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CaseStudy1 Siddhant

The document outlines the process flow for selecting pricing strategies for bottles. It involves selecting a pricing objective, usually profit maximization. Then determining demand through surveys, experiments, and analysis. Estimating costs including variable, fixed, and marginal costs. Analyzing competitors' prices, costs, and offers. Selecting a pricing method, usually target-return pricing, to maximize return on investment and doing break-even analysis. The final price is set after considering all these factors. Low sales of high margin products is often the main reason profits fail, as revenue increases from more low margin product sales but margins and thus profits remain low.

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Sumit Suman
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35 views

CaseStudy1 Siddhant

The document outlines the process flow for selecting pricing strategies for bottles. It involves selecting a pricing objective, usually profit maximization. Then determining demand through surveys, experiments, and analysis. Estimating costs including variable, fixed, and marginal costs. Analyzing competitors' prices, costs, and offers. Selecting a pricing method, usually target-return pricing, to maximize return on investment and doing break-even analysis. The final price is set after considering all these factors. Low sales of high margin products is often the main reason profits fail, as revenue increases from more low margin product sales but margins and thus profits remain low.

Uploaded by

Sumit Suman
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Process flow of pricing strategies for both bottles

Profit is the main objective of the


business in this case. Producer
Selecting the wants to maximise the profit.
Pricing Objective

Methods to be used:
 Surveys Determining
Demand
 Price Experiments
 Statistical Analysis
 Variable & Fixed Costs
 Total Costs
Estimation of
Costs
 Marginal Costs
(Producer wants to set the price such that it
will cover its production costs, distribution,
Analyse the competitor’s offerings, prices and transportation, selling & miscellaneous costs)
costs to decide on the next best strategy for Analysing
Competitor’s
setting the price. Value proposition is what Costs, Prices &
customers want in a product. Offers

For maximising profit, the pricing method


should be Target-Return Pricing in order to get
Selecting a Pricing
Method the best possible ROI. Break-even Analysis
needs to be done to get the idea of the costs
and volume to be produced.

The final price was set after


taking into consideration all Selecting the Final
Price
the previous steps.
Reasons for Failing Profits

 Expenses : Most of the time, company fails to control the expenses which includes office bills, rent, insurances, electricity bills,
advertisements etc which causes the price per product to rise and even though the revenue is increasing, profit keeps failing.

 Inventory Cost : Maintaining inventory is important to cover up the fluctuations in demand. But, if inventory is large, it might costs
too much and the profit per product reduces. Methods like forecasting, aggregate planning etc might help in minimising the inventory.

 Customer Acquisition Cost : Marketing and advertisement helps in increasing the awareness among the customers and at the same
time, increase the customer base if done right. But, per customer acquisition cost should not be too high because then, it will be very
tough for the company to break-even. Try investing only that much in marketing and advertisement that gives you some ROI.

 Staffs Turnover : If this turnover is high, then, the extra hiring and training of staffs add too much to the expenses resulting in
decreasing profit.

 Low Sales of High-Margin Products : The sales revenue might have increased in this case because of more sales of low margin product.
The revenue usually increases because of this reason but since margin is less, profit is also less. Here, the focus should be on
increasing the sales of high margin.

Best Possible Reason for Failing Profits


Low sales of high margin products is usually the reason for reducing profits. Manufacturer saves a lot of money while packaging, handling,
transporting and stocking of same product of high volume (32 ounce products). People don’t usually buy high volume product if they have less
disposable income per month. To satisfy all the needs, trade-off takes place. So, usually, similar products of low volume is purchased most of the
times.

Sources:
 Kotler
 https://americancoinop.com/articles/sales-are-profits-are-down-why

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