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Marketing strategies, pricing and credit policy

Short answer

Plan marketing mix (product, price, place, promotion). Credit sales = Rs 7,20,000/month, average receivables = 7,20,000 x 1.5 = Rs 10,80,000. Control risk by checking customer credit, setting limits, and offering early-payment discounts.

Explain the marketing mix a startup should plan. A firm has monthly sales of Rs 24,00,000, of which 30% is sold on credit with 45 days of credit period. Find the average receivables the firm must finance, and suggest two ways to control credit risk.

Marketing mix (4 Ps; services add People, Process, Physical evidence)

PStartup decisions
ProductFeatures, quality, brand, packaging, warranty
PriceCost-plus, competitive or value-based; discounts; penetration or skimming
PlaceDirect sales, retailers, online; stock and delivery
PromotionSocial media, content, sampling, events, referrals, public relations

Startups with small budgets use low-cost methods: social media, word of mouth, partnerships, early-adopter offers and content marketing. The cost of each customer must stay below the value earned from that customer.

Credit sales numerical

Credit sales per month:

24,00,000×0.30=Rs 7,20,00024{,}00{,}000 \times 0.30 = \text{Rs } 7{,}20{,}000

With a 45-day credit period, money is tied up for 1.5 months:

Receivables=7,20,000×4530=Rs 10,80,000\text{Receivables} = 7{,}20{,}000 \times \frac{45}{30} = \text{Rs } 10{,}80{,}000

The firm must finance Rs 10.8 lakh of working capital, from its own cash or a loan, until customers pay.

Controlling credit risk

  1. Check the customer's credit history and set a credit limit.
  2. Offer a cash discount (for example 2% for payment within 10 days).
  3. Take advance or part payment; follow up due invoices systematically.
  4. Reduce the credit period for new customers.

Answer: Plan product, price, place and promotion together; receivables = Rs 10,80,000, controlled by credit limits and early-payment discounts.

✓ Answer checked by Claude Opus 5.5 (high effort)

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