23E Digital Marketing Fall term 2017 (Period-1)

Transcription

1 23E Digital Marketing Fall term 2017 (Period-1) Instructions for Final Exam: 1. All questions are compulsory. 2. Calculator is allowed. 3. Use of cell phone is prohibited during the exam. 4. Points allocated for each question is given beside the question. 5. Please answer in the space provided. You can use extra papers if needed. 6. Read the question carefully before you answer them. 7. Total points allocated is Total time allotted for the exam is 3 hours. Good Luck. To be filled by the student: Last Name: First Name: Student ID: Date: 1

2 SOME PRACTICE SET QUESTIONS Questions-1: A gaming company called XTreme is planning to sell a new mobile game called MPoker in the Brazilian market, which can be played on smartphones only. The mobile ownership in Brazil is 75%, and only 20% of that has a smartphone. The fixed cost of production of the game is $10 million per year, and the variable cost is $1 per game sold. The price of the game is fixed at $2 per game. XTreme faces competition from another company called MoBrizil. However being an early entrant in the industry XTreme has a substantial market share of 80%. Write down the formula for profit and calculate the yearly profit of XTreme from MPoker if the total population of Brazil is 100 million. 2

3 Question-2: When a company used 10 units of the variable production input instead of 8, the output increased from 50 to 60 units. The cost for one unit of variable production input is $12. How much is the marginal cost? 3

4 Question-3: Assume you use an internet search engine (e.g., Google, Yahoo or Bing) to find instructions/information on how to play Pesäpallo (also referred to as Finnish baseball and is national sport of Finland). Entering the search key pesäpallo for beginners returns ten thousand results that are arranged across multiple web pages (each web page contains 50 search results, and hence there are 200 web pages for the search arranged numerically).the dollar value, V n, of looking 10 at the page n, is V n. Thus, the dollar value of looking at the 1 st, 2 nd, 3 rd web page and so on n is 10/1, 10/2, 10/3, etc. The cost of looking at a page is constant at $2.5 per page i.e. Cn 2.5. How many maximum numbers of pages will you visit before you stop searching assuming you don t find the exact information you are looking? 4

5 Question-4: A small retailer tried to use as a medium to communicate with its existing customers. To seek permission the retailer sent a consent form to a pool of 500 loyal customers for newsletter subscription. Out of 500, only 20% of the consumers subscribed to the newsletter. A newsletter was sent to these subscribed customers informing them about various in-store promotional campaigns. At the end of the promotional campaign total revenue generated by the subscribed loyal consumers was 5000 and that from the non-subscribed loyal consumers was Determine whether the newsletter was a successful marketing campaign or a failure. If the cost of producing and sending that newsletter was 500, then calculate return on investment (ROI) of the newsletter. 5

6 Question-5: A new hotel in Turku tried to advertise its service using paid search campaign on Google. Whenever a user searched for the keyword accommodation in Turku the hotel s campaign showed as banner ad along with other organic search results. For one month-period in June 2012, there were searches on Google with keyword accommodation in Turku. The hotel's banner ad got clicks, and only 500 reservations were made. The total cost of this paid search campaign was $5000. The revenue generated from each reservation is $110, and the fixed cost incurred per reservation is $80. Calculate the following: 5-1. Total impressions generated Conversion rate Cost per click Cost per reservation Profit generated from these 500 reservations Click through Rate (CTR) 6

7 Question-6: Questions: A movie rental company ships 2 million DVDs every day. A round trip ticket for each of those discs cost 84 cents. However, the cost of streaming the same movie via the Internet costs the company merely 5 cents. If the company converts 10% of their volume from postal to digital, what happens to their bottom line (i.e., savings) yearly? (There are 365 days in a year). 7

8 Question-7: Let s assume Evernote (an online platform where you can take notes) has customers. It costs Evernote 9 cents per month to serve its customers. It has freemium vs. paid model. Customer who pays $5 per month gets unlimited storage and additional features. If only customers pay the service fee, then calculate the margin for Evernote. (All calculation should be done at monthly level). Evernote has thought about following two strategies: Pricing Strategy: Evernote increases the price from $5/month to $6/month. Calculate margin (or profit). Volume Strategy: Evernote increases overall conversion rate by 1.86% (from 1.55%) and keeps the price same i.e. $5/month. Calculate margin. 8

9 Question-8: On July 21st, 2007 the final installment of J.K. Rowling s Harry Potter and the Deathly Hallows went on sale. The book was offered in two editions. Standard Edition: $40 retail price Deluxe Edition: $65 retail price for which the reader got some extras: foil stamped slipcase and color end pages and with never before seen works by series illustrator Mary GrandPre. Nielsen s Bookscan shows the deluxe edition sold over 100,000 copies, while the standard edition has sold over 8,000,000 copies. What is the additional profit generated by offering Deluxe edition: 9