An aggressive marketing strategy:
Solution:
Now since the market is competitive and Digital Labs in order to improve their sales and profit figures, if adopt for an agressive marketing campaign, apart from financial issues relating to increased fixed cost and commission cost, company have to consider the marketing strategy of their competitors and also if they are losing on product quality and innovation factors, even a $15 million budget on advertisement will not help the company.
Thus, considering their product quality and what kind of innovative techniques their competitors are offering to the customers, is indeed an important consideration.
Option 2)
A 5% reduction in selling price:
Solution:
Since the target of the company is ultimately to improve the profit figures which as per this option, is by reduction of price by 5%, the core non-finance issue which the sales manager must consider is how will the customer’s demand pattern change in response to reduction in sales.
If the demand of the customers is inelastic, in other words, if the customers do not increase their demand even with fall in price of units just because they found a better substitute or have developed an unfavorable taste for the product, in such case, even reduction of price the unit will not be a successful strategy for the company.(Parkin, 2011)
Option 3)
A 10% reduction in Sales Price to expect increase in sales:
Solution:
Here the sales manager is over ruling other market factors that may fail out his plans of increased sales by reducing the price. Even if Digital Labs reduces its price then it may be possible that even their competitors reduce the prices and market comes back to competition.
Also there is always a contingency that if during the period of proposal of reduction in prices, the relationship with supplier turns bad, then a reduction in price to increase sales may ultimately lead to inventory stock out as company will not be having anything to sell in the absence of supplier’s delivery.
References:
Michael Parkin (2011) 'Elasticity', in CFA Institute (ed.) Economics. Boston: Custom, pp. 10-28.
Michael Parkin (2011) 'Markets in Action', in CFA Institute (ed.) Economics. Boston: Custom, pp. 38-54.
Vikram Gupta (2008) 'Marketing Concepts: Do's and Dont's', in CBSE (ed.) Business Studies. New Delhi: Sharma Publisher, pp. 23-41.
