Sun Chips Case

To: Frito Lay
From: Reena Childers
RE: Sun Chip Marketing Strategy
Introduction
Frito Lay is introducing their new product, Sun Chip. I believe that they should offer their product to customers by offering them for free for the testing. With this being said, Frito Lay should give out the smallest bag, 2.5 oz out as free samples and in turn gain sales from those who would like to be repeaters and keep buying the product. This new strategy will be able to attract new customers and gain a larger sales volume. I believe that by this strategy, Frito Lay will be able to achieve 100 million dollars in their first year of sales and obtain loyal customers.
Background
Sun Chip is a new product released from Frito Lay that is a multigrain chip.
This snack is a newer, healthier snack idea being introduced. The goal of the product, Sun Chip, is to establish 100 million dollars in their first year of sales and in order to establish this a new marketing strategy must be obtained. With the estimated first year sales of 113 million dollars, there is about 17 million dollars needed after 22 million dollars in advertisements (exhibit 1).
Recommendation
Since the initial tests proved that the repeat rate came out to be 47%, giving out the free samples will be the most logical approach.
Also if this strategy isn’t the best idea right in the beginning, I suggest extending the advertisement costs to 25 million dollars. Doing so will increase awareness about the product.
Basis for Recommendation
The rates at which Sun Chip had repeat purchases were so high that giving out free samples would potentially increase the initial volume trial rate (exhibit 2). The initial volume is expected to rise 7.1%. This will lead to more sales volume longer down the road (exhibit 2). The free samples are a very easy way to eliminate any possible risks for failed flavors or for extending geographical areas. Free samples are a more affordable way to increase sales by avoiding major increases in advertising (exbihit 3).
Assumptions and Uncertainties
It is assumed that the free samples should be given out to those customers who would be most assumed to purchase the product. A risk would be that some potential customers interested in the product do not get notified based off of their decreased availability to the free samples.
Action
Steps
At the end of the month, Frito Lay should look into the calculations behind this possible marketing strategy and react based on their findings.
If the calculations show that the profit is possible then they should act instantaneously on the marketing strategy. The faster the product is launched, the more likely it is that Frito Lay would come on top as the number one multigrain chip manufacturer.
Appendix

Exhibit 1 (Sales before marketing strategy)
Trial: 19.9% x 90 mm HH x 6 oz = 107,460,000 oz
Repeat: 41.8% x 17.91 mm HH x 13 oz = 97,322,940 oz
Repeater: 7,486,380 HH x 3 rep x 13 oz = 291,968,820 oz
Total: 496,751,760 oz = 31,046,985 lbs = $83,826,859
Exhibit 2 (Sales with marketing strategy)
Trial: 27% x 90 mm HH x 6 oz = 145,800,000 oz
Repeat: 41.8% x 24.3 mm HH x 13 oz = 132,046,200 oz
Repeater: 10,157,400 HH x 3 rep x 13 oz = 396,138,600 oz
Total: 672,984,800 oz = 42,124,050 lbs = $113,734,935
Exhibit 3
Free samples=(7.1% x 90 mm HH x 6 oz / 16 ) x 2.7 = $6,469,875
Gross Sales = $113,734,935 - $6,469,875 =
$107,265,060