Marketing Metrics

Prof. Rashmi Jain

 Recap
• YoY growth, CAGR
• Cannibalization
• Market size
• Market share
• Case Study
 Relative Market share

• Used to understand how close to the market leader , are other players.
 Which is a better market for brand X
Sales in
Markets Mn
A 475
B 350
C 380
D 270
total 1,475
 Which is a better market for brand X
Sales in TG
Markets Mn Household BDI = Brand sales in mkt X1/Total brand sales in India
A 475 1200 TG in Market X1/ Total TG in India

B 350 800
BDI measures the sales of brand per unit of TG.
C 380 850 It tells us how well the brand is performing in the
market compared to markets potential
D 410 900
total 1,615 3750
 Sales in TG
Markets Mn Household BDI
A 475 1200 0.92
B 350 800 1.02
C 380 850 1.04
D 410 900 1.06
total 1,615 3750 1
 Category Development Index
CDI = Category sales in mkt X1/Total category sales in India
TG in Market X1/ Total TG in India

Sales in TG Category Calculate BDI and CDI

Markets Mn Household Sales
A 475 1400 700
B 350 1000 475
C 380 1050 400
D 410 1100 450
total 1,615 4550 2,025
 Action plan for each market?
TG
Market Sales Househ Category
• BDI > CDI: Brand is doing better
s in Mn old Sales BDI CDI than category. Maintain promotion,
A 475 1400 700 0.96 1.12 defend position
B 350 1000 475 0.99 1.07
C 380 1050 400 1.02 0.86 • BDI<CDI : Brand not leader in
category. Increase promotion, grow
D 410 1100 450 1.05 0.92
total 1,615 4550 2,025 1.00 1.00
Penetration
 Penetration
• 2 different types of industries. A has penetration rate of 35% and B has
penetration rate of 78%. Which industry would you recommend NLDES
to enter?
 Brand KPIs
• How to measure the performance of a Brand?
 Brand KPIs
• Awareness
• Recall
• Top of mind recall
• Depth of recall
• Width of recall
• Consideration set
• Case on brand metrics
Price
 Price Premium

Benchmark price can be a particular competitor’s price, avg Price paid, cost price depending
upon whether you are calculating premium over a competitor/ over the market / over purchase
price
Avg. Price Paid
Q6.
Problems
Being the brand manager of Lux, what steps will you take to increase the
market share of Lux
 Should We Decrease Prices?
  After price Chg
Before Price
  Chg Case 1 Case 2 Case 3 Remarks
Price per unit 10 9 9 9 10% reduction in price
Increase by 10% , 15%,
Qty sold 1000 1100 1150 2000 100%
Cost per unit 8 8 8 8 
Total revenue 10000 9900 10350 18000 
Total Cost 8000 8800 9200 16000 
Profit 2000 1100 1150 2000 
Profit change
%   -45% -43% 0% 
           
 Traps in Price Cutting Strategies
• Low-quality trap
• Fragile-market-share trap
• Shallow-pockets trap
• Price-war trap
Prisoner’s Dilemma
Prisoner’s Dilemma
Which are the industries where you have
seen a price war?
Should We Raise Prices?
Can you think of some products
where pricing has played a major
role increasing the adoption?
 Pricing
Pricing can change the adoption rate of a product!!!!

McDonald – Rs 20 (Ad)

Shampoo sachet - Rs 2/ sachet

Mobile service – Rs 0.5/min and lower

How does customer decides at which price to
buy the product??
 Pricing Research 1
Test 1: Two option of beer were given to the students of a MBA Class. What
would have been the adoption %age?

Rs 100 Rs 140

20% 80%
 Pricing Research 1
Test 2: What is the impact of adding a cheaper beer?

Rs 80 Rs 100 Rs 140

0% 80% 20%
 Pricing Research 1
Test 3: What is the impact of adding a more expensive beer?

Rs 100 Rs 140 Rs 210

5% 85% 10%
 Findings

• In test 2: introducing a lower priced option improved the image of the

moderately expensive beer.

• In test 3 : Adding a super – premium offer, makes the price of $2.5 beer
look better by comparison and gives an option to those who prefer the super
premium products.
 Economist Example
Scenario 1:
• Monthly subscription of printed copy - $30 26%
• Monthly subscription of electronic copy - $ 55
• Monthly subscription of electronic & Printed copy - $ 55
74%

Scenario 2:
• Monthly subscription of printed copy - $30
62%
•Monthly subscription of electronic & Printed copy - $ 55
38%
 Consumer Psychology & Pricing
Purchase decisions are based on how consumers perceive prices and
what they consider the current actual price to be.

Lower price threshold: price below which signifies poor and

unacceptable quality.

Upper Price Threshold: prices above which the product is

expensive and not value for money.

Examples: Tata Nano, Levis Demi Curve Jeans

 Consumer Psychology & Pricing
Reference/ Reservation prices: consumers compare an observed price to an
internal reference price they remember or an external frame of reference such as a
posted “regular retail price.”

Price-quality inferences: price == quality & class. Used in products such as

perfumes, expensive cars, and designer clothing.

Price endings: Price ending with 99 eg 499

You are buying a product, you receive a msg from your friend informing that there is a 25%
discount on the product in a shop 300 ms down the road. What will you do?

You are buying a pen and your friend tells you that the kiraana shop 350 ms down the road is
selling it for Rs 2 less. What will you do?

You are buying a camera and your friend tells you that the electronics shop 350 ms down the
road is selling it for Rs 50 less. What will you do?
 Learning
• Consumer mind behaves in an irrational manner while deciding on what is
the price to be paid for a product.

• Consumers consider price relativity and anchor price to make the price
decisions

• Mind makes decision basis “what it sees” and not complex calculations

• Discounts and freebees can be created without changing the price of the
product.
HomeTown
 Steps in Setting the Price
⚫Select the price objective
⚫Determine demand
⚫Estimate costs
⚫Analyze competitor price mix
⚫Select pricing method
⚫Select final price
Price Elasticity
 More Examples
Which SMS plan would you like (If you typically send 50 -60 sms/mth) :
A. 50p/ SMS
B. Rs 29 /month and 1p/sms

Which Internet 2G plan would you take?

A. Rs 149 for 30 days with 1.2 Gb usage
B. Rs 199 for 30 days with 2 Gb usage
 More Examples
Which SMS plan would you like (If you typically send 50 -60 sms/mth) :
A. 50p/ SMS
B. Rs 29 /month and 1p/sms

No of SMS/mth Cost As per Plan A Cost As per Plan B

50 25 29.5

60 30 29.6
75 37.5 29.75

100 50 30

Which Internet plan would you take?

A. Rs 149 for 30 days with 1.2 Gb usage
B. Rs 199 for 30 days with 2 Gb usage
 Price Discrimination
Can be implemented when
⚫ where user usage patterns are known

⚫ Can create different pricing for different customers

⚫ Can communicate personalized pricing/ offers to customers

⚫ Needs analytical understanding of cost, consumption

patterns, and consumer behaviours.

⚫ Other examples: ICICI direct, salons

• Solved exercise
• What happens when a company changes its price?
Own, Competitor, Cross, Residual
Own, Competitor, Cross, Residual
 Problem
• A company decides to reduce the price by 10%. It has estimated that that
its own price elasticity is -2. How much is would be the estimated increase
in sales.
• Further, past trends have shown that the competitor reaction elasticity to
be 1 (ie shifting the price in same direction) and cross elasticity to be 0.7.
What will be overall estimated change in sales.