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Brand Value Chain 
• BVC is a structured approach to assess the 
sources and outcomes of brand equity and 
the manner by which marketing activities 
create brand value. 
November 4, 2014 Sanjay Patro 1
Brand Value Chain 
Value stages 
Marketing 
Program 
Investment 
Customer 
Mindset 
Market 
Performance 
Shareholder 
Value 
Product 
Communicn 
Trade 
Employee. 
Awareness 
Associations 
Attitudes 
Attachment 
Price Premium 
Price Elasticity 
Cost savings 
Market share 
Expansion 
Success 
Stock Price 
P/E Ratio 
Market 
Capitalization 
November 4, 2014 Sanjay Patro 2
Brand Value Chain 
Marketing 
Program 
Investment 
Customer 
Mindset 
Market 
Performance 
Shareholder 
Value 
Product 
Communicn 
Trade 
Employee. 
Awareness 
Associations 
Attitudes 
Attachment 
Activity 
Price Premium 
Price Elasticity 
Cost savings 
Market share 
Expansion Success 
Stock Price 
P/E Ratio 
Market 
Capitalization 
Multiplier Program 
Quality 
Market 
Conditions 
Investor 
Sentiment 
November 4, 2014 Sanjay Patro 3
Customer-Based Brand Equity Model 
Consumer- 
Brand 
Resonance 
Consumer 
Judgments 
Consumer 
Feelings 
Brand 
Performance 
Brand 
Imagery 
Brand Salience 
INTENSE, ACTIVE 
INTENSE, ACTIVE 
LOYALTY 
LOYALTY 
RATIONAL & 
EMOTIONAL 
REACTIONS 
RATIONAL & 
EMOTIONAL 
REACTIONS 
POINTS-OF-PARITY 
POINTS-OF-PARITY 
& 
& 
POINTS-OF-DIFFERENCE 
POINTS-OF-DIFFERENCE 
DEEP, BROAD 
DEEP, BROAD 
BRAND 
BRAND 
November 4, 2014 Sanjay Patro AWARENESS 
4 
AWARENESS
Pricing Strategies 
Dr.Sanjay Patro
1. Pricing Builds or destroys value faster 
than almost any business action? 
2. Most Profitable firms are not 
necessarily cheapest producers 
3. The Other 3 Ps 
4. Revenue directly linked to Price
Empirical Studies show that : 
1. 1% improvement in price brings an 11.1% improvement in 
operating profit. 
2. 1% improvement in variable costs only brings a 7.8% 
improvement in operating profit. 
3. 1% improvement in volume sales brings a 3.3% improvement 
in operating profit. 
4. 1% improvement in fixed costs brings only a 2.3% 
improvement in operating profits (Marn and Rosiello 1992).
Selecting the Pricing Objective 
1. Profit Oriented 
• Cost Plus Pricing 
• To achieve target return 
• To maximize profit 
1. Sales Oriented 
2. Status Quo Pricing 
3. Price Quality leadership
How would you Price New Offerings
Pricing for New Products 
1. Skimming Pricing Strategy 
Conditions for Effective Skim Pricing 
 When demand is likely to be inelastic 
 Where there are high barriers to entry 
 Where few economies of scale or 
experience 
 PLC is expected to be short
Case of a Firm that has gone 
for Skimming Pricing ???
Zune (Microsoft) 
First released in November 2006, the Zune was Microsoft’s “me too” answer to the iPod. While 
it had some nifty product features that the iPod lacked (like sharing music from player to 
player), the Zune, despite an expensive marketing effort by Microsoft, never really caught on.
Penetration Pricing Strategy 
 Conditions for Effective Penetration Pricing 
 Price Elasticity of Demand 
 Where there is a strong threat of 
competition 
 Strong experience curve effects 
 Low barriers to entry 
 ----------------------- 
 Chota Coke and Chota Pepsi 
 Rs. 1/- Video Downloads
Pricing for New Products
Can a company follow skimming 
and penetration pricing strategy 
simultaneously in its product 
line ?
We need to find out what 
percentage of customers are 
price sensitive?
Assessing Price Sensitivity 
 Taste 
 Importance of Performance 
 Ability to pay 
 Intensity of Usage 
 Category Knowledge
Internal Factors to the Firm 
 Firm’s Objective 
 Costs 
 Marketing Program
External or Uncontrollable 
Factors to Firm 
 Consumer Price Responsiveness 
 Competition and Competitive environment 
 Legal and Environmental Factors 
 Suppliers 
 Retailers and Channel Members
 The Real Price of Everything..is the 
toil and trouble of acquiring it.
Discriminatory Pricing 
1. Product Form Discrimination 
2. Customer Segment Pricing( for diff groups) 
1. Products 
2. Services 
3. Place Discrimination
4. Time Discrimination 
 Yield management 
5.Channel Discrimination 
6.Image Discrimination
Do you think payment plans 
will impact product/service 
usage ?
 Higher consumption means higher 
sales 
 Get people to consume products that 
they have purchased? 
 Shelfware?
Consumers Perceptions of Price 
 Brands are categorized under 
different Price Bands 
 Case of Samsung and LG ,Voltas 
 Lakme Cosmetics –In India
 Birth of a New Category 
 Case of Mobile Phones 
Fast Moving Consumer Durables
Pricing of Current Products 
1. Product-line Pricing 
2. Optional Feature Pricing 
3. Captive Product Pricing
4. Two Part Pricing 
5. By product Pricing 
6. Target Pricing 
7. Price Bundling 
8. Price Unbundling
Bumpy Performance Curves
 You are planning to launch a 100% Fruit 
Juice for upper middle class segment . At 
what price should you launch it ?
Ask 4 simple questions: 
• At what price it is too cheap? 
• At what price it is a good value/bargain? 
• At what price it is getting expensive? 
• At what price is too expensive? 
Van Westendorp Price Sensitivity Meter:
India : A highly price conscious market. 
What happened to Nano?
Price-Quality Strategies 
Premium High Value Superb Value 
Overcharging Medium Value 
Rip-Off False Economy 
Good Value 
Economy 
PRICE 
QUALITY 
H M L 
H 
M 
L
Volume 
• What is the largest brand of Biscuits in the 
world in volume? 
Sanjay Patro
All consumers are different …………and 
are willing to pay different prices
Creating Value Innovation in SUV Market
Price to Capture Value
Price may not have much to do 
with costs ! 
 Take the case of the smartphones 
and their covers/cases
Psychological Pricing 
 Neumerical pricing ( Left to Right) 
 Payment Plans –Annual vs. Quarterly 
vs. Monthly 
 Pricing -- Consumption Sales
 Payment Options Cash / Card 
 Timing of Membership Drives of Clubs 
/Gyms 
 Higher consumption means ,higher 
sales 
 Shelfware?
 A firm has to maximise revenue-should 
it bother about consumption? 
 Immediacy of payment –critical for 
consumption? 
 Image Pricing
From Category Sensitivity to 
Brand ……….. 
 Price Sensitivity Vs. Brand Sensitivity 
 Brand Elasticity 
 Brand Equity and Brand Elasticity
Initiating and Responding to Price 
Changes 
Reactions to Price Changes 
Customer Reactions 
Competitor Reactions
Responding to Competitors’ Price 
Changes 
Maintain price 
Maintain price and add value 
Reduce price 
Increase price and improve quality 
Launch a low-price fighter line
Price Points Must be Right 
 SKUs must be rightly priced 
 Rs. 2,5 0r Rs.10/- 
 50% Of Cadbury’s turnover comes Rs 5/- 
or less SKUs 
 60% of shampoo sales comes from 
sachets
Price Adaptation 
 Geographical discrimination 
 Uniform delivered pricing(Postage Stamp P) 
 Zone delivered pricing 
 FOB Pricing
 Price discounts and allowances 
 Cash Discount 
 Quantity discount 
 Functional discount 
 Seasonal discounts
Pricing of Digital Products
 Pre booking Price 
 Impact of announcement of New 
Product on sales of current variant
 On-line Bidding 
 Reverse Pricing 
 What was Economist’s Predcition 
about online purchases? 
 Auction through ebay or yahoo?
 Conduct periodic pricing experiments. 
 Price Experimentation 
 In price comparison sites, when 
number of competitors double, what 
happens to price elasticity?
Online travel sites? 
 The study of online travel agents, for 
instance, found that the lowest-priced 
and the highest-priced sites were 
owned by the same company. 
 But the pricier one was easier to use, 
allowing the parent company to 
charge busy customers more.
 Any Industry ,only one lowest cost 
competitor 
 How much more the Top performing 
Players in a given industry earn than 
the ind-norm?
Price
Price
Price

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Price

  • 1. Brand Value Chain • BVC is a structured approach to assess the sources and outcomes of brand equity and the manner by which marketing activities create brand value. November 4, 2014 Sanjay Patro 1
  • 2. Brand Value Chain Value stages Marketing Program Investment Customer Mindset Market Performance Shareholder Value Product Communicn Trade Employee. Awareness Associations Attitudes Attachment Price Premium Price Elasticity Cost savings Market share Expansion Success Stock Price P/E Ratio Market Capitalization November 4, 2014 Sanjay Patro 2
  • 3. Brand Value Chain Marketing Program Investment Customer Mindset Market Performance Shareholder Value Product Communicn Trade Employee. Awareness Associations Attitudes Attachment Activity Price Premium Price Elasticity Cost savings Market share Expansion Success Stock Price P/E Ratio Market Capitalization Multiplier Program Quality Market Conditions Investor Sentiment November 4, 2014 Sanjay Patro 3
  • 4. Customer-Based Brand Equity Model Consumer- Brand Resonance Consumer Judgments Consumer Feelings Brand Performance Brand Imagery Brand Salience INTENSE, ACTIVE INTENSE, ACTIVE LOYALTY LOYALTY RATIONAL & EMOTIONAL REACTIONS RATIONAL & EMOTIONAL REACTIONS POINTS-OF-PARITY POINTS-OF-PARITY & & POINTS-OF-DIFFERENCE POINTS-OF-DIFFERENCE DEEP, BROAD DEEP, BROAD BRAND BRAND November 4, 2014 Sanjay Patro AWARENESS 4 AWARENESS
  • 6. 1. Pricing Builds or destroys value faster than almost any business action? 2. Most Profitable firms are not necessarily cheapest producers 3. The Other 3 Ps 4. Revenue directly linked to Price
  • 7. Empirical Studies show that : 1. 1% improvement in price brings an 11.1% improvement in operating profit. 2. 1% improvement in variable costs only brings a 7.8% improvement in operating profit. 3. 1% improvement in volume sales brings a 3.3% improvement in operating profit. 4. 1% improvement in fixed costs brings only a 2.3% improvement in operating profits (Marn and Rosiello 1992).
  • 8. Selecting the Pricing Objective 1. Profit Oriented • Cost Plus Pricing • To achieve target return • To maximize profit 1. Sales Oriented 2. Status Quo Pricing 3. Price Quality leadership
  • 9.
  • 10. How would you Price New Offerings
  • 11. Pricing for New Products 1. Skimming Pricing Strategy Conditions for Effective Skim Pricing  When demand is likely to be inelastic  Where there are high barriers to entry  Where few economies of scale or experience  PLC is expected to be short
  • 12. Case of a Firm that has gone for Skimming Pricing ???
  • 13.
  • 14. Zune (Microsoft) First released in November 2006, the Zune was Microsoft’s “me too” answer to the iPod. While it had some nifty product features that the iPod lacked (like sharing music from player to player), the Zune, despite an expensive marketing effort by Microsoft, never really caught on.
  • 15. Penetration Pricing Strategy  Conditions for Effective Penetration Pricing  Price Elasticity of Demand  Where there is a strong threat of competition  Strong experience curve effects  Low barriers to entry  -----------------------  Chota Coke and Chota Pepsi  Rs. 1/- Video Downloads
  • 16. Pricing for New Products
  • 17. Can a company follow skimming and penetration pricing strategy simultaneously in its product line ?
  • 18.
  • 19. We need to find out what percentage of customers are price sensitive?
  • 20. Assessing Price Sensitivity  Taste  Importance of Performance  Ability to pay  Intensity of Usage  Category Knowledge
  • 21. Internal Factors to the Firm  Firm’s Objective  Costs  Marketing Program
  • 22. External or Uncontrollable Factors to Firm  Consumer Price Responsiveness  Competition and Competitive environment  Legal and Environmental Factors  Suppliers  Retailers and Channel Members
  • 23.  The Real Price of Everything..is the toil and trouble of acquiring it.
  • 24. Discriminatory Pricing 1. Product Form Discrimination 2. Customer Segment Pricing( for diff groups) 1. Products 2. Services 3. Place Discrimination
  • 25. 4. Time Discrimination  Yield management 5.Channel Discrimination 6.Image Discrimination
  • 26. Do you think payment plans will impact product/service usage ?
  • 27.  Higher consumption means higher sales  Get people to consume products that they have purchased?  Shelfware?
  • 28. Consumers Perceptions of Price  Brands are categorized under different Price Bands  Case of Samsung and LG ,Voltas  Lakme Cosmetics –In India
  • 29.
  • 30.  Birth of a New Category  Case of Mobile Phones Fast Moving Consumer Durables
  • 31. Pricing of Current Products 1. Product-line Pricing 2. Optional Feature Pricing 3. Captive Product Pricing
  • 32.
  • 33. 4. Two Part Pricing 5. By product Pricing 6. Target Pricing 7. Price Bundling 8. Price Unbundling
  • 35.  You are planning to launch a 100% Fruit Juice for upper middle class segment . At what price should you launch it ?
  • 36. Ask 4 simple questions: • At what price it is too cheap? • At what price it is a good value/bargain? • At what price it is getting expensive? • At what price is too expensive? Van Westendorp Price Sensitivity Meter:
  • 37.
  • 38. India : A highly price conscious market. What happened to Nano?
  • 39.
  • 40. Price-Quality Strategies Premium High Value Superb Value Overcharging Medium Value Rip-Off False Economy Good Value Economy PRICE QUALITY H M L H M L
  • 41. Volume • What is the largest brand of Biscuits in the world in volume? Sanjay Patro
  • 42.
  • 43. All consumers are different …………and are willing to pay different prices
  • 44. Creating Value Innovation in SUV Market
  • 46. Price may not have much to do with costs !  Take the case of the smartphones and their covers/cases
  • 47. Psychological Pricing  Neumerical pricing ( Left to Right)  Payment Plans –Annual vs. Quarterly vs. Monthly  Pricing -- Consumption Sales
  • 48.
  • 49.  Payment Options Cash / Card  Timing of Membership Drives of Clubs /Gyms  Higher consumption means ,higher sales  Shelfware?
  • 50.
  • 51.  A firm has to maximise revenue-should it bother about consumption?  Immediacy of payment –critical for consumption?  Image Pricing
  • 52. From Category Sensitivity to Brand ………..  Price Sensitivity Vs. Brand Sensitivity  Brand Elasticity  Brand Equity and Brand Elasticity
  • 53. Initiating and Responding to Price Changes Reactions to Price Changes Customer Reactions Competitor Reactions
  • 54. Responding to Competitors’ Price Changes Maintain price Maintain price and add value Reduce price Increase price and improve quality Launch a low-price fighter line
  • 55.
  • 56. Price Points Must be Right  SKUs must be rightly priced  Rs. 2,5 0r Rs.10/-  50% Of Cadbury’s turnover comes Rs 5/- or less SKUs  60% of shampoo sales comes from sachets
  • 57. Price Adaptation  Geographical discrimination  Uniform delivered pricing(Postage Stamp P)  Zone delivered pricing  FOB Pricing
  • 58.  Price discounts and allowances  Cash Discount  Quantity discount  Functional discount  Seasonal discounts
  • 59. Pricing of Digital Products
  • 60.  Pre booking Price  Impact of announcement of New Product on sales of current variant
  • 61.  On-line Bidding  Reverse Pricing  What was Economist’s Predcition about online purchases?  Auction through ebay or yahoo?
  • 62.  Conduct periodic pricing experiments.  Price Experimentation  In price comparison sites, when number of competitors double, what happens to price elasticity?
  • 63. Online travel sites?  The study of online travel agents, for instance, found that the lowest-priced and the highest-priced sites were owned by the same company.  But the pricier one was easier to use, allowing the parent company to charge busy customers more.
  • 64.  Any Industry ,only one lowest cost competitor  How much more the Top performing Players in a given industry earn than the ind-norm?

Editor's Notes

  1. Price is directly linked to revenue. Price premiums are one of the most important benefits of creating brand awareness Pricind startegy of the firm influences how consumers categorize the price
  2. Consumers are willing to pay a premium for a brand justifies the ahigh price in mind
  3. Rsh by Copernicus shows that 15-35% of customers are price sensitive.
  4. Rsh by Copernicus shows that 15-35% of customers are price sensitive.