Here East is number one followed by West North coming third and South slipping

Here east is number one followed by west north coming

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change. Here East is number one followed by West, North coming third and South slipping to the last position. What does that mean? It means that, while South zone was very good in managing the product mix, it slipped when it came to managing expenses. It’s management of productivity could have been better. While South may have managed it’s product mix well, there is also a possibility that the market for the products could have been favourable for such high gross margin earning products. 3. When we finally look at the ROI, a different picture emerges. Here we find that East zone has given the best ROI at 88 percent, followed by South zone with 68 percent, followed very closely by North zone with 67 percent, and West zone doing very badly with only 58 percent ROI. This only emphasizes that territory wise performance has to be evaluated on several parameters, to really find out which territory is doing well. We’ll close this chapter with a look at how one should evaluate a product group. This case lists three product groups: Darcold. Darmet and Darclox Let us evaluate one of them viz. Darcold, and the same method can be replicated for evaluating the other product groups. 52
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TERRITORY AND PRODUCT LEVEL PROFITABILITY Table no: 4.11 all figures in Rs. lacs The above explains how evaluation of marketing efforts both at a territory level, as well as a product level is carried out. Darcold Sales Gross margins Marketing expenses which were not apportioned to the zones tablet 465 209.25 VP salary 22.5 50percent syrup 990 495 GM Mktg salary 36 total 1455 704.25 prdct mgr salary 18 less prorata of salary/ travel Rs.138.5 lacs 11.57 (138.5 ÷ 17415 X 1455) Mgr MR salary 16 advertising full amount because Darcold is the only OTC product 250 VP travelling 50percent 10 Sales and distribution expenses prorata 315.94 (3781.5 ÷ 17415 X 1455) GM Mktg traveling 16 net margin 126.74 product Mgr traveling 12 working capital stocks 78 days of COGS (1455 – 704.25) 160 Mgr MR traveling 8 receivables 20 days' of sales (1455) 80 total 138.5 total 240 ROI 52.8 percent 53
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TERRITORY AND PRODUCT LEVEL PROFITABILITY 4.2 SUMMARY Controllable costs are those which are controllable in the hands of the cost centre head. Opportunity costs open up appropriate yard sticks to choose between 2 alternatives. Opportunity cost of working for self ie. the earning by self employment vis a vis working for another as an employee. Incremental costs are the extra cost that is incurred in the extra activity/task/input. 4.3 SELF ASSESSMENT QUESTIONS 1. What are OTC items? 2. What are controllable costs? 3. What are managed costs? 4. What are the different ways of apportioning Head Office costs to branches? Which method is the most equitable, and why? 54
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TERRITORY AND PRODUCT LEVEL PROFITABILITY REFERENCE MATERIAL Click on the links below to view additional reference material for this chapter Summary PPT MCQ Video Lecture - Part 1 Video Lecture - Part 2 55
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PRICING Chapter 5 PRICING Learning Objectives After going through this chapter you should be able to: Understand the role of pricing as an element of the marketing mix.
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