Page 180 - DMGT509_RURAL MARKETING

Unit 9: Pricing Strategies

6. Low volume-low price strategy: This strategy of reducing prices by reducing the package Notes
size in order to make it appear more affordable, is delivering very good results for a large
number of FMCG product categories, in the rural markets of India. In categories where
maintaining the price point is extremely critical, this strategy is delivering very good
results.
7. Ensuring price compliance: Rural retailers, most of the times, charges more than the MRP.
The manufacture has to ensure price compliance either through promotional campaigns,
as was done by Coca Cola, or by ensuring the availability of products at the retail outlets
directly.

Task Plan increase or decrease in Sales Volume with force changes of FMCG selected
product.

9.3 Production Costs

Total cost = fixed cost + variable cost.

Suppose for manufacturing 5000 computers, the fixed cost is rupees 30 million and variable cost
rupees 20 million then the total cost would as following:
Total cost for 5000 computers = (30+20) = 50 million rupees

Fixed cost works out to rupees 6000 and variable cost rupees 4000 per computer.
Fixed cost per computer = 30000000/5000 = 6000
Variable cost per computer = 20000000/5000 = 4000

Total cost per computer = 6000 + 4000 = 10,000
Let us see what happens when the firm doubles the production to 10000
The fixed cost gets reduced as now the total fixed cost is divided by 10000 as follows.
Fixed cost = 30000000/10000= 3000

Self Assessment

Fill in the blanks:

1. .......................... in highly competitive world has assumed unprecedented importance in
the management of rural markets for firms' profitability.
2. Firms resort to penetrating pricing in order to increase their .......................... .

3. Firms strive for achieving cost leadership by means of manufacturing to achieve economies
of scale and providing the desired experience to the .......................... .
4. .......................... subsidy is actually the money given as share of common advertising by the
firm and the channel member.
5. Advertising subsidy is actually the money given as share of common advertising by the
firm and the .......................... member.

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