Probability is a measure of the likelihood of an event to occur., i.e. how likely an event will occur. Before my MBA programme, I never knew the importance of probability and its application in business decision-making process.
I started appreciating this subject when we were given an assignment on the importance of probability in business. During my research, I found out that probability is used to improve decision-making in the face of uncertainty. Business managers always use their understanding of uncertainty and probability to develop strategies to mitigate risks.
In this blog post, I want to focus on the use of probability in marketing
Marketing is a core business function. It refers to activities a company undertakes to promote the buying or selling of a product or service. The business uses probability in all its marketing decision processes. We will look at how probability is used in the four marketing concepts known as the 4Ps of marketing:- product, price, place, and promotion.
Probability is one of the analytical tools you need in product development. It is used to analyze the likelihood of market acceptance of a new product design. The design could increase sales if they love it or reduce sales if not accepted.
When a product is created, the company needs to decide the price of the product. Probability is used to determine the price that the consumers will be willing to pay for a product. There is a likelihood that the price will be accepted or rejected by the market. The company also uses probability to analyze the impact of the price on the brand. What is the likelihood that the customers are buying the product because of the price and not necessarily the brand? Are they likely to go for a cheaper brand in the future? Does the price influence brand loyalty? What is the likelihood that they will still patronize the brand if there is a price increase?
This refers to where the product is sold. Probability is used to analyze the different locations, channels of distribution, the risk associated with each option and the likelihood of success or loss in sales. In the sales forecast, probability is also used to predict sales volume during the boom and recession periods. This will help the management in redesigning its policies.
The goal of promotion is to introduce the product to the market and communicate the values of the product in order to make sales. Understanding probability can help increase the success of any marketing campaign. It is a powerful tool that helps you determine the best way to reach out to your customers. In designing a marketing campaign, you will use probability to predict if a social media campaign will bring more sales than television campaign.
Customers needs are dynamic and marketing decisions must be made with probability in mind to ensure you’re reaching your target audience at the right time
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