Sugarfree Snacks: Using Market Research on a $600 Budget
A group of Year 12 students is planning a one-term business activity selling low-sugar snack bars at school. They surveyed 120 students. Of these, 68% said they would buy a bar, 45% said they would pay $3.50, 30% said $4.00 and 25% said $3.00. The sample was mostly Year 13 students and members of the business club. The bars cost $1.80 each, including packaging. The group has $600 start-up capital. A stall at the school market costs $80 and is expected to sell 150 bars. Instagram advertising costs $150 and is estimated to reach 4,000 students. A designer would charge $250 for a logo and packaging. The group must also pay a $60 school levy. They want to make a profit and leave a positive impression, not just break even.
1. Assess the reliability of the survey data for deciding price and demand.
Read the worked answer
Sample bias: 120 students is a reasonable number, but the sample is mostly Year 13 and business club members. Those students may have more interest in business, different disposable income and different snack habits from the whole school. The 68% who say they would buy may overstate demand because saying yes in a survey is easy and costs nothing.
Price data: 45% at $3.50, 30% at $4.00 and 25% at $3.00 adds to 100%, but the question may have forced one choice or allowed several. If students could choose more than one price, the percentages cannot be read as demand at each price. The group also has no data on how many would buy at $3.50 versus $4.00, only stated willingness.
Usefulness: the survey is useful for generating a price range and product idea, not for forecasting sales. A better test is a pre-order or a small stall trial with 50 bars at $3.50 and 50 at $4.00, recording actual purchases. The group should also ask about allergens, flavours and how often students buy snacks. Judgement should be based on real transactions, not stated intentions.
2. Calculate break-even for the stall-only, Instagram-only and all-promotion scenarios, including the stock cost for 150 bars.
Read the worked answer
Contribution per bar: $3.50 - $1.80 = $1.70.
Stall only: fixed costs = $80 stall + $60 levy = $140. Break-even = $140 / $1.70 = 82.4, so 83 bars. Stock for 150 bars = 150 x $1.80 = $270. Total cash needed = $140 + $270 = $410. Profit at 150 sales = 150 x $1.70 - $140 = $255 - $140 = $115. This fits the $600 capital.
Instagram only: fixed costs = $150 + $60 = $210. Break-even = $210 / $1.70 = 123.5, so 124 bars. Total cash needed for 150 bars = $210 + $270 = $480, within $600. But the Instagram reach of 4,000 does not guarantee sales; at 150 sales the result is $255 - $210 = $45 profit. At 124 sales it breaks even.
All promotion: fixed costs = $80 + $150 + $250 + $60 = $540. Break-even = $540 / $1.70 = 317.6, so 318 bars. Stock for 318 bars would cost $572.40, so total cash needed is $1,112.40, far above the $600 capital. Even at the expected 150 sales, the loss is $255 - $540 = -$285. This option is not feasible without pre-orders or extra funding.
Judgement: the all-promotion plan is financially impossible, even though it looks attractive in marketing terms.
3. Recommend a launch plan within $600 that balances profit and a positive impression.
Read the worked answer
Recommendation: run the stall and use free school social media, not the paid Instagram ads or the $250 designer. Order 150 bars, price at $3.50, and take pre-orders in the week before the stall.
Budget: stall $80 + levy $60 + stock 150 x $1.80 = $270. Total = $410, leaving $190 buffer. At 150 sales, revenue = $525, profit = $115. Break-even is 83 bars. The buffer covers unsold stock or a small unexpected cost.
Why not paid Instagram: the $150 ad would raise fixed costs to $290 including levy. Break-even becomes 171 bars, above the 150 bars the stall is expected to sell. To make it work the group would need at least 171 sales, and the ad reach data does not prove that conversion. If the group wants Instagram, it should use the free school account and measure orders with a simple code.
Why not the designer: $250 is 42% of capital. The group can make a clear handwritten label and a simple logo in Canva. A positive impression comes from accurate ingredient labels, recyclable packaging and polite service, not expensive design.
Positive impression: donate unsold bars or offer a second-day discount rather than throwing them away. Record actual sales and customer comments to improve the next activity. This plan keeps profit, protects cash and still presents the group well.