Assignment on Retail Management Place Strategy

Team: Zeus Thunderbolt

Monali Behera(21202091)
Namrata Mishra(21202094)
Rahul Mohanty(21202098)
Sagar Bohidar(21202104)
Sidhant Swain(21202115)

Q1. What is Organized Retail? What is Modern Trade? Elaborate with examples.
Ans. Organized retail is a sector which consists of the companies which are associated with production or
sales of goods and services that operate as private limited organizations which are governed by
companies act. These include the corporate-backed hypermarkets and retail chains, and also the
privately-owned large retail businesses.Examples of Organized retail- Walmart, IKEA, Costco and Target.

Modern trade is usually a chain store such as hypermarkets, supermarkets, and minimarkets whose
operations (inventory, logistics, merchandising) are more organized than general trade. Because the
store area is wider and tends to be farther from residential areas, modern trade tends to be visited for
more planned monthly shopping. Examples-Dmart, Big bazar, Village HyperMart,Tata Croma.

Q2. Explain the following Retail Store formats with examples:

Convenience store: These are small shops that are usually found in residential neighborhoods. They are
"small local stores selling mostly foodstuffs open till late at night or even 24 hours a day," . Convenience
stores are usually 500 to 1,500 square feet in size and target to customers who need to make a quick
payment.

Ex- groceries, toiletries, soft drinks etc.

Supermarket: A supermarket is a retail store that sells food and household commodities that are
appropriately placed and organized in specific departments. A supermarket is a more evolved version of
a local food shop that caters to the consumer's home needs. The numerous food products (meat,
vegetables, dairy products, juices, and so on) are all correctly exhibited in their respective departments
to attract customers' attention and allow them to select any merchandise based on their preferences
and needs

Ex- Reliance fresh.

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Hypermarket: A hypermarket is a retail business that combines the functions of a department store and
a supermarket. Hypermarkets, which are often quite big stores, sell a wide range of things of such as
appliances, apparel, and groceries. Hypermarkets provide a one-stop shopping experience for customers.

Ex- Bigbazar

Specialty Store: A specialty store would specialize in a single product line and would not sell anything
else. Specialty stores sell only a few things from a single brand to customers and place a strong priority
on customer satisfaction.

Ex- We will find only haldiram products (not any other brand) at haldiram store.

Departmental Store:A department store is a business that brings together a variety of products for
customers under one roof. Consumers may buy practically all of the things they want from a department
store in one convenient location. Consumers can choose from a variety of options at department stores,
which allows them to meet all of their shopping requirements.Electronic
Appliances,Apparels,Jewellery,Toiletries,Cosmetics,Footwear,Sportswear,Toys,Books,CDs, DVDs

Ex - Shoppers Stop, Pantaloon

Off price retailer: Stores who offer high-quality items at low costs are known as off-price retailers. They
mainly offer used things, as well as items that are out of season. These stores sell an irregular selection
of branded and fashion-oriented plush items at affordable costs.

Ex- Brand Factory, vishal mega-mart.

Discount store:End-users can find a wide variety of products in budget retailers. Customers are
attracted to bargain retailers because they sell all things at a low price. They accomplish this by
purchasing large quantities of the company's merchandise.

Ex- Walmart

Catalogue Showroom:Customers order items from a showroom catalogue. The goods are then picked up
at a store's merchandise pickup location.

Ex- Lenskart, Ikea, electronics shop.

Q3. What is a Franchisee Store? Explain with example

Ans. The type of store in which products are sold from a specific brand. It is a relationship between two
entities franchisor, the one who owns the brand and franchisee, the one who sells the product on behalf
of franchisor and pays the royalty to franchisor. Example: Lenskart.com, KFC, Petrol Pumps.

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Q4. What is a Private Label or In-house Brand at a Retail Store? Explain with examples.
Ans. A private label is a brand which is exclusively manufactured for a retailer who in turn markets the
product under its own brand name and sells them in their own outlets.Generally, they don’t innovate or
create new products rather they prefer copying successful products.Tesco, for example, sells both regular
branded goods like Heinz baked beans and their own 'Tesco Value' baked beans. Tesco will contract with
a manufacturer to create baked beans, which it will subsequently sell under its own label. Private label
brands have the advantage of not including particular marketing expenditures; also, if a supermarket has
an exclusive arrangement, average transportation costs may be reduced, and they may benefit from
distributional economies of scale. Because of the decreased expenses, the store may offer the goods for
less money while still making a profit.

Q5. Explain the following Store Layouts with examples:

a. Free-flow Layout

Free-stream permits you to channel your internal inventiveness. A sort of format doesn't adjust to any
stringently controlled design decisions. It's totally dependent upon you where you choose to find your
items. With free-stream, there are less principles yet it doesn't intend that there aren't any. Free-stream
will in general incline toward the normal social patterns of customers.

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b.Grid Layout

In the grid design, spur of the moment purchases are set close to the front of the passageways and the
staple things towards the base. That way, the customer needs to stroll past all of the drive stuff,
expanding their possibilities of them getting a bonus while heading to their staple things.

Grid formats are extraordinary for giving customers a lot of openness to items as the design urges
individuals to peruse different passageways to get only a couple of things. It's the ideal sort of format for
stores like general stores that have heaps of stock.

Example: In a supermarket, all the dairy items will be together, all the household essentials will be
grouped together and likewise with the bread too.

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c.Loop Layout

The loop or course design is an incredible approach to anticipating and controlling your client's traffic
stream. By authorizing this sort of format, you make your clients stroll past each thing inside the store
from entering to paying and leaving. This is sharp as it expands the possibilities of someone indiscreetly
getting a thing that they didn't mean on purchasing.

Example: If you’ve been to IKEA, you’ll have seen the loop layout in one of its most extreme forms.

d.Spine Layout

The "Spine" design is a variety of the initial three. It depends on a solitary principle walkway running
from the front of the store to the back. This plan is regularly utilized by specialty stores somewhere in

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the range of 2,000 and 10,000 square feet in size. To work with development starting with one area then
onto the next, change the deck in various offices.

Q6. What is Visual Merchandising? Explain with examples.

Ans. The process of assembling and showcasing merchandise in a store area making them visually
appealing and desirable is known as visual merchandising. It is a well-defined strategy that aims to
influence customer decisions inside a store. The goal of visual merchandising is to attract and motivate
customers to buy something present in any retail outlet.
Example: Zara is a perfect example of a company that does storytelling with its visual merchandising. The
clothing and accessories displayed in the store tell stories about certain themes or characters. The
products are displayed at the end of long aisles that make the customer walk around in them, increasing
your chances to discover other items that might interest the customer. The brand uses a wall-mounted
display rack in all its stores, showcasing a complete outfit. This interactive feature has become popular
among shoppers, who share photos of themselves in Zara outfits on social media.

Q7. Explain the following terms with examples:

a. Shelving:
It is a type of retail space design for placing the products in the shelves. A perfect shelving
attracts the customers and boosts the sales.

b. Hanging:
It is a type of design where the products are hanged so as to look eye-catching display and
differentiate the product

c. Pegging
Small rods inserted into gondolas or wall systems – can be labor intensive to display/maintain
but gives neat/orderly appearance

d. Folding
For softlines can be folded and stacked on shelves or tables - creates high fashion image

e. Stacking
Stack displays are any display where merchandise is stacked on the sales floor or a pallet instead
of on shelf and hook racking.

f. Dumping
large quantities of small merchandise can be dumped into baskets or bins – highly effective for
softlines (socks, wash cloths) or hardlines (batteries, candy, grocery products) – creates high
volume, low cost image

g. Colour Blocking

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 This means arranging the products according to their colours so as to attract the attention of the
customers.Usually bright colours are used in this kind of marketing technique. It works in
creating an attractive experience that leads them to take action and buy multiple flavors or
items.

h. End-caps
These are the displays located at the end of an aisle. These are generally used by retailers to
display seasonal , temporary, promotional or high margin items.

i. Promotional Aisle
A space used to display merchandise that is being promoted.

Q8. Explain the following Retailer Profitability terms with examples:

a. Total Sales, Gross Sales, Net Sales

Total Sales/Gross Sales

Gross sales are the total amount of sales a company earned throughout a specific period of time,
without taking into consideration any costs involved with running a business. Gross sales do not factor in
expenses related to running a business, also known as cost of goods sold (COGS), which get deducted
when calculating net sales. For example, they do not account for costs associated with item production,
employee wages, building rent, returns, theft or sales tax. Gross sales tell more about a company’s size
than it does its profitability.

Example #1

MARS is a chocolate shop selling chocolates and candies. It carried out certain sales in January. The
owner of the shop wanted accounting to be up-to-date. He wants to calculate the gross sales based on
these invoices given:

Invoice value Amount (in Rs)

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 523 2000

524 2000

525 1500

526 2500

527 4000

528 3500

529 5500

GROSS SALES=Rs(2000+2000+1500+2500+4000+3500+5500)=Rs.21000

NET SALES

A company's net sales is the sum of a company's gross revenue minus its returns, allowances and

discounts. They can often be factored into the reporting of top line revenues reported on the income

statement. Net sales are defined as gross sales minus the following three deductions:

· Sales allowances=A reduction in the price paid by a customer, due to minor product defects. The

seller grants a sales allowance after the buyer has purchased the items in question.

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· Sales discounts= An early payment discount, such as paying 2% less if the buyer pays within 10 days

of the invoice date. The seller does not know which customers will take the discount at the time of sale,

so the discount is typically applied upon the receipt of cash from customers.

· Sales returns= A refund granted to customers if they return goods to the company (typically under a

return merchandise authorization).

NET SALES is given by the formula: Net Sales = Gross Sales – Sales Returns – Discounts – Allowances

OR Net Sales = (Total Units Sold * Sales Price Per Unit) – Sales Returns – Discounts – Allowances

For example, if a company has gross sales of Rs.10,00,000, sales returns of Rs.50,000, sales allowances of
Rs.30,000 and discounts of Rs.20,000, the net sales is calculated by:

NET SALES -Rs.100,000 (Gross Sales) - Rs.50,000 (Sales Returns) – 30,000 (Sales Allowances) - Rs.20,000
(Discounts) = Rs.90,000 (Net Sales)

b. Sales Growth, Same-store Sales Growth

Sales Growth

Sales growth is a metric that is used to assess a sales team's ability to raise revenue over a given time
period. Companies use sales growth as a statistic to determine the pace at which their monthly sales
revenue rises. Calculating sales growth rate is crucial for determining how much profit a firm makes and
how much the growth rate rises month after month. A positive sales increase may always be put to the
benefit of the employees and the business. Negative growth is an unfavorable result that suggests a poor
approach or poor judgments. The company's existence and financial success are dependent on sales
growth.

For example, if Vistara Airlines had a sale of 2000 seats at rs.5,000 each in year 2020 and 1800 seats at
rs.6,000 each in the year 2021, the positive sales growth would be of Rs.8,00,000 [ 2000 x 5000 =
Rs.1,00,00,000; 1800 x 6000 = Rs.1,08,00,000. Thus Rs.1,00,00,000– Rs.1,08,00,000= Rs.8,00,000].

Same-store Sales Growth

Same-store sales is a financial indicator used by the retailer industry to assess the total amount of sales
of a company's store in locations that have been open for at least a year. Same-store sales statistics
compare the success of a retail chain's retail stores over a certain time period, such as a fiscal year or

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quarter, or a calendar year or quarter, by comparing revenue for the current period to the same period in
the previous year or quarter.

A positive same-store sales figure means that the company generated more sales per store compared to
last year – an indicator of growing customer demand.

Example:The KMAC Inc operated 100 stores that generated total sales of Rs.10,00,000 in 2020. Using the
same number of stores in 2020, the total sales amount to Rs.11,00,000 in 2021 for the same stores.
Therefore, same-store sales are calculated as:

Same-store sales = [(Rs.11,00,000/10,00,000)– 1] x 100 = 10% positive

c. Gross Margin

Gross profit margin shows the percentage of revenue of a company that exceeds a company's costs
of goods sold. The higher the margin, the more effective the company's management is in generating
revenue for each rupee of cost. It gives an estimate of how well a company is generating revenue from
the costs involved in producing their products and services. It is given by the formula.

GROSS MARGIN=REVENUE −COST OF GOODS SOLD​

REVENUE

For example,

Aditya Birla Group has reported total sales or revenue of Rs.225 billion and COGS (Cost of Goods Sold) of
Rs.140 billion as shown from their consolidated 10K statement above. The gross margin total was Rs.85
billion.

Gross Margin= Rs.225 (Revenue)−Rs.140 (COGS)/Rs.225(Revenue)​=37.7%

d. Sales per Square Foot

The average revenue for every square foot of sales space in your store, including non-selling
sections like your stock room, fitting room, and receiving rooms, is calculated as sales per square
foot.
To figure it out, divide your sales by the total square feet of sales space in the store. sales per
square foot tells shows how effective we are at using sales space and assists business in
making better merchandising, inventory, and sales decisions.
Sales per square foot = Revenue / retail space .

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 e. Footfall
Footfall is the measurement of the number of people entering a store or shopping mall. It is also
known as People Counting, Shopper Counting, or traffic.We can determine other vital indicators
that are critical for survival in today's retail economy, such as Conversion Rates and ATV, by
measuring how many visitors enter your store (Average Value Transaction).

f. Conversion Rate
The percentage of customers that come into your physical store and depart with a purchase is
known as the retail conversion rate. It's computed by dividing the number of customers who buy
by the total number of persons that walk through your door and multiplied by 100.

g. Average Transaction Value

Average Transaction Value (ATV), otherwise known as Average Order Value (AOV) in online business,
is a business KPI used to gauge the adequacy of the business cycle and the outreach group in the store.
The more talented the outreach group on the floor, the higher ATV they can convey for the business.

For example, let’s say you want to calculate your ATV for one month. If you had a total of $100,000 in
revenue and 25 transactions within the month, then you would divide $100,000 by 25. $100,000 / 25 =
$4,000. Your ATV is $4,000.

h. Inventory Turns

Inventory turnover is a financial ratio showing how many times a company has sold and replaced
inventory during a given period.

Example: Assume Company ABC has $1 million in sales and $250,000 in COGS. The average
inventory is $25,000. Using this information, we can see that the company has an inventory turnover of
40 or $1 million divided by $25,000. In other words, within a year Company ABC tends to turn over its
inventory 40 times.

i. Days of Inventory
Days in inventory is the normal time an organization keeps its inventory before it is sold.
Days in inventory = (average inventory / cost of goods sold) x period length.
Example: All Smiles Dental Suppliers sells dental supplies to practices in its area. The company
has an average inventory of $1,000 and a cost of goods sold of $40,000 for the year. What are its
days in inventory result for a one-year period?

To find the days in inventory, you can use the formula ($1,000 / $40,000) x 365. As a result, the
days in inventory are 9.13 days. This is a low result, which indicates that All Smiles Dental
Suppliers is operating efficiently within its market and maintaining its finances well.

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j. Product Return Ration
Return rate is an ecommerce metric that refers to the frequency that customers return their
online order.
It is defined as the percentage of sales orders that have a product return.
Product return generally indicates the defects in merchandise quality or customer service or
marketing

k. Sales by Department, Sales by Category

Sales by Department
Department Net Sales Total / Total Net All Sales
It measures the total revenue that a single department gains over a period of time.

Sales by Category
Net Sales per category/Net sales
It measures how much revenue is being generated for each product category
(ex-clothing,FMCG).

l. Accessory Sales Percentage

Net Sales / Accessory Sales
In a retail store, most often the profit is made on the second item sold, not the first. As a result,
this ratio helps a retailer to know the items generating profit.

m. Sales per Employee, Employee Productivity

Sales per Employee = Net sales/Number of employees
Higher sales per employee indicates high profitability

Employee Productivity = Net sales/Full time equivalent employees

It is defined as the amount of work produced by an employee in a specific amount of time.

n. Gross Margin Return on Floor Space (GMROF)

A measure that shows the relationship between total sales corresponding to per square feet
area of the store. It indicates the productivity of the store.
GMROF = Gross margin/Square feet

o. Gross Margin Return on Inventory Investment (GMROII)

A measure that analyzes the firm’s ability to turn inventory into cash above the cost of inventory.
It indicates how the store is doing as a whole and how well specific products are performing.
GMROII = Gross Margin/Inventory investment

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 Assignment on Pricing Strategy

Team: Zeus Thunderbolt

Team members:
Monali Behera (21202091)
Namrata Mishra (21202094)
Rahul Mohanty (21202098)
Sagar Bohidar (21202104)
Siddhant Swain (21202115)

Q1. Explain the following Product Launch Pricing Strategies with examples:
a. Price Skimming

Price skimming is a pricing technique in which a product's or service's price is initially

set high and then gradually reduced as customers become more familiar with it. This
strategy is aimed at early adopters rather than the general public.

Example: Apple prices their innovative products higher during their initial release,
because the company knows steeper prices won’t decrease customer demand for
the latest gadgets, and they benefit from the higher short-term profit margins.

b. Market Penetration Pricing

Penetration pricing is a pricing technique for gaining market share quickly by

offering a low initial price to persuade customers to buy. This price technique is
commonly utilized by new market entrants.

Example: Samsung leading the herd, are available at a steep discount or are priced
at much lower costs compared to Apple, in the hopes that users will become loyal to
the brand.

Q2. What is Price Elasticity? Explain with a quantitative numerical example.

When is Price Elasticity low and when is Price Elasticity high? Explain with examples.

Price elasticity is the ratio between the percentage change in the quantity
demanded or supplied and the corresponding percentage change in price.
for example: price elasticity of demand is calculated as:
price elasticity of demand = %change in quantity / %change in price.
if the change in quantity is -11.76, and the change in price is 8.0, then;
price elasticity = -11.76/8
= 1.47

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 When the value of elasticity less than 1 which means %change in quantity
demanded or supplied is less than %change in price. Example: Necessary goods have
low price elasticity because the demand for these goods never change even if price
changes.

When the value of elasticity greater than 1 which means %change in quantity
demanded or supplied is greater than %change in price. Example: when close
substitute are available (tea and coffee).

Q3. Explain the following Pricing methods examples:

a. Cost-based Pricing or Input based Pricing

COST BASED PRICING:

It is a method of setting the price of goods or services based on cost. This method aims to
recover some of the costs that the goods and services offers to the consumer.
 Mark-up pricing:
It is the method of adding a certain percentage of a mark to the cost of the product
or services to determine the selling price. Companies fist have to determine the cost
of a product or services and decide the profit amount that will be earned beyond
that and then companies add that much mark-up to the cost.
Ex- cost of a car is Rs 500000(unit cost) and sold at the price of Rs 700000 (sales
price)
=700000 - 500000
= Rs200000 (gross profit margin)

Markup Percentage (%)

= Gross profit margin/unit cost
= 200000/500000
= 40% Mark-up percentage.

 Target return pricing:

It is a method by which the firm determines the price based on target rate of return
on investment (ROI). What the firm expects from the investment made in the
venture. Companies calculates the amount invested in the business activities and
then determines the return that is expected from it assuming that a certain quantity
of the product is sold.
Ex- suppose a cloth merchant has invested Rs 10,00000 in business and wants to set
a price to earn at 20% ROI, the designing and manufacturing cost of cloth is Rs 2000
assumed that the sales can reach 500 units.

Target return Price:

= unit cost + (desired return * total investment) / units expected in form of sale
= 2000 + (0.2 * 1000000) / 500
= 2400
So, if price is Rs 2400 then 20% rate of return will be earned, if the cloth merchant
sell 500 units.

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 b. Competition-based Pricing or Going Rate Pricing

COMPETITOR BASED PRICING:

It is a pricing method that involves putting prices in relation to the price of competitors.

 Going rate pricing:

It is a method adopted by companies, where the product is priced according to the
rates trending or prevailing in the market especially on par with the competitors.
Company set a price of its products and services in the line with the price of the
competitor and can sometimes charge more or less depending on the value of the
product and services.
It is often used to price products or services that are homogenous and do not vary in
design
Ex- Soft drink, petrol, airlines.

c. Consumer-based Pricing or Perceived Value Pricing

CONSUMER BASED PRICING:

It is a method in which companies use to set their prices based on the customer
need for that product and how much the customer or consumer is willing to pay for
the product or services.

 Perceived value pricing:

It is a strategy of setting prices primarily based on a customer’s perceived value of a
product or services. The concept is applied more to the products designed to
enhance the customer’s image. Customers pay a price based on their collective
perception of its value.
Ex- Starbucks, Taj group of hotels – they charge high price form their customer as
they had created high value in the mind of customer as they are easily known as one
of the best brands int the world.

Q4. Explain the following Consumer References with respect to Pricing, along with examples:
a. Fair Price
A fair pricing is one that considers quality, performance, supply conditions, delivery
time, and payment choices. It's estimated at a level that's equitable for both parties.
The vendor makes a profit, but it isn't unduly large. As a result, such price should
satisfy both parties in the transaction.
Example: MRP of any goods.

b. Typical Price
It’s an indicator used in the technical analysis of stocks and financial markets. The
typical price of an asset is calculated by adding the high, low and closing prices for a
particular time period, and dividing the total by three.
Example: consider a period of one day. If the high for that day was 1.2200, the low
was 1.2080, and the closing price was 1.2150, then the typical price for that day
would be: TP = (1.2200 + 1.2080 + 1.2150)/3 = 1.2143.

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 c. Last Price Paid
It is the final amount paid in any business.
Example: if shares of Microsoft (MSFT) trade at $50 per share, then $51, and then
$50, and then $49. Since the last price is the most recent trade or print, the last
price is $49 per share.

d. Historical Competitor Price

Competitive pricing analysis is a method of determining how consumers will react to
new prices based on past data or surveys.
Example: if a company's main headquarters, including the land and building, was
purchased for $100,000 in 1925, and its expected market value today is $20 million,
the asset is still recorded on the balance sheet at $100,000.

e. Expected Future Price

Expected future prices influence demand today.
Example: if the price of a computer is expected to fall next month, the demand for
computers today decreases.

f. Usual Discounted Price

This is the price of a product after it has been marked down by a percentage by the
firm. This makes this price lower than the initial price of the product.

g. Price Quality Inferences

Consumers often use the retail price of a product as an indicator of the product's
quality. Higher priced products are assumed to be of high quality and the opposite is
also perceived true.

h. Price Endings
This is the use of odd endings when pricing products. For example, when a $6
product is priced at $5.99.

i. Upper-Bound Price
In option pricing, the upper bound of a call option is the stock price.

j. Lower-Bound Price

This is the difference between the strike price and the spot price in option based
pricing.

Q5. Explain the following Product-Mix Pricing Methods with examples:

a. Product-line pricing
Product-line pricing means the prices within the product line is different so as to
attract different group of customers to purchase one or more product from same
product line.

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 Example: Under Tide, there are many types of detergents that have prices different
from each other.

b. Optional-feature pricing
Optional-feature pricing means when the companies charges extra amount on the
product for adding extra features to it.
Examples: Real-estate companies charge extra amount for sea/river facing
apartment. Automobile companies charge extra amount for adding different
features to the car.

c. Captive-product pricing
Captive-product pricing means when the companies charges more price on the
secondary unit than the primary unit.
Examples: GoodKnight machine cost less than the refill because without the refill the
machine won’t work and we need to purchase the refill multiple times.

d. Two-part pricing
Two-part pricing means a form of pricing where consumers need to pay fixed or
basic price and usage price.
Example: Telecom operators charge basic tariff for each month and extra charges for
total usages.
e. Product-bundling pricing

Product-bundling pricing means two or more products are sold combinedly at lower
price than the same product when sold individually. This type of pricing is done to
increase the sales of the product.

Example: On every Wednesday, Mamaearth offers buy one get one free on its body
lotion.

Q6. Explain the following Price Adaptation Methods with examples:

a. Third-degree Discrimination
This type of discrimination occurs when companies charges different prices for a
product to different group of customers.
Example: Amazon prime charges less fee for its prime membership for people
belonging to age group of 18-24.
b. Second-degree Discrimination
This type of discrimination occurs when discount offered to products purchased in
bulk.
Example: Notebooks when bought in bulk is given discount.
c. First-degree Discrimination
This type of discrimination occurs when companies charges maximum possible price
for which the consumer is willing and able to pay.
Example: Maximum Retail Price (MRP) on any grocery item.

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 Assignment on Pricing Strategy: Atlantic Computer Case

Team: Zeus Thunderbolt

Team members:
Monali Behera (21202091)
Namrata Mishra (21202094)
Rahul Mohanty (21202098)
Sagar Bohidar (21202104)
Siddhant Swain (21202115)

Q1. Calculate the price of Atlantic Bundle (i.e. Tronn Servers + PESA Software tool) based on the
following pricing methods:
a. Status-quo Pricing
Price of 1 Tronn Server = $2000

Price of 2 Tronn Server =2*2000=$4000 (with free PES software)

Total price of 2 Atlantic Bundles to Daytradejournal.com=$4000

Per Atlantic Bundle = $2000

b. Competition-based Pricing
Price of Ontario’s Zink servers = $1700

With respect to Competition Based Pricing,

The cost of Atlantic Bundle would be $1700*2=$3400

Two Tronnn Server costs 4 times the cost of Zink Server = $1700*4=$6800

Total price of 2 Atlantic Bundles for Daytradejournal.com = $6800

Price of 1 Atlantic Bundle = $3400

c. Cost-Plus Pricing

Cost of Tron (Basic) = $1538

Estimated total sale of PESA software = $10590

Cost of PESA per server = $20000000/10590 = $189

Cost of Total Bundle = $1538 + $ 189 = $1727

30% markup = $1727 * 30% = $518.1

Final cost = $1727+$518.1 = $2245.1

According to cost plus pricing price of the Atlantic bundle will be $2245.1.

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 d. Perceived Value or Value-in-use Pricing

Savings Two Zink Servers One Tronn Server

Saving in Electricity 250*2 = $500 $250

Savings in Software License 750*2 = $1500 $750

Savings in Labor costs 80000/400 = 2000*2 = $2000

$4000
Cost of Server 1700*2 = $3400 $2000

Total $9400 $5000

Savings = 9400-5000 = $4400

Profit sharing 50-50 = $2200

Price of Atlantic Bundle = $2000 + $2200 = $4200

Price of 1 Atlantics Bundle = $2100

Q2. Which pricing method should Jowers apply to charge DayTraderJournal.com? Why?

Ans. To meet the growing marketing opportunities Atlantic computers have developed a server known
as PESA (Performance Enhancing Server Application).The updated software allows Tronn to operate
at a higher speed than its original speed to access more information.
The pricing methods as decribed in the previous question can be considered in order to find the best
pricing strategy.Electricity annual cost Jowers should charge $4,200/machine for Tronn Servers with
PESA. If he plans on selling the servers alone without PESA, the status-quo pricing model is still
profitable and should be used at $2,000. However, given the boost and cost savings available for the
consumer with PESA, being $4,200 alone (after 50/50 split is calculated), not inclusive of variable or
fixed production costs, an upcharge of $1,500 for adding PESA is fair for both consumer and customer.
Using the Value pricing technique, it assessed the value of each client who realised from the purchase
of the Atlantic Computer that they would have to buy fewer servers, consume less labour and power,
and obtain fewer software application licences. A consumer obtains services, technical, social, and
economic advantages in exchange for the amount they paid for the goodsMoreover, this method of
pricing allows Atlantic Computers to offer consumers savings from purhasing the Atlantic bundle
demonstrating the actual value of their product which is comparable to approximately four Zink
servers.Thus,Atlantic Computers provides consumer satisfaction thereby increasing their profits.

Q3. Think broadly about the top-line revenue implications from each of the four alternative pricing
strategies. Approximately how much money over the next three years will be ‘left on the table’ if
the firm were to give away the software tool away for free (i.e. status-quo pricing) as compared to
the the other three pricing methods?

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Ans. The total number units in 2001 is 50,000 and Atlantic’s percentage of share is 4% the total number
units in 2002 is 70,000 and Atlantic’s percentage of share is 9% The total number units in 2002 is
92,000 and Atlantic’s percentage of share is 14% The expected sale for 3 years can be calculated as
0.04*50000+0.09*70000+0.14*92000 = 21180 The number of servers sold with PESA with 50% attach
rate = 0.5*21180=10590 variable cost per unit = $1538 Fixed cost = $2000000 Total cost for 21180
units = 21180 * variable cost per unit + Fixed cost = 21180*1538 +2000000 = $34,574,840.

Q4. How is Matzer likely to react to your recommendation?

Ans. Matzer, a 20-year professional of the computer industry, would doubtless have some qualms
about Jowers' decision to price the Tronn + PESA product using a value-in-use pricing approach. Cost-
plus pricing has been the industry policy for years, with software tools often offered for free. In truth,
Matzer and many other Atlantic executives had never considered software to be a differentiation for
the company's server offerings. As a result, they thought they wouldn't be able to charge clients for
the software in addition to the server.

Q5. How is Cadena’s sales force likely to react to your recommendation? What can Jowers
recommend to get Cadena’s sales force to understand and sell the PESA software effectively?

Ans. As from the case it was inferred that Caden’s sales force salary structure was 70% salary and
30% commission and assuming that the commission is based on sales and on number of units, they
would be fine to sell Atlantic Bundle for $4200/unit. Selling bundle at recommended price will earn
them almost double the commission compared to selling the bundle at $2000/unit.

The standard practice in the industry is to give out software tools and charge just for the server.
However, the software tool will generate the majority of the value for both customers and Atlantic
Computer. As a result, it's critical to explain to customers how and how much PESA can help them
to save. To get Caden's sales force to comprehend the value of PESA and sell it at an acceptable
price, the only efficient method to convey this is to charge an adequate price for PESA. Each
salesperson should be aware of the calculations used to determine the total value that PESA may
generate, as well as how the software price is determined by sharing a share of the entire value.

Q6. How are customers in your target market likely to react to your recommended pricing strategy?
What responses can be provided to overcome any objections?

Ans. Because our offering is less priced than competitors, buyers are likely to respond positively.
Further, the major long and short-term benefits will attract buyers and provide our products a
strong competitive advantage. One such criticism stems from the fact that our goods have previously
been supplied with free software. The company, on the other hand, will promote that our products
are far more useful to customers and still cost less than those of competitors.

Q7. How is Ontario Zink’s senior management team likely to react to the Atlantic Bundle?

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Ans. At the point when initially presented, Ontario may not respond to the Atlantic group. Considering
that the sticker cost is such a ton higher than whatever they offer the item, they will probably not
consider it to be a danger to their high existing piece of the pie. The two organizations' internet-based
deals part and various techniques might additionally uphold their convictions. Notwithstanding, on
the off chance that Atlantic starts to penetrate their market power, they could reconsider the choice
and either start making programming like PESA to recapture their strategic advantage or increase their
disconnected deals endeavours to contend and convey through different deals outlets.

Customer Value Propositions in Business Markets (Summary)

• Client Value Propositions in Business Markets Proudly Presents, Thx for Support Customer
Value Propositions in Business Markets Take the instance of an organization that makes coordinated
circuits.

• Providers can give such a client incentive by making their contributions unrivaled on the
couple of components that make the biggest difference to target clients, exhibiting and reporting
the worth of this predominant presentation, and imparting it such that passes on a modern
comprehension of the client's business needs.

• A worldwide bundling provider settled in Hartsville, South Carolina, moved toward an

enormous European client. A producer of customer bundled products, about updating the bundling
94 Harvard business survey. The Building Blocks of a Successful Customer Value Proposition. A
provider's contribution might have numerous specialized, monetary, administration, or social
advantages that convey worth to clients - yet most likely, so do contenders' contributions.

• Reverberating center offers are exceptionally convincing, yet they are difficult to create.
Providers should embrace walk 2006 95 Proudly Presents, Thx for Support Customer Value
Propositions in Business Markets client esteem exploration to acquire the experiences to develop
them.

• These client esteem appraisal devices are normally bookkeeping page programming
applications that salesmen or worth experts use on PCs as a component of a consultative offering
way to deal with exhibit the worth clients probably would get from the providers' contributions.

• A trailblazer in validating incentives throughout the most recent ten years, GEIW&PT reports
the outcomes gave to clients through its worth age arranging cycle and devices, which empower its
field work force to comprehend clients' organizations and to design, execute, and archive projects
that have the most noteworthy worth effect for its clients.

• As providers gain experience recording the worth gave to clients, they become proficient
with regards to how their contributions convey better worth than clients and how the worth
conveyed differs across clients.

Building loyalty in business market (Summary)

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 • Organizations are well acquainted with the fact that it needs to acquire and retain
customers in order to survive in the long run.
• Business markets and consumers markets varies a lot in various aspects. . In a consumer
market, many buyers have similar wants and moreover the selling process is quite short
and sales efforts are mainly focused on end users. A business market, on the other hand,
has fewer consumers and greater transactions. Customers frequently require a
customised solution. Furthermore, selling is a business retailing is a lengthy and difficult
procedure, and it is not a viable option because the sales pitch's intended audience may
not be the end consumer of the product.
• Accordingly, the benefits associated with the product can be broadly classified into 4
different groups namely
1. Tangible financial benefits- These values can be easily communicated by the sellers
and verified by the buyers.
2. Nontangible financial benefits- These values can be easily communicated by the
sellers but cannot be easily verified by the buyers.
3. Tangible nonfinancial benefits- These benefits have a value that sellers find
difficult to measure, despite how consumers perceive them.
4. Nontangible nonfinancial benefits- These values can neither be measures by the
vendors nor the buyers, particularly in monetary terms.
• Marketers have a difficult time interacting. Customers gain because purchasing choices
in businesses are frequently decided by groups of managers rather than individuals.
Furthermore, while the production units of a multilocation corporation may employ the
same materials or machinery, each may have unique requirements. Vendors must first
entice customers. The key to success in such scenarios is to remember that each
member of a buying group is only interested in one or a few benefits.
• Some businesses use customer satisfaction scores as a proxy for loyalty, but there is
very little correlation between satisfaction and loyalty. Other firms look at the value they
generate from the same customer over time or word-of-mouth recommendations. These
metrics are distinct improvement over satisfaction scores but don't give a complete
picture of relationships.
Loyalty is defined as a commitment to continue buying a product or service, whatever the
circumstances. In business, loyalty comes with a number of behavioral characteristics, such as word-
of-mouth endorsement and collaboration. A $40 million software firm has created a three-rung
loyalty ladder for its customers. Each successive rung is a source of higher revenues, which firms can
use to calculate the returns on their efforts. My experience suggests that such forecasts are often
accurate.

When companies compare the rewards of loyalty with the costs of managing customers, they usually
find that they have four kinds of customers. Some customers force vendors to strip away all the
value-added ser-vices they provide and sell them only the basic offering. Underperformers should be
in customer portfolio only temporarily. At one extreme, companies can try to turn them into
commodity buyers by slashing services they don't need or value. Such customers are expensive to
serve, but the returns usually justify the effort. Most valuable customers. MVCs account for less
than 10% of a vendor revenue base, and companies cultivate them assiduously. When new rivals or
technologies appear, it's a good idea for suppliers to move such customers to the partner quadrant.
Such customers are often willing to assure for their vendors.

In most business markets, customers don't show up in the shape desired by vendors. Wesco
was willing to offer low prices as well as a full range of products, but it wanted customers to make

5
long-term purchase commitments. Few were willing to do so; they wanted to see the benefits of
building a relationship with Wesco before they made any promises. When the benefits became large
enough, the supplier even passed on some of its savings to customers. As a result, Wesco's costs
began to drop. To determine whether to invest in, maintain, a relationship with a customer,
compare the advantages of having that buyer remain on its current rung of the loyalty ladder with
the cost of moving it up and the savings from moving it down.

Few companies try to build relationships with individual customers, because that approach deviates
from current practice. Companies still have a long way to go before they can say they manage
individual customers. State-of-the-art customer relationship management systems focus entirely on
companies' interactions with customers.

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1
Q1. Explain the 5 product levels with examples:

a. Core Product :
 This is the 1st product level which aims service and benefit for the customer what she or
he is buying. The purpose for which the product is made and the reason for which
customer is buying
 ex- the core product of a washing machine is to wash clothes in a more convenient way
 ex – the core product of a car is good speed and convenient transport

b. Generic Product :
 This is the 2nd product level which represents or describe the qualities or characteristics of
product which are necessary.
 Ex- Generic product of a washing machine is different features, power load, different colours of
machine
 Ex- Generic product of a car is features, mileage, colours, build quality.

c. Expected Product :
 This is the 3rd product level which tells about what all attributes and expectations customers
have when they buy the product.
 Ex- expected product of a washing machine is low power consumptions, multi specifications.
 Ex- Expected product of a car is like good performance, additional specifications, convenient
mode of payment.

d. Augmented Product :
 This is the 4th product level which means customers wants beyond expectations , additional
factors that helps product to differentiate the product from its other competitors.
 Ex- augmented product of a washing machine -hassle free delivery, disposal of the old machine ,
trial period of machine, exchange or refund.
 Ex- Augmented product of a car best after sales service , free servicing period, high resale value

e. Potential Product :
 This is the 5th product level it refers to what all transformation or evolution may the product
undergo in future where companies search new ways to satisfy customers wants.
 Ex- Potential product of a washing machine – advancement of future technology, solar washing
machine, minimal usage of water
 Ex-Potential product of a car – features with both EV and petrol/diesel (hybrid car), zero
emission, automatic emergency braking, diver assist mode ,video rear-view mirror ,360-degree
camera.

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Q2. Explain the following terms of Product Mix with examples:

a. Width of the Product Mix :

 The width of the product mix refers to the amount of different product lines that a
company sells.
 A product line is the number of parallel product lines offered by a company or a brand ,it
also encompasses all of the various product lines that a company has, as well as each
product within that line.
 Example: - Nike as a brand has offerings in footwear, apparel and other sports gear.

b. Length of Product Line :

 Length of Product Line refers to the number of products/brands that come under a single
product line and it can also be the total number of items a company carries within the
product lines.
 Length of the product line also refers to the total number of products in the mix.
 Example: -BMW as a car company with six car product lines like the 2-series,3-series,5-
series, X series ,M series and the Z series.

c. Depth of Product Mix :

 Depth of product mix refers to the variation or variety in products that a company offers
within one product line.
 Example: - BMW 5-series in the car product line has many several versions like
competition, coupé and the gran turismo.

d. Consistency of Product Mix :

 Consistency of Product mix refers to how closely products are linked to each other. Less
the variation among products, more the consistency.
 Example: - Vehicle manufacturer like Audi has a relatively close consistent product mix,
since all its product lines contain consumer-vehicles both two and four-wheeler
automobiles and those are sold in the same way etc.

Q3. Explain the following terms with examples:

a. Product Line Extension:

 Product Line Extension is a business strategy in which a company seeks to expand its
existing product brand name with a new range of goods in the same product category.
 New colours, forms, shapes, sizes, tastes, packaging, and ingredients can all be part of
the Product Line Extension.
 The basic aim and goal of the campaign is to boost sales and reach of an already
established product on the market.

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  Example: - Colgate-Palmolive extended their line of toothpastes with one that has hemp
seed oil. Its original product line was Colgate Cavity Protection, Colgate Total, Colgate
Optic White, Colgate Enamel Health, Colgate Max Fresh, Colgate Sensitive Pro-Relief,
and more. But due to line extension it brought in Colgate Calming Clean with Hemp
Seed Oil

b. Brand Extension:
 A technique in which a corporation launches a new product category under its well-
known brand name is known as brand extension. It enables consumers to simply
introduce new goods, increase profits, decrease start-up costs, and match their
requirements and desires.
 Brands must investigate and understand emerging trends in order to properly utilize this
method. Companies do research to try to figure out what their potential consumers
want and need in order to design a product that meets those demands.
 Example:- Apple, a technology company that is known for its computers and phones,
also used brand extension. You can find Smart Watches and MP3 Players designed by
Apple
Q4. Explain the following Augmentation Strategies with examples
a. Physical Augmentation:
 Physical augmentation attempts to improve the functional and qualitative features of
consumers.
 It improves the entire usability of the product for the consumer, allowing businesses to
retain customers and gain a competitive advantage.
 Example: Tesla allow is customer to customize their Tesla models in terms of
design,color,interior,wheels.

b. Service Augmentation:
 Service augmentation refers to those aspects of product offering which the customer is
aware of and the company receives Reponses for the same from its consumers.
 Here the company mainly focuses on selling addition consumer benefit services.
 Apple, for example, explains and teaches consumers on how to operate their purchases
through retail stores.
 The companies have technicians on staff who can install or configure an equipment,
such as a washing machine or a television, for free.
 Initially Myntra offered trial and buy service to its customers located in NCR, Hyderabad,
Kolkata, Pune, Chennai, Ahmedabad, Lucknow, Jaipur and Bengaluru.

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c. Availability Augmentation :
 Availability augmentation involves different types of economic utility such as place
utility, time utility, form utility and possession utility.
 Place utility- Place utility is all about making goods or services physically available or
attainable to potential clients is what. For instance , Apple not only sells iPhones and
laptops through its retail outlets, but it also sells its products through Best Buy Co. Inc.
and other electronics retailers (BBY).
 Time utility- When a business enhances the availability of a product so that customers
can buy it when it is most convenient for them, it is known as time utility. 24 hour
availability of customer care service through call or website chat function is an example
of time utility.
 Form utility- When a company inculcates its customers needs and wants in the products
or services it offers, it is known as form utility. For example, wool, thread, and buttons
have a nominal worth and demand if sold individually, but when the raw components
are assembled to make a sweater, the demand and value increase significantly.
 Possession utility- Possession utility denotes how simple it is to obtain a product. For
example, a high-priced piece of furniture might be more affordable with a low-interest
loan.

d. Packaging Augmentation :
 In this strategy the packaging design reflects the brand identity and brings the brand to
life- from the visual appearance and feel of the packaging to its function and
sustainability.
 It provides information that is both descriptive and convincing.
 It makes the shipment and storage of the product much easier which in turn leads to
better usage of the product.
 For example, Apple’s iPhones and iPads are packed in 2 pieces set up rigid boxes which
are better and expensive than paperboard and corrugated boxes.

e. Brand Augmentation :
 It mainly represents the interest or association related to the product or service.
 This is the aspect that distinguishes the brand from other similar products/services. T
 his strategy also means whether to use brand extension or brand name for the new
product.
 For example, OLA cabs and OLA E-vehicle.