To: Prof.

Marzofka
From: Team Refresh
Date: 1/11/2016
Subject: Memo #4

Objectives for next period

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2
3
4

SPI: In Period 2, we ended with an SPI of 1,516. We hope that our strategies will keep us
ahead of the competition and show an increase of 25% in SPI for next period. Our target
SPI is 1,900. We are confident that this goal is achievable, as we will be introducing two
newly redesigned brands.
Revenue: In Period 2, we showed an increase in revenue from $45 million to $61 million.
We expect revenue to continue to increase at a dramatic fashion. We hope to increase
revenue by 35% once again. Our target revenue is $83 million for period 3.
Net Contribution: In Period 2, we had a net contribution of $23 million. We expect
another increase of $10 million to $33 million. This would be due to a large increase in
the volume of our sales, as our margins are becoming slimmer with price competition.
Other: We continue to hope to eat up market share and sell the most products.

Objectives from last period vs. actual performance in Period 1

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2
3

SPI: Objective: 1,221 Actual: 1,516. We blew our prediction out of the water.
Revenue: Objective: $56 million Actual: $61 million. Overachieved our revenue
objective.
Net contribution: Objective: $14 million Actual: $23 million. Increased volume of sale
allowed us to almost double our net contribution.

Recap of last period

There has been some large separation after period 2. We currently are in first place at the end of
period 2 with an SPI of 1,516; Myka continues to trail, although we have gained some distance,
at 1,333, followed by LION at 1,224. We produced the highest revenues at $61 million; Myka
and LION trail behind at $55 million and $52 million. We are happy that we control the most
market share at this point with 21%. We have also pulled ahead greatly with a net contribution of
$23 million. The next closest is Lion at $19 million. We also sported the top selling brand, RICH,
with $54 million in retail sales. At this point, the main separation between groups is based on
pricing and advertising strategies. With R&D projects being rolled out next period by some
groups, including us, it will be interesting to see how this shocks the market and readjusts the
standings.
Strategy for each product
When making decisions for period 2, we continued our specific strategies for each product. With
RISE, we continued targeting the higher earners and affluent segments. The quality of this
product is higher, and we slightly raised our price to $20.66, which would be attractive to these
two higher income segments. Specifically, this price point relates closely to the high earners as

we hope to pinpoint within their semantic circle. We also modified this product entirely through
an R & D project that cost us $1.7 million. This cost was high, but we wanted to keep the
minimum base cost as low as possible in order to encourage higher margins. We pinpointed the
ideal values for the high earners market by using the semantic scales while developing. We
expect a huge increase in sales due to this modification. In advertising, we continued to put a
focus on targeting higher earners with 60% of our efforts, with the other 40% allocated to the
affluent segment. Also, in developing our commercial team, we did not make a lot of changes
other than increasing our salesforce in the beauty portals by a couple workers. We did this
because our experimental research recommended that we do not increase these channels
dramatically as it would result in a lowered contribution. We increased the beauty portal workers
because this distribution market is growing as shown by our research. We also mimicked this
strategy in trying to gain shelf space with merchandising efforts.
With RICH, we are targeting the singles, middle income, and low income segments. The quality
of this product is lower as we dropped our price of RICH to $10.65, which continues be
attractive to the bottom 3 segments (from income standpoint) we are targeting. This price is
down $.50 from period 2. The reason for this drop is because we are trying to target the ideal
price point for the Singles segment as shown in the semantic scales. In advertising, we put a
focus on targeting singles with 55% of our efforts, 25% towards middle income, and 20%
towards lower income. This mix was kept constant from last period. We targeted singles with the
highest percentage, because they represent a very large portion of the customer base and they are
continuing to grow as shown by the market forecast. Also, in developing our commercial team,
we kept our workforce constant as the experiment showed a decrease in net contribution if we
rose our staff substantially. We decided to increase our beauty portal staff slightly for reasons
given in RISE description.
Key changes made to improve performance
We expect to see a large improvement when moving from period 2 to period 3. By lowering our
price in RICH, we hope to see an increase demand from both the Singles and Lower Income
segments. At this stage in the game, prices are very elastic to a certain point, so by lowering them
we should be able to compete well. We also increased advertising by 20% for RICH, as was
justified by the experiments to increase net contribution. Then, we adjusted market research to
12% of our total advertising budget for both RICH and RISE in order to reposition these brands
after the modifications which were made. After these changes were made, we took out a $3.7
million dollar loan to address R&D improvements. Our strategy is to finish our nutrite product
and roll it out in period 3. With a great brand perception of both products already established, we
hope to dominate with these two new & improved products which are now completely modified
and being rolled out in period 3 (RICH & RISE). We will be targeting Singles with RICH & high
earners with RISE. We have burned through most of our loan capacity, with only $600 K
remaining. However, we feel that our revenues are about to pick up drastically as we have been
ahead of the curve in developing products. This should provide a huge bump in immediate cash
flow which we will use to continue to innovate and spread awareness about our products. If we
are the first group to enter the nutrite market in period 4, we will see extremely lucrative profits.
Overall, we expect with these changes we will be highly competitive which will lead to increased
revenues and an increased SPI at the end of period 3 and into the future.