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After acquiring the necessary knowledge and skills on starting an Aloevera Farm, Ashok wanted to be the leading manufacturer of Aloevera products worldwide. He observed that the products were expensive as the demand of the products was more than the supply. He was also keen to promote methods and practices that were economically viable, environmentally sound and at the same time protecting public health.
Ashok's main consideration was about the amount of money paid by the consumers in consideration of the purchase of Aloevera products. He also thought that competitors prices and their anticipated reactions must also be considered for this.
After gathering and analysing information and doing correct marketing planning, he came to know that the consumers compare that value of a product to the value of money which they are required to pay. The consumers will be ready to buy a product when they perceived that the value of the product is at least equal to the value of money which they would pay.
Since he was entering into a new market, he felt that he may not be able to cover all costs. He knew that in the long run the business will not be able to survive unless all costs are covered in addition to a minimum profit.
He examined the quality and features of the products of the competitors and the anticipated reactions of the consumers. Considering the same he decided to add some unique features to the packaging and also decided to provide free home delivery of the products.
The above case relates to a concept which is considered to be an effective competitive marketing weapon. In conditions of perfect competition most of the firms compete with each other on this concept in the marketing of goods and services.
Ashok's main consideration was about the amount of money paid by the consumers in consideration of the purchase of Aloevera products. He also thought that competitors prices and their anticipated reactions must also be considered for this.
After gathering and analysing information and doing correct marketing planning, he came to know that the consumers compare that value of a product to the value of money which they are required to pay. The consumers will be ready to buy a product when they perceived that the value of the product is at least equal to the value of money which they would pay.
Since he was entering into a new market, he felt that he may not be able to cover all costs. He knew that in the long run the business will not be able to survive unless all costs are covered in addition to a minimum profit.
He examined the quality and features of the products of the competitors and the anticipated reactions of the consumers. Considering the same he decided to add some unique features to the packaging and also decided to provide free home delivery of the products.
The above case relates to a concept which is considered to be an effective competitive marketing weapon. In conditions of perfect competition most of the firms compete with each other on this concept in the marketing of goods and services.
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Question : 28
Total: 32
Explain briefly any four factors discussed in the above case related to the concept so identified.
Solution:
Factors discussed in the above case are:
(i) Product cost: Product cost includes the cost of procuring, distributing and selling the product. The cost sets the minimum level or the floor price at which the product can be sold. There are three types of cost-fixed cost, variable cost and semi-variable cost. Sum of all three cost, sets the minimum level at which the product may be sold. However, at the time of introducing a new product or while entering into a new market, product may be sold at a price, which does not cover all the costs but in long run, a firm can survive only when all its cost are covered.
(ii) Utility and demand of the product: It must be noted that the cost of product sets the lower limit of price where as the utility of the product and intensity of demand of the buyer sets the upper limit of price, which a buyer would be prepared to pay.
(iii) Extent of competition in the market: Price of the product can not be fixed without considering the price of competitors' products, and their anticipated reaction which must be considered before fixing the price of the product. Here it is also discussed about the perfect competition in the market.
(iv) Marketing method used: The pricing decision is also affected by various other elements of marketing, such as distribution channels used, extent of advertisement, sales promotion efforts, packaging, after sales service etc.
(i) Product cost: Product cost includes the cost of procuring, distributing and selling the product. The cost sets the minimum level or the floor price at which the product can be sold. There are three types of cost-fixed cost, variable cost and semi-variable cost. Sum of all three cost, sets the minimum level at which the product may be sold. However, at the time of introducing a new product or while entering into a new market, product may be sold at a price, which does not cover all the costs but in long run, a firm can survive only when all its cost are covered.
(ii) Utility and demand of the product: It must be noted that the cost of product sets the lower limit of price where as the utility of the product and intensity of demand of the buyer sets the upper limit of price, which a buyer would be prepared to pay.
(iii) Extent of competition in the market: Price of the product can not be fixed without considering the price of competitors' products, and their anticipated reaction which must be considered before fixing the price of the product. Here it is also discussed about the perfect competition in the market.
(iv) Marketing method used: The pricing decision is also affected by various other elements of marketing, such as distribution channels used, extent of advertisement, sales promotion efforts, packaging, after sales service etc.
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