BA 101 1st Edition Lecture 14 Outline of Last Lecture 1. Too much Cash?2. Lecture: Cash Flow continuedOutline of Current Lecture I. Break Even analysisII. Net Present ValueIII. Marketing strategy Current LectureI. Break Even Analysis: Definition: the break-even is the point at which the sales and costs are equal. Profit iszero at this point. “The business has broken even” -Or- the break-even point answersthe 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 criteriaExpectations importanceLow tech: 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 decisionsMarketing: 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 andfaster)Profit Maximization: setting prices so that the total revenue is as large as possible relative to thetotal 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 soldIt 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