Sales Promotion

Session 20 MM2 Prof. Avinash Mulky

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Marketing in Action
l

Something is in short supply or not available
l

Make it available

l

Existing product or service is not providing satisfaction to consumers
l l

Provide a better or cheaper product Provide it in a more convenient way

l

Introduce a new product or service

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The scope of Marketing

Creating Value

Market Segmentation

Target market selection

Positioning

Product Capturing value Sustaining value Customer acquisition

Place / Channel Pricing

Promotion

Mix

Customer retention Profits

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Value

Value =

Benefits obtained by customers Costs incurred by customers

= Functional + Emotional Benefits
Money+ Time + Energy + Other costs

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Appealing to customers
l l l

l

Increase benefits obtained by customers Reduce costs incurred by customers Increase benefits by more than increase in costs Reduce benefits by less than reduction in costs

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The Role of Price

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The Pricing Range
Value Perceived Downward pressure from substitutes Feasible Price Price Upward pressure through marketing efforts Premium Marginal Cost 0 range

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Comparison of Profit drivers
Profit Driver Old Price Variable unit Cost Sales Volume Fixed Costs 100 New 110 Profit Old 10 L New 20 L

100 %
60 1L 30 L 54 1.1 L 27 L 10 L 10 L 10 L 16 L

60%
14 L 13 L

40% 30%

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Price and the customer
Sales volume in lakh units

1.4 Price response curve 1

0.6

20

40

60

80

100

140

Price in Rs.

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Price and the customer
Sales volume in lakh units Price response curve 1.4

1

Current Sale Optimal sales

0.6

20

40

Price in Rs. 60 80 100 140 (105) Optimal price Current Price

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Price customization: Coca Cola (330 ml can) price in Germany Point of sale
Supermarket Bakery University ( Vending)

Price ( DM)
0.64 0.80 0.9

Index
100 125 141

Petrol pump Vending – Main Road Airport

1.20 1.50 2.00

188 243 312

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Price customization: ATM usage charges
Location of ATM $ per transaction

Casino Highway petrol pumps Shopping malls Convenience stores Supermarkets Universities
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2.33 1.50 1.05 0.88 0.88 0.86

The Role of multiple “ products”

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Airline: Mumbai to Delhi
l l

200 seater aircraft Variable cost per passenger = Rs. 4000

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Airline Sales response curve
Sales Volume Profit Potential B 200 ½ X 200 X 6000= 6 L

A 10000 Price

C

4000

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Pricing with a single price
Sales Volume

200 Maximum Profit rectangle for a single price 100 Contribution = 100 X 3000= 3 L

4000

7000 Price

10000

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Pricing for Business and Economy classes
Sales Volume Economy=2000 X 140= 2.8 L Business= 2500 X 40= 1.0 L TOTAL CONTRIBUTION= 3.8 L 200 ( 26.7 % more than for a single price)

140

40

4000

6000 Price

8500

10000

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Pricing for new products
Skimming l High short-term prices l To recover R&D and promotional expenses l Profits before obsolescence l Prestige connotation l Lower volume- less demands on capacity

Penetration
l l l l l l

High profit through fast sales growth Quick induction of trials Better utilization of capacity Deter new entrants Reduction of short term costs through volume Reduction of long term costs through scale

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