1.

Pricing and Margin Analysis

A. Price Considerations
Determining price is one the most important marketing mix decisions and marketers have
considerable leeway when setting prices. The limiting factors are demand and costs. Demand
factor involves buyer perceived value, set the price ceiling. The company cost set the price
floor. Between these two factors marketers considers all the other factors and after that they
quote a price of their product.

 Determining costs
While determining cost for anything, generally we classify the costs on the basis of their
occurrence into fixed and variable. Fixed costs are those cost which does not changes with
the level of output and variable costs are those costs which changes with the level of output.
Table showing variable cost estimated for the new product
Variable Cost
Particulars Unit Cost
Ghee INR 10
Butter INR 5
Flour INR 8
Sugar INR 2
Rose Petals INR 3
Spices INR 5
Dry Fruit INR 10
Gas INR 8
Pulses INR 7
Vegetables INR 8
Total VC INR 66

Tables showing fixed cost estimated for the new product

Total Fixed Cost
Particulars Unit Amount (PM)
Employee Cost INR 140,000
Store Rent INR 90,000
Electricity INR 35,000
Communication Expense INR 1500
Maintenance Charges INR 7500
Uniform INR 2000
Insurance INR 10,000
Delivery Cost INR 18,000
License Renewal Fee INR 2500
Marketing Expense INR 3000
Other Expense INR 60,000
Total FC INR 369,500
Allocated FC for New Product (5%) INR 18475

Page 1|7
B. Setting Price Based Costs

 Cost plus pricing

In cost plus pricing, a standard markup to the cost of the product is made. This cost involves
the fixed costs and variable cost components of the organization involved in producing the
product.
Table showing setting of price of product by analyzing cost components
Profit Per Plate  
Particulars Amount  
Price 120  
Variable Cost 66  
Fixed Cost 6.158333333  
Profit 51.36  
Cont. Margin 0.45 45%

C. Break even and Margin Analysis

 Breakeven point
As the product in which we are dealing is not a packaged food and it is not a separate food
launch with the separate costs involved for it, hence calculating break-even point will be not
that significant.

 Contribution Margin
The unit contribution divided by the selling price gives us the contribution margin.
Contribution margin= (Price-Variable cost)/ Price
= (120-66)/120
=45%

Page 2|7
2. Demand Estimates, the marketing budget and Marketing performance
measures
A. Market potential and sales estimates
The total market demand is the total volume that would be bought by a defined number of
consumer group, in a defined geographic area, in a defined time period, in a defined
marketing environment, under s defined level and mix of industry marketing efforts.
The upper limit of such total market demand is the market potential.
Chain Ratio Method
Estimating market demand by multiplying a base number by a chain of adjusting percentages.
Q= n*q*p
where Q= total market demand
n=number of buyers (average footfalls)
p=price per unit of product
q= quantity purchased by average buyer.
Table showing calculation of potential market and market share of the organization
Cal. Of Potential Sales  
Particulars Amount
No. Of Buyers in Market 35,000
Qty Purchased by An Avg Buyer (Per Year) 24
Price of An Avg Plate 120
Total Market Demand (Q) 100800000

  Profit Per Plate

Particulars Amount
Price 120
Variable Cost 66
Fixed Cost 2.639285714
Profit 51.36071429

B. Relative Market Share

Market Share Of Bombay Pav Bhaji  
Unit Sold In a year 7000
Profit Per Unit INR 51.36
profit during the year INR 334,880.00
Sources
a. Estimated population of Lucknow: indiapopulation2019.com
b. Age structure: censusindia.gov.in

Page 3|7
C. The profit and Loss statement (projected)
P & L A/C
particular amount
sales 840000
variable cost 462000
fixed cost 18475
profits 359525
tax 17976.25
net profit 341548.8

D. Marketing budget
Since the amount allocated for the purpose of marketing expenses is only 0.03% of the total
revenues. The company does not prepare the marketing budget and even if we will be
preparing the budget for marketing. It is not that relevant which involves the increment in the
cost by 5% (Source: Bloomberg). The cost involved in marketing expenses are estimated to
by Rs.56700/- for the entire organization annually.
E. Market performance Measures

 Analytic Ratios
Gross Margin Percentage: The percentage of net sales remaining after cost of goods sold –
calculated by dividing gross margin by price.
Gross margin percentage = 51.37/120=42.80%
Net profit percentage: The percentage of each sales going to profit – calculated by dividing
net profit by net sales.
Net profit percentage=341548.8 /840000 = 40.6%
Operating Expense percentage: The portion of net sales going to operating expenses –
calculated by dividing total expenses by net sales
Operating Expense percentage= 480475/840000 = 57.19%

 Marketing Profitability Ratios

Net marketing contribution: Net marketing contribution along with other marketing metrics
derived from it, measures marketing profitability.
NMC= Net sales-COGS-Marketing Expenses
= Rs. 8,40,000-4,80,475-20,000
=Rs. 3,39,525/-

Marketing return on Investment: A measure of the marketing productivity of a marketing

investment calculated by dividing NP by marketing expenses
Marketing ROI= NP/Marketing expenses= Rs. 341548.8 /Rs20000= 17.07 times

Page 4|7
PROMOTION STRATEGIES
CURRENT PROMOTION STRATEGIES
Bombay pav bhaji use various promotion tools to attract their customers and increase
customer engagement. they used both traditional and modern tools for their promotion.
 Sponsorship
Bombay pav bhaji give sponsorship to event or program in exchange for specific
promotional benefits. Bombay pav bhaji give sponsorships to colleges etc so that it
can show itself as a brand.
 Radio advertising
Bombay pav bhaji also advertise itself on regional radio channels so that it can create
awareness about its products and offers.
 Outdoor cooking
Outdoor cooking is their resent step in this they used to work in open and make their
food in presence of their customers, so that they can see what they are eating and it
also build trust in the eyes of customers.
 Vouchers & discount
Bombay pav bhaji also give loyalty benefits to their customers according to their
customer rating and they also give discount & vouchers so that they can increase their
sales with creating a good image.

PROPOSED PROMOTIONAL MIX

 Social media
Bombay pav bhaji have its presence on social media and it post actively on them so
that people will know about them. It also helps them to stay connected with their
customers and address their questions.
(https://www.instagram.com/bombay_pav_bhaji/)
 Use of Google & digital advertising
Google AdWords is publicizing program; this web permits you to make online
advertisements to contact crowds that are keen on the items and administrations you
offer. The AdWords stage runs on pay-per-click (PPC) promoting, for example you
need to pay each time a guest clicks your promotion. In this way your marketing cost
will reduced, and you can directly reach your customer.
 Online food ordering app
Online food ordering apps are getting popular among people because of their services
and way of operation, Bombay pav bhaji can advertise their food items on these apps
and by doing so they will show you adds on top of the app and also recommends your
products over others.
 Use of Google Map advertising
We all use maps to navigate and Google maps are most preferred, and Google
provides advertising facilities on it, on this app it shows nearest places and
recommends people also.

Page 5|7
DISTRIBUTION: -
It is a joint Hindu Family business having outlets in:
 Hazratganj (first branch)
 Sahara Ganj Mall
 Nirala Nagar
 Cinepolis Mall
 Eldeco chamber Vibhuti Khand.

All the branches are managed by the family members with mutual co-operation.
Channel Structure:

Vegetable Vendors Utensils/ Spies Commercial Gas

Central kitchen
Hazratganj

Sahara Ganj Mall Nirala Nagar Cinepolis Mall Eldeco chamber

Vibhuti Khand

Zomato/ Swiggy

Channel members: -
Raw material Supply:
For all the branches vegetables n spices are brought from the local market (sabzi mandi) &
kept at a central warehouse. Then the vegetables and spices are sent to the different branches
as per requirement of the branch.
Bread (Pav) is prepared at the Chinhat bread unit which is owned by the Bombay Pav Bhaji.
From there it is supplied to the different branches.
Finished good distribution:

Page 6|7
In the five Restaurant branches the dishes are served to the customers.2 branches are in mall
food court and 3 are in marketplace. There is tie up with Swiggy and Zomato for home
delivery.
Causes of Channel Conflict:

 Goal incompatibility: difference in views and targets

 Unclear roles & rights of channel partners
 Differences in perception
 Discount given by aggregators (Swiggy and Zomato)
 Treatment of damaged and lost goods
 Differences in Promotion budget

Managing Channel Conflict:

 Some channel conflict can be constructive. It can lead to more dynamic adaptation to
a changing environment. But too much is dysfunctional.
 Perhaps the most important mechanism is the adoption of superordinate goals.
Working closely together might help them eliminate or neutralize the threat.
 Exchange of persons between two or more channel levels is useful.
 Cooptation is an effort by one organization to win support of the leaders of another
organization by including them in advisory councils, boards of directors, etc.
 Encouraging joint membership in & between trade associations.
 When conflict is chronic, the parties may have to resort to diplomacy, mediation or
arbitration.

Page 7|7