The Viability of a Proposal to Introduce a New Product Line of Fragrance - Example

Case Study Analysis Report Name Tutor Unit Code Date Executive Summary This report seeks to study the viability of a proposal to introduce a new product line of fragrance. The company desires to introduce new products in order to expand the market share both in Australia and in the bordering Asian. The study used data for 95 products collected from the market. The data is analysed through a descriptive research design. The research findings reveal that customers paid an average 147.76 dollars for a bottle of 100ml of a fragrance. The market has an appetite for male products, which also fetch higher prices. Cologne is preferred than perfume, however customers are willing to pay more for perfume. A fragrance with stronger intensity and a fragrance made in France also attract high prices. Products with medium intensity attract more sales. Therefore, the company should consider introducing more male products to the market, cologne, products made in France and products with medium intensity. Table of Contents Executive Summary 2 Problem under Study 3 Analysis 4 Conclusion 15 References 16 Problem under Study Expansion is a fundamental ingredient in maintaining the market leadership of our company. However, we also have to develop new products for the larger market across Australian as well as the wider Asian market. New product development will requires adequate research so as to assess its viability in the markets. This report presents an analysis of the market for fragrances. It will help to determine whether the company should go ahead and develop the proposed new product line of fragrance. In particular the report is based on a statistical analysis of the characteristics of currently available fragrances including the price, gender, type, made, and intensity. The main aim is to help determine the best price for the proposed new product. Data for the study was collected for 95 products currently available on the market. The analysis is conducted using the descriptive approach because it provides a clear picture of the phenomenon under study. The findings are mainly presented in tables. Analysis Part 1: General Descriptive Statistics Table 1: Mean, Standard Deviation, Coefficient of Variation  PRICE GENDER  TYPE  MADE  INTEN Mean 134.76 1.29 1.53 2.01 2.01 Standard Deviation 79.64 0.46 0.50 0.74 0.84 Coefficient of Variation 59.10 35.40 32.62 36.63 41.99 The mean price for a bottle of 100ml of a fragrance is $134.76. This is the average price that customers currently pay for a bottle of 100ml of a fragrance. The standard deviation is $79.64. This indicates that there is a high variation in the price of 100ml of a fragrance. However, the relative variation is lower than the standard variation given that the coefficient of variation is 53.90 (table 1 above). The mean for gender is 1.29 implying that on average more male products are sold. The standard variation in the purchase of a fragrance by gender is low at 0.50. The mean for the type of fragrance is 1.54, so more people buy the cologne type of fragrance than the perfume. The standard variation in the purchase of a fragrance by type is also low at 0.50. The mean for made and intensity is the same at 2.01 respectively. This shows that fragrance made in USA and fragrance with medium intensity attracts more sales respectively. The standard variation by country of manufacture and intensity of a fragrance is 0.74 and 0.84 respectively, which is relatively high. The relative variation by price, gender, type, made and intensity is high with a coefficient of variation of 59.10, 35.40, 32.62, 36.63, and 41.99 respectively. This shows that all the variables have a high probability to vary. Part 2: Mean, Median, Mode, Standard Deviation, Coefficient of Variation, 95% Confidence Interval and Distribution Table 2: Gender Gender Female Male Mean 142.33 116.64 Median 133 118 Mode 247 69 Standard Deviation 87.64 53.15 Coefficient of Variation 61.58 45.57 Confidence Interval Skewness (Distribution) 0.34 -0.12 The confidence interval is given by; Where = mean, = level of significance, = standard deviation, and = population. Female: 142.33 142.33 Male: ; From table 2 above, the average price of a fragrance incurred by female is 142.33 while the average price of a fragrance incurred by male is 116.64 dollars. This shows that on average, female paid a higher price for 100 ml of a fragrance than male. The median price of a 100 ml of fragrance for female exceeds the median price of a 100ml of fragrance paid by male by 15 dollars. Besides, most female paid 247 dollars for a fragrance whereas most male paid 69 dollars for a fragrance. Therefore, female are likely to pay more for a 100ml of fragrance than male. However, the price of a 100ml fragrance for male is less varied that the price for a 100ml fragrance paid by female, with a standard deviation of 87.64 and 53.15 respectively. The coefficient of variation for female and male is 61.58 and 45.57 respectively. Also the confidence interval for the mean for male () is narrower than the confidence interval for the mean for female (), implying than the price of a fragrance paid by male is as varied as the price paid by female. The skewness (distribution) for female is positive (0.34) while that for male is negative (-0.12). This shows that female generally pay a higher price for a 100ml of fragrance while male generally pay less. Table 3: Fragrance Fragrance Perfume Cologne Mean 177.16 122.39 Median 191 82 Mode 196 82 Standard Deviation 72.81 77.13 Coefficient of Variation 41.10 63.02 Confidence Interval 155.65, 198.67 101.22, 143.56 Skewness (Distribution) -0.32 0.77 Confidence interval is given by; For perfume: For cologne: As indicated in table 3 above, more customers pay a higher price for perfume than cologne, with an average price of 177.16 dollars and 122.39 dollars respectively. Also, the median price of perfume exceeds the median price of cologne by 109 dollars. Most customers paid 196 dollars for perfume whereas most customers paid a lower price of 82 dollars for cologne. In addition, the price of perfume is less varied than the price of cologne, with a standard deviation of 72.81 and 77.13, and a coefficient of variation of 41.10 and 63.02 respectively. The confidence interval for the price of perfume is slightly lower than the confidence interval for the price of cologne, with a difference of 21.51 and 21.17 respectively. Table 4: Intensity Intensity Strong Medium Mild Mean 181.06 173.18 94.5 Median 176 197 80.5 Mode 196 220 82 Standard Deviation 66.11 93.67 45.51 Coefficient of Variation 36.51 54.09 48.16 Confidence Interval 158.5, 203.62 138.48, 207.88 79.20, 109.80 Confidence interval is given by; For strong: For medium: For mild: From table 4 above, on average, a fragrance with stronger intensity attracts the highest price. The mean price for strong, medium and mild scent is 181.06 dollars, 173.18 dollars, and 94.50 dollars respectively. A fragrance with medium intensity has the highest median and mode price. A fragrance with medium intensity also has the highest variation with a standard deviation of 93.67. It also has the highest relative variation with a coefficient of variation of 54.09. The standard deviation for a fragrance with strong intensity and a fragrance with mild intensity is 66.11 and 45.51 respectively. Their coefficient of variation is 36.51 and 48.16 in that order. The variation by confidence interval is highest for a fragrance with medium intensity followed by a fragrance with strong intensity and lastly a fragrance with mild intensity. Table 4: Countries Country France USA Other Mean 172.24 139.61 138 Median 186 134 85 Mode 196 220 68 Standard Deviation 86.39 64.12 93.79 Coefficient of Variation 50.16 45.93 47.96 Confidence Interval 137.20, 207.28 120.66, 158.56 101.95, 174.05 Confidence interval is given by; For France: For USA: For other countries: According to table 5 above, on average, a fragrance made in France attracts the highest price. The mean price for a fragrance made in France, USA, and other countries is 172.24, 139.61 and 138 respectively. Also a fragrance made in France has the highest median price of 186 whereas a fragrance made in USA has the highest mode price of 220 dollars. A fragrance made in USA and other countries has a median price of 134 dollars and 85 dollars respectively. The mode price for a fragrance made in France and other countries is 196 dollars and 68 dollars in that order. A fragrance made in other countries has the highest variation in price, with a standard deviation of 93.79. On the other hand, a fragrance made in France has the highest relative variation, with a coefficient of variation of 50.16. The standard deviation for a fragrance made in France and a fragrance made in USA is 86.39 and 64.12 respectively. The coefficient of variation for a fragrance made in USA and other countries is 45.93 and 47.96 in that order. The variation by confidence interval is highest for a fragrance made in other countries followed by a fragrance made in France and lastly a fragrance made in USA. Part 3: Hypothesis Testing 1. H0: The average prices for female products < the average prices for male products H1: The average prices for female products > average prices for male products The level of significance is 0.05. Test statistic: Calculated = -1.20. The test is one-sided, therefore, = -1.64. Thus, we reject the null hypothesis if z < -1.64. And accept the alternate hypothesis that the average prices for female products exceeds the average prices for male products. Since -1.20 > -1.64, we fail to reject the null hypothesis and conclude that the average prices for female products is less than the average prices for male products. 2. H0: The variance of prices for male products is equal to those of female products H1: The variance of prices for male products is not equal to those of female products The level of significance is 0.05. Test statistic: Calculated = -272.81 The test is two-sided, therefore, = -1.96. Thus, we reject the null hypothesis if z < -1.96. And accept the alternate hypothesis that there is enough evidence to suggest that the variance of prices for male products is not equal to those of female products. Since -272.81 < -1.96, we reject the null hypothesis and conclude that there is enough evidence to suggest that the variance of prices for male products is not equal to those of female products. 3. H0: The average prices for perfume < the average price of cologne. H1: The average prices for perfume > the average price of cologne. The level of significance is 0.05. Test statistic: Calculated = 4.99 The test is one-sided, therefore, = 1.64. Thus, we reject the null hypothesis if z > 1.64. And accept the alternate hypothesis that the average prices for perfume exceeds the average price of cologne. Since 4.99 > 1.64, we reject the null hypothesis and conclude that the average prices for perfume exceeds the average price of cologne. 4. H0: The variance of prices for perfume and cologne are equals. H1: The variance of prices for perfume and cologne are not equals. The level of significance is 0.05. Test statistic: Calculated = -58.95 The test is two-sided, therefore, = -1.96. Thus, we reject the null hypothesis if z < -1.96. And accept the alternate hypothesis that there is enough evidence to suggest that the variance of prices for perfume and cologne are not equals. Since -58.95 < -1.96, we reject the null hypothesis and conclude that there is enough evidence to suggest that the variance of prices for perfume and cologne are not equals. 5. H0: All means are equal: µ1 = µ2 = µ3. H1: At least one of the means is different. Table 6: ANOVA ANOVA Source of Variation SS df MS F P-value F crit Between Groups 1009009 1 1009009 318.1166 2.72E-42 3.891398 Within Groups 596302.4 188 3171.821 Total 1605311 189         We reject the null hypothesis if p < α, and accept the alternate hypothesis that there is a difference in the prices for intensity. Since 2.72E-42 < 0.05, we reject the null hypothesis and conclude that there is a difference in the prices for intensity. 6. H0: All means are equal: µ1 = µ2 = µ3. H1: At least one of the means is different. Table 7: ANOVA ANOVA Source of Variation SS df MS F P-value F crit Between Groups 1009009 1 1009009 318.1251 2.72E-42 3.89 Within Groups 596286.4 188 3171.74 Total 1605295 189         We reject the null hypothesis if p < α, and accept the alternate hypothesis that there is a difference in the prices for intensity. Since 2.72E-42 < 0.05, we reject the null hypothesis and conclude that there is a difference in the prices for intensity. Conclusion The results indicate that customers paid an average 147.76 dollars for a bottle of 100ml of a fragrance. Males buy more products and pay a higher price than females. Cologne and products made in France and medium intensity products are preferred. Moreover, more customers pay a higher price for perfume than cologne. A fragrance with stronger intensity and a fragrance made in France attract the highest prices. Also, there is a difference in the prices for intensity. The conclusions suggest that the company should consider introducing more male products to the market. In expanding the market, the company should mainly use cologne, products made in France and products with medium intensity since they attract more customers. For such products customers are also willing to pay a higher price. References Black et al (2012), Australasian Business Statistics, 3rd ed, John Wiley & Sons Australia. Read More