Margin or Turnover? Marketing Café Meeting Made Their Own Conclusions
10 October 2019
Marketing Café is one of the most popular formats. Is Margin or Turnover Strategy Better for Your Brand? So far is the most attended meeting. More than 150 people visited the Café. Ass it has become a tradition, the discussion was followed by the Master Class.
Denys Zakharenko, mass segment development director for Ukrtelecom believes that top-managers or owners should choose margin approach when they know their customers, have loyal customer base, are good at operational management, can manage prices and costs, have skilled workforce, and are able to create a platform which brings together companies, suppliers and customers and add value in interaction.
Yevhen Tolchinin-Burunsky, head of MIM-Kyiv Consulting Center identified 5 high-margin strategies advantages and three disadvantages.
High margin, low operational costs compared to margins, rather high recession tolerance, ability to implement change quickly, and high brand value are on the advantage side.
Severe competition, expensive marketing and small chances of non-operational income are the main disadvantages.
According to Denys, entrepreneurs or owners of the turnover-oriented brands increases profits dramatically compared to the margin, bites off competitors market share and their resources available for expansion, reduces indirect costs due to the so-called “Learning Curve” effect when accumulation of knowledge and skills increase productivity; may improve quality production in future when the technological wave changes, promotes growth of business, develops companies IQ and makes launch of high margin products possible.
Yevhen thinks that vendors’, suppliers and big market players interest, chances to generate non-operational income and cheap financial resources are yet other benefits of such strategy. High operational income, low recession tolerance, low margin and difficulties in implementation of changes are disadvantages.
Mykhailo Prytula, manager of the Thrash chain made a presentation on the food retail and explained 4 brand development strategies.
- “High turnover, low margin”is possible in the social goods markets. The strategy is sensitive to prices volatility when even the slight price increase may result in a turnover reduction. It is also instrumental when dealing with goods with a shelf life. Sometimes it is better to sell with the small margin rather than keep it and spend on servicing its maintenance. It is also a good strategy when a company wants to get a larger market share or create the need. Many believe that English love for tea was developed due to Lipton’s company keeping the prices three times lower than its competitor because they had bought tea plantations and needed customers for their product. Before that tea was expensive and only very well-to-do could afford it.
- “Low turnover, high margin” is typical for imported goods market. If the competition is low or your product is a luxury why loos the margin? Combination of low turnover and the high margin is typical for the markets without regulated minimal price, i.e. alcohol.
- “High turnover, high price”could be usually found in the market of goods and services with expertise.
- “Low turnover, low margin”is typical when companies are meeting very special needs of their customer. Mykhailo gave a good example was a low margin salad sauce. When stores decided not to sell it, it turned out that customers with serious checks are coming to the stores because of that sauce. The situation was simple: no sauce – no big spenders. Naturally, the sauce was back in the game.
Marketing Café is about the latest and most interesting things going on in the Ukrainian market. It also reflects the latest trends and their impact on the companies operating in Ukraine. No wonder that it is one of the most popular formats at MIM. Marketing Café is one of the most popular formats. Is Margin or Turnover Strategy Better for Your Brand? So far is the most attended meeting. More than 150 people visited the Café. Ass it has become a tradition, the discussion was followed by the Master Class.