Question What is the relationship of Advertisement & Elasticity in relation of HUL?

Answer Advertising elasticity of demand (or simply advertising elasticity, often shorte ned to AED) is an elasticity measuring the effect of an increase or decrease in advertising on a market. Although traditionally considered as being positively r elated, demand for the good that is subject of the advertising campaign can be i nversely related to the amount spent if the advertising is negative Good advertising will result in a positive shift in demand for a good. AED is us ed to measure the effectiveness of this strategy in increasing demand versus its cost. Mathematically, then, AED measures the percentage change in the quantity of a good demanded induced by a given percentage change in spending on advertisi ng in that sector. In other words, the percentage by which sales will increase after a 1% increase in advertising expenditure assuming all other factors remain equal. AED is usual ly positive. Negative advertising may, however, result in a negative AED. In same way if we look in the case study (Building a Bubble) we can see that HUL has tried to reduce the Elasticity of their product through Advertiseme nt. Soap & Detergents contributes the most i.e. 44% of 20,000 crore turnover. So Gopal vittal, executive directorhome & personal care of HUL by the help of Adve rtisement has tried to create a benchmark for its product & has also tried to sh ow its superiority of its product against the competitor s product.

Question Define Elasticity? Answer Price elasticity of demand Price elasticity of demand measures the percentage change in quantity demanded c aused by a percent change in price. As such, it measures the extent of movement along the demand curve. This elasticity is almost always negative and is usually expressed in terms of absolute value (i.e. as positive numbers) since the negat ive can be assumed. In these terms, then, if the elasticity is greater than 1 de mand is said to be elastic; between zero and one demand is inelastic and if it e quals one, demand is unit-elastic. A perfectly elastic demand curve is horizonta l (with an elasticity of infinity) whereas a perfectly inelastic demand curve is vertical (with an elasticity of 0). Income elasticity of demand Income elasticity of demand measures the percentage change in demand caused by a percent change in income. A change in income causes the demand curve to shift r eflecting the change in demand. IED is a measurement of how far the curve shifts horizontally along the X-axis. Income elasticity can be used to classify goods as normal or inferior. With a normal good demand varies in the same direction as income. With an inferior good demand and income move in opposite directions. Cross price elasticity of demand Cross price elasticity of demand measures the percentage change in demand for a particular good caused by a percent change in the price of another good. Goods c an be complements, substitutes or unrelated. A change in the price of a related

good causes the demand curve to shift reflecting a change in demand for the orig inal good. Cross price elasticity is a measurement of how far, and in which dire ction, the curve shifts horizontally along the x-axis. A positive cross-price el asticity means that the goods are substitute goods. Cross elasticity of demand between firms Cross elasticity of demand for firms, sometimes referred to as conjectural varia tion, is a measure of the interdependence between firms. It captures the extent to which one firm reacts to changes in strategic variables (price, quantity, loc ation, advertising, etc.) made by other firms. Question What is the relationship of Market Segmentation on Elasticity with respect to Ma rico? Answer A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will respond similarly to a marketing acti on. Market segmentation enables companies to target different categories of cons umers who perceive the full value of certain products and services differently f rom one another. Generally three criteria can be used to identify different mark et segments: 1) Homogeneity (common needs within segment) 2) Distinction (unique from other groups) 3) Reaction (similar response to market) So after suffering a heavy loss due to elasticity Marico decided to conc entrate on the niche products so that the elasticity of their product could by r educed. For Example: - High class or people belonging to upper class are more co nscious about their health so they are ready to pay some extra price for value a dded products this is why the sifted to products based on the health platform. S o For instance Saffola is a low calostrol oil so if the company increases its pr ice then also people will not stop consuming it hence it reduces the elasticity of their products.