What Were the Long- and Short-Term Profit and Volume Implications of Each of the Options for P&G?

What were the long- and short-term profit and volume implications of each of the options?

For the first option, a new brand, P&G need to budget $60 million in the first year and this new brand may capture at least 60% of its share from competitive brands. Take the data in 1981 for example, the whole volume of LDL is 59 million cases, so the profit of all LDL market is about $167.6 million, based on Table A, Table C and Exhibit 9. Thus if the new brand can perform as good as the Dawn when it was introduced and reach 14% market shares in 5 years, it will profit more than $23.5 million a year. But consider about the two to three years before this new brand could be expanded nationally and the huge investment, it will take much more than 5 years to gain form introducing a new brand.

For the second option, the investment is much less than it for the first option. If Wright introduce the H-80 to Dawn, after 5 years, when the two years improvement and test will be finished and the shares of Dawn may have already risen to 16.5%, that means Dawn will sale more than 10 million cases and gain $27.7 million per year. For the short-term, Dawn have 2 years to earn enough money to pay for the investment and then make profits. If Wright invest to Joy with its new formula, though I don’t think it could improvement its market shares because no one care about the spot on dishes, there will be $3 million more profit after 3 and one-third years due to the reduction in Joy`s cost. That means after 2 years of improvement and text, Joy will keep its profit and volume in 3 and one-third years and gain $3 million more per year after that ( without considering the 1% more shares in five years).

For the last option, increasing marketing expenditures on existing brands is the fastest way to achieve, for only 6 to 12 months in text market. The 20 cents-off price-pack promotion on the 32oz size makes the more $2 million profit per year to Ivory Liquid. What`s more, the discount may...