Customers and growth: the economics of marketing
A dairy brand in Saudi Arabia wants 20 percent more revenue
The prompt
A fictional dairy brand in Saudi Arabia sells a yoghurt drink to 2 million households. Each buys 20 times a year at SAR 5 net to the brand. That is SAR 200 million of revenue at a 30 percent contribution margin. It wants 20 percent more revenue within two years. Three ideas are on the table. A: get into 3,000 more convenience stores. This wins 250,000 new buying households at 12 purchases a year, with SAR 1.5 million of listing fees. B: a loyalty and multipack offer that lifts existing households from 20 to 22 purchases a year, costing SAR 2.5 million. C: a protein drink for gym-goers, bought by 300,000 households 15 times a year at SAR 8. It has a 35 percent margin and SAR 6 million of launch cost. 25 percent of its revenue is taken from the existing drink. Which ideas should it back? (Figures are illustrative.)
This structure comes from the goal maths: revenue = buying households x purchases per household x price. Idea A adds households through a channel, idea B adds purchases per household, idea C adds a new product for a new segment.
Before you reveal anything, plan your own structure and first move on paper. Then reveal one part at a time and compare.