Mia Blake is operating a premium spa service that can accommodate up to 40 guests. The spa centre offers weekly packages only at a price of NZD450 per week.
Although the business receives good reviews it is not very profitable and Mia is considering her future strategy to improve profitability. She is targeting to raise her profit by 10% per week , but at present she has little idea what her current weekly profit.
Mia has produced a forecast of costs for the coming year, and is rather concerned as she feels that she is barely breaking even. She discusses with her business mentor and tells her that her business is not just about money but she definitely needs to make enough and she says -NZD600 a week profit would be a reasonable target figure to get.
She trusts you and knows you are a savvy consultant who knows her business well, therefore seeks your assistance. Below are some estimates she has given you.
General NZD3600 per week
Advertising and marketing NZD1200 per week
Residents are given a special diet as part of the package , whilst at the resort at a cost estimated at NZD100 per resident per week.
Some of the costs are more difficult to predict as they are semi-variable but Mia has some data from past weeks which she provides as a guide. (You briefly describe the potential problems associated with identifying how semi-variable costs can be split into fixed and variable elements to her and show your knowledge with a detailed explanation of possible methods. She agrees with your suggestion that the “High Low” approach would be an appropriate way to estimate these costs.) The figures below are regarded as a fairly typical 6 week period of these other costs in relation to guests, and you feel confident that they can safely be used to predict future average weekly occupancy.
|Week||No. of guests||Other weekly costs NZD|
|Average||28 per week|
Mia is asking for further information on the financial effects of possible strategies
Increase the marketing to NZD2000 per week, She estimates this would enable her to charge a higher price of NZD500 per week with little effect on demand. She does however want to know the minimum average demand which is needed to so as to increase profits to NZD1000 per week
Increase the marketing to NZD2000 per week and at the same time reduce the price to NZD430 per week. She feels that this should increase the average weekly guests by 25%
Another health business has offered to take exclusive use of the entire complex for 6 weeks a year (these would operate roughly every 2 months). This business owner would pay Mia a fee of NZD4000 for each week plus NZD320 per guest. The health business owner estimates that he would normally have get 30-40 guests on these weeks.
These alternatives are not necessarily mutually exclusive
Write a brief report to Mia to help her decide on the way forward.
You should use a Cost-Volume-Profit approach to explore the impact of the various options and then come to a clear recommendation based on your findings. You might also consider any other factors, financial and non-financial which might be helpful in making a decision.
DECEMBER 29, 2018
Make substantiated recommendations
|Assessment Instructions you will build on this work and assume the role of a ‘Marketing Consultant’. Using the evidence, you will:
Prioritise two (2) CSFs Provide an overview of your brand/organisation and a description of its current marketing mix (ensuring you address all 7Ps) Make substantiated recommendations as to how your brand’s/organisation’s Marketing Mix should be altered/developed/enhanced for key stakeholder groups on the basis of your identified CSFs. Again, you should ensure you cover all 7Ps in this section [if applicable], although they can be split between your CSFs e.g. four of the 7Ps altered for CSF1, three altered for CSF2 etc.
Important Reminder : Your brand must fall within the sector listed below;
Beauty products (MAC)
|work will be assessed on your ability to: Present a clear overview of your chosen brand/organisation and identify key market segments Identify and prioritise critical success factors (CSF’s), plus targeted market segments, on the basis of market evidence. Demonstrate an understanding of the individual components of your brand’s existing marketing mix (7P’s). In light of the key CSF’s and the target markets you have identified offer clear and reasoned justification on future decisions on each of the elements of the marketing mix (7P’s). Present your work clearly and creatively in the form of a formal business report, referenced using UWE Harvard as appropriate. You are strongly advised to use sub-headings in sections 3 and 4.
All tasks in assessment brief are comprehensively addressed and of a consistently high standard; Clear integration and substantiation of relevant marketing tools; Submission has practical feasibility within industry context; Conclusions drawn at various stages are sustainable and appropriate; Effective presentation and concise communication of ideas and written quality of report format and writing Evidence of wider reading Clear acknowledgement of ALL relevant academic sources using the UWE HARVARD Referencing system where appropriate; Outstanding presentation quality, structuring and written in language appropriate to a business environment.