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Unformatted text preview: Why is marketing important? What is marketing? Marketing is about: How to manage profitable customer relationships Marketing math: Analytical approach to study how marketing actions impact profits Marketing Research Understanding Customers Segmenting & Selecting Customers Managing Competition Product Strategy Pricing Strategy Promotion Strategy Channel (Place) Strategy Marketing Mix New term Augmenting the definition Marketing = How to manage profitable customer relationships through creating and capturing value using the marketing mix. Question: How does the marketing mix affect the profits? # Let’s Define Profits first… Profits (for a given product) Profits = Revenue – Costs = P rice x Q uantity Sold – Variable Costs – Fixed Costs = P X Q – c X Q – Fixed Costs, where c is the per unit variable cost Let’s introduce an analytical framework to understand how the marketing mix affect profits Market for a given product Product A Current market size: 8 customers If customers purchase the product, they derive a certain Value (that can be measured in $) from consuming the product Assume (for now) that we know this Value for each of the 8 customers Assume (for now) that every customer will buy the product if the Price of the product is equal to or lower than their Value . Hence, they buy if ValuePrice ≥ 0 So we assume here that the customers’ Willingness to Pay (WTP) , which is the Custome r Value ($) 1 11 2 11 3 10 4 10 5 10 6 7 7 7 8 6 Next step: Plot the demand curve Custome r Value ($) or WTP 1 11 2 11 3 10 4 10 5 10 6 7 7 7 8 6 Price (P) Quantity (Q) 11 10 7 6 8 2 5 7 # Calculating Profits from the Demand...
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 Fall '08
 BARNES
 Marketing

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