Pisa PizzaPisa Pizza​, 

a seller of frozen​ pizza, is considering introducing a healthier version of its pizza that will be low in cholesterol and contain no trans fats. The firm expects that sales of the new pizza will be 

​$2424 

million per year. While many of these sales will be to new​ customers, 

Pisa PizzaPisa Pizza 

estimates that 

50 %50% 

will come from customers who switch to the​ new, healthier pizza instead of buying the original version.

**a.** Assume customers will spend the same amount on either version. What level of incremental sales is associated with introducing the new​ pizza?

**b.** Suppose that 

40 %40% 

of the customers who will switch from 

Pisa PizzaPisa Pizza​'s 

original pizza to its healthier pizza will switch to another brand if 

Pisa PizzaPisa Pizza 

does not introduce a healthier pizza. What level of incremental sales is associated with introducing the new pizza in this​ case?

Question content area bottom

Part 1

**a.** Assume customers will spend the same amount on either version. What level of incremental sales is associated with introducing the new​ pizza?

The incremental sales associated with introducing the new pizza will be 

​$enter your response here 

million.  ​(Round to two decimal​ places.)

To solve these questions, we need to break down the problem step by step. Let’s analyze each part.

### **Part A**: Incremental Sales Without Considering Switching to Other Brands

1. **Total expected sales of the new pizza**: The firm expects sales of \$24 million per year.
   
2. **Sales from customers switching**: Pisa Pizza estimates that 50% of the sales of the new pizza will come from customers switching from the original pizza to the healthier version. So, of the \$24 million, 50% is **not** incremental, as it's just a shift from one product to another.

   This means that half of the \$24 million is **new** sales (sales to new customers), while the other half is just a substitution.

   \[
   \text{Incremental Sales} = \text{Total Expected Sales} \times (1 - \text{Switching Percentage})
   \]

   Substituting the values:

   \[
   \text{Incremental Sales} = 24 \times (1 - 0.50) = 24 \times 0.50 = 12 \, \text{million}
   \]

So, the incremental sales associated with introducing the new pizza will be **\$12 million**.

---

### **Part B**: Incremental Sales Considering Switching to Other Brands

1. **Percentage of customers who would switch to another brand if no healthier pizza is introduced**: 40% of the customers who would have switched from the original to the healthier pizza would switch to a different brand if Pisa Pizza does not introduce a healthier pizza.

2. **Adjusting the switchers**: Out of the 50% of sales coming from the original pizza customers (which is \$12 million), 40% would have switched to a different brand. Therefore, the sales Pisa Pizza retains from the original pizza customers can be considered incremental.

   \[
   \text{Retained Sales} = 12 \times 0.40 = 4.8 \, \text{million}
   \]

3. **Total incremental sales**: In this case, the incremental sales will include both the sales to new customers and the sales retained from customers who would have switched to another brand.

   \[
   \text{Incremental Sales} = 12 \, (\text{new customers}) + 4.8 \, (\text{retained customers})
   = 16.8 \, \text{million}
   \]

So, the incremental sales in this case will be **\$16.8 million**.

### Final Answers:

- **a.** Incremental sales without switching: \$12 million
- **b.** Incremental sales considering switching: \$16.8 million

Would you like more details on any step? 

Here are 5 related questions:
1. How can sales forecasts be adjusted for different market conditions?
2. What are the key factors that impact customer switching behavior between products?
3. How does brand loyalty affect incremental sales in competitive markets?
4. What is the impact of introducing a healthier product on overall profitability?
5. How do you calculate the break-even point for a new product introduction?

**Tip**: When analyzing sales impact, always separate the effects of new customers from those of switching or cannibalization to get a clearer financial picture.

Pisa Pizza, a seller of frozen pizza, is considering introducing a healthier version of its pizza that will be low in cholesterol and contain no trans fats. The firm expects that sales of the new pizza will be $24 million per year. While many of these sales will be to new customers, Pisa Pizza estimates that 50% will come from customers who switch to the new, healthier pizza instead of buying the original version.

**a.** Assume customers will spend the same amount on either version. What level of incremental sales is associated with introducing the new pizza?

**b.** Suppose that 40% of the customers who will switch from Pisa Pizza's original pizza to its healthier pizza will switch to another brand if Pisa Pizza does not introduce a healthier pizza. What level of incremental sales is associated with introducing the new pizza in this case?

Learn how to calculate the incremental sales for Pisa Pizza's healthier pizza version, including the impact of customer switching behavior. The problem involves percentage calculations and understanding customer retention dynamics. Suitable for Grades 10-12.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation