Effective marketing also contributes to economies of scale, because attracting new customers and selling higher amounts of products allows for greater purchasing and production power. The larger the size of a firm, the more likely are its losses to be spread … More customers meant more massive server farms, and those economies of scale gave Amazon the flexibility to lower prices and build a series of increasingly powerful computing tools. Economies of scale are cost reductions that occur when companies increase production. It is related to economies in advertising and large scale distribution of the firm’s products. April 17, 2019 By Hitesh Bhasin Tagged With: Strategic Marketing Articles. Marketing Economies of Scale Marketing economies of scale arise from the ability to spread advertising and marketing budget over an increasing output. Economies of scale occur for a number of different reasons: – Division of labor:workers can do more specific tasks in larger scale operations. Required fields are marked *, Copyright © 2020 Marketing91 All Rights Reserved, Marketing Strategy of Baskin Robbins - Baskin Robbins Marketing Strategy. When people go to hypermarkets to buy in bulk, it will be cheaper than buying from smaller shops in smaller quantities. At the same time, many variable costs can be reduced due to operational efficiencies and synergies. No advertising economies, however, are obvious for the levels of advertising common across the broad spectrum of US industry. Workers in larger-scale factories and other such production operations can do more precise, specific jobs. This occurs as the expanded scale of production increases the efficiency of the production process.Image: CFI’s Financial Analysis Courses. Economies of scale bring down the per unit variable costs. How ? Marketing economies of scale arise from the ability to spread advertising and marketing budget over an increasing output. Economies of scope occur when a large firm uses its existing resources to diversify into related markets. When people go to hypermarkets to buy in bulk, it will be cheaper than buying from smaller shops in smaller quantities. As a result of increased production, the fixed cost gets spread over more output than before. I am a serial entrepreneur & I created Marketing91 because i wanted my readers to stay ahead in this hectic business world. This is what makes the assembly line such a profitable model. If we were to consider that when a consultancy company is working with a biscuit company to sell them on a foreign market, it is important to see how many packages of biscuits can fit into a container. The cost is reduced because fixed costs go down. This situation increases economic efficiency as relatively limited training can allow workers to become excellent at their assigned tasks. We can speak about economies of scale from different perspective. One of them consists in the two types of economies of scale, either internal, when it is arising from within the company or external, when it is arising from external factors such as industrial size. On the basis of these estimates, moderate and declining economies of scale in advertising are indicated for firms at the highest end of the advertising per firm distribution. Thus, because of increase in manufacturing capacity or total units produced, economies of scale sets in and the cost of the product goes down. This is also known as the container principle, meaning that, as more products can fit into a container, lesses costs are going to be involved in distribution. The answer lies in the concept of economies of scale. Which is the meaning of marketing economies of scale ? Another perspective, would divide the economies of scale in four categories such as: Let’s take the first category, the technical economies of scale. Marketing economies: The marketing function of a firm incurs a certain cost, such as costs involved in advertising and promotion, hiring sales agents, etc. The fixed costs, like administration, are spread over more units of production. It is related to economies in advertising and large scale distribution of the firm’s products. Marketing economies of scale A large firm can spread its advertising and marketing budget over a large output and it can purchase its inputs in bulk at negotiated discounted prices if it has sufficient negotiation power in the market. Marketing economies: use of various marketing strategies will help in achieving economies of scale. 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