Sales Promotion

Session 20
MM2
Prof. Avinash Mulky

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 Marketing in Action

l Something is in short supply or not available

l Make it available
l Existing product or service is not providing
satisfaction to consumers
l Provide a better or cheaper product
l Provide it in a more convenient way
l Introduce a new product or service

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 The scope of Marketing

Market Target market Positioning

Creating Segmentation selection
Value
Place /
Product Channel Promotion
Mix

Capturing Pricing
value

Sustaining Customer Customer

acquisition retention
value

Profits

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 Value

Value = Benefits obtained by customers

Costs incurred by customers

= Functional + Emotional Benefits

Money+ Time + Energy + Other costs

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 Appealing to customers

l Increase benefits obtained by customers

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

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 The Role of Price

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 The Pricing Range

Value
Perceived
Downward pressure Feasible
from substitutes
Price
range
Price

Upward pressure Premium

through marketing
efforts Marginal
Cost

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 Comparison of Profit drivers

Profit Driver Profit

Old New Old New

Price 100 110 10 L 20 L

100 %
Variable unit
Cost 60 54 10 L 16 L
60%
Sales Volume 1L 1.1 L 10 L 14 L
40%
Fixed Costs 30 L 27 L 10 L 13 L
30%

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 Price and the customer
Sales volume in lakh
units

1.4

Price response curve

0.6

20 40 60 80 100 140 Price in Rs.

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 Price and the customer
Sales volume in lakh
units

Price response curve

1.4

1 Current Sale

Optimal sales
0.6

20 40 60 80 100 140 Price in Rs.

Current Price (105) Optimal price
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 Price customization:
Coca Cola (330 ml can) price in Germany

Point of sale Price ( DM) Index

Supermarket 0.64 100

Bakery 0.80 125

University 0.9 141

( Vending)
Petrol pump 1.20 188
Vending – Main 1.50 243
Road
Airport 2.00 312

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 Price customization:
ATM usage charges

Location of ATM $ per transaction

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

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 The Role of multiple “
products”

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 Airline: Mumbai to Delhi

l 200 seater aircraft

l Variable cost per passenger = Rs. 4000

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 Airline Sales response curve
Sales Volume

Profit Potential
½ X 200 X 6000= 6 L
B
200

C
A

4000 10000
Price

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 Pricing with a single price
Sales Volume

200
Maximum Profit rectangle for a
single price

100
Contribution =
100 X 3000= 3 L

4000 7000 10000

Price

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 Pricing for Business and Economy
classes

Sales Volume

Economy=2000 X 140= 2.8 L

Business= 2500 X 40= 1.0 L
TOTAL CONTRIBUTION= 3.8 L
200
( 26.7 % more than for a single
price)
140

40

4000 6000 8500 10000

Price

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 Pricing for new products
Skimming Penetration
l High short-term prices l High profit through fast
l To recover R&D and sales growth
promotional expenses l Quick induction of trials
l Profits before obsolescence l Better utilization of capacity
l Prestige connotation l Deter new entrants
l Lower volume- less l Reduction of short term
demands on capacity costs through volume
l Reduction of long term
costs through scale

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