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Pricing Siddhant Gupta

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    Pricing Siddhant Gupta Pricing Siddhant Gupta Presentation Transcript

    • 1 Pricing Indian Institute of 12/18/2012 Management RaipurAdarsh Chowdhury (12PGP058)Anurag Rai (12PGP064)Nikhil Garge (12PGP070)Siddhant Gupta (12PGP096)Shubham Singh (12FPM004)
    • 2 Indian Institute of 12/18/2012 Management Raipur What is a PRICE ?Price is defined as the monetary value of aproduct.It can also be defined as everything that acustomer has to give up in order to acquire aproduct or service.
    • 3Role of Pricing Indian Institute of Management Raipur 12/18/2012 Marketing Strategy Competitive Weapon Demand Regulator Role of Pricing Input to Revenue Decision Generator Making Positioning of Product
    • 4 Indian Institute of 12/18/2012 Management RaipurMarketing Strategy• Skimming Pricing• Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price.• Appropriate for a distinctly new product, provides the firm with an opportunity to profitably reach market segment that are not sensitive to the high initial price
    • 5Apple has priced Mac Laptops, iPhone Indian Institute of Management Raipur 12/18/2012 iPod all at a high premium
    • 6 Indian Institute of 12/18/2012 Management RaipurSony launched HDTV Bravia at a highpremium
    • 7 Indian Institute of 12/18/2012 Management RaipurPenetration Pricing• Setting a low price for a new product in order to attract a large number of buyers and a large market share.• Appropriate when there is high price elasticity of demand, strong threat of imminent competition, and opportunity for a substantial reduction in production costs as volume expands
    • 8Karbon, Micromax, Intex, iball etc. are Indian Institute of Management Raipur 12/18/2012certain examples where companies resortto penetrative pricing
    • 9 Indian Institute of 12/18/2012 Management RaipurMaybelline’s use of Penetrative Pricing
    • 10Role of Pricing Indian Institute of Management Raipur 12/18/2012 Marketing Strategy Competitive Demand tool Regulator Role of Pricing Input to Revenue Decision Generator Making Positioning of Product
    • 11 Indian Institute of 12/18/2012 Management RaipurDemand Regulator
    • 12 Indian Institute of 12/18/2012 Management RaipurPVR & Cinemax changing prices tocontrol demand
    • 13Role of Pricing Indian Institute of Management Raipur 12/18/2012 Marketing Strategy Competitive Demand Tool Regulator Role of Pricing Input to Revenue Decision Generator Making Positioning of Product
    • 14 Indian Institute of 12/18/2012 Management RaipurRevenue Generator
    • 15 Indian Institute of 12/18/2012 Management RaipurRoyal Stag & IKEA’s pricing act asrevenue generator
    • 16Role of Pricing Indian Institute of Management Raipur 12/18/2012 Marketing Strategy Competitive Demand Tool Regulator Role of Pricing Input to Revenue Decision Generator Making Positioning of Product
    • 17 Indian Institute of 12/18/2012 Management RaipurPricing as a Positioning tool• Firms use pricing as a tool to position their products & services in the different market segments.
    • 18 Indian Institute of 12/18/2012 Management RaipurPositioning of a Product
    • 19 Indian Institute of 12/18/2012 Management RaipurPricing as low end positioning
    • 20 Indian Institute of 12/18/2012 Management RaipurCompetitive Tool Marketing Strategy Competitive Demand Tool Regulator Role of Pricing Input to Revenue Decision Generator Making Positioning of Product
    • 21 Indian Institute of 12/18/2012Management Raipur
    • 22Factors that affect Pricing Indian Institute of 12/18/2012 Management Raipur
    • 23 Indian Institute of 12/18/2012Internal Factors Management Raipur Marketing Common objectives of Objectives the company are CostMarketing Mix 1. Survival in the Strategy market 2. Profit maximizationExternal Factors 3. Market share The Market leadership Demand 4. Product quality Competition leadership.Other External Factors
    • 24 Indian Institute of 12/18/2012Internal Factors Management Raipur Marketing Survival in market Objectives Due to intense Cost competition Setting low priceMarketing Mix StrategyExternal Factors The Market Demand CompetitionOther External Factors
    • 25 Indian Institute of 12/18/2012Internal Factors Management Raipur Marketing Profit maximization Objectives Prefer financial results to Cost long run performance.Marketing Mix StrategyExternal Factors The Market Demand CompetitionOther External Factors
    • 26 Indian Institute of 12/18/2012Internal Factors Management Raipur Marketing Market Share Leadership Objectives Cost Conditions are • Highly price sensitive market • Low price affect potential buyersMarketing Mix Strategy • Economics of scaleExternal Factors The Market Demand Competition Market Share 16.9% Market share 17.3%Other External Factors
    • 27 Indian Institute of 12/18/2012Internal Factors Management Raipur Marketing Product Quality Leadership Objectives Cost The company set high prices and provide high quality products inMarketing Mix the market. StrategyExternal Factors The Market Demand CompetitionOther External Factors
    • 28 Indian Institute of 12/18/2012Internal Factors Management Raipur Marketing Cost Objectives Cost is related closely with price Cost because to select the price it will include cost of distribution,Marketing Mix Strategy production and all the other costs on product.External Factors The Market Demand CompetitionOther External Factors
    • 29 Indian Institute of 12/18/2012Internal Factors Management Raipur Marketing Objectives CostMarketing Mix Rising prices of Strategy petrol due to rising costs ofExternal Factors imports The Market Demand CompetitionOther External Factors
    • 30 Indian Institute of 12/18/2012Internal Factors Management Raipur In India McDonalds classifies its products into 2 categories Marketing namely the branded Objectives affordability (BA) and branded core value products Cost (BCV). The BCV products mainly include the McVeggieMarketing Mix and McChicken burgers that Strategy cost Rs 50-60 and the BA products include McAloo tikki and Chicken McGrillExternal Factors burgers which cost Rs20-3 This has been done to satisfy The Market consumers which different price Demand perceptions. CompetitionOther External Factors
    • 31 Indian Institute of 12/18/2012Internal Factors Management Raipur Marketing To set the price the Objectives marketers should take into consideration the market Cost demandMarketing Mix StrategyExternal Factors The Market Demand Competition Hafte Ka Sabse Sasta Din”Other External Factors
    • 32 Indian Institute of 12/18/2012Internal Factors Management Raipur Marketing Objectives CostMarketing Mix StrategyExternal Factors The Market Demand CompetitionOther External Factors
    • 33 Indian Institute of 12/18/2012Internal Factors Management Raipur Government policies. Marketing Objectives Inflation/deflation and Cost interest rate affect selling price because they affect costMarketing Mix of production and consumer Strategy perceptions related product priceExternal Factors The Market Demand CompetitionOther External Factors
    • 34Price Sensitivity Indian Institute of 12/18/2012 Management Raipur
    • 35 Indian Institute of 12/18/2012 Management RaipurPrice Sensitivity• The degree to which price affects consumer purchasing behaviour• Input to Marketers• Popularly measured using ―Price Sensitivity Meter‖ developed by P V Westerdorp ▫ Capture the extent to which a product has an inherent value denoted by price
    • 36 Indian Institute of 12/18/2012 Management RaipurTypes of Price Sensitivity• Reference Price Effect• Difficult Comparison Effect• Switching Costs Effect• Price-Quality Effect• Expenditure Effect• End-Benefit Effect• Shared-cost Effect• Fairness Effect• The Framing Effect
    • 37 Indian Institute of 12/18/2012 Management RaipurTypes of Pricing Sensitivity• Reference Price Effect The higher the product‘s price to perceived alternatives the greater is the price sensitivity• Buyer segment, occasions, and many other factors impact sensitivity
    • 38 Indian Institute of 12/18/2012 Management RaipurTypes of Pricing Sensitivity• Difficult Comparison Effect Sensitivity of buyers with respect to price gets reduced if the product price is difficult to compare with other products or if the product is by a reputed manufacturer
    • 39 Indian Institute of 12/18/2012 Management Raipur• Switching Costs Effect Some products involve switching costs while opting for substitutes, buyers are in this case willing to abide by manufacturers price instead of switching
    • 40 Indian Institute of 12/18/2012 Management RaipurTypes of Pricing Sensitivity• Price-Quality Effect Price sensitivity of buyers is lower if high price means high quality• This effect is especially applicable for following type of products: image products, exclusive products, and products with minimal cues for quality.
    • 41 Indian Institute of 12/18/2012 Management RaipurTypes of Pricing Sensitivity• Expenditure Effect As the ratio of the price of the product to the buyer‘s income increases, price sensitivity increases
    • 42 Indian Institute of 12/18/2012 Management RaipurTypes of Pricing Sensitivity• End-Benefit Effect This effect is divided into two sub-parts. It primarily deals with the overall benefit of the product to user:• A. Derived demand: Price sensitivity towards spare parts & components is higher if the price sensitivity towards end product is high
    • 43 Indian Institute of 12/18/2012 Management RaipurTypes of Pricing Sensitivity• B. Price proportion cost: The price proportion cost refers to the ratio of the cost of the component to the price of the end product (e.g., think CPU and PCs). Buyers are less sensitive to a components cost if it is a small part of the overall product price
    • 44 Indian Institute of 12/18/2012 Management RaipurTypes of Pricing Sensitivity• Shared-cost Effect Buyer will be less cost sensitive if the price of the product is shared amongst a group and an individual has to pay less
    • 45 Indian Institute of 12/18/2012 Management RaipurTypes of Pricing Sensitivity• Fairness Effect Price sensitivity of the buyer increases if the product price is perceived to be greater than the ―reasonable‖ price range for the specific product
    • 46 Indian Institute of 12/18/2012 Management RaipurTypes of Pricing Sensitivity• The Framing Effect Bundled products have less price sensitivity and also if a product gets priced as a loss to customer, it will lead to buyer sensitivity as opposed to customer viewing a product having ―opportunity‖ cost
    • 47 Indian Institute of 12/18/2012 Management Raipur Penetration Pricing Promotional Geographical Pricing Pricing Product PredatoryForm Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
    • 48 Indian Institute of 12/18/2012 Management Raipur Penetration Pricing Promotional Geographical Pricing Pricing Product PredatoryForm Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
    • 49 Indian Institute of 12/18/2012 Management Raipur Penetration pricing• Pricing technique of setting a relatively low initial entry price, often lower than the eventual market price, to attract new customers.• The strategy works on the expectation that customers will switch to the new brand because of the lower price.• Penetration pricing is most commonly associated with a marketing objective of increasing market share or sales volume, rather than to make profit in the short term.
    • 50 Indian Institute of 12/18/2012 Management Raipur TATA SkyTATA Sky (A joint venture of TATA And Sky TV)gained market leadership having the first moveradvantage. Soon they had mighty rivals likeDISH TV, AIRTEL DIGITAL TV etc. So have anedge, they launched various price cuts givingbenefits like: Budget packs Regional packs
    • 51 Indian Institute of 12/18/2012 Management RaipurAdd on and A La Carte PacksTwice an year subscription holiday
    • 52 Indian Institute of 12/18/2012 Management Raipur• Ghadi Detergent: Ghadi Detergent (Rohit Surfactants) did to Nirma (Karsan Bhai Patel group) what Nirma had done to wheel.
    • 53 Indian Institute of 12/18/2012 Management RaipurGhadi did extensive soil testing and improved onits ability to work in hard water in UP region.They targeted the mass and soon becamefamous. In turn Everyone else in the market hadto lower down prices to counter attack.
    • 54 Indian Institute of 12/18/2012 Management RaipurChik Shampoo: Chik Shampoo ( Cavin Kare)used penetration pricing by changing the wholegame altogether by launching a completely newSKU ( sachets) into the Indian market.
    • 55 Indian Institute of 12/18/2012 Management RaipurSachets were present before Chik came tomarket but they were not present for all FMCGproduct. With Chik‘s sachets. Cavin Kare grouptargeted the lower level of the pyramidsuccessfully. In response to the attack, the globalgiants like Unilever, Garnier, P&G etc. had tocome out with sachets which they were used togive free of cost as samples in rest of the world.
    • 56 Indian Institute of 12/18/2012 Management Raipur• Parle G: Parle used price penetration owing to their strong distribution network. They had a very wide reach and they used this advantage to the fullest.
    • 57 Indian Institute of 12/18/2012 Management RaipurThey prices their products competitively andwhen they faced pressure from theircompetitors, a new SKU (Parle g in 2 rupeespacket) was launched and that prevented Tiger (glucose biscuit brand from Britannia) fromgetting hold of the market. Tiger was thengradually rolled back from a major part of themarket.
    • 58 Indian Institute of 12/18/2012 Management RaipurLG Television: LG entered the market whenthe Indian market was dominated by localplayers like Videocon, Onida and BPL. Formultinationals, only SONY had left a mark. LGused the mass production method and thusreduced the price more and more and in turnattracted more and more buyers.
    • 59 Indian Institute of 12/18/2012Management Raipur
    • 60China Mobile Phones in India Indian Institute of 12/18/2012 Management Raipur
    • 61 Indian Institute of 12/18/2012 Management RaipurChina Mobile Phones in India• Penetration Pricing• Intention to maximize the market share• Higher sales volume leads to lower unit costs & higher long-run profit• Problem: Consumers have a low quality perception.• However, well suited to certain group of people.
    • 62 Indian Institute of 12/18/2012 Management Raipur Penetration Pricing Promotional Geographical Pricing Pricing Product PredatoryForm Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
    • 63 Text Books Indian Institute of 12/18/2012(Special Indian/ South Asian Edition) Management Raipur Geographical Pricing
    • 64 Indian Institute of 12/18/2012 Management Raipur• Pricing Strategy to gain market share by volume & not by value.
    • 65 Indian Institute of 12/18/2012 Management Raipur Penetration Pricing Promotional Geographical Pricing Pricing Product PredatoryForm Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
    • 66 Indian Institute of 12/18/2012 Management RaipurPredatory Pricing• Predatory pricing is the practice of selling a product or service at a very low price, intending to drive competitors out of the market, or create barriers to entry for potential new competitors.• The predatory merchant then has fewer competitors or is even a de facto monopoly, and purportedly could then raise prices above what the market would otherwise bear
    • 67 Indian Institute of 12/18/2012Management Raipur
    • 68 Indian Institute of 12/18/2012Walmart: The third largest public corporation Management Raipurby revenue, this firm has literally conquered theretail market because of its predatory pricing.They sell in bulk and give huge discounts tocustomers and thus could capture the marketwell. They own huge stores and they are wellknown to take feedback to understand marketsentiments from petty truck drivers and otherpetty staff members.
    • 69 Indian Institute of 12/18/2012 Management RaipurBig Bazar
    • 70 Indian Institute of 12/18/2012 Management RaipurBest Price: Best Price is a Bharti & Walmartjoint venture in India. They have opened a chainof stores on the lines of the large Walmart storesacross the globe. As FDI in retail had limitations,they opened it for shopkeepers and institutionalsales, but the relaxed norms let them reach awider audience. They have priced everythingvery low and they are using Wal-Marts fortehere in India as well.
    • 71 Indian Institute of 12/18/2012 Management RaipurReliance’s Rs. 500/- Mobile
    • 72 Indian Institute of 12/18/2012 Management RaipurPredatory Pricing – Reliance Mobile• Both handsets along with connections were available for Rs. 500/-.• Intention to wipe out the competition.
    • 73 Indian Institute of 12/18/2012 Management Raipur Penetration Pricing Promotional Geographical Pricing Pricing Product PredatoryForm Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
    • 74 Indian Institute of 12/18/2012 Management RaipurPsychological Pricing
    • 75 Indian Institute of 12/18/2012 Management RaipurPsychological Pricing• Based on the theory that certain prices have a psychological impact.• ―According to a 1997 study published in the Marketing Bulletin, • 60% of prices ended in the digit 9. • 30% ended in the digit 5. • 7% ended in the digit 0. • remaining seven digits combined accounted for only slightly over 3% of prices.‖
    • 76 Indian Institute of 12/18/2012 Management RaipurPsychological PricingMOTOYUVA - W156
    • 77 Indian Institute of 12/18/2012 Management RaipurPsychological Pricing• MOTOYUVA - W156 prices at Rs. 1,099/- Samsung Guru- Rs. 2,999/-• Psychological Pricing• This is done to make the customer believe that product is priced cheaply or some cases just break the price barrier that customer has in his mind.
    • 78 Indian Institute of 12/18/2012Psychological Pricing - Playstation Management Raipur
    • 79 Indian Institute of 12/18/2012 Management RaipurPsychological Pricing - Playstation• In 2006 Sony released the Playstation 3 (PS3). The price for the 60gb model was an astronomical $699 and the 20gb model was $499.• Price was very high for a gaming console and the alternatives (Xbox 360 and Nintendo Wii) were much cheaper.• Consequently, the company issued price cuts when it introduced two models, the 80gb and 40gb, and phasing out the 60gb and 20gb.
    • 80 Indian Institute of 12/18/2012 Management Raipur Penetration Pricing Promotional Geographical Pricing Pricing Product PredatoryForm Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
    • 81 Indian Institute of 12/18/2012 Management RaipurPerceived Value Pricing• PVP is an open line pricing technique where respondents estimate the price of a new product compared to those who are already in the market.• This method can be used with concepts or real products. The technique is used with face to face interviews. It is a preferred approach if the client has little idea about the price level of the new product.
    • 82It can used in the following cases:Indian Institute of 12/18/2012 Management Raipur• For new products you can identify price expectations• Identify the willingness to pay• Make rough assessments of price elasticity• For line extensions you can• Assess expected relativities within the product range• For re-launches you can• See if price perceptions in relation to competitors change as new features or additional information is added to product description• For existing products you can• Explore perceived differences in relative values
    • 83 Indian Institute of 12/18/2012 Management RaipurVertu: Vertu is an expensive mobile phonebrand owned by Nokia. The phones in the Vertuseries are not very high tech but still they comeat a huge price. The Vertu with very basicfeatures comes with precious stones and metalsand comes a t a starting price of approx Rs.200000/-. This product works solely oncustomer perception as this brand commandscommendable premium as far as brand value isconcerned.
    • 84 Indian Institute of 12/18/2012Management Raipur
    • 85 Indian Institute of 12/18/2012Sony LCD & LED TV’s: Sony earned huge Management Raipurrevenues by using skimming pricing techniquefor their LCD and LED display panels. They wereprices at INR 21 Lakhs almost a decade ago andnow they are priced at 43 Lakhs for a similarlysized better featured model. Sony has a premiumbrand reputation in consumer electronics modeland they encashed on it. When they startedfacing the heat of the competition, they came upwith ‗Monolithic Design Bravia‘ and tried toretain their market share.
    • 86 Indian Institute of 12/18/2012Designer Branded Clothes : The price of designer Management Raipurclothes runs into thousands on Euros and the brandslike D&G , Versace, Armani etc. are able to sell clothesat such high prices because these clothes are perceivedas fashion accessories rather than basic clothes.As the are held very high in public perception so theycome at a premium pricing. The denims for Armani,for example start at whooping 15000 INR.
    • 87 Indian Institute of 12/18/2012Management Raipur
    • 88 Indian Institute of 12/18/2012 Management RaipurOmega: Premium Swiss watches sell at a huge pricepremium. Omega is one amongst them. It‘s a brand ofthe swatch group company. These watches are oftenmade up of precious metals and stones. Also, Swatchhas the credit of having the thinnest chrono to itsname. But the biggest factor for the huge price tagsthat these watches carry is the positive mass appealand perception.
    • 89 Indian Institute of 12/18/2012Management Raipur
    • 90 Indian Institute of 12/18/2012 Management RaipurRolls Royce: This is another Example of a brand thatworks on perceived value pricing. Rolls Rocye sells itscars only to the elitist class and is available for sale onthe sole discretion of the company. As this is foundonly with the elites, this brand comes at a huge price.The prices of Rolls Royce Phantom and Ghost run intocrores of INR and they do not have any realcompetitor due to the perceived brand image which isenjoyed by just them.
    • 91 Indian Institute of 12/18/2012Management Raipur
    • 92 Indian Institute of 12/18/2012Apple Products: The ―i‖ products also rank very Management Raipurhigh on perceived pricing strategy. This is evidentfrom the fact that Apple makes all the launches a hugeevent and public flock in in large numbers to get theproducts on priority basis. No doubt, that the productsare very sophisticated and technically sound, butApple has still carved out a market for itself which ishappy paying a huge price premium for their products.
    • 93 Indian Institute of 12/18/2012 Management RaipurThe perceived pricing strategy works herebecause Apple priced its latest iphone at a 25%price premium than the nearest competitor fromSamsung (Galaxy S3)
    • 94 Indian Institute of 12/18/2012 Management Raipur IPhone• The Iphone from Apple is offered in price range of Rs. 31,000/- to Rs. 42,500/-.• Comparable NSeries Nokia & Sony Mobile Phones are offered in the price range of Rs. 28,000/--31,000/-.• Pricing is done based on the customer‘s perception about the company and its product.
    • 95 Indian Institute of 12/18/2012 Management Raipur Penetration Pricing Promotional Geographical Pricing Pricing Product PredatoryForm Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
    • 96 Indian Institute of 12/18/2012 Management RaipurValue Pricing • The setting of a product or services price, based on the benefits it provides to consumers. By contrast, cost-plus pricing is based on the amount of money it takes to produce the product. Companies that offer unique or highly valuable features or services are better positioned to take advantage of value-based pricing, than companies whose products are services are relatively indistinguishable from those of their competitors.
    • 97Nike Studio Wrap – Premium Pricing Indian Institute of 12/18/2012 Management Raipur
    • 98 Indian Institute of 12/18/2012 Management RaipurNike Studio Wrap – Premium Pricing • A footwear product targeted at women who favor studio workouts like yoga and pilates • Priced at $110 a pair. • Priced with a strategy to target up-market people doing workouts like yoga and gain profit by value.
    • 99 Indian Institute of 12/18/2012 Management RaipurDove – High price to indicate premiumquality
    • 100 Indian Institute of 12/18/2012 Management RaipurDove – High price to indicate premiumquality• Company aims to be product quality leader in the market.• Priced higher than its competitors.
    • 101 Indian Institute of 12/18/2012 Management RaipurTata Aria – Premium pricing(failure )
    • ‹#› Indian Institute of 12/18/2012Management Raipur
    • 103 Indian Institute of 12/18/2012 Management RaipurTata Aria – Premium pricing(failure)• Tata Aria was launched with an expensive price tag of Rs 12 -15.5 Lakh• Priced with an expectation to create a new market and a new image for TATA Motors.• It did not perform as expected• Company is planning to launch a Mini-Aria with a reduced price to take advantage of the mini- SUV / MPV market.
    • 104 Indian Institute of 12/18/2012 Management RaipurTAG Heuer
    • 105 Indian Institute of 12/18/2012 Management RaipurTAG Heur – Premium pricingSwiss watchmaker TAG Heuer raised average price of itswatches from $250 to $1000 &Sales volume increased sevenfold! Basis of Pricing:- • Price affects perception of quality • Price affects consumer perceptions of prestige
    • 106 Indian Institute of 12/18/2012 Management RaipurPremium Pricing – Chevy Cruze
    • 107 Indian Institute of 12/18/2012 Management RaipurPremium Pricing – Chevy Cruze• The Cruze was launched at $16,995—well beyond what GM has ever charged for a compact and more than the $15,655 Honda asks for its base Civic sedan!• Getting customers to pay more is central to GMs ability to become profitable over the long term.• GM had reason to believe its higher-price strategy for the Cruze will work based on its experience with the Chevy Malibu sedan, whose 2007 redesign was well-received by critics and the public.
    • 108 Indian Institute of 12/18/2012 Management Raipur Penetration Pricing Promotional Geographical Pricing Pricing Product PredatoryForm Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
    • 109 Indian Institute of 12/18/2012 Management Raipur Competitive Pricing(An Example of Pricing Failure)
    • 110 Indian Institute of 12/18/2012 Management Raipur Competitive Pricing (An Example of Pricing Failure)• Back in 2007-08, Anheuser-Busch had lowered the price of its brand ‗Budwieser‘ so as to match the price level of its competitors.• However, this aggressive pricing strategy was short lived.• Within a few months, the prices were increased to cut down the losses.
    • 111 Indian Institute of 12/18/2012 Management RaipurCompetitive Pricing Surf Excel
    • 112 Indian Institute of 12/18/2012 Management RaipurThe price strategy of Surf Excel has always beenin accordance with it competitors
    • 113 Indian Institute of 12/18/2012 Management RaipurHonda City – Competitive Pricing
    • 114 Indian Institute of 12/18/2012 Management Raipur• Back in July 2011, Honda had slashed the price of its product City.• It was done in response to the growing sales of new rivals like the VW Vento and Hyundai‘s new Verna.
    • 115 Indian Institute of 12/18/2012 Management RaipurKodak - Competitive Pricing
    • 116 Indian Institute of 12/18/2012 Management Raipur Kodak• In 1994, Kodak‘s market share of the US film market was 70% but was declining• Flagship product Kodak Gold sold at 17% over Fuji• Kodak launched ‗funtime‘ film at a price lower than that of Fuji
    • 117 Indian Institute of 12/18/2012 Management Raipur Penetration Pricing Promotional Geographical Pricing Pricing Product PredatoryForm Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
    • 118 Indian Institute of 12/18/2012 Management RaipurProduct Form Pricing• One of the variants of price discrimination where the seller charges two different prices for different versions of the product not in proportion to their respective costs. This is quite a common practice where a company adds new feature and increases the price more than the cost difference it incurred in adding new feature. Here all the features bit one is kept constant and that feature becomes the price determining factor.
    • 119 Indian Institute of 12/18/2012 Management RaipurMaruti WagonR and Maruti Zen Estillo:Both these vehicles are powered by the sameK10 engine from Suzuki and are basically of thesame form factor (hatchbacks). Also the modelto model specification is the same (LX,Lxi,Vxi).Only the external shape is different and so theprice is different. The model to model variationin features is also the same. Even the gear shiftmechanism and other mechanical and electricalequipments are the same.
    • 120 Indian Institute of 12/18/2012Management Raipur
    • 121 Indian Institute of 12/18/2012 Management RaipurNokia Cell phones
    • 122 Indian Institute of 12/18/2012 Management RaipurNokia phones-Product Form Pricing• Different versions of the same product are priced differently.• Nokia-5000 is priced at Rs. 4,300/- Whereas, Nokia-7210C-Supernova is priced at Rs. 4,800/- offers almost the same features. The reason for difference in pricing is to demand premium for the sleek structure of Nokia-7210C.
    • 123 Indian Institute of 12/18/2012 Management Raipur Penetration Pricing Promotional Geographical Pricing Pricing Product PredatoryForm Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
    • 124Promotional Pricing Indian Institute of Management Raipur 12/18/2012• Promotional pricing is a sales and marketing technique. It involves reducing the price of a product or service to attract customers. This technique can be effectively used across numerous industries including food services, cosmetics, and household cleaning supplies.• Promotional pricing often involves reducing prices to unsustainably low levels. In some cases, products and services may be sold at or below cost. A buy one get one free scheme may even be used. When this is done, interest in goods can be greatly increased, meaning sales are also likely to increase dramatically.
    • 125 Indian Institute of 12/18/2012 Management RaipurTypes of Promotional Pricing1. Special Event Pricing: One of the Promotional pricing techniques in which, the marketers establish special prices in certain seasons to draw more customers and sales. Example: Promotional Pricing for Diwali by Honda Siel Cars India: Honda had slashed the prices of its entire product range by giving loyalty discounts, free insurance etc.
    • 126 Indian Institute of 12/18/2012Management Raipur
    • 127 Indian Institute of 12/18/2012 Management RaipurSAMSUNG Omnia
    • 128 Indian Institute of 12/18/2012 Management Raipur Promotional Pricing• In Diwali season of 2009 Samsung offered discounts on Samsung Omnia mobile phone. Their market price at that time was Rs. 33,990/- whereas their discounted price for Diwali was Rs. Rs. 31,990/-• Promtional Pricing• In this case special prices are offered during special occasions like festivals to increase the sales.
    • 129 Indian Institute of 12/18/2012 Management Raipur2. Low Interest Financing: Companies may decide to provide low interest rates for financing their products. Example: This Diwali Season Hero MotoCorp (that is trying to set its foot firm after its separation from its Japanese counterpart, Honda) had provided discounted interest rate of 6.99% for its entire range of two wheelers. They were trying their level best using these tactics as profits were under pressure from high production costs and slow growing economy meant sluggish sales figures.
    • 130 Indian Institute of 12/18/2012 Management Raipur• In 2009, Nokia piloted a scheme in two Indian states where it sold handsets on a weekly installment of 100 rupees ($2) over 25 weeks period.• Low-Interest financing• To reduce the burden of initial cost to the customer.
    • 131Food Industry Pricing – MultiPrice Point Game Indian Institute of 12/18/2012 Management Raipur
    • 132 Indian Institute of 12/18/2012 Management RaipurFood Industry Pricing – MassConsumption Products• Low priced, plain vanilla products• Available at price points as low as 2 INR• Price was not changed• Net weight of package was reduced to account for increase in raw material prices
    • 133 Indian Institute of 12/18/2012 Management RaipurFood Industry Pricing – MassConsumption Products• Britannia Tiger biscuits• Britannia’s Tiger is available in packs priced at Rs.2, 4 and 10• Tiger Banana biscuits (new product) are also available in pouches of Rs.2 and 4
    • 134 Indian Institute of 12/18/2012 Management RaipurFood Industry Pricing• Net weight of package was reduced to account for increase in raw material prices• Parle G Glucose Biscuits
    • 135 Indian Institute of 12/18/2012 Management RaipurFood Industry Pricing – RefinedProducts• Marie biscuits – as the name suggests thin, crispy biscuits• Positioned as a product to be consumed by family together• Britannia Marie Biscuit – minimum price is Rs.10
    • 136 Indian Institute of 12/18/2012 Management RaipurFood Industry Pricing – RefinedProducts• Salty biscuits are also part of this strategy• Refined, mid-high income product• Parle Nimkin positioned as an accompaniment for tea• Minimum price starts at Rs.5
    • 137 Indian Institute of 12/18/2012 Management RaipurFood Industry Pricing – Light &Digestive Biscuits• Sunfeast Marie Light Original ▫ Priced at Rs.20 per 250 gm• Sunfeast Marie Light Orange ▫ Priced at Rs.10 per 110 gm• Sunfeast Marie Light Oats ▫ Priced at Rs.25 per 250 gm
    • 138 Indian Institute of 12/18/2012 Management RaipurFood Industry Pricing – Cream Biscuit• Biscuits available at different price points• Parle Kreams• Packs priced at Rs.2 , Rs. 5 and Rs. 10• Britannia Treat Fruit Creams• Rs. 5/- smuggle-in-your-pocket pack, a Rs. 12 hide-under-the-pillow pack or a Rs. 25/- share- with-everyone Family pack
    • 139 Indian Institute of 12/18/2012 Management RaipurFood Industry Pricing – Cream Biscuit• Kreams Gold – Image Pricing strategy• Packs priced at Rs 5, Rs 10 and Rs 18
    • 140 Indian Institute of 12/18/2012 Management RaipurFood Industry Pricing – Cream Biscuit• ITC Dark Fantasy pursuing premium, niche segment or long tail• ITC Dark Fantasy Chocofills priced at Rs.30 for 84 g pack
    • 141 Indian Institute of 12/18/2012 Management RaipurFood Industry Pricing – PenetrationPricing• ITC Glucose biscuit• Priced competitively at Rs.2 and Rs.4 packs
    • 142 Indian Institute of 12/18/2012 Management RaipurFood Industry Pricing – PenetrationPricing• Cadbury Oreo - India was expecting Oreo to be launched as a competitor to Pure Magic (Britannia), Dark Fantasy (ITC) and Hide N‘ Seek Milano (Parle)• Kraft priced it at Rs 5 for a pack of three biscuits, Rs 10 for a pack of seven, and Rs 20 for 14
    • 143 Indian Institute of 12/18/2012 Management RaipurThank You !!!