Exercises: Revenue streams and marketing strategies

The marketing mix is summarised by the four Ps: product, price, place and promotion. State which "P" each decision belongs to: choosing the packaging, setting the launch price, selling online only, and purchasing social media adverts.

Classify these businesses according to their main revenue stream (product sales, subscription fee, advertising or brokerage commission): a streaming TV platform, a free online newspaper with ads, an estate agency and a hardware shop.

The figure shows the marketing mix with its components around the business. Identify the missing component, marked with "?", and give an example of a decision for that component for a brand of fresh juices.

Identify the pricing strategy each case follows and explain it: a new smartphone that comes out very expensive and gets cheaper over the months; a gym that opens with very low fees to fill up quickly; and a coffee shop that sets prices almost equal to the bar opposite.

Distinguish between advertising, sales promotion and public relations, and classify these actions: a television advert, a "second unit half price" coupon and sponsoring the neighbourhood football team.

A farmer can sell his oranges directly at the market or to a wholesaler who then distributes them to shops. Explain the difference between a short and a long distribution channel and one advantage of each for the farmer.

Two almost identical T-shirts sell at $10\ \text{€}$ and at $45\ \text{€}$, and the difference lies in the brand. Explain what brand value is and what it provides to both the company and the customer.

State the main revenue stream of each business (one-off sale, subscription, rental or licence) and justify it: a gym with a monthly fee, design software paid for with an annual licence, a company that rents vans by the day and a shoe shop.

A business launches a new soft drink into a market full of similar brands. Explain the difference between a penetration pricing strategy and a price skimming strategy, and reason which one you would choose if the objective is to gain customers quickly.

A productivity app uses a "freemium" model: the basic version is free and the full version costs 6 € per month. a) What are its revenue streams? b) Analyse one risk of this model and reason why the free version must be useful yet limited.

A music platform has 850 subscribers paying $9,99\ \text{€}$ per month. a) Calculate its monthly revenue. b) If the number of subscribers grows by $10\ \%$ and the price does not change, calculate the new monthly revenue. c) Comment on which lever increases revenue more: gaining more customers or raising the price.

A new kombucha (fermented tea) brand enters a market where almost nobody knows it and there are few competitors. a) Compare a penetration pricing strategy with a price skimming one for its launch and choose one, justifying it. b) Propose two promotion actions coherent with that choice.

A pizzeria sells 500 pizzas a month at $12\ \text{€}$, with a cost of $5\ \text{€}$ per pizza. It is considering an advertising campaign of $800\ \text{€}$ a month which, it estimates, will increase sales by $20\ \%$. a) Calculate the revenue before and after the campaign. b) Calculate the additional margin the extra pizzas provide and reason whether the campaign pays for itself in one month. c) Comment on what longer-term effects could change your conclusion.

In a town there are three coffee shops: a traditional bar with coffee at $1,20\ \text{€}$, a chain with coffee at $1,80\ \text{€}$ and a speciality place with coffee at $3,50\ \text{€}$ and an expert barista. a) Draw, describing it in words, a price-quality positioning map and place the three on it. b) Spot a possible market gap and propose how to fill it.

You can do it on paper and send a photo with your answer.

A home décor SME has $1.000\ \text{€}$ a month for promotion and is undecided between social media adverts and advertising in a local magazine. Compare both options in terms of audience targeting, results measurement and reach, and recommend how to split the budget.

A computer shop that made a living selling equipment starts offering maintenance contracts to companies for $50\ \text{€}$ a month. a) Explain what improvement recurring revenue brings compared to one-off sales. b) Point out two new risks or demands the company takes on with this change.

Design the complete marketing mix for a backpack brand made from recycled materials aimed at students: define the product (two distinguishing features), the price (with justification), the distribution channel and two promotional actions consistent with the brand.

A shop sells 1 000 T-shirts per month at $20\ \text{€}$. It estimates that if it lowers the price to $16\ \text{€}$, it would sell 1 400. a) Calculate the revenue in both cases. b) Reason why lowering the price does not always increase revenue and what this depends on (price elasticity of demand).

A theatre company relies almost entirely on ticket sales, and a crisis causes attendance to plummet. a) Explain the risk of having a single revenue stream. b) Propose three realistic alternative or complementary revenue streams for this company and evaluate which one you would implement first.

A gym with 600 members paying $30\ \text{€}$ a month is considering raising the fee to $35\ \text{€}$ and estimates it will lose $10\ \%$ of its members. a) Calculate the monthly revenue before and after the rise. b) Reason whether the rise pays off and what it depends on (customer sensitivity to price, costs, image). c) Propose an alternative to raising the price that also increases revenue.

"Lowering prices is the quickest and safest way to sell more." Discuss the statement by analysing the effects on the margin, brand image and the competitors' reaction (price war), with a fully developed example.

An artisan bakery is losing customers since a nearby supermarket started selling a baguette at $0,50\ \text{€}$. a) Explain why competing by lowering its price would be a bad idea for it. b) Design a differentiating marketing mix plan (product, price, place and promotion) coherent with an artisan value proposition.

A music festival expects 5 000 attendees with tickets at $40\ \text{€}$, sponsorship worth $80.000\ \text{€}$, an average spend at the bar of $8\ \text{€}$ per person and merchandising sales of $3\ \text{€}$ per person. a) Calculate the weight of each revenue stream over the total. b) Reason what risk depending mostly on tickets involves and propose one measure to diversify.

A recipe app has 100 000 free users and $3\ \%$ premium subscribers who pay $5\ \text{€}$ a month. a) Calculate the monthly revenue from subscriptions. b) Compare two growth levers: raising conversion to $4\ \%$ keeping the price, or raising the price to $6\ \text{€}$ keeping conversion, calculating the revenue in each case. c) Recommend one and justify it.

Unit challenge. Imagine that you are going to launch a digital leisure or training service tailored to the current needs of your local area. Design your commercial strategy by completing these phases in a one- to two-page executive report:

1. Research and segmentation: Check the average household expenditure data on leisure and culture on the INE website (Household Budget Survey) or conduct a brief survey of $10$ people around you about their monthly spending in this area. Using these real data, precisely define your customer segment (demographic, psychographic, and behavioural criteria).

2. Value proposition: Write the differential value proposition of your service. Explain what problem or unmet need you solve and why your target audience will choose you over existing competitors.

3. Monetisation and marketing mix: Design at least two different revenue streams (subscription, pay-per-use, advertising, etc.) and define the variables of your marketing mix ($4$Ps), paying special attention to setting a price consistent with the analysed spending data and selecting effective communication channels.

Evaluation criteria:

• Rigour in collecting and using real data to justify the market segment.

• Consistency between the value proposition and the needs identified in the potential customer.

• Viability and diversification of the proposed revenue streams.

• Strategic consistency among the $4$Ps of the marketing mix.