BA 101 1st Edition Lecture 14 Outline of Last Lecture 1 Too much Cash 2 Lecture Cash Flow continued Outline of Current Lecture I Break Even analysis II Net Present Value III Marketing strategy Current Lecture I Break Even Analysis Definition the break even is the point at which the sales and costs are equal Profit is zero at this point The business has broken even Or the break even point answers the question how many units do you have to sell to cover all of your costs Customer Survey Score components in foundation Product positioning performance and size MTBF mean time before failure Price Age years since initial introduction Awareness how aware your customers are about your product Accessibility how easily your customers are able to find purchase your product Accounts receivable policy your customer s ability to purchase your product on credit Fast Track pages 5 6 Customer buying criteria Expectations Low tech importance Price 15 30 41 Age Ideal age 3 years 29 Reliability MTBF 14 000 20 000 21 These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Positioning Pfmn 5 3 size 14 7 9 High tech Positioning Pfmn 12 3 size 7 7 33 Age Ideal age 0 years 29 Price 25 45 25 Reliability MTBF 17 000 23 000 13 Attractiveness Score represent market research that has been done for you and provided for your use In Foundation you will never have to create an attractiveness score it will be provided for you by the simulation Customer Survey Score Is created using the number of points assigned as an attractiveness score for each category in Foundation those 4 are Age Positioning Price and Reliability and cross multiplying those numbers by the percentage of importance that has been assigned As you can see above the importance of each category varies by market segment The total number after going through that process is the CSS for that product II Lecture Marketing decisions Marketing questions to answer in any marketing situation You should be able to answer them about the market presented by Foundation Who are your potential customers How big is the market How fast is growing Can you usefully group your customers What do they want from you the 4 Ps plus Service The impact of service The service element can be particularly influential for commodity products that is products which are similar to each other without meaningful differentiation Perceived Age In foundation the age of the sensors you are offering for sale are important in both the hi tech and low tech segment of the market However they differ in their ideal age The low tech segment has an ideal age of 3 years The hi tech segment prefers their sensors to be as new as possible How do you manage age Every time you update a product its age is perceived to be cut in half at the time the updates take effect So for the low tech market you would want to update your sensor every other year to keep it within the acceptable age range The high tech sensors should be new every year so they stay on the cutting edge of sensor technology i e smaller and faster Profit Maximization setting prices so that the total revenue is as large as possible relative to the total costs What is the trade off Revenue price per unit x number of units sold Higher price means more revenue per unit but fewer units sold Lower price means less revenue per unit but more units sold It is possible to pursue either a low price strategy ex Walmart or a high price strategy ex Nordstrom Raising customer awareness in Foundation according to Foundation every year 1 3 of your customers forget about your business You must spend enough money on the promotional budget to regain those customers and possibly bring in new ones but don t put too much money into promotions because of the law of diminishing returns