The Data Institute Acquisition Manual

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Volume 4

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ACQUISITION MANUAL for THE TARGET COMPANY

6
Corporate Development
7
Product Management
8
Overseas Development
9
Product Distribution & Service
10
Advertising + P.R.
16
New Technology Primers
17
Physical Process & Orders
18
Competition Analysis
19
Product Perceptions
20
Customer Perceptions
Financial
Industry
Markets
Products
Data Grids
World MDB
Research MDB
Product MDB
Corporate MDB
Reference MDB

Volume
4

 

The Marketing Director's Objectives

Market Summaries in the Acquisition Manual give detailed information on all of the most important national markets for the Company. In addition the Geographic Locations of customers and distribution channels are shown for the major national market.

A comparison is made between company Advertising, Distribution, Sales, and Marketing costs with that of the industry norms in each of the national markets in which the Company operates.

Relative Competitive Promotional Mix objectives and Pricing objectives are proposed for the Company.

Knowledgeable discourse of the use of Marketing Expenditure and its effect on Product Market shares is introduced for each product and each national market over three time series.

Each potential Marketing Objective is explored in terms of ultimate profitability so that the incoming Marketing Director is able to see all the possibilities available.

To conclude this section, a comprehensive range of marketing objectives are analyzed in profit and loss terms to indicate optimum Profitability and Return on Investment scenarios.

  1. Marketing Strategy

  2. Market Summary

  3. World Markets

  4. Market & Industry Geography

  5. Product Marketing Factors

  6. Promotional Mix

  7. Pricing Objectives

  8. Marketing Expenditure & Share

  9. Profitability & Return on Investments


 

1

Marketing Strategy Development:

 

MARKETING STRATEGY DEVELOPMENT


As a general introduction it is useful to define the Objectives facing the Company and make some broad statements as to where the company management may want to go in the next few years. This discussion relates to the Strategy or grand design to enable the Company to actually get there. This Strategy is a suggested battle plan using the resources of marketing, finance and processes elements; albeit, here one will emphasize the marketing elements.

One can, and should, use the scenarios and theoretical situations in order to illustrate the concept of strategy. Thus this section provides a large number of Scenarios which are available to ensure that corporate managers and/or prospective investors are aware and cognizant of many of the foreseeable eventualities.

Whether or not a particular company is a major player in the Products & Services Markets, with a noteworthy market share of the countries in which they operate, is not important - the essential question is whether the company wishes to evaluate the Marketing Strategy options and act accordingly.

Clearly companies feel that the Products & Services markets will continue to have high growth in the coming years and the Market data given below will confirm or deny this proposition.

The company managers will seek to provide many reasons for the Medium and Long-Term growth of the Products & Services Markets. It is however necessary for any observer to ensure that this optimism is well founded.

Any manager seeking to invest in the Company must assume an ambitious objective - being the realization that the Company must retain, and expand, its share of the market in relation to competitive and parallel products.

The questions managers and potential investors must ask are:-

  • Is product quality in the Company so well regarded that buyers are willing to pay a premium of 5 to 10 percent more than for comparable or parallel products?

  • Are service factors in the Company considered the best by customers?

  • Is the distribution system of the Company so structured that it can guarantee product and service delivery within a period less than competitors or parallel products suppliers in each of the national markets?

  • Does the Company have dedicated distribution channels and do these channels carry other competitive or parallel products?

  • Are the distribution channels for the Company of a unit size greater than their competitors or parallel products suppliers and do they thus have the necessary strengths and resources in their own local and/or national markets?



In the Products & Services industry, the Company faces significant and aggressive competitors:-

Company Competitors

Industry Competitors

Significant Company Competitors

Company Competitors 1

Company Competitors 2

Company Competitors 3

Company Competitors 4

Company Competitors 5

Company Competitors 6

Company Competitors 7

Company Competitors 8

Company Competitors 9

Company Competitors 10

Company Competitors 11

Company Competitors 12

Company Competitors 13

Company Competitors 14

Company Competitors 15

Industry Competition

Industry Chief Overall Service Competitor

Industry Main National Market Competitor

Industry Main Regional / Local Market Competitor

Industry Main Trade Cell Market Competitor

Industry Main National Product Superiority Competitor

Industry Main Trade Cell Product Superiority Competitor

Industry Main National Price Competition Competitor

Industry Main Trade Cell Price Competition Competitor

Industry Main National Financial Strength Competitor

Industry Main Trade Cell Financial Strength Competitor

Industry Main National Customer Satisfaction Competitor

Industry Main Trade Cell Customer Satisfaction Competitor

Industry Main National Marketing Aggression Competitor

Industry Main Trade Cell Marketing Aggression Competitor

Industry Main New Product Development Competitor

These competitors are extremely unlikely to allow their opponents to gain any major competitive advantage in the near future.


 

BASIS FOR A MARKETING STRATEGY


MARKET SEGMENTATION

 
Market segmentation is the basic recognition that every market is made up of distinguishable segments consisting of buyers with different needs, buying styles, responses and product variations offered by the Company. No one offer or approach by the Company to the market will satisfy all buyers. Each segment of the market represents a somewhat different opportunity and the Company will need to study the opportunities in different parts of the market before making product positioning moves.

There is no unique way to segment a market and if the management of the Company has been professional they would already have found creative new ways of presenting and marketing their products and services.

The first objective is that of geographic segmentation and whilst companies cannot be strong everywhere it is necessary for the company management to seriously consider where geographically the best market potential will be found.

In general terms this section assumes that the potentially most valuable geographic markets for companies (within the national market) are as follows in terms of the trade cell:-  

Company Trade Cell

Significant Company Markets

Company Trading Area 1

Company Trading Area 2

Company Trading Area 3

Company Trading Area 4

Company Trading Area 5

Company Trading Area 6

Company Trading Area 7

Company Trading Area 8

Company Trading Area 9

Company Trading Area 10

Company Trading Area 11

Company Trading Area 12

Company Trading Area 13

Company Trading Area 14

Company Trading Area 15

Trade Cell

Major Trade Cell Markets

Industry Trade Cell Market / Sector 1

Industry Trade Cell Market / Sector 2

Industry Trade Cell Market / Sector 3

Industry Trade Cell Market / Sector 4

Industry Trade Cell Market / Sector 5

Industry Trade Cell Market / Sector 6

Industry Trade Cell Market / Sector 7

Industry Trade Cell Market / Sector 8

Industry Trade Cell Market / Sector 9

Industry Trade Cell Market / Sector 10

Industry Trade Cell Market / Sector 11

Industry Trade Cell Market / Sector 12

Industry Trade Cell Market / Sector 13

Industry Trade Cell Market / Sector 14

Industry Trade Cell Market / Sector 15




There is obviously considerable scope for and nationally based company to improve its geographic coverage and the company's job is to study the propensity to consume, the growth rates of different regions and nations, find out where competitors are relatively weak (but the growth strong), and give top consideration to those markets which fulfill the criteria.

Another way to break down the Products & Services market is by End Uses and this too can prove useful in a geographic context.

Each discrete End Use calls for different types and mixes of product and services as well as defining different types of customers. An analysis must be made of the character, growth, and potential profitability of these different segments of the market.

The Products & Services markets can also be analyzed by buyer description variables; for example, type of buyer, customer size, customer class - customers can be classified by their buying motive (economy, quality, service, etc.) or some other variable. There are a host of alternative parts of the market on which the Company could concentrate.

The market can also be approached in terms of specific products and the Company can attempt to provide and market the best version of those types of products and services that will experience the most rapid growth in demand.

An easier course for any nationally based company is the provision of existing products in new geographic markets and the provision of new or improved products in existing geographic markets.

 

  • Can the Company face the challenge of the development of its existing product ranges?

Company Products

Significant Company Products

Company Product / Brand Sector 1

Company Product / Brand Sector 2

Company Product / Brand Sector 3

Company Product / Brand Sector 4

Company Product / Brand Sector 5

Company Product / Brand Sector 6

Company Product / Brand Sector 7

Company Product / Brand Sector 8

Company Product / Brand Sector 9

Company Product / Brand Sector 10

Company Product / Brand Sector 11

Company Product / Brand Sector 12

Company Product / Brand Sector 13

Company Product / Brand Sector 14

Company Product / Brand Sector 15

Products & Services

Major Products

Industry Product Sector 1

Industry Product Sector 2

Industry Product Sector 3

Industry Product Sector 4

Industry Product Sector 5

Industry Product Sector 6

Industry Product Sector 7

Industry Product Sector 8

Industry Product Sector 9

Industry Product Sector 10

Industry Product Sector 11

Industry Product Sector 12

Industry Product Sector 13

Industry Product Sector 14

Industry Product Sector 15



MARKET POSITIONING


The second objective of the Company marketing strategy is to select a specific pattern of market concentration that will afford the maximum opportunity to the company management to achieve its leadership objective.

Companies cannot be everywhere and they must now go after more a viable market position which will afford better profitability and prospects for future success.

 

  •     Can the Company follow the principle of more aggressive target marketing?

  •     What makes any part of the market an attractive one for the Company?


The optimum target market segmentation for the Company would have four characteristics:

  1. The market segmentation is of sufficient current size.

  2. The market segmentation has the potential for further growth.

  3. The market segmentation is not exclusively dominated by one competitor.

  4. The market segmentation has some relative unsatisfied needs that a company can serve particularly well.


If company management decide to seek a leadership position in only one market segment, a so called single segment concentration strategy, this will undoubtedly hamper the long-term prospects for that company.

Usually one would expect company management to cultivate a mix of market segments that hopefully have synergistic relations, that is, where strength in one market segment gives the company an advantage in the other market segments. This strategy is called a multiple segment concentration.

The chosen company pattern of market concentration has set the course and determines the products the company will offer, the customers the company will serve, and the competitors the company will face.

In making Market Positioning decisions the Company needs to consider its existing strategic structure, its operational facets and its existing resources:

Target Company Operations

Significant Company Operations

Company Operations & Activities 1

Company Operations & Activities 2

Company Operations & Activities 3

Company Operations & Activities 4

Company Operations & Activities 5

Company Operations & Activities 6

Company Operations & Activities 7

Company Operations & Activities 8

Company Operations & Activities 9

Company Operations & Activities 10

Company Operations & Activities 11

Company Operations & Activities 12

Company Operations & Activities 13

Company Operations & Activities 14

Company Operations & Activities 15

Industry Operations

Industry Operations

Industry Operations & Activities 1

Industry Operations & Activities 2

Industry Operations & Activities 3

Industry Operations & Activities 4

Industry Operations & Activities 5

Industry Operations & Activities 6

Industry Operations & Activities 7

Industry Operations & Activities 8

Industry Operations & Activities 9

Industry Operations & Activities 10

Industry Operations & Activities 11

Industry Operations & Activities 12

Industry Operations & Activities 13

Industry Operations & Activities 14

Industry Operations & Activities 15


 

MARKET ENTRY STRATEGY


The third element of marketing strategy for company managers is to determine how to enter a target market segment. The company can proceed through acquisition, internal development, or collaboration with other companies. Indeed this section may represent a similar Market Entry Strategy for an investor in the Company.

Acquisition of an existing product or company is the easiest and quickest way to enter a new market as it obviates the costly and time-consuming process of attempting to build up internally the knowledge, resources and reputation necessary to become an effective participant in that part of the market. In fact, the following factors would favor acquisition:

  1. The acquiring company has very little knowledge of the Company.

  2. There is a strong advantage in entering the new market as soon as possible.

  3. The predator would face several barriers to entry through internal development, such as patents, substantial economies of scale, closed or difficult-to-enter channels of distribution, costly advertising requirements, or lack of raw materials or other supplies.


Some companies prefer to achieve most of their growth through internal development. They feel that true leadership is only achieved by running their own new product or research and development effort; they might feel that acquiring a company will raise the brows of shareholders and others and/or face the possibility of running foul of competition or fair trading legislation; or indeed they could feel that the companies prone to acquisition are not very good or are too highly priced. Finally there may simply be no suitable companies available to acquire.

Entry into a new market or market segment may also be accomplished by collaboration with others to jointly exploit the new opportunity. A major advantage is that the risk is shared, and therefore reduced, for each of the participating companies. Another advantage may be that each company brings specific skills or resources whose lack makes it impossible for either company to venture by itself. In the best joint-venture combinations, there are not only complementary benefits but also a real synergy of resources and corporate thought.

One might suggest that most companies should rely primarily on internal development to secure its target market positions; but equally, for certain market opportunities, the company might move towards acquisition, and yet in other cases, might affect joint venture with other companies.


Target Company
Base Reference
MARKET POSITION

Sufficient Current Market Segmentation

Potential Growth for Market Segmentation

Competitive Market Segmentation Position

Unsatisfied Market Segmentation

Competitor Dominated Market Segmentation

Performance Grid Definitions

 

MARKETING-MIX


A vital constituent of marketing strategy is for the Company to determine how it will profile its products and services in order to attract and sell to the particular market segment. The key concept here is one of marketing mix.

Marketing mix is the set of controllable variables that the Company can use to influence the responses and thereafter purchases of potential customers.

Many variables qualify as marketing-mix variables and the industry tends to use a popular four-factor classification which they call the four P's:

Product 

 

 

 

 

Quality

 

 

 

 

Features & Options

 

 

 

 

Style & Image

 

 

 

 

Branding

 

 

 

 

Packaging & Merchandising

 

 

 

 

Product Ranges

 

 

 

 

Warranty & After-Sales

 

 

 

 

Service level

 

 

 

 

Associated Products & Services

 

 

 

 

 

Place    

 

 

 

 

Distribution Channels

 

 

 

 

Distribution Coverage

 

 

 

 

Outlet Locations

 

 

 

 

Sales / Market Territories

 

 

 

 

Product Availability -v- Locations

 

 

 

 

Product Handling Factors

 

 

 

 

 

Promotion    

 

 

 

 

Advertising

 

 

 

 

Personal Contact

 

 

 

 

Sales Promotion

 

 

 

 

P R  & Publicity

 

 

 

 

 

Price    

 

 

 

 

Pricing

 

 

 

 

Discounts & Promotional Offers

 

 

 

 

Payment & Terms of Trading

 

 

 

 

 

    

 

 

 

 

END USER

 

Of course, the Company marketing management will contend that buyers are influenced by variables related to the product, the place, promotion and price.

Marketing mix functions, as a strategic concept, can be used by the Company to improve the market position for its products.




If one considers two important factors, being, quality -v- price a matrix can be formed for each of the products offered by the Company.

Nine different marketing-mix strategies can be generated:-

PRODUCT QUALITY -v- PRICE

PRICE

HIGH

AVERAGE

LOW

PRODUCT QUALITY

HIGH

Premium

Penetration

Loss-Leader

MEDIUM

Overpriced

Average

Bargain

LOW

Hit & Run

Shoddy

Cheap

 


A premium strategy consists of offering a high-quality product at a premium price. This should be the strategy employed by the Company.

An average-quality strategy consists of offering an average product at an average price. This is a strategy for the complacent and soon leads to failure.

In many cases company managers should employ a penetration strategy, which calls for offering a superior-quality product at a medium price. If potential buyers can be convinced that products are of a comparable quality to that of competitors but priced at 10-15% less, they might make their purchase decision in favor of the company - thereby gaining market share.

Conditions have to be monitored and checked on an annual basis before a company can confidently select such a strategy and in truth it is not entirely sure if the Company has paid sufficient attention to this task.

First, company managers must really be convinced that the company's products possess the same high quality and performance characteristics as the competitors. This may not be so easy to demonstrate as may be supposed because many buyers judge the product by its price. Secondly, potential buyers must feel that the other elements of the marketing mix - such as service and associated products - are comparable for the company and its competitors. Thirdly, company managers must be sure that competitors will not react to the penetration strategy of the company by lowering their prices. This is a real and very likely possibility and in this case the company will neither gain market share nor recoup an adequate return on its investment. Finally, company managers must check that any proposed marketing-mix strategy is compatible with its other departments' resources and competence. The company must be sure that it can develop the quality products, achieve the necessary economies of scale, and handle the necessary cash flows called for by a penetration strategy.


Target Company
Base Reference
MARKETING MIX

Product

Place

Promotion

Price : Premium Strategy

Average Strategy

Performance Grid Definitions

 

TIMING STRATEGY


The final element of the Company marketing strategy is that of timing. Just because a company may have spotted a good market opportunity, set an objective and thereafter developed a marketing strategy does not mean it would, or indeed should, immediately enter the market. One may lose by moving too soon or too late and thus proper sequencing and timing are a key component of company strategy.

Let us return to the scenario where the company might decide that it would like to increase its penetration of a particular product range and market sector through a penetration pricing strategy. First, it must visualize the sequence of activities that it would have to initiate to launch this strategy. New products would have to be designed and tested with potential buyers; process and operational considerations would surface; distribution channels would have to be established and trained; and sales promotion would have to be prepared. These activities would have to be time estimated and sequenced so that company management could know how long it would be before it could launch its actual attack. These activities are even more critical during or soon after an acquisition as staff is lost, margins eroded and cash-flow reduced.

There is also the question of whether this is an opportune time for company managers to begin the activities in the strategic sequence. Is the company destined for stagnation or prosperity? Are the major competitors increasing their market share or are they minded and ready for an aggressive push? These and other questions must be faced by the Company in trying to determine the best moment to strike.

NEW MARKETS -v- NEW PRODUCTS

PRESENT PRODUCTS

NEW PRODUCTS

PRESENT MARKETS

Market Penetration

Product Development

NEW MARKETS

Market Development

Product Diversification


 

BASIS FOR MARKETING TACTICS

 

FORMULATING PLANS

Much of what we have described above can be regarded as basic strategic planning issues for the Company. The next step is the development of written plans in the form of specific targets, budgets, and work assignments which combine to formulate the tactics of accomplishing the given objectives.

The marketing objectives and targets form the backbone of the company manager's corporate plan. A commitment is made to achieve a certain level of sales, and then all of the resource decisions on marketing, processes, finance and personnel are made. Here we shall concentrate on the major concepts used in developing tactical marketing plans and budgets for the Company.

The precise tactics available to the Company are described (in the various following parts of this report) and this part of the report will simply look at the broad issues.

 

SALES TARGETS

The marketing plan begins with a statement of sales targets for each of the company's operational divisions and products. The sales target does not represent an arbitrary choice of a sales volume but instead emerges from an analysis of the profitability of different possible marketing strategies. The sales target is allocated to the performing units of the company, such as sales regions, sales districts, and finally individual salesmen. They often go under the name of sales quotas and are based on the past performance and estimated potential facing each of these units.

 

MARKETING BUDGET

To enable the various marketing tasks to be carried out, the company develops a total marketing budget and this budget is fully discussed in this report. Normally, the company sees the total marketing budget as some conventional percentage of the sales target. This marketing budget and the viewed percentage of targeted sales turnover varies for each operating division and product group. These variations are startlingly different in some cases.

Companies when entering a new market are especially interested in learning what the marketing budget-to-sales ratio is in the typical competitor company, although this information is usually highly confidential and not easy to obtain. Furthermore a particular competitor may spend more than the normal ratio in the hope of achieving a higher market share. Ultimately, company managers should analyze the marketing work that has to be done to attain a given sales volume or market share and then price this work; the result is the desired marketing budget.

 

MARKETING SPEND

The company has to decide how to allocate the total marketing budget for each operational division and product group to the various marketing-mix tools, such as advertising, sales promotion and personal selling.

Apparently the question of the relative emphasis of the tools is settled by the Company earlier in the forming of a marketing strategy. Yet there may still be conflict among those in different parts of the marketing operation as to how much money they need for their job. A sales manager usually feels that hiring one extra salesman for $10,000 per 3 months will do more good than placing a one-page ad in a magazine. The market research manager usually feels that spending $10,000 to get some basic information about customer needs is worth more than either of the two other uses of the money. Albeit it is clear that the opportunity cost of this book has in this circumstance been directed by the reader to this purchase - evidently the opportunity costs associated to Marketing-Mix decisions are varied and wide.

 

PRODUCT PRICING

Pricing is the fundamental revenue-producing element in the Company marketing plan. The rough pricing guide-lines would be considered earlier as a matter of marketing strategy, but the plan requires a specific level of price to be set within the pre-defined strategic parameters. The planned realized price as well as the list price before discounts, promotions and allowances must be determined and the company's marketing management must carefully consider the three elements of demand, cost, and competition in setting the planned price.

 

MARKETING BUDGET ALLOCATION

Multi-product firms must resolve each year how much money to allocate to each of the products in its line. The product line consists of a mixed bag of new products that are fairly small but have bright futures; important products that have been around for a while and face continued strong demand; and other products, both large and small, that are the tried breadwinners of the past and are just limping along. The Company has to make a basic determination of which products call for increased market budgets, which call for harvesting, and which call for reduced marketing budgets.

For example, one company competitor and prime practitioner of strategic planning, recently decided to put the maximum company resources into specific technology driven products - based on their highly leveraged total earnings growth in recent years - it decided on a level of steady reinvestment in the targeted product areas. It decided to disinvest in some smaller product areas; whilst conversely putting considerable funds into new venture opportunities. Company managers have to show the same resolve and determination if they are to succeed in the long-term.

These plan decisions - on sales targets, total marketing budget, marketing mix allocation, pricing, and marketing budget allocation to products - constitute the key components of the company's marketing programme.

 

MARKETING IMPLEMENTATION + CONTROL

A plan is nothing unless, as the saying goes, it degenerates into work and whilst the company's marketing plan is a blueprint for work and accomplishments, it should define what is supposed to be accomplished during each period along the way. Thus the company's product sales targets are stated not only in total and by performing units but also by periods, such as months and quarters. The same is true of the company's marketing budgets.

One of the major jobs of company functional managers, besides planning, supervising and doing, is controlling and each manager should know what to watch. The product sales managers scans each period the sales volumes and expenses of each sales effort against individual quotas and budgets; he monitors those periods which do not perform according to target; he resolves problems and shortfalls by constructive fire-fighting and implementing ready-formulated emergency plans; he analyses new and potential problem areas which may cause sales problems during the forecast period.

Simultaneously the company's sales director examines the actual sales of his operational units and brings in alternative plans when actual income deviates from targets. Even the Chief Executive of the company gets on the telephone when he looks at total sales for the period and they are below target.

This is only one aspect of the control system which the company calls the annual company plan. Company management also exercises profitability control by examining the real profitability of its various products, markets, and territories and different marketing channels. Finally, there is the major issue of strategic control, that is, whether the Company products, resources and objectives are properly matched to the right markets. In times of rapid change, the Company marketing strategy can easily become inappropriate to its opportunities and threats. The job of the Marketing Director is essentially to evaluate the final and ultimate Objectives of strategic control.


Target Company
Base Reference
MARKETING TACTICS

Sales Targeting

Overall Marketing Mix

Product Pricing

Marketing Budgets

Marketing Control

Performance Grid Definitions

 

MARKETING SUMMARY


The Marketing Management in the Company is the catalytic agent that interprets market needs and translates them into meaningful products and services. To do this, the Company management goes through a strategic-marketing process consisting of analyzing opportunities, choosing objectives, developing strategy, formulating plans and carrying out implementation and control.

The opportunities available to the Company are not simply the general opportunities in the environment - but that subset for which a particular operating unit would enjoy a differential advantage in carrying out marketing actions. It must have a set of distinctive abilities that match well the success requirements for effectiveness in that area. Company management can generate a systematic picture of its relevant opportunities by first considering intensive growth opportunities within its present product-market scope (such as market penetration, market development and product development), then considering integrative growth opportunities within its core marketing system (such as backward, forward and horizontal integration) and finally considering diversification growth opportunities outside of its core marketing system (such as concentric, horizontal and conglomerate diversification).

To choose among opportunities, the Company must refer to its basic purpose and mission, which should be defined in terms of meeting generic needs, not producing particular products. For any opportunity, it must develop a well-integrated set of objectives that are hierarchical, quantitative, realistic and consistent.

Whereas objectives are a statement of where the Company wishes to go, strategy is a grand design for getting there.

The major elements in formulating marketing strategy are; market segmentation, market positioning, market entry strategy, marketing-mix strategy and timing strategy.

A strategy must be translated into a concrete documented plan that specifies sales targets, budgets and work assignments. The key marketing decisions made in the plan are sales targets, total marketing budget, marketing-mix allocation, pricing and marketing budget allocation to products.

Finally, the work specified in the plan must be implemented and controlled. A good plan provides for periodic checking and corrective action by different levels of management. In addition to annual plan marketing, management must carry out profitability control and strategic control.


 

MARKETING OBJECTIVES

MARKETING OBJECTIVES

Company
Objectives

Increase Return on Investment

 

Marketing
Objectives

Increase Return

Reduce Investment Base

Increase Advertising

Reduce Costs

 

Marketing
Strategy

Sell More

Increase Use

Increase Prices

 

Sales
Objectives

Sell more Basic Products

Sell more New Products

Cut Distribution

Match Products to Customer Needs

Sales
Strategy

Make Tangible Sales Plans & Customer Service Requirements

Study Customer Requirements

Advertising
Objectives

Make Advertising & Promotion Plans

Advertising
Strategy

Implement Advertising & Promotions



 

HISTORIC FINANCIAL INDUSTRY DATA

HISTORIC FINANCIAL INDUSTRY DATA

 Financial Definitions


 

MARKETING STRATEGY DEVELOPMENT FINANCIAL SCENARIOS

MARKETING STRATEGY DEVELOPMENT BALANCE SHEET FORECASTS


The MARKETING STRATEGY DEVELOPMENT FINANCIAL SCENARIOS BALANCE SHEET FORECASTS section gives a series of Balance Sheet Forecasts for the Company and the industry using a number of assumptions relating to the strategic marketing decisions available to the management of the Company.

The Balance sheet forecast given shows the effects of financial improvements which marketing Management is likely to recommend:

MARKETING STRATEGY DEVELOPMENT FINANCIAL SCENARIOS

  • Base Forecast : Best Market Scenario

  • Base Forecast : Median Market Scenario

  • Base Forecast : Worst Market Scenario

  • Marketing Expenditure

  • Market Segmentation

  • Distribution Channel Improvement

  • Export Sales Improvement

  • Fixed Marketing Cost Objectives

  • Variable Marketing Cost Objectives

  • General Marketing Process Cost Objectives

  • Distribution & Product Delivery Cost Objectives

  • Selling Cost Objectives

  • Advertising Cost Objectives

  • Promotional & Pricing Cost Objectives

  • Sales Cost Improvement

  • Promotional Expenditure

  • Target Markets Development

  • Product Positioning

  • Product Branding + Multi-branding Investment

  • Sales Personnel + Staff Improvement


Managers in the Company will, in both the short-term and the long-term, have vital decisions to make regarding the marketing improvements, margins and profitability and these decisions will need to be evaluated in light of the customers, markets, competitors, products, industry and internal factors. The scenarios given isolate a number of the most important factors and provide balance sheet forecasts for each of the scenarios.

The data provides a short and medium term forecast covering the next 6 years for each of the Forecast Financial and Operational items. The Financial and Operational Data sections show each of the items listed below in terms of forecast data and covers a period of the next 6 years.

 

 

Financial Comparisons: Scenarios

 

Target Company

Base Reference Industry

 

MEDIAN  FORECAST : Financials

MEDIAN  FORECAST : Margins & Ratios

BEST  FORECAST : Financials

BEST  FORECAST : Margins & Ratios

WORST  FORECAST : Financials

WORST  FORECAST : Margins & Ratios

MEDIAN  FORECAST : Financials

MEDIAN  FORECAST : Margins & Ratios

BEST  FORECAST : Financials

BEST  FORECAST : Margins & Ratios

WORST  FORECAST : Financials

WORST  FORECAST : Margins & Ratios

 


THE TARGET COMPANY FORECASTS

MARKETING EXPENDITURE : Financials

MARKETING EXPENDITURE : Margins & Ratios

MARKET SEGMENTATION : Financials

MARKET SEGMENTATION : Margins & Ratios

DISTRIBUTION CHANNEL IMPROVEMENT: Financials

DISTRIBUTION CHANNEL IMPROVEMENT: Margins & Ratios

EXPORT SALES IMPROVEMENT: Financials

EXPORT SALES IMPROVEMENT: Margins & Ratios

FIXED MARKETING Cost Objectives: Financials

FIXED MARKETING Cost Objectives: Margins & Ratios

VARIABLE MARKETING Cost Objectives: Financials

VARIABLE MARKETING Cost Objectives: Margins & Ratios

GENERAL MARKETING PROCESS Cost Objectives: Financials

GENERAL MARKETING PROCESS Cost Objectives: Margins & Ratios

DISTRIBUTION & PRODUCT DELIVERY Cost Objectives: Financials

DISTRIBUTION & PRODUCT DELIVERY Costs: Margins & Ratios

SELLING Cost Objectives: Financials

SELLING Cost Objectives: Margins & Ratios

ADVERTISING Cost Objectives: Financials

ADVERTISING Cost Objectives: Margins & Ratios

PROMOTIONAL & PRICING Cost Objectives: Financials

PROMOTIONAL & PRICING Cost Objectives: Margins & Ratios

SALES COST IMPROVEMENT: Financials

SALES COST IMPROVEMENT: Margins & Ratios

PROMOTIONAL EXPENDITURE : Financials

PROMOTIONAL EXPENDITURE : Margins & Ratios

TARGET MARKETS DEVELOPMENT : Financials

TARGET MARKETS DEVELOPMENT : Margins & Ratios

PRODUCT POSITIONING : Financials

PRODUCT POSITIONING : Margins & Ratios

PRODUCT BRANDING + MULTI-BRANDING Investment: Financials

PRODUCT BRANDING Investment: Margins & Ratios

SALES PERSONNEL + STAFF IMPROVEMENT: Financials

SALES PERSONNEL + STAFF IMPROVEMENT: Margins & Ratios


FORECAST FINANCIAL SCENARIOS

MARKETING EXPENDITURE : Financials

MARKETING EXPENDITURE : Margins & Ratios

MARKET SEGMENTATION : Financials

MARKET SEGMENTATION : Margins & Ratios

DISTRIBUTION CHANNEL IMPROVEMENT: Financials

DISTRIBUTION CHANNEL IMPROVEMENT: Margins & Ratios

EXPORT SALES IMPROVEMENT: Financials

EXPORT SALES IMPROVEMENT: Margins & Ratios

FIXED MARKETING Cost Objectives: Financials

FIXED MARKETING Cost Objectives: Margins & Ratios

VARIABLE MARKETING Cost Objectives: Financials

VARIABLE MARKETING Cost Objectives: Margins & Ratios

GENERAL MARKETING PROCESS Cost Objectives: Financials

GENERAL MARKETING PROCESS Cost Objectives: Margins & Ratios

DISTRIBUTION & PRODUCT DELIVERY Cost Objectives: Financials

DISTRIBUTION & PRODUCT DELIVERY Costs: Margins & Ratios

SELLING Cost Objectives: Financials

SELLING Cost Objectives: Margins & Ratios

ADVERTISING Cost Objectives: Financials

ADVERTISING Cost Objectives: Margins & Ratios

PROMOTIONAL & PRICING Cost Objectives: Financials

PROMOTIONAL & PRICING Cost Objectives: Margins & Ratios

SALES COST IMPROVEMENT: Financials

SALES COST IMPROVEMENT: Margins & Ratios

PROMOTIONAL EXPENDITURE : Financials

PROMOTIONAL EXPENDITURE : Margins & Ratios

TARGET MARKETS DEVELOPMENT : Financials

TARGET MARKETS DEVELOPMENT : Margins & Ratios

PRODUCT POSITIONING : Financials

PRODUCT POSITIONING : Margins & Ratios

PRODUCT BRANDING + MULTI-BRANDING Investment: Financials

PRODUCT BRANDING Investment: Margins & Ratios

SALES PERSONNEL + STAFF IMPROVEMENT: Financials

SALES PERSONNEL + STAFF IMPROVEMENT: Margins & Ratios

 

 Financial Definitions

 


 

2

Markets & Revenues:

 

BASE ECONOMIC SCENARIOS

 

BASE REFERENCE PRODUCTS COVERED:

 

**** This report covers all the products or brands which were previous, are currently, or will potentially be in the future, important to the Company.

 

 



 

There are four basic issues to investigate when considering the marketing environment for the Company and the industry.

  •    Market Growth

  •    Market Structure

  •    Market/s Serviced

  •    Customer & End User Factors


Market Growth (both short-term and medium term) by each Product and Market Area is quantified below, as is the historic market data (See: HISTORIC MARKET VALUES).

The Market Structure for the industry is very critical for profitability. The nature of the market, the location of the Market-Place, the customer base and the supplier structure is exhaustively covered.

Market/s Serviced is the term used to denote the function between the product/s and services offered by the Company and the industry and the particular market sector which the marketing effort reaches. The Market Serviced is the true market for the Company and the industry in terms of product/s and services.


THE TRADING AREA

The Market analysis provides data in terms of the maximum operational trading cell areas of the Company. This being the regions, countries or states which form the effective competitive and market environment for the Company. Whether or not the Company currently operates in the various areas covered is immaterial as the effects of the Market-Place exist nonetheless.


BASIS OF MARKET COVERAGE

Reports give coverage of all the Major Products and Markets supplied and serviced by the Company and the base reference industry. The reported Target Markets are those which are perceived to be the most important area for the Company in the Medium and Long Term.

In that this report is conceived as Market & Corporate documents it is felt important to concentrate only on those markets which represent the corner-stones of the industry customer bases and not become involved in any peripheral activities of the industry.

Market coverage is designed to encompass not only the existing markets for the Company, but also areas of market expansion, product segmentation, parallel markets, et al. By the same token the data excludes those market areas or sectors which are unavailable to the Company for whatever technical or commercial reasons.

 

The MARKET figures given in this section are notated as DSP (5) and the notations indicated signify the following:-

(1) = VALUE GIVEN AT INDUSTRY SHIPMENT VALUES OR PRICES
(2) = VALUE GIVEN AT WHOLESALE VALUES OR PRICES
(3) = VALUE GIVEN AT RETAIL VALUES OR PRICES
(4) = VALUE GIVEN AT PRICE PAID BY END USERS as appropriate
(5) = VALUE GIVEN AT ACTUAL PRICE PAID discounted as appropriate

UNITS = Units times the multiplier given in brackets, E.g. ( '000 ) = x 1000 Units

 

TERMS USED IN THIS REPORT

MSP: - Supplier or Producer Prices
WSP: - Wholesale or Distributors Sale Prices.
RSP: - Retail Sale Prices.
CSP: - The price at End User or final distribution level.
DSP: - The price actually paid net of discounting.

TURNOVER: Turnover is sales plus investment income, grants and other funds received, income from disposals and other sources.

 

VALUE TERMS AND VOLUME TERMS

The standard report generated usually provides data in VALUE terms. This is by far the most popular (as demanded by readers) measure of commercial activity. We can also provide data in VOLUME or UNIT terms and this can be specified when the report is ordered. Obviously some reports do not lend themselves to Volume quantification and thus availability of this data will vary according to the report and the database.

 

 

Market & Revenue Comparisons: Base Macro Economic Forecasts

 

Target Company

Base Reference Market

 

MEDIAN ECONOMIC FORECAST Scenario Revenue Forecast

MEDIAN ECONOMIC FORECAST Scenario Product Share Forecast

BEST ECONOMIC FORECAST Scenario Revenue Forecast

BEST ECONOMIC FORECAST Scenario Product Share Forecast

WORST ECONOMIC FORECAST Scenario Revenue Forecast

WORST ECONOMIC FORECAST Scenario Product Share Forecast

MEDIAN ECONOMIC FORECAST Scenario Market Forecast

MEDIAN ECONOMIC FORECAST Scenario Product Share Forecast

BEST ECONOMIC FORECAST Scenario Market Forecast

BEST ECONOMIC FORECAST Scenario Product Share Forecast

WORST ECONOMIC FORECAST Scenario Market Forecast

WORST ECONOMIC FORECAST Scenario Product Share Forecast

 Market Definitions

 


3

World Markets:

 


CURRENCY DATA:  The currency figures given in this report are in U.S. Dollars.
If the Windows Regional Settings on your computer is set to a non-U.S. setting then the currency symbol ($) may appear in the local currency (€, £, ¥, etc.).
Either reset your Regional settings, or alternatively read all currency figures in this report as being U.S. Dollars (US$).

 

 Market Definitions

 


4

Market & Industry Geography:

 

Trade Cell Geography:

 

The Trade Cell geographic comparisons between the Company and the Base Reference country provides the following information. Similar data is available, on request, for all the national world markets.

 

The Company

Base Reference Country

Significant Company Markets
Company Trading Area 1
Company Trading Area 2
Company Trading Area 3
Company Trading Area 4
Company Trading Area 5
Company Trading Area 6
Company Trading Area 7
Company Trading Area 8
Company Trading Area 9
Company Trading Area 10
Company Trading Area 11
Company Trading Area 12
Company Trading Area 13
Company Trading Area 14
Company Trading Area 15
Major Trade Cell Markets
Industry Trade Cell Market / Sector 1
Industry Trade Cell Market / Sector 2
Industry Trade Cell Market / Sector 3
Industry Trade Cell Market / Sector 4
Industry Trade Cell Market / Sector 5
Industry Trade Cell Market / Sector 6
Industry Trade Cell Market / Sector 7
Industry Trade Cell Market / Sector 8
Industry Trade Cell Market / Sector 9
Industry Trade Cell Market / Sector 10
Industry Trade Cell Market / Sector 11
Industry Trade Cell Market / Sector 12
Industry Trade Cell Market / Sector 13
Industry Trade Cell Market / Sector 14
Industry Trade Cell Market / Sector 15


Major City Market Geography:

 

The Major City Market geographic comparisons between the Company and the Base Reference country provides the following information. Similar data is available, on request, for all the national world markets.

The following section provides a guide to the distribution of the Market. The data given represents a percentage of the total product value consumed in the various cities and towns of the base reference country.

It should be remembered that these figures do not take central buying or in-house sales and distribution into account, but provides data which is based on the Surveys of End Users and where possible from data provided by the Surveys of Distributors.

The data given is of course primarily intended for use when planning sales and distribution coverage and for other promotional activities and to allow clients to formulate salesforce and distribution tactics whereby salesmen, distributors, service and distribution depots, after-sales services, et cetera can be most effectively sited to ensure optimum coverage of the customer base.

Readers should also consider the Distributors Distribution and the Key Cities when planning for sales and distribution coverage for Products & Services in the country.

 

Target Company

Base Reference Country

The MARKET by MAJOR CITY

MARKET -DISTRIBUTION - EMPLOYMENT

The MARKET by MAJOR CITY

MARKET -DISTRIBUTION - EMPLOYMENT

Major City 1
Major City 2
Major City 3
Major City 4
Major City 5
Major City 6
Major City 7
Major City 8
Major City 9
Major City 10
Major City 11
Major City 12
Major City 13
Major City 14
Major City 15
Major City 16
Major City 17
Major City 18
Major City 19
Major City 20
Major City 21
Major City 22
Major City 23
Major City 24
Major City 25
Major City 26
Major City 27
Major City 28
Major City 29
Major City 30
Major City 1
Major City 2
Major City 3
Major City 4
Major City 5
Major City 6
Major City 7
Major City 8
Major City 9
Major City 10
Major City 11
Major City 12
Major City 13
Major City 14
Major City 15
Major City 16
Major City 17
Major City 18
Major City 19
Major City 20
Major City 21
Major City 22
Major City 23
Major City 24
Major City 25
Major City 26
Major City 27
Major City 28
Major City 29
Major City 30

 

Key Cities:


Within the country there are certain Key Cities which are vital to the distribution and servicing of Products & Services. The following map gives these KEY CITIES and these are ranked according to their relative importance in the country. Any company wishing to enter the national markets should consider the establishment of sales and distribution in relation to these KEY CITIES as they reflect the potential market logistics for Products & Services.

 

Target Company

Base Reference Country

MAJOR CITIES

MAJOR CITIES

 

TOWNS & CITIES COVERED INDIVIDUALLY IN THE  “COUNTRY & CITIES” EDITION OF THIS DATABASE


Major City Customer Base Geography:

 

The Major City Customer Base geographic comparisons between the Company and the Base Reference country provides the following information. Similar data is available, on request, for all the national world markets.

The following section provides a guide to the distribution of End Users. The data given represents a percentage of the total product value consumed in the various cities and towns of the country.

It should be remembered that these figures do not take central buying or in-house sales and distribution into account, but provides data which is based on the Surveys of End Users and where possible from data provided by the Surveys of Distributors.

The data given is of course primarily intended for use when planning sales and distribution coverage and for other promotional activities and to allow clients to formulate salesforce and distribution tactics whereby salesmen, distributors, service and distribution depots, after-sales services, et cetera can be most effectively sited to ensure optimum coverage of the customer base.

Readers should also consider the Distributors Distribution and the Key Cities when planning for sales and distribution coverage for Products & Services in the country.

 



Distribution & Industry Employment Geography:

 

The Distribution & Industry Employment geographic comparisons between the Company and the Base Reference country provides the following information. Similar data is available, on request, for all the national world markets.

 

DISTRIBUTION OF EMPLOYMENT


The following gives the percentages of total employees involved in Products & Services in each of the cities or towns of the country. The data given covers manufacturing, production, marketing and distribution channel employees.

 

DISTRIBUTION

The Surveys of Suppliers and Distributors reveal the geographic distribution channels for Products & Services.

In countries where the Distribution Channels are radically at variance with the Distribution of the Customer Base as seen above, or the Distribution Channels of the Company, there are obviously logistic problems in the supply and servicing of the customers and this may represent an opportunity for the Company, or indeed for companies entering that particular national market, to provide a more superior service and thereby gain market share.

It is thus possible to analyze the distribution of the Customer Base (being the Market) and the distribution of the existing suppliers in order to evaluate whether or not customers are receiving adequate service or product distribution.


Geographic Market Environment Factors:

 

The geographic Market Environment comparisons between the Company and the Base Reference country provides the following information. Similar data is available, on request, for all the national world markets.

 

MAJOR CITY: CRITICAL FACTORS + PARAMETERS

Target Company

Base Reference Country

MAJOR CITY - CRITICAL FACTOR + PARAMETERS

MAJOR CITY - CRITICAL FACTOR + PARAMETERS

 Critical Factors Definitions

 

MAJOR CITY CRITICAL FACTORS + PARAMETERS

Target Company

Base Reference Country

MAJOR CITY - CRITICAL FACTOR + PARAMETERS

MAJOR CITY - CRITICAL FACTOR + PARAMETERS

 Critical Factors Definitions

 

MAJOR CITY: PRODUCT + MARKET SEGMENTATION

Target Company

Base Reference Country

MAJOR CITY - PRODUCT + MARKET SEGMENTATION

MAJOR CITY - PRODUCT + MARKET SEGMENTATION

 Segmentation Definitions

 

PRODUCT LAUNCH FACTORS: MAJOR CITY

Target Company

Base Reference Country

PRODUCT LAUNCH FACTORS - MAJOR CITY

PRODUCT LAUNCH FACTORS - MAJOR CITY

 Product Launch Definitions

 

MAJOR CITY: SHORT-TERM TRADING CONSIDERATIONS

Target Company

Base Reference Country

MAJOR CITY ENVIRONMENT ANALYSIS

MAJOR CITY ENVIRONMENT ANALYSIS

 Definitions

 

MAJOR CITY: SHORT-TERM TRADING ISSUES

Target Company

Base Reference Country

MAJOR CITY STANDING ANALYSIS

MAJOR CITY STANDING ANALYSIS

 Definitions


 


5

Product Marketing Factors:

 

PRODUCT MARKETING FACTORS


PRODUCT MARKETING FACTORS

CRITICAL FACTORS + PARAMETERS


It is important to establish the compatibility between the Company and the Product, Marketing, Supplier, Distribution/Customer Interface and Customer factors and parameters in each of the topics investigated in this report.

The Surveys of Suppliers, Distributors and End Users and various other sources have identified a number of critical or potentially critical factors and parameters for the Company. Most of these factors cannot be evaluated on a monetary scale and their measurements are not comparable, thus another mode of analysis and evaluation must be found.

In order to aggregate the separate factors into a single value or coherent series of values, which will indicate areas of concern or potential opportunity, one must convert them into a value scale. This can be done by assigning value points to each critical or potentially critical factor through a scale of judgments which are based on actual past experience of the product, the marketing and the customers concerned. The relative importance of each factor is indicated by the weights assigned. A factor's rating value is multiplied by its weight to yield its critical value.

Obviously such an analysis can assist companies in evaluating both areas which might produce problems for the marketing of the product and also areas of opportunity which may be exploited when marketing or distributing Products & Services in each of the countries concerned.

The techniques used here are very similar to those used in new product evaluation and screening, indeed subscribers to this report frequently use the weighting and conclusions found here when evaluating new products and markets. The main purpose of these analyses are of course to attempt to provide a rational and objective basis with which to compare and evaluate the factors and parameters critical to the provision of Products & Services in the countries covered.

The basis of the analysis is the use of value judgments to assign the rating value. This is done through a scale:-

AVERAGE VALUES EQUAL

HIGHLY

CRITICAL

CRITICAL

UNCERTAIN

NOT

CRITICAL

MINIMAL

80

40

20

10

5

[Readers wishing to apply this analysis to defined products and markets should amend both the Value scale and the Weight to suit the product. It should be remembered that once a company has decided upon a Value scale and a Weight scale this should be retained and not changed for other products. This is because it is important to be able to relate one product or market opportunity to another and thus scales must remain constant if a valid comparison is to be made. Subscribers wishing to undertake such analyses will find in the rear of this report a blank set of analysis forms which may be photocopied and used when evaluating current or new products or markets].


In addition to the scale of value judgments the results are applied to a standard weighting for each factor and parameter. These weights are based on past experience of the product and the marketing environment in relation to the individual factors and parameters analyzed.

The Value judgments are multiplied by the Weights to give the cell value, thus:-

   Value x Weight = Cell value

For example,

   80 x 1.1 = 88


The figures given in the tables below are individual "VALUE" and "WEIGHT" figures for the cell and are not the calculated "CELL VALUES". This calculation should be done by the reader.

The evaluation of any particular critical factor or parameter of corporate activity will allow readers to gain an insight into the problems and opportunities of the Company and the market.

 

 o

o

o

C

 o

 

E

 +

o

L

L

o

 o

 

o

V

o

A

o

L

o

U

o

E

o

 x

o

 o

o

o

o

RELATIVE IMPORTANCE TO SALES VOLUME MARKET SHARE & PROFITABILITY

 

 

CRITICAL FACTORS + PARAMETERS

Target Company

Base Reference Country

CRITICAL FACTORS

CRITICAL FACTORS

 

PRODUCT - CRITICAL FACTORS + PARAMETERS

Target Company

Base Reference Country

PRODUCT - CRITICAL FACTORS+ PARAMETERS

PRODUCT - CRITICAL FACTORS+ PARAMETERS

 

PRODUCT CRITICAL FACTORS + PARAMETERS

Target Company

Base Reference Country

PRODUCT - CRITICAL FACTOR+ PARAMETERS

PRODUCT - CRITICAL FACTOR+ PARAMETERS

 

TRADE CELL - CRITICAL FACTORS + PARAMETERS

Target Company

Base Reference Country

TRADE CELL - CRITICAL FACTOR+ PARAMETERS

TRADE CELL - CRITICAL FACTOR+ PARAMETERS

 

TRADE CELL CRITICAL FACTORS + PARAMETERS

Target Company

Base Reference Country

TRADE CELL - CRITICAL FACTOR + PARAMETERS

TRADE CELL - CRITICAL FACTOR + PARAMETERS

 

OPERATIONS - CRITICAL FACTORS + PARAMETERS

Target Company

Base Reference Country

OPERATIONS - CRITICAL FACTOR+ PARAMETERS

OPERATIONS - CRITICAL FACTOR+ PARAMETERS

 

OPERATIONS CRITICAL FACTORS + PARAMETERS

Target Company

Base Reference Country

OPERATIONS - CRITICAL FACTOR+ PARAMETERS

OPERATIONS - CRITICAL FACTOR+ PARAMETERS

 

COMPETITORS - CRITICAL FACTORS + PARAMETERS

Target Company

Base Reference Country

COMPETITORS - CRITICAL FACTOR+ PARAMETERS

COMPETITORS - CRITICAL FACTOR+ PARAMETERS

 

COMPETITOR CRITICAL FACTORS + PARAMETERS

Target Company

Base Reference Country

COMPETITORS - CRITICAL FACTOR+ PARAMETERS

COMPETITORS - CRITICAL FACTOR+ PARAMETERS

 

MAJOR CITY - CRITICAL FACTORS + PARAMETERS

Target Company

Base Reference Country

MAJOR CITY - CRITICAL FACTOR+ PARAMETERS

MAJOR CITY - CRITICAL FACTOR+ PARAMETERS

 

MAJOR CITY CRITICAL FACTORS + PARAMETERS

Target Company

Base Reference Country

MAJOR CITY - CRITICAL FACTOR+ PARAMETERS

MAJOR CITY - CRITICAL FACTOR+ PARAMETERS

 

 Critical Factors Definitions



MARKET & PRODUCT SEGMENTATION


It is suggested that the reader consider the following Product and Market Segmentations for the Company products and services. These segmentations will help the companies in the marketplace to increase the attractiveness of their Products & Services and thereby assist market penetration.

  1. MARKET SEGMENTATION THROUGH PRICING - LOWER PRICE: In countries where there is demand for a Products & Services at a price lower than the average retail price it may be possible for companies to offer Products & Services End Users a lower (or discount) priced product, probably under a separate brand name, in order to cover the market sector. The attractiveness of such segmentation would obviously depend on company marginal costs in relation to the probable marginal revenue which may be generated.

  2. MARKET SEGMENTATION THROUGH PRICING - HIGHER PRICE: In some countries a higher than average price may be associated with better delivery, services, et cetera, and it may be possible for companies to capitalize on this by offering Products & Services End Users higher priced products, probably under a separate brand name, in order to cover such market sectors. Obviously it is usually necessary to provide customers with some tangible benefit in return for a higher price. This benefit may be priority delivery and service, better back-up services, et cetera.

  3. PRODUCT SEGMENTATION THROUGH QUALITY - HIGHER QUALITY: Product segmentation through the provision of better quality products is common in most markets. The degree of quality segmentation and its acceptance depends on individual national markets, the prevailing circumstances within that market and the general situation in regard to Products & Services.

  4. PRODUCT SEGMENTATION THROUGH - LOWER QUALITY: Product segmentation through the downward variation of Products & Services quality is also possible. Certain markets and market sectors will be attracted to a down-market product if a reduced price is the benefit.

  5. MARKET SEGMENTATION THROUGH AVAILABILITY - GREATER AVAILABILITY: Often national markets or market sectors will be willing to pay a higher Products & Services End User price for greater availability. End users in certain markets (with a limited supplier base) will inevitably have difficulty in obtaining supplies and in these markets it will be possible for companies to offer greater availability of Products & Services and in return charge a price premium.

  6. MARKET SEGMENTATION THROUGH AVAILABILITY - REDUCED AVAILABILITY: Frequently national markets or market sectors will be attracted by discounted Products & Services End User price for reduced availability. Some buyers will be able to hold high stock and inventory levels and in these circumstances will be attracted to obtaining a price discount for reduced product availability through less frequent delivery and ordering.

  7. PRODUCT SEGMENTATION THROUGH PERFORMANCE VARIANCES: Specialist market sectors and end user application sectors will often have differing needs in terms of Products & Services performance and it will be possible for companies to exploit this and thereby segment the market. The need for Products & Services Performance segmentation of this sort will depend on the complexity of the national market in question, the broadness of the end user sectors and the variability of the applications in which Products & Services are being used. Better product performance will command a price premium and vice versa.

  8. PRODUCT SEGMENTATION THROUGH TECHNOLOGICAL + TECHNICAL FACTORS: Particular end user application sectors will have differing needs in terms of Products & Services technology and it will be possible for companies to exploit this and thereby segment the market. The need for Products & Services Technological and Technical segmentation of this sort will depend on the needs of the national market in question, the end user application sectors and the various national technical standards for Products & Services. Better product technology or technically superior products will command a price premium and vice versa.

  9. PRODUCT SEGMENTATION THROUGH WARRANTY VARIANCES: Many market sectors and end user application sectors will have differing needs in terms of Products & Services warranty and it will be possible for companies to use this to segment the market. The need for Products & Services warranty segmentation of this sort will depend on the circumstances of the national market in question, the warranty needs and expectations of the end user sectors and the sort of applications in which Products & Services are being used. Better product warranty, periods of warranty or warranty terms will command a price premium and vice versa.

  10. PRODUCT SEGMENTATION THROUGH SERVICE FACTOR VARIANCES: Certain market sectors and end user application sectors will have differing needs in terms of product services (in terms of technical, advisory, after-sales and other related services) and it will be possible for companies to thereby segment the market. Service factor segmentation of this sort will depend on the perceptions of the national market in question, the service needs and expectations of the end user sectors and the sort of applications in which Products & Services are being used. Better services or terms of service will command a price premium and vice versa.

  11. PRODUCT SEGMENTATION THROUGH PRODUCT FRAGMENTATION: Specialist market sectors and end user application sectors will sometimes be attracted by the Fragmentation of Products & Services offered in terms of physical variations of the product, the provision of products which allow for the possibility of end users adding value or undertaking some of the production process and it may be possible for companies to thereby segment the market. Product Fragmentation of this sort will depend on the capabilities and capacities of the end users in question, the product needs and expectations of the end user sectors and the sort of applications in which Products & Services are being used.

  12. MARKET SEGMENTATION THROUGH CONVENIENCE FACTORS: Certain national markets or market sectors will be willing to pay a higher Products & Services End User price for the so called 'Convenience Factors'. End users in certain markets will inevitably find difficulty and inconvenience with Products & Services suppliers and supplies and in these markets it will be possible for companies to offer better convenience in terms of ordering procedures, order processing, credit period offered, delivery services and frequency, et cetera of Products & Services and in return charge a price premium.

  13. MARKET SEGMENTATION THROUGH DISTRIBUTION FACTORS: Sometimes geographically particular national markets or market sectors will be willing to pay a higher Products & Services End User price for better product distribution factors. End users in certain markets will inevitably have difficulty in Products & Services distribution factors and in these markets it will be possible for companies to offer better distribution (both geographic and in terms of distribution frequency, et cetera) of Products & Services and in return charge a price premium.

  14. MARKET SEGMENTATION THROUGH CUSTOMER FACTORS: Frequently certain national markets or market sectors will be willing to pay a higher Products & Services End User price for better or improved customer factors. End users in certain markets will be willing to pay for better customer servicing through the provision of up-market or otherwise unique customer services and thus it may be possible for companies to offer these customer services and in return charge a price premium.

  15. MARKET SEGMENTATION THROUGH PSYCHOGRAPHICS: Some national markets or market sectors will be effected and thereby segmented through certain Psychographic factors. End users in certain markets will have certain perceptions and attitudes unique to that market. For instance, an example of Psychographics is the phenomenon of product chauvinism whereby end users in certain national markets will usually give preference to products produced in their own country. This factor usually represents a problem, but can also be an area of potential opportunity for astute suppliers to exploit.

  16. MARKET SEGMENTATION THROUGH BRANDING: National markets or market sectors can be further segmented by the introduction of Products & Services branding in order to achieve pricing differentials or other tactical marketing objectives. Different end users will inevitably have differing perceptions, attitudes and needs and in these circumstances it will be possible for companies to offer Products & Services branding and thereby ensure a more effective market and product segmentation without unduly affecting existing Products & Services.

  17. MARKET SEGMENTATION THROUGH MULTI-BRANDING: Multi-branding is a vehicle whereby a supplier can introduce even more market segmentation and also increase or improve the distribution set-up through allowing the multiple branding of products. In certain markets this will be a very effective way to cater for a broad range of end users, market or application sectors.

  18. MARKET SEGMENTATION THROUGH MARKET STRETCHING: Market Stretching can often extend coverage to new markets or market sectors by the introduction of Products & Services changes in order to achieve product variations or differentials. Different end users will inevitably have differing perceptions, attitudes and needs and in these circumstances it will be possible for companies to offer Products & Services variations and thereby attract purchasers from new markets. This will not unduly affecting existing Products & Services.

 

PRODUCT + MARKET SEGMENTATION

Target Company

Base Reference Country

PRODUCT + MARKET SEGMENTATION

PRODUCT + MARKET SEGMENTATION

 

TRADE CELL - PRODUCT + MARKET SEGMENTATION

Target Company

Base Reference Country

TRADE CELL - PRODUCT + MARKET SEGMENTATION

TRADE CELL - PRODUCT + MARKET SEGMENTATION

 

OPERATIONS - PRODUCT + MARKET SEGMENTATION

Target Company

Base Reference Country

OPERATIONS - PRODUCT + MARKET SEGMENTATION

OPERATIONS - PRODUCT + MARKET SEGMENTATION

 

COMPETITOR - PRODUCT + MARKET SEGMENTATION

Target Company

Base Reference Country

COMPETITOR - PRODUCT + MARKET SEGMENTATION

COMPETITOR - PRODUCT + MARKET SEGMENTATION

 

MAJOR CITY - PRODUCT + MARKET SEGMENTATION

Target Company

Base Reference Country

MAJOR CITY - PRODUCT + MARKET SEGMENTATION

MAJOR CITY - PRODUCT + MARKET SEGMENTATION

 

 Segmentation Definitions



PRODUCT LAUNCH FACTORS


The data given below is based on actual research into the industry launches in the countries covered. Product launches include actual new products as well as product or technology innovations and product substitutions.


ADOPTION RATES:

Product Launch Adoption Rates were identified during the Surveys of End Users in the countries covered. Adoption rate is the term used to denote the likely level of End Users adoption of new products and services. Thus when interviewed a percentage of End Users stated that they were "likely" or "very likely" to purchase (i.e. adopt) new product if introduced to the market. This percentage forms the Adoption Rate.


CONVERSION RATIOS:

In addition to the Adoption Rates, it is also necessary to analyze the Conversion Ratio, i.e. the ratio at which potential new product adopters are converted into buyers.

Not all End Users who stated that they were likely to adopt new products will actually do so; thus this ratio is dependent on all the marketing factors e.g. the distribution channel, numbers of Distributors, sales promotion factors, et cetera, as isolated in the following pages on product launches. These ratios are based on past experience of product launches.

In conjunction with the Product Launch Adoption Rates one can use the Conversion Ratio to determine the actual level of likely Product Launch sales.

Thus the following calculation will provide the likely level of sales at Product Launch:-

 

 

 

 

(

 

AR

 

1

 

)

 

 

PLS

=

U x


x


 

 

 

 

10

 

CR

 

where,

 

PLS

=

Product Launch Sales

 

U

=

Total Universe

 

AR

=

Adoption Rate

 

CR

=

Conversion Ratio

THE RATIOS GIVEN ARE 1:X




SALES GROWTH:

It is possible to isolate likely sales growth data for Products & Services. The percentages given below are the likely average annual sales growth for product launches in the countries concerned. The data is based on current and forecasted economic conditions.

PRODUCT LAUNCH DATA:

In addition to the normal or usual industry costs, during the launch of a product greater costs are experienced. These costs are shown separately in the following tables.

It is possible to isolate these costs based on past experience of product launches.

PRODUCT LAUNCH FACTORS - PRODUCTS

Target Company

Base Reference Country

PRODUCT LAUNCH

PRODUCT LAUNCH

 

PRODUCT LAUNCH FACTORS - TRADE CELL

Target Company

Base Reference Country

PRODUCT LAUNCH FACTORS - TRADE CELL

PRODUCT LAUNCH FACTORS - TRADE CELL

 

PRODUCT LAUNCH FACTORS - OPERATIONS

Target Company

Base Reference Country

PRODUCT LAUNCH FACTORS - OPERATIONS

PRODUCT LAUNCH FACTORS - OPERATIONS

 

PRODUCT LAUNCH FACTORS - COMPETITOR

Target Company

Base Reference Country

PRODUCT LAUNCH FACTORS - COMPETITOR

PRODUCT LAUNCH FACTORS - COMPETITOR

 

PRODUCT LAUNCH FACTORS

Target Company

Base Reference Country

PRODUCT LAUNCH FACTORS

PRODUCT LAUNCH FACTORS

 

PRODUCT LAUNCH FACTORS - MAJOR CITY

Target Company

Base Reference Country

PRODUCT LAUNCH FACTORS - MAJOR CITY

PRODUCT LAUNCH FACTORS - MAJOR CITY

 

 

 Product Launch Definitions



MARKETING COSTS


This section covers Products & Services industry costs under the following component headings:-

  1. SALES & SELLING COSTS
    The table below gives the average sales and selling costs ( as a % of Turnover OR MSP) for Products & Services. These costs include sales personnel

  2. DISTRIBUTION COSTS
    The table below gives the average distribution costs ( as a % of Turnover or MSP ) for Products & Services. Distribution Costs also include PHYSICAL Handling, Processing and other related costs, but exclude order administration or accounts processing or handling costs.

  3. ADVERTISING COSTS
    The following table provides average ADVERTISING costs ( as a % of Turnover or MSP ) for Products & Services. Advertising Costs include all promotional expenditure, but excludes cost of sales personnel (i.e. retail, missionary or other sales personnel).

  4. AFTER-SALES COSTS
    The following table provides average AFTER-SALES costs ( as a % of Turnover or MSP ) for Products & Services. After-Sales Costs include all costs incurred after the point of sale (excluding credit and collection costs) which are not chargeable to, or recoupable from, the customer. These costs also include goodwill items such as after-sales visits to distributors or customers.

  5. WARRANTY COSTS
    The table covering average AFTER-SALES costs ( as a % of Turnover or MSP ) for Products & Services also covers WARRANTY COSTS. These costs include all costs incurred after the point of sale (excluding credit and collection costs) which are not chargeable to, or recoupable from, the customer. These costs also include goodwill items such as after-sales visits to distributors or customers.

    Warranty Costs are composed:-

1.

The ITEM COST, i.e. the actual costs of replacing the faulty or reject product

2.

The COST FACTOR, i.e. the administrative, handling, marketing and other costs involved in handling returns, rejects and warranties.

3.

The WARRANTY COST, i.e. the total cost of warranties. This is the figure given below.

4.

TOTAL AFTER-SALES COSTS

 

The following tables provides average marketing costs ( as a % of MSP ) for Products & Services.

 
NOTES: The costs isolated below represent the industry average and cover the costs of companies in the industry, as well as subsidiaries and other marketing companies or organizations in each of the countries concerned.

The figures given indicate an annual average by year on market and should not be confused with the product launch figures given. The definitions for these sets of figures are not directly comparable.

MSP: Denotes the Suppliers, Manufacturers or Producers Selling Price or, in the case of non-manufacturing sales and services, the overall turnover.

 

 

PRODUCT MARKETING FINANCIAL DATA

 

 

HISTORIC MARKETING DATA

Base Reference Country

HISTORIC MARKETING DATA

 

PRODUCT LAUNCH MARKETING COSTS

Target Company

Base Reference Country

PRODUCT LAUNCH MARKETING DATA

PRODUCT LAUNCH MARKETING DATA

 

PRODUCT LAUNCH MARKETING RATIOS

Target Company

Base Reference Country

PRODUCT LAUNCH MARKETING RATIOS

PRODUCT LAUNCH MARKETING RATIOS

 

 Financial Definitions


HISTORIC FINANCIAL INDUSTRY DATA

HISTORIC FINANCIAL INDUSTRY DATA

 Financial Definitions



PRODUCT MARKETING FINANCIAL SCENARIOS

PRODUCT MARKETING FINANCIAL BALANCE SHEET FORECASTS


The PRODUCT MARKETING FINANCIAL SCENARIOS BALANCE SHEET FORECASTS section gives a series of Forecasts for the Company and the industry using a number of assumptions relating to the marketing decisions available to the management of the Company.

The Balance sheet forecast given shows the effects of marketing changes or improvements which management is likely to recommend:

PRODUCT MARKETING FINANCIAL SCENARIOS

  • Base Forecast : Median Market Scenario

  • Marketing Expenditure

  • New Product Development

  • Market Segmentation

  • Distribution Channel Improvement

  • Price Cutting Effect

  • Price Increase Effect

  • Quality Improvement

  • Target Markets Development

  • Product Branding + Multi-branding Investment

  • New Product & New Technology Cost Scenarios

  • Product Quality Improvement

  • Customer Handling Improvements


Managers in the Company will, in both the short-term and the long-term, have vital decisions to make regarding the marketing improvements, margins and profitability and these decisions will need to be evaluated in light of the customers, markets, competitors, products, industry and internal factors. The scenarios given isolate a number of the most important factors and provide balance sheet forecasts for each of the scenarios.

 

Financial Comparisons: Scenarios

 

Target Company

Base Reference Industry

 

MEDIAN  FORECAST : Financials

MEDIAN  FORECAST : Margins & Ratios

MEDIAN  FORECAST : Financials

MEDIAN  FORECAST : Margins & Ratios

 


THE TARGET COMPANY FORECASTS

MARKETING EXPENDITURE : Financials

MARKETING EXPENDITURE : Margins & Ratios

NEW PRODUCT DEVELOPMENT : Financials

NEW PRODUCT DEVELOPMENT : Margins & Ratios

MARKET SEGMENTATION : Financials

MARKET SEGMENTATION : Margins & Ratios

DISTRIBUTION CHANNEL IMPROVEMENT: Financials

DISTRIBUTION CHANNEL IMPROVEMENT: Margins & Ratios

SHORT-TERM PRICE CUTTING EFFECT : Financials

SHORT-TERM PRICE CUTTING EFFECT : Margins & Ratios

SHORT-TERM PRICE INCREASE EFFECT : Financials

SHORT-TERM PRICE INCREASE EFFECT : Margins & Ratios

QUALITY IMPROVEMENT: Financials

QUALITY IMPROVEMENT: Margins & Ratios

TARGET MARKETS DEVELOPMENT : Financials

TARGET MARKETS DEVELOPMENT : Margins & Ratios

PRODUCT BRANDING + MULTI-BRANDING Investment: Financials

PRODUCT BRANDING Investment: Margins & Ratios

NEW PRODUCT & NEW TECHNOLOGY COST Scenarios: Financials

NEW PRODUCT & NEW TECHNOLOGY COST: Margins & Ratios

PRODUCT QUALITY IMPROVEMENT: Financials

PRODUCT QUALITY IMPROVEMENT: Margins & Ratios

CUSTOMER HANDLING IMPROVEMENTS : Financials

CUSTOMER HANDLING IMPROVEMENTS : Margins & Ratios


FORECAST FINANCIAL SCENARIOS

MARKETING EXPENDITURE : Financials

MARKETING EXPENDITURE : Margins & Ratios

NEW PRODUCT DEVELOPMENT : Financials

NEW PRODUCT DEVELOPMENT : Margins & Ratios

MARKET SEGMENTATION : Financials

MARKET SEGMENTATION : Margins & Ratios

DISTRIBUTION CHANNEL IMPROVEMENT: Financials

DISTRIBUTION CHANNEL IMPROVEMENT: Margins & Ratios

SHORT-TERM PRICE CUTTING EFFECT : Financials

SHORT-TERM PRICE CUTTING EFFECT : Margins & Ratios

SHORT-TERM PRICE INCREASE EFFECT : Financials

SHORT-TERM PRICE INCREASE EFFECT : Margins & Ratios

QUALITY IMPROVEMENT: Financials

QUALITY IMPROVEMENT: Margins & Ratios

TARGET MARKETS DEVELOPMENT : Financials

TARGET MARKETS DEVELOPMENT : Margins & Ratios

PRODUCT BRANDING + MULTI-BRANDING Investment: Financials

PRODUCT BRANDING Investment: Margins & Ratios

NEW PRODUCT & NEW TECHNOLOGY COST Scenarios: Financials

NEW PRODUCT & NEW TECHNOLOGY COST: Margins & Ratios

PRODUCT QUALITY IMPROVEMENT: Financials

PRODUCT QUALITY IMPROVEMENT: Margins & Ratios

CUSTOMER HANDLING IMPROVEMENTS : Financials

CUSTOMER HANDLING IMPROVEMENTS : Margins & Ratios

 

 Financial Definitions

 


 


6

Promotional Mix:

 

PROMOTIONAL MIX


Promotion is one of the four major elements of the marketing mix. Promotion is the company's attempt to stimulate sales by directing persuasive communications to the buyers. The instruments of promotion - advertising, personal selling, sales promotion, and publicity - have separate and overlapping capabilities, and their effective co-ordination requires careful definition of communication goals.

The promotion model describes the relative characteristics and properties of the four forms of promotion - advertising, personal selling, publicity, and sales promotion. The firm seeks to blend these elements into an optimal promotion mix.

The pure theory calls for using these instruments up to the point where their marginal productivities are equal. Although consumer marketers appear to underplay personal selling and industrial marketers underplay advertising, these instruments have distinct contributions to make in any marketing programme that involves the integrated communications concept.

The Company need to urgently address their promotional mix, which describes the array of tools available to the marketing management whose major role is promotional activity. Excluded are the marketing-mix elements of product, price, and place because, while they have some persuasive effects, their major role is not one of persuading potential customers.

Below is a typical list the major promotional tools, or promotools. Examples of promotools:-

Catalogues

Contests 

Corporate identification programmes

Corporate publicity                            

Coupons

Demonstrations

Endorsements

Films 

Free samples

House-organ publications  

Loudspeaker advertising   

Mailings            

Packaging

Personnel Selling

Point-of-sale displays

Posters and show cards

Premiums

Price specials

Product publicity

Sales conference

Sales literature

Sales presentations
Space advertising

Speeches

Trade exhibits

Trading stamps


Each of these promotools have specific potentialities and complexities that could justify managerial specialization. Yet a company, even a very large one, typically does not have a specialist in each area but only in those areas where the importance and usage frequency of the tool justify specialized competence. Historically, companies first made a separate function out of personal selling, later out of advertising and still later out of publicity.

The other tools are employed by the sales manager, advertising manager, or public relations manager as needed. Since many years some companies began to appoint sales promotion managers to handle or advice on miscellaneous promotion tools that no one cared about. The term sales promotion (as distinct from promotion) came gradually into wide use to describe a fourth component of the promotional mix.


The following four components make up the promotional mix:

1. Advertising

Any paid form of non-personal presentation and promotion of ideas, products, or services by an identified sponsor.

2. Personal selling

Oral presentation in a conversation with one or more prospective purchasers for the purpose of making sales.

3. Publicity

Non-personal stimulation of demand for a product, service, or business unit by planting commercially significant news about it in a published medium or obtaining favorable presentation of it upon radio, television, or stage that is not paid for by the sponsor.

4. Sales promotion

Those marketing activities, other than personal selling, advertising, and publicity, that stimulate consumer purchasing and dealer effectiveness, such as displays, shows and exhibitions, demonstrations, and various non-recurrent selling efforts not in the ordinary routine.



1. Advertising

In spite of the tight definition of advertising, it is far from a unitary thing. Advertising involves such varied media as magazine and newspaper space; radio and television; outdoor displays (such as posters, signs, skywriting); direct mail; novelties (matchboxes, blotters, calendars); cards (car, bus); catalogues; directories and references; programmes and menus; and circulars.

It can be carried out for such diverse purposes as long-term build-up of the company name (institutional advertising), long-term build-up of a particular brand (brand advertising), information dissemination about a sale, service, or event (classified advertising), announcement of a special sale (sales advertising) and so on.

Because of the many forms and uses of advertising, it is hard to advance all-embracing generalizations about its distinctive qualities as a component of the promotional mix. Yet the following qualities can be noted, especially when it comes to brand and institutional advertising :

i.

Public presentation

Advertising, unlike personal selling, is a highly public mode of communication. Its public nature confers a kind of legitimacy to the product and also suggests a standardized offering. Because many persons receive the same message, buyers know that their motives for purchasing the product will be publicly understood.

ii.

Pervasiveness

Advertising is a pervasive medium that permits the seller to repeat his message many times. It also allows the buyer to receive and compare the messages of various competitors. Large-scale advertising by a seller says something positive about the seller's size, popularity and success

iii.

Amplified expressiveness

Advertising provides opportunities for dramatizing the company and its products through the artful use of print, sound and color. Sometimes the tool's very success at expressiveness may, however, dilute or distract from the message.

iv.

Impersonality

Advertising, in spite of being public, pervasive, and expressive, cannot be as compelling as a personal salesman. The audience does not feel obligated to pay attention or respond. Advertising is only able to carry on a monologue, with the audience.


Target Company
Base Reference
ADVERTISING -v- SELLING

Advertising : Public Presentation

Advertising : Pervasiveness

Advertising : Expressiveness

Selling : Sales Technique

Selling : Prospect Cultivation

Performance Grid Definitions


2. Personal selling

Personal selling also takes several forms, such as sales calls by a field representative (field selling), assistance by a salesclerk (retail selling), and a golf invitation from one company president to another (executive selling). It can be used for many purposes, such as creating product awareness, arousing interest, developing product preference, negotiating prices and other terms, closing a sale, and providing post-transactional reinforcement.

Personal selling has certain distinctive qualities as a component of the promotional mix :

i.

Personal confrontation

Personal selling involves an alive, immediate and interactive relationship between two or more persons. Each party is able to observe at close hand the characteristics and needs of the other and make immediate adjustments. Each party has the potentiality to help or hurt the other by his interest or lack of it, and this can make the encounter stressful.

ii.

Cultivation

Personal selling permits all kinds of relationships to spring up, ranging from a matter-of-fact selling relationship to a deep personal friendship. In most cases, the salesman will be in a deferential position to the buyer; he must use art to woo him. The salesman at times will be tempted to put on pressure or to dissemble to get an order, but his best he will keep the customer's long-run interests at heart.

iii.

Response

Personal selling, in contrast with advertising, makes the buyer feel under some obligation for having listened to the sales talk or using up the salesman's time. He has a greater need to attend and respond, even if the response is a polite "thank you".

 


3. Publicity

A company and its products can come to the attention of the public through being newsworthy. Here the seller pays nothing for the press he receives. The results of free publicity can sometimes be spectacular.

Because of the sales potential of good publicity, many sellers have geared up to make a deliberate use of publicity, or "free advertising". This means preparing company or product-slanted news stories and features and trying to interest the press in using them. Companies have realized that special skills are required to write good publicity and "reach" the press, and they have turned this job over to professional public relations men. Because of their salaries and cost, however, publicity turns out not to be costless advertising.

Publicity has three distinctive qualities :

i.

High veracity

New stories and features seem to most readers to be authentic, media-originated reports. Therefore readers are likely to regard news stories about products and companies as having a higher degree of veracity than if they came across as sponsored by a seller.

ii.

Off guard

Publicity can reach many potential buyers who otherwise avoid salesmen and advertisements. This is because the message is packaged in a way that gets to him as news rather than as a sales-directed communication.

iii.

Dramatization

Publicity has, like advertising, a potential for dramatizing a company or product.


Target Company
Base Reference
PUBLICITY + SALES PROMOTION

Publicity Effect : Accepted Veracity

Publicity Effect : Off Guard perceptions

Publicity Effect : Dramatization

Sales Promotion : Insistent

Sales Promotion : Product Demeaning

Performance Grid Definitions



4. Sales Promotion

Sales promotion is the catchall for various promotools that are not formally classifiable as advertising, personal selling, or publicity.

These tools may be sub-classified into items for consumer promotion (e.g., samples, coupons, money-refund offers, prices-off, premiums, contests, trading stamps, demonstrations), trade promotion (e.g., buying allowances, free goods, merchandise allowances, co-operative advertising, push money, dealer sales contests), and salesforce promotion (e.g., bonuses, contests, sales rallies).

The older concept saw sales promotion as an ad hoc collection of sales tools to be used when necessary as a direct, short-term sales stimulus. With its professionalizing in recent years, sales promotion is increasingly viewed as an important tool in its own right. It plays a critical role in the introductory and maturity stages of the product life cycle and also appears to be especially effective during periods of rapid inflation. The level of expenditures on sales promotion has been variously estimated as ranging from 20 to 35 percent of the typical company's promotion budget. The effects of sales promotion are often more immediate and measurable than those of advertising. Yet there has been insufficient research and decision modelling devoted to it.

Although sales promotion tools are a motley collection, they have two distinctive qualities as a class :

i.

Insistent presence

Many sales promotion tools have an attention-getting, sometimes urgent, quality that can break through habits of buyer inertia toward a particular product. They tell the buyer he has a chance that he will not have again to get something special. This appeals to a broad spectrum of buyers, although particularly to the economy-minded, with the disadvantage that this type of buyer tends to be less loyal to any particular brand in the long run.

ii.

Product demeaning

Some of these tools suggest that the seller is anxious for the sale. If they are used too frequently or carelessly, they may lead buyers to wonder whether the product class or brand is desirable or reasonably priced.


 

PROMOTION MIX


When the Company considers promotion as a whole, it faces two major decisions. The first is how much total effort to invest in promotion; the second, how much relative usage should be made of the different promotional tools.

Since promotion is only one of several ways to stimulate company sales, the company faces the question of whether promotional funds could not be spent better in marketing research, new product development, lower prices, or more customer services. These latter alternatives tend to increase the real value of the company's offering in the buyer's mind. Buyers, if asked, would probably want the company to cut down on promotion and use the funds to make the offering more attractive.

Yet some promotion is essential in order to create customer awareness of the product's existence and characteristics. Furthermore, promotion can create positive psychological associations that can enhance the buyer's satisfaction. In this last sense promotion may be considered to add to the real value of the company's offering.

The problem of how much for promotion is not difficult in principle. The total promotional budget should be established at a level where the marginal profit from the marginal promotional spend just equals the marginal profit from using the spend in the best non-promotional alternative. A few generalizations might help indicate whether promotion will be a relatively important or unimportant component of the marketing mix.

In general, promotion will be more important in markets where:

1.

Products are alike, thus leading suppliers to try to differentiate them psychologically.

2.

Products are in the introductory stage of the life cycle, where awareness and interest must be built, or in the mature stage, where defensive expenditures are required to maintain market shares.

3.

Products are sold on a direct handling basis.

4.

Products are sold on a self-selection basis.


The optimal proportion to use of the various promotion tools is a difficult question. The most striking fact about promotional tools is their substitutability, as it is possible to achieve a given sales level by increasing advertising expenditures or personal selling, or by offering a deal to the trade or a deal to consumers. This substitutability explains why marketing departments are increasingly trying to achieve administrative co-ordination over all the instruments of promotion.


The promotion mix in Consumer -v- Industrial marketing

Advertising is widely felt to be the most important promotool in consumer marketing, and personal selling the most important promotool in industrial marketing. Sales promotion is considered of equal, though smaller, importance in both markets; and publicity is considered to have even smaller, but equal, importance in both markets.


It should be stated that the term Industrial and Consumer do not only refer to the Business and Private buyer, but rather to the type of product in relation to the type of market situation. Thus a business buyer purchasing industrial components from a wholesaler or factor is in the same Consumer marketing and point-of-sale situation as a private individual buying a product off-the-shelf at his supermarket.


Target Company
Base Reference
ADVERTISING RATING

Awareness Building

Comprehension Building

Efficient Reminding

Lead Generation

Legitimation & Reassurance

Performance Grid Definitions



This view leads some marketers to act as if advertising is unimportant in industrial marketing and as if personal selling is unimportant in consumer marketing. Such conclusions are erroneous and can be refuted both in terms of common sense and research.


1. The role of advertising in marketing

The industrial marketing situation appears to involve sellers confronting highly rational buyers who respond primarily to the quality of the product, its price, delivery and reliability considerations. It would seem that a sales call would have much more impact than an advertising impression, especially if the product is complex. Yet consider the following functions that can be performed by advertising :

i.

Awareness building

If the prospect is not aware of the company or product, he may refuse to see the salesman, or the salesman may have to use up a lot of time in introducing himself and his company.

ii.

Comprehension building

If the product represents a new concept, some of the burden of explaining it can be effectively carried on by advertising.

iii.

Efficient reminding

If the prospect knows about the product but is not ready to buy, an advertisement reminding him of the product would be much more economical than a sales call.

iv.

Lead generation

Advertisements carrying return coupons are an effective way to generate leads for salesmen.

v.

Legitimation

Company salesmen can use tear sheets of the company's advertisements to legitimatize their company and products.

vi.

Reassurance

Advertising can remind customers how to use the product and reassure them about their purchase.


There is substantial research which has confirmed the important role played by advertising in a well-designed promotion programme for industrial products and the effectiveness of four promotional tools: personal selling, advertising, education and publicity.

The typical sales transaction process was divided into four stages: awareness, comprehension, conviction, and order.

The results show that advertising, along with publicity, plays the most important role in the awareness stage, more than is played by "cold calls" from salesmen. Customer comprehension is primarily affected by education, with advertising and personal selling playing secondary roles, each equal to the other. Customer conviction is influenced most by personal selling followed closely by advertising. Finally, closing the sale is predominantly a function of the sales call. These findings have important practical implications. First, the company could effect promotional economies by cutting back on salesmen's involvement in the early stages of the selling job so that they could concentrate on the vital phase - closing the sale. Second, in relying on advertising to do more of the job, it should take different forms, some addressed to building product awareness and some to creating conviction.

Moreover research sought to determine the relative roles of the company's reputation (built mainly by advertising) and the company's sales presentation (personal selling) in producing sales:

The variables were the quality of the presentation and whether the salesman represented a well-known company, a less known but creditable company, or an unknown company.

The reaction and ratings of the buyer groups indicated the following:

i

A company's generalized reputation (the source effect) has a positive influence on sales prospects in improving the chances of

      a) getting a favorable first hearing, and
      b) getting an early adoption of the product.

Therefore, to the extent that corporate advertising can build up the company's reputation (other factors also shape its reputation), this will help the company's salesmen.

ii.

Salesmen from well-known companies have an edge in getting the sale, provided that their sales presentation is up to the expected standards. If, however, a salesman from a lesser-known company makes a highly effective sales presentation, this can overcome his disadvantage. To this extent, smaller companies may find it better to use their limited funds in selecting and training better salesmen rather than in advertising.

iii.

Company reputations tend to have the most effect where the product is complex, the risk is high, and the purchasing agent is less professionally trained.


In general, the research findings confirm the constructive role of both advertising and the source effect in the industrial marketing process. Findings such as these have been developed into a formal model for apportioning promotional funds between advertising and personal selling on the basis of the selling tasks that each performs more economically.


Target Company
Base Reference
PERSONNEL SELLING RATING

Selling for Distribution Channel Stock Position Increase

Selling for Company Stock Position Decrease

Selling for Discounted Stocks

Selling for Enthusiasm Building

Missionary Selling

Performance Grid Definitions



2. The role of personal selling in marketing

The role of a company's force in consumer marketing would appear to be small relative to brand advertising and many consumer companies use their salesforce (or a dealer salesforce) mainly to collect weekly orders from dealers and to see that sufficient stocks are held and displayed. The common feeling is that "salesmen put products on shelves and advertising takes them off".

Yet even here, an effectively trained salesforce can make three important contributions:

i

Increased stock position. Persuasive salesmen can influence dealers to take more stock or devote more self to the company's brand.

ii.

Enthusiasm building. Persuasive salesmen can build dealer enthusiasm for a new product by dramatizing the planned advertising and sales promotion backup.

iii.

Missionary selling. Salesmen are crucial in any effort to sign up more dealers to carry the company's brands.

Within the same consumer industry companies can be found with quite different relative emphasis on the advertising, personal-selling mix. Some rely very heavily on sales-force "push", while many of their competitors rely more heavily on advertising "pull"; some put most of its promotional money into advertising, while others put most of it into personal selling.



PROMOTION + ORGANIZATION

Members of the marketing organization have strong and varying feelings about the proper proportions of the company's promotion money to spend on the different promotools. Individual sales managers find it hard to understand how the company could get more value by spending a relatively large amount of money on a one-minute television commercial than by hiring an additional salesmen for a whole year. Public relations also feels that the company can realize more through switching some of the advertising budget into publicity efforts. There is much disagreement on how money should be divided between advertising and sales promotion, and within advertising between institutional and brand advertising, and within sales promotion between consumer and trade deals.

Historically, companies left these decisions to different people. No one was given the responsibility for thinking through the roles of the various promotional tools and coordinating the company's communication and promotion mix.

Efficient companies are moving rapidly toward the concept of integrated communications. This concept calls for:

i

Developing a corporate position, such as marketing communications director, who has overall responsibility for the company's persuasive communication efforts.

ii.

Working out a philosophy of the role and the extent to which the different promotools are to be used.

iii.

Keeping track of all promotional investments by product, promotool, stage of product life cycle, and observed effect, as a basis for improving subsequent effective use of each tool.

iv.

Coordinating the promotional inputs and their timing when major campaigns take place.

One reason for this organizational integration is that an increasing number of promotional campaigns are multi-tooled and multi-brand. In introducing a new product, the company has to co-ordinate advertisements in the major media, distributor handling, trade deals, customer deals, and publicity. Introduction of the new brand may even be tied to existing brands. All of this takes careful planning, timing, vision and authority.

Another argument is that normally records are not kept of the different promotional effects tried for various company products. One product manager may be considering a special premium to boost sales, unaware that this type of premium bombed for another product manager. By centralizing and analyzing data on promotional efforts for a Product over time and across products, the company is an excellent position to improve its promotional planning.

Finally, integrated management of promotional activities promises more consistency in the company's meaning to its buyers and audiences. It places a responsibility in someone's hand - where none existed before - to constructively worry about the company's image as it comes through the thousand activities the company carries on. It leads to the determination of a total marketing communications strategy aimed at showing how the company can help customers solve their problems.


Target Company
Base Reference
ORGANIZATION RATING

Formal Corporate Position in Company

Formal Corporate Responsibility for Promotion

Established Working Plan for Promotion

Monitoring of Marketing Mix -v- Promotional Spend

Co-ordination of Promotional -v- Marketing Campaigns

Performance Grid Definitions

Target Company
Base Reference
MARKETING COSTS

Advertising Costs

Sales Costs

Distribution Costs

After Sales Costs

Total Marketing Costs

Performance Grid Definitions

HISTORIC FINANCIAL INDUSTRY DATA

HISTORIC FINANCIAL INDUSTRY DATA

 Financial Definitions



PROMOTIONAL MIX
 

PROMOTIONAL MIX BASED BALANCE SHEET FORECASTS


The PROMOTIONAL MIX FINANCIAL SCENARIOS BALANCE SHEET FORECASTS section gives a series of Forecasts for the Company and the industry using a number of assumptions relating to the promotional decisions available to the marketing management of the Company.

The Balance sheet forecast given shows the effects of promotional improvements which Marketing Management is likely to recommend:

PROMOTIONAL MIX FINANCIAL SCENARIOS

  • Base Forecast : Median Market Scenario

  • Marketing Product Launch Cost Scenario

  • Marketing Expenditure

  • Variable Marketing Cost Objectives

  • Selling Cost Objectives

  • Advertising Cost Objectives

  • Promotional & Pricing Cost Objectives

  • Promotional Expenditure


Managers in the Company will, in both the short-term and the long-term, have vital decisions to make regarding the promotional improvements, margins and profitability and these decisions will need to be evaluated in light of the customers, markets, competitors, products, industry and internal factors. The scenarios given isolate a number of the most important factors and provide balance sheet forecasts for each of the scenarios.

The data provides a short and medium term forecast covering the next 6 years for each of the Forecast Financial and Operational items. The Financial and Operational Data sections show each of the items listed below in terms of forecast data and covers a period of the next 6 years.

 

Financial Comparisons: Scenarios

 

Target Company

Base Reference Industry

 

MEDIAN  FORECAST : Financials

MEDIAN  FORECAST : Margins & Ratios

PRODUCT LAUNCH: Financials

PRODUCT LAUNCH: Margins & Ratios

MEDIAN  FORECAST : Financials

MEDIAN  FORECAST : Margins & Ratios

PRODUCT LAUNCH: Financials

PRODUCT LAUNCH: Margins & Ratios

 

 

 Financial Definitions

 


 

 

7

Product Pricing:


PRODUCT PRICING OBJECTIVES


In spite of the increased role of non-price factors in the modern marketing process, price remains an important element and especially challenging in certain situations.

In setting a price, the Company can draw guidance from the theoretical pricing model. The model suggests how one can find the short-run profit-maximizing price when estimates of demand and cost are available. The model, however, leaves out several factors that have to be considered in actual pricing situations, such as the presence of other objectives, multiple parties, marketing-mix interactions, and uncertainties surrounding the estimates of demand and cost. In practice, firms tend to orient their pricing toward cost (as in markup pricing and target pricing), or demand (as in price discrimination), or competition (as in going rate pricing and bidding).

When a firm considers changing its established price, it must carefully consider customers' and competitors' reactions. The probable reaction of customers is summarized in the concept of price elasticity of demand. There are several ways to estimate price elasticity and some problems in interpreting it, but it is a key input in the determination of how much would be gained by the price change. Competitors' reactions also must be taken into account, and they depend very much on the nature of the market structure and the degree of product homogeneity. Competitors' reactions may be studied on the assumption either that they flow from a set reaction policy or that they flow from a fresh appraisal of the challenge each time. The firm initiating the price change must also consider the probable reactions of suppliers, distribution and others.

The firm that witnesses a price change must try to understand the competitor's intent and the likely duration of the change. If swiftness of reaction is desirable, the firm should pre-plan its reactions to different possible pricing developments.

Pricing is complicated when it is realized that various products in a line typically have important demand and/or cost inter-relationships. Then the objective is to develop a set of mutual prices that maximize the profits on the whole line. Most firms develop tentative prices for the products in the line by marking up full costs, or incremental costs, or conversion costs and then modifying these prices by individual demand and competitive factors.

All organizations face the task of setting a price on their products or services. Price goes by many names: fees, charges, fares, tuitions, interest, rents, assessments, et cetera. Historically, price had been the single most important decision of the company, for it determined the value of the product in the customer's eyes relative to competitors' products. Over time, non-price factors grow in importance until the point is reached where over half the managers state that they "did not select pricing as one of the five most important policy areas in their firm's marketing success". More recently because of worldwide inflation, price is again attracting considerable attention.

Pricing is a problem in four general types of situations. It is a problem when a firm must set a price for the first time. This happens when the firm develops or acquires a new product, when it introduces its regular product into a new distribution channel or geographical area, or when it regularly enters bids on new contract work. Pricing is a problem when circumstances lead a firm to consider initiating a price change. This happens when a firm begins to doubt whether its price is right in relation to its demand and costs. It can be triggered by inflation or shortages. It also happens on a more regular basis in firms that periodically introduce temporary price deals to stimulate the trade or final buyers. Pricing is a problem when competition initiates a price change. The firm has to decide whether to change its own price, and if so, by how much. Finally pricing is a problem when the company produces several products that have interrelated demands and/or costs. The problem is one of determining optimal price relationships for the products in the line.



PRICE BASIS


1. Theoretical pricing model

Researchers have developed a simple yet elegant model of how to set a price. The model has the properties of logical consistency and optimization and there is value in examining it because it provides some fundamental insights into the pricing problem and because its very limitations help bring out the complex issues involved in pricing.

The model assumes a profit-maximizing firm has knowledge of its demand and cost functions for the product in question. The demand function describes the expected quantity ( Q ) demanded per period at various prices ( P ) that might be charged. Suppose the firm is able to determine through statistical demand analysis that its demand equation is

            Q = 1000 - 4P

This equation expresses the law of demand, that less will be bought at higher prices.

The cost function describes the expected total cost ( C ) for alternative quantities per period ( Q ) that might be produced. It is customary to distinguish between total fixed costs and total variable costs. In the simplest case, the total-cost function can be described by the linear equation C = F + cQ  where  F  is total fixed cost and  c i s unit variable cost. Suppose the company derived the following cost equation for its product:

            C = 6000 + 50Q

With the preceding demand and cost equations, one is almost in a position to determine the best price and only needs two more equations, both definitional in nature.

First, total revenue ( R ) is defined as equal to price times quantity sold - that is,

            R = PQ

Second, total profits ( Z ) are defined as the difference between total revenue and total cost - i.e.,

            Z = R - C

With these four equations, one is in a position to solve for the profit-maximizing price.

One is essentially trying to determine the relationship between profits ( Z ) and price ( P ). One must solve the four equations simultaneously in order to find the single relationship between Z and P. It is best to start with the profit equation.

The derivation is as follows:

            Z = R-C
            Z = PQ-C
            Z = PQ-(6000 + 50Q)
            Z = P(1000-4P) 6000-50(1000-4P)
            Z = 1000p-4P2 -6000-50000+2000P
            Z = 56000+12000p -4P2


Total profits turn out to be a quadratic function of price. It is a parabola figure and profits reach their highest point 29.6 ( Z ) at a price of 1 ( P ).


Target Company
Base Reference
PRICING OBJECTIVES

Market Penetration Objectives

Market-Skimming Objectives

Early Cash Recovery Objectives

Satisfying Objectives

Product-Line Promotion Objectives

Performance Grid Definitions


2. The problem of Pricing objectives

The theoretical pricing model assumes a single product for which the seller is trying to determine the price that would maximize current profits. Current profits rather than long-run profits are at issue because of the use of stable demand and cost assumptions. In reality, demand can be expected to change over time (as a result of changes in tastes, population, and income), and cost can be expected to change over time (as a result of changes in technology and input prices). Pricing to maximize long-run profits would have to utilize projections of the likely long-run course of demand and cost. A more sophisticated model would be required to solve the problem of pricing optimally over the product's life cycle.

Another limitation is that the company often pursues a more specific objective in setting its price. At least five different objectives of a more concrete sort can be found in practice:

i.

Market-penetration objective

Some companies set a relatively low price in order to stimulate the growth of the market and to capture a large share of it. Any of several conditions might favor setting a low price:

   1)   The market appears to be highly price sensitive.
   2)   The unit cost of production and distribution fall with cumulated output.
   3)   A low price would discourage actual and potential competition

ii.

Market-skimming objective

Some firms want to take advantage of the fact that some buyers stand ready to pay a much higher price than others because the product has high present value to them. The objective of skimming pricing is to gain a premium from these buyers and only gradually reduce the price to draw in the more price elastic segments of the market. It is a form of price discrimination over time rather than over space.

It makes good sense when any of the following conditions are present:

1)

There are enough buyers whose demand is relatively inelastic.

2)

The unit production and distribution costs of producing a smaller volume are not so much higher that they cancel the advantage of charging what some of the traffic will bear.

3)

There is little danger that the high price will stimulate the emergence of rival firms.

4)

The high price creates an impression of a superior product.

iii.

Early-cash-recovery objective

Some firms seek to set a price that will lead to a rapid recovery of cash. They may either be strapped for funds or regard the future as too uncertain to justify patient market cultivation.

iv.

Satisfying objective

Some companies describe their pricing objective as the achievement of a satisfactory rate of return. The implication is that although another price might produce an even larger return over the long run, the firm is satisfied with a return that is conventional for the given level of investment and risk. Target pricing is an example of this.

v.

Product-line promotion objective

Some firms seek to set a price that will enhance the sales of the entire line rather than yield a profit on the product by itself. An example is loss-leader pricing, in which a popular product is priced low to attract a large number of buyers who can be expected to buy the other products of the vendor.

 



3. The Problem of Multiple parties

The theoretical pricing model assumes that the only significant group to consider in the pricing of a product is the firm's customers. But in reality, several parties have to be considered simultaneously.

i.

Intermediate customers

The firm must think through its pricing not only for ultimate customers but also for intermediate customers. Some companies set a price for distributors and allow them to set whatever final price they wish. This is done where it is thought that each distributor is in the best position to determine the price suited to local conditions and to set it high enough to provide sufficient selling incentive. The disadvantage is that the supplier relinquishes control over the final price. The other approach is for the supplier to determine the final price and how much of a distributor's margin is necessary to provide sufficient distributor incentive. The distributors must recognize that the important incentive variable is not the difference between the distributor's and final price (the margin) but rather the margin times the sales volume stimulated by the particular final price.

ii.

Rivals

The theoretical pricing model does not explicitly consider competitive reactions and can be incorporated in the shape of the demand function, but this treatment of competitive reaction is too implicit and static. The price set by the supplier influences the rate of entry of new rivals and the pricing policies of existing rivals. The traditional demand curve is too restricted or simple a way to represent the dynamic reactions and counter-reactions occasioned by a pricing policy.

iii.

Suppliers

The company's suppliers of materials, funds and labor also must be considered. Many suppliers interpret the product's price as indicating the level of the firm's revenues (and profits) from the product. Labor unions will act as if a high price, or price increase, constitutes grounds for higher wages. Thus the firm may have to consider various supplier groups insetting a price.

iv.

Government

Another price-interested party is the government. Under the rules of competition in many countries, the seller cannot charge different prices to comparable customers unless the price differences are based strictly on cost differences. Under other legislation, the seller may or may not be able to require retailers to sell his branded product at a uniform list price, depending upon the national laws. Public utilities must justify their rates before regulatory commissions. At various times, pricing in many industries has been subject to government pressure. The prices of agricultural goods and of imported goods are affected by agricultural and tariff legislation, respectively. Various state and local governmental units pass legislation and rulings affecting the prices that can be set by sellers.

v.

Other company executives

Price is a concern of different parties within the company. The sales manager wants a low price so that his salesmen can "talk price" to customers. The financial director likes to see a price leading to an early payout. The price makes an important difference in copy and media tactics to the advertising manager. The process scheduling manager is interested because the price will affect the rate of sales. These and other executives in the organization can be expected to have strong views on where to set the price.


Target Company
Base Reference
MULTIPLE PARTY PRICING

Intermediate Customer Considerations

Rivals Considerations

Suppliers Consideration

Government Considerations

In-House Considerations

Performance Grid Definitions



4. The problem of marketing-mix interaction

The theoretical pricing model assumes that other marketing variables are held at some constant level while the effect of price on sales is being examined. This is evident in the usual treatment of the demand function as a relationship only between quantity demanded ( Q ) and price ( P ). But this begs the whole question of how optimal values can be set on advertising, personal selling, product quality, and other marketing variables before price is set. As emphasized throughout this manual, the several marketing variables have to all be considered simultaneously to arrive at the optimal mix. This task is missing or assumed away in the theoretical pricing model.


5. The problem of estimating demand and cost functions

Significant statistical problems handicap the determination of actual demand and cost functions. In the case of a new product, there is no experience upon which to base these estimates. Unless data is available on a similar, established product, estimates are likely to take the form of soft facts and guesses rather than hard facts. Data on established products are usually not much more satisfactory.

One researcher has described the major econometric techniques for estimating cost functions from existing data. Demand functions are more difficult to determine because several of the variables are not quantifiable; they are typically highly inter-correlated; both demand and cost have been shifting during the period; and the random errors tend to be large. Because some of the independent variables are also dependent (sales depends on advertising, and advertising depends upon sales), a system of simultaneous equations rather than a single equation estimate of demand seems to be required. Finally, even were these hurdles to be overcome, there are always lingering doubts about whether the relationships measured from historical data apply to today's situation.

Since the demand and cost equations are estimated with an unknown degree of error, the criterion of maximizing profits may have to be replaced with the criterion of maximizing expected profits (where probability distributions are put on the estimated functions) or the criterion of maximizing the minimum possible gain. In any situation of risk and uncertainty, one will want to see how sensitive the theoretically calculated price is to revisions in the estimated data.



PRICING DECISIONS


The fault with the basic pricing model is not one of illogic but of oversimplification. The pricing models used in practice also for the most part tend to be based on a limited view of the pricing problem. They tend to emphasize one of the factors, nevertheless they meet some of the more practical requirements for price determination in the presence of imperfect information and multiple parties. One can examine cost-oriented, demand-oriented, and competition-oriented pricing.


1. Cost-oriented pricing

A great number of firms set their prices largely or even wholly on the basis of their costs. Typically, all costs are included, including a usually arbitrary allocation of overhead made on the basis of expected operating levels.

 

i.

Markup pricing

The most elementary examples of this are markup pricing and cost-plus pricing. They are similar in that the price is determined by adding some fixed percentage to the unit cost. Markup pricing is most commonly found in the distribution and service trades where the outlet adds predetermined but different markups to various products or services carried. Cost-plus pricing is most often used to describe the pricing of jobs that are non-routine and difficult to "cost" in advance, such as construction and high technology development.

Markups vary considerably among different products and in addition, quite a lot of dispersion is found around the averages.

Many hypotheses have been advanced to explain the variations in markups within selected product groups. One researcher conducted a detailed study to examine how much of the markup variance within common basic product groups could be explained by three commonly used rules of thumb:

    a) Markups should vary inversely with unit costs.
    b) Markups should vary inversely with turnover.
    c) Markups should be higher and prices lower on reseller's own brands than on supplier's brands.

In one product group a single rule helped explain 61 percent of the variance in percentage markups, and in two groups a combination of two rules helped explain over 60 percent of the variance in percentage markups and in two groups a combination of two rules helped explain over 60 percent. Yet the principal finding was that a large amount of variation remained unexplained in most product categories and was probably due to erratic decisions, random factors and frequently better adaptations to the current market than could be provided by the rules.

Does the use of a rigid customary markup over cost make logical sense in the pricing of products? Generally, No! Any model that ignores current demand elasticity in setting prices is not likely to lead, except by chance, to the achievement of maximum profits, either in the long run or in the short run. As demand elasticity changes, as it is likely to do seasonally, cyclically, or over the product life cycle, the optimum markup should also change. If markup remains a rigid percentage of cost, then under ordinary conditions it would not lead to maximum profits.


Under special conditions, however, a rigid markup at the right level may lead to optimum profits. The two conditions are that average (unit) costs must be fairly constant over the range of likely outputs and price elasticity must fairly constant for different points on the demand curve and over time. Both conditions are apt to characterize many retailing situations. This may explain why fairly rigid markups are in widespread use in retailing and why this may not be inconsistent with optimal pricing requirements. In manufacturing, however, it is less likely that two special conditions obtain, and here fixed markup pricing is more difficult to justify on logical grounds.

Still, markup pricing remains popular for a number of reasons. First, there is generally less uncertainty about costs than about demand. By pinning the price to unit costs, the seller simplifies his own pricing task considerably; he does not have to make frequent adjustments as demand conditions change. Second, where all firms in the industry use this pricing approach, their prices are likely to be similar if their costs and markups are similar. Price competition is therefore minimized, which would not be the case if firms paid attention to demand variations when they priced. Third, there is the feeling that cost markup pricing is socially fairer to both the buyer and the seller. The seller does not take advantage of the buyer when his demand becomes acute; yet the seller earns a fair return on his investment. Thus the popularity of a cost-oriented approach to pricing rests on considerations of administrative simplicity, competitive harmony, and social fairness.

 

ii.

Target pricing

A common cost-oriented approach used by suppliers is known as target pricing, in which the firm tries to determine the price that would give it a specified target rate of return on its total costs at an estimated standard volume. This pricing approach has been most closely associated with certain firms, which have stated that they price their products so as to achieve a long-run average rate of return of 15 to 20 percent on their investment. It is also closely associated with the pricing policies of public utilities, which have a large investment and are constrained by regulatory commissions in view of their monopoly position to seek a fair rate of return on their costs.

The pricing procedures used in target pricing can be illustrated in terms of a break-even chart. Management's first task is to estimate its total costs at various levels of output. The total-cost curve is shown rising at a constant rate until capacity is approached. Management's next task is to estimate the percentage of capacity at which it is likely to operate in the coming period. Management's third task is to specify a target rate of return. Another point on the total-revenue curve will be $0 at a volume of zero percent of capacity. The rest of the total-revenue curve can be drawn between these two points.

Where does price come in? The slope of the total-revenue curve is price and if at a specific price the company manages to sell its estimated output it will attain the target rate of return.

Target pricing, however, has a major conceptual flaw. The company uses an estimate of sales volume to derive the price, but price is a factor that influences sales volume! What is missing from the analysis is a demand function, showing how many units the firm could expect to sell at different prices. With an estimate of the demand curve and with the requirement to earn 20 percent on costs, the firm could solve for those prices and volumes that could be compatible with each other. In this way, the firm would avoid setting a price that failed to generate the estimated level of output.


2. Demand-oriented pricing

Cost-oriented approaches rely on the idea of a standard markup over costs and/or a conventional level of profits. Demand-oriented approaches look instead at the intensity of demand. A high price is charged when or where demand is intense, and a low price is charged when or where demand is weak, even though unit costs may be the same in both cases.

Some pricing experts believe that demand should be the only factor in setting the price. They believe that price should be set not on cost but on the customer's perceived value for the product. The customer's perceived value is based on the total performance, psychological, and service characteristics of the seller's offer. The customer's perceived value is estimated, and then a price is set that would leave the customer with a slightly higher perceived value-to-price ratio than with any competing offer. This is felt to be a customer-oriented approach to pricing. Cost only comes in if it is too high to leave a profit in selling the product at that price.

 

Price discrimination


A common form of demand-oriented pricing is price discrimination, in which a particular commodity is sold at two or more prices that do not reflect a proportional difference in marginal costs. Price discrimination takes various forms, according to whether the basis is the customer, the product version, the place, or the time.

Pricing that discriminates on a customer basis is illustrated in the selling of high price durable products where discounting or negotiated pricing may be available to customers. The product may be identical in both cases, and the marginal cost of the transaction may be identical; yet the seller has managed to extract a higher price from one buyer than from the other. The occurrence of price discrimination among customers may indicate different intensities of demand or variation in consumer knowledge. Charging different prices to different customers raises strong ethical questions and is potentially disruptive of customer goodwill.

Pricing that discriminates on a product-version basis occurs when slightly different versions of a product are priced differently but not proportionately to their respective marginal costs. Suppliers, however, do not always mark up the more up-market and costly version at a disproportionately higher price. In many cases the price discrimination is reversed to encourage the buyer to trade up, thereby increasing total sales value.

Pricing that discriminates on a place basis is also quite common, since place is a form of utility. Different prices are charged so that each customer pays close to the maximum of what he is willing to pay.

Pricing that discriminates on a time basis also takes many forms. The demand for a product is likely to vary in intensity over the business cycle, over the seasons by the day, and sometimes by the hour. Public utilities, in their pricing to commercial users, typically vary their prices according to the day (weekend versus weekday) and even the time of day. Generally speaking, the firm whose costs are largely fixed can gain by varying prices according to temporal variations in demand.

For price discrimination to work, certain conditions must exist:

 

1)

First, the market must be segmentable, and the segments must show different intensities of demand.

2)

Second, there should be no chance that the members of the segment paying the lower price could turn around and resell the product to the segment paying the higher price.

3)

Third, there should be little chance that competitors will undersell the firm in the segment being charged the higher price.

4)

Fourth, the cost of segmenting and policing the market should not exceed the extra revenue derived from price discrimination.

5)

Fifth, the practice should not breed customer resentment and turning away.



3. Competition-oriented pricing

When a company sets its prices chiefly on the basis of what its competitors are charging, its pricing policy can be described as competition-oriented. It is not necessary to charge the same price as competition, although this is a major example of this policy. The competition oriented pricing firm may seek to keep its prices lower or higher than competition by a certain percentage. The distinguishing characteristic is that it does not seek to maintain a rigid relation between its price and its own costs or demand. Its own costs or demand may change, but the firm maintains its price because competitors maintain their prices. Conversely, the same firm will change its prices when competitors change theirs, even if its own costs or demand have not altered.

 

i.

Going-rate pricing

The most popular type of competition oriented pricing is where a firm tries to keep its price at the average level charged by the industry. Called going-rate pricing, it is popular for several reasons. Where costs are difficult to measure, it is felt that the going price represents the collective wisdom of the industry concerning the price that would yield a fair return. It is also felt that conforming to a going price would be least disruptive of industry harmony. The difficulty of knowing how buyers and competitors would react to price differentials is still another reason for this pricing.

Going-rate pricing primarily characterizes pricing practice in homogeneous product markets, although the market structure itself may vary from pure competition to pure oligopoly. The firm selling a homogeneous product in a highly competitive market has actually very little choice about the setting of its price as there is apt to be a market-determined price for the product, which is not established by any single firm or clique of firms but through the collective interaction of a multitude of knowledgeable buyers and sellers. The firm daring to charge more than the going rate would attract virtually no customers, furthermore the firm need not charge less because it can dispose of its entire output at the going rate. Under highly competitive conditions in a homogeneous product market (such as consumer staples, industrial supplies, and services), the firm really has no pricing decision to make, albeit in fact, it hardly has any significant marketing decisions to make. The major challenge facing such a firm is good cost control, since promotion and personal selling are small elements, the major marketing costs arise in physical distribution, and here is where cost efficiency may be critical.

In a pure oligopoly, where a few large firms dominate the industry, the firm also tends to charge the same price as competition, although for different reasons since there are only a few firms, each firm is aware of the others' prices, and so are the buyers. Thus the slightest price difference would favor the lower-price firm unless service or contractual relationships are sufficient to overcome this. The observed lack of price competition in these markets has been explained on the basis of the individual oligopolist's demand curve's having a kink in it at the level of the present prices. The demand curve tends to be elastic above the kink because other firms are not likely to follow a price cut. An oligopolist can gain little by raising his price when demand is elastic or lowering his price when demand is inelastic, and this is held to explain much of the price timidity in these markets.

This does not mean that the going price in an oligopoly market will be perpetuated indefinitely, indeed it cannot, since industry costs and demand change over time. Usually, the industry takes collective action to raise the price, or in rarer cases, to lower the price. Apparently this is not done through corporate official channels, for that would be illegal; yet typically, one firm assumes the role of price leader.

In markets characterized by product differentiation, the individual firm has more latitude in its price decision. Product and service differences serve to desensitize the buyer to existing price differentials. Firms try to establish themselves in a pricing zone with respect to their competitors, assuming the role of a high-price firm or a medium-price firm or a low-price firm. Their product and marketing programme are made compatible with this chosen pricing zone or vice versa and thus they respond to competitive changes in price to maintain their pricing zone.

ii.

Sealed-bid pricing

Competitive-oriented pricing also dominates in those situations where firms compete for jobs on the basis of bids, such as equipment suppliers and contractors of various types. The bid is the firm's offer price, and it is a prime example of pricing based on expectations of how competitors will price rather than on a rigid relation based on the firm's own costs or demand. The objective of the firm in the bidding situation is to get the contract, and this means that it hopes to set by any of the other bidding firms.

Yet the firm does not ordinarily set its price below a certain level. Even when it is anxious to get a contract in order to keep the capacity up, it cannot quote a price below marginal cost without worsening its position. On the other hand, as it raises its price above marginal cost, it increases its potential profit but reduces its chance of getting the contract.

The use of the expected-profit criterion makes sense for the large firm that makes many bids and is not dependent on winning any particular contract. In playing the odds, it should achieve maximum profits in the long run. The firm that bids only occasionally and/or may need a particular contract badly will probably not find it advantageous to the expected-profit criterion. The criterion, for example, does not distinguish between a $1,000 profit with a .10 probability and a $125 profit with an .80 probability. Yet the firm that wants to keep production going is likely to prefer the second contract to the first. In other words, the dollar value of expected profits may not reflect the utility value.

The chief obstacle to the use of formal bidding theory is guessing the probability of getting the contract at various bidding levels. This estimate requires information about what the competitors are likely to bid. Here lies the problem, because competitors keep their intentions as secret as possible. Therefore the company has to rely on conjecture, trade gossip, or past bidding history.

The theory of competitive bidding has received considerable refinement in the hands of applied mathematicians. Not only the standard situation but also special situations have been explored, such as that of a company that wants to bid simultaneously on a number of contracts and yet cannot afford to win them all. The major problem remains that of obtaining reliable data to insert into the model.


Target Company
Base Reference
PRICING MODELS

Cost Oriented : Mark-up Pricing

Cost Oriented : Target Pricing

Demand Oriented : Price Discrimination

Competition Oriented : Going-Rate Pricing

Competition Oriented : Sealed or Bid Pricing

Performance Grid Definitions


PRICE CHANGES


Pricing is a challenging decision not only when a price is being set for the first time but also when the firm is about to initiate a price change. The firm may be considering a price reduction in order to stimulate demand, to take advantage of lower costs, or to shake out weaker competitors. Or it may be considering a price increase in order to take advantage of tight demand or to pass on higher costs. Whether the price is to be moved up or down, the action is sure to affect buyers, competitors, distributors, and suppliers, and may interest government as well. The success of the move depends critically on how the parties respond.


1. Buyers' reactions to price change

The traditional analysis of buyers' reactions to price change is based on assuming that all buyers learn of the price change and take it at face value and the magnitude of their response to the price change is described by the concept of price elasticity of demand.

 

i.

Price elasticity of demand

This term refers to the ratio of the percentage change in demand (quantity sold per period) caused by a percentage change in price. A price elasticity of -1 means that sales rise (fall) by the same percentage as price falls (rises). In this case, total revenue is left unaffected. A price elasticity greater than -1 means that sales rise (fall) by less than price falls (rises) in percentage terms; in this case, total revenue falls.

Price elasticity of demand gives more precision to the question of whether the firm's price is too high or too low. From the point of view of maximizing revenue, price is too high if demand is elastic and too low if demand is inelastic.

Whether this is also true for maximizing profits depends on the behavior of costs.

In practice, price elasticity is extremely difficult to measure. There are definitional as well as statistical hurdles. In definition, price elasticity is not an absolute characteristic of the demand facing a seller but rather a conditional one. Price elasticity depends on the magnitude of the contemplated price change. It may be negligible with a small price change (one below the threshold level) and substantial with a large price change. Price elasticity also varies with the original price level. A 5 percent increase over current prices of $1 and $1.20, respectively, may exhibit a quite different elasticity. Finally, long-run price elasticity is apt to be different from short-run elasticity. Buyers may have to continue with the present supplier takes time, but they may eventually stop purchasing from him. In this case, demand is more elastic in the long run than in the short increases prices but return to him later. The significance of this distinction between short-run and long-run elasticity is that the seller will not know for a while how wise is his price change.

Major statistical estimation problems face the firm wishing to evaluate price elasticity and whilst different techniques have evolved, yet none completely appropriate or satisfactory in all circumstances.

Certain companies would not have any competitive reactions to worry about in contemplating a price change and thus could proceed directly to the task of estimating the likely reactions of the ultimate customers, using one of four methods:


a) DIRECT ATTITUDE SURVEY
The Company could interview a sample of actual or potential customers to study reactions.

b) STATISTICAL ANALYSIS OF RELATIONSHIP OF PRICE -v- QUANTITY
This could take the form of either a historical or a cross-sectional analysis. A historical analysis consists in observing how sales were affected in the past by price changes. A cross-sectional analysis consists in observing sales varies with the price charged by different companies in the marketplace.

c) MARKET TEST
The Company could offer a representative sample of customers the proposed new price and analyze the results on sales.

d) ANALYTIC INFERENCE
The Company could conjecture how many sales would react to price changes. The company could segment the market into customer units of different sizes and different expenditure levels and thereafter estimate the numbers of customers in that market segment. The company would then apply the probability of their reaction to the price change. This could be done for all the segments to build an aggregate estimate of the final effect.

These different approaches to estimating demand elasticity work with different degrees of success in different circumstances, and sometimes two or more of them may be undertaken simultaneously for additional confirmation. In practical situations, the task is not one of estimating the absolute level of elasticity so much as whether it differs substantially from the break-even level where nothing would be gained through a price change. This level is an elasticity of 1 if costs are constant. The break-even level of elasticity can be translated into the actual sales versus gain or loss in revenue.

ii.

Perceptual factors in buyers' response

Although economists have tended to ignore perceptual factors, they constitute an important intervening variable in explaining market response to price changes.

Customers may not always put the most straightforward interpretation on a price change when it occurs. A price reduction may symbolize any number of things:

a)

The item is about to be superseded by a better product.

b)

The item has some fault and is not selling well.

c)

The firm is in financial trouble and may not stay in business to supply future parts.

d)

The price will come down even further and it pays to wait.

e)

The quality has been reduced.


A price increase may also be interpreted in several ways:

a)

The item is very "hot" and may be unobtainable unless it is bought soon.

b)

The item represents an unusually good value and could not yield a profit at the old price.

c)

The seller is greedy and is charging what the traffic will bear.


In a period of rapidly rising prices, the seller is particularly vulnerable to the charge of taking advantage of buyers. Domestic customers suspect "price pyramiding" where the seller raises his prices by more than his cost increases. The seller risks spoiling the goodwill he has built and driving customers to find substitutes for his product when they feel that his prices have risen too much. It is incumbent on the seller to gain credibility for his price increases, even to the point of showing how much his costs have increased. Alternatively, he may try to keep his prices down by reducing his services or charging for them, and by constantly searching for ways to improve productivity

 


2. Competitors' reactions to price changes

A firm contemplating a price change has to worry about competitors' as well as customers' reactions. Competitors' reactions are important where the number of firms is small, the product offering is homogeneous, and the buyers are discriminating and informed.

How can the firm estimate the likely reaction of its competitors? Let us assume at first that the firm faces only one large competitor. The likely behavior of this competitor can be approached from two quite different starting points. One is to assume that the competitor treats each price change as a unique challenge and considers afresh his self-interest. Each assumption has quite different research implications.

If the competitor has a set price-reaction policy, there are at least two different ways to fathom it - through inside information and through statistical analysis. Inside information can be obtained in many ways, some quite acceptable and others verging on the cloak-and-dagger. One of the more respectable methods is hiring an executive away from a competitor. In this way the firm acquires a rich source of information on the competitor's thought processes and patterns of reaction. It may even pay to set up a unit of former employees whose job is to think like the competitor. Information on the thinking of a competitor can also come through other sources, such as customers, the financial community, suppliers, dealers and the business community at large.

A set policy toward meeting price changes may be discerned through a statistical analysis of the competitor's past price reactions. One can employ the concept "conjectural price variation" ( V ), defined as the ratio of the competitor's reactive price change to the company's previous price change. In symbols:

 

 

PB,t  -  PB,t-1

VA,t

=


 

 

PA,t  -  PA,t-1

where,

      VA,t = the change in Competitor B's price during period  t  as a proportion of Company A's price change during period t

      PB,t - PB,t-1  = the change in competitor B's price during period t

      PA,t - PA,t-1  = the change in company A's price during period t

The last-observed VA,t  can be used by the company as an estimate of the probable reaction of the competitor.
       If  VA,t  = 0,  then the competitor did not react last time.
       If  VA,t  = 1,  then the competitor fully matched the company's price change.
       If  VA,t  = .5,  then the competitor only matched half of the company's price change.


However, it could be misleading to base the analysis only on the last price reaction. It would be better to average several of the past V terms, giving more weight to the more recent ones because they are reflections of more current policy.

A possible estimate of future competitive price reaction  (VA,t + 1)  might be

       VA,t + 1  =  .5VA,t + .3VA,t - 1 + .2VA,t - 2

where three past conjectural price-variation terms are combined in a weighted average.


The statistical method makes sense only on the assumption that the competitor has a fairly consistent price-reaction policy. Otherwise it would be better to base the analysis on a quite different assumption, that the competitor decides afresh on each occasion of a price increase, what reaction would be in his best interest. If this is so, an analysis must be made of how the competitor perceives his self-interest. His current financial situation should be researched, along with his recent sales and capacity, the basis of his customer appeal, and his corporate objectives. If evidence points to a market-share objective, then the competitor is likely to match the price change. If evidence points to a profit-maximization objective, the competitor may react on some other policy front, such as increasing his advertising or improving his product's quality. The job is to get into the mind of the competitor through inside and outside sources of information.

The problem is complicated because each price change occurs under unique circumstances, and the competitor is capable of putting different interpretations on it. His reaction to a price reduction will depend on whether he interprets it to mean:

a)

The company is trying to steal the market from him.

b)

The company is not doing well and is trying to improve its sales.

c)

The company is hoping that the whole industry will reduce its prices in the interests of stimulating total demand.


When there is more than one competitor, the company must estimate each competitor's likely reaction. If all competitors are likely to behave alike, this amounts to analyzing only a typical competitor. If the competitors cannot be expected to react uniformly because of critical differences in size, market shares, or policies, then separate analyses are necessary. If it appears that a few competitors will match the price change, there is good reason to expect the rest will also match it.



3. Using decision theory for price changes

The following illustrates how a major company can integrate various uncertain factors to analyze a contemplated price reduction.

A large company had been selling a product to industrial users for several years and enjoyed 40 percent of the market. The management became worried about whether its current price could be maintained for much longer. The main source of concern was the rapid build-up of capacity by its three competitors and the possible attraction of further-competitors by the present price. Management saw the key to the problem of possible oversupply in further market expansion. The key area for market expansion lay in an important segment of the market that was closely held by a substitute product produced by a number of firms. This substitute product was not as good, but it was priced lower. Management saw a possible solution in displacing the substitute product in the recalcitrant segment through a price reduction. If it could penetrate this segment, there was a good chance it could also penetrate other segments which had resisted the displacement.

The first task was to develop a decision structure for the problem in which all components would be related. This meant defining the objectives, policy alternatives, and key uncertainties.

It was decided that the objective would be to maximize the present value of future profits over the next five years. Management decided to consider the four alternatives of maintaining the price or reducing the price.

The following were considered among the key uncertainties that had to be evaluated:

a)

How much penetration in the key segment would take place without a price reduction?

b)

How would the firms producing the substitute product react to each possible price reduction?

c)

How much penetration in the key segment would take place for every possible price reaction of the suppliers of the substitute product?

d)

How much would penetration into the key segment speed up penetration into the other segments?

e)

If the key segment were not penetrated, what was the probability that the company's competitors would initiate price reductions soon?

f)

What would be the impact of a price reduction on the decision of existing competitors to expand their capacity and/or potential competitors to enter the industry?


The data-gathering phase consisted mainly in asking key sales personnel to place subjective probabilities on the various possible states of the key uncertainties. Meetings were held with the sales personnel to explain the concept of expressing judgments in the form of probabilities. The probabilities were filled out on a long questionnaire. For example, one question asked for the probability that the producers of the substitute product would retaliate if the company reduced its price. On the average, the sales personnel felt that there was only a 5 percent probability of a full match, a 60 percent probability of a half match, and a 35 percent probability of no retaliation. They were also asked for probabilities if price were reduced still further. The sales personnel indicated, as expected, that the probability of retaliation increased with an increase in price reduction.

The next step was to estimate the likely payoffs of different courses of action. A decision-tree analysis revealed that there were over four hundred possible outcomes. For this reason, the estimation of expected payoffs was computerized. The computer indicated that in all cases a price reduction had a higher expected payoff than status quo pricing, and, in fact, a specific price level reduction had the highest expected payoff. To check the sensitivity of these results to the original assumptions, the results were recomputed for alternative assumptions about the rate of market growth and the appropriate cost of capital. It was found that the ranking of the strategies was not affected by the change in the assumptions.

The analysis clearly pointed to the desirability of some price reduction in preference to the status quo. The last step belongs to managers: to decide on the basis of this analysis, as well as other factors that may have eluded analysis, whether to initiate the price reduction and, if so, by how much.



COMPETITOR PRICE REACTION


If one reversed the previous question and asked: How can a firm that has just seen a price change by a competitor decide on its best course of action?

In some market situations the firm has no choice but to meet a competitor's price change. This is particularly true when the price is cut in a homogeneous product market. Unless the firm meets the price reduction, most buyers will shift their business to the lowest-price competitor.

When the price is raised by a firm in a homogeneous product market, the other firms may or may not meet it and they will comply if the price increase appears designed to benefit the industry as a whole. Yet if one firm does not see it that way and thinks that it or the industry would gain more by standing pat on prices, its non-compliance can make the leader and the others rescind any price increases.

In non-homogeneous product markets, a firm has more latitude in reacting to a competitor's price change. The essential fact is that buyers choose the seller on the basis of a multiplicity of considerations: service, quality, reliability, and other factors and these factors desensitize many buyers to minor price differences. The reacting firm has a number of options: doing nothing and losing few or many customers, depending upon the level of customer loyalty; meeting the price change partly or fully; countering with modifications of other elements in its marketing mix.

The firm's analysis should take the form of estimating the expected payoffs of alternative possible reactions. It should consider the following questions:

a)

Why did the competitor change his price? Is it to steal the market, to meet changing cost conditions, or to evoke a calculated market-wide price change to take advantage of total demand?

b)

Is the competitor intending to make his price change temporary or permanent?

c)

What will happen to the company's market share (and profits) if it ignores the price change? Are the other companies going to ignore the price change?

d)

What is the competitor's (and other firms') response likely to be to each possible reaction?


Consider the situation of a firm that enjoys a dominant market share whose major competitor has just cut the price in an effort to win market share. The dominant firm has two broad options:

1) Market-share maintenance. The firm may choose to lower its price to the competitor's price to avoid losing market share. It may choose this course of action because:

a)

its costs fall with volume;

b)

it believes that the market is very price-sensitive and it will lose a substantial market share; and

c)

it believes that it would be hard to rebuild its market share once it is lost.


2 Margin maintenance. The firm may choose to maintain its price and therefore its profit margin. It may believe that:
 

a)

it would lose too much profit if it reduced its price on all the units it sells;

b)

it would not lose much market share; and

c)

it would be easy to regain or hold market share by investments to increase the perceived value of its brand.



Between these extremes, the firm could also consider a partial price reduction to limit its market-share loss.

The proper course of action depends upon estimating the price elasticity of demand, the behavior of costs with volume, and the supply capabilities of the competitor. For example, margin maintenance would make good sense where there is low price elasticity (the company has built up high perceived value and has loyal customers), costs are not too sensitive to small-volume losses, and the competitor is small and cannot finance large expansions in capacity.

An extended analysis of company alternatives is not always feasible at the time of a price change. The competitor who initiated the price change may have spent considerable time in preparing for this decision, but the company that must react may have only hours or days before some decisive position must be taken. The analysis and information are necessarily below the standard usually required for determining such an important decision as a price reaction. About the only way to place such decisions on a surer footing is to anticipate their possible occurrence and to prepare and advanced programme to guide one's responses. Reaction programmes for meeting price changes are likely to find their greatest application in firms where price changes occur with some frequency and where it is important to react quickly.



PRODUCT PRICING LOGIC


The logic of setting or changing a price on an individual product has to be modified when the product is a member of a product group. In the latter case, the true quest is for a set of mutual prices that maximize the profits of the product group. This quest is made difficult because various company products are interrelated in demand and/or cost and are subject to different degrees of competition.

1.

Interrelated demand

Two products are interrelated in demand when the price (or some other element of the marketing mix) of one affects the demand for the other. One uses the concept of "cross-elasticity of demand" to express the interaction. A positive cross-elasticity means that two products are substitutes, a negative cross-elasticity means that two products are complements, and a zero (or low) cross-elasticity means that two products are unrelated in demand. Before changing the price of any single item in his line, the seller should consider the various cross-elasticities to determine the overall impact of his move.

2.

Interrelated cost

Two products are interrelated in cost when a change in the production of one affects the cost of the other. By-products and joint products are related in this sense as are many services. More generally, any two products using the same production facilities are interrelated on the cost side even if they are not joint products. This is largely because accounting practice requires a full allocation of costs. The significance of all this is that if the company increases the price of A, for example, and causes its sales to fall; the cost of the other products, assuming they are not complementary goods, will be higher. Thus management must examine the cost interactions before it changes the price of a single product in the line.

3.

Effect of competition

Various products in a company line are exposed to different degrees of competition. The seller may have little latitude in pricing products in his line where existing or potential competition is keen, and he will have varying degrees of price discretion in the other cases. Therefore the structure of prices for the products in the line should not simply be proportional to costs, however measured, for this would overlook profit opportunities that are associated with taking advantage of different degrees of competition.

4.

Alternative product-line pricing principles

In practice, costs have provided the usual starting point for determining the prices of interrelated products in the line. Even here there seems to be considerable disagreement over which costs should be used. The three most popular cost bases are full costs, incremental costs and conversion costs.

The first pricing principle calls for pricing proportionately to the full costs. The chief criticism against using the full cost is that the allocation of overhead unavoidably involves some arbitrariness. Therefore the resulting prices take on a partly arbitrary character. As a result, the company may be blind to profit opportunities that would exist if the prices of the products were not geared so tightly to the recovery of a somewhat arbitrary overhead burden.

The second pricing principle calls for setting prices that are proportional to incremental costs. The underling theory is that the company should charge customers proportionately to the extra costs it has to bear in supplying additional units of the two soaps. The net effect of pricing on an incremental cost basis is to shift sales toward the soap that absorbs more company overhead.

The third pricing principle calls for setting prices that are proportional to conversion costs. Conversion costs are defined as the labor and company overhead required to convert purchased materials into finished products. Conversion costs thus amount to the "value added" by the firm in the production process; it can be found by subtracting purchased material costs form the allocated full costs. The argument that has been advanced for using conversion costs is that the firm's profits should be based on the value its own operations add to each product. The net effect of pricing on a conversion cost basis is to shift sales toward the product that has more material cost. This pricing principle economies on the use of scarce company resources, such as labor and machines. Other than this, there is no particular economic justification for choosing certain elements of cost to bear the profit markup rather than others; furthermore, this basis again involves arbitrary allocations of overheads.

Costs represent a starting point for developing the pricing structure, but they hardly represent sufficient criteria. Incremental costs provide the lower limit to individual product pricing (except in special circumstances, such as loss leading). But a uniform markup over incremental or any other costs is fallacious in that it ignores the different demand intensities, cross-elasticities, competitive conditions, and life-cycle characteristics of each product. Pricing theory still has to progress to a stage where the cost, demand, and competitive conditions, and life-cycle characteristics of each product can be blended to produce a set of determinate prices.


Target Company
Base Reference
PRICE CHANGE DECIDERS

Buyers Reaction : Elasticity of Demand

Buyers Reaction : Perceptual Factors

Competitors Reaction : Price Reduction

Competitors Reaction : No Reaction

Competitors Reaction : Product Re-positioning

Performance Grid Definitions

Target Company
Base Reference
PRODUCT PRICING

Interrelated Demand Based

Interrelated Cost Based

Competition Based

Product-Line Pricing Based

Model or Price Theory Based

Performance Grid Definitions

HISTORIC FINANCIAL INDUSTRY DATA

HISTORIC FINANCIAL INDUSTRY DATA

 Financial Definitions



PRODUCT PRICING FINANCIAL SCENARIOS



PRODUCT PRICING FINANCIAL SCENARIOS BASED BALANCE SHEET FORECASTS


The PRODUCT PRICING FINANCIAL SCENARIOS BALANCE SHEET FORECASTS section gives a series of Forecasts for the Company and the industry using a number of assumptions relating to the pricing decisions available to the marketing management of the Company.

The Balance sheet forecast given shows the effects of pricing improvements which Financial Management is likely to recommend:


PRODUCT PRICING FINANCIAL SCENARIOS

  • Base Forecast : Median Market Scenario

  • Short-Term Price Cutting Effect

  • Short-Term Price Increase Effect

  • Promotional & Pricing Cost Objectives

  • Research & Product Cost Objectives

  • Market Share Building Objectives

  • Market Share Holding Objectives

  • Market Share Harvesting Objectives

  • Long-Term Product Price Reduction

  • Long Term Product Price Increase

  • Product Positioning


Managers in the Company will, in both the short-term and the long-term, have vital decisions to make regarding the pricing improvements, margins and profitability and these decisions will need to be evaluated in light of the customers, markets, competitors, products, industry and internal factors. The scenarios given isolate a number of the most important factors and provide balance sheet forecasts for each of the scenarios.

The data provides a short and medium term forecast covering the next 6 years for each of the Forecast Financial and Operational items. The Financial and Operational Data sections show each of the items listed below in terms of forecast data and covers a period of the next 6 years.

 

Financial Comparisons: Scenarios

 

Target Company

Base Reference Industry

 

MEDIAN  FORECAST : Financials

MEDIAN  FORECAST : Margins & Ratios

MEDIAN  FORECAST : Financials

MEDIAN  FORECAST : Margins & Ratios

 


THE TARGET COMPANY FORECASTS

SHORT-TERM PRICE CUTTING EFFECT : Financials

SHORT-TERM PRICE CUTTING EFFECT : Margins & Ratios

SHORT-TERM PRICE INCREASE EFFECT : Financials

SHORT-TERM PRICE INCREASE EFFECT : Margins & Ratios

PROMOTIONAL & PRICING Cost Objectives: Financials

PROMOTIONAL & PRICING Cost Objectives: Margins & Ratios

RESEARCH & PRODUCT Cost Objectives: Financials

RESEARCH & PRODUCT Cost Objectives: Margins & Ratios

MARKET SHARE BUILDING Objectives : Financials

MARKET SHARE BUILDING Objectives : Margins & Ratios

MARKET SHARE HOLDING Objectives : Financials

MARKET SHARE HOLDING Objectives : Margins & Ratios

MARKET SHARE HARVESTING Objectives : Financials

MARKET SHARE HARVESTING Objectives : Margins & Ratios

LONG-TERM PRODUCT PRICE CUTTING : Financials

LONG-TERM PRODUCT PRICE CUTTING : Margins & Ratios

LONG-TERM PRODUCT PRICE Increase: Financials

LONG-TERM PRODUCT PRICE Increase: Margins & Ratios

PRODUCT POSITIONING : Financials

PRODUCT POSITIONING : Margins & Ratios


FORECAST FINANCIAL SCENARIOS

SHORT-TERM PRICE CUTTING EFFECT : Financials

SHORT-TERM PRICE CUTTING EFFECT : Margins & Ratios

SHORT-TERM PRICE INCREASE EFFECT : Financials

SHORT-TERM PRICE INCREASE EFFECT : Margins & Ratios

PROMOTIONAL & PRICING Cost Objectives: Financials

PROMOTIONAL & PRICING Cost Objectives: Margins & Ratios

RESEARCH & PRODUCT Cost Objectives: Financials

RESEARCH & PRODUCT Cost Objectives: Margins & Ratios

MARKET SHARE BUILDING Objectives : Financials

MARKET SHARE BUILDING Objectives : Margins & Ratios

MARKET SHARE HOLDING Objectives : Financials

MARKET SHARE HOLDING Objectives : Margins & Ratios

MARKET SHARE HARVESTING Objectives : Financials

MARKET SHARE HARVESTING Objectives : Margins & Ratios

LONG-TERM PRODUCT PRICE CUTTING : Financials

LONG-TERM PRODUCT PRICE CUTTING : Margins & Ratios

LONG-TERM PRODUCT PRICE Increase: Financials

LONG-TERM PRODUCT PRICE Increase: Margins & Ratios

PRODUCT POSITIONING : Financials

PRODUCT POSITIONING : Margins & Ratios

 

 Financial Definitions

 


 

 

8

Marketing Expenditure & Market Share:

 

 
This section has the following Product coverage:-

Company Products

Products & Services

Significant Company Products

Company Product / Brand Sector 1

Company Product / Brand Sector 2

Company Product / Brand Sector 3

Company Product / Brand Sector 4

Company Product / Brand Sector 5

Company Product / Brand Sector 6

Company Product / Brand Sector 7

Company Product / Brand Sector 8

Company Product / Brand Sector 9

Company Product / Brand Sector 10

Company Product / Brand Sector 11

Company Product / Brand Sector 12

Company Product / Brand Sector 13

Company Product / Brand Sector 14

Company Product / Brand Sector 15

Major Products

Industry Product Sector 1

Industry Product Sector 2

Industry Product Sector 3

Industry Product Sector 4

Industry Product Sector 5

Industry Product Sector 6

Industry Product Sector 7

Industry Product Sector 8

Industry Product Sector 9

Industry Product Sector 10

Industry Product Sector 11

Industry Product Sector 12

Industry Product Sector 13

Industry Product Sector 14

Industry Product Sector 15

 

MARKET SHARE FORECAST

 
MARKETING EXPENDITURE -v- MARKET SHARE

  • Marketing Expenditure -v- Market Share

MARKETING EXPENDITURE -v- MARKET SHARE

Target Company

Base Reference Country

MARKETING EXPENDITURE –v- MARKET SHARE

MARKETING EXPENDITURE –v- MARKET SHARE

 Market Definitions

  • Marketing Expenditure Increase +12

  • Marketing Expenditure Increase +10%

  • Marketing Expenditure Increase + 8%

  • Marketing Expenditure Increase + 6%

  • Marketing Expenditure Increase + 4%

  • Marketing Expenditure Increase- + 2%

  • Marketing Expenditure Decrease - 2%

  • Marketing Expenditure Decrease – 4%

  • Marketing Expenditure Decrease – 6%

  • Marketing Expenditure Decrease – 8%

  • Marketing Expenditure Decrease – 10%

  • Marketing Expenditure Decrease – 12%


The application or reduction of marketing expenditure in the Products & Services market will have an effect on the relative product propensity to consume of the customer bases. An average increase or decrease in Marketing activity will mean that some products will benefit at the cost of others.

This section is designed to analyze the relative effect on product or product group market share if a certain level of average marketing expenditure is applied.

Obviously if one company applies marketing expenditure to its particular range of products the effects may mean that those products gain market share at the cost of other products in the marketplace.

The problem arises when the industry as a whole feels either, optimistic (and therefore increases marketing expenditure); or feels pessimistic (and decreases marketing expenditure). How in these circumstances will the relative market shares of products react?

This section thus gives data on how products within the marketplace react to changes in marketing expenditure.

 

 

Financial Comparisons: Scenarios

 

Target Company

Base Reference Industry

 

MEDIAN  FORECAST : Financials

MEDIAN  FORECAST : Margins & Ratios

BEST  FORECAST : Financials

BEST  FORECAST : Margins & Ratios

WORST  FORECAST : Financials

WORST  FORECAST : Margins & Ratios

PRODUCT LAUNCH: Financials

PRODUCT LAUNCH: Margins & Ratios

MEDIAN  FORECAST : Financials

MEDIAN  FORECAST : Margins & Ratios

BEST  FORECAST : Financials

BEST  FORECAST : Margins & Ratios

WORST  FORECAST : Financials

WORST  FORECAST : Margins & Ratios

PRODUCT LAUNCH: Financials

PRODUCT LAUNCH: Margins & Ratios

 


THE TARGET COMPANY FORECASTS

MARKETING EXPENDITURE : Financials

MARKETING EXPENDITURE : Margins & Ratios

Marketing Expenditure Increase: + 2% : Financials

Marketing Expenditure Increase: + 2% : Margins & Ratios

Marketing Expenditure Increase: + 4% : Financials

Marketing Expenditure Increase: + 4% : Margins & Ratios

Marketing Expenditure Increase: + 6% : Financials

Marketing Expenditure Increase: + 6% : Margins & Ratios

Marketing Expenditure Increase: + 8% : Financials

Marketing Expenditure Increase: + 8% : Margins & Ratios

Marketing Expenditure Increase: +10% : Financials

Marketing Expenditure Increase: +10% : Margins & Ratios

Marketing Expenditure Increase: +12% : Financials

Marketing Expenditure Increase: +12% : Margins & Ratios

Marketing Expenditure Decrease: - 2% : Financials

Marketing Expenditure Decrease: - 2% : Margins & Ratios

Marketing Expenditure Decrease: - 4% : Financials

Marketing Expenditure Decrease: - 4% : Margins & Ratios

Marketing Expenditure Decrease: - 6% : Financials

Marketing Expenditure Decrease: - 6% : Margins & Ratios

Marketing Expenditure Decrease: - 8% : Financials

Marketing Expenditure Decrease: - 8% : Margins & Ratios

Marketing Expenditure Decrease: -10% : Financials

Marketing Expenditure Decrease: -10% : Margins & Ratios

Marketing Expenditure Decrease: -12% : Financials

Marketing Expenditure Decrease: -12% : Margins & Ratios


FORECAST FINANCIAL SCENARIOS

MARKETING EXPENDITURE : Financials

MARKETING EXPENDITURE : Margins & Ratios

Marketing Expenditure Increase: + 2% : Financials

Marketing Expenditure Increase: + 2% : Margins & Ratios

Marketing Expenditure Increase: + 4% : Financials

Marketing Expenditure Increase: + 4% : Margins & Ratios

Marketing Expenditure Increase: + 6% : Financials

Marketing Expenditure Increase: + 6% : Margins & Ratios

Marketing Expenditure Increase: + 8% : Financials

Marketing Expenditure Increase: + 8% : Margins & Ratios

Marketing Expenditure Increase: +10% : Financials

Marketing Expenditure Increase: +10% : Margins & Ratios

Marketing Expenditure Increase: +12% : Financials

Marketing Expenditure Increase: +12% : Margins & Ratios

Marketing Expenditure Decrease: - 2% : Financials

Marketing Expenditure Decrease: - 2% : Margins & Ratios

Marketing Expenditure Decrease: - 4% : Financials

Marketing Expenditure Decrease: - 4% : Margins & Ratios

Marketing Expenditure Decrease: - 6% : Financials

Marketing Expenditure Decrease: - 6% : Margins & Ratios

Marketing Expenditure Decrease: - 8% : Financials

Marketing Expenditure Decrease: - 8% : Margins & Ratios

Marketing Expenditure Decrease: -10% : Financials

Marketing Expenditure Decrease: -10% : Margins & Ratios

Marketing Expenditure Decrease: -12% : Financials

Marketing Expenditure Decrease: -12% : Margins & Ratios

 

 Financial Definitions

 

 

 

Market & Revenue Comparisons:  Scenarios

 

Target Company

Base Reference Market

 

MEDIAN REVENUE FORECAST Scenario

MEDIAN REVENUE FORECAST Scenario Product Share

BEST REVENUE FORECAST Scenario

BEST REVENUE FORECAST Scenario Product Share

WORST REVENUE FORECAST Scenario

WORST REVENUE FORECAST Scenario Product Share

PRODUCT LAUNCH: Scenario

PRODUCT LAUNCH: Scenario Product Share

MEDIAN MARKET FORECAST Scenario

MEDIAN MARKET FORECAST Scenario Product Share

BEST MARKET FORECAST Scenario

BEST MARKET FORECAST Scenario Product Share

WORST MARKET FORECAST Scenario

WORST MARKET FORECAST Scenario Product Share

PRODUCT LAUNCH: Scenario

PRODUCT LAUNCH: Scenario Product Share

 

THE TARGET COMPANY  REVENUES

MARKETING EXPENDITURE Scenario Market Forecast

MARKETING EXPENDITURE Scenario Product Share Forecast

Marketing Expenditure Increase: + 2% Scenario Market Forecast

Marketing Expenditure Increase: + 2% Scenario Product Share Forecast

Marketing Expenditure Increase: + 4% Scenario Market Forecast

Marketing Expenditure Increase: + 4% Scenario Product Share Forecast

Marketing Expenditure Increase: + 6% Scenario Market Forecast

Marketing Expenditure Increase: + 6% Scenario Product Share Forecast

Marketing Expenditure Increase: + 8% Scenario Market Forecast

Marketing Expenditure Increase: + 8% Scenario Product Share Forecast

Marketing Expenditure Increase: +10% Scenario Market Forecast

Marketing Expenditure Increase: +10% Scenario Product Share Forecast

Marketing Expenditure Increase: +12% Scenario Market Forecast

Marketing Expenditure Increase: +12% Scenario Product Share Forecast

Marketing Expenditure Decrease: - 2% Scenario Market Forecast

Marketing Expenditure Decrease: - 2% Scenario Product Share Forecast

Marketing Expenditure Decrease: - 4% Scenario Market Forecast

Marketing Expenditure Decrease: - 4% Scenario Product Share Forecast

Marketing Expenditure Decrease: - 6% Scenario Market Forecast

Marketing Expenditure Decrease: - 6% Scenario Product Share Forecast

Marketing Expenditure Decrease: - 8% Scenario Market Forecast

Marketing Expenditure Decrease: - 8% Scenario Product Share Forecast

Marketing Expenditure Decrease: -10% Scenario Market Forecast

Marketing Expenditure Decrease: -10% Scenario Product Share Forecast

Marketing Expenditure Decrease: -12% Scenario Market Forecast

Marketing Expenditure Decrease: -12% Scenario Product Share Forecast


FORECAST MARKET SCENARIOS

MARKETING EXPENDITURE Scenario Market Forecast

MARKETING EXPENDITURE Scenario Product Share Forecast

Marketing Expenditure Increase: + 2% Scenario Market Forecast

Marketing Expenditure Increase: + 2% Scenario Product Share Forecast

Marketing Expenditure Increase: + 4% Scenario Market Forecast

Marketing Expenditure Increase: + 4% Scenario Product Share Forecast

Marketing Expenditure Increase: + 6% Scenario Market Forecast

Marketing Expenditure Increase: + 6% Scenario Product Share Forecast

Marketing Expenditure Increase: + 8% Scenario Market Forecast

Marketing Expenditure Increase: + 8% Scenario Product Share Forecast

Marketing Expenditure Increase: +10% Scenario Market Forecast

Marketing Expenditure Increase: +10% Scenario Product Share Forecast

Marketing Expenditure Increase: +12% Scenario Market Forecast

Marketing Expenditure Increase: +12% Scenario Product Share Forecast

Marketing Expenditure Decrease: - 2% Scenario Market Forecast

Marketing Expenditure Decrease: - 2% Scenario Product Share Forecast

Marketing Expenditure Decrease: - 4% Scenario Market Forecast

Marketing Expenditure Decrease: - 4% Scenario Product Share Forecast

Marketing Expenditure Decrease: - 6% Scenario Market Forecast

Marketing Expenditure Decrease: - 6% Scenario Product Share Forecast

Marketing Expenditure Decrease: - 8% Scenario Market Forecast

Marketing Expenditure Decrease: - 8% Scenario Product Share Forecast

Marketing Expenditure Decrease: -10% Scenario Market Forecast

Marketing Expenditure Decrease: -10% Scenario Product Share Forecast

Marketing Expenditure Decrease: -12% Scenario Market Forecast

Marketing Expenditure Decrease: -12% Scenario Product Share Forecast

   Market Definitions  

 


9

Profitability & ROI Scenarios:

 

 

Financial Comparisons: Scenarios

 

Target Company

Base Reference Industry

 


THE TARGET COMPANY FORECASTS

FIXED MARKETING Cost Objectives: Financials

FIXED MARKETING Cost Objectives: Margins & Ratios

VARIABLE MARKETING Cost Objectives: Financials

VARIABLE MARKETING Cost Objectives: Margins & Ratios

GENERAL MARKETING PROCESS Cost Objectives: Financials

GENERAL MARKETING PROCESS Cost Objectives: Margins & Ratios

DISTRIBUTION & PRODUCT DELIVERY Cost Objectives: Financials

DISTRIBUTION & PRODUCT DELIVERY Costs: Margins & Ratios

ADMINISTRATIVE & GENERAL EXPENSE Objectives : Financials

ADMINISTRATIVE & GENERAL EXPENSE Costs : Margins & Ratios

SELLING Cost Objectives: Financials

SELLING Cost Objectives: Margins & Ratios

ADVERTISING Cost Objectives: Financials

ADVERTISING Cost Objectives: Margins & Ratios

PROMOTIONAL & PRICING Cost Objectives: Financials

PROMOTIONAL & PRICING Cost Objectives: Margins & Ratios

RESEARCH & PRODUCT Cost Objectives: Financials

RESEARCH & PRODUCT Cost Objectives: Margins & Ratios

MARKET SHARE BUILDING Objectives : Financials

MARKET SHARE BUILDING Objectives : Margins & Ratios

MARKET SHARE HOLDING Objectives : Financials

MARKET SHARE HOLDING Objectives : Margins & Ratios

MARKET SHARE HARVESTING Objectives : Financials

MARKET SHARE HARVESTING Objectives : Margins & Ratios


FORECAST FINANCIAL SCENARIOS

FIXED MARKETING Cost Objectives: Financials

FIXED MARKETING Cost Objectives: Margins & Ratios

VARIABLE MARKETING Cost Objectives: Financials

VARIABLE MARKETING Cost Objectives: Margins & Ratios

GENERAL MARKETING PROCESS Cost Objectives: Financials

GENERAL MARKETING PROCESS Cost Objectives: Margins & Ratios

DISTRIBUTION & PRODUCT DELIVERY Cost Objectives: Financials

DISTRIBUTION & PRODUCT DELIVERY Costs: Margins & Ratios

ADMINISTRATIVE & GENERAL EXPENSE Objectives : Financials

ADMINISTRATIVE & GENERAL EXPENSE Costs : Margins & Ratios

SELLING Cost Objectives: Financials

SELLING Cost Objectives: Margins & Ratios

ADVERTISING Cost Objectives: Financials

ADVERTISING Cost Objectives: Margins & Ratios

PROMOTIONAL & PRICING Cost Objectives: Financials

PROMOTIONAL & PRICING Cost Objectives: Margins & Ratios

RESEARCH & PRODUCT Cost Objectives: Financials

RESEARCH & PRODUCT Cost Objectives: Margins & Ratios

MARKET SHARE BUILDING Objectives : Financials

MARKET SHARE BUILDING Objectives : Margins & Ratios

MARKET SHARE HOLDING Objectives : Financials

MARKET SHARE HOLDING Objectives : Margins & Ratios

MARKET SHARE HARVESTING Objectives : Financials

MARKET SHARE HARVESTING Objectives : Margins & Ratios

 

 Financial Definitions

 

 


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