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Profit can be maximised by increasing MRP or by increasing customer base

Created by : Javed Akhtar, Sr. Executive - Logistics, Keventer Agro Limited  | 03 18 2010 13:49:19 +0000
Industry : FMCG/Foods/BeverageFunctional Area : Logistics & Supply Chain(Operations)
Keywords : profit maximization
Activity:  478 views;  last activity : 01 23 2011 08:08:37 +0000

Every company are looking forward to maximise profit and grow with the growth of economy. But where should be the focus. Should it be on charging extra to the customer or on increasing customer base by reducing MRP. The decision needs to be taken but what?

  
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Increase MRP maximise profit Vs Increase customer base maximise profit
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Top Argument
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Hi Javed, interesting debate.........

In my point of view price alone will not increase the profit. A customer looks for the quality first and then price. If your are producing the best product among your competitors then increasing the MRP will not affect your profit.

In the present situation increasing the customer base is very difficult because of many competitors producing the same product. So produce the best product with reasonable price and win the customer and the market. 

Thanks....
By Shailena Varma, Logistics Manager, Target  03 19 2010 12:04:39 +0000
 
Top Argument
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Increase customer base and maximise profit should be the primary focus of the company. It is a time taking process which will come in long time but will be for longer period as maximization of MRP maxise profit for shorter period after which it effects the growth of the company. AS we can take an example of any of the telecom company who are focusing on maximization of profit by focusing in increasing customer base because intense competition is making the company to reduce profit margin so the only option left is to create new market, increase customer base and enlarge profit figure.
By Javed Akhtar, Sr. Executive - Logistics, Keventer Agro Limited  03 20 2010 09:41:39 +0000
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It is always customer driven, depending on referrals and time bound service.
By Ramesh shirolkar, Academic Incharge,, Edutech Nttf India pvt ltd  | 01 20 2011 14:30:19 +0000
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Increasing customer base will creat more valume business.Investment will go up. According the Turnover,business valume, profits will go up.(Only valume will increase)

Only by increasing the MRP,the profit percentage can be increased...

It is very clear.
By Shanmugasundaram , CEO/MD/Director, Safnnite Solutions India Pvt.Ltd  | 03 28 2010 08:14:38 +0000
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Well would vouch for increasing the customer base with a slightly reduced MRP at all times...We look at maximising profits these days through volume sales and not vice versa anyways; you look at operating, competing & working on the lowest profit margins to begin which multiplies in leaps and bounds in the long run, you've also got healthy competition to contend with at the same...probably feel if you concentrate on just pricing or hiking the product you're gonna end up scaring the end consumer...
By Wayne-Russell Macedo, Procurement & Logistics, Dana Group, Lagos  | 03 27 2010 14:20:34 +0000
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Quality is the primary aspect which the customer seeks while purchasing but in present times only high M.R.P products are suppose to be of high quality as they have to pay big price for that product. Its remind us the theory of article's of distinction that the product which has high price are more superior than any other.Example gold products customer loves to pay high amount when it comes to puchase gold.so i think price maximization is good but it should be upto certain extent at par with the product which offfer to customers. 
By Honey Sood, STORE MANAGER, WOODLAND  | 03 21 2010 15:35:47 +0000
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For Brand specific loyal customers its good to increase quality and price both, instead diverting focus on new customer acquiring. 
By Tarun Mishra, Equity Dealer, Religare Securtites Limited  | 03 21 2010 08:01:41 +0000
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Companies do such tactics; take the case of limited addition articles, these are not meant to serve to a wider customer base but targets some prime customers who can afford such things where cost is more in comparison to regular one. Though motivation might not be making more moolah but the thing fits.
By ujjval jain, Retail, Retail  | 03 19 2010 12:35:45 +0000
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its only the wide customer network which leads to maximise the profit in long and term.
By Rajendra Singh Butola, Production Manager, M/S Elie Group Holding Company  | 01 23 2011 08:08:36 +0000
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every orgnization must be customer centric. Because what makes more sales is right product at a right place at a time and at right price..
By Malik Abrar Altaf, Procurement & Logistics Officer  | 01 20 2011 16:36:04 +0000
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Work at the bottom of the pyramid. That is where your money is coming from. Indians are both price and quality concious.
By V. Srinivas, Freelancer, Information Technology  | 01 20 2011 14:28:35 +0000
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MRP is fixed at a rate where cost+profit+channelsales expenditure. Increase in MRP may lead to lesser sale, in view of the copetitor's price. By spending moreamount on advertisement the demand for the product can be increased, increasing the customer's base.Which creates more condusive atmosphere for increasing MRP.
By malladi madhukumar, AGM -MKTG, Andhra Cements Ltd  | 01 20 2011 13:37:54 +0000
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Telecom segment maximise profit by increasing customer base. Liquor is paradox of demand. Whatever be the price demand so not diminish. Gold market shows more turn over in anticipation of growing price. land being inelastic in nature have always increased the price and maximised the profit.Web portal business being performance based industry, starts with free services.So application of price product mix varies.
By textilesinfomediary , SEO services Provider Company  | 03 21 2010 07:42:25 +0000
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Theoretically, revenue can be can be maximized by concentrating on maximum possible price if demand is inelastic and when demand is elastic the demand price equation determines. Practically, the decision is very complicated, and factors like competitor’s response should be considered and a good relationship with customers is essential for the long term existence of any business.


By Padmanabhan R, Articled / Audit assistant, Finance student  | 03 20 2010 16:20:56 +0000
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Let me put forth the economic theory behind maximising profits.

Profit = Revenue(R) - Cost(C)

differentiating with respect to Time and equating to zero for maximal point,

dR/dt = dC/dt

ie; Marginal Revenue = Marginal Cost for maximum Profit

Points in a companies production and sale profile where Marginal Revenue ie; Additiononal revenue increase to the sale of a marginal product is equal to Marginal Cost; the additional cost incured in producing that product, will give the quantity at which the maximal profit is made.

 

 
By Mathew Cherian, Research Associate/Analyst, Western Michigan University  | 03 20 2010 13:51:03 +0000
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very interesting topic...the concept followed in business is getting changed day by day..for example  production concept , product concept, selling concept and the most recent marketing concept..as far as my opinion for any business the most important asset is customer..the more the customer the more will be sale hence by doing intelleigent pricing we can have profit in the long run..whereas my increasing MRP there is two possibility -either achieve short term profit or loose the existing customer also...so it is always better to concentrate on customer..
By sanjeeb tamuli, Business Development-NER, Indian Energy Exchange Limited  | 03 20 2010 12:04:57 +0000
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customer are the king in the market.so definitley the strong customer base maximise profits.

 
By Rajendra Singh Butola, Production Manager, M/S Elie Group Holding Company  | 03 20 2010 09:03:26 +0000
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Profit is derived by selling more and not by increasing MRP alone which may bring down repeat purchases of a product an switching over to alternate products,with better quality at a lower price.best option is to gear up the marketing team,explore avenues of growth and increase profits which will help the manufacturer in the long run and which will be permanent.
By s.baalu , Consultant, XYZ LTD  | 03 19 2010 13:17:46 +0000
Argue for "Increase MRP maximise profit"
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