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1. Calistro currently operates in a market that has been estimated to have about 5 mill. customers and it is estimate that it has a market share of 8%. The average customer purchase is of $100 per year. The gross margin of Calistro is of 60% and the company’s current budget allocates $12 mil. for marketing and sales expenses. The marketing team debates two options:
   1. to create a marketing campaign to show the benefits of the Calistro products compared to competitors in order to increase the market share to 10%. The estimate is that the campaign would cost about $2 mil. extra.
   2. to allocate an extra million to the sales team in order to increase the sales per customer by 5%(gross margin would remain the same %).

As Calistro’s CMO, which initiative would you support and why? For full and partial credit show your work clearly!

1. New Kitchen created an electric opener for wines and any other jars or bottles. The tested customers seemed to like the product, but the company has trouble gaining market share and developing the market. The problem that the company faces is that 60% of the potential customers do not know that the product exists, 30% think it is too expensive, 20% think it will not look good on their counters and 25% do not want another thing on their counters. What is the market development index? Is that good news or bad news? (Hint: The fact that 25% do not want another thing on their counter means that 75% do not have a problem with that.)