Price As A Competitive Advantage


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Price As A Competitive Advantage

  2. 2. OBJECTIVE <ul><li>To study the pricing policies of companies. </li></ul><ul><li>To study the low price influences customer. </li></ul>
  3. 3. Price as a competitive advantage - Definition <ul><li>A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices. </li></ul>
  4. 4. INTRODUCTION TO PRICING <ul><li>Q-What is price? </li></ul><ul><li>FROM CUSTOMER POINT OF VIEW :- </li></ul><ul><li>Price is the sum of all values that a consumer willing to pay in order to gain the benefit of having or using the product or service. </li></ul><ul><li>FROM PRODUCER POINT OF VIEW :- </li></ul><ul><li>Price is the sum of money charged by producer which incurs cost of producing that unit and the profit margin. </li></ul><ul><li>Price is also central to marketing where it is one of four variables in the marketing mix that business people use to develop a marketing plan. </li></ul>
  5. 5. FACTORS TO BE CONSIDER WHILE PRICING A PRODUCT <ul><li>Objectives and the product portfolio - </li></ul><ul><li>Every business should have a series of objectives relating to sales, profits, market share and return on capital. The business objectives might be such that it calls for short term profits. </li></ul><ul><li>Product Positioning - </li></ul><ul><li>The term product positioning has already been explained. It is a very important concept in setting the price of the product. It is clearly very foolish to position a product as a high quality exclusive item, and then price it too low. </li></ul>
  6. 6. <ul><li>Is the product substitutable ? The uniqueness of a product directly correlates with its pricing power. </li></ul><ul><li>Does the product have a strong brand name ? As human beings, we identify and become extremely attached to brands, bestowing substantial pricing power upon the brand-owner. </li></ul><ul><li>Are you offering value for the money ? Customers may value other attributes more than low price — for example, greater selection, longer product life, faster delivery, greater reliability, lavish after-sale service, better location, more attractive terms or reduced risk of defect. </li></ul><ul><li>COST OF THE PRODUCT - </li></ul><ul><li>In this approach to setting price, we first determine the markup and then add it to the cost to find the selling price. That is, we simply multiply the cost by the percentage of markup. </li></ul>
  7. 7. <ul><li>Product Life Cycle </li></ul>Sales & Profits ($) Time Product Develop- Ment Stage Losses- Investment ($) Intro- duction Growth Maturity Decline Sales Profits
  9. 9. <ul><li>Premium pricing :- </li></ul><ul><li>Premium pricing is the practice of keeping the price of a product or service artificially high in order to encourage favorable perceptions among buyers, based solely on the price. </li></ul><ul><li>Creaming or skimming :- </li></ul><ul><li>Selling a product at a high price, sacrificing high sales to gain a high profit, therefore ‘skimming’ the market. This strategy is often used to target &quot;early adopters&quot; of a product/service. </li></ul><ul><li>Penetration Pricing :- </li></ul><ul><li>The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased. This approach was used by France Telecom and Sky TV . </li></ul><ul><li>Economy Pricing :- </li></ul><ul><li>This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. Supermarkets often have economy brands for soups, spaghetti, etc. </li></ul>
  10. 10. Other Strategies <ul><li>Cost Leadership :- </li></ul><ul><li>With this strategy, the objective is to become the lowest-cost producer in the industry. Many (perhaps all) market segments in the industry are supplied with the emphasis placed minimising costs. </li></ul><ul><li>Differentiation Strategy :- </li></ul><ul><li>Differentiation is aimed at the broad market that involves the creation of a product or services that is perceived throughout its industry as unique. The company or business unit may then charge a premium for its product. This specialty can be associated with design, brand image, technology, features, dealers, network, or customers service. </li></ul>
  11. 11. Low price strategy example :- TATA’S Nano -
  12. 12. Product differentiation (high price) :- <ul><li>Example: </li></ul><ul><li>The Mercedes-Benz </li></ul>
  13. 13. CONCLUSION :- <ul><li>From above discussions and examples we can conclude that the price strategy whether it is high such as in Mercedes case and low price in NANO plays as a role of competitive advantage. Price is main factor which influence the sale of any product it depends upon the perception of consumer. Price should be set by the company in such a way that it should give value to customer. </li></ul>
  14. 14. THANK YOU