Consumer Promotion – Product Management Game
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Consumer Promotion
Consumer promotion curves are exponential; the demand impact is positive, meaning demand increases with increasing consumer promotion. As the consumer promotion increases, the impact on the demand decreases. So the slope of the curve decreases with increasing consumer promotions.
The curve of the cheaper product category is more flat. This can be explained by the argument that consumer promotion would have more impact on the sales of the more expensive product category.
Here is the curve for Product 1 category (the cheapest). Axis X represents the spending in consumer promotions and the axis Y represents the impact on demand which varies from 0 to 1. This impact on demand would be later used directly.
In the practical scenario, a team may choose to have zero spending on consumer promotions.
Advertising
Advertising curves are exponential; the demand impact is positive, meaning demand increases with increasing advertising. As the advertising increases, the impact on the demand decreases. So the slope of the curve decreases with increasing advertising.
The curve of the cheaper product category is steeper. This can be explained by the argument that amount on advertising put in a cheaper product would have more impact on demand.
Here is the curve for Product 1 category (the cheapest). Axis X represents the spending in advertisings and the axis Y represents the impact on demand which varies from 0 to 1. This impact on demand would be later used directly.
In the practical scenario, a team may choose to have zero spending on advertisements.
Distribution
Distribution curves have been assumed to be linear. As the distribution spending increase, the impact on demand is linear within a particular range.
The curve is steepest for the expensive product category. The distribution for expensive product category is selective while the distribution for cheapest product category is intensive.
Here is a curve of product 3 category i.e. the most expensive. Axis X represents the spending in distribution and the axis Y represents the impact on demand which varies from 0 to 1. This impact on demand would be later used directly.
There is no impact on demand beyond certain points for all the 3 product categories.
In the practical scenario, a team may not choose to have zero spending on distribution. Minimum distribution spending is Rs. 1,00,000 for all the 3 product categories.
Price
The demand impact of the prices is negative. The demand of the products decreases with increasing prices.
For the product category 1, the price decrease is exponential with a decreasing slope. The demand falls at a decreasing rate with increasing prices. The curve becomes inelastic below a particular price. For this particular category, after a certain price the demand drops to zero. The lower limit for the prices has been kept as Rs. 750.
Here is the curve of the product category 1, the cheapest version. Axis X represents the spending in price and the axis Y represents the impact on demand which varies from 0 to 1. This impact on demand would be later used directly.
For the product category 2, the curve first falls down exponentially, then linearly. The slope of the curve decreases. The curve becomes inelastic below a particular price. For this particular category, after a certain price the demand drops to zero. The lower limit for the prices has been kept as Rs. 2000.
Here is the curve of the product category 2. Axis X represents the spending in price and the axis Y represents the impact on demand which varies from 0 to 1. This impact on demand would be later used directly.
For the product category 3, the curve first falls down exponentially but at an increasing rate. The slope of the curve increases with the increase in price. The curve becomes inelastic below a particular price and above a particular price. The lower limit for the prices has been kept as Rs. 5000.
Here is the curve of the product category 3, the most expensive version. Axis X represents the spending in price and the axis Y represents the impact on demand which varies from 0 to 1. This impact on demand would be later used directly.
Quality
The quality spends include the incremental and the R&D spends.
For the product category 1, the increase in the quality spends increases the demand exponentially at a decreasing rate. A team can decide to have zero spending on the quality. The curve becomes inelastic below and above certain quality spends.
Here is the curve of the product category 1. Axis X represents the spending in quality and the axis Y represents the impact on demand which varies from 0 to 1. This impact on demand would be later used directly.
For the product category 2, the increase in the quality spends increases the demand linearly; at a decreasing rate for higher quality spends. A team can decide to have zero spending on the quality. The curve becomes inelastic below and above certain quality spends.
Here is the curve of the product category 2. Axis X represents the spending in quality and the axis Y represents the impact on demand which varies from 0 to 1. This impact on demand would be later used directly.
For the product category 3, the increase in the quality spends increases the demand linearly. A team can decide to have zero spending on the quality. The curve becomes inelastic below and above certain quality spends.
Here is the curve of the product category 3. Axis X represents the spending in quality and the axis Y represents the impact on demand which varies from 0 to 1. This impact on demand would be later used directly.
Round-1: Product portfolio management
Low price segment:
The products in this category are in the maturity stage of life cycle. Gaining market share should be the objective for the product manager in this market segment.
As this is the price sensitive segment, more weight age is given to Pricing, followed by Distribution costs. We assumed Trade promotion costs as a part of