people’s demand for mobile phones has decreased and the market has become saturated. Apple has begun to increase market sales through marketing while focusing on the development of artificial intelligence. The investment will increase net sales by 15.08% annually starting in 2024. We focus on the Americas region as this region accounts for approximately half of the company’s total sales. Sales in the region increased from $153.306 billion in 2021 to $169.658 billion in 2022, indicating higher customer demand in the Americas. Our company can spend half of its marketing expenditures on promoting the iPhone 16 and Vision Pro, which will increase revenue by 15.08% annually, and incremental sales will reach $50 billion by 2024. The payback period for this investment will be two years. This means the investment is worthwhile and should be made.
Based on Amazon’s annual rate for the year 2022, Net Sales for regions like North America and AWS grew from the past year. On the contrary, the International sector net sales declined from $127,787 million to $118,007 million, an 8% decline due to economic headwinds and fluctuating foreign exchange rate. In 2022, the company’s sales and marketing expense went up to $42,238 million from $32,551 million back in 2021. The main portion of their sales and marketing expense were directed towards advertising, payroll, and AWS marketing activities.
By looking at this information, I would like to propose a strategy for Amazon to focus its marketing and investment effort on the international sector. This is to offset the loss that the company suffered, and utilize their past investments in this sector to further expand the company’s presence around the globe.
The strategy is for Amazon to open up 3 new physical stores (Amazon Go) at each of the following places: London, United Kingdom; Berlin, Germany; Madrid, Spain; Tokyo, Japan; Seoul, South Korea; Beijing, China. The reason that these countries and cities are selected is due to the fact that Amazon has previously made investments at these places in order to break into the market before, and also some are new places that Amazon could leverage to expand its global presence and compete against local competitors.
Mark Mahaney, the Managing Director at RBC Capital Markets, estimated that the cost to open up new Amazon Go stores cost approximately $1 million, and each store would generate $1.5 million in annual sales.
To calculate the amount of investment we need we’ll multiply the number of stores that we’re opening (18) by the cost of opening a store ($1.5 million) and the cost for opening all these stores will be equal to $27 million. Other than opening up new stores, additional budget will be needed for marketing and advertising of this project, therefore, we’ll assume that the cost of marketing and advertising will cost around $3 million. By combining everything together, Amazon will have to invest a total of $30 million for this project to happen.
In terms of revenue, we’ll calculate it by deducting the estimated annual net sales of $1.5 million with the cost of $1 million to open a new stores and we’ll get an annual profit per store of $500,000 per year. By combining all 18 stores, we’ll make $9 million per year.
To calculate the payback period, we’ll have to divide the initial investment by profits per year. This would mean $30 million divided by $9 million, and the result is we’ll need approximately 3 and a half years.
The proposal is for Amazon. The company should invest limited funds into the America (north and south) segment with a focus on improving logistics (shipping speed & delivery service), expanding AWS market share, and furthering their recent attempt to penetrate into the pharmaceutical sector to be a medicine provider. Taking up 61% of the company’s portfolio in terms of net sales, the North American segment alone increased net sales growth by 13% In 2022 and continued to show consistent year-on-year growth at 11% each quarter in 2023. While the North American segment had an operating loss last year, it has been delivering considerable operating income since the beginning of this year. In 2022, the cost of sales was $ 288,831 million dollars, with COGS growth at 6.05% being the lowest level in the past 4 years. However, the Expense was extremely high at around 44.5 % of Net Sales due to Amazon’s fast expansion in 2022.
In 2022, the North American segment’s net sale was $ 315880 million. Given the brand power of Amazon, the marketing expense won’t be too high for e-commerce. However, good marketing for pharmaceutical attempts and AWS expansion will be necessary. We may predict that the cost of goods sold growth can slow down this year given the inflation control, but the expense of expansion can be high still. Let’s set the total cost (COGS+Expense) for 2023 investment in “The Americas” region will be $15,000 Million dollars. Net Income will be $11,000 million for 2023, and $4000 Million for Q1 2024. The payback period therefore will be 1.25 years.
This proposal is for Spotify. They should invest more on North America, which has the 24% of their whole users. It is the second largest market for Spotify and still got chance to increase their premium and free users. At the end of 2022, net cash flows from financial activities is -40 millions euros, which still requires the company to adjust their strategy for gaining more cash flows.
The business idea here is utilize the influencers on Tiktok to transfer more users into Premium subscribers. One macro influencer cost about $800 per video. It is quite expensive, but if Spotify select the influencers properly, they could drive a large amount of audience get to know about Spotify’s premium functions. High quality music with no ads is the most important function which could be expressed in influencers’s videos to attract more users. Macro influencers are those influencers who
who got high converting rate 0.7%. That is gaining 70 people from 1000 people who watch the tiktok video. If Spotify do 5000 videos they could attract 350k new premium users, which bring 455million dollars a month. The investment is 400milion and they may gain payback within a month!
The proposal for my company, Walt Disney would like to open a new Disney park in the China. In comparison to Europe and United States, China has potential to launch series of product and entertainment in park to stimulate sales due to its higher population and power of consumption. After the covid 19, since Chinese are more willing to go outside, more families will take their children to Disney park. Finally it will more likely to gain profit for Disney.
The cost of building a new Disney park would be $5.5 billion, which is estimated based on Shanghai Disney. My proposal would be around $5 billion.
Additional costs would be for marketing and administration, as we need to advertise the new Disney land and hire employees to deal with high volume of customers. Let’s say the new Disney park to be open and the net profit per park would be around $1 billion a year.
The payback would be 5 years.
In 2022, as one of the most significant segments of Unilever, the home care business contributed $13 billion in revenue to the company, accounting for 21% of its total income. To further expand the home care business, the company should increase research and development investments and strive to launch more innovative products.
I propose to launch a new line of sustainable and eco-friendly home care products for Unilever, which align with the brand strategy and as well as the growing consumer trend towards environmentally conscious and socially responsible products. It is estimated that the initial investment in research and development for the new products will cost about $20 million. As this new line of home care products are positioned as high-end, the sales prices will be 15% higher than that of the former products. Assuming a steady increase in market share, the revenue is estimated at $50 million, $80 million, and $100 million for the first, second, and third years respectively.
The Americas region represents a substantial market with diverse consumer preferences so this proposal will be focus on the Americas region. Considering the high-end positioning of the new products, it’s essential to establish distribution channels that align with the target market. The products will be available both online and in major retail stores, targeting urban areas with a high concentration of environmentally conscious consumers. There will be $15 million used in marketing investment and after deducting this part of expenses, the estimated net profit is $15 million for the first year, $45 million for the second year and $80 million for the third year. The payback period should be about 1.3 year.
Apple will invest $8.6 billion to launch the new iPhone 16 and Vision Pro2. The iPhone has always been Apple’s flagship product, but in recent years people’s demand for mobile phones has decreased and the market has become saturated. Apple has begun to increase market sales through marketing while focusing on the development of artificial intelligence. The investment will increase net sales by 15.08% annually starting in 2024. We focus on the Americas region as this region accounts for approximately half of the company’s total sales. Sales in the region increased from $153.306 billion in 2021 to $169.658 billion in 2022, indicating higher customer demand in the Americas. Our company can spend half of its marketing expenditures on promoting the iPhone 16 and Vision Pro, which will increase revenue by 15.08% annually, and incremental sales will reach $50 billion by 2024. The payback period for this investment will be two years. This means the investment is worthwhile and should be made.
As Apple, I would probably choose to fund Asia market. According to Apple’s report for the fourth quarter of 2023 in the three regions, the United States was 40.12 billion dollars, Europe was 20.46 billion dollars, and China was 15.08billion dollars. From these three sets of data, it can be seen that China alone has almost the same sales as the whole of Europe. Indeed, countries in Asia such as China and Japan offer significant growth opportunities for Apple due to their large and expanding consumer base. This could be a potential opportunity for Apple to expand its presence in Asia and thus increase profits in the region. In addition, due to competition from Samsung and other new products in Asia, Apple is likely to increase its budget for marketing, research and product development to boost its product competitiveness and market share. Therefore, according to these factors, I would recommend apple to fund Asia market.
Apple will invest more in the Asia market by launching some products and service to create consistent and smooth IOS system for customers in Asia. Asia is the most populous continent, with over 4.5 billion people. This massive population base presents a significant opportunity for customer acquisition. Sales in the Greater China increased from 68 billion in 2021 to 74 billion in 2022, due primarily to higher net sales of iPhone and Services. The second hugh market for Apple in Asia，Japan, though showed downward trends in 2022 because of foreign exchange.
Walmart’s proposed marketing initiative focuses on launching a new line of sustainable and eco-friendly home products with an average price point of $10. The strategy includes a 20% increase in the current annual advertising investment of $500 million, totaling $600 million for the launch year. The goal is to leverage Walmart’s extensive reach and reputation to promote the new products through in-store displays, online promotions, and partnerships with environmental organizations. Assuming a conservative 10% incremental net sales increase based on similar launches, the projected incremental net sales amount to $10 million. With Walmart’s net margin at 2.3%, the net profit per unit is approximately $0.23. The payback period is calculated by dividing the total advertising investment by the net profit per unit, resulting in a payback time of around 18,115.91 years, assuming a steady monthly sales rate. While the payback period seems lengthy, the initiative aligns with consumer trends toward sustainability, contributing to Walmart’s long-term goals and enhancing its image as a responsible retailer. It is crucial to recognize the strategic value of establishing a market presence in the eco-friendly product sector and the potential for sustained growth over time.
I think Walt Disney should invest in the Asian market. First of all, the density of Disneyland in Asia is not high, and we have a vast potential market. Based on the population density of target customers, Disney still has a vast market in Asia, especially in East Asia. Even though Universal has opened a park in Beijing, Disney still has a very high potential market share.
Secondly, Disney has a higher NET margin in the Asian market. Asia is an essential source of raw materials for Disney’s products, which means Disney’s cogs are lower in Asia and, therefore, will have higher profits. Thus generating a higher net margin.
Thirdly, in terms of the payback cycle, the cost of building a Disneyland is around $5.5 billion. Shanghai Disney’s net profit is over $900 million. Within six years, Disney will recover its costs.
Naer
In considering Walmart’s marketing investment strategy for Asia, particularly in China and India, our proposal is centered on expanding both the e-commerce platform and physical store presence. Over recent years, Walmart has seen a significant increase in global e-commerce sales, from $15 billion in 2019 to $21 billion in 2020, indicating a strong growth trajectory. We propose an investment of $500 million, aimed at enhancing online shopping experiences and opening new strategic store locations. This investment is expected to generate $600 million in revenue in the first year, escalating to $900 million and $1.2 billion in the following two years. Our sales and launch strategy will focus on digital advertising, partnerships with local brands, and community engagement, leveraging Walmart’s existing supply chain efficiencies. We anticipate drawing consumers with competitive pricing, product variety, and convenience, selling through both e-commerce and physical stores. A marketing investment of $200 million is recommended, covering diverse promotional activities. With a projected net margin of 15%, the first year’s net profit is estimated at $90 million, increasing to $135 million and $180 million in the second and third years, respectively. This leads to a total accumulated profit of $405 million over three years, indicating a payback period just over three years for the initial $500 million investment. This proposal aligns with Walmart’s strategic goals in Asia and presents a viable option given the limited marketing budget
Marketing Proposal:
I will suggest Disney to develop a new business idea in its theme parks for the Asia Market. To be more specific, I will suggest Disney to launch a new cartoon character IP in three Asia theme parks, and also develop a cartoon character IP interactive experiences, shows, accessories and theme hotel room business.
Reasons:
1.Disney has six theme parks worldwide, and three of which are located in Asia. Therefore Asia is the largest market for Disney parks.
2.Due to the construction of new themes in Disney’s theme parks in Asia in 2023, there was a significant investment in construction costs. Therefore, setting up a new cartoon character IP for promotion in the theme parks is a relatively low-cost investment. According to the successful launching of Linabell in Shanghai Disney Resort in 2021, it shows that the cute new cartoon character will be very popular with young female consumers in Asia, so it’s likely that this promotion will also bring a high profit for Disney.
Calculation of Payback:
-Investment: Disney made it clear in 2023 that it would spend $60 billion on theme parks over the next decade. Assuming that investment costs are evenly divided, Disney will invest a total of $3 billion in theme parks across the three Asian regions in 2024. This includes investments in the cartoon IP launching and investments in related experiences and services.
-Net Income: Assuming a steady increase in market share, the net income of Disney theme parks in Asia area would be about $1.7 billion.
-Payback: According to the investment and net income, the payback will be 1.8 year.
For the 2021 marketing budget allocation,I recommend focusing on Asia/rest of the world, proposing a unique strategy that merges LVMH’s luxury essence with the region’s rich cultural diversity. By launching an exclusive line of artist-designed luxury items in collaboration with local artists, LVMH aims to capitalize on the growing demand for products that embody cultural significance and artistic value. This initiative seeks to offer consumers more than just luxury; it offers a piece of cultural heritage, blending traditional artistry with contemporary luxury appeal, making each piece a narrative of its own.
Financially, this strategy anticipates generating substantial revenue, starting with $100 million in the first year and projecting a 20% increase annually over three years. This growth is expected due to the unique market positioning of the products and the strong appeal to consumers in Asia, who are increasingly looking for authenticity and exclusivity in their luxury purchases. A marketing investment of $20 million is planned, focusing on digital engagement, influencer collaborations, and exclusive launch events to maximize visibility and appeal to the target demographic effectively.
By strategically investing in the Asia/rest of the world region through this culturally enriched and artistically innovative approach, LVMH can not only expand its market reach but also reinforce its brand as a leader in luxury innovation. This plan promises not only to enhance LVMH’s brand prestige but also to achieve a significant return on investment, aligning with the market’s shift towards meaningful, personalized luxury experiences.
In response to this question, I think Apple can prioritize the Asian region for the following reasons:
1.Growth Potential: Asia/Rest of the World is a region with rapid economic growth, especially in emerging markets such as China and India. These markets have great potential to bring more sales growth for Apple.
2.Brand Influence: Although Apple already has high brand awareness in Asia/Rest of the World, there may still be room for growth in certain emerging markets. By increasing its marketing investment, it can further enhance its brand presence and attract more consumers.
3.Competitive pressure: In the Americas and Europe, where Apple has established a strong market position, competitive pressure may be relatively high.
Disney
I believe that South America would be an optimistic market for Disney to enter versus the other regions. Disney’s legendary characters and culture have a large culture following, which can be shown by the popularity of Disney films and attractions throughout the South American audiences. In other regions, there are theme parks established in Paris, Shanghai, Tokyo, and Hong Kong. I believe it would be an excellent opportunity to build a park in South America, where those consumers can enjoy the Disney experience. In terms of North America, it is diversified population with different interests so Disney can create a marketing campaign catered to different audiences. Disney is very productive when fighting for customer attention and market share with competitors. By investing in marketing, Disney can preserve their status as an industry leader, develop consumer loyalty, and sustain their competitive advantage. Another way to expand is to increase the number of subscribers in the Americas with Disney+ and the ongoing development of the platform. Investing in marketing to attract new customers and sustain current ones, will eventually increase sales and earnings. I do not think an increase in budget is necessary immediately because Disney spends millions on marketing investments already.
I suggest LVMH to fund the Asia market. Here are the reasons.
Firstly, the revenue growth rate of Asia is the highest, with the revenue growth from 23,785 to 26,577 million euros according to the data from Statista. And Asian market account for the largest proportion of total revenue. Additionally, China and Japan rank among the top consumers of luxury goods and have the highest average per capita incomes. According to Alibaba, the sales of luxury goods in China increased from 11% to 20% in 2020 as compared to the overall share of the global industry. Lastly, a rise in consumer spending may result from China’s economy normalizing. According to the report of Mordor Intelligent, sales of luxury goods in China is booming owing to solid consumer confidence and a willingness to buy, especially among the younger generations. In conclusion, Asian market has great revenue growth potential and is worth the investment.
I recommend NVIDIA invest in the Americas market due to high demand for advanced technology across gaming, AI, and autonomous sectors. This region, especially the U.S., hosts key tech hubs like Silicon Valley, offering strong partnerships, top talent, and a robust infrastructure. Investing here allows NVIDIA to expand its market share, boost brand loyalty, and drive growth in one of the most influential tech markets globally. I propose increasing NVIDIA’s marketing investment in the Americas market to approximately $100 million. The budget includes $40 million for advertising, $20 million for brand events, $15 million for social media promotions, $10 million for channel partnerships, and $15 million for research, training, and support. With a total investment of $100 million, and an estimated annual net profit contribution of $15 million in the Americas （assuming a 15% profit margin）, the investment payback period is approximately 6.67 years.
The Asia/Rest of the World region holds enormous potential for Meta’s VR headset. With a tech-savvy population, growing interest in immersive experiences, and rising disposable income, India, Southeast Asia, and the Middle East are ideal starting points for Meta’s VR expansion.
The Meta VR headset, which costs around $500, is intended to provide immersive entertainment, educational applications, and social experiences—features that are likely to be popular in these rapidly growing markets.
Financial Outlook:
Initial Marketing Investment: $12 billion in 2023
Unit Price: $500 per VR set
Estimated Growth Rate: 15% per year
Hypothetical Profit Margin: 35% (for calculation purposes; Meta is actually operating at a loss here as they build market share)
Here’s the breakdown of the estimated performance over the first five years:
Year 1: 10 million units sold, bringing in $5 billion in revenue, with a profit of $1.75 billion.
Year 2: Sales grow by 15% to 11.5 million units, with revenue hitting $5.75 billion and profit at $2.0125 billion.
Year 3: 13.225 million units sold, generating $6.6125 billion in revenue and $2.314375 billion in profit.
Year 4: Sales reach 15.20875 million units, totaling $7.604375 billion in revenue and $2.66153125 billion in profit.
Year 5: Sales grow to 17.49006 million units, with revenue at $8.745031 billion and profit at $3.060761 billion.
Cumulative Profit over 5 Years: $11.8 Billion
Despite this positive outlook, Meta is expected to take approximately 6 years to fully recover its initial $12 billion marketing expense. Given Meta’s current focus on gaining market share rather than making a quick profit, the longer payback period makes sense. Building a new market often requires a significant upfront investment with delayed returns, and Meta is relying on VR’s long-term potential to make it all worthwhile.
My suggestion for Meta would be to allocate more funds towards expanding its advertising services to European regions. In regions such as France, United Kingdom and Germany, the need for digital advertising is rapidly growing and Meta should position itself to be the chosen platform for businesses to use for their digital marketing needs. That being said, Meta has been highly scrutinized by the EU for not complying with data privacy laws, and the app Threads is currently not allowed to be used in the EU. The initial investment of $10 million, a 15% increase over Meta’s historical ad spend in the region, will fund localized digital campaigns about data privacy and will aim to educate the public on how Meta aims to protect user’s safety while also helping businesses grow. Projected incremental net sales are expected to reach $18 million in Year 1, with growth over the next two years, leading to a payback period of 1.5 years. This marketing investment is poised to generate substantial returns within the optimal payback window, aligning with Meta’s corporate growth goals.
With health and wellness trends rising throughout the world and the concerns for the enviroment my recommendation is for Nestle to hone in on this opportunity by launching new line of plant based products. The products will be marketed as not only healthy alternatives but also as sustainably sourced, with a focus on reducing environmental impact, including packaging and sourcing local ingredients where possible.
2. Cost to Make:
Raw Materials (plant-based ingredients): $3 million (initial investment for sourcing, processing)
Production: $1.5 million (for manufacturing, R&D, and quality control)
Packaging: $500,000 (eco-friendly, recyclable packaging)
Logistics & Distribution: $1 million (initial setup and distribution channels)
Cost to Make:
Revenue Estimation (3-year forecast):
Year 1: $10 million (targeting urban markets, with a focus on China, India, and Southeast Asia)
Year 2 : $30 million (expand to more cities and countries, growing demand)
Year 3 : $60 million (strong presence across the region, more distribution partners)
3.Sales and Launch Strategy:
Direct-to-Consumer (DTC): Leverage Nestlé’s e-commerce platform to directly sell to consumers in key urban markets, offering online grocery delivery services.
Retail Partnerships: Partner with large grocery chains, health food stores, and online platforms such as Alibaba, Lazada, and Amazon to sell the products.
Out-of-Home (OOH): Collaborate with restaurants, cafés, and foodservice chains to offer Nestlé’s plant-based items as part of their menu. This builds brand awareness and accessibility.
Sampling and Promotions: Launch a “tasting campaign” in high-traffic areas (malls, supermarkets) where consumers can sample the plant-based products. Offer discounts and coupons through retail partners and online.
4. Why Consumers Will Buy It:
Health-Conscious Choice: Consumers are increasingly prioritizing plant-based diets due to health concerns like heart disease, obesity, and lactose intolerance.
Environmental Impact: With growing awareness of climate change and environmental issues, consumers are seeking plant-based products as more sustainable alternatives to traditional animal-based foods.
Convenience: Ready-to-eat meals and easy-to-use plant-based alternatives cater to busy, urban consumers.
5. Digital Advertising (Social Media, Google Ads): $3 million
Targeted campaigns in key markets like China, India, and Southeast Asia, leveraging influencer partnerships, paid media, and search ads
Retail Partnerships & Promotions: $2 million
Co-branded campaigns, in-store promotions, product sampling, and collaborations with health stores and online platforms
Content Creation & Education: $1 million
Educational content around the health and sustainability benefits of plant-based eating. Collaborate with nutritionists, chefs, and influencers to create recipe videos and lifestyle content.
Public Relations & Media Outreach: $1.5 million
Press releases, media partnerships, influencer campaigns, and participation in health and sustainability-related events
Events & Sampling: $1 million
Product sampling in high-traffic areas, pop-up stores, food festivals, and trade shows in key Asian markets
Total Marketing Investment: $8.5 million for the first year.
LVMH should prioritize China, as Asia (excluding Japan) contributed 31% of its €86.2 billion revenue in 2023, highlighting the region’s critical importance and growth potential. To capture this demand, LVMH will introduce a limited-edition red envelope-shaped handbag for Chinese New Year. Red, a symbol of prosperity in Chinese culture and a fashion trend for 2024-2025, gives this bag dual appeal. Crafted from luxury materials and priced at €2,000, it will cater to affluent consumers seeking culturally inspired, collectible items.
With projected revenue of €40 million in the first year from 20,000 units, growing to €100 million by the third year with 50,000 units sold, the investment will be substantial yet impactful. Initial manufacturing and marketing costs are estimated at €20 million, increasing to €50 million by the third year. LVMH will amplify desirability by collaborating with top Chinese influencers, who will showcase the bag, creating demand and cultural excitement. Exclusively available at flagship stores in China’s major cities, this approach will make the red envelope bag a coveted seasonal item, reinforcing LVMH’s presence in China’s booming luxury market and appealing to fashion enthusiasts globally.