Question 1 (a)Total Volume One of the most notable patterns of sales in regards to total sales volume is that it increases drastically when the average price of soup is low (Average price is calculated by dividing Category Volume by Category Dollars). Total sales volume had significantly increased when either Rocket Soup or competitors (or both) offer low price for promotion. In other words, soup consumption is relatively elastic to price, meaning that customers are highly sensitive to price. See below graphs showing the inverse relationship between the total volumes sold and average price of soups.
Category Volume sold in Week 1 to 40 Average Soup Price in Week 1 to 40 (b)Total Spending Sales pattern in terms of total spending follows the pattern observed in total volume section. One notable difference is that the total spending per week is relatively more concentrated closer to the average total spending in 40 weeks (5,263), meaning it is not as elastic as the volume. It means that customers may purchase more soups when the price is lower, but does not dramatically increase their total spending, even if the price is very low.
It can also be observed that the total spending (or revenue) does increase when the total volume sold are relatively larger, with the exception of week 12, where Rocket Soup charged unbelievably low price (0. 04). (c)Competition Another notable pattern is that the sales volume of Rocket Soup is significantly affected by competitors’ price and sales volume. When Rocket Soup offers cheaper price, the sales volume of Rocket Soup increases and competitors temporarily lose market share, and vice versa.
It would represent that the size of the market is relatively capped and cannot expect a drastic increase over time. (d)Sales Volume after high volume weeks In general, the average sales volume after high volume weeks is lower than the average category volume. From the table 6-3, it can be observed that the average category volume per week is 6,916, and the average of the top 5 sales volume weeks is 14,841, with the average category price of 0. 55. The following weeks of those top 5 weeks are Week 3, 9, 13, 32 and 38. From this period, the average sales volume is 5,184, with the average price of 0. 6, which is close to the average category price of 0. 82. From this, it could be argued that the sales volume after high volume weeks tends to significantly decrease even though the price remains the average level, as the excessive demand from previous week has eliminated demands for following weeks. Question 2 (a)Incremental Volume to Rocket In week 12, sales of Rocket Soup had drastically increased to 16,113 due to the excessive discount on their product. Rocket Soup had launched a promotion with feature and display and charged for 0. 2, which is over 97. 5% discount on their average price. Although the sales had drastically increased, it is not possible to argue whether this excessive demand was from the promotion or low pricing. (b)Promotional Volume burrowed from future sales Since Rocket Soup virtually gave away their product for free in week 12, the average sales volume of Rocket Soup has been lower until week 22. The average weekly sales volume of Rocket Soup was 1613, and yet the average from week 13 to 21 was only 718, which is less than half.
In addition, Rocket Soup performed promotion on week 13, 16 and 19, and yet does not significantly increase any sales due to the previous high sales volume in week 12. Question 3 Although the general price and demand curve in economic would suggest the demand will increase when price is low, there are no significant relationship observed between sales volume and price when no promotion was conducted. The average price without promotion was 0. 90 and the standard deviation was only 0. 128.
On the other hand, the average volume sold was 392 with a standard deviation of 129. 16, meaning it is relatively more randomly varied. In addition, the correlation between the two variables is only 0. 0128, meaning that it has almost no linear relationship altogether. Thus, it is safe to argue that there are no noticeable relationship between price and volume without promotion. Question 4 Unlike price and volume relationship with no promotion, there are a noticeable relationship between price and volume with display promotion.
In week 37, the price with display was the lowest among 40 weeks, priced at 0. 74, and sold the most volume of 2,409. Also, week 8 and 34 showed the lowest sales, when price was charged higher. In other words, the price and volume relationship with display promotion does follow general economic principle of supply and demand, and it has inverse relationship. Correlation of price and volume with display promotion was -0. 486, meaning that it is negatively related, and does sell more when price is low, and vice versa.