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Effect of Marketing on Sales Volume

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					            International SEPT Program, University of Leipzig
                               Intake 04


                         Assignment- Module 101


        THE EFFECT OF MARKETING ON SALES VOLUME:
              A CASE STUDY OF NUOC VIET JSC




Students:           1.   Luu Chi Cuong
                    2.   Phan Minh Hanh
                    3.   Le Khanh Linh
                    4.   Nguyen Phu Huyen




                               April 2009



                                    1
Introduction
Nuoc Viet Environmental Technology JSC (Nuoc Viet JSC) has established in
2004 with the main business areas such as below
 - Consulting, designing, constructing the supply and discharge water system.
 - Consulting, installing the system of industrial waste water treatment.
 - Trading on all kind of water treatment systems including spare parts and
    equipment.
 - Producing the pure water.
 - Transfer of Technology in the sector of water treatment.


Nuoc Viet JSC has competence to build the water supply and discharge systems
in the scale of district area, designing and implementing the pure water producing
lines for the plants, hospitals, school and hotel… Nuoc Viet also co-operate
tightly with the experts who have long time experience in the field of water
treatment in Hanoi University of Technology and Resource & Environment House
as well. Thus it always approach to the latest water treatment technology from
America so Nuoc Viet has succeed on the way to treat the high polluted water
with Mn, NH4, Fe… that’s hard to eliminate by the normal water treatment
system. The capability above contributed the service value to the customers to
gain the high appreciate from them.


In the initial years of 2000, Vietnamese people had started to be familiar with the
change of using pure water manner. This come from the foreigner companies
and then spread in to the other organizations. In the past Vietnamese just drink
water after it was be boiled by normal process and is also have no change for
many years but right now it is totally changed. Nowadays almost of the
enterprises and the organizations are using the pure water that is treated by the
automatic system. So the demand for pure water rising very quickly and it
absorbed the highly concentration of the small and medium enterprises. Right
now just in the Hanoi area there are around 200 enterprises that produce pure
water and supply for the demand of this city and the industrial zones next to


                                        2
Hanoi. The pure water treatment industry has become the super profit area and
with a lot of competition now.
Nuoc Viet JSC with the strength of handling the high technology and long term
experience in water treatment has set its brand name FUTURE in the market and
step by step penetrating in to some industrial sectors such as steel, chemistry,
food & beverage, and textile.


Market Analysis


Pure water supply market is in harsh competitive circumstance with a lot of the
suppliers (around 200 enterprises just in Hanoi area). Beside the well-known
brand names such as Miru, Lucy, Water Source, Joy, Lucky… there are many
other strivers take part in this profitable market. We can define some remarkable
brand names as the table below:


                                                  Capacity       Brand
  No                  Competitor
                                                   (l/day)       Name

   1      Hanoi Technology Development Ltd           12,000     Samoa
   2      Phuong Bac Ha JSC                          12,000       U.V
   3      Minh Tuan Trading & Service Ltd            12,000     Bluesky
   4      Nam Hong Ltd                               12,000     Sahara
   5      Huy Hoang Technology & Trading Ltd         12,000    Hi Fancy
   6      Bac Chuong Duong Ltd                       12,000     Fell Fall
   7      Trung Dung Trading & Service JSC           12,000      Vitada
   8      Dong Duong JSC                             24,000     Natiwa
   9      Prospace Ltd                               24,000     Prospa
   10     Phan Thiet Ltd                         24,000     Alavie
             Some remarkable pure water suppliers in Hanoi market
Note: In the scope of this topic we just mention on the product range of 20 lit
bottle only.


                                         3
Though there are a lot of suppliers in this market, top 3 players (Miru, Water
Source, Lucy) can control most of the market share. The other suppliers share
the rest of market share but they count a small amount of this cake, just around 2
~ 3% of the total. We can have the estimation information as below.
                                                             Market          Market
                          Capacity       Sales Volume        Share           Share
 No      Players
                          (l/hour)       (Bottle/month)    (Industrial     (Consumer
                                                             sector)         sector)
 1    Miru                       3,500          70,000               30%        20%
 2    Water Source               3,000          45,000               20%        15%
 3    Lucy                       3,000          30,000               15%        10%
 4    The other                                                      35%        55%


                            Industry Sector



                                                   Miru
              The other
                                                   30%
                35%




                          Lucy                 Water Source
                          15%                     20%




                           Consumer Sector


                                               Miru
                                               20%



             The other                                Water Source
               55%                                       15%
                                               Lucy
                                               10%




                                               4
Nuoc Viet has established for almost 4 years but still gain a modest market share thus it
needs to reform the company to enlarge its market.
Up to now Nuoc Viet still use the popular marketing method that is advertising on the
newspaper and by the relationship of the director. In fact, it also affect on the increasing
of the sales volume just after the advertising had been done. We collected the data from
January 2007 up to December 2008 and get the result as below:


                                    Sales
                       Price                       Revenue Advertising       Dummy
  No       Time                    Volume
                    (,000VND)                     (,000VND) (,000VND)        Variable
                                  (B/Month)
   1        01/07            12        2,900         34,800        2000                 0
   2        02/07            12        1,930         23,160        2000                 0
   3        03/07            11        4,440         48,840        3000                 0
   4        04/07            11        4,132         45,452        5000                 0
   5        05/07            11        3,527         38,797        5000                 0
   6        06/07            12        5,794         69,528        6000                 1
   7        07/07            12        5,477         65,724        6000                 1
   8        08/07            12        5,253         63,036        6000                 1
   9        09/07            11        5,902         64,922        4000                 1
  10        10/07            11        3,054         33,594        4000                 0
  11        11/07            10        4,008         40,080        4000                 0
  12        12/07             9        2,917         26,253        4000                 0
  13        01/08             9        3,283         29,547        5000                 0
  14        02/08            11        3,754         41,294        6000                 0
  15        03/08            11        4,009         44,099        6000                 0
  16        04/08            12        5,848         70,176        6000                 1
  17        05/08            12        5,070         60,840        6000                 1
  18        06/08            12        5,426         65,112        6000                 1
  19        07/08            12        5,677         68,124        6000                 1
  20        08/08            11        4,366         48,026        6000                 0
  21        09/08            10        3,940         39,400        6000                 0
  22        10/08            10        3,710         37,100        6000                 0
  23        11/08            10        2,941         29,410        5000                 0
  24        12/08            10        4,845         48,450        5000                 0




                                              5
                                                                                               Monthly Sales Volume

                     7,000
                     6,000
                     5,000
                     4,000
   Bottle



                     3,000
                     2,000
                     1,000
                            0
                                 01/07
                                         02/07
                                                 03/07
                                                         04/07
                                                                 05/07
                                                                         06/07
                                                                                 07/07
                                                                                             08/07
                                                                                                     09/07
                                                                                                             10/07
                                                                                                                     11/07
                                                                                                                             12/07
                                                                                                                                     01/08
                                                                                                                                             02/08
                                                                                                                                                     03/08
                                                                                                                                                             04/08
                                                                                                                                                                     05/08
                                                                                                                                                                             06/08
                                                                                                                                                                                     07/08
                                                                                                                                                                                             08/08
                                                                                                                                                                                                     09/08
                                                                                                                                                                                                             10/08
                                                                                                                                                                                                                     11/08
                                                                                                                                                                                                                             12/08
                                                                                                                             Time




                                                                                  Monthly Advertising Expenditure

                     7000
   T housand (VND)




                     6000
                     5000
                     4000
                     3000
                     2000
                     1000
                        0
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                                                                                                                             Timing




The charts above show the affect of advertising on the monthly revenue quite
clearly.
Now we will concern about the relation between Advertising with Revenue by
regression test.


                            Variables Entered/Removed(b)



                                 Variables                       Variables
 Model                            Entered                        Removed                             Method
 1
                            Dummy, Adv,
                                                                                         .      Enter
                            Price(a)

a All requested variables entered.
b Dependent Variable: Quantity



                                                                                                                         6
                                    Model Summary



                                                   Adjusted R          Std. Error of
 Model                   R          R Square        Square             the Estimate
 1
                         ,871(a)          ,759            ,723                591,199
a Predictors: (Constant), Dummy, Adv, Price


                                                      ANOVA(b)

                            Sum of
 Model                      Squares        df                    Mean Square            F              Sig.
 1        Regression       22029208.
                                               3                 7343069,351            21,009         ,000(a)
                                 052
          Residual         6990331.9
                                              20                   349516,595
                                  07
          Total            29019539.
                                              23
                                 958
a Predictors: (Constant), Dummy, Adv, Price
b Dependent Variable: Quantity


                                                   Coefficients(a)

                                      Unstandardized            Standardized
                                       Coefficients              Coefficients           t             Sig.

 Model                                B          Std. Error            Beta             B           Std. Error
 1               (Constant)         3501,646      2134,732                              1,640             ,117
                 Price               -86,322       181,359                    -,072         -,476        ,639
                 Adv                    ,221           ,111                   ,253      1,999            ,059
                 Dummy              1807,520       389,391                    ,775      4,642            ,000
a Dependent Variable: Quantity




                                                                                                     Dot /Lines show Modes
                5794



                5426



                4845
      uantity




                4132
     Q




                3940



                3527



                2941



                1930
                             2000     3000         4000         5000            6000

                                                  Adv




                                                                       7
Base on the data above we can indicate the regression function as below:
                  Q = 3501,646 - 86,322P + 0,221A + 1807,52D
Explaining:
- P-value on F-test = 0,0001 (INOVA table) indicates that the model as a whole is
significant at the 0,01 % level.
- R square = 0,759: means 75,9% variation of quantity (sales) is explained by this
model.
- P-value of Price=0,639: mean Price (P) is play a statistically significant role of
63,9% in determining sales of Nuoc Viet Jsc.
- Ep10=b x P10/Q10= -86,322 x 10/4845 = - 0,1781 thus the price elasticity of
demand at price of VND 10.000 suggests that 10% of price increasing leads the
demand reducing 17,81%.
- Ea10=c x P10/Q10= 0,221 x 10/4845 = 0,0005 is the which suggests that if
increasing10% of advertising cost sales volume will increase 0,5%.


Conclusion


The advertising on the newspaper has effected to the sales volume but it is still
not as strong as the effect of price. Cause of the new entered enterprise in this
market that the marketing competence of Nuoc Viet JSC is not suitable to market
requirement.
In suggestion, Nuoc Viet should promote its marketing strategy to increase its
sales volume and expand their market share.




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Description: Marketing lead sales